Analyzing Brandt24's 1Q23 Performance: Accelerated Growth Signals Positive Outlook

Assessing Risks and Opportunities: Votum's Outlook Amidst Regulatory Concerns and Legal Developments

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Event: Selected 1Q23 KPIs. On April 14 (shortly after the market opening) Brandt24 revealed selected 1Q23 operating figures. At the end of 1Q23 monthly recurring revenues (MRR) stood at PLN 2.105 million which implies c. PLN 439,000 more than a year ago (up 26% yoy) and PLN 251,000 more than a quarter before (up 14% qoq); this implies a material acceleration of the Company’s qoq growth pace (which oscillated around 3-4% in the previous 3 quarters).

In US$ terms (as users of the global version who generate the bulk of revenues pay prices denominated in US$) MRR at the 1Q23 end reached US$ 416,000 (up 15.5%/ US$ 63,000 qoq); this implies a material acceleration of the Company’s qoq growth pace (which oscillated around 0.5-1.5% in the previous 3 quarters). We consider this information positive. At the end of 1Q23 ARPU (average revenue per user) reached PLN 541 (US$ 123) which implies a qoq increase by PLN 58 (+12%) indicating a material acceleration of a qoq growth pace as in previous 3 quarters it oscillated around 2-5% (in US$ terms an ARPU qoq growth reached 14%, by US$ 15 which indicates a material acceleration of a qoq growth pace as in previous 3 quarters it oscillated around 0-2%). The Company also informed that ARPU per a new subscriber (acquired in 1Q23) (so called Initial ARPU) stood at PLN 641 (US$ 146) which is (i) considerably above (18%) the ARPU for all the users (and it should be remembered that 4Q22 Initial AR was impacted by a scale and scope of Black Friday discounts while in 1Q23 the impact comes from price upgrades for new clients introduced in January). We consider this information positive.

 

Given (i) material (+20% yoy) increase in a number of trials, (ii) slightly lower (c.-10% yoy) percent conversion, and (iii) minimally lower than a year ago churn (at 5.3% vs 5.5%) we assume that a quarterly net addition was (at last) visibly positive. We consider this information positive. All in all, we perceive the Company’s 1Q22 results as positive given a material acceleration of the Company’s qoq growth pace of MRR and ARPU with (likely) quarterly positive net addition. The main drivers behind the Company’s 1Q23 operating figures were: (i) price upgrades for new clients (introduced at this year’s start), (ii) price upgrades for some seasoned clients, (iii) moving the subscribers portfolio towards bigger brands, and (iv) material growth of a number of trials (with a moderately stable churn level and conversion ratio).