TietoEVRY Oyj

Good morning and welcome to Tietoevery's first quarter earnings webcast. My name is Tommi Järvenpää, the head of Tietoevery's investor relations. Today, we will go through our earnings development and outlook. In addition, we will discuss the news from this morning regarding Tietoevery Banking's strategic review conclusions. With me here today are our President and CEO Kimmo Alkio and CFO Tomi Hyryläinen, who will next go through the highlights and results of the quarter. Kimmo, please go ahead.

Thank you very much and a very warm welcome on all of our behalf to our exciting results announcement. Q1 characterized as performance as anticipated and naturally we'll go through thoroughly the conclusions of the strategic review of Tietoevri Banking. Furthermore, to open up the characteristics of Q1, we had growth of minus 2%, impacted by the soft macroeconomic environment, high comparison figures, and fewer working days. Overall, very much as anticipated. We did experience healthy growth in Tietoevri Banking of 8%, and in Tietoevri Industry of 4%. Indeed, Q1 was characterized by exceptional headwinds, and we'll be today sharing our perspectives that we do expect to be returning to growth in the second quarter. Profitability-wise, resilient performance, 12% profitability supported by improvements specifically in tieto-evri banking, and continued healthy profitability level in tieto-evri care. Regarding tietoevery banking, strategic review concluding, timing currently not optimal to maximize shareholder value through a listing or sale. Furthermore, the strategic review of tietoevery tech services on schedule with the previous announced timeframe aiming for conclusions in the second quarter. And we'll talk about the strategic reviews naturally a great deal more. In this era, good to provide perspectives the company has on the market side. Market characteristics remain consistent, very similar. Practically, the softness impacting specifically- The shorter-term consulting engagement is very much a phenomenon we see, I believe, in the industry across regions around the world. Furthermore, customer agenda, given the macroeconomic conditions, customer's attention continues to be a great deal on resilience, optimizing run costs, seeking for investments for future technologies. We do see stable demand for software and the technology services, whereby optimisation agenda is active. And we are highly mindful, I'm sure, like any company currently on the geopolitical environment, and we continue our maximum support towards our colleagues in Ukraine. And we confirm the perspective and good to see the momentum customers have On artificial intelligence and the combination of cloud modernization, these continue to be the top drivers and opening up interesting future opportunities. From a customer reference standpoint, pleased to report exciting wins across all the businesses in the first quarter. More and more characteristics around artificial intelligence, more and more characteristics around automation. Maybe one case to share here openly is around this very exciting Tieto Every Care AI-based development for rare disease research. already starting to provide tangible benefits for the hospital staff, very close collaboration with the Helsinki University Hospital. That's just an example whereby our teams go very deep with the client on improving the capabilities through artificial intelligence. This is one characteristic of the deals we are winning. Second factor would be on cloudification across the businesses, whether we think about SaaSification and software. whether we think about the impact of cloudification in the categories of managed services. So overall competitiveness Q1 at the healthy level. Then we move to a big topic naturally for today, updates on the strategic reviews. And I'd like to begin naturally with the banking side. The strategic review has been concluded. As mentioned earlier, timing currently not optimal to maximize shareholder value through a listing or a sale. And I'd like to naturally elaborate on this a great deal further. The current capital market conditions are not seen optimal for a sale or listing of a fintech software business. We have seen fintech peers trading significantly below their long-term valuation levels. Furthermore, we anticipate to be achieving higher value of theater banking in a more favorable market and by developing its performance further within the group as a specialized business towards a leading and a strong position within the category of fintech software. And we'll naturally and are aiming for continuous performance improvement, building also on a solid start for the year 2024. Tieto Every Banking has become more advanced in its operational independence as part of the strategic review process and the business is well prepared for strategic value creation opportunities that may arise in the future. We naturally have monitored the capital markets dynamics throughout the strategic review process, and the process proceeded with both listing and sale options as communicated earlier, and the final conclusions were made now, prior to starting formal EGM process. I'd like to confirm that we continue to develop the independence and resources of banking to pursue the international fintech market opportunity. The banking operational agenda and focus remains fully intact, building competitiveness on the platform and software side, seeking for further growth and scale opportunities and naturally continued performance improvement being on the horizon. So these would be the main highlights behind the decision, and to confirm, which mentioned earlier, very importantly, the market opportunity in fintech software for our banking business operational agenda fully intact to continue the attractive opportunities we have in the marketplace. Regarding tieto-evri tech services, the strategic review is progressing on plan, and naturally in this aiming at a potential sale or listing as a spin-off, and we'd like to confirm that the sales process is proceeding with a high engagement level, and we remain firm with the objective of reaching strategic review conclusions in the second quarter, within which we naturally are in already. So that would be a prompt update on tech services. And we'd be naturally coming back on the topic when conclusions are reached. If I may move forward to our business highlights. The basics on the growth side, profitability mentioned earlier. I'd like to confirm healthy cash flow from operations of 72 million. Backlog stable from the fourth quarter level, somewhat impacted in the first quarter by the timing of large contract renewals. and, naturally, the market dynamics are a factor. We did comment, naturally, earlier in the opening, we anticipate to be returning overall to growth in the second quarter. Then, naturally, of a lot of interest per business, how the year has started, Tieto Every Create, this is naturally the type of digital consulting domain. This is the business with the highest impact from the software market and fewer working days, as this is time and material-based typical consulting business model. And Overall, as we reported, exceptional development in the growth side, negative 5%, profitability of 13.1%. We are engaged in a number of very interesting and increasing number of AI-centric projects. business cases and project with customers, and naturally are anticipating in this business to be seeing somewhat of a bounce back on the economy and then be getting back into a real growth trajectory. That objective naturally remains intact. On the banking side, absolutely continued healthy performance, healthy growth, improved profitability from the prior year. Within banking, growth from the banking as a service, the core banking side, also from financial crime prevention, as well as in the cards business. Strong portfolio overall. Profitability improvement supported by also cost optimization measures, which are partly offset by high inflation and also cost resulting from the legal separation conducted. And to confirm here also, which mentioned earlier, very, very important in all our thinking, continue to be developed the business towards a strong position in international fintech, and that agenda remains fully intact. In the case of Tieto Every Care, we had quite an exceptional quarter on the revenue side due to high comparables from a year ago, eight percentage point impact from last The professional service is specifically driven a year ago by the social reform in the country of Finland. Within the business mix, healthy growth in welfare, we have seen good progress and good win rates around the social care reform. We are comfortable with the future out-of-care business, and we'd like to highlight that we do expect to be returning to growth in the second quarter year. in the second quarter, which is well underway naturally. In the case of Tieto Every Industry, overall solid performance, very much according to our expectations, growth of 4% driven by the data platforms and education, that interesting business mix of software and platform-centric businesses within industry, and overall fair to highlight that the profitability A bit challenged due to higher subcontracting and impact of inflation. We see good opportunities moving forward also in the case of industry. Then we go into tech services, business with growth headwind, improved profit margin, very importantly. we did experience exceptionally low revenues of minus 7%, driven by the combination of slow market impacting the data and application services side, volatility in the hardware software resale as part of end-user services, and naturally by the fewer working days in the first quarter. On the other hand, on a positive note, cloud and security services growing 10%. That shall be a future growth contributor. And to confirm, we anticipate growth to improve in the second quarter moving forward. With this in mind, I'd like to conclude the summaries of the businesses and over to Tomi.

