Earnings call transcript: Nyab Oyj sees strong Q4 2024 growth

Nyab Oyj reported robust financial performance for the fourth quarter of 2024, with significant growth in annual revenue and net profit. The company’s strategic acquisitions and market expansion efforts have bolstered its position in the energy sector. While the stock initially saw a slight decline following earnings, it has since rebounded strongly with an 8.71% gain over the past week. According to InvestingPro analysis, the stock currently appears undervalued based on its Fair Value assessment, presenting a potential opportunity for investors.

Key Takeaways

• Nyab Oyj’s annual EBIT grew by 66.9% year-over-year.
• The company completed a strategic acquisition of Dover (NYSE:DOV) in January 2025.
• Revenue per employee is nearly double that of peers, highlighting operational efficiency.
• The energy segment has become the largest contributor to revenue.
• The stock price experienced a minor decline of 0.18% post-earnings.

Company Performance

Nyab Oyj demonstrated strong overall performance in Q4 2024, driven by strategic acquisitions and expansion into new markets like Norway. The company’s revenue per employee is notably high, indicating efficient operations and a scalable business model. This performance positions Nyab favorably against its competitors in the Nordic region.

Financial Highlights

• Annual revenue: €345.9 million
• Q4 revenue: €117 million
• Full year EBIT: €25.4 million (+66.9% YoY)
• EBIT margin: 7.3% (Q4 margin: 10.5%)
• Free cash flow: €22.5 million
• Net profit: €16.8 million (+90% YoY)
• Negative net debt: €16.6 million

Outlook & Guidance

Nyab Oyj is targeting continued growth in its energy, infrastructure, and industrial segments, with plans to expand further into Norway through its recent acquisition of Dover. The company is committed to maintaining a 7.5% EBIT margin and plans to introduce new key performance indicators, including order intake, to better track performance. InvestingPro analysis rates the company’s overall financial health as GOOD, with particularly strong scores in cash flow management and relative value metrics. Get access to 6 additional ProTips and comprehensive financial analysis with an InvestingPro subscription.

Executive Commentary

CEO Johan Larsen emphasized the company’s strategic focus: "We have steadily built a better and stronger company." He also highlighted the importance of infrastructure investment: "Society must invest in infrastructure, energy, and industry to develop." CFO Lars Rendell added, "We are always focused on winning the right projects for us."

Risks and Challenges

• Engineering talent shortage could impede growth.
• Market volatility may impact future revenue streams.
• Integration risks associated with the Dover acquisition.
• Potential macroeconomic pressures affecting the energy sector.
• Competition in the Nordic market remains intense.

Q&A

During the earnings call, analysts inquired about the Dover acquisition’s synergies and the company’s approach to project selection. Executives confirmed their commitment to a 7.5% EBIT margin and discussed stable revenue profiles and market opportunities, emphasizing their selective approach to projects.

Full transcript - Nyab Oyj (NYAB) Q4 2024:

Marco Peltonen, Director of Investor Relations, New York: Hello, everyone, and welcome to New York’s results presentation. New York has today released its year end report for 2024. And giving the presentation, we have the group’s CEO, Johan Larsen and CFO, Lars Rendell. My name is Marco Peltonen, and I am the Director of Investor Relations at New York.

During the presentation, you can write your questions for our management to the chat and we will go through them at the end. And now to get started, I hand over to Johan, who will go through year 2024.

Johan Larsen, CEO, New York: Thank you, Marco. Welcome, everybody. Our first year end report as a Swedish company. Looking forward to it. Also, our first report with Klaasra Value by my side.

So another quarter of steady development. I’m happy to state that our yearly revenue amounted to €345,900,000 and that we have a revenue in the quarter of €117,000,000 Continuous improvements in most areas quarter by quarter throughout 2024 and the great improvements with the comparison periods. We finished the year with a EBIT of €25,400,000, an improvement of 66.9% year over year. For the full year, we had a EBIT margin of 7.3% as expected and communicated that it would improve with in comparison with 2023. And important to highlight is the margin for the quarter Q4 that amounted to 10.5% EBIT.

