At this time, I would like to welcome anyone to NNIT's webcast for Q3 2026. Today's call will be recorded. If you have any objections, please disconnect at this time. All participants will be in listen-only mode throughout the presentation. Afterwards, there will be a question-and-answer session. To ask your question, please press five star on your telephone keypad. I will now turn the call over to your speakers. Please begin.
Thank you very much, operator. Please turn to slide two. Good morning, and thank you for joining NNIT's webcast. My name is Lars Petersen, and I head up the NNIT Corporate Communications Department. With me today at the headquarter in Copenhagen, I have our CEO, Claus Rydkjær, and CFO, Carsten Ringius. in a minute, they will present the Q3 business highlights, financial results for the quarter, and importantly, our new strategy towards 2030. Please turn to slide three. Claus will go through the key business highlights, including the regional performance, and then Carsten will follow with the group financial highlights and financial outlook. Then Claus will come back and update you on the new strategy named OneNNIT 2030. Before heading on to the next slide, though, please pay attention to the disclaimer at the bottom of the slide.
That was on the previous page, but as we have turned to page four, I will say, Claus, please go ahead.
Thank you, Lars, and good morning, everybody. My name is Claus Rydkjær, and I am the CEO of NNIT. Now, I will briefly go through the key figures for the third quarter. The financial performance was in line with our expectation, whilst underlying business performance is improving. Our revenue for the third quarter amounted to DKK 410 million, corresponding to a reported revenue growth of [-3.5% and constant currency growth of -4.2%, adjusting for the divestment of NNIT Singapore. Our group EBIT, excluding special items, was DKK 22 million, equal to a margin of 5.4%. Despite revenue and margin are contracting compared with last year, the trajectory is in line with previous quarter, moving towards stabilization. That gives us confidence as we take the next step with OneNNIT, sharpening our focus, strengthening execution, and bringing more value to you. Please turn to the next slide.
The third quarter progressed as planned. Business performance for the past two quarters have been stable and much better compared to the first quarter. We see that our transformational initiatives are developing, and metrics like utilization are improving, and customer satisfaction maintained at a high level. We continue our rigorous performance management setup. As mentioned last quarter, our setup is running at a higher cadence to operationally improve our commercial and delivery model. This is highly necessary to change the current trajectory. Overall, we are trending in the right direction. We have just recently launched our new AI offering named AI Value Realization. This offering is built around three stages, especially giving life sciences companies a clear way to engage depending on their maturity, ambition, and capacity. In short, the three stages are AI Value Compass, then AI Value Partnership, and last, AI Workforce.
This offering joins the lineup of Alera and Lumina, and with these offerings, we have a strong portfolio of offerings towards our customers in life science, public sector, and other regulated industries. Later in the presentation, I will speak more into how AI will be at the core of NNIT going forward. OneNNIT 2030. That is the name of our new strategy towards 2030, which we recently launched. The strategy is underpinned by our detailed transformation program and will act as a clear direction for NNIT looking ahead. After we have been through the quarterly results, I will be going into more detail around our strategic ambition. Lastly, I will just briefly highlight that we have narrowed our full-year financial outlook for constant currency revenue growth. We now expect the constant currency growth to be -1% to -6% from previously single-digit negative.
Group EBIT margin, excluding special items, are maintained at 4%-7%, and below last year's level of DKK 83 million, respectively. Please turn to the next slide. In our life science regions, we continue to see a somewhat fragmented picture. However, the revenue in the third quarter has contracted across the regions, which is to a wide extent due to deliberate strategic choices, greater selectiveness in contract onboarding, and sharpened focus on NNIT's core product offering. Despite the revenue decline and lower regional EBIT, the financial performance in Region Europe was weaker than we expected. In constant currency, revenue declined 12%, impacted by lower order entry, continued customer hesitation amongst tier- 1 customers, and project delays.
