mVISE interims highlight a business continuing to make progress on its three-year 2018+ strategy. Headline revenues rose nearly 7% y-o-y and 12% organically. With new white-label partners now marketing elastic.io, a big acceleration in product and associated (high-margin) consulting sales is expected in H2 and the company has maintained its FY19 guidance. We see the shift to cloud-based, big data-driven platforms providing an excellent long-term growth tailwind. In our view, these prospects are not reflected in a consensus FY20 P/E of 12.1x.
Organic growth of 11.8% y-o-y represented a healthy performance but is below the c 25% rate implied by the mid-point of FY19 guidance. Low professional services utilisation in Q2, a slow start from SaleSphere and a delay to the start of elastic.io marketing contributed to weaker than expected growth. Combined with an uptick in development costs, this led to a dip in EBITDA margins (from 7.2% in H118 to 1.3% in H119). Nevertheless, the company re-iterated FY19 guidance. H2 is typically seasonally stronger – with a full period of large partners now selling elastic.io and SaleSphere orders ramping, product sales should grow substantially. This product growth should pull through high-margin consulting revenue.
mVISE believes the shift to cloud-based platforms and growth in big data provides an excellent long-term growth opportunity. Customers engage it to help devise, integrate and implement migration and hybrid strategies. Augmenting the core professional services business with high-margin software products (elastic.io and SalesSphere) should accelerate growth, raise margins and enhance visibility. mVISE’s three-year 2018+ strategy targets revenue of €33–35m in FY20 (a 33% CAGR) and 19% EBITDA margins (+7pp) primarily driven by product sales.
mVISE’s interims prompted a 12% fall in the share price and a 20% cut to consensus EPS estimates (below company guidance). The 12.1x FY20 EPS multiple implied by the current €3.02 share price is still 19% below its nearest peers. The company has delivered substantial growth historically and is exposed to healthy fundamental trends that should sustain this trajectory. In our view, if mVise delivers the acceleration in H2 it anticipates, it could prove a catalyst for the shares.