Cint Group AB (publ)

STO:CINT

Earnings Call Transcript 2022-Q1

[Operator]

Good morning or good afternoon all, and welcome to the Cint Group's First Quarter 2022 Results Presentation. My name is Adam and I'll be your operator today. [Operator Instructions] I will now hand the floor to Tom Buehlmann to begin. So Tom, please go ahead when you are ready.

[Thomas Buehlmann, executive]

Great. Thanks very much, Adam. Good morning, everybody. It's a pleasure to be here for our Q1 2022 presentation. If we just go to the agenda slide, please. You can see it's the usual suspects; Joakim and myself. The one slight difference from our perspective is that we're actually physically sitting in the same room together, which is the first time ever, actually, when we've done one of these kind of face-to-face, at least between each other. So that's a small ray of optimism in all the nonsense going on in the world.

So we're going to talk about the Q1 highlights, we're obviously going to be talking about the integration of Lucid and how that is progressing, including some financials perspective around that; financial update, obviously, of course; and then summary and a Q&A. If I could just ask to go to the sort of 2 slides forward, #4, just very brief recap, as we kind of think of ourselves, talk about ourselves.

As you can see, we've refreshed this slide. We are, think of ourselves as, the global software leader in connected consumer insights for market research. As you can see on the graphic, we are a marketplace we connect supply and demand in a real time and a programmatic way. That's really what we do in the connected consumer insights space. In terms of operational KPIs, just some headlines and we'll obviously talk about, but there is more detail as we go through this morning, very good progress on the operational KPIs on the left hand side, nice increase on both B2B customers, just obviously demand side connect consumers which is obviously supply side and as a result, also the throughput through our platform. Which is the completed surveys.

The pie chart there, in terms of net sales by region, a little a little bit different from what we've shown in the past, you can see now that we're very much more of a U.S. centric business that was always, even in a Cint standalone context, very much our strategy, but it's now also reflected in our numbers. So you can see almost 60% of net sales by region coming out of the Americas, which kind of as you would expect, based on what we've been trying to do and then did with the with the acquisition of Lucid.

Move to the next slide, just a recap of our strategy, the 5 bubbles that you'll be getting familiar with sort of moving left to right, increasing share with established insight companies. They are growing very nicely as you might have read in the -- in our in our report this morning, and we'll talk more about that. The tech enabled those people at Qualtrics, SurveyMonkey, Snap and others grown even more nicely. I would say back to the pattern, we would we would typically expect. The new customer acquisition, a very core part of our commercial strategy, as we saw in the KPIs on the previous slide. Very good. Good progress on that. And that really is, as I've said in the past, it's kind of one of the building blocks for our future growth.

Then expansion of software platform or product portfolio. I mean this really is right now, this is about integration, right? So this is going to be big focus of our integration efforts moving forward. And then finally, of course M&A. Absolutely, yes. Part of our part of our strategy, I would say in the medium term, but for reasons we've discussed in the past, we're going to be probably pausing on that for the course of 2022 so we can demonstrate both to ourselves and to you that we can actually integrate and merge our 2 businesses.

To brief recap on the financial targets. It's kind of rule of 50 business 2525 In terms of organic net sales growth and EBITDA margin both in the medium term and obviously, for the time being no intent -- no intention to pay any dividends at this point in time.

If we could move to Slide# 7, please, which is really a summary of Q1 and here I would say, I mean, I really mean this. I think we've had a really good start to 2022 and I say that for 2 reasons. One is we've managed to very successfully maintain our revenue momentum. Now, as we all know, with this kind of very substantial combinations, there is a tendency to get a little bit inward looking, introspective, and lose the eye off the commercial ball. We talked about that in the -- in October and a couple of times since then. And I said at the time that we will be very focused on the commercials on our customers, both on the demand and on the supply side, and we've managed to do that. I would say pretty successfully in Q1. So I'm pleased with that.

And at the same time, I think we're making really good progress on the integration and on the synergies and we'll talk more about both of those things. But kind of really taking a step back, what did I say? Why did we say great start to 2022, there's 2 reasons, maintaining really good, positive revenue momentum while at the same time delivering a really good progress on the integration and on the synergies.

Now, looking a little bit more detail, you can see there in the bullets we've got organic growth adjusted for currency is 28% and on a pro forma basis, we've got -- excluding GapFish, we've got year-on-year growth of 32%. So really, very nicely in line with our medium-term goals. Contributions from across the board, I would say again, we'll talk about that more from both business segments and geographies and customer segments as well.

In terms of adjusted EBITDA, a little bit down from same time last year. And I would say that kind of partly strategy and partly maths. The maths part obviously is about the combining a higher EBITDA business with a lower EBITDA business, we've got some FX in there, got some costs for the LTIP and so on. So, that's kind of the maths piece. And the strategy piece really is, what I said right at the outset, which is, a real focus on maintaining the revenue momentum and that means focusing on the commercial side, it means ensuring we've got enough supply.

