Yesterday, q.beyond released Q1 results, which came in as a mixed bag with continuous strong top-line growth on the one hand, but a decreased EBITDA margin on the other hand. Here are our takeaways:

Q1 sales increased stronger than expected by 13% yoy to € 46.6m (eNuW: € 45.8m) mainly driven by the Cloud segment which increased by 15% yoy to € 36.9m (eNuW: € 36.1m) following the consolidation of data specialist productive-data, which was acquired in Q4 ’22. Furthermore, the SAP segment recovered and grew by 4% yoy to € 9.7m (eNuW: € 9.6m). 

Q1 EBITDA however turned negative towards € -1.3m (eNuW: € 1.8m), partly driven by provisions for selective work force reduction to the tune of € 1.3m. The work force reduction mainly took place in business areas that are no longer prioritized and and in case of duplicate functions. Moreover, higher electricity and licensing costs as well as an increased marketing budget in connection with the new strategic algnment burdened the margin.

Besides the negative one-off effect on the EBITDA, the launch of the Strategy 2025 also became visible in a significantly improved free cash flow of € 1.1m (vs € -0.6m in Q1 ’22; eNuW: € 1.3m). Still, in light of outstanding CapEx and outlays incurred to implement measures with regards to the Strategy 2025, free cash flow is expected to come in lower in the coming quarters.

Overall, q.beyond looks well on track to reach its FY '23e outlook despite the rather mixed results, in our view.  Especially for sales (guidance: € 185-191m) and free cash flow (guidance: > € -8m) we currently see no risk to the outlook after a strong Q1. Moreover, EBITDA (guidance: € 5-7m) is set to gradually improve throughout the year, as reduced personnel expenses should compensate for the provisions made in Q1. On top, the current marketing offensive  is seen to start bearing fruit in H2 '23e.

Valuation continues to look undemanding, especially after the recent share price weakness, as the stock is trading at 4.0x EV/EBITDA 2024e, marking a notable discount to the 2y forward-looking historic average of 11.8x.

We reiterate BUY with an unchanged PT of € 1.30 based on DCF.