At this time, I would like to welcome everyone to NNIT Investor Presentation for Q1 2026. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be in a listen-only mode throughout the presentation, and afterwards there'll be a question and answer session. To ask a question during the Q&A, please press five star on your telephone keypad. I'll now turn the call over to your speakers. You may now begin.
Thank you very much, operator. Please turn to the next slide. Good afternoon, and thank you for joining NNIT's webcast. My name is Lars Petersen, and I'm heading up the communication department at NNIT. With me today at the headquarter in Copenhagen, I have our newly appointed CEO, Claus Rydkjær, and CFO, Carsten Ringius. In a minute, they will present the first quarter results for 2026 we released a couple of hours ago. Please turn to slide three. In the presentation, Claus will go through the key business highlights, and then Carsten will follow with the regional performance, group financial highlights, and elaborate on the financial outlook, which we updated on May 7. Before heading into the next slide, please do pay attention to the disclaimer in the bottom of the slide. Let's turn to slide four. Claus, please.
Thank you, Lars. Good afternoon, everybody. My name is Claus Rydkjær, and I am, as mentioned, the CEO of NNIT. First of all, I just want to mention that I'm very pleased to have joined NNIT, where I see my experience from the consultancy industry match very well with the aspirations of the company. I had my first day on April 7th, since then I've spent a lot of time meeting the people and establishing a deep understanding of the organization. So far I've had a sort of a very good and positive impression of our people. They're highly skilled, motivated, and very engaged across functions, regions, and departments.
Based on the first quarter results, which we will go into in more details later, it's clear that we need to act to change the current trajectory. We need to restore growth and lift profitability while we're launching initiatives to support top-line development. Together with the leadership team, we're assessing our operating model and what our value proposition is towards our customers to ultimately increase the impact of our sales efforts. My priorities for the rest of the year are to return to profitable growth. We're currently leaving no stone unturned, meaning that we are applying a holistic and analytical mindset on how we're going to take action to break current momentum.
We're also sharpening our strategic focus and what our service offerings should be in the short term as well as in the long term. With all due respect to the complexity of the company, this analysis phase will not be done overnight. We need to conduct an exhaustive analysis to ensure we make the right choices. We owe that both to our employees and our owners. The conclusions and actions that will come out of this effort will also enable us to strengthen our go-to market approach. I will assure you that you will hear much more about this later in the year. Please turn to slide five for the group figures for the first quarter.
We expected the first quarter results to be modest. However, the financial performance was below initial expectations, reflecting geopolitical turmoil and sustained customer caution impacting worse than planned. Revenue came in at DKK 422.5 million, equal to a reported revenue growth of - 9% and constant currency revenue growth of - 7.3%. The lower revenue generation had a material impact on group EBIT, excluding special items ending at DKK 1.1 million, corresponding to a margin of 0.3%. Clearly, we're not satisfied with the results, why we are taking action to improve. Please turn to next slide. Last week on May 7th, we updated our financial outlook for 2026.
Beyond the first quarter financial performance, the order entry did not materialize as planned, meaning the backlog for the rest of the year is not looking as strong as we had expected. Therefore, we updated our constant currency revenue growth outlook from previously 0%-5% to now being single-digit negative. Despite cost savings materializing as planned, we continue to scrutinize the cost base to partly offset some of the revenue shortfall to protect profitability. However, the group EBIT margin, excluding special items, has been updated from 6%-9% to 4%-7%, reflecting the lower revenue outlook. Special items have changed from significantly below last year's level of DKK 83 million to below last year's level of DKK 83 million.
Carsten will share some more details on the outlook later in the presentation. Please turn to slide seven. Let me begin by saying that we have some strong building blocks to leverage at NNIT. Firstly, we are well represented with big pharma, having 19 of the 20 largest companies as customers in our portfolio. Secondly, existing customers stay as customers with NNIT for long periods due to high quality of project deliverables. Lastly, our customer satisfaction is high, with a score of 4.6 out of five, which truly underpins the customer loyalty. As a company, we need to leverage these building blocks to restore growth. To further support those building blocks, we have launched two AI platforms during the first quarter.
