Q4 and FY 2024 - Topicus.com
Excellent cash flow, profitability, and solid M&A pipeline for FY25
Yesterday, Topicus.com (or TOI) announced its Q4 and FY 2024 results. As per usual, there’s no conference call to discuss the financial performance.
We wrote quite a bit on Topicus (and Constellation Software) already.
We’d summarize the report as follows: excellent cash flow, underlying EBITA margin exceeding expectations, and a solid M&A pipeline for FY25 pending the acquisition of the Belgian Cipal Schaubroeck. Meanwhile, the earlier completed financial investment in Asseco Poland (acquisition of the treasury shares is still subject to regulatory approval) is expected to be a nice growth kicker.
The Q4 2024 headline numbers showed the anticipated acceleration in top-line growth because of a pick-up in M&A activity and the favorable comparison versus Q4 2023.
Revenues increased by 18%, of which 5% organic.
Cash flow from operations grew by 28% to 79.6m EUR, also driven by solid performance for Sygnity, whose EBITA and cash conversion improved even more.
Free cash flow available to shareholders topped 36.6m EUR, or +27%. This metric needs to be contextualized as changes in Subordinate Voting Shares in Topicus.com vs. Topicus Coop create noise on the NCI line. Non-controlling interests are primarily the direct Topicus Coop shareholders (and a bit of Sygnity, GeoSoftware and GeoActive), as Topicus.com consolidates this subsidiary at 100%. This happened to be just Joday and IJssel, but with CSI having exercised its call option in Q1 2024, there are now three parties to be considered NCI as it relates to direct Topicus Coop share owners. Keep in mind, though, that Topicus Coop and Topicus.com Subordinate Voting Shares are 1-for-1 exchangeable. As we wrote in the Topicus.com deep dive, we don’t consider Joday, IJssel, and CSI operating NCI, and thus don’t include them in our own free cash flow available to shareholders calculation. The point is that a change in outstanding Topicus Coop share count will always impact the reported FCFA2S, and it has to be formally recorded that way. The FCFA2S per share number won’t change, but that isn’t something that will reach the headlines.
Let’s take a closer look at the quarter, and discuss our updated valuation model.