Eight Capital -BUY - cantechletter.comI still struggle witht the valuation.
By Staff Filed under: All posts, Analysts, Software Stock: ksi kneat.com keeps Buy rating with Eight Capital
Eight Capital analyst Christian Sgro is holding the line on kneat.com (kneat.com Stock Quote, Charts, News, Analysts, Financials TSX:KSI) after getting his first impressions of the company’s just-released quarterly earnings. Sgro maintained a “Buy” rating and $4.50 target price on KSI on Thursday, saying an uplift in annual recurring revenue is a good sign.
Kneat, which offers data and document management software focusing on validation lifecycle management and testing for the biotech, pharma and medical device spaces, announced on Wednesday its fourth quarter 2022 financials. The Q4 featured total revenue up 16 per cent year-over-year to $7.3 million, with SaaS revenue growing 87 per cent to $5.7 million. Adjusted EBITDA was negative $1.3 million compared to positive $1.1 million a year earlier.
Kneat said the revenue rise was positively impacted by one-time, upfront and on-premise license fees revenue associated with the scaling of licenses with existing legacy customers, along with the timing of professional services revenue service milestones being met.
“As the largest global companies in life sciences continue to gain real business value from Kneat’s purpose-built software, they are buying more, and leading the way for others in the industry to follow,” said CEO Eddie Ryan in a press release.
Calling the overall impact of the quarterly numbers a positive, Sgro said kneat’s $7.3 million topline was a beat of his estimate at $6.7 million as well as the consensus call at $6.8 million. Adjusted EBITDA at negative $1.3 million was larger than expected, however, with Sgro’s estimate at negative $0.5 million and the Street at negative $0.7 million.
“Annual Recurring Revenue (ARR) of $24.2 million (+85 per cent year-over-year) came in ahead of our $20.7 million (+58 per cent year-over-year) estimate, which we believe is the most important leading metric for the company,” Sgro wrote. “While there is no consensus figure for ARR, we fully expect this to drive increased consensus revenue estimate revisions post the conference call [on Friday].”
For the most part, kneat’s share price has been trading for the past 12 months within the $2.50-$3.50 range. At the time of publication, Sgro’s $4.50 target represented a projected one-year return of 52.5 per cent.
“We see an EBITDA miss as tough to ignore in this environment, however point to the company’s November 2022 Boston Validate user conference as explaining much or all of the delta. All in all, we believe execution on growth continues to justify a premium valuation,” Sgro said.