Redeye expects a stable Q3 report from Addnode with limited growth yet solid margins. While keeping our Base Case unchanged, we lower 2024 and 2025 slightly on the back of a softer automotive industry, affecting PLM.

DM: 3-year Licenses Likely to Remain at a High Level Driven by Europe

Lagercrantz Group

Fortnox

Systemair

PowerCell Sweden

Invisio

Enea

Hexatronic Group

Addnode Group

* Concentration risk in revenue sources, with over 20% of sales related to Autodesk and Dassault Systémes platforms.
* Uncertain positioning to capture the greatest market value, given the mix of VAR and SaaS offerings.
* Potential limitations in pricing power, particularly within the public sector.
* Lack of certainty regarding the longevity of competitive advantages beyond the near term.

* Strong recurring revenue base (70%) and meaningful reinvestment opportunities, enabling scalable growth without expensive reinvestment.
* Benefiting from secular tailwinds in digitalization across multiple sectors, with a track record of successful geographic expansion.
* Demonstrated competitive advantages through switching costs and consistent value creation, with no signs of weakening position.
* Limited regulatory interference and cyclical dependencies, with high operational stability and independence from commodity prices.
* Positive sustainability impact through products that contribute to efficiency and environmental improvements, coupled with high employee satisfaction.

* Operating margin below 20% and not consistently increasing, potentially indicating challenges in cost management or competitive pressures.
* Return on Equity (ROE) below the 20% threshold for the past five years, suggesting room for improvement in capital efficiency.
* Earnings growth has not consistently exceeded 10% annually over the past five years, indicating potential limitations in profitability expansion.

* Strong gross profit margin and consistent revenue growth above industry average, indicating pricing power and market share gains.
* Solid financial health with favorable current ratio, manageable debt levels, and strong interest coverage, suggesting stability and capacity for growth.
* Impressive cash flow conversion rates, indicating high-quality earnings and ability to generate real cash profits.
* Attractive dividend yield with recent growth and good cash flow coverage, showing commitment to shareholder returns.

* Limited insider ownership, with management and board members collectively owning less than 10% of shares, potentially reducing alignment with shareholder interests.
* Absence of a controlling owner with long-term commitment, which could impact strategic decision-making and long-term stability.
* Lack of substantial personal stakes by most board members, with only one member holding a significant share (about 5%), potentially reducing their commitment to shareholder interests.

* Strong leadership with CEO Johan Andersson's 18-year tenure, deep industry knowledge, and proven track record of value creation, fostering a culture of innovation and long-term commitment.
* Decentralized organization promoting accountability, with consistent delivery on promises and a clear strategic plan focused on consolidating partnerships and expanding product portfolios.
* Effective capital allocation, demonstrated by successful M&A activities, attractive returns on investments, and a consistent dividend policy, supported by opportunistic use of company stock.
* Transparent and timely investor communication, with management being candid about mistakes and maintaining consistent storytelling and key metrics over time.
* Board diversity and expertise aligning with business strategy, including industry veterans and leaders with relevant experience in software and Addnode's end markets.

SEKm	2023	2024e	2025e	2026e	2027e
Revenues	7,412.0	8,141.1	6,641.3	7,502.4	8,441.1
Revenue Growth	19.1%	9.8%	-18.4%	13.0%	12.5%
EBIT	410.0	586.5	737.0	851.6	957.4
EBIT Margin	5.5%	7.2%	11.1%	11.4%	11.3%
EV/Revenue	1.6	1.9	2.3	2.0	1.8
EV/EBIT	29.8	25.8	20.7	17.9	15.9
EBITDA - CAPEX	552	758	923	1043	1146
EBITDA - CAPEX Margin	7.4%	9.3%	13.9%	13.9%	13.6%
EV/EBITDA - CAPEX	22.1	20.0	16.5	14.6	13.3
Net Debt	837	1234	1314	1298	1294
NWC/R12mSales	-7.3%	-7.0%	-7.0%	-7.0%	-7.0%

Key financials

DM: 3-year Licenses Likely to Remain at a High Level Driven by Europe