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Profile Software | Raising the Profile: Growth in High Gear

Algosystems enhances group outlook; acquisition sealed at attractive valuation – Profile signed an SPA in November to acquire 87.23% of Algosystems, a GR network engineering & cybersecurity company, for a consideration of €3-4mn, implying an attractive valuation of c3-4x EV/EBITDA for a business generating EBITDA €14m incremental revenue in 2026e, although we anticipate some margin dilution over 2026-27e given Algosystems’ low-2-digit EBITDA margin profile, before mgt progressively lifts margins as operating efficiencies and synergies are captured. Strategically, we see meaningful upside from cross-selling opportunities with Profile’s banking software, as higher-tier banking clients increasingly expect software providers to demonstrate cybersecurity expertise.

c19% EBITDA CAGR over 2025-29e on mix optimization, accelerated project delivery – We have revised our mid-term estimates following the deal, implementing material upgrades to group revenue for 2026e (+22%) and 2027e (+30%), also supported by modest upgrades to our financial software forecasts. We now incorporate c19% revenue CAGR in 2025-29e, underpinned by the solid financial software base, ongoing SaaS transition strategy and execution of GR state contracts, which we understand may carry a longer execution tail than initially estimated. We have revised our 2025e slightly lower to reflect phasing effects tied mainly to GR state digitization projects. On profits, we expect some margin dilution over 2026-27e given Algosystems’ low-2-digit EBITDA margin, although we anticipate recovery in subsequent years as momentum in financial software is sustained, higher-quality state projects are delivered, and operating efficiencies/synergies are realized in the acquired business. Overall, we eye 19% EBITDA CAGR in 2025-29e, with group EBITDA margin reaching >26% by the end of the period.

Self-funded model, cash generation still offers ample deployment flexibility – With a solid recurring revenue base, improving profitability and moderate capex needs, the model is essentially self-funded, ensuring continued capex/R&D investment. Post the addition of Algosystems, we expect Profile’s robust financial solutions core and its significant Greek state project backlog to drive solid FCF leading to net cash of almost €40mn by 2028e, still allowing plenty of room for the company to seize M&A opportunities, reinvest for development, or boost returns.

Valuation – PROF has comfortably outperformed its broad peer group driven by positive sentiment on the effectiveness of its SaaS transition plan and the trajectory of GR state contract execution. We continue to base our valuation on a blended methodology, combining our DCF (8.3% WACC) with an M&A-based component to reflect ongoing deal activity within the financial software industry. Our PT increases to €9.2 (reflecting the combined effect of profit upgrades, valuation roll-over, lower WACC) and values PROF at c12x 2026e EV/EBITDA, still at c10% discount vs. the EU IT sector. We thus continue to see scope for further upside ahead, especially as contract uptake in both core businesses has gathered pace.