Penneo: One-time effects to boost '22 earnings - ABG

Q4 will mark a strong end to the year
Penneo will report its Q4'22 and FY '22 on 28 February. We lift '22e ARR slightly, to DKK 71.0m, for 28% y-o-y growth, to reflect the preliminary ARR figure announced on 19 January. However, we raise '22e adj. EBITDA significantly, to negative DKK 11.3m. This is in line with the new guidance of negative DKK 10m-12m and is a result of the company recognising a significant amount of one-time fees in Q4 from customers using Penneo's services beyond their initial agreements (this has no effect on ARR). Lower provisions and less recruitment than the company anticipated contributes further to the improved profitability, but the latter was already implied in our estimates.

Better '22e mainly from one-offs, cash burn continues
While the improved profitability in '22e contributes to a much lower cash burn for the year (we estimate free cash flow of negative DKK 25.3m incl. leases), we have not extrapolated the higher profitability into '23e and '24e, as we consider the improvement in '22e to be mainly driven by one-offs. As such, we stick with our cautious short-term view in light of the high cash burn and continued cautious buying behaviour driving lower ARR growth. We still expect Penneo to return to higher ARR growth when the macro picture eventually normalises, as we remain positive about the long-term prospects given the impressive SaaS metrics historically, a quality product offering, and vast markets. However, we stick to our estimate of a need for a DKK 30m equity issue in '24e to allow for another round of growth investments.

Adjusted FVR of DKK 8-15/share on peer multiple expansion
Our DCF remains at DKK 15/share, while the lower end of DKK 8/share is lifted by higher DocuSign multiples.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/penneo/Equity-research/2023/2/penneo---one-time-effects-to-boost-22-earnings-/