Ladies and gentlemen, thank you for standing by. I am Tom, your Chorus Call operator. Welcome, and thank you for joining today's conference call on the 9M figures 2023 of GFT Technologies SE. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, please press star followed by one on your touchtone telephone. Please note, questions can only be asked via telephone and not via webcast. Please press the star key followed by zero for operator assistance. And now, I would like to turn the conference over to Andreas Herzog, Head of Investor Relations. Please go ahead.
Thank you, operator. Thank you, Tom. Welcome all to our call on our earnings for the first nine months of 2023, which we published this morning. With me is our CEO, Marika Lulay, and our CFO, Jochen, which both will guide you through our numbers, and of course, will be available for your questions afterwards. As a last reminder, please keep in mind that this webcast is being recorded, and all information, of course, is also available on our website. Having said that, I would like to hand over to our CEO, Marika Lulay. The floor is yours, ma'am.
Thank you, Andreas. So welcome, ladies and gentlemen, also from my side. So let's go into our nine-month results. The overall story, let's jump directly to slide number three, is that we grew 10% on revenues compared to the nine months of 2022. And due to a very good utilization in Q3, also our adjusted EBIT, excluding currency exchange effect, grew even by 14%. If we obviously include the effects, the adjusted EBIT grew by 7%. And this clearly speaks about our resilience and ability not only to protect our margin, but to improve our margin, even in challenging times. Good news is also that our biggest market, Brazil, we were able to stop the trend of revenue reductions in Q3. So revenues in Brazil grew quarter to quarter, Q3 to Q2, by 11%.
As already explained at the Capital Market Days, there is always a risk of a one-time effect for Q4. Banking clients may ask for MTA, so-called Mandatory Time Absence. And how does it work? They simply ask all their suppliers to stop working for an average two weeks, usually in December, some in November. It doesn't happen every year. Last year, for example, this risk did not materialize at all. This year, the requests are very strong and actually across the globe, not just in U.K. So we think it is due to rising geopolitical risks and banks simply focusing on optimizing Q4, their Q4. The total request which reached us would have impacted us with a reduction of EUR 12 million-EUR 15 million against our expectations. We were able to manage this down to approximately EUR 7 million-EUR 8 million revenue impact.
Hence, we adjust our revenue guidance for 2023, slightly down to now EUR 800 million-EUR 810 million. Despite this reduction, we remain confident to deliver the current guidance on EBIT adjusted. We also improved in Q3, our positioning in the market, in our core offerings, digital banking and cloud services. Industry analysts ranked us even higher, so that's positive. We also improved our ranking for sustainability from bronze to silver with EcoVadis. And this puts us into the top 25% of companies assessed by EcoVadis, who is one of the largest providers of sustainability platforms and ratings. Let's move on to slide number four. And you know that we recently launched the AI.DA Marketplace. Actually, it was beginning October, and since, we saw an increased demand for AI-enabled solutions and data platforms.
The current request, and maybe this is simply of qualitative interest, the current request from our financial services clients are mainly about enhancing chatbots, be it for consumer interactions, HR services, or generically upgrading the intranet chatbots. But also AI-enabled solutions for invoice processing, or for example, with one client, we are building a voice interface for ATMs, which is then supported by AI. For industrial clients, it's different. It is mainly about using AI to improve the quality assurance processes in production, and that is usually strongly connected by building a proper data platform as a base. And for this, we also work, for example, with partners like Snowflake. Obviously, we also eat our own food and, for example, introduced AI features to develop, test, and enhance our own products, like SMARAGD, our compliance solutions.
With regards to speedup programming, version 1.1 for GFT AI Impact, version one was launched with the marketplace. Version 1.1 will now be ready and released end 2023, and we already have a product release plan also for 2024. We are currently running now five proof of concepts with five clients... and the pipeline is growing. So I expect that we have more clients by the end of the year using that solution. And the proof of concepts are showing that we can save, and we means we and the clients, can save an average 40% of the time of a programmer for standard coding. Standard coding usually counts for 80% of the workload. On next slide five, I also want to share with you the developments, the recent developments we made on UDPN in Q3.
UDPN is our solution for a payment infrastructure for cross-border transactions with stablecoins. And UDPN leverages DLT technology, and I'm very proud to share that two banks, Deutsche Bank and Standard Chartered, have completed the first transaction in the test environment, obviously. It was a real-time, on-chain transfer and swap between USDC and EURS stablecoin. Both went public with a press release talking about it, and I'm looking forward for the other 11 proof of concepts to be completed by end of the year, and those results will also be published.
