Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NNIT AS (STU:5NN, Financial) won the largest contract ever in the USA, which is strategically important and progressing according to plan.
- The company has seen good traction and demand within the data, digital, and manufacturing areas.
- Internal software KPIs, such as customer satisfaction and employee attrition, are tracking well, indicating strong internal performance.
- The turnaround initiatives in region Asia have improved gross margins by almost 10 percentage points, showing positive impact.
- The public sector business in Denmark is performing well, with improved profitability and a solid backlog and pipeline for future growth.
Negative Points
- The third quarter was more challenging than expected, with a significant decline in revenue, particularly in the data migration business.
- There was a moderate slowdown in the life sciences market, leading to project delays and hesitancy in signing new agreements.
- The US region experienced an organic growth decline of 8.33%, primarily due to the slow recovery in the data migration business.
- Capacity adjustments were necessary in the US and Europe, impacting 5% to 10% of the workforce, reflecting a mismatch between capacity and demand.
- The financial outlook for the year was adjusted downward, with expectations for organic growth and operating profit margins reduced.
Q & A Highlights
Q: Can you elaborate on what could drive the Q4 margin to the higher end of the 8% to 12% range?
A: Carsten Ringius, CFO, explained that optimizing capacity to deliver on the strong backlog and ensuring all projects are completed in Q4 without postponements are key factors. Par Fors, CEO, added that the capacity reductions in Q3 will lead to better matching of capacity and demand.
Q: Are you confident in rehiring skilled consultants if the market demand picks up again?
A: Par Fors, CEO, stated that they are confident in recruiting when demand increases, as the current soft demand is a market-wide phenomenon. Reductions are being made selectively in specific areas and geographies.
Q: Are the project delays related to existing backlog projects or potential new engagements?
A: Carsten Ringius, CFO, clarified that some delays are related to backlog projects. In the Life Sciences business, projects often follow an agile process without strict deadlines, leading to postponements.
Q: Does the market's reduced growth expectation impact your medium to long-term guidance?
A: Par Fors, CEO, confirmed that despite a slight reduction in market growth, NNIT aims to outgrow the market by at least two times, maintaining their long-term growth aspirations.
Q: When will the full impact of the 5% to 10% capacity reduction be realized?
A: Par Fors, CEO, indicated that the full impact will be seen in Q1, with a significant impact already in Q4 as reductions are being implemented in October.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
