SoftwareOne Holding AG (SWON) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the SoftwareONE Full Year 2024 Results Conference Call and Live Webcast. I am Maira, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Anna Engvall, Head of Investor Relations of SoftwareONE. Please go ahead.

Good morning, and thank you to everyone for joining SoftwareONE's full year results. I'm Anna Engvall, Head of Investor Relations at SoftwareONE. And joining me today are Raphael Erb, our CEO; and Rodolfo Savitzky, CFO. In terms of agenda, Raphael will kick off with an overview of key developments in 2024 and the fourth quarter. Rodolfo will take you through our financial performance and thereafter hand back to Raphael, who will provide an update on the combination with Crayon and outlook for 2025. We will finish the session with Q&A as usual. Before we get started, please let me draw your attention to the disclaimer regarding forward-looking statements and non-IFRS measures on Slides 2 to 3. With that, I will hand over to Raphael.

Thank you, Anna. Good morning, everyone, and thank you very much for joining the call today. Before diving into the full year and Q4 numbers, which are in line with guidance, let me start with some overall perspectives on last year. 2024 was challenging, and our results reflect this. But it was also a pivotal year where in Q4, we undertook fundamental changes to restore customer centricity and build a trajectory of sustainable, profitable growth at SoftwareONE. I would like to touch on a few key highlights. In terms of financial performance, we delivered CHF 11.4 billion gross billings with revenue over CHF 1 billion and adjusted EBITDA of CHF 223 million in 2024. As a company, we are capable of much more. With 2 years of organizational changes now behind us, I want to clearly communicate our target to more than double reported EBITDA this year, drastically cutting our level of earnings adjustments. We have also taken action to resolve the GTM-related sales execution issues and made significant progress on our new cost reduction program, which support our outlook for 2025. Furthermore, our announced combination with Crayon opens a new chapter for SoftwareONE. We are bringing together 2 leading software and cloud solution providers with dedicated teams around the world and shared core values. The value creation opportunity is significant. And for both companies, it's the right next step in an industry, which continues to evolve and consolidate. Finally, you have read that Rodolfo will be stepping down as CFO of SoftwareONE. I would like to thank him for his many contributions, including strengthening the finance and IT organizations and implementing the operational excellence program, which leaves the company with a solid basis for the integration of Crayon. But we do not say goodbye yet as he will still be supporting us into the second quarter. Let's now look at our full year and Q4 performance. Revenue for the group was up 2.9% year-on-year. As expected, Q4 was a challenging quarter as customers continued to exercise caution due to the macroeconomic environment. The annual budget flush was muted, particularly in our largest market, DACH. In addition, we had certain markets emerging from GTM-related execution issues. Conversely, contribution margin was up 5% for the year, driven by efficiencies in our delivery network. The adjusted EBITDA margin was 22%, down 2.3 percentage points compared to prior year with some immediate benefit from our cost reduction program and tight business management. Moving on to the geographical performance. It's a mixed picture. APAC continued to deliver excellent results with nearly 16% growth for the year and 19% in Q4. This was driven by strong growth in our Microsoft business across the region, but also successful scaling of our AWS practice. In this region, we are implementing the GTM step by step, very differently from the rushed approach taken in other markets. India is a great example, having completed the transformation while delivering revenue growth of 17% for both Q4 and the full year. DACH grew by 2% for the year with a solid performance in other ISVs, offset by the Microsoft business. Following a strong Q3 driven by a number of large customer wins, Q4 was weak as expected with not much of a budget flush. The performance in the other regions, rest of EMEA, NORAM, LATAM was impacted by the GTM-related disruption in the second half. Based on actions taken, we are now seeing early signs of momentum in new pipeline generation and sales productivity gains. Turning to our business lines. Software & Cloud Marketplace revenue was down for the year with slightly higher growth in other ISVs, offset by Microsoft business. The overall decline was due to a combination of our GTM sales execution issues in the second half and external macro conditions. We added 67,000 Copilot users in Q4 2024 with some natural slowdown in the adoption curve following high initial interest. At the same time, we are seeing continued strong momentum in services as customers explore use cases, which drive ROI and seek our advice on security and governance topics. Microsoft has also recently introduced Copilot Chat, allowing organizations to start using AI without the full Copilot investment. Services delivered over 7% revenue growth in Q4, driven by Cloud Services, Digital Workplace and SAP Services. Revenues from xSimples declined in Q4, largely due to more aggressive pricing, while momentum at the billings level was maintained. While we report our 2 business lines separately to provide granularity to the market, it's important to note that the world of licensing and