Dustin Group AB

STO:DUST

Earnings Call Transcript 2020-Q3

[Operator]

Welcome to the Dustin Group conference Q3. [Operator Instructions] Just to remind you, this conference call is being recorded.Today, I am pleased to present CEO Thomas Ekman; and CFO Johan Karlsson. Please begin your meeting.

[Thomas Ekman, President & CEO]

Great. Thank you very much. And so good morning, everyone. Most welcome to our third quarter presentation and conference call. Hope you've had a good morning so far despite the difficult time in our history. Here on our side on the call is myself, Thomas Ekman; and Johan Karlsson, CFO; and also Fredrik Sätterström, is in the room as well, Head of IR.So today, we present our third quarter for our fiscal year '19/'20. Our markets, like the world at large, is, as we all know, in a situation, which is still tough to navigate, and the short-term outlook is, of course, uncertain and challenging. Our third quarter from March to May has been a full corona quarter, quite volatile and day-by-day planning and sometimes hour by hour. Now though when we see that when we come further into this human crisis, the crisis as such is also, what you can call, the next normal. We can see now when some of our market is starting to ease up on lockdowns, that business is coming back, while in other markets, it is still significantly lower activity.What is very clear, though, is that the world has taken a leap in digitalization. Apart from the tragic current circumstances and the short-term turmoil, we are very much very well positioned to gain both market shares and growth from this increased pace of change.We have both new investors as well as potential investors on the call. So most welcome. So before we go into the highlights of the quarter, I just briefly want to run through Dustin at a glance. So going to Slide 2, Dustin at a glance. As you can see, our share of IT services versus hardware is 84% and 16%, and Sweden is our largest market with 44% of sales. 80% of our sales is online and remaining 20% is coming from relation sales, aiming to public and large corporates as well as advanced sales that is not yet ready to push online.Our focus since beginning has been B2B, building from an online push model, primarily to SMBs, which then has expanded to both large corporate and public and B2C.The average order sizes today is -- are SEK 8,000 for SMBs and SEK 12,000 on LCPs. So many small orders are shipped from our central online platform and warehouses as well as directly from distributors.So overall, we have a strong position, and we are investing and pushing ourselves forward to even further benefit from the underlying trends, such as the accelerating online market, demand for mobility, managed services and security and cloud-based solutions. And our belief in our position has, for sure, increased during the last quarter.So moving on to Slide 3 for the financial highlights of the quarter. Net sales -- or we continued to strengthen our total market position despite the uncertainty and short-term decline in the market. Net sales grew with 3.2% to nearly SEK 3.3 billion, where our organic growth was 1.3%. The growth was driven by positive organic growth from LCP and B2C segments. Both LCP and B2C had strong quarter with good sales and improved margins. The spread of corona caused a more cautious market for SMB, where we saw a negative organic growth, still though, outperforming the overall decline in the market.Gross profit was SEK 493 million compared to last year's SEK 531 million, giving us a gross margin at 15.1%, down somewhat from last year's 16.7%.Our adjusted EBITA came in at SEK 106 million versus last year's SEK 124 million, giving us an adjusted EBITA margin at 3.2% for the quarter.Gross profit and consequently, the EBITA was affected, of course, by the short-term corona turmoil in the market, given somewhat lower sales and also a change in sales mix.EBIT was SEK 52 million compared to last year's SEK 78 million, where items affecting comparability was negative SEK 28.7 million this year versus last year's negative SEK 26.2 million.As we announced in May, the restructuring costs within services and solutions is SEK 26.9 million. And as a natural reaction to the sudden uncertainties in the market, we took, of course, immediate actions to strengthen the balance sheet and to set the house in order, we are -- where we now see a strong cash flow from operating activities, that's SEK 468 million compared to last year's SEK 101 million.We've also lowered our leverage, which is now 2.5 versus 2.9 last year. And this is also right in the middle of our leverage target, which is between 2 and 3 to EBITDA. But I will come back to more of the operational highlights later in the presentation. But while on the numbers, Johan, can you take us further into the financials of our segments?

