Movinn published on March 22^nd the company’s Annual Report for 2023. The following are some key points that we have chosen to highlight in connection with the report:

• 6% revenue growth in Q4-23 – slightly above our expectations
• Continued high-cost base resulted in lower result than estimated – lower cost base expected in 2024
• Improved profitability important for the cash position

Continued Robust Revenue per Unit – Paves the way for Revenue Growth in 2024

Movinn’s revenue in the fourth quarter amounted to DKK 21.1m (19.9), corresponding to a growth of 6%, 5% above our estimate of DKK 20.1m. The company has faced challenges throughout 2023 regarding demand, primarily in Odense and Aarhus, which has affected the vacancy rates amounting to 15% for the full year compared to 13.5% in 2022. It should be noted that Movinn added 142 new units in 2022, affecting the vacancy rates negatively. Regarding the Danish units, the vacancy rate was 14.5% in 2023 compared to 10.3% 2022. Despite the higher vacancy rates, the revenue per unit has remained robust throughout the year, which continued in the fourth quarter as the revenue per unit amounted to DKK ~197k. As we have stated in previous updates, we see revenue per unit at these levels as strong given the high vacancy rates, paving the way for higher revenue per unit, hence revenue growth, as vacancy rates is expected to decrease. We expect Movinn to focus on lowering the vacancy rates in 2024 where the company has removed 13 units in Aarhus that was underperforming. Moreover, we expect the overall demand for Movinn’s units to accelerate throughout 2024 as a result of an improved macroeconomic environment, which is expected to drive revenue growth.

EBITDA Result Slightly Below our Estimates

The EBITDA result amounted to DKK -0.9m in Q4-23, compared to our estimate of DKK -0.3 and Q4-22’s result of DKK -1.3m. A contributing factor to the lower-than-expected EBITDA result, despite better revenue than estimated, was higher than expected staff costs. Going into 2024, Movinn has downsized the organization, which is expected to decrease the staff cost in the coming years. The company has continued to invest in technology development and in January 2024 Movinn launched direct booking on the website including real-time availability, dynamic pricing based on the length of the desired stay, secure verification of clients and digital sign agreements as well as instant payment. This means customers can make direct bookings and payments on the website from anywhere in the world at any time without involvement from Movinn’s staff. The new technology is expected to decrease the costs regarding sales staff. In total, the staff costs are expected to decrease by DKK 1.6-1.8m in 2024, which, in combination with DKK 1.6-1.8m in savings from downsizing the portfolio in Aarhus, is estimated to improve the EBITDA result for Movinn in 2024.

Improved Cash Flow Important for the Liquidity

The cash position at the end of 2023 amounted to DKK 7m, compared to DKK 9.1m at the end of Q3-23. With interest-bearing liabilities amounting to DKK 22.2m, the net debt amounts to DKK 15.2m. With a dwindling cash position, as depicted in the graph below, we see it as crucial for Movinn to strengthen profitability in 2024, thereby generating positive cash flow to avoid potential external capital injections.

To summarize, Movinn’s 2023 showed quite high vacancy rates amounting to 15%, as a result of a decrease in demand due to an overall challenging macroeconomic environment, which was also accelerated by an oversupply of units in Aarhus and several large projects from customers cancelled or completed at the same time in Odense. In 2024, we expect vacancy rates to come down through an overall increase in demand, the downsizing of underperforming units in Aarhus and the new sourcing strategy regarding adding new units through larger projects. The lower vacancy rates are expected to drive the revenue growth in 2024 through a higher revenue per unit, and in combination with a lower cost base, this is expected to improve Movinn’s profitability in 2024.

We will return with an updated equity research report of Movinn.

