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Good morning, and welcome to the Q4 and 2022 presentation of the Atea results. I am really happy to stand here and present these results in an extreme situation.
Revenue came in at NOK 14 billion, up almost 18%. Robert will take you through the breakdown, but I'm especially happy with the services development in this last quarter of 2022. The EBIT came in at NOK 449 million, up 11.5%. But if we adjust for the sale of the shares in the company eRate, which brought in NOK 32 million in Q4 2021, the growth in EBIT is more than 21%.
A fantastic cash flow, which we told you about after Q3, as we are bringing down inventory when supply chain issues have gone back to much lower levels, which leaves us with a healthy cash position as we leave another great year. So you would probably think we have brought down or eaten from our backlog, but that's not true. The backlog is still around NOK 5 billion, but healthy. As normally, I'll leave it to Robert to give you all the good news.
Thank you, Steinar. I'd like to start by reviewing our income statement. Atea had record high sales in all countries and across all lines of business during the fourth quarter. Gross sales were up 17.6% to NOK 14.0 billion. Organic sales growth in constant currency was 18.1%, as acquisitions and changes in currency rates had only a small impact on growth.
Sales were strong across all lines of business. Hardware sales increased by 24.3% with a high increase in shipments across nearly all product categories. Software sales grew by 12.3%, driven by strong demand for cloud subscriptions. Services sales increased by 10% from last year with higher billing of consulting and system implementation projects. Our gross sales are then converted into net revenue based on the principal agent criteria in IFRS 15.
With this adjustment, net revenue according to IFRS was almost NOK 10 billion, up 21.2% from last year. Total operating expenses grew by 11% to NOK 2.2 billion. Growth in operating expenses was due to an increase in the average number of full-time employees and due to an extraordinary item last year. As Steinar mentioned, in December last year, Atea realized a one-time extraordinary gain of NOK 32 million from the sale of shares in an associated company. This was reported as a reduction in operating cost.
Based on exceptionally high growth in sales, Atea's EBIT grew by 11.5% to NOK 449 million. Excluding the extraordinary gain taken in Q4 last year, EBIT in the fourth quarter grew by 21.1%. We'll now take a closer look at sales and profit development across the countries in which we operate. Atea reported record high sales across all geographies in the fourth quarter, as all countries reported double-digit sales growth. In Norway, sales grew by 12% to NOK 3.4 billion, driven by strong demand for hardware. EBIT was NOK 136 million. Last year's EBIT was impacted by the onetime gain of NOK 32 million from the sale of shares in an associated company. Excluding this extraordinary item, Atea's Norway's EBIT grew by 22% from last year.
In Sweden, sales grew by 18% with very high demand across all lines of business. With strong sales performance and lower growth in operating expenses, EBIT grew by 19% to SEK 198 million. In Denmark, Atea continued to deliver on its turnaround. Gross sales in Denmark grew by 19% and EBIT improved to DKK 61 million, almost double the operating profit last year. In Finland, sales increased by 43% with exceptionally high demand from the public sector in each business line. EBIT grew by 72% to EUR 4.5 million. In the Baltics, sales grew by 14% to EUR 54 million, and EBIT grew to EUR 2.6 million. Atea Baltics had high growth in product sales to the public sector in Latvia and Estonia and strong demand for its managed cloud solutions.
Atea Group Functions, which includes shared services and group costs, had a net operating expense of NOK 30 million compared with an operating expense of NOK 1 million last year. The difference was primarily driven by less internal profit from Atea's logistics operations in Sweden and higher corporate costs associated with the company and partner event.
Now a word on our cash flow and balance sheet. Atea's cash flow from operations was an inflow of NOK 1.7 billion in the fourth quarter. The strong cash flow was driven by higher cash earnings, the impact of seasonal fluctuations in working capital and by an inventory reduction of NOK 200 million during the quarter. During the last 6 months, Atea has taken steps to actively reduce its buffer stocks of inventory as supply constraints in the electronics industry have eased. Atea plans to further normalize its inventory balance during 2023, freeing up additional cash flow, which was tied up in the business during the supply shortages.