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes. Thank you, Thomas. Moving to Slide 4 and the SMB segment in some more detail. Sales for the quarter ended at SEK 1,386 million, a decrease of 2.3% over last year, representing an organic decrease of 5.7%. As in previous quarters, the acquisitions made during Q3 last year continued to add volumes in the SMB segment, and in Q3, 3.6% came from acquisitions.After a strong start in March, as a result of high sales to customers working from home, we saw a slowdown during April and May. The smaller SMBs had a more positive development than the larger, as they are buying IT hardware because they need it, and they are not following a long-term exchange plan. The economic shutdown also affected sales of more project-related services and onboarding as we have difficulty entering customer sites.The segment result for the quarter decreased from last year's SEK 142 million to SEK 109 million or 24%. The main reason for the lower result was a weaker product mix with a high share of basic hardware, such as PCs and mobile phones. At the same time, we saw less high-margin project sales as we didn't have access to customers in the same way as before. Added to that, the lower volume in services affected margins negatively.Services and software as share of sales remained constant at 24%, and the customer base for software-as-a-service was up from 66,000 last year to 138,000 this year.Moving on to LCP on Slide 5. LCP had just another strong quarter and is continuing to show good volume development and improved margins. Sales in LCP was SEK 1.606 billion in the quarter, an increase of 7.7%, of which 6.6% was organic. During the quarter, we saw good growth coming mainly from the public customers in Norway, Denmark and Finland. While the large corporates, like the large SMB customers, were more affected by the slow economy following the corona pandemic and showed negative growth.The segment result increased from last year's SEK 80 million to SEK 102 million or by 29%. The result improvement came both from the growth, but also from improved margins. The third quarter margin of 5.9% was up by 0.9 points over last year. The main reason for the margin improvement is the efforts put into the public contract as they mature. Here we are exchanging product to optimize costs but also add our private label products to improve margins. All in all, a very strong result in the LCP segment.Moving to Slide 6 and the B2C segment. As Thomas said, B2C also had a very good quarter with sales of SEK 159 million compared to SEK 143 million last year, representing a growth of 8.2%, of which 9.7% was organic. The main reason for the high-growth number was the strong demand for work-from-home equipment as a result of the corona pandemic. Our strategic intent continues, however, to be focused on margin rather than volume.Segment result was SEK 11.9 million compared to last year's SEK 8.8 million. The segment margin was up from 6.2% last year to 7.7% this year. And the main reason for the better -- for this was a better product mix and higher volumes.Moving on to Slide 7 and net working capital. Net working capital was negative SEK 530 million compared to last year's SEK 104 million. The reason for the improvement could be seen in our strong position in the value chain. As you remember, we are the aggregator between 105,000 B2B customers and some 2,500 brands and distributors. In these turbulent times, we have been able to work with our partners in distribution and increase payment terms in order to be prepared to, if necessary, support our customers. In Q3, we have, therefore, increased credit terms with all our main distributors.What effect has this had on our working capital? Looking at the details, we see that inventory was up by SEK 63 million, mainly as a result of us preparing for a more turbulent supply condition going forward, but also from large customers reducing their purchasing.Accounts receivables was down SEK 227 million or by 16%, while sales was up 3%, a very strong performance in these difficult times.Moving on to accounts payables, which is 11% higher than last year, mainly due to the longer payment terms with the major suppliers. And as Thomas said, leverage -- the effect on the leverage was -- we ended on 2.5 at the end of the quarter. This should then be compared to our target of -- the range of 2 to 3 and the end of Q2 of 3.1.Moving on to Slide 8 and cash flow. Cash flow for the quarter was SEK 334 million compared to negative SEK 504 million last year. Looking at the parts, we see that cash flow from operating activities before change in net working capital was SEK 109 million compared to SEK 66 million last year. The difference was mainly due to the changed accounting rules from IFRS 16. Change in net working capital was positive SEK 359 million compared to SEK 35 million last year. And cash flow from investing activities was negative SEK 96 million compared to SEK 559 million last year. The main difference being the 2 acquisitions made last year and this year's only the earn out payments.Cash flow from financing activities was negative SEK 38 million compared to SEK 45 million last year. Main impact during the quarter came from the IFRS 16 affecting negatively by SEK 35 million.The investments in the IT platform continued in the quarter, and we invested SEK 10 million in IT development. Outside that, the main investments were done supporting the service strategy with investments in hardware for data centers and development of market information platform used for the brand repositioning. Net investment in lease assets of SEK 97 million were mainly coming from the automation of the warehouse and the consolidation and the improvement of the data centers.Moving back to Thomas.

