Tieto Oyj (TIETO) Earnings Call Transcript & Summary

Dear ladies and gentlemen, we are happy to introduce our second quarter results. You will first hear a presentation by Kimmo Alkio, our President and CEO; and Tomi Hyryläinen, our CFO. As usual, a Q&A session will follow the presentation. [Operator Instructions] My name is Tanja Lounevirta. I'm Head of Financial Communications. On my behalf, I welcome you all. Kimmo, please go ahead.

Thank you very much, Tanja, and a very warm welcome to all of you to our Q2 results announcements. Our second quarter is characterized as overall a good quarter and actually favorable development across all the businesses. The main message is regarding the performance itself. We have been -- we have turned to growth fully according to our year 2021 game plan and continuing to achieve solid profitability. Q2 organic growth of 2%, with the adjusted operating margin of 12.2%. The overall group level performance supported by strong performance in the software businesses, 13% growth in Industry Software and 9% growth in Financial Services Solutions. Overall, we have seen favorable development in the contracting contracts and win rates in the marketplace. We have been demonstrating good competitiveness. As an example, the top 5 contracts making up approximately EUR 300 million for future revenues. And also worth highlighting, a strong book-to-bill within our Cloud & Infrastructure business. Furthermore, given the overall development, we have actually moved forward favorably also in terms of the leverage of the company, net debt-to-EBITDA now being below the factor of 2. Given the overall dynamics in the marketplace and the kind of evolving pandemic, we believe it's, again, just good to take a short moment to reflect the overall market development very much according to our own predictions we have seen in the second quarter, healthy activity level in the market, healthy activity level from the standpoint of TietoEVRY to during the second year of integration, naturally, the type of internal work that which dominate the company's agenda year 2020, that tends to be also behind us. And overall, we are seeing the business impact of the pandemic, I'd call it, normalizing very clearly reducing and declining any type of a potential negative impact. Overall, the market is very dynamic on one end. The new digital type of services around cloud, data, analytics and the B2B industry-specific software moving forward rapidly. On the other hand, anything to do with traditional outsourcing businesses, price competitiveness continues to be high on the agenda. But very much in accordance with our own expectations of the market would be developing. Furthermore, we'd like to also highlight the increase in dynamic talent market. And we have, as TietoEVRY, also during the second quarter, increased our recruitment capacity to support our growth ambitions and overall visible the talent dynamism in certain talent pools that naturally have to do a lot with the type of cloud-native data analytics and actually advanced software engineering. So we are also addressing this part to support the growth potential that we clearly do have. Furthermore, important to keep high on the agenda in serving our employees worldwide of being a fantastic place to be and refining our own working practices, engagement models. We have a very interesting and, I believe, successful crowd-sourcing exercise taking place internally, with actually 48,000 inputs from employees on exactly the preferences for future work. And we'll be sharing more of that information during the second half of the year. But overall, as a summary, the pandemic impact reducing, market becoming healthy, talent market quite active and high degree of attention on the future work, and I believe we'll be in a good shape in these regards. Furthermore, moving on to the actual developments of the second quarter, with the overall wins in the marketplace, looking into the competitiveness of the company, as reflected earlier, good order intake, good wins, totaling about EUR 300 million for the top 5 contracts, overall backlog growth of 3%. And I referred earlier briefly to Cloud & Infra, book-to-bill was actually 1.4, being a combination of large renewals and a number of new multi-cloud contracts that have clearly accelerated during the second quarter. Some of the samples we have announced during Q2, DNB extension of a partnership comprising both of infrastructure and financial services specific software services. Second one, Region Skåne in Sweden, modern end-user and workplace services. And finally, a very interesting one within our Product Development Services side, a contract with a significant industry leader, TCV, over EUR 30 million, approximately over a 2-year time frame. The customer name shall be disclosed during the second half of the year. So overall, positive momentum. And really important to continue to actually elevate our growth potential in terms of the won deals overall in the second quarter. Looking into very practically then into the group level performance financially for the second quarter. Revenues of EUR 722 million. Adjusted EBITA at the aforementioned 12.2%, EUR 88 million. And actually, the growth profile in all businesses moving in the favorable direction from the first quarter. We would like to confirm throughout this year that the impact of the premerger lost customers still impacts the group numbers by about 3.5% and naturally impacting during 2021 the top line development of Cloud & Infra. Overall profitability improvement continues to be achieved by consistent improvement in efficiency of the company, continued drive for synergy realization and, naturally, the positive development in our software businesses. So overall, Q2 performance at the group level very consistent with our own expectations. Furthermore, moving into the highlights per business. Digital Consulting, organic growth 1%, adjusted EBITA 13.4%, clearly seeing growth in the new digital domains within Digital Consulting, specifically in the areas of cloud and technology consulting, data and analytics. So overall, looking at the service practice performance within the DC arena, good development in all new digital services. Legacy application services naturally continues to be rather on the lower end as one would have expected. Margin improvement has been driven by the merger-related synergies and continuous attention on productivity and efficiency. Here, it is worthwhile highlighting that additional recruitment activities have been initiated to address the active talent market, specifically in certain domains, and to support our growth opportunities, specifically in cloud data and the business applications domain. As an example, in the ERP domain, we are seeing high activity level in the marketplace, and these continue to be areas that, from a talent and resourcing standpoint, we