Yesterday, USU released a strong set of Q1 results, which slightly exceeded our estimates on the topline.

Q1 sales increased by 12.6% yoy to € 33.3m (eNuW: 32.8m), driven by strong international sales as well as a continuously high number of new and follow-up orders, which further increased the record order backlog to € 89m (+17% yoy). Looking at the sales split, SaaS revenues again rose disproportionately to € 4.0m (+21.5% yoy), fully in line with our estimate. Thanks to the ongoing digitization trend and several project wins, consulting revenues also had a significant impact, growing a considerable 22.7% to € 21.5m.

Q1 EBITDA grew by 10.2% yoy to € 3.8m (eNuW: € 3.8m), implying a stable margin of 11.7% after the first quarter. The flat margin development is based on the increasing share of SaaS revenues (lower initial sales), a higher use of freelancers considering the strong order intake as well as a slightly increased marketing ratio (+0.5pp). On the other hand, increased personnel costs in light of wage inflation have been entirely offset by price increases.

On the back of this, management confirmed the FY ‘23e guidance of € 134-139m sales (eNuW: € 138.5m) and an EBITDA of € 16.5-18.0m (eNuW: € 17.6m), implying a margin of 12.6% at mid-point. This is absolutely reasonably, in our view, considering the record order backlog as well as the fact that Q1 is usually the weakest quarter.

Overall, the investment case remains fully intact, as USU is shifting its business model towards a SaaS dominated business model, while at the same time winning further significant projects. Moreover with the introduction of the “One USU” strategy, management is aiming for further efficiency gains going forward. In fact, USU merged all its German entities to create a leaner operational structure, which should significantly benefit SG&A as well as personnel costs going forward. The total costs of the program are estimated at € 0.5m (eNuW).  

Despite the recent strong share price performance, valuation continues to look undemanding, as the stock is trading at 22.7x PE ‘24e, 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.