Topic: VOQUZ Labs announced preliminary FY ’23, indicating a strong sequential recovery in H2 regarding both, top-line growth and profitability. Management also issued a promising outlook for the coming year. In detail:

H2 sales increased by 16% yoy to € 3.4m (eNuW: € 3.1m), which should have been mainly driven by the company’s flagship product samQ (eNuW: 75% of sales), as indicated by the recently published order intake figures. Importantly, the newly launched product visoryQ, a tool that automates ERP decision-making processes for SAP products, appears to be already in high demand, accounting for 10% of sales (eNuW). Overall FY ’23 sales came in at € 5.2m (eNuW: € 5.0m), indicating a 11% yoy increase.

H2 EBITDA came in at € 0.9m (eNuW: € 0.3m), implying a 28% margin. The gap to our estimate can be mainly explained by scale related to the better top-line as well as a  higher than expected share of license revenues. On this basis, FY ’23 EBITDA turned positive at € 0.4m (eNuW: € -0.2m), an 8.6% margin. Moreover, the company indicated that EBIT might even turn slightly positive (eNuW new: neutral), while FCF should have still been slightly negative with € -0.2m (eNuW new) following continuous investments into the product portfolio.

Promising outlook. Management also put out a guidance for FY ’24, targeting sales growth of 10-20% yoy (eNuW new: +17%) and an EBITDA margin of 15-20% (eNuW new: 16%). This should be, among others, driven by the ongoing S/4HANA transition (mainstream maintenance for old ERP software ends in 2027), of which VOQUZ is seen to be one of the main beneficiaries especially with its new product visoryQ, as well as compelling cross- and up-selling opportunities. Further, we expect a slight rebound effect, after many IT buyers postponed orders amid macro headwinds in 2023. From 2025 onwards, management aims for annual organic sales growth of >20% (eNuW new: +25% in ‘25e & +22% in ‘26e) and EBITDA margins north of 20% (eNuW new: 20.5% in ‘25e).

Despite the strong share price performance YTD, valuation still looks undemanding with the stock trading on a mere 1.2x EV/Sales and 7.6x EV/EBITDA ‘24e (0.8x/4.0x based on FY25e) carried by the strong underlying mid-term prospects as well as the scalability of the capital light business model.

Reiterate BUY with an upgraded PT of € 22 (old: € 20) based on DCF.