Trifork Group AG (TRIFOR) Earnings Call Transcript & Summary

Okay. I think we can go ahead. Dear audience, welcome to the presentation of Trifork's second quarter and half year results 2023. My name is Frederik Svanholm from Trifork Investor Relations. I am hosting this call today, with my colleague Kristian Dollerup from our IR team and Kresten Thorup, our CTO. Today, our CEO, Jorn Larsen; and our CFO, Kristian Wulf-Andersen will be providing a presentation of approximately 20 minutes followed by a Q&A. Before we start, there's a couple of practical information's. First, I would like to inform you that, this presentation will be recorded and made available in its full length on our investor web page later today. Second, I would like to inform you that, if you want to download the presentation for today's call, you will be able to find it on our front page of the investor website or under the tab Events. Third, we invite you to ask questions and engage with management after the presentation. And how that works is you raise your hand by clicking the raise hand button. We will announce your name and then you are un-muted. You should be free to ask your questions. We will do our best to ensure that everyone gets a chance to ask their questions within the allocated time. Before we really get started, I have to present this disclaimer. I know you're all fast readers, so let's jump to the presentation. I'll hand the word over to our group CEO, Jorn Larsen. Jorn, if you are un-muted. Please go ahead.

Thank you so much, Frederik. I'm un-muted. So, welcome to this presentation of our Q2 and first half year of 2023. So, overall, we are quite happy with the result. We believe it's -- it was a good quarter. We saw good revenue growth in the quarter, and we also recouped from the little slower Q1 that we saw in some areas in Q2. So, our half year revenue of EUR 104.9 million is satisfying, and we have confidence and we continue with the guidance that we laid out last year. So, also, we see that in this graph, as we always present that every year we build on top, and we have still a CAGR of 24%. And this year is will be another good year in this growth journey. Let's move on to the next slide. The EBITDA margin, we had a result of EUR 16.3 million for the first 6 months. And our guidance for the year is EUR 34 million to EUR 37 million, and we maintain that as well for the EBITDA. Let's move on. Also, we maintain our mid-term guidance as well as the '23 guidance that I just mentioned. And let's move on. The Trifork group, in short, is as most of you know, is the Trifork segment and the Trifork Labs segment. And we will talk more into these 2 as we go. So let's move on to the next page. Here is the cockpit page that we always present. So here we'll spend a little more time. So first of all, the Q2 compared to '22 to '23 was a total growth of 20.3% with an organic part of 16.3%. For the 6 months, we saw a total growth of 14.4%, with an organic part of 11.4%. So it's an acceleration in the year of '23. When we look at our Trifork segment adjusted EBITDA margin, Q2 resulted in 14%. And if we look at our leverage, I will not highlight all the numbers, just the most interesting one, because our leverage of 0.2x is still quite low. We accept up to 1.5x and maybe 2x for a shorter period of time in order to do M&As. But also after the Q2 was closed, we actually agreed with the shareholders of Nine to increase our shareholdings in Nine up to 90%. So we obtained 20% of the company more than we had before. And I'm very happy to announce this deal, because it means that we have a leader team, not only Jacob as one of the co-founders of Nine, but also a broader range of the management team that are continually invested into the company. But that will have an effect on leverage in the Q3 numbers. So that's just the heads up. We now grow the number of business units to 71. So we still have a strong belief that, this is the right system for Trifork. And the huge benefit of the system is that all these business units of relatively the same size are able to compare and learn from each other because they are in more or less the same situation from a cultural and organizational size point of view. We grew the number of headcounts to close to 1,200. We have now 21 active startups. And I will get back to that