Release Date: September 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant improvement in EBITDA margin, reaching 25.8% in H1 2024.
- Adjusted operating profit increased to its highest level since 2017 at EUR 133,000.
- Operating cash before working capital increased by 7% to EUR 0.653 million.
- Successful cost reduction measures, including a 10% reduction in hosting costs.
- Strengthened balance sheet post-year-end through fundraising and new shareholder investment.
Negative Points
- Total and recurring revenue down by about 11% due to a weak recruitment market.
- 10% of customers worldwide reduced headcounts, impacting subscription revenue.
- Significant challenges in acquiring new large clients due to market conditions.
- Market conditions expected to remain tough for the remainder of 2024.
- Decrease in cash and cash equivalents, with a net outflow of EUR 153,000 in H1 2024.
Q & A Highlights
Q: A combination of geopolitical uncertainty, the direction of UK legislation and regulation, and the upcoming impact of AI on the workplace is likely to make the recruitment sector highly uncertain for the foreseeable future. How does Dillistone intend to turn this landscape to its advantage using its world-leading tools?
A: Jason Starr, CEO: We agree that the recruitment market is facing significant changes due to geopolitical and technological factors. However, we believe that as the economy recovers, the demand for new leadership and skills will increase. Our products are well-positioned to help companies navigate this new landscape, particularly with our tools designed for both temporary staffing and executive search.
Q: Given new business sales are harder to come by, do you have any additional products that you can cross-sell into the existing customer base?
A: Jason Starr, CEO: Yes, we have been developing products specifically designed to offer quick and easy returns on investment for our clients. For example, we are investing in automation and AI to reduce manual work in the contingent market. On the executive search side, we are working on AI-driven tools to assist candidates in the hiring process, which we expect to launch by the end of the year.
Q: Given the increasing regulatory focus on data security, especially in HR and recruitment, how are you ensuring that your data center platforms remain compliant with global regulations?
A: Jason Starr, CEO: Our Chief Operating Officer, along with an external consultant, ensures that we are fully compliant with GDPR and other data security regulations. We also invest heavily in the security of our platforms, conducting regular testing to protect our clients' data.
Q: If there was a significant recovery in headcount of recruitment firms and a substantial increase in subscription sales, what would the working capital impact be, and what would your priorities be for deploying that cash?
A: Jason Starr, CEO: Our high-margin products like Lantus would see most of the revenue drop straight to the bottom line, positively impacting our cash flow. Ian Mackin, CFO: We would look to invest this cash in ways that create better returns for shareholders, possibly through further product development or other strategic initiatives.
Q: What competition do you have, and are other companies in your sector taking market share from you?
A: Jason Starr, CEO: In the executive search space, we have relatively few global competitors. However, the contingent space is much more competitive with many local players. Our focus has been on the temp sector, which is more regulated and has higher barriers to entry, giving us a competitive edge.
Q: What's the catalyst to boost the recruitment market? Lower interest rates?
A: Jason Starr, CEO: Confidence is the biggest factor. Companies need confidence to hire, and candidates need confidence to change jobs. While lower interest rates could help, the overall economic and geopolitical environment will play a significant role in boosting market confidence.
Q: Is there a focus on acquiring larger clients to offset the losses from smaller clients due to market downturns? If so, what strategies are in place to attract and retain larger clients?
A: Jason Starr, CEO: While we would love to acquire larger clients, the reality is that larger companies are currently not spending. Our focus has been on new startups and smaller firms, which are more likely to invest in new technology during this period.
Q: From a route to market perspective, are there ways to increase the global opportunity, especially for Lantus, whether through marketing, language versions, or something else?
A: Jason Starr, CEO: Lantus is already being used globally, and most of our sales are done through online marketing. We are selling it in multiple regions without having salespeople on the ground, which has been effective. We expect this to improve further as the market picks up.
Q: Are there any M&A opportunities? Is diversification a possibility?
A: Jason Starr, CEO: While we have successfully made acquisitions in the past, our current focus is on managing the environment and organic growth. Given our current cash situation and the need to pay off existing loans, we are not actively pursuing M&A opportunities at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.