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EUR 231.33 For Business Accounts Only

Good revenue growth, above expectation.

Good revenue growth, above expectation.

EARNINGS/SALES RELEASES

In Q4 18, revenue growth (+10.7% on constant scope) was above expectation and benefited also from a low comparative in Q4 17 (-16.7% on constant scope). Prodware had record SaaS revenue growth (+45.9%) following a weak Q3 18 (+2%). Geographically, there was a good development in International (c.+11%), in particular in Benelux (+23.6%) which integrated the Microsoft Dynamics business acquired from CTAC in the Netherlands.

FACT

In Q4 18, revenue reached €52.7m (+12.6%, +10.7% on constant scope). Revenue growth was above expectation and benefited also from a low comparative in Q4 17 (-16.7% on constant scope). Prodware had record SaaS revenue growth (+45.9%) following a weak Q3 18 (+2%). Geographically, revenue growth was sustained by the rebound of activities in Benelux (+23.6%) which integrated the Microsoft Dynamics business acquired from CTAC in the Netherlands.
2018 revenue.

Prodware posted revenue of €175.9m (+4.9%, +4.3% on constant scope) above expectation (€172m estimated).
SaaS revenue surged by 25.8% to €29m and represented 16.5% of total revenue (+2.8pts yoy). Software editing was stable at €56.5m (32% of the total) and the integration services increased by 2.9% to €90.5m thanks to the growing implementation of Microsoft Dynamics 365.
Geographically, the trend was contrasted between International markets and France and the French-speaking countries. International revenue surged by 17% to €107m (61% of total revenue), driven by activities in Germany, Spain and Belgium/Luxembourg. Conversely, revenue in France and the French-speaking countries dropped by 10% to €69m due to a significant slowdown in North Africa and a difficult environment in France in Q4 18.

The release of the 2018 results is due on 11 March 19.


ANALYSIS

Strong year-end for SaaS.
Prodware is involved in a business transformation which consists of replacing traditional software licence fees by three-year subscription fees in the SaaS mode. SaaS provides recurring and predictable revenue. The transformation of the model had been well-managed up to now as there was no significant disruption in total revenue growth.
In Q4 18, Prodware had record SaaS revenue growth (+45.9%) following a weak Q3 18 (+2%) and a strong H1 18 (+25.7% o/w +20% in Q2 18, +37% in Q1 18). All in all, SaaS revenue grew by 25.8% in 2018 and is expected to drive growth in the medium-term considering that it represented 16.5% of revenue in 2018.
Steady software editing and other services.
In 2018, software editing revenue (€56.5m) was stable which was a good performance (vs -11% in 2017, -6% in 2016). Integration revenue growth (+2.9%) benefited from the deployment of the Microsoft Dynamics 365 platform at customers and the integration of the Microsoft Dynamics 365 business acquired in early October 18 from CTAC in the Netherlands (annual revenue of €2m).
Dynamic International activities.
In 2018, International revenue grew significantly (+17%) and represented 61% of the total. The international activities were sustained by the large number of contracts based on the Microsoft Dynamics 365 online platform signed at the beginning of 2018 which had a strong positive impact on revenue growth in H1 18 (+30%). In H2 18, growth (+7%) included a good development in Q4 18 (c.+11%), in particular in Benelux (+23.6%).
In France and the French-speaking countries, revenue dropped significantly (-10% o/w -18% in H1 18). Prodware mentioned that Q4 18 was impacted by a negative environment for the delivery of projects in France but did not disclose the significant effect on revenue.


IMPACT

In conclusion, Prodware had good revenue growth in 2018 including a fast-growing business transformation to SaaS. Based on reported revenue of €175.9m (vs €172m estimated), we believe that the EBITDA could be in the range of €32.5-33m in 2018 (vs €32.1m currently estimated).
Underlying
Prodware

Prodware is engaged in the publishing and hosting of business computer solutions. Co. publishes and integrates management software for accounting management, human resources, customer relations, pay stubs, production, etc. In addition, Co. is involved in the design and implementation of network applications and securitization services. These applications and services include supply of network systems, server installation and hosting, and installation of security software such as antivirus and anti-intrusion. Co. markets its products and services through a network of agencies in France, as well as through partner distributors internationally.

Provider
AlphaValue Corporate Services
AlphaValue Corporate Services

AlphaValue Corporate Services capitalise on the research and credit analysis expertise deployed by AlphaValue with major institutional investors at European level over the past nine years. The proprietary tools and processes enabling AlphaValue Corporate Services to establish a valuation and/or a credit risk assessment are identical to those used by AlphaValue to the benefit of its institutional clients. The only difference is the recognition that a company evaluation cannot be dissociated from the fact that the latter is paying for the service (AlphaValue Corporate Services), as opposed to the investor footing the bill (AlphaValue). AlphaValue’s research tools are characterised by the transparency of the valuation methodologies, their responsiveness to market data and by nine years’ experience of a universe numbering more than 450 European companies. Through its coverage and sector exhaustiveness, AlphaValue ranks alongside the major research houses in Europe and constitutes the only new entrant to the European space in the past decade. This significant presence is reflected in an unrivalled distribution capability via platforms commonly adopted by investors to access research: Factset, Bloomberg, Capital IQ and the numerous websites. AlphaValue is one the largest research contributors to these platforms, to the benefit of AlphaValue Corporate Services issuer clients.  The AlphaValue Corporate Services analysts are AlphaValue’s sector specialists. Their robust knowledge of the business models in their sectors enables the rapid generation of incisive, relevant research and advantageous interaction with the management teams.

Analysts
Hélène Coumes

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