Netcompany Group A/S

CSE:NETC

Welcome to Netcompany's financial presentation for the first 3 months of 2025. Today's call is being recorded. [Operator Instructions]

Today's speakers are CEO, Andre Rogaczewski; and CFO, Thomas Johansen. Andre, please begin.

Good day, and welcome to this presentation of Netcompany's results for Q1 2025. My name is Andre Rogaczewski, and I'm the CEO and Co-Founder of Netcompany, and I'm joined today by our CFO, Thomas Johansen. And before we get going, there are some important disclosures that I need you to read through. So could we please have Slide #2, please?

I will pause for 30 seconds here and let you have a read-through of these important disclosures. And with that, can we please go to Slide #3. The topic of today's presentation is our performance for Q1 2025. I will walk you through the business highlights for Q1 and our financial guidance for 2025. Once I'm done, Thomas will go through the numbers in greater detail before we open the call for questions. And can we have the next slide, please?

The group continued the growth momentum from last year and grew revenue in Q1 2025 by 9.1%. Gross profit increased by 16.1%, yielding a margin of 29.5% compared to 27.8% in the same quarter last year. The improvement in gross profit was a result of improvement in all regions. Adjusted EBITDA increased by 24.4% in Q1 '25, yielding an adjusted EBITDA margin of 17.6%. Thomas will go into more details behind the margin development in each specific segment. And during the first quarter of 2025, the workforce in the group increased by 342 equal to a 4.4% increase. And can we have the next slide, please?

We want to give you a short update on the SDC transaction we announced on the 10th of February. We are very satisfied with the ongoing process of the transaction. And on the 31st of March, we will have regulatory approvals granted. We are now awaiting the final fulfillment of conditions and expect to close the transaction mid-2025. And in connection with the closing of the transaction, we expect to begin the integration of SDC into Netcompany Banking Services, and we will also reinitiate our share buyback program. We look forward to being able to share more information with you subsequent to closing of the transaction. And can I have the next slide, please?

So during the first quarter, we have won several new contracts, of which I'm mentioning a few here. In the Danish public sector, we were selected as the vendor for the development and maintenance of the student debt system. The new system will be implemented by leveraging our AMPLIO platform. Also in the Danish public sector, we were selected by the agency for digital government for the modernization of the NemKonto system, the central account registry facilitating public payments.

The modernization includes moving the solution from an old mainframe solution to our AMPLIO platform. In the Danish private sector, we have renewed and prolonged a number of ongoing projects that I'm not able to disclose further. And can we have Slide #7, please.

In Netcompany Southeast Europe and European institutions, formerly known as Netcompany-Intrasoft, we have also signed several new contracts in the first quarter of the year, of which we have highlighted a few here. In the public sector in Greece, we have signed a contract with the e-government Center for Social Security, IDIKA. The scope of the project is to improve the operational functioning of hospitals in the national health systems. As mentioned in connection with our annual report, we also signed a large solar contract with the Greek Tax Administration early in 2025, another important testimony to the success of our product and platform approach. And in the private sector in Greece, we have been chosen as leader of a consortium for EYDAP, the largest water supply and sewage company in Greece. The project includes the implementation of our PULSE platform.

In the European Union, we have been awarded a multiyear framework agreement with the European Border and Coast Guard Agency, securing the external borders of the EU member states. And can we have the next slide, please?

In Q1 2025, we employed an average of 8,150 full-time employees, which was an increase of 4.1% compared to the same period last year. Compared to revenue growth, number of FTEs grew at a slower pace as a result of our increased use of existing platforms throughout the entire group. In addition, it was mainly in the international part of the group, we added net new employees. The attrition rate for the last 12 months was 18%, which was an increase of 1.7 percentage points compared to last year. We continue to be able to attract the talent we need in all entities. And can we have Slide #9, please.

Irrespective of the increased geopolitical turmoil and the high level of uncertainty in the beginning of 2025, we reiterate our full year financial expectations. For revenue, we expect growth between 5% and 10% for the year. And for adjusted EBITDA margin, we expect to end the year with a margin between 16% and 19%. These targets are based on organic growth and hence, exclude the impact from the SDC transaction. Upon closing of the SDC transaction, we expect to reinitiate our share buyback program. Our expectation to buy back shares to a total value of DKK 2 billion by the end of 2026 remains unchanged. And can we have the next slide, please?

