Nagarro Aktie

Good afternoon, everyone, and welcome to Nagarro SE's Q1 2026 Earnings Call. [Operator Instructions] With that, it is my pleasure to hand over to Michael.

Great. Thank you, Carla, and good afternoon, everyone. My name is Michael Knapp, and I'm part of the Investor Relations team at Nagarro. If you have not yet received a copy of our Q1 2026 earnings release, you can find it as well as a copy of our quarterly statement and today's presentation in the Investor Relations section at nagarro.com. Joining me today is Manas Human, our Co-Founder and Custodian of Entrepreneurship. Manas and I will be covering the results and strategic updates for the quarter.

Before we begin, please note that some statements made during this call may be forward-looking and are subject to risks and uncertainties as outlined in our financial reports. Additionally, please refer to the quarterly statement for important information regarding non-IFRS measures. With that, I'm pleased to hand you over to Manas.

Thanks, Michael. Once again, welcome, everyone, and thank you for joining us on this earnings call. My main message today is that we are seeing a positive response from clients to our Fluidic Intelligence approach. As I mentioned during our last earnings call, this approach is all about unlocking the intelligence that already exists across organizations in people, teams and departments, but often remains trapped in silos throughout the organization.

Now as our clients advance their digital transformation journeys into AI transformation journeys, existing workflows are being fundamentally rethought and redesigned for an Agentic world. This is driving increased demand for partners like Nagarro who combine domain and client-specific expertise with strong capabilities in AI and data. Nagarro has long been recognized for our engineering excellence and our deep understanding of client context, which remains a key reason why clients choose to work with us year after year.

More recently, we have made significant investments to strengthen our CXO level consulting capabilities as we evolve towards a more advisory-led approach. This combination of strategic advisory on the front end for AI transformation, coupled with strong engineering execution in the client context, positions us well to become a leading partner in this new era. We now see ourselves no longer as a digital engineering leader, but as a leader in AI transformation and engineering.

We are already seeing tangible examples of the value we can deliver to our clients with AI, a few of which I will touch on shortly. Simultaneously, we have restructured our organization to better enable our own rapid change, that is along this advisory-led dimension that I've just described, but also along the growth dimension, which is essentially putting in place a classical powerful sales and growth structure.

We have cut down the number of business units from around 20 to just 10. We have created a growth-oriented incentive structure. We are enhancing regional GTM sales and account management. We are scaling partnership management. We are engaging with advisers to push into large deals. We are hiring growth leaders from Tier 1 peers and so on.

That said, we are still at an early stage in realizing the benefits of the initiatives and capabilities we are putting in place. Over time, we expect these initiatives to translate into sustainably higher growth rates. The results for 2025 demonstrated the resilience of our operating model during a period of subdued demand for IT services. Our teams delivered solid outcomes for our clients while maintaining a sharp focus on operational discipline.

The results underscore the stability of our customer base and the strong confidence our long-standing clients place in us. Our underlying performance remained largely aligned with our expectations when taking into account the impact of foreign currency fluctuations during the year.

If we were to use the exchange rates prevailing at the time of our initial 2025 guidance, the full year revenue would be approximately at the midpoint of our EUR 1.02 billion to EUR 1.08 billion range. Adjusted EBITDA, excluding the EUR 15.5 million unrealized ForEx impact on intragroup loans would be approximately EUR 153.7 million, placing us towards the higher end of our guided adjusted EBITDA margin range of 14.5% to 15.5%.

So overall, the company continues to perform well in this cautious, but stable demand environment. We were pleased to complete 4 acquisitions in 2025 with 2 announced later in the year, Charles Hudson and Inaho. Charles Hudson is a Massachusetts, U.S.-based technology services firm known for quality engineering for the digital commerce and retail sectors. Inaho Digital Solutions is a boutique IT services provider, specialized in modernizing legacy applications and digital transformation in Japan and for Japanese clients worldwide. We are thrilled to welcome colleagues from all the acquisitions as well as their clients to the Nagarro family.

We're also very happy to have our first ever CFO. I'm very pleased to introduce Prateek Aggarwal, who is listening in on this call as CFO and member of the Management Board. Prateek brings more than 2 decades of finance leadership experience in tech and IT services. He has held very senior roles in global listed companies in multi-country and culturally diverse operating environments. He has a wonderful track record in financial management, operational discipline and capital markets engagement. Prateek will, of course, play a much larger role in subsequent earnings calls and in shaping the direction of the company.

We have also been actively expanding our partnerships with leading players in AI transformation, including AWS, Databricks, OpenAI, Cursor, CARTO. I'll talk more about the importance of these partnerships in a bit. We are confident that as we continue to execute our strategy, the market will eventually recognize the sustainable value that we are building here.

Digging deeper into the Q1 numbers, we reported revenue that grew over 6% year-on-year in constant currency. This growth is tracking largely in line with our 2026 guidance. We remain focused on controlling what we can control and our emphasis on operational discipline continues to yield results. Our Q1 gross margins came in at 31.2%, which is 60 basis points better than the year ago period as we focus on targeted initiatives for margin expansion, including the margin support program that we have spoken about, which continues to optimize resource allocation, improve utilization rates and drive efficiencies across the organization.

Our Q1 adjusted EBITDA margins were 12.6%, which improved year-on-year, but it's below our target for 2026, mostly due to the fewer number of working days in Q1. Please note that the EBITDA margin was 15.6%, but includes a large share-based payment benefit, which we are adjusting for. Altogether, we are maintaining the guidance we provided in March.

Beyond the financial metrics, our long-term focus on delivering superior client experiences remains the primary driver of our sustained success characterized by intimate partnerships, continuous innovation with our clients and measurable outcomes. Our CSAT score was 92.7% and NPS remained healthy at 65%. Accounts that generate more than EUR 1 million dipped slightly to 179 as several implementation-led programs were successfully completed with many converting into stable recurring managed services engagements.

We have previously articulated our strategy of up across together to capture the AI opportunity, and we are already making tangible progress along all 3 dimensions. We are moving up the value chain, complementing our engineering strength with CSO level AI advisory where we are already seeing traction with some clients. This is now a key KPI across the company.

We are expanding across regions and accounts, enabling our industry teams to capture global opportunities more effectively. And we are working together more seamlessly, simplifying our structure, strengthening cross-selling and reducing duplication, particularly in our AI efforts. We are now streamlined, as I said, into just 10 business units, 6 vertical BUs and 4 capability BUs, 2 of these capability BUs called AI in Change and AI in Run are fully focused on capturing the AI opportunity. Overall, this leaner, more aligned structure is going to be a key enabler of our next phase of growth.

By deeply understanding the client's strategic priorities and then exceeding their expectations, we ensure that our services remain both indispensable and embedded within the long-term AI transformation road maps. We continue to believe that our client relationships -- our deep client relationships represent our most valuable long-term asset.

Coming to governance. You know, I showed you a similar slide during our Q3 call to highlight that we have taken a number of actions over the past several quarters to address investor concerns, improve corporate governance and enhance financial reporting and transparency. I want to highlight some of the additional items we have completed on our list. We recently shared an update on our progress across leading global sustainability indices with marked year-on-year improvement across key benchmarks backed by stronger underlying governance systems and more comprehensive transparent public disclosures.

I mentioned this in Q3, EcoVadis placed Nagarro among the top 5% of participating companies globally, awarding a score of 79 and a Gold Medal. In addition, ISS ESG upgraded Nagarro to a C+ rating with prime status and our S&P Global score rose to 52 in 2025, reflecting continued progress on the sustainability agenda. Finally, our MSCI rating improved to BBB in 2025, while our CDP rating advanced to B.

Improvement across these benchmarks reflects just a more disciplined and structured approach to sustainability across our business. Also, we announced in March that the Supervisory Board's independent investigation into prior allegations was completed. That process was highly rigorous and comprehensive and the conclusions are very clear. None of the allegations were substantiated and no evidence of fraud or misconduct was found.

At the same time, the process did provide valuable insight into areas where we can further strengthen our structures, processes and documentation, and we are already addressing these areas, including enhancements to our finance, accounting and risk functions and a strengthened Supervisory Board and Audit Committee.

And of course, again, and perhaps most exciting, we are very pleased to welcome Prateek as the new colleague, CFO and member of the Management Board. Now we view all of these items here as important steps in our continued evolution towards a more institutionalized governance framework, fully aligned with the expectation of global capital markets and as a foundation for building long-term investor confidence.

Our customer diversification across industries continues to provide both growth and stability. At the same time, we are now using the consolidation of BUs to increase our focus on some specific subsectors and offerings while deprecating others. Simultaneously, with the involvement of management consultants and new hires, we are developing improved playbooks and growth motions. We see this improved discipline of execution and improved focus on commercial excellence as a new phase in the industry, but also in Nagarro's evolutionary journey.

Our diversification extends to geographies as well. The U.S. and Germany remain extremely important markets for us. The Middle East has been a nice addition to growth in the last few years. Yet because of this diversification, we have the resilience to weather the current geopolitical challenges in the Middle East without major impact. Michael, do you want to now maybe discuss the balance sheet and cash flows?

Absolutely, Manas. The chart on the left shows our financial position at March 31, 2026. Our financial liabilities were EUR 310.9 million and lease liabilities were EUR 69.2 million. Our cash balance remains strong at EUR 112.6 million, implying net liabilities of EUR 267.5 million and a net leverage ratio of 1.9x. The company's liquidity position at the end of the 3-month period was comfortable with working capital of EUR 232.7 million.

Cash flows for the 3-month period ended March 31 showed total cash outflow of EUR 13.5 million versus an outflow of EUR 23.6 million for the comparable period in the prior year. Operating cash outflow for the current 3-month period decreased to EUR 0.3 million versus EUR 37.5 million inflow for the comparable period last year. This was primarily due to an increase in working capital amounting to EUR 32.4 million.

In Q1 of 2025, operating cash flows benefited from higher collections of U.S. public service receivables. And additionally, Q1 2026 operating cash flows were negatively affected by EUR 12 million due to a decrease in noncash income and expenses when compared to Q1 of '25. These negative effects were partially offset by higher EBIT of EUR 5.9 million and a decrease in income tax payments of EUR 1.3 million.

Days of sales outstanding increased from 82 days at the end of the year of 2025 to 86 days at the end of March 2026. Kindly note, we calculate DSO based on quarterly revenues and include both contract assets and trade receivables. Cash flow from investing activities for the current 3-month period was an outflow of EUR 1 million and CapEx was EUR 1 million, less than 1% of our 3-month revenue, reflecting our asset-light model.

Cash outflow from financing activities for the current 3-month period was EUR 12.2 million and compared to EUR 58.4 million in Q1 of 2025. Cash outflows decreased in Q1 '26, mainly due to a decrease in net repayment of bank loans of EUR 25.2 million and the decrease in the purchase price of treasury shares, which totaled EUR 19.6 million. And with that, I'll turn the call back to Manas.

Thanks, Michael. Maybe we talk a little bit more about the business before we go into Q&A. I wanted to spend a moment discussing the importance of partnerships for us in this new environment as well as the success that we are seeing in growing our partner base. One of the advantages of the simpler internal organization that we are now building is the ability to be more concentrated and deliberate in leveraging partners. Partnerships with leading players across the AI ecosystem are a critical enabler of our growth strategy.

Collaborations with platforms like AWS, Databricks, Snowflake, OpenAI, Cursor, SAP, Atlassian and Salesforce, and I know I'm leaving some out, but we have a lot of many, many more. These allow us to combine best-in-class technology products with our own engineering and domain expertise. This positions us to deliver end-to-end AI transformation for our clients from the strategy and data foundations to application, workflow, integration and ongoing operations.

And just as important, these partnerships give us early access to innovation, but they also allow us to give our own feedback into product road maps. They allow us to strengthen our credibility with clients and they also expand our ability to drive impactful and scalable outcomes at clients. So together, these partnerships are really important for us and they're amplifying our relevance in an increasingly AI-driven services market.

Now we spent a lot of time discussing Fluidic Intelligence at a high level. So I wanted to drill down a bit to provide you with 3 concrete examples of how this is delivering quantifiable results for our clients. I'm going to keep the client names anonymous, but I just want to give you a sense of the kind of work that we are doing.

First, an example of client experience, leading to better client acquisition. For a leading European luxury car manufacturer, we have transformed the customer journey by unifying riders, dealers and data into a single adaptive system. We began this as a short-term rental platform with limited conversion, but redesigned it end-to-end into a scalable and intelligent customer acquisition engine. The result was a 35% increase in new customer acquisition, demonstrating how AI-enabled platforms can drive meaningful business impact by just combining technology, data, customer experience and domain expertise.

Next, manufacturing example. For one of Asia's largest manufacturers, we reduced unplanned downtime by 30% by transforming how their manufacturing operations were run. By connecting machines, IoT systems and operational data into a single adaptive intelligent ecosystem, we were able to shift from reactive maintenance to real-time prediction prevention. The result was faster decision-making, improved efficiency and greater resilience.

