GFT Technologies SE

XETRA:GFT

Earnings Call Transcript 2022-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. My name is Denise, and I will be your Chorus Call operator. Welcome, and thank you for joining today's conference call on the 9-month figures in '22 for GFT Technologies SE.

[Operator Instructions] I would now like to turn the conference over to Andreas Herzog, Head of Investor Relations. Please go ahead, sir.

[Andreas Herzog, executive]

Well, thanks a lot, Denise. Good morning, ladies and gentlemen, and welcome also from my side for the first time. Today, I think you all follow the release of our figures this morning. With me is our CFO, Jochen Ruetz, who will walk you through the numbers and of course, will be available for your questions afterwards. In case any questions may arise after the call, please do not hesitate to contact our IR team. I will be more than happy to assist. And without further delay, please, let me hand over to Jochen Ruetz. Floor is yours.

[Jochen Ruetz, executive]

Thanks, Andreas. Thank you very much. Welcome, everybody, to our 9-month call. I think the presentation is available on the screen. It's on our website, so many ways to get to it and follow the presentation. We've taken a bit of the juice out of today's call by giving the talk on the 20th of October with the already upgraded guidance for profitability. So therefore, let's be efficient. I know there's a lot of numbers coming out today, right? Let's directly jump into the numbers, which is starting at Slide #3.

We do see continued growth in the first 9 months. Well, it's kind of the same headline like last quarter, but it is the same situation. And we have further upgraded our earnings outlook, which also happened last time. I'll come back to that in a second. But our growth trend is intact. We do see clients going into digitization strongly just like the last 18 months, it is an unchanged trend. Growth drivers are long and complex to modernization projects. Another highlight, we've now more than 10,000 experts at work for our clients. And we continue our successful and cost-efficient management of the P&L, which leads me to the outlook for '22, which we have adopted, not for revenues, that's stable at EUR 730 million, but the EBITDA, we adjusted to EUR 87 million. It was EUR 81 million before; and the EBT at EUR 66 million now, and last number we gave was EUR 60 million. The KPIs on the right side, I will ignore for now because they are all coming up on the next slides again.

So let's move forward and go for Slide #5, where we're looking at the main KPIs. Revenue after 9 months is up 34% versus last year; quarter-over-quarter, Q3 versus Q3 last year is up 28%. And the order book is up 23%, again, above previous year. It is pretty much in line with the quality of the 30th of September of last year. It covers Q4 and it covers part of Q1 of '23. So quality is pretty decent. Most of '23 pipeline needs to be moved to order book in the last 3 months of the year, and that's what we're currently working.

EBITDA adjusted and EBITDA this year are identical because there's nothing to adjust for. We only adjust for M&A effects like earn-outs, et cetera. And there was nothing in adjustments in '22. In '21, we still had an earn-out running for our Canadian acquisition. Therefore, there we have an adjustment, not in '22. Still I compare EBITDA adjusted to previous year, which is up 37%. On the right side, with the smaller bullet point, you see some comments. While utilization was good last year, it's good this year, not a driving force. We have always some capacity adjustments. We are hiring more than 3,500 people this year. You don't always get it right. And therefore, there's always 0.3% to 0.4% of capacity adjustment costs in our P&L. That's very normal.

The next one is not always happening, FX effects on positive side. The weak euro helped us for these FX transaction effects. Last year, it was negative. So some tailwind from the weakening euro. And the last point is pretty new. Our share-based compensation gave us a positive. You might remember when you follow the stock, it was EUR 47 at the end of last year when we went into '22. And we have to always go for the actual price plus a bit of Monte Carlo. Share price at the end of September was EUR 31, and therefore, overall, we had a positive effect from our virtual share program of EUR 2.36 million. Going a bit down, EBT, up 70%, strongly, disproportionately also reflected in our net income, which is a bit burdened by a higher tax rate. The distribution of our profit leads to a tax rate of 29%. For the full year, we guided 28% to 29%, and that's where we see us coming in.

Let's go forward. Slide #6, and let's look at the diversification of our portfolio. On the left side, we see our portfolio based on client size. On the very left, the only client above EUR 50 million is still Deutsche Bank, and it now accounts for 13% of our total revenue. Deutsche itself this year is slightly growing. So it's more than stable. It's growing roughly 7%, 8%. But it's still share wise at the total portfolio reducing 13% this year, 16% last year, the trend will continue. We do see all other clients growing faster, especially the clients above EUR 10 million revenue per year. They now stand for 41%. And the next smaller group bigger than EUR 5 million, they combined represent 60% of our revenue. They are the key drivers to our growth and especially profitability.

