Huddlestock is a WealthTech and TradeTech company that develops SaaS solutions for digitizing work processes for financial companies, custody banks, asset managers and retail trading venues. Huddlestock offers innovative technology software with a leading expert professional services business. The open, compliance optimized, and data centric-platform allows customers to offer a differentiated real-time product that reduces cost and increases efficiency. Through its expert professional services business, Huddlestock delivers strategic technology solutions and process automation for the financial services industry. Huddlestock is listed on Euronext Growth Oslo since November 2022.
Pressmeddelanden
Challenging Traditional Business Models in the Financial Market
Huddlestock Fintech AS (”Huddlestock” or the ”Company”) has during the second quarter 2023 significantly bolstered the Company’s offering by combining the offerings and integrated the capabilities of the acquired businesses, as well as further technological development. Huddlestock’s strong value proposition to providers of investment services is expected to contribute to new deals and business opportunities going forward. This, combined with a strong outlook for the Professional Financial division into 2024, justifies a strong outlook for both the full year of 2023 and 2024. Huddlestock are estimated to reach a revenue of NOK 179M in 2024, and based on an applied EV/S target multiple of 3.9x, a potential fair value of NOK 3.2 (3.2) per share is derived in a Base scenario.
- Consolidated Net Revenues Amounted to NOK 29.4M
During the second quarter of 2023, the net revenues amounted to NOK 29.4M (12.2), corresponding to a growth of 140% Y-Y and 70% Q-Q (16.6). However, Huddlestock acquired and consolidated the companies Tracs Group, Dtech, and Bricknode during the year 2023, and thus, they are not included in the comparable periods. Compared to the pro forma revenues Q1-23, which amounted to NOK 25.3M, Huddlestock achieved a revenue growth of around 16%. The EBITDA result during Q2-23 amounted to NOK -1.8M (-4.8), while the EBIT result amounted to NOK -9.5M (-7.6), where the increase is mainly derived by an increase in depreciation and amortization by approximately NOK 4.8M.
- Strong Value Proposition in the Financial Markets
Huddlestock has during Q2-23 successfully completed several accretive acquisitions, including Tracs Group, Dtech, and Bricknode. By combining the offering and further developing the technology, Huddlestock has enabled the empowerment of their clients by delivering Investment as a Service, which constitutes of a unique end-to-end plug-and-play solution. Huddlestock’s offering enables a white-label solution that provides the client with, among other things, full control over the end clients’ holdings, trading and order management, safekeeping, and regulatory compliance. This, in combination with an end client user interface for online devices, constitutes a strong value proposition for providers of investment services, which is now poised to challenge more traditional solutions and business models.
- We Repeat our Valuation Range
Huddlestock has delivered a strong quarter with substantial growth. During H1-23, the consolidated net revenue amounts to NOK 45.9M (21.3), corresponding to a growth of 116%, while the proforma revenue totals NOK 54.7M. Meanwhile, we view positively the fact that Huddlestock has clearly outlined a cost reduction plan, expected to be executed in H2-23 and throughout 2024. All in all, we repeat our valuation range, where we still perceive that an investment in Huddlestock offers an attractive risk-reward proposition at current levels.
8
Värdedrivare
2
Historisk lönsamhet
8
Ledning & Styrelse
8
Riskprofil
Samtliga analyser av bolag från och med år 2020 betygssätts utifrån ett nytt betygssystem - Värdedrivare, Historisk Lönsamhet och Ledning & Styrelse sträcker sig från 1 till 10, där 10 är högsta betyg. Riskprofil sträcker sig från 1 till 10, där 10 är att anse som högst risk. Aktieanalyser av bolag publicerade innan 2020 har betygssatts utifrån en annan modell.
Powering the Future of Investing
Huddlestock Fintech AS (”Huddlestock” or the ”Company”) is a Wealthtech and Tradetech company, acting as an innovative software provider with a leading expert professional services business, within the financial markets. Huddlestock possess a strong market position in the professional services business, with multiyear relationships within the Nordic financial market. Huddlestock also provides software to the financial market, offering innovative, compliant, and data-centric SaaS solutions across several verticals, including Wealthtech, Tradetech, and Investment services, among others. Huddlestock are estimated to reach a revenue of NOK 179M in 2024, and based on an applied EV/S target multiple of 3.9x, a potential fair value of NOK 3.2 per share is derived in a Base scenario.
- Capitalizing on Strong Underlying Market Growth
The rising adoption of cloud-based solutions, digitalization and increased investment are expected to drive the market growth on the global Core Banking Software (CBS) market. The global core banking software market is estimated to grow at a CAGR of 18.3%, with an estimated value of USD 40.7 billion by 2029. Huddlestock is a leading provider of investment and wealth management SaaS solutions and the Company’s services enables financial companies to digitize their operations and democratizing access to capital markets, why Huddlestock are expected to capitalize on the growing market demand.
