NNIT A/S (NNIT) Earnings Call Transcript & Summary

[Operator Instructions]. I'll now turn the call over to the speakers. You may now begin.

Thank you very much, operator, and excuse for the slight delay. And -- but most important, good morning, everybody, and thank you for joining this webcast. My name is Par Fors, and I'm the CEO of NNIT. And with me today, I have our CFO, Carsten Ringius. And together, we will present our results for the fourth quarter and also the full year of 2024, which we released yesterday evening. Please turn to Slide 2. I will walk through the key business highlights, including a regional update. After this, Carsten will go through the group results, including our financial outlook for 2025 and our adjusted financial aspirations towards 2027, which we announced on the 11th of February. Before heading to the next slide, please pay attention to the disclaimer in the bottom of the slide. Let's turn to Slide 3. No doubt that 2024 was an eventful year for NNIT. We faced challenges greater than we firstly anticipated, such as the slower-than-anticipated recovery in our data migration business, a more cautious customer behavior, a more moderate market slowdown in Europe and continued challenges in Asia, most notably in China. On the other side, we saw solid growth trajectory in the private and public segment of our business and also turnaround efforts in Region Asia positively materializing. In Q4, we managed to change the growth and profitability trajectory from Q3. Our revenue for the fourth quarter amounted to DKK 470 million equal to a growth of 7.1%. Organic growth was also 7.1%. The margins picked up in the last quarter, as planned, ending at 9.1%. The Q4 financial performance resulted in an organic growth for the full year of 6% and a margin of 6.3%, which was in line with our latest outlook announced end October last year. Even though our initial expectations going into the year were higher than what we delivered in terms of financial performance, we are happy with ending the year on a solid note. Please turn to Slide 4. During the year, we have made good strategic progress. We have reached several important milestones after the divestment to ensure that NNIT has a strong platform to stand on and further evolve. In our corporate strategy, we have made some deliberate choices to diversify our business focusing on global life science and the private and public space here in Denmark. In 2024, we have proven that those choices has been the right ones. Besides improving and growing our Life Sciences business, the Public segment has really had a strong year with close to 30% growth where we also won important contracts. A key revenue driver for NNIT is our ability to grow engagement with existing customers. This can be done only if the customer relationship is strong. Our customer satisfaction score for 2024 is a direct testimonial of that. We reached a score of 4.5 out of a scale of 5, which is actually the highest performance ever. In terms of Net Promoter Score, 2024 ended on [ 43 ], which is helpful because our customers at large are willing to recommend us to others. For the past years, NNIT has acquired companies in Europe, U.S. and Denmark. Now all group companies, except SCALES, have been integrated into NNIT during 2024. This has been a major effort by all our employees in order to make this happen, and we have even completed the integration faster than planned. This means that Excellis Health Solutions, Migration Powerhouse and SL Controls are now an integrated part of NNIT with location in both U.S. and Europe. After the divestment, NNIT has streamlined the system landscape and simplified IT backbone. As part of the divestment, we have completed the IT separation, we have implemented a new ERP system and also a new HR system. All of these projects have been completed in 2024, which again has required a huge effort from all our employees. The benefits are great as all entities are now running on the same systems, access and quality of data have increased and the costs have been structurally lowered. Lastly, I would like to mention the relocation of offices we have done across the globe. We did this for 2 reasons: one being to strengthen our employer brand and also to lower our facility costs. We have actually managed to do both things, and we are happy with the outcome. Please turn to Slide #5 for a regional update. The business and financial performance across our regions is fragmented. Despite the overall organic growth of 6% for the full year, we saw that the regions were facing different challenges. For