And so kind of I'm very confident as we move -- look at the next bullet, the final bullet, in terms of the synergies that we'll be kind of reaping those in good order and we'll continue to make progress on that.

So let's move to the next slide look a little bit more detailed on the net sales development. This is on a pro forma basis, so Q1 to Q1 comparison. Moving left to right, you can see on a business segment, we've now kind of combined the Cint core business with what's Lucid called software and services. And you can see that's growing 30%, really nicely, quarter-on-quarter. And then the media measurement, which is a combination of the Lucid audience business and what we, in the past on the Cint side, had as connected data growing over 65%, 67% year-on-year, obviously a much smaller base. But as I said consistently since we were started talking about this combination, that's a really, from my point of view, a very strategic area. It's what we're spending a lot of time and energy on. And I'm very confident that it'll provide -- become a very substantial part of our overall business in the quarters to come.

So the regions, as we've kind of a similar pattern to what we've had in the past, very strong growth, across all 3 regions, which is very nice to see. The one [indiscernible] I would make here is the Americas, which is growing at, quarter-on-quarter, the fastest clip, 35%, of all the regions and it's also the biggest. So that's positive. I think it's a combination of kind of scale now combined with Lucid in the Americas it's a function of strategy. Both our companies historically have focused a lot on the Americas and there's also an element of kind of overlap between the Americas as a geography and the tech enabled companies as a segment. So we're kind of benefiting from that as well, but really nice across the board growth on the regional side.

And then on customer types. It's again, both segments growing very nicely 36 and 31 for the tech enabled and established. What I would comment here is that in Q4 last year, we had a flip of those growth rates. So the established grew a little bit faster. I said at the time, there was sort of 2, 3 main reasons for that and that we expected that to reverse again. It has done now. So we're kind of back to a pattern that over -- over the medium term, we would generally expect to see.

If we move to the next slide, please, in terms of operational KPIs. The first thing I would say is these are Cint only, which I'm not fully happy about, but these are Cint only. We are in the process of mapping the kind of Lucid KPIs together with the Cint KPI. So going forward, the plan is to present combined data as soon as we can do. We've not been able to do at this time around, unfortunately, but we will. And we're working on that very hard. But just to give you a sense on the kind of Cint-only operational KPIs, you can see there, very nice growth on both the demand side, which is B2B customers, in terms of the connected consumers, which is the supply side, obviously, and as you can see, the resulting throughput, which is the completed survey. So not going to dwell too much on this, in anticipation of being able to kind of show the combined in the combined KPIs as soon as possible.

We now move on to the integration of Lucid and Slide 11, please. The headline really kind of summarizes my views. I think our integration is ahead of plan, and our synergies are also ramping up earlier than we had originally thought. So in terms of what we've done, a lot of this has been, I would say, organizational focus. So we had multiple work streams across all the various parts of the business, as you would expect. And then a big focus was on the organization with the leadership team, the L2s as we call them, who are running the kind of functional business areas. And then in March, we had a set of events that resulted in the structural changes -- the key structural changes to the organization to deliver the cost synergies were completed as well.

So I would say it was deliberately speedy and with a substantial focus on OpEx for the simple reason that that's a synergy bucket that is directly in our control. Some of the others, we also think we can -- we're definitely confident of being able to realize but less directly or less immediately in our own control. So OpEx focused.

So bottom half of the slide, you can see that -- just to kind of summarize where we are and then we've got an additional slide to go a little bit more into the detail. We were talking about a run rate EBITDA synergy rate of EUR 40 million after 24 months with the initial benefits going to be accruing after 6 months. So the update that I can give you here today is we're very confident at least, at least EUR 40 million, and we are ramping up faster than expected. And that's really driven by the kind of very clear and speedy focus on the OpEx synergies. And we think we're going to be starting to see those on the OpEx synergy side from Q2 onwards.

In terms of the nonrecurring integration costs, we estimate those to be about EUR 40 million. We can talk more about how we see those breaking down, in the Q&A section, if you guys are interested. And then on the right-hand side there, you can just see a recap of how we envisage the synergies kind of splitting out. So a little bit over half really coming from the OpEx side. And so that's where our focus has been partly because of magnitude and largely because that's something that's directly in our control.

So if we move to the next slide, please. This really is kind of designed to give us a little bit more of a breakdown and visibility as to what is happening on the synergy side. You can see on -- down the left-hand side there, the 3 buckets, then with the total and the integration costs. And then across the top is the kind of time is the sort of time line. So October plan we've talked about, so I won't go into that in any more detail at this point. And Q1 forecast is where we are today, right? So you can see growth synergies very much reaffirmed. We're going to -- we believe -- continue to believe that they're going to be starting in Q3 and then progressively ramping up from there. That's largely around the audience, the measurement business, getting exported, if you like, into Europe and elsewhere, plus, of course, the enterprise proposition as well.

