Tieto Oyj (TIETO) Earnings Call Transcript & Summary

Good morning and welcome to TietoEVRY's Third Quarter Earnings Webcast. My name is Tommi Jarvenpaa, Head of TietoEVRY's Investor Relations. With me here today are also, our President and CEO, Kimmo Alkio, and CFO Tomi Hyrylainen who will next go through the highlights and results of the third quarter. Kimmo, please go ahead.

Thank you very much and a good morning, warm welcome to everybody to our third quarter results announcement. I'd like to begin with a full summary of Q3 highlight being somewhat of a mixed performance in a softer market us delivering growth of 2% based on the solid performance in our software businesses. Software businesses continue to demonstrate nice strength even in the midst of the type of an economic cycle we are within and we're seeing weaker demand in Tietoevry Create and Tech Services as we had predicted. Profitability of 13%, despite the softer market environment and continued high inflation and very good to have seen in the third quarter, improved profitability in the Tietoevry Industry. You could look at the totality of performance in the Tietoevry Industry and specific profit improvement for Tech Services. We'd also like to confirm that as we announced in end of July the MentorMate acquisition, it has been closed in the third quarter. Business performance and integration is progressing as planned and I will provide further details a bit later on. Also, we'd like to confirm that the strategic reviews of both Tietoevry Banking and Tietoevry Tech Services are on track with our earlier announced schedules. Given the macroeconomic and geopolitical environment, we'd like to highlight some of the implications and implications being the impact on demand visibility. The economic slowdown, primarily impacting the smaller consulting engagements and the type of time and material volumes in our managed services. I believe we are seeing similar phenomenon as we would be seeing industry-wide. Also we would like to highlight that given the prolonged war in Ukraine, this has started to tangibly impact our revenue generation in our Ukrainian business. That's naturally very unfortunate. It is very unfortunate for the people of Ukraine and we absolutely continue our commitments to do everything possible that a company can do, supporting the safety and well-being of our colleagues and their families. Furthermore, we also confirm the [indiscernible] era and this naturally continues to require high degree of tension company-wide on continued optimization and increases in pricing and very determined efficiency drive across the company to be driving further resilience. I would also like to confirm the core of our strategic direction and the core of shareholder value creation, as we are repositioning and continue to reposition TietoEVRY as a leading software and digital engineering company and very practically, we have our specialized businesses that kicked into effect in the early part of 2022 driving the specialization to competitiveness and performance improvement. Second factor, we continue to gain benefits and expect to be gaining further benefits from customers investments especially mid and long-term investments into the cloud and data-centric world and with us having very specific set of software assets that fit very well into the customers' investment agenda. And also the notion around strategic reviews, these are some of the factors in place where we expect to accelerate the execution and repositioning of the company. And I'd like to now promote a bit of an update, both from a standpoint of what we are doing in terms of taking advantage of cloud data and especially cloud and data-centric markets, an update on strategic reviews. In terms of the MentorMate acquisition, I'd like to confirm the whole logic of the acquisition and part of the new updates that we are providing in this report. First of all, very important that this acquisition enables our Create business in taking next step forward in becoming a leading digital engineering player globally. This significantly expands our customer base and growth potential in the US market. The type of capabilities around design data cloud and AI are spot-on in terms of our belief in how the market will develop and customer investment into these categories and we are also gaining further talent pool in the locations of Bulgaria, Paraguay and fitting extremely well to the global delivery model of our Create business and to confirm the revenue growth and profitability accretive to our Create business. And a bit of a recent updates furthermore; integration fully on schedule, all the activities completed as planned in the third quarter. We have also experienced first revenue synergies during the past 3-month timeframe, and performance overall well on track, despite the fact or factor that there's also a degree of softness in the US technology services and consulting market. Also to confirm in the report we have the purchase price and enterprise value of EUR 162 million. This represents 10.6 multiple of the last 12-month EBITDA including full synergies and 14.4 on standalone basis, and we fully expect to synergy realization to take place within the first 24-month timeframe. So we are currently very satisfied, things are ticking exactly according to our internal integration plan and activity is taking place of expanding the addressable market reach in the US. Next into our strategic reviews. As earlier mentioned both are on track with the earlier now schedules. And as every quarter, we'd like to provide a few updates on the progress we are making. In the banking business, we are making progress in building the management team, CFO and CIO selections have been conducted, and the team is as expected finalizing the strategy and establishing the readiness for the end-to-end operations as an independent company. And I want to confirm that we had mentioned earlier, we expect the strategic review decisions during early part of '24 followed by implementation and with the aim to be listed as an independent company. Then in terms of progress with Tech Services, in the past 3 months, operational simplification and performance uplift has been ongoing and actually progressing steadily. And furthermore, we have began the engagement with potential buyers according to the original intent of Tech Services strategic review and to confirm the preparations aiming at a potential sale or listing as a spin-off, as announced in July of 2022, and we are on track towards the original 12 months to 18 months timeline. I'd