Q3 Trading Update
28/02/2023 07:00
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RNS Number : 2091R Softline Holding PLC 28 February 2023
Noventiq Holdings plc
(the "Company")
Noventiq announces strong results for Q3 FY2022, including 45% turnover growth
and 75% gross profit growth
28 February 2023, London, UK - Noventiq (LSE:SFTL), the global digital
transformation and cybersecurity solutions and services provider, announces
unaudited key operating highlights for the third quarter of FY2022.
Q3 FY2022 BUSINESS HIGHLIGHTS
· Q3 2022 turnover was $398.8M, an increase of 45% in USD, and 57% in
constant currency. For the 9 months to 31 December 2022 turnover was
$1,089.9M, an increase of 37% in USD, and 49% in constant currency. Q3 YTD
FY2022 turnover was close to the level of turnover delivered for the whole of
the prior year FY2021
· Q3 2022 gross profit was $71.4M, an increase of 75% in USD, and 82%
in constant currency. For the 9 months to 31 December 2022 gross profit was
$167.2M, an increase of 65% in USD, and 73% in constant currency
· Broad based geographic growth, with double-digit growth in all 4
regions, including strength in India
· Services turnover growth in USD of 197% in Q3, driving 54% share of
gross profit Q3 YTD
· Hardware turnover in Q3 grew 376% year-over-year
· Recurring turnover was 69% Q3 YTD, up from 57% Q3 YTD last year
· Destination for talent, with nearly 5,900 people, up 127%
year-over-year overall, and up 177% in Services. Inline with the company's
equality and diversity commitment, with Noventiq organic operations in
emerging markets showing 144% growth in women hiring compared to FY2021
· Enhancing Microsoft capabilities and expanding in existing and new
geographies
· Investment in growth based on capabilities related to key vendors
including AWS, Apple, Google
· Continued investment and execution of M&A strategy with 3
transactions announced in Q3, and 7 transactions signed in FY2022 enhancing
skills, capabilities and geographic presence
· Expanded geographic footprint, establishing presence in 8 new
countries YTD
Sergey Chernovolenko, Global CEO at Noventiq, said:
"I would like to thank our 5,900 talented professionals at Noventiq for their
continued dedication and focus on delivering for our customers. I am very
pleased with the strong business results again this quarter, and the fact that
we are increasing all elements of our business outlook for FY2022. I feel good
about how we are positioned and how we have delivered on our strategy, while
also continuing to invest and transform our business for long term profitable
growth. I am proud to have overseen the important corporate actions we have
taken since the completion of our strategic review last July. We successfully
navigated a complicated process of demerger, safeguarding and strengthening
the Noventiq business. I now look forward to supporting Herve in his new role,
as I focus on the continuation of our business growth trajectory as President
and COO of Noventiq."
Jacques Guers, Chairman of the Board of Directors at Noventiq, noted:
"We have been engaged in a process of evaluating long-term options with the
aim to ensure greater value, certainty, and liquidity to shareholders. Over
the past few weeks, we have made a number of important announcements,
representing significant developments for our company, and being substantial
steps towards our objective to realise the true fundamental value of Noventiq
for all of our stakeholders. The leadership changes we have announced today
will also reflect a seamless transition towards this objective. I want to
thank Sergey for his incredible leadership during a pivotal moment of our
history, and I am thrilled that we will continue to benefit from his deep
experience as we move forward. Hervé brings decades of international
experience in U.S. publicly traded corporations, and with his deep expertise,
energy and ambition, I am very pleased to see him lead this next stage of our
transformation."
Hervé Tessler, President & COO at Noventiq, noted:
"I am honoured to have been selected to lead the company at such a crucial
time. We have a strong foundation for growth, and the right recipe for
success. I have worked closely with Sergey and the team since I joined the
company nearly a year ago, to accelerate our growth trajectory, and to ensure
we are well placed to capitalise on the vast opportunities ahead of us. I am
very much looking forward to working with our talented leadership team to
deliver on the next phase of our incredible growth story."
