Poor Gentrack, i havent checked in with it for a while but it's clearly not been doing well.

Shares are down ~80% since 2018, and EBITDA (operating profit) has dropped from $28m in FY18 to an expected $11m for the current FY20 (its financial year ends in September).

In today's ASX announcement, Gentrack said the second half was ahead of the first and that cash flow would be positive for the full year.

But they also said that increased costs and added competitive pressure would mean the revenue run rate for FY21 would be "well below" the H2 FY20 run rate, and that EBITDA would be closer to break even.

COVID is clearly having an impact and it seems industry conditions remain tough. There's a new CEO coming on board who will try and turn things around, but it looks like it could be a tough job.

Assuming around $100m in FY20 revenue, shares are on only 1.4 times that. Pretty cheap if they can revive margins. If not, and the top line remains stagnant, the current 12x EBITDA isn't cheap at all. 

Until things can be shown to improve, it's an avoid for me. But I do think there's a good business here, just don't have a good handle on the competive landscape and direction of the major profit drivers at this point in time.

Gentrack has provided more detail on its FY20 outlook, following an initial statement on 15/1/29 (see here) 

The company has reiterated that it is facing difficult trading conditions in its utlities segment in Australia and the UK. This is due to a competitive environment for customers, as well as regulatory price caps on electricity, which is leading to a deferal of IT investment.

Gentrack now expects FY20 EBITDA to be between $8-12m. That compares with $24.8m in FY19, and $31m in FY18. OUCH!!

In response, Gentrack is seeking to reduce its cost base by ~$8m, half of which will be realised in teh current year. The business also reiterated that it is a profitable business, with no debt and around $8.6m in cash. Recurring revenue is forecast to grow by 5% (the company is transitioning away from a license model to a subscription model), and the company remains a market leader in its chosen markets.

Following a further drop in the share price, this could potentially be a buying opportunity if you believe it has the ability to resume growth. Personally, i'd want to see some evidence of this before i was encouraged to buy.

You can see the latest ASX announcement here

Gentrack issued a short (but not sweet) announcement today saying that revenue for the year ended 30 September 2019 would likely come in at $112m with EBIT slightly below the previously advised range of $25-26m.

By my count that's the 3rd time it's downgraded this year. Conditions are apparently tough in the UK with Gentrack highlighting a lot of uncertainty and saying it expected FY20 to be "broadly flat".

See ASX announcement here

Gentrack has updated its guidance for the year ending September 30, 2019.

EBITDA is now expected to come in between $25-$26 million -- down slightly from $27-$28 million due to an increase in provisions for bad and doubtful debts in the UK utilities market.

This is the second downgrade since July; prior to then the company had guided for ~$31 million.

In FY18 they did $31 million in EBITDA. So the FY19 result will represent a decrease of ~18%.

At the current price ($5.36), Gentrack is on an EV/EBITDA of ~21

See ASX announcement here

Gentrak provide billing and customer management software for utilities and airports. 

It has experienced strong top line and profit growth in recent years, although capital raises have diluted growth on a per share basis. In the most recent FY, revenue grew 38% while NPAT grew 16%. EPS grew just 6.5%.

In the first half of FY19, revenue grew 5% but EBITDA dropped 19% as the company ramped up employee count and continued its transition to a SaaS model.

For FY19, the company recently guided for EBITDA to be between $27-28m, less than the $31m in FY18. Previously, Gentrack told investors to expect a result "marginally ahead of FY18, but has downgraded due to "delays in customer projects and bad debt risks". The company was however quick to point out that these were due to customer resourcing and do not indicate the projects are at risk. It also confirmed it had a "strong pipeline of opportunities"

Half of revenue now comes from Europe following the recent acquisition of Evolve Analytics.

The business is profitable with high free cash flow and even pays a dividend. There's $4m in debt (as of HY19) and around $6.4m in cash.

Revenue has declined in existing businesses as it transitions to a subscription model, although this provides better earnings visibility and lowers the barrier to sales. A better model longer term.

Management calling for ~15% EBITDA growth long term. But expect growth to be lumpy due to contract and implementation timing. Also some headwinds with regulatory change in Europe. 

There is good sales momentum, a big market opportunity, strong balance sheet, sticky customers, high operating margins and most revenue is recurring in nature.