continue to work on actively. Regarding the anticipation for the third quarter, we'd like to provide, as usual, a bit of a soft view per business. For Digital Consulting, adjusted operating margin anticipated to be below Q3 '20 level. Next, moving on to the very interesting and important Cloud & Infra side. Organic growth minus 10%, adjusted EBITA improving to 6% level from the first quarter, which was actually 4%. The premerger lost customer impact continues to be about 10% on revenues. Very important that our turnaround program is on schedule. We have seen continued uplift in quality through very specific customer feedback included also within the domains of the ex-IBM environments, which were the challenge for the past 1.5 year time frame. During the second half of the year, we expect profit contribution to come directly from capacity reduction in legacy services and increased levels of automation. And importantly, as I mentioned some minutes ago, healthy book-to-bill -- or actually a strong book-to-bill of 1.4, adding to the comfort of sustainable turnaround that we believe we'll be achieving. Anticipation for the third quarter of this year, revenue decline expected to be less than in the second quarter of this year. Adjusted operating margin expected to be above the level of Q2 this year and below the level of Q3 2020. Moving forward to Industry Software. Very healthy growth of 13%. Fair to mention that we did have a license revenues worth about 5 percentage points within this business in the second quarter outside also the additional license revenues were a very healthy pace, and this is at the levels overall that we have been anticipating. And healthy profitability level of 23%. The business continues to be driven forward well through performance in the health care and welfare business, and we have the same message from a profitability and scale standpoint, combination of revenue growth and continuous attention on efficiency improvement, including standard R&D and software release practices. And to confirm, the oil and gas divestment closed during the second quarter on the 7th of June. Regarding the third quarter, we anticipate the adjusted operating margin to be at the level of Q3 last year. Furthermore, on the Software Solutions side in Financial Services, organic growth healthy at 9%. Profitability also healthy at 13.7%. The strength of this business in the second quarter, we have more of the software solutions growing, covering core banking payments and the cards businesses. And overall profit development naturally driven by the top line development and attention on efficiency improvement, including standardized R&D practices. And we like to remind everybody that the investment level has been maintained to support the delivery of 1 new business, specifically actually in both cards and the core banking. And we believe these are very relevant investments to support the growth ambition and growth outlook for the quarters to follow as well. For the third quarter, we anticipate the adjusted operating margin to be at or above Q3 2020 level. Then into Product Development Services. Organic growth of 2% and profitability healthy at 10.4% level. During the second quarter, we have seen clear activation improvement in the market activity and actually demand increase and pipelines getting clearly stronger in all key industries within Product Development Services. Within PDS, we have also initiated additional recruitment activities to offset active talent market, visible in certain higher-end software engineering skill domains to further support our H2 growth opportunities and growth ambition. And to confirm, the significant over EUR 30 million contract over 2 years, as mentioned within the customer references opening page. Very important development to support the growth ambition and opportunity to cross-utilize certain software engineering skills across a number of customer industries. Regarding expectations for the third quarter, we anticipate the adjusted operating margin for PDS to be at the level of Q3 2020. Furthermore, and similarly, as we opened up in the first quarter, a view into our international operations. This is a business where we continue to capture demand for transformation and future digital services, highly advanced, cloud-native data analytics, data platforms type of businesses as well as digitalizing business processes and driving application transformations very specifically in Western Europe and the U.S. based on the very strong delivery center capabilities we have from a couple of our global operation centers. And healthy growth, nearly 20% -- actually at 19%, but the 20% level bar, we are maintaining in that range. So overall, favorable development and continues to support our growth ambition and view on expansion possibilities. Furthermore, I would like to provide a couple of highlights regarding our sustainability agenda and activities and achievements during the second quarter. Our sustainability agenda has 2 core categories. The upper side is as visible on the left side, the activities we conduct to impact our customers' agenda and common objectives to actually support environmental objectives in the societies we live within. Within the domain of impact through customers, we have a couple of core areas that we'll be talking more about in the quarters to come as well. We talk a lot about the solutions to reduce carbon footprint. We talk a lot about sustainability impact analysis, and we talk about services for data-driven sustainability. That is on the upper side of impact with and through customers. In the second quarter, we had a couple of really nice examples on the transparent CO2 reporting through a sustainability dashboard, very specifically with a couple of very significant customers in Sweden, Systembolaget and Swedbank. And this type of sustainability dashboard, we'll be sharing more information on equally in the quarters to come. Regarding our internal operations, the other half of the very important sustainability agenda, regarding the exciting place to work, we have a couple of very specific measures, one around diversity and inclusion and second one being the continuous attention on employee experience. Within the diversity agenda of the company, during the second quarter, we have already seen a significant shift as we are paying more attention into attracting female talent. We have seen an increase to about 32% level in the overall applicant pool, very significantly from the more traditional level of about 14%. And this pilot has been so far really successful, and we continue to work very actively regarding the total sustainability priorities of the company. With this in mind, we've now gone through the highlights of the overarching view of the company, views per business and brief highlights on sustainability. Now glad to hand it over to Tomi for the CFO view.

