Formpipe: First step towards improving margins - ABG

3% sales miss, but better underlying profits than expected
'23e-'25e EBIT down 12-5% on lower sales and higher D&A
Key peer for Private (SignUp) has received a public bid


Improved margins

After four consecutive quarters with poor margins, Formpipe showed solid progress in Q1. The EBIT margin of 5.5% expanded from 2.9% in Q1'22, stemming from: 1) solid sales growth of +6% y-o-y (albeit -3% vs. ABGSCe due to lower delivery sales than we expected), and 2) a significant slowdown in opex, which grew 2% y-o-y (vs. +15-23% y-o-y in the previous four quarters). Although EBIT of SEK 7m was below ABGSCe SEK 9m, it should be noted that profits suffered from lower capitalised costs and higher D&A. As such, EBITDA-CDC of SEK 11m rose from SEK 5m in Q1'22. Both Public SE and Public DK had a solid quarter, while sales in Private saw headwinds from lower delivery sales and a more hesitant ERP market. On the latter, SaaS ACV was SEK 5m (flat vs Q1'22). We remain cautious on ACV in Private in Q2e, but expect improvements in H2e, partly in light of Temenos' recent wording.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/formpipe/Equity-research/2023/4/formpipe---first-step-towards-improving-margins/