ARR SEK 23m, +44.6% y-o-y, +9.6pp vs. ABGSCe

We raise our ‘20e-‘22e ARR estimate by 7.7%

EV/sales 11x-6x ‘20e-‘22e, ~60% above peer median

Q3’20: ARR of SEK 23m, +7.1% vs. ABGSCe
Safeture reported Q3’20 ARR of SEK 23m, +7.1% vs. ABGSCe, for y-o-y growth of 44.6%, while customer churn in the quarter amounted to 0%. Meanwhile, net turnover in the quarter came to SEK 6m, -9.6% vs. ABGSCe, for y-o-y growth of 31.1% when adjusted for divested unit revenues in Q3’19; 85% of the net turnover in Q3’20 was recurring. Operational costs in the quarter were SEK 10m, -11.6% vs. ABGSCe and mainly driven by the new base in terms of marketing and sales personnel. Operational costs remained more or less flat y-o-y while the ARR grew by +44.6%, highlighting the leverage in Safeture’s model. Ultimately, Safeture reported EBIT of SEK -4m, +65.9% vs. ABGSC’s estimate of SEK -5m.

Enhanced momentum drives higher ARR estimates
Looking ahead, we raise our ARR estimates for ’20e-’22e by 7.7%. This is partly on the back of the strong report, but also due to Safeture’s increasing momentum in terms of new business. The company’s investments in its new sales and marketing team, as well as its operational structure, are evidently paying off. The new business pipeline exceeds current revenue generation by more than 5x, and Q3 saw Safeture close several important deals and partnerships. For instance, Safeture announced a three-year partnership extension with Special Projects and Services Limited in the UK, which has netted Safeture USD ~0.7m in revenues during the last year. The partnership started in 2020 and has now been extended to 2026.

Safeture trading at EV/sales levels ~60% above peers
Based on our updated estimates, and at the current share price, we find that Safeture is trading at an EV/sales of 11x-6x for ‘20e-‘22e. According to FactSet consensus, this is approximately ~60% above our peer group median EV/sales for that same period. Our peer group consists of Nordic software corporations with
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