Key financials
Q3 YTD 2022* Q3 YTD 2021 % Q3 2022 Q3 2021 %
Turnover ($ '000) 1 089 875 796 964 37% 398 786 274 423 45%
Recurring turnover % 69% 57% 62% 50%
Turnover by business line ($ '000)
Q3 YTD 2022* Q3 YTD 2021 % Q3 2022 Q3 2021 %
Software & Cloud 900 595 725 888 24% 304 177 247 339 23%
IT Services 118 345 49 651 138% 57 001 19 186 197%
Hardware 70 936 21 425 231% 37 608 7 898 376%
Q3 YTD 2022* Q3 YTD 2021 % Q3 2022 Q3 2021 %
Gross profit ($ '000) 167 218 101 573 65% 71 417 40 813 75%
Gross profit by business line ($'000)
Q3 YTD 2022* Q3 YTD 2021 % Q3 2022 Q3 2021 %
Software & Cloud 63 635 57 229 11% 27 561 22 470 23%
IT Services 91 056 40 942 122% 39 339 16 908 133%
Hardware 12 527 3 402 268% 4 518 1 435 215%
Turnover by region ($ '000)
Q3 YTD 2022* Q3 YTD 2021 % Q3 2022 Q3 2021 %
APAC 537 254 395 596 36% 158 159 109 874 44%
EMEA 253 196 138 511 83% 128 038 63 636 101%
RoE** 121 003 115 310 5% 59 418 52 877 12%
LATAM 178 423 147 547 21% 53 172 48 036 11%
Reported growth
*9 Months ended 31 December 2022
**Rest of Eurasia
BUSINESS Review
Services - Services remains a segment with a very strong rate of growth. Q3'22
turnover grew 197% year over year to $57m. Services now represents 11% of
Group turnover, and contributes 54% of total Gross Profit. Services growth
reflects the impact of acquisitions, as well as strong organic growth.
Software & Cloud - Turnover from Software & Cloud increased by 23% in
Q3'22.
Hardware - Hardware grew 376% year-over-year in Q3'22 including a mix of
organic and inorganic growth.
Geographic Turnover - Double-digit growth in all regions, both organically and
due to recent acquisitions.
Profitability
Gross Profit in Q3 FY2022 was $71.4M, up 75% year over year. Gross Profit
margin, turnover based, was 17.9% compared to 14.9% for Q3 last year, partly
driven by the contribution of the Services business.
For Q3 2022, adjusted EBITDA was $12.8M. Adjusted EBITDA margin, Gross Profit
based, was 17.9%. Adj. EBITDA reflects the significant investments the company
is making for future growth. These investments include people, motivation and
retention, continued company diversification into Services, corporate
governance, systems such as CRM, ERP and digital platforms.
Other selected financial events
Further to the announcement on the 7(th) October 2022 of the sale of its
Russian business: EGM Sale of Russian business
(https://www.londonstockexchange.com/news-article/SFTL/notice-of-shareholder-circular-and-general-meeting/15663913)
, the company completed the transaction on the 20(th) October: Sale
confirmation
(https://www.londonstockexchange.com/news-article/SFTL/softline-completes-sale-of-its-russian-business/15680538)
. At the general meeting held on the 25(th) October 2022, shareholders
approved the bonus issuance in relation to the transaction: GM Result 25 Oct
2022
(https://www.londonstockexchange.com/news-article/SFTL/result-of-general-meeting/15687479)
.
Further to the announcement on 24(th) January 2023 of its intention to
re-domicile the company from Cyprus to the Cayman Islands: Re-domiciliation
(https://noventiq.com/news/noventiq-announces-its-intention-to-re-domicile-the-company-from-cyprus-to-the-cayman-islands)
, shareholders approved all resolutions in relation to the transaction at the
general meeting held on the 15(th) February 2023: GM Result 15 Feb 2023
(https://noventiq.com/news/noventiq-announces-the-results-of-the-general-meeting)
.
