FY15 results came in within the range guided to at the July trading update. Revenues declined 6% y-o-y, as license revenues fell (reflecting the focus on the new cloud platform) and subscription & transaction revenues grew more slowly than expected. The EBITDA loss of £41.8m was at the lower end of the expected range, reflecting cost-cutting in H215 (H2 opex excluding D&A fell 32% h-o-h). The shift to the cloud model has been more challenging than the company originally anticipated. Management therefore decided to undertake more extensive restructuring and took a more conservative view of the value of previous investments, with impairments of tangible and intangible assets totalling £94.3m and other one-off costs totalling £34.2m in FY15. 

Monitise no longer expects to see revenue growth in FY16. While the sales focus has shifted away from customised solutions to build a more profitable business in the longer term, sign-ups to the cloud platform have been slower than expected. The company expects to achieve positive EBITDA in H216 and continues to target positive EBITDA for FY16, expecting cash to trough above £45m in the year. We have cut our revenue estimates for FY16, and forecast an EBITDA loss of £7.6m (with positive EBITDA of £1.1m in H216). Our FY17 forecasts assume that the company is successful in signing up more customers to the cloud platform and that the Create and Content businesses continue to grow to partially offset the loss of revenue from the Visa contracts.

The stock is currently trading below the cash on the balance sheet at the end of FY15, and only modestly higher than the trough cash position the company expects to reach in FY16. Reaching EBITDA break-even and signing up new cloud customers will be the key triggers for the stock price to recover.