NTCYF (NTCYF) Q2 2026 Earnings Report, Transcript and Summary

Thank you, Andre. I will go through our financial performance for Q2 '26 and also our updated revenue guidance for 2026. So if we move past the break in Slide #8 and straight into Slide #9, please. As Andre already mentioned, we continued the strong start of the year with organic revenue growth of 17.1% in constant currencies compared to Q2 2025. Currencies impacted revenue growth positively by 0.2 percentage points in the quarter, resulting in reported organic revenue growth of 17.3%. Organic growth was driven by 18.5% growth in the public sector and 14.6% growth in the private sector. Revenue growth was driven by new wins related to our production platforms with all segments contributing to the growth most significantly Netcompany U.K. and Netcompany SEE and EU as well as continued expansion of existing customer relationships. Group revenue increased 43.3% in the quarter, of which 26.1 percentage points were nonorganic related to the inclusion of the Netcompany's Banking Services. Netcompany Denmark revenue increased 6.4% compared to Q2 2025, driven by 22.2% growth in the private sector with contribution from multiple verticals. Netcompany SEE and EU grew revenue 19.6% compared to the same period last year. Growth was driven by public sector, including EU, which grew 26.4%. Netcompany U.K. continued its strong growth path from the previous quarters and grew revenue by staggering 57.3% compared to Q2 2025. The growth was driven by both the public and the private sector as a result of increased engagements with both existing and new customers adopting our products and platforms. In Netcompany Norway, revenue increased by 8.5% compared to the same quarter last year. And in Netcompany Netherlands, revenue increased by 31.1%. Netcompany Banking Services revenue increased 17% compared to pro forma revenue in STC of Q2 2025. Can we move to the next slide, please. During the first half of 2026, Netcompany group revenue increased 15.1% organically to DKK 3.9 billion, the growth was driven by public sector, including EU institutions that grew 17% in the first 6 months of 2026 as well as the private sector revenue, which increased 14.4% compared to the same period last year. And can we move to the next slide. In Q2 2026, organic adjusted EBITDA before allocated headquarter costs was 15.5%, an increase of 1.6 percentage points compared to the same quarter last year, including the additional net impact on margin associated with the Netcompany's cycling partnership. Adjusted EBITDA for special items which in Q2 2026 amounted to DKK 148 million related to a provision for redundancies is expected to be realized during the coming 9 to 12 months. The provision relates to ongoing sizing of the organization, adjustments in employee mix and realization of efficient growth in all entities throughout the group. The net effect here of is expected to have a full impact from the second half of 2027 and onwards. Group adjusted EBITDA before allocated headquarter costs increased 45.7% to DKK 346.5 million in Q2 2026, of which 30.9% were organic. In Netcompany Denmark, adjusted EBITDA margin decreased 0.3 percentage points to 16.4% in Q2 2026, which mainly reflected increased local marketing costs related to the partnership with Netcompany INEOS Cycling team. Excluding the net impact from the Netcompany INEOS partnership, adjusted EBITDA margin in Denmark would have been 21.1% for Q2 2026. Netcompany CEU adjusted EBITDA margin was 16.2% in Q2 2026 compared to 15.1% in the same quarter last year. In Netcompany U.K., adjusted EBITDA margin increased to 13.6% from 1.6% in the same quarter last year as a consequence of strong operational performance and stable costs. In Netcompany Norway, adjusted EBITDA margin was 1% in Q2 and in Netcompany Netherlands margin increased to 25.6% in the quarter. For Netcompany Banking Services, the adjusted EBITDA margin was 7.9% in Q2 compared to pro forma adjusted EBITDA margin of 3.4% in SDC in the