The smaller clients, which is [indiscernible] represent 28%, and we're quite happy with the development in that area. Now let's go to the right side of the chart. We do see our all sectors growing. We have 3 sectors, industry and others this year, growing by 51% and now representing 12% of our total revenue. The insurance business is also growing by 51%. That's a coincidence, same number, representing 18% of the GFT revenue. And last, but not least, the big banking business, up 27%, still standing for 70% of the GFT business. Let's move forward, Slide #7 and looks at the quarters more in detail.

If we compare Q3 '22 to Q2 '22, obviously, there's not a big jump in revenues. It's -- I think it's 0.4%, so it's more or less flat. When you look at previous years, the jump in Q3 versus Q2 is always the smallest during the year. Why is that? Well, while we're growing our team size, it's summer holiday season. Therefore, there are less billable days in the third quarter. The main reason why there's always the smallest growth in Q3. When we look at profitability, we see a jump despite nearly flat revenues, and it is supported by those 2 tailwind effects I was mentioning. We were also mentioning in the talk message, which is FX transaction effect which stood only in Q3 for EUR 1 million and those virtual share effects, which also stood for EUR 1 million. And so if you take them out, the margin doesn't improve that much. Still it's improving, but not that jump. That seems to happen on the right side.

Second bullet point, revenues quarter-over-quarter versus '21, up 28%, EBITDA up 39%. And now easily, you can do the math for Q4, as we have given full year guidance. So we're expecting EUR 180 million to EUR 190 million in revenues, and the EBITDA adjusted is expected to be EUR 24 million, but without any of those tailwind effects. So there should be a small improvement in margin in the last quarter versus Q3. Let's move forward, Slide #8, revenue by segment. And let's start at the top. The biggest revenue driver in the GFT entities is Americas, U.K. and APAC, standing at EUR 342 million. That's up 53% compared to last year. And this divides into 40% organic growth and 13% FX growth. We've highlighted the bullet point which countries are growing how fast? And maybe let's use Brazil, which is growing 84% on a euro basis to describe the local currency growth, which is only 60%. So 60% local growth in Brazilian real, roughly 60%, 84% on a euro basis. So that's the FX tailwinds we're currently seeing, and we are showing in that FX column.

Also good growth rates in other banking markets like Mexico, U.S. and U.K. and the Canadian market where we mainly serve insurance companies, also growing by 54%. Continental Europe, we didn't make the 2 digits yet, right? 9% up all organically. There's obviously no FX effect because the non-euro countries, Poland and Switzerland are quite small. Although Switzerland is giving us the biggest growth in the 9 months of this year, up 9%, which brings us to the GFT Group, up 34%, of which 8% come from FX effects, 26% come from organic development.

Brings us to Slide #9, thank you, for earnings by segment. We don't have it as highlighted as in the revenue side, yes, something we might change for next year's communication that you see the FX effect better already on this slide. But let's comment on the EBT because it's all the same kind of commenting and start with Americas, U.K. and APAC. So the EBT increase is 91% for Americas, U.K. and APAC. We have the strong growth, is also delivering good margins. And of the 91%, 21% are FX related and 70% are as we would call it, on the slide before, organic. So that's the distribution between FX tailwind we're seeing and 70% is true margin improvement. When we come to Continental Europe, we're up 19% based on a 9% revenue growth on the slide before. And obviously, there is no FX impact for Continental Europe.

And when we look at the group, the overall growth of the EBT is 70% of which 13% come from the FX tailwind of the weaker year and 57% are coming organically. This brings me to Slide #10, which is again, the revenue breakdown now by countries. All countries you see here are in growth mode. Only 1 shows a negative, which is France. And 7 markets grew by more than 30%. Again, this is all euro basis. So like everybody in the Americas, Brazil, Mexico, U.S., Canada show somewhat smaller growth in local currency and the euro is kind of speeding it up a bit. Brazil, our biggest market, more than EUR 100 million after 9 months. U.K. is #2. Let's comment on U.K. that we have moved, it was not us, a client wanted us to start invoicing him no longer from the U.K., but from Poland. We anyway delivered to that client from Poland. Now the invoicing is happening from Poland. That's why Poland is growing steeply because we moved EUR 7 million from U.K. to Poland to deliver into HSBC, this will continue next year, it will probably be roughly EUR 25 million, which we moved from U.K. to Poland.

