Penneo: ABGSC’s DK small/mid-cap seminar feedback - ABG

Mgmt. with emphasis on low churn and high uplift

Confident in demand for Sign and KYC offerings

Sees no need for new capital raise

Considerable focus on low churn and high uplift
Today we had the pleasure of hosting Penneo, represented by the CEO, Christian Stendevad, and the CFO, Casper Christiansen, at our Danish small/mid-cap seminar. During the presentation, management spent a considerable amount of time diving into the company’s low churn and high uplift. For instance, Penneo is still able to upsell to customers acquired in 2014, which we believe is a testament to the quality and benefits of its product offerings.

Mgmt. confident in demand despite challenging outlook
With the demand for its KYC offering primarily being driven by regulation and compliance (i.e. a clear need to have), management indicated that the demand for the KYC offering should be less cyclical. This contrasts with the company’s Sign solution, which is primarily driven by efficiency gains and cost reductions. We note from previous conversations with management that it has seen slightly longer sales cycles for the Sign offering lately. However, this seems to be of little concern, with management today instead emphasising the vast size of the market for digital signatures, which is further driven by the continued digitalisation both in the Nordics and particularly in Europe.

Sees no need for capital raise – cash positive est. in Q2’24
We note that investors now generally attach a much higher weight to profitability than previously – even for fast-growing SaaS companies. As Penneo is currently loss-making and has a high cash burn, we were not surprised that the company’s cash position was of particular interest among the audience today. However, despite the high cash burn, management seems reluctant to raise new capital given its current strategy, estimating that it will become cash positive from Q2’24. However, if Penneo can sustain strong SaaS metrics in the years ahead and given that capital is ...
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