Quadients H1 2021 resulst

QDT earnings for six months ending JUly 31, 2021 were released on Sept 27.

This is not investment advice. Please read the disclaimer. I might own discussed stock(s) currently or at a later time.

Transition of its business segments is ongoing and seems to be on a good track. Growth numbers and any comparisons to H1’20 are not nesseraliy that meaningful (covid). see website

  • ICA seems well on track
    • crossed 10k customers
      • 1.2k net new customers in H1’21, thereof 150 AP/AR customers
    • customer communication volume +35% in H1’21 (vs H1’20)
    • growing revenues
    • current profitability (16%) depressed due to
      • Investments
      • shift to subscriptions, lower license revenue
      • aim for 30% end of 2023
    • For H2 QDT claims a continued strong growth momentum for subscription and
      • accelerated shift in model from license to SaaS in H2 2021
  • MRS is still the dominating segment with sales of €320m (70% of major operations)
    • shrinking sales, Organic sales decline expected at low single digit level in H2 2021
      • they aim for better than -5% p.a. between 2021-’23
    • still quite profitable (44.5%) and they want to stay in that range (43-45% end of FY’23)
    • high potential for upgrading installed base
  • PLS shows nice developments, though current profitability is low (or hidden)
    • installed base reaches 14.5k units in H1’21 and
      • usage rate at 60% (stayed high after 57% in 2020)
      • high profitability at 25-30%, but
    • overall solution margin at -1.4% (up 538bp vs H1’20)
      • hides true profitability?
    • will show organic decline in Q3/Q4 due to very high comparable base (Lowe)
    • aim is for >25k by 2023 with a profit margin of 35-40% for installed base

Done deals. The acquisitions of YayPay (AR) and Beanworks (AP) seem to be a nice addition within ICA. Two divestments in 2021 also seem to be the right steps, lowering OpEx/risks/losses.

Valuation perspectives. The stock trades at a fwd 10x P/E which looks cheap and a much lower dividend yield of 2.2%(not that cheap). The company aims at a minimum 3% p.a. organic revenue growth and in-line EBIT growth at about the same level between 2021-’23. On the one hand, a 10x P/E might not be as cheap as it looks for a company with these low growth rates retaining most of its (reported) profits. On the other hand, the true profitability of ICA and PLS is partially depressed/hidden and these good segments are growing nicely. If MRS’ decline is not too fast, a 10x PE might indeed be (very) cheap. More comfort on the valuation level comes from taking a look at InPost (see here) that is still worth almost €8bn after declining -27% from IPO; and from the rebutted offer for QDT’s CXM unit (see here and here).

OK balance sheet, with all financial covenants easily met, net debt well covered by future cash flows from leasing/rental portfolio. Not to forget, €265m ordinane mezzanine debt exchangeable for existing shares (potential dilution).

The stock sold off -9% the next day (in a weak market) as ‘an increased profit-growth forecast failed to impress’. The stock did surge more than 100% over the past year.

My decision for now it to keep my small position (2.5%). I still like the overall set-up of good segments hidden by bad segments within the consolidated results – comparable to SES SA (SESG LX).

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