New Forecasts: breaking through

With FY22 in line and no changes to our existing FY23 forecasts, our focus is on the introduction of new forecasts for FY24 and FY25. We model Clareti recurring revenue growth of 17% and 18% resp. With Clareti having broken through to positive cash EBITDA for the first time in its history in FY22, we expect operating leverage to drive significant margin expansion over the next three years and beyond (Gresham guides to 40% of ARR dropping through to cash EBITDA). We model cash EBITDA margins of 1

Clareti Connect Tier 1 bank win

Gresham complements several large deal announcements during 2022 with a further $1.3m (minimum over 5 years) Clareti Connect deal with an existing Tier 1 banking customer, providing further evidence of the success of its land and expand strategy. Additional fees will come from recurring usage-based fees and professional services. This is a solid end to a successful year, where Clareti ARR is likely to have seen mid-to-upper teens organic growth. Such progress is likely to exert upwards pressure

Significant contract win

Gresham announces a 3-year $1.9m win, ramping to $0.5m recurring ARR, with a new customer that is a leading global asset manager. The deal is significant not only in terms of its size and quality but also as it includes core functionality from both Clareti and Electra, providing further validation of this acquisition and instrumental in yet another replacement of legacy vendors. Momentum remains strong at Gresham, which remains a core tech holding.

Further upgrades

After upgrading FY22 revenues and adj. EBITDA by 10% and 4% in early October we upgrade both by 5% today, bringing the total upgrade to 15% and 10% resp. We also upgrade FY23 revenues by 4% (9% since Oct), adj. EBITDA by 3%, cash EBITDA by 15% to £4.5m and FCF by 18% to £4.3m. Gresham is one of the fastest growing companies in our universe with operating leverage further magnifying earnings growth. The potential to push towards £10m FCF in a meaningful time frame is likely to exert upwards press

Upgrades on contract wins

Gresham announces contract wins today that cause it to expect FY22 revenues and earnings to be ahead of expectations. The first is a £1m over 5 years Clareti deal to replace a legacy incumbent solution for one of Europe’s largest privately owned banking and financial services groups (new logo). The second comprises renewals and extensions across a broad array of products and services with Gresham's largest customer, ANZ. Furthermore, management expects to close further subscription business in Q

Strong H1 supports a record FY22

Gresham has delivered H1 19% organic revenue growth with cash EBITDA margins rising to 8% from 6% and adj. FD EPS up 74% yoy as organic leverage and accretion from Electra kicks in. Clareti ARR has risen 18% organic with $ denominated revenues helping protect against £ weakness. H1 revenues of £23m leave a comfortable £19m to do in H2 and H1 adj. EBITDA of £4.5m is tracking at least in line with our FY22 forecast of £9.2m. Bigger picture, Gresham estimates that the marginal cash EBITDA margin on

Strong H1 underpins high teens FY22 organic growth

Gresham reports that positive trading has continued in H1 with group revenues up 19% organic to £23.1m. Clareti ARR grew an impressive 17% organic to £25.9 and continues to be the engine of growth. There was also strong trading from non-Clareti revenues which has the potential to continue in H2 depending on some material Contracting revenues renewals. As such Gresham expects FY22 results to be at least in line with expectations. We make no changes to forecasts at this time, though further positi

£6.3m contract win expands market share

Gresham has announced a landmark win with a key Tier 1 existing banking customer worth up to £6.3m over a minimum of c. 5 years. Building on an initial 3 year contract signed in June 2020 worth £1.7m over 3 years, the scope of work has materially expanded with Clareti being chosen as the customer’s single enterprise platform across its whole UK business, covering retail accounts, cards, payments and as well commercial banking. Clareti will replace manual processes and, of particular note, legacy

Strong year confirmed, prospects very strong

Highlights from FY21 results are 20% organic growth for Clareti, a significant improvement in cash EBITDA, comments from the company that it could generate double the revenues from the installed base, general optimism and specific optimism on further margin improvement. We really urge investors to look at this company as we suspect it has prospects beyond our immediate 220p price target.

Strong end to the year beats by 8% on EBITDA

Highlights of FY21 are 28% organic revenue growth at Clareti, group EBITDA 8% ahead of our forecasts and net cash nearly £4m ahead of our expectations on “very strong” cash collections and lower than expected acquisition costs. Our unchanged FY22 forecasts are well underpinned by 88% contracted revenues. We forecast ARR will grow a further 17% organic in FY22, which is one of the fastest growth rates in our universe. We introduce a Buy recommendation and 220p price target.

Contract extension and upgrades

Gresham has won an extension and expansion deal with a long-standing Tier 1 investment bank customer as it continues to standardise on the Clareti platform. Including this and other deals, current ARR rises to £23.3m, a 5% organic uplift from end June. Clareti/Electra are trading in line, though Gresham flags potential for further new business in FY21 and an “encouraging pipeline” for FY22. Non-Clareti revenues are performing ahead of expectations leading us to upgrade FY21 revenues and adj. EBI

Contract extension adds significant visibility

A renewal and extension worth c. A$30m over the coming year at ANZ takes FY21 revenue visibility to c.100% with a quarter to go. Q4 wins would mean upside. ANZ will grow its Clareti revenues 35% yoy to A$14m. It is this type of growth in excess of opex growth that is pushing Clareti into positive FCF generation. We think the market is missing the substantial operational gearing that a SaaS company experiences as it goes through b/e and can see Clareti generating FCF of up to £6m in short order a

Continued strong growth in H1

Gresham has delivered a strong H1 with Clareti revenues up 22% lfl to £9.6m and Electra off to a good start. We note group cash EBITDA margins of 6% vs. PY 3% and expect continued margin improvements to drive earnings growth faster than revenue growth over the coming years. Electra cash EBITDA margins of 14% are also tracking ahead of our forecast 9%. With Clareti/Electra expected to break-even on this basis over the next 12 months, the operational gearing of the SaaS model continues to kick in.

