• Revenue: EUR993 million in FY24, with a like-for-like growth of 10.3%.
• Adjusted EBITDA: EUR381 million, representing a margin of 38.4%.
• Unlevered Free Cash Flow: EUR25 million in FY24.
• Net Revenue Retention Rate: 107%.
• Private Cloud Revenue: EUR624 million, up 11.8% like-for-like.
• Public Cloud Revenue: EUR183 million, up 14.2% like-for-like.
• Web Cloud & Others Revenue: EUR187 million, up 2.1% like-for-like.
• CapEx: EUR343 million, representing 35% of sales.
• Leverage: 1.8 times as of August '24.
• Share Buyback Offer: EUR350 million at EUR9 per share.

• Warning! GuruFocus has detected 7 Warning Signs with OVHFF.

Release Date: October 24, 2024

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

Positive Points

• OVH Groupe (OVHFF) delivered solid FY24 results with revenue reaching EUR993 million, exceeding their target with a 10.3% like-for-like growth.
• The company achieved an adjusted EBITDA margin of 38.4%, surpassing their goal of above 37%.
• OVH Groupe (OVHFF) generated a strong unlevered free cash flow of EUR25 million, showing significant improvement from the previous year.
• The company maintained a high net revenue retention rate of 107%, indicating strong customer loyalty.
• OVH Groupe (OVHFF) plans to offer a public share buyback of EUR350 million, providing shareholders an opportunity to monetize their investment.

Negative Points

• The macroeconomic environment in Europe remains challenging, impacting growth and leading to contract renegotiations.
• The ARPAC growth in the public cloud segment was weaker than expected due to delayed projects and optimized workloads by customers.
• The company is focusing more on margin improvement and cash generation rather than aggressive sales growth, which may limit expansion in a competitive sector.
• OVH Groupe (OVHFF) has a current data center utilization rate above 60%, indicating underutilized capacity.
• The share buyback offer price of EUR9 per share, while offering a premium, may not fully satisfy all shareholders given recent share price fluctuations.

Q & A Highlights

Q: Why has OVHcloud decided to focus more on margins and cash generation instead of sales growth? Is this strategy premature given the company's size in a competitive sector? A: Benjamin Revcolevschi, CEO, explained that OVHcloud has been investing significantly over the past decade, and the current macro environment is challenging. The strategy to focus on cash generation and margin improvement is to ensure long-term sustainability and profitability. The company aims to leverage its leadership in private cloud and domains while maintaining a conservative approach to growth, which is aligned with market position and capabilities.

Q: Do you expect an acceleration in AI-related growth in fiscal year '25, given its contribution to public cloud growth in Q4? A: Benjamin Revcolevschi, CEO, stated that OVHcloud is targeting the inference market, which has significant potential for customers using pre-trained models. The company has implemented necessary infrastructure like GPUs to support this growth and expects continued dynamics in AI to drive growth and profitability in the public cloud segment.

Q: What is the current utilization rate of OVHcloud's data centers, and how long will it take to reach optimal loading? A: Stephanie Besnier, CFO, mentioned that the current infrastructure utilization rate is above 60%. The company plans to expand or acquire new capacity when utilization approaches 90%, typically 18 months to 2 years in advance, focusing on optimizing cash generation from existing infrastructure.

Q: Are the midterm targets from the Investor Day still valid following the new FY25 guidance? A: Stephanie Besnier, CFO, confirmed that the FY25 guidance includes a growth target of 9% to 11% and an adjusted EBITDA margin of around 40%. The company aims to be free cash flow positive by FY26, with further improvements expected in adjusted EBITDA beyond FY25.

Q: Can you provide more details on the refinancing, including interest rates and timing for the new facilities and notes? A: Stephanie Besnier, CFO, explained that the refinancing includes a EUR550 million term loan with a five-year maturity and a bridge for EUR470 million, planned to be refinanced with a bond by the end of the year or early next year. The estimated average interest rate is between 5% and 5.5%.

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