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ABGSC ceases coverage of Kahoot! BUY is our final recommendation. NOK 32 is our final target price.
Kahoot! AS
Q2 ARR of USD 163.5m, +15% y/y (Q1: +15% y/y)Added 20k subscribers in Q2 (ARCe: 36k)Active accounts down 2% q/qQ3 revenue guidance USD 43m, +17.6% y/y and ahead of ARCe
Kahoot! AS Kahoot ASA
NOK 35/sh cash offer from GS, GA, mngt + certain others43x-22x 23-25e adj. EBITDA on consensusQ2: Growth below but adj EBITDA above on lower costWe recommend the bid and guess no counterbid
Financial outlook section included
We see no fundamental changes to our investment case post Q1 earnings and thus reiterate HOLD. However, we have slightly increased our target price to NOK 20 (18) on favourable FX and marginally higher adj. EBITDA. As we anticipated, the slowdown in ARR resulted in Q2 revenue guidance falling below consensus. This reinforces our concern regarding the downside risk to FY23 revenue guidance which is expected by consensus. Furthermore, we believe that there is downside risk to 2024 consensus estimates, which project accelerating revenue growth and continued low investment/opex growth. As the stock trades at 18x consensus ‘23e adj. EBITDA we struggle to find upside to multiples as well.
Revenue and adj. EBITDA aboveBillings 2% below ARCe and Cons. 11% y-y growth (Clever flat y-y)Expects Q2 revs of USD 41-42m vs cons at USD 42mReaccelerating growth needed to reach FY growth guidance
Target changed to correct currency (NOK)Kahoot today hosted an analyst lunchUpbeat outlook on engagement trends (targeting growth to return)High focus on cost. We feel there is upside to guidancePositive growth trend has continued into Q2
Kahoot today hosted an analyst lunchUpbeat outlook on engagement trends (targeting growth to return)High focus on cost. We feel there is upside to guidancePositive growth trend has continued into Q2
Kahoot’s 2023 guidance of >USD 170m revenues implying >16% growth is supported by ~15% growth on Q1’23 guidance mid-point given the high H1 comps. However, despite a hiring freeze set to boost adj. EBITDA to >USD 42m, this still implies 20x. We also remain somewhat below 2023 guidance given poor visibility and our concerns on declining engagement trends and ARPU. We see a re-rating potential on ’24-25e, but find it unlikely to be priced in yet.
P&L and CF in line with January trading update, but SBC above ARCe Expects FY23 revenue of >USD 170m (ARCe/Cons 167/173m), +16% y-y FY23 adj. EBITDA guidance of >USD 42m (ARCe/Cons 40/44), +40% y-y Q1’23 guidance of USD 39-40m revs (ARCe: 39.2)
We have looked at a few strategic alternatives that we think could be in the best interest of Kahoot and its shareholders today. First and foremost, we question whether Kahoot should monetize display advertisement, similar to other B2C applications with fremium vs premium offerings. Using Duolingo as a proxy, we estimate a revenue potential of >USD 250m, before factoring in potential negative consequences ads could have on the Kahoot usage.
Following the weak trading update, we once again revise our estimates down (’23-24e sales/adj.EBITDA 5-8%/11-15%). We continue to highlight estimate risk on poor visibility and that the SBC element must be addressed. There is considerable downside as FCF w/o working capital (growth) and SBC is ~USD 5m. Although the shares might be more attractive for General Atlantic for a takeover, Kahoot still trades at a relatively high sales multiple (5.1x ’22).
PW: Q4 invoiced revs of USD 43.5m vs USD 50-55m guidance (+10% y-y) Clever flat y-y. Core Kahoot +15%. 60k subscribers added but low ARPU Prelim. adj. EBITDA above USD 9m (cons: 9.2) Estimates and share to come down
While Clever impresses and we find the growth uptick in Q3 and Q4 (at guidance) positive, we are still left with lots of unanswered questions and low visibility. Growth on core Kahoot has significantly slowed down and seemingly depending on new product launches, there is low disclosure on Clever, and the share based compensation expense have become an even larger concern (trading at 30x our ’23e rep. EBITDA). As such, we downgrade to HOLD.
USD 53.9m invoiced revenue (+28% y-y PF), in-line with consensus Clever above but Kahoot platform slowing significantly down (+13% y-y) Expects FY22 I.R. of USD 175-180m (>190). Q4 in-line with ARCe/cons SBC expense continues to increase. USD 7.5m in Q3 vs 4q avg. of USD 4m
Kahoot reported Q2 results slightly ahead of expectations and with reiterated guidance. Management sees a strong back-to-school season and solid growth of larger deals in the Work segment, supporting the Q3 guidance. We however still see the Q4 guidance as too ambitious but argue this is reflected in market expectations and consider the risk/reward attractive on a medium-term horizon. Kahoot trades at 27x 2022 / 17x 2023 FCF, a discount to peers.