services is becoming more and more integrated. This means we should not lose sight of the overall ecosystem view across marketplace and services, and it's key that this ecosystem continues to grow. I'll come back to this topic later on. At Q3, I set out certain immediate priorities, which I'm pleased to say we have delivered on, while also progressing the acquisition of Crayon. On GTM, we took action to overcome the disruption and ensure successful adoption of the new model. We now see a foundation for higher growth in the impacted markets. Secondly, we delivered on our cost reduction program well ahead of schedule with CHF 58 million of annualized savings from 1st January this year. Thirdly, we took decisions to drive regional empowerment with new leadership appointments across DACH, rest of EMEA and APAC. It's important for me to emphasize that these changes are part of a broader change in mindset, moving away from the top heavy organization that we had become to empowering the front line, holding them accountable and restoring agility. Now focusing on our GTM transformation and the specific actions taken. On the people side, we have announced 3 new regional Presidents: Patrick Kaegi in DACH, Rico Andreoli, leading rest of EMEA and Varun Paliwal taking over APAC from myself. They have all been with the company for more than 10 years in various sales leadership roles and understand our business and culture inside out. We also implemented further changes at the country level to ensure the right people are in the right seat on the bus. Finally, we implemented an experienced central business management team and cadence to manage our 60-plus country organizations and ensure we stay focused on our targets. To drive improved performance, the teams intensified the level of customer engagement to drive pipeline. P&L responsibility is now with the regions who will be held accountable for results. We also adjusted compensation plans with quotas and incentives tailored to different sales roles and tightened business cadence. By year-end, the impacted countries had successfully adopted key elements of the transformation, including the new segmentation with digital sales for SMEs, dedicated resources for new customer acquisition and a focus on service-led sales motions. Early signs also indicate generation of new sales pipeline and improvements in sales productivity. As for time line, the remaining markets, including rest of EMEA and APAC, are progressing in a phased approach, safeguarding customer relationships. Meanwhile, LATAM has completed the transition. Moving on to the cost reduction program. We initiated this program with my CEO announcement. And today, I'm very pleased about the progress we have made. Again, it's very important to emphasize that this program is about more than cost reductions. It's about shaping the organization towards customer centricity and sustainable profitable growth. As of year-end 2024, we had achieved CHF 58 million annual savings against an original target of CHF 50 million by end of Q2 2025. We have simplified the organization quickly and removed non-value-creating processes and management layers. We now expect the cost reductions to reach CHF 70 million before the program is completed at the end of Q1, creating a strong starting position for profitable growth and the integration with Crayon. We are actively positioning our offering to support customer needs and capitalize on market opportunities while also aligning with key profit drivers, including vendor incentives. As I mentioned earlier, we increasingly look at our business with vendors more and more from an ecosystem perspective with integrated solutions consisting of licenses plus services, driving business outcomes for our customers. We are tailoring our offerings towards customer segments, very aligned with our GTM strategy, where we have dedicated sales teams focusing on specific segments and offerings. I would now like to share some exciting developments with clients and partners over the last 3 months. We recently renewed the 2024 OCRE Framework agreement, expanding our role beyond educational and research institutions to supporting the broader public sector. This puts us in a unique position to help 25,000 public sector organizations across 35-plus European countries as a multi-cloud and AI adviser. This is a significant win, which enables us to scale our hyperscaler solutions around Microsoft, AWS and GCP within public sector across Europe, which continues to offer attractive vendor incentives. In addition, we recently signed a strategic partnership agreement with U.S.-based ServiceNow, combining their leading workflow automation capabilities with SoftwareONE's expertise in optimizing customers' IT investments. We are the only European-based partner with such an agreement, and it will further enable us to provide tailored solutions in the IT asset management space. AWS continues to be a top priority. We grew over 35% in 2024 and aim to build a sizable AWS business in all regions to become the fastest-growing partner globally. Furthermore, we won the AWS Global Nonprofit Consulting Partner of the Year in 2024. Finally, we have also just been named a Global Red Hat Premier Partner. Red Hat is one of our top 10 partners, and we grew nearly 40% last year with them. To recap, these investments and recognitions are fully aligned with our strategic direction of offering integrated solutions, upselling and cross-selling our services and cloud consumption offerings and being a leading partner of choice for our vendor community. On that note, I hand over to Rodolfo to take us through our financial performance.