Thank you, Kimmo, and good morning. So as mentioned, our Q1 performance came in very much as anticipated with minus 2% growth and healthy 12.1% profit margin. We did have quite significant headwinds during the Q1, impacting our performance as mentioned. Our working day adjusted growth for Q1 was negative 0.6%. One-time items of 15 million for Q1 consisted mainly of strategic review costs and capacity reduction costs to address the lower market demand. Financial impact of the ransomware incident for Q1 was, as earlier communicated, revenue impact being approximately 1.2 million and incremental operating cost to restore customer services of approximately 1.1 million, which we are reporting in the category of one-time items. We have received some customer claims and have an ongoing dialogue with our insurance company. In Q1, our corporate income tax percentage was 24%, which is slightly higher than normal. This is due to the legal entity restructuring activities, and the impact is one-time nature, so this is only impacting our Q1 corporate income tax rate. On cash flow side, we delivered healthy cash flow in Q1 with 72 million of operative cash flow. Our working capital developed favorably with decrease of 3 million. And to note, this quarter also ended on a weekend, same as in Q4, which increases the AR levels, the sizing, you recall, 50 to 60 million. Compared to prior year, our net financials paid, so impacting the cash flows, were up by 9 million, driven by higher net debt. This is mainly due to the acquisition of MentorMate, as this is comparing to prior year, as well as increase in interest rates and timing of interest payments. Interest-bearing net debt decreased from Q4 to 880 million, with net debt EBITDA being at 2.2. On personal side, our rolling 12-month attrition continued to decrease, being 9.4% at the end of Q1. However, the quarterly attrition remained stable from Q4. Net personnel decreased by approximately 270 FTEs from Q4. This is mainly driven by the capacity management performed in CREAT to address the current market conditions. Our new higher level of approximately 600 FTEs in Q1 also reflect the lower attrition levels as mentioned and the current market conditions. We expect the group level salary inflation for the year to be 4.5%. Previously, we said between four to five. So this is specified more towards the middle point of that compared to 5% in 2023. Next, I'll summarize the performance drivers for Q2. On growth driver side, Most importantly, we expect to be back to growth in Q2, as mentioned. Consistent with Q4, the weaker economic environment will continue to impact create and tech services. We do see continued good momentum in banking and industry into Q2, and care will return to growth. This is supported by the normalized comparable and a small tailwind from the working days as well, despite the healthcare reform continuing to impact the demand in the care business. Tech services growth is expected to improve from Q1, which is supported by normalized hardware software resale, comparable, and tailwind from working days. On profit drivers, we see continued benefit from the efficiency measures, which we executed during 23, and consistent with prior quarters, high technology cost inflation continues to impact especially banking and tech services. Similar to prior year, annual salary increases take full effect from 1st of April, so full impact into Q2. On the other drivers, FX impact is expected to be positive 5 million on revenue level and working day impact to be positive plus 1.2% impact to growth. Then to Q2, profitability outlook for business. Tech services is expected to be above prior year profit level with banking and industry expected to be at or above prior year level, and create and care expected to be at or below prior year profit levels. Back to you, Kim.