adjustment from our Q1 number in just a moment. But also we can see that our presence and our popularity on our Inspire YouTube channel and our Instagram account is still growing and accelerating and is now at 54.3 million. Let's move on to the next. So here, there is a lot to say. You all know our go-to-market model of Inspire, Build, and Run. And we see that Inspire is growing slowly. And I will get back to that in just a moment. We see that Build is still the major part. But what we see is that Run is actually growing quite a bit here. And every percentage in Run is a really happy story. So let me start there. So we had an organic growth of 31.1% of Run. And that is long-term recurring business. And also the margin in Run was quite good, 21.7% in Q2. So this is pretty good news. And this is to that level, you can say, we guide on pipeline and activity level going further into the future. Then Build is, you can say, business as usual. We had an organic growth of 10.4%. That is quite distributed among a lot of business units. Some business units see very high growth. I'll get back to that. And some business units see lower growth. And I'll also put some words on that in a moment. But then let's just talk a little bit about Inspire, which is the sub-segment that is facing, you can say, the challenges today. And it's due to 2 things. One is that, the uncertainty and the recession we have in the world makes companies cut back on training, education, and travel, which is unfortunate, I guess, on a longer perspective. So I'm confident that, this will come back. But also the startups, the product companies that mostly are startups, small or big, also cut back on their marketing budgets because of this funding. You can say winter, we say we have in the world, where it's way harder to get funding for new companies. And Inspire is actually hit on revenue on both of these accounts. But let's just move on. So the main events for Q2 are some that I already mentioned. First of all, we have been able to grow the number of FTEs. And a year ago, or 1.5 year ago, everyone was talking about how difficult it was to hire people. It's still always hard to find good people, but it's easier than it was. And we can see we have grown the number of people in our company. Also, in a very heated labor market, and competition for talent, you also see higher churn. We see that the churn is quarter-by-quarter going down, which is also very good for us and our business. You also see that sick leave is constantly reducing. And these are good trends when we compare to how it was 1 and 1.5 year ago. We also have increased our shareholding of own shares. And they were mainly bought from 9 Holding ApS, actually 0.9%. So we have a little storage of Trifork shares that we can use for M&As or other purposes in the future. Then we have Labs. So last time, there was a lot of talks about, if we were going to re-evaluate our valuation of the total portfolio of lab companies. And this time, it happened. So for a few companies, 3 companies, we have set the valuation to zero, because we don't believe in those companies' continued journey. I will get back with an image that put this in the context to tell you more about what we believe our lab situation is. And believe it's a positive situation, but of course, not for these 3 companies that suffered from the hard condition of finding funding. And I already mentioned that we negotiated additional 20% of Nine, which we are as well happy about. But also with ESL, we have an agreement to reduce the minorities there. Let's move on. Every time, I also show you some examples of real work. And here is a very good case story where 2 of our group -- companies and business units have been collaborating in moving a lot of systems from 1 physical place into our private cloud. And in this case, it's Norli. I have a statement here from Kristian, who is very happy about how that collaboration and how that move of all these complex systems went. And this is something that is completed now. We are very happy to be a day-to-day operation partner today and hopefully in the future as well. Also, another case story is actually connected to some degree with one of the companies that -- in one of the lab companies that unfortunately had to fall. One of the companies that we took out of the portfolio was