Thank you, Kimmo, and good morning, everyone. I'm pleased with our Q2 performance overall. We turned into organic growth and delivered 12.2% adjusted operating profit. Our reported profit was strong as well at EUR 139.7 million or 19.4%, supported by continued profit improvement, reduction in onetime item levels and capital gain from the sale of oil and gas business. We delivered EUR 11 million of operative cash flow, and we're able to reach our leverage target of net debt-to-EBITDA of below 2, 18 months ahead of schedule. Synergy contribution to profit was EUR 21 million in Q2. However, synergies are not visible fully in the P&L due to temporary profit decline in Cloud & Infra, similar to Q1. Onetime items were in line with our estimate and include a positive impact from the oil and gas divestment. We continue to experience FX tailwind, primarily from the Swedish and Norwegian currencies. Impact to Q2 revenues was approximately EUR 30 million. Oil and gas divestment, as mentioned, was completed during Q2. So we delivered EUR 11 million of operating cash flow. Our operating cash flow was negatively impacted by increase in net working capital of EUR 83.9 million. We have, from time to time, had last -- large changes in our net working capital when many working capital elements move into the same direction simultaneously. That was the case in this quarter as well. There's nothing structural in the change, and the cash generation foundation of the company remains healthy. The working capital change came from increase in receivables of EUR 30 million and a decrease in liabilities of EUR 53 million. Half of the increase in receivables was due to reduced levels of sale of receivables as we're in the process of renewing some of our facilities. In liability side, there were changes in seasonal elements like personnel-related accruals and advanced payments, contributing to EUR 25 million of the change, and periodic fluctuations mainly in VAT liabilities and change in restructuring provisions, as expected, contributing to some EUR 23 million of the change. Free cash flow was at EUR 116 million, very strong. That was impacted by the oil and gas sales proceeds. We achieved our leverage target of below 2 net debt-to-EBITDA 18 months ahead of schedule, as mentioned, with reported net debt to EBITDA of 1.6. When fully adjusting for oil and gas divestment, so taking out the capital gain and the profit contribution for the past 12 months, the net debt-to-EBITDA would be at 1.9. So even as fully adjusted, we reached our target level. Our synergy takeout continues as planned, and we confirm that we are on track to reach our synergy target of EUR 100 million. We will be reaching a run rate of EUR 90 million to EUR 95 million at the end of this year. We keep the integration cost estimate of EUR 110 million to EUR 120 million unchanged, with accumulated integration cost at the end of Q2 of EUR 94 million. The remaining synergy takeout relates mainly to procurement and facilities-related efficiencies with some further process and IT optimization activities. Our Q2 onetime items were EUR 63 million positive, fully as expected, with EUR 9 million of cost and EUR 73 million positive impact from oil and gas divestment. EUR 73 million differs from the capital gain of EUR 71 million, which includes EUR 2 million of M&A costs from Q1. Onetime costs from the IBM transition of services are now completed. Cash flow impact from the full year forecasted onetime items of EUR 47 million to EUR 56 million is some EUR 70 million to EUR 80 million due to back-end-loaded cash flow impact, particularly in restructuring, as we have discussed before, and this is also visible in our Q2 working capital change. So oil and gas divestment, it was closed in Q2. However, a minor part of the asset transfers will be finalized in the autumn. When these asset transfers are completed, we will receive an additional EUR 2 million of cash. Capital gain from the divestment amounted to EUR 71 million, and free cash flow was impacted positively by EUR 142.5 million. As the transaction is nontaxable, it will drive a reduction in our effective tax rate for the group by approximately 4%. CapEx for the quarter amounted to EUR 18 million, and we estimate the full year CapEx to be at or slightly above 2020 level, with some quarterly fluctuations. Next, I'll summarize the Q3 performance drivers. The impact from the premerger lost customers in Cloud & Infra will be lower than in Q2 at approximately 2%. Synergy contribution will continue at similar levels with a slight increase compared to Q2. Cloud & Infra profit improvement program is expected to contribute to further profit improvement during H2 '21. And FX tailwind is expected to continue, and working day impact will be neutral. Now back to you, Kimmo.

