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Investing.com -- SoftwareONE Holding AG’s (SIX:SWON) stock dropped over 1% on Wednesday following the company’s first-quarter earnings report, which showed a 6% decline in revenue, falling short of expectations.
Despite the revenue drop, cost-saving measures helped boost EBITDA, providing some relief amid a challenging market environment.
For the first quarter of 2025, SoftwareONE reported revenues of CHF 232 million in constant currency, missing the consensus estimate of a 2.2% decline.
This marked a further decline compared to the 5% drop in the fourth quarter of 2024. Breaking down the figures, Software (ETR:SOWGn) & Marketplace revenues fell by 11% year-over-year to CHF 111 million, following a 15% decline in the previous quarter.
In contrast, Services revenues remained flat at CHF 121 million, after a 7% increase in the fourth quarter of 2024.
EBITDA for the quarter rose by 2% to CHF 46 million, representing a margin of 19.8%. This exceeded the consensus estimate of CHF 44 million, or an 18.3% margin, by 5%.
The margin improvement was attributed to the completion of a cost-reduction program that generated CHF 88 million in annualized savings.
Selling, General, and Administrative (SG&A) costs for the first quarter were CHF 102 million, down 11% year-over-year and 3% quarter-over-quarter.
Exceptional costs for the quarter were CHF 19 million, up from CHF 17 million in the previous year.
The Marketplace EBITDA margin increased to 48.3% from 46.1% in the first quarter of 2024.
The Services margin also improved, rising to 6.9% from 3.6% year-over-year. Microsoft-related billings grew 10% year-over-year to CHF 4.4 billion.
However, Marketplace growth was hindered by weaker performance in the Microsoft (NASDAQ:MSFT) transactional business and a reduction in Enterprise Agreement (EA) contract incentives.
Regionally, the company reported a 16% growth in constant currency in the Asia-Pacific market. In contrast, Latin America saw a 3% decline, the rest of Europe, the Middle East, and Africa was down 1%, the DACH region decreased by 4%, and North America (NORAM) posted a 31% drop.
The weakness in NORAM was attributed to ongoing go-to-market issues and a challenging macroeconomic environment.
SoftwareONE continues to expect the completion of its acquisition of Crayon in 2025. The company’s 2025 guidance remains unchanged, with projected revenue growth of 2-4% in constant currency.
The consensus estimate for revenue stands at CHF 1,039 million, or a 2.1% growth rate in constant currency, while UBS estimates a 1.7% growth rate to CHF 1,029 million.
The company is also expecting an EBITDA margin of 24-26% of revenue, with a consensus estimate of CHF 245 million, or a 23.6% margin.
Microsoft incentive changes are particularly affecting June in 2025, which is expected to lead to similar revenue growth to the first quarter. With a 10% growth rate expected in the second half of the year, the full-year results would be lower than expected.