Netcompany Group As Adr

Hello and welcome to Net Company's interim report for the first nine months of 2024. For the first part of this call, all participants sign a listen-only mode. Afterwards, there'll be a question and answer session. To ask a question during the Q&A, please press five star on your telephone keypad. This call is being recorded. I'll now turn the call over to your speakers. Please begin.

Good day and welcome to this presentation of NET Company's results for Q3 2024. My name is André Rogaczewski and I'm the CEO and co-founder of NET Company and I'm joined today by our CFO Thomas Johansen. And before we get going, there are some important disclosures that I need you to read through. So could we please have slide number two, please? I will pause for 30 seconds here and let you all have a read through of these important disclosures. And with that, can we please go to slide number three, please? The topic of today's presentation is our performance for Q3 2024. I will walk you through the business highlights for the third quarter and our financial guidance for 2024. Once I'm done, Thomas will go through the numbers in greater details before we open the call up for questions. And can we have the next slide, please? In Q3, we grew revenue by 10.4%. Once again, growth was supported by the ongoing recovery in the Danish part of the group, as well as continued growth in the company Intersoft, Norway and in the Netherlands. And in the first nine months of 24, we grew revenue by 8% in constant currencies. Gross profit in Q3 grew 24.5% in constant currencies, yielding a gross margin of 31.1%. which was an improvement of 3.4 percentage points compared to the same period last year. Adjusted EBITDA grew 40.1% in constant currencies in Q3 2024. And the adjusted EBITDA margin increased 3.9 percentage points to 19.1% in constant currencies in the quarter. The increase in margin was a result of continued recovery in the Danish part of the group and improved performance in Net Company Intrasoft, Norway, and in the Netherlands. We added 328 full-time employees when comparing to the same quarter last year, bringing the total FTE number to 8,088, an increase of 4.2%. And can we have the next slide, please? During the third quarter of 24, we have won several new contracts, of which I'm mentioning a few here. In Norway, we have been chosen by the Norwegian Ministry of Foreign Affairs to deliver a new case management system. The system will ensure efficient and secure handling of export licenses and sanctions. Furthermore, the system will simplify in cooperation with other public authorities. The project will be based on our MPO platform. In Denmark, we have been selected by Combet for the implementation of the new Danish CAS benefit system. The new system is set to take effect from 1 July 2024. The Danish Ministry of Foreign Affairs has selected us to the sole service provider for a new framework agreement. The agreement covers a number of services for the key systems within the Ministry of Foreign Affairs. And in the UK, we've been selected by Leonardo to migrate applications to a secure public cloud. Slide number six, please. In the company Intrasoft, we have also signed several new contracts in the third quarter of the year, of which we have highlighted some here. In the EU, we have been awarded a five-year framework contract with the European Union Intellectual Property Office. The objectives of the contract are to provide the necessary services to enable successful implementation of IT-related projects and to deliver maintenance services of day-to-day operations. In the public segment in Greece, we signed a supplementary agreement with the Technical Chamber of Greece to increase the scope of the initial contract regarding the Unified Digital Map and the National Infrastructure Registry. Furthermore, we have signed a two-year maintenance agreement with Information Society And in private segment Greece, we signed a contract with HEDNO to develop a central unified data platform for analytics and big data applications. Also in private segment Greece, the payment institution Otropay has selected us to provide a core banking system. And can we have the next slide, please? In Q3 2024, we have employed an average of 8,088 employees, which was an increase of 4.2% compared to the same period last year. And in Denmark, the number of employees decreased compared to Q3 last year, but during the quarter we welcomed 191 new employees to our offices in Denmark. Employee growth in the Netherlands and their company Intrasoft was 11.8% and 8.3% respectively. And churn for the last 12 months was 17.5%, which was in line with the period last year. Can we have slide eight, please? For the first nine months of 2024, we grew revenue by 8% and realized an adjusted EBITDA margin of 17.1%, both in constant currencies. We maintain our expectations for the financial performance for 2024 and expect revenue growth for the group between 7 and 10% and adjusted EBITDA margin between 15 and 18%. We increased the share buyback program for 2024 from at least 700 million DKK to 800 million DKK and initiate a new share buyback program of 250 million DKK to be executed by 24th of January 2025. Furthermore, we reiterate our mid-term targets. And with that, I will pass the word to Thomas, who will give us a more detailed view on the financial performance in Q3 2024. Here you go, Thomas.