Decent free cash flow, €22,500,000 have a good cash generation overall. And our order backlog is 10.3% higher than when we left 2023, noting that we’re in a good position for 2025. When it comes to revenue splits, energy worth highlighting now our biggest segment out of those segments we address. We have also communicated this to the market that we expect that And they are also part of what we have said also that we will do our best to even out our seasonality. A lot of the energy projects can have quite high activities in Q1.

So, now it’s our biggest segment infrastructure at the stable level and the industrial, mainly due to a little lower investment levels. That’s been lagging a bit since we had our macroeconomic circumstances in 2023, but still an important area for us. And I expect growth there going forward as I actually do in the other two segments as well. Threefour of our volume for 2024 was in Sweden and a quarter in Finland. Finnish economy, we see some clear slowness in the market there.

They have a much more volatile economy than Sweden, more state based and so on. But we have handled it very well. We have performed well on the Finnish side, and we have been able to utilize skills and competence on the Swedish market from our from our Finnish business. And we have only shy of €100,000,000 volume in Finland annually. So even in slower times, we can hold up quite great and have efficient cross border collaborations.

Private sector versus public sector, we have stated that we want the mix of approx fifty fifty. At the moment public sector is a bit bigger. That’s just fine with us. We follow the markets, and we have a lot of strong base industry clients, public adminis public road service administration and so on. So, we we feel quite happy with our strong, great clients and how they are divided between private and public.

When it comes to revenue per employee, worth mentioning and highlighting, because I think this says a lot about our business model that we have clearly explained is very different from those we are compared to. You can also see that in our growth, long term growth every year in combination with our profitability. And when it comes to revenue per employee, we end up at seven and 703,000 per employee, which is, quite quite close to double the amount that many comparisons with or viewers, our peers. And I would give the simple explanation and say that we are to a high extent a consultancy company, but we also take business risks in fixed price contracts and so on. Although we’re very happy with the growth of our collaborative contracts that lowers the risk profile.

And with our more than 70% white collar staff, we have a very scalable business. Most of the production is executed by niche providers, subcontractors and such. We have the headcount of 492 people. And, has stated one third of our revenue from collaboration model projects. We have our own concept called Kraft Samla, and this area is growing.

We are happy with that. We’re coming to the products at an early stage and can give our clients added value. And it also means that the risk, quite clear to be in the products on an early stage, often contributing with the planning and so on. Last year, we had a very nice eNPS score, important within our unique business model to have skilled personnel. I think that we are by far the best in the industry with this figure.

Looking forward to present the figure for 2025 that we will have shortly. We have a net cash position of €16,600,000 and the proposal for dividend is $0.01 per share. Some about the developments in the fourth quarter. Happy we have gotten the trust from Kemioki Oyu to construct a 5,000 square meter fish farming and water treatment facility. Goes in line with our specialist knowledge, exciting contract for us.

We have also won the trust of the Swedish Transport Administration, one of our biggest clients, to construct the new southern entrance at Hegivik Stafugn in Solentunna. And the Dover acquisition, of course, more about that later. That was completed now, January 2. A platform investment. And we have some key executive appointments.

We have a new CFO, Claes, with me today and a new HR director, Morten, that are contributing already and the key competence with international experience to support our future profitable growth. So the Dover acquisition. What it’s about for us is to create a platform for a geographic expansion. This gives us possibilities to expand the core business into Norway. The sector they address are the sectors where we already have proven our industrial knowledge, which is energy, infrastructure and industry.

So we are aiming at the same sectors, but with different kind of services. And, we see that we reach deeper in the value chain and that there are a lot of cross selling synergies. And, the implementation so far has gone very well. And worth mentioning also is that we naturally see that there is a shortage of engineers in the market, and we don’t expect that shortage to be lower. The shortage will increase over time going forward.

