Research update Risk Intelligence, Q1 2022: Key KPIs continue to develop strongly
30 May 2022
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Research update Risk Intelligence Q1 2022
Equity research Risk Intelligence
For the first quarter of 2022, Risk Intelligence reported net sales of DKK 3.9 million, corresponding to a negative growth of minus 7.5 per cent. Key KPIs such as recurring system revenue and ARPU continue to grow at a high rate. We have adjusted our forecasts downwards, and in a base case scenario, a fair value of DKK 7.5 (9.3) per share is calculated for the next 6-12 months. That leaves a good potential upside for a stock that has been under pressure.
Key KPIs continue to grow
Recurring system revenue at the end of the past quarter amounted to DKK 14.8 million. Total recurring revenue amounted to DKK 16.3 million. That corresponds to a strong growth of 20.4 and 18.4 per cent, respectively. The average revenue per customer amounted to DKK 139,000 and grew by 13 per cent. Although these key KPIs were slightly below our forecast, the continued strong growth bodes well for the future.
Compared to Q1 2021, net sales fell by 7.5 per cent to DKK 3.9 million. That was below our estimate of DKK 5.4 million. The decline is partly explained by lower ARPU than anticipated and falling consultancy-related revenue. The reported EBITDA result was minus DKK 1.7 million. Our forecast was for minus DKK 0.7 million. The deviation is due to lower than expected revenues. On the positive side, operating expenses were slightly below our expectations.
Downgraded forecasts
In light of the outcome for the first quarter of 2022, we have adjusted our revenue estimates downwards. We expect net revenue for the full year 2022 to be DKK 21.6 million. That is down from DKK 23.3 million in the previous research update but still in line with the company’s guidance (the lower end). Over the full forecasted period, 2022-2026, we expect an average yearly growth rate of 27.7 per cent, down from 35.1 per cent in the previous research update. On the other hand, we expect a small negative EBITDA result in 2022 of minus DKK 1.2 million (previously minus DKK 3.7 million). With the assumed revenue growth, the EBITDA margin will rise to 30.4 per cent by 2026, aligning with the company’s previously communicated long-term target.
Pressured share creates an interesting situation
The valuation multiples for the reference group of “Intelligence providers” with a high share of recurring revenues remain high but slightly down compared to the last analysis. By combining a multiple valuation with a DCF valuation, we calculate a fair value of DKK 7.5 (9.3) per share. The downward revision is explained by downward-adjusted revenue and profit forecasts. The multiple valuation is depressed by slightly lower multiples and the DCF valuation by a higher discount rate, mainly due to a higher risk-free rate. Our valuation equates to EV/Sales 2022 of 6.4x. The peer group is trading at a median EV/Sales 2022 of 8.3x. The stock is currently trading at an unjustifiably low 2.0x.
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