Thank you, Raphael, and welcome, everyone. After 3 years at SoftwareONE, it is now the right time for me to move on to pursue other professional opportunities. I have to say it has been an exciting journey with many changes and a few challenges. Nonetheless, I'm really pleased that during this time, we managed to build a stronger foundation for SoftwareONE, in particular with operational excellence to keep -- to help the company realize its future growth trajectory and to capture the value creation opportunity of the combination with Crayon. With that, let me begin by discussing our financial performance at the group level. Revenue growth for the full year was 2.9% in constant currency, in line with our revised outlook. In Q4, revenue declined by 5.1%, driven primarily by a muted budget flush in key markets such as DACH and continued underperformance in certain markets, reflecting the rushed implementation of the go-to-market transformation. Our focus on operational excellence continued to yield positive results with further delivery cost efficiencies translating into a 5% constant currency increase in contribution margin for the year. SG&A expenses increased by 12.4% in the full year, mainly as a result of GTM ramp-up costs and other non-personnel cost investments. Our adjusted EBITDA margin stood at 22% for the full year, reflecting lower growth in H2, while benefiting slightly from new cost reductions in quarter 4. In terms of ForEx, the strengthening of the Swiss franc versus several key currencies led to a negative impact of 2.3 percentage points on group revenue for the year. Finally, I would like to mention that we intend to start reporting organic growth from Q1 this year to further enhance transparency. For 2024, organic growth was around 2% year-on-year in constant currency with M&A contributing approximately 100 basis points. The bridge illustrates the year-on-year changes in adjusted EBITDA. Marketplace delivery costs improved compared to prior year driven by ongoing process optimization. Service delivery costs remained nearly unchanged despite increased volumes, benefiting from our leaner and more agile global delivery footprint. Meanwhile, sales and marketing costs increased due to ramp-up investments across key countries as part of our go-to-market transformation. Admin expenses grew due to the expansion of corporate functions in the first half in IT investments to support automation, all these partially offset by productivity gains. Moving on to the business line. In Marketplace, revenue declined 0.8% for the full year as go-to-market related sales execution issues impacted the ability to effectively respond to changes in incentives in the second half. This was compounded by muted year-end customer spending. Thanks to improvements in delivery cost, contribution margin was 88.3% for the year, reflecting an increase of 1.4 percentage points versus last year. The adjusted EBITDA margin stood at 49.6%. In Services, we delivered 7.3% growth for the full year with a sector-leading margin of 43.3%, up 3 percentage points. The adjusted EBITDA margin remained broadly stable due to higher SG&A. Finally, corporate costs grew due to IT investments and the ramp-up of new functions in the first half; however, with the ongoing cost reduction targeting corporate costs, we are confident in keeping them stable or even lower in the coming years. As in prior quarters, I would like to remind you that the allocation of some sales and admin costs is based on a combination of contribution margin and revenue. The more muted marketplace growth in Q4 relative to services significantly impacted the allocation. We're internally reviewing the allocation keys to present a smoother distribution of costs between business lines in upcoming report. Over the last 2 years, we have invested significantly in effectiveness and efficiency to create a scalable platform for growth. This is the backbone for a smooth integration and synergy achievement with Crayon. We can see the impact of the programs on the almost flat development of personnel costs in admin and delivery over the last 2 years despite inflation and volume growth. Now let's look at the different pillars of our initiatives and what lies ahead. The go-to-market transformation is geared towards driving cross-selling and increasing SME revenue via our digital sales hubs, which complement Crayon's channel platform. In Services delivery, we remain focused on standardizing our offerings and leveraging our regional and global footprint to profitably cross-sell our differentiated Services portfolio with Crayon. Lastly, our regional shared service centers, where we continue to drive process automation standardization will enable the seamless integration of Crayon's local finance organizations and support transactions with customers of around CHF 16 billion for the combined company. Both the latest cost reduction, operational excellence and go-to-market programs resulted in significant organizational changes with redundancies and external advisory costs. These extraordinary costs are reflected in our reported EBITDA adjustments for '23 and '24. To understand our true underlying performance, we applied adjustments of CHF 107.3 million in 2024. Of this total, CHF 45.8 million related to severance payments. With these initiatives now behind us, we expect below-the-line adjustments of less than CHF 30 million in 2025, of course, excluding Crayon implementation costs. As a result, reported and adjusted EBITDA will converge over the coming quarters. On a 12-month basis to eliminate seasonality, our operating cash conversion, including CapEx, was CHF 133 million or 60% of adjusted EBITDA with minimal change in net working capital. CapEx includes investments in internal IT and systems, our Marketplace platform and support to our Services delivery platform. Again, these investments are part of our focus on driving efficiencies and effectiveness throughout the organization. In terms of our net cash development, we had further outflows. This included M&A and earn-out payments, restructuring expenses as well as significant return to shareholders in the form of dividends and the share buyback program, leading to a net cash position of CHF 12.6 million at year-end. Net working capital was at negative CHF 155.6 million at end December, broadly in line with 2023. Our days sales outstanding rose mainly due to the growth of multiyear consumption-based offerings. Based on IFRS 15, the accrual for the multiyear revenue recognition represents approximately 8 additional days of sales. Therefore, our customer payment terms have remained roughly constant during the past periods. The accounting for these multiyear contracts is also reflected in the DPOs. Nonetheless, working capital management remains a top priority. As such, we have put in place initiatives to expedite collection by improving invoicing accuracy to limit rebuilds, leverage dashboards to collect transactions, along with new KPIs linked to bonus achievement. I'll now hand back to Raphael to go through the Crayon acquisition.

