Webstep ASA

OSE:WSTEP

Earnings Call Transcript 2021-Q4

[Save Asmervik, Chief Executive Officer]

Welcome to the presentation of the fourth quarter results for Webstep ASA. My name is as Save Asmervik. I will take you through the highlights, business and financial reviews as well as share a few words on the outlook. Let us start with the highlights. The numbers show that the quarter and the year have been good for Webstep. Headcount has increased, demand is good and operations are steady. The strong growth in revenues continued in the fourth quarter, ending with NOK 219 million. This is an increase of 16% compared to last year. Total revenues in 2021 increased by 12% to NOK 775 million. Capacity-wise, we have, over the past 12 months, seen an increase in number of consultants. In total, Webstep has now 478 employees, an increase of 15% compared to end of 2020. We're pleased with our growth rate in 2021, and we will strive to continue the same pace in 2022. I will come back to you on this later in the presentation.EBIT amounted to NOK 18.4 million for the quarter and almost NOK 66 million for the year. In addition to share price appreciation, Webstep has an ambition to create long-term shareholder value in the form of dividend payments. Our dividend policy is to pay annual dividends, representing a minimum of 75% of the group's consolidated net profit. In light of Webstep's financial situation and positive outlook, the dividend proposal for 2021 is NOK 1.70 per share, representing 96% of consolidated net profit. Prior to the business review, I would like to give you a brief recap on our go-to-market model and how we are positioned for continued growth. In short, our wide range of highly skilled tech experts are delivering services on three levels. The traditional way of delivering advisory services has been for our customers to hire the needed experts. These services will continue and grow based on strong customer demand and stay at the core of the company. There is, however, an increased demand for team-as-a-service, allowing Webstep to construct cross-disciplinary teams to solve customer challenges. Sometimes the team is under supervision from the customer, and sometimes we're taking full responsibility for delivering defined services. Our team-as-a-service business is increasing, and we are looking at growing this delivery concept moving forward. Our third delivery method is our project and solutions business. This includes delivering development projects and even complete solutions with a mix of third-party software and system development. As an IT expert house, all our deliveries are based on profound expertise in market-leading technologies. In order to stay competitive and relevant in the market, we need to master emerging technologies as well. Cloud, AI, blockchain, IoT and security are all drivers in the race for digitalization. I'm proud to say that we are delivering advice and IT services leveraging these key technologies. In total, we represent a solid delivery platform, capable of solving complex business challenges. Webstep has a diversified customer base across most sectors. As the diagram shows, we support our customers in solving business challenges within industries such as transportation, retail, finance, health care, energy and public sector. This make us less vulnerable to challenges affecting specific sectors. For the fourth quarter, the two largest sectors were IT and telecommunications and public administration. Furthermore, the split between private and public sector is a healthy sign for our company. Demand in public sector has, over time, proven more stable. Currently, 32% of our revenues comes from customers within public sector. Top 10 customers represent about 34% of total revenues, reflecting that we have a broad customer base. Now let me present a couple of customers that we are working closely with, Moen Marin and Equinor. The first customer I would like to mention is Moen Marin based in Trondheim and a part of ScaleAQ Group. This is the world's largest supplier of vessels to the fishing and aquaculture industry, and we're proud to be working with this leading player. Moen Marin has been a customer of Webstep since 2019 and is a good example how we are -- have experienced renewed trust from many of our customers in 2021. Currently, we have IT consultants engaged in developing software and applications. Our services cover both back-end and front-end development as well as IT architecture. The solutions include the use of IoT to monitor live sensor data. Safety is key at Moen Marin and the use of mobile applications is making multilevel maintenance easier as well as increasing safety on board. Secondly, I would like to give you an update on our deal with Equinor announced first quarter last year. The agreement has a duration of 3 years, and the initial contract value was approximately NOK 85 million. We're pleased to see that Equinor is satisfied with our deliveries and that the agreement has been extended further. Total contract value is now about NOK 140 million as the number of deployed teams have increased from 2 to 5. The frame agreement is part of a digital transformation of Equinor, and Webstep is delivering autonomous development teams as well as experts. Our five Webstep teams are now engaged in software development in the plant sector at Equinor. All six offices -- office locations in Norway are involved in the delivery services to Equinor. Now let me cover our organizational development and our recruiting activities. We have, over the past months, been working on structural actions in four areas. Successful recruiting is key and we have strengthened the talent acquisition group that are supporting all regional offices in identifying new candidates. Coordinated sourcing activities has proven very successful, and we have increased the inflow of talents. Secondly, we're working hard to reduce churn. Many of