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Research: TMT
MotorK’s FY23 revenue growth was robust across most regions, with slow growth regions gaining momentum. Q124 revenue fell slightly year-on-year due to delayed delivery contracts, but these are expected to contribute to Q2 sales. Revenue quality improved, with software-as-a-service (SaaS) recurring revenue rising as a share of group revenue in FY23. M&A continues to play a pivotal role in unlocking opportunities across MotorK’s markets, providing potential average contract value (ACV) expansion from customers migrating to the platform. While personnel investments for growth swung EBITDA to a loss, MotorK’s holistic SparK platform remains well-positioned to capitalise on the automotive industry’s digital shift and technological innovation.
Written by
MotorK |
Strong pipeline and cash target reaffirmed |
Q124/FY23 results |
Software and comp services |
1 May 2024 |
Share price performance
Business description
Next events
Analysts
MotorK is a research client of Edison Investment Research Limited |
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MotorK’s FY23 revenue growth was robust across most regions, with slow growth regions gaining momentum. Q124 revenue fell slightly year-on-year due to delayed delivery contracts, but these are expected to contribute to Q2 sales. Revenue quality improved, with software-as-a-service (SaaS) recurring revenue rising as a share of group revenue in FY23. M&A continues to play a pivotal role in unlocking opportunities across MotorK's markets, providing potential average contract value (ACV) expansion from customers migrating to the platform. While personnel investments for growth swung EBITDA to a loss, MotorK’s holistic SparK platform remains well-positioned to capitalise on the automotive industry’s digital shift and technological innovation.
Year end |
Revenue (€m) |
ARR |
PBT* |
Diluted EPS* (€) |
DPS |
EV/sales |
EV/EBITDA |
12/21 |
27.6 |
15.1 |
(8.2) |
(0.37) |
0.00 |
9.3 |
307.1 |
12/22 |
38.5 |
24.6 |
(8.8) |
(0.22) |
0.00 |
6.7 |
N/A |
12/23 |
42.9 |
34.1 |
(11.2) |
(0.24) |
0.00 |
6.0 |
N/A |
12/24e |
55.7 |
44.6 |
5.0 |
0.09 |
0.00 |
4.6 |
14.8 |
Note: ARR, annual recurring revenue. *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Robust FY23 results, but short of forecasts
FY23 annual recurring revenue (ARR) and committed ARR (CARR), MotorK’s key performance indicators (KPIs), were in line with the February trading update at €34.1m and €38.6m, respectively, but ARR was below our €37.2m forecast. FY23 revenue was up 11.4% y-o-y to €42.9m but c 17% below our forecast, reflecting a smaller-than-expected rise in contract assets, reflecting the group’s focus on larger value Enterprise contracts that have shorter term lengths. Cash EBITDA, which excludes contract asset changes and R&D capitalisation, was a loss of €14.9m, versus our €12.4m forecast. In Q124, management confirmed it expects to generate positive cash EBITDA in FY24, which is in line with our updated forecasts.
Converting strong pipeline key to cash target
MotorK reported a 2% y-o-y decline in revenue to €11.2m in Q124 despite a 30% increase in recurring billings to €8.5m, reflecting signed Q1 contracts, which management expects to contribute to Q2 revenue. ARR and CARR continued to grow from end-FY23 (up 3% and 1%, respectively) driven by enterprise strength, as well as backlog and contractual price increases. A €20m pipeline across its Retail and Enterprise segments provides robust FY24 growth potential. MotorK’s operational KPIs were strong, with low churn of 6.3% and net revenue retention of 111.1%, reflecting continued execution of the group’s land and expand strategy. Our revised FY24 forecasts reflect a lower FY23 revenue base, but a reduction in net debt supported by a €14m equity raise post year-end and positive FCF.
Valuation: Delivering cash EBITDA key for re-rating
For FY24e, MotorK trades at an EV/sales multiple of 4.6x (a 25% discount to peers) and EV/EBITDA of 14.7x (a 34% discount). We believe converting the €20m pipeline into revenue and achieving positive FY24 cash EBITDA are key for a re-rating.