The simple benefit of that infrastructure is not only that it is real-time, but also it has much lower cost than other infrastructures, like SWIFT. We, GFT, we will definitely continue investing, and we think that this solution could play an important role for our change in our revenue architecture on the long term. But obviously, we first need the central banks to launch the stable coins properly, which are fiat backed. Now, let's go into the details of our financial year. Jochen, over to you.
Thank you, Marika, and let's directly move to slide number seven, which is the nine-month key figures of 2023. So we do see the 10% revenue growth here. We came in at nearly EUR 595 million after nine months. The order book is down 1 percentage point, and reflects some seasonal decrease in shorter order cycles. The order book is improved versus our Q2 numbers. Last quarter, our targens numbers were only partially included. We still had some data issues back then, so now it's the correct number. We're 1% down versus a year ago. EBITDA up 4%. The EBIT adjusted improved by 7%, 7%.
This includes, and this is now the bullet point on the right side, the smaller ones, capacity adjustments of EUR 3.6 million and negative FX effects of EUR -0.9 million, both burdening us stronger than a year ago. If we exclude the FX effects, the EBIT adjusted, as Marika has already mentioned, would have improved by 14%. The EBIT-adjusted margin came in at 8.8% after nine months, nearly on the same level as last year. EBIT is up 3% because we do have amortization effects due to the acquisition of targens this year, therefore, the EBIT is below the EBIT adjusted. Net income obviously also increased by 3%, as we have a stable tax rate of 29%.
This brings me to slide number nine, and let's start on the right side of the slide, and look at our sectors. So we have seen solid growth, especially in our banking sector. It still represents 73%, and by that, the majority of our business, up 12%. Half of the growth is coming from targens, half is organic growth. Looking at the insurance sector, we're down 1%, so more or less stable. There is a bit of FX impact exactly in this insurance numbers, so it on a local currency basis, it would look a bit better. But fundamentally, we see a big number of projects coming to an end this year. We're able to recover and replace them, but we don't see room to grow the insurance business in 2023.
Look for better in industry and others, we're growing by 15% after nine months. And here we see strong growth, especially in Germany and Spain. On the left side, the well-balanced client portfolio, well, we discussed it last time in Q2, and it looks pretty much the same, so there's not much to comment here. The biggest client on the very left, bringing in more than EUR 50 million a year, is Deutsche Bank. And it still stands at 16% of the year revenue of the year 2023. And that's probably also our outlook for the full year. It will be between 15% and 16% on a full year basis. Let's move forward. Slide nine shows our quarters. And now let's first compare to the quarter a year ago, Q3 2022. We do see solid growth.
It's 10% up on the revenue side, and we have an improved EBIT adjusted by 14%, mainly due to the improved profit of the top line growth, the 10% growth is helping, and higher utilization, despite some negative FX effects compared to a year ago. If we compare to the last quarter, to Q2 of this year, growth is only one percentage points, and it is like for like, because the targens acquisition was in both quarters, Q2 and Q3. It's a 1% growth. Adjusted EBIT increased by 41%, and again, it's mainly due to the improved utilization. Reduced negative FX impacts in Q3 versus Q2, and we have a normalization of our Brazilian business. Moving forward to slide number 10, revenue and earnings by segment. And let's start at the top with the Americas, UK, APAC segment.
Again, we see growth. This year, it is 3% growth, of which 4% is organic, and we have a negative minus 1% on the FX side. Biggest growth drivers in this segment is currently the U.S. and Mexico, both mainly driven by the banking sector. When we look at the EBIT adjusted, we're burdened by weaker performance in Brazil, and the shift of profitable projects from our U.K. business to Poland, in line with client demand. So it was not our choice to move the project, the client wanted to. And on top, we had more negative FX effects in this segment than in Continental Europe, which is mostly in euros. So let's look at Continental Europe, again, euro-based mostly.