Kashet. And Kashet was a company that utilized the MasterCard platform. And that whole journey gave us a lot of insight into all the things you can do with modern card platforms such as Visa and MasterCard. And here we have actually helped Spar Nord and SparXpres, which is a sub brand of Spar Nord. And here we have provided the technology platform for them to be able to issue a lot of Visa cards that actually is a gift card. So it's a prepaid gift card that you can profile to be used in a specific content. And more than 6,500 retail outlets are using this platform today. Let's move on. So here we see the distribution between our business areas and we can also see how they were growing or not. I will not talk about all of them. But I want to highlight that Digital Health is yet again the winner. So, with a growth of 52% in Q2 compared to the year before, and with a 6-month growth of 57% from the same period last year. It's a very strong growth. And I'm very happy to see that we continue to succeed with exporting know-how and products from Denmark into other markets. But also in Denmark, we have succeeded with winning good business within this business area. Let's move to horizontals. And here we saw last time that cyber protection was suffering a pause, hopefully a pause in sales. And we can see that happily, we can see that in Q2. We have actually regained some of the lost territory from Q1. But for the year, we are still down by almost 20%. We can all see -- what I can also say is that a good part of the growth and run is actually due to products from our cloud operation. So we have a lot of success with selling and implementing the Trifork Netic and cloud stack, which is a technology stack you can use on your journey towards the hyperscalers. So it's a very popular product among our customers. And we have a hard time keeping up with delivering fast enough on this demand. Let's move on. So here are some more color on our lab situation. And so first of all, just from top down, top 10 of our lab companies are more than 90% of the total valuation. And I'm quite confident of the situation of all these 10 companies. But it is also important for me to say that we have been working very hard with these companies to make sure that they are well prepared for the next 1 or 2 years. Some of them are already dividend paying, so they are less of a concern and they have a strong growth path. Some of them will still eventually need funding. But they have secured their intermediate funding for quite a while, and they are able to reduce the burn to a minimum. And yet others, again, have very strong investors. So it's not Trifork who have to keep these companies alive in case that external mean, external or new investors don't come in. Then the current investors can actually keep these companies going. And then -- and some of them also have, you can say, a good traction in business that increases the chances of get good funding. So that's very comforting for me when I look at our lab portfolio. I'm sure there are some questions to that at the end. At the ESG update, a quick overview is that more and more we are working together with our customers to actually fulfill our mission of improving the world with software. And that's examples of smart energy storage. We know today that a lot of these new energies from wind or solar are not steady flow energies. So you need to mitigate use and uptake of energy and also be able to storage energy. And also cost savings in energy is quite mandatory. So with the Salling Group, we had a -- we have a case story where we helped them reduce their need for energy altogether. Also, we chose a few years ago to be the main stopover partner for the Aarhus event of the Ocean Race. And in Aarhus, there was more than 350,000 people who were exposed to our brand. And we had many, many people in our network, customers and partners, that we could meet with under the excuse if they wanted to experience this event in Aarhus. It has never been seen before in Denmark. But also in the Netherlands and also in Italy, we had a number of partners and colleagues and customers out sailing with us. And also already mentioned some of these social data as churn and sickness and also the distribution and inclusivity in our -- among our colleagues. I think that's all from me. Then Kristian?