Results show progress towards key cash milestone
MotorK closed FY23 with ARR of €34.1m, up 39% y-o-y, although below our €37.2m forecast. Adding signed contracts not yet delivered and billed, as well as contractual price increases totalling €4.5m, CARR was €38.6m at year-end, just below the company’s guided range of €39–43m. Of reported ARR, Retail contributed €26.7m, up 27% y-o-y, and Enterprise €7.4m, up 107% yoy.
The Enterprise division, MotorK’s fastest growing segment, reported a 107% y-o-y increase in FY23 ARR to €7.4m, while Retail grew robustly, up 27% y-o-y to €26.7m. Growth across both divisions was supported by a strong increase in new customers, with total organic customers reaching 891 in Retail (+20% y-o-y) and 38 in Enterprise (+90% y-o-y).
The group’s SparK platform underpins a successful land and expand strategy across its customer base, leading to robust net revenue retention of 113% in retail and 129% in Enterprise. There was low Retail churn of 5.8% and a 10% y-o-y progression in Retail ACV to €19.5k (Enterprise not disclosed) in FY23. Lead indicators are also positive with management believing there is scope to substantially expand the ACV of acquired customers, which typically have much lower-than-average ACVs when they first migrate onto SparK.
Exhibit 1: FY23 summary table
€m |
FY22 |
FY23 |
||||||
Actual |
y-o-y change |
Forecast |
Actual |
Change |
y-o-y change |
|||
Revenue |
38.5 |
40% |
51.4 |
42.9 |
-17% |
11% |
||
Operating expenses (excluding D&A, SBP and one-off items) |
(38.3) |
43% |
(45.0) |
(44.4) |
-1% |
16% |
||
Adjusted EBITDA |
0.2 |
-72% |
6.5 |
(1.4) |
N/A |
N/A |
||
Cash adjustment* |
15.9 |
131% |
18.9 |
13.5 |
-29% |
-15% |
||
Cash EBITDA |
(15.6) |
159% |
(12.4) |
(14.9) |
20% |
-5% |
||
Normalised operating profit |
(7.8) |
129% |
(4.1) |
(10.2) |
150% |
31% |
||
Share-based payments |
(1.5) |
-84% |
(1.6) |
(1.2) |
-25% |
-22% |
||
Exceptional items |
(3.5) |
9% |
0.0 |
(3.1) |
N/A |
-11% |
||
Reported operating profit |
(12.9) |
-21% |
(5.6) |
(14.5) |
158% |
13% |
||
Operating cash flow |
(9.2) |
152% |
4.0 |
(6.2) |
N/A |
-32% |
||
Net debt/(cash) |
(2.2) |
-93% |
6.8 |
21.3 |
213% |
N/A |
||
Source: MotorK, Edison Investment Research. Note: *Change in contract assets and R&D capitalisation.
The 11% y-o-y increase in FY23 reported revenue of €42.9m reflects a mix of a positive movement in ARR but slower growth in contract assets, reflecting the company’s focus on higher-value, but shorter-term Enterprise contracts. Reported revenue consists of billings plus the change in contract assets (revenue from multi-year deals is recognised in the year of signing, whereas customers pay over the life of the contract). The revenue mix also continues to improve, with SaaS recurring revenue reaching €32.5m, expanding 5pp year-on-year as a share of total revenue to 75%.
MotorK typically capitalises a portion of its development costs. In FY23, it capitalised 64% of its €14.5m R&D expenditure. We forecast capitalised R&D decreasing from 22% of revenue in 2023 to 17% in 2024, with the company targeting 10% by 2026. R&D contributed to 91% of the group’s overall FY23 capex.
Opex remained high during the year but within our expectations. Negative free cash flow and €3.2m deferred consideration related to the acquisition of GestionaleAuto.com, to be paid in June 2024, moved the group from a net cash position to a net debt position of €21.3m. A €2m cost reduction programme announced in H123 added to costs, but management expects this to generate €2.7m in annual run-rate savings starting in FY24, which should support operationally geared growth – reflected in our forecasts.