We are convinced that our combination with Crayon is the right next step for both companies. To provide further context, I would like to take a step back and briefly describe SoftwareONE's journey until today. Phase 1 was very much defined by accelerated growth rooted in a strong sense of entrepreneurialism. We grew with Microsoft, diversified with our multi-vendor business and expanded globally. After Comparex and the IPO in 2019, we focused on rapidly scaling up our services business, also via M&A in response to customer and partner demands. This accelerated growth was naturally followed by a period of consolidation and investment. With this behind us, we have the portfolio and capabilities to succeed in the market and support the Crayon integration. To recap, the strategic rationale is compelling. We are highly complementary from a geographical, customer and offering perspective. Together, we will offer partners global access across the full customer spectrum from enterprises to SMEs. Our customers will benefit from our large Marketplace and enhanced Services portfolio. Furthermore, our scalable delivery and transactional platform will support smooth integration and future growth. Along with substantial synergy potential, including CHF 80 million to CHF 100 million of cost synergies, there is clearly a significant value creation opportunity. Over recent weeks, we have done work to reconfirm the substantial synergy potential based on a detailed bottom-up assessment. This analysis has also been verified by an independent expert. We have full confidence in our ability to deliver on the targeted synergies. Meanwhile, we continue to progress along the transaction time line. The draft prospectus has been submitted, and we expect the tender offer period to start around 17th March. We also recently announced our intention to apply for a secondary listing in Oslo, allowing Crayon shareholders to hold shares listed in Norway. In the meantime, we are making headway and integrating -- integration planning, particularly from a governance perspective to ensure day 1 readiness. Importantly, we also announced today that Crayon founding shareholders, Rune Syversen and Jens Rugseth will be proposed as additional members of the SoftwareONE Board, effective upon closing of the transaction. Their in-depth industry expertise and experience will be invaluable as our 2 companies come together. Moving on to our 2025 stand-alone outlook. We are guiding for revenue growth of 2% to 4% in constant currency for 2025 on a stand-alone basis. We expect a gradually improving trajectory through 2025 as the benefits of our GTM transformation come through with a slight revenue decline expected in the first quarter. As announced at Q3, we expect a negative impact of 2% to 3% from the changed Microsoft incentives on EAs. These incentives will bottom out in 2025. In terms of profitability, we are guiding to an adjusted EBITDA margin of 24% to 26%, driven by cost reductions with operating adjustments below CHF 30 million. Reported EBITDA is expected to more than double in 2025. We continue to guide to a dividend payout ratio of 30% to 50% of adjusted profit. The 2026 stand-alone targets remain unchanged with double-digit revenue growth and an adjusted EBITDA margin approaching 27%. Before we wrap up, I would like to emphasize 3 key points. We have taken decisive actions to resolve our GTM issues, significantly reduce costs and drive regional empowerment, customer centricity and agility in the organization. We are now ready to capitalize on past investments and our scalable platform to drive profitable growth. In that context, reported EBITDA will more than double this year compared to 2024. Finally, we are excited about the unique opportunity to come together with Crayon to create further value based on substantial synergy potential. With this, I'll now hand back to the operator for the Q&A session.