Thank you, Tommy. I'd like to, before going into the kind of future outlook, a way forward highlighting on our sustainability program, the updated objectives that we call sustainability pledge. We have three focus areas we are building from the kind of strong agenda we have had in recent years, specifically focusing on climate action and continuing on that side, the ethical conduct, number of priorities and around social impact. And the key focus areas, as mentioned, as a continuation from the work conducted in prior quarters and prior years, very much around the energy management, carbon emissions and circularity. Furthermore, in the ethical side, Overall, the values, integrity, and very importantly, cybersecurity and responsible AI will gain further attention. And in terms of social impact, continued attention on diversity... equality and inclusion. So these continue to be big and also the human rights and labor rights, also in terms of our operating value chain as well. And we'll be reporting on this progress naturally on an ongoing basis. Then in terms of our bit of a summary, our way forward, we continue to advance on specialization with all specialized businesses. performance we have seen in a somewhat of a soft market being well resilient, and as mentioned, a number of time expected to return to growth in the second quarter. We will pursue all main strategic objectives very consistently for banking while it operates within the group. And To confirm, we anticipate to conclude the strategic review of tech services in the second quarter and a lot of attention going on into AI across all our businesses in terms of both building customer solutions, providing kind of services for clients, and naturally AI as an enabler of driving productivity in the company as well. So this would conclude the CEO and CFO summaries and over to the Q&A.

Thank you, Kimmo and Tomi. We are now ready for the questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Sami Sakamis from Danske Bank. Please go ahead.

Hi, good morning. I have three questions. We'll take these one by one. Starting from separation of banking, can you please help us understand a bit more what has changed? It was only one quarter ago the board decided on the demerger by 1st of July. So have market conditions really changed so much during this quarter? And then maybe if you think about banking going forward, do you think you might revisit the separation sometime in the future when market conditions are more ideal? And then could there be implications for some of the preparatory measures that you have taken, such as the legal structure?

