Earnings Call: Q2 2021

Aug 18, 2021

Throughout the call, all participants will be in listen only mode and afterwards there will be a question and answer session. Today, I am pleased to present CEO, Andrey Rogrzycki and CFO, Thomas Johansen. Please begin your meeting. Good day, and welcome to this presentation of Netcompany's results for Q2 2021. My name is Andre Logachesky, and I'm the CEO and Co Founder of Netcompany, and I'm joined today by our CFO, Thomas Johansen. And before we get going, there are some important disclosures that I need you to read through. So could we please have slide number 2, please? I will pause here for 30 seconds and let you all have a read through of these important disclosures. And with that, can we please go to Slide number 3, please? The topic of today's presentation follows our usual layout, which is that I will first give you an update on the business highlights for Q2. I'll also go through our revenue visibility and our financial guidance for 2021. Once I'm done, Thomas will go through the numbers in greater details before we open the call for any questions. And can we have the next slide please? We continued the strong momentum from the last quarter into this recently ended quarter And grew top line by 21.2% in constant currencies, all of which was organic. This is very satisfying taking into consideration that we are starting to see more of the deferred vacation not taking in Q1 In taking in this quarter, in line with what we had expected. Gross profit increased by 13%, yielding a gross margin of 35.5 percent which was 3 percentage points lower than in Q2 2021. The reason for the lower margin can be summarized into one single reason and that is support of international growth. Thomas will go more into details with the mechanics here of, but overall we've seen a need to continue to support our international entities In establishing a solid foundation for both short term and longer term growth, this has a negative temporary dilutive impact on margins. However, it sets us up for continued longer term growth on the entire group level. And that is what we believe is more important than short term margins. The lower gross profit margin naturally impacts adjusted EBITA margin To the same tune, an adjusted EBITDA was $166,700,000 which yields a margin of 20.2%. In addition to the gross profit related impact to adjusted EBITA margin, we also had nonrecurring severance costs Related to our U. K. Operation in Q2, further diluting adjusted EBITA margin. For the 3rd consecutive Quarter over quarter FTEs grew by more than 500 actually 575 to be specific. And I'm particularly proud of our ability to continue to attract new employees and to retain our valued talent in a labor market That is increasingly tightened. I believe this to be a testimony to our strong employer brand build over the last 2 decades Where we have always focused on delivering complex and important projects to our customers in both the private and public sector. And can we have the next slide please? Continuing on the employee topic, the breakdown here shows where the 575 new FTEs have been hired. We have added FTEs in all our units and we have reduced the level of independent contractors in the UK to 14, Which for all practical matters means that we have concluded the conversion away from independent contractors to old employees in the UK. The main intake of new employees was in our largest unit, Denmark, where FTE increased by 287 people. However, on a related basis, the highest intake was in the UK, while the level of our own employees increased by 39%. Of that increase around 15% was conversion of independent contractors to employees and the remaining 24% was net new hires. In our 2 talent pools, Vietnam and Poland, we also increased our Feet level with close to 150 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Feet Feet Feets compared to the same period last year. Trading for the last 12 months was 18.3%, which was 2.4% Points higher compared to last year. In Denmark, churn has picked up during Q1 and overall we begin to see more movement of employees between different jobs, A clear indication that we're coming to an end to the COVID-nineteen spillover effect on the labor market. While we clearly enjoy a strong employer brand, we see increased competition for talent with digital competencies across all the geographies we are in. Churn also picked up in the UK and in the Netherlands. In the Netherlands, the churn is at a high percentage level, but with limited employees actually leaving them. The amount of administrative employees measured as non client facing resources was 5 point 9% in Q1 2021 compared to 6.8% in Q2 2020 And thus continuously decreasing towards our target, which is 5%. Can we have slide number 6 please? We have won a number of larger multiyear contracts, both with different governmental agencies, but also with different private So it's in various geographies and I will mention a few here. In Denmark, we've won the contract with the Agency for Labor Market and Recruitment, A contract which will lead to a modernization of the platform used for unemployed citizens. In addition, other of the agency solutions will be modernized. Also in Denmark, we won a contract with the