Moving on to our debt balance. Atea had a positive net financial position of NOK 304 million at the end of Q4 as defined by Atea's loan covenants. This corresponds to a net debt-EBITDA ratio of negative 0.2. Atea's loan covenants require the company to maintain a net debt-to-EBITDA ratio of less than 2.5, which would mean that the maximum net debt balance allowed by Atea's loan covenants was NOK 4.5 billion at the end of Q4.
Atea's net debt balance was, therefore, NOK 4.8 billion less than the maximum allowed by its loan covenants at the end of Q4. The company has significant additional debt capacity before its loan covenants will be reached.
That concludes the presentation of the fourth quarter financials. I'll now hand the podium back over to Steinar to discuss full year results and provide an update on market trends.
Thank you, Robert. Another great quarter at the place to be. I will now discuss some of the interesting observations that we have done, leaving another exciting year and entering a year that promise to be another good year for Atea. If we take a look at the last 5 years, we have growth in revenue on average of 8% and an EBIT of 15%. We are stable, and we have promised to stay that way. As Churchill once said, or at least I've been told he did, the biggest fair of the mall is fare. And I feel that this is part of what people look at when they look at the IT market today.
But let me discuss that further. We showed you previous slide of this from IDC in the Q3 presentation. They call it -- we call it the digital gap. The difference between how the IT market develop and the economy itself. This slide has been updated with 2024. And as you can see, the market, the total IT market, is predicted to grow 5% plus for the next 2 years, even though some companies and the economy itself and a lot of individual people will suffer as the economy is closing zero growth.
The price increases that we've seen, especially on hardware in 2022, will probably not come into effect as much in 2023. In 2022, we've said that somewhere around 1/3 to 25% of the growth comes from price increases. When that is said, we do expect some price increases also in 2023, especially on software, which will help, if you want, the growth numbers.
But let me further discuss a little bit the individual areas. I think the most important part of the hardware area is to say that there is a strong demand. We had 24% growth in Q4. We had massive growth in 2022 on top of a very strong 2020 and 2021. The supply chain problems that had hampered the industry for a long time is not as evident today as it was only 3 months ago. As I said, after Q3, we believe that Q1 will be the quarter where we will no longer discuss supply chain issues. This does not mean that everything is as it was in 2019 or 2018. But they are stable, they're workable and they're predictable.
The market is especially strong on data center and networking. We grew with one of our premier partners in Q4 on networking with 100%. The market is strong. Don't believe the people who say everything is going to the public cloud. We are building out local data centers as we have never done before. This, of course, also drives software as software drives hardware. And this is the beauty of the business model we have. Of course, cloud is an interesting resource for a lot of people. And we have about 350 consultants and experts working with Microsoft and AWS public cloud. But what's more complex is that most of the customers that utilize the public cloud also have on-premise resources, which makes this more of a hybrid or multi-cloud environment, which generate services.
And talking about services. As you saw, the second half of this year and especially Q4 were extremely strong on consulting. This comes from the complexity of multi and hybrid cloud. The other part of our services business is the managed services offerings. 2022 has been an investment year for us on managed services. As most of you remember, entering 2022, we went from a country to a more centralized production organization on managed services, to be more efficient on the invested capital, but also better quality but maybe even more important, faster in services development in the years to come.
We have signed agreements second half of 2022 worth NOK 1 billion that we will implement during 2023, and we expect that sales to increase in 2023. I actually expect Managed Services to contribute massively, especially second half of this year.
I also want to comment briefly because we get a lot of questions on all the firing that's going on in the tech industry. I read a report yesterday that it has now crossed into 100,000 people being fired from companies in the tech industry. As much as I'm sorry for all of those, some of them are actually our friends. I want to say that for Atea as a company, this is a good thing. We can stand on our own feet. A lot of our smaller partners cannot. They will get less help as we go through 2023 and 2024 from the big tech companies, and this will give us a chance to take even more market share. It will also lower the pressure on tech heads in Europe as approximately 25% of these people that have been fired or will be fired actually works in Europe. I'm not saying that I'm clapping for companies firing people. I'm just giving you the interesting perspective from our side.
