Axtel SAB de CV (STU:4GK) Q2 2024 Earnings Call Highlights: Strong Growth in Enterprise and ...

GuruFocus News
4 min read

In This Article:

  • Revenue: Increased 4% year-over-year in the second quarter.

  • Enterprise Segment Revenue: Increased 7%, driven by a 15% increase in digital transformation and value-added services.

  • Government Segment Revenue: Increased 9% in the second quarter.

  • EBITDA: Increased 8% to MXN824 million compared to the second quarter of 2023.

  • Net Debt to EBITDA Ratio: Improved to 2.6 times from 3.5 times a year ago.

  • Cash Flow: Positive $24 million in the second quarter.

  • CapEx: $18 million in the second quarter, down from $21 million in the same period last year.

  • Cash Balance: $67 million at the end of the second quarter.

  • Digital Transformation Revenue: Supported by a 24% increase in cloud and cybersecurity services.

  • Contribution Margin: Remained unchanged at 73% year-over-year but declined 200 basis points sequentially.

Release Date: July 19, 2024

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

Positive Points

  • Revenues and EBITDA increased year-over-year and sequentially, with a 4% revenue increase and an 8% EBITDA increase.

  • Enterprise and government segments showed strong growth, with revenues increasing by 7% and 9% respectively.

  • Cybersecurity, cloud, and Systems Integration Services EBITDA increased by 49% compared to the second quarter of last year.

  • Axtel received recognition as the top growth partner in Latin America for sales of data protection and resiliency solutions.

  • The company is on track to meet its net leverage ratio target of 2.5 times by year-end, with a current ratio of 2.6 times.

Negative Points

  • Termination of services related to the 2019 mass-market divestment impacted second quarter results, contributing to a decline in wholesale revenues.

  • Revenues from the wholesale infrastructure segment decreased by 8% year-over-year, affected by a 65% decline in continuity services.

  • Legacy voice revenues declined by 4% in the enterprise segment, representing 8% of enterprise segment revenues.

  • The company is not yet seeing an active pipeline of fiber to the tower projects from 5G deployments.

  • Contribution margin declined by 200 basis points sequentially due to contraction in nonrecurring revenues.

Q & A Highlights

Q: Do you still confirm the EBITDA guidance for the year? A: Yes, we confirm our guidance in terms of EBITDA. We expect an improving second semester, particularly driven by enterprise and government segments, with a richer pipeline of contracts and projects.

Q: What net leverage ratio do you expect by year-end? A: We recorded 2.6 times in June and expect to be around our target of 2.5 times by December, depending on the exchange rate stability.

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