same quarter last year. The integration, as Andre mentioned, progressing as anticipated and we are starting to see the impact on synergies materializing. Can we have the next slide, please. Organic adjusted EBITDA before allocated costs was DKK 634 million in the first half of 2026, yielding an organic adjusted EBITDA margin before hedged quarter cost of 15.9% compared to 16.2% in the same period last year. The decrease in organic adjusted EBITDA margin was driven by lower license revenue and increased investments in agentic AI as well as increased marketing costs related to the partnership with Netcompany INEOS Cycling team. Excluding the net impact of the Netcompany's INEOS partnership, organic adjusted EBITDA margin would have been 16.7% in the first half of 2026. Can we have the next slide, please. In Q2 2026, we employed an average of 9,895 full-time equivalents, which was an increase of 18.7% compared to Q2 2025. Around half of the increase was nonorganic and related to the inclusion of Netcompany Banking Services. To enhance and streamline our product and platform offering and to further embed AI capabilities into these, all efforts around product and platform development as well as AI initiatives, previously anchored with the business segments in Denmark and Southeast Europe was moved into one central unit, product development as of 1st of January 2026. In Q2 2026, the number of FTEs in this unit increased by 124 FTEs compared to the same quarter last year as investments in adopting agentic AI into our products and platforms accelerated. The number of organically client-facing FTEs for the group increased by 9.3% to 8,137 in Q2 2026. The attrition rate for the last 12 months was 16.3%, which was a decrease of 1.9 percentage point compared to 18.2% in Q2 2025. Can we go to the next slide, please? The group generated free cash flow of DKK 41.2 million in Q2 2026 compared to DKK 25.6 million in Q2 2025 and significantly improved free cash flow compared to Q1 this year, which was negative with DKK 310 million. The free cash flow in Q2 2026 was supported by the positive development compared to Q1 in net working capital. We have previously stated that the negative working capital that we saw in Q1 would be leveled out during the remainder of 2026 and the improvement in working capital in Q2 2026 illustrates that we are following that path. Days sales outstanding remained stable at 57 days in the quarter, compared to 58 days in Q2 2025 and 57 days in Q1 2026. Cash conversion rate was 17.7% in Q2 compared to 32.6% in Q2 last year. However, adjusted for the taxes paid on account, cash conversion rate was 18.9% in this quarter compared to 14.6% in Q2 2025. Can we have the next slide, please? Revenue visibility end of Q2 2026 for the group, excluding Netcompany Banking Services amounts to DKK 6.8 billion, an improvement of 10.4% compared to Q2 2025 with an improvement in visibility in the public segment of more than 11.5% compared to last year. Revenue visibility for Netcompany Banking Services amounts to DKK 1.7 billion and is solely related to the private sector. Can we have the next slide, please? Based on revenue growth of 14.9%, of which 15.1 percentage points were organic for the first 6 months of 2026 and taking into account the current backlog and weighted pipeline, we raised our revenue guidance for 2026. For the group, excluding Netcompany Banking Services, revenue growth is now expected to be between 6.5% and 10.5%, which was previously between 5% and 10%. Guidance for adjusted EBITDA margin, excluding Netcompany Banking Services of between 17% and 20% is maintained. For the group, we raised revenue growth guidance for 2026 to be between 16% and 20.5%, which was previously between 15% and 20%, while maintaining adjusted EBITDA margin of between approximately 16% and approximately 19%, all in constant currencies. With that, the presentation of the financial performance is concluded, and we will open the call for the Q&A. So if we move to the Q&A slide, please.

