Penneo: Impressive SaaS metrics, investing in growth - ABG

Q2’22 slightly on the weak side Good potential if strong SaaS metrics continue New 1-year fwd. fair value range of DKK 9-24 (12-26) Q2 ARR and adj. EBITDA lower than ABGSCe Penneo reported Q2 ARR of DKK 64m (-8.0% vs. ABGSCe at DKK 69m), resulting from lower uplift of 17% and new ARR of 19%. However, the churn rate was kept low at 3%. Adj. EBITDA was DKK -4m (vs. ABGSCe at DKK 0m). The company reiterated its FY’22 guidance of DKK 77m-82m in ARR and negative adj. EBITDA of DKK 15m-20m.

Impressive SaaS metrics mean waiting longer for profitability We note that SaaS companies have seen significant multiple contractions YTD’22, as investors generally put more weight on profitability than previously – even on fast-growing SaaS companies. Penneo has demonstrated a churn rate of ~2-4% (avg. of 3%) from Q2’20-Q2’22, translating into an LTV of ~30 years and a LTM LTV/CAC ratio of 20x, which is impressive. At the same time, it has demonstrated a net retention rate averaging ~120% from Q2’20-Q2’22, with the majority of ARR uplift coming from pure upselling. Thus, if Penneo continues to deliver strong SaaS metrics, we believe it should continue to invest aggressively in growth, as this will maximise long-term shareholder value. However, we acknowledge the risk that slower growth and funding constraints may require the company to focus on becoming profitable earlier.

New 1-year fwd. FVR of DKK 9-24 per share (12-26) Following a change of analyst, we have thoroughly revised our estimates. We now estimate an ARR CAGR ’21-’24e of 36%. Due to the company’s focus on growth, however, we do not expect Penneo to reach profitability in ’22e-’24e, resulting in continued high cash burn. Based on our estimates, we calculate a 1-year fwd. fair value range (FVR) of 9-24 per share (12-26). We derive the upper end of our FVR of DKK 24 from a DCF and the lower end of DKK 9 using multiples from U.S. e-sign vendor DocuSign. We also make use of EV/ARR transaction multiples from Apax Partners’ acquisitio ... Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/penneo/Equity-research/2022/8/penneo---impressive-saas-metrics-investing-in-growth/