Release Date: November 08, 2024

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

Positive Points

• BTS Group AB (BGPBF) reported an 8% increase in group revenue and a 13% rise in EBITDA, with margin improvement from 8.4% to 9.2%.
• BTS Europe showed significant profit improvement, with EBIT tripling from 2.9% to 9.2%, driven by successful project completions and effective sales initiatives.
• BTS North America continues to secure large strategic projects, particularly in the energy, pharma, and biotech industries, with a focus on AI-driven solutions.
• The CAC acquisition in Thailand is progressing well, enhancing BTS Group AB's footprint in Southeast Asia and contributing to a 16% increase in net sales.
• The launch of AI tools and the Verity product has been successful, with a doubling of clients using BTS Group AB's bots from Q2 to Q3, indicating strong market interest and potential for growth.

Negative Points

• BTS Other Markets experienced a mixed quarter, with some regions like Southern Europe facing project delays and longer deal closure times, impacting overall performance.
• Despite growth, BTS Other Markets saw a decline in margins from 11.6% to 10.6%, partly due to lower margins from the CAC acquisition and poor performance in Italy and Spain.
• Net Mind in Spain, an acquired entity, failed to meet its earnout targets due to a tough year, resulting in profit neutrality.
• BTS North America, while showing growth, is facing a conservative market sentiment with cost control being a priority, potentially affecting future growth.
• The company's year-to-date EBIT margin is 11.4%, below the long-term target of 17%, indicating a need for continued focus on organic growth and operational efficiencies.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with BGPBF.

Q: Could you clarify the reversal of the burnout in Net Mind? Is it due to poor performance or expected performance in the acquired entity? A: The CEO explained that Net Mind in Spain had a tough year, resulting in profit neutrality. The earnout will not be met, and they are working with the founders to bring services to market and return to growth.

Q: Are you satisfied with North America's margin performance, given the flat growth despite organic growth? A: The CEO stated that North America needs higher organic growth to improve margins.

Q: What is the recruitment outlook per region, and how does it align with growth plans? A: The CEO mentioned that recruitment will focus on rapidly growing markets like the Middle East and Southeast Asia. North America remains conservative, while BTS Europe plans to increase recruitment due to strong pipeline demand.

Q: With the launch of Verity and bots, will the license share of revenue increase over time? A: Yes, the CEO expects the bots to grow quickly and become another version of simulations, potentially increasing the license share of revenue.

Q: What is the reasonable timeframe to reach the 17% EBIT margin target, given the current market conditions? A: The CEO indicated that the target was set with a long-term view of 3-7 years, aiming for gradual margin improvement. Strategic investments and automation initiatives are expected to contribute to this goal.

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