NTCYF (NTCYF) Q3 2026 Earnings Report, Transcript and Summary

Welcome to the Netcompany Interim Report for the first 9 months of 2026. Today's call is being recorded. If you have any objections, please disconnect at this time. [Operator Instructions] I will now hand the call to your speakers, CEO, Andre Rogaczewski; and CFO, Thomas Johansen. You may now begin. André Rogaczewski: Good day, and welcome to this presentation of Netcompany's results for Q3 2026. My name is Andre Rogaczewski, and I'm the CEO and Co-Founder of Netcompany. I'm joined today by our CFO, Thomas Johansen. And before we get going, there are some important disclosures that I need you to read through. So could we have Slide #2, please. I will pause for 30 seconds here and let you all have a read-through of these important disclosures. We go to Slide #3. The topic of today's presentation is our performance for Q3 2026. I start by walking you through the business highlights for the quarter. And once I'm done, Thomas will go through the financial performance of the quarter and the financial guidance for 2026 before we open the call for questions. And can we have the next slide, please? I'm pleased to report that our growth momentum from the first half of the year has continued into Q3, where we grew revenue by more than 8%. This brings our accumulated growth for the first 9 months of the year to more than 28%, a testament to the fact that both public and private customers continue to embrace our AI-powered product and platform offerings. Looking at our geographic performance, we've seen growth across all markets, most significant in the U.K., which has grown more than 42%, highlighted in the quarter by the NHS win. It becomes increasingly clear that our offerings align very well with the largest market for IT services in Europe. Our AI orchestration tool, Phoenix AI continues to gain traction across all our entities. What's particularly encouraging is how customers are responding to the solution. They are valuing the security and sovereignty embedded in Phoenix AI, which in turn enables them to implement and work with the Agentic agents faster and better. And can I have the next slide, please? Our strong momentum from the first half of the year has continued into Q3. We delivered group revenue growth of 8.1%, which brings our cumulated revenue growth for the first 9 months of the year to more than 28%. Based on this strong Q3 performance and our solid visibility into the remainder of the year, we are raising the floor for our full year '26 revenue guidance with 2 percentage points. Growth was broad-based across the group and demonstrates our underlying business strength and critically, our relevance in the era where AI is truly reshaping the market. Can I have the next slide, please? A significant growth factor in the quarter was once again our U.K. business segment. In Q3, we were able to announce another win in this segment that underscores Netcompany's position as a trusted digital partner for the U.K. public sector. Netcompany has been appointed as a digital delivery partner for NHS England's adult screening programs. This is a 5-year contract valued at GBP 250 million, a partnership that began in September 2026. We'll be supporting all 7 national adult screening programs, including breast, cervical and bowel cancer screenings. These programs reach millions of people across England every year, making this a generally mission-critical partnership. Beyond operating and maintaining existing screening services, we are also driving next-generation innovation in this contract. We'll be delivering a new national breast screening service and an enhanced cervical screening service that includes digital invitations and at-home HPV self-testing kits. But these aren't just technological upgrades. They represent a shift towards a more personalized data-driven approach that specifically targets communities that screening has historically been underserved with. The ultimate goal is clear and compelling, find diseases earlier, reduce the time between invitation and result and increase uptake through more accessible and targeted screening pathways. This contract reinforces Netcompany's track record in delivering mission-critical health care services for the NHS and demonstrates our capability to lead complex, high-impact digital programs at a very high scale. And can we have the next slide, please? So the market for AI is evolving rapidly, and we see a clear shift in focus. AI adoption is still accelerating across industries, but increasingly, organizations are moving beyond pilots and concepts. The real emphasis now is on the actual delivery of solutions, proven products and platforms that deliver sovereign AI for highly regulated businesses. As part of the EU's tech sovereignty package, the Cloud and AI Development Act, the so-called CADA proposes a framework of 4 union assurance levels. These levels are designed to classify cloud and AI service providers for the public sector, and they represent an important step towards ensuring European digital independence. First level focuses on data resiliency and basic self-assessment, the foundational requirements. Second level adds supply chain transparency and control safeguards, ensuring visibility and governance across the supply chain. Third level introduces EU corporate control and staff citizenship, strengthening European control and accountability. And the fourth level represents the highest standard with strict foreign immunity and full stack control delivering complete sovereignty and independence. At Netcompany, we are in a leading market position, delivering sovereign AI for highly regulated businesses across all 4 levels. This capability gives us a significant competitive advantage as European organizations navigate these new requirements and seek trusted partners who can meet their sovereignty and compliance needs. We have the technology, the expertise and now the market validation to execute at scale in this space. It makes me genuinely proud of what our teams have accomplished so far, and it makes me excited about what lies ahead for Netcompany. And with that, I will now pass on the word to Thomas, who will go through the numbers. Thomas, please go ahead.