Okay, thank you very much, Sami. So let's take the three components. So on the first one, we have, as you would anticipate, we have naturally monitored the capital market dynamics throughout the whole process. And as communicated earlier, the process has proceeded with both the listing and sale options. And the final conclusions were made now prior to starting any formal EGM process. So all the factors coming together in that sense in a timely manner, And indeed the time for the board of directors to make the decision moving forward. So very importantly, and as we are confirming in our release, we are mindful on any potential strategic avenues moving forward. But we'd like to also be clear that the strategic review process is concluded. There's a clear agenda for banking currently. And as we move forward, we shall be open for strategic alternatives to maximize shareholder value. That message is hopefully also clear. In terms of the implication of the preparatory measures, so that sets a fine foundation that we continue to build the independence of banking, and actually we'll be looking at making sure that short-midterm we optimize the structural setups that we have a high degree of kind of mindfulness on the efficiency as well. So that would be maybe some of the short commentary. Glad to go deeper if you'd like.

Okay, thanks. And then moving on to the ransomware attack, you booked one million in extra costs and there was one million euro revenue loss in Q1. Can you provide guidance for Q2 and can you comment on the magnitude of the claims that you have received from some customers?

Yes, so if we start from the revenue impact and the sort of additional cost, the incremental cost, so the incremental costs are pretty much there, final. As we communicated also, we restored majority of the service already by mid-March, so that tells you as well that most of that incremental cost is already there. In terms of some of the SLAs that will come in, there's probably a small piece which will impact in Q2, nothing at all material, nothing of significance of millions. Then, in terms of the claims, we don't now, of course, publicly talk about that process. Okay. Yes. Yeah, sorry. Yeah, go ahead. Yeah, so I was meant to add that other than what we have said, that we have received a few claims and we're naturally looking at those together with our insurance company.

Okay, and then finally, if I look at your Q2 guidance on margins for banking and care, even though you suggest a stronger top-line momentum, you're maybe a bit hesitant on margins. Can you explain your thinking there?

So Q2 margin dynamics, as you probably I mentioned before, and you recall that the salary inflation is the main component sort of driving a bit the margins down in all of the businesses consistently. That would be sort of the large dynamics and then... Further than that, there's of course some of the comparables, which will ease up, and the working days will start to deliver benefits rather than headwinds.

Okay, thanks. I don't have any further questions.

The next question comes from Christopher Bejan from DNB Markets. Please go ahead.

It's Christopher Bejan from DNB Markets here. So you alluded to it, but you've had some tailwinds to the margins in the banking business from being a kind of setting it up to be a completely emerging separate business. Should we expect some of that to revert now and become a tailwind to the margins as you're kind of keeping it in the fall?

So overall, I think we will see steady development. That would be, I think, a bit too soon to provide now new insights, given that this decision has just taken place. We'll be doing planning with the banking team on any further optimization. I don't think we have any new perspectives on that currently, but we'll be looking into, of course, naturally what type of potential efficiency measures, as there's been a lot of work ongoing for the separation.

But absolutely, we will be building on that independence, which is the driver for growth and scale, which we have indicated when we launched a strategic review as well. So we are building on that goodness. Absolutely, that we can confirm.

Okay, thank you.

The next question comes from Jocko Tervenen from SEB. Please go ahead.

Yes, good morning. It's Jaakko from SAP. I have a couple of questions. I'll take them one by one. First one is on the indicated Q2 growth. Meanwhile, your order book is down minus 4%. Could you give some additional color on the drivers on the closed outlook research here?

Of course, we could go business by business, but if you sort of take the component of the working days, it was negative 1.4 percentage points for Q1. It's going to be positive 1.2 for Q2. So there's sort of a delta swinger of 2.6%. That's naturally a big sort of tailwind coming into Q2. Some of the businesses also had Very high comparable when we look at the prior year Q1. You likely recall the businesses as well in the create care as well as tech services. So some of those dynamics will play in. The order backlog, as Kimbo mentioned before, there's more of a timing thing that impacts now this minus four. We think it's sufficient. And as we have said, we, of course, keep our guidance for the year in tact.

Okay, thanks. Then perhaps a few words on pricing actions in various segments. Have you implemented price hikes near to prior year level? And could you talk about a bit further on the pricing dynamics in the create segment? When should we expect that to improve?