Finally, a supply chain example at a leading -- one of the world's leading global CPG companies, we elevated end-to-end sales and operations planning by moving from static periodic forecasting to a dynamic real-time model. By building workflows that could combine AI-driven forecasting with human judgment, we transformed this sort of S&OP process into a continuous decision system improving accuracy and accelerating cross-functional alignment. The result was a 20% improvement in planning performance, demonstrating how AI applied practically can drive this dynamic responsive decision-making to deliver measurable business impact.

So now when you look at the numbers, 35%, 30%, 20%, these are not small numbers that we are talking about. And as you can see, adopting AI at scale to deliver such numbers in different parts of the value chain is going to be a competitive imperative for our clients. And we, as a company, are aligning to capitalize on this.

As I mentioned earlier, we are at the very early stages of realizing the full benefits of these initiatives and changes that we are putting in place internally. But our projects and engagements and conversations with our clients give us a lot of confidence that we are on the right track to deliver this sort of value to our clients and thus be a winner in this new AI transformation journey.

So just to summarize before we go to Q&A, our strong engineering DNA that is well known and our deep understanding of client context with long client relationships, it continues to reinforce our right to win in this evolving environment, particularly as we see more examples of enterprise challenges arising from poorly executed AI initiatives.

At the same time, our industry expertise, our regional footprint and expertise, combined with our lean small teams approach is enabling us to deliver increasingly impactful advisory-led transformation for our clients. I do believe that AI transformation will ultimately follow a similar trajectory to digital transformation. But this time around, we are of the scale that we can position ourselves to play a more strategic role at the highest levels of our clients' organizations. Again, while it's still early days, the direction is clear, and we are executing with focus, confidence and conviction. And with that, can we now transition to the Q&A. Carla, could you please do that?

[Operator Instructions] And our first question comes from Yannik Siering with MPCM.

I will take them one by one, if that's fine. So the first one is on Q1 demand and the growth bridge. So you framed it as being in line with expectations. Question being, what level of constant currency organic growth would you need in the remainder of the year to land in the middle of the guidance? And what are you seeing in your pipeline and maybe also in the book-to-bill, now in early Q2 already that points you to be confident for the full year guidance?

And the second one is on the margins. So adjusted EBITDA margin was 12.6% in Q1. The midpoint of your guidance is obviously a little bit higher. Maybe you could walk us through the bridge here between utilization. You mentioned this one is a bit better. Maybe also pricing, again, here, what makes you confident on the guidance?

And then the last one, maybe a little bit difficult, but on AI revenues and on the quantification of those, do you have any idea or any idea that you can give us what the trajectory here is and how the path to a little bit more material contribution would look like if this is completely organic or if you need some M&A to become more relevant in this space, that would be helpful.

Good afternoon to you as well. So let me try to answer these questions one by one. Looking into the start of Q2, our pipeline and early numbers from April look good, so which gives us confidence to continue on our guidance. In terms of constant currency growth and the bridge, I think that's more of a mathematical thing that can be derived fairly easily. I won't hazard a guess with our calculator and some time. So -- but that can be more or less derived.

In terms of margin, the quarter 1 and quarter 4 are -- have typically fewer working days because of the holidays and a shorter February month and things like that. So the bridge to the full year guidance is largely around the working days, although there is some buffer in terms of utilization that is possible. But at the moment, we don't think we would need to use that, but the working days itself should be -- should suffice.

When it comes to AI revenues and quantification, it's -- the lines between AI and not AI are somewhat blurry because there's AI in the delivery of services, there's AI in the creating of point solutions, there's AI in the embedded in larger platforms that we are building. And I think AI is everywhere in some ways. So we are not separating out the numbers in any sense. The KPI that we are going to track from this year on is -- and this is more internal, but it's just like trying to get a seat at the very top table for AI transformation at our clients.

And this, I think, is a number that which internally we are focused on. And we are making good progress on this in clients, which are both small and midsize, but also some of the very largest clients. So there's still a lot of work to do, but we are seeing that we have a right to be at the table much more than we did, for example, for digital transformation, which is very, very heartening for us.

[Operator Instructions] And as we have no further audio questions, I will hand back over to you, Michael, for the text questions.

Thanks, Carla. We have a number of written questions. First question comes from Sergi at Aguja Capital. And the question is, how would you characterize overall client demand today versus 3 to 6 months ago? Where are you seeing improvement? Or where is it worsening in discretionary spending or decision-making cycles across your customer base?

Sure. Sergi, so what we are seeing is that I think the overall demand environment remains fairly similar to 6 months ago. But what has changed is that the degree of engagement on enterprise-level AI -- Agent AI topics is far advanced from where it was 6 months ago. And what was -- you know, initial pilots of AI were around simpler topics like voice AI or contact center AI or document management, and document -- knowledge optimization AI or AI in SDLC. But the idea of AI in core workflows at the enterprise level is now really not so much if topic, not even a when topic, but how topic.

And those conversations and those projects, they bode very well for the industry, I think, because they will be fairly comprehensive and complex once they get growing. So that's kind of where we are on that. So it's more the nature has changed, rather than the volume per se.

Thanks, Manas. The next question is, can you elaborate on recent advances about AI Agentic programming? Is this having an impact on your sales? Or do you expect it to have a near or medium-term impact?

So this -- there's, of course, large productivity impacts that AI will bring to the industry. And I think this is a question that probably everyone is talking about, and I can just give you 3, 4 or 5 different views on it. So I mean, I think there will definitely be increased productivity. The question is what the level of productivity will be, which we've seen in enterprise environments or brownfield environments, this is much less than in greenfield or homogeneous environments.

There's also the aspect of all the reinvention that has to be done in terms of company's internal organizational and workflows and systems and processes, which is room for new services work. There is also the question of maybe third-party SaaS products or software products being displaced by custom-built software. Someone may decide not to buy another or renew their license for CRMs or ERPs or many of the other products that they use and instead build something out custom. So there is that aspect.

There is -- so there are various different, I think, impacts on the industry. But -- and some of them are positive, maybe clients pulling in their road maps, clients wanting to do more because the bar for being AI-enabled or AI transformed is now much higher. I think of it like the Internet, right? You would think the business put up a website and it was on the Internet. And it didn't really stop at that, and you ended up doing a lot more with that.

So I think that in general, the services business, of course, has a lot of change, but there's a lot of work that still has to be done. Every hotel chain, every transport operator, every hospital operator, every pharma company, every single business has to figure out like the examples I gave, how in maybe 15, 20, 30 different parts of their organization, they use AI and they do it all in a secure orchestrated way. And that's what the opportunity is for services companies.

Thanks for that Manas. Our next question comes from Alejandro Estebaranz at True Value. He says, hello and congratulations on the quarter, especially in a challenging environment. It seems that investors believe that repurchasing shares at current valuation levels could create significant shareholder value, especially considering that the market appears to be valuing Nagarro as a declining business, while quarter after quarter, the company continues to grow and generate value. How does management currently view the opportunity for share buybacks and the company's current valuation?

Alejandro, thanks for the question. The company believes that the current valuation does not reflect, of course, the value of the company. But as we now have a CFO, which investors have long suggested, we are waiting for Prateek to come on -- come up to speed with the fundamentals of the company to take a more -- yes, a better judged view of capital allocation. So I would not comment on the part of share buybacks. But of course, all the alternatives are open at this time while we wait for Prateek to come up to speed.

Thanks, Manas. The next question comes from [indiscernible] Question is, if AI improves developer productivity by 30% to 40%, how does Nagarro ensure its top line grows rather than shrinks? And then the second part is, could you provide more color on a shrinking number of clients generating more than EUR 1 million?

Yes, sure. So as I said, there are all these different factors and the timing of these factors is not very clear, right? So -- but we expect, and that's what we are seeing as of now that while we are using AI with many of our clients, what they are doing is basically pulling in their backlog. They are actually adding more work. So we don't see that reduction in the work that we are getting, and -- even when they are achieving significant increases in productivity.

So again, I don't want to be an oracle and forecast how this will go. But as I said, we expect enterprise products -- some enterprise products to be converted into services and builds -- custom builds, we expect the companies to be doing more with AI. We expect there to be a lot of work to unify data and to put in enterprise class structures around AI, which is really an evolving field and which most of our clients do not have the internal capacity to manage on their own because this is a really rapidly evolving field.

And we have the advantage of having a large number of experts with a lot of exposure to the best-in-class partners, best-in-class moves across different industries. So we can really help our clients with these transitions. That's why we don't expect business to contract.

The second part of the question was around the ones -- yes, the contracting number of clients over 1 million. A large number of that -- a large percentage of that is roll-off of large implementations that have just wound down. And we don't expect that to be a trend. This is just a batch of implementations that have gone into managed services and the overall health of the pipeline of over 1 million clients remains very much intact.

Thanks, Manas. Next question is, what are the expected impacts to EBITDA and revenue targets in your Fluidic Intelligence business that you're currently executing?

Great question, Michael. So at the moment, we are -- the Fluidic Intelligence business, we are seeing it in different layers. We have an advisory layer. We have a layer of solutioning. We have a layer of accelerators, which we call Fluidic Forge and then we have a layer of AI in SDLC and Fluidic teams. And so there are different layers.

And I suspect that over time, there will be different movements in these layers with respect to EBITDA and growth, et cetera. But at the moment, our expectation is that the advisory aspect, which perhaps you're referring to, is going to remain a very small part of our overall revenues. And so not very meaningful. We do expect to cover costs on that, but it's not necessarily a very meaningful part of our EBITDA or revenue.

I must say that in some of the early engagements where we are completely steering the AI journey for our clients, including some where we even have requests to put in interim CTOs, for example, I think that if you start to become that important for your clients, you have more pricing power. But again, I don't want to make any sweeping generalizations at this point.

Thanks, Manas. The next question is around M&A opportunities. Are you seeing prices coming down? And maybe what does the pipeline look for 2026?

So thanks. I just want to say that, again, reiterate that capital allocation is a topic which is now our CFO's topic. But -- so in terms of pipeline or future, I will not say much. But in terms of pricing, I think that there is -- there are modest reductions, but not very significant reductions. Yes. But the pipeline, we do have, as always, some interesting opportunities, but I think we will defer to our new CFO for the final pull of the trigger in these cases.

Got it. Thanks, Manas. The next question focuses on Japan and particularly the market in 2026. We've talked in the past that we thought this was a good opportunity. Wondering how that's going.

So we are in double-digit millions with Japan, but it's a bit slower than expected. Actually, today, there's a very senior person from a Japanese trading house in the very office that I am in, and I was with them earlier in the day. So the efforts to build these partnerships that can drive more rapid growth in Japan are ongoing. There are some nice lighthouse customers in manufacturing, in SAP, in AWS and other cloud areas and some AI-based work.

And there's some nice interesting examples, but the volumes are not there yet. These are -- it's like probably a slower burn than we expected, but it's still very much part of our future to pursue Japan and Japan Inc. around the world more aggressively.

Okay. The next question is, how do you manage to increase your revenue weight in automotive given the sector crisis, especially in Germany?

That's a good question. I think that there are 2 or 3 parts to it. One is that we have longstanding relationships with some auto manufacturers where we are able to be part of their newer initiatives. I was again with the recency bias just a few hours ago meeting another -- a very large auto company around their Agentic AI for finance marketplace working financing marketplaces. So there's a lot of work of that type, which is all new.

There is also a type of customer that is relatively new. We work with car companies that are in the electric mobility space or our sovereign government pushed car companies in the Middle East, for example. And in these car companies, which are being set up from scratch, we have the chance to work with them on different parts of their ecosystem from digital, of course, but also manufacturing, product life cycle management, IoT and things like that.

And finally, with more established car companies, our focus is more on the distribution, on sales, on digital, consumer, in-car experiences and so on, which continues to be an area of differentiation and focus. And if you look at the real competitors of the space, like, for example, the Chinese car companies, the kind of digital work they're doing within the car or outside the car is a key part of their appeal. And there's, I think, lasting demand in these areas.

So yes, I mean, the industry itself is, of course, facing headwinds in some countries, but there is still a lot to be done. And we want to be close partners with our clients through their transformation to deal with this.

The next question is, how much time do you need to turn the company from an engineering-focused company to your more strategic approach that you outlined?

So that's a good question. I think that the answer lies in the degree of change. I think already at many of our key clients, the conversations at the top level are about that AI transformation advisory. For it to percolate through our entire client base will be at least 18 months. But we are -- as I said, it's a quarter-by-quarter KPI that we are tracking now. And we expect to get really some traction. We're getting traction with European retailers, global CPG companies, with auto, with all kinds of companies. And it's just a matter of scaling it up.

And I'd say just a matter. But once that -- once it's clear that where the capability exists, which is now a lot of it is in our AI and change business unit, it's more simple to tap into by client teams. It's simpler to deliver. And I think with this internal organization, we have really solved for some of this. Why I say it will take 18 months is because we are now capacity constrained. So we have gone from being a little bit demand constrained to being capacity constrained, which is a good problem to have. So we are really hiring all out in these areas to support that change.