our consultants cherish the flexibility at Webstep. As an employer, we are making it simple for our employees to focus on skill enhancement and professional development. At the same time, we offer a solid package of social benefits as well as our well-known favorable salary model. The third part is related to organization. Over the past months, we have taken steps towards a more unified Oslo office. This will make Webstep more effective and visible in the competitive Oslo region. The last element I want to highlight is our continued focus on team-as-a-service. This has proven to be a very well-received delivery model and brings predictability both to customers and consultants. Based on successful recruiting activities and continued high focus on reducing churn, we have also received good press coverage, boosting our image as an attractive employer. With a mission to help shape the future, Webstep is also playing an active role influencing how society is being developed. Through our operations, projects and activities, we are proud to state that we are creating profitability without compromising ethical values and with respect to individuals, the environment and the society at large. We believe that the UN Sustainable Development Goals are important beacons for our business -- for the business in our time. It's our responsibility as an organization and employer to contribute to the achievement of the Sustainable Development Goals. Webstep believes that we will have a direct impact on the goals shown on the slide. Based on our actions and commitment to preserve environment and help develop a sustainable society, we have seen news articles improving our visibility as a responsible player in the IT market. Next is a summary of the financial results. You can find the income statement and balance sheet in the report for the fourth quarter. I will not go into details on this now, just mentioning some key figures. Webstep continued the strong growth in the fourth quarter. Total revenues for the group ended close to NOK 219 million compared to last year, and this is an increase of 16%. For the full year, revenues have increased with 12% and ended at NOK 775 million. The increase is mainly driven by the number of employees in addition to a better utilization and hourly rates. Revenues from owned consultants continues to grow and now represent 91% of total revenues in 2021. The use of subcontractors will vary over time. Sometimes Webstep delivers through others, and sometimes Webstep co-prime. EBIT for the quarter is NOK 18.4 million, and the EBIT margin is 8.4%. To summarize the group for 2021, it's been a year with a good recruitment, high demand and exciting projects, good growth for both revenue and EBIT. Let's move on and take a look at our two segments, starting with Norway. The Norwegian segment represent 86% of our consolidated revenue, both for the quarter and the full year. For our offices located in Norway, we ended the year with 51 more employees compared to December 2020. Both for the fourth quarter and the full year, we saw significant revenue growth due to the higher number of consultants. Revenue growth of 19% and 14% in fourth quarter and full year, respectively, as well as a good improvement in EBIT. We're satisfied to see that the high numbers of consultants onboarding in past quarters have been truly utilized. The table below shows the split between Oslo and the regional offices and the subcontractor revenue. We're pleased to see that both Oslo and the regional offices have experienced strong growth for the period. For subcontractors, there is a reduction implying that more of the revenues are generated by our own consultants, which contributes to the increased margin. Now let's take a look at the Swedish segment. Our Swedish offices stands for 14% of consolidated revenue, both for the quarter and for the full year. Over the past 12 months, the number of employees in Sweden has increased by 12. Revenues in Sweden are slightly below our expectations due to delayed deployment on billable projects. Also, in the fourth quarter, we saw a higher level of absence than normal. Additionally, there has been a shift in revenue mix for the fourth quarter, where more of the revenues are generated by our own consultants in Sweden. In total, we are satisfied with the growth in number of employees. This represents a solid platform for growth for our Swedish segment. Next, I will take you through the outlook. 2021 was a good year for Webstep. With continued high demand for IT consultants, we are optimistic about 2022. We are experiencing renewed trust from our long-term customers as well as seeing new business opportunities arise. Our market focus will continue to be on organic growth in existing locations. With a strong recruiting effort we see across the company, we expect to be around 845 -- sorry, 485 employees by the end of first quarter 2022. Our broad go-to-market platform brings flexibility and value to both customers and our own consultants. I believe our team-as-a-service model will grow moving forward as customers see the benefit from our optimized services. We will focus on organic growth in existing locations and further improve our operations in Oslo. A more unified Oslo office will improve both mindshare and effectiveness in a highly competitive region. The Webstep working experience is also continuously being enhanced. Last but not least, we will work to improve our margin. We expect a scaling effect from our organic growth and effective team deliveries, strengthened core processes like sourcing and improved onboarding processes will also have a positive impact on our margins. To conclude, with the solid growth in capacity and continued focus on recruiting activities, I believe Webstep is well positioned to support our customers on their digital journeys. If you have any questions, please contact us at [e-mail]. Thank you for your attention.