Movinn published on November 3^rd the company’s Q3-report for 2023. The following are some key points that we have chosen to highlight in connection with the report:

• Revenues relatively in line with expectations
• High vacancy rates continue to affect margins
• Lower investments expected to improve cash flow as demand increases

Revenues Relatively in Line With our Estimates

Movinn’s revenue in the third quarter amounted to DKK 21.2m (19.4), corresponding to a growth of 9% Y-Y but 4% below our estimate of DKK 22m. Movinn continues to face weaker demand, especially in Aarhus and Odense, which affects the vacancy rates, hence also revenues. The average vacancy rate amounted to 17.3% on the Danish units, compared to 16.3% in Q2-23 and 8% in the same quarter last year, which has a negative impact on revenues. As a result of changed market conditions Movinn are now downsizing in Aarhus where the company will remove 13 of the 43 units from its portfolio that are underperforming, which is expected to improve vacancy rates and save costs. On a positive note, the vacancy rate on the Swedish units were low, amounting to 3.6% compared to 23.5% in the last quarter and was close to break-even on an EBITDA level.

Moreover, the revenue per unit remains robust despite the tough market climate, amounting to DKK 199k for the Danish units, in line with last quarter, and DKK 108k for the Swedish units, up from DKK 88k in the last quarter. By Movinn taking action to address high vacancy rates, such as removing underperforming units in Aarhus, combined with the expectation of improving macroeconomic factors in 2024, we estimate that vacancy rates will decrease in the future. Consequently, this will result in higher revenue per unit, which is expected to reach the upper end of Movinn’s guidance range of DKK 180-225k per unit. This is anticipated to drive revenue growth without the necessity for Movinn to add additional units to its portfolio.

EBITDA From Operations Slightly Below our Estimates

Movinn’s cost base was relatively in line with our expectations but with slightly higher staff costs than estimated, which is expected to be a result of a rebuild within the sales organization during Q2-23, which also has affected the costs in Q3-23. EBITDA from operations amounted to DKK 0.3m, corresponding to a margin of 1.4%, compared to our estimate of DKK 1.4m. The difference is primarily attributed to the slightly lower revenue and higher staff costs compared to our estimate. The table below shows a complete comparison between our estimates and the result during the quarter.

Lower Investments Expected to Improve Cash Flow as Demand Increases

The cash flow from operations amounted to DKK 1m in Q3-23 compared to DKK 0.2m in the same period last year and DKK 0.4m in Q2-23, where the improvement was attributable to a stronger development regarding working capital. Movinn continues to withhold investments in new units as a result of weaker demand and high vacancy rates, which improves the cash flow from investments compared to Q3-22, something that is expected to continue until vacancy rates decreases. Going forward, as demand is expected to increase and contribute to a stronger operating margin, the lower investments is expected to improve Movinn’s free cash flow. However, Movinn continues to invest in tech development to further automate the company’s sales efforts and be less dependent on sales staff, hence improving the scalability of the business model.

To summarize, Movinn delivered a report relatively in line with our expectations both regarding top-line and bottom-line performance in a tough market. The high vacancy rates are expected to remain in Q4-23, hence affecting both revenue growth and margins. However, the company’s efforts to improve bottom-line metrics, with more controlled growth, i.e. larger projects, and removal of underperforming units, is expected to decrease vacancy rates in H1-24, which is estimated to result in stronger financials.

We will return with an updated equity research report of Movinn.

Movinn announced on September 21^st, that the company launches a third Swedish market in the city of Ludvika. To begin with, there will be a soft launch of five units, which are expected to be launched on the 15th of October. Subsequently, it will be possible for Movinn to expand with additional units depending on the market reception. Ludvika is an important market due to the current limited supply of corporate housing and its high demand.

“Ludvika is a smaller city with about 15,000 citizens with a strong corporate history. The largest employer in the area is the Japanese multinational electronics company Hitachi who has 2,700 employees in Ludvika with a large portion of foreign workers, which is thought to be one of the reasons for the shortage in corporate housing in the city. The fact that Movinn is doing a soft launch of fewer units is expected to limit the vacancy rates and enable the company to continuously assess the market and only add new units based on demand. Moreover, Movinn will be able to manage the units from the subsidiary Movinn Sverige’s base in Stockholm, which, in combination with the company’s PropTech systems that automates several processes including bookings, rental contracts and customers getting access to the apartments, will ease the management of the new units.