COGS is about smart order routing. That's going to take a little bit longer because it requires some technical builds on our side. So beginning of next year, we see those starting out, but then kind of honing in now a little bit more on the OpEx side, we're definitely confident of at least 21.6%, which is what we had earmarked back in October. And we think we're going to start benefiting from that already in the current quarter, i.e., Q2. And that's really on the back of some costs takeout and pretty ruthless I would say, cost avoidance plans that we've had in place since the beginning of the year. Both companies are quite aggressive, separate, quite aggressive hiring plans. We froze those right from the get-go and took some additional measures on the cost takeout as well. So very, very comfortable at this point saying that we're going to be at least 21.6% on the OpEx synergy side and ramping up faster than we originally thought.

Then in terms of the integration costs, as I said, about EUR 40 million in total, that sort of split 2/3, I think, yes, 2/3, 1/3, '22 and '23 and about half is around very substantial process efficiencies sort of, lead to cash. We've initiated a very extensive lead to cash program that includes both the CRM, which is obviously on the commercial sales outward-looking side of ERP, which is more the inward-looking. The inward looking side around IT, but it's not just IT, it's about the whole kind of process efficiency, simplification and automation. That's kicked off and very confident that's going to benefit the business not just in the next 2 years, but well into the future as well.

So I'm going to pause there on the integration side. And if we move to the next slide, and hand over to Joakim for the financial update.

[Joakim Andersson, executive]

Thank you, Tom. So let's move to Page 14 and the financial highlights. So if we start to the left on this slide, we saw net sales amounted to EUR 67.3 million in the quarter, which corresponded to a 32% growth on a pro forma basis. And as Tom just mentioned, we saw strong contribution from all regions and segments in the quarter.

Our gross profit amounted to EUR 41.3 million, which corresponded to a growth of 29% on a pro forma basis. The gross margin was 61.3% and the higher gross margin this quarter is obviously explained by the mix effect of the revenue stream coming with the consolidation of Lucid, where software business within the marketplace segment is accounted for on a net revenue basis, and as such, it contributes with 100% gross margin to the mix.

Our adjusted EBITDA amounted to EUR 8.1 million, and we delivered a margin of 12.1%, which was lower than last year's 16.9% on a pro forma basis, but very much in line with our expectations.

If we move to the more detailed P&L on the next page, please. We have outlined our drivers to the lower profitability in the commentary. And key here, as Tom mentioned, is that Lucid previously strived to reinvest in surface cash into the business. And Lucid ended last year with a more active investment plan, which then also meant that we are consolidating a much lower EBITDA margin this quarter than what Lucid delivered a year ago. And on top of this, we had beneficial FX effects last year, and we had our LT costs this year, and there was a slight pressure on GM in this quarter. We expect the EBITDA margin to improve progressively during the year as we grow the business and also get the synergy effects that Tom mentioned on the previous slide.

Bottom right, you will see the profitability trajectory that we have talked about in the last quarters, and you will recognize that part. And we are now, in a way, resetting the data series, but at the same time, we aim higher to now aim towards the 25% in medium term instead of the 20% we had before, and we feel very confident about reaching it.

And then finally, on this slide a comment, you will see that -- you'll see on the top of the table, we are introducing a new KPI, which we call total customer spend as a way to measure all business volumes that are processed on our platform regardless of the revenue recognition. So this KPI includes the total value of the project, including fees and take rates. We will, going forward, use this KPI when calculating the operating leverage to allow for better comparison with our historical numbers, and you will find that calculation in that table as well.

That's all I had today, Tom. So back to you, to wrap it up.

[Thomas Buehlmann, executive]

Perfect. Thank you, Joakim. So just to kind of -- this is a refreshed key attraction of the summary slide. We really think that there's -- there continues to be significant potential, large underlying markets, lots of opportunity to grow. And we've not talked about that a lot. We've been more focused on Lucid and the combo and the synergies. But we really see this continued structural shift benefiting the digital players. And it's really about still digitizing; what, in many areas, is still a pretty analog and people-heavy industry. I mean we've not talked about that a lot in the last few quarters, but I just wanted to kind of highlight that because as we have kind of macroeconomic and geopolitical turbulence, it's often good to think about the fundamentals, and we see this as one of the key sort of fundamental tailwinds that we are benefiting from.

We definitely see both companies and therefore, the combo optimally positioned at the center of the value chain. We've got market-leading offerings on the kind of the marketplace, on enterprise, on measurement to capitalize on these market dynamics and very complementary value propositions, right? We talked about the marketplace. We talked about audience. We talked about measurement and enterprise. And we really do that as we've demonstrated on a global scale, which is something that, again, we've not talked about too much, but it is important because customers increasingly are after multi-country, regional or even global work. And so we are very well positioned to take advantage of that.

Both organizations delivering profitable growth, a little bit of a disparity in EBITDA margin, as Joakim mentioned, but with the sort of integration work on -- that's definitely getting harmonized and optimized, and we believe we're a very robust combination today and even more so in the future. And then we do have a very, very kind of concrete synergy deliveries underway, which will continue to drive very strong bottom line performance.

And so with that, Adam, I'm going to pause and hand back to you for questions.

[Operator]

[Operator Instructions] Our first question today comes from Predrag Savinovic from Carnegie Investment Bank.

