Trifork Holding AG

CSE:TRIFOR

Earnings Call Transcript

[Frederik Svanholm, executive]

Dear audience, welcome to the presentation of Trifork's Fourth Quarter and Annual Results for 2024. We will just wait a few moments and let everyone dial into the call. So please hold on. We are just waiting for the last people to join We'll start in a few moments.

Okay. Let's start the presentation. My name is Frederik Svanholm. I am the Investor Director at Trifork. Today, our CEO, Jorn Larsen; and our CFO, Kristian Wulf-Andersen, will be providing a presentation of approximately 35 minutes, followed by Q&A.

Before we start, I have a bit of practical information. First, I would like to inform you that this presentation is recorded and will be made available in its full length on our Investor web page later today. Second, I would like to inform you that if you want to download the presentation for today's call, you'll be able to find it on the front page of our Investor website. Third, we invite you to ask questions and engage with management after the presentation.

Before we get started, we have to present this disclaimer. And you're all very smart people, so you can read fast. So I think we can jump ahead.

And I will now hand it over to Group CEO, Jorn Larsen. Jorn, please go ahead.

[Jorn Larsen, executive]

Thank you, Frederik. And first of all, thank you so much for listening in. I can see we have a lot of participants today, and I hope we will get through a lot of interesting questions later on.

First, I want to talk about how we ended '24, and how we are already looking into '25 with the guidance of '25. And I'm very grateful for everyone at Trifork to fighting very hard in '24. '24 was not the easiest year in our career.

I'm proud to say that we almost broke the revenue record, but we didn't make it at the end, even though we had some good acceleration towards the end of '24. I also want to thank our customers and partners, because without them, we would not be here today. And with this, I'd like to open the presentation here.

So the Trifork Group, as you know, is Trifork and Trifork Labs. And also in '24, this combination of having Labs and Trifork proved to be something, I think, saved the year in a few different levels that I will talk about later.

We have more or less the same distribution between Inspire-Build-Run. We have a private part of business of 62% and the rest in public. It is our aim going forward that we like to be even stronger on public business. And so we have a number of initiatives that goes in that direction as well as continue our growth in private.

In Labs, we have 24 companies, and we will talk about them later on. We have an all-time high book value for the lab companies and some of these lab companies are doing very well. Let's move on.

So what I mentioned here before is that if you compare the '23 and the '24, then '24 was a disappointment. So let me be clear. We did not win 2 quarters, Q2 and Q3. And those 2 quarters pulled down the expectation from what we anticipated going into '24 to where we ended. And I apologize for this towards our investors and shareholders.

However, we are hopeful. And when we look forward, as you can see, we already here indicate what we expect for '25. So '24 ended being back in growth, nevertheless, a small growth, but a growth. And we see good traction and reasonable good pipeline and backlog for '25. So our CFO and all our number of people have really been careful when we have done this estimation. We know that we don't want to repeat, if we can avoid it, what we did last year with downgrade on guidance. So this is something we have spent a lot of time on, and this is how we guide.

On the result, the difficulties of '24 can be seen in the low profit EBITDA of EUR 27 million. But here, I want to also mention, because we will look at it later on in the presentation, that actually our net result, we were better than '23. And that may be counterintuitive, but Kristian will explain how that happened again. So let's move forward.

So Kristian, I'd like you to explain our guidance because we changed a few things in our guidance looking forward. So please go ahead, Kristian.

[Kristian Wulf-Andersen, executive]

Yes. Thank you, Jorn. So what you see here is the overall guidance for '25 for the Trifork Group with the guidance in revenue, Trifork Segment adjusted EBITDA and the Trifork Group EBIT. Overall, these are the expectations as you see here, and we have here supplied also the corresponding margins on the different items.

Jorn already talked into the guidance for '25. Then in relation to the midterm target, then that's -- of course, we cannot go through a year as '24 with a flat development and then expect that we will end up on net the same results in '26, which the midterm guidance was covering. So now we have '24 as the base year in relation to what we guide on midterm. And we have then adjusted to 10% to 15% annual growth, taking into account the difficulties in the current economical environment. And then still expecting that we can grow in this environment, but that it's not, I would say, as easy as it would be in a normal environment.

So the 10% to 15% annual growth, whereas 5% to 10% is organic growth as you see. We haven't changed the expectations to where we would be in relation to margins. So EBITDA and EBIT margins are still the same we guide, and we also still guide on the same approach towards leverage of 1.5x in the period. So that's unchanged as before.

