Post Q2 2024- Very strong Q2 - Target price 242

14% growth, 23,7% EBITDA margin and impressive on cash

We were spot on in our analysis, and a lot better than most (or all?) analysts 💪. You will probably never see such a “spot on” quarterly preview again😅

The volume question arriving from Q2 figures was properly commented on from management during the day, making us fairly confident in their full year guiding, which implies around 23% growth in H2 (with more growth coming in the bigger Q4). There are five reasons why we believe in 23% growth:

1. Already signed contracts that will show up in the figures in Q4.

2. Distribution agreements with Broadcom and VMware gradually delivering volumes.

3. AI volumes accelerating. Volumes are up from 2% of gross profit to around 6% last 12 months (CO-pilot and other products).

4. Market share improvement in Europe due to increased manning.

5. Nordic consultancy improvement.

6. Some negative shit will happen, and is included in our estimates.

EBITDA is on track, with stable margins in the software area (licenses) and consulting margins improving at an impressive rate

Cash guiding was improved by 2,5 pp. It is worth noting that even if they hit their upper guiding range (12,5%), this implies that H2 will have a negative NWC development. We will discuss this matter with management later today, but we don’t really care as long as the annual cash development continues at these strong levels. A Protector mantra has always been that quarterly volatility must be expected, and this is certainly true for a company with gross sales ten times the size of revenue and gross profit. See through the noise and truly understand what is going on, is our advice on a sunny Friday morning🌞

Share price was up 12% yesterday and is up another 2% at the moment. Note that DNBs analyst predicted share price down 5% yesterday, we hope you did not listen to their repeated poor advice😅

Finansavisen had Sverre on the front page, related to Crayon and other investments. Feel free to have a look.

Lillestrøm, 30.08.24

Disclaimer: Hvaler is a significant shareholder so you cannot trust us (or perhaps you can?)