[Thomas Ekman, President & CEO]

Very good. Thank you, Johan, and then continuing over to Slide #9, and let's go through some operational highlights during the quarter.As mentioned previously, we see that the speed of change has increased. And therefore, we have also increased the pace in the implementation of our strategy. And have, by that, closed 14 local offices around the Nordics and reduced our workforce with approximately 50 positions. These actions we had in our plans, but the timing of them was, of course, caused by corona that we could increase the speed. And this is expected to generate an annual saving of SEK 40 million starting now from July.We have also set our robot in operation in our central warehouse outside Stockholm. It is a project that has gone very well. We managed to build, implement and get it operational in time, and we are right now filling it up and training it up. And as of yesterday, it handles 52% of the orders, and we will reach 75% of the orders by end of August. 75% is also the target we have what the robot will handle. So this is very good, of course, and increase the efficiency in the warehouse and also increase the customer experience with a longer cut-off time and so forth. So -- and we also estimate that this will give us an annual saving of SEK 10 million, also now with the impact from July.We are continuing our consolidation of the Nordic data centers, where now 2 out of 4 are operational, and the migration of customers is ongoing. There have been some delays in this project due to the corona but we will deliver and finalize this during the autumn. Here, we also expect that an annual saving of SEK 10 million.And as you have seen, we -- as we also mentioned briefly last quarter was that we updated our brand position during this quarter and our visual identity. And this we do, of course, to further support our strategic journey and where we broaden our portfolio to also include services. And that goes, of course, very well in our new updated brand promise, where we keep things moving.Then we have also done changes in executive management, where Morten Jakobi will now take on the role as EVP Netherlands. And by that, heading up our full Dutch operations and start the work also integration of Vincere Groep into Dustin. Morten was previously EVP People and Culture, and he is a very good fit and as a strong commercial leader with people in mind.Stephanie Forsblom was previously VP Communication Brand, she will take on the new role as EVP Markets and Communication. It's the new unit where we gather all communication, all marketing and design activities. Stephanie has been with Dustin for 5 years and has a proven track record of strong leadership and also getting things done.And last but not least, of course, I'm also very happy that we have recruited Martin Lindecrantz as our new EVP HR. Martin has a broad HR background, latest as Head of HR at AFRY. And Martin is also a great combination of numbers and people, and that will, of course, strengthen the team as such and our HR Department. All of them will take on their positions in August, which I'm very happy for.Then continuing over to Slide 10. As you all have experienced, the last 3 months during the pandemic, the world has taken a leap in digitalization. And we have, for sure, done that as well. We are still in the pandemic, and even though the future in the short run, at least, is uncertain and turmoil, some things are already clear and here to stay. We saw a strong work-from-home trend beginning in March, where everyone needed basic hardware, as Johan went into, to set up their home offices. That cooled off somewhat in April and May, but still, I mean, if you look at some interesting data points here to exemplify the sudden work-from-home trend is the sequential increase from February to March in demand in webcams, which was up 450% and also headsets that were up 130%. Of course, a small point, but anyway, it gives a signal on what people did at home watching video or doing everything over video.The pattern overall, if you look at the pattern on SMB, LCP and B2C is similar to periods before where we had the economic turmoils and times of worry. SMB are the first one to react. They are also the first ones to come back. Larger corporate slightly later and the public sector continues to buy. And now when we see, as mentioned before, when we see that some of our markets are now opening up and eases the regulations, we can see demand and activity increases again. Even though short term, it's hard to say how that will be depending on how the ease of lockdowns will continue, but the public sector continues with a stable demand.Longer term, of course, this digital leap suits our position very well. I mean the immediate change in customer behavior will stay. This in turn is giving and will give an increased demand for online purchasing, cloud services, mobility solutions. And with that, increased focus on security and remote management. I said earlier that the 3 years of change has happened in 3 weeks. And even though it is a human tragedy right now with the spread of the virus, we are also in full speed ahead towards a much more digital world. And with our strong online position, our scale and extensive experience of providing IT services and products, we can help our customers to take the necessary steps and use of tools to become even more relevant and digital to their customers, so they, in turn, then become more successful.So before we go over to Q&A, let me just summarize the quarter over to Slide 11. Net sales grew with 3.2% to nearly SEK 3.3 billion, where organic growth was 1.3%. Gross margin at 15.1%. Adjusted EBITA came in at SEK 106 million, giving us an EBITA margin of 3.2%, EBIT at SEK 52 million and EPS at SEK 0.35 per share.Operating cash flow at SEK 478 million (sic) [ SEK 468 million, ] strong balance sheet, leverage at 2.5x to EBITDA. And as said, we have increased our pace of implementation of our strategy. Our robot in the central warehouse is operational. We are soon done with the consolidation of our data centers. And we launched our new brand position and made strong improvements in the executive management team.So our financial position remains strong, and we are well positioned for the conditions in the prevailing business climate. As you have seen during the quarter, we are continuing to actively follow the developments and are taking a proactive approach in preparing for various scenarios depending on developments in the market. All of this is, of course, to enable us to act swiftly and to have activities and tools ready from both a cost and risk perspective, and of course, also to leverage the opportunities that our strong online position can offer us and our customers.And I think by that, Johan, we can -- are happy to take any questions you might have. So please, operator.

