Thank you for the write up. One question if I may.
Margins historically (pre covid) were substantially below current levels: why do you believe they will be able to retain higher margins for longer? in other words why are current margins sustainable as opposed as being a result of increased demand / cycle? B&C margins were higher historically, and have declined during covid, but now have returned to their longer term averages. Powersoft's operating margins were around 10% in 2017-2018-2019 and 12.4% in 2016. After the covid bounce they're now at 20%+. Why is this the new normal?
The major part of the better margins are the economies of scale / operational leverage. So if revenues go back to levels pre-covid, the margins will definitely also be lower. Another part is that they switched from a pure product company to a more solution focused business model which is more favorable from a margin aspect. But on the other side, Powerside is also increasing its sales depoartment, so costs will also increase going forward. Management expects that a 26 % EBITDA-Margin is reasonable for the forseeable future.
Really comprehensive write up!
Thanks!
Thank you for the write up. One question if I may.
Margins historically (pre covid) were substantially below current levels: why do you believe they will be able to retain higher margins for longer? in other words why are current margins sustainable as opposed as being a result of increased demand / cycle? B&C margins were higher historically, and have declined during covid, but now have returned to their longer term averages. Powersoft's operating margins were around 10% in 2017-2018-2019 and 12.4% in 2016. After the covid bounce they're now at 20%+. Why is this the new normal?
thank you
The major part of the better margins are the economies of scale / operational leverage. So if revenues go back to levels pre-covid, the margins will definitely also be lower. Another part is that they switched from a pure product company to a more solution focused business model which is more favorable from a margin aspect. But on the other side, Powerside is also increasing its sales depoartment, so costs will also increase going forward. Management expects that a 26 % EBITDA-Margin is reasonable for the forseeable future.