Formpipe - Walks the talk

Sales -2% y-o-y, but ARR grew 15% y-o-y We cut ’21e EBIT by 10% on higher cost assumptions 14x ’25e EV/EBIT, ’20-’25e EBIT CAGR of 19% Increased costs burdened profits Q1 was the first quarter following the newly announced strategy that sees the company now prioritising growth over profits. Although reported sales of SEK 101.5m did not show any improvements in growth terms (-2% y-o-y and -2% vs. ABGSCe) the company’s key metric for future growth, ARR, increased 15% y-o-y to SEK 271m. Meanwhile, opex was up 12% y-o-y, giving EBIT of SEK 5.7m, down vs.

SEK 14.8m in Q1’20. This was -29% vs. ABGSCe, with the shortfall stemming from higher-than-expected costs (we expected a headcount increase of 3 q-o-q while the reported figure was +17) as well as the 2% sales miss.

Recurring revenue grew 9% y-o-y to SEK 66m, and now accounts for 65% of sales (59% in Q1’20). Private and Public Sweden had a good quarter, while Public Denmark saw y-o-y growth of -20% (mainly due to lower Delivery revenues). We find it encouraging to see that FormPipe’s partner, Temenos, grew bookings by 105% y-o-y and SaaS ACV 130% y-o-y in Q1, suggesting that the company is enjoying solid momentum.

Continuing to execute on its forward-leaning growth strategy We assess that FormPipe is executing its forward-leaning growth strategy quite well. The firm’s pace of recruitment was, however, higher than we had expected, leading us to increase our opex forecasts for ‘21. We expect net recruitment levels to remain high over the coming quarters, but with a slower pace than in Q1.

Besides more support personnel for FormPipe’s partners, we think that some new hires will be allocated to support the recently renewed agreement with one of the company’s Danish customers, which in turn will increase Delivery sales as of Q3e. Overall, we leave our sales forecasts largely intact after the report, but reduce our ‘21e EBIT by 10% due to the aforementioned factors. For ‘22e and ‘23e, our EBIT is up 2% and 1%, respe....