Thanks for that, Manas. The next question is regarding adjusted EBITDA, a little below expectations in Q1. What's the plan to get back to guidance of 14.5% to 15.5% for the year?

I'll go back, Michael, to the answer I gave to the first question -- first caller, which is that it's a working days thing. Q2, Q3 have larger working days, plus we have some utilization levers, and we feel comfortable about being in line with the guidance.

And then maybe if you could provide an update on the German Mittelstand that we've talked about, what's the traction been like there?

Good question. So the traction on the Mittelstand has been reasonable. I think we have -- I would characterize it as, again, a double-digit million kind of impact of the moves we have made, but it's not been as scaled as we had expected. In our new reorganization, we have more firepower in the business unit, which is industrial, which is called Industrial, more firepower in Germany in the industrial BU to do more with the Mittelstand. But yes, it's been a moderate success, but not a great success.

And the next question is about cash collections or collections. Do you think they're a structural issue for the company? There's some concern about the ability to convert EBITDA into real cash flow.

So I mean, we've been really buffeted around for the last -- since we went public by our U.S. public sector collections, which tend to be very lumpy. And that's something that we are continuously trying to manage. Even in this quarter, the public sector -- U.S. public sector collections have thrown us off. On the positive side, we have not -- we have always been able to get that money in finally. So there is no risk to the money. But from a cash perspective, it's quite lumpy. We again have -- I'm sorry to put so much on the shoulders of Prateek, but we have a new CFO, and I'm sure he's going to take a look -- a closer look into it and talk more about it in subsequent calls.

Thank you for that, Manas. I'm not seeing additional questions. I want to thank everyone for your questions and participation today. We really appreciate your interest in Nagarro, and we look forward to connecting with you again soon.

Thank you all very much. Have a good day.

Thank you, everyone. This concludes today's Nagarro's Q1 2026 Earnings Call. You may now disconnect your lines. Thank you.

Good afternoon, everyone, and thank you for joining us today for Nagarro SE's Q3 9 Months 2025 Earnings Call. [Operator Instructions] With that, it's my pleasure to hand you over to Michael.

Great. Thank you, Sami, and good afternoon, everyone. My name is Michael Knapp, and I'm part of the Investor Relations team at Nagarro. If you have not yet received a copy of our Q3 2025 earnings release, you can find it as well as a copy of today's presentation in the Investor Relations section at nagarro.com.

Joining me today is Manas Human, our Co-Founder and Custodian of Entrepreneurship. Manas and I will be covering the results and strategic updates for the quarter. Before we begin, please note that some statements made during this call may be forward-looking and are subject to risks and uncertainties as outlined in our earnings release. Additionally, please refer to the release for important information regarding non-IFRS measures.

And with that, I'm pleased to hand you over to Manas.

Thanks, Michael. Once again, welcome, everyone, and thank you for joining us on this earnings call. We are taking a slightly different approach this quarter and hosting just 1 combined call so that we can expand on our prepared remarks a little and still have time to address your questions.

We'll start by briefly highlighting our strong Q3 results, but perhaps even more importantly, underscoring the important and sustained actions we have been taking to address investor concerns, improve corporate governance and enhance our financial reporting and transparency.

I also want to discuss how we have set the stage to drive better shareholder returns through improved execution and a disciplined capital allocation strategy. The operational changes we have made are already driving measurable improvements in our results, which perhaps have been overshadowed a bit at this time by a subdued demand environment and FX noise, but we believe we are still at the very early stages of showing the benefits from some of these new initiatives and processes that we have put in place, especially on the sales execution side.

I'd also like to talk more about the future and in particular, about our vision of Fluidic Intelligence. We would like to explain that to you. We are promising our clients significant productivity improvements by unlocking the intelligence that already exists within their organizations. We are removing barriers for our clients between their people, their data, their decisions, creating low-friction enterprises that adapt faster and execute with clarity.

And I'm excited to say that we're already seeing a very positive response from our clients around this promise, this theme of productivity improvements, and we will present an example of this. And finally, we'll be happy to take your questions.

Now we are pleased with our execution in Q3, which demonstrates the strength and resilience of our business model despite all the ongoing macroeconomic challenges. Our teams delivered exceptional service to our clients, and we focused intently on operational discipline. During Q3, our revenue growth accelerated and is tracking to the guidance we provided last quarter. This is a testament to the stability of our customer base and the confidence our loyal customers place in us.

Importantly, we're also seeing significant outperformance in profitability. Both our gross margin and adjusted EBITDA margin are ahead of expectations, reflecting the positive impact of the efficiency measures that we have implemented. In fact, the adjusted EBITDA margin of over 17% is the highest level we have seen since 2022. This margin expansion positions us well to generate strong earnings and cash flow moving forward.

Over the past few quarters, we have prioritized making fundamental structural improvements to the way we operate. To that end, we have taken a number of decisive actions to improve corporate governance, financial reporting and transparency. We're already seeing tangible improvements in our internal process and operations.

I'll talk more about this shortly. But these changes are not simply about meeting regulatory requirements. They're about building a world-class company about strengthening the foundation of trust and operational excellence that will support our growth ambitions for years to come. Our success is directly linked to our client success, and we are intensifying our efforts to deliver quantifiable business impact to help them win in their markets.

We are actively showing clients how we drive significant measurable improvements to their businesses. We aren't just selling hours. We are pitching outcomes. And importantly, clients are responding. The quality of our relationships is improving, evidenced by the increase in client satisfaction scores and a strong pipeline of new high-value contracts. This focus on value creation ensures that our services remain essential and deeply embedded in our clients' strategic initiatives.

Finally, in line with our disciplined approach to capital allocation, we remain committed to enhancing shareholder returns. We are pleased to announce that we are extinguishing approximately 75% of our treasury shares. We're also buying back EUR 20 million worth of stock. We believe there's a clear disconnect between the current share price and the intrinsic value of our share.

The current share price even after today's jump does not reflect our strong financial performance, our expanding margins and improving operational structure. We believe the buyback program is one of several tools we are using to deploy capital, while signaling our confidence in the company's long-term outlook. We are confident that as we continue to execute on our strategy, the market will recognize the sustainable value that Nagarro has been building and in fact, has been building for a couple of decades now.

Digging a little deeper into the numbers, we are pleased to report that our Q3 revenue growth reached 9.4% year-over-year at constant currency. This solid performance in a subdued demand environment keeps us on track with the revenue guidance we provided earlier.

Turning to profitability. Our focus on operational discipline continues to yield impressive results. Our Q3 gross margins came in at 33.1%, which is over 300 basis points better than the guidance that we have provided. This significant outperformance is a direct consequence of our increased focus on margin expansion through targeted initiatives, including the successful implementation of the margin support program that we have earlier talked about. This program has optimized resource allocation, improved utilization rates and driven efficiencies across our organization.

Our Q3 adjusted EBITDA margins were over 17%, which is above the high end of our guidance range. These strong margins are a clear highlight of our quarter and underscore our deliberately improved operational efficiency and our ability to translate top line growth into meaningful bottom line results for our shareholders. And all in all, we are maintaining the guidance we provided last time. But when you look at our tracking to our guidance for 2025, please also keep in mind the significant headwind presented all year by foreign exchange rates, especially the conversion between dollars and euro. To put this in perspective, if we were to adjust our revenue for the full 9 months to account for the foreign exchange impacts from the dollar and euro, our revenue would be approximately EUR 719 million, which would have placed us right near the midpoint of the initial 2025 full year guidance that we had issued back in January '23.

Further, as you will see on the next slide, if currency exchange rates have not moved, our adjusted EBITDA would also have been at or above the midpoint of the initial 2025 full year guidance we issued in January. This ability to deliver what we promised at the start of the year despite the highly volatile environment, underscores the fundamental strength of Nagarro's business and the fundamental strength of Nagarro's positioning in the market and the fundamental strength of our relationships with our clients.

Beyond these financial metrics, our long-term focus on delivering a superior client experience remains the primary driver of our sustained success, our commitment to our intimate partnership, innovation and measurable outcomes for our clients. By deeply understanding their strategic challenges and exceeding their expectations, we ensure that our services remain indispensable and embedded in the long-term digital transformation road maps.

We believe the quality of our client relationships is our most valuable long-term asset. We believe that we can double our revenues well within this decade simply by doing more for the 187 clients we already have today that generate more than EUR 1 million in revenue each with us.

We have lost connection to Manas, please bear with me regaining connection.

Coming out of this -- let me just talk again on the slide, and I hope, I'm not repeating my words too much. I want to take a few minutes to provide a clearer view of our underlying profitability. We recognize that our reported adjusted EBITDA figures for recent quarters have been significantly impacted by fluctuations in foreign exchange rates, specifically related to noncash impacts on loans between different companies within the Nagarro Group.

Here, I want to highlight what our adjusted EBITDA margins might have looked like for the past 3 quarters, if we had corrected for this FX impact on intercompany loans, the resulting adjusted margins would have been materially higher and more representative of our sustained and resilient operational efficiency.

We believe that this adjusted view provides a better picture of the fundamental robust earnings power of our business than the numbers that we have reported. This is also tangible evidence that the margin discipline we have been driving throughout the business is taking hold. We have now started to work similarly to elevate our sales execution. We are confident that as we continue to embed these operational improvements, the strength and stability of our business will shine through regardless of market conditions.

Now as you know, we have taken a number of actions over the past several quarters to address investor concerns to improve our corporate governance and enhance our financial reporting and transparency. I want to highlight some of these by putting them all on one page. First, KPMG was appointed as Nagarro's external auditor. KPMG approved the 2024 annual financial statements without qualification, hopefully putting to rest many of the allegations that have been made against the company since we have been public.

Working with the Tier 1 auditor has also led to enhanced reporting and disclosures, including how we account for purchase price allocation for deals and a combined management report that aligns to the specific broad topics defined by GAS 20. Then we developed new programs to drive a basic level of profitability across our business units and introduced an expanded bonus component for senior people, linking compensation directly to the company's margin performance. And now we are expanding that incentive linked to growth.

Then we added 3 new members to the Supervisory Board with outstanding backgrounds as leaders at global companies. Martin Enderle is an experienced Chairman. Jack Clemens is an excellent Chair for the Audit Committee, and that's having an impact. And then Hans-Paul Bürkner has been an excellent mentor, a sparring partner for me in his role as the Chair of the Strategy Committee, and all of this change has been fantastic.

Next, we have outlined a commitment to a disciplined capital allocation policy that included share buybacks, dividends and M&A. We have done all of these. We bought back EUR 52 million worth of stock to date. We intend to buy back another EUR 20 million as we announced this morning. We also paid out a EUR 12.6 million dividend and continue to pursue smaller tuck-in acquisitions. We are on track to announce soon a very small, but meaningful acquisition in the Japan, India tech services corridor. So that's that.

And then we have some more good news this week, just a couple of days ago, our sustainability commitment was validated by an EcoVadis Gold Star rating, which is up from bronze that we had. This places our sustainability management system in the top 5% of assessed companies. And I would like to congratulate the Nagarro team that worked on this. We continue to uphold our dedication to becoming a more sustainable organization through ambitious science-aligned climate targets following the science-based target initiative.

We have run a CFO search process and should have good news for you soon on that front. And finally, Nagarro has been developed from the first day on strong principles of ethics and full regulatory compliance. But in order to ensure that even in the decades to come, we are continuing to maintain the highest standards of integrity, compliance and operational resilience, we are further enhancing our processes and governance frameworks across the organization.

Now our customer diversification across industries continues to provide both growth and stability. But in the meantime, there has been an evolution in our thinking given the tighter market conditions that have now persisted for a couple of years. We are going to be a bit more deliberate about targeted growth and more deliberate about where we place our bets.

We're going to give a little extra emphasis in terms of sales efforts, where we have the right to win in those verticals and topics where we feel we can go big. While we do this, we continue to explore meaningfully our big secular growth opportunities that we have outlined in past calls in Japan and for Japan Inc. around the world.

German Mittelstand in hardware and IoT and now in a fledgling way in the supply chain. We are developing playbooks around many of these topics and are improving our discipline around these. We see this improved discipline of execution and improved focus on commercial excellence as a new phase in Nagarro's evolutionary journey.

Just a few words on our geographies. You know that our diversification extends to geographies as well. The U.S. and Germany remain of top importance for us. The Middle East has been a nice addition to growth in the last few years. We fully expect Japan to play this role in the coming years.

Michael, with that, do you want to now discuss the balance sheet and cash flows?

Absolutely, Manas. Thanks. The chart on the left shows our financial position at September 30, 2025. Financial liabilities were EUR 301.2 million and lease liabilities were EUR 70.8 million. Our cash balance remained strong at EUR 129.4 million, implying net liabilities of EUR 242.6 million, which leads to a net leverage ratio of 1.7x.

