2 elements worth mentioning about this company :1/ Still limited...

2 elements worth mentioning about this company :

1/ Still limited margin despite very high gross margin
Gross margin of 96 % in FY 23 led to an EBITDA margin of only 12.3 %.
2 main elements to explain this difference :
- high level of development costs : product design and development costs represented 22.5 % of sales (total development costs even higher after taking into account capitalised development costs),
- sales and marketing costs represented 39 % of sales in FY 23.

2/ Nice operating leverage in this business
. FY 23 : adjusted EBITDA* increased by 40 %, when revenue was up by 7 %; Margin** of 16 % vs 13 %,
. H1 24 : adjusted EBITDA up by 111 %, with an increase of 6.5 % of the revenues. Margin** of 21 % vs 12 %.

Obviously, the operating leverage has accelerated during H1 24. It will be interesting to understand what element can explain it. I suspect that it may be explained by less increase for sales and marketing costs, as the share of direct sales is decreasing (more digital sales, at lower costs).
At some stage, there will probably be also a decrease for their development costs (32 % of sales in FY 23 if we include the capitalised costs).
Andrew Crebar indicated in Nov 21 that this was one of the highest in his Mopoke cloud index ("mature SAAS average 7-12 %").

* adjusted EBITDA is EBITDA excluding non cash share base expense, business combination cost, capital raising and restructure expenses.
** these margins are inflated by the fact that some development costs are capitalised. In FY 23, adjusted EBITDA after capitalised development costs were 7.8 % vs 3.3 % in FY 22. Anyway, it does not change the significant operating leverage effect.