Netcompany Group A/S Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Webb - Morgan Stanley - Analyst : Hi, morning, yeah, I've got a few questions please to start with. Firstly, just as we think forward to, have you seen any, I guess you haven't, have you seen any changes around customers committing to starting new projects? And I guess when we think about the broader Q2 dynamics, fewer working days, any view at this stage on the potential pipe of license revenues for 22 Q1 is obviously quite strong, second question, maybe Andre. On the topic around the kind of system sovereignty of of Europe, what needs to change in terms of how the EU procures for this to be a a meaningful tailwind for the European providers over time? Are there already ways that that can be written into into tender contracts, or there's going to be a shift in how those bids are evaluated, and then one for you, Thomas, with regards to reporting disclosure. As you move closer to completing on SDC, are you looking to revise your disclosure at all, or would SDC just become a 6th reporting segment? Thank you.

Question: George Webb - Morgan Stanley - Analyst : That's great, thank you. If I could just throw one more in, I noticed on the faina finance side you increased your shareholding quite materially, kind of flagged that that was a 1 billion EB business now here in what, 22% of it. Do you have a specific game plan there, or more broadly when you take minority stakes, what's the idea, that you have in terms of exit or just the thesis?

Question: George Webb - Morgan Stanley - Analyst : That's great, thank you very.Much.

Question: Claus Almer - Nordea Markets - Analyst : Thank you. Thank you. So just a few questions from my side as well. The first goes to Denmark and the development in the gross margin. It is mentioned that the cost associated to SDC is dragging down on the margins, I guess, excluding the ones being included in the special items. What would margin have been without these extra costs? That would be the first one.

Question: Claus Almer - Nordea Markets - Analyst : Okay, thanks. And is there more tendering activity going on in this quarter, since it's been mentioned or it's just more than normal level?

Question: Claus Almer - Nordea Markets - Analyst : Okay, that makes sense. Then my second question goes to this 1.5 times expected leverage end of the year, including the STC. What kind of capital structure of SDC do you assume in that calculation?

Question: Claus Almer - Nordea Markets - Analyst : Somebody was more trying to figure out is the cash position within SCC, what is the assumption behind that?

Question: Claus Almer - Nordea Markets - Analyst : That makes sense. And then just a final one, you're changing the name of Infosoft. Why is that?

Question: Claus Almer - Nordea Markets - Analyst : So it doesn't reflect that you are considering adding new activities to to to that segment.

Question: Claus Almer - Nordea Markets - Analyst : That makes a lot of sense. That was all for me. Thank you so much. Klaus.

Question: Daniel Djurberg - Handelsbanken Capital Markets AB - Analyst : Thank you operator. It's Daniel Gilberg here and, good day, Andre and Thomas. My first question would be on a little bit on working progress being down, some here, and you have had two quarters in a row with significant increase in pre-built invoices. So, work in progress is now roughly. 53% I guess of total contract work by the end of Q1 versus 39% a year ago. So, should we be worried about this or is your funnel good enough to, secure a increase again work in progress. Just some insights here would be great.

Question: Daniel Djurberg - Handelsbanken Capital Markets AB - Analyst : Perfect. May I also ask you, on the pipeline, you mentioned that both in private and public sector it remains at the satisfactory level indicating continued growth. Can you comment, I guess, this continued growth, is it in line with your final year or 25 guidance, would it be in the low end or mid and or upper part of that range. Thanks.

Question: Daniel Djurberg - Handelsbanken Capital Markets AB - Analyst : Sounds good. May I ask you on two details on, special items, in, what should we expect in Q2, similar to Q1, the DKK20 million more or less. And also if you look at the revenue split, you have something called the label that's recognized at the point of time, DKK46 million. Up from DKK2.6 billion. I'm sorry. Can you just help me to know, understand what this is?

Question: Daniel Djurberg - Handelsbanken Capital Markets AB - Analyst : Yeah, obviously, yeah, thank you so much for clarification. Thanks.

Question: Yiwei Zhou - SEB - Analyst : I thank you for taking my question. I have three questions here. I do want a time. Firstly, I just want to understand this accounting change, you says in the report that it increased your gross profit by DKK4 million and how should we understand the impacts on the EBTA.

Question: Yiwei Zhou - SEB - Analyst : Okay, so you basically just separate, and reporting in one line, so there's no impact. Okay, great. Thanks for clarification. And then, second question on the current market trend, we see sort of the Dutch parliament the calling government to reduce dependency on the US technology and we always see some other European countries that followed, and a lot of talks all here in Denmark, but what are you seeing with your customers if you can.