This gives us a lot of opportunities. I can also say that our first main focus now is the implementation that is handled successfully, goes very well. Main focus for development with this business will be Norway, and then in Sweden and somewhat in Finland. The more international business, where there aren’t two big volumes that are more international and global. It’s more about continue to deliver to some of the world’s biggest energy clients on long term frame agreements with margin improvements, quite marginal margin improvements there is to be expected, but clear improvements still.

Lars Rendell, CFO, New York: Right. Thank you, Juha. Taking some further looks into our financial development, starting with the order book. Order backlog, as you saw, closed at €325,100,000. As heard, that is 10% higher compared to the value at the end of twenty twenty three.

The production in the quarter was at the high level and the backlog reduced with some 15% during the quarter. The backlog primarily driven by projects in Sweden and the balance is supporting year on year growth for 2025. Our model continues to drive growth and profitability. The share of collaborative contracts now represents approximately one third and the average project size increased, this improving revenue security as well as reducing risk and strengthening our market position. The cross border and intra project collaboration is accelerating in New York, enabling resource optimization and further profitable growth.

Taking a look at our net sales, The fourth quarter revenue was EUR 117,100,000.0, representing a growth of 33% in relation to previous year. Compared to 2023, the winter was milder in the Northern Region, supporting project execution. We saw increased activity in all our three industry segments. The largest growth driver was power network projects. Sweden grew a whole 48% and increased the share of group total revenue to 78.

Likewise, public sector had the highest growth with 52%, giving a 59% share of quarterly revenue. Then summarizing our profitability development strong. Q4 operating profit was EUR 12,300,000.0, giving an EBIT margin of 10.5% compared to seven point five percent 20 20 three. EBIT increase was derived from volume growth combined with higher project margins and cost scaling. The quarterly net profit was EUR 9,300,000.0, giving a full year profit of EUR 16 point 8.

Percent. That represents a year on year growth of net profit and earnings per share of almost 90%. Looking at our financial position. Free cash flow for the quarter, EUR 18,300,000.0 corresponding to a cash conversion of 135% of EBITDA. The twenty twenty four full year free cash flow, EUR 22,500,000.0 is equivalent to a year on year increase of 70%.

We land the quarter with a negative net debt, €16,600,000 amounting to negative €550,000 in relation to EBITDA. The rose return on capital employed of 12% represents an increased reserve and we closed 2024 with a stable equity ratio above 70%. We highlight our 2024 full year performance versus our financial targets. The revenue growth of 23% outperforms the target to be above 10. The EBIT margin 7.3% is quite well in line with our target to perform above 7.5%.

We exit 2024 with a negative net debt, giving a capital structure ratio with substantial headroom compared to net debt to EBITD ratio below 1.5. The proposed dividend equates to 42.4% of 2024 net profit. Also this in line with our target to distribute above 35% of the sale. Yeah. At this point, we choose to inform about the pro form a adjusted financials for 2024, combining NIAB reported numbers with the acquired Doerber business and linked transaction effects.

Notably, this is preliminary numbers based on unqualified company filings and the numbers in total have not been subject to external audit yet. However, will serve us as a good indication. On a stand alone basis, excluding allocated group costs, the acquired Dover business amounts to a revenue of some EUR111 million, an EBIT of EUR 4,500,000.0 and a net profit estimated to €4,200,000. In addition, the acquisition brings following effects: Accumulated transaction costs during 2024, totaling €1,000,000 and those will be costed during the first quarter twenty twenty five additional annual amortization of intangible assets of EUR 1,100,000.0 financing cost mainly related to the bridge facility we acquired estimated to EUR 1,300,000.0 post tax on a full year basis. The acquisition, including Dover business and adjustments, would thus have brought additional operating profit of EUR 2,400,000.0 and a net profit of EUR 1,300,000.0.

