Penneo: Demand remains weak, but still many positives - ABG

Q2 numbers almost bang in line with our estimates (0-1% deviation)
Still no signs of improving demand, but Q2 also had many positives
'23e-'25e adj. EBITDA up 2-5%, but cash burn still looks worrisome

Demand still weak, but do not forget the positives
We leave '23e-'25e ARR unchanged, as these estimates already reflect weak demand in '23e and an improvement beyond; Q2 provided more support for this thesis. We expected no signs of improving demand, so the reiterated FY'23 guidance of DKK 87m-95m came as no surprise (ABGSCe at DKK 89.1m). Several factors from the Q2 report, however, provide support for higher growth once demand improves. We note strong growth in the number of new customers, and while the initial deal sizes from these are lower today, the combination provides further support for a strong uplift beyond '23e. Belgium is also experiencing strong growth, suggesting good prospects for Penneo's further international expansion. Churn also remained very low at ~4%.

Adj. EBITDA up 2-5% on fewer hirings; cash burn still a worry
We lift '23e-'25e adj. EBITDA by 2-5% (note numbers close to zero, however), with the revision beyond '23e driven by a tad lower hiring estimates following management's comments at the conference call today. Looking at H2, weak profitability in Q3 should not raise any concerns, as we expect the seasonally stronger Q4 to more than compensate, and we thus expect Penneo to reach its reiterated FY'23 adj. EBITDA guidance of negative DKK 10m-15m (ABGSCe -12.3m). The higher-than-expected cash burn in Q2, driven by weaker-than-expected NWC and higher R&D capitalisation, was the only negative surprise in the Q2 report, and we stick to our estimate of a need for new capital in '24. However, we remain positive on the long-term prospects given strong SaaS metrics, a quality product offering, and vast markets with strong demand drivers.

FVR adjusted to DKK 5-13 (6-13)
We keep the top end of our FVR at DKK 13, while we reduce the lower end to DKK 5 (6) on....

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