Question: Yiwei Zhou - SEB - Analyst : Okay. And there was also some talks about there will be a new funding to develop its own like technology on and on software. It's something you are seeing it has started to proceeding or it's still early. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:00AM, NETCG.CO - Q1 2025 Netcompany Group A/S Earnings Call

Question: Yiwei Zhou - SEB - Analyst : Yeah, thanks. And then, I would also like to ask about the SDC, I realized that, some of the Norwegian customers of SDC has switched to a competitor recently. Could you maybe talk about if That was due to the pricing or is due to the concern about the new ownership.

Question: George Webb - Morgan Stanley - Analyst : Set of services in Denmark.

Question: Yiwei Zhou - SEB - Analyst : Lines my colleague it was actually my colleague is too loud. Sorry, can you ask them.

Question: Yiwei Zhou - SEB - Analyst : I, sorry, it was actually because my colleague asking that question on the other conference call. Sorry, it's good for me now. Thanks. I'll jump back to the queue.

Question: Aditya Buddhavarapu - BofA Securities - Analyst : Hey, good morning. This is Aza from Bank of America. A few questions from my side. I'll take them one by one. Firstly, on the UK, could you just give us some color on the ramp up of the Dallas contract? What is the contribution in Q1? How should we think about that increasing through the rest of the year?

Question: Aditya Buddhavarapu - BofA Securities - Analyst : Okay, got it. Thank you. And on similar lines in Norway with the A of contract, maybe you can come in on the side if you could just talk about, do you think you, will be sort of the full run rate value of that as you progress to the, or is there more to be done, next year?

Question: Aditya Buddhavarapu - BofA Securities - Analyst : Okay, got it. You talk about exiting some low margin contracts in the UK. Any car you can offer on that maybe in terms of, what is the impact of that one and, for that country through the rest of the year.

Question: Aditya Buddhavarapu - BofA Securities - Analyst : Okay, understood. And on Denmark you mentioned the tender activity was higher than normal. Do you think that Would sort of start to benefit your growth, a few business contracts this year itself, or is that for 2026, I mean, was that no higher than normal activity somewhat factored into your, outlook for the year.

Question: Aditya Buddhavarapu - BofA Securities - Analyst : The, just the higher than normal contract or tender activity you're seeing in Denmark, is that, is any potential benefit from that factored into your outlook for 2025?

Question: Aditya Buddhavarapu - BofA Securities - Analyst : Okay, I understand. And then just one last one on licenses we usually talk about that being about 1% of your revenues. Clearly you had a good 11. So should we think about maybe this year could be a bit higher than that 1%, given if you have some more, license revenues coming in for the rest of the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:00AM, NETCG.CO - Q1 2025 Netcompany Group A/S Earnings Call

Question: Aditya Buddhavarapu - BofA Securities - Analyst : Okay, thank you so much. Thank you.

Question: Balajee Tirupati - Citigroup Inc. - Analyst : Hi thank you Balaji Tirupati from City. Congratulations. Firstly, on another steady performance in a rather uncertain environment. Two questions from my side if I may. Firstly, could you share color on dynamics between public and private sector where private sector has softened further in the quarter. So is the current elevated uncertainty going to further impact your private sector business? And second question is if you could comment on EU and European government response towards prioritizing European vendors, have you seen any tangible signs? And would some of the large global services companies, strong local presence be seen as European in that context? Thank you.

Question: Balajee Tirupati - Citigroup Inc. - Analyst : It does, thank you.

Question: Anna Wallace - Deutsche Bank - Analyst : Hi, Andrea, Thomas. Just, coming back to the license revenue. So I'm sorry, I'm maybe a little bit unsure what, how to understand this. So, they made up around, I think it was 2.6% of revenue this quarter, and I think you've said earlier that that they should be around 1% of total revenue for a whole year. So maybe could you, is that correct? Could you remind me how much you expect they will make up, for the total year of 2025? And if it is around 1%, then should we then expect like a margin drag in especially Q Q2 and Q4 because these quarters last year had a very high level of, or at least a higher level of license revenue and, maybe given that a large portion of these license revenue. Revenues has been taken out here in in Q1. So just hoping you could help me clarify how to maybe model that for the remainder of the year. Thanks.

Question: Anna Wallace - Deutsche Bank - Analyst : Okay, Thomas, I hope you will forgive me for trying one last time, but, would it be fair to assume then at least that the license revenue level is structurally higher than the 1% that you gave for for 2024? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:00AM, NETCG.CO - Q1 2025 Netcompany Group A/S Earnings Call

Question: Anna Wallace - Deutsche Bank - Analyst : Yeah thanks thanks so much.