In a short trading update, NetDimensions Holdings Ltd (LON:NETD) has said that H1 revenues were lower than expected due to delays in deal rollouts. The delays are expected to continue into H2; hence we have cut our FY16 revenue forecast by $1.2m to $27.0m. Nevertheless, the adjusted EBITDA loss has significantly improved and we now forecast the group to trade at breakeven in FY16 (previously a $0.6m loss). We are maintaining our FY17 forecasts, but note that if the deal rollouts do materialise in the period, they could potentially result in FY17 upgrades. NETD’s larger US peers continue to trade at significant EV/sales premiums and therefore we continue to believe NETD shares could warrant a significant re-rating.
Trading update: Roll-outs delayed, costs controlled
The company reports that revenue for the period was broadly unchanged from H115 while the adjusted EBITDA loss for the period was less than $1m – which is a substantial improvement on the $1.8m EBITDA loss in H115. The reduced loss was due to better management of expenses, which NETD also expects will benefit the full-year EBITDA result. We understand that the company has received open purchase orders for significant annual on premise licences. However, due to delays in the roll-outs, the company has not been able to recognise the revenue or cash flow. Expenses have been tightly controlled due to a significant slowdown in new hires, which is below budget. While a busy Q4 performance could potentially boost the FY16 results if annual licences or perpetual licences are sold, the increasing focus on recurring Secure SaaS rental revenues means that a strong new business performance in Q4 will not necessarily boost FY16 numbers.
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