Q2’20 ARR SEK 17m, -16.1% vs. ABGSCe, +26% y-o-y

Churn of 8% due to client insolvency risks, but…

…order intake remains strong from large customers

Q2’20: ARR of SEK 17m & EBIT of SEK -8m
Safeture reported annual recurring revenues (ARR) of SEK 17m in Q2’20, +25.9% y-o-y, though 16.1% below our estimate of SEK 21m. Net turnover came in at SEK 4.7m, down by 10.2% y-o-y, mainly due to the divestment of Travelogix in Q3’19. Approximately 91% of the net turnover in Q2 was recurring. Reported operational costs saw a slight jump at SEK -13m, mainly due to Safeture continuing its investments into its sales and marketing activities, in conjunction with a strengthening of the management team. In addition, costs of a one-off nature in association with the implemented share issue of roughly SEK 23m gave rise to the increase in operational costs. Ultimately, Safeture reported EBIT of SEK -8m, down by 39.9% vs. ABGSCe.

COVID-19 customer risk, but large new orders emerge
Safeture reported Q2’20 churn of ~8%, mainly due to two existing customers facing insolvency risk and therefore their agreements with Safeture could be discontinued. In addition, a few existing customers have renegotiated their agreements with Safeture, effectively pausing the agreements until Q4’20. On a more positive note, Safeture received three large new orders during Q2’20. Perhaps most notably, Siemens signed an order for EUR 0.8, over three years, acting as an important reference order for Safeture. The existing customer, Chubb, signed an extension order worth a minimum of USD 2m over five years, and International Paper signed an order worth USD 0.4m over three years.

EV/sales of 11.0x-5.8x on 2020e-2022e, ~25% above peer avg.
We still estimate that Safeture will be able to reach profitability during ‘22e, where we forecast an EBIT margin of 1.3%. In addition, based on our updated estimates, Safeture is currently trading at EV/sales of 11.0x-5.8x for ‘20e-‘22e, which is approximately 25% above the average EV/sales
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