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So good morning, everyone here in the studio and online as well, and welcome to this Q2 and first half report for the Nixu Corporation. My name is Teemu Salmi. I'm the CEO of Nixu as of last Monday, 1st of August. I'm really happy to be here with all of you today.
With me on the stage, I also have Valtteri Peltomaki who has been the interim CEO from first quarter until now until I have stepped in. And I will also be joined on the stage later on by Janne Kärkkäinen, who is our CFO, as well for the questions and answers.
We will run this presentation today that Valtteri will present the first half results, first of all, and look into the history, and I will take over and talk a little bit about the future for Nixu and what will happen next, so to say, in the company. But -- and we will take all the questions and answers at the end of the presentation. And please, online, feel free to enter all your questions, and I will get back to them later. And we'll take the questions in the room as well a little bit later on.
So without the further ado, we'll start the show, and I'll hand over to Valtteri for the first half. Valtteri, please.
Thank you. Thank you, Teemu. And I thought I would start with things that we see around us or have been seeing throughout the first half. And if I just would get the slides to change, that would take us further a bit quicker.
But as we are waiting for the slides to change, I would say one of the big things we've seen during the first half -- of course we've seen for a while but especially during the first half, is this cybersecurity becoming a very Board- and leadership team-centric topic. There's a lot of discussion, a lot of questions. Maybe the war in Ukraine has a part to do with it, but it's still being very much discussed with us and within the teams.
But then again, the cybersecurity, information security teams and the CISOs, they develop every day cybersecurity onwards and onwards, but there is still this gap between the leadership teams, the Boards and the CISOs and the cybersecurity teams. And this puts a sort of a development point into all of the industry that we need to figure out how to get this language barrier between these two teams. And following this, we have started to develop also our expertise towards more and more strategic consultancy as well.
Then another topic which we have seen rising heavily during the first half, not necessarily a surprise, but this state-backed actors working towards companies but also towards other nations, as we've seen, for example, with our parliament website the other day. And of course, war in Ukraine, Finland, Sweden joining NATO and other geopolitical issues create this tension, and the state-backed cybersecurity crime has been rising very heavily during the first half.
And then these two added with the other -- or added with the cybersecurity depth that we have had since COVID times means that there will be growth in the European cybersecurity sector for quite some time. Even though the inflation and the macroeconomics are not necessarily going in the right direction at the moment, we see that the need for cybersecurity is there today and will remain for some time. But more on that later in our presentation.
Then we'll go into the second quarter and first half numbers in total. As I said, after the first quarter, we got the growth running. We got back on growth track during the first quarter. And now during second quarter, we also got our profitability to develop to right direction. Growth continues and even increases its speed a bit during second half.
Here is the second half as isolated -- the second quarter as isolated numbers. We see that the growth pace rose to 8%, accelerating from the first quarter's 6%. So development being towards the right direction and also our profitability developing rather nicely from the first quarter's minus 2% to second quarter's plus 4% and also developing rather nicely from last year's second quarter as well.
Of course -- well, let's look at the full first half numbers first. As we see, we ended up to a total of 7% growth for the first half in our revenue and the EBITDA being below last year, about 1% of our revenue. And there's, of course -- as we got then the growth pace now running rather nicely or at least towards the right direction, we have had a rather good sales success in managed services, which was also the case during first quarter, but it continued rather nicely throughout the half. Our managed services are still in turnaround. As I said earlier, it will affect our profitability during this year but going towards the right direction over there as well.
And as said, the recruitment and subcontracting costs are higher than normal. There is, of course, attrition in the market rather heavily, and it might very well be that it remains there for quite some time.
Good. Then behind the growth, what were the topics around there? I have pulled up a couple of areas over here. One is the turnaround with our managed services. As you remember, after first half of '21 or in the end of first half of '21, we lost a couple of major managed services clients, which ended up to a situation where our second half of '21 was rather bad revenue- and profitability-wise in managed services. However, now the first half of '22 is already 1% better in revenue than the first half of '21 was. So we have -- actually, we have hit the dip and now we are already growing past the first half of '21. Still, there is work to do for the second half in the growth and specifically profitability to be better in the managed services during second half.
