SUSE Q2 results see shares down amid slowing revenue growth

green Indian chameleon sitting on a branch | SUSE Private

SUSE has announced its financial results for Q2 2023, revealing a turbulent quarter with its revenue growing by one percent to $161.9m, while its core revenue was down 1 percent from the previous year, reaching $132m.

As a result, the firm’s shares fell 10 percent to €11.26 at 07.37 GMT yesterday, before further slumping to €10.33 at 16.35 today.

Meanwhile, for the half year, SUSE’s reported sales reached $330.31m, a jump from $313.32m last year and its annual recurring revenue was up 6 percent from $658m January 31, 2023.

SUSE also announced its new regional sales structure with sales leadership changes underway, including the appointment of new CRO Werner Knoblich, to enable closer customer relationships.

The developer of Linux products said that trading was softer than anticipated in the quarter and attributed the slump to “the impact of the ongoing economic uncertainty on customers’ decision-making” resulting in “further delays to the completion of new contracts and a reduction in average contract lengths”.

Furthermore, the firm explained that sales force reorganization during Q1 did not gain the expected level of traction and impacted performance. Growth in sales through the Cloud route-to-market was also lower than anticipated. These have collectively led to downward pressure on current and expected revenues and cashflow in 2023.

Operating profit was $12m, down 63 percent, reflecting primarily a higher unrealized foreign exchange loss. While, net cash inflow from operating activities was $4m, down 83 percent and also driven by lower annual contract value and shorter contract lengths.

Speaking just after his first two months on the job, Dirk-Peter van Leeuwen, CEO of SUSE, said: “We have some challenges to address. I have already taken swift actions to unlock future growth and we will continue to set up our organization for success over the coming quarters. With these changes and the growth in our markets, open source model and strong product portfolio, I am very confident we are well placed to deliver on our long-term potential.”

Jonathan Atack, interim CFO of SUSE, also said: “We are navigating the current headwinds and we continue to grow, with high-profit margins, and to generate cash. By maintaining an appropriate level of investments across the business, we are ensuring that we will reaccelerate growth as our performance and markets recover.”

The firm’s headcount remained similar in Q2 compared to the prior quarter, with the company pledging to continue investing in R&D functions, offset by a modest decline in its sales force.

Over the quarter, SUSE delivered a new version of Rancher and added new paid-for components to enhance the value of Rancher Prime, it also launched the latest version of its enterprise Linux platform, designed to deliver high-performance computing capabilities essential for AI workloads.

In addition, the company also recently appointed chief revenue officer Werner Knoblich in July and said it will announce the replacement of its previous CFO in due course, following last month’s shake up.