Investing.com -- Trustpilot (LON:TRST) has delivered a stronger-than-expected financial performance for 2024, surpassing market expectations and setting an optimistic tone for 2025, sending its shares up by over 14% on Tuesday.
The company posted an adjusted EBITDA of $24.1 million, which is 5-7% higher than consensus estimates.
This marks an improvement in profitability as the adjusted EBITDA margin moved into double digits at 11.4% for 2024, up from previous years.
The company’s revenue growth continued its positive trajectory, with a 19.7% year-over-year increase to $210.7 million.
This was largely driven by strong performance in North America, where bookings grew by 26% in constant currency terms.
The UK and Europe/Rest of the World regions also reported strong revenue increases of 18% and 19% respectively, reinforcing Trustpilot’s global expansion strategy.
Free Cash Flow reached around $17 million, matching Morgan Stanley’s projection but slightly missing the market consensus of $19.8 million due to increased capital expenditures on PP&E and higher cash taxes.
Trustpilot has raised its guidance, projecting high-teens percentage revenue growth in constant currency.
Importantly, the company expects an adjusted EBITDA increase of about 10% above market consensus, with EBITDA margins improving by two percentage points to 13.4%.
This revision translates to an expected 2025 adjusted EBITDA of approximately $32-33 million, compared to the previous market estimate of $29.5 million.
Morgan Stanley itself has upgraded its forecast from $28.4 million to $32.7 million, reflecting confidence in the company’s trajectory.
One of the standout aspects of Trustpilot’s performance has been its strong showing in North America.
The region saw a 10 percentage point improvement in its Net Dollar Retention Rate, a crucial metric that indicates customer retention and expansion.
Additionally, the company recorded a 17% increase in Annualized Average Contract Value (AACV) and a net 4% rise in customer count, demonstrating effective market penetration and customer engagement.
In addition to operational performance, Trustpilot announced a further £20 million share buyback, signaling confidence in its financial stability and growth prospects.
Morgan Stanley notes that given the strong 2024 performance and 2025 outlook, the company’s shares are likely to outperform by a mid-single-digit percentage in the near term.
Despite these positive developments, some areas of concern remain. Free cash flow, while strong, was slightly below expectations due to increased expenditures.
Additionally, while revenue growth remains solid, macroeconomic conditions and competition could pose risks in the longer term.
Nevertheless, Trustpilot’s ability to drive sustained margin improvements and solidify its position in North America suggests that its upward trajectory is well-supported.
Morgan Stanley maintains its view that Trustpilot’s valuation remains fair after two years of strong share price performance.
The brokerage sees a balanced risk-reward profile, with the potential for continued margin expansion and operational efficiencies driving further upside.
"While we believe investors were looking for upside to consensus forecasts, the scale of the adj. EBITDA upgrade is a positive," Morgan Stanley notes, reinforcing the likelihood of sustained investor interest.