MotorK: Building a Continuous Growth Reservoir

LONDON–(BUSINESS WIRE)– Regulatory News:

MotorK Plc (AMS: MTRK) (“MotorK” or the “Group”) announces continued recurring growth momentum for the nine months ended September 30, 2022, supported by a robust set of operational KPIs. The Group also announces entering into exclusive negotiations regarding the sale of its B2C business unit DriveK, in accordance with the strategy communicated at the time of the IPO. In light of the current macroeconomic environment, the Group adjusts its financial guidance for the full year 2022 to take into account certain delays in customers’ migration from recent acquisitions and a longer sales cycle for certain Enterprise contracts.

9M 2022 FINANCIAL HIGHLIGHTS

• Annual recurring revenues (ARR) ¹ of €21.8 million, including €6.8 million from M&A, up 28% organically, compared to €11.7 million in the prior year, and up 86% including M&A
• SaaS recurring revenues of €16.2 million, up 41% year-on-year (“YoY), now representing 65% of total revenues, confirming the 70% recurring mix objective for the year-end
• Solid organic set of operational KPIs ² withchurn remaining at low 3.9% and overall Net Retention Revenue (“NRR”)³ of 118% highlighting strong up-sell and cross-sell potential within the existing customer base
• Average annual contract value (ACV) ⁴ of €16.6k, up 14% against €14.5k in the same period last year, demonstrating continued growth in multi-product adoption within customers’ base
• Revenues of €25.0 million, up 20% on the prior year period
• Entering into exclusive negotiations for the disposal of DriveK
• Solid Enterprise pipeline fueled by continued constructive dialogue with OEMs, providing growth potential for 2022 and beyond
• First signs of customers postponing investment decisions to 2023, while confirming interest for the SparK platform
• Adjusting guidance for the full year to factor certain delays in migrating customers from recently acquired companies and potentially longer sale cycle contracts, particularly in the Enterprise segment

Amir Rosentuler, Executive Chairman said: “Although we see the first signs of customers postponing investment decisions to 2023, and therefore needed to adjust the guidance for the full year, we are confident in our ability to continue to deliver sustainable growth. Our strong competitive positioning and unique SparK platform, coupled with our successful M&A strategy and a strong pipeline, enable us to execute our growth strategy.”

OPERATIONAL HIGHLIGHTS

Sound Business Fundamentals

In the first nine months of 2022, MotorK reported continued recurring revenue growth with recurring SaaS revenues up 41% YoY to €16.2 million. SaaS recurring revenues now account for 65% of Group revenues (vs. 55% in 9M 21) underscoring continued improvement in revenue mix and on course to meet the objective for the current year of 70%.As a result,the Group expanded its ARR base, up 28% organically (or 86% including acquisitions) totaling €21.8 million during the period.

The Group’s organic progress was also a result of upselling and cross-selling additional services to MotorK’s customer base. As a result, during the period average annual contract value (ACV) increased by 14% to €16.6k, compared to the prior year period value of €14.5k. The Group further reports limited churn of 3.9%, translating into a robust 118% NRR.

Revenues for the first nine months ended September 30, 2022 totaled €25.0m, up 20% YoY and -3% organically. This plateau trend on the organic side is largely attributable to a basis effect vs. Q3 21 which included a large Enterprise contract in Germany. Adjusting for it, organic growth on the remaining perimeter stood at 4%, and 24% for SaaS Recurring Revenue.

Digital Marketing revenues remained on the same trend communicated at H1 22, totaling €5.4m at 9M 2022, down 7% YoY. The downwards trend is mostly attributable to reduced demand in advertising campaigns in a context of persisting low inventories level but must be read more generally in light of the Group’s strategy to gradually reduce the non- recurring and low-margin part of its revenue base.

As communicated in H1 22, revenues year to date do not account yet for the full contracted growth reservoir of the recently acquired companies and currently in the process of migrating to MotorK’s platform which effects will start materializing in Q4 22 and beyond.

Multiple Drivers for Durable Growth

External growth confirms its strategic potential offering a unique opportunity for the Group to cross and up-sell its products to an enlarged customer base. So far, the Group has acquired through M&A more than 2,300 customers, most generally with lower annual spending than the Group’s average (€16.6k ACV). As a result, acquired ARR generate a higher average level of NRR than typically more advanced customers. The Group now anticipates to benefit from the full migration potential by year 3 following acquisition, with close to 140% NRR achieved by year-end. On a financial standpoint, return on investment from M&A is close to one year, hence comparable to organic development.