The company's liquidity position at the end of the 9-month period was comfortable with working capital of EUR 223.5 million. In the interim consolidated statement of cash flows for 9 months of 2025, Nagarro has included the unrealized loss on intra-group loans within the Nagarro Group of EUR 15.8 million that was formerly under other noncash income and expenses into net cash flow from operating activities.

And this is leading to a positive impact on it and a corresponding decrease in effects of exchange rate changes in cash and cash equivalents. For Q1 and first half 2025, this reclassification has a positive impact on net cash inflow from operating activities with a corresponding negative impact and effects of exchange rate changes on cash and cash equivalents of EUR 7.4 million and EUR 15.9 million, respectively. The numbers for comparable periods in 2024 are not material.

Overall, there's no change in cash and cash equivalents and total changes in cash and cash equivalents in the statement of cash flows for Q1 and the first half of 2025. Cash flow for the 9-month period ended September showed a total cash outflow of EUR 49.2 million versus an inflow of EUR 33.1 million for the comparable period last year.

Operating cash flow for the current 9-month period increased to EUR 77.1 million versus EUR 64.9 million for the comparable period last year. This was primarily due to other noncash incomes and expenses of EUR 7.2 million. Days of sales outstanding improved from 88 days at year-end 2024 to 85 days at the end of September.

Kindly note that we calculate DSO based on quarterly revenues and include both contract assets and trade receivables. Cash flow from investing activities for the current 9-month period was an outflow of EUR 8.9 million, and CapEx was EUR 6.1 million. That's less than 1% of 9-month revenue, which reflects our asset-light model.

Cash outflow from financing activities for the current 9-month period was EUR 117.4 million, mainly due to purchase of treasury shares amounting to EUR 50.1 million, net repayment of bank loans of EUR 24.3 million, lease payments of EUR 16.6 million, interest payments of EUR 13.8 million and the dividend paid during the period amounting to EUR 12.6 million.

Turning to our capital allocation initiatives, which are designed to create shareholder value. We bought back a total of 684,000 shares that amounts to EUR 50.1 million. And we are pleased to announce this morning that we're continuing the buyback program and intend to acquire up to EUR 20 million worth of shares.

In addition, we plan to redeem approximately 75% of the roughly 1.1 million treasury shares currently held to enable further share buybacks and adjust capital levels to appropriate levels for the company's business needs. We announced and paid a dividend of EUR 1 per share amounting to EUR 12.6 million or 13.1% of 2024 EBIT. This was declared during our AGM in June, and we expect to sustain our dividend policy of distributing between 10% and 20% of our EBIT annually.

Our inorganic growth strategy remains highly disciplined, and it's focused on synergistic tuck-in opportunities rather than large transformative M&A. These smaller strategic acquisitions are crucial for filling specific technological, geographical and client-specific gaps. And we believe this measured approach ensures rapid integration, minimizes operational disruption and provides a clear path to immediately enhance our service portfolio and deepen client value.

And with that, I'll hand it back to Manas.

Thank you, Michael. Now we spent the first half of this call talking about all the good work we have done in the recent past. I would like to shift gears and look towards the future a bit.

We believe that in the next few years, every company in every industry will have to find significant double-digit productivity gains. Competition around this will heat up. A company without a clear path to realizing these productivity gains with AI will be lost. It will be a bit like a consumer company without a website in the '90s or 2000s or today, a consumer company without a social media presence. So this productivity movement is a big transformation ahead of us that will cut across each and every industry.

Now as you know, Nagarro has been a big proponent of agile, and we have helped a large number of our corporate clients make the move to agile. In the next years, we're going to help them make the move to what we call Fluidic Intelligence.

Let me spend a few minutes explaining what we see as Fluidic Intelligence. When we say Fluidic Intelligence at Nagarro, we are describing a fundamental shift in how individuals, technology and enterprises will operate in the age of AI. It's a deep rethinking of how human judgment and machine capability will come together to create step change outcomes. So let's start with individuals and take the example just of engineering and software engineering.

So there's a big revolution ongoing in the software front, as you know, where engineers are no longer just writing code. They're orchestrating entire systems alongside AI assistants and agents. They're debugging complex distributed systems faster. They're exploring architectural options that they may not have considered otherwise and shipping micro services in days instead of weeks.

But the real shift is that the nature of work has changed. The engineer is now the decision maker, the strategic decision maker setting direction, applying judgment, teaching the AI what good looks like in that project's context. And the result is a seamless and fluid collaboration between the human engineering nutrition and the AI capability. And we believe that this is the way the future will work and all individuals and teams that are not working this way will be simply too slow to compete.

And this is what we call Fluidic Intelligence at the individual or small teams level. But if you look then beyond this at technology inside large enterprises, most organizations sit on 10, 20, 50 years of operational knowledge. Much of it is scrapped in systems that only some experts understand or it's in the head of -- heads of managers or experts or buried in some spreadsheets or logs. And when an issue takes place, whether it's a quality issue, supply chain issue or whatever, the disruption just has to trigger teams spending days piecing together this tribal knowledge from here and there to diagnose what's going on.

With Fluidic Intelligence, AI can surface the right insight at exactly the right moment by understanding every bit of adjustment, anomaly, recovery pattern that's stored across the enterprise historically. So the real unlock isn't just data, it's the accessible contextualized decision-making knowledge. And this is the technological dimension of Fluidic Intelligence.

And it goes beyond technology to the enterprise itself. Most organizations are like cities that grew organically. They are built with a certain old context in mind, the departments that don't talk to each other, they work in silos. They have independent objectives, independent incentives, independent budgets, workflows create friction and information moves slowly. And even a simple change to a simple topic may take weeks or months and may require many changes to many systems.

And in this friction-free future enterprise that we see powered by Fluidic Intelligence, that same scenario is intelligently orchestrated end-to-end in minutes or hours, pulling context on the right systems, checking constraints, routing decisions to the right humans, automating everything else.

So Fluidic Intelligence for us in some is at one level, human AI collaboration, at one level, the knowledge fluidity across different technology platforms. And the third is like the friction free flow at the enterprise across departments. And we think it's the architecture of how the next generation of intelligent organizations will operate.

Now given Nagarro's own context of not only being an agile software engineering company, but trying to build an agile company, given our deep engineering expertise, given our history of engaging with clients on the agile transformations and other complex and challenging cultural topics, I think this is work we are uniquely positioned to deliver.

Now in a minute, I'll show an example of what Fluidic Intelligence looks like in practice because it's the best way to understand it is to actually see an example. But first, a few words on how we are going to deliver it using special intellectual property that we have developed. What we are doing is we have, in the past several months, centralized our IT investments that used to exist in the BU silos.

We have consolidated them all these AI accelerators and platforms into a portfolio that we call the Fluidic Forge. At a high level, it includes 4 streams of activity broadly. The first is the operational intelligence to run the business where work actually happens. This is a front line with orders and fulfillment and exceptions and incidents, and you want to bring predictability to the messiest part of operations, which is this.

The second is more around decision planning intelligence. This is where strategy and map come together to improve the business. The third is around the technology integration and orchestration across the ERP, CRM, order management, warehouse management, finance, HR and whether it's legacy mainframes or the latest data platforms by using agents that work across systems and inside every workflow.

And the final pillar is the modernization of the mission-critical core of data across legacy mainframes as well as data platforms. So this vision is about what an organization needs to do to move to this new world. It's not about small pilots in some corner, but rather about transforming the enterprise end-to-end.

And we feel that Nagarro is just the right size. We are big enough and embedded enough at our clients to take on such transformational work, but we are also technical enough and agile enough to work on every little piece that needs to come together for this transformation at our clients.

Now let's take a real-world example of how this transformation is achieved. And this example is the example of Dublin Airport and of modernizing Dublin Airports operations. And I believe most of us would be frequent travelers, frequent air travelers, so we will be able to relate to this example.

Dublin Airport is Ireland's national Gateway and the 12th largest airport in Europe. It handles over 30 million passengers annually. It operates in a highly dynamic system with thousands of different processes with interdependent, airside logistics coordination, retail management, security, ground transportation and so on. And every decision impacts passenger experience, safety and operational agility.

Now despite its evidence and the scale of the airport, it has faced frequent disruptions and challenges in decision-making. Data critical decision-making is scattered across silo systems, baggage handling, for example, passenger information, for example, gate management, air traffic control, ground operations and many more.

And this fragmentation resulted in delayed awareness, reactive operations and inefficiencies. And a lot of the operational intelligence of the airport was not in the systems, but facet knowledge held by experienced staff insights that were not captured or shared across teams. And to manage this complexity as the airport plan to scale, it needed to evolve into a Fluidic system, where data decisions and intelligence flow seamlessly across teams and technologies.

So this is what Nagarro did. We came in, mapped the airport as a single connected system. We revealed the fragmentation across these different operational and decision-making layers. We identified these critical knowledge assets and key friction points that were limiting the agility and cross-functional decision-making such as challenges with operational command visibility and unified control into flight operations, passenger operations, the limited ability to anticipate passenger flows or peak loads or queue congestion and not being able to drive retail and other non-aeronautical revenue and leaving money on the table and not being able to optimize the utilization of pavement and assets stands, taxiways, runway users and so on.

And we use the Fluidic Forge AI accelerator that I just talked about to address these friction points, creating this sort of connected intelligence and predictive control and optimization with measurable business outcomes. Now I won't go into the details, but the airport has now much more data streaming, real-time event-driven dashboards, AI models for flow prediction, for congestion alerts.

And these are integrating all kinds of data, like weather data or airline schedules or how people are coming through security and so on. There's agent-based modeling for dynamic workforce planning. There's a digital twin of airfield operations, there's AI maintenance schedulers and so on. So -- and the outcomes are, of course, how -- everything is optimized, how airlines use the airport, how the revenue and yield from retail locations is optimized, efficiency and ground handling, better experiences for passengers.

And if you think about it, it's also going to drive better regulatory compliance and also agility to respond to things that may happen in the environment, which all comes from this unified data fabric with intelligence sitting on top of it. And this collaboration with Dublin Airport is not a one-off thing. It continues as the airport expands its AI native capabilities from passenger flow forecasting and retail intelligence and so on to sustainability analytics and other new frontiers setting this global benchmark for frictionless airports of the future.

So in this example, we talk about how we brought Fluidic Intelligence to this airport, to Dublin Airport. But from the vantage point of where Nagarro sits, we have like hundreds of such clients. We have this opportunity to deliver similar results on data and AI to many great clients across various industries.

And as you know, we are privileged to work with some of the world's most recognized and forward-thinking companies, companies that are not just leading their industries today, but actually reimagining what the future will look like across how we live, how we move, how we work, how we bank, how we connect and so on. And these are loyal clients. These are not just one-off partnerships. These are loyal clients who work with us year after year. They include, for example, 3 of the top luxury car manufacturers, 3 of the top 5 global leaders in industrial automation, 5 of the leading global retailers, 2 of the top 3 global hotel groups, 2 of the leading global cities.

And then there are these niches like half -- almost half the top banks in the Middle East. 3 of the top 4 management consulting companies and so on. I could just go on and on, right? So there's a huge base of loyal clients where we can bring these capabilities to them. And with these clients, we will work towards the future, we work towards inventing what comes next.

And with that sort of like a little bit of framing of where we sit and to speak into how we see Nagarro evolving into the future, maybe we transition to the Q&A. Maybe the operator can switch to Q&A.

Our first audio question comes from Nicolas David from ODDO BHF.

I have a few questions. The first one is regarding the overrun environment. Manas you said that the demand is still soft. But I understand that this comment is more on a 9-month basis because, I mean, you showed a pretty good Q3, both on a year-on-year basis, but also on a quarter-on-quarter trend. So did you see, nevertheless, an improvement in the trend recently? And how do you see Q4? Do you see further improvement? Or are you worried about potential big furlough by the end of the year? So my first question would be around the overall environment.

And regarding that, also, could you comment please on the pricing environment. Some of your competitors have been mentioning further pricing pressure be it linked or not to the AI evolution? And my last question is regarding the profitability. So if we take the midrange of your annual guidance, it implies a 14% EBITDA margin.

Excluding the write-off of your intercompany loan, it would be like 15.8%. Is this profitable level sustainable for the next years? Or do you need some investment? Or is that something that could push downwards the margin for the next year?

Thank you, Nicolas, for these questions, and I'll take them one by one. I think that the demand environment is still soft, but I think the degree of clarity and confidence that now exists about where AI is going to take us, has not been there for a long time. So it's difficult to predict how the quarters will look, but I think the 3-year, 5-year horizon is really bullish now, I would even say bullish because the transformation is here.

I think we had this period when the technology had been introduced. There were lots of questions about whether it would be capable enough to bring about changes, how it would impact the IT services sector and so on. I think these questions are by and large, behind us. I think there is a fair amount of tangibility into how the future will look.

