International managed service provider Cancom has reported a big increase in sales and recurring revenue for the first quarter, although the Munich, Germany-headquartered firm has confirmed the second quarter will be tougher as a result of the pandemic.
The company said group revenue in the first quarter ending March increased 27.3% to €453.8m year-on-year. And EBITDA was €26m – up 3.5% annually. These earnings were affected by a €2.4m executive board severance payment, believed to be paid to the company's previous CEO who walked out on the firm at the beginning of the year, after a disagreement over business strategy.
The EBITDA margin was 5.7%, down from 7% the previous year. At €189.1m, Cancom's annual recurring revenue (ARR) achieved a growth rate of 35.5% when compared to the prior year.
In organic terms - without taking into account recent company acquisitions - revenue growth was 22.7%. The sale of more software licenses and hardware for remote working during the pandemic was a main driver for the overall sales increase, said Cancom. Rudolf Hotter, the new CEO of Cancom, said: "We achieved an outstanding revenue performance in the first quarter and were able to acquire many new customers. There was particular demand for laptops and tablets for working on the move or in the home office. High sales in the PC client business, which has lower margins than the professional and managed services business, and the special effect of the executive board severance payment, are the main reasons for the lower EBITDA margin."
In the group segment of Cloud Solutions, Cancom achieved a 35% increase in revenue in the first quarter to €87.5m. EBITDA rose by 19.3% to €18.9m, which equates to an EBITDA margin of 21.6% (prior year: 24.4%).
On forecasts going forward, Hotter said: "It is already becoming apparent that, as expected, the second quarter will be significantly burdened by the coronavirus crisis and the almost complete shutdown in April and May.
“Although uncertainty about further economic development remains very high, in view of the high growth rate in the first quarter and assuming a normalisation of the general conditions in the third and fourth quarters, we are maintaining our annual forecast of moderate revenue and earnings growth."
For the full year 2019, Cancom generated revenues of €1.64bn, which was up 18.9% year-on-year, and EBITDA was €134m - up 16.7%.