Agency for IT and Learning. This contract was a 4 year new contract with a customer that we've already served for many years. In the UK, we've continued to expand our presence with the NHS following our award to participate on the framework contract that we succeeded to get On to last year. More specifically, we have recently been awarded 2 year project to support NHS Digital improving quality data, which in the end will lead to better health care for the citizens in the UK. 2 new deals were signed in the Netherlands in Q2, One framework agreement and one where our current customer prolongs their cooperation with us for another 4 years. In addition, we've also signed another larger framework agreement in Netherlands There's a unit called Locius in the beginning of July. So actually in Q3, but I wanted to mention it in this setting too. In general, there's been some delay decision making in awarding public contracts in the Netherlands following the election in the spring. With these recent wins in the Netherlands, we are confident that utilization will increase. Overall pipeline in all countries look healthy And lays the foundation for continued growth throughout the rest of the year. And can we have the next slide please? The investment in terms of increased usage of sorry, the investment in terms of increased usage of Danish resources in Norway, the UK And in the Netherlands was continued from Q1 into Q2 as we firmly believe that this will give us a strong foundation for longer term growth outside of Denmark. Revenue in Norway increased more than 47% in Q2 following the strong growth of 30% in Q1 On the back of the strong momentum we had in Norway in Q4 last year. Margins improved also supported by the high utilization realized in Norway in Q2. We see strong demand for our services in Norway. We have finally been able to get our employees back into the offices in our new headquarters in Oslo And our new office in Trondheim. In the UK, we've seen a positive activity following the winner from last year with the NHS. And we've seen a growth of 22% in the quarter. In the 2 margins also, we see an interesting and continuously developing pipeline In the UK and with our finalization of changing from independent contractors to our own employees, we now have a foundation to really expand on. In our most recent acquisition, the Netherlands, the integration is progressing to plan. However, we are very negatively impacted by the election in February and there's still not a new government in place there. This has delayed decisions on large attendance, which negatively impacted our revenue growth in the Q2. However, things are beginning to progress in the Netherlands, which the signing of a couple of new framework agreements is a testimony to. We are satisfied with the progression of our integration of the new markets And we are convinced that they are solid foundations for significant future growth. And can we have the next slide please? The strong performance in all of our business units has increased the level of contractually committed revenues close to $3,100,000,000 at the beginning of July, which was an increase of more than 23% compared to the same period last year. As in recent quarters, we see improved revenue visibility in both the private and the public segment throughout all of our units. And this leads me into our expectations for 2021. So can we have the next slide please? For our top line, we now expect revenue growth of between 18% to 20% compared to 15% to 20% previously. As we also mentioned in our Q1 earnings call, some of the growth we have had so far in 2021 It's caused by deferral of vacation from the employees as we see societies generally easing COVID-nineteen restrictions. And we expect that deferred vacation will be held, which in turn will impact our revenue growth and margin numbers negatively as expected. However, the underlying sentiment in the markets we operate in are positive and we do have a better revenue visibility than we did last year, Which also means that we have raised our expectations to the top line growth to the upper end of the guided range for revenue at 18% to 20%. Despite the strong performance in the Q1, we still expect to have to invest in our entities internationally by utilizing Danish resources On international projects, hence we maintain our expectations to our margin at between 23% 25% for the full year. And with that, I will give the word to Thomas to take you through the financials in greater details. Please go ahead, Thomas. Thank you for that, Andre. And like already mentioned, I'm CFO in Netcompany, and I will go more into details with the financial performance Now Andre has already spoken to our performance in general terms, and I will go more in details with the performance in Q2. Revenue growth was 22.4%, positively impacted from currencies by 1.2 percentage point, leaving growth in constant currencies at 21.2 percent against Q2 2020. All revenue growth was organic in Q2 2021. Gross profit margin was 35.5 percent in Q2 compared to 38.4% in Q2 2020. The lower gross margin was a combination of different factors, which I will elaborate on a little later. The common denominator, though, can be labeled as Future growth enabling investments. Administrative