Nothing else changes, not pricing, not delivery structure. It's simply a moving of invoicing entities. This brings me to Slide #11, which is our income statement. As always, not so much to talk about, maybe cost of purchased services, which are up 40%, while our personnel expenses are only up 29%. If we combine the 2 numbers we do in the fourth bullet point on the right, this means an improvement of our efficiency of these 2 cost items combined versus revenues from 82% to 80%. So we are reducing the share of those costs versus the revenue, usually benefiting the EBITDA. We see an increase in operating expenses primarily for higher personnel-related expenses, but also we see travel costs coming back. And we have nearly a doubling from EUR 5 million to EUR 11 million of our SaaS licenses, which in the past often went through depreciation because you bought the licenses. Now they are more and more moving into the variable operating expenses and we pay them on a monthly basis.

So that is the trend that some of the depreciation and amortization costs are moving into the other operating expenses. Well, then the depreciation and amortization is only growing by 2%, which shows which high scale it's contributing. Bringing me last but not least to the income tax. Again, the 29% is -- due to the distribution within the GFT countries today, we foresee 28% to 29% for year-end. Let's go to Slide #12. Cash flow analysis. We have an unchanged solid financing structure. We have credit facilities in place. We have M&A hunting lines on top, which we don't show here. If we find adequate M&A targets. So well financed. The thing that we talked about in the 6 months numbers was the operating cash flow, which after 6 months stood at exactly 0. And I was explaining that the main reason is that clients are coming back to their 2019 behavior, meaning because of COVID and because of the negative interest rates, they pay their suppliers pretty early and pretty fast, now with the normal world again of positive interest rates, and we see payment culture coming back to normal, which means like in 2019.

And we're negotiating payment terms with clients again, which was not happening for 2 years. So this brings our working capital at somewhat up in 2022. We were not sure if it would take all of '22 or most of it would be done by half year. But as we can see, the full cash flow that we now represent here EUR 22.9 million happened in Q3. It looks like the major part of this adoption of working capital happened in the first half year. And now we're back to normal. So now we have, again, the situation like in '19, and we should continue from here. So that's good news, and we see strong cash flow in the third quarter.

While other cash flows are related either to loan paybacks, dividends or our investments, which usually represent 1% of our revenue. So overall, net cash positive at the end of the quarter with EUR 7.35 million. Let's move forward, Slide #13, very short one balance sheet. Well, it just grew by 8%, mainly because of the growth of our business, which drives receivables. Two reasons: the working capital effects I already mentioned, plus additional ones coming from growth. Growth usually leads to somewhat more working capital plus this little jump we see this year getting back to the 2019 payment culture.

Equity ratio of 36% on the right side, I think everything else is not worth discussing. In this round today, let's move forward to Slide #14, the GFT team. Overall, 10,000 experts is what we state. This is all our head plus all our freelances. If we add them up, it's more than 10,000 by today. If we do the IFRS way of calculating, we have to calculate in full-time equivalents. Here, we have 8,766 at the end of September, which is 20% up compared to a year ago. The number of contractors, this is now third bullet point, is slightly up from 1,160 to 1,280. So it shows a trend of slowing growth with contractors. We favor, of course, whenever we can own personnel. Looking at utilization, it was very good in Q3, 91%, year-to-date 90.2%, strong numbers, not much we can improve here at the moment, especially in a period where you grow so heavy.

On the right side, attrition, we see a reduction, right? We were talking about the 20% for quite a while, 19% or 20%. Now we are coming back to 18%. This is trailing 12 months attrition and to come down by 2 points is quite a steep reduction. And it means people are reacting to the current situation in security, recession discussions, and people leaving is kind of reducing a bit, at least a bit, 18% is better than 20% for us. This brings me to Slide #15, and finally, to #16, our outlook for the year. Let's start on the left. Revenue 29% growth to EUR 730 million. This is the unchanged number. When we look at EBITDA adjusted and EBITDA, this is the number we updated in our talk at the end of October, EUR 87 million expected. Main drivers continue to be efficient programs with our clients' cost containment and the tailwind topics I was already mentioning.

