- Revenue: Increased 17.6% to $130.5 million in Q3 2024 from $111 million in Q3 2023.
- Revenue (Nine-Month Period): Increased 13.9% to $376.8 million from $330.9 million last year.
- Recurring Revenue: Grew 22.8% to $88.8 million in Q3 2024, representing 68.1% of total revenue.
- Recurring Revenue (Nine-Month Period): Increased to $258.4 million from $210.4 million in the prior period, a 22.8% increase.
- Results from Operating Activities: Increased to $34.3 million from $30.9 million in Q3 2023.
- Results from Operating Activities (Nine-Month Period): Increased to $100.4 million from $86.4 million in the prior period.
- Net Income: Increased to $20.6 million from $17.6 million in Q3 2023.
- Net Income (Nine-Month Period): Increased to $58.7 million from $47.1 million last year.
- Adjusted EBITDA: Increased to $37.7 million from $33.4 million, achieving a 28.9% margin.
- Adjusted EBITDA (Nine-Month Period): Increased to $108.2 million from $95.9 million, a 12.8% increase.
- Cash Flow from Operating Activities: $37.4 million compared to $35.5 million in the prior quarter.
- Cash Flow from Operating Activities (Nine-Month Period): $111.5 million compared to $97 million in the comparable period.
- Cash, Cash Equivalents, and Short-Term Investments: Reached $258.7 million as of July 31, 2024.
- Dividend: Quarterly dividend of $0.26 per common share payable on November 29, 2024.
- Professional Services Revenue: Increased 14% to $18 million from last year.
- Acquisitions: $43.4 million spent on acquisitions in fiscal 2024, including $30.8 million on SeaChange.
Release Date: September 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 17.6% to $130.5 million in Q3 2024 compared to Q3 2023.
- Recurring revenue grew by 22.8% to $88.8 million, representing 68.1% of total revenue.
- Net income rose to $20.6 million from $17.6 million in Q3 2023.
- Adjusted EBITDA increased by 12.9% to $37.7 million, achieving a 28.9% margin.
- Cash, cash equivalents, and short-term investments reached near record highs at $258.7 million.
Negative Points
- Decline in software licenses revenue due to decreased demand for on-prem software.
- SaaS revenue, while growing, is less profitable compared to traditional revenue streams.
- Integration of SeaChange acquisition not yet at standard profitability levels.
- Increased R&D expenses due to acquisitions, SaaS, and AI initiatives.
- Competitors facing financial difficulties, indicating a challenging industry environment.
Q & A Highlights
Q: Your MD&A states that the decline in software licenses revenue is due to a decrease in demand for on-prem software. Can you provide details on the major drivers behind that?
A: Vincent Mifsud, President: It's mainly driven by our choice strategy and offering customers the ability to stand up either their own SaaS or use our SaaS platform. This shift is the primary reason for the decrease in demand for on-prem software.
Q: Is there any impact from increased churn or pricing pressure affecting the decline in software licenses?
A: Stephen Sadler, CEO: Churn is about the same as it has always been. There is some churn from maintenance to SaaS or licenses going to SaaS. Pricing pressure is not too bad for us because we focus on profitable growth and sales.
Q: The filings state that R&D expenses are up due to acquisitions, SaaS, and AI. Can you quantify how much of the increased R&D is due to SaaS and AI?
A: Stephen Sadler, CEO: The increase is significant even without SaaS and AI. The addition of SeaChange also contributes to this. It takes time to streamline R&D costs post-acquisition.
Q: On the integration of SeaChange, when do you expect it to operate at standard levels of profitability?
A: Stephen Sadler, CEO: It usually takes about two to three quarters to reach full EBITDA margin levels. The first quarter is generally negative, the second quarter is flat, and by the third quarter, we are halfway to our normal margins.
Q: Have the difficulties in integrating MediaSite, which went into bankruptcy post-acquisition, been resolved?
A: Stephen Sadler, CEO: MediaSite is operating close to standard levels, but not quite there yet. Most issues have been resolved, with a few remaining.
Q: The tone on the organic business sounds more positive. Is this due to an improvement in the external environment or traction from investments?
A: Stephen Sadler, CEO: The improvement is due to better execution and our choice strategy. Our competitors are struggling with debt and unprofitable revenue, which benefits us.
Q: Is the choice strategy fully implemented across all product lines?
A: Vincent Mifsud, President: For products we've had for 12-18 months, yes. For new acquisitions, it takes some R&D efforts to enable choice.
Q: Why not more aggressively use cash for share buybacks given the stock's low valuation?
A: Stephen Sadler, CEO: It might be a good idea. We always consider the best allocation for capital. If the stock remains low, we may buy back more shares.
Q: What are the challenges in closing M&A deals despite having cash?
A: Stephen Sadler, CEO: Valuations are still high, and many companies have a lot of debt. We are not keen on taking on their debt, which makes deals take longer to close.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