On 9th February 2023, Noventiq and Corner Growth Acquisition Corp. signed a
Letter of Intent for a Business Combination: Letter of Intent
(https://noventiq.com/news/noventiq-and-corner-growth-acquisition-corp--sign-letter-of-intent-for-a-business-combination)
Leadership update
Following the completion of its strategic review in July 2022, under Sergey
Chernovolenko's leadership as CEO, the company successfully navigated a
complicated process of demerger, safeguarding and strengthening the Noventiq
business, while achieving strong business results. The company continued to
evaluate options designed to ensure that the significant fundamental value of
Noventiq is properly reflected by the market. As a result, in February 2023
the company signed a letter of intent to proceed with a potential business
combination with Corner Growth Acquisition Corp. to maximise and leverage
significant opportunities within the U.S. investment market.
Hervé Tessler will lead the project to complete the business combination, and
will become Chief Executive Officer of Noventiq with immediate effect. Hervé
will also join the Noventiq board of directors. As a global senior executive
with decades of international experience in US publicly traded corporations,
Hervé brings a wealth of experience to this role in building diverse,
high-performing teams across multiple geographies and functions. Hervé is
well-versed in driving results and leading initiatives on a global scale to
transform international operations and company-wide functions.
Sergey Chernovolenko, who successfully navigated the company to next level of
its development, will step down from the role of CEO and will focus on the
continuation of the business growth trajectory and company development as
President and COO of the company. Sergey will continue as a member of the
board of directors, and will support Hervé in his new role, as the company
delivers a seamless transition.
Balance sheet and liquidity
The Cash position as at 31 December 2022 was $191.2m.
M&A
Noventiq's M&A strategy augments the 3-dimensional growth strategy, and
the company has been active over the past few years with a specific focus on
key strategic objectives.
In the third quarter of 2022, Noventiq announced three acquisitions. All of
them will strengthen Noventiq's positioning as a leader in digital
transformation and cybersecurity, and will also help the company to grow in
different capabilities and expand to new territories in India, the Eastern
European regions, and beyond:
· Value Point Systems (October 2022): Value Point Systems (VPS) is an
Indian digital infrastructure and cybersecurity solutions & services with
more than 1,200 employees, and over 2,000 local customers. This acquisition
accurately represents Noventiq´s strategy and vision for this market:
"Investing in India, for India". Noventiq will strengthen its global
cybersecurity proposition with the skills of VPS' Security Operation Centre
(SOC) - including the cybersecurity integration capabilities and a
sophisticated cybersecurity consultancy offering. VPS' SOC is one of the
industry's leading SOCs in India.
· Saga Group (November 2022): Noventiq signed an agreement to acquire
the majority of Serbian software and digital solutions leader Saga Group,
bringing 400 people to Noventiq´s team. Saga Group, which has operations in
more than 25 countries, will contribute to Noventiq's growth in Central and
Eastern Europe strengthening Noventiq's position in markets such as Serbia,
Montenegro, Bosnia and Herzegovina, and North Macedonia. This transaction also
helps Noventiq to reinforce its global portfolio as Saga Group is an advanced
partner of Oracle and Cisco, as well as Microsoft, DELL, Hewlett Packard
Enterprise, Juniper, VMWare, and others. Saga Group has built an impressive
portfolio of proprietary digital products, including its own IP for digital
banking, Fintense - created by Saga's subsidiary NF Innova -, which is an
omnichannel digital banking platform. Saga's other own solutions are, Weaver,
a sophisticated AI smart assistant; and Selecta, a next generation AI-powered
CRM platform - these two platforms are created and owned by Intellya, another
of Saga Group's subsidiaries. The deal to close the acquisition of Saga Group
and its subsidiaries was announced on February 2023.
