Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SoftwareONE Holding AG (SWONF, Financial) delivered solid results with 7% growth in H1 2024, despite macroeconomic uncertainties.
- The company successfully launched a transformed go-to-market model in key markets, targeting the underserved SME segment.
- Adjusted EBITDA grew by over 11%, with a margin of 23%, reflecting a focus on profitable growth.
- The operational excellence program exceeded initial targets, resulting in significant cost savings and productivity improvements.
- Strong regional performance in APAC and NORAM, with growth rates of over 10% and 15% respectively, driven by large customer wins.
Negative Points
- The macroeconomic environment continues to affect clients' purchasing behavior, particularly in the DACH region.
- Public sector application services business in Colombia was impacted by a change in government, leading to revised revenue guidance.
- SG&A expenses increased by 13% in H1, largely offsetting productivity improvements.
- Foreign exchange fluctuations had a negative impact on revenue, reducing it by 2.4 percentage points in H1.
- Net debt position increased to CHF208.7 million as of June 30, 2024, due to outflows including M&A, dividends, and restructuring expenses.
Q & A Highlights
Q: Can you provide more details on the potential going private transaction and the challenging environment mentioned?
A: Brian Duffy, CEO: The transaction committee, made up of independent board members, is committed to completing everything in a timely manner. Updates will be provided when necessary. The challenging environment reflects the current business conditions.
Q: Can you elaborate on the one-off item in the Q2 margins and its impact on H2?
A: Rodolfo Savitzky, CFO: The one-off item is primarily related to legal cases in emerging markets like Africa and China. We do not expect this to recur in the second half. We anticipate an acceleration of revenue growth and improved sales force productivity in H2.
Q: What is driving the revised revenue guidance and how do you see the macroeconomic environment affecting your business?
A: Brian Duffy, CEO: The revised guidance is due to a slowdown in customer buying decisions in DACH and the impact of a government change in Colombia affecting our application services business. However, we are confident in our pipeline progression and expect strong performance in DACH in Q3.
Q: Why has the services segment decelerated, and is it due to macroeconomic factors or market share issues?
A: Brian Duffy, CEO: The deceleration is specifically tied to our application services business in Colombia due to a government change, not a broader macroeconomic issue or market share loss.
Q: Can you discuss the market share and adoption rate of Copilot, and whether the 15% adoption rate target is still conservative?
A: Brian Duffy, CEO: We are happy with the progress, having reached 600,000 users. If the acceleration continues, we may revise our 15% adoption rate target. Copilot offers significant ROI for customers, and we expect its momentum to continue.
Q: What is driving the 5% growth dynamic in your Microsoft business, and is it sustainable?
A: Rodolfo Savitzky, CFO: Microsoft billings grew by 8%, driven by subscription-based services like CSP. While not all billings translated into revenue growth, the development is healthy and in line with our plan.
Q: What are your expectations for net working capital development in the second half of the year?
A: Rodolfo Savitzky, CFO: Net working capital is cyclical. We expect a similar level in December 2024 as in December 2023, where we had a negative net working capital.
Q: Can you provide guidance on go-to-market restructuring expenses for the full year?
A: Rodolfo Savitzky, CFO: We expect a similar level of expenses in H2 as in H1, with a shift in the mix. The focus is on growing market share and wallet share, and we are already seeing a payoff in our investments.
Q: Why is the go-private transaction taking longer than expected?
A: Brian Duffy, CEO: The new Board joined in April, and the transaction committee was established in May. The Board received interest from May through June, and discussions are ongoing. The timeline is reasonable, and updates will be provided when available.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
