PSI Software's Q3 2024 Loss: A Setback Amidst Recovery Efforts

PSI Software SE, a leading provider of AI-driven solutions, reported a loss per share of €0.12 in the third quarter of 2024, marking a significant reversal from the €0.088 profit per share in the same period last year. This decline can be attributed to the cyberattack that occurred in February 2024, which has had a lasting impact on the company's financial performance. Despite the challenging quarter, PSI is taking steps to recover and improve its financial situation.

The cyberattack in February 2024 had a substantial impact on PSI Software's revenue and profitability. Sales decreased by 3.8% to €177.4 million, with the Energy Management segment experiencing a 7.6% drop in sales to €84.8 million. The operating result was negative at -€19.4 million, a stark contrast to the -€2.7 million in 2023. Cash flow from operating activities was also negative at -€34.2 million. However, PSI has resumed productive operations and is implementing measures to enhance IT security, expecting improved financial performance in the fourth quarter.

The cyberattack specifically impacted PSI Software's Energy Management and Production Management segments. The Energy Management segment, which focuses on energy grids, energy trading, and public transport, experienced a 7.6% drop in sales and a substantial deterioration in its operating result to -€19.5 million. This was primarily due to lower productivity following the cyberattack, particularly in fixed-price projects. However, the segment's business has been normalizing since then. In contrast, the Production Management segment, which deals with metals, industry, and logistics, maintained stable sales but saw a decrease in operating profit. Despite this, the segment achieved a 23% year-on-year improvement in its operating result to €3.7 million in the third quarter, indicating a faster recovery from the cyberattack's consequences.

The cyberattack also influenced PSI Software's cash flow and liquidity position. Cash flow from operating activities was -€34.2 million in the first nine months of 2024, compared to -€6.5 million in the same period of 2023. This decline was primarily due to the cyberattack and one-off working capital changes. Cash and cash equivalents fell to €27.4 million, a decrease of €19.6 million from the previous year, offset by higher current financial liabilities. Despite these challenges, PSI has sufficient funds for financing and expects a significant improvement in cash and cash equivalents in the fourth quarter. The company is implementing measures to enhance IT security and resume productive operations, aiming to improve financial performance.

PSI Software is taking several measures to enhance its IT security and prevent future cyberattacks. Following the cyberattack in February 2024, the company has resumed productive operations since the beginning of May and is now almost completely back to normal. In the course of the restart, further measures were adopted that will significantly increase the security of the IT systems as part of a revised IT strategy and are currently being implemented. These measures are expected to improve the company's financial performance in the fourth quarter.

In conclusion, PSI Software's third quarter 2024 results reflect the lingering impact of the February cyberattack. Despite the challenges, the company is taking steps to recover and improve its financial situation. Investors should monitor PSI's progress and consider its potential for recovery in the coming quarters. As an investment-focused perspective, it is essential to prioritize stable, income-generating investments that offer consistent returns, such as utilities, renewable energy, and REITs, over speculative ventures like AI that lack profitability. By diversifying investment portfolios and capitalizing on undervaluations created by market perceptions, investors can secure steady returns and mitigate risks.