We also would like to highlight a quote from the Managing Director in Movinn Sverige who says ‘We are also showing the strategically important clients that when they call, Movinn answers’. This indicates, according to Analyst Group, that one of Movinn’s larger clients has required corporate housing in Ludvika, which suggests that demand is currently higher than supply, something that is expected to lead to low vacancy rates as well as building a good relationship with a strategically important client”, says the analyst at Analyst Group covering Movinn.

How Analyst Group sees Movinn as an investment

During H1-23, Movinn delivered revenues relatively in line with our expectations but with higher costs than estimated, as a result of lower demand leading to higher vacancy rates. The macroeconomic headwinds that have contributed to this outcome are anticipated to persist to some extent throughout 2023, gradually subsiding thereafter in 2024, which is estimated to result in an improved profitability thereafter. With an estimated EBITDA of DKK 10.4m in 2024, an applied target multiple of EV/EBITDA 15x, and a discount rate of 11.4%, a net present potential value per share of DKK 7.5 (10.2) is derived in a Base scenario.

Movinn published on August 25^th the company’s Q2-report for 2023. The following are some key points that we have chosen to highlight in connection with the report:

• Revenues slightly below our estimates
• Costs relatively in line with our expectations
• Lower investments expected to improve cash flow as demand increases

Revenues Slightly Below our Estimates

Movinn’s revenue amounted to DKK 20.7m (17.8) in Q2-23, corresponding to a growth of 16% Y-Y but 8% below our estimate of DKK 22.5m. We estimated that demand would be stronger during the second quarter due to the seasonal pattern where Q2 historically has been the strongest quarter. However, demand has continued to be slightly weaker than we expected due to an ongoing challenging macroenvironment. The weaker demand is especially attributable to the company’s two markets Aarhus and Odense, which represents approximately 33% of Movinn’s Danish portfolio, where there is currently an oversupply of apartments in Aarhus due to a high construction activity and some of Movinn’s clients have had several large projects finished in Odense at the same time, meaning that project-related clients was no longer on assignment in the city. The weaker demand is expected to continue throughout the year, which is likely to result in an update in our revenue forecast for 2023. However, the macroeconomic challenges are expected to ease during 2024, with increased demand as a result, which, in combination with that Movinn is expected to enter new markets such as Germany and Stockholm, is estimated to drive the growth in the coming years, why we still see the long-term growth-case being intact.

The revenue per unit amounted to DKK 186k in Q2-23, divided into DKK 198k on the Danish units and DKK 88k on the Swedish units, which was in line with Q1-23. The vacancy rates were also similar to the previous quarter, amounting to 16.3% on Danish units and 23.5% on Swedish units, corresponding to an average vacancy rate of 16.7% for Movinn. Analyst Group maintains that the revenue per unit remains robust, especially regarding the Danish units, considering the elevated vacancy rates driven by weaker demand. As the vacancy rates trend towards more normal levels, around 10%, through increased demand, an increase in revenue per unit is anticipated to further ascend to the upper end of the range of Movinn’s guidance of DKK 180-225k per unit.

Costs Relatively in Line With our Expectations

Movinn’s cost base was in line with our expectations in Q2-23, corresponding to an EBITDA from operations DKK 0.4m and EBITDA margin of 1.8%, compared to our estimate of DKK 2.2m and 9.8% EBITDA margin, where the difference largely is attributable to the fact that the revenue was lower than estimated. However, except from weaker demand, thus resulting in higher vacancy rates, Movinn was affected by slightly higher staff costs than anticipated, connected to hiring new staff within marketing and sales, as well as parting ways with several HQ staff members, expected to affect staff costs both in Q2 and Q3-23, but after that result in a better efficiency within the organization, leading to better profitability. Moreover, Movinn’s strategy of taking on larger projects, hence lowering the costs for adding new units, is expected to improve profitability going forward. An example of this new strategy is that the company has signed a long term lease agreement with AG Gruppen on a 94 unit development in Copenhagen. Such projects are anticipated to drive the profitability of the company in the future. The table below shows a complete comparison between our estimates and the result during the quarter.