- Significant Revenue Synergies Going Forward
Huddlestock has successfully completed several accretive acquisitions in 2023, including Tracs Group, Dtech, and Bricknode. The combined products and technologies from these companies are highly complementary to Huddlestock, providing a complete infrastructure for financial service operations, a regulatory umbrella, a full-service RegTech platform, and pension solutions. This creates a comprehensive end-to-end solution, with improved onboarding processes and a significantly shortened time to market. The coordination is expected to generate significant revenue synergies through leveraging upselling opportunities within the combined customer base, as well as by expanding the target market with the complete end-to-end solution.
- The Proportion of Recurring Revenues is Growing
Huddlestock’s revenue model is primarily based on two revenue streams: consulting services and the technology business. The consulting services is based on secured contracts for longer periods, providing good visibility in terms of earnings. Recurring revenues have historically accounted for a smaller portion of the total revenues, amounting to 16% during the full year of 2022. Through acquisitions and new clients, Huddlestock has increased the proportion of recurring revenues in Q1 and pro forma LTM. In Q2-23, Huddlestock secured three new clients with a combined Annual Recurring Revenue (ARR) of NOK 1.9M.
8
Värdedrivare
2
Historisk lönsamhet
8
Ledning & Styrelse
8
Riskprofil
Samtliga analyser av bolag från och med år 2020 betygssätts utifrån ett nytt betygssystem - Värdedrivare, Historisk Lönsamhet och Ledning & Styrelse sträcker sig från 1 till 10, där 10 är högsta betyg. Riskprofil sträcker sig från 1 till 10, där 10 är att anse som högst risk. Aktieanalyser av bolag publicerade innan 2020 har betygssatts utifrån en annan modell.
Analytikerkommentarer
Sep
Interview with Huddlestock’s CEO John E. Skajem
Aktiekurs
N/A
Värderingsintervall
2023-09-04
Bear
1,4 NOKBase
3,2 NOKBull
4,6 NOKUtveckling
Huvudägare
2023-06-30
Comment on Huddlestocks’s Q2-23 Report
2023-08-25
Huddlestock published on August 24, the company’s quarterly report for the second quarter 2023. The following are some key financial metrics that we have chosen to highlight in connection with the report:
Analyst Group view on Huddlestock
During the first half of 2023, Huddlestock has successfully completed the acquisitions of the companies Dtech, Bricknode, and Tracs Group. The combined offering that Huddlestock has developed represents a unique end-to-end solution that empowers Investment-as-a-Service. Huddlestock’s B2B offering is tailored to a broad target group within the financial market, ranging from wealth and asset managers to savings platforms and corporate pension providers, to mention a few. Huddlestock’s offering enables a comprehensive white-label solution that provides the client with, among other things, full control over the end clients’ holdings, trading and order management, safekeeping, and regulatory compliance. This, in combination with an end client user interface for desktop and smartphones, constitutes a strong value proposition for providers of investment services.
Net revenue growth 140% Y-Y and 77% Q-Q
During the second quarter of 2023, the net revenues amounted to NOK 29.4M (12.2), corresponding to a growth of 140% compared to the same quarter the previous year. During the previous quarter (Q1-23), the net revenue amounted to NOK 16.6M, reflecting a substantial growth of 77% Q-Q. This increase in revenue corresponds to approximately NOK 12.8M in absolute terms Q-Q. It is important to note, however, that Huddlestock has acquired the companies Tracs Group, Dtech, and Bricknode during the year 2023, and thus, they are not included in the comparable periods. When compared to the Proforma revenue for Q1-23, which amounted to NOK 25.3M, Huddlestock achieves a revenue growth of around 16%. For the first half of the year, Huddlestock’s consolidated revenues amounted to NOK 45.9M (21.3), corresponding to a growth of 116%, while the proforma revenue totals NOK 54.7M.
Huddlestock’s revenue can be derived from two main business areas: the Professional Service Division and recurring revenue from the Technology Business Division. Turning our attention to the recurring revenue from the Technology Business Division, which amounted to NOK 10.7M during the second quarter of this year, and in comparison to the previous quarter’s proforma figures, the recurring revenue reached NOK 9.5M. This represents a growth of approximately 13%. For the first half of the year Huddlestock’s proforma recurring revenues from the Technology Business amounted in a total of NOK 20.2M. As for the Professional Service Division, Huddlestock reports that several mandates have been extended throughout the period, and the outlook indicates a high capacity utilization with visibility extending until the year 2024. Taken together, we can conclude that both business areas have maintained a strong pace during the quarter, contributing to the growth achieved in this period.
