• Q3 Sales Growth: 7.5% increase compared to Q3 of the last fiscal year.

• Nine-Month Sales Growth: 2.9% increase over the nine-month period.

• New Business Order Entry: EUR 23 million from new customers and EUR 18 million from cross and upselling, totaling EUR 41 million in additional annual contract volume.

• Revenue Guidance: EUR 510 million to EUR 530 million for the full fiscal year.

• EBITDA Guidance: EUR 77 million to EUR 81 million for the full fiscal year.

• EBIT Guidance: EUR 43 million to EUR 46 million for the full fiscal year.

• Personnel Expenses: Increase due to investments in AI, cloud, and cybersecurity experts.

• Goodwill Increase: Due to acquisitions of CONPLUS, iT Total AG, and ISC.

• Operating Cash Flow: Solid performance despite a EUR 4 million decline in factoring volume.

• Investing Activities: EUR 27 million for acquisitions and EUR 12 million in CapEx linked to new contracts.

• Net Financial Debt to EBITDA Ratio: 2.0.

• Warning! GuruFocus has detected 5 Warning Signs with FRA:D6H.

Release Date: August 13, 2024

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

Positive Points

• Datagroup SE (FRA:D6H) reported a 7.5% sales growth in Q3 compared to the same period last fiscal year, indicating strong business performance.

• The company achieved a record year with EUR41 million in additional business, surpassing their targets for new customer and cross-selling revenues.

• Datagroup SE's CORBOX portfolio continues to provide stable, long-term contracts, contributing to predictable and stable revenue streams.

• Investments in AI and cybersecurity are already yielding results, with significant automation in IT service production and new contracts in cybersecurity.

• The company is confident in meeting its revenue guidance for the fiscal year, projecting between EUR510 million to EUR530 million in total revenue.

Negative Points

• Personnel expenses have increased due to investments in AI, cloud, and cybersecurity, impacting the EBIT margin, which is lower than the previous year.

• Rising financing costs due to higher interest rates have affected the company's financial performance.

• The company faces EUR16 million in headwinds from transformation revenues, which are being phased out.

• Goodwill and financial liabilities have increased due to recent acquisitions, impacting the balance sheet.

• The delay in revenue realization from new contracts, due to the ramp-up period, affects immediate financial performance.

Q & A Highlights

Q: Can you provide an overview of Datagroup SE's business model and its stability in challenging economic times? A: Andreas Baresel, CEO, explained that Datagroup SE is a leading German IT full-service provider focused on mid-sized companies. The company operates its CORBOX portfolio, a standardized IT service setup, which ensures stable and long-term business through contracts typically lasting two to five years. This model provides resilience even in challenging economic conditions.