Osirium reported FY18 revenues and operating loss slightly ahead of our forecasts. Although bookings intake was lower than expected in H218, the increase in proofs of concept underway and the number of customers using PxM Express support accelerating bookings growth in FY19. By broadening the product offering with the recently launched secure IT process automation solution, Opus, and the soon to be launched endpoint privilege management (EPM) solution, Osirium is growing its addressable market and creating upsell opportunities for its ‘land and expand’ strategy.
FY18 revenue of £0.95m (+48% y-o-y) was slightly ahead of our forecast, as was the EBIT loss of £2.67m. Bookings growth of 34% undershot our 50% forecast; growth in the pipeline and proofs of concept underway support faster growth in FY19. We have revised our forecasts to reflect the cost base in FY18 and higher capitalised development costs in FY19 and FY20. We are forecasting a net debt position of £33k by the end of FY19 and note that the company is considering a fundraise later this year to strengthen the balance sheet and accelerate growth.
Osirum’s strategy to drive growth is focused on its commitment to innovation, its customer focus and market expansion. Over the course of 2018, Osirium expanded its customer base to include new verticals and continued upselling to existing customers. Today it has announced a three-year contract renewal with its largest customer which increases the number of devices secured by 50%. The recently announced launch of Opus builds on Osirium’s innovative privileged task automation solution and the company is soon to launch an EPM solution in conjunction with RazorSecure. Both products widen Osirium’s addressable market and provide additional upsell opportunities with existing customers.
After recent weakness in the share price, Osirium is trading in line with peers on an EV/sales basis. We have performed a reverse DCF to analyse the assumptions factored into the current share price, using a WACC of 11% and a terminal growth rate of 3%. We estimate the share price is discounting average annual bookings growth of 22% for FY22–28, break-even EBITDA in FY23, average EBITDA margins of 12.0% for FY22–28 and a terminal EBITDA margin of 35%. In our view, bookings growth will be the key driver of share price performance.