[Operator Instructions] Our first question comes from the line of George Webb from Morgan Stanley.

Yes, a few questions from my side to kick off with. Starting off on the revenue growth side of things. Q2 was clearly very strong, organically at roughly 17%. I guess I find it a little curious that the full year revenue visibility ex NBS didn't materially change between Q1 and Q2. I think it was about 10% in Q1 at 10.5% in Q2. Why doesn't the revenue visibility tick up more strongly? And when we think about even the upper end of the full year guidance organically of 10.5%, how should we be thinking about the implied slowdown in H2 given that strong first half run rate? Secondly, on the margins into the second half, clearly, you need a meaningful improvement on those to reach even the lower end of the range. I guess what gives you the kind of confidence that that's an achievable outcome at this stage. And then just lastly, it's a technical one. On the restructuring provision you booked in Q2, how much of that is close to DKK 150 million, are you expecting to be cash out in 2026 versus in 2027?

Thanks, George, for the questions. Good morning to you also. When it comes to revenue growth and revenue visibility for 2026, it's absolutely correct, as you say, that we continue to see strong visibility, 10.4%, which is slightly above what we saw in Q1. We are looking into the second half where comps are a little bit tougher. We continue to see strong demand for our services. We continue to see strong demand for our products and platforms. So we are confident that the revenue visibility gives us a good segue into delivering on our operated guidance, and I'll leave it at that. In terms of margins and in terms of the implied pickup in the second half, you are right that there is a tick-up implied in the second half. The same was actually the case last year where margin from H1 and then the full year increased by 1.6 to 1.7 percentage points. So we are seeing some impacts there in the second half of the year. If you look at the relative part of revenue decomposition this year compared to last year, you also note that the amount of licenses realized so far in 2026 is lower than it was in 2025. And clearly, that will also have an impact in the second half, realizing increased licenses of which we know that some are already booked. So few bits and bobs up and there, but we feel comfortable that we will get into our guidance. When it comes to provision, we cannot really comment too much on the cash out on a quarterly basis. All we can say is that we will realize those provisions, redundancies during the next 9 to 12 months as stated in the announcement, and that will, of course, be through the course of the next 3, 4 quarters. But I'm not going to be able to give you a detailed cash out quarter by quarter.

That's fine. In terms of the agentic benefits and the coding tools, we talked about that kind of fueled the initial guidance raise of the year. I guess this restructuring provision is the way to unlock some of those savings. You're talking about those savings fully run rating more kind of second half of 2027. Has your opinion on the amount of savings you expect to come through from that change changed at all in -- with regards to the potential impacts in 2026 as it moved out to 2027? Or I'm trying to work out how you kind of think about those 2 things in kind of a combination.

Yes. Well, I'll start and then Andre will fill in. It's a complex question and a relevant question, George. And there's a lot of moving parts when we talk about efficiencies. We see a great opportunity to embed and to work with agentic AI. And that means that we continue to grow, and we will continue to grow. It also means that we will continue to recruit young talent, but it also means that we will shift a little bit around in terms of the overall distribution within the pyramid structure. So whether the impact is going to be bigger or smaller than what we anticipated. I think we're all learning right now as to what is going on with agentic. And we're also learning some of the things that you as a company like ours need to be very adhering to in order to unlock all of those potential and not just shift them over to somebody else in terms of increased cost for compute and the likes. And that was what Andre mentioned in the beginning of his intro but I think it's probably worth a little more detail on that there, Andre. André Rogaczewski: Yes. We see -- I mean, the reason why we're actually growing is because we're coming in with very complex solutions to regulated industries based on platforms and products where customers really believe that it's a reliable way to go forward, and we will deliver time and budget. More functionality is put into our products and platforms. We have a product and platform division now that is just -- it's actually a decent size and can produce a lot of platform features and product features. And on top of that, we are using AI. So I think when you look at the composition of our larger engagements, many of them are fixed priced, customers really care about having delivered these things at time and at budget. And we can do that by having more functionality doubtless in a product and platform division and using AI at a cost that is also controlled. We are definitely at the moment, probably one of the most leading companies when it comes to have local LLMs with fixed token price on our own infrastructure. Now the demand is created twofold. One is, of course, the token price technical discussion right now. Token prices will definitely go up. But if you have your own infrastructure and you have your own LLMs and you're using them for the purposes that you will be using them for, you can actually decide how much it's going to cost, and you can even fix that price for a longer period of time. So when it comes to using Feniks for all our employees, we know how much that's going to cost, and we know it's not going to go up because we are in charge of that. Secondly, I think right now customers really don't care about what LLM it is, they care about the effect of it and how it's embedded into their systems. And again using open source, open weight LLM's on own infrastructure, you can accommodate those demands in a very particular way. And the most important thing for customers is to get there, not necessarily which LLM they use and they want to stay independent, especially European customers. They don't want to use global LLMs where they don't know how much it's going to cost in 1 or 2 years' time. So that's the market we are in and customers really experiencing -- we're experiencing a great interest in that.

Our next question comes from the line of Claus Almer from Nordea.

Also a few questions on my side. If we are looking more into these one-off costs you put in Q2. How should we try to translate that to savings in the latter part of '27, '28? And what is the phasing? That will be the first question.

Yes. And thanks for that question, Claus. And probably not surprising. We're not going to be able to give you any specific insight on a quarter-by-quarter basis other than say that we will see benefits throughout the stipulated period, which is the next 9 to 12 months.