[Operator Instructions] First question comes from the line of Michael Briest from UBS.

A couple from me. Rodolfo, obviously, sorry to see you go. But is there anything you can say about the successor? I assume it's not internal, but if it's external, what industry experience they have? And will the person be announced before the tender offer completes? Just then in terms of free cash flow, you talked about the working capital intensity increasing. Can you give any guidance on how you think with these lower restructuring charges and working capital movements, et cetera, how free cash flow would develop this year? And then finally, just on the Copilot progress in Q4, I think you acknowledged it was somewhat weaker. Could you talk a little bit more about what happened there and how you would expect that to progress in 2025, excluding Crayon?

So Michael, thanks for the comment, and thanks as well for the questions. Look, on the successor, effectively, it's an external successor as it was announced. You will know more in the coming weeks. I think from my side, I'm absolutely keen on ensuring a smooth handover. So that's my commitment to Raphael and the Board. So -- but unfortunately, I can -- for reasons of confidentiality, I cannot comment more at this stage. But I can say we will have a smooth succession, and that will happen over the coming weeks. I think in terms of the free cash flow, yes, a couple of points there. One big improvement element will be the -- I mean, as we discussed, right, both Raphael and I here during the presentation, I think we have now completed the big reorganization programs with heavy investments. So the expectation is that going forward, the level of below-the-line adjustments will be quite small, CHF 30 million we have said. Of course, that's a big boost for cash flow. And then on the working capital, we're taking a lot of measures to optimize partly process excellence. I mean the better you -- the level of perfect invoices, of course, then you eliminate reveals and, therefore, there's less issues to immediately collect the money. We're also including working capital targets with our commercial organization so that they increase focus on that. And so the expectations that we will see -- we don't have a specific guidance for that, but we do expect a significant reduction in DSOs and DPOs in the coming year. So as you have seen, the impact on cash flow was quite muted on the working capital is well managed, but the clear expectation is that it will be a positive cash flow generation in 2025.

And maybe I take the question, Michael, on the Copilot. So yes, as we mentioned in Q4, we added 67,000 users. We saw some natural slowdown in the adoption curve following, obviously, the high initial interest, which we have seen. I think what's important that at the same time, we see strong momentum on the Services side around our Copilot offerings, which we have. That's really what's scaling. And I think in general, from an outlook perspective, we see continuous growth on the Copilot side, but not, let's say, not a hyper growth environment, but continuous growth throughout 2025.