like to also offer a couple of perspectives on important and core customer wins in the past quarter in our respective business categories in digital engineering, in our Create business, very solid progress in actually driving the digitalization agenda for clients such as Heinzel Group and Flytoget actually in Norway, the common factor being the cloud, cloud native and data centricity taking greater advantage of real-time information through data management, data integration, data platforms towards also machine learning and artificial intelligence, as is the intent with more or less all Tietoevry Create customers. Software and platform side, nice examples in the third quarter, our banking credit solutions selected by the Savings Bank of Finland that was announced in the third quarter, and furthermore in our Care business, one of the regions in the country of Finland joining the partnership model for the life care system development, software development and actually the functional roadmap development, very practical releases to be serving the well-being counties in the future adding to the productivity of the hospital staff, doctors and nurses. Wonderful to have more hospital districts, and counties joining this common development initiative where we already have had a number of account is present for the past roughly 1.5 year timeframe. And furthermore, Handelsbanken Norway modernizing its wealth platform with our Banking Solutions, and managed services and transformation good cases around the full modernization of infrastructure and application environments covering DigiFinland, Haugen-Gruppen and Cargotec, as an example, Cargotec example system integration and management type of CM services in place. So these are some of the customer cases. Next, I'd like to move into the actual performance information first summarized in the Group numbers already mentioned. From a totality standpoint, the P&L growth of 2%, adjusted EBITDA at 13%, and furthermore, cash flow from operations being minus EUR 2 million. This is significantly impacted by changes in working capital and Tomi will further elaborate on this topic and also the order backlog of minus 1%, reflecting both seasonality and the market dynamics. And I'd like to also offer the sub-data point that the backlog invoiceable in the fourth quarter, up by 3%. Then into each one of our businesses. Tietoevry Create decline of 4%, fair immediate to highlight that the underlying growth of being a plus 1%, the delta impacted by the fewer working days that impacts by 2 percentage points and 3 percentage points difference from the Ukrainian currency devaluation that took place in the third quarter of last year. Growth to be fair is impacted by the lower demand for smaller customer engagements and very specifically as highlighted earlier the impact of the war in Ukraine, this is impacting our Create business. The pipeline for larger engagements remains healthy. And as mentioned, first revenue synergy is taking place with MentorMate in the US. In this environment, we have somewhat lower utilization rates that do impact profitability. We see the opportunities on hand and believe we have the staff available to actually take advantage of the market whenever the market rebound happens. Tietoevry Banking continued strong growth in the third quarter. There was actually healthy growth in all 6 businesses within Banking. Profitability has been negatively impacted by the continued increase in technology cost and increased cost resulting from the legal separation and these factors impacting profitability. We have shared these exactly the same way also in prior quarters. Performance improved measures including technology cost optimization and actually broader efficiency improvement activities across all functions within Banking does support profitability and important to conduct in this higher [indiscernible] era. Furthermore, then we'll go into our Care business. Again, we have good performance in Care as we had expected somewhat slower growth this time 3% the growth driven in the third quarter in the welfare and data and analytics part while the traditional strength of the healthcare side temporarily impacted as fully anticipated by the health and social care reform in Finland and as anticipated slowness in further investment decision-making and profitability continues to be driven by the scalability of the software businesses and degrees of modernization in technology stack and the ways of working within the R&D teams of the Care division. And then into Tietoevry Industry. Healthy progress in both growth and profitability, well in alignment with our internal expectations, organic growth of 6% driven by the Pulp Paper division and the Public 360, as well as the Data Platform side. Profitability naturally being supported by the strength of the scalable parts of the industry software portfolio, so profitability bouncing solidly upwards 17.7% level. And furthermore, couple of weeks ago, we have appointed new Managing Director for Industry, Carsten Henke, with a significant background in TietoEVRY leading the Pulp Paper and fiber business, very high degree of modernization into software architecture scalability of software, as well as the international expansion. And I'd like to confirm that the background to the appointment now Ari Järvelä whom has been in both Care and Industry, is able to dedicate his capacity to the Care business and we have a dedicated leader now with Carsten for the Industry side. Furthermore, Tietoevry Tech Services solid profitability has been driven by the efficiency measures we have talked about in prior quarters as well at the first comment on the growth side of negative 4% within the business mix which continues to evolve towards the more scalable services, this time cloud platform and security at 12% growth, traditional infrastructure at minus 9%, in the second quarter, we were minus 11%. Currently, we anticipate to see further progress of this decline stabilizing during the fourth quarter, that's developing in a bit favorable direction. User experience services at negative 4%, that tends to be lower margin business for us. Profitability in this business also being impacted by higher salary and technology costs, and very importantly, has been the predictability and solid execution of our cost efficiency program quite broad within the Tech Services business, and as anticipated, became visible in the third quarter and the full impact shall be visible fourth quarter onwards. With this background on the business performance, I'd like to hand over to Tomi.