We launched the AI-enabled software delivery framework named Lumina. Lumina is a scalable platform, positioned for deployment across the public sector and life science. The second platform, Alera, is the name of our validated AI platform for regulated collaboration. It addresses the growing gap between rapid AI adoption and strict regulatory requirements across highly regulated industries such as life sciences, finance, and the public segment as well. We've received very good feedback from customers validating the proof of concept and the focus is now to market and scale the AI platforms to a broader number of existing customers and potential customers. During Q1, we've continued to improve the operational metrics such as utilization, and we've progressed well on the cost-reducing initiatives.
The efficiency gains and uplift seen in Q1 were insufficient to offset the impact of the significant revenue decline on profitability. As mentioned earlier in the presentation, we're leaving no stone unturned. Our focus is to launch initiatives around our sales effort to improve the top line in the short term. To support profitability, we're taking out cost and capacity to align with the current market demand. We expect positive impact from the initiatives towards the second half of the year. We're also taking the next steps in terms of assessing our operating model, how we go to market, and ultimately revisiting and sharpening our strategic focus. The analysis phase is currently ongoing. Please turn to the next slide. Now I will hand over to Carsten for the next section. Carsten, please.
Thank you, Claus, and good afternoon. Please turn to slide nine for an update on our life science regions. The life science industry has been affected by the broader slowdown we have seen in the past quarters. This leads to customer hesitation impacting project scope and size, and has weakened the Q1 order increase. In Region Europe, the financial performance was below expectation. In constant currency, revenue declined 15.3%, heavily impacted by aforementioned customer hesitation. On a more positive note, the region has continued to expand its presence to the lower tier segments as strategically outlined last year. Moreover, we have started to see traction with our AI offerings, where we signed a larger contract with a mid-tier global pharma company. The regional EBIT decline compared with the same period last year driven by the revenue decline.
This was partially offset by the naturalization of cost savings and capacity adjustments. Region U.S. had a very challenging quarter on the back of the unexpected slowdown that occurred in Q4 last year. The slowdown affected the backlog entering the year, resulting in a constant currency growth of - 15.8%. Despite the slowdown, U.S. has closed several small-to-medium-sized contracts. Some larger projects continue to be delayed. From a commercial perspective, U.S. has been part of the National Drug Code pilot program, now progressing into its second phase. We believe that the NDC-12 is an interesting business opportunity. It is too early to conclude on the revenue potential.
U.S. profitability materially declined compared with last year due to the contraction in revenue and fewer closed deals within the supply chain area where IP revenue can be recognized by signing. We are unpleased with the financial development in U.S. for the first quarter, but we do see and expect to see a gradual improvement through the coming quarters based on the pipeline bringing U.S. back to previous levels. In the first quarter, Region Asia was significantly impacted by the decline in revenue from an existing large tier one customer that was not possible to offset from new contract signings. As a result, the constant currency growth was - 7.8%. The macroeconomic situation in China continues to be impacted by the trade policy conflicts. However, Region Asia has continued to expand its customer base towards local companies during the quarter.
The region's EBIT margin declined year-over-year due to the lower revenue. By on cost savings materializing as planned, Region Asia has continued to reduce its cost base by merging two business areas to leverage commercial and cost synergies. Please turn to the next slide, where I'll go through Public DK and SCALES. In connection with the release of our annual report for 2025, it was announced that we would report on Public DK and SCALES separately instead of one region, known as the former Region DK. On April 24th, we released a restatement of the former Region DK. The Public DK segment delivered solid growth of 4.8% in Q1, mainly driven by existing contracts from 2025. Two of the larger contracts that we won in Q4 last year, we have ramped up and started to deliver on the projects.
These contracts are with the Danish Health Data Authority. In Danish, it is Sundhedsdatastyrelsen, and with the Danish Agency for IT and Learning, also known as Styrelsen for It og Læring. In Q1, the order entry has been lower than normal, mainly due to the Danish general election taking place in March, affecting decision-making on tenders. As mentioned on a previous slide, we launched our AI framework, Lumina, which has been demoed to a number of customers with strong feedback, and we believe that we have a role to play with Lumina going forward. Revenue increase, operational efficiency gains, and cost savings materializing positively contributed to the regional EBIT margin that increased compared with the same period last year. SCALES has continued its growth momentum into Q1, delivering constant currency growth of 10.8%.
The growth has mainly been driven by the backlog from last year. SCALES won two large contracts in Q1, which will start to have impact on revenue in 2026, going into 2027 as well. During the quarter, SCALES has also integrated the former Microsoft service offering team from the former Region DK to drive a stronger and more coherent offering towards our customers. Even though the margin development was flat compared with same period last year, SCALES continued to have a very solid profitability with a regional EBIT margin of around 20%-25%+. Please turn to the next slide. The first quarter results were below our initial expectations. Of course, we are not satisfied with the performance on both revenue and profitability.