[Operator]

[Operator Instructions] Our first question comes from the line of Ramil Koria of SEB.

[Ramil Koria, Analyst]

A few questions, if I may. Just starting off on the working cap side. I mean, how sustainable is -- were all these extended credit terms with your suppliers? And what has been said more specifically with them? And perhaps if -- I mean do you know if they are getting similar terms with OEMs? Or is this a matter of them trying to sort of retain you as resellers?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think, yes, if they get the same terms from the OEMs, it's -- we don't really know that. We believe that there are some relief from -- on their side as well. But we don't have that fact on our side. The -- how long we can maintain them? I think there is nothing agreed on the terms for the extended payment at this moment. Obviously, we are following the situation. We have seen, I would say, at the moment, stabilization of sales on, of course, a very low level, but still not going further down, which is promising. We believe that together with primarily the distributors, we were able to maintain these credit terms for as long as we need it from a market perspective. But as I said before, we have no written agreement on that.

[Ramil Koria, Analyst]

Let's see here. And then the impact from lower billing ratios on the service side, is it possible to provide us with any flavor on sort of the impact in absolute terms from lower service sales in the quarter?

[Thomas Ekman, President & CEO]

I think you can see it -- not specifically, but you can see it on -- of course, on the SMB decline of the organic growth. There, you can see that, that is where we first see the impact. Some of the larger corporates that we had was sort of -- they are contracted long before, and that continued in March and April and so. But the SMB which is more short-term run than that, there, you can see that we have that. And that is due to the fact that the offices were closed. So you can see the trend signal of it, as you can see in the decline in SMB.

[Ramil Koria, Analyst]

Okay. And then just moving on to the cost side, 2 questions. First off, shorter term, it's written in the report that you managed to save some SEK 20 million from, I would say, temporary measures such as reduced travels, expenditure and marketing expenditure, et cetera. How would you expect that to sort of develop going into Q4 now? Is it a matter of sort of you awaiting markets to come back before increasing marketing spend again? Or should we consider this as something sustainable at least partly? And then on the longer term cost development here, it seems like you're expecting to save some -- is it SEK 60 million from closing offices, warehouse automation and consolidation of data centers. How should we sort of reason around that in terms of gross numbers and then sort of underlying cost inflation impacting that on a net basis, i.e., should we expect the entire SEK 60 million to feed through? Or how are you projecting internally? And what can you say on the cost side?

[Johan Karlsson, CFO & Executive VP of Business Support]

Well, I think you can -- you'd have to look at it in 2 different time perspective: obviously, what we have done in Q3 and what we'll also continue in Q4 are, let's call it, short-term initiatives, where, as you mentioned, we have reduced working time. We have cut travel bonuses down and a few other activities that can be done short term in order to reduce cost in order to meet the lower demand that we've seen in Q3. We believe that to be maintained. We will maintain that in Q4. But as we are moving towards a more long-term situation with lower volumes, we are also preparing for that situation, not necessarily that will happen, but we are preparing for that with more long-term initiatives. And the restructuring reserve we took in the quarter is one of the actions that we are doing to match our cost base to become more profitable in the future. These are things that we have talked about before that comes from the integration of the acquired entities and the building of the service factories that we discussed before, that was not at scale. The initiatives that we are now doing in data centers and in the offices and in the staff, primarily in the service and solution area are made to scale up the services business, and that will continue going forward. If then volume comes back, then we will have to increase resources in the services and solutions sector, but then also the volume will go up.