Thank you, Kimmo, and good morning. Despite the softer market as has been discussed, we delivered healthy underlying growth of 4% and similar profitability as prior year when we adjust for the fewer working days as discussed and the Ukrainian currency devaluation in Q3 of prior year. The FX headwind continued to be high in Q3, having negative minus EUR 55 million impact to reported revenue. Our order backlog declined in Q3, which was driven by normal seasonality and somewhat slower market environment as discussed. Organically, order backlog was down by 1%, compared to prior year, however, as mentioned, stronger by 3 percentage points for the backlog realizable in '23. In Q3, our one-time items were at expected levels, so we keep our full-year one-time items estimate unchanged. As MentorMate acquisition was closed in July, we have performed preliminary purchase price allocation, which resulted in EUR 138 million of goodwill and EUR 23 million of identified intangible assets. The acquisition naturally also impacted our Q3 free cash flow and net debt EBITDA levels which I'll address in the next slide. So our operative cash flow was negative EUR 2 million. Primary driver for this was the increase in net working capital of EUR 97 million. Approximately 50% of this increase in working capital came from accounts receivable as the quarter ended on a weekend. This has roughly EUR 50 million impact for this quarter. Our AR levels I can confirm were back to normal levels already during the following week, so that was recovered immediately. The rest of the increase was due to normal seasonal decrease in vacation accruals and lower AP levels, which was primarily due to lower external purchases during Q3 or towards the end of Q3. Our underlying cash generation foundation remains unchanged. With this negative operative cash flow also, our free cash flow was negative EUR 192 million, off with MentorMate acquisition, the impact was EUR 159 million. With this, our reported net debt EBITDA was 2.1 at the end of Q1. If adjusted for the weekend, the impact net debt EBITDA would be at 2.0. As you recall, our leverage target is between 1 and 2, so we are currently slightly above our target level, however, we expect to be within the target level in the early part of '24. Next to attrition. So our attrition continues to decline with end of Q3 rolling attrition being at 10.8% and the attrition of the quarterly attrition stabilizing at around 10%. Our net headcount was increased slightly during Q3, impacted mainly by the acquisition of MentorMate and the capacity reductions in Tietoevry Tech Services due to efficiency measures. We keep our salary inflation estimate at 5% as communicated already in Q2. Next, I'll summarize the performance drivers for Q4. On growth drivers, we expect a weaker economic environment to continue with customers initiating cost saving actions and postponing investments and this is impacting primarily Create and Tech Services businesses as discussed. Banking growth will be impacted by high comparable of prior year with approximately minus 4% impact, an expectation of modest end of year license sales compared to prior year. Tietoevry Care growth will continue to be impacted by the healthcare reform in Finland, consistent with Q3. At Tietoevry Industry, we expect healthy growth levels to continue. On profit drivers, inflation will continue at high levels, including technology cost inflation which impacts primarily Banking and Tech Services. In Tech Services, the efficiency measures continue to support our Q4 profitability. Consistent with Q2 and Q3, Tietoevry Banking is impacted by increased cost level as a result of legal separation, profit impact being negative 1.5%. FX headwind, we expect to continue with negative EUR 44 million and working day impact being negative 0.3%. Then to Q4 profitability outlook per business. 2 of the businesses, namely Create and Banking, we expect to be below prior year level. 2 of the businesses Care and Tech Services, we expect to be at the level of prior year. And Tietoevry Industry, we expect to be above prior year profit levels. Back to you, Kimmo.