Now before I pass on the word to Thomas, I just want to highlight our latest campaign, where we, on the 22nd of April, illuminated the Statue of Liberty in Paris with the message stand tall Europe. In these uncertain times, we believe that Europe is in a unique position -- in a unique position to strengthen itself, and we take pride in being a mission-critical provider of world-leading digitalization services and solutions supporting governments and enterprises throughout Europe.

And with that, I will now pass on the word to Thomas. Please go ahead, Thomas.

Thank you for that, Andre. And like already mentioned, I'm the CFO in Netcompany, and I will now go more into details with the financial performance of Q1 2025. So if we move past the breaking Slide #11 and straight into Slide #12, please.

Andre has already spoken about our performance in general terms, and I will now go more in detail with the performance for Q1 2025. Revenue increased 9% in Q1 measured in constant currencies and currencies impacted growth negatively by 0.1%, leaving reported revenue growth at 9.1% for Q1. The growth was driven by increased activity in all business segments beside the U.K. compared to same quarter last year. Revenue grew 3.5% in the Danish segment and was driven by an increase of 6.5% in revenue from the public sector, while the private sector revenue was on level with Q1 last year.

Netcompany Southeast Europe and EU Institution continued its strong growth performance from 2024 and grew revenue by 18.6% in Q1. The growth was driven by a combination of license revenue and continued growth in the public and EU areas. As more and more of our large implementation contracts are based on one or more of our products or platforms, license revenue is a natural part of Netcompany's business and will continue to be driving revenue growth going forward. The products and platforms are the enabling factors that allow us to grow significantly while the IT services industry is not.

Also, Netcompany Norway delivered strong growth with 19.7% revenue growth in the quarter, which was driven by continued ramp-up on the Avinor contract.

In Netcompany U.K., the public sector grew revenue by 9%, driven by increased activity on the DALAS framework contract and other larger engagements with HMRC and NHS. A decline in the private sector as a result of discontinuation of historical low-margin contract left the overall revenue for the U.K. segment in line with the same quarter last year. Netcompany Netherlands grew revenue by 3.7% in the quarter compared to a tough comparable in the same quarter last year. Can we move to the next slide, please?

The gross profit margin in Q1 was 29.6%, an increase of 1.9 percentage points compared to the same quarter last year. The margin was positively impacted by higher license revenue in Q1 2024 compared to the same period last year. Lower margin in Denmark was caused by continued time spent on business development and tender writing, product development and on existing products and resources spent on the ongoing SDC transaction. Netcompany Southeast Europe and EU increased gross profit margin by 5.5 percentage points to 24.7%. The improvement was positively impacted by the license related to the solar tax project in Greece.

In Netcompany U.K., gross profit margin improved by 2.8 percentage points to 21.8% in the quarter. The improvement was driven by increased utilization and the previous mentioned discontinuation of historical low-margin contracts. Gross margin in Netcompany Norway increased by 6.8 percentage points in Q1 compared to the same quarter last year as a result of better utilization and ramp-up on the Avinor project. Netcompany Netherlands, gross margin increased 2.7% and reached 36% in Q1. Can we move to the next slide, please?

Adjusted EBITDA margin before headquarter allocated costs increased by 2.2 percentage points to 18.6% in Q1 for the group. Adjusted EBITDA margin in Denmark was 22.3% compared to 23.4% in Q1 last year. The lower margin was a result of development in gross profit, as already discussed. Netcompany Southeast Europe and EU Institutions adjusted EBITDA margin increased 6.4 percentage points in Q1 2025 compared to Q1 last year. And in Netcompany U.K. and Netcompany Norway, the adjusted EBITDA margin increased 1.6 percentage points and 8.7 percentage points, respectively, driven by better utilization in both segments. In Netcompany Netherlands, the adjusted EBITDA margin improved by 2.2 percentage points and reached 18.6% for the first quarter of 2025. Can we move to the next slide, please?

We have continued our focus on working capital during Q1. And as a percentage of revenue, the combined work in progress, prebilled invoices and trade receivables was 27.3% compared to 33.6% in Q1 2024. This development was caused by an increase in prebilled invoices and better and faster collection of accounts receivables. Can we go to the next slide, please?