Q1 results mixed; several indicators to drive FY24 momentum
Q124 reported revenue was down 1.6% y-o-y to €11.2m, reflecting a higher proportion of delayed-delivery contracts booked in the quarter, which management expects to contribute to Q2 revenue. Geographically, the decline in revenue was driven by the more recently entered markets of Spain and Germany, where revenue fell by 7% y-o-y to €1.2m and 53% y-o-y to €719k, respectively. As shown by its FY23 results, MotorK can deliver rapid growth in new markets, which is evidenced by the 140% y-o-y revenue increase in Germany.
ARR and CARR were only up 3% q-o-q to €35.1m (+26% y-o-y) and 1% q-o-q to €39.1m (+16% yoy), respectively, but a €20m pipeline in its Retail and Enterprise segments provides robust FY24 growth potential.
Exhibit 2: Summary of Q124 results
€m |
Q124 |
Q123 |
y-o-y change |
SaaS |
8.5 |
8.7 |
(2.6%) |
Digital marketing |
2.4 |
1.8 |
32.3% |
Other |
0.4 |
0.9 |
(58.7%) |
Total revenue |
11.2 |
11.4 |
(1.6%) |
% recurring revenue |
75% |
76% |
(0.5%) |
ARR |
35.1 |
27.9 |
25.8% |
Committed ARR |
39.1 |
33.7 |
16.0% |
Source: MotorK
In addition to the €12.3m capital raise announced in February, management announced a €1.7m raise with its Q1 results; the aim of the raise is to diversify its shareholder base and strengthen the company’s financial position. The reserved capital increase, based on a reference price per share of €4.00, resulted in the issue of 425,000 new ordinary shares and is subject to a six-month lock-up period.
Forecasts still aligned with cash EBITDA target
We revise our FY24 revenue forecasts, expecting similar levels of growth to our previous forecasts off a lower FY23 base. That said, we increase our cash EBITDA forecast in line with a reduction in the expected growth of contract assets. The impact of lower revenue on the adjusted EBITDA margin is partially offset by our lower expectation for general and administrative costs, reflecting the c 40% cost reduction achieved in H223. We note H123 was affected by significant one-off consulting fees, which we do not anticipate reoccurring in FY24.
Exhibit 3: Summary of forecast changes
€m |
FY24e old |
FY24e new |
Change |
y-o-y |
|
Revenues |
62.8 |
55.7 |
-11.2% |
29.8% |
|
Adjusted EBITDA |
21.0 |
17.3 |
-17.6% |
N/A |
|
Adjusted EBITDA margin |
33.4% |
31.0% |
-2.4% |
34.4% |
|
Cash EBITDA |
0.1 |
1.0 |
1,569.9% |
N/A |
|
Cash EBITDA margin |
0.1% |
1.8% |
1.7% |
36.5% |
|
Reported operating profit |
6.0 |
3.0 |
-50.5% |
N/A |
|
Reported operating margin |
9.6% |
5.4% |
-4.2% |
39.2% |
|
Normalised PBT |
6.6 |
5.0 |
-24.5% |
N/A |
|
Reported PBT |
5.1 |
1.7 |
-66.6% |
N/A |
|
Normalised net income |
5.1 |
3.8 |
-24.5% |
N/A |
|
Reported net income |
3.8 |
1.3 |
-66.6% |
N/A |
|
Normalised diluted EPS (€) |
0.12 |
0.09 |
-28.4% |
N/A |
|
Net debt/(cash) |
12.6 |
3.5 |
-72.0% |
N/A |
|
ARR |
49.6 |
44.6 |
-10.0% |
30.9% |
Source: Edison Investment Research
As shown previously, the €14m cash injection from the two capital raises drives a substantial reduction in our net debt forecast to €3.5m. We believe the group is in a strong position to move back to a net cash position in the mid-term if it can maintain its positive free cash flow trajectory.