[Jorn Larsen, executive]

Thank you, Kristian, for explaining that. So here, we're going into the details of the full year and for the Q4. So first, in Q4 compared to Q4 '23, we see that we are net up by 1.8% and Q4 '23 was a quite good quarter in that year. I don't know if you remember, but that was where we had a lot of healthcare revenue and/or extra revenue coming from Switzerland. So it's good to see that we are actually net up by 2%. Of course, it's not a double-digit number. But nevertheless, it's very nice to see.

And when we compare the 12 months, we can certainly see the impact from Q2, Q3 that disappointed. And so we were not able to catch up. So we are down by 0.9% in total. And that's, as I said before, is not -- was not satisfactory. But what we see is now we are in a better trend.

So also what I want to highlight is the revenue of '24 and the adjusted EBITDA and the margin of Q4. So all these 3 numbers actually look quite okay. And if we up that with a few percent is where we want to head into '25 and then improve from there. So the basic underlying metrics are healthy. Let's move on.

So as you know, we are operating in this go-to-market model, Inspire, Build and Run. And for Inspire, I will also touch on later. We improved our overall business in Inspire, but not as much as we anticipated. So we have continued to optimize the business in Q4 and going into the New Year.

So we know that we will continue to improve the numbers in Inspire. But I want to highlight here that on the last bullet, that we are still growing our awareness in the world. We have plus 1 million online subscribers. We are nominated one of the best video channels. And as you can see in this bullet, we are very popular when it comes to inspiring our tech community. And that is, of course, with -- I'm very proud that we are able to do that with the limited resources we, however, put into this.

Next. So Build was okay. As you can see, the margins are not quite where they should be. I would like to see the margins go up a little bit, and that is reflected in still in Q4 that we have some capacity that was not utilized. Plus we invest in business development and sales. So this has to continue to kick in before we can improve. And if we then move to Run.

So here we have some very good news, and it's good news on multiple levels, because a part of our build is still selling consultant hours to our customers. And a number of the acquisitions that we made over the years have been purely consultant businesses, where we sell hours to our customers. And what happened in '24 was that the unemployment in tech increased and a lot of companies have to cut down, but also with the invasion of AI, where it is anticipated that AI can do a lot of the work that developers can do, and this has the effect that consulting companies need to look for different markets if they want to grow. And we are one of those companies that are looking to increase a different market and what is the different market? How can we outcompete, you can say, that companies can hire themselves and where we have to work in this environment where we have unemployment. And the way we can do that is to sell IP and products.

So it is with great pleasure that I see here that I can show you here that we have good margin. We all know that when you do product sales, you have better margins than if you sell hours in a hot market. So the game changer for us going forward is just to keep pushing on our run, to sell products, but also that the services that we haven't built will be on top of our products. So we will bundle, you can say, product revenue and service revenue and thereby, we will eliminate ourselves for some of the competition that you have if you just sell service. Because if you do the bundle, then it's a stronger offering towards the market. And when we sell this bundle to our customers, they save money compared to if they have to develop themselves or with freelancers or consultants. And so that's the way forward for Trifork, and we call it product-led business, and we will talk more about it a little bit later.

What we also saw in '24 is that we were able to continue our, you can say, the risk of having few big customers. So the customer concentration has developed in a healthy way. But what we also can see is that we have a very loyal customer base, because when we did the IPO, we still have 18 of our top 20 customers as customers. And I'm very proud about that. And also, I'd like to thank our organization for maintaining a really healthy relationship to our biggest customers. And I can tell you that the 2 customers that disappeared, they are unfortunately no longer with us. It's simply companies that went out of business. So they didn't start buying from another place.

Main events in Q4 in Trifork Labs segment, the win in Switzerland for Swiss Post that are one of the companies that are going to facilitate the whole Swiss population with an electronic patient record. And that's a revolution in Switzerland. It's something that in Denmark and in other countries, we have had for a long time, maybe not one. So actually, Switzerland here, they go a little bit forward by setting a foundation for everyone that we can each have a record.

In Labs, the big news was the collaboration with an investor into our lab company, XCI. So XCI is one of our fastest-growing and best companies in labs, not the only one, but a very good one, where we reduced our stake. So it's not like we exited, but we went from 20% shareholding to 14.3%. And that, I think, is a very strong signal towards XCI, but also very beneficial for Trifork. Let's move on.