Revenue amounted to DKK 422.5 million, resulting in a 9% negative reported revenue growth compared with the same quarter last year. The constant currency growth was -7.3%. Operational efficiency gains, capacity adjustments, and materialization of cost-saving initiatives could not offset the revenue declines. The group EBIT, excluding special items, ended at DKK 1.1 million, equal to a margin of 0.3%. Special items amounted to DKK 8.3 million, which was significantly lower than last year. The amount is fully related to restructuring costs. This lower cost than last year is driven by lower earn-out payments in 2026, finalization of new IT platforms, and integration and lower restructuring costs. Free cash flow was DKK 41 million for the first quarter, which was DKK 114 million better than last year.
This is mainly due to a lower cost base, improvement in days sales of outstanding and that we have completed earn-out payments related to prior acquisitions. Turn to the next slide, please. Last week, we updated our financial outlook for 2026. The background for adjusting the constant currency revenue growth outlook was due to the worse financial performance in Q1 than initially expected and due to lower order entry negatively impacting the rest of the year. As Claus alluded to, we are initiating short-term levers to regain growth momentum. The impact from those is expected to be towards the second half of the year. Group EBIT margin, excluding special items, was adjusted due to the constant currency growth update. However, we do expect to offset some of the lower revenue through further cost savings and capacity adjustments.
Special items was updated to reflect a potential need for more structural changes and costs related to capacity adjustments. In the updated financial outlook, the market unrest is assumed not to further deteriorate, and no M&A activity has been assumed. Please turn to the next slide. Now I will hand it back to Claus for some closing remarks. Claus?
Thanks, Carsten. Please turn to the next slide for my closing remarks. At NNIT, we do have some strong building blocks to leverage. We are very well represented with the 19 of the 20 largest pharma companies being our customers. Customers stay with us for long periods, and the customer satisfaction is high. Furthermore, we've launched our AI platforms, Lumina and Alera, to accelerate our AI journey. With these two offerings, we believe we have a role to play in this space and we're now focusing on scaling. Based on the current financial performance and the trajectory of the past quarters, we must act.
We are launching initiatives to restore growth and to reduce our full cost base to lift profitability. This will not have an impact overnight, but we expect to see positive implications during the second half of 2026. We're also sharpening our strategic focus where we are assessing our operating model, go-to-market approach, value proposition, and service offerings towards our customers, amongst others. We will include you in our findings along the way. Lastly, we adjusted our financial outlook, which we communicated on May 7th. Despite a year with negative constant current growth, we expect to reach a margin in the same area as last year. This concludes the Q1 2026 presentation for today. We will open the line and take your questions. Operator, please turn to the next slide and open for questions.
Thank you. We'll now start the Q&A session. If you wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. We'll have a brief pause while questions are being registered. The first question will be from the line of Yi wei from SEB. Please go ahead. Your line will now be unmuted.
Hi, Claus and Carsten . Thank you for taking my questions. I have three questions for now, do one at a time. Firstly, when we're looking at your regional performance, I mean, I realize that some of your large peers, international peers, claim that their Life Sciences segment was a positive growth contributor in Q1, but you are experiencing double-digit decline here. What are the market dynamics, and do you think you have lost some of the business to the large players? It's my first question.
Well, thank you for the question, Yiwei. As you know, we have different customer bases if you compare Region Europe with Region U.S.. If you look at our Region Europe, we believe that we are, you can say, having a strong foothold with our tier one customers. As you also know, we have strategically launched last year a dedicated focus towards tier two and tier three customers. We do believe that we have a significant potential with the tier two and three customers that we still need to expand our footprint with. With our tier one customers, we experience that we see some hesitation in proceeding with the projects that we are engaged with. As you know, we are not a full service Life Sciences provider.
We are a niche player, and we are experiences within the areas that we normally do projects in that we see some hesitation leading to this revenue shortfall. Especially if you also look at our Irish business, where we have impacts of the tariff decisions in the U.S. causing some of our customers, specifically in Ireland, to consider moving, for example, to the U.S. I think you cannot, you can say weigh NN IT against the sort of the general growth trajectory in the life science business. We'll look at how we are positioned towards the specific customers.
