Redeye comments on the preliminary Q4 figures from Formpipe. While hurting Q4 2024, the implications for 2025 and onwards are likely minor. However, the important ACV/ARR figures are not yet disclosed.

Bredband2

Starbreeze

Heliospectra

BrightBid

Arise

Formpipe Software

* Not expected to achieve five-fold growth in a decade, limiting potential for exponential expansion.
* Industry's 10-year median ROIC is below 15%, indicating potential challenges in achieving consistently high returns.
* Limited ability to increase prices above inflation in the public sector, potentially constraining revenue growth.
* Revenue base not sufficiently diversified, with Lasernet constituting over 20% of revenues, creating potential vulnerability.

* Strong recurring revenue model with about 80% of sales from SaaS and Support & Maintenance, enhancing business stability and predictability.
* Highly scalable business with +85% SaaS gross margin and negative net working capital, allowing for efficient growth with limited investments.
* Benefiting from secular tailwinds related to digitalization of businesses and the public sector, supporting long-term growth potential.
* Sustainable competitive advantages in core public sector markets with high switching costs, positioning the company for long-term success.
* Close cooperation with customers, including co-creation of new functionality, fostering innovation and customer loyalty.

* Operating Margin (EBIT) below 20% and not showing consistent growth over three years.
* Return on Equity (ROE) falls short of the 20% threshold for the last five years.
* Revenue and earnings growth have not consistently outperformed industry averages or historical rates.

* Strong gross profit margin exceeding 40%, indicating profitable product mix and pricing power.
* Return on Assets (ROA) outperforms industry average, demonstrating efficient asset utilization.
* Healthy debt management with Net Debt less than two times Operating Cash Flow and five times Free Cash Flow.
* Good interest coverage ratio, with earnings (EBIT) covering interest more than five times.

* Management has not consistently delivered on promises, lagging behind important 2025 targets for growth and margins.
* Lack of long-term executive team tenure, with senior team and CEO tenure not exceeding five years.
* Unclear performance requirements for executive incentive programs, potentially misaligning management with long-term shareholder interests.
* Absence of founder involvement in the business, potentially missing out on the benefits of founder-led companies.

* Strong CEO leadership with a clear long-term vision and industry expertise, driving innovation and value creation across segments.
* Lean, decentralized organization promoting accountability and customer-centric approach, with a well-defined strategic plan for growth.
* Transparent and timely investor communication, focusing on long-term business value and consistent storytelling.
* Reasonable executive compensation aligned with performance, and significant insider ownership demonstrating confidence in the company's future.
* Diverse and experienced board of directors with relevant expertise, promoting gender diversity and maintaining strong governance practices.