We're also growing rather nicely outside of Finland. Here as an example, the revenues of Sweden grew over 15% during the first half as full Nixu was growing about 7%. And as we stated earlier on in our release, that we are -- as a -- one big example of our client intimacy is this building the ecosystem to support the indirect industrial cooperation in the F-35 project, which is a work we have done for some time already now, and this will then take years and years to then finalize together with the organizations in the ecosystem.
Some sales successes from first half listed here. We have been successful in our managed services sales specifically in Sweden and Denmark. So outside of Finland. Also good client deals in Finland, but as a change to previous years, I would say, that the success in Denmark and Sweden in managed services has been really good. We have also been able to close substantial digital identity deals in Benelux and also in Denmark, which then support our development in those markets.
Then a couple of other commercial successes which we have announced earlier on: the Valtori, the Finnish government ICT center working together with us on their cloud security program for the years to come; and a very interesting cooperation with SANS on training and educating cybersecurity professionals here in Finland.
Good. Then we move into looking further towards the future, and Teemu takes the lead from here.
Thank you, Valtteri. And also, before we move on, let me take the opportunity really to thank you, Valtteri, for your interim job. I think you've done an excellent job here during the waiting time until I have stepped in. So really big thanks to you and to the team getting us where we are right now with the quarter 2 results. Very much thank you. Great.
Right, current market visibility then. A couple of things that we're looking at when it comes to affecting our business and how we are positioned. I think Valtteri started very well, talking about how the topic is actually now increasingly becoming an important thing on Board level in many bigger international multi-companies -- multinational companies. I can myself say, coming from another multinational company recently and being responsible on the other side for the cybersecurity and data privacy-related questions, that is growing. It is a very important question for all companies, and cybersecurity is becoming an integral part of the strategy of all companies. And that will actually fuel also our business for the future.
The war in Ukraine, of course, it's still also mentioned by Valtteri early on. It is having a lot of impact on cybersecurity, right? And we still don't know, of course, where that will end, but we see that it is absolutely not slowing down happenings around the world either. So also potential for us to help companies and societies there to build on cybersecurity and protection.
Then of course, there are uncertainties we don't know. We see inflation. We see macroeconomics in general developing in the wrong direction. We see countries now starting to talk about recession hitting 2023. I think, however, my view on the cybersecurity market, that is a bit more noncyclical, and there should be, of course, a necessity to keep on investing in cybersecurity despite the fact of recessions. But this is an uncertainty that we have to play with and constantly keep a close eye on.
And then last but not least, also remember the fact that there is a shortage of expertise and war for talent is ongoing all the time. And here, we need to act smart in order to attract and retain our great consultants that we have and the Nixuans that we have within the company.
Good. So if I look at some focus areas now. I have been 8 days with the company. I'm still a bit humble about this. I have made an initial assessment of where I think we need to focus on moving ahead.
One thing is that I definitely see a great platform for continued growth and profitability for the company. I mean I think Valtteri just went through the numbers showing that we are definitely on the right track. We will now, during the last months of this year, make a strategic review of Nixu to define the future of Nixu as well. And the ambition is that then to build a new strategic -- strategy where we look at our portfolio, our offering and our go-to-market strategy for the years to come, and we will be ready with that to be able to present that also to the market early next year. So until then, of course we continue executing the strategy we have in place, but this is an important journey that will take a lot of my time and the leadership's time for the fall to come.
And we will accelerate, of course, the good business momentum and the growth that we see right now and, of course, make sure that we do whatever to even do better in the future. So that will be a focus area now short term, in third quarter and second half of the year.
