Telematics and fleet management: Microlise vs. Quartix Technologies

The UK AIM market has three quoted commercial vehicle tracking businesses: Microlise Group (SAAS), Quartix Technologies (QTX); and Trakm8 Holdings (TRAK). This note focusses on the larger two, Microlise and Quartix, initiating research coverage on each and comparing respective business models, strategy, growth opportunities and valuation. Whilst the businesses generally target different parts of the market, our conclusion is that Quartix offers better near-term value, cash returns and ROCE, whil

Coming into its own

H1 results are very pleasing, as not only are the financials strong: ARR +21% y/y (~11% organic), but this was supported (and driven) by excellent operational and strategic progress as well. For instance, the company signed its largest ever contracts in France and Australia, while also saw strong trading in the UK. Successful sales and marketing initiatives and also broader uptake of Microlise’s enlarged product suite were key to driving this, and this second point highlights how Microlise is pr

Wins, expansions and strategic clarity

A series of wins and expansions highlights strong ongoing momentum and how recent product initiatives are driving competitive differentiation and further ways to unlock efficiency. First of these, is a 5-year contract with new customer, Romac (a leading 3PL) where Microlise has sold its new end-to-end Transport Management System (acquired via ESS). Meanwhile Goldstar Heathrow (a prominent haulage and warehousing provider) has also bought Microlise TMS and its Safety and Compliance solutions too,

Sewing up the market

An H1 update to June reveals continued strong progress, as ARR and recurring revenue both grew double digit organic, thanks to broad-based strength with new and existing customers and through direct and indirect channels. So a very ‘complete’ performance, which underlines Microlise’s UK market-leadership and growing international profile thanks to strong execution, as highlighted by several major deals - most notably, a £10.6m contract with Woolworths (AUS). Meanwhile UK growth continues to be u

Product launches

In line with Microlise’s strategy: to offer the best and most comprehensive product set, the company has launched new value-add products which are highly relevant to existing and prospective customers. The first: Driver Hazard Warning (DHW) will add to the company’s suite of Safety, Health and Compliance products: this alerts drivers to low bridges and vulnerable road users (cyclists, mopeds, e-scooters) and so reduce accidents, fatalities while also minimise insurance premiums. This is a recurr

Double-digit growth with a confident outlook

Microlise has reported a strong FY23 with 13% yoy revenue growth, 12% growth in exit ARR and 15% yoy growth in adj EBITDA. Microlise has a strong moat among the UK’s largest HGV fleet operators with a c.60%+ market share. The strength of this position is reflected in a 7% yoy growth in subscriptions and long-term contract churn of just 0.7% (FY22: 0.4%). Microlise has provided a confident outlook with organic growth expected to improve from current levels (FY23: 11.8% organic ARR), c.£30m of unu

5-year, £10.6m contract win in Australia

Microlise has signed an initial 5-year contract with a total contract value of AU$20m (c.£10.6m) with WooliesX, part of the Woolworths Group, Australia’s largest supermarket chain. WooliesX has selected Microlise to deploy applications across its entire online delivery fleet operation throughout Australia. This is a sizable new win and a strong indicator of the potential for Microlise to replicate its success among UK fleet operators, internationally. Microlise shares have performed well YTD but

FY23 Ahead, Upgrades to FY24, SAAS shares oversold

Microlise has released an impressive FY23 trading update and exceeded our previous FY24 revenue forecast (FY24 SCMe: £70.8m) one year early. FY23 revenues increased 13% yoy to c.£71.7m and are 8% ahead of our forecasts. This was driven by a strong performance in both recurring revenues (ARR +11% yoy, +10% organic) and non-recurring (+17.5% yoy). Adjusted EBITDA increased 14% yoy to £9.4m (+10bps margin expansion to 13.1%) which is 3% ahead our forecasts. We have upgraded FY24 which reflects the

Completion of ESS acquisition

Microlise has completed the acquisition of Enterprise Software Systems. Microlise first announced the proposed acquisition on 30 November 2023 and has now received confirmation from the UK Competition and Markets Authority that no further information is required at this stage. Microlise is acquiring a provider of transport management system (‘TMS’) solutions with c.75% recurring revenue and c.20% EBITDA margins. The acquisition is highly complementary with ESS boasting a number of enterprise cli

Earnings enhancing acquisition of TMS provider

Microlise has reached an agreement to acquire Enterprise Software Systems (‘ESS’), a leading provider of transportation management system (‘TMS’) solutions. The acquisition remains conditional upon no objections being raised by the UK Competition and Markets Authority (‘CMA’) but if agreed, would see Microlise acquire a c.20% EBITDA margin business (FY’Aug23: 19.6%) with c.75% of revenue recurring, for c.£8.5m in cash (c.8.5x EBITDA multiple). We view the proposed acquisition of ESS as highly co

H1’23: Continued ARR progress

H1’23 was a period of strong growth for Microlise, and a number of operational highlights in the period leave the company well placed for improved future revenue growth and margin expansion. Microlise continues to boast top quartile SaaS credentials with 250+ new customers added, 12 major multi-year renewals (inc. Tesco), 10% growth in subscriptions and excellent retention with just 0.5% churn in the period. The Group has made progress since IPO with new customers secured in France, Australia an

H1 trading update: double digit ARR growth

Microlise has released a strong H1 trading update with 11% yoy ARR growth (+10% organic). H1’23 revenues grew 10% to £33.9m, boosted by the addition of 250 new customers, while adj EBITDA increased 4% as Microlise has invested ahead of the curve in product development, operations, and sales & marketing. We leave our forecasts unchanged, but firmly underpinned by the H1 performance (£33.9m revenue leaves £32.6m required in H2) and 95% increase in order backlog expected to be delivered in H2 as ne