Net revenue for Huddlestock Q1- and Q2-23, Q1-23 Pro forma and H1-23 Pro forma.
During the quarter, Huddlestock successfully consolidated the operations of Dtech, Bricknode, and Tracs Group into Huddlestock. Concurrently with this consolidation, Huddlestock has achieved operational advancements, including the successful product launch during the second quarter 2023 with a Swedish client. The client has more than 60.000 end-clients and is digitally processing approximately 15.000 trades per day through Huddlestock’s system. The fact that Huddlestock has gone live with the client marks a significant milestone for the company, simultaneously demonstrates the growth potential with the new customers, where Huddlestock generates revenues for example through monthly licenses, Assets under Management (AuM), as well as transaction fees. Furthermore, Huddlestock’s sales team has transitioned to a unified CRM system, which has improved efficiency and the combined prospects expands the sales pipeline. The group can now execute on sales synergies, such as cross-selling and engage with all of the Company’s prospects. After the end of the quarter, Huddlestock signed a Letter of Intent (LOI) regarding equity trading with Stack by.me. Stack by.me is a Norwegian provider of an investment app that can be likened to social media. The platform currently offered by Stack by.me to its numerous clients is a Software-as-a-Service (SaaS) solution operated by Huddlestock and will continue to be supported by Huddlestock Investor Services.
EBITDA result amounted to NOK -1.8M during Q2-23
The consolidated EBITDA result during the second quarter amounted to NOK -1.8M (-4.8), corresponding to a decreased EBITDA loss of NOK -3.0M Y-Y. The consolidated EBIT result during the quarter amounted to NOK -9.5M (7.6), corresponding to an increased EBIT loss of NOK 1.8M, which is derived by an increase in depreciation and amortization by approximately NOK 4.8M. As mentioned earlier, it should be noted that completed acquisitions were not consolidated in the comparable period of the previous year, making the comparison somewhat misleading. However, when comparing EBITDA and EBIT results on a proforma basis for Q1-23, which amounted to NOK -6.0M and NOK -14.3M respectively, Huddlestock’s EBITDA and EBIT results have improved by NOK 4.1M and NOK 4.9M respectively.
In terms of total operating costs (including cost of materials/subcontractors), they amounted to NOK 31.2M, reflecting a decrease of NOK 0.1M compared to proforma Q1-23 (31.3), while it should be noted that revenues in the same comparison have increased by approximately 16%. Thus, the interim report serves as evidence that Huddlestock has successfully consolidated the newly acquired companies, all the while maintaining effective cost control.
Huddlestock presented in both the report and the conference call a cost reduction program, enabled in part by cost synergies among the acquired operations and built upon the previously communicated cost synergy initiatives. The first part of the cost reduction program was initiated during the second quarter, before the summer, which Huddlestock anticipates will yield an impact of approximately NOK 9.2M in cost savings starting from Q3-23. Huddlestock has also initiated an additional part of the cost reduction program, estimated to amount to NOK 7.8M, with effects expected to materialize in the early part of year 2024. Below outlines Huddlestock’s cost reduction program and the additional part, detailing the nature of the intended savings, the expected date implemented effects from, and the corresponding sum.
At the end of Q2-23, Huddlestock’s cash and equivalents amounted to NOK 10.8M, compared to NOK 1.7M at the end of March (Q1-23), corresponding to a net change in cash of + NOK 9.1M. The increase in cash and equivalents during the quarter can be attributed to a capital injection of NOK 5M from Njord Group AS, as well as from the acquisition of subsidiaries, net of acquired cash. As for the net cash flow from operating activities from continuing operations, it amounted to NOK -11.6M during the first half of 2023, equating to an operational burn rate of NOK 1.9M per month over the period.
In conclusion, we are of the opinion that Huddlestock has progressed well operatively and has successfully consolidated the acquired companies during the second quarter, considering both the net revenue growth and the development of the total operating costs. Analyst Group views the developments during the quarter positively, as well as the initiation of the cost reduction program, which is anticipated to gradually be materialized in the figures over the upcoming quarters. Furthermore, Huddlestock holds a strong position with a robust prospect pipeline, significant upcoming product deliveries in both 2023 and 2024, and stable prospects for Visigon (part of the Professional Service Division). These factors are expected to drive growth in the other half of 2023. It should be noted, however, that the forthcoming quarters are projected to be somewhat weaker, attributed to seasonal effects, a point emphasized by Huddlestock’s CEO, John E. Skajem, during the conference call.
We will return with an updated equity research report of Huddlestock.