Copyright © Inderes 2011 - present. All rights reserved.
  • Latest
  • Markets
    • Stock Comparison
    • Financial Calendar
    • Dividends Calendar
    • Research
    • Articles
  • inderesTV
  • Portfolio
  • Forum
  • Q&A
  • About Us
    • Our Coverage
    • Team
Press release

IAR Systems Group AB: DNB Markets: Emboldening start to 2025

I.A.R. Systems Group

The Q1 results held important building blocks demonstrating resilience, despite slower design starts and robust SaaS offering pipeline commentary, with greater upselling potential. We expect IAR Systems' defensive recurring revenues, strong balance sheet, and share buybacks to cushion share price volatility amid the SaaS transition, but have cut our 2025e EPS by 15% and reduced our fair value to SEK150-260 (160-265).

Healthy Q1 beat: 1) 3% organic sales growth YOY despite deal slippage from Q1 to Q2e (4% net sales beat versus our forecast), with +46% organic growth in APAC (partly from a large deal win but also fuelled by RISC-V) slightly offset by a 21% organic drop YOY in North America amid a tough comparable, deal scrutiny from indirect tariff headwinds, and slower project starts; 2) forward-leaning pipeline commentary with lower churn, a `three-fold' rise in the number of new customers and a `substantial part' attributed to its full launch of its new SaaS offering on 1 April, while noting that SaaS onboarding entails longer sales cycles; 3) adj. EBIT was 18% above our forecast (23.2% margin, -16% YOY) despite head count growth of 10% YOY; 4) the soft points in the results were its deferred revenue (-3% YOY) and FCF (23% cash conversion) from accounts receivable build-up, although it cited adequate payment ability among its customers; and 5) its key competitor announced in Q1 that it plans to phase out its compiler, which should allow for some low-hanging fruit customer wins for IAR Systems.

2025-2026e adj. EPS lowered by 15-5%, to factor in FX headwinds (of 24-34%) slightly offset by higher organic growth and incremental margins (up 9-28%). We forecast -1% organic sales growth and -51% adj. EPS growth in 2025 to factor in the SaaS transition. That said, our estimates could prove too conservative, as IAR Systems cited a greater value proposition offered through its SaaS platform (1.5-2.5x higher revenue potential over three years, an upsell opportunity not reflected in our model).

Fair value lowered to SEK150-260 (160-265), where the low-end is based on a 2025e EV/EBIT of 20x (SaaS shift-pressured earnings) and the high-end on a DCF that captures IAR Systems' targeted `rule of 40' financials beyond 2028-2030e.

Best regards,

Joachim Gunell | DNB Markets | Equity Research
DNB Bank ASA, Filial Sverige
Visiting address: Regeringsgatan 59, Stockholm
Postal address: 105 88 Stockholm
E-mail: joachim.gunell@dnb.se | www.dnb.no

Find us on social media
  • Inderes Forum
  • Youtube
  • Instagram
  • Facebook
  • X (Twitter)
Get in touch
  • info@inderes.se
  • +46 8 411 43 80
  • Vattugatan 17, 5tr
    111 52 Stockholm
Inderes
  • About us
  • Our team
  • Inderes as an investment
  • Services for listed companies
Our platform
  • FAQ
  • Terms of service
  • Privacy policy
  • Disclaimer
Inderes’ Disclaimer can be found here. Detailed information about each share actively monitored by Inderes is available on the company-specific pages on Inderes’ website. © Inderes Oyj. All rights reserved.
  • Latest
  • Markets
    • Stock Comparison
    • Financial Calendar
    • Dividends Calendar
    • Research
    • Articles
  • inderesTV
  • Portfolio
  • Forum
  • Q&A
  • About Us
    • Our Coverage
    • Team