Nagarro Se

Good afternoon, everyone. Welcome to Nagaro's SE Retail Investor Call following today's earning release for Q1 2024. You should have received a copy of the earnings release for Nagaro's first quarter 2024 results. If you have not received the press release, a copy of the release as well as this presentation is available on nagaro.com in the investor relations section. Representing Nagaro on today's call are Manas Heeman, co-founder and custodian of Entrepreneurship in the Organisation, and Gagan Bakshi, custodian of Strategic Finance. Before I pass you over to Manas, I would like to remind those listening that some of the comments made on today's call may contain forward-looking statements. These statements are subject to risks and uncertainties as described in the company's earnings release. Additionally, please also refer to the earnings release for the notice on reported results that are non-GAAP measures. As in our previous retail call, we will have a short presentation at the beginning and then move on to the Q&A session where you can ask your questions. Nagaro is happy to partner with NetRoadShow for today's call. Now let me briefly explain how you can raise your questions. If you would like to ask a question and have joined the call via Zoom, please press the raise hand icon on your screen. Alternatively, you can use the Q&A chat box to submit a question. And if you have joined the call on the phone, please press star followed by one on your telephone keypad. When preparing to ask your question, please ensure that your line is unmuted locally. We would kindly ask you to stick to two questions. However, you may re-enter the queue If there is time, we will come back to you or follow up on any unanswered questions after this call. With that, it is my pleasure to hand you over to Manas Heeman to begin.

Thanks, Preka, and welcome all of you again to this special earnings call for retail investors for Nagaro for quarter one, 2024. And on behalf of all my Nagaro colleagues, some of whom you see in this picture. I would like to thank all the retail investors who have put their faith in us and actually continue to hold on despite a fairly wild ride in the industry as a whole. The idea today is for us to briefly describe how Q1 went and then to have more time set aside for questions so you can have your specific queries answered. In general, quarter one 2024 was a quarter in which we tried to prove that we can play defense as well as we can play offense. So after a couple of years of very rapid growth in 21 and 22, our focus in 23 and especially towards the later part of 23 and into Q1 2024 has been on profitability. And we have worked on a couple of concepts to drive that, including the organization bonus that we have talked about earlier, but also this aspect of a margin support program, which is a way for us to have our business units take a little bit more responsibility on how the margins are delivered by the company. So the focus is on profitability, but We are also happy that in an otherwise challenging time from the demand perspective in our industry, Nagato has still continued to do fairly well on the demand side. We are happy to say that our clients remain very engaged, energetically engaged with us on existing topics or new topics. And our client satisfaction, as reflected in our net promoter score, remains very high at 66%. There's a lot of conversation and a lot of projects around data and potentially AI, but more around data at this point. Attrition is at historical levels. And in terms of cash conversion and in terms of our cash levels, because our growth has moderated, we have been able to have a better cash conversion and have better cash levels. So that's the general context. You have probably seen the numbers for the quarter already. It's 238 billion of revenue, 8.7% of quarter-on-quarter revenue growth in constant currency, 5.0% year-on-year revenue growth in constant currency. The gross margin figure needs some explanation. You should look at the footnote. We have historically put all the costs that we incur into our global business units as our cost of revenue, which means that it's taken out of our gross margin numbers or gross profit numbers. But as our company has become more mature and has scaled globally, our BUs are also now global. So they've also become more sophisticated in selling. So a lot of our sales costs are now within the GBUs and not outside the GBUs. So we have actually consulted with one of the top consulting firms to re-establish a definition for gross margin, which is more in line with our industry peers, because otherwise you were seeing the shrinkage of gross margin, which was not actually reflecting what was happening at a project level, but it was just reflecting the fact that our GBUs are now moving their sales in from regional structures back into the BU and more consultative selling. So our gross margin as for the previous method for the quarter was 26.8%. Our gross margin as per this new method is 30.9%. We end the quarter with a cash balance of 126 million, and we retain our guidance at roughly 1 billion euro in constant currency terms for 2024, and an adjusted EBITDA margin projected at 14%. So that's kind of where we are, and I would suggest we go straight to questions so that we are able to give more time to the questions. But what I will also do is just tell you that this presentation is also on our website, and you can go and refer to it at any time. With that, Breika, maybe you can repeat the instructions for the questions once more, and we can dive into the questions directly.

Thank you, Manas. We will now begin the question and answer session. If you would like to ask a question and have joined the call via Zoom, please press the raise hand icon on your screen. Alternatively, you can use the Q&A chat box to submit a question. And if you have joined the call via the phone, please press star followed by one on your telephone keypad. When preparing to ask your question, please ensure that your line is unmuted locally when speaking. We would kindly ask you to stick to questions. However, you may re-enter the queue and if there is time, we will come back to you or follow up on any unanswered questions after this call. We will pause for a moment whilst questions are registered. We have a text question from Arturo Lopez. Good afternoon, Manus. Congratulations on the results of Q1. I would have two questions, if you would be so kind. What lessons have you learned during the difficult year 2023, and what lessons do you keep for the future? What is your perspective on Gen AI? There is a lot of talk about its inflammation in enterprises and the huge productivity