[Ramil Koria, Analyst]

That's clear. Just a final one, if I may. On sort of the SMB trajectory here, you're commenting that you saw demand coming down towards April, May. And you're posting sort of minus 6% organic revenue decline in SMB in the quarter. How should we reason around the trend going into Q4? Could it be that given the trend in Q3 now, could it be that in Q4 the decline will increase, if you will? Perhaps, I'm a bit too specific here, but any flavor is very helpful.

[Thomas Ekman, President & CEO]

Yes, yes. Sure. Sure. I mean, of course, we all know that the uncertainty of the -- it also depends on how the market reacts now when they're opening up. But as I said, earlier, of course, when markets are opening up, we see that the activity increases. And as also previously explained, I mean, the SMBs are the first ones to come back. However, I think we should be cautious now during this summer, this will probably be quite a -- I mean, many people will be on vacations to take out vacations, so it will be a vacation summer in that sense. So we'll see how it develops, but it has been fairly stable, I should say, in the beginning of the fourth quarter compared to June. So as Johan also mentioned, it's sort of we see a quite a stable level right now. So I think that is what you can expect for Q4. But however, with the disclaimer that it depends a lot about what -- how the different regulations in the different markets, how they will turn out that we'll see.

[Operator]

And our next question comes from the line of Mikael Laséen of Carnegie.

[Mikael Laséen]

Okay. Great. Yes. I also have a few questions. First of all, it would be great if you can explain how the development for the project-related revenues within the SMB segment? How much of the segment is those type of activities? Revenue development maybe in Q3 growth year-on-year. What type of margins are reasonable for those type of activities under normal conditions? And yes, if you could elaborate on the project side, it would be great? And also, maybe add a few comments on Netherlands.

[Johan Karlsson, CFO & Executive VP of Business Support]

On the project-related revenues, I would say that these are the -- typically, these are the kind of AV and data center projects-related revenues. I think we mentioned before that the profit on these are about the double compared to hardware sales. So that -- the effect there, obviously, is high when we are not selling these projects. And at the moment, it has been quite hard during the quarter to actually get access and close these projects. We can do some of the work, but we cannot finalize some of the projects, and hence, we cannot invoice the projects. And that has been the effect of -- on the -- primarily on the margin, I would say, rather than the volume. It has an effect, obviously, on the volume as well, but margin is more affected than volume.

[Mikael Laséen]

Okay. So is it double the SMB margin? Or is it double hardware margin? Or...

[Johan Karlsson, CFO & Executive VP of Business Support]

It's double hardware margin.

[Mikael Laséen]

So maybe around 10%, 12%, it's...

[Johan Karlsson, CFO & Executive VP of Business Support]

Exactly, exactly. And you can see that by -- if you look at the acquisitions, that's been about that range where we have been in the acquired entities.

[Mikael Laséen]

I noticed actually regarding that, but some of the acquisitions are really much higher margins than that.

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes, there are, of course, pockets of high margin, let's say, offerings. Hosting is one of them. And you would see that also in the, let's say, small company ERP offering that we have primarily in Denmark, it's just much higher margin.

[Mikael Laséen]

Yes. And Netherlands, how is that like developed in the quarter?

[Thomas Ekman, President & CEO]

Netherlands has been, of course, quite highly affected by the lockdowns, in terms of doing quite strict lockdowns in the Netherlands. So that was, of course -- I mean, as in the Nordics, the offices were closed. However, we have also quite good recurring base in Netherlands, which, of course, is good to have in situations like this. But overall, it has been -- the Dutch market should, say, have been one of the toughest for us during this quarter, yes.

[Johan Karlsson, CFO & Executive VP of Business Support]

But mainly on the, let's say, consultancy services side, recurring is maintaining. Hardware has been reasonable, actually slightly positive growth, but small numbers, but obviously, very hard to have high utilization of consultants in these times.

[Mikael Laséen]

Okay. Great. And another thing which will be great to get more clarity around the warehouse automation savings effect. Where is that coming from? Is it cost? Or well, you obviously get better revenue potential, of course, but...

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes. But the savings comes from costs that we do not need the same amount of people to send out all the orders. And of course, we also get higher efficiency overall in production capacity, if you call it that, in the warehouse. And -- so -- but the saving comes from that and we can do more in shorter time.

[Thomas Ekman, President & CEO]

A good improvement is, of course, that we are now using much less space because the robot is very space efficient. So our ability to maintain the warehouse as it is size-wise with more sales is good.