To illustrate further the M&A growth potential, assuming illustratively a full penetration of the SparK platform on the already acquired customer base, would generate in itself up to €40 million additional revenue in the mid-term. The Group is currently monitoring approximately 40 potential M&A opportunities to keep anchoring its European leadership.

In parallel, and in line with its reinforced focus towards OEMs, the Group continues nurturing its Enterprise pipeline. As of September 2022, the Group benefits from the strongest Enterprise pipeline in its history. The implementation of the pan European strategy starts bearing fruit and positions the Group as a unique credible partner for OEMs to handle multi-country roll-up projects.

Although recent, the commercial launch of the Spark platform is gaining significant traction. SparK’s ability to cover all customer needs while reducing the associated complexity resonates well with customers and fits into a broader industry trend of relying on fewer, but more robust vendors.

Planned Sale of B2C Business Unit

The Group has entered into exclusive negotiations with GEDI Gruppo Editoriale (“GEDI”) with the view to combine DriveK and AutoXY, their respective consumer automotive portals. As part of the contemplated transaction, MotorK will receive as consideration cash together with a 20% shareholding in the new combined entity. MotorK and GEDI are working together towards a completion of the transaction by year-end 2022.

As communicated during the IPO, the sale of DriveK is consistent with the Group’s strategy to focus its activities and financial resources exclusively on the B2B SaaS business. DriveK has been classified as Assets Held for Sale and Discontinued Operations, in accordance with IFRS 5, since December 31,2020.

The combination of DriveK and AutoXY will create the largest new car marketplace in Europe for consumers to select, compare and configure their next new car. The shared ambition is to become the premier consumer automotive portal for Southern Europe for OEMs and dealers for profiled and qualified prospects. The transaction will unlock substantial synergies potential, leveraging respective longs-standing relationships with major OEMs, coupled with marketing savings and sharing of best practices. MotorK will remain a 20% minority shareholder with the view to contributing to the new combined entity and benefiting from expected future value creation. As part of the contemplated agreement, both parties will benefit inter alia from mutual liquidity provisions, usual for this kind of transaction. MotorK was supported by Alvarium as Corporate Finance advisor, with a team led by Associate Partner Federico Lonoce.

OUTLOOK

Adjusting Guidance to Current Environment

Overall, the business environment remains supportive and the Group’s platform offering keeps resonating well within the industry, understanding the critical need to be properly digitally equipped to address fast moving trends in mobility.

However, the Group has observed over the past month first signs of customers postponing investment decisions to next year in light of current macroeconomic conditions. This resulted in a softer than expected Q3 22, despite no change in deal & win ratio recorded by the Group over the period. The current environment has generated certain delays in migrating customers from recent M&A and could postpone the execution of certain longer sales cycle contracts, initially planned for Q4 22.

In that context, the Group revises its financial guidance for the full year 2022 as follows:

• Revenues of €42-44 million, on an organic basis, or +52 to 60% growth
• ARR of €25-27 million, on an organic basis, or +66 to 79% growth

As external growth is an integral part of the Group’s growth strategy, with a communicated objective of 2-3 bolt-on acquisitions per year, the Group believes it’s equally important to provide the following guidance factoring the acquisitions performed this year.

• Pro Forma Revenues of €46-48 million, accounting for FY22 M&A on a 12-months basis
• ARR of €28-30 million, or +85 to 99% growth

In terms of profitability, the revised revenues guidance will impact the initially targeted 20% Adjusted EBITDA margin given the fixed nature of the cost base. The Group now anticipates Adjusted Margin in the low to mid teens. The cash position of the Group remains solid and compatible with a fully-funded growth plan until achieving positive operating cash generation.

EARNINGS CONFERENCE CALL

MotorK will hold a conference call in connection with its 9M 22 financial results on 18 October, 2022 at 17:45 Central European Time (CET). Details to register for the call are available on MotorK’s website (www.investors.motork.io), and registered participants will have access to a replay of the webcast.

NEXT PUBLICATION: FY 2022 TRADING UPDATE

MotorK will post its 2023 financial publication schedule on the company website by year end.

*Fidcar, Dapda, FPN, Carflow and Webmobil24

¹ Annual Recurring Revenues (“ARR”) is defined as the yearly subscription value of the customer base at the end of the reporting period.
² Annualized set of KPIs
³ Net Retention Revenues (“NRR”) is defined as the percentage of Recurring Revenues retained from existing customers
⁴ Excluding recently acquired companies (Dapda, FranceProNet and Fidcar) currently under migration