The EBT is up to EUR 66 million. And just to give you a flavor, this means a 9% EBT margin, last year was 7%. If we take out 2 of the -- 3 of the tailwinds that we have, which is the FX effects, which you can't plan to have again easily and the virtual share program, if you take those 2 out, plus the reduced M&A effect, we're closer to 8.0% as a true operational margin improvement. Good news is the M&A part will remain, right? It will not change until we do further M&A. So this already pushes us to 8.5%. So we have achieved the 0.5% EBT margin improvement. We usually want to do per year from 7% to 8%. We already see 8.5% because of the M&A. So we are looking positively into the next year when it comes to the margin side. And this brings me to '23. Again, as I said in -- after the H1 numbers, it's still too early to call, right? We see clients in some markets, a bit more cautious, like in U.K. and APAC, we have some of those discussions. But we also see clients in an ongoing investment mode, and this is especially in Americas. From top to bottom, from Canada to Brazil.

So this makes us eagerly work on turning our pipeline into order book in Q4, which is what our teams are working on. And we're really curious to see what this growth potential will mean for '23. Too early to call. As I said, we will have to wait this time until March. We usually give the preliminary numbers. But let me highlight, we're not pessimistic, although the recession discussions out there are existing, we're not pessimistic for the year '23. And now I'm ready to take your questions.

[Operator]

[Operator Instructions] The first question we have is from Andreas Wolf from Warburg Research.

[Andreas Wolf, analyst]

Congratulations on Q3. I have a more general question on the client behavior in the banking industry. So what are the implications of the new environment of growing interest rates? Do you see budgets on the client side increasing, supporting IT investments? And then maybe quickly on the order backlog. It's still impressive how fast it's growing. However, as you look at the growth rate over the last couple of quarters, it seems to grow at a slightly slower pace. So that would be probably linked to my first question. If you see changed client behavior right now, which might explain the somewhat slower growth pace, although it's still impressive. And the last one is on attrition, seems to have declined slightly compared to Q3. Many tech companies are already laying off personnel. Is this putting pressure from wages?

[Jochen Ruetz, executive]

Good question. Yes. I'll start with the client behavior. It's a bit early to call, right? It is just happening that the interest rates are coming back. At the same time, everybody talking about the recession. But I would still be positive on the answer. And I would rather not use the clients in Europe, where we see that change really happening. I would use the clients in the Americas where we saw that change happening faster in South America. And yes, interest rates which benefit banks and insurance companies, our main client group. If interest rates grow, profits grow, and this means IT budgets can grow.

There's already the opportunity of can grow is helping us a lot, and we see that happening in the Americas side. So Europe now also follows this trend and has higher better profitability, which everybody is a bit skeptical for '23, right, because of credit risk, which might happen in that year. But for the years after, it should be a positive for the IT budgets of the long-lasting 0 interest rate European banks, where we have seen that trend for a long time. The American banks had their way out of it earlier, not only because of interest rates, but because of fees and other business they did, and they are spending.

And the same is true for Brazil, where we never saw negative interest rates. So following the trend of banks and insurance companies having the ability to be more profitable, should be beneficial for IT budgets. That's what we expect. We don't really know how much of this will happen in '23 because of the already discussed reasons. But for the future, that's a positive, clearly a positive. Order backlog, yes, correct. When we looked at the revenues and actuals, it is kind of slowing down and the order backlog also represents the same trend. It's not -- we're not at 0, right? So it is -- we do see a positive trend into '23, but the 29% revenue growth we are experiencing in '22 is probably not the number we will aim for easily when we go into much and give you guidance. And therefore, it is visible in the order book as well, of course.

Attrition, last but not least, yes, we saw the number go down. It's mainly linked to the months after holiday season, the European and North American holiday season. It's maybe a bit also too early to say it's really changed. But from our perspective, it might have a bit of a positive impact on the wage inflation, we will see next year. But still inflation rates are there. We can't just ignore them. Our people will not ignore them. It will be an interesting combination of the 2 we go into the salary rounds of '23. But still, it's going to be probably one of the highest we've ever seen '22, '23 combined, will be the highest salary rounds -- salary increases in the GFT Group since I've joined, and that's quite some time ago. I hope I answered your questions.