Thank you, Tomi. So moving forward and recapping the growth agenda of the company and then towards the conclusions of the Q2 report. So we confirm our growth dynamics and growth agenda for the year. We have gone through the favorable development and the direction for all the businesses. Currently, we have seen in the first half of the year, and especially towards the summertime period, the growth agenda has been materializing according to our plans and turning the corner to growth of 2% during Q2. And we do anticipate for the second half, according to the color coding here, that all service lines, except Cloud & Infra, to be positively contributing to our growth ambition. So overall, quite a good start -- continuation into the second half. As a summary, entering the second half, market sentiment is fine. We anticipate the pandemic impact to continue to diminish and market being active and normalizing. We have a high degree of attention, have had since the beginning of the year, on the growth agenda for the company. Very important from a total performance and profitability standpoint to ensure the Cloud & Infra turnaround will continue. And overall, the efficiency, productivity and financial foundation for the company continues to be at a healthy level. So overall, as we close the first half, we have good momentum in the company and a clear agenda moving forward. With this in mind, this would be a good time for the Q&A.

Yes. Thank you, Kimmo, and Tomi. So we are ready to proceed to the Q&A and take questions from the conference call. Moderator, please go ahead.

[Operator Instructions] I have a question from the line of George Webb from Morgan Stanley.

Kimmo and Tomi, a couple around the Cloud & Infrastructure business, please. Firstly, you mentioned the good order intake in the quarter and a book-to-bill of 1.4. Can you talk through how your expectations for that business line are moving as you go into the end of this year and 2022, and as those premium lost contract headwinds fall out? I guess we have the CMD expectations that you think that, that business can grow 0% to 2% into 2023? As you look at today, is that what you see as you look into next year? Or are the current dynamics imply anything differently? And then secondly, just thinking about the profitability of Cloud & Infra in the second half. Can you give us a sense of the scale of the cost/benefit you're expecting to come directly from the head count restructuring measures you previously announced once it reaches a full run rate basis?

Sure. So thank you very much. And so a couple of reflections. So as you noticed, I'm going to try to give -- I'm going to try to stay away from giving quarterly forecast on the business, but I will, of course, comment your question. So this year, we are trying to be super open consistently on what type of improvement levels, the consistent improvement both on top line and profitability, but this is a turnaround year. So we do expect to fully maintain the view of what we shared at the Capital Markets Day. And with this turnaround behind us at the end of '21, we expect to be getting towards much more normalized figures in '22. Maybe that's where I probably need to leave that without giving quarterly guidance forward. And regarding the profit improvement overall, so the contributing factors are clear on the cost base reduction for the second half of the year, both in terms of personnel and capacity reductions. So we are relatively comfortable with the direction that is being undertaken.

Okay. And maybe one follow-up, if I can, on salary inflation. Can you maybe just give a bit of color around how you're seeing that market dynamic change, perhaps how it feels to you versus previous cycles of cost inflation and labor market tightness?

So clearly, in the last couple of quarters, and I believe this is very much -- and I would anticipate you all have heard the same thing, very much a global phenomenon on the active talent market. So yes, we are seeing that. It relates to a very specific type of skilled domains where it is more visible, as I reflected in my summary as well. We are identifying certain locations in the world where the talent market is a bit hotter. We have actually acted upon this already some months ago, adding to our HR teams and recruitment capacity. So I want to be very frank. Yes, we are seeing it. We have already addressed it. And yes, we are commenting openly the salary inflation will rather be in the 2% to 3% range than 2% level and relates very much to certain hotter pockets. And all these are actually accounted for in our plans moving forward.