costs grew by $26,000,000 or 27.5 percent. In that, a non recurring severance payment of around $7,000,000 related to operation in the UK was included. And adjusted for this, Administrative costs grew by around 20%, driven by normal costs associated with hiring new employees, Cost for external advisers in connection with our new headquarter in Oslo and our new office in Trondheim. And in general, more costs related to employee related activities following the gradual easing of COVID-nineteen related restrictions Amortizations have reduced by more than 60% as part of the intangible assets related to the FSN Acquisition of 52 percent of the shares in February 2016 have now been fully amortized. Net financials was reduced by 58% as both interest costs on our loans have gone down as we reduced the outstanding amount due. And also, we have converted a loan related to our acquisition of Hunter Macdonald in 2017, denominated in British pound to Equity, which has reduced the currency adjustment included in Net Financials too. And can we have the next slide, please? Public Sector revenue grew by 10.4% in Q2, driven by growth in particular in Norway, revenue grew by 77.6 percent and in the UK where growth was close to 14%. In contrast to the period up to 2020, Revenue growth in Denmark was the lowest of the units in the public sector, this time at 6.5%. This was, as in Q1, Due to a combination of more larger scale projects being won in the Private segment in Denmark and also a number of resources The Danish Public Segment Organization working on projects outside of the Danish Organization. The usage of Danish Resources on projects in other countries leads to lower margins in those countries as resources in Denmark are more expensive. However, It sets us up for future margin expansion and the cross usage of resources is an important element of implementing the correct net company methodologies in the countries outside of Denmark. Adjusted EBITA margin was 15.1% compared to 18.8% in Q2 2020, mainly driven by the increased usage of freelancers in Denmark, increased cost utilization and more hours spent on Business Development. Can we have the next slide, please? As in Q1, the Private segment outgrew the Public segment again in Q2, 2021 and grew by 45%. The growth is broadly based from both the Danish, Norwegian and the UK operation. Private segment revenue in Denmark grew by 40.7%, where the growth in Norway was 46.7%, and the growth And the UK was 46.7 percent. As the level of private segment businesses outside of Denmark is still limited, the cross usage of resources from both the Private Danish operation does not impact the Private segment in the other countries to the same magnitude as for the Public segment, And hence, we do not see the same level of margin decrease in the Private segment for the Group as seen in the Public segment. Consequently, margins in the Private segment increased in Q2 2021 compared to Q2 2020. Gross margins increased to 40.3% from 39.6% last year. Adjusted EBITA margins was unchanged at around 26%. Can we have the next slide, please? The growth was, as mentioned, based on strong performance in the Private segment. Norway saw the stronger growth in the Group and grew by 47.1 percent as a result of the wins on the public segment during Q4 2020, which has led to an increased utilization in Norway. In the UK, revenue grew 22.3%, driven by our relationship with the NHS, but also with other large existing customers. In the Netherlands, revenue declined 2.9% following lack of decisions on a number of larger public tenders following the election in February. It was only towards the very end of the quarter that these tenders were finally awarded, and Netcompany managed, as Andrei has already mentioned, to get on 2 of these. So can we have the next slide, please? Gross profit margins are 3 percentage points lower than for Q2 2020. There are a number of factors impacting the gross profit margins, We have increased the usage of freelancers in the Danish operation by 40 compared to the same period in 2020. In the group, whereby senior resources from the Danish organization have been utilized on projects in the UK, Norway and the Netherlands. The amount of senior Danish resources currently on international assignments is around 100. This has impacted gross margin Negatively by around 1.5 percentage points. Thirdly, we've spent more hours on what we call business development activities in the Q2 this year compared to the same period last year. This covers tender writing activities, enhancing of our GovTech framework, Investing into solutions delivered that potentially can be developed further into platforms and so on. When we do these activities, The level of utilization declines, leading to lower revenue, but on cost that are still maintained. This has reduced gross profit margin by around 2 percentage points. Offsetting these negative impacts to gross profit margin was significantly improved performance in the UK and in Norway, which together improved Group margins by a little more than 2 percentage points. While the activities related to the increased cross utilization have a short term impact on margins, it is our firm belief That they are the right ones to make as they