Webstep ASA

OSE:WSTEP

Earnings Call Transcript 2022-Q1

[Save Asmervik, executive]

My name is Save Asmervik, and I will take you through the highlights, business and financial reviews as well as share a few words about the outlook.

Let us start with the highlights. First and foremost, I want to highlight that we are close to passing 500 employees. Our employees are the most important factor for what we can achieve as a company and deliver within technology. Over the last 12 months, we are counting 57 more employees. We are pleased with our growth rate in a fierce recruiting market, and we will strive to continue further in the same pace.

The last 12 months, we have accumulated revenues of NOK 814 million, and we are pleased to exceed the NOK 800 million mark. Revenues for the quarter ended at NOK 233 million, which is a 20% increase compared to the same period last year. It's been a great start of the year, and we are excited about the journey ahead of us.

We are pleased to see EBIT margin for the quarter ending right above 10%. EBIT was close to NOK 24 million. Compared to same period last year, the change is close to NOK 6 million.

Additionally, I want to mention the Annual General Meeting in April. Kjetil Bakke Eriksen was elected Chairman of the Board. As former CEO of Webstep, Kjetil brings excellent insights in the company's operation. As proposed by the Board, dividend of NOK 1.70 per share was approved by the shareholders in the general meeting.

Prior to the business review, I would like to give you a brief recap of the market fundamentals and our go-to-market model. Digital technology is a key enabler for developing society. As demand of IT services is growing, we also see the need for more teams, deliveries, tailored solutions and projects. And as the market is changing, so is Webstep. We predicted demand for Team-as-a-Service and developed a suitable offerings and services reflecting the growing market opportunity. In addition, we see that our enhanced go-to-market model also fits well to meet the areas where our customers are investing.

The market predictions from Radar Ecosystem, a leading vendor fact-based market insight, show 4 distinct focus areas related to the IT consultant market. These are areas where customers are investing and Webstep covers all 4. We are well positioned to build, assemble and deliver the required competencies. In fact, our go-to-market model is shaped to deliver services that are making us a valuable partner. Comprehensive projects, Team-as-a-Service and complex solutions are currently being delivered by Webstep across regions. I believe that our capacity to deliver stand-alone development teams has improved positioning of Webstep in the enterprise segment. We are more than ever being regarded as a trusted partner and tech adviser with skills and resources to support large customers.

Team-as-a-Service is a game-changer in making Webstep relevant. In addition, we are also continuously building competence and knowledge, leveraging our partnerships with global tech vendors and platforms. This is key to our reputation as a credible enabler to our customers.

Now let me take you through some of the core elements of our go-to-market model. In short, our wide range of highly skilled tech experts are delivering services on 3 levels.

The traditional way of delivering advisory services has been our experts for hire business. These services will continue and grow based on strong customer demand. Our Team-as-a-Service offering allows Webstep to construct cross-disciplinary teams to solve customer challenges. This is the fastest-growing delivery concept and confirms our growth strategy. Our third delivery method is our Project & Solutions business. This includes development projects and drivers in the race for digitalization. In total, we have a solid delivery platform capable of solving complex and business challenges.

Now let me take a moment to reflect on our diversified customer base. Webstep has customers across most sectors. This makes us less vulnerable to challenges affecting specific sectors. Top 10 customers represent 35% of total revenues for the quarter. We also have a healthy split between private and public sector with more than 2/3 of our revenue coming from the private sector this quarter.

Now let me present a couple of customers that we are working closely with. Webstep has several customers in the energy and utilities industry, and I have referenced several of them in previous presentations. This time, I would like to cover elKompis, which is owned by Skandia Greenpower. Webstep has been working with them since the summer of 2021.

The core objective for elKompis is to develop a smart solution to manage and monitor your domestic energy consumption. At elKompis, we are designing an intuitive user interface as well as contributing to back-end development. Implementing smart functions allows users to reduce their consumption of energy. The solution also includes smart individual forecast of consumption, in short, smarter and cheaper electricity.

Another great customer story is Autoliv in Sweden. Autoliv is a worldwide leader in automotive safety, and they are present in more than 20 countries. Their customers are all major car manufacturers. Webstep has signed a frame agreement with Autoliv, and we are currently delivering several project teams. We are involved in data science projects, app development and software development, leveraging artificial intelligence. And the beauty of this agreement is that Webstep is contributing to safety solutions, saving thousands of lives each year.