[Predrag Savinovic, analyst]

My first question is on the cash flow. There are a few moving parts here like the working capital swing from Lucid transaction cost, integration, et cetera. So I'm just wondering if we look at the cash flow on an underlying basis or we land on in terms of operating cash flow.

[Joakim Andersson, executive]

Yes. It's a good question. I think the 2 things that are disturbing that are the easiest kind of isolate, I think we mentioned them in the report. One is EUR 14.4 million relating to the transaction as such. That should be probably the last, this material piece from the transaction. That relates to a decrease of the payables. It was booked as a payable in the transaction and now it was paid out in the first quarter. So that had obviously a cash flow impact. That's the one thing and the biggest piece. The second piece is on the NRI, the nonrecurring items, the integration costs. So it's kind of on the other side of the same coin, where we had EUR 4.5 million in total NRIs this quarter were EUR 4.1 million related to the integration and the acquisition. So those are the 2 biggest items that you -- probably should adjust for you.

[Predrag Savinovic, analyst]

Then on the organic growth, if we look at the pro forma based one, it looks quite strong. I mean the reported one is also quite strong, but it's even better when you look at the pro forma base, and that sounds like it's attributable to Lucid, of course. Can you reason a bit around what is behind this pace in the growth here?

[Thomas Buehlmann, executive]

Yes. Hey, Predrag, so look, I think it's continued momentum, right? And it's across the board. I think we had -- since stand-alone had a pretty good -- very good growth last year. That's -- at the macro level, it's a function of kind of a digitization offering to provide respondents at better cost effectiveness and much more quickly. So that's the kind of initial talk to get us in the door. And I think that kind of momentum has carried through and is carrying through into this year from a kind of medium-term sort of structural level. Lucid will have the same tailwind benefits, right? Because they're also offering a similar value prop on the marketplace. And then I would say, what's also helped is a deliberate integration strategy to be pretty quick, particularly on the commercial side. So we integrated the commercial teams, nominated leadership there very quickly.

And so that kind of reduced the uncertainty time for the commercial guys quite substantially. And then the final bit I would say is we landed quite a number of -- both companies landed quite a number of new customers during the course of 2021. And as we've done, as we've said in the past, getting those on board and on stream and connected to the platform is a good thing, right? So -- and we continue to do that.

The other thing I would point out, as we've talked in the past, is the exclusive Services business is -- was not -- has not been growing. And so we're not calling that out specifically. But I can say that I think in Q1 that declined by 3% or 4%, I think, something like that, year-on-year. So the decline has slowed down. We've managed to slow that down, as I said we would do, and we are working on. But therefore, kind of the underlying growth is, we think that as really positive. So does that help?

[Predrag Savinovic, analyst]

Yes. It sounds very encouraging. And just a final question from my end. Also curious about a contract that was larger, that you referenced in Q4 on the established side, which gave you a boost then, generally speaking. And to me, it sounds like that is almost like a base effect, meaning that it should be a positive driver for every quarter incrementally then until Q4 2022, basically. Is that right or wrong? And could you read around this contract in terms of organic growth for the established segment?

[Thomas Buehlmann, executive]

So I think I mentioned 2 sort of customer-specific things in Q4. I'm sort of racking my memory now. One was NPD and the other one, I think was Ipsos. So if we take you to those in turn. I mean, NPD was the -- one of our enterprise customers that we announced middle of last year. I think Q4 was the kind of the kickoff enterprise license that we were able to invoice. And there, absolutely, I fully expect that NPD will follow the pattern of our other large and important customers, they kind of get used to the platform and start pushing more and more volume through the platform over time, which is what happened with many of our other larger customers. So on that side, absolutely.

On the Ipsos side, I think I did call that out as potentially a one-off because it was pre-Christmas, Q4 for them, for the established guys is typically very strong and more seasonal than it is for the tech-enabled. And so couldn't -- I wouldn't kind of necessarily say that that's sort of an indication of future growth that will be linear throughout the year. I think we do have a good relationship with Ipsos. They are an important customer, particularly on their API integrations, we're doing very good business, but I wouldn't necessarily extrapolate that out throughout the course of this year now. Does that help?

[Operator]

The next question comes from Daniel Ovin from Nordea.

[Daniel Ovin, analyst]

I have first questions around the gross margin. So I see in the report that you also have put in here, exclusive gross margin, and I calculate that it's down quite a bit on a year-over-year basis around 2 percentage points. So I just wanted to ask a little question around that. You're right in the report that you invest to secure supply. Can you explain a bit around what this means? And also, is there anything that has changed in the market that suggests that also going forward, there could be some pressure on the gross margin? That's the first question.

[Joakim Andersson, executive]

Daniel, I can start with that, and maybe Tom will fill in. But yes, you're right. You're totally right. So the gross margin on the legacy Cint side was down approximately 2 percentage points. The reason for that is, I mean, a little bit the same as we talked about in the last couple of quarters, I think that that's generally in the sector and in the market that is a shortage of supply. And we see on the demand side, we see unmet demand. And then we have discussed whether we should continue to invest top line and invest to grow the business and thereby sacrificing a little bit on the gross margin or not. I mean, it's a deliberate choice to take or to make. And we did decide to do that selectively.

