Last week, USU released final FY 2022 figures, which were fully in line with the preliminary results:

Final FY sales came in at € 126.5m, ahead of the guided range of € 120-125m and up 13.1% yoy thanks to a strong order momentum as well as an increasing share of SaaS revenues (+31.5% yoy). In fact, recurring revenues (SaaS + Maintenance) made up 45% of all new deals, up from 30% in previous years. Going forward, management guides for a continuously strong growth of SaaS revenues of 25% annually. In 2026e, SaaS is expected to make up more than 75% of all new deals.

Final FY EBITDA grew by 17.0% yoy to € 16.8, exceeding the guidance of € 14.5-16m. The EBITDA margin improved by 0.4pp yoy to 13.3% stemming from the increased share of recurring revenues as well as a positive operating leverage, which overcompensated for rising input costs.

On top of that, USU remains a reliable source of dividends. Management proposed a dividend of 0.55 per share (+10% yoy), implying a yield of 2.4% based on Friday’s closing price. Worth highlighting, since the company started paying dividends in 2006, it always managed to either keep it stable or increase it compared to the previous year.

For 2023e, management guides € 134-139m sales (eNuW: € 139m) and an EBITDA in the range of € 16.5-18m (eNuW: € 17.6m), impyling a margin of 12.6% at mid-point. In our view, the outlook should be well achievable given the record order backlog of € 83m and an increasing demand for digital solutions.

Moreover, management provided a new mid-term guidance. Until 2026e, sales are expected to grow at a CAGR of 10%, which is slightly above our estimate of 9.2%. Moreover, the EBITDA margin is seen to improve to 17-19% (eNuW: 18.6%), based on the targeted increased share of recurring revenues.  

Overall, we remain highly convinced of the case as the company looks well on track to continuously increase margins by reaping the compelling growth opportunities in the segments of IT Service Management and Knowledge Management.

Despite the recent strong share price performance, valuation continues to look undemanding, as the stock is trading at 19.3x PE2024e, a clear discount to the 2-year forward looking average of 25.1x.

We hence reiterate BUY with an unchanged PT of € 32.00 based on DCF.