Digital Workforce Q3’24 preview: We expect growth to remain strong, but there is uncertainty about how it will scale to profitability

Translation: Original published in Finnish on 10/30/2024 at 6:58 am EET.

Digital Workforce, the software robotics automation pioneer, will publish its Q3 business review on Friday morning. We expect the strong revenue trends seen at the beginning of the year to have continued in the third quarter. We expect growth to scale to profitability, but there is some uncertainty about the magnitude of this as the company has been investing at the same time. In addition to operational developments, the focus is on the company's comments on Finland and growth markets. 

We estimate growth to have been well above the sector in Q3 too

We expect Digital Workforce's revenue growth to have continued to clearly outperform the sector and to have been 10% or 6.6 MEUR in Q3 (Q2'24 company 14% and sector -1%). By business area, we forecast Q3 revenue of 4.3 MEUR (+14%) for Continuous Services and 2.3 MEUR (2%) for Professional Services. In line with the industry focus, we expect healthcare in Finland and the geographically growth-oriented North American market to have driven growth in the third quarter, as in the second quarter. We will also continue to look for comments on the developments in the growth markets (US, UK and Ireland) and on how the good sales pipeline in healthcare in Finland has been and will be launched.

Scaling of growth to profitability is a small point of doubt

We expect an EBITDA margin of 0.3 MEUR or 4.8% of revenue in Q3. Profitability improvement from the weak comparison period is thanks to the closure of the Danish and Norwegian offices at the end of last year, administrative efficiency measures and an increase in revenue (EBITDA-% Q3’23 -1% and Q2'24 3%). The result will continue to be constrained by investments in line with the strategy and a change to a more costly personnel profile. However, the extent to which these investments will limit profitability is questionable, as there were also bonus payments and large marketing events in Q2, the continuation or scale of which is uncertain for Q3. We don't expect any surprises on the other earnings lines. As a result, we expect Q3 EPS to have increased to EUR 0.02 (Q3’23 EUR 0.00).

We expect good revenue growth, but investments will limit the scaling of growth to profitability in 2024

Digital Workforce commented in Q2 that its early year successes with both new sales and existing customers provide a good platform for continued profitable growth for the remainder of the year. The company estimates that full-year revenue in 2024 will be higher and adjusted EBITDA will be positive and improve compared to 2023. We expect that the company’s revenue will grow by 10% and EBITDA will be 1.2 MEUR or 5% of revenue in 2024 (2023 adj. EBITDA 0.2 MEUR).