Thank you, Tomi. Thank you. Few considerations furthermore, on our way forward. Important to confirm that we actively drive our strategic agenda, expanding the scalable software and digital engineering businesses in the core of value creation and strategic differentiation, and also and naturally to confirm the importance and high attention on the strategic reviews of Tietoevry Banking and Tech Services, and also to confirm in the current era an environment of macroeconomic and geopolitical uncertainty, very important to continue our focus on operational and financial resilience across the company, and we do believe we shall be one of the more resilient companies given the type of business mix we have and able to serve through the current type of a macroenvironment. This would conclude our considerations and we like to move to Q&A.

Thank you, Kim and Tomi. We are now ready for the questions.

[Operator Instructions] The next question comes from Daniel Djurberg from Handelsbanken. Please go ahead.

I've been disconnected three times. So you might have answered this already or discuss it already. Sorry for that. Starting off a little bit on the attrition rate coming down. I guess there is large differences within the Group. Can you comment a bit on the Nordics side of things? And if it's a big problem that is getting too low? And if you need to address this to work on the demographic?

Yes. So actually, this 10%-ish is quite healthy. I'm not overly concerned. It would be too low levels at this point in time. Naturally, there is some variation in geographics, Nordics typically being lower in attrition side and then our delivery centers offshore we tend to see higher. But currently, there is not that big of a difference to be honest, but not overly concerned. It's at the healthy levels currently.

Okay, that's good. Also a little bit on the salary inflation. You talked about 5% this year and entering 2024. In your view, should we look for a little bit less in Sweden, perhaps 3.5%, just any comments on the cost entering 2024 would be great.

That's actually a really difficult question because when we look at sort of the current macroeconomics and the geopolitics, that will play a role when we then enter into next year and how the world sort of looks like. Really difficult question. So for now, I would sort of keep this 5% and then see how the world develops.

Perfect. Is it possible to give any extra granularity on the near-term guidance for Q4? You discussed as well and you also spoke about the cash flow. Obviously, I also had a question on, but I think you answered it. But on the, for example, the Create and Banking, we saw a decline obviously in Q3 year-over-year of roughly 220 basis points and 110 basis points respectively from this headwind of fewer days et cetera and also legal costs and so on in banking. Should we expect a similar decline i.e. 100 basis points, 200 basis point or is it increasing in Q4? It's my question really.

