Mobile money specialist Monitise has reported FY14/15 results. In-line with guidance, but towards the lower end of the range, EBITDA losses were up 33% to £41.8m on revenues down 6% to £89.7m. The company has also made several significant write-downs, and announced a change of CEO. However, H2 saw improvements in both margins and free cash flow. In our view Monitise remains on track for EBITDA profitability in the second half of FY15/16, with a much more focussed strategy now in place.
Key metrics in line with guidance, but mask H2 improvement: For the year to June 2015, revenues fell 6% to £89.7m. Flat development and integration revenues of £44.7m and 6% growth in subscription and transaction revenues to £33.1m were offset by a 39% decline in oneoff product licences to £11.9m. EBITDA losses grew 33% to £41.8m, partly reflecting lower gross margins (52% versus 65%) due to pressures on several large, fixed price contracts, most of which are now complete. However, H2 saw an underlying 18% improvement in opex, reflecting improved cost discipline. Free cash flow also improved significantly in H2, a £32.8m outflow comparing to £63.6m in H1 14/15.
New CEO appointed and strategy outlined: Lee Cameron, formerly Deputy CEO, has been appointed as the new CEO. In the analyst meeting, a clear new strategy was revealed for the group going forward, with enhanced focus on Monitise’s bank-grade SaaS and PaaS platforms and the scaling back of product and geographic ambitions.
Clear guidance on FY15/16: Guidance is for no growth in revenues in the current financial year as growth in SaaS & PaaS revenues continue to lag declines in upfront licence fees. EBITDA breakeven is expected by the second half. This is anticipated to be driven by 1) receding margin pressure from a number of large scale projects reaching conclusion and 2) tight ongoing cost control. The net cash position is expected to remain above £45m in the current financial year. Although a decline on the £88.2m closing 14/15 position, note this represents about half of anticipated full-year revenues.
Key FY14/15 metrics were in line with previous guidance. However, the unexpected announcement of a new CEO has impacted the share price. Financial performance saw clear improvements in H2, increasing confidence in the group’s ability to reach the EBITDA breakeven target by H2 15/16.