Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vitec Software Group AB (FRA:7VS, Financial) reported a 15% increase in sales for the third quarter, reaching 809 million.
- Recurring revenue increased by 17%, highlighting the company's strong focus on stable income streams.
- The company successfully completed two acquisitions during the quarter, adding Swedish Taxi and Trinergy to its portfolio.
- Vitec Software Group AB (FRA:7VS) maintains a diversified business model with operations in 12 countries and 42 business units, reducing dependency on any single market.
- The company's cash flow for the first nine months was strong, reaching 939 million compared to 727 million in the previous year.
Negative Points
- EBITA margin decreased from 34% to 31% in the third quarter, indicating pressure on profitability.
- There is a slowdown in new sales and customer investments, affecting short-term revenue growth.
- Transaction-based revenues, which have a lower gross margin, increased, impacting overall profitability.
- The company faces challenges in maintaining historical growth rates, requiring either more or larger acquisitions.
- Return on equity and return on invested capital have been declining over the past few years, partly due to increased acquisition multiples.
Q & A Highlights
Q: Are there any parts where you see a slowdown that also plays into the weaker margin?
A: No, not really a slowdown. The business units with a profile of license or service revenue have been slow all year. There's also a bit of seasonality due to holidays affecting service revenue, especially with our more European footprint now.
Q: Are there any changes in the market regarding new sales, which have been slow for some time?
A: We haven't seen an effect yet, but we are hearing positive signs from customers due to lower interest rates and energy prices. Investments might start picking up next year.
Q: Regarding price, what are you seeing in relation to KPIs linked indices as a basis for price hikes next year?
A: We have already done our price increases in Q2 and April. We will follow local CPIs for future adjustments, but we have to wait for the indices to be published.
Q: Can you share a proxy for how much Enova and Bid Theater contributed to transaction-based revenues in Q3?
A: We don't disclose that level of detail, but the difference between the long-term rate and current levels is a good proxy for their contribution.
Q: Regarding M&A, do you plan to do more acquisitions or larger ones in 2025?
A: We hope for a mix of both. We have the capacity to onboard more acquisitions without adding resources. Larger acquisitions are possible, especially in larger countries like the Netherlands and Belgium.
Q: Why do you keep some minorities in initial years for acquisitions like Trinergy and Taxi Technique?
A: It's a version of an earnout. These are high-growth companies, and we want entrepreneurs to feel part of the company. It aligns incentives between us and the sellers, who remain active in the company.
Q: Has Enova's product mix affected gross margins in Q3 as it did in Q2?
A: The mix is similar to Q2. During summer, volumes in activated energy are high, which has a lower margin. This follows seasonal patterns.
Q: Why was acquisition-related amortization flat in Q3 compared to last year?
A: It's a mechanical effect. We do reevaluations within 12 months to set the final purchase price allocation, which can cause some alterations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