Thank you for that, Andre. And I will go through our financial performance for Q3 2026 and our updated revenue guidance for 2026. So if we move past the breaking Slide #8 and straight into Slide #9 in one go, please. As Andre already mentioned, we continued the strong start of the year with 7.6% revenue growth for the group, excluding Netcompany Banking Services in constant currencies compared to Q3 2025. Currencies impacted revenue growth negatively by 0.6 percentage points in the quarter, resulting in reported revenue growth for the group, excluding Netcompany Banking Services of 8.2%. For the total group, revenue increased 7.6% and amounted to DKK 2.3 billion in Q3 2026. Growth was driven by 7.6% growth in the public sector and 8.8% growth in the private sector. As in previous quarters this year, revenue growth in the quarter was particularly strong in Netcompany U.K., supported by existing and new contract wins. Netcompany Denmark grew revenue by 2.6% compared to the same quarter last year. Revenue growth was impacted by allocation of around 150 client-facing FTEs to the Netcompany Banking Services segment, impacting growth negatively by approximately 4 percentage points and lower revenue in Germany and Sweden, impacting revenue growth negatively by approximately 3 percentage points in the quarter. Netcompany CU grew revenue 4.8% compared to the same period last year. The growth was driven by increased revenue from both public sector, including the EU and the private sector, which grew 3.8% and 8%, respectively. Netcompany U.K. continued the strong growth from the first half of the year and grew revenue by 42% in Q3 2026 compared to the same quarter last year, driven by both the public and private sector, which grew revenue by 50.8% and 19.5%, respectively. The growth was a result of increased engagements with both existing and new customers. In Netcompany Norway, revenue was on level with the same quarter last year and in Netcompany Netherlands, revenue increased by 15%. In Netcompany Banking Services, revenue increased 7.6% compared to the last quarter -- or the same quarter last year. And can we move to the next slide, please. And during the first 9 months of 2026, Netcompany Group, excluding Netcompany Banking Services, grew revenue by 12.6% in constant currencies. Growth was driven by public sector, including EU institutions, which grew 12% in the first 9 months of '26 as well as the private sector, which increased 14.5% compared to the same period last year. Can we move to the next slide, please? In Q3 2026, adjusted EBITDA before allocated headquarter cost for the group, excluding Netcompany Banking Services, was 20.6%, an increase of 0.6 percentage points compared to the same quarter last year despite additional costs associated with the Netcompany in Cycling partnership. Group adjusted EBITDA margin before allocated headquarter costs increased to 18.9% in Q3 2026 compared to 17.3% in the same quarter last year. In Netcompany Denmark, adjusted EBITDA margin improved significantly sequentially from Q2 '26 with 11.5 percentage points to 27.8% in Q3 2026. Compared to Q3 last year, adjusted EBITDA margin decreased slightly by 1.6 percentage points, which was mainly caused by increased marketing costs. In Netcompany CU, adjusted EBITDA margin was 16.3% in Q3 '26 compared to 12.3% in the same quarter last year. Netcompany U.K. adjusted EBITDA margin increased to 15% from 13.8% in the same quarter last year as a consequence of strong operational performance and stable administrative costs. In Netcompany Norway, adjusted EBITDA margin was negative 2.1% in Q3 2026. And in Netcompany Netherlands margins increased to 24.6% in the quarter. In Netcompany Banking Services, the adjusted EBITDA margin was 12% in the quarter, an improvement of 5.6 percentage points compared to the same quarter last year as cost synergies are being realized. The integration is progressing as anticipated and synergies are materializing according to the original plan. Can we have the next slide, please? In the first 3 quarters of 2026, the group, excluding Netcompany Banking Services, realized an adjusted EBITDA