Our next question comes from the line of Christoffer Bjørnsen from DNB.

So I guess, the first one again on Cloud & Infra. You're saying that the growth or the decline in revenues in the third quarter will be lower in the second quarter. Maybe you could give some more granularity on that just to kind of help us understand the headwinds in Q3. And then furthermore on the Cloud & Infra, talking about the strong book-to-bill. Maybe you could talk a bit about what's going on there in terms of what -- is there any changes in the business mix or service mix in terms of what is -- what you're winning on now compared to what you were winning on a year ago. And then my third question is on international business and the significant cost there. So maybe talk a bit more about the dynamics there. What is driving that growth and kind of how sustainable is it for maybe the medium term? That would be very helpful.

Okay. So indeed, Cloud & Infra and then the international. So when we look at the overall logic and expectation on the top line development for the year -- and I hope everybody has been able to follow our commentary that the impact of the premerger lost customers will diminish quarter after quarter during this year, that's a very important factor. So we expect that to be an element. We are more and more active as we have seen in winning contracts, winning new footprint, winning public cloud services or multi-cloud services. So I want to be very frank that, of course, that also, from a top line standpoint, it is also a turnaround year. So that's what we have tried to guide everybody and, hopefully, very, very consistently. Profitability improvement, we expect that to be also consistent given the fact that, as we have commented, we have ended the era of duplicate investments due to IBM-related challenges. These have ended fully on schedule at the end of second quarter and related activities on cost optimization and actually driving the transformation from legacy environments to shared environments, we are able to activate this even further. So with this industrial logic in mind, I think we have a healthy opportunity and probability of continuing the turnaround favorably. And it will take this year. Regarding the consideration of international, our reflection here would be exactly the same as in the first quarter. We are driving -- the reason we brought it to the table into the quarterly reports as well as of Q1, we've seen several quarters of successful business penetration in the new digital domains, cloud-native development, cloud and analytics, cloud platforms as well as driving application modernization from legacy to cloud environments. And reflected upon earlier, this relates to our international operations and global operation centers from places such as India and Ukraine towards Western Europe and the U.S. markets. The reason we very much like and see the further potential because this is all in the new digital domains where the market growth potential is clearly attractive. So nothing really else or new to share on international, potential is good.

And then just one final quick one. We've seen a couple of examples, where especially in the public sector, some tenders are put out where there is increasing focus on environmental factors where, even in some cases, the weight is more of those kind of KPIs than on pricing and quality. So I'm just trying to -- is that how you're seeing that as well? Is that a way where you can compete in terms of being more environmental-friendly basically than some of your competitors and that's the way you can win? And how do you do that?

Yes. Yes, thank you for that. So I would have 2 comment on that important point. So we are very comfortable with the multiyear development in our sustainability agenda. And our sustainability team has, for several years, played a very active role in the bid propositions, given that we've seen this becoming more and more critical now for several years already. So I wanted to mention, at the very practical level, at the bid level, we have a very good ESG agenda. And I never want to be overly optimistic until we deliver better performance. This is potentially a factor that gives us kind of competitiveness the more ESG becomes important. Because we have a very granular agenda, and these examples that we have this time shared on the services for data-driven sustainability of co-measuring the impact with our customers. So I think we have a very interesting and a great opportunity to be rather as a thought leader and prove the point on how the tech sector can actually impact the environment and very specifically with our customers. So we'll continue to be big on our agenda.

Our next question comes from the line of Gautam Pillai from Goldman Sachs.

Congratulations for a good set of results. Firstly, can you provide some color on the pipeline for the Industry Software and financial software segment? Very impressive growth in the quarter. But can you provide some soft indication of how that should progress into the second half of 2021 and beyond? Is this level of high single digit to double-digit growth sustainable? Or were there any kind of unusually large contract in the software segment this quarter?

Sure. So let me indeed address those separately, although the message will be quite consistent. So first of all, within the Industry Software, our view on the market, our competitiveness and the pipeline has remained consistent, meaning consistently quite good. I just want to confirm, as we were very open about that in Q2, we had some contribution from Q2 specific license revenues. Nevertheless, the growth rate is healthy. On IS, we are fully within the trajectory we have been expecting and planning. So that's all consistent in terms of pipeline, in terms of revenue development, in terms of quality of operations and profitability. Regarding FS, our message would be quite the same. Mark our attractiveness and competitiveness in the market is good. The overall pipeline development consistent, consistently fine. And in terms of the relevance of the investments we have in place is naturally all there to support our ambition to deliver even better performance, fully as reflected and shared at the CMD. So in that sense, nothing dramatically new, exactly in the right direction regarding IS and FS.