H1 update – well positioned for the full year

Gresham has issued a half year trading update and provided further commentary on recently acquired Electra. First half trading is comfortably in-line with our expectations with Group revenues of £14.5m (H1’20: £12.2m) +14% on a like-for-like basis (or +19% reported). Clareti revenues jumped 22% like-for-like, driven by 13 new or incremental licence agreements, including three new banks in Europe and one of the world’s largest professional services firms. This strong growth is reflecting in Clare

Upgrades on Transformational Acquisition

We upgrade FY22 EPS by 18% today on completion of the Electra acquisition. This is a strategic acquisition that marks a decisive step on the path to creating a global fintech champion of substantial scale, and yet we see no strategic premium in the price paid (11x EV/EBITDA). It more than triples Clareti’s North America ARR to some £12m, significantly enhancing its presence in the largest market for its products and accelerates FCF b/e. Stripping out legacy businesses and cash and valuing Claret

Tracsis - Interims: FY order book visibility and a doubled pipeline

Interims to January are in line with the February TU, and materially unchanged forecasts for the FY July 2024. After the well flagged expected 1H24 revenue movement of -7% (vs 1H23 which had been strengthened by c£2m perpetual licence sales in the US), prospects for the second half are supported by several new contracts that will generate revenue in 2H24, in addition to material contract delivery milestones from existing large projects such as major TRACS Enterprise, Railhub deployments, and Rem

Eleco - FY23 recurring revenue growth of +22%, EBITDA +2% ahead

Eleco’s FY23 results show robust organic recurring revenue growth of +17% with recurring revenue +22% to £20.7m, adj EBITDA +2% ahead of the January update, and a confident outlook with Q1 ARR already at £24.5m vs £22.6m at FY23. At this point, the excellent start to FY24 leads us to reiterate our FY24-26E revenue, adj EBITDA, EFCF, and DPS, and we include the April 2024 acquisition of Vertical Digital in our FY24-26E net cash, as we explain below. As Eleco builds upon the successful acquisition

An excellent win, momentum rebuilding

Made Tech has won a material expansion (worth up to £19.5m/2yrs) with a long-standing customer, The Department for Levelling Up, Housing and Communities (“DLUHC”). Coming off the back of a soft H1 bookings performance, we expect this win to materially boost investor sentiment and reassure how notwithstanding a tough backdrop (given an impending general election) MTEC continues to outcompete legacy providers and in-so-doing, grow its share of wallet with large/strategic customers. Landing near FY

Morning Note – 24 April 2024

LIBERUM: 1Spatial: Walk the talk and get SaaSy

Alphawave Semi - FY23 results, 1Q24 trading update

Following the updated guidance published last week, Alphawave reported a 74% YoY increase in revenue to US$321.7m for FY23 generating adjusted EBITDA of US$62.6m, up 34% YoY. As previewed, bookings in 1Q24 were strong at US$117.9m, up 20% YoY and ahead of guidance. The results release and conference call confirm that revised guidance mainly reflects a more conservative approach to revenue recognition under new CFO, Rahul Mathur, and an acceleration in the pace at which Alphawave is pivoting away

LIBERUM: Cerillion: Continued strong trading in 1H

tinyBuild (TBLD LN) - Focused on H2 recovery

tinyBuild’s FY23 results confirmed a sharp drop in revenue and swing into adjusted EBITDA losses, as well as asset impairments and high cash burn. After already making $10m of annualised cost savings, the company continues to run-down its cash balance and now relies on a H2-weighted release schedule to reduce cash outflows.

Morning Note – 23 April 2024

To infinity…

Cerillion has announced a very solid update, as H1 sales and EBITDA are both up 10% y/y to £22.5m and £10.9m respectively, notwithstanding the exceptionally strong base period (sales and EBITDA +27% and +38% resp.). Results therefore point to continued strong customer demand, reflecting how Cerillion’s out-of-the-box product continues to resonate and gain adoption, particularly in a ‘budget conscious’ environment, by offering faster time to market, greater configurability and at a lower cost. Me

Synectics + (SNX, House Stock at 188p) - Positive AGM statement

Hybridan Small Cap Feast - 24 April 24

24th 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

In-line H1, strategic initiatives advancing at pace

As reported in March, underlying EBITDA profitability improved to record levels despite FX headwinds. Further platform and proposition developments were completed, key steps on its digital roadmap, and it has already won 7 contracts YTD. Alongside planned growth in private membership, this will at least offset the loss of one contract. Forecasts are left unchanged today and, as member engagement throttles back up, FX headwinds ease, and proof points of digital efficiency emerge, markets should b

itim - Further professional services contract secured with The Entertainer

itim is a disruptive SaaS-based platform that enables store-based retailers to implement a proven Omni-channel solution. This morning, the group has announced an additional professional services contract with its long-standing client, The Entertainer. Following a year-long trial, The Entertainer is opening in over 800 Tesco stores across the UK & Ireland, alongside a supplier agreement for Tesco stores across Central Europe. Under the contract, The Entertainer will extend its use of itim's Unify

Alphawave Semi: FY23 trading update, amended forward guidance

Alphawave Semi has reduced guidance for FY23 and prospectively citing lower revenues from China, changes in expected revenue recognition from long-term contracts, and continuing investment in R&D. The share price has reacted negatively, giving up most of the gains since the trading statement at the end of January. Current consensus, which is a good match for pre-existing guidance, should be reduced, most likely following release of the FY23 results and full 1Q24 trading update due on 23 April. H