margin before allocated cost of 17.4%, in line with the same period last year despite both lower revenue, increased cost to Agentic AI and the partnership with Netcompany Cycling team. Can we move to the next slide, please? In Q3 2026, we employed an average of 9,653 FTEs, which was an increase of 171 FTEs or 1.8% compared to the same quarter last year. The increase in FTEs was related to both client-facing FTEs and FTEs in the product development unit, which was then partly offset by reduced FTEs in the administrative and support functions of the group. To enhance and streamline our product and platform offerings and to further embed AI capability into these, all efforts around product and platform development as well as AI initiatives previously anchored within the business segments in Denmark and Southeast Europe was moved into one central unit product development as of January 2026. In Q3 2026, the number of FTEs in this unit increased by 134 FTEs compared to the same quarter last year as investments in adopting Agentic AI into our products and platforms accelerated. Attrition rate for the last 12 months was 16.8%, which was a decrease of 1.2 percentage points compared to 18% in Q3 2025. And can we go to the next slide, please? The group generated a negative free cash flow of DKK 170.6 million in Q3 2026 compared to negative DKK 55.5 million in Q3 2025. The development was mainly driven by development in working capital and to some extent, also impacted by continued investments in our product and platforms and increased tax payments. The main negative drag we have on working capital in 2026 is the change in level of prepayments from the former owners of SDC, Netcompany Banking Services. At the time of the transaction last year, SDC held a positive cash position, mainly based on prepayments received from the owners of around DKK 0.5 billion. These prepayments have not been maintained in the new ownership structure of SDC, where the banks are now in a commercial model with us in terms of Netcompany Banking service. So rather being the owner of their own banking central, they now have a commercial relationship with Netcompany Banking Service. And this explains more than half of the negative development in our working capital year-to-date for the group. Compared to Q3 2025, trade receivables increased and advanced payments from customers decreased, driven by products reaching milestones and being invoiced. Trade receivables was then further impacted by outstandings of close to DKK 300 million from customers related to RRF-funded projects, which will be collected in Q3 2026 in connection with the release of funding from the European Union. Days sales outstanding increased from DKK 53 to 61 million compared to Q3 2025. Adjusted for the RRF funded project, days sales outstanding would have been unchanged compared to the same period last year. Can we have the same -- can we have the next slide, please? Revenue visibility end of Q3 2026 for the group, excluding Netcompany Banking Services, amounts to DKK 7.4 billion, an improvement of 10.5% compared to Q3 2025. Visibility for Netcompany Bank Services amount to DKK 1.75 billion and solely relates to the private sector. Can we have the next slide, please? Based on revenue growth of 12.6%, excluding Netcompany Bank Service for the first 9 months and taking into account the current backlog and weighted pipeline, we raised the lower part of revenue guidance for 2026. For the group, excluding Netcompany Bank Services, revenue growth is now expected to be between 8.5% and 10.5%, which was previously between 6.5% and 10.5%. Guidance for adjusted EBITDA margin, excluding Netcompany Bank Services of between 17% and 20% is maintained. For the group in total, we raised the bottom of the revenue growth guidance for 2026 to between 18% and 20.5%, which was previously between 16% and 20.5%, while we maintain adjusted EBITDA margin expectations of between approximately 16% and 19%, all in constant currencies. And with that, the detailed walk-through has been concluded, and we will open the call for Q&A. So if we move to the Q&A slide and open the call, please.