Thank you for that, Andre. And like already mentioned, I am the CFO in Net Company, and I will go more in details with the financial performance for Q3 2024. So if we move past the breaking slide number nine, and if we then go into slide number 10 in one go, please. So André has already spoken to our performance in general terms, and I will give more details for the performance in Q3. In Q3 2024, we increased revenue by 10.4%, both in reported and in constant currencies. The growth was driven by continued recovery in the Danish entity and continued growth in NET Company Intrasoft, NET Company Norway and NET Company Netherlands. Revenue in Denmark increased 12.1% driven by an increase of 13.1% in the public segment and an increase of 10.4% in the private segment. The improvement in both segments was driven by increased utilization and usage of platforms. For the first nine months of 2024, revenue in Denmark grew 8.4%. Net company Intersoft continued its good start of the year and grew revenue 10.2% in the quarter. The growth was driven by the public and EU area that grew 13.9%, despite a tough comparable. In Norway, revenue increased 25% driven by a 37.9% increase in the public segment, which was then slightly offset by an 8.4% increase in the private segment. In the Netherlands, we also continued the strong growth from the beginning of the year and grew revenue 29.9%, solely driven by the public segment. In the UK, revenue declined 7.2% compared to the same period last year. This decline was a result of continued slower than anticipated ramp-up on larger engagements. Can we move to the next slide, please? The gross profit margin increased by 3.6% to 31.4% in Q3 compared to the same period last year. The increase was driven by better margins in Denmark, NITCOM and Intrasoft, Norway and the Netherlands. In Denmark, the gross profit margin reached 42.1% in Q3, which was an increase of 1.8% compared to the same quarter last year. The improvement was driven by better utilization. The margin in Net Company Intrasoft increased 3.7% and reached 20.6% in Q3. In the UK, the margin was 20.7% compared to 21.9% in the same quarter last year. The lower margin was a consequence of approximately 7 million Danish spent on savings payments, and adjusting for this, the gross profit margin would have been 25.6% in Q3. The margin in Norway increased 22 percentage points in Q3 compared to the same quarter last year. The improvement was driven by better project execution, better utilization and a part of license fee income. In the Netherlands, margin increased to 36.1% in the quarter compared to 25.5% in Q3 last year. The increase in margin was a result of continued focus on joint projects and improved utilization. Can we move to the next slide, please? Adjusted EBDA margin before allocated cost from headquarter increased 4.1% to 20% in Q3 2024. And for the first nine months of 2024, the margin increased 2.5% to 18%. In Denmark, margin increased 2.3% to 28.8% in Q3 2024 compared to Q3 last year. The increase was driven by better utilization. The margin in NET Company Intersoft increased 3.3% to 11.6% in Q3. The increase was solely driven by improved performance and utilization, as NET Company Intersoft did not recognize any license revenue in the quarter. In the UK, EBITDA margin reached 10.2%, and the decline compared to the same quarter last year was driven by lower gross profit margin, as already explained. In Norway, margin improved significantly by 28.1 percentage point as a result of an improved gross profit margin. In the Netherlands, margin continued to improve and reached 23.6% in the quarter. The increase was driven by the improved gross profit margin and administrative costs being on level with the same period last year. Can we have the next slide, please? Work in progress increased by half a percentage point to Danish 1.25 billion in Q3 2024. As a total, the combined work in progress, pre-built invoices and trade receivables increased by 7.5% to 2.258 billion in line with revenue development for the last 12 months that increased 7.1%. And can we go to the next slide, please? Free cash flow was 145.3 million Danish in Q3 2024 compared to 100.4 million Danish in Q3 last year. The improvement in free cash flow was driven by improved EBITDA, slightly offset by the development in working capital changes. The development in working capital changes was mainly caused by tying up of work in progress due to payment terms, which was somewhat offset by the development in trade receivables. Leverage was 1.5 times in Q3 2024 compared to 1.6 times in Q3 2023. Can we have the next slide, please? Revenue visibility improved 7% to Danish 6.278 billion, of which contractually committed revenue amounted to Danish 1.335 billion and non-contractually committed engagement amounted to Danish 80.9 million. Visibility increased by 8.1% in the public segment and 4.7% in the private segment. In the first nine months of 2024, we have realized a lower amount of license revenue compared to the same period last year. For the full year, we expect license revenue to account for at least 1% of the total revenue, with a potential upside. This implies that license revenue in 2024 will be more back-end loaded than in 2023, which naturally also impacts revenue visibility. We continue to see an indication that public entities and private companies are increasing their willingness to increase their IT investments. And with that, I've concluded the detailed financial walkthrough, and we will now open the call for questions. So if we move to the Q&A slide, please, and open the call for questions. Thank you.