Helen of Troy beats Q2 estimates, shares rise on better-than-expected results
Introduction & Market Context
SoftwareONE Holding (SWON) presented its Q1 2025 financial results on August 28, revealing a mixed performance characterized by declining revenue but improved profitability. The Swiss IT services provider saw its stock slip 2.55% to 6.88 following the presentation, reflecting investor concerns about top-line growth despite operational improvements. Despite recent volatility, the company’s shares have demonstrated resilience with an 11.4% gain over the past week and a 25.6% rise year-to-date.
Quarterly Performance Highlights
SoftwareONE reported a 5.7% year-on-year revenue decline in Q1 2025, raising questions about the company’s sales performance amid challenging market conditions. However, the company managed to increase its adjusted EBITDA by 2.3% to CHF 317 million, while expanding its EBITDA margin by 1.4 percentage points to 19.8%.
The company’s Microsoft business emerged as a bright spot, with billings growth of 10% demonstrating continued strength in this core segment. This performance underscores SoftwareONE’s established position in the Microsoft ecosystem despite broader revenue challenges.
During the earnings call, CEO Rafael emphasized the importance of this metric, stating: "Our billings grew 10% overall. So as long as these billings are growing, these are the fundamentals, right?"
Strategic Initiatives
SoftwareONE’s cost reduction program has exceeded targets, achieving CHF 88 million in annual savings. This initiative has been crucial in offsetting revenue pressures and supporting margin expansion.
"We have now established a new cost base in our company, which is also much more aligned again to our income streams," noted the CEO during the presentation, highlighting the strategic importance of the company’s operational realignment.
The company also discussed its ongoing sales transformation, particularly in North America where performance has been challenged. Management attributed some of the regional weakness to Go-to-Market changes and lost deals, indicating that the transformation process remains a work in progress.
Meanwhile, the APAC region was highlighted as a strong performer, providing some geographic diversification to offset challenges in other markets.
Forward-Looking Statements
Looking ahead, SoftwareONE anticipates continued negative revenue growth in Q2 2025 but expects strong positive momentum in the second half of the year. This projected recovery trajectory suggests management believes current challenges are temporary rather than structural.
The company maintains its confidence in achieving an ambitious EBITDA margin target of 24-26%, representing a significant improvement from the current 19.8%. Additionally, SoftwareONE aims to more than double its reported EBITDA by the end of 2025, signaling aggressive profitability goals despite near-term revenue headwinds.
Several risk factors could impact these projections, including ongoing macroeconomic uncertainty, changes to Microsoft’s incentive structure, and increasing competition in the cloud services sector. The company’s ability to successfully navigate its sales transformation, particularly in North America, will also be crucial to meeting its targets.
Analyst Perspectives
Analyst consensus appears cautiously optimistic about SoftwareONE’s prospects, with price targets ranging from CHF 7.54 to CHF 16.42, suggesting significant potential upside from current levels. The company’s financial stability, evidenced by a healthy gross profit margin of 31.3% and more cash than debt on its balance sheet, provides some reassurance despite the revenue challenges.
The market’s response to SoftwareONE’s presentation reflects this mixed sentiment, with the stock declining modestly as investors weigh improved profitability against revenue concerns. With the stock trading well below its 52-week high of 16.04, but significantly above its 52-week low of 4.31, market participants appear to be taking a wait-and-see approach to the company’s projected second-half recovery.
As SoftwareONE continues its operational transformation and cost optimization initiatives, investors will be closely monitoring whether the anticipated revenue rebound materializes in the latter half of 2025, potentially unlocking further value in the stock.
Full presentation:
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