Admicom is releasing its results on Friday, and in this context, it is worth considering the growth of these two companies. SmartCraft issued its first earnings report as a listed company in Q2/2021. SmartCraft’s quarterly revenue at that time was 6.3 million euros, calculated at the exchange rate on the closing date. Admicom’s Q2/2021 revenue, on the other hand, was 6.5 million euros. I couldn’t find the previous 12-month ARR amount in Admicom’s Q2/2021 report (if anyone finds it, feel free to share a tip), but for SmartCraft, it was €22.2M at the time.
I looked at the corresponding figures for Q3/2023. SmartCraft’s revenue was €8.9M and the 12-month rolling ARR was €32.6M. Admicom’s corresponding figures were €8.5M and €32.7M.
Neither company has made any acquisitions recently, so the focus is on organic growth. I would dare to claim that, in addition to Q4 revenue, SmartCraft has also overtaken Admicom based on the full-year ARR. As the investment story for both companies is based on growth, the development of these figures is, in my opinion, of essential importance when assessing the companies’ potential. Jari Sarasvuo once hoped for a “golden recession” because it offers an opportunity for success to companies capable of change. The current economic and global situation now gives us investors a great opportunity to examine the pace of these two horses when the “running weather” is no longer normally fair.
14 February 2024 - SmartCraft ASA, the leading Nordic provider of mission-critical SaaS solutions to small and mid-sized companies in the construction sector, today reported its results for the fourth quarter of 2023, ending the period with annual recurring revenue (ARR) of NOK 387 million, which represents a growth of 21 percent compared to the same period 2022. Organic ARR growth was 14 percent.
Reported revenue in the fourth quarter was NOK 107 million (+18 percent), of which 97 percent was recurring. Adjusted and reported EBITDA margin was 39 percent. Operating cash flow was NOK 32 million in the fourth quarter, compared to NOK 29 million in the same period last year. For the full year 2023 operating cash flow was 153 million, up 32 percent compared to 2022, and net profits were 115 million, an increase by 71 percent. In the fourth quarter the group had a churn of 7.2 percent, a reduction from 7.9 percent in the third quarter of 2023.
Did anyone notice what drove up SmartCraft’s share price yesterday? The intraday peak was 11.54%, reaching a price of 29 kroner. Towards the end of the day, the rally faded and the day closed at a price of 26.70 kroner. I didn’t notice any significant news myself.
To me, it doesn’t look like a bad deal. Revenue is 37 MSEK and the purchase price is 24 MSEK. The purchase price is paid in cash, as it should be, since no dividends are paid and the accumulated cash is used for growth.
Hopefully, the acquisition can be integrated into the group as effectively as the previous deals.
The company released its Q1/24 figures today, and overall they showed nice growth. Rolling ARR grew to NOK 401 million, representing 16 percent growth. Organic growth accounted for 12 percent of this. If the early April acquisitions of Clixifix and Locka were taken into account, ARR growth would have been 31 percent (to NOK 456 million)!
Q1 reported revenue was NOK 110 million (+16%), of which 97% was recurring. The EBITDA-capex margin increased by 2 percentage points to 33%. Cash flow also saw slight growth, and churn was 7%.
As for Finland, both revenue and profitability declined. But fortunately, the company operates in several markets, and the strong momentum in Sweden and Norway ensures continued growth.
This is a good place to continue owning this construction-sector SaaS growth company.
Q2 julkaistiin aamulla. Homma rullaa erinomaisesti.
SmartCraft ASA, the leading Nordic provider of mission-critical SaaS solutions to small and mid-sized companies in the construction sector, today reported its results for the second quarter of 2024, with record-high revenues with continued high margins. The company ended the period with annual recurring revenue (ARR) of NOK 461 million, which represents an annual growth of 29 percent. Organic ARR growth was 11 percent.
Reported revenue in the second quarter was NOK 133 million (+32 percent), of which 90 percent was recurring, including a dilution of 7 percentage points from the recent acquisitions. The adjusted EBITDA–capex margin was 29 percent, including a negative effect of 3 percentage points from the acquired companies. Churn was 8 percent in the second quarter, up 0.5 percentage points from the first quarter 2024.
This is quite a company. When organic ARR growth is “only” 11% at the bottom of the cycle, it leaves you feeling a bit underwhelmed. I’ve been spoiled by this one.
Based on the webcast, more acquisitions can be expected. Multiples have come down with the market, and the company has the balance sheet for acquisitions since cash isn’t paid out as dividends. Profitability always takes a bit of a dip from these acquisitions, but the company has a strong track record of raising the ARR and profitability of acquired companies. In that sense, it differs from, for example, Talenom, which has made acquisitions abroad, but the improvement in profitability in places like Sweden is still yet to be seen.
Expansion into the UK, in particular, could increase the growth trajectory even further within a couple of years. As a market, the UK is in a completely different league in terms of size compared to the Nordics. On the other hand, digitalization is lagging there, so there’s plenty of market to capture. According to the webcast, there would be demand for many products in the current portfolio on the misty island. I expect new M&A moves to focus on Britain. Then it’s just a matter of cross-selling and implementing the Smartcraft way of operating.
I fully agree with your comments. According to what Gustav said at Redeye’s SaaS Day, 80% of the Nordic SME construction firms they interviewed do not use proper digitized processes in their business operations at all, so penetration even on the home turf is still in its infancy (and of this 15-20%, one in five uses SmartCraft’s products, so there is also market share to be taken from competitors ).
Both Clixifix and SmartCraft are also excited to combine and transfer functions and models in both directions.
A large part of the products offered by SmartCraft are still very country- and language-specific, so the expansion card to cover the entire Nordics is still waiting in their pocket.
Q3: growth is rolling along on track, margins were eaten by “one-offs” which, according to the webcast, mainly won’t show up in Q4 unless opportunities are seen in marketing to invest in similar projects (I was only half-listening). Additionally, profitability in the UK has risen handsomely and I believe we will see M&A activity there very soon.
A pretty decent Q3. ARR grew 29% Y-on-Y, of which 10% was organic. The share of organic growth is okay in this market environment, and I expect the medium-term target of 15-20% organic growth will be reached once the market situation normalizes. Finland is currently dragging all the figures down (organic ARR growth -1%).
In the UK, things have indeed been set rolling on the right track immediately. ARR there grew +30%, and the EBITDA-capex margin was turned from negative to positive (double-digit level). Regarding the UK, the presentation gives a strong hint about future acquisitions (developing list of potential acquisition targets).
This is a good basis to continue from. However, for Q4, we’ll have to see in due time that those “one-offs” truly remain one-off.
PS. I noticed yesterday that the company’s website is also available in Finnish, where you can read the results of the Digimeter survey, for example.
Speculation in the air. Procore has landed in Norway and is likely shopping around.
Procore’s CFO is the chairman of Bidco’s board.
Edit: This will be tempered in light of new information. Procore had bought another company (Novorender AS) on January 28th, so new moves are unlikely following that. The share price also reflected this during the morning. The carefully chilled bottle of champagne has been moved back to the back of the cupboard.
(small update) Current CEO Gustav Line has submitted his resignation after a seven-year career at Smart and will move to a Norwegian software company (non-competing) by the end of the year at the latest. This doesn’t personally surprise me, as I’ve already picked up such ‘vibes’ from interviews during a couple of earnings reports. It will be interesting to see who steps into his shoes.
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