In the first quarter of 2025, we generated free cash flow of DKK 67.9 million compared to negative DKK 4.9 million in the same quarter last year. The improvement in free cash flow was driven by improved operating profit. As a result of the improved cash flow, our cash conversion rate also improved from negative 4.3% in Q1 2024 to 47% in Q1 2025. Days sales outstanding decreased from 66 days in Q1 last year to 57 days in Q1 this year. Main reason was the timing of the Easter last year had delayed some payments in the beginning of April 2024. Debt ratio was 1.2x compared to 1.6x in Q1 last year, positively impacted by the current pause in our share buyback program as a consequence of the SDC transaction. We expect leverage at the end of 2025 to be around 1.5x, reflecting additional net debt to be incurred to fund the SDC transaction and the impact of the expected reinitiation of our share buyback program, too. Can we have the next slide, please?

Revenue visibility at the end of Q1 2025 increased 3.8% to DKK 5.6 billion compared to DKK 5.4 billion in Q1 2024. In general, revenue visibility was higher than normal in the beginning of 2024 last year as a number of contracts, primarily in the private sector were signed for a longer period than normal. And when we reported our annual report, the revenue visibility at the beginning of 2025 was, in fact, 1 percentage point lower than at the same time in 2024. illustrating well the extraordinarily high level of revenue visibility that we saw in the beginning of 2024. Compared to revenue visibility at the end of 2024, revenue visibility sequentially into the end of Q1 2025 increased by 15% compared to a 9.1% revenue growth in the same quarter.

And just to make sure that everybody understands the nature of the noncontractually committed part of revenue visibility, let me here just reconfirm that the noncommitted part of revenue visibility historically has been 100% converted into realized revenue, which we also expect for the noncontractually committed revenue for this quarter. The notion noncontractually committed revenue is used on engagements typically in the private segment, where we have significant teams performing mission-critical work for our clients that will continue for a substantial period of time, but where the clients, due to internal procurement procedures, have not extended the contract legally for the full year yet. However, based on the nature of the work of the contracts, this revenue will be realized and the contracts will be prolonged during the year.

Pipeline in both the private and the public sector for 2025 remains at a satisfactory level, indicating continued growth, and we remain committed to our financial guidance for the year, as Andre has already mentioned.

And with that, I've concluded the detailed financial walk-through, and we now open up the call for questions. So we can move to the Q&A slide, please, and open the call for questions. Thank you.

[Operator Instructions] The first question is from the line of George Webb from Morgan Stanley.

I have a few questions to start with. First, as we think forward to 2Q, have you seen any -- I guess you haven't seen any changes around customers committing to starting new projects? And I guess when we think about the broader Q2 dynamics, fewer working days, any view at this stage on the potential pipe of license revenues for 2Q. Q1 is obviously quite strong.

Second question, maybe, Andre, on the topic around the kind of system sovereignty in Europe. What needs to change in terms of how the EU procures for this to be a meaningful tailwind for the European providers over time? Are there already ways that, that can be written into tender contracts there to be a shift in how those bids are evaluated?

And then one for you, Thomas, with regards to reporting disclosure. As you move closer to completing an SEC, are you looking to revise your disclosure at all? Or would SEC just become a fixed reporting segment?

Thank you, George. Good questions. I think I'll try and answer the first 2 and then I'll leave the third to you, Thomas. So we don't see any change in the overall attitude or behavior from customers when acquiring new projects. We address the market continuously with our platforms and products. The sales cycles are the same length as they've always been quite long. But when we get in, we start discovery phases and then we start very strategic long-term partnerships with our customers.

Of course, it's a market with a lot of volatility and geopolitically, it's -- there's much more uncertainty out there. But it's been a strange market for the last 2, 3 years anyway. I think the things we are coming with all the types of services and platforms, we are extremely relevant, and we see that happening, that relevance occurring across our markets. So we don't see any new behavior, and we don't see any changes in the way customers look at us. When it comes to the sovereignty and the whole Stand Tall Europe campaign, I think it's important to say that what we're doing here is creating an awareness of how important it is for European companies, our customers, governments and private enterprises to think digitally and digital is the way forward to create the competitiveness they need.

