Osirium Technologies — Trimming FY21 expectations

Osirium Technologies (LN: OSI)

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Research: TMT

Osirium Technologies — Trimming FY21 expectations

Osirium has signed up many more new customers year-to-date compared with FY20, but lower average contract values mean that bookings and revenue for FY21 are likely to be flat year-on-year. We have revised down our FY21 forecasts accordingly. We continue to expect stronger bookings growth in FY22 supported by a higher level of the contract base due for renewal and the potential to sell more to the large number of customers won in FY21.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Osirium Technologies

Trimming FY21 expectations

Trading update

Software & comp services

30 November 2021

Price

16.75p

Market cap

£5m

Net debt (£m) at end H121

0.9

Shares in issue

29.4m

Free float

91%

Code

OSI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.5)

(25.6)

(20.2)

Rel (local)

(7.9)

(24.4)

(29.4)

52-week high/low

31p

17p

Business description

UK-based Osirium Technologies designs and supplies subscription-based cybersecurity software. Its product portfolio includes privileged access management (incorporating privileged access, task, session and behaviour management), secure process automation and privileged endpoint management software.

Next events

FY21 trading update

January 2022

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Osirium Technologies is a research client of Edison Investment Research Limited

Osirium has signed up many more new customers year-to-date compared with FY20, but lower average contract values mean that bookings and revenue for FY21 are likely to be flat year-on-year. We have revised down our FY21 forecasts accordingly. We continue to expect stronger bookings growth in FY22 supported by a higher level of the contract base due for renewal and the potential to sell more to the large number of customers won in FY21.

Year end

Revenue (£m)

EBITDA*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

EV/sales
(x)

12/19

1.17

(2.15)

(19.5)

0.0

N/A

5.0

12/20

1.43

(1.36)

(12.9)

0.0

N/A

4.1

12/21e

1.44

(1.67)

(11.4)

0.0

N/A

4.1

12/22e

1.64

(1.60)

(10.4)

0.0

N/A

3.5

Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Slower bookings momentum in H221

Osirium expects to report bookings for FY21 at a similar level to the £1.57m achieved in FY20. We were forecasting 25% bookings growth for FY21 to £1.88m. Osirium has signed up many more new customers this year than last year (customer numbers now are 70% higher than at the end of CY20, implying at least 40 new customers so far this year compared to 16 for FY20), but these have been for smaller contract values and decision times have been longer. Revenue for FY21 is also expected to be at a similar level to FY20 (ie £1.44m versus our forecast of £1.60m). The company expects decision-making to normalise in FY22.

Revising estimates; still factoring in growth in FY22

Increasing awareness of the security risks inherent in remote working and high-profile ransomware attacks are driving demand for privileged access security software, providing a large addressable market for Osirium’s software. The company has seen 97% customer retention by value year-to-date, providing a strong base for its land and expand strategy, and is seeing a growing number of leads from its channel partners. It also has £1.5m of contracts up for renewal in FY22, providing a good bookings base for the year which should be augmented by expansion opportunities and new customer wins. We have revised our forecasts to reflect FY21 guidance and bookings/revenue growth of 28%/14% for FY22. Our EBITDA loss forecasts increase by £158k in FY21 and £259k in FY22.

Valuation: Bookings growth key to upside

At 4.1x FY21e sales, Osirium is trading at a discount to peers on an EV/sales basis (the UK software sector is trading at 5.4x calendar year sales). As it is an early-stage company several years from profitability, we have performed a reverse discounted cash flow to analyse the assumptions factored into the current share price, using a WACC of 9% and a terminal growth rate of 3%. We estimate the share price is discounting average bookings growth of 25% for FY23–30e, break-even EBITDA in FY26, average EBITDA margins of 4.9% for FY23–30e and a terminal EBITDA margin of 36%.

