- Revenue: SEK 1.3 billion, an increase of 5.8% (5.5% organically).
- System Sales: Up 8.2% (7.8% organically).
- Services Business: Increased by 3.1% (2.9% organically).
- Annualized Recurring Revenue: SEK 1.8 billion, an increase of 5.4% compared to Q2 2023.
- New Cloud Service Contracts: SEK 134 million, up from SEK 116 million last year.
- Adjusted EBITA: SEK 97 million, an increase of 19% compared to the same period last year.
- Gross Margin: Improved from nearly 23% last year to slightly above 25% this year.
- EBITA Margin: Increased to 7.6% from 6.8% last year.
- Net Cash Position: SEK 122 million compared to SEK 80 million at year end.
- Cash Flow from Operating Activities: SEK 130 million.
- Total Cash Flow: SEK 15 million compared to minus SEK 78 million last year.
- Nordic and Baltics Revenue: SEK 649 million, flat in the quarter.
- Nordic and Baltics EBITA: Increased by 2.7% to SEK 58 million, EBITA margin of 8.9%.
- UK Revenue: SEK 178 million, organic decrease of 4.7%.
- UK EBITA: Increased to SEK 12 million, EBITA margin of 6.9%.
- West Revenue: SEK 205 million, small organic decline of 0.7%.
- West EBITA: Increased to SEK 7 million, EBITA margin of 3.4%.
- Central Revenue: SEK 265 million, organic growth of 42%.
- Central EBITA: SEK 18 million, EBITA margin of 6.6%.
- Organic Growth: 5.5%, slightly above the long-term target of 5%.
- Return on Capital Employed: 20.6% for the last 12 months.
Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Proact IT Group AB (STU:PIU0, Financial) reported a solid growth in Q2 2024, with revenue increasing by almost 6% to SEK1.3 billion.
- The company saw a significant improvement in EBITA, which increased by nearly 19% compared to the previous year.
- Annualized recurring revenues grew by 5.4%, indicating a stable and growing stream of income.
- Proact IT Group AB (STU:PIU0) has initiated a new share buyback program, reflecting confidence in its financial stability.
- The company continues to see strong demand for its cloud services and cybersecurity offerings, positioning it well in a growing market.
Negative Points
- The UK market showed a decrease in revenue by 4.7% organically, attributed to longer sales cycles and slower systems business.
- Consulting and professional services growth was weaker than expected, particularly in the UK and West regions.
- The company faces challenges in staffing and recruitment, which has impacted its ability to capitalize on market opportunities.
- Despite overall growth, the services business only increased by 3.1%, indicating slower growth compared to system sales.
- The macroeconomic environment remains uncertain, which could impact future growth and demand for Proact IT Group AB (STU:PIU0)'s services.
Q & A Highlights
Q: The gross margin was strong in Q1 and again in Q2 at about 25%. Should we expect a slightly higher gross margin in the coming quarters?
A: Gross margin is good, driven by improvements in our services business and good margins on the systems business. While systems business margins are more volatile, we are pleased to show high and consistent gross margins in both areas for two consecutive quarters. (Jonas Hasselberg, CEO)
Q: What type of cybersecurity services or products are most demanded by customers, and how could this affect profitability?
A: Customers are increasingly realizing the need for disaster recovery protection, including multiple backup solutions and clean room services. Protective services like monitoring and incident response are also in demand. This shift towards disaster recovery services is picking up and could positively impact profitability. (Jonas Hasselberg, CEO)
Q: Regarding cybersecurity revenues, how much is from proprietary solutions versus third-party products?
A: We don't share specific numbers, but it's a good mix of our products and services combined with the expertise of our engineers. The significant portion of our cybersecurity revenue comes from our expertise. (Jonas Hasselberg, CEO)
Q: The growth in service revenues was weaker than expected, particularly in consulting services. What areas or geographies saw slower growth?
A: Slower growth was seen in the UK due to slow systems business last year and in West due to recruitment challenges. The market for peer services is still good, but we need to find enough staffing to cover the opportunities. (Jonas Hasselberg, CEO)
Q: Which regions have shown the strongest improvement in demand during 2024?
A: Germany has picked up, and the UK is also improving. However, the UK remains the weakest due to factors like elections and the lingering effects of Brexit. Overall, we are bullish about the UK, but it shows less growth compared to other regions. (Jonas Hasselberg, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
