Solid Q1 profitability and sales growth
Innofactor’s Q1 results beat our expectations and profitability reached solid levels. Revenue amounted to EUR 17.2m (Evli 16.8m) and grew 6.2% y/y. EBITDA amounted to EUR 2.0m (Evli 1.2m). All countries were profitable and showed sales growth in Q1. Non-cash internal debt exchange rate fluctuations kept PTP in the red but operating cash flow was a solid EUR 3.1m. The order backlog was at a good level of EUR 54.1m and the pipeline remains healthy according to the company. Guidance remains intact, with net sales and EBITDA expected to increase compared to 2020.
COVID-19 impact expected to be minor
Innofactor expects the impacts of the Coronavirus pandemic on the rest of the year to be minor. Our 2020 estimates remain largely intact as the solid Q1 offset adjustments due to the pandemic for the later quarters. We expect minor growth in 2020, with revenue of EUR 65.1m (2019: 64.2m), and an EBITDA of EUR 5.9m (2019: 5.1m). The high share of recurring revenue, some 55% in Q1, will prove to be beneficial under current circumstances. Additional funding of EUR 3.0m was secured for financial flexibility and possibly pursuing inorganic growth opportunities. The ownership in Arc Technology was increased and will be reported as a subsidiary from Q2, 2020 net sales impact is approximately EUR 1.0m.
BUY with a target price of EUR 0.95 (0.90)
Innofactor has been on a good track on EPS growth and improved operational efficiency and the impact of COVID-19 is estimated to be limited. Valuation has become fairer on peer multiples, but we see long-term potential intact. We retain our BUY-rating with a target price of EUR 0.95 (0.90).
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