Another trend or observation is how being social responsible is coming higher and higher on the list of IT purchasing managers. We have worked systematically with this area and environmental questions for more than 15 years. We've been audited every year since 2007 on the work that we do. We're not perfect. We work every day, and we have about 30 people full-time working on this, and it's profitable at the same time as we do a lot of reuse recycling in this area.
I am proud of the work we do every day, but mostly maybe from the Global 100 price that we were given at the World Economic Forum this month. They rate the 100 most environmental-friendly companies in the world with more than $1 billion of revenue. We came in for the second year in a row among the 50 highest, this year 49. But believe it or not, we were rated as the #1 of all IT services company in the world with a revenue of more than $1 billion.
We work on our own footprint. We work together with our customers on their footprint, and we work to develop services and products together with our partners that will bring a better future.
The last area I want to discuss is our people. I believe that most of the people looking at this that do not work in Atea underestimate the power of the culture in the company. And the reach that, that gives us around in every small and big city in the 7 countries that we do business and even beyond that as we follow our customers out in the world in all the corners of this globe.
We have massively worked over many, many years to build a culture of extreme delegation and ownership. If you want to learn more about what we do, you know who to contact. We often get questions about how we allocate and how we think about allocating our cash.
First of all, I'm happy to say that we will propose for the general assembly to increase the dividend from NOK 5.5 to NOK 6.25 per year with 2 installments in the same way and process as many years. We have bought back about 1.8 million shares to use for incentive programs, and we will ask AGM for the same opening. We don't know if we're going to use it, but we're going to ask for it.
Our CapEx is less than 1% and will stay that way. We are more than happy with what we are around 0.7% to 0.8% of the revenue. It gives us the headroom to do investments internally.
M&A right now, it's difficult to agree or match on price expectations. But my experience going through many difficult periods, even not just like this one, is that when we get further into that, the prices will fall. We expect to be active on the M&A side in the year that we've just entered.
So looking at the full year, a very, very good year. 16% growth on revenue, more than NOK 46 billion. But maybe even more impressive, the growth of 16% gives us a growth of NOK 5.5 billion, a growth of more than NOK 5 billion, you're going to have to search very hard to find a competitor that have a yearly revenue of the same number that we had in growth. EBIT of NOK 1.2 billion. We leave the year very happy.
With that, I will hand over the word to our Chairman. As many of you know, Ib always gives a word after the year close. Ib?
Thank you, Steinar. Dear colleagues, dear fellow shareholders and all who are watching this online, as Steinar just said and as you know, it's a tradition that I had the presentation of Q4 and the full year show up and give you some comments on the situation in Atea and the major events of the past year.
A lot has been said about 2022 because it has been a very special year with a lot of challenges, some of which we have not seen for a very long time. Let me just mention, war in Europe, energy crisis, delivery problems, certain price increases that we could not pass along to our customers, inflation, interest rates, fear of recession, salary pressure, et cetera, et cetera, name it. A lot of challenges to be managed in a short period, many of which challenges we had little influence on, but still needed to act on.
On the other hand, we are set in the world to handle the challenges and face that business one way or the other. We must foresee the problems and act accordingly because at the end of the year, it can be nice with excuses, but they are seldom appreciated.
That said, it's not necessary for us with excuses for our results for 2022 as we came through with flying standards due to the right strategy and the right people. Because, as you know, our business is people business. Let's look at the figures. The management has been through it in details, but I think we should focus on a revenue of NOK 46.7 billion. That's up 16% from last year and an EBIT of NOK 1.2 billion, up 14% from last year. We are not commenting on what we will reach this year, but I would be very disappointed if we do not pass NOK 50 billion in revenue.
So it's very good results compared to the business that we are working in and to all the competition. It shows us what Atea is. It's a very stable, always growing year-over-year, focusing on the right customers and the right products from the world's leading suppliers.
