Revenue growth accelerated in 24Q1 and loss narrowed year-on-year. Maintaining the “buy” rating, Foxit Software published annual reports and quarterly reports. In 2023, it achieved revenue of 611 million yuan (yoy +5.33%), net profit to mother of 90.94 million yuan (-1.74 million yuan in '22), and deducting non-net profit of -179 million yuan (-78 million yuan in '22). 24Q1 revenue of 169 million yuan (yoy +16.87%, qoq +0.33%), net profit to mother of 10.609 million yuan (6.47% year-on-year decrease), deducted non-net profit of 206.562 million yuan (21.55% year-on-year reduction). The main losers were due to subscription transformation affecting revenue growth+increased expense investment. As the transformation deepens, revenue growth is expected to gradually accelerate. We expect the company's 2024-2026 EPS to be -0.03, 0.29, and 0.72 yuan respectively. Comparable to the company's 24-year ifind unanimously expected an average PS value of 9.1 times, giving 2024 9.1 times PS, and a target price of 73.96 yuan, maintaining a “buy” rating.
The results of the dual transformation are showing, and revenue growth may accelerate
In 2023, the company's subscription business revenue was 216 million yuan, up 75.6%. The ARR for subscription products was 250 million yuan, up 80.6% from the end of 2022. Subscription business revenue accounted for 35.36%, +14pct year on year, and cloud transformation accelerated. Subscription-related contract liabilities amounted to 161 million yuan, an increase of 71.3% over the previous year. The annual comprehensive business volume was 850 million yuan, an increase of 20.1% over the same period, achieving steady growth. The 24Q1 subscription business revenue was 74 million yuan, up 73.3% from the same period, accounting for 44.1%, up 8.8 pcts from 2023. The 24Q1 subscription business ARR reached 281 million yuan, up 13.1% from the end of 23Q4, and continued to grow steadily. In the 2023s, sales revenue was 208 million yuan, an increase of 22.4%. 24Q1 channel revenue was 63 million yuan, an increase of 49.0%, and channel revenue growth accelerated. The results of the company's cloud transformation+channel transformation are gradually showing, and revenue growth may accelerate.
Revenue growth in Europe and the US accelerated in 24Q1. Domestic and overseas two-wheel drive growth can be expected to increase by 14.6% in 2023. The North America/Europe/Asia (excluding mainland China) market revenue accounted for 56.5%/23.6%/5.7%, and the year-on-year revenue growth rate was 0.3%/19.5%/-7.3%. Revenue growth in Europe and the US accelerated in 24Q1. Revenue in mainland China/North America/Europe also increased by 3.7%/11.0%/26.0%. Both European and American transformations showed results, and revenue growth trends were accelerated. Channel revenue in North America/Europe/China increased 8.6%/59.5%/45.5% in 2023, while subscription revenue in North America and Europe also increased by more than 80%. The company focuses on continuing to develop the general PDF software market in overseas markets. In addition to the general PDF market, the domestic market is deeply expanding the vertical industry market. We believe that with the gradual iteration of the company's products, domestic and foreign markets are expected to jointly drive the company's revenue growth in the future.
AI functions continue to be rich, and AI commercialization can be expected
The company continues to iterate on the AI functions in the PDF editor, and the product experience continues to improve. In terms of human-computer interaction, through Smart PDF Commands, AI related instructions for PDF functions have been realized, and now more than 100 AI-based instructions can be realized. In January 2024, the company signed a software agency agreement with the core PC channel provider to provide its users with a PDF editor with integrated AI capabilities. AI may further increase the company's penetration rate in the core channel. Improved user experience is also expected to enhance the competitiveness of the company's products.
Risk warning: New application expansion falls short of expectations; risk of market competition; risk of fluctuations in the performance of joint ventures.