On the other hand, we are pleased to see margin increasing compared with last year, which reflects the actions we have taken to reduce cost base through capacity adjustments and structurally lower the cost base. To change the trajectory, we are accelerating transformation initiatives to focus on sales and delivery. Despite region U.S. delivering negative constant currency growth, the performance was better than we expected. This was driven by stronger order entry across its business areas, whilst the region has continued to focus on NDC-12, as we have mentioned in past quarters. The margin was solid, driven by high utilization, strong delivery execution, and the materialization of cost initiatives. In the third quarter, NNIT Singapore was divested. Region Asia's constant currency growth was -18%, heavily impacted by a decline in revenue from an existing large tier- 1 customer that was not possible to offset from new contract signings.
The region's EBIT margin declined year-over-year due to the lower revenue. Beyond cost savings materializing as planned, Region Asia has continued to tighten its cost base and adjusted capacity. Please turn to the next slide, where I will go through Public Denmark and SCALES. The Public Denmark segment delivered strong growth of 15.5% in Q3, driven by ramping up on the projects won in late 2025. These contracts are with the Danish Health Data Authority, also known as Sundhedsdatastyrelsen, and with the Danish Agency for IT and Learning, also known as Styrelsen for IT & Læring. The region has continued to onboard more customers in the public sector to Lumina. We see promising results, as Lumina is not only generating efficiency gains for NNIT in terms of project delivery, but making an impact for our customers that adopt Lumina as a service.
We continue to see further opportunities to apply Lumina to bids around legacy system transformation, where new custom solutions are in demand. We are pleased with the progress so far and expect our AI frameworks to be a central part of our services going forward, which I will also outline in the section around our new strategy. The regional EBIT margin increased from 5.1% in Q3 last year to 7.3% in Q3 this year. The margin uplift is driven by leveraging revenue growth and from the actions taken during the past quarters, where we initiated further cost reductions and capacity adjustments. SCALES' financial performance for the third quarter was in line with our expectations, as the comparison numbers were impacted by phasing of revenue and recognition of advanced license sale. The underlying growth compared with last year was 6%, driven by onboarding of new customers and expansion of existing engagements.
The regional EBIT margin declined compared with the same quarter last year, which was partly due to the lower revenue and less high-margin license sale. The regional EBIT margin in Q3 2026 was 24.8%, and adjusted for the revenue phasing and advanced license sale in Q3 2025, the adjusted regional EBIT margin was around 27%. Please turn to the next slide. Now, I will hand over to Carsten for the next section. Carsten, please.
Thank you, Claus, and good morning. Please turn to slide nine for the key financial highlights. Let's start with the key financial highlights for the third quarter. Starting with the top line, reported group revenue was DKK 409.6 million, compared with DKK 431.6 million in the same quarter last year. This corresponds to a reported decline of 5.1% and a constant currency decline of 5.9%. Adjusting for Singapore, which we divested after the second quarter, the decline was 4.2%. The revenue development was in line with our expectations. It includes deliberate strategic choices and becoming more selective in which contracts we onboard. We have sharpened our focus on NNIT's core offering and are deselecting work that is not aligned with our strategic direction. Beyond that, revenue was affected by lower order entry and project delays in region Europe.
This was partly offset by more contract signings in region U.S., building on the momentum we saw towards the end of Q2. Finally, the quarter was affected by revenue phasing and an advanced license sales related to SCALES. On profitability, group EBIT, excluding special items, was DKK 22.2 million, corresponding to a margin of 5.4%, compared with DKK 35.6 million and 8.3% in Q3 last year. This decline is primarily driven by the lower revenue. The comparison is also demanding, as last year's third quarter was supported by the material capacity adjustment carried out at that time. Importantly, the underlying cost picture continues to improve. Total costs in Q3 were around DKK 9 million lower than the same quarter last year. For the first nine months, they were around DKK 52 million lower than in the comparison period.
