Keyware Technologies (EBR:KEYW) Research Update

• Arrowhead is updating its coverage on Keyware Technologies with a fair value bracket of EUR 1.91 to EUR 2.12 (share price on November 05, 2021: EUR 1.15), based on the blended valuation method, with equal weightage to Discounted Cash Flow (DCF) method and EV/EBITDA (2021E) multiple-based valuation
• Revenue increased by 47.1% year-on-year (YoY) to EUR 8.5 mn in H1 2021 as a result of accounting treatment of the settlement amount related to the previous authorization partner, the increased demand for payment apps and generation of strong subscription-based revenue  
• The Authorization segment reported an increase of 128.4% YoY in revenue, which amounted to EUR 2.5 mn, while the Terminals segment reported a revenue of EUR 3.7 mn, which represented an increase of 13.9% YoY. Additionally, the COVID-19 pandemic led to an increase in demand for payment apps, which, in turn, led to a growth of 53.1% YoY in the Software segment as sales amounted to EUR 2.4 mn 
• The company posted a 17.2% YoY increase in gross profit, which amounted to EUR 6.1 mn, with growth in the Software and Authorization segments compensating for the fall in the Terminals segment 
• EBITDA increased to EUR 1.9 mn in H1 2021, growing by 21.3% YoY, even though the EBITDA margin decreased to 21.8% in H1 2021 from 26.5% in H1 2020 
• The net profit increased to EUR 438k, growing by 57.6% YoY, owing to a higher EBIT 
• The company repaid debt totaling EUR 1.3 mn and took two loans amounting to EUR 950k. This had an impact on the cash and cash equivalents, which decreased slightly by EUR 77k in H1 2021 (from FY 2020) to EUR 1.5 mn