Revenue is up 22%, 11% organic, supported by, of course, the first time integration of targens, which is shown under M&A, another 11% growth. Overall, Germany is growing by 55%, explicitly due to the targens acquisition. We also see growth in Poland. As already mentioned, we moved roughly EUR 11 million of projects from UK to Poland, which is benefiting the continental Europe revenue growth. On the profitability side, we see a 39% increase, which is because of the targens integration, which is contributing, and a shift of profitable projects from UK to Poland. So on a group level, in a nutshell, revenue up 10%, 7% organically, 4% M&A, -1% coming from FX. Looking forward, slide number 11, revenue by markets, and let me comment on some of those.
Brazil, unchanged, biggest market in the GFT group, representing 17% of our total revenue. As Marika already said, Brazil, for the first time this year, is growing versus the quarter before, so we see a comeback of the Brazilian business. UK, unchanged, number two, although we lost EUR 11 million, which were shifted towards Poland, where you do see a very strong increase on the revenue side. EUR 11 million come from a pure shift of already existing client projects. Third largest market at the moment, Germany, 12% of our business, fueled by our targens acquisition. But on top, we see 12% growth in the local business, without the targens acquisition.
And let me also mention U.S. and Mexico, also strong growing markets, although especially in the U.S., we see it slowing down quarter-over-quarter, which is showing the insecurity in the local U.S. market that we're facing at the moment. Year to date, 15% growth, and Mexico is up 46%. Let me move forward, slide number 12, which is the income statement. Not so much to comment here, as there are no relevant changes to the last quarters. The fourth bullet point brings together our people costs, which are a combination of cost of purchased services and personnel expenses. If we combine all the freelancers we buy or the own, our own people cost, we see it is unchanged at 80% of the revenue. Last year, it was 79.9%, so quite stable on a nine-month basis.
Operating expenses are somewhat up, mainly because we see travel coming back at least somewhat, and we have higher license costs for the IT products that we are using. The last point I want to mention is, again, income taxes. We see 29% tax rate, which is in line with last year, and which will be the tax rate also we guide for the full year. Moving to slide number 13, the cash flow analysis. We started the year with a positive net cash of EUR 35.7 million. We see an operating cash flow after nine months of EUR 13.17 million.
As you can see mentioned in the third bullet point, and I keep repeating this since Q1, we have a special effect, that we had a payment late Q4 last year, which came in as a positive operating cash flow. EU funds into our Italian organization, which two weeks later, but that was in Q1 of this year, were distributed to the end users of the funds. And therefore, we had a positive EUR 14 million in 2022, and now we have a negative EUR 14 million in 2023, which is extraordinary. If we add those 14 and the EUR 13 million operating cash flow we're showing, we stand at EUR 27 million operating cash flow after nine months, which is a good number.
We believe we should be able to add another EUR 20 million in the last quarter, which would bring us to an operating cash flow of close to EUR 50 million. I also want to mention cash flow from investing activities. This is purely, and it is mentioned on the right side in the last bullet point, the acquisition of targens, which was taking most of the funds in this category. And in the end, brings us to a net cash on the very right side of EUR -19.2 million. With the inflows we are still expecting, we do see net cash to be roughly positive in the end of 2023. Brings me to balance sheet on slide number 14. Not really much to mention here.
The balance sheet total has expanded, but this is purely aligned to the targens acquisition and a bit aligned to the business growth we have seen. But there's no major shifts in the ratios. Equity ratio stands at 42%, improved by 2 points versus the beginning of the year. Going to the people slide, slide number 15, we see, first of all, that we have 10,500 talents on board at GFT. That's headcount, plus all our freelancers. Now going for the numbers in the graphic on the left side, this is FTEs, full-time equivalent, equivalence, as IFRS demands. Here we see a growth of 3% compared to the beginning of the year. We had reductions, as mentioned in the second bullet point, in Brazil, Poland, Vietnam, and Mexico.
At the same time, increases in Germany because of the acquisition, Italy and Spain. The number of contractors is down somewhat to 1,136 in the GFT organization, which compares to the 1,275 at the beginning of the year, and of course, some of the freelancers came on top because of targens. The interesting and the very strong number of Q3 is our utilization rate. We improved it to 92%, 92.1% to be precise. Our teams were perfectly matching the demand, and boosting utilization to 92% is heavily linked to the attrition number, which we see on the right side. So good things came together. We had the right sized team on the production side, and we did not have to replace that many people.
We did not have to onboard so many people, which usually costs us utilization due to some unbillable days or weeks. So it was kind of a perfect quarter for the utilization. And again, as I mentioned, attrition is down. It's now at 11.2%. The lowest number we had over the last decade was during COVID, at roughly 10%, so we're pretty close to that. People are not moving jobs as lightly as they did a year ago. And with that, back to you, Marika.