Thank you very much, Jorn. So I will deep dive a little more into the financials. And then in the end, we will open up for questions. All revenue in the second quarter was EUR 52.2 million. As Jorn mentioned the 20.3% revenue growth, and of this 16.3% was organic growth. Then looking into different markets. Then we saw in Denmark, which is our biggest market, 12.7% growth in Q2 alone. With the majority of the growth coming in the private sector. Since the last quarter and since the end of 2022, we also focused on how much each quarter is impacted by third-party licenses and hardware revenue, because the cycles when we sell hardware, it might be recurring revenue, but the period of renewal of hardware might be 3 or 4 years where it might be on software deliveries more quarterly or annually. So, in order not to disturb the quality figures, we include this information in the notes in the report. And this is also why we highlight this here when we're talking about growth. So, here you also see the adjustments for that. The inorganic growth in the second quarter came from IBE, the Swiss acquisitions we made last year and included since the 1st of January. And this accounted for 4.1% in the quarter. Looking into the driver segment performance in relation to adjusted EBITDA where we also guide us, as Jorn mentioned in the beginning. Then we have no adjustments for special items. So, this accounts both for adjusted EBITDA and EBIT. So, we didn't have any adjustments in 2022 and 2023 since the adjustments primarily was related to the IPO in 2021. But we saw growth accelerated in Q2 to 22%. So, all EBITDA, adjusted EBITDA margin of 14%, which was better than Q2 last year. All when we see for the half year, then we're more or less equal to the same ratio as we had last year with EUR 16.3 million. Looking into the Trifork Group performance and then on EBIT, which we also guide that. We -- as I said, don't have any special items in relation to that. We had a small increase in depreciations and amortizations, which came out from the acquisition we did in the beginning of the year. So, no additional major adjustments in relation to depreciations. All we saw in the quarter 7.2% margin and all for the half year 8.7% margin. So a slight improvement for the half year compared to 2022. Then deep diving a little more into the segment -- the sub segment performance in the driver segment. Then as you know, we have Inspire, Build, Run. And as you saw in the initial slide with the ratios, then we saw a high increase in revenue in the Run-based business. So here you see that all for the 6 months, this was a EUR 26.7 million compared to EUR 20.2 million last year. Looking into the margins, then as Jorn mentioned, there was some additional cost in this Inspire. We did invest more in Inspire in the first half year than we did in 2022. So here we saw a decline in profit. So here for the second quarter isolated, you see then the minus of EUR 0.8 million. But we also saw the positive impact in Run-based business with the 21.7% margin and EUR 3.4 million in EBITDA. I'll talk about more details in each of the sub segments after this. So we go into the Inspire and here you see the numbers. I would say, we did complete a lot of the conferences that we talked about also in Q1, but we did not have the amount of sponsors and attendees as we would have expected initially. So this is the reason for these adjustments or a little lower results. So all we are more or less equal to revenue in 2022, but we did additional efforts and also increased activities. So this is the reason for this. Half year, we have a minus of EUR 1.5 million. We do expect this to be better, so we'll not have the same amount of loss in the second half. We do have some activities where we are very comfortable that they will improve, but if we will break even, we're not sure on yet. Build performance. You see here we did have growth in the quarter of 10.4%, and on the EBITDA margin, we are having better margins in the second quarter than we did in 2022, but still not up to the same margins as we saw in 2022. Reason for this is a lot of the sales investment, sales in business development is within the Build phase segment, so we were also expecting that the margins would be a little lower overall for the half year. The Run performance here. All you see a very high growth, 60.2%. Some of that was related to hardware, just about EUR 2 million compared to the same period last year. So that is why we're also here just for that and give you the numbers in relation to that, but we did see the 31.1% organic growth for the second quarter, which was very satisfying. And not the least, we also saw a high margin increase, both in the second quarter and now also for the half year to the 21.4% for the half year. A lot of that is related to getting more traction into the cyber operation centers where we can have room for more customers without adding additional cost. We've not invested as much in the operation centers in the same period. And we also see a Run-based business coming in from other business areas where we -- as we have talked about in past quarters, actually now are selling more part of engagement, selling that as products and then selling as implementation. So there, when we build the products and sell it to our customers, then we have -- then it's part of an engagement in delivering a new functionality, but afterwards, it turns more into the Run-based business, and then we take the initial investment when we build solutions and then afterwards we tend to have higher margins. Also looking into the revenue split, you here see the development from over a period of quarters, and as you see we now include from every quarter, we also include the third-party license and hardware split in the previous course when we do our reporting. And so here you can see how that has developed. So looking into Q1 '22, you see the high increase in license and support of our own products, which is the highest increase here. And you also see that hardware was roughly EUR 2 million higher in Q2 '23 compared to Q2 '22. This is all included in the notes, so you have all the information there. Looking into the labs performance, then Jorn already talked about the reasons for doing impairments to some of our investments and overall we saw an EBT in the Labs segment of minus EUR 4.5 million. We still have trust in a lot of the investments we have and still believe that they will improve in the future. So as Jorn mentioned with the top 10, we are quite comfortable. Overall, when you see the accumulated realized gains here out to the right, you see EUR 70.3 million. So this has also been adjusted so that we now have taken the loss of the initial investments of those impaired companies, so all that's included. So this accumulated realized is then from 2016 when we started to report in this way. Then the cash flow and financial position, I guess Jorn also already mentioned that we have a 0.2x leverage and net interest-bearing debt to adjust the EBITDA. So we still have appetite for more acquisitions. We saw a solid development in the quarter, so I don't have a lot of additional comments here. But now, I think we'll go over to questions.

