Letter of the CEO
Q1/2024 – Embracing Partnerships and Business Development
As expected, the first quarter of 2024 was challenging. On one hand, we experienced a negative impact with some of our existing customers stopping already agreed work on short notice due to hard market conditions where they had to adjust cost levels and investments. On the other hand, we also saw a positive trend with many new successful customer dialogues and signed new agreements. These did not have a material impact on the performance in Q1/2024 but are expected to have a positive effect later in the year.
We have continued our business development activities focusing on specific customers where we propose new business propositions through so-called ride-alongs, where we identify specific opportunities together with the customers. Some activities are also aimed at strengthening our partnerships with leading global tech companies. Partnerships are integral to Trifork’s growth strategy and close relationships with our partners are important to earn their trust and get the credibility needed to be one of their preferred innovation partners. We believe this will increase the future demand for Trifork’s capabilities in building and running solutions on our partners’ innovative and well-established technologies.
The beginning of 2024 has been one of the busiest ever concerning activities with our partners. We were honoured by NVIDIA to exhibit at their GTC conference in California, where 17,000 tech professionals gathered to learn about the latest in AI. We were there to speak about and show our experience in building industrial AI solutions on NVIDIA’s technologies and, as a result of this, we came home with a list of potential customers showing interest in our AI capabilities within e.g., manufacturing, logistics, and aviation.
We have also been fortunate to be a part of the Apple Vision Pro product launch. Trifork is building new innovative Apple Vision Pro apps for various industries and some of these apps have been shown to hundreds of potential customers. Currently, we are engaged in several dialogues with customers on how to use Apple Vision Pro in optimizing their business and we expect that end of year we will have up to 50 developers engaged in building these kinds of applications for the new spatial platform.
I believe that our increased focus on the US market also plays an important role in becoming an even closer partner to the large US tech companies. On a smaller scale, we hosted an event for 90 IT managers in Copenhagen focusing on data observability tools from Splunk, Dynatrace, Datadog, and New Relic.
In the second quarter, we will continue to attend, co-host, and present at other partner events.
As stated when we announced the financial results for 2023, in 2024, we focus on a number of prioritized areas:
- We want to continue strengthening our development and sales of more Trifork IP as part of the solutions that we deliver. This includes our Digital Twin platform, Dataplatform, Vision AI framework, Vision Pro framework, Digital Health platform, and Contain (our cloud-native platform). We believe that we in this way will be able to deliver even better value for money to our customers and at the same time get an even stronger relationship with them.
- The 2023 EBITDA loss of EURm -2.7 in our Inspire subsegment was not satisfactory. Thus, in Q1/2024, we have been in the process of reshaping our GOTO organization and approach towards conferences. EBITDA for Q1/2024 was negative at EURm -1.0. This includes extraordinary one-off costs of reorganizing of EURm -0.2. No major events took place in Q1/2024, so a negative result was expected. Cost reduction effects from reorganizing are expected to impact from Q2/2024. The remainder of 2024 is expected to be between break-even to negative by EURm 0.5, equal to an improvement of at least EURm 1.0 compared to 2023.
- Our Cyber Protection business still suffers from not yet having a critical mass of customers in our operation center setup. This means that this area still requires investments and that margins are limited. In Q1/2024, we invested in reorganizations and upgrading of competences, including one-off costs of EURm -0.3. The reorganization is now in place and a new plan is formed to achieve economies of scale and to have the right business and investment model for future growth in Cyber Protection.
In the first quarter of 2024, we realized a total revenue of EURm 50.4, representing a growth of 1.4%. This result was affected by a reduction in working days and accelerated vacation planning due to the Easter break occurring in March (Q1) as opposed to April (Q2) in previous years. After accounting for the effect from normalizing working days, which is calculated to add EURm 2.8 in revenue or 5.6%, the normalized growth for Q1/2024 would be 7.0%. In Q1/2024, EURm 0.7 was attributed to inorganic growth. We expect a normalization of revenue growth in the upcoming quarters and maintain our current revenue guidance. The customer ratio remains around two-thirds private and one-third public, with the highest growth observed with our public customers.
Adjusted EBITDA in the Trifork segment reached EURm 5.8, equating to an EBITDA margin of 11.6%. The reduced working days accounted for approximately EURm 2.0 on EBITDA in Q1/2024, and the quarter was also influenced by one-off costs of EURm 0.5 related to organizational adjustments in GOTO and Cyber Protection. We view these results as expected and anticipate a normalization of EBITDA margins over the next quarters, maintaining our current guidance on adjusted EBITDA for the Trifork segment and Trifork Group EBIT.
Our Trifork Labs segment developed according to our plans, and overall, we see a positive development in our Labs companies. In the first quarter, we reported a fair value gain of EURm 2.0, with EURm 0.2 in realized gains and EURm 1.7 in unrealized gains, primarily driven by one company that continues to outperform its budget. EBT from Trifork Labs was EURm 1.3.
For 2024, Trifork continues to expect total revenue of EURm 230-240, equivalent to a growth of 10.6-15.4%, Trifork Segment adjusted EBITDA of EURm 38.0-42.0, and Trifork Group EBIT of EURm 21.5-25.5. These projections do not include potential acquisitions and assume no significant changes to the soft market environment throughout the year.
We will host our first Capital Markets Day on 29 May 2024 in Copenhagen and look forward to welcoming investors, media, and analysts to learn more about our growth journey, capabilities, strategies, financial development, and future ambitions. More information can be found on our investor relations webpage.
Jørn Larsen
CEO, Trifork Group