Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Atea ASA (ATEAY, Financial) reported strong cash flow from operations, with an inflow of NOK665 million in Q2 2024, significantly higher than the previous year.
- The company has a strong balance sheet with a net debt-to-EBITDA ratio of effectively 0, indicating financial stability.
- Software revenue grew by 14.8% year-over-year, driven by strong growth in cloud subscriptions.
- Gross margins increased from 29.9% to 31.5% due to a higher proportion of software in the revenue mix.
- Atea ASA (ATEAY) remains on a solid long-term growth trajectory, with a compound annual growth rate of 5.1% in revenue and 9.3% in gross profit over the past two years.
Negative Points
- EBIT for Q2 2024 was NOK243 million, below expectations and down from NOK291 million last year.
- Net revenue declined by 5.5% year-over-year, primarily due to a decrease in networking hardware shipments.
- Revenue in Sweden fell by 11.1%, with a significant decline in hardware revenue due to lower networking equipment shipments.
- Services revenue fell by 1.2% year-over-year, attributed to lower demand for technical consultants.
- The company faced challenging year-over-year comparables, impacting revenue performance negatively.
Q & A Highlights
Q: How do you see the development of Copilot going forward?
A: Steinar Sonsteby, CEO: Copilot, part of the AI hype, is progressing slower than expected. We anticipated 20% of our customers would adopt it by year-end, but it will likely be closer to 10%. This slower adoption is a global trend, not specific to Atea. However, we are confident that Microsoft and partners like Atea will make Copilot a success over time.
Q: Can you provide more details on the defense spending development?
A: Steinar Sonsteby, CEO: Defense spending has increased significantly in the Baltics and Norway, with Finland also ramping up. However, Sweden and Denmark have seen a decline in spending, contrary to political statements and expectations. We view this as a delay rather than a permanent reduction.
Q: What caused the Q2 EBIT decline, and how do you plan to catch up in the second half of the year?
A: Steinar Sonsteby, CEO: The EBIT decline was primarily due to slower-than-expected order intake in Sweden. We expect to recover in the second half as the backlog has increased, and we anticipate growth resuming.
Q: Can you explain the large EBIT decline in Sweden and how you plan to address it?
A: Steinar Sonsteby, CEO: The decline is due to delayed order intake and longer evaluation periods by customers, influenced by interest rates and financial conditions. However, our win rate and backlog are strong, and we are confident in our ability to recover.
Q: What are your expectations for IFRS 15 revenue growth in the second half of 2024?
A: Robert Giori, CFO: We haven't provided firm guidance but expect stronger revenue growth returning to normal levels. We have positive growth drivers that should support this trend.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