[Andreas Wolf, analyst]

Yes. And just a quick follow-up, if I may. So if I look at the order backlog, you should be able to turn this into revenues within 1 or 2 quarters. So is there a potential threat coming from higher wages that might put pressure on the margin that is built into the order book when you negotiated prices with your clients for those orders?

[Jochen Ruetz, executive]

Clear, yes, to that, right? Just like if you asked me a year ago. Well, we wouldn't have talked inflation yet, right? A year ago because we didn't see it coming that much. But then when it was happening, and we have probably 6% to 7% average salary increase in '22, we achieved it with our clients. The challenge in '23 might be that the overall growth in the market isn't as broad as we saw it in '22. But we're still optimistic we will achieve pushing the increased salaries to our clients. Is it a challenge? Yes, it is. Absolutely. It was in 22, we achieved it mostly. It will be in '23. And this will, in the end, determine the margin that we will be able to guide. How good do we expect to be on moving increased salaries to our clients. Absolutely. But we still need a bit of time for that and see how this evolves over the next, probably, even 6 months. We usually do salary business in April. So 4 more months to go. Happy to take more questions.

[Operator]

The next question we have is from Knud Hinkel from Pareto Securities. Apologies, the next question we have is from Sven Sauer from Kepler Cheuvreux.

[Sven Sauer, analyst]

I have 1 question, also regarding the client behavior. I mean is it fair to assume that if we see increasing economic or recessionary pressure going forward that clients would rather postpone or interrupt long-term and complex modernization projects compared to shorter-term projects? And on top of that, I mean, is it technically feasible? And do you -- would you offer or what would you respond to your client in the middle of such a long-term complex modernization project, he would ask to postpone. Is this possible?

[Jochen Ruetz, executive]

That's not what we're seeing by our clients. Usually, when they go for a long-term change, which has a business value, right? They don't do it just because they love tech change. They do it because they see a business value, saving money after implementing that major change which will drive their profitability in 3, 4, 5 years. And usually, those business cases are pretty solid, especially in banks in Europe, anyway, have a lower profitability. And therefore, we don't see them shut down long-term initiatives in a moment of crisis. We didn't see that over the years. It's more the short-term things, the things that have a payback that might be in 2, 3 years or further out.

There, they might push it out by a quarter, half a year. This has happened in the past. But the long-term initiatives and especially in the insurance companies, but also in retail banks, they are usually not reduced. They are just formed. Investment Banking might be a bit different. They react faster. It's a small part of our overall revenue, but investment banks tend to react faster to market trends, while retail and corporate banks and especially insurance companies when they have a long-term change program running, they don't stop it. No, absolutely not. That's not what we have seen in the past. That's not what we've seen in 2007, '08 which is kind of the mother of all crisis for us as somebody who only delivers into banks and insurance companies, and that's not what we're expecting this time.

[Operator]

[Operator Instructions] The next question we have is from Knud Hinkel from Pareto Securities.

[Knud Hinkel, analyst]

Yes, I have 2 questions -- not a little bit more left. I would discuss a little bit, yes, spending mode. So what we've seen in the most recent quarter that spending -- some software companies were giving profit warnings. So that seems to cool down a little bit. I think now that you're lucky enough to grow the insurance business in industry business that much, it makes sense to discuss maybe these customer segments in separation. So we already talked on banking, but they might -- what the outlook might look there. Insurance companies, I would say, they probably also not so happy about inflation and higher interest rates. What is your outlook on that segment?

And industry, I would rather -- I would also assume recessionary fears might prevail here. So maybe you can also say something on the outlook for that segment. Furthermore, we already talked on working capital. If I look at the 2021 balance sheet, net working capital, so taking all together, inventories, due payments receivables, stuff like that and also what is called the contract assets and contract liabilities, taking all together was at 16% of revenues. What should we expect for '22, given that you expect a normalization of payment behavior in the coming years, maybe?

Furthermore, I would be interested to learn -- now we're talking about projects, how long does a typical project last within GFT? And does that differ in the different customer segments? That would be my third question, and if we get still time, maybe also you can say a little bit now we're talking about cost inflation and stuff like that, how are these structured. So are there certain milestones to be met and then they are negotiated? What is -- can you talk a little bit about the structure during the process?

