LS telcom Misses Full Year 2024 Earnings Expectations Amid Project Delays and Weak European Demand

Telecommunications software and systems provider LS telcom AG (WKN: 575 440 / ISIN: DE0005754402) reported full-year 2024 earnings that fell short of analysts’ expectations. The company’s sales for the year ended September 30, 2024, were EUR 41.36 million, down from EUR 47.26 million in the previous year. Revenue was EUR 42.71 million, compared to EUR 48.61 million in the prior year. Net loss was EUR 3.6 million, compared to a net income of EUR 0.213 million in the previous year. Basic loss per share from continuing operations was EUR 0.62, compared to a basic earnings per share of EUR 0.04 in the previous year. Diluted loss per share from continuing operations was also EUR 0.62, compared to a diluted earnings per share of EUR 0.04 in the previous year.

LS telcom attributed the earnings miss to several factors, including project delays, software delivery issues, and weak demand for spectrum management solutions from public order givers in Europe. The company’s press release on December 6, 2024, stated that the full year was particularly affected by delays in several large, high-margin software projects that were already agreed upon. Additionally, at a major customer, the software could not be fully delivered due to the customer’s incomplete IT environment. The weak demand for spectrum management solutions from public order givers in Europe further impacted the company’s revenue and earnings.

Despite these challenges, LS telcom managed to reduce its foreign service provider costs by 37% or EUR 3.1 million, bringing the total cost down to EUR 5.37 million. The company also increased the productivity of its development teams at offshore locations like India, helping to maintain personal expenses at nearly the same level as the previous year, with EUR 23.92 million compared to EUR 23.37 million. However, these efforts were not enough to offset the overall decline in earnings.

Looking ahead, LS telcom expects to return to revenue growth and positive EBIT in the following year. The company’s press release stated that the board of directors expects revenue to be between EUR 41.0 million and EUR 46.0 million, and EBIT to be between EUR 0.8 million and EUR 1.9 million. LS telcom also plans to strengthen its sales activities in the defense sector, leveraging its expertise in radio frequencies and drones. The company is currently in several promising negotiations for potential new projects.

LS telcom’s shares have fallen 8.81% in the last 52 weeks, reflecting investors’ concerns about the company’s earnings miss and the challenges it faces in the current market environment. The stock’s beta is 0.86, indicating that its price volatility has been lower than the market average. Despite the recent decline, LS telcom’s shares remain attractive to some investors, given the company’s strong position in the telecommunications software and systems market and its potential for growth in the defense sector.

In conclusion, LS telcom’s full-year 2024 earnings missed expectations due to project delays, software delivery issues, and weak demand for spectrum management solutions in Europe. However, the company has taken steps to reduce costs and improve efficiency, and it remains optimistic about its prospects for the coming year. Investors should closely monitor LS telcom’s progress as it works to overcome these challenges and return to revenue growth and positive earnings.