Napatech: Low gross margin due to timing of order - ABG
Sales 2% below and GM of 51% vs ABGSC at 70%
Reiterates 2022 outlook with GM of 69-70%
Expect small negative changes to 2022 consensus
Significant miss on GM largely explained by timing of order
Napatech delivered Q1 sales of DKK 52.2m, up 12% y-o-y (+4% adj. for FX). This is 2% below our estimate of DKK 53m. The gross margin was 51% vs. ABGSC at 70%, i.e. significantly below our estimates. This is explained by lower margins due to delivery of large hardware-only order with plan to buy software later. If the software had been shipped with the hardware, revenue in Q1 would have been USD 9.5m (i.e. ~DKK 63m) with 60% gross margin. As such a remaining ~10pp of the deviation is explained by customer/product mix and new price list that was not in effect in Q1. Operating costs were DKK -36m, in-line with ABGSC at DKK -36m. This resulted in an EBITDAC of DKK -9.1m vs. ABGSC at DKK 1m. FCFF was DKK -11.2m vs ABGSC at DKK -4m.
Reiterates FY 2022 guidance and gross margin of 69-71%
The company reiterates its 2022 sales guidance of DKK 235-260m, i.e. a midpoint of DKK 248m, which is in line with our current estimate of DKK 247m. Napatech also reiterates its gross margin guidance of 69-71%, vs. ABGSC at 70%, and total operating costs of DKK 155-165m, vs. ABGSC at DKK -164m. This results in a 2022 EBITDAC guidance of DKK 13.3m on a midpoint basis which is above ABGSC at DKK 9m.
Expect small negative changes to 2022 consensus
Following the report, we expect to see small negative changes to consensus estimates for 2022. The quarter was affected by the hw-only order resulting in a low gross margin. However, the company stress that they expect the sw-part of this order to be placed later in 2022 (Q2-Q3). In addition, with an expected normalization of the customer mix in Q2 and new prices in effect, the company reiterates its gross margin targets for 2022 which is supportive to our full year estimates. Note that component pricing challenges are already factored into their targets.
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Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/Napatech/Equity-research/2022/5/napatech---low-gross-margin-due-to-timing-of-order/