The 2024 consolidated combination, should the acquisition have been completed in January, therefore shows a revenue of EUR $457,000,000 with an EBIT margin of 6.1% and a net debt to EBITDA ratio of 0.4% positive. Finally, we take this opportunity to inform on our plans for 2025 reporting. On the group level, we will report on order intake and linked year on year growth as a new KPI. With the Dover acquisition, we get the material part of the group working with a different operational and business model. We will continue to disclose consolidated performance for our new legacy civil engineering in terms of order intake, backlog, revenue and EBIT margin.

We will also disclose these KPIs separately for Sweden and Finland. We will combine the acquired Dover business with our existing SITEMA Finnish operations to a new consulting segment. And for this, inform about order intake, headcount, revenue and EBIT margin. That was all from me. So over to you, Johan, to summarize.

Johan Larsen, CEO, New York: Thank you very much, Claus. Very well described and even more so with a mild fishing journey. You fought well. Thank you. Yes, to summarize this, we are, of course, quite happy with the year.

We have steadily built a better and stronger company. We have succeeded very well in evening out seasonality. We have protected our scalable business model and have grown without increasing our risk. And we have proven ourselves and our capabilities as with handling bigger volumes. For us, it’s no surprise, but it’s, of course, good to show this to the market.

We know these industries and this industry, we know what we are doing. And we come out in a very good position before 2025 or into 2025. And for the quarter, it’s a strong operational and financial performance, great improvement from the previous year. We increased our volume with 33%. And as I was quite clear with 1% in Q3 that the underlying and ongoing growth were much higher than the 6% we showed in Q3 due to timing effects and timing reasons.

So this, of course, is no surprise for us. And we have a solid EBIT margin, very well performed both in Finland and Sweden. Sweden, of course, have had a much better margin due to better and stronger market and also how the structural settings for the markets are in each country. But great performance on both sides, very happy to see that. We fight when it’s hockey, but when it’s running business, we are colleagues.

Strong and diversified order backlog. We have put ourselves in a great position. The increase is about 10% year over year, and it provides good prospects. Continued strong growth in Energy, it’s now our biggest segment as told earlier, also good and related with acquisition of Dobre. Even if they have both infrastructure and industry, it’s within energy.

They have their vast majority of business. Good market position, we are exposed to stable market segments, high underlying demand in both Finland and Sweden. And it’s a remarkable high tendering activity in Sweden. Dover acquisition, we have run that through a bit. So the summer is quite easy.

Expansion in Norway and the increases revenue potential and a lot of synergies are possible. Good performance for the year. Overall, we are in line with our financial targets looking forward for 2025 and continue our work with the steadily build a better and stronger company. That’s it for me.

Marco Peltonen, Director of Investor Relations, New York: Thank you, Johan. Thank you, Claus. Let’s move on now to the questions we have received. Another question is that for the full year of 2024, the EBIT margin amounted to 7.3%. However, the integration of the growth of personal business will naturally put some downward pressure to your margins.

How fast do you anticipate Nynaeup to return to the margin levels that we saw pre acquisition and about your target of 7.5% or should we expect a lower margin for the foreseeable future?

Johan Larsen, CEO, New York: Hi. No, you shall not expect a lower margin for the foreseeable future. Naturally, from day one, there is a dilution in the margin. Work is already ongoing to improve the less margins. There are a lot of business coming up, And we won’t change, as we know of today, our long term financial target of delivering about 7.5%.

So with our stated throughout the year that the best way to view us or try to foresee our future is by looking at our financial long term targets. So that is what I suggest you’ll do.

Marco Peltonen, Director of Investor Relations, New York: Then could you provide some insights into how the cash flow profile conversion looks like for the acquired businesses or from Dogen? How does it compare from your current cash profile?

Johan Larsen, CEO, New York: Yeah. The cash conversion are quite similar. The seasonality is more preferable. It’s quite even throughout all quarters, helps us on group level. Of course, Klaus has a much better understanding and knowledge in this area than I do.

