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Tecnotree Corporation Stock Exchange Release 29 April 2022 at 9.00 EET

HIGH ORDER BOOK POSITION

First quarter (1[st] Jan - 31[st] Mar 2022)
  • Net sales were EUR 13.3 (11.2) million.
  • Operating result was EUR 2.0 (3.1) million.
  • Net result was EUR 1.0 (2.4) million.
  • Order book at the end of the period stood at EUR 64.0 (47.3) million.
  • Cash flow after investments was EUR -2.1 (1.7) million.
  • Earnings per share were EUR 0.00 (0.01).

Key figures, MEUR 1-3/2022 1-3/2021 1-12/2021
Net sales 13.3 11.2 64.2
Operating result 2.0 3.1 23.7
Result before taxes 1.6 2.9 21.4
Result for the period 1.0 2.4 18.3

Earnings per share, basic, EUR 0.00 0.01 0.06

Order book 64.0 47.3 53.5

Cash flow after investments -2.1 1.7 4.0
Change in cash and cash equivalents -2.1 1.7 9.5
Cash and cash equivalents 15.6 10.0 17.6

Equity ratio % 81.6 43.2 85.2
Net gearing % -22.7 13.0 -26.0

Personnel at end of period 756 679 750

CEO Padma Ravichander: Healthy Revenue Growth Continues But With Elevated Cost

Tecnotree's products continued to witness healthy confidence from customers (both old and new) resulting in strong order book position of EUR 64 million in the first quarter. We expanded our footprint within the Zain Group and won a new full Digital BSS Project from Zain South Sudan. We also recorded a revenue growth of 18.7%, resulting in a revenue of EUR 13.3 million for the quarter.

In terms of our cost budget Q1 was a challenging quarter. Tecnotree's investments in maintaining global talent, deploying consultants to multiple geographies to support multiple deliveries and other costs such as infrastructure, travel and rent are operating expenses that we have to accrue on an equated basis throughout the year. This leaves Tecnotree with the requirement to spend throughout the year to deliver and grow on the record high order book.

Tecnotree's management needs to balance between three different revenue cycles. The first cycle is quarterly where Q1 has historically been the weakest quarter. The second cycle is the annual cycle where Tecnotree has to deliver the order book accrued in 2021 during 2022, through new deployments of its digital stack. The third cycle is where 2022 deliveries directly impact MSO, AMC and license upgrade revenues in 2023 and beyond. Finally, Tecnotree as a part of this third cycle has to also invest in 2023 order book through expanded marketing and sales initiatives in 2022.

With the current order backlog and pending deliveries currently Tecnotree's cost base is sustainable. However, the cost model is subject to additional risks which management will need to take active effort to mitigate such as:

1. Currency risk (Euro directly affecting INR & USD denominated costs);
2. High wage inflation and global demand of top technical talent (we have seen record movement in benchmarks to attract and retain talent especially in markets where our customers and development centres are based);
3. Global supply chain pressures (revenue recognition is based on successful delivery to our customers and is dependent on on-site hardware being available with our customer which has risk of being delayed).

Management is taking additional efforts to control costs and to ensure the above risk do not affect delivery of Tecnotree's ever growing order backlog.

Additionally, Tecnotree also made investments into its new initiatives - Tecnotree Moments, Tecnotree DiWa (Digital Wallet) and SaaS. We are witnessing encouraging response from the market and hope to see revenue in 4 - 6 quarters. Given the promising response, we will continue to evaluate further investment in these initiatives.

Order intake
New orders recorded during the first quarter totalled to EUR 23.8 million compared to EUR 26.4 million last year. Order book in the end of the first quarter was EUR 64.0 million being 35.2% higher compared to EUR 47.3 million last year.

Revenue
Revenue in the first quarter was EUR 13.3 million showing 18.7% growth compared to last year. The growth in revenue came from MEA & APAC segment.  

Profitability
Tecnotree's operating result in first quarter was EUR 2.0 million compared to EUR 3.1 million last year.

Financial situation
Cash and cash equivalents at the end of the first quarter were EUR 15.6 million compared to EUR 10.0 million last year.

Other business updates
With Tecnotree Moments platform and its Fintech offerings, we hope to synergize new partnerships with communication and Digital Service Providers, eco-system players and internet of things (IOT) providers, to introduce new revenue models and API frameworks to take advantage of the 5G roll-outs world-wide and forge new frontiers to empower digitally connected communities in the sectors of Education, Health, E-commerce, Gaming, Sports and Entertainment.