Gofore Oyj (GOFORE) Earnings Call Transcript & Summary

Good day, everyone, and welcome to Gofore's Q4 and Full Year 2024 Results Presentation. Talking to you today are me, Mikael Nylund, the Group CEO of Gofore. And with me, I'm happy to say I have Teppo, our Group CFO.

Good to meet you.

We are a little bit in the flu season here in Finland right now, so excuse us for any coughing or any other inconveniences. Let's hope that we can get along well here. You can ask questions on the streaming platform during the presentation. We have Emmi from our IR here outside of the picture, and she will be taking your questions, and we will be then answering them at the end of the presentation. Let's start by summing up our key messages for today. It was a difficult 12 months in the IT industry as a whole, and we at Gofore, of course, got our fair share of that. For us, it meant in Q4 that our profits were quite strong considering the market situation and in comparison to the market situation. Our growth was a little bit negative. But on the good side of this is that we had some positive signs, especially in October and November regarding capacity and also higher than otherwise in 2024 utilization numbers. Regarding outlook forward and especially the Q1 that has now started, sadly, we don't see a quick turnaround in the market. There seems to be a widespread cautiousness in the market and people are a little bit reluctant or don't trust the future as much as we would have hoped. So, any pickup in the economy, any pickup in the investments we see at this point being gradual during the year that has started. In the presentation, I'm now going to look at the highlights for 2024, then Teppo will take over and talk you through the details of the financials. And after that, I will continue by talking shortly about our growth strategy at Gofore and also how we see the outlook going forward on a more deeper level. As said, a difficult period behind, last year was difficult, but also the difficult period stretched towards 2023. So, you could say an 18-month period that has been different from the market situation that we have seen before. And what this does for Gofore is that it leaves a gap year in our long history of profitable growth. Our focus here was on profitability in 2024. And I think we managed that quite well. Short-term, we managed okay with diminishing sales. That's a tough job to do. We managed okay. And I think long-term, I think we are in a good shape to continue our profitable growth. 2024 was a year when we did a lot of good things, even though they were not directly reflected on the net sales and the financial numbers. We went through the year without any big restructurings and reductions of personnel, which is different from what the industry as a whole in general had to do during the difficult times. If we look at Q4 highlights, we see that there was some recruitment and some capacity growth during Q4. But towards the end, we already saw that year-end and we held back a little bit on the recruitment. Also, the longer holiday season in December affected that. But it's important to remember that there's still a lot of room for improvement. The free capacity, the bench is quite big and has been quite big for the whole year, which makes us structurally able to do also much better years when customer demand allows it. Adjusted EBITA landed at 13.4%, strong considering the market. And also, EBITA profitability was impacted by the longer holiday season last year. It's nice for people to have a longer Christmas break, and I'm sure it was needed for the people also. But business-wise, that's, of course, always going to be impacted. In Q4, we also released our updated strategy together with updated long-term targets and had a Capital Markets Day event in January, which I hope many of you also had a chance to attend. Looking at the full year, net sales landed at EUR 186 million in 2023. Profitability was decent, 12.8% of net sales in adjusted EBITA. The good news here is that I think we managed the gross margins quite well in this diminishing market. So, most of the -- as Teppo will explain later in the presentation, most of the fall in profitability was due to lower utilization rates, which is, of course, also fixable when customer demand allows. A lot of work was done during the year also in terms of employee and customer value, and I'm going to present those things to you a little bit more in detail next. But always important for the future to have those developments and investments into the future because we are, of course, looking at stronger growth years coming up. The Board has