· G7 CR Technologies (December 2022): Headquartered in Bengaluru, G7 CR
Technologies is considered India's leading Managed Services Provider for
Azure-based cloud solutions offering services from advisory to migration,
implementation, security and optimization, among others. G7 CR is also a
significant player in the market for Microsoft products. This means that
Noventiq will strengthen its capability for delivering services for Microsoft
Azure migrations and support. through the acquisition of G7 CR Technologies.
Microsoft's Azure business is historically growing globally at 40-60% every
year. This transaction represents the fourth acquisition of Noventiq in India,
and the second acquisition in this market in the third quarter of 2022, which
once again highlights the company's goal on continuing to invest in India, for
India.
During the current fourth quarter (Q4) of FY2022, the company has closed the
acquisitions with DigiTech, Seven Seas Technology, and Saga Group.
Microsoft
Noventiq is a globally managed Microsoft's partner and has been further
progressing this cooperation. Noventiq sees very significant potential to
partner with Microsoft and scale in many more markets around the world.
Noventiq works closely with Microsoft across multiple customer segments
ranging from SMBs to large organizations across private and public sectors.
Noventiq, and formerly Softline, has collaborated with Microsoft for more than
25 years and is continuing to expand its services footprint with Microsoft
solutions. Noventiq is now a Licensing Solutions Provider and Cloud Solutions
Provider in more than 35 countries. The company is a member of the prestigious
Microsoft Intelligent Security Association, a Microsoft Azure Expert Managed
Services Provider, with twelve Advanced Specializations by Microsoft, and
maintains 5 out of 6 Microsoft solutions partner designations. In 2022,
Noventiq has received a number of Partner of the Year awards.
ESG
Noventiq continues to advance and embed ESG principles across its operations,
and it continues to be at the forefront of Noventiq's strategy. The company
focuses on creating an environment where people can prosper. Noventiq's
commitment to its teams has been recognized with the certification of Great
Place To Work in many of its regions. The company has a longstanding
dedication to the preservation of basic rights and human dignity in the
workplace and beyond, including diversity and inclusion policies which are
incredibly important to the company's leadership team.
As part of its ESG strategy, Noventiq's purpose is to ensure environmentally
sound and sustainable development of the company, and will continue to look
for ways to reduce the climate impact of its business. Noventiq also has a
resilient framework in place for ethics and compliance in all the markets
where they operate. The company will continue to promote diversity across its
extended governance structure. The company has implemented a Board governance
structure in line with best practice
The company published its ESG statement that can be read here:
https://noventiq.com/about/esg (https://noventiq.com/about/esg)
Awards
Noventiq was recognised as a 'Visionary' in the 2022 Gartner Magic Quadrant
for SAM Managed Services.
Business outlook
Noventiq is increasing all key metrics of its business outlook.
The company now expects to deliver turnover growth of at least 34% in reported
currency in FY2022, or at least 45% in constant currency based on FX rates at
the end of Q3. This reflects broad based performance from the regions, and
would represent approximately $400M of new turnover, versus 2021. This outlook
reflects the continuation of a solid demand environment; however, the company
is also conscious of the broader economic and geopolitical uncertainty.
The company now expects gross profit margin above the range of 13 to 14% for
FY2022, up from prior guidance of the upper end of the range.
Noventiq now expects to deliver adjusted EBITDA margin on gross profit of low
double digits in FY22. This includes the impact of the very significant
investments the company has been making this year.
Noventiq remains focused on delivering a strong Q4 and driving continued
profitable growth for the full financial year 2022, and will continue to
manage the business responsibly while closely monitoring the demand
environment.
For the full year FY2021, Noventiq reported turnover of $1,121,542,000 and
gross profit of $146,461,000.