Lower Investments Expected to Improve Cash Flow as Demand Increases

The cash flow from operating activities amounted to DKK 0.4m during the second quarter, compared to DKK -0.8m in Q1-23, where the improvement was attributable to a stronger development regarding working capital. Moreover, Movinn continues to decrease the company’s investments, in line with the strategy of a more controlled growth and focus on profitability. Going forward, as demand is expected to increase and contribute to a stronger operating margin, the lower investments is expected to improve Movinn’s free cash flow. Furthermore, when entering the German market, which is expected in 2024, Movinn is expected to replace security deposits with rental guarantees, which is expected to decrease investments further, hence contributing to improved ROIC and cash flow.

To summarize, Movinn delivered revenues slightly below our estimates due to demand being lower than expected, among other things as a result of the current macroeconomic environment, which also resulted in vacancy rates remaining at high levels, contributing to a slightly weaker bottom-line performance than estimated. However, despite the high vacancy rates, the revenue per unit remained strong, which indicates a strong revenue per unit as demand improves. Going forward, we expect an improved cash flow and ROIC through lower investments and increased demand.

We will return with an updated equity research report of Movinn.

Movinn announced on August 14th, that the company (as operator and tenant) has signed a long-term lease agreement with AG Gruppen (as developer and owner) on 94 unit development in Copenhagen, Denmark (“the development”). The property is conceptually planned to have serviced apartments, a wellness area and shared workspace. The property lease and operations will be placed in a separate subsidiary fully owned by Movinn A/S and the commercial launch date is expected to be in late 2025 / early 2026.

The development is located within walking distance to the beach and short commute to the city center as well as the airport alike and will consist of a mix of studio, 1-bed and 2-bed apartments – each fully furnished and fitted with kitchen space as well as bathrooms. The development will have a full wellness area in the basement and in the ground floor there will be a shared workspace and meeting rooms for residents to use on request as the general concept is to create a holistic concept where guests and residents can combine health, wellness, working and living under one roof.

The commercial launch date is expected to be in late 2025 / early 2026 and as AG Gruppen will be the developer as well as owner, the lease agreement will not have any financial impact for Movinn in 2023 and 2024. The project is projected to generate annual revenues of DKK 20-22m as well as EBITDA of DKK 3-5m once commercialized and mature, measured in 2023-prices.

“At the end of Q1-23, Movinn had a total of 444 units in five markets, of which 280 in Copenhagen, why adding 94 more units is a large project. This is in line with Movinn’s strategy to take on larger projects in order lower its costs in connection with adding new units, as larger contracts are expected to be easier to negotiate, as well as a lower cost for maintenance as more units are in the same building, something that is estimated to lead to lower variable costs in relation to revenues.

The projected annual revenues of DKK 20-22m once commercialized in 2026 implies, given the middle of the interval, an annual revenue per unit of approximately DKK 223t, compared to the company’s guidance of DKK 180-225t in annual revenue per unit and Analyst Groups estimate of DKK 215t for the Danish units in 2026, when the units are expected to be commercialized. Regarding the projected EBITDA of DKK 3-5m annually, this implies, given the middle of the interval, an EBITDA margin of 19%, which is in line with the company’s guidance of a long-term EBITDA margin above 15% and slightly higher than Analyst Groups estimate of 18% in 2026. Thus, the development is expected to generate a high revenue per unit as well as a high margin compared to existing units, which is estimated to translate into improved cash flow for Movinn in the long run”, says the analyst at Analyst Group covering Movinn.