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes, it is.

[Mikael Laséen]

Okay. Great. And final one, following up on the outlook question here. Is it fair to assume stable revenue organically in Q4, given what we see today in the market? Is it -- should we interpret it like that in total portfolio of yours?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think -- yes. I would say that to look at the details a little bit more. I mean, we've had negative growth on the SMB side and on the corporate side. And we believe that, that situation to remain in Q4. While at the same time, we've been quite positive on the public side. So it depends a little bit on the mix between the 2 sides in the different quarters, what will be the final number. But if the mix is the same, the business seems to be running in about the same pace as in primarily end of Q3, so we haven't seen any downturn coming from, let's say, April, May, when coming into June.

[Mikael Laséen]

Okay. Great. So if we look about the same, I think, Q3 then, roughly, because I mean, you are, of course, dependent on the business cycle, and that doesn't look that strong, if you look at leading indicators, of course. So on the one hand, the lockdown is eased -- are eased, but on the other hand, the economic situation is getting maybe a bit tougher. So in total, about the same as you have seen now in Q3.

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes, with the visibility we have at the moment, yes.

[Thomas Ekman, President & CEO]

Yes, exactly, exactly..

[Operator]

Our next question comes from the line of Daniel Thorsson of ABG.

[Daniel Thorsson, Research Analyst]

Yes. So quite a lot of questions so far, and some of my questions are already answered, but do you see any differences geographically explaining the margin development upwards or downwards how is Netherlands performing margin-wise versus Nordics, et cetera?

[Johan Karlsson, CFO & Executive VP of Business Support]

I don't think -- it's more related to what kind of business we have in the different markets. So you would see difference is coming from a larger share of, let's say, corporate sales in Sweden, which is more affected compared to, let's say, Finland and Norway, where we have more public sales and Denmark as well. So public sales countries are performing better. Also, high share of smaller SMBs has been good, which is, in a sense, good for Sweden as a country compared to, for example, Denmark, where we have more slightly larger SMB customers. So there is in fact that much -- there is a country difference, but not a huge country difference, I would say. It's more on how our business looks in the different countries.

[Daniel Thorsson, Research Analyst]

Okay. That's very clear. I thought there could be difference within the different business units between the countries, but it doesn't sound like that.

[Johan Karlsson, CFO & Executive VP of Business Support]

Small differences, I would say.

[Daniel Thorsson, Research Analyst]

Okay. And then within SMB, you referred to lower margin due to the lower share of high-margin projects, obviously. But looking at the share of sales coming from software and service, that is still flat at 24%, what is growing within software and services when the project service is declining?

[Johan Karlsson, CFO & Executive VP of Business Support]

What is growing is really the SaaS part of it. So you can see the number of seats that we have this year compared to last year, it's almost -- it's doubling. And the pure SaaS sales is not really a high-margin product compared to implementations of recurring revenue projects such as network as a service, infrastructure as a service and things like that. It's a weaker mix within the service and software.

[Daniel Thorsson, Research Analyst]

Okay. So is the SaaS part more like hardware sales? Or is it slightly better than that margin-wise?

[Johan Karlsson, CFO & Executive VP of Business Support]

I would say it's like -- if it's a pure SaaS, it's like hardware. If we can add help desk to it, it becomes slightly better.

[Daniel Thorsson, Research Analyst]

Okay. Clear, clear. And then a final one, have you seen an underlying price pressure on standardized hardware like PC and mobile phones in the market that is hampering the SMB margin driven by the suppliers, which now then try to compensate you with relative payment terms in a tougher market and that the margin in SMB will never come back to historical levels again due to that. Could that be a risk?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think that -- I don't think we have seen any -- and we are not afraid that this is, let's say, a change of the whole market in terms of margin, but we have seen similar trends as in other situations where volumes are -- there is a volume shortage in the market that different competitors are trying to outperform us on price. And this happens also in this situation. Primarily companies that are dependent on a lot of consultancy sales that needs consultancy sales and gain consultancy sales through hardware sales, they are desperate to get hardware sales at the moment, of course, in order to support their consultancy business. And there, we have hard times, I would say, primarily in Denmark, very fierce price competition at the moment. But these are -- and this has happened many times before, and it's a typical sign of a weak market where there is a fight for the lower volume.