That's of course a big consideration. We'll try to of course provide a sharp view as we externally usually do. So very likely the performance drivers that Tomi summarized give actually a good foundation. If I started a bit high level, I playback with the granularity that is possible today. So overall, I think we'd like to confirm that kind of a overarching view and the background to our updated guidance naturally based on the assumption of a slower while stable market also then towards the end of the year, and of course there's been quite a guide a bit of volatility in the market that I would anticipate everybody has seen. So these are the background factors. Then if we think a bit naturally, every business has it's very, very unique type of dynamics. I'll try to briefly comment the ones you were most curious of on the Create side. So Create has more of a pockets of success. We have reflected upon on that a bit in the earlier quarters as well typically larger engagements of high strategic value. They are on the core of investments for clients. They tend not to be that impacted in the case of volatility, while the smaller ones can be, they tend to be smaller engagements. So this gives a bit of a balanced view and of course exactly how the quarter will play out, but it's clearly a more challenging environment for Create and as an example one year ago in Q4 like everybody recognizes. Then I'll comment on Ukraine. It is very specifically impacting the Create business. So that's naturally a new development we have now shared that became more tangible unfortunately in the third quarter. And then Banking side, maybe some consideration. There were quite high comparables in the fourth quarter from last year and many of our businesses, we tend to have less end of year license sales. Banking would be one of them than we traditionally would have had the more businesses move to a SaaS defined platform world, the less you have peaks on licenses. I don't know Tomi, if you want to add anything else. Those would be my reflections based on -- otherwise Daniel one would we could spend 15 minutes on each business. Okay. I'll be back Daniel. We heard. We were cut off from this end. Daniel, can you hear us?

I can hear you now loud and clear.

Okay. So I understood. We were likely cut at the very end of the commentary, I was just saying, Tomi if you have anything else to add or Daniel please offer any other reflections you'd like us to further offer.

Did you ask me or Tomi?

No. First, I asked Tomi. But also, Tomi said, here he shook the head.. He has nothing to add. So if you'd like any other perspectives.

No, I think I should get back into queue now.

The next question comes from Mark Hyatt from Morgan Stanley. Please go ahead.

I've got three if that's okay. Firstly, could you just talk a little bit about your expectations in terms of the path of demand recovery in Korea. Is this like a one to 2 more quarters of subdued activity or is this something that you think could be more persistent? And to that, how is this impacting your hiring plans in Create specifically? And then maybe just turning to Industry, obviously very strong growth, 6% this quarter, what areas you are seeing strength in that business? And can you talk to the level of resilience that you are seeing in the business despite the uncertain macro? And then finally, just one on margins, margin was 13% this quarter and that kind of implies a decent step-up in Q4 in order to hit the bottom-end of the FY23 margin guidance. As you look into the fourth quarter, what gives you confidence on the achievability of the full-year margin guidance?

