Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Netcompany Group AS (NTCYF, Financial) reported a 9.1% revenue growth in Q1 2025, driven by increased activity across all business segments except the UK.
- The company secured several new contracts in the public sector in Denmark and Greece, as well as a multi-year framework agreement with the European Border and Coast Guard Agency.
- Netcompany Group AS (NTCYF) increased its gross profit margin to 29.6%, a 1.9% point improvement compared to the same quarter last year.
- The company generated a free cash flow of DKK67.9 million in Q1 2025, a significant improvement from negative DKK4.9 million in the same quarter last year.
- Revenue visibility at the end of Q1 2025 increased by 3.8% to DKK5.6 billion, indicating strong future growth potential.
Negative Points
- The attrition rate increased by 1.7% points to 18% over the last 12 months, indicating potential challenges in retaining talent.
- The UK segment experienced a decline in private sector revenue due to the discontinuation of historical low-margin contracts, leaving overall revenue in line with the previous year.
- The gross margin in Denmark decreased due to continued time spent on business development, tender writing, and product development.
- The company's debt ratio was 1.2 times, reflecting a pause in the share buyback program due to the SDC transaction.
- The adjusted EBITDA margin in Denmark decreased to 22.3% from 23.4% in Q1 last year, impacted by lower gross profit.
Q & A Highlights
Q: Have you seen any changes around customers committing to starting new projects, and what are the potential impacts on license revenues for Q2?
A: We haven't observed any significant changes in customer behavior regarding new projects. The sales cycles remain lengthy, but once initiated, they lead to long-term partnerships. Despite geopolitical uncertainties, our services and platforms remain highly relevant. Regarding license revenues, we expect them to continue contributing to growth, but specific projections for Q2 were not provided. (Andre Rogaczewski, CEO)
Q: How will the SDC acquisition affect your reporting, and will it become a separate reporting segment?
A: Post-closing, SDC will be reported on a standalone basis for 2025 to ensure clarity in the numbers. (Thomas Johansen, CFO)
Q: What is the rationale behind increasing your shareholding in Festinna Finance, and what is your strategy for minority stakes?
A: Festinna Finance is a leading software product in life and pension calculations. Our increased stake represents a strategic partnership, enhancing our ALO platform and offering a market-leading solution. This reflects our commitment to integrating financially and strategically with successful companies. (Andre Rogaczewski, CEO)
Q: Can you explain the impact of increased tendering activity on Denmark's gross margin and future growth?
A: The increased tendering activity, particularly in the public sector, has led to higher costs, impacting the gross margin. This activity is above normal levels and is part of our strategic focus on financial services and public sector investments. While it may not drive immediate revenue growth in 2025, it positions us for future opportunities. (Thomas Johansen, CFO)
Q: How does the current geopolitical climate affect your business, particularly regarding European sovereignty in technology?
A: There is a growing awareness among European governments and enterprises about the importance of digital sovereignty. Our platforms and solutions are well-positioned to support this shift, offering strategic infrastructure and digital ecosystems. We see this as an opportunity to strengthen our relevance and partnerships across Europe. (Andre Rogaczewski, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