But since he has a cold, I try to do my best in your place.

Lars Rendell, CFO, New York: My voice, thanks you for that. Thank you.

Marco Peltonen, Director of Investor Relations, New York: And then the acquired businesses from Dover have quite weak, 24 in terms of revenue growth and EBIT margin compared to ’23. Could you talk a bit about this performance? What measures will be implemented to strengthen the profitability and steer the company back to growth?

Johan Larsen, CEO, New York: Yeah. Well, I can see you can see our track record, knowing these industries having one of the best margins in the business. Our track record when we did the reverse takeover of the Finnish Kalta business, who had slight red figures the last year, and quite significant margins improvement straight off. So I would say that there are a lot of potential, work is ongoing, and we run business to have profitability. So the goals are clear, and the market will see a bit more what will happen during this year.

Marco Peltonen, Director of Investor Relations, New York: And the next question, the order book growth could be even better. How do you see the landscape for generating new orders to in 2025?

Johan Larsen, CEO, New York: Yes. Well, first of all, our order book is at a 10% higher level than the comparison period. And we’re quite happy with that, especially since we had such high revenue in the fourth quarter. But you should also know that as I have mentioned that there are collaborative contracts with phase two that aren’t disclosed as volumes. There are guarantee volumes in certain contracts that have roof volumes and so on.

So you shouldn’t stay too blind focusing on the order book. We are very happy with our position and that’s what I can say now.

Lars Rendell, CFO, New York: Correct.

Marco Peltonen, Director of Investor Relations, New York: And how did the acquired businesses or intake develop in Q4 and into full year 2024?

Johan Larsen, CEO, New York: Yeah. I would say that they don’t have a order intact intake to a high extent. Their main business is perennial framework agreements that have a maturity disarm that are many years away from now. So we’re very confident and we have a lot of time. I would say where we are all stand now.

So the clients are there.

Lars Rendell, CFO, New York: I think overall, I think the revenue profile was quite stable during 2024 compared to previous years for the door by acquired business. And now we are just looking ahead and see, as you once said, several opportunities to start to accelerate the same. Yes.

Marco Peltonen, Director of Investor Relations, New York: Yes. And it appears that your order intake of significant orders is already higher than in Q1 twenty twenty four. Would you say that this is representative for other smaller orders as well?

Johan Larsen, CEO, New York: I would say so. It’s a good market. We can’t hide the fact that society must invest in infrastructure, energy, and industry to develop. And that’s all the markets that we address. So we are winning new contracts have a big pipeline and like the markets look favorable and good and we’re very happy.

One of the foundations or ideas of our reverse takeover of Skalto, except for being a listed company, was to get the skills and knowledge how to operate in Arctic climate. And we can really utilize that with the more hot market that is current in Sweden. We have engineers who are skilled and designers and so on who contributes very well from the Finnish side, also with the more CapEx heavy business and such. So

Lars Rendell, CFO, New York: And I would say, I just add that we are always and will remain focused on winning the right projects for us, being selective and we are happy to, as I also said, to gain projects and contracts with recurring revenue, increasing revenue security and lower risk for us. So I think that we are happy for that development as well, yeah, that we see.

Johan Larsen, CEO, New York: Yeah. It works as planned and it’s good somewhere.

Marco Peltonen, Director of Investor Relations, New York: And could you provide more details on the current order backlog and which major projects are expected to contribute to revenues in 2025?

Johan Larsen, CEO, New York: Yes. Well, that is, of course, contracts we have already disclosed, but, Helena, don’t look so soon. For but then fall, we have our own line. We have the municipality contract in Luleo. And the frame agreements with Vattenfall.

We have multiple perennial agreements. So it’s a mix.

Lars Rendell, CFO, New York: And with growth comes a more diversified profile as well, where more projects become contribution to the overall performance.