So with the organization, we still grew because the people we hire and the people we acquire through acquisitions are core to our future growth. And we are a more lean company now than we were in the mid-summer of '24. It does take a little time to adjust an organization to be -- to have another profile.

We also see sick leave down trending. However, I would like to see it going closer to 2% than these 3%. It seems like COVID kind of never ended. We have a higher sick leave now than prior to COVID, unfortunately, and that also cost on margin.

With trade shows, we had a very good year in '24. So never before where we so much, you can say, extraverted and on the scene of big tech conferences. So our logo and our case stories were seen by a lot more people in '24 than ever before, and I'm very happy about that as well. Let's move on.

Also like a proof case, we have a number of new case stories in our report, and I hope you will take a look at them. And you can find them all on our trifork.com. But here is one. And this is a very good example of when our lab company that produces products and we help that product company implement this product at a customer, and this is a customer in the U.S. So it's one of the biggest companies in America and ranked at 51 on the Fortune 500 by revenue. And it's an energy transfer company. So they transfer things like gas from A to B, and they have thousands of miles of pipes, and they have 8,000 field technicians.

So if you recall a case story a few years ago from Vestas, this is very much like that. So any company that has assets in the real world and where they have an army of field technicians that needs to maintain these assets for them to work, we can support them with very effective tools.

And you see here, Randall, he states that working with our tools has been really a positive thing. And the good thing about this company is that they have a very aggressive M&A strategy. So they buy 2 to 3 big companies every year. And every time they buy a company, they have more and more field technicians. So this is a very good customer for us. But on top of that, they also want to work with us in other things that we can provide. So this is a good example of this land with some IP and then you get a lot of service on top of that. Let's move on.

So going into '24, with all the things that happened in '24, we had 4 main strategic priorities. And we have worked very hard through the year with all of these. And as I mentioned already, the optimization of Inspire, we partly succeeded with that, but that's probably the one we were least good at. The one where we really had a positive trend is our Run business.

So not only did we sell more of the IP we already had that were just shown in the case story just before with Energy Transfer, but we also innovate new products. And in the year of '24, we launched our new Corax AI platform that is very popular in the market, and we have a lot of meetings with customers who want to take advantage of our platform, because it's a jungle when you want to work with AI. But if you work with our Corax data and Corax AI, you have a safe garden where you can utilize the full power of AI no matter where it's from, but you have a very structured way of using AI. And we can also make sure that you execute AI in a very safe environment. So we have GPUs in our server centers. So if you have some very secret stuff you want to use AI on, we can make sure that this information and the data analysis do not leave the premise. And that's probably more important than ever before. Two years ago, everyone was just happy to do whatever computing in the public cloud. Today, that's not the case. Let's move on.

So the strategic priorities for '25. I just want to mention one, but here you can see a number. I want to mention the top one because the top one is to double down on selling more IP, more products, having this IP first strategy towards the market. And there are many reasons for that. And now I want to mention another one that I didn't mention before, and that is if you have something a customer can really benefit from when they want to do their business. And let me use aviation as an example.

So for more than 10 years, we have been working to develop custom solutions for a number of airlines. But now all these airlines, they need to continue their innovation, but they also need to maintain the whole software stack. And in reality, all these airlines more or less have invented the wheel 100 times. We are looking into the top 100 airlines in the world. And we have a good communication with at least 25% of these at present, and we want to expand that more into '25.

And we see that they need the same thing. And they made all these custom platforms. And there is no idea in them to continue to maintain these platforms. So what we offer is a product suite that can replace the custom-built software that they have. And that's a very good way for us to get our product in, but it's also a very good way for the customers to save a lot of money, and that's a good match. Let's move on.

So here, there are some interesting things because Trifork has always been a company that is very curious about new technologies. And the orange dots are some of these new technologies that we have been following over the years. And still quantum computing is very interesting, and we are still observing and following very closely. But what I want to talk about here is Gen AI and digital twins because sometimes -- and also spatial computing, sometimes you follow one technology trend. But then when you combine a few of them, then you actually have like almost a superpower.

So recently, I was on one of my favorite ride alongs, where I followed the leadership of a company in their production facilities and in the workshops. And then -- and I saw a pattern that we are working on now, and that is to create digital twins of individual experts.

