Loyal Solutions announces financial results for the first half of the financial year 2025/26

Loyal Solutions reported strong first-half FY2025/26 results with revenue up 56.5% to TDKK 28,530 and positive EBITDA of TDKK 2,375 (versus TDKK -3,901 a year earlier), while net profit was TDKK 428 and cash receipts TDKK 28,508. Annual recurring revenue rose 13% to TDKK 45,113 (below plan due to delayed contracting but management expects FY ARR of TDKK 53,776) and OPEX was reduced ~12% year‑on‑year; management reiterates budgeted full‑year revenue of TDKK 55,646 and cites continued pipeline growth and client wins including MYER and integrations with partners such as Qatar Airways.

Analysis

Market structure: Loyal Solutions’ 56.5% revenue growth and positive EBITDA directly benefits payment networks (Visa/Mastercard through VMLS integrations), merchant acquirers, and retailers that improve spend via card-linked loyalty (e.g., Myer). Incumbent small loyalty vendors and high-cost outsourced operators face margin pressure as SaaS, private-cloud models scale; expect modest price compression for legacy bespoke services over 12–24 months. Cross-asset: stronger cashflows at merchants reduce short-term retail credit spreads and slightly improve Nordic small-cap credit sentiment; FX impact is minimal but AUD/NZD exposure rises through announced Australian client wins.

Risk assessment: Key tail risks are client concentration (a few large programs could represent >30% of revenue), delayed contracting (ARR currently 45,113 TDKK vs budget 53,776 TDKK — ~16% gap), and regulatory/data-privacy shocks (EU/UK/MEA). Immediate catalyst: Feb 10 webcast (days) for guidance clarity; 3–6 months critical for new contract closures; 12–24 months to validate sustained ARR retention and margin expansion. Hidden dependency: heavy reliance on Visa VMLS/API stability and partner integrations; outage or de-prioritization by a scheme would be material.

Trade implications: Tactical long exposure to payment networks (V, MA) and payment-enabled merchants is preferred over small loyalty pure-plays. Use 3–6 month call spreads on V/MA to capture upside from increased merchant digitalization; consider a 2–3% core long allocation to PayPal (PYPL) to play merchant wallets and loyalty bundling. Pair trade: long MA (payments network) vs short a high-multiple marketing SaaS with negative FCF (replace with CRM/marketing SaaS ETF underweight) until Loyal proves ARR hit.

Contrarian angles: Market may underprice operational leverage — Loyal cut OPEX ~12% y/y while growing revenue 56% suggests unit economics can quickly improve if ARR catch-up occurs; conversely the market may underweight delayed-contract risk and customer concentration. Historical parallel: card-linked-offer cycles (2014–2018) show early platform winners scale rapidly but many niche vendors get squeezed by networks; a single large contract loss could halve forward EBITDA. Monitor ARR trajectory: if ARR < budget by >10% at full year, de-risk loyalty-SaaS longs within 48 hours.

Key Decisions for Investors

• Establish a 2–3% long position in Visa (V) and Mastercard (MA) combined (equal weight) with a 3–6 month horizon to capture payment-network upside from loyalty integrations; add 1–2% more if Loyal announces ARR ≥53,776 TDKK at fiscal year-end.
• Buy a 3–6 month call spread on PayPal (PYPL) to leverage merchant wallet adoption: buy ATM-to-10% OTM calls (size = 1–1.5% notional) to limit premium outlay while retaining upside to merchant loyalty wins.
• Initiate a pair trade: long MA (1.5% notional) vs short 1.5% notional of a high-multiple marketing/loyalty SaaS ETF or single name with negative free cash flow (benchmark an ETF if single-name liquidity/mispricing risk is high); hold 3–9 months and tighten stop-loss if MA outperforms by >10%.
• Contingent action: If Loyal misses ARR target by >10% at year-end or reports >30% revenue concentration in ≤3 clients, reduce exposure to niche loyalty/CRM SaaS names by 50% within 48 hours and rotate proceeds into large-cap payment networks (V, MA) and defensive tech (CRM leader like CRM up to 2%).
• Event trade: Attend/monitor Loyal webcast on Feb 10 and be ready to trade on two datapoints—(1) new contracted ARR bookings (threshold: ≥+8,663 TDKK) and (2) client concentration metrics; if both positive, scale into bespoke loyalty-SaaS small caps (allocate up to 1–2% only) within 5 trading days.