Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Columbus A/S (OCSE:COLUM, Financial) delivered a 9% growth in Q2 2024, amounting to DKK427 million.
- Strong performance from Cloud ERP business lines, Dynamics and M3, which make up around 75% of the total business.
- Recurring revenue increased by 13%, mainly due to the acquisition of Endless Gain last year.
- Cash flow from operating activities remained positive at DKK16 million, marking an increase of DKK12 million.
- New partnerships and extended agreements, such as with Schur and FedEx, underscore Columbus A/S's commitment to long-term client relationships.
Negative Points
- Security and digital commerce business lines did not meet expectations and experienced a decline in Q2.
- Profit before tax declined by DKK5.7 million due to extraordinary adjustments related to the acquisition of ICY Security.
- Efficiency declined from 66% last year to 63% this year, primarily due to setbacks in security and digital commerce.
- The overall business line contribution was slightly below expectations, driven mainly by underperformance in Security and Digital Commerce.
- Sweden experienced a negative development of 9%, with significant declines in Digital Commerce and Dynamics.
Q & A Highlights
Q: In Q2, did the adjusted EBITDA of DKK30 million include the positive reversal of earn-out and redundancy costs?
A: Yes, the adjusted EBITDA of DKK30 million included the positive reversal of earn-out and redundancy costs. The redundancy costs amounted to DKK9.1 million.
Q: Could you quantify the restructuring costs taken in commerce and security?
A: The redundancy costs of DKK9.1 million were taken in June and are included in the Q2 results. Approximately a little less than half of these costs pertain to the commerce and security business units.
Q: Please elaborate on the weakness in Sweden. Does this reflect the whole market, and do you see signs of recovery?
A: The investment hesitance has been more pronounced in Sweden, particularly in the retail sector, which is heavily impacted. However, we are starting to see early signs of recovery in our commerce business in Sweden, although we remain cautious.
Q: What measures have been taken to address the underperformance in the security and digital commerce business lines?
A: We have streamlined these parts of the organization, including a reduction of approximately 60 FTEs. Additionally, we have implemented a leaner management structure in digital commerce and recalibrated the management team in security.
Q: Can you provide more details on the new partnership with Schur and the extended partnership with FedEx?
A: Columbus has been chosen by Schur for comprehensive support for their Microsoft Dynamics Solution. We have also extended our 30-year partnership with FedEx through a new agreement where Columbus will play a significant role in FedEx's solution modernization program.
Q: How is the New Heights strategy progressing towards the 15% EBITDA margin by 2026?
A: The New Heights strategy aims to sustain robust top-line growth while working towards a 15% EBITDA margin by 2026. We are focusing on improving commercial excellence to boost project profitability, and we are starting to see positive results from initiatives implemented last year.
Q: What are the key financial performance indicators for the business lines?
A: Dynamics and M3 are performing well with growth of 17% and 10%, respectively. Data and AI showed an 18% growth, and customer experience and engagement grew by 50%. However, digital commerce and security experienced negative growth, and measures have been taken to address this.
Q: How is the recurring revenue performing?
A: Recurring revenue increased by 13%, mainly due to the acquisition of Endless Gain last year. It now constitutes 14% of our total business, up from 13% in the same quarter last year.
Q: What is the outlook for the rest of 2024?
A: Based on the financial performance in Q1 and Q2 and the current order book and pipeline forecast, our full-year guidance for 2024 is an organic growth of 8% to 10% and an EBITDA margin of 9% to 10%. However, this outlook is subject to general market uncertainties.
Q: How is the performance in different markets?
A: Denmark continues to grow fast, driven by Dynamics. The UK is also performing well with a 43% growth. Sweden faces challenges, particularly in the retail sector. Norway shows slight improvement, and the US market is stabilizing with slight growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