So imagine that a person who have 40 years of experience and imagine a group of people who have a lot of experience. Imagine that you could create a digital twin like a human or like an artificial copy of these people, but in one digital twin. So then less experienced people can access this, you can say, virtual or spatial person and consult that is what you all are used to do with ChatGPT or whatever you use nowadays. But imagine you can take experience in, because experience today is something that is undocumented on the internet. So therefore, there will never be like a general available AI to ask. But we can build this model if we can capture the experience of people into a digital twin using Gen AI and maybe also spatial computing. And we call that assisted work in the field. And that's something we are working hard on to bring to the market in '25. Let's move on.

So Trifork has always been about a combination of organic growth and M&A. And we made 3 acquisitions in '24. And we are very happy with the traction of all of them. And we are working hard also to find very interesting companies in '25 and to include in the Trifork Group. Let's move on.

So as I said, I think Kristian, he can explain more about the consequences of the development in our lab company -- in our lab group. So first of all, the book value is up again. And we have some very strong traction in the top 5, but also in the 6 to 10 place in lab. These, as you remember, they are not places 1 to 5. They are randomly ordered but grouped in 2.

And so some of these companies are showing good profit, good growth. And in the combination of all of our lab companies, they actually have more than EUR 100 million in combined revenue. And you know that we don't consolidate that revenue. We only consolidate, you can say, the profit and the dividends from them.

And Kristian, I'd like to hand it over to you now, because now we see a lot of bars and numbers, and you are very good at that.

[Kristian Wulf-Andersen, executive]

Yes. So all details, of course, is applied in the annual report, but I'll just go through some of the details. And as Jorn said here in relation to the lab companies, then last year we started also providing a little bit more insight information in the average for the top 10 companies. And this is what you see here. So seeing the development in the revenue, as Jorn talked into, but also seeing the development in the margins and in the growth of the companies.

Overall, what we've done here in the way that we show it to you is that we also then have accounted for our ownership ratio in the different companies. So that's what you see here in the weighted by current lab ownership because, of course, we don't own 100% of all the companies. But overall, you could say the development that we have tried to nudge and to support in general in our lab companies is that instead of just focusing on burn and development of growth that they also improve profitability. And this is what you see here in this slide, how that has developed in the last 2 years.

Then also, if you look into the annual report, you see that the number of pages has more than almost doubled compared to last year. And last year, we reported a separate ESG reporting. And this year, we have included the CSRD reporting as required by the legislation in Denmark. So that's why you see a lot of additional pages here. We're happy to report all of this and follow, you could say, the development within CSRD. And there's a lot of things happening right now also in the legislation in EU, et cetera. So how that will be in the coming years, we don't know, but this is the status that we have right here.

So of course, environment is very important. We have in our past ESG reporting as well, reported a lot on this. So what we are focused on in this report is the Scope 1, 2 and 3, meaning -- and how we want to reduce on the different scopes, but very much focused on creating the baseline for following the future transitions that Trifork will live up to in the future.

Then on the social part, it's -- you could say, business as usual for Trifork. It's like we really are concerned about the employees we have, and the well-being of the employees we have. But of course, we can also improve. And as a company that does grow, and we believe that we want to grow in the future, we will also do much more in how we support our employees in the future.

In relation to governance, of course, we have to live up to governance, but we also improve governance all the time. And here, we also go the next step in relation to actually going to our suppliers, et cetera, and start evaluating our suppliers in relation to not only governance, but also in relation to the environmental and emission criteria, et cetera, moving forward.

Overall, if we look back and distribute on quarters, we see, as Jorn talked into, that Q4 was once again up compared. And here it's like just to show a longer trend line with -- including the quarters. So overall positive trend in Q4. But of course, as Jorn also mentioned, we're not happy with the flat development and especially Q2 and Q3 being low in '24.

The Trifork Groups and equal to the Trifork Segment revenue as we do not include any revenue from any lab companies in what we report. Jorn already talked into. I'll just mention here that, of course, this is a mix of the different countries that we operate in. And where we saw a negative development in U.K. and a more flat development in Denmark, our biggest market. Then we saw a very nice improvement in U.S. with 69.9% in Q4. And also for the year, U.S. has been driving new revenue as part of the Trifork Group.

Looking into Trifork Segment performance on EBITDA or adjusted EBITDA. Then for the year, the 13.1% was disappointing overall seen for the year, but improvements in Q4 with the 16.1% was on the right track, you could say. And despite, you could say, the initiatives that we've been doing with the cost-saving programs that we launched or communicated about back in November. And some of the cost savings already started saving costs in Q4. So of course, that's positive, but other initiatives had an increased impact on cost. And this is then a combination. But in the long run, we're actually well off, we believe, in the track of these initiatives and believe this to improve the coming quarters.