Movinn published on May 4^th the companys Q1-report for 2023. The following are some key points that we have chosen to highlight in connection with the report:

• Revenues slightly above our estimates
• Higher costs than expected – but better efficiency is expected going forward
• Positive signs in the cash flow statement – better cash flow expected in the coming quarters

Revenues slightly above our estimates

Movinn’s revenue amounted to DKK 20.6m during the first quarters, close in line with our estimates of DKK 20.2m. The revenue growth amounted to 27% compared to the same period last year, when the revenue amounted to DKK 16.2m. The revenue growth compared to last year is a result of Movinn’s strong unit growth during 2022, which is now materializing in sales. Furthermore, the revenue per unit amounted to DKK 198t on the Danish units and DKK 83t on the Swedish units, which can be compared to DKK 183t and DKK 20t respectively for the full year 2022. Analyst Group estimates the revenue per unit on the Danish units to DKK 192t and for the Swedish units to DKK 90t for the full year 2023. As we expect the revenue per unit to increase successively over the year because of new units maturing, we believe that the first quarter results regarding revenue per unit were strong and above what we expected. The strong revenue per unit was achieved despite the higher-than-expected vacancy rates of 16.1% on the Danish units and 27.9% on the Swedish units, why we estimate the revenue per unit to increase even further when demand improves, and vacancy rates decreases to more normal levels. Demand is expected to improve in the coming quarters due to the natural seasonal pattern where the second and third quarters are usually stronger for Movinn, as well as through a well-diversified client portfolio.

Regarding unit growth, Movinn grew its unit portfolio by four new units during the first quarter, which were added on the Swedish market. A slower unit growth was expected as the company focuses on fully integrating units that was added during 2022, hence increasing bottom line performance and cash flows. Furthermore, Movinn is currently going through a change in strategy, taking on larger projects, i.e., projects with more units at once, meaning more units will be added at the same time compared to several smaller units in different locations as has been the case in the past. This strategy is expected to lead to lower costs going forward, as larger contracts are easier to negotiate and maintenance of units in the same building is more efficient, but also that unit growth will fluctuate more between quarters. Moreover, Collective yoyo, Movinn’s brand for furniture rental was launched during the quarter. Even if the brand is new and stands for a minor part of the revenue share (1%), we see positive on this as it adds an additional revenue stream for the company, as well as activating the furniture on the balance sheet. Analyst Group estimates that Collective yoyo will increase its revenue share going forward.

Higher costs than expected – but better efficiency is expected going forward

The variable costs in Q1-23 amounted to DKK 16.1m, which was higher compared to our estimates (13.9) and the same period last year (11.9). The higher costs are a result of changes in the organization and processes to sustain future growth. However, Analyst Group expects the variable costs to decrease in relation to revenues going forward, primarily driven by the company taking on larger projects going forward, leading to a better negotiation position as well as better efficiency in maintenance. Furthermore, Analyst Group expects that macroeconomic factors, such as continued decreased inflation and energy prices, will decrease Movinn’s cost base going forward. On a positive note, the Swedish subsidiary is approaching break-even and is expected to contribute with a positive EBITDA from operations at the end of the year. EBITDA from operations amounted to DKK 0.8m for the first quarter, compared to our estimates of DKK 3.5m. The table below shows a complete comparison between our estimates and the result.

Positive signs in the cash flow statement – better cash flow expected in the coming quarters

The cash flow from operating activities amounted to DKK -0.8m, compared to DKK 0.4m during the same period last year, where the decrease is attributable to the higher costs during Q1-23. However, regarding the cash flow from investing activities, we can see a decrease in investments in fixed assets as well as security deposits, which is assumed to be due to fewer units being added. Going forward, as costs are expected to decrease, hence contributing to an increased EBIT, we expect a positive effect on the cash flow going forward through the decreasing investments. Furthermore, when entering the German market, which is expected in 2024, Movinn is expected to replace security deposits with rental guarantees, which is expected to decrease investments further, hence contributing to improved ROIC and cash flow.

To summarize, Movinn delivered a first quarter with slightly higher revenue than expected, where a strong revenue per unit was the largest contributor, despite a higher-than-expected vacancy rate. Going forward, when demand is expected to improve and vacancy rates drop, we estimate that this will result in a higher revenue per unit. Regarding costs, the variable costs and staff costs were higher than expected, but where we see improvement going forward as the macroeconomic situation improves, as well as the company taking on larger projects.

We will return with an updated equity research report of Movinn.