ReadyTech Holdings (ASX: RDY) expects EBITDA margin to improve in FY24 due to lower labour cost

Highlights

• ReadyTech offers software as a service to a range of sectors
• In 1HFY24, the company registered around 14.2% increase in revenue to AUD 54.7 million
• In FY24, the company expects low double-digit growth in revenue

Australia-based ReadyTech Holdings Limited (ASX:RDY) provides software as a service (SaaS) to the education, employment services, justice, workforce management and government sectors. It provides mid-sized companies, payroll and HR solutions; and to education providers, it offers cloud-based educational management systems.. Moreover, the company offers multiple products and services to government and judicial agencies.

During the financial year 2023 (FY23), the company witnessed a 32% YoY increase in revenue to AUD 103.31 million and recorded 13.2% YoY growth in EBITDA to AUD 29.76 million. Net income in FY23 decreased by 43.4% YoY to AUD 4.98 million, while net debt grew by 11.9% YoY to AUD 31.49 million.

Key financial highlights of 1HFY24

In 1HFY24, RDY’s revenue surged by almost 14.2% YoY to AUD 54.7 million and subscription and license revenue increased by approximately 17.1% YoY to AUD 47.2 million. The rise was driven by double digit growth across all segments.

During the reported period, RDY secured 16 new enterprise contracts, which had annualized deal value of AUD 7 million. Underlying EBITDA grew by 10.6% YoY to AUD 17.4 million in 1HFY24.

Outlook

In FY24, the company expects to see low double-digit growth in revenue, backed by the timing of multiple crucial enterprise acquisitions which are expected to happen in FY25. During the same period, the underlying EBITDA margin is expected to reach 34% - 35% (excluding LTIP impact) and labour capitalization as a portion of revenue is anticipated to range between 14% - 15%, compared to 15.8% in FY23.

The improved medium-term outlook forecasts organic revenue exceeding AUD 170 million.

With the proven M&A strategy, the company aims to increase and create synergies by targeting new customers, capabilities and access to new markets. This growth is fueled by the focus on research and innovation.

The company aims to capitalize in the tech ecosystem, including more than 4,000 customers.

Share performance of RDY

RDY shares closed 5.83% higher at AUD 3.45 apiece on 28 February 2024. Including today’s gain, RDY’s share price has increased by 4.55% in the last 12 months and has surged by almost 15% in the last nine months.

The 52-week high of RDY is AUD 3.84, recorded on 4 September 2023, while the 52-week low is AUD 2.8, recorded on 26 May 2023.

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 28 February 2024. The reference data in this report has been partly sourced from EODHD/Others.

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