MotorK — Strong pipeline and cash target reaffirmed

MotorK (AMS: MTRK)

Last close As at 22/05/2024

EUR5.80

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Market capitalisation

EUR259m

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Research: TMT

MotorK — Strong pipeline and cash target reaffirmed

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.

Max Hayes

Written by

Max Hayes

Associate Analyst

TMT

MotorK

Strong pipeline and cash target reaffirmed

Q124/FY23 results

Software and comp services

1 May 2024

Price

€5.18

Market cap

€235m

Net debt (€m) at 31 December 2023

(includes lease liabilities of €4.4m)

21.3

Shares in issue

45.4m

Free float

24.6%

Code

MTRK

Primary exchange

Euronext Amsterdam

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.9

12.6

161.0

Rel (local)

8.3

4.8

125.2

52-week high/low

€5.18

€1.87

Business description

MotorK is a European SaaS provider operating in the automotive retail industry, selling mainly in the EU5 but with a global presence. Its cloud-based platform, SparK, offers OEMs and dealers a suite of digital tools to support the vehicle lifecycle end-to-end.

Next events

AGM

30 May 2024

H124 results

25 July 2024

Analysts

Max Hayes

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5700

MotorK is a research client of Edison Investment Research Limited

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
(€m)

PBT*
(€m)

Diluted EPS* (€)

DPS
(€)

EV/sales
(x)

EV/EBITDA
(x)

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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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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