will enable the units outside of Denmark to generate growth at a rate which will sustain the strong growth of the Group And can we move to the next slide, please? Adjusted EBITA margin for the Operating Entity decreased by 4.1 percentage point in the quarter. Most of that is due to the reduced gross profit margin that I just explained. In addition, a non recurring severance payment in the UK accounted for 0.8 percentage point of the 4.1 percentage point reduction in adjusted EBITA margin. We did see increased costs related to employee activities, and this was expected. And we are actually pleased that it's now possible to have more face to face activities with our employees. We expect these type of costs to continue to increase through the remaining part of 2021. Can we move to the next slide, please? Free cash flow was negative €10,000,000 in Q2 2021 compared to positive NOK 103,000,000 in Q2 2020. The main reason for this was the payment of NOK96 1,000,000 due to The Danish Vacation Foundation, following new vacation law implemented in Denmark, whereby employees earn the right to their vacation on a monthly basis rather than in the old model where it took 1 year 4 months to have the right to paid vacation. The payment of the amount due related To the vacation for the Danish employees is voluntary for all companies in Denmark. However, if you as a company do not pay the amount, you will have to Interest to the government and given our strong cash position, we have chosen to pay the amount due. Day sales outstanding were 65, In line with the level in Q2 2020. And in general, DSO tend to be a little higher around Q2 as The end of June is also the high season for holiday with many of our customers. Work in progress has increased by 16% and accounts receivable around 26%. Together, they increased by 21.9 percent, in line with revenue growth. In Q1, we repurchased own share So in Q2, we repurchased own shares of around €50,000,000 and we have invested a further €25,000,000 into the JV we have with Copenhagen Airport. So despite all of these payments, cash at hand still remains high at 179,000,000. So with that remark, I've concluded the detailed financial analysis, And we'll now open up the call for questions. So can we move to the Q and A slide, please, and open up the call for questions? Thank you. Thank The first question comes from the line of George Webb from Morgan Stanley. Please go ahead. Your line is open. Good morning, Andre and Thomas. I hope you are doing well. A couple of questions on my end. So firstly, to touch on that Danish resource cross utilization topic. And as you've mentioned that sets up this year and expect it to continue for the rest of the year. Can you give a bit of background on what prompted you to step up that Cross utilization in Q1 and Q2 of this year in particular, is that down to anything around the progress the non Danish business units were making? Was it tied to the whole work in progress being made easier by remote working or is there any particular catalyst there? And to what extent is this Still a short term measure that only lasts this year to accelerate that build out of capability or could it continue into 2022? And then secondly, the background question, can you talk about what level of wage inflation you've been seeing in prior years in your business And what you're expecting for this year as a whole? Thank you. Yes. Thank you so much, George. Well, basically the usage of Danish Resources in particular Norway and UK is a result of Complex high end projects where we need Danish resources to make sure that we get It's not enough. Sometimes you have to work with us in order to make sure that the people you train do it the right way. And the whole idea is to have More Norwegians, more British people and also more Dutch people knowing this and using it the right Because then they can teach. Again, they're in place. So it's just it's actually on the positive background because many of Projects that we've won, particularly also in the public sector, requires us to use Some of the best people and that's investing into future growth. Your question regards to whether it will continue in 2022. Well, The reason why we're doing it now is because many of these projects are being defined and also many of the employees we've hired in Norway and hired in the UK. They need that now in order to reflect and teach onwards to the people there. So right now what we're looking into It's at least this year and then hopefully we'll have trained enough. So the competencies in these Markets are on substantial level. I mean depending on the growth and the type of projects we get there, we might need to help more or less. But right now we've chosen to invest into competencies at specifically Norway and in the UK. And when it comes to the wage inflation, Thomas, do you have any projections in regards to that? Yes. Typically and thanks, George, for the questions. Typically what we do in Netcompany is once a year we adjust the wages for all of our employees. And then we have our own rhythm, and the ones that are well performing will or have historically been given Salary increases are between 9% 12%, which even in a tough and tightened labor market It's still competitive. Now we