decided on a dividend of EUR 0.48 per share. That's a payout ratio of 46%, and that's a slight increase from the year 2023. This side is always really tough when we have declining sales. That's always a problem. You get the savings from the customer side quite unexpectedly, you have to react quite quickly, and that's going to impact the efficiency of staffing, of resourcing. So that's something that usually translates into a little bit bigger free capacity than we would like to have. But on the good side, customer prices, again, considering the market situation, I think, held up quite well, minus 0.3% during the year. We've talked about it during the year that the that the price competition and overall capacity has continued. And considering that, I think this is a decent number to have. Of course, not what we'd like it to be in the long run, but considering the situation decent. Salaries, on the other hand, went up during the year, 1%. I think also that even though bigger than the customer price change is a good result and is a testament to the flexibility that we have in the salaries, also controlled raises and especially then new hires and using the new hires to balance the salary situation. That's also an important dynamic in the salary expenses. In all, this means that going forward, we think that the gross margins and the structure of the company is well placed to build on future growth. As I said, we had the chance to invest also in improved customer value and employee value. And if we start with the customer value side, I think the important thing here is that we have better customer satisfaction than we had during the stronger growth years. I think that's the bottom line of the good work that we do and that when we have not been able to invest that much in new growth, we have invested in the current customers. And that's also something that I think has worked in building the relationships with the customers. We believe in and we target always strategic relationships with our customers, long-term relationships. And I think these numbers show that we have been able to do that. The number of big customers went up a little bit during the year, not as much as we are used to, but also shows that not many of the bigger customers actually their cuts and budgetary savings didn't impact us as much as the market in general. We have been building the offering for the future, and I especially want to highlight our joint R&D project together with our important long-term customer, Ponsse, that we are working on, and that will result in improved simulator technology for the Intelligent Industry customer segment and improved value for those customers in the future, partly also publicly funded by Business Finland. Even though there were on a general level, tough times in the market. We had some brighter spots. There was growth still in the home markets in Finland and kind of mindset-wise, our home market, the public sector, slight growth, but there was growth. And also, something that grew along the year was our advisory services, which also managed to go up a couple of percent during the year. But especially maybe highlighting some more niche areas, the well-being services counties, the new regional entities here in Finland that are responsible for health care and social services. That's an area where we managed to grow. And other capability-wise, very strong growth was cybersecurity, which goes hand-in-hand with the geopolitical and security situation in the world. There were investments both on the private sector side and the public sector side to various cybersecurity initiatives. It was also a tough period for the employees, struggling in a weaker market, as a lot more from our employees than better times. And taking that into account, I think we also did good with our value that we can provide to our employees. We didn't have to resort to layoffs, as said, like many others in the industry did. I think this makes us stronger in the long run, makes us a trusted employer, attractive employer in that sense. Otherwise, also, our attraction went up during last year in a study conducted by University here in Finland, we were ranked as the first in IT consultancy services companies. And I think that's a really good accomplishment from us and also something to build on when we get back to the growth track. Retention was very good, below our target level. So, we're extremely happy by that, partially aided, of course, by the market situation and not so many job openings for the people. So, those were the quick highlights from 2024, and now Teppo will continue with the financial performance.