[Jochen Ruetz, executive]

All right. Let's start from the top. What is the expectation going by our industrial sectors. Yes, banking, absolutely. I think we agree on that -- growing interest rates should be supportive for banks, probably one of the few industries out there who benefit from increasing interest rates. But insurance companies do too because they have a strong cash flow into their systems, which they then have to invest well. And so far, the investing was no fund. It was sometimes negative or 0 interest. So getting some interest again for insurance companies is also helpful. And therefore, we don't expect a different development in banking and insurance, both will benefit from the interest rates. At some point in time, again, '23 might for some be a year they feel or they have thoughts about, but the interest rate itself should be supportive. In the industry, I fully agree. The recession scenario will probably most bother the industrial clients. . And here, we will need to see how it's working out. When we say industry, it's industry and others. So this includes health care providers and other industries as well, which might not be that hampered by any interest rates, for example. But yes, the industry segment would maybe not show the same growth rates that we have seen in '22. For the other 2, we are more optimistic because the interest rate increase should be supported. On working capital, we have not done the full math on the calculation you just did. But as I said, we see ourselves going back to the ratios we saw in 2019 to kind of the pre-COVID situation, which was -- while it wasn't perfect interest rates back then, right? I think it was already negative or 0, but there was no reason for big entities to be good corporate citizens like they did during the COVID period, which we clearly saw.

They were negotiating all kinds of payment terms with us and pushing it out wherever possible. We're back to that situation. Therefore, the ratios should be similar to 2019. So when you use your logics on the '19 numbers and compare it to the revenue growth since then, you should get to a decent percentage in your calculation. Typical project. It's not that different between banking and insurance, insurance tends to be even more long lasting, longer-term change project. It doesn't mean the contract necessarily is long term. Usually, it's rather the shorter term. It is using the modern agile way of developing software with all the buzzwords, scrum, masters and scrum way of doing it very agile, 6-week sprints, and therefore, often projects are handed out for 8 weeks as kind of an indicator, but that doesn't mean it's not a 3-year change project for that insurance company.

That's the difference between the detailed contract and the long-term project. And we have a lot of those long-lasting -- especially insurance, long-lasting programs where we are part of, where we're not afraid for '23. In banking, it's a bit shorter, right? They are not -- they are more agile in their handing out projects, but with same logic also, it's mid- to long-term programs. Let me take 1 example that in the German market is quite popular or known, which is the Deutsche Bank journey into the Google Cloud. It's a 10-year journey overall. And they're now in the third year, if I'm right. So there is a way to go.

We don't see them adapting it for the '23 noise on the horizon. It might not be a good year. They will continue investing into that Google transformation, but it is then again handed out in smaller pieces, and we are part of that. So therefore, it's a mixed bag, long-term programs handed out in shorter pieces. And the cost inflation then, how can you then include price increases in those kind of programs? Well, you have to discuss with your client. With some clients, you might have a contract on pricing for 12 months.

Therefore, you have to go into negotiations at the beginning of the year or at the end of the old year to talk about salary inflation. You go to new clients or you go in the same client for a new program, then you go with new prices, right? You try to bring in new prices. If you suddenly do cloud in a client where you used to do back-end services, you go with new pricing, very simple. And therefore, one of the reasons GFT is trying to always be at the front end of the technological expertise and development is it's easier to negotiate prices in new technologies, which are sought after where the resources are scarce, and that's how we have been able to increase our prices pretty much in line with the cost increase in '22, and we plan to be able to do the same in '23. So I hope that helped.

[Knud Hinkel, analyst]

Yes, it did. I just looked into my model, what you said on 2019. So according to my logic, it was 90% of sales. So that would be a major leap to jump from around 16% and 21% to 90%, given that your top line has increased that much. So that's a big -- would be a big outflow. So is that what you want to say?

[Jochen Ruetz, executive]

Yes, exactly. And probably, when you take the 9-month '22 numbers, we are already pretty much there.

[Knud Hinkel, analyst]

All right. Okay. Maybe 1 follow-up question on the question, Mr. Wolf asked. Yes, we've seen a lot of layoffs by -- also by the big tech companies in the U.S., which made it into the newspapers and so on. My question would be what do you expect these guys to be -- my suspicion is that they don't lay off that much software engineers and IT expert, but more management guys and marketing guys and so on and so forth. Is that also what you see? Or don't you have any more insight than us in that regard?

