USU Software is Europe’s largest provider of IT and knowledge management software. Its focus on investing in R&D and international expansion has seen it achieve a robust growth track record, which continued into H120. It expects to continue to grow in H220 and be profitable. Beyond 2020, USU is in a strong position to capitalise on the increased pace of digitisation forced on companies by COVID-19.
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USU Software |
SaaS-powered growth
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Technology |
Deutsches Eigenkapitalforum 2020
6 November 2020 |
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USU Software is Europe’s largest provider of IT and knowledge management software. Its focus on investing in R&D and international expansion has seen it achieve a robust growth track record, which continued into H120. It expects to continue to grow in H220 and be profitable. Beyond 2020, USU is in a strong position to capitalise on the increased pace of digitisation forced on companies by COVID-19.
R&D is the key
USU is focused on growing its high-margin software business (78% of 2019 revenue) that includes three main solutions: IT/enterprise service management; software licence management; and digital customer service. It consistently invests a sixth of its annual revenue on R&D, focused on growth areas of AI, cloud management and enterprise service management. The group continues to expand into new markets, making recent forays into Asia and Scandinavia, along with strengthening its position in the US and France. M&A is another lever of USU’s growth strategy, with a focus on acquiring software solutions related to its existing portfolio of products. USU has racked up an impressive track record, with revenue increasing at a CAGR of 9.4% between 2013 and 2016. The company distributes half its operating profit and has a 14-year track record of maintaining or growing its dividends. In the medium term, USU is targeting revenue growth of 10% annually and an adjusted EBIT margin of 13–15% by 2024 (adjusted EBIT in 2019: 6.5%).
Strong performance in first half of 2020
H120 revenue was up 16% y-o-y to €52.1m, benefiting from growing SaaS sales and a strong showing by the IT services business, outpacing cost of sales (+14.4% y-o-y) and operating cost, resulting in adjusted EBIT increasing over 5x to €3.9m (€0.69m in H119). This led to a net profit in H120 of €3.1m (net loss of €0.96m in H119). USU ended the period with its net cash position nearly doubling to €19.2m (€10.4m at the end of 2019). Orders on hand at the end of H120 were a record €59.5m, 21% above the end of 2019 at €49.2m. For H220, USU expects revenue growth versus H219 levels and to be profitable at the adjusted EBIT level, even if there is a significant deterioration of economic conditions due to COVID-19.
Consensus growth to outperform industry
USU’s shares trade at 24.9x 2021e consensus earnings. Although this seems expensive, we note that consensus forecasts for USU imply top-line growth of 9.8% in 2020 and 13.3% in 2021, which is robustly ahead of the 5.4% decline forecasted for global IT spending by Gartner in 2020 and 4% growth for 2021.
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Consensus estimates
Source: Company data, Refinitiv |
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