Sure, indeed. So I'd like to play back a little bit on per business type. So naturally, as reflected in prior quarters, our software businesses have been during the whole inflatory era looking at and working on the price increases. That continues to be on the agenda. We continue to make progress. On the software side, that's a pretty natural kind of evolution on how to apply price increase in a software business. There we continue to make fine progress. Then when we think about the create side, there are a number of markets in the world Where price competitiveness is high, it's kind of a global phenomenon, given that the softer market price increases in the digital consulting category. In our case, and I would say in the case of any peer company, it's much more difficult to do until we see the economy picking up. And with that in mind, demand picking up and a healthier balance between supply and demand. So that would be a comment on Create. And then when we look at the tech services, you have a number of different businesses within tech services. Capacity services continue to experience price erosion, just like we've talked about it for a number of years. Whenever we go to the data and application layers, then the pricing opportunity becomes healthier. So a bit of a mixture with that in mind, understandably in tech services.

Okay, thanks. Then perhaps a commentary on the technology create client activity levels? Are you seeing any signs of improving customer activity and when should we kind of expect that to materialize? And is there massive variation between the geographies or competence areas?

So naturally, this is a topic, a very, very hot topic in our dialogues continuously with all the businesses. And I think our summary of the current situation would be that there's no significant development. We are kind of waiting for the economy to pick up. But we'd like to be very frank that as we commented here, that the soft market environment continues. Of course, I'll comment on your point as you asked about CREATE specifically. I would say no, those signals are not there. It is visible through the price competitiveness. We have some early stage first signals from some other businesses that some larger clients are seeing a bit of the light at the end of the tunnel. I think it's too early to tell. We all look at the combination of our feedback from our teams, feedback from our customers, and the kind of macro predictions. I think it's too early to say that the economy would be picking up. It's possible second half. I think we need to see tons of more proof points before that could be stated.

Okay, thanks. Very helpful. All from my side.

The next question comes from Felix Henriksen from Nordea. Please go ahead.

Thanks for taking my question. I have a couple. I'll take them one by one. Firstly, on the banking situation, could you just maybe talk to me why you're sort of still using the strategy as to build on the independence because now you have a segment within your company with a fixed cost that is suited for an independent company. So is the end goal to dispose this asset still eventual?

Thank you, Felix, for that. So I would like to confirm what's the real point of today. And I'd like to be, if I may, quite repetitive on that consideration. Very important that we conclude the process itself. And when we emphasize the notion that the capital market conditions not being the optimal conditions, we can further develop the business forward, we see tangible opportunities, and we believe in due time there is further value creation potential. With that in mind, we will ensure we have very strong operational focus of continuing to improve the performance, and in due time, if and when opportunities arise, it is natural for our board to consider such potential opportunities. I would not speculate, if I may, any further.

Fair enough. Then on the tech services strategic review, what's your level of confidence on being able to divest these assets? Are the capital market conditions here better or similar in your view and do you still have sort of, is it still possible for you that you will also back out of this as a disposal?

Thank you for that as well, Felix. What we are able to share today is that we are continuing to make firm progress on tech services, and we believe, based naturally on our research as well, that the capital market conditions for managed services type of businesses or companies have remained relatively stable throughout this strategic review process. This is an important priority for the company currently, and we'll naturally be coming back to when conclusions are reached.

Fair enough. That's all from us. Thank you.

The next question comes from Oystein Elton-Lodgaard from ABG Sundal Collier. Please go ahead.

Good morning. I had a question on care. You say that you have started to see some progress on health care reform procurements and expect to return to growth in the second quarter. Does this mean that the period of low growth in the care segment is now behind us and we should expect higher growth here going forward?

So thank you for the point. We would like to confirm indeed that Q1 was exceptionally low. It's a bit of an anomaly in terms of even the mid- or long-term view of the business. And yes, we do anticipate to be returning to growth. And yes, we have had healthy win rates in terms of the social reform. I would like to elaborate still a bit further. and even when Q1 revenue growth was exceptionally low and delivering healthy profitability, so the fundamentals of resilience and scale as a software business, we continue to progress in quite a favourable manner.

And a follow-up on that, if I may, is with with the new health care reform progressing? Do you expect to return to kind of higher growth in the care segment going forward, maybe higher than it has been? It has been very weak, for instance, in 2023, or is that too early to say?