So let us begin indeed, we shall follow your sequence there. So in the case of Create, so I'd like to begin by my opinion of the industry-wide phenomenon. So Create is a type of business tends to follow the economic cycles kind of faster in terms of degrees of volatility, so that would be a generic comment. If a company is based on purely on short cycle projects, you tend to be mostly hit. I see this as a quite a balanced view if I offer a multi-quarter perspective, given that we are in the midst of a shift towards larger engagements, I think there is ability to be more competitive, a greater strategic value scale more and utilize our global delivery network and we have a healthy degree of large clients. We need to do a lot more. We have a tremendous opportunity. I know you put it in a bit of a larger frame over 1 to 2 year, couple of year time-frame in the US market. So it's the largest market. We have very interesting differentiation in a couple of sub-industries in the US through MentorMate. So these are some of the factors and we are naturally not blind of the implications that potential further volatility may have especially in the countries, where we are more prone towards smaller customers and smaller engagements and these are naturally the recovery actions we have continuously underway. Then about the hiring plan, I'd like to offer a very consistent view as we offered 3 months ago, as part of Q2 report, we are highly mindful of the type of a delta in utilization and how long do we accept some, a few percentage points lower utilization. We shall only keep it if we believe that there is good pipeline, good engagement, opportunity to win deals, opportunity to activate staff to new projects with that as a background while we are clearly more conservative on the hiring plan and playing a very kind of tactical game short-term also considering of the demand uplift and relation correlation to utilization and profitability and actual revenue generation. That's the background of business usual weekly basis short cycle optimization. And then if I look back to the big picture view on Create, the whole world of cloud native data, data towards machine learning AI, Gen AI over the years, next couple of years, I think we'll see tremendous opportunities. Then if I go next into the industry, indeed so as I commented earlier, Q4 very consistently with our internal plans, how it played out in the third quarter, we have couple of the businesses inside industry, we have the data platforms, predominantly the type of B2B integration. B2B integration tends to be a modern term for the traditional -- it's a modern version of old EDI transactions between enterprises, and within the public sector for billing and invoicing. That's a strength. Paper pulp and fiber, we are very strong, especially as the fiber market is picking up. We have very competitive MES software solutions, Manufacturing Execution System, that tends to be fully integrated into the core ERP [Technical Difficulty] Sounds like we are back. So Mark, we were cut off maybe there some issue with the data cables, we see it on geopolitical risk in the environment. So Mark, do you still hear me or do you now hear me?

Yes, I can hear you loud and clear now.

Indeed. So I was commenting on the industry side the Paper Pulp and Fiber so now there's strength in there. Third one would be around the public sector document management, we call it the Public 360. These are some of the fact of ones that are already I would call them relatively scalable in a positive velocity towards real scale and naturally with the recent leadership appointments, we anticipate in the next era, I would call it in the next roughly one-year cycle to consider further portfolio decisions that I think we have interesting hidden value in the industry. We need to rethink exactly the most optimal portfolio of scalable software businesses a bit mid and long-term commentary would be here. Then in terms of the margins. Thank you for that point as well. Couple of the underlying factors from an efficiency standpoint being the biggest one, the very systemic execution of the cost savings programs in Tech Services and that has been progressing positively predictably within a very tight operational kind of management attention. And the second factor, I would like to highlight is the Banking side, given the -- and I hope you feel this is very consistent with our prior commentary in the past quarters. Both the impact of inflation on employee cost of, total cost base and on the technology cost side, a lot of attention is to go into cost level optimization in Banking. And I would add as a third component given the macro level uncertainty, we have firmed up efficiency improvement actions across all businesses several months ago, independent of the healthiness of the business point being even if the margins are high. This is something that everybody needs to currently do to build resilience for the next months and quarters to come. So, Mark, those would be, I think, the first comments.

The next question comes from Sami Sarkamies from Danske Bank. Please go ahead.

I have three questions. We will take this one by one. Starting from the full-year guidance, we have already talked about the Q4 outlook, but could you perhaps elaborate on the key risk factors? I mean, if we look at the growth you're guiding for 4% for the full year, we are at that level after the first 3 quarters, but did only have 2% growth in the third quarter. And then on margins, you are now behind last year, but did have quite material drop in the third quarter and I think last year Q4 margins were quite strong.

Thank you, Sami. So maybe I'll begin. From a growth standpoint, so I would like to highlight 3 factors as you were asking about specifically, risks. So one part that we have highlighted earlier today that demand visibility, how it is actually progressing in the industry at large. So that is naturally a factor. And we have come also -- we believe that and have -- are anticipating and have anticipated for several months that the market will be slower, and we expect it to be somewhat stabilizing during the fourth quarter and not further eroding. So that is naturally a factor, if I may, we would likely agree any company needs to be super mindful when the environment has been this volatile. Then, if I may and I'll try to be specific on your very fair question there that naturally we have paid a lot of attention for the revenue generation and predictability in the Create business and Tech Services sides, given that there has been -- we have been missing the beat in terms of where our own expectations have been naturally, the reasons being for, let's say, a bit lower growth performance that we have touched upon in the earlier discussions. So very specifically, Create is to Ukrainian side, we have a small business exposure actually in one country in the Nordics that we are working super actively on. So the more of these mitigation activities continue, the more we naturally eliminate possible risk factors. And Tech Services similarly, I touched on this very briefly in my first summary, as part of the presentation of the development in the traditional infrastructure side that would be one of the factors in the equation and you shall remember the commentary that we did now minus 9%, we were minus 11% in Q2. We see tangible progress towards somewhat better results in that decline towards end of year. So some of these would be some of the factors. And then, indeed -- and I did a comment on margins already.

