Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arribatec Group ASA (OSL:ARR, Financial) achieved record high revenue of NOK150.1 million in the second quarter.
- The company signed a significant NOK73 million agreement with EEAS for support improvement and cloud migration, expected to positively impact future revenue and EBITDA.
- Recurring revenue increased by 19% compared to the same quarter last year, now accounting for 43% of total revenue.
- The cloud segment experienced a record quarter with a 12% increase in revenue year-over-year.
- Arribatec Group ASA expanded its global presence, now operating 17 offices in 11 countries, serving 1,700 clients.
Negative Points
- Adjusted EBITDA decreased to NOK3.4 million from NOK8.4 million a year ago, with clean EBITDA just above breakeven.
- Cash reserves decreased to NOK30 million from NOK39 million due to a large VAT payment.
- Revenue in Continental Europe and the UK decreased compared to the previous year.
- The EA-BPM segment experienced a 5% revenue decline and had to temporarily lay off staff due to project losses.
- The marine segment saw a 23% revenue decline due to reduced new ship deliveries.
Q & A Highlights
Q: How is the rollout of kiosks in hotels progressing, especially after the agreement with a large Norwegian hotel chain?
A: Geir Johansen, CEO: Signing with a hotel chain doesn't mean immediate rollout across all hotels. Typically, they test in a few locations before a broader rollout. Partner hotels within chains may also have autonomy over adopting new technology, which can delay implementation.
Q: Should we expect the elevated cost of goods sold (COGS) to continue, or is the increase in hardware sales temporary?
A: Geir Johansen, CEO: The high hardware sales this quarter, mainly due to an NOK8 million delivery to Flytoget, are expected to decrease. Most hardware sales are typically from cloud services, and we anticipate a return to normal levels.
Q: With declining revenue in business services for four quarters, can we expect improvement in 2024?
A: Geir Johansen, CEO: Yes, we expect an increase due to the EU project worth NOK74 million over four years, and two large ERP installations and cloud migrations in Norway. Additionally, we have signed 20 agreements for Unit4 cloud migration, with more expected in 2024.
Q: Is the entire Flytoget contract revenue recognized now, and will there be recurring revenue?
A: Geir Johansen, CEO: Some work remains, with final delivery expected in November. There will be recurring revenue as we manage the Flytoget installation, which includes monthly payments.
Q: What are your thoughts on liquidity and the potential need for external financing?
A: Geir Johansen, CEO: We have an existing agreement with Danske Bank and maintain a good dialogue with them. We expect liquidity to improve by the end of the year, anticipating a strong Q3.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