So with a few suppliers, we have invested a little bit more to continue to grow the business. We have seen this, as I said, a few quarters, it remained in Q1, and it will probably continue to be seen. At the same time, we believe that we now, with the integration of Lucid and when we get to a position where we integrate both platforms, we will benefit from each other, if I may put it that way, supply. So since customers will benefit from Lucid supply and vice versa. So we think that, that will be better, but we think that we will probably continue that we would like to see more supply on our platform. Tom, anything you want to add?

[Thomas Buehlmann, executive]

No, I think that's exactly right, particularly acute, I would say, in the U.S., which is where most supplies is programmatic. As Joakim said, it was a -- is a deliberate choice to kind of get the supply that we can sell. And so it's not a surprise, but a choice that we made. And we plan to continue to do that, by the way, for the -- during the year. I think the kind of what the gross margin impact will be I think as Joakim said, is going to be partly by how much supply is there and partly by kind of working out exactly how the synergies and the combination will pan out in the market. So we're working on that at the moment.

[Daniel Ovin, analyst]

One other question also on the adjusted EBITDA margin. I'm thinking here especially on the ex-Lucid business. I understand from discussions we had previously that the cost base in Lucid is perhaps a little bit more of a fixed nature versus Cint and would that then suggest that you have more seasonality in that line and perhaps than Q1 a bit lower than ex-Cint would have been. Maybe you can talk a little bit about if there is any larger impact to take into consideration from this? That's the second question.

[Joakim Andersson, executive]

Yes, I can try to address that. I mean, obviously, when you integrate and combine 2 big businesses like this, there is a lot to factor in, and we fully recognize that it's quite complicated for you guys to follow and to make your estimates. What we've seen in this quarter and what we plan for the coming quarters is -- I mean, first of all, the integration and the kind of people-related integration, organization-related changes were made at the end of Q1, which then meant that the kind of costs that Lucid had and the costs Cint had in the beginning of the year or end of last year, we carried kind of in the first quarter. So yes, a little bit of an impact there.

Then what we will see when now we have implemented a new organization is that the cost base will be probably a little bit more stable in a way a constant than what you typically see on Cint -- what we're seeing in Cint in the last year. So that also then means that the seasonality on the top line will flow through, that's more constant cost base and then have a greater -- we would see a greater seasonality effect on the profitability. So by that, we would expect that the Q1 probably is the lowest, and then we will see if the margin coming up in the next quarters with Q4 being the strongest. If that makes sense.

[Daniel Ovin, analyst]

Just one follow-up question also on the synergy gains. So now they appears that they're coming through sooner than expected. And just a question here. You already talked about cost avoidance, et cetera. Is there any impact in Q1? So did Q1 already benefit anything from synergy gains? That's the -- another question.

[Thomas Buehlmann, executive]

Joakim will have the specific kind of numbers. I would say very, very modest.

[Joakim Andersson, executive]

Yes. And I will not give you any numbers, but yes, very modest because of the implementation at the very end of the quarter.

[Thomas Buehlmann, executive]

I think we said -- I think in one of the slides that kind of some of the restructuring was done in March. So tail end of the quarter really.

[Daniel Ovin, analyst]

Just one last quick question here also. On the amortization for PPA, is -- what you have here in this quarter, is that a level that we should assume also going forward?

[Thomas Buehlmann, executive]

Yes, until we give you something else. No. It's on a preliminary basis, I think you have that typically in this situation. But we -- as of now, we don't see any changes to it, but it's a preliminary one.

[Operator]

The next question is from Viktor Högberg from Danske Bank.

[Viktor Högberg, analyst]

So could you help us a bit with historical periods of macro turbulence, how that has played out for you? You weren't that large in connection with the financial crisis some 10-plus years ago. So could you help us with the usual progress throughout periods such as this one we're seeing now?

[Thomas Buehlmann, executive]

Okay. I mean it's a good question. We probably need to -- neither Joakim have company histories that go that far back. But from -- just to kind of recap where Cint was founded in 1998. And so we had the kind of the dot-com bubble boom bust. We had 2007/'08 and all the subsequent events as well. And of course, COVID more recently. So I need to check the exact numbers, but I do recall a slide from -- that I've seen is that we demonstrated year-on-year growth substantially year-on-year growth in virtually every single year since our foundation. So that's kind of #1. And the second one I would say is kind of how we -- more recently, which I think is more relevant is how we weathered COVID, right, which was fairly -- which is pretty positive. And I think it was positive. I hate to say something positive in relation to COVID.

