Company Brief
22 JUNE 2018
Causeway Technologies


Company Analysis



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Robert Warensjo
robert.warensjo@megabuyte.com

PUBLICATION DATE: 22/6/18 |

1

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Company Brief | 22 JUNE 2018
Causeway lays ambition to double up
Owner managed construction industry software player Causeway grew revenues 4.5% to
22.3m in calendar 2017, as further momentum and growth in its subscription transition was
partly offset by reducing initial licence fees - the improved revenue mix fed into higher
EBITDA margins (25.8%) and strong cash generation. We caught up with CFO Mark Howell
who highlighted ambitions to double revenues in the next three years with the support of
acquisitions and overseas wins, putting its hefty Guggenheim-led refinancing from last year
to good use.
Company overview
Causeway provides enterprise software solutions to the construction and facilities management
industries throughout the design, build, operation and maintenance lifecycle. The company was
founded in 1999 and completed a number of acquisitions through the following decade in order to
add breadth to its offering. As a result, Causeway's product portfolio today is much wider than many
of its construction industry software peers, which typically focus on a particular niche. Causeway
employs around 200 people and has offices across the UK, Ireland and India. Causeway remains
owner managed, although, in June 2017, it announced a 90.5m refinancing package led by
Guggenheim Partners, comprising an initial 40.5m plus a further 50m of incremental facilities, to
support expansion organically and through M&A.
Financial performance
Causeway grew revenues 4.5% to 22.3m in the year to December 2017, within which a 12% rise in
annual licence and subscription revenues to 18.2m (82.0% of total, up 5.6pp) offset a 14% drop in
initial licence fees to 2.5m, reflecting a continuation of its subscription transition. Professional
services revenues were down 22% to 1.3m. The annual value of contracts grew 18% to 20.2m
and total lifetime contract value, which typically incorporates a five year minimum contract term,
ended the period at 66m (2016: 46.5m). By geography, UK revenues grew 2.2% to 20.3m versus
a 35% rise in Rest of World revenues to 2.0m.
Adjusted EBITDA rose a greater 26% to 5.8m due to a stable operating cost base, expanding the
margin by 4.3pp to 25.8%. Expensed R&D investment totalled 4.2m (2016: 4.6m). Operating cash
flows grew 13% to 6.2m, or 108% EBITDA conversion, supported by its improved revenue mix. This
easily financed 1.6m of interest and 0.2m of capex (2016: 2.0m), resulting in Causeway's net
debt balance falling from 36.2m to 32.0m. However, net debt less shareholder loans trebled to
32.0m, after shareholder loan notes and pre-existing bank debt was repaid as part of the
Guggenheim led refinancing.
FIGURE 1: Causeway Technologies summary financial performance (Dec year-end)

Source: Megabuyte, Company accounts
23.3
21.0
21.3
22.3
4.0
3.7
4.6
5.8
2.5
4.8
5.5
6.2
2.4
4.6
3.5
6.1
17%
18%
22%
26%
0%
10%
20%
30%
0
10
20
30
FY-14
FY-15
FY-16
FY-17
mRevenue
Adj. EBITDA
OCF
FCF
Adj. EBITDA margin, rhs

Scorecard Mark*



64

Peer Group Average 52/100

* Megabuyte Scorecard Calculation
Rating and corresponding peer group
average calculated as at 21 June 2018.
Ratings are calculated on a rolling basis.


Quick Facts


REPORT ABOUT:
Causeway Technologies


PEER GROUP:
Specialist Applications

SECTOR: Software

MEGABUYTE COVERAGE
LEVEL:
Full Coverage

HQ:
United Kingdom
Ownership:
Owner Managed
Co Size:
Mid-market
Revenue:
22.3m
EBITDA
5.6m


Company Brief
22 JUNE 2018
Causeway Technologies


Company Analysis

2
| PUBLICATION DATE: 22/6/18

Strategy, outlook and other developments
Other developments during the year included a short tenure for CEO Colin Smith, who departed the
company just 8 months after his appointment in March 2017, resulting in Chairman Phil Brown
resuming the Chief Executive role and the appointment of Rob Ramsay as Chief Operating Officer.
On a call, CFO Mark Howell highlighted that, despite Smith's brief time as CEO, there was no impact
to the group's ongoing initiatives, which primarily focuses on three key strands: product
development, complementary M&A, and overseas growth. All supported by the added firepower from
its refinancing.
In greater detail, Causeway is focusing on enhancing the features and functions of its Cloud-based
source-to-pay platform (supplier performance, e-tender, e-invoicing etc) and project management
(budgeting, cost and value management, mobility, field-based solutions) credentials through both
organic development and acquisitions. While the group is yet to pull the trigger on the M&A front
since its refinancing, Howell noted that the group is closing in on two deals that would boost trailing
revenues by around a third. Causeway also recently appointed Gavin Disney-May as a non-
executive director to bolster M&A support. Turning to its overseas developments, Causeway is in
exploratory talks with a small number of large US construction firms. Initial focus in the region will be
on securing organic wins to build up referenceability, with incremental investment based upon
traction. The group also has its eye on expanding in Australia and Europe through existing customer
relationships and India via its existing operations in Bangalore.
Causeway's fiscal outlook continues to be shaped by its subscription transition, which is now in its
second year. However, with the transition nearing completion, Howell is predicting double-digit
organic revenue growth in 2018. On top of this, the group is targeting to double revenues in the next
three years to almost 50m, supported in part by the two close-to-being-signed acquisitions and
further M&A in 2019/20.
Megabuyte Scorecard
Causeway's Scorecard rating was unchanged at 64 after inputting its latest results, maintaining its
premium to the averages for the peer group (52) and Software sector (55). The group's quartile
positioning was also unchanged, as it maintained strong cash conversion and high and expanding
EBITDA margins, but continues to deliver below average revenue growth metrics, impacted by its
subscription transition.
FIGURE 1: Factor Performance (quartile scores in brackets)
Size
Organic
Growth
Revenue
CAGR
EBITDA
Margin
Quartile Performance
22.3m (2)
5% (2)
-2% (1)
26% (4)

Margin
Expansion
OCF
Conversion
FCF
Conversion

2.8pp (4)
105% (4)
92% (4)


Source: Megabuyte, Company accounts
Megabuyte view
Causeway's results were broadly in line with guidance given to us last year by management, as its
subscription transition limited growth in headline revenues but fed into strong progress in the bottom
line and high cash generation. What's clear from our latest conversation is that the group's
expansionary ambitions are really starting to ramp up with a goal of doubling the top line in three
years, a stark change to its 21-23m range of the last five years. Causeway's next 12 to 24 months,
therefore, look to be transformative to say the least, with it seemingly close to putting its
Guggenheim-backed warchest to good use and executing on the M&A front alongside some
interesting developments in the US.
Company Brief
22 JUNE 2018
Causeway Technologies


Company Analysis

PUBLICATION DATE: 22/6/18 |

3





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