Everyone, we are pleased to welcome you to this meeting presenting Wavestone's revenue for the first quarter of 2022/2023. Today, the speakers are Pascal Imbert, co-founder and CEO of Wavestone. Hello, Pascal.
Hello, Justine. Hello, everyone.
Laurent Stoupy, CFO of Wavestone. Hello, Laurent.
Hello, Justine. Good evening, everyone.
Laurent, the floor is yours.
Thank you, Justine. Over the first three months of the 2022/2023 fiscal year, Wavestone revenue was EUR 122 million, up 6% compared with Q1 of the last fiscal year and in line with our expectation. At constant scope and exchange rates, excluding Advancy, Y-Innovation, NewVantage Partners and Nomadis, growth was 3%. Growth that must be seen against a particularly demanding baseline. Turning to our operating indicators, you can see that they are all strongly positioned. Consultant utilization rate was 76% for the quarter, slightly above the firm's normative level. As a reminder, the rate was 75% in Q4 2021/2022, and 77% for the whole of the last fiscal year.
Sales prices confirm their positive trend, reaching EUR 868 over the quarter, an increase of 1.6% compared with EUR 854 for the whole of the last fiscal year. Finally, order book remains excellent, at 4.2 months as of June 30th, 2022. As of end of June 2022, Wavestone had 3,683 employees compared with 3,732 at March 31st. To note, this is a traditional downturn at this time of the year. Recruitment momentum is still good, in line with our objective of nearly 1,000 gross hires over the whole of the fiscal year. However, pressure on staff turnover rate was more pronounced during the quarter. At the end of June, on a rolling twelve months basis, it stood at 19% against 18% in 2021/2022.
Despite these pressures, we're maintaining the objective of gradually bringing staff turnover rates back to about 15%, but this growth looks increasingly difficult to achieve in the 2022/2023 fiscal year. Pascal, I give you the floor now.
Pascal, yes, your mic is.
Right.
Thank you.
All right. I know. I forgot to unmute my mic. So I have to put EUR 10 again on the table. Sorry for that. Thank you, Laurent. On July 20th, we have announced a planned new acquisition. It's a U.K. consulting firm which won't surprise you, as the U.K. is one of our target geographies. This U.K. firm specializes in operational and digital transformation projects for major corporate accounts. It would strengthen Wavestone's value proposition in the U.K. with management consulting skills. Over the last three fiscal years, the firm's annual revenue has been between GBP 15 million and GBP 20 million. The acquisition price is 1.5 times the firm's last annual revenue in enterprise value, of which 25% depends on performance over the 18 months following the acquisition.
The purchase depends on obtaining certain approvals, which will enable us to take some steps prior to the acquisition's finalization. Closing should be in the coming weeks. As you can see, the 2022/2023 fiscal year has started well. Q1 growth is in line with our expectations. It appears to be weaker than that targeted for the full year, but this is due to a demanding baseline effect. In fact, you've seen that our KPIs are still strongly positioned. The issue of human resources is for sure one of the major challenges of the year, with pressure on staff turnover increasing further. In this area, as planned, we've made initial adjustments to our salary policy to maintain competitiveness in a market under pressure. Of course, at the same time, we continue to pursue raised prices to manage our price to salary ratio in an optimal way.
The other challenge of the year is the expected worsening of the economic environment. We are therefore extremely vigilant on any sign of a slowdown in demand. To date, however, if I exclude the transport and the public sectors, such a slowdown has not materialized, as our solid order book shows. At the beginning of June, we set the objective of achieving an annual revenue for this new fiscal year of over EUR 505 million for the whole fiscal year. An objective we are confirming today. We are also confirming our objective of an EBIT margin of circa 15% over the whole fiscal year. These objectives are at constant exchange rates. They take Nomadis, our latest acquisitions into account, but they don't include potential new acquisitions. New acquisitions that we hope to make during the fiscal year.
Indeed, we continue to pursue our external growth activity. Targets in the U.S. and in the U.K. are still the priority, like the planned acquisition I mentioned a few minutes ago, but without ruling out tactical purchases in other geographies. That covers what we wanted to comment regarding our first quarter, and we'll now be happy to answer any questions you might have.
You can now ask your questions. To do so, please unmute your mic.
Pascal, could you update us on the company's progress in the U.S.? I know you had been referring to some challenges here specifically. Would love to understand how things are going so far.
Yes, good morning to you, Ben. We are still in a challenging situation in the U.S., but we are seeing signs of improvement. The alignment of the teams on the same priorities is now completely done. We are reinforcing our business development activity, and we are structuring our sales teams in the U.S. We see some progress, not in a large extent regarding the figures for the first quarter, but we are seeing this improvement materializing gradually, and we think we'll continue to see them gradually materialize in Q2.
I would say that our recovery plan is going as expected. I just looking for the evolution of the economic environment in the U.S., as in fact we see that some of our competitors or fellow companies in the U.S. are beginning to see signs of quite significant slowdown in that geography, which is something that we don't see for the time being in Europe. I would say that for the time being, in the U.S., we are so small and we are positioned in a niche so that we don't see such signs for the time being, but nevertheless, to be monitored in the quarter to come.
Work in progress, some positive signs, but we have still to remain focused on that geography.
Thank you. Good to see you.
Likewise.
If you have any questions, you can unmute your mic.
Yeah. Good afternoon. Paolo Cipriani. Can you hear me well?
Yes. Yes.
I just have a couple of questions from my side. First of all, one is regarding staff turnover now. Is this pressure on staff turnover, I mean, same as usual? I mean, that is typical of an IT consultancy, the same as previous years, or inflation is like increasing this pressure? I mean, wage inflation is increasing this pressure. That will be the first question.
