Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TeamViewer SE (TMVWY, Financial) reported a 9% year-over-year revenue increase in constant currency for Q2 2024.
- The company's adjusted EBITDA margin improved to a strong 41%, reflecting continued profitability.
- Enterprise revenue saw a significant 21% year-over-year growth in constant currency, with a net retention rate increasing to 116%.
- The Americas region experienced double-digit revenue growth, highlighting successful restructuring efforts.
- TeamViewer SE (TMVWY) extended its EUR440 million revolving credit facility by two years, showcasing confidence in its business model and strategy.
Negative Points
- The company faced a sophisticated cybersecurity attack at the end of Q2, although it was contained to the internal corporate IT environment.
- Despite overall growth, the APAC region faced considerable FX headwinds impacting revenue development.
- Subscriber churn in the SMB segment increased slightly to 50.7%, driven by mix effects and increased free-to-paid conversion activities.
- Net income decreased by 22% year-over-year due to higher income taxes, despite a 14% increase in profit before tax.
- The macroeconomic environment remains challenging, with delays in customer decision-making affecting the pipeline.
Q & A Highlights
Q: Can you elaborate on the expected backend-loaded nature of enterprise billings growth and its impact on the second half of the year?
A: We anticipate a slight acceleration of billings growth in the second half, primarily driven by enterprise. The uptick will be more pronounced in Q4, which is typically a significant quarter for enterprise deals. This expectation is based on historical trends and our current pipeline.
Q: What are your expectations for free cash flow in the second half of the year, considering the strong performance in Q2?
A: We remain confident in delivering our previously guided pretax levered free cash flow growth of around 12%. The strong Q2 performance was partly due to the revised scope of our Manchester United partnership, and we expect continued strong cash flow in the second half.
Q: Can you provide more details on the SMB churn and whether it has peaked?
A: The slight uptick in SMB churn is mainly due to tough comparisons from last year's free-to-paid campaigns. We are constantly monitoring churn and implementing measures to improve it. It's too early to say if churn has peaked, but we are actively working on it.
Q: What is driving the growth in higher-value ACV buckets? Is it mostly new wins or upsells with existing customers?
A: The growth in higher-value ACV buckets is a mix of both new wins and upsells with existing customers. We have focused on acquiring new logos, particularly through partnerships with companies like SAP, Siemens, and Microsoft, which tend to bring in larger deals. Additionally, we have successfully moved existing customers into higher-value segments.
Q: How should we think about the phasing of multiyear deals with upfront payments in Q3 and Q4?
A: Multiyear deals with upfront payments are expected to be significantly higher in Q4 compared to Q3. This is because Q4 typically sees more enterprise activity and year-end deals, where customers utilize their budgets for longer-term contracts.
Q: What was the level of free-to-paid campaign activity in H2 last year, and should we expect continued higher subscriber churn for the rest of this year?
A: Free-to-paid campaigns are more active in the first half of the year, leading to higher churn in Q1 and Q2. We expect churn to be less pronounced in the second half. Additionally, we are still dealing with the washout of the post-COVID cohort, which also impacts churn.
Q: Are you tracking whether clients who have left the platform are coming back, especially in the SMB segment?
A: Yes, we track this, and we do see customers returning after leaving the platform. This is a positive signal for our product's strength and customer satisfaction.
Q: What gives you confidence in achieving the 6% to 7% billings growth in Q3 and Q4?
A: Our confidence is based on the strong pipeline conversion in enterprise, historical trends, and the expected higher activity in Q4. We have seen consistent growth in billings from new subscribers and larger deals, which supports our outlook.
Q: How are you thinking about continuing the share buyback program, given the strong cash flow performance?
A: We will continue the buyback program as planned. We have approximately EUR30 million left in the current program and will proceed once the earnings call is completed.
Q: Can you clarify if the expected billings growth acceleration in H2 will be across both SMB and enterprise segments?
A: Yes, we expect billings growth acceleration in both SMB and enterprise segments in Q3 and Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