Thank you. Next, I will guide you through our financial performance and some highlights regarding our net sales distribution. So, public sector increased its share compared to private sector. And this was logical because of market was decreasing, especially in intelligence industry sector. This has also seen in business outside of Finland, where the market downturn was quite evident. Our subcontractors brought in 16%, which was a slight 2% drop from 2023. Top 5 customers made up 27%. We had 46 big customers, bringing in net sales of more than EUR 1 million per year. Our profitability remained good. We put in a lot of effort to keep the utilization rate up. However, it was lower compared to 2023. It was a tough market for the utilization rate and use of subcontracting. Q4 was a dualistic quarter. October and November were among the best of the year. But as often the case, December was a soft month due to Christmas holidays and pausing of some projects at the year-end. So, let's take a look at some key takeaways regarding our net sales. Customer prices were slightly lower than 2023. However, our volumes were actually positively affected. Capacity or FTA, especially in H1 was exceeding in comparison to 2023. On the other hand, utilization was lower and partly offsetting FTE increase. Subcontracting had some negative effect on top line. At the same time, it supported our crew utilization. Product sales were positive, but on an annual basis, development was not good. So, let's take a look at our breakdown affecting the profitability. A net sales drop was mainly because of utilization and subcontracting. Our staff costs were also slightly higher, but our employment agreement showed resilience toward the economic cycles. Our margins held up well despite the market downturn. This was mainly because of public customer -- public sector customers and a broader offering. Subcontracting ecosystem gave flexibility to fight for utilization. And finally, a significant factor was the OpEx saving program. So, our cash conversion and balance sheet will enable us a further capital allocation like investment in organic growth and digital product development, continue acquisitions and our KPIs support debt financing for M&As. As said in our dividend policy will pay at least 40% of our net profit as dividends. Thank you.

