Formpipe Software

Research note


Formpipe Q2 comment: More SaaS affects earnings in the short term

Formpipe’s Q2 showed sales of SEK 97.1m, which was lower than our expectations of SEK 106m. This is mainly explained by the trend that more and more orders are done as a cloud service (SaaS), which affects the sales in the short term. EBITDA was also slightly lower than our expectations and came in at SEK 19.0m, where we expected SEK 22.1m. On the other hand, EBIT and the EBIT margin was in line with our expectations and came in at SEK 7.5m and 7.7% respectively (SEK 8.1m and 7.6%). However, even if the shift towards more and more SaaS orders affects earnings negatively in the short run, we believe that the shift will have a positive impact in the longer term.

Moreover, we are pleased to read that Formpipe increased its recurring revenues from SEK 43.3m in Q2 2016 to SEK 46.7m. This means that recurring revenues amounted to 48% (43%) of the net sales, which we see as positive. In the longer term, Formpipe expects further growth in recurring revenues without increasing the costs to the same extent. This will further allow improved margins on a long-term basis.

Furthermore, the Life Science segment still shows negative earnings. On the positive side, at the end of the second quarter, the Life Science segment has SaaS agreements that generate an annual income of SEK 2 million compared to Q2 last year when the SaaS agreements amounted to SEK 0.5m. 

We will take a closer look at the numbers and follow-up with a more detailed research update within the next days. For now, we do not expect to make any changes in our base case of SEK 15 per share.

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