It was worth trying. And in another way, this -- I hope it's not me who is doing the echo. Well, I guess this would be a number of FTEs to leave the company. In the same time, you are still planning to grow your revenue. So how should we think about FTE moving forward? Will it be a growing number? Would it be declining? Or yes, that will be a follow-up question. André Rogaczewski: I mean if you look at historically, we've been doing this definitely to a small degree in the last 2 years, but every month, we're doing it more and more. If you look at the revenue, it's going up, the number of employees is not going up in the same pace. So we would definitely be able to deliver more per employee. At the same time, we don't see customers pressing or putting pressure on the prices because what we deliver are really complex solutions in regulated industries where competition -- I mean, we beat competition both on quality, and we are also very competitive in price. So I mean, what we're seeing at the moment is a slower growth in employees compared to a higher growth in revenue. And I think that's a very, very positive development. Now customers are also asking for additional services that we normally don't help them that much with, could be more industrial knowledge and how to go about it. So we're also hiring people in new areas where the margin is quite good actually and where customers are asking us for more services. So it's very difficult to say exactly what's going to happen. But when you look at the core of development or testing, for instance, one thing is absolutely certain. If you have a token cost and the tools that are competitive and you know exactly what the cost is for that, it will replace some of the costs associated with doing that manually. And at the same time, if you can deliver even more complex solutions that were impossible to deliver in 1 or 2 years' time, but took 4 or 5 to 6 years' time, just 2, 3 years ago, you are at a very, very competitive situation. And that's why we are winning new customers. So what I can tell you is we're definitely delivering more with fewer people, but we're growing at the same time. And the mix of our employees is also changing accordingly. I know it's a long answer, but it's a very positive development. And I think the industry is going to be divided probably into, as it always has happened over time historically. Some companies will do this and other companies will not. And they will probably stagnate more than and not create that growth. And I think the growth in itself just shows that we are on the right path here.

It makes a lot of sense. And maybe a different topic on -- maybe on the same topic, so to speak. 17% revenue growth was quite impressive and full year guidance growth is also rather impressive versus the peers. When we talk about AI-driven projects, both on the pipeline, but also in the growth you have delivered so far. Is it possible to quantify in any way how important has AI project already become? André Rogaczewski: Yes. It's important in 2 ways. One is, of course, to construct the actual solution as fast as possible and the most reliable, that's Feniks AI. But it's also important that the solution you construct and this is where it gets really interesting as hooks into AI engines that can process faster. So if you receive bookings in your transportation company or if you have cases that you need to administer and faster, you need hooks into an AI algorithm that can help you in a responsible way. These are built in, in our solutions. So you don't have to do that later. It's there, and it's part of our solutions. And without that, I'd say you would be very -- we will be having big difficulties in competing in the future. And a lot of -- we have that built into our architecture. It's built into our platforms. It comes out of what we do. It's born with it. And I think that's a real differentiator and is extremely important.

Sure. So I was more trying to figure out if you look at your -- let's just say, the private sector in the pipeline. What is the magnitude of these large platform -- IT infrastructure projects you are currently in discussion with the customers to move forward with? André Rogaczewski: But I don't think we have many customers now where we don't have AI embedded into their solutions. It's the -- it's more the rule than the outset. I can't -- I mean, even if I look back the last 6 months, I can't remember, we've had any talks with customers with AI -- embedded AI is not part of it.

Our next question comes from the line of Mads Quistgaard from DNB Carnegie.

Also a couple of questions from my side. I will take them one by one. So first, coming back to the implied margin guidance for H2. So I understand there will be license fees, positive restructuring fees and also the normal seasonality. What about the use of R&D capitalization in H2 and also on the synergies in NBS? So are you still targeting the 35% execution of synergies in NBS? And how much have you realized so far this year?

Yes. So if we start with -- thanks for that, Mads. If we start with the synergies in NBS, that is progressing, as we've said to target. Now whether we're going to agree reached in Q1, Q2, Q3, Q4 is not so important for us as long as we reach it throughout the year, and we don't really go too much details on the quarters. But that is tracking according to plan. At the same time, it's also important for us to state that we also -- while we are realizing efficiency gains in NBS. We're also investing into that unit. We have hired a capable and very senior -- new CEO to the business because we expect to be able to do more business. So it's not a pure cost out, but the cost out that we have committed to, we stand committed to also for '26, '27 and onwards. So that is progressing according to plan. In terms of the impact on the implied guidance, correct. As I stated earlier, there will be more licenses to come. There will also be other benefits in the second half. In terms of the capitalization, we've seen that capitalization in Q2 increased compared to Q1. And the reason for that is related mainly to a fairly large projects that we do within Netcompany Banking Service, where we are developing a critical solution for the customers that instead of being sold as a normal project where we would get revenue on an ongoing basis is a project that we have agreed to develop a piece of software for that we will then charge a license revenue in a 10-year period subsequently. So that is the main pickup and there's also a little here and there, as Andre was alluding to with the product division units that are doing new feeds and new solutions. So that's the run rate in Q2 is going to be more or less run rate for the rest of the year.