[Daniel Thorsson, Research Analyst]

Okay. But that is driven by competition. Have you seen any drivers from the supplier side that are saying that now you get 1 or 1.5 percentage point lower margin, but you get better payment terms instead?

[Thomas Ekman, President & CEO]

No, no, no.

[Johan Karlsson, CFO & Executive VP of Business Support]

No, not at all. No.

[Operator]

Our next question comes from the line of Christoffer Bjørnsen of DNB.

[Christoffer Wang Bjørnsen, Analyst]

This is Christoffer Bjørnsen from DNB Markets here. So I just wanted to continue to follow up on the trajectory outflow which in third quarter. So you mentioned March seeing tailwinds from home office and then a worsening through the last 2 months of the quarter. So I'm just trying to get a sense of what you're trying to say for the current Q4. So if you had organic sales growth of around 1% in Q3, but it was worse in the last 2 months, should we then expect Q4 to be worse than in Q3 or as good as Q3? I just got the impression that you tried to say that it will be as good as Q3. But if it's stable from April, May, I struggle to see how it could not be worse than Q3? That's my first question.

[Johan Karlsson, CFO & Executive VP of Business Support]

I think the first thing we said was that you need to look at the differences in the different customer categories coming from Q3 to Q4. So you need to be understanding that the share of public sales compared to SMB and LCP corporate sales because they develop very different in these times. And in the corporate and SMB sales, you would say that, yes, we would probably have a slightly lower sales compared to last year than we had on average in Q3, but again, visibility on that is very low. And then, therefore, it's really hard for us to say. There is no significant change, that will be our message on that. And public, we believe, to continue more or less in the same pace as it has done in the last 3 quarters, actually.

[Christoffer Wang Bjørnsen, Analyst]

Sure. Sure. But then the last 2 months of Q3 were significantly worse than March? Or wasn't that big of a different?

[Thomas Ekman, President & CEO]

I mean it was not that big difference if you look from -- I mean, what we sold a lot of, as I mentioned, we sold a lot of basic hardware at the beginning of March. But then that given how things turned out in end March, April, May, with the uncertainty, then it was fairly similar in the whole quarter. But -- and now we see -- as I said, we see a stabilization in end of the Q3, also continuing now in the beginning of our Q4. So -- as Johan you said, visibility on that is very low right now.

[Christoffer Wang Bjørnsen, Analyst]

Sure. Okay. And then just 1 last 1 from me. On the software-as-a-service side, with that significant explosion in number of users compared to last year? Can you just help us understand how that translates into revenues growth for you guys? Why is the revenues growth lower than kind of the number of users, what's happening there from software?

[Thomas Ekman, President & CEO]

I think that's more to do with the mix of the -- let's say, the offerings that we have within software-as-a-services rather than -- I think the average price of a user has not changed significantly as we can see it in our numbers.

[Operator]

And our next question comes from the line of Erik Elander of Handelsbanken.

[Erik Elander, Research Analyst]

One question from my side. So I mean, on a 12-month rolling basis, now you have within LCP, a margin that was gone actually from 5.5% in Q2 up to 5.8% in Q3, which is obviously a very strong performance, given that you have the same type of customers and all of that. And you explained it in the report saying that it's a result of more mature deliveries and also economics of scale. But I mean is this kind of a trend, i.e., a 30 basis points improvement in the rolling 12-month margin within LCP, is that something you should extrapolate going forward as well in the coming quarters? Or what has actually -- is it just those 2 explanations that's behind this improvement? Or is it something else? For instance, the public sector has become more profitable for you because you sell more services? Or can you explain what is actually behind it?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think what we have said before, Erik, is that I mean if the margin on LCP is very dependent on new contracts or the age of the contracts, that's for sure. And they vary somewhere between, I would say, 5.5% and 6.5%. Now because we had the Danish new agreement last year, we went even further down towards 5% when that contract was new. Having said that, obviously, we are trying to add services to the offering also in LCP, but more product near services than maybe in the -- on the SMB side. So there will be added services also in LCP adding to the margin going forward, but probably not at the rate of SEK 0.3 per quarter.

[Erik Elander, Research Analyst]

Okay. So this is basically a one-off then, but probably a new level that you will operate on, given that you have more actual projects compared to 1 year ago?

[Thomas Ekman, President & CEO]

Exactly. Exactly.

[Operator]

And our next question comes from the line of Erik Lindholm-Rojestal of Nordea.

