Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NowVertical Group Inc (NOWVF, Financial) achieved a significant milestone with an EBITDA of $2 million, marking a 19% EBITDA margin, which is considered best in class within the industry.
- The company reported a 9% year-over-year revenue growth, reaching $10.7 million for Q3 2024, despite focusing primarily on improving EBITDA and operating income.
- NowVertical Group Inc (NOWVF) has successfully reduced its acquisition-related liabilities by 31%, resulting in potential cash savings of approximately $7.4 million.
- The company has secured 94% of its revenue against its 2023 revenue by the end of Q3, demonstrating strong client retention and strategic account growth.
- NowVertical Group Inc (NOWVF) has integrated its business into two main markets, Latin America and North America, with 80% of its revenue coming from strategic accounts, indicating a strong and valuable client base.
Negative Points
- The company is still in the process of completing its integration efforts in Latin America, with about 20-25% of the integration remaining.
- Despite the positive financial metrics, the company has faced challenges with its share price, which has been on a downward trend, raising concerns among investors.
- There is a need for improved communication with the investor community, as acknowledged by the management, to better convey the company's strategic changes and progress.
- The focus on organic growth means that there are currently no plans for inorganic growth or acquisitions, which could limit expansion opportunities in the short term.
- The company is still working on demonstrating consistent revenue growth, with a stronger focus expected in 2025, indicating that current growth may not yet be at its full potential.
Q & A Highlights
Q: What level of interest is NowVertical seeing in its recently announced solution offerings?
A: CEO Sandeep Mandi Rata mentioned that while they are seeing some traction, they are cautious about being overly optimistic. They have combined products and services to offer solutions, such as in the healthcare sector, where they helped a client reduce data risk by over $7 million. They are also seeing success in selling higher-value solutions, like a $750,000 contract in financial forecasting, which was won against a Big Four firm.
Q: How much of the success in core BI can be attributed to the new global delivery model?
A: CEO Sandeep Mandi Rata explained that Argentina has a mature delivery model with capabilities in various technologies. They are leveraging these capabilities to expand into other regions, such as Brazil, North America, and the UK. While the integration is beginning to show results, it is not yet significant enough to report separately.
Q: Can you provide more insight into the revenue momentum going forward?
A: CEO Sandeep Mandi Rata stated that while the focus has been on profitability and sustainable growth, they have still seen revenue growth. With the foundation now in place, they expect to demonstrate accelerated revenue growth in 2025 as they continue to integrate the business.
Q: Has the integration in Latin America been completed as planned?
A: CEO Sandeep Mandi Rata confirmed that the integration is progressing well, with significant restructuring already completed. They are about 20-25% away from full integration, with the expectation to demonstrate results in 2025.
Q: What are NowVertical's competitive advantages, and are the margins sustainable with high growth rates?
A: CEO Sandeep Mandi Rata emphasized the balance between growth and margins. They are focused on sustainable margin improvements while planning for growth. The strategy includes leveraging strategic accounts and high-value solutions to drive growth while maintaining sustainable margins.
Q: Is there a focus on organic growth over acquisitions in the near term?
A: CEO Sandeep Mandi Rata stated that the current focus is on organic growth and sustainable business practices. Acquisitions are not a priority at this time, as they could distract from the momentum gained in organic growth.
Q: What is the probability of receiving the earnout from the sale of Allegion?
A: CEO Sandeep Mandi Rata expressed confidence in receiving the earnout, stating that Allegion is a robust business and they are tracking its progress to ensure the earnout is realized.
Q: Are there any plans to instate a share buyback given the recent share price trends?
A: CEO Sandeep Mandi Rata noted that while the share price has been on an upward trend recently, the focus remains on improving business fundamentals rather than on share buybacks. The management team is committed to driving the stock price through strong business performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