can do that and still maintain our performance given the usage of the pyramid structure and the ongoing hiring of new employees. So when we look at it on a full year, cost per employee is Fairly stable. Now in terms of what the wages are going to look like next year, still premature to look like or to say anything about. But during the year, we have not increased the wages midterm or what have we. So we've managed with our model so far. That's really helpful. Thank you. And maybe just one quick follow-up. I mean just in Q1, attrition was kind of sub-sixteen percent LTM, Up to over 2018 in Q2. Is that would you expect that to get worse from here? Is that now a kind of level that you can plateau at even in a tough labor market? I think it's a result of COVID being more or less over at least in the minds of people. And We have also seen a smaller churn when we were in the midst of the pandemic. So I think it's a natural reaction. Well, it's difficult to say exactly what's going to happen, but right now we are able to attract New talent, we see no change in the satisfaction of our employees at the moment. So I think those two things Indicate that we still have a very positive work environment and people like to be with us. So we're definitely hoping That this increase in churn is just a result of let me put it this way that the labor market is free again in a sense. Thanks very much. Thank you. The next question comes from the line of Klaus Almer from Nordea. Please go ahead. Your line is open. Thank you. Also a few questions from my side. The first question goes to the high tender activity mentioned In the report and I guess also in this presentation, when do you expect these projects to be awarded? And also is the nature of the projects that you are tendering for, especially outside Denmark, changing in structure size and so on? That will be the first one. Yes, thank you for that question. I think it's a very good question. And I'm actually delighted to say that The nature of the projects and also the size of the projects that we're bidding for is they're getting more complex and they're also getting larger. And that goes both for Norway in the U. K. And especially in when it comes to the GovTech framework and our Public tenders, you need to know exactly what you're doing and you need experience. And that's also one of the reasons why we've Chosen to invest some of our daily resources into that. So it's on the basis of a positive development and Theoretically, you can continue to grow in Denmark by more than 20% for many, many, many years. Practically, I think it's a good idea To invest into winning larger projects in the other markets. And when it comes to when these will be awarded, Well, typically it's on the 6 months, typically 2 quarters from tender writing activities to winning. Approximately 6 to 8 months typically when it comes to the public tenders. Some a bit quicker, some a bit Slower, but that's typically the time frame. Okay. That makes sense. Then the second question goes to the employees. The number of employees is up by something like 22% year over year. You also mentioned that you are adding Denmark's external consultants. So what is the total amount of client facing resources up year over year? The client facing resources is up by around 0.8 percentage points. So The non client facing, 5.9% compared to 6.8% quarter to quarter. So around a little bit of 1 percentage point, Claus. And then clearly, we spend more time, as Andre said, on activities related to tenders. We spent more time with Danish Resources on projects in UK, Netherlands and Norway, and that does not yield Same revenue, so that's why there's not a one to one match on that in top line growth. But does that include the external consultants You added in Denmark? Yes, they are included because they are fee billers. So everything that is fee billers is included in that. So the Freelancers, the 77 in Denmark is included and the independent contractors, the 14 that is left in the UK are also included because they're fee billers Of e generators. Okay. Sure. And then this growth, if you look at it Year over year more than 20%. And if you try to match that with your implicit guidance for revenue growth in the second half, Then you have grown your number of employees somewhat more than that is reflected in the guidance. Does that mean you are expecting to keep using a lot of resources on tendering activity? Or how should we try to match these development Yes. No, I think in general, what We said in Q1 and what we've also highlighted here is that part of the growth that we had in The first half of the year is also due to the fact that our employees have deferred some of the vacation. So that means that some of the growth we've had in Q1, you can say something we've borrowed from or in the first half is something we've borrowed from the second half. So irrespective of the fact that we are more FTEs, and I understand your logic, which is correct. Then we do not expect the full impact of that in the second half of twenty twenty one because there is still some Deferred vacation that will be taken and that will clearly have a negative impact on the potential growth. So I understand your logic, Claus. And the reason why it's