In U.S., what is impacting us specifically in Q1 is the lower signings of business within the serialization business, which is coming with a relatively high profitability, thereby impacting both the top line and specifically the profitability in Q1. We see that merely as postponements and not a link to some kind of overall declining trend within this business area. It is more of a mixed picture than what we see you describing there.
Okay. Thanks. Can I just follow up here? Maybe, looking at your service offerings, do you see any, sort of your conventional business are at risk, because of the agentic AI? Have you seen any customers switching to the AI solutions that you are not engaged with today?
I think sort of, if we look at it from a short-term perspective, then sort of we're not seeing sort of an immediate threat in the short term, as a result of customers moving to AI solutions, taking away our work. However, I do strongly believe that, when we look at the longer term, sort of, we really need to sort of continue to build on top of our current AI platforms to have a strong response as AI becomes more dominant also in our areas of expertise.
I think sort of in the short to medium term, sort of, what we are sort of really zooming in on when we look into our offerings portfolio is to make sure that as we see an increased need for sort of specialist capabilities, we want to, sharpen our capabilities within our sort of the niche fields of play, in a stronger way compared to what we've, done in the past. This is where sort of, we will focus, going forward. You could argue that we will have sort of a dual focus. In the short term, it's really about strengthening, our capabilities further in the niches in which we play. On the mid to long term is really making sure that we have strong AI responses as AI becomes even more dominant in our field of work.
Great. Thank you. My last question here, then I jump to the queue. Some of your peers also talking about sort of the benefits from AI, where they could do automation in the corporate function, the back office. Where are you in this journey? Do you also have some initiatives here?
As you're aware, sort of I joined roughly four or five weeks ago. One of the things that we're pushing forward now is a deep analysis of how we also leverage AI, not just for customer-facing purposes, but also how can we kind of go even further in leveraging AI internally, both as an enabler of our internal functions and to drive efficiencies and there. Really also in the way that we work on a daily basis and how we deliver our services. Sort of AI will impact our business in multiple ways. As a tool to further automate our internal work is definitely high on the agenda.
Cool. Thank you. I will jump back to the queue.
Thank you. The next question will be from the line of Poul Jessen from Danske Bank.
Thank you both. I also have two questions. Just first reflecting on the last answer you had. When you say you have to internally drive efficiencies and deliverance models on AI. Have, as you see it, NNIT being behind the curve there and not being as forward-looking as we should have assumed that a company would be in this industry?
No, no. We believe that we are actually very well-positioned and have been working with AI for several years to be able to leverage this both into our, you can say now in our production, but also in our enabling function. We don't believe that we are behind the curve. Actually, not at all.
It's more acceleration?
Sorry, Poul, could you repeat?
It's more an acceleration of what you're already doing?
Yes. Yes. Exactly. We are scaling up. We see a still modest, you can say revenue generation from AI towards our customer, but it is really now scaling, and we are putting massive efforts into scaling it extensively over the coming quarters. Also internally expand the use of AI. Just to mention two examples, we have replaced the IT internal helpdesk with AI-supported guidance, thereby also saving, you can say, external costs, for example, in an area like this. We're currently applying agentic AI across different functions. We have also established a center of excellence internally focusing on the supporting functions to put AI into operational tasks to leverage that technology to save cost.
Okay. Then to Claus. You said that point one is to restore growth. You also said that actions has been taken already. Can you just give some examples of what actually has already been changed and to drive growth?
As I've come in, we're working with a, what I would call a horizon one and a horizon two perspective. The horizon one is really to identify the immediate and short-term actions that we can execute already where we've already started now. Horizon two is more related to the analysis work where we're turning every stone to really understand how we can ensure the right setup of NNIT going forward.
If we look at the short-term actions, what we are doing is that, we have, sort of, implemented, sort of on the CRM side of our company a more detailed and disciplined follow-up of the full pipeline to give us much more clarity on how quickly the, sort of the pipeline moves from stage to stage, enabling a much more detailed follow-up with the, with the regions. That's one example. Another example is that sort of, then from my seat, sort of I'm now doing a weekly follow-ups on pipeline, and all variations to plan, with each of the individual regions. We are getting sort of, I would say, much stricter governance, applied across the organization.
