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ConocoPhillips reported strong financial results for Q4 2024, with earnings per share (EPS) of $1.98, surpassing the forecasted $1.79. Revenue also exceeded expectations, reaching $14.7 billion compared to the anticipated $14.27 billion. The company maintains robust profitability with a 49% gross margin and healthy returns on equity of 16%. Despite these positive figures, the company’s stock experienced a 1.85% decline in pre-market trading, closing at $98.36, and further decreased to $88.85 in subsequent trading sessions. InvestingPro analysis reveals 10+ additional key insights about ConocoPhillips’ performance and outlook.
Key Takeaways
- ConocoPhillips beat EPS and revenue forecasts for Q4 2024.
- Stock price fell by 1.85% in pre-market trading despite strong earnings.
- Organic revenue declined 2% year-over-year.
- Net debt increased to €773 million, raising financial stability concerns.
- Potential delisting and AGM postponement may impact investor sentiment.
Company Performance
ConocoPhillips demonstrated robust financial performance in Q4 2024, with both EPS and revenue exceeding market expectations. However, the company faced a 2% year-over-year decline in organic revenue, which may have contributed to investor caution. The company’s strategic acquisitions and focus on innovation, including AI-driven solutions, highlight its commitment to future growth.
Financial Highlights
- Revenue: $14.7 billion, surpassing the $14.27 billion forecast.
- Earnings per share: $1.98, exceeding the $1.79 forecast.
- Recurring revenues grew by 5%, now comprising 75% of total revenues.
- Adjusted EBITDA: €225 million, with a 19% margin.
- Free cash flow: €66 million.
Earnings vs. Forecast
ConocoPhillips reported an EPS of $1.98, a 10.6% surprise over the forecasted $1.79. Revenue also beat expectations, reaching $14.7 billion compared to the $14.27 billion forecast. This positive deviation highlights the company’s strong financial performance in the quarter.
Market Reaction
Despite the earnings beat, ConocoPhillips’ stock fell by 1.85% in pre-market trading and further declined in subsequent sessions. The stock’s performance contrasts with its 52-week high of $135.18, suggesting investor concerns about other factors such as increased net debt and potential strategic shifts. According to InvestingPro analysis, the stock is currently undervalued, with analysts setting price targets between $114 and $165. The company has maintained dividend payments for 55 consecutive years, currently offering a 3.5% yield, and operates with a moderate debt-to-equity ratio of 0.39.
Outlook & Guidance
The company projects low to mid-single-digit organic revenue growth for 2025, with continued positive development in recurring revenues. ConocoPhillips aims to return to EBITDA growth and maintain its focus on innovation and operational efficiency. With an EBITDA of $24.3 billion in the last twelve months and strong cash flows that adequately cover interest payments, the company maintains a solid financial foundation. InvestingPro subscribers can access a comprehensive analysis of ConocoPhillips’ financial health, which currently rates as "GOOD" based on multiple factors including profitability, cash flow, and relative value metrics.
Executive Commentary
CFO Daniela Hommel emphasized the company’s commitment to growth and innovation, stating, "We aim for adding a new dimension to healthcare." She also highlighted the importance of not hindering growth by leveraging the best talent available.
Risks and Challenges
- Increased net debt, potentially impacting financial stability.
- Organic revenue decline, raising concerns about growth sustainability.
- Potential delisting and AGM postponement, which may unsettle investors.
- Market saturation and macroeconomic pressures could affect future performance.
- Interest rate fluctuations, despite 80% of net debt being protected.
Q&A
During the earnings call, analysts inquired about the company’s strategic initiatives and potential restructuring. Executives confirmed no major restructuring plans for 2025 and emphasized their focus on operational efficiency and organic growth across all segments.
Full transcript - Conocophillips (COP) Q4 2024:
Conference Moderator, CompuGroup Medical: Good morning, everyone, and welcome to the CompuGroup Medical Investor and Analyst Conference Call for the Full Year Results twenty twenty four. Thanks for joining us today whether you have dialed in on the phone or are following the webcast online. You’ll find all the relevant information such as this presentation, the annual report and the press release which we published early this morning on our website. We will start with the presentation by our CFO, Daniela Hommel, followed by the Q and A session. Before we start, as always, there are some housekeeping remarks.
Let me remind you on our Safe Harbor Statement, which is shown at the beginning of the slide presentation and is valid for the entire call. Thank you for your patience. Now let’s start. I will hand over to our CFO, Daniela Hommel. Daniela, over to you.
Daniela Hommel, CFO, CompuGroup Medical: Thank you, Claudia. Good morning, ladies and gentlemen, and a warm welcome to all of you. 2024 marked a year of transition for CGM. We initiated considerable change. With our new CEO, we were fully focused on enhancing customer centricity, operational excellence, and innovation for the benefit of our customers.
