Fadel Partners achieves milestone growth in FY23, driven by recurring revenues and new client wins
In 2022, the global licensing industry expanded at 8% to >$300bn, driven by the rapid growth of digital content and media consumption.
This presented a significant opportunity for licensors, licensees, and brand owners to create new and attractive revenue streams. However, managing all the associated royalty agreements whilst trying to stop potential illegal and/or inappropriate use of the content online can be incredibly resource intensive.
This is where software developer () steps in. Its leading IP management, brand compliance, and media content systems automate all of this complexity - serving a host of blue chip clients such as Hasbro, Whirlpool, Marvel, L’Oreal, Sanofi, Philip Morris, Coca Cola and Pearson.
Indeed, after raising £8m in Apr'23 at 144p, these secular trends came through loud and clear in today's upbeat FY23 results. Sales climbed 10% to $14.5m ($9.1m H2'23 vs $5.4m H1), gross margins widened 2% to 62%, and importantly ARR (79% of group) jumped 31% to $11.4m - thanks to new logo wins, client upselling, product launches, and the ongoing SaaS transition. Plus, net funds closed Dec'23 at $3.0m, with gross cash ending 25th Apr'24 at $4.6m after receiving some large customer payments post-year end.
Going forward, investors can expect more of the same, especially as its new cloud software LicenSee continues to ramp. This is a 'straight out the box' package, aimed at small/mid sized businesses, which ultimately should materially enhance ’s TAM.
In terms of FY'24 numbers, house broker Cavendish reiterated its 260p/share target price, based on turnover increasing to $16.3m (+12.6% LFL) and $20m (22.4%) respectively over the next 2 years - correspondingly delivering gross margins of 67% and 70% whilst ending each period with net cash of $2.0m and $2.2m.
The group is also aiming to breakeven at the EBITDA level in FY25. Further out, the goal is to achieve a $50m sales run-rate over the next 5 years (28% CAGR LFL) with high recurring revenues and gross margins.
CEO Tarek Fadel commenting: "During 2023, we achieved exceptional client wins in the Brand Vision space, with notable new software licenses for major clients such as PepsiCo, Kimberly-Clark, Sanofi, and Philip Morris. These successes not only validate our investments in the Brand Vision product and our go-to-market strategy but also propelled a 31% growth in total recurring revenue. We have made an encouraging start to FY'24."
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