Thanks, Jochen. So let's come to our outlook. Uh, let's move to slide number 17. And I already said it at the beginning, but let me summarize here. So we confirm our earnings guidance. We only adjust the revenue guidance due to one-time effects in Q4, slightly down. Our revenue should grow for 2023, 10%-11% to EUR 800 million-EUR 810 million. Adjusted EBIT will grow at least in line with revenue, so at least 10%, up to 13%, reaching EUR 74 million-EUR 76 million. And our EBT, which then obviously includes all effects from M&A effects and share-based compensation, will grow a bit less, by 3%-6%, reaching EUR 68 million-EUR 70 million.
Now, if I make a qualitative, more qualitative statement about the outlook, obviously the increased geopolitical risks, they make it more challenging for our clients to take investment decisions. Also, the increased interest, although it now came to a halt, but it's still a bit unclear whether we stay at the level or it'll go up or go down. So hence, our market simply remains being more volatile, more short-term oriented. Nevertheless, we are confident that due to our positioning in the market, our niche at scale, we will continue to grow in 2024. We will continue to outpace the markets due to our positioning, due to our strong delivery excellence, despite more headwinds. And on the next slide, it talks a bit about the strategy. I will go quick over them. I think we covered them a lot in our capital markets day.
But slide 18, some of you may recognize this slide. It talks about our strategy. It remains unchanged. We continue to collaborate with market-leading partners to always be at the forefront of technologies, and I sometimes summarize it by saying we simply focus on fast-growing niches which scale globally, which is obviously then also allows for higher profitability. Now, slide 19 shows our long-term goals. The long term in our industry is shorter. It's 2026. So they also remain unchanged. We want to have a decent diversification by sectors, keeping banking as our core sector. We wanna outgrow the markets, as said before, technological excellence, and both the economies of scale, which comes by growth, and a well-managed organization should lead to an adjusted EBIT margin of 10%, or ideally higher, in 2026.
Now, slide 20 summarizes our strategic pillars, which enable us to deliver on our promises, which is accelerate profitable growth. It's, in short, our ruthless focus on delivery, our agile at scale company culture, our constantly renewed offering portfolio, all supported by a programmatic M&A strategy, and this will allow us to grow and to grow profitable. With this, I hand back to our operator, opening the Q&A session.
Thank you. We'll now begin the question and answer session. Please note, questions can only be asked via telephone and not via webcast. Anyone who wishes to ask a question may press the star key followed by the number one on their touchtone telephone. If you wish to remove yourself from the question queue, press star, then two. If you're using speaker equipment today, please lift the handset before making any selections. We'll pause momentarily to assemble the roster. The first question comes from Knud Hinkel with Pareto Securities. Please go ahead.
Good morning, everyone, thank you very much for having me. I've got a couple of questions, if I may. First one on, where to start? So, on the revenue contribution of targens. So, if I, I'm looking now at the Q3 only, not nine months. So if I slip out the contribution of targens, which I would put at EUR 8 million, and then also the growth that come from Deutsche, which obviously had very good third quarter, is it fair to say that the business with all other clients was almost flat in the quarter? That would be my first question.
Secondly, can you elaborate a little bit on, insurance business? That was a little bit, a bit soft in the first nine months. I think you said, after H1 that, yeah, they are reluctant to start, big projects. Maybe you can say, something on the development in the, in the third quarter. Third question, number of FTEs was up 4%, but your personnel expenses increased by 30%. So I guess, there were some wage increases, because of the inflation, but that's probably not all the 10%. I saw in your presentation that you talked on the mix of the locations of your, of your personnel, and that it shifted a little bit to, to Spain and Italy and Germany.
Is that, was that voluntary or is that a coincidence? That would be my third question. On digital payments, that's probably for Marika. I'm not 100% sure if I understand it correctly. Do you target the profit pool of credit card companies with that? Or do you think that a digital payment will be become a business of its own right, and you target that with that initiative? So that would be my first questions. Thank you.
Okay, thank you. Then let me start with your last question first. So you talk about the UDPN network solution, I guess. So it's not about addressing the profit pool of credit card companies, but addressing the profit pool of infrastructures like SWIFT, which make money by simply managing cross-border transactions of today's fiat money, so real money. In the future, we will also have infrastructure. We need infrastructure to transact stable coins, and this also needs an infrastructure, and somebody needs to do it, and somebody's gonna make money on this.