I would say, if I may, that it's our ambition, but our ambition levels are clear. I think externally what we are able to comment is what we have provided for now. So we commented on the second quarter, and the opportunity is clearly there. Win rates are good. I just add the element of uncertainty, which has to do with any type of public initiatives on cost-based optimization in the full social reform. Those are the unknowns. We see fairly good opportunities to pursue a favorable path in the growth trajectory. Okay, thank you.

The next question comes from Daniel Gerberg from Handelsbanken. Please go ahead.

Thank you, operator. Yeah, questions, a couple of questions. Starting with tech services, and obviously time goes by, value gets lost, uncertainty among customers and employees is, of course, high. And I would like to ask you about the deadline about this strategic review. When is it? the final date. Thanks.

Thank you for the question. So as confirmed today that we expect to provide our conclusions in the second quarter.

That's great. Another question on why the board didn't abandon the investment process earlier on, because to me, the capital market conditions hasn't turned so much worse in Q2, quite opposite. You know, inflation going down, interest looks to fall back as well, and exactly what is not good enough for the board.

Thank you, Daniel, for that as well. So I'd like to confirm the earlier commentary that, as communicated earlier, we have proceeded both with the listing and sale options, and the final conclusions were made now also in due time prior to starting any potential formal EGM process. So fully understood the question, and these are the factors behind the dual track, and now the factors came together, and time for the decision, and the board was ready to make that conclusion.

And why didn't they do that a quarter back?

If I may, quarter back, we also commented we have absolutely a dual track in place.

Yeah. So you can deny that there are some rumors in the market stating possible irregularities in the banking accounting, such as depreciations, putting hurdles to this divestment. Can you deny that?

We have no such information.

Perfect. Thank you. Another question on banking would be on Klaus Andersson from Simcorp, taking on the job as CEO to become a CEO for a listed company, I guess. This also, I guess, is the same thing with the management in banking, and I guess that a potential board must have been appointed as well, since it was so far off, close to the IPO more or less. How will this decision impact the management of banking?

To confirm, so Klaus continues as the head and CEO of the banking business. Maybe in terms of your other point around the considerations on governance, so I'd like to maybe reflect on that topic a bit. So as we continue to develop the independence and resource banking to be able to pursue this whole international fintech opportunity. We'll be looking into a governance setup together with our board to ensure that there is the external views provided to the management team, participation by the Group C level, that we maintain absolutely the best possible development and trajectory for the business and remain open for the potential longer-term strategic alternatives. So really building on all the work that has been done up to now and taking the business forward.

And my final question would be about to maximize shareholder value. The share is trading close to 10-year lows. And I guess there's a little bit lack of trust in the market being visible in the share price at least. So I would like to learn a little bit on what lesson learned is now, following the strategic reviews and what the board has learned.

Sure. So thank you for that question as well. So I think naturally the reflections are very transparently done with the board of directors. Naturally, prior to the... or including Q1 of last year, we had six good quarters in the back of the company, hit clearly a softer market. Those are factors that have impacted our case as well. Yes, the share price is exceptionally low at this point in time. In our belief also, everybody is looking for clarity on the outcomes of both of the strategic reviews. And we are sharing these as soon as information, we are sharing naturally as soon as information is available. And we understand fully that people are waiting for the outcomes of tech services review as well. Okay, that's my question.

Thanks.

The next question comes from Aditya Budhavarapu from Bank of America. Please go ahead.

Hey, morning, Kimo, Tommy. Thanks for taking my questions. I have a few, so I'll take them one by one. Again, going back to banking, given that you're now going to keep this within the group, can you talk about maybe the level of investments required to pursue the opportunity that you mentioned and to continue the product development? How are you thinking about that?

Sorry, what was the latter part? Can you repeat just the last sentence?

Sorry, how about you? Can you talk about the level of investments you might need to make in banking to continue pursuing the market opportunity you talked about?

Indeed. So the level of investment that are required, they are actually reviewed with the team when we think about especially the short and mid-term and naturally more work to be done. And we would be coming back to later on exact avenues for maximizing the growth and scale of the business. In due time, we would be coming back naturally on the topic. But for the short and mid-term, the clarity of the business plan and required investments level, we are unified on these topics.

