Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LINK Mobility Group Holding ASA (LMGHF, Financial) reported strong quarterly growth, with revenue reaching NOK1.8 billion, marking a 17% organic growth in fixed currency.
- The company has a sticky and scalable business model with a low revenue churn rate below 2% and a net retention rate of approximately 110%.
- LINK Mobility Group Holding ASA (LMGHF) has a significant contract backlog, which has increased from mid NOK20 million to around NOK40 million per quarter since the beginning of 2023.
- The company closed the acquisition of easy for you, a Portuguese messaging company, expanding its market share in Portugal.
- LINK Mobility Group Holding ASA (LMGHF) has a strong cash position with NOK2.5 billion in reserves, which will be used for acquisitions and bond repayments.
Negative Points
- Global Messaging segment experienced higher churn, with a total churn rate increasing to 2.9%, attributed to a client ceasing to use their services.
- The company reported a negative free cash flow of NOK16 million for the quarter, impacted by working capital build and higher taxes paid.
- Gross profit growth in the Global Messaging segment was lower at 4% in fixed currency, affected by customer mix effects.
- The enterprise segment experienced a slight decline in margins due to high volumes from a low-margin customer in Central Europe.
- Q3 is expected to have lower new contract wins due to summer vacations affecting business operations in the Nordics and Southern Europe.
Q & A Highlights
Q: Looking at the churn, it's stable for enterprise but Total Churn increasing to 2.9% relates to Global Messaging. Could you give some flavor on the trend here? Do you expect the churn to increase additional from the Global Messaging customer base?
A: The churn on Global Messaging is normally quite low but can be more volatile depending on customer usage. The elevated churn in the current quarter is due to one client stopping usage, driven by Link's decision to end the business. This trend is expected to continue for the next few quarters as the customer base stabilizes. - Thomas Berge, CEO
Q: Given the election and Olympic Games in France, was there any particular traffic boosting the results in Western Europe in the second-quarter?
A: In France, we have some agreements related to these events, but we don't expect them to have a material impact. There will be some value related to both events. - Unidentified Company Representative
Q: Can you explain the extraordinary low margin traffic related to Central Europe with a larger enterprise customer?
A: This is related to a large client in the retail industry and is campaign-related. They drove a significant volume of traffic during the second-quarter. The exact campaign activity for the third-quarter is not yet known. - Thomas Berge, CEO
Q: Q2 has historically been a good cash flow quarter, supported by working capital. In Q2 '24, changes in working capital contribution were negative. Can you give more details on this and is it expected to rebound in Q3?
A: We expect working capital to have a neutral impact over time. The second-quarter saw an unfavorable cutoff for receivables, leading to a working capital buildup. We expect it to normalize over the next two quarters. - Thomas Berge, CEO
Q: What is the probability that you will start to support RCS for EZ4U in the second half of 2024 or beginning of 2025?
A: The probability is very high based on current information. The exact mobile operators involved in the first tranche are not yet confirmed, but we expect Apple to start supporting RCS in Europe by the end of 2024. - Thomas Berge, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