So the UDPN network will simply operate by the same principles than SWIFT. So there is a percentage or a per mil, which the participants have to pay to swap stable coins over this infrastructure. So therefore, we rather address the, let's say, the, the, how is it? The fee pool, so to speak, of the banks, when they use those types of infrastructures. Is that more clear?
Yep, yep. Thank you.
Thank you. Then let me also take the insurance question while Jochen can prepare the number answers, financial answers. So on the insurance side, it's a bit of a mixed picture. We have won additional insurance clients for core insurance transformation programs and even cloud migration. But we had one large project for an insurance company in Canada, which actually had nothing to do with core insurance or cloud transformation. It was about implementing processes, improving their security because they had a huge data leakage two to three years ago, where data was stolen, they got fined, and then they asked us to come in and help them to upgrade the whole IT processes. We've done that.
We delivered that, and that obviously is a project in itself, and there is nothing you do thereafter, and also not something you do sell to other insurances, because it is very special to this insurance company. So if we were to deduct that special project, you would see growth in insurance. But again, if you just count all insurance projects together, these look like just being stable.
Okay, just to clarify, that, that project was last year, and that makes the comparison tough, or what do you allude to?
Exactly. The project was delivered last year. I think-
I see.
It went a bit into Q1, but not much. It was a huge program. We had, I think, easily 100 people on it, really huge, and this ended. And therefore, it makes simply the comparison tough.
Okay.
To your number question, you asked how much targens' revenue was. It was roughly EUR 10 million, EUR 10 million a bit in the third quarter. And therefore, your assumption that Deutsche was contributing as in quarters before, and all other clients were not growing is correct. You asked about the people number. Yes, you're right. We increased personnel costs by 13%. FTEs on an end-of-quarter basis, that's always important, right? Because, personnel expenses relate to average employees, and, FTE numbers in our graphics are always the end-of-quarter numbers.
We have been replacing freelancers. That's one of the reasons why the freelancer costs are reducing. But this doesn't explain why FTE is not growing faster. We had roughly 6% salary increases, and the rest is effects between, more expensive and cheaper countries, and average versus end of quarter view of these numbers. At the end of the year, we will give an exact update on how this works out on an average basis. I think that speaks most.
Perfect. Thank you very much.
You're welcome. Next question, please.
The next question comes from Andreas Wolf, with Warburg Research. Please go ahead.
Yeah. Hi, good morning. Can you hear me?
Yes.
Yeah, great. Congratulations on a solid performance in a difficult environment. I'm curious on your current client discussions. Firstly, regarding Q4, so obviously you still have the EUR 10 million variability in your guidance, which I assume might be related to MTAs or possible MTAs at the end of the year. Maybe you could comment if you still expect those. And then regarding the next year, apparently, I would assume that you are already entering the discussions, budget discussions regarding next year. Maybe just from a big picture perspective, you could share what you see in general in terms of client behavior. Whether our clients basically have seen the trough in their spending, and that we might expect at least a similar development as this year, also for next year. That would be helpful. Thank you.
Thank you very much, Andreas. Thanks for the congratulations. So in terms of the guidance for this year, yes, we decided to continue with the span, because we obviously keep negotiating the MTA impact every day. The truth is that we know this early as end November, but the earnings call is today. We discussed this a lot, and then we thought that the simple truth is, we don't know, so therefore we came up with the span. Obviously, could go to the lower end, could go to the upper end. Otherwise we would have not done it. But it's purely impacted by MTA. Maybe one or the other project all of a sudden gets delayed into Q1, but then it kind of follows the same MTA logic.
What we currently see, that especially the banks, it doesn't happen in other industry, not in insurance, but it happens strongly in banks and actually for the first time ever across the globe. So far, it was mostly U.K., a bit Germany, sometimes a bit the U.S., but very seldom. Nowadays, it even goes to Brazil. Even banks in Brazil talk about MTA. Seems so that they all met and talked about it. So the only reason for the span is that, and even if a project gets delayed, again, it would get delayed for the same reason, just optimize Q4 and then start in Q1. So therefore, we don't see any connection between the Q4 performance and our growth aspirations for 2024. They remain unchanged. Having said that, obviously, there's stronger volatility, there are geopolitical risks.
