Dalet, a very recurring activity

With a share of revenues from maintenance, subscriptions and services growing, this publisher of solutions for media professionals appears well equipped to weather the crisis. The main challenge for the company remains to increase its customer base.

by Aymeric Val

At a time when the sanitary storm is capsizing whole swathes of the economy, Dalet can boast of having above-average flotation qualities. Evidence of this is the good level of its sales in the first quarter, which confirm the unsinkable nature of the model of this partner of producers and distributors of media content. In detail, the turnover of this software publisher its first three months of 2020 stood at 11.8 million euros against 11.7 million for the same period last year. The performance in published data reached + 1%. Of course, society is not immune to the economic climate. In the quarter under review, license sales fell 31% to € 2 million. In addition to the unfavorable base effect (strong growth was recorded at the start of 2019), managers recognize “the postponement of certain milestones on projects”, in connection with the context of the health crisis. But this dropout was more than offset by the surge in recurring revenues. Thanks to the acquisition of the Flex Media Ooyala platform geared towards multichannel digital content distribution, subscriptions attracted 0.5 million revenues in the first quarter, compared to a zero contribution last year. More significantly, Maintenance / Support revenues jumped 14% over the period to 5.2 million. Taking into account Services, which was more or less stable, the share of recurring activity increased at a faster rate than that forecast in the roadmap, at 48% of turnover. A very solid base to tackle the crisis, knowing that the available liquidity is also high.

Commercial momentum remains strong

As indicated in April when the annual accounts were published, Dalet is unable to provide the market with quantified targets, and for obvious reasons relating to economic instability and the uncertainty about the coronavirus epidemic. However, the cautious remarks of management should not be misleading: the favorable outlook for the group is not questioned, far from it. To date, and taking into account the postponements already announced by customers, the billable order book for the remaining 9 months of fiscal year 2020 amounts to 40 million euros. In other words, the group has fairly good visibility for the coming months. Unless there is a wave of cancellations or postponements of projects, activity is assured. Significantly, order intake reached 7.7 million in the first four months of the year, fairly close to 2018 levels for example. Dalet therefore does not idle! In the medium term, we remain convinced of the potential to increase the revenue base (including by subscription and in Cloud mode), the cornerstone of better absorption of fixed costs. The company is far from having filled up with customers. Thanks to Ooyala, it has widened its field of action to sport, brands and business organizations. What allow a commercial acceleration. Another lever for improving results: cost savings. Dalet began to work there, particularly in Research and Development, a position which represents 27% of revenues. For the time being, and in the absence of expected profits in the very short term (dilutive effect of Ooyala), Dalet capitalizes 0.7 times its estimated turnover, which is very low for a software publisher. If you are patient, there is a lot to gain by placing yourself on the title today.

Our advice: Buy Dalet at 10 euros to aim for a return to 11.50 euros at first. Beyond the opportunity to position ourselves in the short term, we believe that this dossier constitutes an interesting avenue in the category of high-potential technology companies. Isin code: FR0011026749.

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