If we look into the Trifork Segment performance on Inspire-Build-Run, then as Jorn talked into, we were really not satisfied with the development in Q4 in Inspire, and that caused us to do some changes. I will come back to that. And Build already talked into. And then Run, the average for the year was 24.5% in EBITDA margin, which was at a satisfying level for the year.

The cost saving program, not talk much more into this. It's following the plan, and we still have the same target with a EUR 10 million saving on the same activity level as in '24. So that's progressing well.

Looking into the Trifork Group performance on EBIT, then it's impacted by the same, you could say, parameters as EBITDA. And the result of that is then an increased margin in Q4 compared to the rest of the year. Overall, if we look into the Trifork Segment, Inspire, and look at the time line, then what you see here is a positive development in revenue, but negative development on the EBITDA level.

Next year, since we have done more actions on Inspire segment here is that most likely we'll see a decline in revenue, but improvement on EBITDA level. So that's the game plan and based on the initiatives that we are now in progress on to lower the risk on EBITDA, but then maybe also not including as much revenue from this as in the past. And this is just a follow-up here on the quarterly level. So no more comments here.

In the Build-based segment, in the same way and the same way of showing this is the bar showing the revenue and the margins being the light blue here. So we saw the drop in the margins during Q2, Q3 and then now an improvement again in Q4. So we believe that we are on the right track in relation to where to go now and that the growth starting again. So this is the way we see this moving forward.

Overall, we here saw more or less the same revenue as in Q4 as last year. So the flat development here. And this is from where -- so you can say Q2, Q3, we saw a decrease, but now we are at par again in the Build. And then the initiatives that Jorn talked about in relation to supporting the Run-based business with the services here in additional services in Build, that's the plan for the growth in the future.

The Run-based segment here, we saw a small increase in -- but from being flat to being an increase from '23 to '24. But overall for the year, we saw the decline, the impact that we saw in Q2, Q3, but now in a better place. And we saw the margins in Q4 being high. That, to some extent, is also seasonality. So usually we would see better margins in Q4, but also overall for the year, we are satisfied with the margins here.

And once again, just to show the historical development to follow the margins over the quarters and to follow the revenue development.

When we're looking into the Run-based segment, we also always look into how it's distributed in relation to own license and support to hosting and securities, which are the 2 most important parts for us. And then we have the third-party licenses and hardware coming on top. So what we see here is that we have a good trend, we believe, now in the 2 first parts, hosting and security and license and support on own licenses, and this is where we focus moving forward.

Then going back to the Lab segment and a little more details here. What you see in the left is the development on EBT in the lab companies. And we've seen that since '16, where we had a negative EBT, then we have had a positive EBT on all the years. And this EBT is a combination of realized and unrealized gains. And what we saw in '24, if we look out to the right is that we increased the realized gains. So even if we divested or if we impaired some smaller investment, then the positive development, both in realized and unrealized gains in the lab companies that are doing well had the positive impact, as you see here.

The reason for us to believe that this dual strength or dual strategy of both having a Trifork Segment and Trifork Labs segment is that we believe that this is a more healthy model for us or a good model for us in relation to -- when looking into the total profit for the company. So what we see here that '23 and '24 actually on net income is more or less on par, despite that we actually lost business or had challenges in the Trifork segment, then by adding on the positive impact from the Lab segment, then they're equal to be on the same net income level, which is a positive seen from our part.

In '24, we also acquired some NCIs and that increased the earnings per share as Trifork now, more of the profit in the company now belongs to Trifork shareholders.

Overall on the Trifork Group cash flow and financial position, then we see that the leverage was a little higher in the end of the year. That was to some extent due to delays in receiving exit proceeds from some of our exits, but also that we had some large deals just in the end of the year, which caused our amount of debtors, the balance of debtors to be somewhat higher than what we usually see. So end of January, the net debt ratio has already now decreased. So net debt reduced by just about EUR 9 million from December ending to January ending.

Just then also talking into here that we initiated a share buyback program of EUR 2 million, which will run in the first half of '25.

And now we move on to questions.

[Frederik Svanholm, executive]

[Operator Instructions] And we will have the first question from Yiwei Zhou from SEB. Yiwei?

