Customer de-stocking hits device shipments

Aferian has this morning given a trading update for the year to 30 November 2022. Revenue and profit will both be impacted by a shortfall within the devices business as customers reduce inventory levels, ironically due to an easing of concerns over supply chain logistics. We reduce our estimates for both FY22E and FY23E following the announcement. The group has also announced that it has been in discussions around a ‘significant acquisition opportunity’, which has been aborted.

Customer de-stocking hits device shipments

Beeks Financial Cloud Group, the cloud computing, connectivity and analytics provider for financial markets, has delivered impressive FY22 results. Revenue (+57% YoY) and profit (underlying EBITDA +52% YoY) both grew strongly, which we view as a highly creditable performance given the material investment currently being made in the platform and new product development. The group made strong operational progress during the year and commentary on the outlook is positive. We leave underlying FY23E revenue and earnings estimates unchanged following the announcement and introduce FY24E forecasts.

Impressive FY22 results

Instem has once again delivered a strong set of interim results, in our view, with the outcome consistent with the August 2022 trading update. The growth story remains the key highlight, with all four divisions making a positive contribution. Earnings quality continues to improve, and the group’s financial position remains robust. Commentary on the outlook is positive, with price rises and stronger growth in high-margin software business expected to benefit second-half financial performance. We maintain FY22E-FY24E earnings estimates following the release.

Another positive period for Instem

Beeks has this morning published a short trading update for FY22 and, probably just as importantly, revealed the name of its first customer for the Exchange Cloud platform – ICE Global Network, a leading global exchange business and part of the group that owns the NYSE. We leave forecasts unchanged following the positive announcement but are delighted to see both the financial performance and the unveiling of the exchange customer.

Breaking the ICE

Instem has signed its largest ever single contract, a five-year $12m deal with a leading global contract research organisation (CRO). The group is deploying its new Aspire clinical trial acceleration solution to over 2,000 users worldwide. In our view, the contract win validates the group’s growth strategy and further demonstrates Instem’s inherent M&A ability. We leave forecasts unchanged following this positive news, anticipating that the deal will underpin our future projections.

Largest ever contract validates growth strategy

Aferian’s H1 22 results show a strong performance from the software business, plus signs that headwinds impacting the devices business may be abating. This performance was accompanied by record exit Annual Recurring Revenue (ARR), driving improved revenue quality and visibility. Both business units continue to report strong operational progress, and management commentary on the outlook for the second half is positive. We revise estimates following the announcement and continue to believe that the group is well-positioned to capture growth opportunities from the ongoing structural shifts towards IPTV and streaming video consumption.

Strong software performance, abating headwinds in devices

Instem’s update for the six months to 30 June 2022 (H1 22) confirms that the business continues to trade strongly, with revenue up c.39% YoY. The group continues to experience wage inflation, as was previously signalled in the FY21 results. However, this will, at least partially, be offset by price increases implemented in April 2022. The group’s financial position remains robust, and commentary on the outlook for H2 22E is positive. We make no changes to earnings estimates following the announcement.

H1 22 – strong trading and positive outlook

With the global economic situation increasingly uncertain, we have taken the opportunity to review recent industry forecasts on the streaming video market. The message remains positive: the industry continues to expect robust growth in the near/medium term, despite the challenging macro backdrop. We have also taken a deep-dive into Netflix Inc’s Q1 22 release, which revealed that the industry leader in streaming video is facing a number of headwinds. In our view, one difficult quarter for Netflix is not a sign of turbulence for the global video streaming market, nor an indication of more challenging conditions for the markets addressed by Aferian.

Market backdrop remains favourable

Aferian’s update for the six months ending 31 May 2022 highlights a strong performance from the (higher margin) software and services business, with management actively mitigating the short term supply disruption being experienced by the devices segment. At the group level, earnings quality continues to improve, as does earnings visibility. Management strikes a confident tone in the outlook commentary, and we leave estimates unchanged. In our view, the release demonstrates further progress towards delivering the 2025 strategy, and we continue to believe that Aferian is strongly placed to benefit from the ongoing structural shifts in the TV industry.

Strong performance in software and services

Instem has reported FY21 results consistent with the January trading statement and in line with our forecasts. Despite the ongoing macroeconomic turbulence from Covid-19, the group continues to report impressive revenue growth, both headline and organic. With three major acquisitions, the group also made a strategic step change in its platform during 2021. While the release contains positive commentary on the outlook, we adjust FY22E and FY23E profit forecasts to reflect revised opex assumptions.

FY21 Strong financial performance, strategic transformation

Aferian has announced a small acquisition to continue the expansion of its software suite – a business called ‘The Filter’, which offers a video recommendation platform, powered by advanced Artificial Intelligence (AI) technology. The deal is small ($2.0m initial consideration) and we make no changes to estimates at this time, but it appears to be a useful additional element for Aferian’s software offer to existing and new customers.

Product suite in-fill

Beeks has reported impressive H1 22A results, in our view. Revenue (+46% YoY) and profits (underlying EBITDA +41% YoY) both saw strong growth – a highly creditable performance given the material investment currently being made in the platform and new product development. The group made strong operational progress during the half and commentary on the outlook is positive. We increase FY22E and FY23E revenue and EBITDA forecasts following the announcement.