Good. Thanks, Teppo. And maybe it deserves just one more mention like I already said and Teppo showed in more detail that the slightly lower profitability for 2024 was largely due to a gap in utilization rate, something that is, of course, a short-term effect and something that in a better and more favorable market demand situation is also quick to fix. So, we believe that the company is in good shape in terms of structure, in terms of overhead and also in terms of gross margins and customer prices at this point in time. Let's now quickly look at strategy highlights. We did, as I said, have a Capital Markets Day in January. The stream is available. The material is available on our Investor site. So please go have a look if you haven't already. But quickly about the strategy that we are working on. On the left-hand side, our focus. Gofore is a very focused company and wants to be a very focused company. We focus on 2 customer segments that we call digital society. That as the name suggests, revolves around the idea of a digitalizing society. And on the other hand, intelligent industry, more around machines, more around hardware that also becomes more and more digitalized as actually the hardware in itself becomes more and more commoditized. We have a strong geographical focus in Finland, our home market and in the DACH region. So, no changes in the geographic focus, in the strategy update. On the right-hand side, we talk about the unique value that we can provide to these customers. And the unique value is partly due to our focus on certain types of customers. We can serve those customers with a value that we have learned along the time and building up experience and expertise for just that kind of customer. In our eyes, the unique value consists of the Goforeans themselves. We get a lot of feedback, and that's -- I'm super happy about that. We get a lot of feedback from our customers about the mindset that Goforean consultants have when they work together with the customers. We always want what's best for the customer. We want to work together as a team with the customer. We are there to make results for our customers. And that's, of course, the basis for everything else. We work towards having strategic customer relationships. We want to be long-term partners to our customers. We want to provide significant value for those customers in good times and in bad times. And that's something that has served Gofore well also in the past and where we want to put even more effort into. And then we have the exceptional offering. For a long time now, we built a very comprehensive offering. We like to think of ourselves as an end-to-end digital transformation consultancy, helping the customers from building those digital strategies, how they will transform their business to actually implementing them and driving through that change in the organization. But we also want to -- on top of the pure consultancy offering that we have, we want to build more conceptualized and IPs of our own to make that even more valuable for our customers. Supporting both sides of the strategy equation is our M&A strategy, which we will continue with, even though the M&A market has been a little bit slower in the past 2 years, and our last acquisition was in 2023. In the CMD, we also discussed specific growth areas. So, let's have a quick look at them. In Finland, we have identified 5 different growth areas that we work with. Kind of our home market and what we know best from our past is the digital government area, the public sector market in short, where we are one of the market leaders and we have an excellent track record and deep expertise in the area. Looking now for the upcoming years, we can't expect a strong growth in that area. There will be moderate growth, and we will be able also hopefully to take more market share, but that segment of the market will not be strongly growing due to the unhealthy public finances' situation and the savings in government budgets. That's why we put a little bit more effort into the others that we see here. Firstly, the well-being area, I already mentioned that as an area where we did quite well last year and which is a growing market. It's kind of an adjacent market to the digital government with also mostly public sector customers. So, you can bring over quite a lot of the knowledge from the digital government side to the well-being, and it's not as heavily competed as the digital government area with needed special focus on health care and social services knowledge. That's something that we expect to grow. As I mentioned, in Finland, we have the new regional level of organizations that are called the well-being services counties, and those will be driving the digitalization in that area, even though also there, we see limited budgets, which will partly hold back that development. We have retail and services. So, companies that basically serve the digital society customers, the end customers that we otherwise also work with. So, a little bit of an adjacent market for us as well. And customers in this area are quite well positioned in the slower economic cycles, and we've seen activity there. We have seen also big buyers consolidating their contracts, and we are happy that we are considered a good alternative in those situations. Then security, a bit of a new area for us where we want to be the new player in town. We see fast growth, fastest growth in that area for obvious reasons because societies and other organizations are investing into comprehensive security, both on the civil side and the military side. And lastly, we have machines and production, the Intelligent Industry customer segment, where we have a very focused approach and I think a state-of-the-art offering that will be serving those customers well into the future, and we hope that we can provide those customers with globally edge in their own product development and bringing in new -- more and more digitalized products into the market from our customers. Likewise, in the DACH region, we have this growth streams or growth areas and they are similar. We want to have synergies in the area of what kind of customers we approach and with what kind of offering we approach those customers. That's extremely important for our strategy. But there needs to be also the local flavor because the markets are a little bit different. Growth in DACH is based on the automotive industry where we have via acquisitions, long-standing customer relationships and long-standing success. There will be machines and production as in Finland. There will be digital government, as you know, Germany is not that well digitalized on the public sector side, and we expect and hope with the new government, hopefully, that they can form quickly a functioning and strong government that they want to invest also into the public sector services, public administration and digital government. And finally, there's retail and services is an area where we have long-term customer relationships, but our main focus on growth is in the 3 on the left-hand side and first mentioned. One part of the unique value that we as Gofore want to provide our customers is a focused offering and that's the key on top of the good people that we have, on top of the Goforeans and the expertise and the mindset that Goforeans have together with our customers. This is one of the value-creation elements. And we want to add, as I said, new parts