[Yiwei Zhou, analyst]

I have several questions, and I'll do one at a time. Firstly, looking at the guidance, EBITDA guidance for 2025, it suggests that EUR 5 million to EUR 10 million absolute EBITDA growth here in the Trifork segment. And you also mentioned that the cost savings expect to generate a EUR 10 million here also in '25. In relation to this, I mean, is the guidance here just reflects caution or I'm missing anything here?

[Kristian Wulf-Andersen, executive]

Well, in relation to the guidance, then of course, you can always be very optimistic and say everything will go right or you can look into '24 and see what happened there. So of course, I mean, we are -- we trust that the cost-saving program will turn out as we expect, and in the end give an annual saving of EUR 10 million. But on the other hand, we also know that part of that is not taking effect until maybe midyear, et cetera. And we also know that in order to initiate that program, we have some cost initially in the year. Some was carried in '24, some was carried here initially in the year, which is additional cost. But we do see that the majority of effect to kick in in '25 and in the guidance that we have.

That said, in relation to, you could say, we also see that we need to continue to invest in business development as we also communicated earlier or during '24. And we do see improvements, you could say, as Jorn also said, in relation to pipeline and improvements in the pipeline, et cetera, but we still believe that we need to invest even more there.

So depending on how fast that kicks in, you could say the impact from those investments, potentially, you could then say, whether it's cautious or if it's optimistic or conservative, then you could say that's the reality we look into. So we believe it's a solid guidance for what we can achieve in '25.

[Yiwei Zhou, analyst]

Okay. Is it possible for you to elaborate a bit more on the amount of the special items or severance payments here in '24 and also your expectation for the special items here in '25? I know you have not sort of separated as one line. But if you can help me understand.

[Kristian Wulf-Andersen, executive]

I think you could say if we do too much in that, I mean, we rather would like to see this as an ongoing part of the business. Because we also see that moving on, that we from time to time, we'll have to adjust the organization, you could say. And as Jorn talked into, then we see there is a change in the market to how we can sell and how we should sell. So meaning that the competencies and the services that we provide to our customers in the past might not be the same as in the future. So we have been transforming in '24. But if that is, you could say, one-off and special item that way, we believe it's better to keep it as part of the business and then included in the guidance.

[Yiwei Zhou, analyst]

And then the next question is on the Danish private segment. You had a double-digit growth here in Q4. Could you elaborate a bit on the -- which business lines or customer vertical have driven the growth here? And also on the public segment here in Denmark, as I recall that you had some sort of nice contract wins, framework wins here in the summertime. But Q4 performance of growth was more or less muted. Is there any sort of change here in the market dynamics or the customer activities here?

[Jorn Larsen, executive]

Maybe I can start answering Kristian, so you can chip in. But you started talking about the private sector. And what I see clearly is a shift from manufacturing into other kind of businesses, such as trading companies, financial banks, et cetera. And not surprisingly because, as you know, the banks has benefited from the rising interest rates. And so we were, you can say, negative impacted when the interest rates were low, but we are, on the other hand, positively impacted now that they are higher, okay?

And -- but also trading. So trading of various things, energy trading. The past years in the world, there has been a lot of changes in energy prices. And when there are big changes in that, there will be companies that specialize in optimizing their business or benefiting, promising from that. And some of these companies have been very successful and now need more structured systems that might also be regulated. So they are preparing for those situations. We are helping them with that. And these energy trading companies are also heavy on data, because it's a lot of trades, a lot of exchanges they trade on, they use a lot of different banks and all that we can help with, you can say, getting lower risk and better dashboarding, better monitoring of that kind of business.

[Yiwei Zhou, analyst]

And my -- I'll do my last question, I'll jump back to the queue and give opportunity to others. And you also mentioned here the -- you're seeing opportunities here in the cyber protection business. And as I recall that you are also under way to divest this business. Don't you see that the change of the ownership or external investors will sort of impact here to capitalize this opportunity.

[Jorn Larsen, executive]

Yes. I think that if I have to mention just one, you can say, downside of being a listed company, where you might -- where we feel the pressure from types -- from guys like you and investors to do strong performance from quarter-to-quarter. I think that the cyber business that we foresaw like 5, 7 years ago would be trending up. And then a year ago, we saw that the market was lacking behind our expectation. And then you were like, "Oh, that's not good Trifork. Why did you do that?" And then we said, okay, we have to do something about that. We might have to divest this business. And now as the world has been moving into being much more in need for cyber protection and also bringing things to Europe, and so now we saw at the end of the year that security for us and security operations center was in higher need, finally, because we were betting on the right trend, but our timing was not right.

