da Intermonte – CY4GATE company research report

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di seguito e in allegato inviamo il company research report relativo a CY4GATE a cura di Intermonte.

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Laura Morreale

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FY23 revenue hit by €13mn order delay. Order intake up 22%


n FY23 revenues below exp. due to €13mn order rescheduling. CY4 has just announced preliminary revenues at €65mn (€57mn on FY22, +15% YoY), or -4% YoY compared to pro-forma FY22, implying 4Q23 revenue at €20mn (vs. €30mn recorded in 4Q22). Indeed, preliminary revenue came in lower than our €80mn expectation (-19%), mainly due to the postponement of an important foreign order in the Cyber Intelligence field worth €13mn, which was awarded in mid-December, but for which the conditions precedent were realized only in January, and on which negations to finalize the contract are still underway. As is customary for CY4 activities, order intake typically peaks in November and December due to normal business seasonality. However, as has been the case in the past, some orders may experience delays, as the contractual framework often requires extra time for negotiation and finalization.

n Order intake in FY23 amounted to €73mn, a 22% increase on 2022 data. Going by the most noteworthy contracts announced by the company during the year, we highlight a good contribution from both Decision Intelligence and Cyber Security solutions, with a great contribution from foreign (European) clients. Despite turnover for the year falling below expectations, we view the accelerated order intake as a fundamental driver for medium-term growth. Approximately half of these orders will run for three years.

n Change in estimates. For FY23, we are aligning our revenue estimate with the just-announced preliminary data, while nearly halving our EBITDA estimate, resulting from the delayed profitability on the aforementioned large foreign order, as it involves licenses for software applications in the field of Decision Intelligence featuring high margins. In our FY24-25 forecasts, we also include the recent acquisition of XTN, which we expect to contribute c. 6% to both revenue and adj. EBITDA. On the cash flow side, we factor in the lower cash earnings for FY23 and include the €8.7mn payment of the first tranche of the XTN acquisition in 2024E.

n Investment case. Preliminary FY23 revenues are likely to be negative news but already partly discounted in the share price, and somewhat offset by the supportive order intake flow and current pipeline, which enhance visibility on 2024. The latest acquisition enhances continuity on execution of the external growth strategy put in place so far, enabling CY4 to gain new technological know-how with the aim of enriching product functionality in the cyber protection field. We expect M&A to continue to be an important pillar of growth, with a focus on the acquisition of software houses, targeting new and complementary cyber niches. In our view, the ongoing newsflow regarding potential regulation of the Italian lawful interception market is hindering the current stock performance, but no budget cuts have occurred thus far, and fears could have been excessive. Furthermore, CY4 has been deploying new solutions, as management envisages strong opportunities from the adoption of AI technologies in the lawful interception business, with the aim of mitigating potential budget restrictions for individual prosecutors. We confirm our BUY rating, reducing our TP to Eu10.5 (from Eu12.0) in light of the new estimates, based on 3.5x EV/sales and 10.5x EV/adj. EBITDA on our 2024E forecasts.