There are definitely 3 areas where public tenders, and that goes for all European countries are changing towards a more strategic nature. And we are involved in all those 3 strategic areas. One is the digital, you can say, structural backbone of digital IDs, digital wallets, the whole idea of companies and citizens being able to be identified digitally for us to build our solutions upon. We have a great deal of that infrastructure, and we also advise both countries and agencies about that. Then we have the digital assistant, AI-driven assistance to be working on digital documents and data. This is also an area where strategically a lot of governments are thinking how to do. And finally, but not most least importantly, all the digital ecosystems that are being built out there that goes for airports, logistics, transportation, but even physical assets. We are also very relevant there.

And we're pushing that overall strategic agenda for our customers to understand that it's not just one solution. It's an entire digitization of their government and their companies, and we can actually deliver valuable platforms, assistance and guidance in all those areas together with also other partners they might choose. And within that way, we become extremely relevant as a joining partner in that journey.

And Thomas, maybe you could...

Yes. And then just to add on the question regarding the inclusion of SDC into our report post closing. We will report SDC on a stand-alone basis for 2025 so that the numbers are clear to everyone, George.

That's great. If I can just throw one more in. I noticed on the Festina Finance side, you increased your shareholding quite materially kind of flagged that as a DKK 1 billion EV business now 22% of it. Do you have a specific game plan there? Or more broadly, when you take minority stakes, what's the idea that you have in terms of exit or just the thesis?

I mean the whole idea with Festina Finance is that we truly believe is one of the best software products when it comes to life and pension and calculation engines for that. It is market-leading also in a European perspective. Now what we do is that we acquire a stake in a company that is actually very successful. That's good, obviously. But it's also a strategic, you can say, partnership or marriage where we go out together because we build our AMPLIO platform on top of Festina Finance kernel and then we address customers, I think, with a very great solution and a solution that is absolutely market-leading. So in that sense, it's also a sign of loyalty and going-to-market strategy where we are, so to speak, very well integrated, both financially, but also in an offering type of way.

The next question is from the line of Claus Almer from Nordea.

So a few questions from my side as well. The first goes to Denmark and the development in the gross margin. It is mentioned that the cost associated to SDC is dragging down on the margins, I guess, excluding the ones being including the special items. What would margin have been without these extra costs? That will be the first one.

And thanks for that, Claus. We don't disclose in the report what the impact is for either increased tender writing activity, increased our spend on product development or the SDC activities. But the margin is dropping on a gross margin level is dropping, what 0.8 percentage points. So it's probably fair to have some sort of an even split between the 3 elements in terms of what is driving the margin down.

Okay. And is there more tendering activity going on in this quarter since it's been mentioned? Or it's just more the normal level?

It's more than normal level that has been going on in this quarter in the public area, also in the private area. So no secret that we are getting much more active into the entire financial services industry vertical in which we are currently working with SDC and the integration, which is great. but there are also a number of other activities in that vertical that we're spending time on. There's continued investment going into the public sector in Denmark, both in terms of the broader tax vertical, but also in the vertical in public sector that is receiving increased funding throughout Europe, which would be defense.

Okay. That makes sense. Then my second question goes to this 1.5x expected leverage end of the year, including the SDC. What kind of capital structure of SDC do you assume in that calculation?

So the capital structure of SDC is assumed to be that the DKK 1 billion that we are paying in terms of equity or in terms of purchase price to the sellers will be injected as equity into Netcompany Banking Services, which will then be paid out for that. But since it's a merger, we will also resume the equity of SDC going into Netcompany Banking Services. So when you add those together and you then subtract the purchase price, then you get to a proxy for what the capital structure is going to look like by the end of 2025.

Something that more I was trying to figure out is the net cash position within SDC, what is your assumption behind that?

The assumption behind that is going to be that it will look as it has looked over the last couple of years in SDC, where the institutions customers are paying a number of prepaid through the year. And that cash will recycle into Netcompany Banking Services. Now we're making all of these agreements right now with the owners, i.e., the customers to Netcompany Banking Services. So I cannot disclose more than what I'm disclosing here, but it will be similar to how SDC has looked historically.

That makes sense. And then just a final one. You changed the name of Intrasoft. Why is that?

Concluded the integration of Intrasoft into our platform, and it is now Netcompany Southeast Europe and EU institutions, a very logic thing for us to do also really to reflect that we are one group, and that's important for us also going forward.

So it doesn't reflect that you are considering adding new activities to that segment?

