Speqta: Direct Share Issue Likely Sufficient to Reach Profitability
Research Update
2024-03-12
09:43
Redeye takes a positive stance towards Speqta’s direct share issue despite somewhat lowering its Base Case. While coming at a substantial discount of 31%, bringing in SEK55m and a 33.5% dilution, the direct share issue significantly reduces the risk in Speqta – as we believe the funds are enough to turn Speqta profitable.
FN
Fredrik Nilsson
Yesterday, Speqta announced a direct share issue of SEK55m at SEK4.5 per share, corresponding to a 31% discount to yesterday’s closing price and 26% relative to 5 days VWAP. The share issue causes a dilution of about 33.5%.
While we consider the 31% discount substantial for a direct share issue, with the additional SEK55m, we believe Speqta has enough funds to reach profitability. Thus, although coming at a considerable cost to current shareholders, Speqta has likely secured all the financing it needs, which is a significant advantage, especially in the current market. Also, Speqta was in immediate need of financing, and we believe it is unlikely that an ordinary rights issue would have been a cheaper option. Nevertheless, it would have been a much slower option. Despite the arguably substantial discount of 31%, we still believe it is encouraging to see Speqta successfully executing a direct share issue. From now on, management, the board, and shareholders can focus on the development of the business rather than financing.
While we generally are very sceptical about companies following up large dividends with share issues, it is not the case in Speqta. The large dividends were distributed by Speqta’s previous owners, board, and management before BrightBid made a reverse acquisition of Speqta. Thus, back then, Speqta was another business led by other people.
In conjunction with the direct share issue, Speqta reported a preliminary ARR at the end of February of about SEK65m – roughly aligning with our Q1 forecast of SEK68.2 and implying continuing solid growth.
As a result of the direct share issue, increasing the number of shares, we lower our Base Case to SEK9 (11). While the 35% discount we expected in our Q4 Update was roughly in line with the outcome, the share price was higher back then. Thus, the larger dilution hurts our Base Case. However, with this share issue, the downside risk in Speqta is reduced significantly, and we raise our Bear Case to SEK4 (3). Our Bull Case is reduced from SEK31 to SEK27.
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Revenues | 58.1 | 92.8 | 117.8 | 149.1 | 187.0 |
| Revenue Growth | 113% | 59.6% | 26.9% | 26.6% | 25.4% |
| ARR | 62 | 86 | 116 | 151 | 193 |
| ARRGrowth | 62% | 40% | 35% | 30% | 28% |
| EBITDA-CAPEX | -56.5 | -32.7 | -19.8 | -9.1 | 3.7 |
| EBITDA-CAPEXMargin | -97% | -35% | -17% | -6% | 2% |
| EBIT | -57.7 | -38.8 | -25.5 | -13.6 | 0.72 |
| EBIT Margin | -99.3% | -41.8% | -21.7% | -9.1% | 0.4% |
| EV/Revenue | 3.6 | 2.0 | 1.8 | 1.5 | 1.2 |
| EV/ARR | 3.4 | 2.2 | 1.8 | 1.5 | 1.1 |
| EV/EBITDA-CAPEX | neg | neg | neg | neg | 58.3 |
| EV/EBIT | -3.6 | -4.8 | -8.2 | -16.1 | 300 |
| NetDebt | (20) | (43) | (20) | (10) | (14) |
| NWC/R12mSales | 0% | -22% | -22% | -22% | -22% |
Case
Adtech SaaS solutions target key markets
Evidence
Huge market and positive feedback support significant potential.
Challenge
Customer acquisitions are typically costly.
Challenge
Huge market often equals huge competition.
Valuation
Base Case SEK 9
People: 4
Speqta's receives an above average rating for management. While its track record in Speqta has been mixed historically, it managed to realize significant value in the divestments following the strategic review. Also, management and board have deep knowledge within digital marketing. The board and some key managers have substantial shareholdings.
Business: 3
Speqta receives an average rating for Business for several reasons. It has potential for recurring and scalable revenues. It targets a large market with significant growth potential. The offering helps its customer to improve their profitability. On the other hand, Speqta’s rating is lowered due to the main product, Bidbrain, being in an early phase, where the strengths of its value proposition are yet to be seen.