At the same time, operational efficiency and delivery execution continued to improve, with high utilization across the group. As part of the transformation program, we expect further cost savings to come through operational efficiency gains. Special items amounted to DKK 18.5 million compared to DKK 7.9 million last year. These relate predominantly to restructuring costs as part of the transformation program. Turning to cash flow, free cash flow in Q3 was DKK 27 million compared with DKK 36 million in the same quarter last year. Operating cash flow remained positive, supported by favorable working capital developments. The slight decline reflects lower operating cash flow and higher investment outflows, including continued investments in tangible and intangible assets, as well as movements related to the divestment of NNIT Singapore.
To sum up the quarter, revenue came in as expected, the cost base is structurally lower, and cash generation remains positive. Turn to the next slide, please. Turning to our full-year financial outlook, we have narrowed our outlook for constant currency revenue growth. We now expect from - 1% to - 6% from previously being single-digit negative. We have narrowed the top-line guidance due to the business performance improvements we have seen the past quarters and due to the backlog and pipeline for the remaining part of the year. Group EBIT margin, excluding special items, and special items are maintained at 4%-7% and below last year's level of DKK 83 million, respectively. Our updated financial outlook assumes no further deterioration to the current macro environment, and outlook is also reflecting the divestment of NNIT Singapore, which was around DKK 11 million in Q4 2025.
Furthermore, a potential divestment of SCALES is not reflected in the financial outlook for 2026. Please turn to the next slide. Now, I will hand it back to Claus for a more detailed view on our new strategy towards 2030. Claus.
Thanks, Carsten. Please turn to the next slide. OneNNIT 2030 is the strategy guiding our transformation, and our ambition is clear. We will be the innovative AI-driven niche specialist that delivers tangible impact for our customers. We will do that in life sciences internationally and in regulated industries here in Denmark. We will not try to win on scale. We will win on depth, on expertise, and on the measurable difference we make for our customers. To deliver on that ambition, we have built. Could we move to the next slide? To deliver on that ambition, we've built two focused businesses, international life sciences. Life science serves pharma, medtech, and biotech companies, pushing the boundaries of life science across R&D, manufacturing, and supply chain. Regulated industries in Denmark serve the institutions that hold Danish society together across the public sector, healthcare, and critical sectors.
Both businesses run on a modernized portfolio. Until recently, our offerings were fragmented, spread across many domains, and hard to repeat. Today, they are packaged solutions under one taxonomy, and we've defined our first value path. A value path is how we take a customer from ambition to realized value. It starts with advisory and AI, where we help the customer set the direction and define the value potential. From there, we implement the solutions that capture that value. We then manage the services that make sure the value is fully realized and sustained over time. Advisory and AI opens the door, and implementation and managed services build the long-term relationship. That is our land and expand model, and it moves NNIT from delivering hours and projects to securing outcomes. Could we move to the next slide, please?
A strategy only matters if the organization can execute it, so we've simplified our operating model. Each business has its own business development and a segment-based go-to-market that follows how our customers buy. In life science, that means global accounts and tier- 2 and tier-3 customers in Europe, the U.S., and China. In Denmark, it means public, healthcare, and critical sectors. Behind both businesses sits one streamlined AI-enabled delivery organization. It has shared capability in projects, platforms, data, and quality compliance and validation, backed by nearshore and offshore delivery. This setup strengthens collaboration across geographies and organizational units. It drives synergies, and it ensures that we put the best of NNIT in front of every customer in sales and in delivery. Please move to the next slide. Which brings me to AI. At NNIT, AI is not a side initiative.
It's an integral part of our strategy, and it is embedded in everything we do. It is built into our offerings and value paths across every niche and the full customer life cycle. It is part of how we deliver, accelerating customer projects with human accountability built in. It drives our own efficiency through automated processes and AI workforces, and it opens strategic conversations with customers in every niche. We're investing deliberately in this capability, and we will measure ourselves on the value it creates. Two focused businesses, a simpler operating model, and AI at the core. That is OneNNIT 2030. With that, let's turn to the next slide for my closing remarks. Let me wrap up with a few concluding remarks before we take your questions. First, on performance. Q3 came in on track.