to the consulting offering, especially for the intelligent industry. We are also now investing into building our own IP. We have very unique technology in the area with our simulator platform and that's something that, as I said in the beginning, we have started to significantly invest into development of that during last year, and that will continue in the coming years and that's something that we believe will provide us with an edge compared to a lot of the competition. But as said, if you want to look more deeply into Gofore's strategy, go have a look at the Capital Markets Day stream or the material that is distributed on our IR website. Let's then have a look at the targets and outlook for the future. It was also already mentioned that in Q4, we updated our long-term financial targets and we want those updated long-term financial targets to reflect on the fact that we believe that Gofore's competitive edge is stronger than it has been before. Even though we have a gap here in our growth path, the competitive edge that we can showcase both in customer value delivered and employee value delivered has become even stronger. It is a tougher market. It will be a tougher market, and we are prepared to invest into that and as one of the elements in that, we also reorganized our organization during the end of last year and have started this year with a more market-driven, more customer-driven organization. So that means that we will put a lot more effort into sales work into building those new strategic customer relationships with new customers. So based on that, our updated long-term financial targets look like this. We are targeting EUR 500 million in net sales by 2030. We keep our profitability target at 15% of adjusted EBITDA and also the dividend policy, which is important for us because we have a lot of, for example, employees as shareholders, which I think is a big part of also the success that Gofore has had and they value some sort of cash flow also from their ownership. So that's something that we, among other things consider when deciding on the dividend. So, we will continue paying out 40% of net profit in dividends. Looking at the market outlook, the one thing that hasn't changed, and that's maybe the most important thing here is that when we look at it in the mid and long-term, the fundamentals for digital transformation have not really changed. If anything, they have gotten stronger. Technology will continue to develop. Technology has developed. We have seen a lot of new technology coming out also last year when investments were a bit lower. And that's going to drive the digital transformation market in the mid- and long-term. And we believe that the demand there is strong and will get stronger. Of course, then the shorter-term and looking at, for example, the coming year, the situation might be a little bit different. On the public sector side, savings from government budgets will continue. We've already seen the effects of those in the past 2 years, increasingly in the last year. So that same level of budgets will continue also into this year. But on the other hand, the government that we have in place that has driven this kind of fiscal policy is also now very committed to growth measures. They will be deciding on new investments during this year. That's why I, and we believe they will be continuing investments, for example, into comprehensive security on the civilian side and on the military side. So, there are areas that will grow, and there are opportunities in the public sector. We feel that there will continue moderate market growth in that area as mentioned earlier. The problem in the public sector market is the overcapacity of IT consultancy and that overcapacity translating into aggressive pricing, which is a difficulty for us because we want to, of course, keep the gross margins and keep the business healthy going forward also on a gross margin level. So that's something that we've struggled with, and we need to approach that situation also this year on a case-by-case basis and try to find those growth opportunities despite this. On the private sector side, I think the good news here is that some of our customers have already reported increased order intakes that we have had a long phase of, especially the manufacturing clientele having reported from quarter-to-quarter decreasing order intake. And that's been a bad situation. And of course, that's limited the amount of investment that those customers have done. But now I think in Q4, for the first time in a long time, since some companies, some customers of ours reporting increased order intake, which is a very good signal. Others, not yet -- others may look to H2, and then we'll see if that can get kicked along the road. But hopefully, H2 will mean a turn for many other customers as well. In retail & services, which is a different, more domestic-driven customer segment, the situation is a little bit different, and we expect more growth in that market area. And there are opportunities for us because we haven't really been that strong. We haven't really put that much focus into that customer segment. Looking into the DACH region. There's no going around the fact that the German economy is struggling more than expected maybe and the turn will be slow. Hopefully, this year will be a slight growth in GDP, but time will tell. There's also the German parliament re-election, and we are hoping for a functioning stable government in Germany that will be able to drive the economy forward. We will be also able, hopefully, to invest in public digital services and digital transformation. And even though there are a lot of very evident problems in the economy and the market in the DACH region, I think the need for a bigger transformation in that area is even bigger than in our home market. So, energy-wise for the auto industry to be able to compete in the global competition and also as already several times mentioned, the public sector digital transformation, which is behind the, let's say, European standard of digitalization of society. The talent market remains a bit easier. That is, of course, a reflection of the market as a whole. There's not that much demand for talent in the market right now. We've had good opportunities to bring in new good people. Of course, there are areas where everybody struggles to find the best talent, and those are the niche areas like, for example, AI and cybersecurity expertise, and that's where we work hard to be an attractive option for the people. Lastly, the short-term outlook for Q1. And our estimation is that the drivers behind growth and profitability have not really changed that much, and there's a continued uncertainty of customer demand. That doesn't mean that we won't be able to see growth during 2025. We believe that there is that possibility, but that does reflect on the fact that customers are still hesitant, and there's a lot of uncertainty out there in the world that will also affect their business. And that's why they are hesitant to add to their investment budgets for digital transformation for 2025. And hopefully, during the year, the trust in the development will grow and we will see resulting bigger investment. That's what we believe, and that's what the underlying macro indicators also would indicate that will happen. So, thank you. At this point -- and now we are able to take some questions. Do you have any questions for us, Emmi?