not a Full one to one spillover is that there is still some deferred vacation to be had in 2021. Okay. Thank you so much. The comment from my side, I could just see that there on the presentation, I was referring to 2 slides that are in the appendix. So we will update the latest version, but the slides that we're missing and the reason why you could not potentially reconcile ongoing is the revenue in public and private. And they're the first two slides in the appendix. So that's where they are. Thanks. Thank you. The next question comes from the line of Yiwei Zhou from SEB. Please go ahead. Your line is open. Hi, Andrew and Thomas. Thank you for taking my question. I have 2 left here. So you mentioned the higher attrition rate in the Dutch operation. And would you add a bit more color on this? Are you seeing sort of more senior and the management level employee leaving the company? Or is was More sort of consultants are leaving. I'll do question 1 at a time. Okay. When it comes to the Dutch operation, it's as you guys know, it's the most recent acquisition. And For sure, we've also taken some deliberate action in taking some people out and putting in new people. We've also done that. So it is a natural thing that we do. And we've had it actually also happened in Norway and U. K, if you look at it historically. So we're not too worried about that. To add on what Andre is saying, there's also a little bit of timing in it the way when you compare and when you calculate these churn rates. So From the time people leave us and then until we have hired new ones, if that happens in different quarters, then of course, the quarter where we have levers but no new starters, The churn will, by pure math, be higher. On the last couple of months, we've seen inflow of staff in Holland And to the tune of 8 to 10 new employees per month. Yes. Okay. And can I just follow-up here? So if you compare to Denmark where you have a very strong brand, do you see it's more challenging for you to hire people in this new market? Well, of course, you don't have the same brand as you have in Denmark, but it's similar to what we did in Norway and also in the UK. You got to start up by working closely with universities and take it one step by step and then Over time you will build up your brand and that's no different from the Netherlands that has been in Norway and In the U. K. So in Norway for instance we now have a much better brand than we also do in the U. K. But it actually follows Pattern because in the beginning you don't need that many people relatively and then when you start building up the brand and the activity starts to yield results, You can hire even more. So we're following that path as we normally do. Okay. Thank you. Very clear. And then my second question Yes. Regarding the utilization rate for Norway and the UK, so it is positive to see The gross margin improved, but the Q2 and how should we compare the utilization rate to Denmark? We don't disclose the utilization rates on our ratios on a country specific level. On the group, historically, and that's also the case now, we've had utilization rates of between 86%, 87%, 8.7 ish. And both the U. K. And Norway have enjoyed increased utilization rates during Q2, which of course is also leading into improved gross margins. Neither the operation in the UK nor Norway Are at an accumulated level to the same to the group on utilization year to date, but they are picking up. And Norway is a little bit ahead Of the U. K. Okay, great. Thank you. I jump onto the queue. Thank you. The next question comes from the line of Gianmarco Conte from Deutsche Bank. Please go ahead. Your line is open. Good morning, Andrea and Thomas. Thanks for taking my question. I have a few. Maybe just one going back on the Danish resource. How are you actually addressing the now recurring problem of having these resources to other geos, which will lead to lower margin As well as having to hire freelancers. Like my question is, could this be a recurring event potentially That's the F. S. Guidance. Do you have a plan on hiring senior staff in those geos So I said you replicate the Danish business. That's my first question. My second question is in what years did you actually invest And for business development activity, such as tender writing. And then I'll take the follow-up. Toss is in the other geos and will that continue and will we hire senior staff in those geos? I mean, Of course, we will also hire senior staff in those geos and we will also, I think that's very important, make sure that the next generation of New hires in these geographies because we also hire consultants and senior consultants that are taught off by Danish managers to do what they have to do In order to succeed with the projects we win. And this is a long term investment because we want to be successful in delivering these projects To the customers in both Norway and in the U. K. Where we are spending most of the time right now. And that's because We know that winning and delivering projects will yield a long term relationship with our customers. So that is an investment into our customer relationship building and an investment into teaching the next generation of local staff How to do and that the best way to do it