[Operator Instructions] Our first question comes from the line of Claus Almer from Nordea.

I will start out -- I will do 2 questions one by one. And this is probably for you, Thomas. So the whole guidance structure on your EBITDA margin, if you do the math, then interestingly in Q4, if you are looking at the mid to the high end of the range, you really need to step up on the margin side. So maybe you can lay out what scenario you see to end in that upper end of the range. That would be the first one.

And the answer to that is not going to be as detailed as you would require, Claus. I think you can appreciate why. So the difference in the range of the EBITDA range guidance has to do with the revenue mix. And it's clear that the higher percentage of revenue generated in Q4, which is related to license revenue that can be income recognized in Q4, the higher the margin will be. So it's solely depending on mix.

Sure. That was also what I expected you to answer. So maybe a follow-up on that part. Do you see some really large license projects in the pipeline that might be signed in Q4?

Without discussing time lines for when contracts are signed, then we do see a number of large projects in our pipeline that have a significant amount of licenses.

Sounds good. Then the second question, probably not a big surprise, cash flow or net working capital. So with the tie-up of capital so far in 2026, should we expect net working capital go to -- the increase in net working capital should go to 0 full year? Or could you give some color on what to expect for Q4? I know you said this DKK 300 million in Greece, but is there more color to be added?

Yes. Without going into detail as what working capital is going to be for the full year, if we take the first 9 months, working capital have a drag of what, DKK 950 million-ish negative. And for Q4, that will not be reversed. So we are not expecting a positive working capital, as you probably would imagine, of DKK 950 million in Q4. On a quarterly basis, we do expect positive working capital in Q4, but we are dragged for the full year by the lower level of prepayments from the former SDC banks. And then specifically in Q3, we have a negative impact on working capital in addition on that with the DKK 300 million on the RRF projects, which are being collected in Q4 as opposed to Q3.

So just to be sure, fair enough, it's not going to be breakeven on full year, but would the net working capital reduction in Q4 be more than the DKK 300 million you're getting from Greece? André Rogaczewski: I cannot discuss the working capital in Q4, Claus. First of all, we're not guiding on it. Second of all, it's Q4, which we are in the middle of. But logically, we will expect an improvement in working capital in Q4, first of all, from the collection of the RRF outstandings and other impacts also. But the number I cannot give you.

Our next question comes from the line of Wei Zhou from SEB Bank.

I have 3, and I'll do one at a time. Just firstly, just one follow-up on the cash flow. I mean when looking at 2025 and also what level you would like to end for this year, I mean, the cash conversion is much lower than sort of the old net company. Is there any structural change here that -- so we should expect that the cash conversion will be lower going forward for the medium, long term? And if you can give a target or soft guidance on the cash conversion?

There's nothing for the old Netcompany, and it's a little bit difficult to talk about the old Netcompany, Netcompany Group because we have acquired Netcompany Banking Services, and it is part of the group. So going forward, we don't expect any structural changes in what was Netcompany before Netcompany Bank Services in terms of the cash conversion. And then specifically for 2026, we've had this drag on working capital with Netcompany Banking Services due to a significantly lower amount of prepayments from the former owners into now a commercial counterpart, namely us, which, of course, has a huge drag on working capital. Now that is not expected to be carried on into 2027, basically mechanically because all the impact has been taken in 2026.

And is it possible to give us some guidance on the cash conversion?

We're not going to guide anything for '27 or onwards at this point in time, and I'm sure you can appreciate that. Okay.

And my second question is on the growth guidance implied it is a significant slowdown in Q4. So which markets you are seeing the weakness?

So I think, of course, when you look at the year-to-date and then the range for the full year, which gives you the implied guidance for Q4. And then remember, there is a little bit of a mix if we look at the group in terms of what is Netcompany bank service and how much is that impacting Q4 and not. But when we look in Q4 and compare to Q4 2025, we are comparing with a very strong 2025, which, of course, then makes comparisons a little bit harder. Overall, we maintain our full year guidance, and we've raised the floor. So for the group, 18.5% to 20.5%, which is fully in line with what we started with the year with. And hence, also, therefore, not anything dramatically surprising to us in management in terms of how Q4 is going to look like or anything that will have any impact whatsoever on our view on what the future is looking like. So mathematically, we have a year this year where relative growth has been strong in the beginning of the year and then not relatively as high compared to last year and the end of the year. But overall, we are in what we started to guide for the year with, and we've raised the lower end of that 2x now.

