Comment on Bricknode’s New Client

Bricknode announced on Tuesday, December 13th, that a Swedish wealth management firm (“the Client”) has selected Bricknode Broker solution to manage investment operations. The deal is projected to increase Bricknode’s annual recurring revenues by around 7-10% within the next few years.

Bricknode has signed a new important client in their wealth segment where the Client has selected Bricknode Broker to consolidate their investment operations. The name of the Client is not public, which may be explained by the fact that the client is expected to launch its investment activities under a new brand in Q1 2023. The Client is a wealth management firm with an experienced team of financial advisors focusing on wealth management portfolios. Bricknode Broker enables securities firms to administer their financial operations when it comes to wealth products that they offer, such as mutual funds, equities, bonds, etc. The Client chose Bricknode’s digital investment platform in order to automate and administer its daily operations including accounts, transactions, and order management. Bricknode has also been chosen due to its capabilities in managing the Client’s investment operations safely, digitally and efficiently, but also because the platform is scalable.

Bricknode projects that the Client will increase Bricknode’s Annual Recurring Revenues (ARR) by approximately 7-10% within the next few years.

An illustrative example on Bricknode’s ARR

In Bricknode’s case, the recurring revenues accounted for ~94% over the time period Q2-2021 – Q1 2022, and if same the level would still apply for the last twelve months (LTM), the ARR would have amounted to 16.9 MSEK. Given this, the Client would illustratively increase Bricknode’s net revenues with approximately 1.2 MSEK – 1.7 MSEK annually, within a few years. Please note that this is an illustration made by Analyst Group, and has not been communicated by the Company.

As mentioned earlier, the sales cycles are long within Bricknode Broker and therefore we do not expect the business vertical to grow at an exponential rate in terms of acquired customers. But, on the other hand, a new customer, for example like the Client, implies a significantly higher ARR. Because of the business critical nature of Bricknode Broker, this implies a high Total Contract Value (TCV). Furthermore, Bricknode can grow with its customers, which is also the case for the new Client that expects to launch its new brand in Q1-23.

Analyst Group assesses that the new customer means a significant step for Bricknode with an expected growing ARR in 2023 and beyond. In the press conference in connection with the announcement, Bricknode also communicated that the sales pipeline is very strong, with 53 prospects in the pipeline, where three of them are in very late stage of negotiations and with a projected deal value that amounts to 3.6 MSEK in ARR, corresponding to approximately 20% of the current revenues. Bricknode trades as of today at a P/S multiple of 1.9x, which Analyst Group consider to be attractive to investors, given the current value drivers for Bricknode.