That concludes the presentation part, and we will start the Q&A. So just to remind you to ask a question, please raise your hand by clicking the raise hand button. I will then announce your name and then you should make sure that you are unmuted and then you are free to ask your question. I think, we shall start with Simon Jonsson from Berenberg.

Simon here. A few questions from my side. First, could you provide some more commentary on the performance in the different geographic markets, please? And in particular, why you're navigating the Danish market so much better than some of your peers?

So while Kristian is thinking about the numbers on the different countries, because I think he needs to bring that up, I can comment on why we are navigating the Danish market better than maybe others. Not that I have a lot of information of what others do. I think, you know, when you are a small company like Trifork still is in Denmark, it is easier to navigate. If you have 2 big part of the -- or if you have too much market share, I think you are more affected on how the fluctuations in the economy works. For us, it's really up to ourselves on how much market we want to go and get and that counts for all the markets we operate in. If there is really a function of effort into business development and sales activities and then the outcome. And having said that, yes, we need to work a little bit harder now than we used to, but that's not really an excuse not to do so. So that's what we do. And there are some math between, how much effort you put in and the outcome. So that could be the answer. And at least this is what works for us. And one example I can give is that even in a harsh economy, companies, they are still interested in technologies that can optimize the business or grow new business. Because the case story we had with Spar, with the Spar Solution was exactly to expand business. And you can say the Norli case that we had with [ software ] Danish one, is to optimize for cost and running on a more modern platform and infrastructure. So there you increase cyber protection, but you also increase effectiveness on running on a more modern platform. And of course, we know that. So a lot of the pitches and concepts we sell to our customers nowadays are solutions and concepts that have the aim of making the customer more competitive. And maybe Kristian, you have all the geographical numbers now.

Yes, so in relation to the geographical numbers, then we only publish that annually. But we decided in the financial review this year to actually include our biggest market, which is Denmark still, where we saw the growth of 12.7%, as we stated. But also in the U.S., which was the fastest growing market, where we in Q2 saw a 61% growth, and for the half year, 64% growth. So that's what we have included now in the financials. But otherwise, we do it annually in the annual reporting and not in interim reporting with all countries and segments.

Then could you also comment on where is your utilization rate is in your Build business at the moment? Is it at normal levels? And maybe you can tie that into your hiring plans for the rest of the year as well?

I would say, we don't actually disclose any utilization rates in the business. But that said, we can say that due to those longer decision cycles, we have had pausing periods where we have not been able to optimize the use of our workforce into the engagements. So there's still room for improvement. And Jorn, maybe you can talk into hiring.

Yes, I think we are definitely still hiring. And I can just copy what Kristian just said that they are -- in some of our business units, they are fully utilized. And they are, of course, the ones who hire. But there are also business units that struggle to have everyone in work. And then you could say, why can't you just use people from here to there? But that's not how the world really works, because we work with many areas of expertise. And we do optimize across the whole group. It is in the interest of all business units. But it's not always completely possible. So if you have some very specialized people, and the sales are, you can say the sales cycle are too long, then there might be some people waiting for that contract to actually finally close. And so they can start deliver. So there are some -- there are still room for improvements and still for margin improvements in the group for sure.

Understood. One final question from my side. You highlighted in the report that you will focus more on acquisitions of operating companies with lower risks than labs investments.

Yes.

And at the same time, you have also earlier commented that multiples still are too high in the markets. It's difficult to do acquisitions. Could you maybe provide an update here? How are your discussions going with potential targets?

Yes. So a kind of acquisition is to reduce minorities, which that has been our strategy the first 6 months here, but also last year. So that's one way you can apply funds. The other way is to look at our lab portfolio. Because normally we say that lab companies need to exit and be sold to someone else. But there are maybe 1 or 2 exceptions there. And we can talk about this when, if we choose to do something in that area, because that is companies we know very well. So that could be one source of M&A. And the other thing we have also seen is investment into our customer activities. So what we call joint ventures or co-ownership of products we build, but we build for our co-investors. So that's another, you can say, we feel low risk way of applying investments. And then there's the classical M&A where we look for business to bolt-on and grow our business. And that is finally starting to look better. And we probably don't have a lot of appetite to do very high risk and big acquisitions. We want to do things in a controlled manner as we have always done. And so if we would see a larger potential candidate, we would find a way to mitigate the risk of bringing such a company into the group. But what our primary compass is heading to is to find businesses that we can bring into the group that has the size of an average business unit for us. And that starts to look better.

