Last week, NAGA reported preliminary H1 figures, that were weaker than expected on the topline, but strong on the EBITDA line:

• Q2 sales came in at € 7.9m, down 54% yoy and 32% qoq, 21% below our estimates of € 10.0m. The soft topline was mainly driven by a lower trading activity of only 101 trades per active customers in Q2 (-50% yoy, -26% qoq) and a slightly declining number of active customer (-6% qoq but 22% yoy to 19.9k). Positively, revenue per trade remained stable qoq at € 4.00, volume per transaction increased by 25% qoq to 16,000 (including leverage) and overall AuC increased 1%, despite a declining number of active customers, implying a higher average AuC per customer of € 1,800 (8% qoq, 48% yoy).
• H1 EBITDA of € 2.3m was 15% above our estimate of € 2.0m. The stronger EBITDA can be explained by the cost cutting initiatives, such as reducing marketing spend and personal expenses, that kicked in faster than expected. Still, net income in H1 should be negative to the tune of € 1.5m, due to D&A (eNuW: € 2.5m) and financial expenses (eNuW: € 1.2m).

Overall, H1 was a mixed back: While the quality of customers seems to improve despite sharply cut marketing spendings, customer activity that literally fell off the cliff, heavily burdened topline. Going forward, we expect number of active customer and trades to stabilize and slightly increase until year end, resulting in sequentially improving sales. Assuming ongoing disciplined spending paired with leaner operation, EBITDA should further improve. For FY23, we expect € 38m sales (-24% yoy), € 3.1m EBITDA and € -4.2m net income. The latter is burdened by D&A and high financial expenses (additionally driven by high interest payments for the convertible bond).

As 2023 can be seen as a transition year for the company, NAGA should return to annual top-line and bottom-line growth from FY24 onwards due to the strategic shift towards global growth, new acquisitions, and expansion of the license base paired with ongoing cost discipline and leaner operation.

Given that the company has so far not published its audited FY 2022 figures, we put the recommendation under review (old: HOLD). A favourable audit opinion in the coming weeks is necessary for us to become constructive again.