With 19% sales growth y-o-y in Q1 (of which 10% organic), we conclude that Formpipe continues to execute well on its forward-leaning growth strategy. Sales were 1% above our forecast, where we note particularly strong growth for SaaS sales, up 47% y-o-y, driven by Private, which saw 23% sales growth. We note here that its partner Temenos recently presented a solid set of Q1 numbers, growing ACV by 58% y-o-y and also guiding for a strong 2022 (particularly for US and Europe). EBIT of SEK 3.5m for a margin of 2.9% was below our forecast SEK 8.9m, driven by higher costs than expected, partly because Formpipe remains active in terms of recruitment.
Small est. revisions on sales, but reduced margins for ‘22e
We make small changes to our sales forecasts and continue to expect rapid growth ahead. On our new estimates, we see a ’21-’25 sales CAGR of 12%. However, we think that near-term margins will be pressured from its growth initiatives (more recruitment, increased travel expenses, etc.) and from sourcing of more sub-consultants in the Nordics. As such, we cut ‘22e EBIT by 16% but make smaller cuts on ’23e-‘24e (3-2%).
We expect margins to improve in 2023 and beyond
On our revised estimates, the share is trading at 20x EV/EBIT in 2024e. While we expect an 2022 adj. EBIT margin of 9.1%, we see a trajectory of improvements in the coming years from operational leverage, with it reaching 19.2% in 2025e. This is just slightly below the company’s targeted 2025 EBIT margin of 20%. Furthermore, we continue to see solid M&A opportunities given its 0.4x NIBD/EBITDA on ‘22e.
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