Our next questions, I hope will come from, I think, it's Poul. Poul, you're unmuted.

Yes, I hope you can hear me.

We can hear you.

Okay. Coming back to the question where I stopped before, Berenberg, about it's more or less on current trading. What do you see in the market? You say you have to work harder, but do you see longer processes of decision? Of course, that's the case when you have well a lot of projects to do, but how is it in your space? And are companies changing scope, or do you see more price competition?

Actually, so just to start with the latter one, the price competition. No, I think that the world has adapted to inflation in a reasonable way. And also, I believe that when companies buy IT services and solutions, it is not just the price. And so therefore, it seems like it's not -- it is important with the price. But I don't see a something very hard in price negotiations or in price competition. And of course, it's also up to every company like us to find our own niches where competition is lower, because you really want to win because you have high quality products and proven know-how and domain knowledge, and not just because you can do it cheap. That's the market we have always been in. So we are probably less affected than maybe some others. And so with the expansion in our investment into business development and sales, first with Morten Gram as our Chief Revenue Officer and also with Karan in U.S., we have -- we see much more business now than we did just 6 months ago. And we all know that there are millions of companies in the world that could be our customers, and they are not today. So for us, it should never be an excuse that we are not able to find a customer, because we all know where they are. They all have a web page, and they all use LinkedIn, and it's really just reaching out and then telling about what things we can do. So, so far, I'm actually quite hopeful for the future, because what we deliver is will work in a tough economy, and it will work in a positive economy. It's just the type of solutions we sell that change.

And just follow-up, when you're then in the report comments that you prioritize growth over profitability or earnings right now.

Yes. Yes.

How should we read that? Are you going for growth at any cost? There must be a balance here.

No, we don't grow for growth at any cost. We are not a lab company. Lab companies and product companies who live from VC funds, they do that. No, so we are probably...

It doesn't sound like you too have that comment.

No, no. I have been at Maersk for a few years, and I think Mr. Moeller, he said profitable growth is a good way to grow. So that's still what we believe in.

Okay. And then if you look at the full year guidance, which you maintain, if I take first half and subtract that from -- then I get an implicit growth, organic in the range of 5 to 15 in second half, growing 11 in first half. So what will take you to the upper and to the lower end of that range? Because the midpoint is below where you were in the first half.

Yes. And that is simply the sales cycles that will take us one or the other. Because if a sale closes 15th of December or 15th of January, we'll actually define that. I believe we have the pipeline to be in this range. And hopefully, after Q3, we can narrow this band. But right now, we'd like to have this flexibility just in case.

How many people did the IBE add to the business?

This is roughly -- in headcount, you could say it's more. It's roughly about 30 people, because they have some part-time employees that still count in headcount, but not on the FTE as much. So that's roughly where they were.

All right. That means that when you grow 13% in headcount and you then subtract IBE, then you are taking on about 10%, 11%.

Yes.

If you want to grow 10% to 15%, of course, that's including IBE. But if you take organic, is that then more or less a reflection of what you look for?

Yes. You could say, it's primarily impacted by the increase in the run-based business. Because there, you don't need the same kind of headcounts to grow your business as you do in the build-based business.

And IBE, that's mainly software selling?

IBE is all run-based business. So it's recurring revenue, very long time contracts, 5 to 10 years in most cases. So that's a really solid business.

Yes. So they are having a good profitability, I guess.

Yes.

And then my question is, when you then have more or less flattish EBITDA margins year-over-year between the quarters and you've added IBE with EUR 1.9 million in revenue, are you having an underlying pressure on your margins?

Well, I think there's really one explanation and the one we have been trying to give also last quarter. And that is we are quite bullish on business development. So it's primarily in business development and sales that we have invested. And that is really a large part of the increased, you can say, cost base. And of course, we do expect that to reflect in more business and more profitability on a mid-term or short-term horizon.

Okay. Perfect. I will step back to see if there are others who will ask questions, otherwise I'll be back.

We have questions from Serge Rotzer from Credit Suisse.

