Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crayon Group Holding ASA (CRAYF, Financial) reported a 14% growth in gross profit, reaching NOK1.4 billion.
- Adjusted EBITDA improved significantly, ending at NOK238 million, an increase of NOK95 million compared to the same quarter last year.
- The company upgraded its full-year adjusted EBITDA outlook to 19% to 20%, reflecting strong profitability measures.
- Working capital improved by NOK748 million from the previous year, leading to an upgraded outlook of minus 10% to minus 15%.
- Crayon Group Holding ASA (CRAYF) continues to see strong demand for software and cloud services, with an 18% growth across direct and channel sales.
Negative Points
- Consulting in the Nordics showed a cautious demand, declining by 1% year-on-year.
- The company's gross profit outlook for 2024 was revised down from 18% to 20% to 15% to 17%.
- The channel business in Europe experienced a 4% decline, negatively impacted by the Broadcom distribution model transition.
- APAC operations faced slower than anticipated volumes with Broadcom due to increased prices.
- The US market showed a soft performance in software and cloud, impacted by slower decision cycles due to the US election.
Q & A Highlights
Q: With the current growth rate at 12%, how do you anticipate a recovery in Q4 and 2025, and does this depend on market conditions improving?
A: CEO Melissa Mulholland explained that Q4 is their largest quarter, and they expect significant volume, particularly in software and cloud. They are ramping up resources in consulting due to increased pipeline and demand, which will contribute to growth in Q4 and into 2025. The market for software and cloud remains solid, while consulting is showing improvement.
Q: Regarding the Microsoft incentives, what level of headwind do you expect as EMEA incentives ramp down, and how does this affect your outlook for co-pilot adoption?
A: CEO Melissa Mulholland stated that they do not foresee a negative impact from the EMEA incentive decrease, as they focus on gross profit and margin-positive agreements. Co-pilot adoption is still in single digits of their total gross profit mix, but it is performing as expected with increasing adoption.
Q: Can you elaborate on the consulting segment's growth and the areas where you see market improvement?
A: CEO Melissa Mulholland mentioned that they are ramping up resources in consulting, particularly in the Nordics, where they have focused on resource optimization and profitability improvement. They are seeing healthy utilization and increased pipeline, which supports growth in this segment.
Q: What are the specific drivers in software and cloud for Q4 that will accelerate growth, and how does this relate to your working capital guidance?
A: CEO Melissa Mulholland highlighted that they are accelerating market share in Europe, with growth in both public and private sectors. They are expanding their business with multiple vendors, not just Microsoft. CFO Brede Huser added that the working capital guidance is based on strong year-to-date performance, and they are confident in their upgraded outlook.
Q: Regarding the shift from EMEA to CSP, how will this affect your working capital in the future?
A: CFO Brede Huser indicated that while the shift may flatten the curve, providing more visibility and less variation, it is not expected to create a headwind for working capital.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