Changes to forecasts

Exhibit 1: Changes to estimates

£'k

FY21e

FY21e

FY22e

FY22e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Bookings

1,880.5

1,568.7

(16.6%)

0.0%

2,350.6

2,007.9

(14.6%)

28.0%

Revenues

1,595.6

1,437.3

(9.9%)

0.2%

1,903.9

1,644.7

(13.6%)

14.4%

EBITDA

(1,509.8)

(1,668.1)

10.5%

22.3%

(1,345.2)

(1,604.4)

19.3%

(3.8%)

EBITDA margin

-94.6%

-116.1%

22.7%

-70.7%

-97.6%

38.1%

Normalised operating profit

(3,135.6)

(3,293.9)

5.0%

14.7%

(3,131.5)

(3,390.7)

8.3%

2.9%

Normalised operating margin

-196.5%

-229.2%

(32.7%)

-164.5%

-206.2%

(41.7%)

Reported operating profit

(3,135.6)

(3,293.9)

5.0%

14.7%

(3,131.5)

(3,390.7)

8.3%

2.9%

Reported operating margin

-196.5%

-229.2%

(32.7%)

-164.5%

-206.2%

(41.7%)

Normalised PBT

(3,346.1)

(3,504.4)

4.7%

13.2%

(3,342.0)

(3,601.2)

7.8%

2.8%

Reported PBT

(3,346.1)

(3,504.4)

4.7%

13.2%

(3,342.0)

(3,601.2)

7.8%

2.8%

Normalised net income

(2,844.2)

(2,978.7)

4.7%

18.9%

(2,840.7)

(3,061.0)

7.8%

2.8%

Reported net income

(2,844.2)

(2,978.7)

4.7%

18.9%

(2,840.7)

(3,061.0)

7.8%

2.8%

Normalised basic EPS (p)

(10.91)

(11.43)

4.7%

(11.1%)

(9.68)

(10.43)

7.8%

(8.7%)

Normalised diluted EPS (p)

(10.91)

(11.43)

4.7%

(11.1%)

(9.68)

(10.43)

7.8%

(8.7%)

Reported basic EPS (p)

(10.91)

(11.43)

4.7%

(11.1%)

(9.68)

(10.43)

7.8%

(8.7%)

Gross cash

454.2

205.0

(54.9%)

147.4

319.2

116.6%

Net debt/(cash)

2,251.1

2,500.3

11.1%

145.0%

5,060.5

5,588.7

10.4%

123.5%

Source: Edison Investment Research

Exhibit 2: Financial summary

£'k

2016

2017

2018

2019

2020

2021e

2022e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

477.6

647.6

957.5

1,171.6

1,434.9

1,437.3

1,644.7

EBITDA

 

 

(1,136.7)

(1,609.4)

(1,767.3)

(2,152.1)

(1,363.5)

(1,668.1)

(1,604.4)

Normalised operating profit

 

 

(1,725.6)

(2,296.8)

(2,674.8)

(3,399.7)

(2,872.4)

(3,293.9)

(3,390.7)

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Share-based payments

(96.9)

0.0

0.0

0.0

0.0

0.0

0.0

Reported operating profit

(1,822.5)

(2,296.8)

(2,674.8)

(3,399.7)

(2,872.4)

(3,293.9)

(3,390.7)

Net Interest

9.7

4.2

(0.6)

(52.2)

(222.3)

(210.5)

(210.5)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(1,715.9)

(2,292.6)

(2,675.4)

(3,451.9)

(3,094.7)

(3,504.4)

(3,601.2)

Profit Before Tax (reported)

 

 

(1,812.8)

(2,292.6)

(2,675.4)

(3,451.9)

(3,094.7)

(3,504.4)

(3,601.2)

Reported tax

453.3

409.4

407.6

622.5

590.2

525.7

540.2

Profit After Tax (norm)

(1,286.9)

(1,883.2)

(2,267.8)

(2,829.4)

(2,504.5)

(2,978.7)

(3,061.0)

Profit After Tax (reported)

(1,359.6)

(1,883.2)

(2,267.8)

(2,829.4)

(2,504.5)

(2,978.7)

(3,061.0)

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(1,286.9)

(1,883.2)

(2,267.8)

(2,829.4)

(2,504.5)

(2,978.7)

(3,061.0)

Net income (reported)

(1,359.6)

(1,883.2)

(2,267.8)

(2,829.4)

(2,504.5)

(2,978.7)

(3,061.0)

Basic average number of shares outstanding (m)

10

10

13

15

19

26

29

EPS - normalised (p)

 

 

(12.38)

(18.12)

(18.14)

(19.45)

(12.85)

(11.43)

(10.43)

EPS - normalised fully diluted (p)

 

 

(12.38)

(18.12)

(18.14)

(19.45)

(12.85)

(11.43)

