Keyware Technologies (EBR:KEYW) Research Update

• Arrowhead is updating its coverage on Keyware Technologies with a fair value bracket of EUR 2.18 to EUR 2.29 (share price on May 25, 2022: EUR 1.03), based on the blended valuation method, with equal weightage to Discounted Cash Flow (DCF) method and EV/EBITDA (2021E) multiple-based valuation
• The company acquired Payments Solutions BV in January 2022 to expand its foothold over the Electronic Payment Solution market and leverage the synergies between the terminal segment operations and Payment Solutions BV. This acquisition is expected to increase its revenue by EUR 2.3 mn and increase EBITDA by EUR 440k in FY 2022
• The company took a loan of EUR 1 mn to fund part of the acquisition
• Revenue increased by 36.5% year-on-year (YoY) to EUR 17.7 mn in FY 2021 on account of an increase in signed contracts and sales efforts in the Terminals segment, recovery in consumer spending in the Authorization segment and an increase in demand in the Software segment
• The Terminal, Authorization and Software segments reported YoY growth of 6.5%, 158.4% and 14.1%, respectively
• Gross profit improved by 22.3% YoY to EUR 12.4 mn in FY 2021. This growth was driven by strong demand in the Authorization segment and lower costs incurred while purchasing the terminals
• EBITDA in FY 2021 amounted to EUR 4.0 mn, showing a growth of 40.6% YoY, owing to higher gross margins by the company
• Cash and cash equivalents were reported at EUR 1.7 mn in FY 2021 compared to EUR 1.5 mn in FY 2020. This increase in cash was due to the lower amount of loans paid back by the company compared to FY 2020
• In FY 2021, the company took loans of EUR 1.2 mn and repaid the loans related to Magellan acquisition, ending the year with a debt of EUR 1.6 mn as compared to EUR 2.9 mn in FY 2020