Q4 is a quarter with fewer working days typically. So there is some of that. And again, I would not want to predict quarters, but I think that in general, the outlook is bullish. In terms of pricing pressure, I think there's pricing pressure in large multiyear deals because there's some doubt about where the productivity improvements will take us. But I think that in general, Nagarro's business is still majority T&M business, and we don't see that much pricing pressure there as maybe in multiyear managed services deals.

Finally, in terms of profitability, I think a couple of years ago, we had said that we believe that when we spun off the company, we said that 15% adjusted EBITDA was our target. And a few years later, we said 18% is where we want to gradually get to, I think that's where our target is. I think that we will need to make some more investments, but we also see still a lot of opportunities to rationalize our costs and to pool our resources and make more targeted bets.

So I think that we will -- we do expect profitability to keep improving in the years to come.

And if I may, regarding the outlook, you mentioned more the AI visibility driving the demand. It's you really believe that it's really technology and AI, which has been driving up and down. It's even more than the macro itself? Or macro has still an important role to play. And if so, what is your view regarding the macro? Is it really unchanged there or slightly better?

That's a great question, Nicolas. I think that there have been periods in this -- in the last few years, where the macro has played a role but in general, I think technology is seen as a must invest, when it becomes critical to competition. And I think we are entering a phase where it will become a must invest when it comes to productivity improvements.

That's why I'm very bullish about this. I don't think that companies will pare back their budgets only to spend more money in terms of reduced productivity. So I think the technology changes will prompt the macro. That's my personal reading.

Our next question comes from Fabio Holsch from M.M. Warburg.

Starting with maybe can you confirm that the sequential margin improvement now in Q3 was mainly driven by FX in the other operating results compared to Q1 and Q2? And then how we should think about FX revaluation risk going forward? That's my first question.

And then second question, can you comment on what drove the decision to redeem the 75% of treasury shares now? And how aggressive you plan to be with the EUR 20 million buyback?

Sure. So the margin improvement is -- I mean, it's a secular trend. The underlying margin improvement with the reported adjusted EBITDA margin because we don't correct for this revaluation of intracompany loans, it has shown a weakness in the first 2 quarters, but with the adjustment, you can see that there's a secular trend of being over 15% and now in a 17% range.

So I think that the revaluation risk remains because if the dollar drops dramatically to -- against the euro, then the adjusted EBITDA margin that we declare will be affected. On the other hand, if it rises, it will be affected. But I think we're also going to be talking to our auditor about potentially restating our adjusted EBITDA to account for this intracompany loan topic because we think it's not -- we think it's distracting and doesn't fully reflect the operations of the business.

So that's that. I think in general, the margin improvement is not predicated on FX. It's actually the underlying effect is really about all the operational efficiency that we're working towards. On the redeeming the 75%, we keep looking at our balance sheet from time to time and monitoring it and seeing what's best.

And at the moment, we have I mean, currently, we have decided to redeem 75%. And the share buyback, I think we have certain regulatory, I think how much we can buy on any single day, but we will be trying to buy this EUR 20 million as soon as possible.

Okay, perfect. And if I may squeeze in 1 more. Can you elaborate on your growth plans and Fluidic Intelligence, how that is concentrated in the specific verticals or geographies, which ones you maybe prioritize?

So we are actually in the middle of a strategic review, and we will have more clarity by the beginning of next year. But in general, we -- if you look back over the last years, we have seen that the U.S. and Germany continue to be our largest market. And we see excitement across the Middle East and Japan. So I think these are the markets where we have the real focus.

And outside that, in terms of verticals, we are doing very well in industrial, and we're doing well in retail and CPG, life sciences. So there are a few verticals that we can easily see that are bucking the trend and then there are some verticals which are really big for us and really important, like banking, for example, or automotive, to some extent, even if they are not doing very, very well at this particular moment.

So I think that in general, we are -- we have already started to shift away from some of the verticals that we used to report like horizontal tech. I think from -- for the last 5 years, we've been kind of shifting away from that. But there may be a few others that we decide at least not to invest too much in. It's not that we shut down accounts or anything like that. I think it's just that we don't want to be -- we want to be playing in a tight market where we have a very good chance of winning. And that's the philosophy going forward.

So the company has been a very entrepreneurially driven company, but we also have the ability, I believe, to be strong and to take decisive decisions centrally to steer it in certain directions, and that's kind of what we have been kind of playing out in the last few months.

[Operator Instructions] And I'd now like to hand over to Michael for text questions.

Great. Thanks, Sami. So first question, Manas. Congratulations on strong quarterly results and clarity of the presentation, wanted to ask about the recent significant reduction in equity through the cancellation of treasury shares. Can you elaborate on the strategic objective behind this move? And how we should interpret it in the context of your future capital allocation policy?

Well, I think it's just -- thanks, Michael. I think it's just an assessment of the levels of capital needed to run the company, and that's the reason for the exhibition of the shares. And our capital allocation policy continues along the lines of what we have described before, we will take a good look at it as the new CFO in place and come out with a fresh update.

But at the moment, this is our -- we are on track with our -- we're in line with the current capital allocation policy. I don't see this as a departure.

Great. Thanks, Manas. The next question is in 2 parts. First is can you please elaborate on your strong expense control, noting that your SG&A declined by EUR 12 million sequentially.

And then secondly, can you explain what changes were made to the stock compensation and incentive plan, which was called out as EUR 11.5 million in your quarterly report. Were those related in any way or discrete items?

So on the first, I think the main change that we have made is to try to push towards a certain minimum margin in every business unit. And what this has led to has been streamlining of the spend that we have in practices, which are mainly sales and presales oriented.

I think that when we spun off in 2020, our target was that we were aim for 15% EBITDA and really invest in practices and capabilities to drive a global footprint across different industries. Because that was the nature of the situation, we found ourselves beautifully placed to ride the wave of digital transformation, and we felt that we should take full advantage of that wave to build out as many footprints as possible across different industries and different verticals, different offerings.

And what this is, is a little bit more of a rationalization. It's also a realization and recognition that the AI revolution is going to be a lot more common to different industries. So it's better to invest in a central way than in all these different practices across the BU. So that's the main theme.

On the stock compensation and incentive side, my guess is that's coming from just revaluation based on stock options, et cetera, but I'm not totally sure maybe we can reconnect separately and go over that line item.

Great. Next question is a 3-parter. Do you have any visibility on returning to double-digit growth in 2026? And then what free cash flow conversion target do you have for the coming quarters? And do you have an estimated net debt level by year-end?

Sure. So we don't like to predict the short-term future. It's always more difficult and volatile -- but I think that double-digit growth in the medium term is absolutely where we need to be at. And we don't know, when it will come, but the company is just gearing up to ensure that no matter what the market conditions, we are able to deliver that.

And that's the first part. It involves a lot of different changes that we are making to the way we run our business units, but also the way we run our different geographies and the way we run key accounts and the playbooks we use and how sales is organized. But that's definitely something in our future.

In terms of FCF, we are not -- we don't talk to set targets because the faster you grow, the more your cash flow suffers. So we are really focused more on growth and margins rather than FCF.

And in terms of net debt level, we have obviously an outer bound that we have always declared of 3x adjusted EBITDA, but typically, we like to steer at the 2x EBITDA level to keep that as a -- and maybe go up a little bit beyond that. But 3x is the outer bound. We don't expect the net debt level to change.

I mean, let me not give a prediction for the year-end, but that's a general approach to stay around the 2x mark. Or rather, actually also a question of how much cash you want to keep. And typically, we're trying to keep between EUR 100 million to EUR 125 million of cash across our different offices. So that's kind of where we kind of end up with the net debt.

Great. Thanks for that, Manas. Next question would be you're seeing big tax implications that the dividend payment had this year? Are you exploring ways to improve this?

Yes, we have been obsolete transferring cash that was at different parts of the organization upstream towards the [ SE ] and there have been some tax implications of that. And yes, we are definitely working on how to reduce those and normalize those in the years to come.

Okay. The next question is the current narrative for the sector seems to be that AI could disrupt the IT sector, implying clients are focusing most on their budgets, most of their budgets on hyperscalers, meaning that could be less for companies like Nagarro. Could you please share your view on this?

No, I don't think that's the right way to think about it personally. I think that if you want to use more compute and do more things with technology, you need to know what you are doing, right?

So the challenge is not in -- it's not just a question of harnessing more chips. But as each one of us knows enterprises are horribly complex. And the example of Dublin Airport totally is one example that we all can relate to, but I think we see similar frictions in every experience that we have, whether it's on a hospital chain or insurance or banking or there are all these different frictions that we have or in cities and governments and so on.

And I think the opportunity to actually drive change with AI and with what we call Fluidic Intelligence, is going to be dependent a lot on the people who get it done, who have done this many other companies, and they can bring it to you and they can tell you how it's done, what works, what doesn't work, and that can actually design it in a way that doesn't lock you in as a customer, that keeps you flexible to jump on the next wave of innovation that happens.

So I don't at all believe that IT services is -- or the IT services sector is going to be depressed. I think it has good room to grow. There's, of course, intermediate adjustments that we have been seeing in the last couple of years. But I don't think that this -- I'm very excited about the medium-term outlook for the sector.

Okay. The next question is, should we expect the head count to keep on rising in the following quarters?

We try to -- again, I'm always very wary of giving predictions. I think we do -- personally, I would say, I guess, head count will keep rising gradually. But it's a lot more about what we do with people than the number of people that are deployed. So there is a big change to retrain, to improve the productivity, the people we already have and then to choose a different kind of person when you are hiring.

So for example, in India, our fresher hiring, which we hire the most people fresh from colleges has now moved to the AI business unit so that the people that we are hiring are all AI native. And we see that there is a whole new level of capabilities that people like that can bring.

So I think it's a reorientation of how people are added to a company, but I don't think it's an end of people growth. We do expect the growth to be a bit more conservative in the next few quarters, but maybe picking up after that.

Perfect. Thanks for that. The next question is what impact will the potential higher act in America have on your business?

At the moment, we don't expect any significant impact, but we keep waiting and watching. We don't expect any significant impact.

Okay. And the next question is how much growth is expected to come as a percent of revenues from joint ventures in Japan? And when will we start to see them contributing to revenue?

That's an interesting question. So whether it's joint ventures or partnerships, I think we are going to have like double-digit millions next year. And hopefully triple-digit millions by -- in a 2 years, right? So we have a very strong pipeline. It's -- as you know, the Japan is a complicated environment to work in because there are cultural nuances, there are language topics.

And that's why the acquisition that I just mentioned briefly is important because it allows us to work with -- work globally with the language trained workforce, for example. So I think we're putting the pieces in place, and we have the pipeline, and we expect it to take off in the next year or 2, but I must say that at this moment, we probably have already a 3-digit number of leads and opportunity for separate projects that we are looking at.

Great. And the final question is around conversations with your clients for 2026 digital transformation spending, how are those evolving so far? I know it's still early and companies are finalizing their 2026 budgets. But according to conversations so far, they are still conservative? Or do they look more optimistic about ramping up projects next year?

I think that in general, it is better than it's unit for the last few years. But I won't say that spring is here and summer can't be far behind. I think that it is definitely a stronger base than we are projecting out than we have had in any of the last few year ends, but let's wait and see. I don't want to be -- go out on the limb and forecast a recovery, but it does look better than it has been in the last years.

Great. Well, thanks for your feedback on those points, Manas. I want to thank everyone for joining us today. We really appreciate your interest in Nagarro, and we look forward to connecting with you again soon.

Thank you very much.

Thank you, everyone. This now concludes Nagarro's Q3 2025 earnings call. You may now disconnect your lines.

Hello, everyone, and a warm welcome to Nagarro's First Half 2025 Retail Investors Call. My name is Emily, and I'll be coordinating your call today. [Operator Instructions]

I would now like to turn the call over to our host, Michael Knapp. Please go ahead, Michael.

Great. Thanks, Emily, and good afternoon, everyone. Welcome to Nagarro SE's retail investors call following today's earnings release for the first half of 2025. My name is Michael Knapp, and I'm part of the Investor Relations team at Nagarro, and I'm delighted to moderate today's call.

You should have received a copy of the earnings release for Nagarro's second quarter 2025 results. If you have not received the release, you can confirm -- you can find a copy along with today's presentation on the Investor Relations section of the Nagarro website. Manas Human, our Co-Founder and custodian of entrepreneurship, and I will be representing Nagarro on today's call.

Before I pass you over to Manas, I'd like to remind you that some of the comments made on today's call may contain forward-looking statements. These statements are subject to risks and uncertainties as described in the company's earnings release. Additionally, please also refer to the earnings release for the notice on reported results that are non-IFRS measures. As in our previous retail call, we will have a short presentation at the beginning and then move to the Q&A session, where you can ask your questions. [Operator Instructions]

And with that, it's my pleasure to hand you over to Manas.

