Paragon ID (EPA: PID) Research Update

Highlights:

• Arrowhead is updating coverage on PID with a fair value bracket of EUR 58.9 to EUR 71.4 (share price on November 14, 2022: EUR 31.5) based on the discounted cash flow (DCF) method
• Paragon ID reported its highest-ever quarterly revenue in Q1 2023 at EUR 42.2 mn, up 65% year-on-year (YoY), primarily owing to the growth in the e-ID segment (up 170% YoY) and Transport and Smart Cities segment (up 90% YoY)
• The Traceability and Brand Protection and Payments segments reported growth of 57% and 13% YoY, respectively, in Q1 2023
• The acquisitions of EDM, UrbanThings and Tracktio contributed EUR 2.6 mn to the total sales in Q1 2023
• Considering the performance in Q1 2023, the order pipeline for the remaining three quarters, and the current visibility of raw materials’ availability, the company revised its sales growth target to over 20% YoY from 10% YoY for FY 2023, which will take its revenue to over EUR 155 mn (almost double of that in FY 2021)
• The company posted sales of EUR 130.8 mn in FY 2022, up 55.9% YoY. This, in addition to operational efficiencies, better supply chain management, improved fixed cost absorption and higher-than-expected contribution from acquisitions, led to an improvement in EBITDA margins to 8.0% in FY 2022 from 6.9% a year earlier. EBITDA, on an absolute level, increased to EUR 10.5 mn in FY 2022 from EUR 5.8 mn in FY 2021
• As a result of the EBITDA growth, the net loss reduced drastically to EUR 2.5 mn in FY 2022 from EUR 5.7 mn in FY 2021