[Jochen Ruetz, executive]

Honestly, I don't have more insights into what the tech guys are really doing. And it is not that much impacting GFT. We're usually talking people in the U.S. And our team in the U.S. is 60, 70 people. We -- U.S. for us it's a near offshore country, right? We offshore from other locations into the U.S., we're not so dependent on the U.S. work market. And therefore, this is not a big impact for us. For us, it would help or be of impact, once it ripples through the whole global system and it reaches India, Poland, Brazil. Last week, I saw cognizant numbers, and they talked about Nutrition in India of 30% or the attrition of 30% comparing to our '18. This doesn't sound like people are not moving jobs and it's not easy to find the next role.

So this ripples through, obviously needs some time, right? Statistically for the big guys who in the U.S. also buy near offshore to buy less near offshore. First, they start in their countries, which is probably the big part of their cost base. And therefore, it takes a bit of time for those effects to go global IT customers. Okay. Let's go for more questions.

[Operator]

We have a follow-up question from Andreas Wolf.

[Andreas Wolf, analyst]

A quick follow-up on the '23 pipeline. Last year, you were able to give a '23 guidance pretty early on, i.e., in H2 already. This time, you have not made -- you did not make such a step, was this basically because there is more uncertainty? Or do you still feel very optimistic about next year? I know the guidance will be issued as usually probably next year, but maybe you could share with us your level of optimism for next year in general?

[Jochen Ruetz, executive]

Well, last year was kind of the exception. I think we didn't do that in a long, long time. But we're kind of forced to by regulation because our analysts, right, of which some are in the call and asking questions. Back 12 months, we're not optimistic enough. So we did see more growth in our visibility for '22, which have not been the analyst consensus back then. And that was why we were kind of forced and we wanted them also to give the market information on how we see '22 going. Now we're not doing this for '23, which also carries the message, right? Obviously, the guidance seems to be closer to what we are expecting, discounting all the uncertainty that we still have in the budget process that is still ongoing. So maybe the current analyst estimates are pretty well in line with what we believe is correct.

[Operator]

Next question we have is from [ Stephen Vintil from ISO Holdings ].

[Unknown Analyst]

Congrats on another great quarter. Only 1 question on geographies. Which regions are you planning to push for growth? And can you comment on Brazil now after the elections? Has anything changed? Do you foresee any changes? How are you looking at Brazil specifically? And Asia, Singapore has grown a lot. Hong Kong, not so much. How is your push into Asia growing? And are you considering potential acquisitions in that region? And you mentioned India? Are you planning to tap into the Indian labor market at some point?

[Jochen Ruetz, executive]

Good questions, regions. The growth region of '22 will most probably also be the growth region of '23, which, in our case, is Americas, U.K. and APAC with a strong focus on all countries in Americas. We want and we believe we will heavily grow the U.S. in the next 4 years. It is compared to the size of the U.S. market, inside GFT, it's too small, right? We need to at least triple or increase to 4x, which will take some time, right? It's EUR 60 million now. We should rather be at EUR 200 million in the EUR 730 million company, which shows we've been -- of course, starting in Europe, and we're a bit late in the U.S. We just started there on the day when people were carrying out boxes from [indiscernible], which was in 2008, maybe not the perfect starting point.

And since then, we've grown it. And now we will take an extra push, and we're strengthening all our nearshore capacities in Latin America, Brazil and Mexico to leverage into the U.S. So the U.S. is our key growth markets for the next years. We believe the Brazilian growth rates will -- we thought so before the election, right? So no matter who won, as President will come back somewhat, right? These 50%, 60% in local currency are not sustainable. It will probably half in the year of '23, but this shows we're still optimistic. The President doesn't have such so much of an impact on the demand side. Bolsonaro opened when he won 4 years ago, he opened investments. Companies suddenly became very optimistic. And started an investment wave, but we don't yet necessarily now stop because Brazil is on the right track.

For the first time, I have a higher inflation in the rest of the world than in Brazil. We never had that since we started Brazil, right? That's like a curiosity. And we believe Brazil will be an attractive onshore and nearshore into U.S. market for the years to come and continue growing. I think we have a lot of potential in Mexico. We just had a management change there. So we have restarted. But from that perspective, it's one of those global countries, which should grow among the fastest in your portfolio.

