Investing.com -- Shares of SoftwareOne Holding Ltd. (SIX:SWON) jumped on Wednesday following its third-quarter update, which aligned with earlier forecasts and confirmed expectations.
At 6:21 am (11:21 GMT), SoftwareOne Holding was trading 6.6% higher at CHF 704.
The update showed that SoftwareOne’s Q3 revenue grew 3.1% year-over-year on a constant currency basis, with adjusted EBITDA margins coming in at 16.6%, a decline of 4 percentage points compared to last year.
The dip in margin was largely due to challenges within the software marketplace segment, particularly related to sales execution in North America and cautious client spending in regions such as the UK and France.
Additionally, revenue from SoftwareOne's largest vendor partner, Microsoft (NASDAQ:MSFT), reflected headwinds from shifting incentive structures, although total gross billing with the vendor still managed a 7% increase.
The company reiterated its expectations for 2024, forecasting revenue growth between 2-5% and an adjusted EBITDA margin in the range of 21-23%.
This implies a slight revenue decline year-over-year for Q4 and a 7-point drop in the quarterly EBITDA margin, which is expected to hit 24.5-25%.
As part of its strategy to boost profitability, SoftwareOne announced a new restructuring plan aimed at cutting costs by CHF 50 million by mid-2025.
This plan includes a focus on reducing corporate overhead and trimming management layers, which are currently perceived as too “top-heavy,” with specific cuts anticipated at the executive board level.
SoftwareOne’s goals for 2026 remain strong, with the company targeting double-digit revenue growth and an EBITDA margin of roughly 27%.
However, Citi analysts noted that the market may be skeptical about these targets due to SoftwareOne's inconsistent performance in recent quarters. A key factor in these strategic moves is the company’s ongoing discussions with potential private equity buyers.
SoftwareOne stated that it expects to either present an offer to shareholders or conclude its going-private talks by February 2025, in conjunction with its full-year results.
According to Citi Research, investors are likely to view this timeline as a positive development, despite the continued uncertainty surrounding SoftwareOne’s financial outlook for 2025 and beyond.
With sentiment around the stock at a low, the combination of clear 2025 expectations and an approaching decision on going private could act as positive catalysts, said Citi analysts.