Enhancing our product portfolio is an ongoing focus. The acquisition of Predoc strengthens our excellent market position and creates the opportunity to offer a purely web based solution to customers in Northern Europe. With the acquisition of mUAbs, we enhanced the organization, digitization, and structured collection of patient data. In France, we acquired our sales and service partner for twenty five years, CPS concept, thus strengthening our sales and distribution capabilities. Looking back at last year, we also focused on IT security.
The C5 attestation we received is a testimony to the progress we have made. Once again, we have proven our innovative strength with further milestones of launching AI and cloud based solutions, like the AI driven phone assistant, CGM One or CGM Stellar, supporting our ambulatory and pharmacy customers. We remain fully committed to our purpose. Nobody should suffer or die, because point medical information was missing. This purpose is more relevant than ever.
In several of the counties we are present, medical data is now becoming available through connected products and AI modules in order to prevent patients from suffering or dying. At CGM, this is what drives every one of us to contribute to advancing healthcare. And we aim for adding a new dimension to healthcare. Leveraging our robust platform strategy and an unrivaled presence in across 19 countries, we aim to engage our current customers, attract new ones, and ultimately inspire, support, and advance the market for digital health solutions. This strong foundation, built on over thirty five years of experience in the healthcare industry is further enhanced by the integration of artificial intelligence and data driven solutions, allowing us to make a significant positive impact on the world.
Every day, the employees of Compucoch Medical work with passion to develop new innovative solutions for the benefit of our customers. At CGM, we are committed to supporting healthcare providers, the everyday heroes who play a vital role in patients’ lives, including doctors, dentists, pharmacists, laboratory technicians, nursing staff, and the entire medical team. We recognize the significant responsibility we carry and are dedicated to delivering optimal solutions that enhance the quality of medical care, alleviate the workload of healthcare professionals, ensure patient safety, protect medical data, and drive advancement in healthcare through digital innovation, all while addressing rising cost. The digitization and continuous evolution of technology have fundamentally changed how medical information is accessed, managed, and shared. We embrace the challenge of navigating these changes and are resolute in our commitment to remain at the forefront of this ongoing transformation.
For more than three decades, we support our customers in healthcare with software and IT solutions, backed by the founding Gotthard family. For the next phase of CGM’s development, we have found a second anchor investor and strategic partner. In December 2024, Compu Group Medical entered into an investment agreement with CBC Capital Partners. The investment agreement was subject to the successful closing of a tender offer launched by CBC, offering 22 to CGM shareholders. In January, we, the managing directors, as well the administrative board and the supervisory board, published a joint recent statement recommending shareholders to accept the offer.
After the first three weeks of the new year twenty twenty five, CVC exceeded the minimum acceptance threshold of 17. After the successful closing of the tender offer, which still depends on several regulatory approvals, a delisting offer is planned, most likely during the second quarter. As already announced in the offer document, our annual general meeting will be postponed probably to 08/01/2025. As a result of the voluntary tender offer, CGM’s shareholder structure has changed considerably. The majority stake held by the Gotthard family and associated shareholders remains unchanged at over 50%, but the free float has fallen below the mark of 25% due to CVC’s almost 22% stake.
To deliver against our purpose, we are determined to continue investing on a high level going forward. CVC is fully committed to support our strategy of innovation growth in the envisage partnership. With CVC’s deep healthcare and software expertise, strong commitment, and global network, this potential partnership will provide the support and the resources to catalyze the next phase of innovation, growth and transformation in healthcare. Now, let’s take a look at the financial performance of 2024. Two days ago, we announced and we means the managing directors, the administrative board and the supervisory
: board, that
Daniela Hommel, CFO, CompuGroup Medical: the dividend will be the mini legal minimum dividend this year amounting to 5¢ per share. The proposal comes against the backdrop of the company’s long term innovation growth strategy, including investments in infrastructure and resources for greater customer centricity and AI based processes and products. Based on the consolidated financial statements, it also takes into account the revenue and profitability development in 2024 financial year in accordance with the revised guidance. With this decision, we are focusing on customers and employees. Looking at the organic revenue development in 2024 year over year, we were down by 2%, thus ending the year within the guidance range as revised in July 2024 after the ad hoc announcement.
As we said, back in July, this development has been attributable to the one off revenues which have declined. Recurring revenues grew by 5% and exceeded the guided goal of a share between 756570% by four percentage points. Adjusted EBITDA was down year on year and ended up with €225,000,000 within the revised guidance range. The margin was three percentage points below last year at 19%. Free cash flow exceeded the revised guidance and stood at €66,000,000 Adjusted EPS stood at €1.27 below the revised guidance range due to higher tax payments.