And last question, capital allocation. I realize that your current share buyback program, the DKK 2 billion commitment you announced along with your 2025 Capital Market Day will soon be completed. So should we expect more shareholder return or you are again looking at deleverage or more M&As?

All of that we will address when we guide for 2027. And the good thing about that is that it's only, what, 3 months, and then you'll have more details on that way. But as of now, we cannot comment on what our expectations are for capital allocation in '27.

Our next question comes from the line of George Webb from Morgan Stanley.

Three questions from my side, please. Maybe firstly, one for you, Andre. You kind of flagged how AI developments in the market is evolving rapidly in your opening remarks and some of the factors you're seeing. I guess, nowadays in some ways, a quarter feels like quite a long time in this environment. So curious around a bit more detail on how you're seeing customers evolve their technology and procurement decisions. Is that changing at all and how you're continuing to evolve Netcompany's position? Second one, just Thomas, can you just talk a little bit about the structure of how prepayments worked on the banking services business? Was it annual prepayments in Q1 for employee cost of the year? Was it something different? That would be helpful to understand. And then just thirdly, just on the SCE and EI business, that step down in growth in Q3. How should we just go into a bit more detail, how should we be thinking about that? Was that as the RRF scheme is coming to an end that this is a logical thing towards happening? Or is there any other factors we should be aware of? André Rogaczewski: Thank you, George, and thank you for some great questions here. I think everything that customers are talking about right now is basically agents, agents and even more agents. Everyone wants to enforce and put in AI agents and in particular, for them to work and to get the benefits, these agents need to orchestrate and work with the older systems or we need to modernize these older systems. Now if you can have that discussion with customers, modernizing their systems and also putting in those agents doing the work and doing it in a sovereign and in a controlled way, you are really relevant in them choosing a vendor. And this is exactly where we are. We have the platforms and the products where we can build new solutions upon. And then we have an agent infrastructure set up with sovereign AI and where we can, as a part of these projects, realize the benefits of putting in agents. And I think we are moving towards an era right now where we see more and more systems being replaced basically by agents. That doesn't mean that the systems do not exist. They're just underneath the agents, serving the agents and the agents will be working with each other, serving our employees in our businesses. And that's a really compelling and interesting development when you come in and you modernize systems. And everywhere we win at the moment, everywhere where we are tendering at the moment, that's a very important part of our proposition. And I have to say, in that respect, we are leading. We are leading technologically, but we're also leading vertically in some of our strong verticals. And that goes for tax customs, that goes for the airports, it goes for the whole utility and transportation verticals. We're putting in agents to help our customers, but we can without modernizing all their old systems. It's a good combination. And we've been positioning ourselves for this for quite a while, but now we're actually seeing it happening. And Thomas, I think.

Yes. And then on the structure of the prepayment in the formerly known SDC now Netcompany Banking Service, those prepayments have indeed been structured as an early payment in the year to cover ongoing work. So basically front-loading cash flow into SDC and then easing of that instead of being paid when you send the invoice. So that has been the structure historically in SDC, which then changed when they moved from owning the banking central to having a commercial relationship with Netcompany Banking Service. So nothing extraordinary in that other than, of course, it has a drag on working capital, which is quite significant and is explaining the main negative development this year. On the EUSE business, what we have seen, in particular, during the last couple of quarters in '25 and the first couple of quarters in '26 is that there has been a run to complete, in lack of a better word, but a run to complete a number of the RRF projects. And the technical part of that is that they have to be completed and then they have to be audited for funding to be released. So therefore, that has been extraordinarily busy on that side, which is now more normalizing. But when you then, of course, look quarter-to-quarter, then it looks like all the business is disappearing, which is not the case. It's more a matter of how the overall timing has been in terms of the workload for the projects to be complete and for them to be audited so that the European Union can release the funding according to the rules and regulations under the RRF and thereby abating to the payment in year in 2026, which is the deadline for those projects. So it's more a timing of that, George. And then we continue to see strong demand from our services and our offerings, both in Southeast, but also in the European Union. And a number of very large initiatives are ongoing right now in the European Union. And just to mention one is the VERA, which is VAT in the digital era, which is a significant undertaking done by the European Union. So we are looking into continued growth we expect in that part of the business, too.