Do you think it will be comparable to Q4 or better than that?

We don't think it will be much better than Q4 also because from a seasonality perspective, our Q1 volume in general is lower than Q4 volumes. And therefore, we don't think there will be necessarily an increase in numbers in Q1.

Okay. And sorry, Rodolfo, just on the margin for this year. Can you talk about how that will develop? I mean, will the first half be below last year, perhaps given the way the savings come through, et cetera?

Look, I think as we think of the year, as we have said, I think it will be a gradual ramp-up in terms of growth. So that's one aspect to keep in mind. On the other hand, I think all these efficiency measures that we have put in place will translate into a relatively strong margin improvement and that we will see throughout the year. It will be an acceleration of margin as well, also leveraging the higher growth that we will see in the second half.

The next question comes from the line of Knut Woller from Baader Bank.

A couple. First to start with, Raphael, you mentioned that you saw early signs of a positive pipe momentum and improving sales efficiency. Can you give us some more color here? And then touching on the expected synergies of Crayon, I'm not quite sure whether I understood the CHF 180 million quite correctly. Can you give us here also some more color? And then just quickly on CapEx, for Rodolfo, can you give us here some color what you expect for 2025 and beyond?

Yes. So maybe on the pipeline momentum, what we can see is, especially on the Services side, and we mentioned it before also on the Copilot question, we see an increase in demand and pipeline from a Services perspective, which is good. We also see in some of the markets where we had the fast and rushed implementation of the GTM such as the U.K. as an example, we see a stronger pipeline, and we see also a higher sales productivity already now in January. These are just some early signs to share with you. On the Crayon synergy question. You mentioned CHF 180 million of cost synergies. Maybe there is a misunderstanding. So the cost synergies is CHF 80 million to CHF 100 million. It's not CHF 180 million. Maybe I wasn't clear enough in my message before, but it's CHF 80 million to CHF 100 million.

Maybe on the CapEx, as you have seen, the level of CapEx, of course, it reflects investments across 3 important fronts: One is internal systems development to make sure we accelerate this efficiency and automation. Also, there are investments to support our Services portfolio. And finally, the marketplace is also an important area. So with this in mind, I mean, in this area of improvement in automation and efficiency, we will continue to invest behind modernizing our infrastructure. However, as part of our increased focus on efficiency and cost control, we do expect a modest reduction in CapEx over the coming years, but we are talking more in the mid- to high single-digit level improvement, percentage improvement. As again, we think it's important to continue to invest behind these automation initiatives.

The next question is from Christian Bader from ZKB.

I have a few questions regarding your number or your staff. I mean you spent CHF 46 million for severance payments. So I'm assuming the number of employees will decrease further throughout 2025. Can you maybe give some numbers where you expect the number of employees to turn out by the year-end on a stand-alone basis? Secondly, I would be interested to understand which, let's say, staff categories are let go? I mean, is this a mix across all functions? Or is this only for head office functions? And the third question is also related to that. I mean, in light of, let's say, significant reductions of your headcount and your expected guidance of 2% to 4% growth, it implies either that the individual salesperson has to become significantly more productive or everybody is about to sell a much better product at, let's say, a higher incentive, et cetera. So those are my questions about staff, please.

Maybe let me start and elaborate a little bit on your questions. So in terms of -- related to the saving program, I think, what we have done now in the initial couple of months is mainly we have taken out management layers and unproductive costs, right? So it's not that we have less headcount, we have reduced the headcount in Q4, but not significantly. We have basically also taken out, I would say, high costs or more higher cost management layers. And at the same time, we still have done a few investments as well into the front end and into our Service delivery organization to make sure we can deliver the services, which we promised to our customers. Maybe Rodolfo, do you want to add on?