U.S. and Europe, we have seen a moderate slowdown of the life sciences market causing cautious customer behavior and price pressure emerging, and this is especially true for Europe. Also, both regions have been negatively impacted by the decline in the data migration business. In Asia, a challenging macroeconomic environment in China has resulted in a significant price pressure, especially from local competitors. On the other hand, Region Denmark has seen a solid traction within the private space and strong growth in the Public segment as mentioned earlier. A few more comments on Europe. During 2024, we managed to organically grow our business in Region Europe with almost 10% in a difficult market where we saw new projects that were characterized with a shorter time frame, more narrow scope and some of them also postponed or put on hold. Despite the solid organic growth, the profitability came below last year's level, which was underwhelming. This was mainly due to having too many people with low utilization. In January, we welcomed Pia Ingels as the new Head of Region Europe replacing Ricco Larsen who has been an important part of the company for the last 25 years. Pia comes with great NNIT experience where she lastly has overseen our engagement with Novo Nordisk very successfully. Besides having a consultancy background, Pia has a strong commercial mindset and great understanding of project background -- execution and also a background in consultancy, SL. The immediate focus for Pia and Region Europe is to strengthen the backlog and pipeline, and of course, also to improve profitability. Turning to Region US. The organic growth for 2024 was a full year basis disappointing. The decline was mainly driven by the data migration business, but also some slight decline in other parts of the market, especially within R&D. Despite the revenue decline, regional operating profit margin increased compared with last year as there were less spend on external subcontractors and also we did some capacity adjustments early in the year and also have a continued focus to drive down costs. We also saw a significant pickup in performance in Q4. Region Asia returned to growth and profitability in 2024. The material improvement compared with last year is due to the initiatives carried out through the end of 2023 and the beginning of 2024, where Asia rightsized its capacity making sales function a part of the delivery unit and an enhanced commercial focus on project execution and fight the price pressure. We're happy with the development, but it is too early to state that we are fully back on track as we remain cautious due to the continued challenging macroeconomic environment and also the strong price pressure. As mentioned earlier, we have progressed well in Region Denmark. We continued to deliver solid growth during 2024, especially within the Public area and for the SCALES Group company that was performing very well. The growth was supported by the existing contract we had going into the year and also some new important contracts that we won. We grew our profits, however, the margin was slightly lower compared with last year mainly due to significant amount of billable resources completing crucial internal projects, such as the IT separation during the year. We have now concluded on those projects going into '25, which will support margin expansion. Please turn to the next slide. On the 11th of February, we released our preliminary figures for 2024. In the same announcement, we also shared the outlook for 2025 and our adjusted financial aspirations toward 2027. I will briefly go through the figures, and later in the presentation, Carsten will go through the details and also the assumption behind them. Firstly, the outlook for 2025. We target an organic growth between 7% to 10%, which is above the latest external market outlook from the Everest Group, which sits around 4% to 5% for the Life Science and around 8% for the Public sector in Denmark meaning that we will grow ahead of market, gaining market share. In terms of profit margin, we target group operating profit, excluding special items, between 7% to 9% for 2025. In regard to our financial aspirations toward 2027, the ambition for the organic growth is between 7% to 10%, and the group operating profit margin, excluding special items, above 10% in 2027. Please turn to the next slide. This concludes my part of the presentation. Now I will hand over to Carsten for the group financial performance and the details around our financial outlook and our financial aspiration. Carsten, please go ahead.