No. No, I think it's -- as Thomas alluded to, it's a natural thing to be naming it what it should be part of the group now, delivering solutions in that region. Now we deliver platform and product-based solutions. So we will be delivering, as we've always seen in Munich, we've seen it in Stockholm. We've seen it in several places. We can now deliver solutions in particular geographical areas just by pushing a particular product or platform and then grow from there. So of course, in that area of Europe, they will be doing -- handling that part.

The next question is from the line of Daniel Djurberg from Handelsbanken.

It's Daniel Djurberg. My first question would be on -- a little bit on work in progress being down some here, and you have had 2 quarters in a row with significant increase in prebill invoices. So work in progress is now roughly 53%, I guess, of total contract work by the end of Q1 versus 39% a year ago. So should we be worried about this? Or is your funnel good enough to secure an increase again in work in progress? Just some insights here would be great.

Thanks for that, Daniel. And the decrease in net value in work in progress is actually a result of our continued focus on working capital management. If you look at the asset side of work in progress. Then you'll notice that contract work in progress is increasing from DKK 1.4 billion in March '24 to DKK 1.7 billion in March '25. But what we've been able to is to have the customers to fund part of that buildup in the work in progress. So the work in progress on the asset side is a result of the underlying activity. And when we then take the net work in progress, then we are also taking into consideration our i.e., Netcompany's ability to have the customers fund the work in progress, which we believe is much more sound than Netcompany having to pay banks for the customers.

Perfect. May I also ask you on the pipeline, you mentioned that both in private and public sector remains at a satisfactory level, indicating continued growth. Can you comment, I guess, this continued growth? Is it in line with your final year or '25 guidance, would it be in the low end or mid or upper part of that range?

Not surprisingly, we cannot really comment on whether it's in the low end or in the high end, Daniel, and you would be surprised if we said something, right? But what we can say is that we continue to see good and strong activity in our pipeline also on the private sector. And it really comes back to our offerings in terms of the products and platforms. So the change we did a couple of years ago, focusing very much on products and platforms is really starting to pay off now. That is what is differentiating Netcompany, not only in the public sector, but also in the private sector. And it will be a foundation for continued growth for Netcompany going forward, both in the public, but also importantly in the private sector.

Sounds good. May I ask you on details on special items in what should we expect in Q2, similar to Q1, the DKK 20 million more or less? And also, if you look at the revenue split, you have something called label that's recognized at the point of time, DKK 46 million, up from DKK 2.6 million, sorry. Can you just help me to understand what this is?

Special items, so cost for our advisers, legal and financial advisers and the likes, which, of course, is not a small amount. It is expected to be continuing more or less on the same level into Q2. So that's the cost for our advisers. And I think if you compare back to when we acquired Netcompany Intrasoft 2.5 years ago, the amount in special license at that point in time for advisers was to the tune of DKK 50 million to DKK 55 million. In terms of the definition of the point in time or over time, the DKK 46 million is the IFRS notion for license revenue. So that's the license revenue in Q1, DKK 46 million compared to DKK 2.5 million in Q1 2024. And that license revenue was what we also when we closed 2024, to some extent, had alluded to there was an opportunity for that to be part of the 2024 accounts, which it turned out not to be because the contracts were signed in the beginning of January. So that's the swing there.

Up, we have Yiwei Zhou from SEB Bank.

I have 3 questions here. I'll do one at a time. Firstly, I just want to understand this accounting change. You said in the report that it increased your gross profit by DKK 4 million. And how should we understand the impact on the EBITDA?

There's no impact on EBITDA.

Okay. So you basically just separate and reporting in one line. So there's no impact.

Yes.

Okay. Great. And then a second question on the current market trends. We see sort of the Dutch parliament calling government to reduce dependency on the U.S. technology. And we also see some other European countries has followed. And a lot of talks also here in Denmark. But what are you seeing with your customers, if you can elaborate a bit?

No, there's no doubt that the customers also on a very high level are discussing -- I mean, actually discussing several things. They're also discussing sovereignty and where the data is placed, but also in greater terms, how secure and how sure they are upon their data systems and their IT systems to work on a daily basis. So there's more uncertainty about whether they're standing on a robust fundament. And in that sense, they also discover that many of the systems are really old and they need to do something.