Yes. Jorn, Kristian, Frederik, many thanks. Well, basically, I'm on the same line like my predecessor, because you did EUR 105 million sales in the first 6 months. And the midpoint is again EUR 105 million. But the range is between EUR 100 to EUR 110 million. So EUR 10 million is quite a lot of money for you. And I understood that most of that is coming from Run. And therefore, you're guiding also for higher margin. But in Run, you should have quite a good visibility. So therefore, I'm a little bit puzzled. Why this wide range? And yes, well, this is coming from, this is question number one.

It must be you, Kristian.

Yes, I would say, as Jorn explained before, we would still like to have this range, because we're still, in relation to the impact that the efforts that we do right now will have in the second half and when they will kick-in. Then, especially in relation to the Inspire-based business, there we do see some uncertainty in relation to how much that will improve, when it will start improving, or if we need to cut off some business in order to improve margins. And then that would have a negative impact on revenue.

I agree. But the Inspire, normally, it's not the game changer in revenue.

No, but it's still impacting the total revenue in that sense.

Okay. Then let's go to the next line, you know. Based on your guidance, it's a EUR 100 million or EUR 110 million you can do. And based on that, the EBITDA is then EUR 17.6 million to EUR 20.6 million. So you achieved a EUR 16.3 in the first 6 months. So even in any case, even if you would decline sequentially from EUR 105 to EUR 100, you could improve your EBITDA. And I wonder where this should come from, then. Why you still can improve your EBITDA, even if you would decline in the second half?

One answer there, again, would be the Inspire-based business. So if we pull a plug, you could say, on some of the activities and stop activities, then we also stop the losses in that area, which then directly would improve the traffic segment margins. Also, in relation to the run-based segment and the margins we have there, still opportunity to improve them. Not saying that, we will 100%, but still opportunity to keep improving the margins and keep the margins higher, you could say, than in the last years.

Can you help me, then, to understand as well about your personal costs? You confirmed that you still are hiring people. So I expect it will be net positive, you know, including the fluctuation. So you will have more employees on the company. And personal expense are growing steadily. We have now EUR 28.5 million. So, personal expense will grow further going into the second half. And still, the margin in EBITDA is that much improving. So you must have really good and strong science to be that positive on that. Is this correct? So personal expense will further increase or I missed the mix a little bit, you know. Yes, from leverage, from business mix, from personal expense growing. So that's my question, those are my problem.

Good. So we will very likely increase the number of employees, the remaining part of the year. And where we will be hiring engineering talent will be in business units that also have the business to justify that. So that will be a stable or increasing profitability. And so that's at least what I can comment on that. Kristian, would you add more comments to this question?

Yes, I don't know. It's a lot of things that can actually change. So depending on if you add or subtract and inspire, et cetera . And so it's still based on that, that we want to keep the range as it is right now. And then as Jorn said in Q3, we most likely have decided exactly how we want to come around it in the different sub-segments. And then we could be even more precise.

Okay, helpful, fair enough. Last question and then I will stop here. Last year, we had quite a seasonality in the second half. Q3, it was EUR 43 million sales, and then Q4 was almost EUR 50 million sales. Do you expect a similar seasonality this year? By the way, the same was true also in the personal costs, quite a high swings in personal costs. Probably you can remind me what has been there last year and how this will look like this year?

I mean, the seasonality in relation to hardware sales, or third-party licenses, we already talked into, right? So, why we take that as a separate line item, so that you can look through that. And as I said, we will also provide that information quarter-by-quarter and comparison quarter for the year before, when we reach the course. The second part would be in relation to the Inspire-based business, where we have invested. I mean, last year, you saw the impact of the new YOW! conferences in Australia, and they are taking place in November, December. And of course, now we're working as much as we can to make it a success this year as well. But it's still with some uncertainty whether it will be as successful this year. But this is what we're working for. And that would give some seasonality, especially in Q4.

Okay, very helpful. Many thanks and good luck for the second of this year.

The next question will come from Mads Quistgaard from Carnegie.

Can you hear me now?

Yes.

