Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IONOS Group SE (WBO:IOS, Financial) achieved a revenue increase of 7.8% for the first nine months of 2024, driven by effective cross and upselling, price adjustments, and new customer acquisitions.
- The company's adjusted EBITDA margin stands at 29.3%, showcasing high profitability levels.
- IONOS Group SE's customer base grew by 170,000 compared to the same period in 2023, reaching 6.3 million customers.
- The web presence and productivity business, excluding aftermarket, achieved impressive growth of 12.3% year over year in Q3 2024.
- The cloud solutions business experienced a revenue growth of 11% year over year for the first nine months, with expectations for further growth in Q4.
Negative Points
- The aftermarket business operates at a lower margin compared to other segments, with a trailing 12-month average EBITDA margin of around 14%.
- The cloud solutions business experienced a deceleration in Q3 2024, influenced by slower demand and adjustments in the product portfolio.
- The company's churn rate increased slightly to 14%, driven by price adjustments.
- The aftermarket business experienced lower revenue levels, impacting EBITDA by approximately EUR10 million compared to the previous year.
- There is uncertainty regarding the impact of the German federal budget on future federal contracts in the cloud business.
Q & A Highlights
Q: Can you discuss the assumptions behind the 13% growth guidance for cloud solutions in Q4, and provide an update on the ITZBund contract?
A: Britta Schmidt, CFO, explained that the growth is expected to be driven by the ITZBund contract, which is progressing well. The company is building the first blocks in close connection with the customer, which will contribute to Q4 results. The aftermarket business is also on a positive trajectory, with expectations to be flat year-over-year.
Q: With the revised CapEx guidance, have your growth targets for the cloud business changed? Also, how might the German political environment impact future federal contracts?
A: The reduction in CapEx is due to efficiencies, not a change in growth targets. The company remains committed to investing in cloud solutions. Regarding the political environment, there is slight uncertainty due to the federal budget, but confidence remains in the ITZBund contract. Other federal investments might slow down until the budget is confirmed.
Q: Do you foresee macroeconomic weaknesses affecting cloud solutions growth in 2025, and are you targeting AI startups with NVIDIA GPUs?
A: The company remains confident in its cloud solutions offerings and does not expect significant slowdown. They are targeting growth in the SMB sector and offer NVIDIA chips for AI startups, focusing on providing products that support AI usage rather than training.
Q: How does the deprioritization of managed services affect cloud solutions' margin targets, and has churn increased due to macro factors or price increases?
A: Managed services had low margins, so deprioritizing them does not impact margin targets. The slight increase in churn to 14% is primarily due to price increases, not macro factors. The company anticipates churn to normalize as price adjustments stabilize.
Q: With the revised cloud solutions growth guidance, what role does the ITZBund contract play, and how have political events affected customer additions?
A: The ITZBund contract is a significant driver for Q4 growth, with expectations of strong acceleration. Political events have not significantly impacted customer additions, as the business model is resilient. The focus remains on supporting digitalization, which is increasingly recognized in Europe.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