Got it. And secondly, on the Cloud & Infra segment, in early May, one of your competitors announced a large contract win with the Finnish public sector ATR agreement, roughly EUR 84 million. Is this a contract that will ramp down in your Infra business? If yes, what impact will this have had eventually when we start modeling this? And that's a specific issue creating adversity or Cloud & Infra targets for 2022?

Yes, thank you. So maybe 3 considerations regarding that, as it was touched upon also in the Q1 report. So indeed, that frame agreement was won by a competitor. We believe we had very solid grounds for taking it for court appeal, which is the type of the public procurement processes work in certain ways. Some of you may have seen that one of the larger constituents and parts of the frame agreement, an entity called Valtori, actually last week did announce that they are prolonging their contract with TietoEVRY over a multitude of years at the value of EUR 98 million. This was announced by Valtori. They also said that it is expected to be signed here in the early part of the third quarter. We have not brought it into our report until the contract is formally -- that continuation of that agreement is actually formally signed. So these would be the 3 factors. And the overarching loop that we commented in Q1, the frame agreements at the end are subject to how many entities within the public sector actually wish to apply that frame agreement.

Got it. And finally, can I please check on the recent [indiscernible] in the press release you highlight that the impact to affected customers' business could be serious. Can you provide an update here? Is the attack contained? And also, is there any liability directly to Tieto?

Sure. So this -- so naturally, I would like to maybe reflect a bit even one level higher. And of course, I will comment your very fair point. So the world of cybersecurity, it continues to evolve. And being very important also in terms of our value to society, our value to customers in helping when extraordinary things happen in cybersecurity. I believe we have highly advanced capabilities within the total cybersecurity domain. It has been proven with a couple of cyber attacks in the first half of the year, 1 in Norway and 1 [indiscernible] impacting specifically Sweden where we have served our customers and I believe increase in the trust level how quickly we have deployed in the range of 100 people to work 24/7 supporting -- getting all systems back online ASAP. That's the background. Regarding we had very -- we had quite minor impacts regarding our customers, first of all, in Sweden, these related to a few customers in the rather small and medium business segment. So from a societal standpoint, not severe. Some of the other ones outside of TietoEVRY's domain were quite disruptive to the society. We believe the implications to us are minor. And we do not see, based on this couple of -- so far, any significant exposure. Precautionary measures, including insurance arrangements, we naturally do have in place.

Our next question comes from the line of Panu Laitinmäki from Danske Bank.

I have 2 questions left. Firstly, on the margin outlook in the consulting business, you are now expecting the Q3 margin to be lower than a year ago. The question is that, where is this coming from? Is this reflecting the higher salary inflation, more new recruits or just abnormally low costs a year ago? And then the second question is on the guidance, actually. So the organic growth improved in Q2, and now you have only 5 months left in the year. So why didn't you specify the organic growth guidance for the full year? I mean, it's still quite wide for the group.

Okay. Thank you, Panu. So a couple of considerations, a good point also on the digital consulting side. So yes, we have activated our recruitment -- additional recruitments. And because we do see the growth potential -- and naturally, when you recruit people, you -- we do not get into immediate billability. So that element in your list of items, indeed, are a contributor. And also, the activity level with customers is increasing. Thus, yes, we believe the cost base in Q3 last year due to the pandemic was also somewhat lower than usual. So nothing structurally that I see currently concerning. It is more the optimization of the growth agenda regarding Digital Consulting. And regarding guidance, we believe that it is appropriate to just maintain the total guidance level we have. And no reason currently to start to change it.

Can I just ask a follow-up on the consulting? So how should we kind of think about this? Is it so that when you have the new recruits in and you have the revenue growth continuing, you should expect a further increase in the margins? Or is it so that the margins have actually peaked because they were a bit exceptionally good during the pandemic?

I think, in terms of the digital consulting, naturally -- 2 comments. So right or wrong, there are "normal quarterly fluctuations." What we see very important, both for DC and other businesses that we have, the margin trajectory heading sustainably in the right direction. And I believe that is the case also for Digital Consulting. The fact of the growth agenda attention on efficiency, productivity, billability and continue to head in the right direction, as mentioned, in profit as well. So I think that's the important overarching financial view also for DC.

Our next question comes from the line of Michael Briest from UBS.