Financials: 1
Speqta receives a rather low rating for Financials. Although, it has a solid net cash position, its operations are cash flow negative. However, if the investments in Bidbrain pays off, Speqta has a good chance of becoming highly profitable going forward, resulting in a higher Financials rating.
| Income statement | |||||
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Revenues | 58.1 | 92.8 | 117.8 | 149.1 | 187.0 |
| Cost of Revenue | 16.0 | 22.3 | 28.3 | 35.8 | 44.9 |
| Operating Expenses | 87.6 | 90.4 | 96.2 | 107.7 | 121.7 |
| EBITDA | -45.5 | -19.9 | -6.7 | 5.6 | 20.4 |
| Depreciation | 0.72 | 0.31 | 0.19 | 0.28 | 0.32 |
| Amortizations | 5.9 | 11.0 | 11.2 | 11.4 | 11.9 |
| EBIT | -57.7 | -38.8 | -25.5 | -13.6 | 0.72 |
| Shares in Associates | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Interest Expenses | -4.3 | -0.10 | -0.10 | -0.10 | -0.10 |
| Net Financial Items | 4.3 | 0.10 | 0.10 | 0.10 | 0.10 |
| EBT | -62.0 | -38.9 | -25.6 | -13.7 | 0.62 |
| Income Tax Expenses | 1.5 | 0.00 | 0.00 | 0.00 | -0.13 |
| Net Income | -60.5 | -38.9 | -25.6 | -13.7 | 0.49 |
| Balance sheet | |||||
| Assets | |||||
| Non-current assets | |||||
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Property, Plant and Equipment (Net) | 0.25 | 0.10 | 0.14 | 0.16 | 0.22 |
| Goodwill | 33.3 | 33.3 | 33.3 | 33.3 | 33.3 |
| Intangible Assets | 75.9 | 77.5 | 79.5 | 82.8 | 87.6 |
| Right-of-Use Assets | 6.2 | 6.2 | 6.2 | 6.2 | 6.2 |
| Other Non-Current Assets | 0.59 | 0.59 | 0.59 | 0.59 | 0.59 |
| Total Non-Current Assets | 116.3 | 117.8 | 119.8 | 123.1 | 128.0 |
| Current assets | |||||
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Inventories | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Accounts Receivable | 16.2 | 26.0 | 33.0 | 41.8 | 52.4 |
| Other Current Assets | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Cash Equivalents | 22.3 | 44.6 | 22.4 | 12.3 | 16.3 |
| Total Current Assets | 38.5 | 70.5 | 55.4 | 54.1 | 68.6 |
| Total Assets | 154.8 | 188.3 | 175.2 | 177.2 | 196.6 |
| Equity and Liabilities | |||||
| Equity | |||||
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Non Controlling Interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Shareholder's Equity | 83.8 | 99.9 | 74.3 | 60.6 | 61.0 |
| Non-current liabilities | |||||
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Long Term Debt | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| Long Term Lease Liabilities | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 |
| Other Long Term Liabilities | 10.2 | 10.2 | 10.2 | 10.2 | 10.2 |
| Total Non-Current Liabilities | 15.4 | 15.4 | 15.4 | 15.4 | 15.4 |
| Current liabilities | |||||
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Short Term Debt | 0.63 | 0.63 | 0.63 | 0.63 | 0.63 |
| Short Term Lease Liabilities | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| Accounts Payable | 29.0 | 46.4 | 58.9 | 74.6 | 93.5 |
| Other Current Liabilities | 22.1 | 22.1 | 22.1 | 22.1 | 22.1 |
| Total Current Liabilities | 55.7 | 73.1 | 85.6 | 101.3 | 120.2 |
| Total Liabilities and Equity | 154.8 | 188.3 | 175.2 | 177.2 | 196.6 |
| Cash flow | |||||
| SEKm | 2023 | 2024e | 2025e | 2026e | 2027e |
| Operating Cash Flow | -44.8 | -12.4 | -1.3 | 12.4 | 28.6 |
| Investing Cash Flow | -11.0 | -12.9 | -13.4 | -15.0 | -17.1 |
| Financing Cash Flow | 25.0 | 47.5 | -7.5 | -7.5 | -7.5 |
Disclosures and disclaimers