Oh, perfect. Good. So I have 2 questions left. So the first 1 is on Inspire. You seem quite confident you will see an improvement in the second half of the year. What is that based on? Is it based on current momentum? Or what is it based on?

Yes, our Inspire business, as you know, is divided into different businesses. So it's Inspire Inspirational Workshops, it's conferences. And then we also have another flavor of conferences in our conference center in London. So part of this is related to already received bookings, et cetera, at our conference center where we see a higher activity level in the second half than in the first half. The other part is that we now have a longer, planning period to the upcoming conferences. So we hope to be able to actually mitigate what Jorn talked about in relation to the challenges by running conferences. And then you could say, if we kind of mitigate that, then we might have to adjust how we actually do this and only then bet on the winners. But this is an ongoing process in our business area in Inspire to really make sure that we invest mostly in the things that we can actually see the success in.

Very clear, makes sense. And then 1 question on Cyber Protection, because given all the regulation we have in the market today, I guess it must be fair to assume you expect strong growth within the Cyber Protection business, not only for a few months, but also for a few quarters. Is that a fair assumption or what?

Yes, so that's a very good question. And there is no doubt that the cyber threats around the world are increasing quite a lot, quarter-over-quarter. And we saw quite clearly that, when the war broke out in Ukraine, there was a lot of fear and it led to companies starting quite quickly to invest in Cyber Protection. And over the past quarters, there are more and more stories of businesses being hacked or interrupted from cyber crimes. So you would think that, there is a strong appetite to defend yourself and your business. But then when the inflation kicked in and the recession kicked in, it was as with education, it was something that it seems like the companies took longer to decide. They said, oh, maybe it's not that important to protect our business anymore. Maybe we can wait a quarter or 2. That's how we experience it. It doesn't make any sense that you would like to take that risk. But it seems like this is what businesses and organizations are doing. We do have, and that's also why the EU will come with new regulations. The NIS2 will, for a lot of companies, be a quite hard regulation. And like with the GDPR and Data Protection Laws, when they came, they actually upgraded a lot of transparency in what data is used for. And the same thing will happen now that you need to document how you actually protect yourself against cyber crime. And if you cannot document that and you are hacked, then it's the same, you can say, harsh punishment as it was with the GDPR and Data Privacy Laws. And then that risk level for the businesses and the business owners and the management increases quite a lot more. So we think that, and we hope to see, that the spendings will increase over the next many quarters. But there is this little wait or halt in the growth in this area as we see it and as we see it in the market. But of course, we do see Splunk and CrowdStrike and other of our partners that there are sales and we just need also to be a bigger part of that. So yes, the short answer is we do expect this to grow, but there seems to be some kind of a pause right now.

Yes, and maybe to add that what we did in this pause was actually then to make a concept to educate our customers and companies to what is actually going to hit them when these new regulations are getting into effect. So we now have a kind of fast start, you could say, in order to how to evaluate a company and actually how to get it integrated into the company so that they know what to prioritize initially and what they can do on the longer run. So this is actually what we explained in the case story we have in relation to Cyber Protection in this report.

Great answer. And then I have a final question. Over the last 2 weeks, there have been a lot of talks in Denmark around major investments in the Danish Healthcare segment, especially also for AI projects. And I know you do a lot for the Danish Healthcare customers in Denmark. Is that true? And do you expect to sort of increase momentum for the Danish Healthcare system going forward?

Yes, we did see new work coming in. And as you could also see in the presentation, Digital Health is in a strong growth period in Denmark and in Switzerland, which is our 2 prime markets for Digital Health. And hopefully, there will be more markets later. But yes, we see a high activity level. And yes, there are a lot of things we can still do to optimize and increase the safety of patient care in our markets.

Great.

In respect of time, I think, and because I don't see any more raised hands, I think we are going to conclude the Q&A session here. And I would like to offer interest in Trifork. If you have any further questions or need anything from us, please don't hesitate to reach out. Our contact information is on the IR website. And we hope to see you again very soon in our investor roadshows or conferences. Also, please mark your calendars for 31st of October, when we release our third quarter results. Thank you, everyone, and have a great day.

Thank you.