SoftwareOne going through tough times in Q3 trading
Swiss reseller Q3 numbers hit by an overly hasty GTM strategy
SoftwareOne today shared what CEO Raphael Erb referred to as “disappointing” numbers in a Q3 trading update.
Group revenue went slightly up by 3.1 per cent year-on-year in constant currency (ccy) and 1.4 per cent in reported currency to CHF 236.7m (£210.53m) in Q3 FY24, (prior year: CHF 233.4m).
The contribution margin climbed up 5.2 per cent year-on-year ccy to CHF 153.5m, driven by continued optimisation of the delivery network.
Adjusted EBITDA dipped 15.8 per cent year-on-year ccy to CHF 39.2m (previous year: CHF 47.9m).
Adjusted EBITDA margin declined by four per cent, from 20.5 per cent to 16.6 per cent year-on-year.
The strengthening of the Swiss Franc compared to the Euro, US dollar and Brazilian real led to a negative foreign currency translation impact of 1.7 per cent on group revenue.
Double-digit revenue growth in APAC (24.3 per cent) and DACH (11.3 per cent) helped raise the bar a little, but was dampened by poor performances in EMEA, NORAM and LATAM, where revenue decreased respectively by 6.5 per cent, 15.4 per cent, and 6.1 per cent.
The services giant attributed the below-expectations results to sales execution issues due to the new go-to-market (GTM) strategy implementation.
This, it said, impacted the ability to respond to vendor incentive shifts, as well as a more wary spending environment.
“While certain regions continued to demonstrate momentum in Q3 2024, our overall performance did not meet expectations,” said Rodolfo Savitzky, CFO of SoftwareOne.
Complicated GTM model implementation
The accelerated implementation of the GTM model, which was intended to better align sales resources to the needs of the company’s different client segments and drive sales productivity, considerably dragged down revenue across key markets.
The “rushed” execution in NORAM, DACH, UKI, Mexico, Brazil and India at the end of Q2 FY24 impacted SoftwareOne’s ability to respond to vendor incentive shifts.
Other changes included redefining sales roles, internal transitions and reshuffling of some client accounts, new hires and the exiting of employees.
New digital sales hubs in Nashville and Barcelona also required a growth in headcount.
These different factors led to significant sales execution issues, which were identified in Q3 2024, in NORAM, in the UK and Mexico, resulting in missed sales opportunities and unsatisfactory quota attainment.
EBITDA and EBITDA margin were also hit by investments in the GTM concept, as well as higher corporate expenses.
“Our third-quarter results were disappointing,” said Erb.
“This was due to a combination of factors, including the rushed implementation of our new GTM model, which led to sales execution issues impacting our ability to effectively respond to changed vendor incentives, as we have done in the past.”
Erb recently took over from Brian Duffy as CEO to steer the company into better waters after weak performances through Q1 and H1 FY24.
Looking ahead
The leadership team is trying to learn from the lessons being taught by the current situation, as it aims to make 2025 a profitable year.
“The changes we are implementing will empower our frontline and country organisations by reducing corporate overheads and management layers,” stated Erb.
The Swiss reseller is also planning on saving more than CHF 50m in annual cost by the end of Q2 FY25, in a move to “drive sustainable profitable growth.”
“With operational excellence and the GTM concept, we have built a solid foundation and now the focus must be fully on execution,” said Savitzky.