So this is why we believe the region Americas, U.K. and APAC will drive growth in '23 and the years to come. Asia, here, we do a lot of new banks, right, so-called new banks that we built. This might be a bit more up for discussion for clients if they do that investment in '23 or if they push it out. So we don't think Asia will be our major growth market in the year '23. We're well positioned once demand and investment willingness is back, we see us growing there strongly again. We come from 0, 4 years ago. It's now EUR 40 million. We would like to grow it in '23, but maybe Asia is not the right market for that.

We will continue focusing on Singapore as the main hub and on Hong Kong as the second hub. But we just went live, at least for families and friends for a bank in Malaysia. So we also deliver into other Asian markets from our hubs. We deliver mainly from Vietnam, which is our offshore hub in the Asian market. It's different to India, right? We want to be different. Therefore, we don't see us going into India in '23. Would I say no forever? No, I will not, right? It is a market we will always have on our radar, if it is worthwhile going there. But currently, we don't see us going there in the year '23, where anyway, growth rates are a bit more moderate than in the years before.

[Unknown Analyst]

Can I follow up on, especially London, U.K. I mean there has been a lot of discussion and turmoil in the U.K. Do you -- and in a way, it doesn't make a big difference whether your clients are literally based in the city of London or somewhere else. But do you get any feedback from -- on London and your London-based clients?

[Jochen Ruetz, executive]

Yes, for sure. [indiscernible] feedback. We had higher hopes for growth in the U.K. this year, and it's probably not linked to the political environment. It's linked to our positioning inside the clients and some clients being a bit -- I was talking about the investment banks, right, who react faster when they will see something like a recession on the horizon. And we saw that happening in the U.K. It's the market where we have most investment banking clients compared to the total revenue in that market. And therefore, we saw some kind of reaction. We believe, therefore, we will see growth in '23, but it will not be very strong growth in that market because we have a lot of investment banking clients. We want to push more into insurance, more into retail banking, which would then broaden the base there. But overall, we believe the U.K. will continue to be an attractive market. No matter they are outside the European Union. It is the banking market in Europe, still the case. And we don't see that change shortly. And therefore, it is still our biggest market inside Europe, and it will continue to be also in '23.

[Operator]

The last question we have is from Sven Sauer.

[Sven Sauer, analyst]

Just 1 follow-up question. I was wondering if you could provide some color on the penetration of the cloud transition of your clients depending on each of the regions. So do you see more of your clients in Europe already transitioning to the cloud or more in Americas? Yes, that would be it.

[Jochen Ruetz, executive]

Yes. Well, this is now the tough one for the CFO, right? Maybe something to really come back to in our full year numbers, so we always go a bit more deeper and Marika could dig into that. But there's a simple answer from my perspective, which is regulation opened for U.K., U.S., 2 or 3 years before Europe. And therefore, those banks, insurance companies are on their journey into the cloud 2 or 3 years ahead. Europe was only able to join after the ECB clearly said, okay, this is a rule, this is not, you can use the public cloud and the journeys in Continental Europe in the European Union started. And because of these 2 to 3 years, inside the banking, especially the banking sector also insurance, we are in Europe somewhat behind the Anglo-Saxon players. And of course, Brazil never had so tough regulations on that, and therefore, they are also ahead. So that would put those 2 regions into context without being able to now give more details in which country is how fast that would be something we would have to go deeper into. But I think the answer on the regions is what you really meant right?

[Sven Sauer, analyst]

Yes. Yes, exactly. That's it. So you think that this is just pushed by regulation?

[Jochen Ruetz, executive]

The main reason was regulation. The European banks were not allowed to go for the public cloud. Again, it's about the public cloud. And you remember Europe discussing a lot about data protection and everything surrounding that. And this was just taking more time on the American and the British side, they are a bit more laid back on this, and they were faster, simply faster.

[Operator]

That was our final question. I will now hand back to Andreas Herzog for closing comments. Please go ahead, sir.

[Andreas Herzog, executive]

Well, thank you, operator. So thank you all for joining our call, and I will hand over for last remarks to, Jochen.

[Jochen Ruetz, executive]

Well, not much to say, right? Maybe we meet at the [indiscernible] Capital Forum or another event in the coming weeks and months. In this call, we will meet again early March for the preliminary figures. So this will take a bit of time. If you have questions, come our way, Andreas and myself, always happy to support, and thanks for listening today. Thank you very much. Bye-bye.

[Operator]

Thank you, gentlemen. Ladies and gentlemen, that ends today's conference. Thank you for joining us. You may now disconnect your lines.