Good afternoon from backstage. First off, it's Joni Grönqvist from Inderes asking, if you have good visibility to your current order book. What does it look like in terms of pricing, i.e., are you able to keep pricing levels seen in 2024?

Well, let's split the answer into public and private sectors because those are different dynamics. And the public sector side, typically, the prices are pretty fixed with a certain level of price increase during the agreement period with framework agreements that we are usually talking about 5 years, even 7 years long framework agreements. So, as long as the framework agreements are in effect there, I think we are typically quite good with the pricing situation. And that's one part of -- important part of the equation that has helped us keep up the customer price level. On the private sector side, during last year, we've seen -- and that continues into this year also, obviously, we've seen customers consolidating -- putting their suppliers out for competition, and they try to find, let's say, price of the day, which for them, of course, means a lower price level. And that will affect, to some extent, also the price levels that we have, especially because that's an area where we have opportunities for growth as well. So, we want to be selectively aggressive enough in our growth to be able to be considered as partners for the private sector customers.

Jaakko Tyrvainen from SEB. In the short-term, will you continue to focus on cost and profitability management given the muted and uncertain growth outlook?

To some extent, yes, but I think our mindset is now a little bit different from a year back when the answer would have been very much stronger. Yes, we will continue to focus on that. I think we and many others have also estimated the situation a little bit, let's say, overoptimistic in the sense that maybe we thought that a year ago, the situation would improve faster and would improve across the board, let's say, almost instantly having kind of a V-shaped situation with the customer demand. It's going down and it's going then straight back up. That obviously didn't happen. And the return of the customer demand will take longer time, and that's why we consider now the situation a little bit different. So, we do put a little bit more effort into the growth measures. For example, the organizational restructuring we did during end of last year and which we have now started the year, that's an investment into growth. And we want to make sure that we take our share of the -- maybe a little bit smaller growth opportunities in the market than we've seen before. So, kind of a yes, but also investing into growth answer.

Thanks. Jaakko Tyrvainen continues. You sit on a large cash pile, are you seeing the prolonged soft market creating opportunities in M&A? Have the valuation expectations come down on non-listed side?

Yes, this is the question we get every time we come up here, and that's understandable. And I still answer in the way that I've done before. It needs to. There is a certain bottling up of M&A transactions, and that needs to start -- the action needs to start at some point. So that's what we are counting on. And even though we haven't landed any acquisitions, we have constantly discussions going on. So, we are also quite optimistic that this is the case. Valuations, again, slowly on the private side, they maybe start getting more realistic if realistic is what we see with the listed companies. So, it's gradual again. But yes, there needs to be parity there at some point, and we hope it's soon.

Thanks, Mikael. Then it's Daniel Lepistö from Danske Bank. Can you elaborate the Q1 '25 outlook, especially the notes on price competition, DACH area challenges and ceiling price customer contract overrun? What magnitude headwind to margins should we expect?

Yes. Let's start with the -- and you might want to repeat the areas where Daniel was especially interested, but let's start with the ceiling contract note. That's a one-off type of event that we noted in the Q1 profitability drivers. As to the impact of that, maybe Teppo wants to add something, but I'd say that it's below the actual materiality threshold that we have. But for the sake of transparency, we have wanted to include it here. It's not business as usual, even though the materiality is not that big. That's why also we haven't really quantified it. But hopefully, this helps, Daniel.

Also price competition in that situation.

Yes. Yes. So, price competition for Q1, no huge changes there. We see a continuation of what we've seen during 2024. So that will not have as such a huge impact on profits and change that margin that we have. But it's still a big driver behind winning the tenders there. So that's something that we will start considering on a case-by-case basis, what is the winning price for the cases. So, in that sense, it will continue to affect us. But shouldn't be expecting any like quick changes in margins or decrease in margins. It's more of the same that we've seen during the last 18 months already. For the DACH area, yes, that was actually our business in the DACH area was more impacted during 2024 by customer savings and by the weak economy driving the customer savings than we expected at the beginning of the year. So, we have some work to do to offset that negative impact, and that's what we've been working on, and we had the opportunity to release a good news at the end of the year with the auto manufacturer with a test center service that we provide them a very significant contract, and that is now ramping up during the beginning of this year. But there's still work to do to offset the effects of customer savings and the changing in our customer project portfolio because of those.

Joni Grönqvist also asking about Q1 or specifically January numbers, some comments on that? And should we expect the same trend in the rest of Q1?

Yes, January was not particularly strong. We hoped for a more positive change of the year situation at the end of the year. But when we got closer to the end of the year, we knew that we probably will not have it. So, it's similar to what we experienced especially in 2024. Beginning of the year and January is always weakened by the year-end change in project portfolio. There will be projects that -- more projects than normally. Significantly more projects than normally that will end by the end of the year. And starting new projects that there also is a lot at the beginning of the year always takes time. So, January is typically seasonally soft in that sense, and it was especially soft this year as it was a year before. This means that in practice we have more free capacity at the moment than we would like to, and that is what we, of course, will be working hard on to get that free capacity into projects. That's why we also commented that we hope probably will not see a significant rise in capacity during the quarter because we have reserved capacity in the form of the free capacity. So that's what the upside opportunity in Q1 is to improve on the utilization from January, which was similar last year, a year ago.

Thank you. And it's Jaakko Tyrvainen again asking about the private side of things. Are you seeing decision-making being postponed in the industry side due to current collective agreement negotiations? Should the outcome be negative for industrial companies? Are you seeing this impacting customers' investments in digital IT development?