Thank you, Par. Please turn to the next slide. In Q4, we returned to profitable growth on the back of an unsatisfactory Q4 -- or Q3 results. Revenue amounted to DKK 470 million, equal to the organic growth of 7.1%. As Par alluded to, the growth was mainly driven by expansion of engagements with existing customers across regions with the exception of Region US. We are happy with the performance in the light of the moderate market slowdown and the uncertainty around the macroeconomic environment. Our group operating profit margin, excluding special items, was roughly in line with last year's level, mainly due to the decline in the data migration business. Please turn to the next slide. As Par mentioned, we ended the full year of 2024 in line with our latest outlook. Of course, we are pleased with that. However, we had expected better performance when we started the year. Revenue amounted to DKK 1.85 billion, equal to an organic growth of 6% in a challenging market. Group operating profit was in line with last year, and margin was slightly below. To improve margins going into 2025, we do see a number of levers that I will go through on the slide for the financial outlook for 2025. Please turn to the next slide that specifies the special items for 2024. Let me start by saying that special items came in higher than we initially planned for. The total net amount was DKK 69 million, which was the same amount as the year before, 2023. The level of special items materially increased in Q4 by a number of variables, I will go through the elements now. We had DKK 26 million related to earn-out payments. We expect these payments to be final in 2025, and therefore, we see no further earn-out payments from 2026. New IT platforms and integration of group companies amounted -- or accounted for DKK 27 million. This was higher than we initially planned mainly due to us completing the integration faster, moving in special items from 2025 to 2024. Additionally, we also progressed further on the Phase 2 of the new ERP implementation, which was also moved from 2025 to 2024. Restructuring cost was DKK 20 million, which was also higher than anticipated as we have made more capacity adjustments during the year due to lower utilization and streamlining the organization. In connection with our relocation of the headquarter in Denmark, moving out of the premises in Oestmarken, we also had some special item costs of around DKK 9 million. We incurred one-offs associated with the divestment of our infrastructure business amounting to DKK 6 million. Lastly, we released an accrual of DKK 20 million in Q1 2024, which was related to a reservation made in relation to the divestment of our infrastructure business. Please turn to Slide 11 for the financial outlook for 2025. As announced on the 11th of February, we expect to organically grow our business in 2025. We continue to see good opportunities to outgrow the market across all our business areas based on our current pipeline and indications from customers. Organic growth is expected to be between 7% and 10%. We also expect to grow our profitability compared with 2024 to between 7% and 9%. The drivers for the margin increase are driven by several improvements within commercial excellence. Additionally, we do expect that the full year impact from the restructuring initiatives carried out in 2024 will have a positive impact into 2025. Special items are expected to be materially lower than 2024. Earn-out payments amount to around DKK 20 million. And restructuring costs is expected to be materially lower than last year. We expect the first quarter to be below the guided range for both organic growth and group operating profit margin, excluding special items, as financial performance is expected to gradually improve throughout the year. In the outlook for 2025, we assume that there will be no further deterioration of the current macroeconomic environment. Please turn to the next slide. In connection with our prerelease of the full year '24 figures, we also adjusted our financial aspirations. Before going into the adjusted figures, I will elaborate on why we updated the financial aspirations. There are 3 important drivers for why we changed. The first being that the financial performance in 2024 was lower than we initially expected. The second being that the external market outlook has been downgraded. The market outlook from Everest Group now projects a CAGR of around 4% to 5% for the Life Science segment, which is around 3 percentage points lower than the outlook we were in possession of at our Capital Markets Day in September 2023. And lastly, we do see that the macroeconomic and geopolitical uncertainty is impacting the business greater than we initially expected. With that being said, we remain certain that the strategic direction we set in 2023 remains the right one and that NNIT is well positioned to continue to profitably grow the business. As part of the adjusted financial expirations, we changed the structure of the aspiration. There are 3 changes. Organic growth is now measured as annual growth instead of CAGR. The profitability measure continues to be group operating profit margin, excluding special items. However, instead of yearly average, it has been changed to an open-ended range by end of the period. And the period has been prolonged with 1 year to 2027. Please turn to Slide 13. The adjusted financial aspirations towards 2027 constitute of an annual organic growth between 7% to 10%; and the group operating profit margin, excluding special items, above 10% by the end of 2027. As for the outlook for 2025, we do see great opportunities to outgrow the market across our business areas, which we have also proven in the past 2 years. The margin expansion will be supported by a number of levers such as economies of scale from top line growth and optimization of utilization. Our continuous focus on improving organizational efficiency increase the solution repeatability across regions to leverage our great service offering and structurally streamlining our cost of the business across regions and corporate functions and leverage the synergies from the integration of group companies is now finalized. As for the outlook 2025. We assume no further deterioration of the macro environment and that we are able to alleviate cost and salary inflation through price adjustments. Lastly, we have not included any M&A activity in the financial aspirations. However, we are continuously looking for targets and opportunities. Please turn to the next slide. Before we head into the Q&A section, Par will provide some closing remarks. Operator, please turn to the next slide.

