CentralNic Group plc (LON:CNIC) FY22 update confirmed accelerating momentum towards the end of the year, with revenue and adjusted EBITDA ahead of our forecasts, which we raised on 21 December. Its ability to effectively match advertisers with high-intent consumers, alongside global market demand for privacy-safe customer targeting solutions, continues to drive Online Marketing. Economies of scale and acquisitions have strengthened its operating leverage, leading to improved profitability. CentralNic’s attractive cash dynamics have supported a significant reduction in net debt, which we believe will continue to fall in FY23 in line with expected profit growth.

FY22: Ahead of consensus and our forecasts

CentralNic expects to report revenue of $728m, up 77% y-o-y and up 60% y-o-y organically. Revenue was also ahead of both our forecast and market consensus of $708m. Management expects adjusted EBITDA of more than $85m, equating to growth of at least 84% y-o-y and c 2% higher than our previous forecast. FY22 adjusted EBITDA to our net revenue estimate of $176m, which deducts costs directly passed onto its customers, was 48.5%, 9.5pp higher year-on-year as a result of stronger operating leverage from its scaling Online Marketing business and accretive acquisitions made in the year. Net debt decreased by $24m to $57m in the year, supported by expanding profit margins and an adjusted operating cash conversion (normalised operating profit/operating cash flow) in excess of 100%.

Forecasts revised

We have upgraded our FY22 revenue and profit forecasts based on the trading update. While we expect the same FY22 structural tailwinds to continue to drive demand in FY23, we believe revenue growth will be slower at 15% y-o-y as management moves its focus from high volumes of M&A to further strengthening its balance sheet and increasing returns to shareholders. We have left our FY23 profit and cash forecasts materially unchanged, reflecting potential operating cost pressures, particularly wage inflation and hiring needs.