Let’s take a look at the quality of revenues over the past couple of years. Recurring revenues have grown with CAGR of 8% over the past couple of years. As I already mentioned, in 2024 recurring revenues have grown by 5% and they now account for almost three quarters of total revenues. As we already explained during the last year, the main reason for the revenue decline lies in the development of the one off revenues which we have seen a slower progress of where we have seen a slower progress of projects in different areas in 2024, while we had very strong one time revenues in 2023. For the group and for all three operating segments, it is an identical picture.
One time revenues are down year on year but represent the smaller part of the overall business. On the other hand, we see continued growth in recurring revenues in the group and in all three operating segments over the prior year. A strong proof point of the resilience of our business model. Now let’s go into more financial detail starting with our AIS segment where we recorded a revenue decline of 5%, which is due to the decline in one time revenues. The reason for the decline in one time revenues is mainly the high levels in the TI business in 2023, as well as slower module sales across the board.
Recurring revenues increased by 3% and now account for 76% of segment revenues. The adjusted EBITDA in the AIS segment was impacted by ongoing investments in product innovation and decreased by 15% with a margin below prior year. Coming to our hospital segment, revenues slightly grew by 1% year on year. The revenue growth is attributable to growth in recurring revenues. One of revenues came in law due to tough comps with large project rollouts in Germany and Poland in 2023.
Against this backdrop, the growth in recurring revenues was able to compensate the strong prior year’s development. The continued investment into larger projects and G3 technology
Conference Operator: lead to
Daniela Hommel, CFO, CompuGroup Medical: a slightly weaker EBITDA margin. Finally, let’s talk about our pharmacy segment. In 2024, the PCS segment was also up against tough prior year comps, where the segment benefited from one time revenues, especially in the hardware business. The strong development of recurring revenues offset the decline in one off revenues. Overall revenues in the segment were on the prior year level.
As usual in the segment, the margin stood strong at a level above 30%. In the prior year, 2023, the margin was positively influenced, among other things by research and development grants in Italy and Germany. Now, let me give you a short update on the R and D development. The investments in our future oriented product portfolio and innovative solutions are a key to sustainable success and an accompanying improvement in the work of our customers. In 2024, R and D expenses showed a slight increase, while R and D CapEx is below the prior year level.
R and D expenses as percentage of revenue remain high at 22%. Let’s move on to the free cash flow. With €66,000,000 free cash flow was below prior year level but better than anticipated. Due to the decline in one off revenues, payouts for restructuring, and higher than expected tax payments already mentioned in the summer, free cash flow was below the prior year. But we see an ongoing improvement in our working capital management, which supports us on our path.
Talking about finance, we are recording a leverage above three times EBITDA of the last twelve months. Net debt has increased from €730,000,000 to €773,000,000. This includes the share buyback program in early twenty twenty four as well as acquisitions during the last year. At the same time, we remain well financed with more than 80% of our net debt protected against higher interest rates. On the next slide, you find the guidance for the full year 2025.
The organic revenue development is expected in a low to mid single digit percentage growth range. We expect a continued positive development of recurring revenues with light growth year on year. Looking at the adjusted EBITDA, we expect to return to the growth path again after this year of transition, supported by at least slight organic revenue growth within each segment. With that, thank you for your attention. I’m now looking forward to your questions, and I’m handing over to the operator for the Q and A session.
Conference Operator: We will now begin the question and answer session. The first question comes from Knut Waller from Baden Bank. Please go ahead.
Knut Waller, Analyst, Baden Bank: Yes. Hi, good morning. And a couple of questions. When do you expect to return to margin expansion again? You’re guiding for an absolute EBITDA growth again, but when should we expect Konti Group to return to margin expansion again?
Then the second question on the cash flow. We have seen a burden by tax, but also by a reversal of provisions. You’re not guiding on free cash flow anymore, but is it fair to assume that the free cash flow should improve noticeably in 2025? And then on capitalization, when we look at reported EBITDA, we saw that the quality of EBITDA basically improved out of my perspective. If we would adjust for the decline of capitalization, reported EBITDA would have been broadly flat.
So how should we think about capitalization in 2025 and the years beyond? Thank you very much.
Daniela Hommel, CFO, CompuGroup Medical: Many thanks, Knut, for all your questions. I start with the first one on the margin expansion. We stated already in November that it is important that we invest and not overly steer the margin to do not miss market changes. That’s why for us, it’s a balance of where do we invest and what do we want to obtain in the margin. And that’s why, yes, we aim for increase but not for an overall margin increase.