Let's move on to our organizational development and recruiting activities. Webstep firmly believes in the importance of a strong local presence in order to be close to the customer and act as a strategic partner. We are investing continuously in our employees in order to strengthen their expertise.

In this quarter, we have organized several high-quality events. We have had external speakers in addition to internal events organized by in-house experts, sharing their competence and experience with colleagues. Generous sharing of knowledge builds a strong Webstep community that is highly appreciated by our employees.

All the regional offices have grown in number of employees in the quarter compared to corresponding quarter last year. Especially, we see a positive effect on recruitment churn and utilization from our Team-as-a-Service delivery model. From that, you can see the Bergen office has the highest change year-over-year in number of employees. This office has the highest share of Team-as-a-Service deliveries as well.

During the quarter, we have also conducted an employee engagement survey, confirming very high employee satisfaction and loyalty within the company. Webstep performs these surveys annually and this defines areas of improvement within the company. This is key to ensure continued high satisfaction among our employees. I would like to mention a few highlights from the survey. More than 90% of our employees confirm that they are proud to work at Webstep, that they have a good work-life balance and that Webstep are delivering on our company values.

Next is a summary of the financial results. You can find the income statement, balance sheet and cash flow statement in the report for the first quarter. I will not go into this in detail, just mention a few key figures. I will start with a consolidated overview of the group.

With 57 more employees compared to the same quarter last year, the group has a solid growth of 13%. Total revenue for the group ended at NOK 233 million, 20% up from corresponding quarter. We have a solid growth in revenues and EBIT per employee. This indicates that we are growing at a good pace and are attracting exciting projects and people, which is key in a competitive market.

Revenue from Webstep consultants represent 93% of total revenues this quarter to almost NOK 217 million. We have an increase of 24% year-over-year. EBIT ended at NOK 24 million, a positive change of almost NOK 6 million year-over-year. We are also pleased with our EBIT margin of 10%.

Let's now look at our 2 segments, starting with Norway. For our Norwegian segment, we are 40 more employees than the same quarter last year. And compared to last quarter, we are 7 more employees. The Norwegian segment represents 87% of total revenue for the quarter, and we have exceeded NOK 200 million in quarterly revenue for the first time.

Revenue for Webstep consultants are driven by higher head counts, utilization and hourly rates. Revenue breakdown are shown in the table with positive changes for Oslo and our regional offices. In addition, we had less use of subcontractors in the first quarter, which contributes to an improved margin. EBIT margin is the same level as for the group or 10% for the quarter. EBIT is enhanced from NOK 16 million last year to NOK 21 million this year.

Let's move on to the Swedish segment. Over the past 12 months, the number of employees located in Sweden has decreased by 17. And compared to last quarter, we have 7 more employees.

We are very satisfied with the growth in employees and a continued focus on increasing capacity and attracting highly skilled talents. Our Swedish segment represents 13% of the total revenue. The year-over-year change in revenues is 8% from NOK 29 million to NOK 31 million. The positive change is mostly explained by increased number of consultants in addition to highly hour rates. EBIT ended at NOK 3 million, a positive change of 31% compared to same period last year. Especially, I want to highlight the positive change in EBIT margin for the first quarter, improved to 9.7%.

Next, I will take you through the outlook. The high demand for Webstep experts continues in 2022. We have a solid order book and exciting ongoing processes. Demand for services across our delivery model looks promising. Despite the fierce talent market, we are very pleased to see a strong recruiting for Webstep in the first quarter. Some of the signed experts will join us during the second quarter, while most of them will be onboarded in August. We expect to be exceeding 500 employees in Webstep by the end of the second quarter. Our go-to-market platform brings flexibility and value to both customers and our consultants, especially Team-as-a-Service deliveries are strengthening our position in the enterprise market. Strengthening and coordinating enterprise initiatives will be key to positioning Webstep as a strategic partner to our customers.

Last but not least, we'll focus on organic growth in existing locations and further develop the Webstep working experience.

To conclude, we are excited about the rest of 2022. Webstep is well positioned to attract new experts and customers and ready to develop tomorrow's digital solutions. Please contact us if you have any questions. Thank you for your attention.