Formpipe: Strong ACV and a strategic product sale - ABG

Adj. sales up 2% y-o-y but -4% vs. ABGSCe
There were two key areas worth emphasising in FormPipe’s Q2 report. First, in light of its intensified growth focus, Private saw 20% y-o-y growth coupled with a very strong ACV of SEK 7.5m (vs. SEK 4.6m in Q1 and SEK 3.1m in Q2’20). Second, the company has recently sold the product rights for its TAS product to the Danish Agriculture agency (Landbrugsstyrelsen), which gave SEK 41m gross proceeds to net sales and SEK 29m to EBIT. As the product was already mainly concentrated on Landbrugsstyrelsen, not only did the transaction entail a solid contribution to earnings, but it also freed up resources to use in other, more scalable projects with better growth outlooks. As such, we can see the benefits of the agreement. Adjusting for this, sales were SEK 102m (-4% vs. ABGSCe), up 7% y-o-y excl. FX, while adj. EBIT came in at SEK 3.9m (vs. ABGSC SEK 5.7m) for a margin of 3.8%. Although this was a tad below our forecasts, we think that the overall Q2 numbers were good, particularly given the strong ACV number.

We trim our Delivery sales forecasts
While the solid ACV leads us to increase our SaaS forecasts, we trim our adj. ’21-‘23e sales estimates on lower Delivery sales forecasts. We still expect Q2 to mark the trough in terms of Delivery sales, but now expect slightly slower growth in H2’21e. In terms of adj. EBIT, we cut our ’21 forecast by 13% (note a small change in absolute terms), ‘22e by 4%, and ‘23e by 2%.

21x ‘23e EV/EBIT, ’20-‘23e sales CAGR of 8%
In our view, FormPipe continues to execute well on its new growth strategy. With the acquisition of EFS, it has strengthened its relationship with Temenos, and we expect this to driver further growth for Private ahead. For Public Sweden, we remain cautious in the near term due to an intensified competitive landscape, but believe that growth should come back in 2022 as the firm seeks to allocate more resources to this area. On our new forecasts, FPIP’s share is trading at 21x ‘23e EV/EBIT.

https://www.introduce.se/foretag/formpipe/Equity-research/2021/7/formpipe---strong-acv-and-a-strategic-product-sale/