Perfect. Then maybe a question to you, Andre. I think we have recently seen Europe is considering to include a By European criteria for public procurement. Is this the kind of initiative you think is needed to really get the Europe for Europe agenda moving and potentially also open up more opportunities for Netcompany and, not least, CEU. André Rogaczewski: Yes. I mean the short answer is, of course, I mean, whatever you think about it politically, this is happening. So the big discussion in Europe right now is to -- especially when it comes to public procurement and hence, also the spillover effect of private businesses and regulated industries. Data, location, ownership, these things are definitely under discussion. I think we'll see European regulation being -- coming in on those areas, especially when it comes to society-critical systems, but also systems in regulated industries like financial industries. So that is coming and it's here and it would definitely be very positive you can say a thing for us since we are so European-ly focused. And what we're also seeing is an increasing interest and it's actually a spiking interest from European companies and European governments to invest into own hardware and putting in LLMs, open source, open weighted LLMs into own infrastructure. That is in order to control token costs and to build solutions that are under own control. Now we are leading when it comes to that part. That's for sure. And that's in many industries because it's a common infrastructure we have under all our solutions. So no doubt that I mean we can still help the customer. If the customer comes and says, "Listen, we want to use Anthropic for something," it's not like we're saying, "Well, we don't want to talk to you at all." But I -- because we -- of course, we will, and everyone has different opinions about what to do, but we have an infrastructure and an offering that will accommodate these European demands, and we are definitely leading in that part of the business.

Perfect. And then just my final question is, have you seen any updates on the European facility, which is set to replace the RRF?

Not any formal update as of yet, Mads. But there are significant and continued discussions as we hear in terms of putting in a "RRF version 2". And the numbers we hear is between EUR 10 million and EUR 20 billion and the allocation to IT digitalization between 10% and 20%, so another EUR 1 billion to EUR 3 billion-ish. We'll see what about the timing and the likes, but the talks around it are consistent. So let's...

Our next question comes from the line of Yiwei Zhou from SEB.

Also a couple of questions and I'll do one at a time. Firstly, I just want to follow up, the license income in the second half. So if we -- I know you have some license income expected to receive from the cycling team. And besides the -- if I correctly, DKK 30 million in the second half, from them. What are the products do you expect to also receive license income from that would be materializing?

Yes, thanks for that question, and I'm not going to be able to disclose what type of solutions we are selling to what clients. And hence, I cannot give you an idea of what type of product platforms we are expecting to sell in the second half. What I can say is that it's firm and materialized and very, very late stage in the pipeline. So we feel comfortable that, that will materialize also over and above the Pulse license that we are selling to the Netcompany INEOS Cycling team.

Okay. Fair enough. And then a second question, also a follow-up on the NBS. I mean we see the EBITDA has been a decline over -- quarter-over-quarter over the last 2 quarters. I think, could you elaborate a bit on the trends? I mean you have talked about the synergy materialize as planned. But why we have't seen the EBITDA start to increase?

What we have committed and what we stand for is the full -- when we are in the 2, 3 years into the ownership where we've said that we would see an improvement in margin due to the reduce of costs. We stand committed to that. Now we also want to make sure that we do things the right way and that we create a Netcompany Banking Service that is here for the long run and that we'll be able to compete and take market share. And that is not done by following a very structured have to take cost out at X per quarter because otherwise, we are DKK 1 million or DKK 2 million behind. So there's sometimes things slip one quarter and the other. It might also be that we are spending more resources on various projects for preparation in 1 quarter, which will then benefit another quarter. So don't look too much on the quarterly development is my advice on NBS, but more on are we meeting our annual targets. And are we meeting what we have said, committed throughout the 3-year period.