But I think it was positive from a business perspective for 2 reasons. One, the kind of the -- all of the uncertainty that COVID created in every dimension of all our lives meant that brands needed to do more research to find out what their consumers or potential consumers were thinking, feeling, doing. And I would say that applies to any kind of macroeconomic or geopolitical uncertainty. There is the need for more information by brands. So in a weird way, that is beneficial for us. And it definitely was in COVID. We got work from, I would say, 2 main buckets that we had less work prior. One was government. So regional, local and in some cases, national governments came to us and asked that -- wanted to kind of survey their citizens. And secondly, was pharmaceutical, right?

So as you expect, we got much more work than we've done in the past from the pharmaceutical and pharmaceutical related industries. So a need for more information in times of uncertainty is one thing. The other thing is, I think, we reacted pretty fast and pretty sensibly to the COVID situation. So we took the right measures in terms of cost avoidance and in some cases, cost reduction. So -- and I wasn't here back in June 2007/'08 or indeed at the dot-com bubble. But my guess is the kind of the DNA of Cint to now Cint Lucid combo is to be pretty responsive to what is thrown at us. So I mean that's really the 2-part answer. One is fast responsiveness from the company, but -- and coupled with the need for more feedback from consumers/citizens in times of uncertainty. Does that -- Viktor, does that help?

[Viktor Högberg, analyst]

Yes, absolutely. So I'm thinking here on the growth comments and organic growth being in line with the Q4 level of last year. Now you're meeting harder comps in Q2. And then just if you could help us with what to expect for the full year, you're reiterating the targets of at least 25% organic growth. Is that something we should read as for this year as well? Or what could you do to help us on the timing for that one?

[Thomas Buehlmann, executive]

Well, the -- one of the disadvantages from your perspective of Joakim and I sitting opposite maybe he can make hand signals, right, and tell me what not to say. So no, I mean I mean we don't give any guidance. So first of all, but I can say, I mean, we've got 1 out of the 4 annual quarters under our belt. We've kind of delivered on our medium-term guidance, I would say, in Q1. And I definitely reaffirm the 25% growth rate for the medium term, right? But Joakim is signaling now, so better stop there.

[Joakim Andersson, executive]

Yes. No, that's probably as much as this can get from us now.

[Viktor Högberg, analyst]

And also, just a follow-up on a question earlier on the underlying margin in Cint versus Lucid. Did you say anything on the EBITDA margin? I might have missed it? The respective companies?

[Joakim Andersson, executive]

No. No, we did not. What we did do this report, you can see in the notes, Note 8 in the report, we have put in -- I know that you guys will ask this. So we put in the table with the 2021 Lucid performance. So there you will see on the EBITDA on what Lucid did last year and kind of the trajectory they were on. We didn't comment specifically on Lucid. We don't. On the Lucid margin. But it's mid-single digit, probably something like that in Q1.

[Viktor Högberg, analyst]

On the adjusted EBITDA level?

[Joakim Andersson, executive]

Yes.

[Viktor Högberg, analyst]

Also on the progress with the Service segment within Lucid, you said that it just declined about a couple of percentage points. So just some outflow there. What to expect from the rest of the year once you've stabilized it, what's the plan and what to expect in terms of growth from that segment?

[Thomas Buehlmann, executive]

From Services specifically, I mean, I've said in the past that we are very focused on that because I certainly don't want to be carrying on any growth dilutive segments. So as you can imagine, we're ultra-focused on that. Now we don't break out kind of Services specifically, and we don't intend to do that kind of formally. But I did want to talk about it because it is kind of relevant in terms of understanding the overall, the overall growth picture. Now the -- what I said in the past is that the Services was declining kind of in double digits end of last year. It's now kind of low single digits for Q1. I do expect us to get a full grip on that in the quarter or 2 to come.

And what I would say is, I mean, we both Cint and Lucid provides what we call services as part of the -- an important value proposition. So it's not something we're playing to ditch at all. Now Services is typically provided either on certain geographies, Japan and some countries around the Mediterranean. There's a high expectation of Services if you're a marketing service provider like we are, but partly also, it's customer journey, right? That's the big part where a lot of time, we get customers in with a fairly high degree of service components, so they get used to a new way of buying respondents or accessing respondents. And then what we try and do is get people down the funnel.

So from services to self-serve, which is the Access probe a self-serve user interface and then, of course, ultimately, the objective is to get down to APIs, right, which are fully automated and hands off. So it is an important way of serving our customers and particularly onboarding customers. So it's not something I want to kind of drive into the ground at all ditch, but it is something we want to get the economics to the right place and the growth rate to the right place. So that's the focus.

[Viktor Högberg, analyst]

And also, you didn't include -- you spent some time on it. You didn't include the Lucid figures and the KPIs and the customers and panelists. You're not really done with the work there. On a gross basis, it added 60% or something on both sides of the platform. What is your best guess on the overlap, the net addition to these figures once you've calculated it? Could you give us some color on what you expect in terms of a net addition.

[Joakim Andersson, executive]

To be honest, Viktor, I understand the question, and I understand the need to provide combo KPIs, which we're working on, but I don't like guessing, so I'm not going to try because I will be wrong. So I'd ask to wait until we've actually done the numbers and come up with the right KPIs.

[Viktor Högberg, analyst]

We'll spend more time on it in connection with Q2 then.