So of course, we constantly need to readjust what we want to do and balance the quarter-to-quarter numbers by the long trend potential. So that's what I can say about that now. So in just 12 months, that changed quite radical from our side, what we saw on them.

[Kristian Wulf-Andersen, executive]

Yes. And what we can say is that we had a good trend in the last part of the year. So that part of the business actually then became breakeven, where we, in last year, saw more investments in that area. So that's a positive trend, you could say. And of course, as Jorn is saying, then we want to do what makes sense to our investors in the end and how we create the highest, you could say, profit in the end, whether it then is divesting or it's keeping or whatever, this is an ongoing process. So in the guidance we have for '25, we have not included any divestments or any new potential acquisitions. So that's how you should look at that into the guidance.

[Yiwei Zhou, analyst]

Okay. Just want to clarify, we can rule out that you...

[Frederik Svanholm, executive]

Pardon me. Yiwei, sorry, but it's difficult to counter to, I'm sure, but we have a long list of other people in the line. So if I can ask you to step back in the queue, and then we will take questions from the other people.

[Yiwei Zhou, analyst]

Yes, this was my last question, as I said.

[Frederik Svanholm, executive]

Then we will take the next question from Mikkel Rasmussen from ABG.

[Mikkel Kousgaard Rasmussen, analyst]

Yes. So just 2 from my side. I'll take one by one. First one goes to the license sales, which you saw being delayed from '24 into 2025. I was just curious to see if you could actually elaborate on whether these have already been recognized so far in Q1? Or is there still some uncertainty regarding these licenses?

[Kristian Wulf-Andersen, executive]

So I mean, that's, of course, Q1 numbers you're talking about now. So I guess we cannot say exactly, but just say that what we communicated earlier is still valid.

[Mikkel Kousgaard Rasmussen, analyst]

Sure. Second one goes to guidance for the year. I just noticed that it's still quite narrow. And looking at your guidance history, the last 4 years, only landed within the initial guidance range on the top line one time. So just curious to see or to hear what's your assumptions here, if it's sort of valid to say that the lower end of the sales guidance is more conservative than the higher end is optimistic? And also maybe elaborate a bit on the revenue visibility backlog, because you have quite short duration IT contracts compared to some of your peers at least?

[Kristian Wulf-Andersen, executive]

Yes. I mean, since we don't disclose any backlog information, we can say, as Jorn said, that we are building up the pipeline and that we are now at a much better place than we have been ever before in relation to the pipeline.

In relation to if guidance is more conservative or optimistic in the higher end, I mean, that's more or less maybe answered by the answer to one of the other questions that I did just before. So I think we guide here what we believe is, you could say, conservative and trustworthy from us from our side.

[Frederik Svanholm, executive]

And our next questions will come from the line of Poul Jessen from Danske Bank.

[Poul Jessen, analyst]

Yes. Two questions. One is just to be certain about the cost cutting. You are reducing the cost annualized by EUR 10 million. How much of that did we see in Q4 already? And then secondly, the run rate is then EUR 10 million by mid next year or is it a total EUR 10 million impact on -- sorry, '25?

[Jorn Larsen, executive]

Maybe I can answer from an overview. Okay. So thank you for the question, Poul. I'm sure Kristian will have some comment as well. But as I see it, a few of the cost savings had effect in Q4, such as my reduction in my personal pay that goes immediately and my colleagues in the dealership who did the same. But a lot of the other cost savings, they actually come with an extra cost in the beginning. And also, when you want to move from a bigger office to a smaller office, then you actually also have double cost. And as you know, the EBITDA mechanism we have in IFRS also have somehow a negative impact on that initially. And as Kristian already said, we will be at midyear before the office reduction cost actually kicks in. So we will have to be in Q3, Q4 before we see the full impact on the cost saving.

[Kristian Wulf-Andersen, executive]

And I can just add, maybe Jorn should be the CFO, because he said more or less what I would say.

[Poul Jessen, analyst]

Okay. And that means that the total cost savings aggregated for '25 will be less than EUR 10 million?

[Jorn Larsen, executive]

Yes.

[Poul Jessen, analyst]

Okay. And the extra cost you talk about will be reported as ordinary and not a special item?