Financial performance came in as expected, and underlying business performance continued to progress in the right direction. We launched our AI offering, AI Value Realization, that is built around three stages, giving life sciences companies a clear way to engage. This AI offering joins Alera and Lumina that we have deployed to selected customers. OneNNIT 2030 is launched, setting the strategic direction for the company where AI is at the core. We narrowed the range for constant currency revenue growth in the full year outlook whilst we maintained the outlook for profitability and special items. This concludes the Q3 presentation for today. With that, Carsten and I are happy to answer your questions. Operator, please turn to the next slide and open for questions.
If you do wish to ask a question, you need to press five star on your telephone keypad. To withdraw your questions, please press five star again. There will be a brief pause while the questions are being registered. Our first question comes from the line of Poul Jessen, Danske Bank. Please go ahead, and your line will now be unmuted.
Thank you. I have a few questions on the strategy. First of all, you put the focus at the center together with AI. One thing is that you differentiate by focus on regulated industries and life science, but on the AI, where are you differentiating when you look at your competitive landscape? Everybody is, at least in their presentations, reporting that they are doing the same. So, where is the differentiation here?
I would say that we are doing, to explain it in a relatively simple way, we are doing two things that we believe will differentiate us in the market. One is, we are leveraging AI to deepen our niche expertise in the areas that we operate. For example, GxP compliance, that we can further substantiate our deliveries to our customers by leveraging AI within the areas where we truly differentiate, and that is on the deep life science knowledge. That is the one approach that we are taking to the market with AI when we look at offerings. The other dimension is with the AI Value Realization value path. We have created an offering that actually grows with the customer.
The fundamental idea is that we know, particularly in our tier- 2 and tier-3 customers, that a lot of those are still struggling to really sort of nail their ambition and also outline how they will deliver on it. What we do is that we go in, work with them on setting the ambition in a life science context, which also factor in sort of the regulatory and compliance considerations that they need to bring in. So they get a sort of a full life science-specific governance view of their ambition, and then we lay out the roadmap. Then sort of on the AI Value Partnership, we can step in and then work with the customer and act as their extended organization over a period of time.
If that period of time is very long, we have the ability to introduce AI agents that actually then deliver to the customer in certain areas instead of human resources, you could argue. We also believe that that sort of AI-enabling offering is a differentiator in the life science market.
Is it fair to conclude then that AI, everybody is running for, but your key differentiation here is your life science and heritage and deep insight into those specific areas where you have been for decades?
Completely agree. When we look at the life science business, sort of, we don't do AI for the sake of AI. We do AI to substantiate our differentiation related to our life science insights.
Okay. When it comes to the change where you take this and then combine it with your refocusing on tier- 2 and tier-3, if you look especially on the European operation, which have had severe headwind for two years now, should we expect a runoff of the large enterprise customers or the tier- 1 before you will start getting the gains from this strategy and the focus on tier- 2 and tier-3? In other words, when we look into 2027, would Europe then, based on this strategy, move into growth again?
Well, this is Carsten answering here. When it comes to the outlook for 2027, of course, we will be more specific when we get to the release of our new reporting in February. But if you look at your question in relation to the customer segments that we are addressing in region Europe, we have 19 of the top 20 global pharma companies as our customers in Europe. Our focus will still be to retain this customer group as we build up also our footprint with the tier- 2 and tier-3 customers.
What would be the main change for our approach towards the tier- 1 customers is, you can say, the focus areas, the more focused solution scope that we will be approaching these customers with, where we can deliver more value and have a clear, you can say, value pathway from the solutions that we sell to be able to cross and upsell on these specific customers. It is something we have also been elaborating on previously in relation to the challenges we see with these large customers, where we end up when we talk about staff augmentation with competing with global players like Accenture and Capgemini, et cetera. This is not really where NNIT should be competing.