Okay. Could you, given now that, again, banking is part of the group, will you at some point maybe pursue other alternatives for the group which could maybe involve spinning off all the software units as a whole or maybe looking at care or industry as potential assets which you can crystallize the value. Are there other options as well which you think are worth looking at?

So here I'd like to confirm the full strategic logic that we had announced actually two years ago, that we think that it is absolutely the best path forward by being specialized in the businesses, much kind of a clearer way forward, highly differentiated approach. Business models highly differentiate investment needs, capabilities, leadership qualities. So specialization is the core. And as we had commented as part of the strategy launch, that we look at longer term the optionality of each business to maximize the potential for each one. So exactly which way to scale the business is a bit mid- and long-term. It's a really good opportunity to consider also structural alternatives, but we'd like to be very clear this is the best for the foreseeable future on the group structure, and we all recognize, as commented earlier, that it's important to make the conclusion then on tech services.

Okay, understood. And then this on create, can you, given what you said on the working days, which I assume will have some benefit to create as well, can you talk about that business? Should you expect that to return to growth as well from Q2? Or is that more dependent on the demand? And maybe you think that's going to happen more in the second half of the year?

Yeah, the largest driver, of course, for that business is the market and the recovery of the market. Yes, we will see some of the benefit from the working day. So it has a natural sort of tailwind to improve the growth towards Q2. That's how we would comment at this point in time.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Christopher Bjornsen from DNB Markets. Please go ahead.

Yes, thanks for taking another question. So on the banking business, you say kind of the market conditions have been favorable. I kind of agree with the other guys that a bit difficult to understand. There has been also some chatter in the market that there are parts of the business that are kind of not fully modernized, the core banking software suite. Are there any kind of internal stuff or hurdles that you need to kind of come over and complete in terms of modernizing the software before it's optimal to kind of sell that business? Is that kind of part of it? Or maybe you can...

Thank you, Kristo, for that consideration as well. So I think what we are now today, the very relevant parts that the business continues to perform at a very respectable level. Yes, we see continuous... opportunities, like in any business, to be fair, like in any software business, whether we think about the competitiveness of the platform side or the software side, SaaSification, whether we think about the sharp choices on international market expansion. So I would say those are the normal considerations for continuing the performance trajectory As mentioned, no details that we would at this point in time open up on all the normal balance of positives, what to be looking for, and how to also resolve challenges in the business, which are in any business. So I would say that's what we can comment today at this point. Okay, thank you.

The next question comes from Samu Wilhomsen from Nordia Markets. Please go ahead.

Yes, thank you for taking my question. Now, when the seller listing process of banking, at least for now, is done and dusted, and given that we are at the short-term exceeding no proceeds from them, I was just wondering, can you describe more on your near-term financing needs also, In terms of investments and M&A, given that you have short-term interest-bearing debt in your balance sheet of 400 million and then the 300 million bond will be there also in Q2. So any call on your near-term financing would be highly appreciated.

Thank you for the question. When we did the demerger refinancing arrangements, those were set to work in different types of strategic review outcomes. From these facilities that we have signed, we are covering all our refinancing needs for 2024. Then the bond, which you mentioned, the 300 million bond, which is due mid-25, that naturally will get into the refinancing process in due time once we have clarified the outcomes of the strategic reviews.

Okay, thanks. And to what extent you are looking to utilize the bond market further in this refinancing? Is it still an option?

Absolutely. Bond market is likely the best opportunity for corporates to get long-term funding.

Fair enough. Thank you.

As it seems, there are no further questions at this point. I would like to thank everyone and hand over back to Kimmo for final remarks.

Very good. Thank you everybody for joining today. I hope you've heard from us today a clear summary of the progress made in Q1. Resilient business in a bit soft market, expected return to growth in the second quarter. And very importantly, we've been able to share today the conclusion of the strategic review of banking, and very importantly, continue to pursue all the opportunities in the marketplace. And we have also confirmed also through the Q&A that there's an element of optionality longer term on the avenues forward, and a lot of attention naturally on the strategic review of tech services and simultaneous to everything else, looking at the market opportunities through the lenses of the growth potential moving forward. Thank you very much for joining and looking forward to our next sessions. Thank you.