In addition to that, we also have a number of concrete activities in the sales area that we're pushing out, where we're looking into sort of upselling, cross-selling potential on top accounts, both across the life science business and the public business. We're looking into to sort of contracts that are not meeting the sort of the margin ambitions. Kind of laying out the individual strategies for each of these contracts. It kind of It's a relatively wide array of very short-term operational actions that we are basically implementing immediately. With the longer slightly longer effort to really analyze the organization in depth running in parallel.
We hopefully already by the summer holiday will be able to also communicate to the organization, more details about sort of, where we go from here. With an ambition to really sort of provide much more clarity when we get to the second half of the year, closer to the beginning of Q4.
When should we expect a comment or an outcome of that analysis? Is that the Q2 results and orders or when you announce it internally?
I think you should expect something in Q4. Something very, you can say more detailed, but already a direction after the summer vacation.
Okay. The last one for now is on the guidance. If I take your high-low on the guidance, I assume that, let's say, SCALES continues at the rate you had in first quarter and a little more, and you had Public Denmark at some 4%-5% growth. Implicitly you are guiding some 10%-20% decline in Life Sciences, where you had 14 or so in a constant currency in Q1. Does that mean that the guidance you have given by now does not assume a material impact of the initiatives?
Well, I can, I can not confirm you can say that is - 20%. You know, the initiatives that we are launching here on the very short term basis, as Claus alluded to, is both initiatives to take out costs, of course, to safeguard our margin, but also upselling on existing accounts. It is something that will both, you can say, short term, fill some of the pipeline gaps that we have seen coming from Q1 with the lower than expected order entry. Also long term, as we have more, you can say, structural changes to our go-to-market approach, build a more pipeline later in the year.
On the short basis, it's both cost and short-term revenue gap close activities we're looking into on existing accounts. As mentioned, I think the more detailed plan for returning to long-term growth is something that we will share after the summer.
Okay. I'll step back in the queue.
Thank you. As a reminder, if you wish to ask a question, please press five star on your telephone keypad. We'll have a brief pause while questions are being registered. We have a question from Poul Jessen from Danske Bank. Please go ahead your line will now be unmuted.
Thank you. I have a few one. I think, Carsten, on the full year numbers, you guided a very soft first quarter, and you had. You also guided that or indicated that the public sector should see a ramp up on deliveries from the contracts you won last year, accelerating in the second quarter. Should we see a higher growth rate for the rest of the year in the public sector than what we saw in the first quarter?
We're not delivering specific guidance on the regions, we are correct. We are expecting some improvement in the public sector from these larger contracts that are now live in Q2. It is something that will increase our revenue and growth going forward within public.
Okay. There has been no talk whatsoever about sales, looking forward or any initiatives today. Can you give any, if you want, update on where you are in the strategic review or when we should see a conclusion on it?
Strategic review, we have so far, you can say, changed our external segmentation and how we report. I think most, you can say, people following NNIT also look at the standalone annual report for SCALES and have an idea about how they have been performing. What we have done now is make a more transparent reporting for SCALES, including moving the Microsoft offerings we had in Region Denmark through SCALES to allow them also to establish a broader offering towards the customers once that they have completed implementation. The idea with this is really to also enable SCALES getting a larger proportion of recurring revenue in their business. That is still the plan to win large implementation projects and then extend the offerings of what has been transferred from Region Denmark, thereby fueling further growth.
Okay. Can and then a final one. Can you explain what's going on in the SCALES numbers that if you take the public numbers with the report for 2025, then if we assume a flat gross margin, then they should have had growth in 10%-15%. When you consolidate and you report a SCALES as private growth last year of 27%, more or less double than what the indications in the SCALES report were. This year you're back to the growth where SCALES has been more or less for a number of years. Anything I miss on why you were close to 30% last year and that deviates significantly from the recorded SCALES, at the what else do you.
Yes. That is a very good question, Poul. It is really because what you see here is the consolidated SCALES reporting numbers. Here we have to take out internal revenue. As you maybe recall, SCALES had a big implementation in NNIT, where they rolled out a global ERP solution across the full NNIT business. In this reporting, we eliminate, you can say, that internal revenue. You will see that as external revenue in the standalone SCALES reporting.
Okay. I think it should be the other way around on where the growth would be highest. We can take that later on. Thank you for now.
Yes.
Thank you. As we have no further questions in the queue, I'll hand it back to the speakers for any closing remarks.
Thank you for the questions and for attending and listening in. Please do not hesitate to reach out to Carsten or me if you have further questions. With that, I want to wish you all a good evening.