CANCOM SE (XTER:COK) (H1 2024) Earnings Call Highlights: Strong Cash Flow and Share Buyback ...

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  • Revenue Growth: Increased by roughly 30% year-over-year in H1 2024.

  • EBITDA Growth: Increased by 33% year-over-year in H1 2024.

  • EBITDA Margin: Slight increase from 6.4% to 6.6% compared to H1 2023.

  • Operating Cash Flow: Positive EUR 68.6 million in H1 2024, a significant improvement from a negative EUR 79.9 million in H1 2023.

  • CapEx: EUR 12.1 million in H1 2024, aligning with a CapEx to revenue goal of 1.4%.

  • Share Buyback Program: Completed with a volume of EUR 115.6 million, representing 10% of share capital.

  • German Segment Revenue: Declined by 1.1% overall and 6.1% organically in H1 2024.

  • International Segment EBITDA Margin: Dropped from 11.1% to 7.7% due to weaker performance in Belgium.

Release Date: August 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • CANCOM SE (XTER:COK) reported a significant improvement in operating cash flow, with a positive cash flow of EUR 68.6 million in the first half of 2024 compared to a negative cash flow in the first half of 2023.

  • The company's EBITDA margin increased slightly from 6.4% to 6.6% compared with H1 2023, driven by higher services businesses.

  • The international segment showed strong growth, particularly in Austria, contributing significantly to the company's overall performance.

  • CANCOM SE (XTER:COK) successfully completed a share buyback program, utilizing EUR 115.6 million, which indicates strong financial health and shareholder value return.

  • The company maintained discipline in capital expenditures, aligning with their CapEx to revenue goal of 1.4%, showing effective cost management.

Negative Points

  • The German segment underperformed, with a 1.1% decline in overall revenue and a 6.1% organic decline, not meeting the company's expectations.

  • There was muted demand in the SMB segment and public sector businesses, particularly affecting Q2 results.

  • The Belgian business experienced slower demand and decision processes, contributing to an organic decline in the international segment.

  • Despite positive cash flow, the company typically experiences negative cash flow in the second and third quarters due to ongoing project costs.

  • The company faced challenges with top-tier customers in Germany not reaching usual seasonal demand levels, impacting overall performance.

Q & A Highlights

Q: Can you elaborate on the reasons behind the muted demand in the German segment during H1 2024? A: Rudiger Rath, CEO, explained that the muted demand was primarily due to a lack of impulse from the SMB segment and top-tier customers in Germany not reaching usual seasonal demand levels. This was exacerbated by the Lynx leak budget debate, impacting the expected demand in June.

Q: How did the international segment perform, and what were the key contributors to its growth? A: Rudiger Rath, CEO, noted that the international segment saw significant growth, driven by the acquisition of the KBC Group, now Cancom Austria. This contributed to a 30% increase in top-line growth and a 33% increase in EBITDA, despite some weaker performance in Belgium.

Q: What factors contributed to the improvement in operating cash flow? A: Thomas Stark, CFO, highlighted that the improvement in operating cash flow was driven by a reduction in accounts receivable and inventories. The company achieved a positive cash flow of EUR 68.6 million in H1 2024, compared to a negative cash flow in the same period of 2023.

Q: Can you provide details on the share buyback program and its impact? A: Thomas Stark, CFO, stated that the share buyback program was completed with a total volume of EUR 115.6 million, representing 10% of the share capital. The program was executed between July 1 and July 24, 2024, with a price per share of EUR 73.

Q: What is the outlook for the second half of 2024, given the current economic conditions? A: Rudiger Rath, CEO, expressed optimism for gradual improvement in the second half of the year. Despite low visibility, the forecast assumes growth based on realistic assumptions. Key drivers include expiring Windows 10 support, security, and network upgrades, and modernization needs in the SMB and public sectors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.