That makes sense. And can I just come back on your first question. It's interesting because you were kind of citing customs and tax on the AI agent side. I mean I guess are you hearing from your perspective that governments are moving just as fast as private sector in terms of being open and willing to use these AI agents in their future structures? Or I would have guessed that maybe they'll be a bit slower, but maybe that's what you're seeing. André Rogaczewski: They're really moving faster than I think anyone expected. But it has -- of course, they have requirements. I mean there's a reason why Takeda was invented and there's a reason -- I mean, we really have to guardrail and make sure that the AI agents they're using is responsible AI. So they need to monitor the agents. They need to have a log about what did the agent do and why did it do what it did. So it's not just taking some arbitrary agent somewhere in the cloud and using it on a society critical system. You can't do that. That would be completely unresponsible and legal. But if you have the infrastructure where you can lock and you can be absolutely transparent about what the agent does, then that will yield -- and it will just change the entire dynamic of administration in the public sector. And it will happen. It has to happen. If you look at the -- I mean, it's a real great business case for any society. And we're seeing it across all geographies. Everyone is looking into how to use AI agents in a confined regulatory environment. And here, we have a leading position in Europe.

Our next question comes from the line of Balajee Tirupati from Citi.

Two, if I may. Could you share a view on the Denmark business? Firstly, could you share color on allocation of FTEs to Banking Services segment? What was this towards and when is it likely to reverse? And then on public sector in Denmark, which remains weak against your initial expectation of growth catching up in the year, is the pipeline conversion taking longer? And then second question on gross profit performance in Denmark, which does stand out despite mentioned drags on the revenue growth. And I do appreciate that headcount growth is muted and there has been some license revenue, do you see further upside here factored within your 2026 margin target or improvement has to come from outside of Denmark where gross margin has rather been in check despite higher growth? André Rogaczewski: I think I'll do the first 2 ones and then you can do the third one, Thomas. So yes, it's absolutely well spotted that we are putting in some more resources into banking services. And it's because we are finally seeing the possibility to build services there. We can also see we are actually growing in that area. Again, back to the agents and back to being able to orchestrate what an agent does, and we're actually investing into being able to use agents and AI agents giving that ability to our banks and also selling it as separate modules to other banks, not even being part of our core banking services. So we have put in some people to help with that, and I think that's a very wise decision. And when it comes to the market in Denmark and the public sector, we've recently won a few considerable deals. And I see the Danish public sector being digitized even more in 2027. So it's not that our visibility or what we're looking into has weakened. But the decision of putting people into banking services is because it's really where we can use AI agents immediately. And we are bidding for some really interesting public sector deals to be won, both in Q4 and Q1. So I'm slightly positive on the public sector and the private sector, we're also gaining traction on very large deals. So I mean, all over, I mean, having all that said, I think the Danish market, we are one of the biggest players, but we still have a great opportunity here.

And on margin, Balajee, again, difficult for me to do a full decomposition of margin buildup in Q4 and onwards market by market. But you're absolutely correct in your observation that margin has increased in Denmark, which, to some extent, also was what we have been discussing and expecting and also discussing with the market given all the initiatives that has been put in place. So that is good to see. Whether margins will then pick up further or in other geographies is not something I can comment on other than say that for us, it looks comforting and promising around the group.

As no one else has lined up for questions in this call, I will now hand it back to the speakers for closing remarks. André Rogaczewski: Thank you all, and have a great day.