Okay. Last question, I want to understand the Feniks AI. What is your pricing strategy for this. And are you also looking to charge token and also if there will only be a fixed license income going forward? André Rogaczewski: So Feniks is being used by ourselves at the moment, and we know what the cost structure is. We are now launching it more commercially to be used with our customers and the developers and people at our customer site. We will be launching it in a differentiated price mix. And of course, we are in control of what the tokens are and we can add to the tokens if we need to, and we will. So that's a part of the pricing model. But I can't go into more details about exactly how it's going to be structured. That can also vary from industry to industry and it can also vary in terms of how big an engagement we have with the customer. I can't say any more right now, but we will come back with more when it really reaches the market for sure.

Our next question comes from the line of Poul Jessen from Danske Bank.

I have a few questions. Just coming back to the special items of DKK 149 million. Just curious about in the past, you haven't made provisions for taking out capacity or has been done ordinarily through your reporting? What's different here? Are you closing down specific lines so that you can do a provision or what's the reason by doing it now, not just by doing your normal pyramid management?

Yes, I can start, and Andre will fill in. We actually also did it last year in connection with the restructuring charge of DKK 352 million that we did on NBS. So in that aspect, it's not new. Clearly, the magnitude is of a size but also what is important here is that we are entering into a new era, as Andre was talking about in terms of how we work. And therefore, we are taking the actions to be able to remedy for that going forward. So this is not something that we expect to be the new normal. But as of now, we find it prudent to do. And this will also allow us to continue to attract the talent that we need to continue to thrive and grow our business. André Rogaczewski: Yes. And you see it as a tool as well because it will -- I mean we need to force ourselves and it is actually happening in a very good way to be less doing the traditional work when it comes to manual work and being maybe more doing the new types of services work where we know more about the verticals and the business and the solutions are definitely growing in complexity and in scale and a number of integrations. So we will see you will still hire a lot of talented young people. We still need a lot of technologists. We need the good ones, the best ones, but we will also hire people who know about the business verticals. I think the mix will change over time. And of course, that could also imply that we are doing organizational shift around. And this is a good tool. We're just being prudent and making sure that we are ready to do that. As I said before, we are growing more than the market is growing. We are taking market share. We are not growing as fast as number of employees as we're doing in the market, and that's what we see now. And we will also be both courageous and do the right thing when it comes to having the right mix on our products and also deliver in this changing time. But I don't see the lack of great people. We still see a lack of great people everywhere. And what is happening right now is it more the manual parts, the more tiresome, not really interesting IT work being replaced by price competitive algorithms. It's important you know what you're doing here. So -- and I truly believe we do.

And the savings that you are heading for, should we see these as savings that will support margin in the future? Or could we see that you would reinvest them into operations, so the net impact is 0. André Rogaczewski: No, I think they will materialize in better margins at our projects, and we have delivered -- we have built many of these things over the last -- 2 years. Feniks was introduced first time as a probe 1.5 year ago already. So I think most of this is in place and we are ready to yield the benefits. And I said before, customers are not paying less for their solutions. They just want them to deliver it faster and more -- in a more reliable way in a modern way. But they're not paying less. On the contrary, they want more. So that's -- so I think we're in a very good position to get the best benefits out of this.

Then on the top line on NBS, you've grown 10% and 12% in Q1 and 2. Is it new clients coming on board? Or is it existing clients who are purchasing these services? Or is it just because it was soft comps you had last year?

It's existing clients, Poul. And then there's a lot of the potential new projects going on with that client base. And then, of course, we also at one point in time want to extend that to new clients. But the growth as it is now is with the existing client base.

And then the final one. We've had a new government and elections in the spring. We had a summer, have you seen execution on the government pipeline starting to turn into contracts? Or has there not been any negative impact here at all? André Rogaczewski: We're definitely having -- we had a long election. Well, we had election and then we had a long period of time not having a government. But the government has definitely set up a cause with much more utilization. And we are seeing a pickup in the public sector on that. So yes, it's been a slow first half year, but we expect it to pick up over the second half year.

But is that already in Q3? Or is it a Q4 event that we should expect all the signatures on the contract?

During second half without being specific. So during second half. André Rogaczewski: It's always difficult with government.

As no one else has lined up for questions in this call, I will hand it back to CEO, Andre Rogaczewski for concluding remarks. André Rogaczewski: Thank you all for joining in, and have a wonderful day.