Altitude Group (ALT LN) - Delivering on high growth strategy

Altitude’s FY24 results, flagged in a trading update last week, confirmed strong growth in revenue, adjusted EBITDA and adjusted EPS. We remain confident in the Group continuing its fast growth, based on strong momentum seen in Merchanting in Q1 FY25. Reflective of the evolving business profile, we have updated our model assumptions, adjusting revenue slightly, improving margins and lowering tax charges, which leaves adjusted EBITDA unchanged and, importantly for investors, increases adjusted EP

Hardman & Co Monthly: October 2024

Feature article: Labour’s first Budget - Investors in their sights? Summary ► Budgets are always important for investors. ► The imminent Budget, at the end of October, will be doubly so, because it is the first from the new Labour government, and it has already signalled the need to fill an alleged £22bn black hole, while ruling out changes to more than half the tax base. That implies a lot of the pain will be felt by investors. ► This paper considers the impact of increases in rates for th

Morning Note – 30 September 2024

Pinewood Technologies (PINE LN) - Full speed ahead

Pinewood Technologies’ H1 results, its first as a standalone SaaS business, show that the Group is putting the building blocks in place for its accelerated growth plan. New UK Lithia sites are being added, product and sales team investment is being made, and the discovery and planning stages of the US rollout are underway. Management is confident in meeting full year market expectations (£7.8m underlying PBT for the 11 month FY24 period), so our underlying P&L estimates are unchanged. We reiter

Neuromorphic Computing Industry Research October 2024

This report looks at the neuromorphic computing industry. Neuromorphic Computing systems are designed to specifically mimic the human brain. The report talks about the overall market size, expected growth rates as well current trends driving the growth in the industry. Companies can also be categorized as core and non-core, the former being those that exclusively engage in neuromorphic computing solutions and those for which neuromorphic computing is just one part of their overall product or ser

Morning Note – 6 August 2024

Hybridan Research 12/03/2024 - Crossword Cybersecurity: Final deferred payment for Threat Status acquisition

Crossword Cybersecurity announced today that it is issuing 7,749,226 new ordinary shares in respect of the second anniversary deferred acquisition of £450k for the acquisition of Threat Status (announcement dated 14 March 2022). The consideration shares, which are subject to a 12 month lock-in, have been issued at the preceding three-month average price of 5.81 pence per share. In addition, £125k consideration is payable in cash. Total consideration payable on the second anniversary following co

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Allenby Capital TMT Update - 30.09.24 - MWE.L, CHSS.L, MIRI.L, ENET.L, ELEG.L, MBT.L, PPS.L, ITIM.L

Please find below our weekly update covering themes that we feel that are of interest to investors and participants in the small and mid-cap TMT sector as well as commentary on recent newsflow.

Super sizing it

Hybridan Research: Crossword Cybersecurity plc: 15/07/22: On track to deliver 75% growth for 2022

Good Morning, Crossword Cybersecurity plc this week announced a trading update for the six months to 30 June 2022 and the extension and increase of several Convertible Loan Notes issued in December 2019. We have published research on this which is attached and a snapshot of the research is below. The cybersecurity solutions company has this week announced a trading update for the six months to 30 June 2022 and the extension and increase of several Convertible Loan Notes issued in December 2019

Hybridan Research: 23/09/22: Crossword Cybersecurity plc (CCS): £3.6m equity raise to fund topline growth to £6m in 2023

The cybersecurity solutions company focused on cyber strategy and risk, announces today that it has completed an oversubscribed fundraising of approximately £3.6m (gross) through a placing of 16,761,407 ordinary shares at a price of 21.7p per share. The placing price represents a 10% discount to the closing bid-price on 22 September 2022. Crossword intends to use the proceeds from new and existing institutional shareholders for sales and marketing, product development and support, geographical

Hybridan Research: 29/09/2022: Crossword Cybersecurity plc: On the cusp of a new growth phase

About one week after the closing of a successful equity raise for £3.6m, Crossword today announces its unaudited interim results for the six months ended 30 June 2022. 1H22 revenue totalled £1,525k, up 85% year-on-year and achieving 38% of its annual target. The loss before tax was £2,273k for the period. Management reiterates its guidance for growing revenues by circa 75% to £4m in 2022 and by a further 50% to £6m in 2023. Crossword indicates that its ARR (Annual Recurring Revenue) grew 48% s

Hybridan Research: 21/03/23: Crossword Cybersecurity plc: Bottom-up revenue forecasts upon launch of Ransomware Readiness Assessment Service

Good Morning, Crossword Cybersecurity plc, last week announced, the launch of its new Ransomware Readiness Assessment service. We have published research on this which is attached and a snapshot of the research is below. Crossword Cybersecurity announces the launch of its new Ransomware Readiness Assessment service, as part of its managed services Nightingale. The service helps organisations reduce exposure to ransomware attacks and is expected to attract business for Crossword’s Consulting pr

Hybridan Research: 19/04/2023: Crossword Cybersecurity plc (CCS.L): Aiming to achieve £6m revenue in 2023

Crossword Cybersecurity today announces its audited results for the year ended on 31 December 2022. Revenue was £3.65m, up 68% year-on-year. Organic growth was 55% in 2022. Meanwhile, Crossword crystalised the synergies among its home-grown and acquired offerings by adding approx. 20 clients to a total of 120+ and increasing revenue per client by 40% to £28,700 per client, up from £20,500 in 2021. Cost structure and bottom line: Total cost of sales and administrative expenses increased by £2.6