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01/11 13:54
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture. While there is growth in recurring revenue and EBITDA improvement, the revenue decline and project rollout delays, particularly with Sainsbury's, are concerning. The absence of shareholder return plans and increased debt further dampen sentiment. However, positive growth in new markets and high expectations for AI solutions provide some optimism. The Q&A reveals management's vague responses on financial impacts, adding uncertainty. Overall, the factors balance out, leading to a neutral sentiment.
Revenue NOK 347,000,000, a decrease of 3% year-over-year. The decline is attributed to last year’s rollout of electronic shelf label tag replacement in Norway, despite growth in The Baltics (driven by large self-checkout deliveries), The UK (16% growth including ESL and Autostor installations), and Sweden (28% growth).
Recurring Revenue (12-month rolling) Increased by 17% year-over-year, driven by a 68% increase in license revenue, mainly from the Sainsbury’s order picking contract and self-checkout solutions.
EBITDA Improved to NOK 10,000,000 from a loss of NOK 6,000,000 year-over-year. This improvement is due to recovery in the international segment, particularly in The Baltics and Spain, while profitability in The Nordics remained flat despite a revenue decrease in Norway due to prior cost reductions.
Operating Cash Flow NOK 8,000,000 for the quarter, with cash at the beginning of the year at NOK 82,000,000 and ending at NOK 85,000,000, reflecting a flat development.
Net Interest Bearing Debt Increased by NOK 12,000,000 to NOK 72,000,000, primarily to fund development CapEx in Spain and The Baltics, as well as leasing payments.
Disposable Funds NOK 85,000,000, down from NOK 102,000,000 at the end of last year.
Equity Ratio Stable at 46% at the end of the quarter, compared to a covenant of 30%.
CapEx Spent NOK 11,000,000 on development related to the CashGuard Connect project in Spain and the POS solution in The Baltics.
Inventory Reduced by NOK 34,000,000, mainly from self-checkout deliveries in The Baltics, grocery lockers in Sweden, and shop fitting equipment in The UK.
New Product Launches: Initiated two proof of concepts for an artificial intelligence solution to reduce theft in self checkouts in Norway and Sweden. Started a new proof of concept for VentSafe in the UK. Launched the Oto store in the UK for a leading fragrance shop. Introduced the Peo solution set, a smaller and standardized solution.
Market Expansion: Expanded operations into the UK and Ireland, with significant growth in the UK market. Continued growth in The Baltics and Spain.
Operational Efficiencies: Improved EBITDA from NOK -6 million to NOK 10 million. Achieved a 17% growth in rolling twelve-month recurring revenue. Reduced inventory by NOK 34 million.
Strategic Shifts: Transitioning to a new electronic shelf label partnership with Vucent. Formalized a partnership with SAI for AI solutions.
Revenue Decline: The company experienced a flat revenue development with a decline of 3% to NOK 347 million, attributed to last year's rollout of electronic shelf label tag replacement in Norway.
Project Rollout Delays: The rollout of the Sainsbury’s order picking solution is expected to be delayed, moving into next year due to added requirements and the freeze months for grocery retailers in the UK.
Competitive Pressures: StrongPoint faces competitive pressures in the UK and other new markets, necessitating ongoing investment and adaptation to maintain market share.
Regulatory Issues: The company operates in multiple countries, which may expose it to varying regulatory environments that could impact operations and profitability.
Supply Chain Challenges: The company is managing supply chain challenges, particularly in the context of cash management solutions and hardware installations.
Economic Factors: Economic conditions in Europe, including inflation and consumer spending patterns, may affect grocery retailers' operations and, consequently, StrongPoint's revenue.
Debt Increase: The net interest-bearing debt increased by SEK 12 million, primarily to fund development projects, which could pose financial risks if not managed properly.
Recurring Revenue Growth: 17% growth in rolling twelve month recurring revenue, driven by license revenue from proprietary and third-party solutions.
Proof of Concepts: Initiated two proof of concepts for AI solutions to reduce theft in self checkouts in Norway and Sweden.
CashGuard Connect: Developing a proprietary cash management solution with plans for additional pilot stores and seeking long-term financial commitments.
Sainsbury's Project: Ongoing rollout of order picking solution, with expected completion delayed to next year due to added requirements.
Market Expansion: Focus on expanding in the UK, Ireland, and Spain, with positive expectations for growth in these markets.
Revenue Guidance: Expecting revenue between NOK 1,500,000,000 and NOK 1,800,000 for the year.
EBITDA Margin Guidance: Targeting an EBITDA margin of 4% to 6% for the year.
Long-term Outlook: Cautiously optimistic about growth potential in new markets and the global potential of their order picking solution.
Share Buyback Program: None
Dividend Program: None
The earnings call presents a mixed picture. While there is growth in recurring revenue and EBITDA improvement, the revenue decline and project rollout delays, particularly with Sainsbury's, are concerning. The absence of shareholder return plans and increased debt further dampen sentiment. However, positive growth in new markets and high expectations for AI solutions provide some optimism. The Q&A reveals management's vague responses on financial impacts, adding uncertainty. Overall, the factors balance out, leading to a neutral sentiment.
The earnings call highlights significant strategic restructuring, including workforce reduction and deprioritization of the Lavelta program, which raises concerns about operational capacity and future growth. The lack of shareholder return plans and competitive pressures add to the negative sentiment. Although the cash runway extends to Q4 2026, uncertainties around partnerships and regulatory risks, coupled with management's unclear responses in the Q&A, further contribute to a negative outlook.
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