We don’t want to miss investment chances, especially we know that soon a strong partner on board. And, that is the answer that I can give you. It will be a balancing of investments and operational excellence measures that we have, in place at the same time. For free cash flow, yes, we didn’t guide this explicitly. We also looked at our peers for day guide.
But, your implicit, assumption that free cash flow will rise is correct. We assume this fee, need to steer cash flow, free cash flow in that direction. We have working capital measures in place and that’s why, yes, we expect a higher free cash flow. With regard to capitalization, and thanks for your comment on improvement of the EBITDA, we really appreciate this. With regard to capitalization, you know that we are impacted there from IRS IRS by IRS thirty eight, which requires a certain cost to capitalize.
And yes, you are also right. There is some management decision beyond this which we can either choose or not choose. Our expectation is that capitalization will be around flattish, because we put all these new products that we want to churn out into the market in that phase of development where we can capitalize cost.
Knut Waller, Analyst, Baden Bank: Thank you very much, Liam. Maybe just one quick follow-up. Is there any plan of a restructuring this year? Or just asking in different terms, how should we think about the adjustments? Will there be any extraordinary expenses this year or a larger restructuring program or not?
Thank you.
Daniela Hommel, CFO, CompuGroup Medical: As of now, I’m not aware of any restructuring programs planned for 2025. However, it’s equally important to note that our focus remains on driving operational efficiency. I stated this in my speech and also when I explained the margin question. And we want to enhance our strategic initiatives. With these initiatives, we continuously assess our business landscape and we want to become better and cleaner every day.
That’s also our strategy now. We do not want to hinder ourselves from growing and not counting on the best people we can find. Therefore, from time to time, yes, there may be layoffs. But as I said, I’m not aware of a restructuring program planned for 2025 as of now.
Knut Waller, Analyst, Baden Bank: Thank you very much.
Conference Operator: The next question comes from Wolfgang Specht from Berenberg. Please go ahead.
: Yes, hello. Good morning. Two additional ones from my end. First, on the segment, you stated you’re expecting organic growth in all three verticals. Could you elaborate a little bit on the ambulatory business, which is obviously your most important one?
Do you have any idea in which directions growth could come from regarding regions or countries? Or do you expect, let’s say, growth to return in most of the countries you’re operating? And second question would be on the buyout process. Which approvals are currently still missing when you look at the process?
Daniela Hommel, CFO, CompuGroup Medical: Many thanks Wolfgang for those questions. And I start with the second question. I also state which approvals we have to provide you with a full picture and we have also announced them but to remind you, virtual control clearance has been obtained for Germany and Austria. And, regarding the foreign directive investment clearance, approval has been obtained in Belgium, Denmark, France, Italy and Sweden Sweden and with that, FDI clearance is still outstanding for Germany, Austria, Romania and Spain. With regard to your first question, on the ambulatory business.
First of all, I want to remind you what the usual value or business drivers are. It’s churn, it’s price increases, it’s new customers, it’s upsell, it’s downsell. With those KPIs we steer the business and we expect, indeed similar growth trends in the regions. The growth will come from the enhancement of our G2 products, from the rollout of G3 products and also from churning out AI modules.
Conference Operator: We have a follow-up question from Knut Walder from Baden Bank.
Knut Waller, Analyst, Baden Bank: Maybe just on the growth. I think there have been some delays, for example, in harvesting the secure tailwind, which would be relatively high margin. And also in terms of Hospital Future Act, we have seen a lagging of the monetization or at least turning backlog into revenues. What kind of expectations for Sigur and Hospital Future Act have you factored into your guidance 2025? Thank you.
Daniela Hommel, CFO, CompuGroup Medical: Thanks, Knut, also for these questions. I want to remind you that we are generally are facing several regulatory initiatives of which Segura is only one. This year, we have considered, all of them with a risk adjustment in the budget in our guidance. The second wave of Segura specifically is expected to either start late this year or move to 2026 entirely. Please be reminded that we are dependent here on the decision of the French government and it’s not entirely in our hand.
With regard, to your observation on his, the observation is correct. There was a delay in churning out, the Karhat Sudgay products, the Hospital Futures Act products last year. We stated this also when we discussed the downturn in the one time revenues. However, the good news is, that can that is part of our 2025 plan, so we can catch up here and we are looking forward to doing this with our customers.
Knut Waller, Analyst, Baden Bank: Thank you very much.
Conference Moderator, CompuGroup Medical: Okay. And since there are no further questions, we would like to thank you very much for dialing in today. As always, Investor Relations is available for further questions, so don’t hesitate to shoot an e mail or give a call to Frederic or myself. Thank you very much for dialing in and have a nice day.
Conference Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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