[Erik Lindholm-Rojestal]

Can you hear me?

[Thomas Ekman, President & CEO]

Yes, yes, we can hear you.

[Erik Lindholm-Rojestal]

Great. So I think 2 questions from me. So obviously, there was some difficulty in completing some project-related services as offices have been closed. But do you expect this to come back as lockdowns ease and offices start opening up? And have you built up sort of a backlog that you can start to deliver on once this happens?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think you need to be cautious on the project-related sales for some time because the lead times on these projects are longer than on pure hardware sales. So in these last 3 to 4 months, obviously, activity also on the purchasing side, that's been -- has been lower, not only on the delivery side, let's say. So it's also a purchase issue from customers. So I think that will remain for some time.

[Thomas Ekman, President & CEO]

Yes. And the ones we sort of -- the ones we had in line are -- when the markets are opening up, then, of course, we come back and deliver on those that we do, for example, in Finland and so forth. So that we see. So that is -- on that note on your question is -- yes, that is happening. But we are -- when the market is opening up or when the offices are opening up, then it starts happening.

[Johan Karlsson, CFO & Executive VP of Business Support]

It will gradually get better. And the good part for us is that we have quite a lot of smaller customers that do project really with investments. And they are even -- they are faster than the large corporates. So that we will see also this time.

[Thomas Ekman, President & CEO]

We can also see in the sales. I mean, all the sales meetings right now is over video, and we get a lot more questions, a lot more demand on how to set up, I mean, for example, video conference rooms and how to set up these kind of equipment, given the fact that this is the way we will operate in the future. So that we'll see. Depending on how markets open up, that, of course, it's an opportunity for us to grab even further, which is good, of course.

[Erik Lindholm-Rojestal]

Yes. Certainly, very interesting. And you write in the report that -- and you said that you have a strength and a view of sort of your strategy and long-term business. Can you give a bit more flavor on what you mean with that?

[Thomas Ekman, President & CEO]

I mean I think the -- what we mean is, I mean, we have been talking about the digital world for maybe 20 years. That is -- it's -- what we see now is, will happen. I mean, we see, of course, the immediate increase in online shopping overall, we see the demand for cloud services and mobile solutions that I can have my employees working from wherever. And of course, with that comes an increased focus on security, it comes an increased focus on remote management. I mean I want for us selling standardized services for us together with the products. And that's, of course, when we have the target to sell you a network-as-a-service product, for example, but -- and we come and install it, but then we are not in the office. We do everything remotely. And we sell [ a U.S. ] standardized package. And that, of course, is also a demand that we can see an increase in.The whole digitalization, even from the smallest SMB is doing things digitally as well as the largest corporate. So it is a massive change. And that is here to stay. And of course, with our online position, it is perfect. It's very good. But with that said, I mean, right at the moment, a very short-term moment, of course, in the turmoil, it's -- we need to do a lot of changes and securing our balance sheet and everything. But for the longer term, of course, this digital leap suits our position very well.

[Operator]

And we have 1 further question on the line so far. That's a follow-up from Ramil Koria of SEB.

[Ramil Koria, Analyst]

Just a follow-up on the OpEx side. So the cost program of SEK 40 million is having a -- you're having a full run rate from basically today. So that's SEK 27 million in Q4. And then on top of that, you had temporary cost reductions of SEK 20 million, which you commented should remain going into Q4, given demand remaining at Q3 levels or end Q3 levels. So you should have a tailwind of roughly SEK 50 million on the OpEx side alone? Or am I missing something here?

[Johan Karlsson, CFO & Executive VP of Business Support]

You are only a little bit on the -- maybe on the optimistic side on the SEK 40 million, it doesn't start 100% as of today. It starts today, but not 100% of the savings are realized in this day. So there will be a gradual increase of the saving throughout the quarter.

[Operator]

[Operator Instructions] Okay. So no further questions at this time. I'll hand back to our speakers for the closing comments.

[Thomas Ekman, President & CEO]

Okay. Very good. Thank you very much for all your questions and listening into the conference. And please just -- if any further questions, just send us an e-mail or call us directly, and we're happy to answer anything. And with that, have a great summer, and see you soon. Thank you very much.

[Johan Karlsson, CFO & Executive VP of Business Support]

Thank you.

[Thomas Ekman, President & CEO]

Bye-bye.