Exhibit 4: Financial summary
€m |
2019 |
2020 |
2021 |
2022 |
2023 |
2024e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
27.9 |
19.3 |
27.6 |
38.5 |
42.9 |
55.7 |
Annualised recurring revenue |
|
|
7.5 |
10.0 |
15.1 |
24.6 |
34.1 |
44.6 |
Operating costs excl. D&A |
(26.5) |
(20.5) |
(26.7) |
(38.3) |
(44.4) |
(38.5) |
||
EBITDA |
|
|
1.5 |
(1.1) |
0.8 |
0.2 |
(1.4) |
17.3 |
Normalised operating profit |
|
|
(0.8) |
(4.3) |
(3.4) |
(7.8) |
(10.2) |
6.3 |
Exceptionals |
(0.0) |
(0.1) |
(3.2) |
(3.5) |
(3.1) |
(2.1) |
||
Share-based payments |
(0.2) |
(0.1) |
(9.7) |
(1.5) |
(1.2) |
(1.2) |
||
Reported operating profit |
(1.1) |
(4.5) |
(16.4) |
(12.9) |
(14.5) |
3.0 |
||
Net Interest |
(1.4) |
(1.8) |
(4.8) |
(1.0) |
(1.0) |
(1.3) |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
(2.3) |
(6.1) |
(8.2) |
(8.8) |
(11.2) |
5.0 |
Profit Before Tax (reported) |
|
|
(2.5) |
(6.3) |
(21.2) |
(13.9) |
(15.6) |
1.7 |
Reported tax |
1.1 |
0.9 |
(2.8) |
(0.1) |
2.3 |
(0.4) |
||
Profit After Tax (norm) |
(1.1) |
(5.2) |
(11.0) |
(8.9) |
(9.6) |
3.8 |
||
Profit After Tax (reported) |
(1.4) |
(5.4) |
(23.9) |
(14.0) |
(13.2) |
1.3 |
||
Discontinued operations |
1.6 |
0.0 |
0.4 |
6.7 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
(1.1) |
(5.2) |
(11.0) |
(8.9) |
(9.6) |
3.8 |
||
Net income (reported) |
0.2 |
(5.4) |
(23.5) |
(7.3) |
(13.2) |
1.3 |
||
Basic average number of shares outstanding (m) |
26 |
27 |
30 |
41 |
40 |
43 |
||
EPS - basic normalised (€) |
|
|
(0.04) |
(0.19) |
(0.37) |
(0.22) |
(0.24) |
0.09 |
EPS - diluted normalised (€) |
|
|
(0.04) |
(0.19) |
(0.37) |
(0.22) |
(0.24) |
0.09 |
EPS - basic reported (€) |
|
|
0.01 |
(0.20) |
(0.79) |
(0.18) |
(0.33) |
0.03 |
Dividend (€) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
128.8 |
(-30.8) |
42.6 |
39.9 |
11.4 |
29.8 |
||
EBITDA Margin (%) |
5.3 |
-5.9 |
3.0 |
0.6 |
-3.4 |
31.0 |
||
Normalised Operating Margin (%) |
-3.0 |
-22.3 |
-12.3 |
-20.2 |
-23.7 |
11.3 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
22.8 |
16.8 |
26.2 |
52.8 |
60.5 |
63.7 |
Intangible Assets |
11.2 |
9.9 |
18.0 |
36.8 |
46.5 |
46.2 |
||
Tangible Assets |
1.6 |
1.7 |
3.1 |
5.0 |
4.6 |
4.5 |
||
Investments & other |
10.1 |
5.2 |
5.2 |
11.0 |
9.4 |
12.9 |
||
Current Assets |
|
|
25.4 |
28.3 |
63.4 |
45.7 |
36.1 |
60.0 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
16.0 |
11.5 |
16.0 |
26.5 |
32.6 |
36.9 |
||
Cash & cash equivalents |
9.4 |
11.8 |
43.3 |
19.2 |
3.5 |
23.1 |
||
Other |
0.0 |
4.9 |
4.2 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(13.6) |
(14.5) |
(15.2) |
(18.1) |
(27.6) |
(32.7) |
Creditors |
(11.1) |
(6.1) |
(8.3) |
(12.0) |
(13.1) |
(21.4) |
||
Tax and social security |