Johan Larsen, CEO, New York: Yes. And relying on our business model where we don’t have to invest in a high CapEx business. We don’t even have to hire that many people and so on. It’s scalable. Our average project size consisting of over 100 projects per year go up in size, a small bit and portion for those who are ready for a bigger responsibility.

And we grow from there. That’s where our historical track record and high growth with good margins comes from.

Marco Peltonen, Director of Investor Relations, New York: And more questions of the Dovre acquisition. Is the staff at Dovre based around the world or can they be relocated entirely depending on where the projects are carried out? What type of projects are we talking about there and how do you do you intend to continue being so geographically spread out or will or Yeah. Focus more in the Nordic countries?

Johan Larsen, CEO, New York: Yeah. It’s mainly white collars. It’s mainly engineers. Some of them are movable and can work wherever they like or please. And they are from all over the world, but we have a clear base in Norway where we have most of this revenue is in Norway, in Norwegian.

It’s more of a consultancy business. It has more related and possible synergies with our ongoing and existing business. But it’s there are a lot of opportunities there.

Lars Rendell, CFO, New York: Yes. I think we see it as a strength that we actually that the combination of local sourcing and delivery combined with some geographical flexibility and capability. So those that combination is for sure a strength in the business acquired by Neha.

Marco Peltonen, Director of Investor Relations, New York: Will you please have more thoughts on the market outlook in Norway and how much of the revenue Norway is expected to account for in the future?

Johan Larsen, CEO, New York: Well, in the future, we can’t really give that indication now. I would say that that would tend to be a forecast. And what we can say is that we will have growth and we will have margin improvements. And we also see Dobre and their core business and consultancy business taking a bigger place and role in Sweden over time going forward. So it’s on both sides.

Marco Peltonen, Director of Investor Relations, New York: And the EBIT margin for Nelant was very strong in Q4 with operating profit growing at more than twice the pace of revenue. Could you elaborate on how NetApp (NASDAQ:NTAP) achieved this level of cost scalability and the key factors driving this performance?

Johan Larsen, CEO, New York: Yes. I would go back to what we talked about earlier, our business model, how scalable it is and then when it comes with volume, but then you also have a seasonality effect. This isn’t too strange, even if it’s an improvement with the comparison period of three point zero pp, meaning 3% units. It’s a weak comparison period. And historically, we have delivered on EBIT levels around 9% or something like that for a full year.

Now we are a listed company with the costs related to that. Happily, our size and volume now makes it not so expensive to be a public listed company. So with with that said, I think I made an explanation.

Marco Peltonen, Director of Investor Relations, New York: There is a question about collaboration with Lule University of Technology, how it can benefit Lule.

Johan Larsen, CEO, New York: Yeah. We’re looking into it and actually have some seeds planted and see what progress we can make. But of course, a technical university in our hometown where this company is founded and have its seed provides possibilities, especially since we have a lot of engineer and energy work and so on. So I guess there will be more about that in the future.

Marco Peltonen, Director of Investor Relations, New York: And, despite the 23% revenue growth, net cash flow from operating activities has only increased marginally. Do you have any comments on that?

Johan Larsen, CEO, New York: No. My comments is that we have a very strong free positive cash flow throughout. But as all other companies, we have timing effects and such depending on size of contracts that has higher revenue for the last month before closing the quarter and so on. So it’s not much to highlight, I would say.

Lars Rendell, CFO, New York: Yes. In addition, the comparison period there you know, benefited from a settlement, which was in that period. So I think the as Johan says, the performance in the fourth quarter was well in line with what we expect to see from free cash flow.

Marco Peltonen, Director of Investor Relations, New York: Yeah. Okay. Now we have gone through all the questions we have received. New York will release its full annual report on Monday, March. And for now, we thank everyone for participating.

And until the next time.

Lars Rendell, CFO, New York: Thank you very much. Sorry for the

Johan Larsen, CEO, New York: voice. Thank you.

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