Original-Research: USU Software AG (von NuWays AG): BUY

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Original-Research: USU Software AG - from NuWays AG

Classification of NuWays AG to USU Software AG

Company Name: USU Software AG
ISIN: DE000A0BVU28

Reason for the research: Update
Recommendation: BUY
from: 07.03.2024
Target price: 30.00
Target price on sight of: 12 Monaten
Last rating change:
Analyst: Philipp Sennewald

Q4 preview: Sequential improvements following license recovery

Topic: USU Software is going to release its 2023 annual report on March
28th, which is seen to show further sequential improvements during Q4,
partly driven by a recovery of the license sales as well as continuously
growing SaaS sales.

Q4 sales are seen coming in at EUR 34.9m, implying a muted 4.0% yoy but
showing further sequential improvements with 6.3% qoq. This should be
driven among others by a recovery of the license revenues, which we expect
to come in at EUR 3.1m thus accounting for almost half of the FY license
sales (eNuW: EUR 6.5m) but still 30% down yoy. Mind you, that license
revenues deteriorated in the first 9M of '23 following prolonged sales
cycles. Besides this, SaaS sales look set to show further strong growth of
20% yoy to EUR 4.6m. Overall, FY '23 sales are seen at EUR 133m, hence meeting
the lower end of the company's guidance (EUR 132-139m).

While growth remains muted, Q4 adj. EBITDA is expected at EUR 4.3m,
indicating an improved margin of 12.4% vs Q3 (+3.9pp qoq). Again, the main
driver behind this is seen to be the sequential increase in license sales,
which usually show higher initial margins compared to subscription-based
SaaS revenues. Yet, FY adj. EBITDA is anticipated to amount to EUR 13.1m,
thus reaching the lower end of the guidance (EUR 13-15m) but also implying a
margin decline by 3.4pp to 9.9%.

2024 another transition year. While sequential improvements should continue
throughout 2024e, we still expect profitability to be slightly below the
levels of '21 & '22 with an adj. EBITDA margin of 12.5%. This is mainly due
to the ongoing SaaS transformation, where management aims for a >75% share
of new customer business by FY '26 and hence a consequent decline in
license sales. While this will have an adverse short-term effect on
profitability, margins are seen to strongly expand in mid-term (eNuW: 17.1%
by FY '26e), as the annual subscription payments of the SaaS contracts
should equal perpetual license sales including maintenance after c. 3
years.

Although another transition year is likely laying ahead, current valuation
appears undemanding at 13x EV/EBIT '24e (vs historic avg. of 20x).
Reiterate BUY with an unchanged PT of EUR 30 based on DCF.

You can download the research here:
http://www.more-ir.de/d/29087.pdf
For additional information visit our website
www.nuways-ag.com/research.

Contact for questions
Die Analyse oder weiterführende Informationen zu dieser können Sie hier downloaden
www.nuways-ag.com/research.
Kontakt für Rückfragen
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Diese Meldung ist keine Anlageberatung oder Aufforderung zum Abschluss bestimmter Börsengeschäfte.
Offenlegung möglicher Interessenskonflikte nach § 85 WpHG beim oben analysierten Unternehmen befinden sich in der vollständigen Analyse.
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The issuer is solely responsible for the content of this research.
The result of this research does not constitute investment advice
or an invitation to conclude certain stock exchange transactions.

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Quelle: dpa-AFX