We are by far the biggest player in the Nordics with a market share of about 20%. And the major part of our revenue is coming from the biggest companies, public as well as private, which give us a very stable platform also in difficult times. We think that it's very important for all of us to be part of the sustainability agenda and thereby taking part in the worldwide responsibility for a better tomorrow. Steiner has been in it already, but I think that it's very important for us. We have, for many years, prioritized these areas and invested a lot of effort in order to improve year-over-year. And again, this year, Atea is named among the world's most sustainable companies.
Overall, we are #48 -- sorry, 49 of the Global 100 index of companies with over $1 billion in revenue. However, in our own business area, which is, of course, the most important thing for us, the IT Service division, we are recognized as the world's most sustainable company. Quite an achievement and now for the second consecutive year.
So what type of company are we today? I will allow us to call us a value share because we have shown growth, organic growth stability, profitability and willingness to pay aggressive dividends and sales still sustain a very strong financial situation. So we can make the acquisitions that we want.
The nice results means that the Board will suggest to the General Assembly that we pay out a dividend of NOK 6.25 per share in the normal 2 installments, May and November. That will also leave a lot of money in the company for the acquisitions that we might want to do.
For our shareholders, the share price is, of course, important, not least to the biggest shareholder. And if you look at Atea, our results that keeps improving and has never been better, it's stability, it's organic growth year after year, and it's a policy of paying significant dividends. That should give a nice share price. But it's then difficult to see when you see the actual share price. I know that tech shares have fallen a lot, but is Atea a tech company? We are, of course, working with IT products and solutions, but we are as much a consulting company, advising our customers in the art of infrastructure, digitalization, security and a lot of business central issues. However, we don't own products or software, but advise a specific customer on what's best and then recommend the right products and solutions.
We work with all leading suppliers, but we are married to none of them. So we'll never be obsolete, old fashioned or overtaken by new technologies. We will just select the best supplier for our customer. That is the strength of Atea and that's perhaps why it's difficult to put us in the box with others. And that's also the reason that I'm disappointed with the share price. But let's see if our good results this year can change that. It would be fair to all of us.
So finally, I want to thank all of our 8,000 managers and employees for a fantastic job done under difficult circumstances. You deserve our gratitude. So keep up the good spirit and your dedicated work. I hope you all agree that this great company is certainly the place to be. And once again, all shareholders can be very satisfied with your achievements. So thank you and a happy continuous New Year.
Thank you, Ib. So that concludes the Q4 and 2022 presentation. Rob and I will now take questions both from the audience and from online. So I give it to you guys what are people wondering about.
Thank you, Steinar. Thank you, Robert. We've definitely got some questions here. So I'll just start here. For 2022, you did not land on NOK 1.2 billion. Does this mean that you are disappointed with that?
I hope I don't look like a disappointed man. Coming $400,000 shy on NOK 1.2 billion is not a disappointment. So no, I'm very happy.
Good. Another question here. On the 5% growth numbers that you showed from IDC, how much of that is actually price? And how much of that is volume increase?
So for the year that have passed, we believe that for us, about 1/3 of the growth comes from price increases. The 5% growth in 2023 that IDC are speaking about in that slide, in that report is not coming from price increases. It comes from a strong and healthy market. We hope to grow faster than that.
I think that Ib discussed that in his discussion. And we believe that software will have a price increase that will, especially for the second part of this year, that will give us some help, so to speak. But the 5% that IDC are discussing in the report is not including price increases.
A Separate question. What type of M&As are you looking at? Are you looking to strengthen existing regions or new regions? And is it software or hardware versus services?
So our primary focus, as I've always said, is the geography we're already in. That's where our customers are. When we look at that geography, we are looking at companies that know something that we don't or where we do not have critical mass. That knowledge could be about software or hardware.
But the most important thing for us is really that it is something that our customers are asking us for where we're not able to 100% fulfill that demand. So this is our primary focus, and this is what you've seen over the last couple of years. We do have the opportunity to go outside our geography. But the primary focus is inside. We hope also to take a step out.
Very good. New question. CapEx increased quite significantly during the quarter. Can you please help us understand what you've increased investments in?
The growth in CapEx is coming from data center investments as we won new contracts, and it's come from just internal investments in facilities and other IT equipment that we use internally as we've been bringing -- increasing the number of employees that we have in the company and as people have been returning back to the workplace, we've been doing some renovations and other facility improvements. But it's been physical assets.