Thanks, Michael, and everyone, thanks for joining the call, and welcome. So today, we're going to talk a bit about Q2 and about H1 2025. In general, we are making good progress in what is a relatively slow demand for IT services. In terms of operational efficiency, we are actually performing better than it seems. It's been currency fluctuations and impacts on the revaluations of internal loans and bank deposits that are masking some of the structural improvements that we have driven. We'll talk more about that in a bit.

We're also going to talk a bit about the way forward for Nagarro. We have -- we are seeing a slight pickup in activity in topics like data and cloud and AI. And we also see some new investments. But I think in general, our approach is that we just don't want to write this growth of our subsector. We want to, in fact, layer on new opportunities to accelerate this return to double-digit growth. And to achieve this, we have talked earlier about some strategic initiatives and partnerships that are gaining momentum. I'll share updates on that shortly. And we are also strengthening our governance -- corporate governance trying to be really good at everything we do, and I'll talk a little bit more about that as well. And then, of course, we will take questions.

Next slide, please. So let's dive in. We continue to push forward despite the global situations with moderate growth, but strong operational performance. As I said, some of what we have done operationally has been obscured by foreign exchange movements. And primarily, the pronounced weakening of the dollar against the euro has led to a revaluation of our loans and our deposits and it's creating this noncash accounting losses, which is impacting our bottom line and making it look that the company is not doing so well even when the underlying business has actually improved over the year ago period.

Meanwhile, we continue to have clients that are sticking with us, clients with over EUR 1 million is now 188. And these are companies that all -- for whom we are all strategic. We want to keep -- continue to do more and more with them. We're also encouraged very much and this is quite important. I think that to see that now more clients are comfortable with and have a clear understanding -- clearer understanding of the benefits that they can achieve with AI. And this is leading to a ramp-up of our internal design activity, our internal reinvention of Nagarro activity, which we believe will start to contribute to our business later this year and in the years to come.

Now coming to quarter 2 results. We had revenue of EUR 252 million and an adjusted EBITDA of EUR 30.5 million with adjusted EBITDA margin of 12.1%. Gross margin reached up from 30.0% a year ago to 33.2%, as we benefited from our productivity gains under the margin support program launched about 1 year, 1.5 years ago.

The company displayed excellent operational efficiency in this first half year. And without the currency effect, we would have delivered adjusted EBITDA margins at the high end of our range. However, because of these devaluation losses we talked about, we had an impact of EUR 18.0 million of -- just from these devaluations, which is a huge number on adjusted EBITDA and we are exploring ways to mitigate these impacts in the future. Although this currency movement is really massive and doesn't happen every day.

Based on what we have delivered to date as well as the current demand trends and the expected trajectory of the costs, we are fine-tuning our guidance for the full year. In January, we had projected our revenue for 2025 to be between EUR 1,020 and EUR 1,080 million based on the then prevalent exchange rates, we now expect revenue to come in near the lower end of that guidance. We had targeted a gross margin in the region of 30%. We expect to maintain that. We had targeted adjusted EBITDA margin between 14.5% and 15.5%.

And while operating aspects wise, we are right on target and actually doing well against the target, because of the currency devaluations, we expect -- currently expect based on the current currency rates, adjusted EBITDA margin to be between 13.5% and 14.5%. So these -- by the way, these revaluations are kind of onetime. So if currency remains flat, then they will not recur in the subsequent quarters.

Coming back to Q2, our best-performing industry cluster is management consulting and business information, while telecom, media and entertainment is under pressure. Central Europe grew 9%, lots of SAP work also in there. North America declined slightly, partly due to currency. Our NPS for the quarter was 66. And as I said, we have 188 clients, which are an important part of our footprint. We have very little churn in this set. We have a few new members this year. We continue to drive this. We expect to keep delighting these customers and doing more business with each one of them as we help them win in their markets.

We remain diversified across industries, across clients, which enables us to deliver solid performance in good times, but also to deliver derisked performance in difficult times. But it's also an offensive strategy because part of what we are bringing to our clients is the ability to create ecosystems for them, ecosystems that may cut across industries or cut across traditional ways of thinking and allow our partners and clients to explore whole new business models.

So for example, I will just talk about an example that's just from a couple of weeks ago, Nagarro has launched this -- supported this launch of a fully autonomous S market grocery store concept by SAP and a well-known contract food service provider. In less than 3 months, the team tells me 2.5 months, Nagarro helped pull together half a dozen shopping hardware solutions, various SAP and other software products, including our own NAVI platform for electronic shelf label integration in the retail setting and to sort of build this whole new ecosystem concept. And this is where Nagarro really shines.

There are many more such examples. Our ability to execute complex ecosystem projects with speed and innovation around the world whether in Waldorf or in Bengaluru is what makes Nagarro really special.

Anyway, coming back to the numbers, we have seen significant growth year-over-year in automotive, manufacturing and industrial and in management consulting and business information. We see a large opportunity in the digitization intelligence of -- and new intelligence in manufacturing and supply chains around the world. And especially in Europe, if you see the latest Der Spiegel article about how AI might actually do special things in Europe because AI in the U.S. is more geared towards consumer. AI in Germany, for example, may be much more geared towards manufacturing.

So I think that also holds true for Japan, by the way. And I think you see that also in our own partnerships with Siemens and SAP and Advantech and others that we are sort of also steering a little bit in this direction. We continue to see declines in our Horizontal Tech industry, which we have sort of kind of -- we've personally moved away from in the last 10 years. Our customer diversification still remains. Our top 5 clients represent only 15% of total revenue in Q2.

Similarly, regional diversity of revenue has been critical for us and for stability and growth. And we also find in environments that are problematic economically, where you have heightened policy uncertainty and trade tensions, it really helps to have this diversification. We continue to see, for example, excellent traction in the Middle East, winning some new prestigious logos across public and private sectors. And that's kind of what we also want to do with other regions as maybe some regions are slower, we are able to move faster in some other regions.

In our last earnings call, I had said that we are determined to get growth back into double digits soon regardless of how our industry subsector performs. We are now totally focused on that. We have, as I mentioned in the last call, some initiatives to layer on these lines of growth over the normal subsector growth. And I can give you an update on some of these.

The first of this is Japan. In the last months, we have continued to develop our partnerships targeting Japan and targeting Japanese companies throughout the world. We are working with multiple partners and have several dozen distinct business opportunities, small ones, bigger ones. It's really -- the groundwork is going very well. It's also reflecting in revenue increases that are fast, but from a tiny base. So it will take some time to get some impact.

We want to do in Japan, what we did in the Middle East, land and expand via organic and small inorganic moves potentially. As I said in the last call, Japan is one of the world's largest economies, largest IT markets. It's -- the economy is changing of late. The mindset of the large Japanese companies is advancing, Warren Buffet is investing. There is a digital debt coming due, and the country really wants to leverage AI. All of this leads to a very exciting market.

The second area was the German Mittelstand. I had mentioned that we work a lot with SAP in the German Mittelstand, but not so much in digital. That is starting to change, and that is also moving along fairly well.

The third is Edge AI and IoT rooted primarily but not only in the partnership with Advantech that we had announced. Here again, we have a couple of dozen joint leads, and we are excited about what this partnership will mean for us next year onwards.

What's not on the slide yet, but which is very important is data engineering and AI. As I said earlier, we are very encouraged to see that our clients now have a clearer view of the benefits that they can achieve through AI and a better idea of how they can derisk the challenges that AI imposes. As an engineering forward firm that is just not too big, not too small, we feel that we have an excellent chance at success in this new phase of transformation at our clients. We are big enough to be -- to have a seat at the table and small enough and engineering focused enough to be able to give the confidence that we can drive this forward in a humanistic pilot and expand and in a sensible cost-efficient way.

We are redesigning our offerings. Therefore, we are redesigning our positioning. We are redesigning how we work internally for this next phase so that we can contribute -- we can have this new era -- we can launch this new era for the company and have this data engineering and AI contribute much more meaningfully to our revenue in the rest of the year and in the years to come. We will talk more about this in our coming earnings calls, I'm sure.

Michael, with this, could you please hop in and say some words about the balance sheet and cash flows.

Sure. Thanks, Manas. The chart on the left here shows our financial position at the end of June 30, 2025. The financial liabilities were EUR 300.7 million and lease liabilities were at EUR 66.9 million. Cash balance remains strong at EUR 121.8 million, implying net liabilities of EUR 245.8 million, and net leverage ratio of 1.8x. The company's liquidity position at the end of the 6-month period was comfortable with working capital of EUR 206.9 million.

For cash flows for 6 months ended June 30, 2025, we show total cash outflow of EUR 74 million versus an inflow of EUR 8.8 million for the comparable period last year. Our operating cash flow for the 6-month period decreased slightly to EUR 26.1 million versus EUR 27.6 million for the comparable period last year. And this was primarily due to the increase in payment of income taxes of EUR 8.7 million and other noncash incomes and expenses of EUR 9.1 million.

Our days sales outstanding improved from 88 days at the end of the year of 2024 to 85 days at the end of June. And you can note that we calculate DSO based on quarterly revenues and include both contract assets and trade receivables.

For cash flow from investing activities for the 6-month period, we saw an outflow of EUR 4.3 million. CapEx was EUR 3.7 million, which is less than 1% of our 6-month revenue, and that continues to reflect our asset-light approach.

For cash outflow from financing activities for the 6-month period was EUR 95.8 million, mainly due to the purchase of treasury shares amounting to EUR 50.1 million. We also had a net repayment of bank loans of EUR 24.9 million, lease payments of EUR 11.3 million and an interest payment of EUR 9.6 million.

If we move on to our capital allocation initiatives that are designed to create shareholder value. We bought back a total of approximately 684,000 shares as of June 30, 2025, for a total of EUR 50.1 million. We also announced a dividend of $1 per share, which amounted to EUR 12.6 million or 13.1% of our 2024 EBIT.

This was declared during our annual meeting, which was held on June 30, 2025. And as Manas noted earlier, we also announced in April, the business transfer of Notion Edge France, which was an SAP gold partner that specializes in SAP customer experience. And this expands our offerings to keep players in retail, CPG, manufacturing as well as in other sectors in France, and we expect to continue to make acquisitions in the coming quarters as well.

So with that, I will hand the call back to Manas.

Thanks, Michael. As you all know, in the last AGM, we had 3 new members join our Supervisory Board. I just would like to say a few words about the roles that they are playing and the subcommittees that we have set up. Martin Enderle, who is Chair -- was still recently Chair of the Supervisory Board at Delivery Hero, and he's also now the Chair of our Nomination and Remuneration Committee; Hans-Paul Buerkner, who has been Global CEO, Chairman and Chairman Emeritus of BCG is now Chair of the Strategy Committee and an excellent sparring partner with us on our -- on the reinvention I talked about, Nagarro's reinvention; and Jack Clemons, who has been Global CEO at Bata and has been on various other Boards, including being Chair of the Audit and Risk Committee of the Worldwide Fund for Nature, is now Chair of our Audit Committee.

So we have had a couple of Board meetings. We've had some committee meetings after the AGM. And I'm just very happy with all the discussions and ideas and experience -- the wealth of experience of these members as well as the existing members earlier, the previous members of the Board are contributing. So we have a lot of energy and momentum on this side. We are also in the late stages of our search for a custodian of finance for the organization, our CFO. And we will talk more about that when we have concrete news. Well, that's that for the wrap-up and update for Q2 2025.

We will now transition to the Q&A.

[Operator Instructions] Over to you Michael.

I'm not seeing any questions at this time. Can you confirm on your end?

I can see certain questions. Should I just -- how do you want to do this?

I can read the questions -- the first question comes...

Let me just take the questions and then answer them. I can just do that. I have them open in front of me, I can just answer that. So we have 10 minutes, so let me just make good use of the time. There are a couple of questions around buybacks and why we are not doing buybacks, even when the share price is relatively low?

And I'll just say this that we remain prepared for buybacks, where we have certain covenants with our banks around our equity positions and all the fluctuation of these currencies, we are trying to be a little bit -- play a little bit on the safe side because currencies could really fluctuate some more. So -- but it's just that. We continue to keep that as a as part of the policy, and that is something we keep looking at opportunities to buy back shares. Michael, are you now back on the questions or if that's -- or Maria, either of you?

Yes, I'm still not seeing questions, but bear with me. Okay. I now have them as well. Okay. Why don't we move on to Andreas who asked, could you please elaborate on what drove the substantial improvement in gross margins? Is this tied to internal efficiency projects or only one-off? And should we expect the same level of gross margin in the coming quarters?

So it is tied to structural improvements in the way we work. I think that we are not promising that we will exceed our guidance on gross margin. But in general, we are comfortable with the guidance that we have. And the reason we say that we are not guiding above it above the original guidance is because we want to have the flexibility to reinvest. We're required in the areas of data engineering and AI. So -- but what we can say is that our margin support program has really gotten our business units, trying to trim the fat, if you will, and improve utilization. And I think we're doing a lot better now.

And this is not a one-off result. It's something that we expect to persist in general. I mean the trend in general should persist, but we may reinvest some of that back and some work within the BUs on AI and data engineering.

