Analyst Group’s Comment on Movinn’s Q3-report

Movinn published on November 3rd the company’s Q3-report for 2023. The following are some key points that we have chosen to highlight in connection with the report:

  • Revenues relatively in line with expectations
  • High vacancy rates continue to affect margins
  • Lower investments expected to improve cash flow as demand increases

Revenues Relatively in Line With our Estimates

Movinn’s revenue in the third quarter amounted to DKK 21.2m (19.4), corresponding to a growth of 9% Y-Y but 4% below our estimate of DKK 22m. Movinn continues to face weaker demand, especially in Aarhus and Odense, which affects the vacancy rates, hence also revenues. The average vacancy rate amounted to 17.3% on the Danish units, compared to 16.3% in Q2-23 and 8% in the same quarter last year, which has a negative impact on revenues. As a result of changed market conditions Movinn are now downsizing in Aarhus where the company will remove 13 of the 43 units from its portfolio that are underperforming, which is expected to improve vacancy rates and save costs. On a positive note, the vacancy rate on the Swedish units were low, amounting to 3.6% compared to 23.5% in the last quarter and was close to break-even on an EBITDA level.

Moreover, the revenue per unit remains robust despite the tough market climate, amounting to DKK 199k for the Danish units, in line with last quarter, and DKK 108k for the Swedish units, up from DKK 88k in the last quarter. By Movinn taking action to address high vacancy rates, such as removing underperforming units in Aarhus, combined with the expectation of improving macroeconomic factors in 2024, we estimate that vacancy rates will decrease in the future. Consequently, this will result in higher revenue per unit, which is expected to reach the upper end of Movinn’s guidance range of DKK 180-225k per unit. This is anticipated to drive revenue growth without the necessity for Movinn to add additional units to its portfolio.

EBITDA From Operations Slightly Below our Estimates

Movinn’s cost base was relatively in line with our expectations but with slightly higher staff costs than estimated, which is expected to be a result of a rebuild within the sales organization during Q2-23, which also has affected the costs in Q3-23. EBITDA from operations amounted to DKK 0.3m, corresponding to a margin of 1.4%, compared to our estimate of DKK 1.4m. The difference is primarily attributed to the slightly lower revenue and higher staff costs compared to our estimate. The table below shows a complete comparison between our estimates and the result during the quarter.

Lower Investments Expected to Improve Cash Flow as Demand Increases

The cash flow from operations amounted to DKK 1m in Q3-23 compared to DKK 0.2m in the same period last year and DKK 0.4m in Q2-23, where the improvement was attributable to a stronger development regarding working capital. Movinn continues to withhold investments in new units as a result of weaker demand and high vacancy rates, which improves the cash flow from investments compared to Q3-22, something that is expected to continue until vacancy rates decreases. Going forward, as demand is expected to increase and contribute to a stronger operating margin, the lower investments is expected to improve Movinn’s free cash flow. However, Movinn continues to invest in tech development to further automate the company’s sales efforts and be less dependent on sales staff, hence improving the scalability of the business model.

To summarize, Movinn delivered a report relatively in line with our expectations both regarding top-line and bottom-line performance in a tough market. The high vacancy rates are expected to remain in Q4-23, hence affecting both revenue growth and margins. However, the company’s efforts to improve bottom-line metrics, with more controlled growth, i.e. larger projects, and removal of underperforming units, is expected to decrease vacancy rates in H1-24, which is estimated to result in stronger financials.

We will return with an updated equity research report of Movinn.