Additional Information
The Company has been operating under the brand name of Noventiq since October
2022. The change of the company name to "Noventiq Holdings plc" was duly
passed at the General Meeting on 15 February 2023.
https://noventiq.com/news/noventiq-holdings-plc
(https://noventiq.com/news/noventiq-holdings-plc)
Noventiq's related supporting materials can be accessed in the Investor
Relations section of Noventiq.com
Results conference call
An investor, analyst and media webcast will be held on 28(th) February 2023 at
8:00am UK time. Noventiq will announce key operating highlights for Q3 of
FY2022 for the twelve months year ending 31 March 2023.
A livestream of the investor call will be available and can be accessed here:
Noventiq - Q3 FY2022 Trading update
(https://www.lsegissuerservices.com/spark/SOFTLINEHOLDING/events/b1a1e0b4-a1f1-4fb7-b629-7a231f4c9052)
About Noventiq
Noventiq is a leading global solutions and services provider in digital
transformation and cybersecurity, headquartered and listed in London. The
company enables, facilitates and accelerates digital transformation for its
customers' businesses, connecting 75,000+ organisations from all sectors with
hundreds of best-in-class IT vendors, alongside its own services and
solutions.
Noventiq - led by a highly qualified board of directors including Jacques
Guers, Roy Harding, Igor Borovikov, Karl Robb, Marc Kasher, and Sergey
Chernovolenko - reported a turnover of US$ 1.1 billion in the fiscal year of
2021, and is currently one of the fastest growing companies in the sector.
Noventiq's 5,900 employees work in 60 countries throughout Asia, Latin
America, Eastern Europe and Africa-markets with significant growth potential.
Additional information about the company can be found here:
https://noventiq.com/investor-relations
(https://noventiq.com/investor-relations)
Contacts
Steven Salter
Global Investor Relations VP
IR@noventiq.com (mailto:IR@noventiq.com)
Rocio Herraiz
Global Head of Communications
pr@noventiq.com (mailto:pr@noventiq.com)
Important Notices
The financial results set out in this release are sourced from the Group's
management accounts for Q3/YTD FY2022, Q3/YTD FY2021, and are unaudited. The
"constant currency" metric excludes the effect of foreign currency exchange
rate fluctuations by translating the current period revenues
into U.S. dollars at the weighted average exchange rates of the prior period
of comparison.
This document may constitute or include forward-looking statements. Forward
looking statements are statements that are not historical facts and may be
identified by words such as "plans", "targets", "aims", "believes", "expects",
"anticipates", "intends", "estimates", "will", "may", "continues", "should"
and similar expressions. These forward-looking statements reflect, at the time
made, the Company's beliefs, intentions and current targets/aims concerning,
among other things, the Company's or the Group's results of operations,
financial condition, liquidity, prospects, growth and strategies.
Forward-looking statements include statements regarding: objectives, goals,
strategies, outlook and growth prospects; future plans, events or performance
and potential for future growth; liquidity, capital resources and capital
expenditures; economic outlook and industry trends; developments of the
Company's or the Group's markets; the impact of regulatory initiatives; and
the strength of the Company's or any other member of the Group's competitors.
Forward-looking statements involve risks and uncertainties because they relate
to events and depend on circumstances that may or may not occur in the future.
The forward-looking statements in this document are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in the Company's records (and those of other members of
the Group) and other data available from third parties. Although the Company
believes that these assumptions were reasonable when made, these assumptions
are inherently subject to significant known and unknown risks, uncertainties,
contingencies and other important factors which are difficult or impossible to
predict and are beyond its control. Forward-looking statements are not
guarantees of future performance and such risks, uncertainties, contingencies
and other important factors could cause the actual outcomes and the results of
operations, financial condition and liquidity of the Company and other members
of the Group or the industry to differ materially from those results expressed
or implied in this document by such forward-looking statements. No
representation or warranty is made that any of these forward-looking
statements or forecasts will come to pass or that any forecast result will be
achieved. Undue influence should not be given to, and no reliance should be
placed on, any forward-looking statement. No statement in this document is
intended to be nor may be construed as a profit forecast.
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