MUMG: Proprietary Software Driving Growth
Edison | Nov 15, 2017 02:29AM ET
Mensch und Maschine Software SE (DE:MUMG) provides CAD/CAM software to the industrial and construction sectors to support the digitisation of their design, manufacture and build processes. The company has enjoyed strong growth over recent years, with revenues and EBITDA growing at CAGR 8.8% and 101% in 2012-2016. The ongoing transition to accommodate Autodesk’s shift to a subscription-based model is nearing completion, which should see VAR return to growth in FY18. This is coupled with continued strength in the high margin proprietary software division, which grew 8% y-o-y in 9M17. The shares trade in line with peers on a consensus FY18e P/E basis.h2 Q317 results confirm margin improvement/h2
For the nine months to 30 September (9M17) M+M reported improving gross and EBITDA margins, despite a 9.5% y-o-y fall in total revenues. This was due to the 8% higher contribution from the Software division (at 97% gross margin), which more than offset the anticipated 16% fall in VAR revenues (42% gross margin). Net income and EPS both improved 22% to €5.3m and €0.33, respectively.
h2 Operating update: transition nears completion/h2Management has reiterated its FY17 guidance of €17.5-18.5m EBITDA (€15.8m in FY16), 52-57c EPS and a dividend of 45-50c. VAR performance is likely to be subdued in the short term as Autodesk (NASDAQ:ADSK) completes its transition from perpetual licensing to a subscription based model. This will reduce upfront revenues, but over time should provide a recurring revenue stream for M+M. Management expects this division to return to growth from Q417. Continued investment in R&D for the proprietary software division (€7.1m in H117) should aid further top-line expansion for the segment.
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