[Joakim Andersson, executive]

Yes.

[Viktor Högberg, analyst]

And also last question. On the working capital profile, now with Lucid integrated and consolidated, different revenue recognition models in the marketplace. Could you help us with -- should we expect anything to change in terms of working capital profile for the new group?

[Joakim Andersson, executive]

That's a very good question. Well posted. I think, I mean you know the Cint way now. And I'd say that Lucid works in a similar way. They're obviously in the same sectors, they have the same issues, call it, we're paying -- we are paying out the suppliers faster and when they are getting paid from the customer. The difference between Cint and Lucid as you rightly point out, is that they then recognize revenue on a net basis, but they process the payments on a gross basis. So they get paid from the customers for the full project, and they pay the suppliers for the full project for the full amount, but they only recognize revenue on a net basis of the fees. So if you look at kind of the driver or the ratio of working capital to sales, it will look very different, which is why we're also now introducing this new KPI, so it would be more kind of similar when you do model and we internally as well, model the drivers to different well items. So fundamentally, the same kind of a way of dealing with it, but there is a difference in the driver and the KPI, as I mentioned. Does that make sense?

[Viktor Högberg, analyst]

And so should expect to tie up some cash as you go?

[Joakim Andersson, executive]

Yes, exactly, exactly. So it will show the same pattern, but I'm really longing to get into the details and get a better understanding for it. We're now in the integration of the organizations. We now have a dedicated team, and we have combined the Lucid and the Cint the finance teams as well. We have a dedicated team that are working on collections and working capital. So I'm hoping to get a better feel and a better efficiencies out of it. Then obviously, it's kind of a sector thing. So it's fundamentally, it's more difficult to change this behavior but really to drive and try to squeeze out capital -- cash from the working capital is something we will hopefully be able to do now going forward.

[Viktor Högberg, analyst]

Sorry, just the last final question from me. Integration costs -- can you help us with how to expect the phasing on that one. You said 2/3 of it in this year, EUR 4 million already recognized what do you expect to peak now in Q2, Q3 and then come down or even the distribution?

[Joakim Andersson, executive]

Yes. I think what we said, we said that EUR 40 million in total, 2/3 now and 1/3 next year. I think you can expect that to be fairly linear. We don't see any kind of big bumps that -- we had [ EUR 4.1 million ], I should say, as we grow. And yes, the rest will come in obviously Q2, Q3, Q4. But there's nothing -- I don't think there is a need to model that more -- in a more different way. Maybe -- sorry, maybe 2023, I mean, probably more...

[Thomas Buehlmann, executive]

Frontloaded.

[Joakim Andersson, executive]

Frontloaded, yes in Q2, Q3. Even though it's not linear [indiscernible], probably only the 2 first quarters, actually.

[Operator]

And the next question comes from Daniel Thorsson of ABG.

[Daniel Thorsson, analyst]

Lots of good questions on the financials so far. So I'm happy with that. So I go to a platform technical question here. How is the developing going on integrating the platforms? And have you so far decided to merge them fully like one frontend platform for users and the one back-end solution for suppliers? Or will this be 2 different platforms in the future?

[Thomas Buehlmann, executive]

So Daniel, thanks for the question. So the intent is to have one entry point on the demand side and one entry point on the supply side from a technical perspective, right? So the customers and suppliers just have one point of entry to the marketplace. That is definitely the intent. In terms of the underlying kind of technology and business models, that is still the area where we're exploring and we're discussing with demand and supply side partners extensively because it's important that we do the right thing for them as well. From a technology perspective, I mean, the plan is to ultimately go to one platform, right? But I think the road there will be fairly extended for the simple reason that we need to be extremely thoughtful about how we do that. So -- and so I expect that to take many, many quarters to fully happen.

In terms of what we've done so far is, we've opened up the connection between the 2 supply platforms, so that is good. So we got kind of Lucid supply for the Cint platform and vice versa. So that is in the process of happening. In terms of actual kind of coding integration work beyond that, that has not started because we're spending a lot of time and energy on the thinking and the planning right? So -- and I don't expect that we use the word coding. I don't expect that to start for a couple of quarters, actually, because I think the important thing is to get the thinking right and the planning right -- and then the kind of the actual kind of coding work will follow elegantly thereafter.

[Daniel Thorsson, analyst]

And depending on what route you're deciding to take here, will it be a massive change for either the demand or supply here?

[Thomas Buehlmann, executive]

No, I don't think so. I think massive change is not a good idea because we want to maintain the growth rates. We want to kind of keep growing the way that we have. And clearly, the value propositions that we offer on both the demand and supply side are positive. Otherwise, we wouldn't be able to grow. So no, I don't expect that to be either forced change or massive change. I think that will be conceptually wrong.

[Daniel Thorsson, analyst]

And then secondly, on the supply side and the gross margin here. I mean, given that the gross margin fell in the quarter declined slightly here, I guess that the suppliers and the panel owners are not that unhappy because of the merger because they are basically gaining some more money right here short term. Have you met any unhappy suppliers so far of panel owners that may cause a problem for you when merging the 2 largest players in the industry?