Okay. So thank you, Carsten. And now we turn to the Q&A session.

[Operator Instructions] The first question will be from the line of Mads Quistgaard from Carnegie.

I have few and I will take them one by one. So first, on special items, so when you say restructuring cost is expected to be significantly below the level in 2025 compared to '24, is it then below DKK 20 million or is it below DKK 50 million, which is the number stated in Note 2.5 in the Annual Report? That's my first question.

It is the latter, Mads. It is below the cost we have for restructuring in 2024.

Good. So below DKK 50 million. Perfect. And then what is sort of a sustainable gross margin in the U.S. going forward? Is it still above 50% or is it close to 40%? Or how should we see it?

It is not in the line of Q4 at 54%. It is little higher than in the beginning of the year. So we expect a level about 40% of the U.S. business going into '25.

Okay. Makes sense. And then on -- maybe on the free cash flow and also depreciation and amortization here in 2025. Can you probably give some comments around the SG&A, operating cash flow and potential free cash flow here for this year?

Yes, I think it's important to note that for 2024, we had some significant project activities ongoing impacting our cash flow. First of all, we had the IT separation, which was, from an expense point of view, accrued for in 2023. But of course, we had the negative cash flow from the salary payments related to this work going on in 2024. This amounts to more than DKK 50 million. And then the second element is our investment in our new ERP platforms and HR solutions, which amounts for more than DKK 50 million. So just these 2 elements alone constitute a negative cash flow of DKK 100 million in 2024. As we have completed these activities, this will, of course, not be repeated into '25, thereby improving our cash flow.

Okay. Makes sense, Carsten. And then final question from my side in terms of seasonality. So how do you see this year? Do you see it as a ramp-up from Q1 to Q4? So again, Q4 will be the strongest quarter? Maybe you could provide some comments around the demand environment here in the beginning of '25.

Well, in relation to the profitability, as we have done some capacity adjustments also in Q4 last year, we expect to see the benefits of that, of course, into the new year, both in the U.S., but also in Region Europe. If you look at the seasonality, as I mentioned during the webcast before, we expect Q1 to be at a lower level than the guided range, but with gradual improvements throughout the year. As you have also seen, we have made an adjustment to the regional management for Region Europe, and we expect the effort that Par is putting into restructuring Region Europe will improve the profitability throughout the year as well. So we see gradual improvements throughout the year.

The next question will be from the line of Poul Jessen from Danske Bank.

I have a question or just a clarification, coming back to Mads' question on restructuring. I assume that the restructuring in 2025 would be less than DKK 20 million. Isn't that correct?

Well, we expect it to be at a significant lower level than in 2024. And we have currently not plans for increasing it more than to DKK 20 million, but we are not guiding specifically on the amount. What is important for us is that we are quickly addressing all capacity as we go through the year. And if we see significant need for restructuring, then we will address it sooner. So we don't encounter experiences like we did in Q3 last year significantly decreasing our profitability. But my expectation, just to repeat it, is that we will have a significantly lower amount of special items into 2025 than what we have seen in '24. As mentioned just before as well, you have seen that we have made some changes to the management of Region Europe in Q1, which, of course, will be coming with some restructuring costs in Q1 already.

Yes. I was just wondering what's the base number when you say significantly lower here. The DKK 69 million is including earn-outs and the new IT platform is what I'm just thinking about, the restructuring was DKK 20 million last year.

Yes. And my current expectation is that we will also be below that amount for restructuring.

Okay. And then we say no more earn-outs in 2026. But if you look at the balance sheet, you have a long-term earn-out on the balance sheet of DKK 5 million. I guess, long-term, that means that it's something for '26?

It is for payout in '26. But we have earn-out related to SL Controls and prime4services in '25, which will be expensed throughout the year in '25. This is what is amounting to our estimated DKK 20 million.

