Greater Than: Vehicles at standstill impact km’s driven and hence ARPU – Danske Bank

Q1 20 sales came in at SEK3m, below our SEK3.6m, which is explained by the majority of vehicle fleets using Greater Than’s Enerfy solution being at standstill due to COVID-19 lockdowns. This hurts ARPU. However, the number of Enerfy platform users grew 178%, from low levels. This is positive and indicates that activity, although impacted at the beginning of the COVID-19 outbreak, is accelerating at a good speed.

Long-term case reinforced. It takes time to change the habits of traditional, large companies, which for decades have run their operations in the same way and quite profitably. Hence, Greater Than’s mission to persuade the largest insurance companies to rethink their car insurance logic and business models takes a lot of effort. If successful in doing this, we believe it will be highly profitable. The COVID-19 outbreak could be one incentive leading to quicker adoption. One example is that ride-hailing companies, which have most of their car fleets at a standstill, are still paying insurance fees. This is not sustainable long term. In addition, insurance companies are now under pressure to refund insurance fees paid by consumers even though they have been in lockdown. These events could speed up change among insurance companies.

Building an ecosystem. Greater Than has strong relationships with Zurich, Toyota/Denso/Kinto, ComfortDelGro, MS First Capital. It has been recognised on the 100 InsurTech global list and is short-listed as the TU Automotive Insurance product of the year.

Q1 20 outcome. Greater Than reported SEK3m in revenue, down y/y from SEK3.8m and below our SEK3.6m forecast. The reasons for the lower revenue are (1) lower ARPU, which is due to fleets of vehicles using the Enerfy solution being at standstill due to COVID-19 lockdowns, (2) less hardware sales, as customers have likely awaited the app-2-car solution, which does not need a hardware dongle. The EBIT loss came in at SEK6.8m, slightly better than our SEK7.6m estimate. The company had a cash burn of SEK7.1 (opFCF and capitalised R&D) in Q1 20, with SEK9.5m in net cash at the end of the quarter.

Estimate revisions. Our estimate revisions are small on the back of the results. We expect ARPU to be equally impacted in Q2 20 due to April being a lost month, and parts of May as well (so it seems). Still, the long-term prospects have not changed noticeably, rather the opposite if anything. We have a valuation range of SEK90-166 per share.