So it's actually, in that sense, it's not bad for a vendor like us to be delivering that type of infrastructure, delivering those types of applications and being able to do it pretty fast and having a very good idea about how to go about doing it concretely. And in that sense, our platform approach is ideal because we can reuse so much from other implementations. I mean all companies and governments are very different. But if you can reuse 50%, 60%, 70% and then very fast configure the rest, then that's the way forward. And with the reference cases we have, both for governments and private enterprises. We are very relevant in that sense. So this uncertainty is also -- there's also definitely a possibility in a way into a market where normally we will have a longer sales cycle, for sure.

Okay. And there was also some talks about there will be a new funding to develop its own technology and software. Is something you are seeing have started proceeding or it's still early talks?

No. I think what we're doing is -- every platform we have already is basically in place. It's on our shelves. It can be reused for a lot of purposes. So we can, of course, as we've always done, go into a strategic engagement with the customer and build something on top of that or create some new type of solution. But most of what we need in order to go into the markets right now, especially within government is already on our shelves, and we can use it immediately. So we don't see any greater funding needs to go into this market, if that was your question.

Yes. And then I would also like to ask about SDC. I realize that some of the Norwegian customers of SDC have switched to a competitor recently. Could you maybe talk about if that was due to the pricing or it is due to the concern about the new ownership structure?

No, no. The short answer to that is that SDC, we came in -- it's all about timing. The new banking services that we provide are coming over the next 1, 2 years when we get the whole deal established and we start building what we need to build and harvest the synergies that are there. Well, then we will be addressing those markets with very relevant services. So what you see there is a result of previous activities and previous tenders and whatever being going on.

We are absolutely certain we have a very interesting and great set of services in Denmark.

Question on the [indiscernible].

We cannot hear your question.

Sorry, it was actually my colleague asking question on the other conference call.

The next question is from Aditya Buddhavarapu from Bank of America.

Aditya from Bank of America. A few questions from my side. I'll take them one by one. First, on the U.K. Could you just give us some color on the ramp of the DALAS contract? What is the contribution in Q1? How should we think about that increasing through the rest of the year?

On DALAS, we cannot give any specific numbers other than saying that we are seeing activity, which is great in the DALAS frame agreement, and we are also seeing activity which is more than 5 people. So it is activity that is notable, but we cannot comment on the size or the level as we're not entitled to. But very happy to see that, that framework is absolutely alive as we've also said throughout 2024 and that there will be a continued expectation for the framework to be realized at the original value as we also said in 2024. So very happy to see that, that is being reconfirmed.

Okay. And on similar lines in Norway contract, maybe you can comment on the if you could just talk about do you think you will sort of the full run rate value of that as we progress through the year? Or is there more to be done next.

So the ramp-up on the Avinor contract is good. It has been significant for the Norwegian business. We expect the ramp to continue throughout the year on the Avinor contract from the current level.

Okay. Got it. You talked about exiting some lower-margin contracts in the U.K. Any color you can offer on that maybe in terms of what is the impact of that in Q1 and continue through the rest of the year?

No further comments than what is in the quarterly. It becomes a little bit too transparent to various customers if we are to discuss all individual customers on a profitability perspective. But we are in an increasing margin trajectory for the U.K. both as a result of continued improvement in utilization, increased ramp up on DALAS and the discontinuation of lower-margin contracts.

Okay. Understood. And on Denmark, you mentioned the tender activity was higher than normal. Do you think that would sort of start to benefit your growth [indiscernible] contracts this year itself or is that for 2026? I mean was that higher than normal activity somewhat factored into your outlook for the year?

I'm not quite sure I got the first part of the question. Can you please restate that?

Yes. Just the higher-than-normal contract or tender activity you're seeing in Denmark. Is that any potential benefit from that factored into your outlook for 2025?

So if you're asking us where we expect to realize revenue in the grid between 5% and 10%, we cannot comment on that other than we reconfirm our guidance for the full year on top line, 5% to 10%. And clearly, tender writing activities is a key part of making sure that the pipeline is growing. Now as Andre said, sales cycles continue to have the same length. So the increased tender writing activities that we're seeing in Q1 is probably fair to assume it's not going to be the driving factor for revenue growth in all of 2025, but more into 2026. So the pipeline that we are working on and converting on is, to a large extent, also a result of the work being done in 2024.