And then profitability. We saw the numbers. We're heading in the right direction. But of course, we are not happy with where we have the profitability today. This definitely need to increase, and we need to start also there very quickly now short-term activities, understanding and analyzing and implementing activities that will actually boost our profitability as we move ahead.
Same goes for our cash flow. It's also an area that I see needing attention. So we will also start focusing on cash flow, turning that into a more positive direction as well. So short term, also a very important activity during the second half of this year. And obviously, we will look at the long-term cash flow situation as well in conjunction with the strategy and how we will develop that.
Last but not least, what would Nixu Corporation be without the Nixuans. That's the heart. That's the core of what we do. We are a people business, and it's all of the great people that build up Nixu that we need to retain. We need to attract more Nixuans to us, and that is a focus area to make sure that we continue to be a great place to work for all the Nixuans and for the future as well. So definitely, at the core of our strategy will be the people dimension.
Those would summarize a little bit of the things that we will now focus on in the second half and also for my priorities in steering and guiding the organization and company for the future.
Right. Last but not least before we get into questions and answers, our financial guidance remains the same. We have not changed our guidance since the first half or the previous quarters. We estimate our revenues to grow and our EBITDA to increase from previous financial year. So that guidance remains in place for the full year of 2022.
With that, we are actually coming to questions and answers. And I would also like to invite Janne, please, to join us on stage, and Valtteri as well, please.
And before we hit the online questions, let's check if there are any questions in the room from the audience.
It's Atte Riikola from Inderes. Maybe first about your employees. So you said in Q1 that the employee turnover was a little bit higher than your target level. So was the situation the same into Q2?
Yes, maybe I'll answer this one. Unfortunately, also during the second quarter, the attrition is higher than we wish it to be or what it has been on a long term. And I expect it to, also due to the sort of turbulence in the market, to remain a bit higher than earlier on for some time as well.
Yes. How is the salary inflation developing?
I would say the salary inflation is on a reasonable level still. I'm not publishing any sort of concrete numbers around that, but, of course, as there is too few experts in the field, that also has some effect to the salaries as well.
Okay. And then if you look at the current number of your employees, is it enough for this year to keep on the growth track?
I would say that we have a good team to keep us on the growth track. Then again, our recruitment is actually on a very good level. So we are able to attract people to Nixu as well. So I wouldn't see too much of risk over there.
And then again, we have -- if it would happen that we wouldn't be able to recruit everyone, we need every day -- we have a very good field of subcontractors where we have also excellent expertise to be used if needed.
All right. Then a couple of questions about managed services. So in Q1, you said that the managed services was -- the profitability was still negative. Was it -- now there was like a turnaround in Q2, but was the profitability still negative?
Yes, it's still affecting negatively our profitability, and we work heavily to get it to the right level by the end of the year.
Yes. And you said you had a couple of larger managed services deals. So were those like Nixu cyber defense center deals or...
Yes, yes. So the bigger ones were exactly those, yes.
Yes. And then there was like smaller digital identity deals or...
Yes. And they were actually also very, let's say, nice sized as well.
All right. Then some of your peer companies have said that the demand for cybersecurity has increased dramatically now when there's war in Ukraine, but you said that there's no like significant impact in the short term. So could you open up the situation?
Yes, I would say that we would have or I personally would have expected it to rise very steeply after the beginning of the war or the -- Russia's attack. However, it has sort of been developing gradually, step-by-step becoming better. And I think there is also marks of the digitalization done during the last 2 to 3 years during the COVID times when the cybersecurity was rather forgotten in those developments. So now the companies are also getting back to doing cybersecurity afterwards to all that digitalization. So it's not only the war, but there's also sort of this development that we need to keep the digital society running with the cyber secure enough services.
Yes. And then if we look at your demand outlook and sales pipeline, is there like -- you have had some of those big deals now. So are you like, in your sales, targeting those big deals? Or is there more like small projects here and there? Or how is the situation?
