Translation: Original published in Finnish on 01/09/2025 at 8:51 am EET

In recent years, LeadDesk’s growth has suffered from the maturing of the Nordic market and the economic downturn, as growth investments have geared more toward the growth markets of Continental Europe. The company has also managed to keep up with the AI transformation in its market. With the Zissonacquisition in December, the earnings potential will begin to surface and the earnings-based valuation (EV/EBITA 2025-26: 13-9x) starts to offer stronger share price drivers. We raise our target price to EUR 8.5 (was EUR 8.0) and recommendation to Buy (was Accumulate).

LeadDesk enhances the sales and customer service of European companies with SaaS software

The key value of LeadDesk’s customer service and call center software for sales and customer service organizations is increased efficiency by centralizing management of multiple communication channels to one software and enabling communication automation (e.g. chatbots). The solution covers high-volume customer communication from the customer to the company (Inbound sales and customer service) and from the company to the customer (Outbound sales). LeadDesk has grown successfully in Europe throughout its history (2014-2024e organic growth of about 13% p.a., ~65% of recurring order backlog international) mostly profitably. The business is capital-light and relies on recurring income flows.

Cloud transformation supports growth, especially in Continental Europe, but Nordic markets slow down the pace

The European CCaaS market (Contact Center as a Service) is growing due to the cloud transformation (estimated at ~8-16% p.a.). It is challenging to achieve strong sustainable competitive advantages in a large market but we estimate that LeadDesk's product is competitive in the SME segment across Europe, and in the Nordic countries also in the Enterprise segment. In 2022-2024, Group growth was hampered by the maturity of the Nordic countries (esp. Finland) and weak economic activity, as the stronger shift in growth investments to Continental Europe has been gradual. We now see good drivers for stronger growth. LeadDesk consolidates its market with acquisitions that we believe have created value and raised the company to a sufficient size to maintain competitiveness. With the support of acquisitions, it has also kept pace with the AI transformation, which we expect will accelerate market consolidation.

Acquisition quickly transformed LeadDesk to a profit and cash flow machine although the growth path is still long

With the Zisson acquisition, LeadDesk’s business takes a step toward a more mature development phase, although the same happens in revenue as the weight of the Group's business grows in the maturer Nordic markets. However, we expect the exceptionally weak revenue growth in 2024 (~2% organically) to pick up slightly organically (2025e: +5%, +32% with the acquisition) and profitability to strengthen (adj. EBIT 2024e: 5.8%, 2025e: 7.6%). As growth investments have shifted to Continental Europe with stronger growth, we expect the company’s annual organic growth to pick up to 6-7% in 2026-2028 and profitability to continue strengthening with economies of scale (adj. EBIT 2026-2028: 10-12%). As the business matures, we estimate the EBITA margin to be around 18% in the long run, although the level depends on the size the company achieves in the long run.

Performance improvement brought by Zisson acquisition offers drivers to correct the low valuation

The dilemma of LeadDesk's valuation has been a clear underpricing of the potential (DCF EUR 11.9 per share), but at the same time, weak short-term share price drivers partly due to cyclically low growth and still limited profitability scaling. Supported by profitability strengthened by the Zisson acquisition, the valuation now turns highly attractive also in light of earnings multiples (EV/EBITA 2025-26: 13-9x) and we see this as a buying opportunity.