Sales and earnings largely in line with our expectations

Modest sales revisions, ’19e-’21e EBIT cut 2-5%

22x EV/EBIT ‘19e, 17% EBIT CAGR ’17-‘21e

Q2 metrics: sales and EBIT +1.5% and +19% y-o-y, resp.
After two consecutive quarters with declining LFL growth, FPIP reported Q2 sales of SEK 102m, up 1.5% y-o-y. This was in line with our expectations, but we stress that it is the company’s margin trajectory and its share of recurring revenues that should be in the limelight. In Q2, the EBIT margin came in at 11.3% (+11bp vs. ABGSCe), compared to 9.6% in Q2’18. The expansion was mostly driven by a reduced share of low-margin revenues (‘delivery’) in combination with a solid number of on-premise licenses during the quarter. The latter showed a significant bounce-back from the weak Q1 number, stemming from the recently signed agreement for its Long-Term Archive product.

’19e-’21e EBIT reduced due to higher fixed costs
Despite the modest deviations on both sales and earnings vs. ABGSCe, we have reduced ’19e-‘21e EBIT by 2-5% due to lowered assumptions for SaaS (high-margin sales) in addition to higher costs. SaaS sales were somewhat lower than expected in Q2, while FPIP’s recent reorganisation has entailed an uptick in its fixed costs.

2019 is a transformation year; ’20-’21 outlook is strong
We continue to expect increased market activity in H2’19, coming from low levels in the first half of this year. Based on its recent signings and the fact that a procurement was lost some time ago due to a lack of competition amid other corresponding products with sufficient quality, we think that FPIP has one of the strongest offerings on the market. Ultimately, we estimate that this will boost its license selling ahead, although we assert that FY’19 will be a year of limited sales and earnings growth in conjunction with the recently renewed Danish contract (it accounted for 20% of ’18 sales), which continues to burden. On our revised forecasts, FPIP is currently trading at 22x ‘19e EV/EBIT with >
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