Okay. And then just one last one on licenses. You usually talk about that being about 1% of your revenues. Clearly, you had a good Q1. So should we think about maybe this year could be a bit higher than that given that you have some more license revenues coming for the rest of the year?

We have no comments on the proportion of license revenue to total revenue for the year. However, we continue to have multiple cases in pipeline that also includes products and platforms, which will also yield license revenue for the remaining part of 2025 without giving you any indication for the number.

We have Balajee Tirupati from Citi.

Balajee Tirupati from Citi. Congratulations firstly on another steady performance in a rather uncertain environment. Two questions from my side, if I may. Firstly, could you share color on dynamics between public and private sector, private sector has softened further in the quarter. So is the current elevated uncertainty going to further impact your private sector business?

And second question is if you could comment on EU and European government response towards prioritizing European vendors. Have you seen any tangible signs? And with some of the large global services companies strong local presence be seen as European in that context?

Good questions. Thank you, Balajee. Well, as I usually say, we have a very strong foothold into public sector across Europe, and it's deliberately. I mean we have tax and customs verticals. We do have within digital government. But if you look into some of our other offerings, they actually span across both public and private sectors. Some airports are private, some airports are public. I mean that goes for a lot of infrastructure as well.

So as long as it's very regulated industries and they are within in our span when it comes to platforms, we don't really care that much. But you're right, public sector is a very important part of our business. But it's not that we think that private sector is not responding to the need for digitization. On the contrary, we see very, very strong indications in our pipeline. A lot of private enterprises are looking into legacy modernizing many of their older systems, exactly the same way it's been happening in public sector.

And when it comes to the EU and whether there's a tendency to go towards more European vendors or if the global players are trying to become more European, so to speak. Well, we see that happening as well. Just recently, we saw Microsoft come out with a press release about their services being able to be handled on European soil by European data. So we definitely see a European response to this need for independence. And I think it's a positive one. We see European companies being considered more interesting than ever before. And that also goes for both governments and private sector.

So in that sense, I think we are very well positioned. I hope that answered your question.

The next question is from the line of Anders Vollesen from Jyske Bank.

Just coming back to the license revenue. So I'm sorry, I'm maybe a little bit unsure what -- how to understand this. So they made up around -- I think it was 2.6% of revenue this quarter. And I think you've said earlier that they should be around 1% of total revenue for a whole year. So maybe could you -- is that correct? Could you remind me how much you expect it will make up for the total year of 2025? And if it is around 1%, then should we then expect like a margin drag in especially Q2 and Q4 because this quarter last year had a very high level of -- or at least a higher level of revenue and maybe given that a large portion of the license revenues has been taken out here in Q1. So just hoping you could help me clarify how to maybe model that for the remainder of the year.

I can certainly clarify what we have said. The modeling you have to do for yourself, Anders. But 2024, we said that we would expect license revenue to be around or a little more than 1% of revenue where we also ended. And then we decided not to give any indications for what license revenue would be of total revenue for '25, and we will not do that either today and not going forward. What we see and what is important to, of course, note again is that all the big projects and all the big engagements for digitalization that we embark on and that we win, we win because we have products and platforms.

Therefore, products and platforms will yield a consistently growing part of license revenue. And what that then ends up in, we'll see when the year has passed. But we will see more and more license revenue simply because we sell more and more large-scale projects that are tied up to one of our products or one of our platforms. So I cannot give you more steer than that. The license revenue related to solar tax for Q1 was the one that the market had expected that we did in Q4. That was then pushed from Q4 into Q1 as the contract was signed in January.

But important to stress that the license is not to be seen as a one-off. It is a natural part of our business. It will be a natural part of our business going forward. And it is an important part of our business because it ties into the products and platforms, which is truly what is setting Netcompany apart from the rest of the IT services industry.

Okay. Thomas, I hope you will forgive me for trying one last time, but would it be fair to assume then at least that the license revenue level is structurally higher than the 1% that you gave for 2024?

I will, of course, always forgive you for answering -- asking those questions, Anders, but I cannot answer that. I think you can deduct from my previous statement where you should think it's going.

[Operator Instructions] It does not seem like we have any more questions. So I will hand it back to you, the speakers. Please go ahead.

Well, thank you all for joining in on this call, and have a beautiful day.