(10.43)

EPS - basic reported (p)

 

 

(13.08)

(18.12)

(18.14)

(19.45)

(12.85)

(11.43)

(10.43)

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

64.6

35.6

47.9

22.4

22.5

0.2

14.4

EBITDA Margin (%)

-238.0

-248.5

-184.6

-183.7

-95.0

-116.1

-97.6

Normalised Operating Margin

-361.3

-354.7

-279.4

-290.2

-200.2

-229.2

-206.2

BALANCE SHEET

Fixed Assets

 

 

1,178.8

1,812.1

2,360.2

3,124.4

3,487.3

3,967.4

4,326.9

Intangible Assets

1,134.5

1,731.9

2,307.2

2,936.5

3,335.5

3,808.3

4,180.5

Tangible Assets

44.3

80.2

52.9

187.9

151.9

159.1

146.4

Investments & other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

3,953.7

1,646.4

3,134.6

4,837.3

2,300.8

1,150.9

1,316.2

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

380.9

622.6

748.0

982.4

818.4

945.8

997.0

Cash & cash equivalents

3,572.8

1,023.8

2,386.6

3,854.9

1,482.4

205.0

319.2

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(648.5)

(857.7)

(1,170.3)

(1,923.0)

(2,143.7)

(2,314.4)

(2,707.7)

Creditors

(648.5)

(857.7)

(1,170.3)

(1,889.1)

(2,088.7)

(2,284.4)

(2,677.7)

Tax and social security

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

(33.9)

(55.0)

(30.0)

(30.0)

Long Term Liabilities

 

 

0.0

0.0

0.0

(2,422.4)

(2,518.6)

(2,731.1)

(5,923.6)

Long term borrowings

0.0

0.0

0.0

(2,345.4)

(2,502.9)

(2,705.4)

(5,907.9)

Other long term liabilities

0.0

0.0

0.0

(77.0)

(15.8)

(25.8)

(15.8)

Net Assets

 

 

4,483.9

2,600.8

4,324.5

3,616.3

1,125.8

72.8

(2,988.2)

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

4,483.9

2,600.8

4,324.5

3,616.3

1,125.8

72.8

(2,988.2)

CASH FLOW

Op Cash Flow before WC and tax

(1,136.7)

(1,609.4)

(1,767.3)

(2,152.1)

(1,363.5)

(1,668.1)

(1,604.4)

Working capital

226.8

85.5

187.2

633.7

396.5

68.3

342.2

Exceptional & other

0.0

0.0

0.0

0.0

14.0

0.0

0.0

Tax

120.4

291.4

407.6

473.3

557.3

525.7

540.2

Net operating cash flow

 

 

(789.4)

(1,232.5)

(1,172.5)

(1,045.1)

(395.7)

(1,074.1)

(722.1)

Capex

(968.0)

(1,320.6)

(1,455.7)

(1,852.8)

(1,875.1)

(2,065.9)

(2,125.8)

Acquisitions/disposals

0.0

0.0

0.0

0.4

3.3

0.0

0.0

Net interest

9.7

4.2

(0.6)

0.0

(56.5)

(8.0)

(8.0)

Equity financing

5,047.1

0.0

3,991.5

1,726.4

0.0

1,925.7

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

(60.6)

(48.5)

(55.0)

(30.0)

Net Cash Flow

3,299.3

(2,549.0)

1,362.8

(1,231.7)

(2,372.5)

(1,277.3)

(2,885.9)

Opening net (cash)/debt

 

 

(273.5)

(3,572.8)

(1,023.8)

(2,386.6)

(1,509.5)

1,020.5

2,500.3

FX

0.0

0.0

0.0

(0.0)

(0.0)

0.0

0.0

Other non-cash movements

0.0

0.0

(0.0)

354.6

(157.4)

(202.5)

(202.5)

Closing net (cash)/debt

 

 

(3,572.8)

(1,023.8)

(2,386.6)

(1,509.5)

1,020.5

2,500.3

5,588.7

Source: Osirium, Edison Investment Research


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This report has been commissioned by Osirium Technologies and prepared and issued by Edison, in consideration of a fee payable by Osirium Technologies. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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General disclaimer and copyright

This report has been commissioned by Osirium Technologies and prepared and issued by Edison, in consideration of a fee payable by Osirium Technologies. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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