is specifically on Encompass projects is by doing it together. So that's what we do. And then I'd also said earlier, when you've done it with 1 person can typically Grasp maybe 2 or 3 persons on the level lower. So by doing so we will Create more people in the local geographies that are capable of doing the same exercise again after the Danish have been So that's what we're doing right now and specifically in the government sector and specifically investing More a lot of time both in Norway and in the UK where I think we've had a breakthrough on several verticals In government, so I think it's a sensible thing to do in order to create the necessary growth there and the potential of growing even more in those countries. I'm sorry, I think I forgot the second question. Maybe I didn't write it down. Sorry about that. Yeah, yeah. So the second question was in what geography did you exactly invest? That was the UK and then the Norway specifically, yeah. It was in the U. S. Yes, also because the size of these, if you like the Netherlands, it's not that we're not helping the Dutch, But they are still a small operation. So what takes more effort is of course both Norway and in the UK where We've been for a longer time and where we see the demand of more complex net company projects and engagements. Okay. Just to follow-up, how many freelancers did you actually ask to and how many did you have in Q1? I'm just trying to understand first, Srila, what would be the market impact on a quarterly basis? So from Q1 into Q2 or from Q2 to Q2? So how many freelancers Did you have in Q1 2021? And how many did you have in Q2? Okay. Q2, we had 77. And in Q1, we had 59. And in Q2 2020, sorry, in Q2 2020, sorry, we had 40,000,000,000,000, dollars 42,000,000, dollars 38,000,000,000 and then $77,000,000 in Q2, 2021. So the increase from Q2 to Q2 was 40, so 40 more net freelancers. And sequentially from Q1 into Q2, The increase was 2018. Right. So on the level of normal freelancers sorry, Gianmarco. And the level of normal freelancers is, I mean, historically, we've been somewhere around the level of 40 ish in the group. Right. That's actually very helpful. Just to ask And on the first question, I was talking about the Bain and Trues. Is it not just possible to effectively hire Someone like some number of senior figures, for example, in the U. K, so you don't have to basically export People from Denmark. Or is the level of the complexity of the projects that you're addressing for example with the NHS so much A company dependent that you will actually know how to navigate the modality of how you're doing consulting at the company? Well, the thing is that there's a reason why we actually create those great I mean Those margins that are industry specific high because the reason why we create these margins is because we actually deliver in time on budget within the required ports. I know this sounds a bit bullish, but you really need to know what you you have to be trying you have to be working with this For quite a long time to understand how to do and how to operate and run a project that comes at a time. And you see it again and again In the industry, you're going to have experienced people that you hire and you put them in charge of a project and even though they've had 5 or 10 years of experience in other places. They will not deliver it on time and on budget and within the required quality levels. So we know from experience that taking 1 or 2 very, very Talented and great project managers from and it's not only Denmark, but primarily Denmark taking some of those resources that have done this before And several times will yield a successful project and then yield the margin we need and yield The people that we need to build up in the local geographies. So to answer it shortly, No, you cannot just hire experienced people in the lower geographies and then think that after reading the manual, They will run-in their company project exactly the same way as we do in with Experience Resources in Denmark. Thank you. The next question comes from Medt Kriskard from Carnegie. Please go ahead. Your line is open. Yes, thank you. I have two questions. I will take them 1 by 1. My first question is on the trend on the gross margin. You had 2% to this point impact, Which is explained by increased business development in the Danish public sector. Is Fokus tilting again towards the public sector in Denmark? And is it mainly tender writing activities which drag on the margin? Or is it from building on the GovTech framework? So that's my first question. Well, we are definitely even though the private market has been growing a lot in Denmark, we are still very much into the public market as well and we see a great deal of interesting tenders coming up. So we're definitely writing on that too. And When it comes to the GovTech framework, as you know, this strategic asset for us and we're using it across borders. So we're also investing some time and resources into that. But most of that time spent is on tenderizing or business development Directly associated to customer engagements. That's the closest I can get to an answer to that. Thank you. Okay. The next question comes from the line of Two questions please on my side. Firstly, if you