Next question, please?

Great. Next question comes from [Alessandro], who asked in addition to a question about the buyback. Will we add a CFO role in the company, it was announced last quarter?

Yes, yes. And I think I mentioned it briefly, but we are in that search space, and we should have someone in the next months. We are working on it.

Great. And our next question comes from Gerard who asked, how do you explain that some days ago, EPAM posted its results updating its guidance up, while Nagarro is saying it would reach the low side of guidance as well, decreasing the EBITDA margin?

I'm really happy to hear the EPAM news because it has a certain meaning for the industry when EPAM declares this. And EPAM has gone through a tough time because of the Ukraine exposure and many other aspects. So it's very good to hear that news. I would not comment on it because I don't -- I'm not very familiar with EPAM's year-on-year situation on EPAM's guidance, where the guidance was originally.

But in general, I think it ties in well to what we are also seeing that engineering forward companies may have a chance to really ride this data engineering and AI wave. And yes, so it's exciting. Yes.

Great. And then another piece of Gerard's question is some months ago, there was a piece of news saying Nagarro leases an office in Gurugram, that their global capability center, total size 706,000 square feet expected 30,000 employees. What's your perspective on building in India?

So on building versus leasing or just in general, but let me answer both parts, right? In general, we have not bought except for occasional -- very early on, occasional small purchases that we have made or things that have come to us through acquisitions. But in general, we have just leased our infrastructure in India, which allows us to move out to newer offices when the offices become dated and older. And we are able to negotiate really good rates with our landlords because of the way we operate.

And so anyway, it's far more -- one can take bets on the real estate market, but that's not our sweet spot. We prefer to just lease these buildings. Our -- this large -- this news article about this large office comes many years after that office was actually spoken for. So it's a bit surprising. I think some journalists just saw the data and put that news up. This office is a very important part of our telling the Nagarro story to clients and partners.

In the last weeks, we had the SVP of partnerships for Siemens, for example, here. We had -- for Qualcomm, we had the Head of Automotive and Industrial business for Qualcomm. We have had -- we are waiting for the Advantech people. We have a new Siemens lab. We have labs for many other partners that we work with.

So this is pretty much every day of the week and every week of the month. We have someone or the other visiting us around the world. So it's really a place where we get a chance to showcase Nagarro's capabilities, especially in India to our clients. Yes, that's kind of what we use this office for. Of course, we also have lots of people, thousands of people in the region.

Great. Thanks Manas. Next question comes from [Mufasa] capital. This is related to the buyback, but maybe a slightly different angle, which is why do you have much allocation to M&A when the business is already well diversified, you're cutting headcount and trading at a low valuation?

Yes. So I think you may have misinterpreted the comment Michael made on the last call. I mean we are not necessarily going to go out and buy -- the cash is not necessarily going to be deployed for a large acquisition. It could be, but it's not necessarily that we are -- I don't think Michael meant to indicate that's what we are steering for.

As I said earlier, the buyback is a little bit on hold because of our -- the currency fluctuations and the impact it has on the equity position of the group and the bank covenants and so on. So a little bit cautious around that as well. But yes, we're not rushing into large M&A deals just for the sake of doing them, for sure.

Great. Thanks, Manas. Another question from Gerard, follow-up question. Congratulations for attracting talent from Boston Consulting Group, sounds exciting. What are the main initiatives that he is undertaking?

So the main thing is strategy, right? So strategy is an interesting topic. It has multiple aspects. I think that the aspect that is really interesting right now is how do you reinvent a company. And Hans-Paul joined BCG, and I may get these numbers wrong, so don't quote me on these. But I think he joined BCG when it was a very small firm like a few tens of millions or a couple of hundred millions. He became CEO, if I remember correctly, when it was about $1 billion, he took it to $8 billion in revenue, and it's now like many times that even. So he has the experience of seeing a very global organization, very partner-driven, one partner one vote kind of organization and trying to see how with clients around the world in different verticals, in different functions, how to get these to work together.

And I would say we have some experience of our own as well in this. Where it's really good to have a sparring partner who has not only seen this within BCG, but has also seen it in many -- has seen different challenges, different strategy challenges in different firms that he has advised, right? And there's a lot of that, that we can learn from as also his indefatigable energy and enthusiasm. So it's really -- yes, he's leading the strategy part is the short answer, but there's a lot more to it.

Next question comes from [Alejandro]. He asks are you seeing more ramp-up in the larger, medium or small projects? And also, how is the pipeline evolving compared to last year?

So we don't talk much about pipeline because a lot of our work is very intimate with our clients. We are basically in T&M kind of contacts with them. We are working on stuff that's evolving rapidly. So it's not fixed bids. It's not the typical kind of sales pipeline. Our fixed bids and periodic kind of payments work accounts for roughly 1/3 of our total revenue, not more than that.

So it's -- we don't think of pipeline in the traditional sense. But we are seeing action on all sides. It's not very clear any particular side, which is dominating. We are trying to also in clients where we have had historically a purely digital engineering kind of expertise and reputation. We're also trying to bring our other services there like managed services.

We just won a reasonably large contract with a logistics provider, for example, in the managed services space, where for many, many years, we have just been a digital player, and there were other large companies in the managed services space. At the same time, in other places like in the German Mittelstand, as I talked about, we're trying to move from the large SAP projects to more digital work. So all kinds of stuff is happening.

But in general, the strategy that we are taking is we're calling it up across and together. Up is -- we have talked about this before, UP is more into the boardroom, trying to be in the sort of strategic reinvention of these -- of our clients as they take up data and AI and the impact it can have on them, which as I said before, is much more clear today than it was some months ago.

Across -- at our clients, trying to do more at each and trying to -- and that requires the together part, which is really the teaming that is required across BUs, across regions, across central functions to try to make this all work. So I think we have our fundamental approach fairly clear. With this reinvention that I talked about around data engineering and AI, our branding and our go-to-market will be sharpened. And we have, I think, the skill sets and the capabilities and the IP that is being generated and the partnerships to sort of provide the platform for that next phase.

Sorry -- I'm sorry I went over time, I think we even...

No problem. I'm sure the audience appreciates the detail there. So because there are a number of additional questions, and we're at time, I would encourage you to just shoot your questions directly to me, [email protected], and I will take these additional questions as they come in. So apologies that we didn't get to everyone, but thank you so much, Manas, for the time. And I want to thank everybody for joining us today on Nagarro SE's Retail Investors Call. This concludes our call.

Thank you very much. Have a good day.

Hello, everyone, and a warm welcome to Nagarro's First Half 2025 Earnings Call. My name is Emily, and I'll be coordinating your call today. I would now like to turn the call over to Michael Knapp to begin.

Please go ahead, Michael.

Good afternoon to everyone. Welcome to Nagarro SE's First Half 2025 Earnings Call. My name is Michael Knapp, and I'm part of the Investor Relations team at Nagarro. I'm delighted to moderate today's call. You should have received a copy of the earnings release for Nagarro's second quarter 2025 results. If you have not received the press release, you can find a copy along with today's presentation in the Investor Relations section of nagarro.com.

Manas Human, our Co-Founder and custodian entrepreneurship, and I will be representing Nagarro on today's call. Before I pass you to Manas, I'd like to remind those listening that these statements are subject to risks and uncertainties as described in the company's earnings release. Additionally, please also refer to the earnings release for the notice on reported results that are non-IFRS measures.

[Operator Instructions] we'll have a chance to ask questions in a separate call scheduled today at 2:30 p.m. CST.

With that, it's my pleasure to hand you over to Manas.

Thank you, Michael. And once again, welcome, everyone, and thanks for joining this earnings call. The content we are presenting today is in 2 parts: the first part is regarding Q2 and the first half of 2025. We are making good progress in what is still a subdued demand environment for IT services. Our underlying business is performing better than it appears on the surface. As we will discuss, currency fluctuations and related impact on the revaluation of internal loans and bank deposits are masking some of the structural improvements we have driven in adjusted EBITDA. I'll talk more about that in a moment.

The second part of this presentation is regarding the way forward for Nagarro We have seen already a pickup in activity in data, cloud and as well as new investments in digital transformation during the second quarter, which is encouraging. But we are determined to not just write the growth of our existing industry subsector but to layer on new opportunities to accelerate or return to double-digit growth. To achieve this, we have several strategic initiatives and partnerships that are gaining momentum, and I'll share those updates as well.

In addition, our journey towards strengthening our corporate governance is progressing very well. and I look forward to talking about that as well. And then, of course, we'll be happy to take questions.

So let's just dive in. Nagarro continued to push forward against the prolonged economic -- global economic challenges with moderate growth and strong operational performance. That said, some of the positive things we have done to improve our operating efficiency are being obscured by FX movements. Due to the pronounced weakening of the dollar related to the euro, the reevaluation of our loans and deposits are creating noncash accounting losses. This is directly impacting our bottom line and making it look like the company is underperforming even when the underlying business has significantly improved for the year ago period.

Meanwhile, our long-term focus on delivering a superior client experience is driving stickiness and loyalty with our customer base even in a slow demand environment for digital specialists. A proof point for this is the continued increase in the number of EUR 1 million plus generating companies that we are proud to call our clients.

Importantly, we were also encouraged to see in Q2 that more clients are now comfortable with and have a clearer grasp of the benefits that they can achieve through AI. This has led to a pickup in our internal design and reinvention activities, which we believe will begin to contribute to our business later this year and then on for years to come.

Coming to Q2 2025. We had revenue of EUR 252 million. I'm trying to move to get the auto lights working in the room. Coming to Q2 2025, we had revenue of EUR 252 million and adjusted EBITDA of EUR 30.5 million, which is an adjusted EBITDA margin of 12.1%. Note that gross margin reached 33.2%, up from 30.0% from the year ago period as we benefited from productivity gains via our margin support program that we have talked about on previous earnings call, this has now really become a way of life at Nagarro and is structurally benefiting our profitability.

The company displayed excellent operational efficiency in this first half. Absent currency effect, you would have delivered adjusted EBITDA margins that would have been towards the high end of our prior 2025 guidance range. However, adjusted EBITDA was impacted by the revaluation loss on intercompany loans and cash holdings because of the weakening of the dollar against the euro, as I mentioned earlier. This resulted in a huge negative impact on adjusted EBITDA of EUR 18.0 million in H1 which is obviously what is reflected in the numbers that we have post that, we are exploring ways to mitigate these impacts in the future.

Based on what we have delivered to date as well as current demand trends and the expected trajectory of cost, we are fine-tuning our guidance for the full year 2025. In January, we had projected revenue for 2025 based on the currency rate prevalent then to be between [indiscernible] for the year.

We now expect revenue for 2025 to come in near the lower end of that guidance and EUR 500 million roughly of that we have covered in H1. We had targeted gross margin in the region of 30%, and we expect to deliver that quite comfortably. We had targeted adjusted EBITDA margin would be between 14.5% and 15.5%, given currency fluctuations and the resulting impact on margins, as we have just discussed, we now expect adjusted EBITDA margin to be between 13.5% and 14.5%. This is, of course, assuming that the currency doesn't move any further from here.

Coming back to Q2, our best-performing industry cluster remains management, consulting and business information, while telecom, media and entertainment was under pressure. Central Europe grew strongly at 9%, including SAP growth, while North America declined slightly partly due to currency. Our NPS for the quarter was a strong [ 66 ]. The customer satisfaction rating is also reinforced by the fact that we have 188 accounts that are currently generating more than EUR 1 million of revenue each. This dedicated group of clients in which there's very little churn has been an important part of our success, and we are focused on continuing to move this number higher, but also to do more with each customer.

We remain diversified across industries and across clients, which enables us to deliver solid performance in good times as well as in more difficult times. But it is also an offensive strategy since part of what we bring to our clients is the ability to create ecosystems for them, ecosystems that cut across industries and allow our clients and partners to explore whole new business models.

I'm tempted to use an example from just a few weeks ago. Nagarro has recently supported the launch of the fully autonomous market grocery store concept by SAP and a well-known contract food service provider. In less than 3 months, Nagarro helped pulled together half a dozen shopping hardware solutions and various SAP modules and other software products, including our own NAVI platform for electronic shelf label integration to explore a whole new ecosystem concept.

There are many more such examples being able to execute such complex ecosystem projects at speed and with innovation around the world, whether in Waldorf or in Bangaluru is what makes Nagarro really special. Anyway, coming back to the numbers, we have seen significant year-over-year growth in automotive, manufacturing and industrial and in management consulting and business information. We see a large opportunity in the digitization and intelligence of manufacturing and supply chains around the world and particularly in Europe and particularly in Germany and in Japan, big manufacturing nations. And you will see this in our partnerships as well.

The partnerships with Siemens, with SAP with Advantech and others. And we continue to see declines in Horizontal Tech, as you can see in the figure, which we have purposefully moved away from over the last 10 years. Our top customers remain -- are well diversified as well with our top 5 clients representing only 15% of our revenue in Q2.