I'm not hearing you anymore.

Pardon us. There seems some technical issues. So maybe we…

You have come back now.

And then, Sami, if I comment within the margins maybe I would repeat the same points I commented to Mark on the margin side. Maybe, Tomi wants to add a bit on the margin.

Sami, it's slightly good to recall as I mentioned in my set that we are actually delivering now in Q3 equal or actually even a bit better underlying profit compared to prior year, just as a starting point into Q4.

Okay. Let's move on to Banking. I think after Q2, you did highlight tailwinds from price increases in the second half of the year. These are no longer sort of mentioned. So what has changed there?

So in terms of the Banking specifically on price increases, to be fair, as in all our businesses, but of course comments specifically Banking, the price increases have been worked on for several quarters. There is naturally a dependency here. My comment would be the same as in the Q2 discussion, depending on when customer agreements are concluded with the higher prices and it is naturally not a one-way decision. So the degree of how would I call it, uncertainty on exactly when agreements get to the closure on pricing increases. And that's why we are not commenting any more specifically until we have more information.

Okay. And then finally related to capital allocation and MentorMate acquisition, we're providing additional color today. You paid 14.5 times EBITDA multiple for this consulting company, your own stock is trading at 8.5 times multiple including also software businesses. Why don't you just buy your own stock instead? And then secondly, can you elaborate on the synergies where they come from, as these companies operating outside your current territories?

Of course, it's the wrong starting point to compare now MentorMate to overall Tietoevry multiple. So MentorMate multiple is well within the SoTP ranges of this type of business as Create is. So that should be the starting point to look at that. And now the reference to 14 multiple, of course, that's an LTM 12 months. Of course, we're sort of buying a company which is a high growth. So one should always when looking at these multiples, look at what period of time one sort of compare. So of course sort of high growth, it's up to multiple quite fast. And as we were confirming today, the MentorMate is performing according to our business plan despite the US market softness as commented. Now the synergies are both cost and revenue synergies, and as commented, this will be a realizable within the 24-month timeframe, naturally sort of indicating the lower risk level of the synergies embedded into the business case.

Some of the factors on those revenue synergy side so we have seen cases where there is actually healthy demand from the MentorMate side and lack of capacity or certain skill levels where we actually have already now have had the access to our global delivery network. So those are some of the really practical things on how we are able to actually win a bit more business even short term, but of course, it will take a bit of time to get the full scale of the larger market penetration in the US. But that's actually something we are working on very, very actively.

The next question comes from Felix Henriksson from Nordea. Please go ahead.

I have three. I can also go one by one. Starting off the Create, a sort of more short cycle business, can you comment on the demand trends that you saw throughout Q3? Was there any sort of developments across the months there? I know we're talking about summer months, but still if there is sort of outlook in terms of your customers spend getting worse or better or is it stable?

That's a very good question, and I'll now try to pick out right level of detail for external commentary. So if we think about the demand side, first of all, we throughout the quarter and any of these months where we may have had somewhat declining revenue forecast and here I talk more than 2 or 3 months, it tends to be a bit of a 2 folded view part of the business doing well and then having some pockets of softness. And if I little bit open-up that where we would have seen in the current [Technical Difficulty]. Felix, we are back. Can you hear me?

I can hear you now. Yes.