Right. On this topic, yeah, for sure, pressure on HR is stronger than what we've seen in previous fiscal years. It reminds me of a situation we were seeing more before the financial crisis. You can see it's been a while since we haven't seen such a pressure. Surprisingly, even if inflation is of course not helping in that context, what we see in the inquiries we make when someone leaves the company, the salary topic remains quite at the same level than what it was on a historical basis.
It's by far not one of the main topics for leaving the company. The main topics being more questions of work-life balance, changing of occupation, for instance, a large corporate instead of working in a consulting company. It's also entrepreneurial projects, mobilities. There are some leaves, some resignations linked to expectations for better salary, but quite at a low level. We want absolutely to be connected and to be in line with our market practices in each geography. That's why we are making some movements in our salary policy.
I would say that the pressure is more. I would say somewhere somehow connected to what is called the great resignation. You know, people are seeking for different occupations and wanting to change for, in fact, the sake of changing their way of life. These are the main topics.
Okay. The other question is regarding the Q1. Now I see that this is a 3% organic growth in Q1. If I do remember well, is it true that in Q1, 2000 of previous year, there was a positive effect of 3% of revenue due to the one more working day?
Yeah. That is correct, yes.
Okay. Okay.
Maybe to elaborate a little on this 3% organic growth, which is lower than what we are targeting for the whole fiscal year. There are some combination of several effects. Q1 was exceptional last year, and especially regarding utilization rate. We're at the maximum. We had a quite low percentage of leaves during this Q1. We recovered a more average percentage of leaves during this quarter, and so that pulls down the revenue.
There is a question of timing of arrivals and people leaving the company during this quarter. That's why it's not in line with the expected growth for the whole fiscal year, but that was expected in our plan.
Mm.
We are confirming our objective of 6% organic growth for the full year.
Okay. Thank you.
You're welcome. Good to see you, Paolo.
Nice to see you, nice to see you as well.
You can unmute your mic if you still have questions. If there is no more questions, Pascal, I let you conclude.
Okay. No, well, I will ask another question if
Yes.
If there are any questions. I just didn't want to take the floor too much. Yeah. Regarding the price increase now, can you just elaborate a bit more, how it's working, the price increase that you're having here? You talk about sales price, like, I mean, how much is the price increase that you are, I mean, putting on your clients? And how much is on the other side, the wage increase that you, on average, that you are giving to your employees?
For the time being, it's very well connected. We forecast for the full year an increase of our average compensation average salary, which will be between 1%-2%, closer to 2% than the middle of the range. This is linked to the average salary. In fact, I mentioned that we are updating, adjusting our salary policy. On some grades in some geographies, the increase can be higher than that, 5%, 6% or even 8%, I think, in one situation.
On average, it gives an average salary, taking into account the fact that we are hiring younger teammates than the average of experience within Wavestone. We forecast something that will be close to a 2% increase in our average salary. Regarding sales prices, we are targeting 1%-2% average daily rate increase. We are, I would say that given what we saw in Q1, we are optimistic to be able to reach a 2% increase of our daily rates over the full fiscal year.
Of course, on daily rates, the environment and the inflation on the environment helps in our discussion with our clients. I would say that it is. For the time being, it is going on quite well on that topic, and we are more and more targeting the top of the range we were targeting for the fiscal year. Which is to say, 2% increase.
The average salary, how much is the average salary of the consultancy? I mean, on average.
We don't. In fact, this is data we don't publish. We don't communicate on that. It is the average experience of our consultant is something around four years of experience. It's quite. I'd say that it is between 50 and-
Mm-hmm
... uh, one hundred thousand euros.
Mm-hmm. So basically-
Depending on the geographies.
It depends on the geography. Basically, the inflation for a business like yours, no? At the end, in terms of margin, it shouldn't affect if inflation will stay like that even in the next year. I mean, more of the problem of margin is a problem that could potentially increase the turnover. I mean, in a business, the inflation in itself.
No. Yeah, our experience, because we've been in the history of Wavestone in several occasions, we've been through such inflation periods, and it didn't prove to be a challenge for the margins of the company. We were cautious for the current fiscal year because inflation and wages seemed to pick up quite fast. We were wondering if our clients would be ready to accept adjustments in our average daily rates very rapidly. As I mentioned, it goes quite well.
In fact, we have no concern in the midterm on the topic, because we've always seen that prices, sales prices are very well connected to wages in our business. Inflation, I would say, is not a real concern for the profitability of the company. It is something that you have to pay attention to manage it, and to have a good forecast in order to manage it in a proper way. I would not say that we see it as a huge concern for the company. We are much more sensitive to the evolution of the global economic environment and the growth and the investments at our clients.
That's the main.
Mm-hmm
Topic that can lead to some changes in our business.
Yeah. Okay. Regarding the price that you see around in terms of acquisition, no? The price that you see U.K., U.S., France. I mean, is the prices are still very, very high compared to the previous year? Because the previous year was very high.
Yeah
the price of the companies acquired.
Yeah.
I mean, is there any change or?
No.
Do you see any change?
We are, for the time being, we are on the same basis and that doesn't surprise me. We've always seen a delay between slowdown in the economic environment and prices for acquisitions.
Mm-hmm.
For the time being, we still see quite high prices, and I think it will remain the same at least until 2023.
Mm-hmm. Okay.
Well, thank you very much for.
Thank you very much.
... being with us today and attending this meeting about our first quarter. I wish you a good end of day, and I talk to you soon, in fact, in October, at the end of October, to share our H1 revenue and share some messages about what we see regarding the H2. Knowing that our comprehensive results for H1 will be published at the end of November.
Thank you.
Thank you very much. Goodbye.