Similarly, regional diversity of revenue has been critical for us for both stability and for growth. We also are happy to follow our multinational clients around the world. By generating revenue from services in multiple regions, we reduce our risk exposure while increasing our potential for growth. And this sort of diversification, we feel is very important in the current environment of heightened policy uncertainty and trade tensions.

We're also seeing excellent traction in the Middle East, securing new logos across public and private sectors. This is also sort of underlying these numbers. In our last earnings call, I had said that we are determined to get revenue growth back into double digits soon regardless of how our industry subsector of digital engineering performs.

For this, we have initiatives that will layer on a few different lines of growth on top of our normal subsector growth. I have listed these initiatives in the last call, and we'll give you a quick update today. The first of these is Japan. We have continued to develop our partnerships targeting Japan and Japanese companies throughout the world. We are working with multiple partners and have several dozen distinct business opportunities.

Now this is also reflected in revenue growth, although from a very small base. We want to do in Japan, what we did in the Middle East, land and expand via organic and potentially inorganic means. Japan is one of the world's largest economies, of course, of late, the economy is changing. The mindset of large Japanese companies is advancing. There is digital debt coming due and the country wants to really leverage AI. All of this leads to a very exciting market.

The second is the German Mittelstand. We work a lot for the mittlestand via the SAP business unit, but we have only a very few clients in this [indiscernible] Segment on the digital engineering side. Here, again, we feel we have the right to win. That's one of the largest German services firms. And we continue to make progress on this opportunity. We will have more in the coming quarters.

The third is Edge AI and IoT. This is rooted in the partnership that we had announced with Advantech and a couple of other such partnerships. Here again, we have a couple of dozen joint business opportunities and leads. We are very excited about what the Advantech partnership in particular will mean for us from next year onwards. A few more words about the big picture. What's not on this slide yet, but what is very important is data engineering and AI.

As I said earlier, we are very encouraged to see that more clients are now comfortable with and have a clearer grasp of the benefits that they can achieve with AI. On our side, too, we are very far more clear now about what exactly we want to be. As an engineering forward firm that is not too big and not too small, we feel we have an excellent success excellent chance of success in this new phase of transformation of our clients. So we are redesigning our offerings, our positioning and our internal organization for this next phase in a way that we believe will begin to contribute to our business later this year and for years to come.

We see this as yet another reinvention on our way to becoming one of the world's truly great companies. We will doubtless speak in much more detail about this in the coming calls.

Now over to you, Michael. If you would like to say some words to the balance sheet and cash flows now, that would be great.

Yes, absolutely, Manas. The chart on the left shows our financial position at June 30, 2025. Our financial liabilities were EUR 30.7 million and lease liabilities at EUR 66.9 million. Our cash balance remained strong at EUR 121.8 million, implying net liabilities of EUR 245.8 million and a net leverage ratio of 1.8x. The company's liquidity position at the end of the 6-month period was comfortable working capital of EUR 26.9 million.

Cash flows for the 6-month period ended June 30, 2025, show a total cash outflow of EUR 74 million versus an inflow of EUR 8.8 million for the comparable period last year. Our operating cash flow for the current 6-month period decreased slightly to EUR 26.1 million versus EUR 27.6 million for the comparable period last year. This was primarily due to an increase in payment of income taxes of EUR 8.7 million and other noncash incomes and expenses of EUR 9.1 million.

Our days sales outstanding improved from 88 days at the year-end 2024 to 85 days at the end of June. Kindly note that we calculate DSO based on quarterly revenues and include both contract assets and trade receivables. Cash flow from investing activities for the current 6-month period was an outflow of EUR 4.3 million.

CapEx was EUR 3.7 million, and that's less than 1% of 6-month revenue, reflecting our asset-light model. Cash flow from financing activities for the current 6-month period was EUR 95.8 million against EUR 1.7 million in the comparable period last year, mainly due to the purchase of treasury shares amounting to EUR 50.1 million and net repayment of bank loans of EUR 24.9 million and lease payments of EUR 11.3 million and interest payments of EUR 9.6 million.

Turning to our capital allocation initiatives designed to create shareholder value. As I mentioned, we bought back a total of approximately 684,000 shares as of June 30, 2025, amounting to EUR 50.1 million. We also announced a dividend of $1 per share, which amounted to EUR 12.6 million or 13.1% of 2024 EBIT. This was declared during our annual meeting held on June 30, 2025. And as Manas noted earlier, we also announced in April, the business transfer of Notion Edge, France and SAP gold partner specializing in the SAP Customer Experience Suite. And this expands Nagarro's offerings in key players in retail, CPG, manufacturing and other sectors in France, and we'll -- we expect to continue to make acquisitions in the coming quarters.

And with that, I'll hand the call back to Manas.

Thanks, Michael. As I mentioned last quarter, we are -- and as you note from the AGM, we are very pleased to add 3 new members to our Board that were formally appointed at the AGM. Martin Andrle, who was until recently Chair of the Supervisory Board of Delivery Hero is our Board Chair, and he is now also the Chair of our Nomination and Remuneration Committee. [ Hans Paul Bergner ], who has been Global CEO, the Chairman and Chairman Emeritus of BCG, is now Chairman of the Strategy Committee and an excellent sparring partner with us on our reinvention and Jack Clemons, who has been global CEO of [indiscernible] And has been on various other boards, including being Chair of the Audit and Risk Committee of the Worldwide Fund for Nature is now Chair of our Audit Committee.

We have had a couple of Board meetings and Committee meetings after at the AGM, and I'm very impressed with the discussions and ideas and experiences that these Board members, 2 Board members as well as the existing Board members have already contributed. We are also in the late stages of our search for Custodian Of Finance for our organization, our CFO. And more on that when we have concrete news.

Well, that's that as a wrap up for the quarter. We can now transition to Q&A.

Thanks, Manas. And it looks like our first question comes from Andreas Wolf at Warburg.

I have the following questions. The first is on the deployment of AI in software development projects. What are you observing there, Manas. I'm asking, especially against the background of the Horizontal Tech revenue development. I see that other verticals developed quite nicely, but maybe you could also comment on the deployment of AI, especially against the backdrop of Horizontal Tech revenue development.

And the second is on the balance sheet i.e., liquidity versus financial debt. It looks a bit inefficient right now. Are there any plans to kind of reduced financial liabilities using the liquid assets that you have sitting on your balance sheet? And the last question is probably related to the second, is on what has been the impediment so far on buying back further shares. You got an approval at the AGM to extend the share buyback so far, Nagarro has not utilized this opportunity.

Thank you, Andreas. I'll take the first question and maybe Michael can take the second question. So in software development, we are seeing exciting use of AI. And I think now more and more of our clients are leveraging AI. We see -- and we also have this recent Stanford University research study, which shows that there are productivity improvements to be had with -- when teams use AI. But these are very much dependent on the complexity of the software base.

So if you have -- like it's a fresh -- greenfield versus brownfield situations. So they have lots of nice charts. You could look this video up on YouTube. And that's kind of what we are seeing that in more complex corporate situations, there's relatively limited productivity gains, whereas in more greenfield, simpler apps, there's a huge productivity gain.

And I think that we have sort of felt -- those of you who have followed the company for the last several years will remember that even in the -- even when you were doing the spinoff, we were talking a lot about trying to always move towards complexity, and we believe that complexity is the best defense. And at the same time, as companies are starting to use AI, they will need a lot of data engineering. They will need a lot of pilots, they will need to know how to scale those journeys of improved intelligence across their organizations. They will need to manage that change. So there's a lot of -- on the positive side as well from this. So I think that both of these go hand-in-hand.

And I would hesitate to say more right now than -- because we are just on the edge of a relaunch. And once we relaunch, I think the -- our view on this will become more clear. On the use of cash that we have and on the especially for buyback, maybe, Michael, you can take that since you are handling the balance sheet part.

Sure. No problem, Manas. Yes, I think as we've -- as you've seen, buyback is an important part of our capital allocation strategy. But it's not in and of itself the only thing we're doing, right? We're issuing dividends, and we're also looking for inorganic growth opportunities as well. So we look at it as a mix of what's optimal. Clearly, where the stock is trading we see it as significantly below what we would consider intrinsic value for the stock. So I think that will continue to be an important element of the broader strategy.

And at this point, I'm not seeing any additional questions. So I will turn the call back over to Manas.

Okay. Great. I just want to say that -- I mean, there are a couple of questions, which I'll just say a couple of words on. So these are not from analysts, but just to be polite. So we have invested, as you know, in AI -- most of these are around AI and data engineering. We've invested in an AI team many, many years ago. And we have, as a result, a 4-digit number of people in the business unit that's focused on AI and data. And this is apart from the people that you -- that every business unit is now sort of building on their own because AI is like electricity, and I think it will power everything we do.

So it's not going to be very separate for very long, even though we have a very specialized AI business unit. And there's also a question around how does this offering go out to clients. And again, I don't want to speak too early, but in general, we are looking at all the aspects of what it will take for a client of ours to make this journey with AI, which includes the advisory around AI and the piloting around AI, the ROI delivery at the estimates of ROI for the entire journey, it could be the change management. It is the engineering, of course, which we are really very strong at our understanding of different functional aspects across industries, whether that be, let's say, supply chain or manufacturing or maybe even HR or different topics.

So -- and it will be driven by a set of offerings, both service offerings and product offerings that we are putting together. So it's definitely something quite structured. I think that still some months ago, it wasn't very clear how this world would play out. I think it's far more clear now. And even the technology is reaching a level of maturity and there's a level of excitement around Agentic AI that is actually -- I think it's a good time to take our next step. And this next step, we see this as a reinvention of the company, the way we think of ourselves the way we act, but more on that in subsequent calls. But that's pretty much all I had on those questions, and I will maybe -- if that's the only questions we have that we can end this call at this point. Thank you very much for joining.

Manas, I may have spoken too soon. We do have a late question here, if you wouldn't mind. This is from Garcia [indiscernible]. And this question is any view on the revaluation of liabilities and if that will affect you in the second half, you talked about actions you might take to mitigate those impacts. And then are you confident on achieving margins in the second half?

Yes. So what I would like you to think of this as is an engine, operating engine that's running at very high or relatively high efficiency. And we've always said that the company had the capability to deliver more margin. It's just that we had not stressed it in that direction because the way we were growing earlier, we felt that growth was a priority. In a slow moving environment. We have upped the -- we are sort of tuned more towards the margin and the operating engine is very strong and is delivering very good margins.

However, this sort of these sort of static liabilities that we have which are largely internal loans and stuff. They lead to noncash changes every time the currency changes, and it's a onetime effect when the currency changes, it doesn't affect our operations on a day-to-day basis. So if the currency remains where it is, it will not affect us in H2. So that's kind of why we feel very good about our margin in the direction in which you are on the margin. Of course, we don't control currency, but it currently stays where it is, we are in a good place.

Manas, we have one more question coming in. from Jonathan Art who asks, what do you mean by a relaunch, do you mean a rebranding? And for your IFRS figures like adjusted EBITDA, shouldn't these intercompany alone and the FX impact be removed from that?

The adjusted EBITDA topic, I think, is a fair question. We have never seen such large impact, and maybe we should be removing them. So Jonathan, I think you're maybe right there, we will give it some consideration. But the -- on the other side of the relaunch, what we mean is, see, again, over the years, we have tried to steer the company via our brand. And I don't mean Nagarro itself, but the tag line that we carry, which sort of aligns what our clients can expect from us and aligns what we internally try to deliver.

So for example, when we were a small company, our tagline was complex is simple. So we went for the most complex projects. We went for like revenue management or price ticket price optimization at Lufthansa or something like that. And that was a way to break in. So complex as simple was a tagline. As we scale, it became enterprise Agile. So agile while being enterprise class robust. So building mission-critical systems, but being very agile and quick to market. And even the S market with SAP that I just announced today, is a classic example of that, building like really serious systems but in a very fast way.

And it's not as though these tag lines or capabilities go away, but we sort of build on them. And then the next 1 was thinking breakthroughs. And that was say what really come out of the engineering, we want to come into where we are actually making impacts on the clients' business through innovation and innovation and design thinking was something that we try to get through the entire company. And now there's scarcely a client of any size where we are not bringing innovations. We're not bringing ideas and working on how can we do things better, right?

So the next phase, which we have just sort of introduced a little bit, I would say, weekly is being the fluid idea of fluidic. And that -- we haven't really backed it up fully yet, and we haven't really clarified it fully yet. But in that sense, we will do a rebranding. I mean we will clarify what we are about, what our offerings are, how we lead how we work, what kind of people we're looking to hire, what kind of leadership we're trying to grow. So there is a whole change in that direction. I hope that answers your question, Jonathan.

Michael, if that's the last question, then we can close the call here.

Yes. Great. It looks like that is. So thank you, Manas. And thank you, everyone, for joining us today. This concludes Nagarro SE's first half 2025 earnings call. Thank you for joining and you may now disconnect your lines.

Thanks.