Flexera Software LLC

Overview Key strengths Key risks Good market positions for its core software monetization, license optimization, and asset management businesses and a diverse customer base. Very high financial leverage of over 10x as of September 2022, which we expect will remain high over the next 12 months. Recurring revenue represents more than 95% of total sales post-transition to pure subscription model. Small scale in a highly fragmented market competing against larger, better-funded software players. Sufficient projected free cash flow of more than $50 million in 2023 amid rising interest rate environment. Narrow product focus on the information technology (IT) asset management and software license optimization markets. The company terminated the sale of new perpetual licenses in the beginning of 2022 and

...Flexera has completed its transition to a pure subscription-based business model, which will likely improve the stability of its revenue in a weakening economy. The company terminated the sale of new perpetual licenses in the beginning of 2022 and migrated to a pure on-premise subscription and software as a service (SaaS)-based cloud revenue model. This shift increased Flexera's share of recurring revenue to about 96% as of September 2022, up from 90% a year ago. This migration resulted in our estimated flat year over year revenues in 2022 as the drop off in perpetual license revenues offset growth in subscription licenses, which led to a temporary delay in revenue recognition during the transition. We view Flexera's products as entrenched in its customers' IT...

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