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Profile Software | Momentum fueled by improved execution, product uptake

LSS step-up in H2’24 reinforces our view on the revenue path; continued FS mix optimization supports our Buy – We reiterate our Buy on Profile following on from its FY’24 results, which confirmed our expectations for accelerated top line and improved mix. Our key takeaways from results were that: a) PROF managed to deliver on its LSS top line guidance (at €18.1m, +95% yoy) reinforcing our view that execution is becoming more linear; and b) EBITDA margins came in at 25.8% (+1.5pps yoy) despite the rising contribution of LSS (typically less margin-accretive) which, in our view, suggests that FS profitability was particularly strong. Taking into account mgt guidance for >20% sales growth in 2025, we reaffirm our FY’25 numbers – revenue and EBITDA at €50.3m (+26% yoy) and €13.5m (+31% yoy) – while also making incremental upgrades to our mid-term forecasts, mostly on account of stronger uptake across FS.

Expecting c16% EBITDA CAGR over 2025-28e on LSS expansion, FS mix optimization – We continue to view Profile as quite well positioned to sustain growth across its two core pillars, supported by favorable end-market dynamics in FS and accelerated LSS execution. We incorporate c12% revenue CAGR in our 2025-28e forecasts, underpinned by the solid recurring FS base, the ongoing SaaS transition strategy, and the execution of Greek state digitization contracts (LSS backlog at >€100m as of FY’24). While LSS remains relatively lower-margin compared to FS, we anticipate continued margin expansion at group level, as profitability in FS continues to improve through SaaS-led mix optimization. Our updated projections point to c16% EBITDA CAGR through 2028e, driven by scale effects from increased share-of-wallet in existing FS contracts, new higher-margin FS contracts, and improved LSS project terms as Greek digitization matures. We see group EBITDA margin ultimately expanding to the tune of c4.5pps over 2025-28e, reaching c31% by 2028e.

Robust cash generation offers flexibility in deployment – With a solid recurring revenue base, accelerating profitability, and moderate capex needs, the model is essentially self-funded, ensuring continued capex/R&D investment. Profile’s strong fundamentals, combined with the >€100m LSS backlog, look poised to drive FCF generation of €9-11m p.a. between 2025-28e and net cash of >€40m by 2028e, which would put the company in an ideal position to seize M&A opportunities, reinvest for development, or boost shareholder returns.

Valuation – PROF has outperformed its broad peer group over the past 2 years, driven by positive sentiment on the effectiveness of its SaaS transition plan and the trajectory of LSS execution. We continue to base our valuation on Profile on a blended methodology, combining our DCF (at 8.9% WACC) with an M&A-based component to reflect ongoing acquisition activity within the financial software industry. Our updated estimates, following slight revisions to our 2026-27e numbers, arrive at a PT of €6.7, valuing PROF at c12.1x 1-yr fwd EV/EBITDA, still at c15% discount vs. the EU IT sector. We thus continue to see potential for further upside ahead, especially as FS uptake appears to have gathered pace and execution constraints in LSS seem to have cleared.