itim Group Plc (LON:ITIM)is a disruptive software-as-a-service (SaaS) platform that empowers traditional retailers with an Omni-channel solution, enabling them to effectively compete against online-only players. The company has recently released its full-year results for the period ending December 31, 2022. The reported revenues and earnings align with WH Ireland adjusted forecasts and demonstrate positive growth in Annual Recurring Revenue (ARR).
Although the conversion of contracts has been slower than anticipated during this period, itim Group’s revenue has increased by 4% compared to the previous year, reaching £14.0m (FY21: £13.5m). However, the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) has decreased from £2.2m in FY2021 to £0.2m, and Earnings Per Share (EPS) has decreased from 3.75p to -2.0p. These declines can be attributed to wage cost inflation and investments in expanding the workforce to support future sales growth.
The ARR for the year has shown significant growth, increasing by 19% to £13.2m (FY21: £11.1m). Looking ahead, itim Group emphasizes its focus on cash management, reducing customer incentives, and relaunching their consultancy business. They also plan to introduce new applications to their platform. The company maintains a healthy cash balance of £3.9m at year-end (FY21: £6.2m).
Considering the slower contract conversion, we have previously adjusted our forecasts, and we maintain those unchanged at this time.
The modest revenue growth reflects the impact of investments made during the period. itim Group experienced delays in decision-making and project delivery by retailers due to ongoing economic uncertainty. Despite this, the company has managed to achieve a 19% increase in ARR, with recurring revenue now constituting 84% of total turnover. The reported total revenue of £14.0m for FY22 aligns with our expectations. However, the significant increase in sales staff ahead of revenue growth plans, combined with wage cost inflation, has negatively affected profitability. The company’s EBITDA has decreased to £0.2m, and EPS stands at -2.0p, down from 3.75p in FY2021. itim Group’s net cash position at the end of the year remains healthy at £3.9m (FY21: £6.2m).
itim Group is actively focusing on conserving cash and improving profitability. They are implementing strategies such as reducing customer incentives and relaunching their consultancy business. Additionally, the introduction of new products, including a payment hub, expands their retail offering and has the potential to increase revenues from new and existing customers.
In our view, while the retail market remains challenging, itim Group’s proprietary Omni-channel platform for store-based retailers is well-positioned to benefit from industry trends. Considering the current implied FY23 EV/Revenue multiple, which represents a more than 50% discount compared to the peer group average, we believe there is potential for the company’s shares to recover once the contract pipeline is successfully executed.