0.0 |
0.0 |
(2.9) |
(3.8) |
(2.6) |
(2.6) |
||
Short term borrowings |
(2.5) |
(7.1) |
(2.7) |
(2.0) |
(11.8) |
(8.7) |
||
Other |
0.0 |
(1.3) |
(1.3) |
(0.2) |
(0.1) |
(0.1) |
||
Long Term Liabilities |
|
|
(27.1) |
(28.5) |
(10.0) |
(18.6) |
(17.3) |
(22.8) |
Long term borrowings |
(23.5) |
(25.6) |
(6.2) |
(15.1) |
(13.2) |
(18.2) |
||
Other long term liabilities |
(3.7) |
(2.9) |
(3.8) |
(3.5) |
(4.2) |
(4.6) |
||
Net Assets |
|
|
7.5 |
2.1 |
64.4 |
61.8 |
51.6 |
68.1 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
7.5 |
2.1 |
64.4 |
61.8 |
51.6 |
68.1 |
CASH FLOW |
||||||||
Net income |
0.2 |
(5.4) |
(23.5) |
(7.3) |
(13.2) |
1.3 |
||
Depreciation & amortisation |
2.7 |
3.8 |
4.2 |
8.0 |
8.7 |
11.0 |
||
Working capital |
(7.4) |
2.5 |
(2.0) |
(6.7) |
(2.9) |
0.9 |
||
Exceptional & other |
1.6 |
1.9 |
15.0 |
(3.2) |
4.2 |
2.5 |
||
Tax |
(0.1) |
(1.2) |
2.6 |
(0.0) |
(3.0) |
0.0 |
||
Net operating cash flow |
|
|
(3.0) |
1.7 |
(3.6) |
(9.2) |
(6.2) |
15.7 |
Capex |
(3.6) |
(3.2) |
(3.9) |
(9.1) |
(9.5) |
(9.4) |
||
Acquisitions/disposals |
(0.6) |
0.0 |
(5.4) |
(4.5) |
(3.9) |
(3.2) |
||
Net interest |
(0.5) |
(0.5) |
(6.9) |
(1.3) |
(0.6) |
(1.3) |
||
Equity financing |
0.0 |
0.0 |
70.1 |
(0.7) |
0.8 |
14.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(0.1) |
0.1 |
0.2 |
(0.1) |
(0.0) |
0.0 |
||
Net Cash Flow |
(7.8) |
(1.9) |
50.5 |
(24.7) |
(19.4) |
15.8 |
||
Opening net debt/(cash) |
|
|
8.2 |
16.2 |
20.6 |
(34.4) |
(2.2) |
21.3 |
FX |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.1 |
(2.5) |
4.5 |
(7.4) |
(4.1) |
1.9 |
||
Closing net debt/(cash) |
|
|
16.2 |
20.6 |
(34.4) |
(2.2)* |
21.3 |
3.5 |
Source: Edison Investment Research, company accounts. Note: *Restated in FY23 accounts.
|
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Research: Healthcare
Newron Pharmaceuticals has shared positive top-line data for its evenamide programme from its potentially pivotal Phase II/III trial (study 008A) in patients with poorly managed schizophrenia on current antipsychotic therapy, but not considered treatment-resistant. The trial met its primary endpoint of improvement on the Positive and Negative Syndrome Scale (PANSS) score from baseline, and the key secondary endpoint of improvement on the Clinical Global Impression of Severity (CGI-S) scale. Statistical significance was met in both, consolidating the already strong results from the Phase II trial (study 014/015) in treatment-resistant schizophrenia (TRS). Management plans to follow this up with a potentially pivotal Phase III study in TRS (study 017), which, subject to final agreement by potential partners and regulatory bodies, could commence within 2024.