Okay. So there would be no payment or expenses in the P&L in '25?

It would be expensed, but the cash flow effect will be in '26.

Okay. Then on the guidance, you talked about a strong pipeline, a strong backlog moving into '25. Is that referring to Public sector Denmark or across? And does it also include expected wins during '25? Or is it on the portfolio?

I mean, I think the pipeline is pretty well spread out through the regions. But of course, the 2 strongest regions regarding pipeline is clearly the Danish business, both for the Public sector business in Denmark but also the Private business. And outside Denmark, it looks hopeful and good in the U.S. And also in Europe, the kind of Danish part of the Life Science business in Europe, of course, we've had impressive growth of normal this year, by 14% totally. So it's -- in Denmark, it looks good. Outside Denmark, a little bit tougher; and in Asia, a bit tougher.

But it's including expected wins when you talk about the outlook [indiscernible]. It's not something necessary you have won by now?

Yes. We also have expectations that we will win some contracts during 2025. If you look at the Life Science pipeline, these are, by nature, smaller projects. So we need to, of course, during 2025, also ensure that we win projects to fulfill our revenue growth ambitions. If you look at the Public pipeline, we have quite an okay historical win rate. If we look at the tenders that we have been part of, our current outlook do not expect that we have a 100% win rate or a balanced win rate in line with our history within the Public tenders that we have submitted to previously.

And then about the SCALES people and others who have been working on internal projects. Should we see now that they have become client-facing that, that will boost the growth. So they have not contributed to growth fully '24. So when they now can look at external clients, so this is an accelerator?

Yes. Let me give a comment on the SCALES performance. As you know, we have been using SCALES to deliver our new ERP platform in NNIT and that work commenced in the second half of 2023 and has been running throughout current year. And if you look stand-alone at SCALES business, considering revenue towards NNIT and external, you would see a continued growth in the SCALES business. Of course, the revenue towards NNIT is coming without margin. Thereby, if you look at Region Denmark as a whole, explains part of the decline in the regional operating profit. With ERP implementation now being complete, you would see a pickup in margin just contributed by SCALES now, replacing the NNIT internal revenue with external revenue again. So that has a positive impact into '25.

Okay. And then I look at the admin expenses, they were up 11% in '24 versus '23. I would assume that you became more lean, and without an operations business, that should not go up that much. Is that salary increases or are you expanding your overhead or how should we take that?

No, I would take the 23% number with a certain amount of caution because, as you recall, we had the first 4 months related to -- or sorry, we had the first 4 months of the year with also running the infrastructure business. And of course, the correct split of back office cost, corporate costs are based on extrapolations for the first 4 months. And of course, there's also been a lot of work gone into the separation after the split that is under special items in '23. So I think a direct like-for-like comparison is difficult between '23 and '24.

So the '24 number is more the base to look for?

Yes, I would say that.

And then we should expect lower both for local and headquarter cost allocation, lower leases across the group?

Yes, we should see a decline into '25 when we are reaping the synergies from our investments in new platforms, relocation of offices, et cetera.

Final question for now. Novo Nordisk, if you look at the note on their revenue then, they actually have accounted for close to 28% of the growth meaning 28% of the 7% growth. So they have been a real contributor to growth last year. How should we look at that? Will that be a main generator also for the future?

I mean, I think we are extremely pleased by that growth because, as you recall, Poul, for many years, the revenue with Novo Nordisk was just declining and declining in the old NNIT setup. So now with the totally new NNIT setup where we sell services to the line of business, we see a pickup of growth. And I think I have a very positive forecast for 2025, I would say, in line with that performance of '24.

Okay. And how do you look at it? They are, of course, currently in a huge spending mode. When you look at it on the long term, is that business level you expect to maintain? Or should we some time that Novo will potentially also reduce or moderate their growth?