It is based on our deep life science competencies that we should be focusing on the very specific areas where we are having the deepest competencies and thereby delivering most value to our customers.
Okay. Why you are not coming out with some quantifications or ambitions on the longer term on the back of the strategy update, is that because the world is still much more uncertain?
Well, I think in relation to the outlook part, it is something that we will be more specific on. I think right now we are focusing on executing this shift into our new operating model, and we will be ready with that fully operational 1st of January. I think based on that, it is the right timing for us to put more figures on it when we go out with our report in beginning of February to be more specific on the ambition and the joint efficiencies that we get out of this new operating model.
Okay. For the very near term, the guidance you have given for 2026 has an implied guidance for the fourth quarter of +10% to -10% on revenue growth. Can you say a little about what would take it to the upper end and to the lower end perspective? What is the key differentiation here?
Well, as you maybe know, the Q4 is having some budget, you can say, impacts from people typically buying licenses and hardware. So we have some swings in relation to, for example, Microsoft license sales that could bring us to the upper level. We also have potentially some signings in our U.S. business where we, as we are selling IP in these instances, could recognize revenue that could bring us, you can say, to a good finish to the year. On the other side, postponements of projects will have the opposite effect, thereby taking us in the lower end of that interval.
Okay. Postponements, that would mainly be Europe. The Microsoft licenses would be SCALES?
Yes, that could be Europe, where we have seen postponements of projects previously, but if we see further postponements from Q4 to Q1, that could have a negative effect. If the SCALES Microsoft license sales is postponed for some of our large customers, it could be having a negative effect.
Okay. The final one that maybe you cannot answer that right here, but if you take the numbers you put into the report on, if it is DKK 22.2 million for the quarter, but if you sum up all the segments or regions, then it is 5% lower at DKK 20.9 million. So there is a difference of DKK 1.3 million from the regions up to the consolidated number. That might be one of the regions where the margins are not correct. It all relates to regional overhead cost.
Okay, that sounds odd, but we will get back to you on that.
Okay. Thank you. That was all for me.
All right. Thank you.
As a reminder, if you wish to ask a question, please press five star on your telephone keypad. The next question comes from the line of Yiwei Zhou from SEB. Please go ahead.
Hi, it's Yiwei from SEB. Thank you for taking my questions. Two questions. Firstly, when you're looking at the coming years, and I appreciate that you talk about your new operating model would be ready at the beginning of 2027. Do you need to do more like rescaling of the employee and more rightsizing to address the demand? Should we expect more restructuring costs in the coming years?
I think if I take the first stab on that, Yiwei. As you can see in our Q3 statement, we have a restructuring cost of DKK 18 million, and a large proportion of that is related to some restructuring addressing how we will organize ourselves in the new operating model. I believe this is the main part of the restructuring cost we will have in relation to implementing the new operating model. Going forward, our ambition is not to be fewer employees, but as we will plan to go back to a positive revenue growth, we expect, of course, this to be also impacted by the efficiency gains we get out of AI in our delivery. Hence, we will not have to build up our capacity on the resource side at the same level as we have seen before when we deliver projects.
We expect not to be fewer employees going forward, but actually to gradually increase the number of employees.
Okay, that is helpful. Secondly, can you talk about the process for divesting SCALES?
I cannot put more comments on that besides what was in the company announcement that we sent out.
Okay, fair enough. That was all for me. Thanks.
Thank you, Yiwei.
As a reminder, press five star to ask a question. As no one else has lined up for question in this call, I will hand it back to the speakers for any written questions or closing remarks. Please go ahead.
I just want to thank you for your questions and for listening in, and please do not hesitate to reach out to either Carsten or me if you have further questions. With that, I want to wish you all a great day and a wonderful weekend.