[Thomas Buehlmann, executive]

Unhappy? No. I would say there are slightly nervous players out there on the supply side, which we're doing our best to reassure and if any are listening in, we want to partner with you in the medium term and beyond. And the reason is that in the past us and Lucid were seen very much as head-to-head competitors and in some ways, we were. And as a result, some both supply and demand folk kind of played us off against each other a little bit. And now with the combination, obviously, that is no longer possible. So some people who may have kind of done that a bit more overtly, are feeling a little bit nervous, but we're doing our best. I mean, we have no intention of kind of taking advantage of our position and equally, we want to partner with all supply partners going forward. So some are a little bit nervous, I would say, and we are doing our best to kind of reassure them because we are a marketplace, we do need breadth and quantum of supply. We need both. And therefore, all supply partners are important. We want to work with them and new ones, too.

[Daniel Thorsson, analyst]

My final question is on competition. Have you seen anything happening on the competition side from the largest social media platforms like Facebook or LinkedIn entering this market? I actually got a request myself from LinkedIn asking if I could do a survey related to software companies, which I thought was pretty well spotted. Because they could target specific target groups for consumer insights. So anything you see there moving in the competitive landscape and actually offered USD 5 to complete the survey. So they have a similar model, at least.

[Thomas Buehlmann, executive]

Yes. No, they do. I mean, look, success is copied, right? So in a way, it's a compliment. No. So I mean LinkedIn, we talked about, I think, in the last quarter. So in terms of competitive development in Q1, nothing unusual that would need mentioning. I mean taking a step back and taking your question more broadly, I mean, yes, the social media networks are obviously a group that we do monitor closely because they do have large kind of consumer bases underlying them or underneath them, and therefore, there is a possibility to do a quasi research. But we talked about this in the past. There's a scale question. There's an independence question. There's a GDPR question. And then there's also a profile taxonomy question, right? So it's important to kind of categorize all your respondents in a standard way so that we can provide the real-time respondents for the question. So we think we've got good kind of -- moats or barriers to entry. But nevertheless, we do keep a close eye on the social media side, but nothing that's popped up in the last quarter, no.

[Operator]

The next question is from Charlie Brennan of Jefferies.

[Charles Brennan, analyst]

Just a couple of questions for me actually. You've spoken a fair amount about the unfulfilled demand and the investments into the supply side. Given that dynamic, you've clearly got some discretion over the rates of organic growth that you're reporting and ultimately, the margin. I'm wondering whether actually talking about organic gross profit makes more sense than organic revenue and whether that's a metric we should be paying more attention to? And the second is just a small financial follow-up. It feels like you're flagging up capitalized R&D a little bit more explicitly now. Should we expect that to materially change as we go through the course of the year?

[Thomas Buehlmann, executive]

Charlie, so I'll pick up both of them probably -- so yes, you're absolutely right. And actually, I intended to mention the gross profit growth point, when we talked about the supply squeeze and how we invested a little bit there. I think you're right. And that's also the way we discuss it internally and the team as long as we see that the investment in more revenue contributes with growth in gross profit. I think it's a good thing. So not saying that we will lose sight of the gross margin. That's kind of a key KPI for us, and we do discuss that too. But I agree with you. Gross profit is probably going to be more and more important and more interesting to follow.

[Charles Brennan, analyst]

Should we assume that your midterm targets for 25% organic revenue growth are consistent with 25% gross profit growth?

[Thomas Buehlmann, executive]

Conceptually, I think that's an interesting thought, and we haven't really -- I mean, we have our financial targets. I wouldn't be -- I'm not in a position now to kind of confirm that. But conceptually, I think it's interesting. That's a vague comment to it.

If I move on to the capitalization of development costs, yes, I mean we are -- it is now the line you see in the P&L is now with Lucid, obviously. So we have the Cint CDC policy. On the one hand, and we have the Lucid CDC policy on the other hand, and those 2 add up. In the integration work, we are looking into it and drilling deeper into it. We have confirmed that the policies on each side is relevant. It makes a lot of sense. And obviously, we have auditors having reviewed them as well standalone. And we are now looking into it more as we also have combined our development teams on both sides. That work ongoing to make sure that we are mapping up the relevant hours or the relevant costs that we take in the development team to the capitalization. You shouldn't expect it to -- I don't say, I mean, early conclusion is that we shouldn't expect it to change dramatically, first assessment is that we are probably on a decent level on both companies and also the combine.

[Operator]

Nothing further in the queue at present. [Operator Instructions] As we have no further questions, I'll hand back to the management team for any closing remarks.

[Thomas Buehlmann, executive]

Thanks, Adam. So thanks all for joining. Just to recap, we really do see this as a very strong quarter, a combination of continued revenue momentum with very solid and good progress on the synergies. So thank you for your time and attention and questions this morning. I look forward to speaking and in due course. Thank you.

[Joakim Andersson, executive]

Thank you.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.