Solid Q2: inv. revenue 3% above est., EBITDA at USD 7m (est. USD 5.4m) Q3 revenue guidance at above 54m (48% growth vs Q2), in-line with ARCe Active accounts at 28.0m (Q1: 29.9m) but paid subscriptions + 40K in Q2 FY outlook reiterated (estimates below): Q4 guidance still looks ambitious
Consensus figures for Kahoot just released – we are broadly in-line for Q2 FY2022 cons. inv. revenue at USD 176m. Potential guidance cut reflected We are in-line on revenue, but well below consensus on EBITDA for FY22 Kahoot trades at 14x 2023opFCF – attractive level for long-term investors
Consensus figures for Kahoot just released – we are broadly in-line for Q2 FY2022 cons. inv. revenue at NOK 176m. Potential guidance cut reflected We are in-line on revenue, but well below consensus on EBITDA for FY22 Kahoot trades at 14x 2023opFCF – attractive level for long-term investors
Kahoot will release its Q2 results on 11 August and being slightly below consensus on revenues, we are 18% below on a USD 4.2m Adj. EBITDA. We see short-term concerns such as i) margin expansion may not come until 2023, ii) we (and market expectations) are below FY guidance and iii) soft engagement figures. We however argue that this is reflected in current valuation and consider the risk/reward attractive on a medium to long-term horizon.
Kahoot’s CMD did not provide much new information other than a deep dive on its segments. The company reiterated the FY 2022 guidance as well as 2025 guidance (where we and market expectations are well below). With low market expectations, delivering on the Q2 figures with a reiterated strong Q3 guidance could be a positive catalyst. We consider the risk/reward attractive and reiterate our Buy rating.
We consider the risk/reward attractive, with Kahoot trading at 20x/ 14x FCF or 8x / 5x invoiced sales for 2022/ 2023. With normal seasonality, the company is – with reported Q1 figures and a Q2 estimate at the low end of the guidance – on track to reach invoiced revenue slightly below its 2022 guidance at USD 185m. With low market expectations, the Q2 figures (with reiterated strong Q3 guidance), and the CMD on June 1st could be positive catalysts.
Q1 figures broadly in-line with estimates Q2 revenue guidance to exceed USD 36m vs our estimate at USD 37m Q1 active accounts at 29.9m (Q4 at 30.9m) due to Home& Study decline FY outlook reiterated, on track to be slightly below FY guidance
We find the current valuation attractive, trading at a discount to similar peers at 24 x 2022 FCF and 9x 2022 sales. Market expectations have come down after disappointment on organic growth in 2021. We think the market hasn’t fully understood Kahoot and Clever seasonality and expect the group to reach the low end of 2022 guidance. This assumes 37% proforma revenue growth (2021: 46-47% proforma growth, ~60% organic). The CMD in May could be a catalyst.
Q4 figures on revenues and cash flow already pre-announced 2022 guidance reiterated, normal Clever seasonality impacting Q1 Ambitious 2025 target: USD 500m in invoiced revenues (ARCe: USD 354m) ….and expecting 40% cash conversion in 2025
Invoiced revenue of USD 39.7m. Guidance: >USD 40m. Cons.: USD 39.9m Clever significantly above guidance but Kahoot (ex. Clever) below Annualized, organic ARR growth of 29% and strong OCF of USD 13m Shares likely to be volatile on guid. miss and questioned mngt visibility
With a continued momentum fall in Q2 we have lowered our longer term (Kahoot) bookings estimates by 20%. While we also see short-term risk in not reaching the FY USD 90-100m guidance, which in our view implies a too large turnaround in short time, we argue that subs growth will come up from current (pre-Covid) levels with a now broader offering and new launches. This gives us a significant upside to the current share price and we hence reiterate our BUY rec.
Q2 invoiced sales of USD 20.6m (-7%/-11% vs ARCe/Cons) H1 invoiced sales below guiding but USD 90-100m 2021 target reiterated Org. sub. growth of 43k (incl. Motimate) vs our long term 100k est. We expect negative estimate revisions and share to trade down
Clever achieved high user growth pre-Covid as well Clever mngt. sees 3x+ revenue growth potential in existing client base Plans international expansion in 2022. 3 English speaking countries More information to be provided upon closing (end of Q2 expected)
Kahoot sent out its Notice of AGM this morning… …where two SB representatives are proposed for the new BoD… …and authorization to issue 61.3m additional shares for M&A Positive to see additional commitment from Softbank, in our view
Kahoot announced this morning the acquisition of Clever… …an open(free) platform that connects apps with teachers and students Strengthening Kahoot’s offering and enables revenue synergies 10-11.4x 21e bookings screens well against Kahoot and wider SW space
Headline figures (i.e. invoiced sales and OCF) preannounced… …adj. EBITDA margin of 22.7% in-line with Q1 trading update guidance 1H21 and FY I.S. guidance of >USD 40m and USD 90-100m reiterated Kahoot 360! Spirit to be launched during May
We were visited by CEO Eilert Hanoa this morning, who increased our confidence in the investment case of i) continued high organic growth from both new and existing features and geographies, ii) significant scale and iii) more accretive M&A. Adds to the Kahoot legacy platform was below expectations in Q4, but the momentum on group level is still in shape with strong performance in Drops. We see the recent weakness as a good buying opportunity.
Q1 trading update: Invoiced sales of USD 19.1m (-5%/-1% vs ARCe/Cons)… …organic paid seats growth below ARCe but comforting guidance Acquired Motimate for USD 25-27m, representing 5x 2021 ARR target Minimal organic estimate changes expected, but target should be lifted?
Practice problems from Kahoot to be directly displayed in Google Search Our initial thoughts are the large brand exposure this integration gives… …and further boosting Kahoot’s latest focus on the Academy platform “Practice problems” is one part of Google’s five tools to L.E.A.R.N.
Kahoot this evening announced an acquisition of Whiteboard.fi… …an online whiteboard tool for teachers with more than 7m users Consideration of USD 6m, in addition to USD 6m performance element More financial details likely to come in quarterly presentation