Do you mean for Novo specifically? Yes. No, I mean, honestly, I mean it's hard to look at the crystal ball what would happen in the very long future. But I mean, we have -- there's a lot of positive -- there's a lot of investment going into Novo that does not just cover 2025. So we have a positive prospect for the future that we can look into. But of course, what will happen 5 years to now, I don't know that. But at least for 2025 and also looking into '26, there's a lot of projects going into that year. So for that period, we're at least positive.

The next question will be from the line of Mikkel Kousgaard Rasmussen from ABG.

I have 2 questions, I'll take them one more one. So the first one is related to Poul's question previously. In terms of backlog for 2025, I mean, you obviously have to win some contracts in order to get it within guidance. But just assuming that you don't win anything new, how much could you realistically grow revenues this year?

I mean, I think we have given a revenue guidance for 2025, which is that assumption or that forecast of 2025 is built basically on 2 components. Firstly, we have backlog into the year, which we think underpins that number. But of course, on top of that, we need to expand some existing contracts and also win some new contracts. So it's a balance of those two, but we are -- as those numbers are fresh out of the press, we think we have a solid plan to make them materialize.

Okay. Next one goes to the, say, medium- to long-term margin target of now only above 10%. I remember at the Capital Markets Day you spoke about -- or at least your target previously was an average of 10% to 13%. But given that 2024 would be sort of a transition year, that meant that it would be more back end-loaded and you'd probably see margins above maybe 13% in 2026. Now you've postponed it 1 year. Is there anything structural in the way we should think about margins, long-term margins, in the business, obviously, aside from the lower market growth.

Well, we strongly believe that we can improve our margins, of course, reflected in the guidance. We do see also with the adjustment of our revenue trajectory that we see this materializing slower. That is the entire assumption about the updated financial aspirations. But we, as I went through the presentation, see several levers for actually expanding our margin. One is to get of course, our capacity adjustments in place and running that as part of the sort of normal business practice to adjust that very agile compared to how we have done that in the past. So that is one major contributor. And the other one is, of course, addressing our regional and corporate overhead costs where we see opportunities to improve that further. And then, of course, extend the repeatability of our solution portfolio to a higher degree. That is an area where we can still improve quite a lot by cross-selling the different solutions that we have across regions and thereby driving up our profitability more than what we have done historically.

And I think, and not the least, I mean, as a consultancy company, I mean, the efficiency utilization, billability, we have, we call it, it's an extremely important lever for us to push that up. Every percentage point contributes significantly to our bottom line. So for that period, that's maybe one of the larger levers.

But there's no difference like in the way we should think about long-term margins, it's not like a structural change?

No.

[Operator Instructions]. The next question will come from the line of Yiwei Zhou from SEB.

Also a follow-up question on the special items. Maybe just to challenge you a bit, Carsten. So you treat the capacity adjustment costs as restructuring costs. But if the market demand continues to be more volatile than you think, I mean, should we expect you continue to increase special items in the future? I mean, isn't it just a part of your normal business operation, at least we know some of your peers did just treat it as a normal cost.

Well, I think there are two sort of separations on this. One is sort of the ongoing adjustments of teams where you see projects materialize and we have to adjust your capacity. This is something that we are handling as part of normal business. What we consider special items is, for example, when we do organizational changes, integrate companies, do significant reductions, consolidating teams, taking out management layers, so these kind of very -- yes, restructuring the organization to a higher degree, not just taking out 1 or 2 or 3 employees as you would normally do, where you have to address capacity surplus or too big [ events ]. So we are differentiating between these elements.

Okay. I'm just hoping that you can be more specific in the future when you guide on these special items. And my next question here is on the minimum target. I can understand the low organic growth outlook. But what is the uncertainty for you to lower also the margin outlook? I mean -- and Mikkel has asked the same question here. But what I understand that those cost initiatives that you have been completed as planned, so we should see that -- those margin drivers start to materialize here in '25. And isn't it just the capacity adjustments will continue to be main [ uncertainty ] for you to reach the margin target? Because when I compare your EBIT margin to the peers, you are still much lower than their profitability. And if you say there's no structural difference, I mean, isn't it just the utilization is much lower at current level than most of your peers? If you can help me to understand the dynamics and what you have assumed in the medium-term target, especially the updated one.