can discuss the competitive environment especially outside of Denmark. Are you seeing some of the pressure On the labor market, it's starting to be reflected in a more favorable pricing environment. And then secondly, around In particular, the U. K. And the Netherlands, any specific verticals you're focusing on or were you seeing a strong momentum? You've seen the UK has been very much driven by the NHS, but any more color on verticals would be very useful. Thank you. Yes. I think when it comes to favorable prices going up on our services and Because of the decision being more and more confirmed in businesses, I think it's very difficult to predict that. Think in the government sector there's a very high competition on all tenders. And in the private sector, one might expect that some prices will go up if the need of if the resources are becoming More and more scars. But looking at it historically, I think, I mean, if we look back over the years, we haven't seen A tremendous price development in service. It has been quite stable really and that's what we've been planning with so far. When it comes to industry specifically, I think the GovTech framework as you if you look into that Framework, you see there's a lot of focus there on both grant management solutions, but also on the whole tax and customs part And a lot of on self-service and larger portals for self serving solutions for citizens. And that's where we are definitely putting our focus both in the UK and in Norway and of course health as you mentioned yourself Which is already at somewhere somewhat where we've penetrated both Norway and the UK. Okay. Thank you very much. Thank you. We have a further question from Mitch Quicksgaard from Carnegie. Please go ahead. Your line is open. Thank you. Yes. So then my second question, is it possible to give an update on Sweden? I guess, can some of the margin drag be explained by tender writing activities in the Sweden? So maybe just to explain, are you in the middle of tender writings in Sweden, are you availing the results of certain tenders in the public sector? Thanks. Well, I mean, we are also writing some tenders to the Swedish market. That's the closest I can get to that. But And we have an open opportunity to go into Sweden also on a greenfield basis if we want to do that. But I cannot come closer to that. When we see something interesting coming up in the Swedish market That we think we have a good chance of winning. Then of course we will invest into tenderizing there, but we take it on a case by case basis. Sorry, I can't get into more detail than that. That's great. Thank you. We have a question from Claus Almer from Nordea. Please go ahead. Your line is open. Thank you. Yes, just a few follow ups about the Danish operation. We saw that the Danish operation Was down profit wise year over year. Should we expect the same for the second half this year? That will be the first? Say down, Claus, which things are you referring to? EBIT sorry, EBITA level. So on EBITDA level, it's correct that the Danish organization was down year over year. There are some costs that are Coming in on administrative level, as also alluded to, in the second quarter And also remind you that Q2 in 2020, we had a significant reduction of costs We did not use any travel or anything, Denmark closed down on the 11th March 2020. It seems a long time ago, but so Q2 was kind of low. We will increase or continue to increase cost during the second half of the year. And that is all reflected and incorporated also in our guidance for the full year where we maintain with the 23% to 25% margin. Okay. Then also mentioned that during this presentation that you are transferring Resources outside Denmark, thereby having a negative revenue impact. Does this mean you're also Tendering for less projects in Denmark or is actually more a timing of revenue in Denmark I. E. We will see more revenue, everything equal, going forward. I mean, That's a question with many moving parts, which makes it difficult to give you a straight answer. But in terms of revenue in Denmark and potential going forward, If you look at it in another way, we have around 100 people from the Danish organization doing jobs In international units, we've substituted them with 44 more freelancers compared to Q2 2020. So that means that could we have had more top line in Denmark? Was there more work if we had substituted the full 100? Most likely. But If we would have done that, that would have just been passed through, of course, and no real meaning to do so. So the level of FTEs, which is a good indicator for how the future will look, is looking promising in Denmark also. Some timing in terms of when we write tenders and when they come, and that's how it's always been. That is particularly so in the public sector. And then we continue to focus on larger potentials in the private sector, which also looks promising for the remaining part of the year. So that's as close as I can get it. I know that the I think you wanted a more detailed question, but we cannot be more detailed at this point in time. Fair enough, Thomas. Thanks. Thank you. We have no further questions. So I will pass back for any closing comments. Well, thank you so much and have a very good day.