Safeture’s Q4 2024 report showed slower ARR growth than expected, at 8% y/y and -0.5% q/q. ARR was cSEK58m by the end of the fourth quarter, compared to our estimated cSEK62m. Cost control was good, with positive EBIT for the second quarter in a row. Nevertheless, we believe investors should continue to count with consistent profitability around SEK65m in ARR, as communicated by the company.

In the report, the company showed quarterly churn of five percent, markedly higher than the typical quarter and driven by a German customer reducing its number of licenses. The company also revised its financials targets, from 30% annual growth to 15%. The two other parts of the financial targets, gross margins greater than 80% and sustainable profitability around SEK65m in ARR, is maintained. Although this is quite a hefty decline, we are encouraged by the company being honest in its communication. Market conditions have been challenging, and the company has had a tough time fulfilling its previous 30% target during 2024. The 15% level is stated to be representative of underlying market's growth. By adding new partners or expanding into adjacent areas, the company could still grow faster than that. Nevertheless, we now use 15% as the baseline for our estimates.

On the back of the report, we broadly lower our estimated sales growth over the forecasting period. As scalability is postponed into the future, this means that the margin ramp-up will happen later, naturally having a negative impact on our DCF model. Our fair value range is now SEK4(5) to SEK13(18), with a Base Case of SEK8(11) per share. Safeture trades at an EV/S and EV/EBIT multiple of 2.7x and 38.1x for 2026e, with the latter expected to fall quite quickly beyond 2026 as margins improve from low levels.