I cannot predict whether this continues a bit bumpy in Q1. Could be, right? That banks still wait a little bit, or they wait whether the Fed increase the interest or the ECB, or they keep it stable again. Overall, we think that if I take a big picture, we had fantastic 2021, 2022, with huge demand, fueled by zero interest. We had 2023, more bumpy. I think 2024 probably gonna rather be a bit like a 2023. Hopefully a bit better towards Q2, Q3. That's what I can see. Hoping that the stabilization of the interest or even reduction would again make our clients be more ready to invest, or simply get used to how to operate in a, in a, let's say, an environment of interest, which they were not used to for the last years.
Thank you. Related to your last answer, Marika, a follow-up from my side. Could you remind us what the share of clients is in the GFT portfolio, which benefit from higher interest rates, i.e. probably-
70%.
Lending - 70%?
Yes.
Okay, thank you.
Yeah. So they benefited a lot, and you can see this when you look at the banks. Their profitability is impressive. And you would have assumed they take the money, invest a lot into digitization, but what simply happened, what simply seemed as the high interest, actually more or less attacked and killed, to a certain extent, the fintechs. The banks became less nervous, and they actually thought, "Why not optimizing my EBT and actually improving my shareholder return, and maybe my bonus gets paid out a bit easier?" So it's pretty short-term oriented behavior, which tells you it's not A, it has nothing to do with GFT. B, this just means they pause a bit or slow down a bit in their investments, but they still gotta do it.
What has changed in terms of the client conversations, what is very interesting, is that while I would say until Q1 this year, most clients spoke about the classic things like cloud transformation, core banking, digitalization, et cetera. With the launch of OpenAI and ChatGPT, clients quickly changed and even stopped investment in that regard, and now keep investing in AI-enabled solutions. So there was a qualitative shift, which happened this year, which actually makes me look pretty promising into the future because we are well positioned. We have a lot of good conversations. Having said that, the first project and investments are rather small digits, six digits. You know, it's usually not yet seven digits, but it's piling up. And given that most of the things are so-called proof of concepts or a phase one, this could fuel a big investment.
And as the return on investment, then I will stop talking, Jochen is already looking at me. As the return on investment is very short for AI investments, it's usually less than a year, and that is extremely interesting for banks, because they love having ROIs of less than one year. Which is not the case for big cloud transformation projects, which usually have a much longer period before they pay off. So therefore, it's a bit of a mixed picture I'm sharing here, I know. But I would say, if you ask me one answer, is it more positive, more negative? I would say it's more positive, but yes, it's a volatile environment.
That's very helpful. Thanks for the color.
Again, if you'd like to ask a question, you can press star then one to join the queue. The next question comes from Lukas Spang with Tigris Capital. Please go ahead.
Yes. Hi, good morning. I would like to follow on the growth topic for next year. You already said that you expect further growth, but you also mentioned the uncertainties. So how do you handle hiring for next year regarding all these uncertainties, and also on the other hand, keeping the utilization high at the same time?
Yep, that's, I would say that's the recipe for success, right? To get that perfectly aligned. So, it's, there is no magic. It's pretty simple. We analyze our pipeline and the quality of the pipeline, the reliability of the, let's say, of the conversations we have with the clients, whether they want to start a project or not, on a, if not daily, but definitely on a weekly basis. We do have countries where we can hire pretty much on short notice, with a lag of, max four to six weeks, which obviously helps to react very fast. We have other countries, or with Germany, is on the other end, where you rather need months, which obviously in those countries, we rather be very conservative and very cautious. And then we augment simply with other countries.
So as we are specifically in Q4, most of our clients are closing their budgets in Q4. Most of them actually on December 23rd, which is not helpful for this call. So we are in close contact with the clients. We understand their budgets, we understand their priorities, and that helps us and enables us to then decide where to recruit them out. But it's a judgment call in the end. You can get it, usually, you get it always a bit wrong. Either you have too many or too less people, so the art is to close the gap to the max. But this is something which is management skills we have.
So, and especially in those times, we will, in, if needed, we'll most probably rather stay on the conservative side, where in the years 2021, 2022, we went on the progressive side. We simply said, "Hire as much as you can, demands will follow." Now the priority is rather the opposite round. Make sure the demand is there and then we hire.
Yep. Yep.
