eg solutions has reported FY2015 results ahead of our forecasts, and confirming the positive momentum flagged in the February trading statement. Improved financial performance is being driven by new contract wins for the operational intelligence suite – 10 during 2015. The result was impressive revenue growth, accompanied by a significant improvement in EBITDA margin, and also in free cash flow. Overall, a strong set of results, which together with the solid balance sheet, give further confidence in eg’s future growth prospects.
Strong financial performance: FY2015 results exceeded our forecasts. Revenue of £7.5m (+69%) is a record level. This was accompanied by a 30pp improvement in EBITDA margin and a £2.1m turnaround in free cash flow.
Contract wins the key driver: New contract wins continue to be the key driver of improved financial performance, and the managed cloud product is performing strongly. eg recorded 10 significant contract wins during FY2015, vs a previous annual average of between three and four. Furthermore, the wins included two new verticals (utilities and local government) and roll-outs to global customers. The outcome was a 20% increase in the user base, which now exceeds 100,000 globally.
Visibility improving: eg’s contracted order book now stands at £15.4m, to be recognised over the next four years, with half of that to be recognised over the next two. Furthermore, the order book is up £1.8m since December-14. With recurring revenues now 50% of the total, these figures give reassurance over the near-term revenue outlook, given our c.£9m revenue expectation for 2016E.
Forecasts unchanged: For now, our 2016 and 2017 estimates remain unchanged. However, we will revisit forecasts as the year progresses. We take the opportunity to introduce 2018 estimates, as shown below and overleaf.
Following the February trading statement, today’s announcement contains few surprises. The company is reaping the benefits of historic investment, delivering record revenues, improving profitability & cash generation. With a solid cash position following the Ja