Nagarro (NA9) Q3 2024 (Retail Investors) earnings summary

Executive summary

• Q3 2024 revenue grew 5.6% year-on-year in constant currency to €243 million, with robust client loyalty and new client acquisition despite slow digital IT services demand.

• Adjusted EBITDA margin was 14.3% in Q3 2024, with margin pressure due to slow growth and a challenging demand environment.

• Net profit increased to €12.8 million in Q3 2024, with strong operating cash flows and a cash balance of €141 million at quarter-end.

• Strategic review led to withdrawal of medium/long-term targets beyond 2024; analyst consensus is now recommended for future outlook.

• Data and AI are key drivers in client conversations, though generative AI is not yet dominant.

Financial highlights

• Q3 2024 revenue: €243 million, up 5.6% year-on-year in constant currency; gross margin: 31.5% (current method), 27.4% (old method).

• Adjusted EBITDA for Q3: €34.6 million; net profit: €12.8 million; EBIT: €22.6 million.

• Operating cash flow for 9M 2024: €64.9 million; cash balance at quarter-end: €141 million; net leverage ratio: 1.3x.

• Top five clients accounted for 15% of Q3 revenue; low client concentration maintained.

• Basic EPS was €0.96 in Q3 2024.

Outlook and guidance

• 2024 guidance: revenue near €960 million (constant currency), gross margin ~30% (current method), Adjusted EBITDA margin above 14%.

• No guidance beyond 2024; analyst consensus is the reference for future years.

• Management expects CSAT to remain near 92% for 2024.

• Recovery in digital IT services demand remains gradual and unpredictable.