Yes. So look, a couple of comments. When we talk about these initiatives, as Raphael described, right, it seeks to improve efficiency through different measures, right? This last wave has been described by Raphael, I don't repeat. But that doesn't mean that in other areas of the organization, we don't need to invest to support growth. So at the end of the day, you cannot simply take the restructuring. Of course, these are the reductions in FTEs. That's correct. But of course, there has to be hiring of FTEs in other areas. So at the end of the day, we do expect a positive development on FTEs, right, but you cannot take a one-to-one assumption saying these are the restructurings and, therefore, it's a net reduction. There is also some FTEs that are coming in. As Raphael also explained, there's a mix effect in many cases whereby we replace resources in higher cost locations by resources in lower cost locations. I think on the point on the sales, it's a very good point you raised. I think in prior presentations, what we have said is we need to increase the level of sales productivity. We know that the benchmarks in the industry are around 20 or even below, and we were significantly above that number. So I think with all the measures that Raphael and the team are implementing in terms of go-to-market, you can achieve a higher level of sales productivity as you define, meaning more sales per sales rep. But this is not like we're stretching resources beyond the normal, right? That's important to keep in mind. That means we are taking our sales productivity in line with the top performers in our class, right, who is definitely where we want to be. I don't know if we covered the questions.

Yes. No, I think that was useful, but just you referred to -- your latest comment about sales productivity, you mentioned a number of 20. What does that number 20 mean, please?

Yes. Apologies. It's the expenses as a percentage of sales. And you can see it, and I think we had it in one of our graphs in prior presentations where we showed the ramp down that we expect over the coming, let's say, this is a program that takes a little longer over the coming years.

I see. Okay. And just to confirm, you said you expect the number of employees to slightly increase due to mix changes, right?

I would qualify it more as roughly stable, right, for the year with, of course, separations, but then there has to be hiring and changes in mix along the way.

Okay. Interesting. And then I have another one on your guidance for 2025. Can you maybe also share some thoughts about which assumptions are you making for the segments in 2025, please?

Well, here, we don't provide guidance. So I think we shouldn't start today.

Okay. And then my last one is...

Maybe the only one thing I can mention, I mean, but it's just reiterating something we have already discussed is we expect some headwind related to Microsoft incentives of 2% to 3% for the year. So of course, if you say, well, this also probably has a bigger impact on the licenses part of the portfolio; of course, you can then do the adjustments in your numbers. But we don't provide the specific guidance by business line.

All right. Okay. That's fine. And the last one for me, which kind of tax rate shall we model for this year, please?

I would say similar to -- the normal tax rate is, we say around 29%, 28%. So I would say that tax rate.

[Operator Instructions] The next question comes from the line of Nooshin Nejati from Deutsche Bank.

Two for me. First, I wanted to know that on the back of this -- all these initiatives that you are taking to improve the GTM issues, how should we think about your Marketplace performance in H1 and specifically in NORAM? So should we expect further decline here? Or you think that you have already mitigated that risk and we're going to see some growth there? And then second one on guidance. I just wanted to see what is the scenarios here for low end and high end of the guidance specifically for the budget flush in 2025?

In terms of initiatives, thanks for your questions. So what we expect in terms of Marketplace performance is that it gradually improves quarter-by-quarter throughout 2025. We see an improvement in terms of growth compared to Q4 2024. That's really the outlook which we have. In NORAM, we have really done the big bang implementation of the GTM. So we will see some -- we foresee to see some continued headwinds going into Q1, but then also followed by gradual improvements throughout the year. And the guidance question, maybe, Rodolfo, you want to take?

Well, the guidance, we have provided a range indeed, right? And if you want to -- part of the range covers the volatility or uncertainty around our environment. In general, we continue to see the underlying environment as being quite positive. But of course, like you correctly say, there can be some deviations at quarter end. So that's why we provide a range. So that's captured within our numbers.

[Operator Instructions] There are no more questions at this time. I would now like to turn the conference back over to Anna Engvall for any closing remarks.

Thanks, everyone, for joining, and we hope to speak to you soon again. Thank you.

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