Well, capacity adjustments is one thing. But I think as Par also mentioned, one of the biggest levers we have is increasing the utilization on the individual consultants. And there we see a big potential from the current level that we are coming from. So that is one significant driver that we need to drive throughout '25 to realize these profitability gains. The regional and corporate cost reductions will only get us so far. I think the driver around solution repeatability is also a significant one that we need to utilize to get above the 10% where we want to be.

And maybe as the topping of that, I mean, I think if you should be humble and self-reflecting, I mean, the transformation from the old NNIT to the new NNIT, as we call it, has taken a little bit more blood, sweat and tear than we anticipated. So the negative consequence of that, you've seen the numbers that we presented, but you also see a greater potential to improve the operation of many aspects both in terms of overhead, but also our utilization and our efficiency numbers. So -- and I think we are demonstrating that in our outlook for 2025 that we are moving yet another step in the right direction. So we were offered a good start in '23. We are not pleased by the performance in 2024, but we see definitely a better 2025. But as I said, there's also some needed action in Europe to get us in the right place with the new leadership in place. So those actions are actually ongoing as we speak.

Okay. And let me put it another way. So you're seeing -- it sounds like you're targeting a 10% adjusted EBITDA margin midterm. Previously, it was at 10% to 13%. And if you compare it to your peers, I mean, it is around 13% or even higher. I mean, what is the sort of the level you think -- is there any structural difference you're seeing compare your margin to the peers?

I mean, I think there are many reflections, that's a very, very good question. And one thing is I truly believe that the way to get to margins, higher margins, is actually to have the type of focus that we have as a company, meaning that we are building 2-legged people who understand technology, but also understand the business. I think those businesses generally are the ones that are able to generate the greater margins. It is true that there are some competitors that are at 13% to 15%. Many are at a clearly lower level. Our ambition is definitely to move as a first stepping stone towards 10%. Is that the end station? No, it doesn't necessarily need to be that. But we need also to set realistic goals, which we can deliver upon. And that's why we've given that guidance. So I think if you reach a 10% EBIT margin as a starting point and as a floor because that's what we communicated that we should reach 10% and hopefully larger, but we also want to set targets that we can achieve and hopefully over-deliver upon. So definitely above 10% long term to 13% will probably take a little bit longer time.

Okay. Clear. My last question here, you mentioned the new customer in the Danish Private sector. Is it also Life Science or is it other verticals you have won?

In the Danish market, I think we mentioned in the U.S. market, right, in last...

No, Danish. You're saying you bring new customers in the Danish Private sector. I remember you will mainly target the Public sector here in Denmark. But you said that you bring new customers in the Private sector.

Yes, I mean, in general -- I mean the Danish business, if you look at the Danish business, they constitute basically of 3 parts. First, you have the Public business and that we talked about. Then you have SCALES who continuously are bringing in new clients to grow their business. I mean, it's a project business. They do not have any kind of repeatable business. Their projects, which could be 24 months long, but their whole business model is continuously bringing in new clients. That's one source. Then the third leg of the Danish business is actually our consultancy business, which is cloud, cybersecurity, BI, DevOps, et cetera. They are also continuously working on new clients. So that's why we kind of phrased it that way.

So those new customer in the Private sector, is it a SCALES customers or is it your own customer?

It's both in SCALES, but also in the third part of the business here in Denmark because, as I said, it's 3 different parts of the Danish business. It's Public, it is SCALES and it's also the consulting. And the 2 latter parts, to a large degree, operates on Private business outside Life Science.

As there are no more questions in the queue, I'll hand the call back to the speakers for any closing remarks.

Okay. Thank you for very good questions. Appreciate for you listening in. And please do not hesitate to reach out to me or Carsten if you have any further questions. With that, thank you for participating, and have a great day.