• Q1e: We expect 25% ARR growth and adj. EBITDA of DKK -1.9m
• Likely to reiterate FY'24 guidance with no material change in demand
• FTE reduction lifts '24e-'26e adj. EBITDA by 19-5% (on low numbers)

Q1e: We expect 25% ARR growth and DKK -1.9m adj. EBITDA

Penneo reports Q1 on 23 May. We forecast ARR of DKK 92.8m for 25% y-o-y growth, driven by low churn of 4.5%, uplift of 15.5%, and new sales of 14.0%. Noting that Q1 is a seasonally weak quarter, we model revenues of DKK 24.0m and adj. EBITDA of DKK -1.9m (vs. DKK -6.6m in Q1'23). We forecast FCF (incl. leases) of DKK -11.7m, highlighting that Q1 will not see the same positive working capital effect as in Q1'23 (due to invoicing dynamics) while DKK 2.4m will be paid in postponed employee taxes. Combining this with no inflow from warrants takes the Q1e cash position down to DKK 30.3m.

FTE reduction takes '24e-'26e adj. EBITDA up by 19-5%

We do not expect Penneo to report any material change in demand in its main markets since Q4'23, and thus expect the FY'24 ARR guidance to be reiterated, though Belgium should continue the strong momentum (although it only accounts for 9% of ARR). We forecast 23% ARR growth in '24e vs. the implied guidance of 18-25%. Turning to profitability, we have noted a reduction in the number of FTEs during Q1, which we understand is due to some FTEs leaving from natural attrition and not necessarily being replaced. The main focus is clearly on profitability, which we view as positive considering today's trading environment and the company's cash burn. We thus raise '24e-'26e adj. EBITDA by 19-5% (on numbers close to zero), and now expect a FY'24 figure of DKK 7.8m vs. guidance of DKK 5m-10m. Our revised estimates will see Penneo reaching a FCF (incl. leases) of DKK -3.5m in '25e, slightly less optimistic than the company's unofficial ambition of neutral or positive FCF from '25.

FVR of DKK 6-14

Penneo is trading at 2.5-1.6x EV/ARR in '24e-'26e. Our DCF yields DKK 14, while a valuation vs. US peer DocuSign