We don't especially see that as a significant or individual driver behind decision-making. I'm sure it plays a part. And Jaakko is referring to a locked-up situation for salary -- national level salary increases with the manufacturing, the technology industry. So, we'll see where that ends up. But yes, it will impact our customers, but I would not consider that to be a huge impact.

Thanks. Tyrvainen also has a question on the public side of things. In your market outlook commentary, you are expecting the Finnish public sector to remain in modest growth. What are the key drivers here?

Well, the underlying key driver is the same as always, a digitalization of society, which is like an unstoppable force in a sense. Especially for the Finnish public sector, I think the drivers are there to improve efficiency. We have a deficit in public finances and somehow we need to improve on that efficiency, and digitalization is one of the keys to that. If we look at especially health care, social services, it's not only about the cost of things, it's also about a lack of skilled workforce. Again, digitalization needs to be seen as a tool to remedy. So, there's a lot of -- or almost all megatrends drive digitalization also in the public sector. So, it would be I think impossible and if not impossible, it would be foolish to try to stop that development and not invest into digital technology.

Also, Jaakko continues like in hindsight, how much of the 2024 public sector performance was impacted by sudden and unexpected cost savings of this sector?

Not something that is easy to quantify here. So, I won't be trying, let's say, some, but unexpectedly very limited amounts. Especially for the customers that we work with on a long-term basis, I think we usually have a good discussion with them about the budgets, and we know a little bit beforehand before the cuts come. But there were some customers where our position is not as strong as we'd like it to be yet. So, there were some, but a limited number.

Thanks. Now let's put Teppo in the hot seat. Joni Grönqvist is asking, Teppo, can you give some comments on the working capital changes in Q4?

Yes, that was definitely positive. So, we gained a lot there. I would expect that the trend is not so radical in 2025. But that was definitely a good development from our side.

Thank you. Then Jaakko Tyrvainen, again asking about our own IP and the mentioned investing in that. How will this impact your numbers, costs, CapEx in 2025?

Well, we know that it has had a profitability impact of around EUR 0.5 million for last year. So that was on the OpEx side of things. Let's see how we are going to book that the development is progressing from more of a research phase into more of a development phase. So it might be that similar and a little bit bigger impact will be on the CapEx side, but nothing more significant than that.

Thank you. Maybe the M&A from a slightly different point of view, Joni Grönqvist is asking that if we were to make larger acquisitions, what kind of companies should these be?

Good companies. So, no use buying bad companies, be they small or especially large, so good companies. I don't think it would change how we look at what a good company is. It needs to have a sufficient track record of successful business. We are not that much in a turnaround business ourselves; that's not the strong expertise that we have. It needs to have a strategic fit so that it can be geography-wise in the focus areas that we have or it can be something that provides stronger capabilities for the offering part to our customers, or it can be about individuals or groups of important customers. And it needs to be, and I think that's even important -- more important when we look at bigger targets, it needs to be enough of a fit culturally. Something that we can learn from, but also something that subscribes to the values that we at Gofore have on what it is to be a good IT consultancy employer.

Thanks, Mikael. Last one, Panu is asking about the public sector and the private sector breakdown in 2025 and '26. It looks like the Finnish government is not putting money that much on new IT projects right now. And on the other hand, lower interest rates might encourage the private sector to invest more. But how does that look like in your point of view?

Well, that's pretty much what we hope for. What we said is that how we look at things and how IT budgets are channeled into the kind of development that is relevant for Gofore into the transformative digital services, into a digital transformation as a whole. We don't think that the budgets will be decreasing. They will be -- it will be slower growth than we've seen in the past years, but we still don't think and estimate that it will be decreasing. What we are especially hoping for is that the economic environment would improve in the sense that private sector investments would start flowing, and the economy is developing favorable for them. And that's the problem at the moment, a certain gloominess that goes around in the economy. So, we are hoping for that to change for sure.

Thank you both, and thank you all the participants for your good questions.

Thank you.