I had a question on the way over here, which is kind of a related question that I know I've gotten from some other shareholders as well about whether we're capitalizing a lot of internal development costs, i.e., employee costs, and putting that on the balance sheet.
The answer is no. Atea is not a development company. We don't have an R&D team developing our own products. We have a couple of very, very, very limited resources doing that kind of work. But that's not what we do. We're a reseller of other people's technologies. So we don't have internal development expenses, which are being capitalized. That kind of expense is in the single-digit percentages of the total CapEx spend. And no, that's not where the CapEx growth is coming from. It's coming from physical assets in the data center and also to in the workplace.
Okay. A new question here. Steinar, you mentioned data center investments. Can you help us better understand which geographies and the demand for local cloud and infrastructure is seeing the fastest growth?
So it's interesting when we talk to friends around the world because they don't really understand, I think, fully the customer mix that we have and the influence that have on what we do every day.
So our biggest customers have for years been the defense organizations in the different countries. Hospitals, tax associations, social security, police, these customers, large central government customers, which we have more of in Norway, Sweden, Denmark, Finland than in most parts of the world are not utilizing public cloud the same way as SMB and private people do. So most of our data center investments goes to customers that has a different opportunity to utilize the public cloud. These customers, especially if you look at Sweden, are not allowed to use public cloud. Some of them are testing and doing some investments.
And to give all the investors looking at this broadcast, about 10% of what we do which, of course, is a big number because we have a big revenue, about 10% of what we do is direct resell of public cloud. When that is said, a lot of the consulting work that we're doing is actually bridging the gap between the local and the public cloud, which we call hybrid cloud. But it's the customer mix, and people have to understand that. That's -- from that customer mix is where our discussion and answers come from.
We got time for 2 last questions here. So in light of the proposed dividend. Can you please help us understand your capital allocation priorities going forward? And you -- Steinar at the same time, you mentioned tougher times for some of your competitors. Could Atea be a better home for some of these companies?
Robert, do you want to discuss the capital, which I briefly discussed in my presentation?
I don't really know how much more there is to say about that. We've increased the dividend. It's -- so the increased dividend is now NOK 6.25. It's over 80% of the net profit after tax. We have -- we're asking for an authorization to continue the share buybacks, although that is just made on decisions made discretionarily by the Board. M&A is an area that will be active, but this is also too opportunistic. And CapEx is something that has been stable and we expect to be stable at around 0.8% of our gross sales. So there's not much more to say about it.
When it comes to could we be a home for good colleagues in the industry, the answer to that is yes. We think it'll create some opportunities that others are not as prosperous as we are. On the other hand, we will still be careful. The world is unpredictable. And even though we have been steady when it comes to the total numbers, there is not lack of challenges that we have to tackle during a year like 2022 and we expect 2023. But more than happy to take on good people.
And final question, you seem confident on the market for 2023 and beyond. What do you base this on?
I base it on a lot of data points. First of all, as I think I mentioned, I should have mentioned the backlog in or leaving 2022 was actually 5% higher than coming into the year. So over the 12 months, we have increased the backlog. The backlog leaving 2022 was 85% to 90% sold the last 4 months, meaning that the data first data point is we have a high backlog.
Secondly, the backlog consists of sales only the last months. Thirdly, IDC as one of the global companies investigating this are saying that we will grow by 5%. The market will grow 5%. We are now almost half into Q1. We see no slowdown. Our discussion with our customers are not changing, if to anything, to more interesting discussions.
The world has not finalized its digitalization. We've just started and the pandemic has shown people the power of digital technology. So there is a lot of things that help us going forward. I also want to mention that the supply chain problem that we've had over many years now has become much, much better, much better. It's not exactly how it was, but it's better. But what's most important is it's now predictable. So we will hopefully not discuss the supply chain problem in quarters to come.
So a lot of good things, challenging, but a lot of good things, and we hope that will give us a really, really good 2023.
With that, my friends, we close this presentation of the Q4 and full year 2022 results. We hope you liked it. We'll see you next time.