ATOSS delivered a strong set of Q3 results showing continued double-digit growth and a clear EBIT beat, underlying the company's strong operating leverage. In detail:
Q3 sales arrived at € 47.2m (eNuW: € 47.9m), growing by 12.2% yoy. This was carried by Cloud & Subscription sales (+25.3% to €23.4m) as well as a better utilization in Consulting (+13.8% to € 10.1m), both compensating for the continued decline in license revenues (-15.6% to € 1.8m). This is clearly displaying the success of the ongoing transition SaaS. In fact, Cloud & Subscriptions accounted for 49.6% of sales in Q3, while total recurring revenues (incl. Maintenance) made up 70% (+2pp yoy), which further enhances earnings quality and visibility. Total ARR as of 9M came in at € 95.4m (+26% yoy) driven by a continued strong net retention rate of 111% (€ 8.2m contribution) as well as new and migrated customers (€ 11.3m).
Noteworthy in this context: ATOSS' entry level solution Crewmeister, which targets customers with <30 employees, continued to show strong traction, supported by regulatory tailwinds from mandatory working-time recording, product enhancements, and efficient digital customer acquisition, visible in a strong ARR uptick to € 8.5m (9M'24: € 6.5m).
Adding to this, order intake bounced back in Q3, as overall OI at 9M came in at par with last years figure. More importantly though, OI in Cloud & Subscriptions, the company's main revenue driver, was ahead of last year's figure, as respective backlog now amounts to € 102m (+27% yoy).
The highlight of the release however, was the strong EBIT, which came in at € 17.2m (eNuW: € 16.1m), implying a 36.4% EBIT margin. This was mainly driven by scale effects in connection with the cloud transition, and cost discipline visible in lower-than-planned cost ramp-up across R&D, S&M, and G&A.
Against this backdrop, management lifted the FY25 EBIT outlook from previously =31% to 34%. This is reasonable in our view, given a 9M margin of 34.6% and the seasonally rather strong Q4 still ahead. In fact, reaching the 34% target at the guided € 190m sales would imply a Q4 margin of only 32.4%.
Overall, Q3's strong profitability and resilient top-line momentum fully confirm our investment case of scalable, high-quality recurring growth with strong operating leverage. With recurring revenues now at 70% of total sales and still a lot of margin potential stemming from the cloud migration (eNuW: 80% cloud ratio target by FY30 should be seen as the ceiling), we continue to view ATOSS as a core quality compounder in European software.
BUY with an unchanged PT of €152 based on DCF.
ISIN: DE0005104400