We focus on our optimal clients, which are on the higher end of companies, and also, of course, public organizations. And over there, our vision is -- and also, what the clients say is that they would like to buy cybersecurity in bigger solutions which are maybe a bit simpler for them to buy but also very much simpler to manage as cybersecurity and the problems of a CISO or a CIO in cybersecurity, they are growing all the time. There is a technical solution to 1,000 different problems they may have. And there is 1,000 problems in their IT environment and in their digital business environment and their OT environment. And what we try to do, where we are the best, is that we provide a bigger solution which solves much of these problems. And hence, they would be then the bigger deals as well. Of course, you need to prove yourselves with smaller things first, but where we aim is exactly the bigger things.
Yes. Maybe then about the profitability in H2. You -- we know that managed services are turning around, but is there some other factors that are impacting positively on your profitability?
Yes, I can take that. First of all, the revenue growth as such is obviously generating profitability as such. And obviously, some positive development already in the managed services side as well.
All right. Then last question. You have now been working under your new One Nixu operational model for a while. So if you could like a little bit tell us, how has it been going? And are you satisfied with your new model?
I would say that we are very satisfied with the way we can provide our expertise and services to all of the countries where we are present. So let's say the big digital identity deals in the Benelux, we don't have enough people in Benelux to deliver them, but we have plenty of people elsewhere to make sure that we deliver the high Nixu quality services over there or -- the same thing in all of the countries.
So the sort of first thing we had in our mind with that Better Together model was that we are able to deliver with all the 400 Nixuans, with all of our managed services to all the markets where we are. And that is working very well at the moment. Of course, there are -- no model is perfect, but I would say that we have taken very good steps with this one.
Maybe just to add one thing on that. Of course, when we talk about the strategic review to be done in the second half of this year, obviously our operating model also internally will be discussed. And we will reflect on what is working well, and we will also reflect on what are the areas that need attention from the initial thought of how to run our company, right? So there's always room for improvement always, right? So -- but yes.
Good. No more questions in the room, as I can see. Maybe, Janne, we go over to the online question.
Yes, let's take the ones from the online. We have -- we don't have much. But first question, "What actions have you implemented to lower the employee turnover?"
Yes. Maybe this is -- has to do a little bit with the history. So I have to ask you, Valtteri -- to address the question to you.
Yes. So we have emphasized the sort of situation with every single Nixuan and understood that it's different. We have a very sort of flexible hybrid working model. People work wherever they feel the best to work is. But then again, we have also arranged a lot of positive possibilities for everyone to join us at the office and actually start meeting once again with each other and get the Nixu culture spread to the new Nixuans who have joined doing COVID times and not necessarily seen too much of their colleagues physically yet. And all the time, we develop our ways of taking care of our clients.
But then one very important part is the interesting and challenging enough projects and deliveries we have with our clients. And with those, we have worked very hard to get big and challenging and interesting deliveries or projects for our people, and that seems to be working as well.
Very good. Second question, "Has the first half performance and current future outlooks alter management's view on the Nixu's long-term financial targets that were set last year?"
Yes. Well, not necessarily altered those long-term targets. But then again, now that we move forward with them, I'm pretty confident that we will look into those targets and the plans to reach those targets during now the second half. So I think then around change of the year, we'll hear more about that.
Yes. Not to supersede, of course, that topic. I mean we need to do our homework and work first. But, I mean, like I said also in my presentation part, that this will be a focused area for us in the second half, is to review and revisit our strategy. And with all respect, it will take a couple of months to do that. So we will be ready early next year to present that more widely what we actually mean. But as I also said earlier, until that, we run under the same guidance, under the same setup as we have communicated before. But early next year, we'll come back with some new updates on the topic.
Very good. No other questions from the live audience at this point, so.
Very good. Then if there are no further questions from the room, just scanning one last time, then I want to thank you all for participating, for listening. And until next quarter report, stay safe. Thank you and bye-bye.