You've seen in 2023, our utilization in the first two quarters was below what we can do, as we're proving in the third. So we would like to avoid the first two quarters of 2023 in the year 2024. So go with less risk into the year, which should show utilization rates of above 90% already in the first quarter. That's our aim.
Yeah. And then on the earnings outlook, if we assume for a moment that you will reach the upper end of the adjusted EBIT guidance, which would make nearly EUR 24 million adjusted EBIT in Q4 necessary, compared to roughly EUR 21 million in Q3 and roughly EUR 19 million in last year's Q4, so 26% up year-over-year. What would make this strong earnings improvement Q4 versus Q4, if this is still in your guidance range?
So in order to make that happen, we definitely need the revenue be on the upper ends of the guidance, which means very successful negotiations on MTA. The reason that the EBT is, or the EBIT is better than in last year, is simply we did not only have wage increases, we also negotiated price increases in 2023. If you simply look back, the reason that we are able to protect the margin in percent, although we had restructure, although we had lower utilization in the first six months, tells you that our price increases were very successful. Obviously, if then you get the utilization right, it directly goes to an improved margin on the bottom line.
Okay. Thanks.
More questions?
The next question comes from Wolfgang Specht with Berenberg. Please go ahead.
Yes, hello, good morning. Two additional ones from my side. First, on your competitive situation regarding Thought Machine and Guidewire, which is, let's say, a huge enabler for projects both in banks and insurance companies. Do you notice any activity among competitors for, let's say, more employee training on these software stacks? Or do you believe you can keep your lead here, regarding skilled personnel for this software suite?
So on Guidewire, as this is a very mature solution and already very long in the market, I would say, we were actually rather entering the market. There were other companies before us. We simply speed up our positioning by really being extremely successful in Canada, and there we reached the leading position in Canada, French-speaking Canada. And by doing that, we then, let's say, developed our positioning. So I would say in Guidewire, it's more a qualitative leading position, not a leading position in terms of being the first one or being the biggest one. Others are maybe even bigger, but they focus then more on commodity. So I would say Guidewire, easy.
Thought Machine, yes, we do see, and I think that's actually good news, because it means that other competitors see that as an interesting market. They are training more people. On the other hand, yes, for sure, this will challenge us, because they will walk in, maybe even with lower prices, to conquer market share. But what they cannot keep up with very quick is simply that we've delivered most of the projects, most of the implementations. We have the vast majority, and especially banks are, by definition, very risk-averse, and especially with a big investment of changing their core banking system, they wanna have a partner they can trust, who delivers, which is a qualitative argumentation.
And this cannot be compensated by saying to a bank, "Oh, I trained 500 people overnight." They say, "Great, but have they delivered ever anything? No, thanks, go home." Right? So what we probably rather will see is that they either win smaller banks or that they win small parts and then build up. So I think we will still keep the competitive advantage, I would say, definitely for some years. Over time, I fully agree with you, over time, it will become a normal market where a lot of people have the knowledge, and the competitive advantage will decrease. Hence, you know, our wave strategy, that's when we have to hop onto the next wave, because ultimately we're gonna be eaten by the big guys who are usually a bit slower, but they come from the back.
Okay, understood. And then, different topic, M&A market. Do you see any, let's say, easing of the market or more assets coming, for purchase, or, does it remain difficult?
Well, I would say our pipeline is. We do have a pipeline. So it's actually, I'm, you know, I'm a bit struggling how to give the right answer now, so we have a good pipeline, I would say. Do we see an ease in terms of pricing? Well, no, not really, to be honest, as we only look for, you know, profitable companies with a good positioning, where they grow, so we do not look into distressed companies who need to be restructured. Probably those become cheaper, especially in these times, I can imagine, but that's what we are not interested. So I would say the multiples have not yet massively come down, but definitely they don't go up, let me say.
So the party which we sometimes saw in the last two years, where targets have asked for, from our perspective, insane multiples, which we simply then said, "No," they did not close, but they have been closed. That we see less, but our position is of no difference than the last two years. Overall, I would say we have a good pipeline.
Okay, thanks a lot.
We have no further questions. I'll turn the conference back over to Andreas Herzog for any closing comments.
Okay, perfect. Thank you, operator, and thank you very much for participating in our call today. As it seems there are no further questions, I would like to thank you again for your participation, and if questions may arise later, please do not hesitate to contact our IR team. So again, thank you. Take care and goodbye.
Goodbye. Bye-bye.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.