Ny analyse fra ABG:
Kahoot - The growth story continues
Kahoot! has been under pressure since the start of February and YTD the stock is down over 30%. The poor performance stems from too high expectations after a very positive Q4 trading update, in addition to fear of inflation, expectations of rising interest rates and lofty valuation metrics for tech-stocks. But with little evidence for these scenarios playing out I believe we are presented with a unique buying opportunity in Kahoot, which are moving full steam ahead with its recent acquisition of Clever.
Until now Kahoot have built up an arsenal of commercialisation tools that it is ready to deploy, and that’s why I’m convinced they will transition from a ‘’nice to have’’ to a ‘’need to have’’ platform for schools and businesses. This is also the reason why we believe Kahoot is one of the best growth prospects among listed Nordic technology companies today.
The business segment, otherwise known as Kahoot! at work, is currently used by 97% of Fortune 500 companies, which employs ~30m workers. In Q2’21 Kahoot! will launch their new offering, Kahoot! 360 Spirit, that will revolutionise how Kahoot monetises large corporation. Previously Kahoot priced its products per host, which we estimate to have an ARPU of USD ~30/month. But with Kahoot! 360 spirit they will monetise employees (users) at a rate of USD 6-9/month instead. Moreover, our estimates show that there are on average 30 users per host. This means that an organisation with two host previously would generate USD ~60/month, versus USD ~360/month today, assuming a conservative USD 6 per employee/month. Now, imagine a company with 1.000 employees and a USD 9/month subscription for its entire organisation (which is not unlikely) would pay USD 0.1m! I believe this represents a step-change in organic revenue growth for Kahoot, in a segment that already accounts for ~60% of revenues.
In addition to this, the recent acquisition of Clever makes a lot of sense to me as it will give the combined company an unmatched position in the US education system among EdTech companies. I think Clever offers a unique value proposition as it enables teacher and students to get access to all their favourite learning apps through one single log-in, and 1.2m teachers and 20m students (US K-12) use the platform every month already, which is ~50% of all US students, a user base that has grown by 25% p.a. the past three years. Moreover, I see multiple ways for Kahoot to accelerate Clevers growth further by 1) Introduce Kahoot’s existing teacher users to Clever and vice verca 2) Expand Clever to colleges/universities in the US 3) Sell Kahoots own apps on the Clever platform (where they are not present today).
Looking at the financial implications, consolidated numbers are not yet available until the transaction is completed near the end of Q2’21, but when I added Clevers existing numbers into our Kahoot estimates I find very positive effects. Firstly, assuming 25% growth for Clever and a 15% opex growth, Clever would lift Kahoots 21’E and 22’E invoiced revenues by 26% and 36%, respectively. That in turn implies a USD 52m adj. EBITDA and USD 90m FCF in 22’E for the combined company. Seeing that Kahoot is already trading at a 23’E (ex. Clever uplift) FCF yield of 3.3%, which is a 17% discount to SaaS peers, even though Kahoot have much higher growth (~35% vs Peers at ~20%), makes Kahoot attractive on a valuation to peer’s basis as well.
While the long-term growth outlooks rock solid, I do see some near-term positive triggers too. First, the stock has recovered >10% since the sell-off earlier in May and even traded above NOK 68, where the recent share issue was done at. Secondly, early in July (~2. July) Kahoot will release its Q2 trading update and hopefully release consolidated financials (post Clever acquisition) and new financial targets going forward, and therefore, the market will soon realise that Kahoot! + Clever = True!
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