Release Date: November 08, 2024

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

Positive Points

• Bechtle AG (BECTY) achieved international growth of 10.7%, with organic growth at a strong 8.8%.
• The company reported a positive cash flow from operating activities, amounting to nearly EUR290 million from January to September.
• Bechtle AG (BECTY) successfully reduced inventories and improved receivables management, contributing to cash flow optimization.
• The company expanded its workforce by 5.2% year-on-year, with a significant portion of new employees joining through acquisitions.
• Bechtle AG (BECTY) made strategic acquisitions, including Qualcomm and DriveWorks in the UK, enhancing its market position and service offerings.

Negative Points

• Bechtle AG (BECTY) had to adjust its guidance twice in the year due to extraordinary circumstances, indicating challenges in meeting expectations.
• The company experienced a decline in business volume by 1.1% in Q3, with organic terms showing a decrease of 1.9%.
• There was a significant cost pressure from increased personnel and operating expenses, including higher vehicle costs.
• EBIT remained under pressure due to rising costs and a lack of top-line growth, impacting manufacturer bonuses and other operating income.
• The business volume in Germany fell by 8%, attributed to a high benchmark from the previous year and a challenging economic situation.

Q & A Highlights

• Warning! GuruFocus has detected 2 Warning Sign with BECTY.

Q: Can you elaborate on the reasons behind the two guidance adjustments this year? A: Unidentified Company Representative: The adjustments were due to extraordinary circumstances, including a lack of demand momentum from key customer groups, particularly in the SME sector in Germany and France, and increased cost pressures from personnel and operating expenses. These factors made it necessary to revise our guidance twice this year.

Q: How did the business volume and revenue develop in Q3, and what were the regional differences? A: Unidentified Company Representative: Business volume declined by 1.1% overall, with a significant drop in Germany due to a high benchmark from a large software project last year. However, international growth was strong at 10.7%. Revenue increased by 2.2%, mainly due to IFRS 15 adjustments.

Q: What are the main factors affecting EBIT in the third quarter? A: Unidentified Company Representative: EBIT was under pressure due to increased personnel and operating costs, higher depreciation from IT investments, and not meeting manufacturer bonus targets due to lack of top-line growth. Additionally, there was a decline in other operating income.

Q: Can you discuss the cash flow performance and any measures taken to optimize it? A: Unidentified Company Representative: Cash flow from operating activities was nearly EUR290 million, showing a positive trend. We have successfully reduced inventories and improved receivables management, contributing to this performance.

Q: What are the strategic focuses for Bechtle's M&A activities? A: Unidentified Company Representative: Our M&A strategy focuses on internationalization and strengthening our market position. Recent acquisitions include Qualcomm in the UK and SIG System Informations in Germany, enhancing our capabilities in digital workplace solutions, IT security, and cloud services.

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