[Kristian Wulf-Andersen, executive]

Yes, that's right.

[Poul Jessen, analyst]

Then to the performance, now you once a year give the split on the customers on size. You have -- the largest one is down 17%. The next 9 is down 25%. Is that 1 or 2 customers driving that? Is it equally split? Or -- and then the growth that you then have on from customer #21 and onwards, is that because you're signing up new clients or selling into existing smaller clients?

[Jorn Larsen, executive]

I can start by saying that, Poul, we have a lot more customers now than we had a year ago. And when we start doing IP sales to a customer, they typically start small because a lot of the licenses and the way we do business will increase by when they implement and the number of users on the platform. And the usage, it could be also volume of data and other things.

So we will need -- we will see a number of smaller customers in the beginning that will grow rapidly over time. Back to the story I had with Energy Transfer in the U.S., they have onboarded half of the 9,000 or something like that. And then their cap on the first is 9,000, but then when they buy more businesses, then they onboard more seats, you can say, on the system. But also if we sell more systems to them, more IP to them, then that will grow as well in 2 dimensions. So it starts with a number of new customers, and then they will mechanically grow.

[Frederik Svanholm, executive]

I can maybe also just add a little bit of color to your question specifically on the top 10 and 20, Poul. And first of all, the #1 customer is a Danish public customer, and it actually consists of several sort of different engagements. So we don't see that as one engagement per se. So it's hard to sort of conclude necessarily on the dynamics underlying there. And as you saw on the top 10 and 20 slides that Kristian and Jorn showed earlier, these customers as well that Jorn talked about, I mean, it's a couple of customers where we can see the revenue contribution has declined in 2024 in there. But in terms of the revenue from the remaining companies in the top 10 and 20, there is no sort of significant decline as such. This is more in line with, you can say, the revenue picture we see across the group.

[Poul Jessen, analyst]

And those reducing, is that because that projects has come to an end or is it because they are in a cost savings mode themselves? Or has less jobs?

[Frederik Svanholm, executive]

We have obviously talked a lot about that earlier in the year and both on these calls and in the report. And then in terms of, you can say, the overall engagements in the top 10 and 20, they are -- you can say, there's nothing you can infer about that. Actually, the concentration is also a result of business development across the group below the top 10 and 20, right? And there, we have been quite successful landing new customers in '24.

Next question comes from Mads Quistgaard from Carnegie.

[Mads Quistgaard, analyst]

I also have 2. So first, Jorn, you mentioned some initiatives on how to improve the performance in the public sector. Could you maybe elaborate on the initiatives you're going to launch in '25?

[Jorn Larsen, executive]

Yes. I mean back to COVID, it's not long ago, there we were flat out hiring everyone we could get a hold of. And if you remember, it was really difficult to hire, but our customers were buying because of necessity, everything they could from us, and we delivered everything we could to mainly the business area of the public sector and healthcare. And so we didn't really have any energy in the organization to serve maybe the 90% other public customers.

Now that's different. So now we have a strong appetite to grow our muscle into delivering to public. And one agenda point I have is that I think the public sector in general should reuse a lot more than they do. Because a lot of agencies and customers, they develop their own technology on different technology stacks. And I think there is a lot for them to win by sharing technology across. So in this way, we hope to be -- to help to reduce the budget demand for the public sector, getting the same functionality.

[Mads Quistgaard, analyst]

And then maybe on the U.S., very strong growth in the quarter. I also know that this is impacted by acquisitions. But could you maybe just explain what is starting to work in the U.S.? Or what has been the main driver in the U.S. in the quarter at least?

[Jorn Larsen, executive]

Yes. So that is a number of product areas. So in the U.S., we have reduced, you can say, catalog of service and products. So Karan and his team has selected a few what we call swim lanes. And that's spatial computing, it's Arkyn and it's vision AI and it's AI. And for those, we are quite successful building pipeline and also making contracts and backlog from the pipeline. So it's mainly these 4, 5 areas that we are focusing on in the U.S.

[Mads Quistgaard, analyst]

So all the leads you had in the U.S. in the past is starting to convert into actual contracts now?

[Jorn Larsen, executive]

Yes.

[Frederik Svanholm, executive]

Thanks for your questions, Mads, and thanks for all the questions from the analysts. And to anyone listening in, thanks for your time. We will close it here, and hope to see you guys around soon. Have a nice day.