Palantir a high-risk investment with ’a one-of-a-kind growth and margin model’
Introduction & Market Context
Seco SpA (BIT:IOT) presented its results for the first nine months of 2024 on November 13, showcasing resilience in a challenging market environment. The Italian edge computing and IoT solutions provider emphasized its strategic positioning in a rapidly expanding market, with the total addressable market projected to grow from $8 billion in 2018 to $29 billion by 2028, representing a compound annual growth rate exceeding 12% between 2023-2028.
Despite facing headwinds from destocking trends across its markets, Seco highlighted its ability to maintain profitability through improved gross margins and operational efficiency. The company’s current share price of €2.08 reflects ongoing market assessment of its transition through this challenging period.
As shown in the following market growth projection:
9M 2024 Financial Performance
For the first nine months of 2024, Seco reported net sales of €139.4 million, representing a 14.0% decrease compared to the same period in 2023. Despite this revenue decline, the company achieved significant improvement in its gross profit margin, which increased by 261 basis points to 52.1% compared to 49.5% in 9M 2023.
The company’s adjusted EBITDA reached €20.4 million, representing 14.7% of sales, down from €37.3 million (23.0% of sales) in the comparable period. Adjusted net income declined to €1.6 million from €16.2 million in 9M 2023, primarily due to the impact of lower sales volumes.
The financial highlights are summarized in the following slide:
Seco’s revenue breakdown shows a diversified client base across multiple industries and regions. EMEA remains the dominant market, accounting for 83% of sales, followed by the USA (10%), APAC (6%), and Rest of World (1%). By end market, vending machines represent the largest segment at 37%, followed by industrial applications (30%) and fitness equipment (12%).
The company’s sales breakdown is illustrated in this chart:
A key positive development was the growth of Seco’s Clea software platform, which generated revenues of €17.0 million in 9M 2024, representing 12.2% of total sales and an increase of 214 basis points compared to 9M 2023. This higher-margin software business has contributed significantly to the overall gross margin improvement.
The company also reported positive cash generation of €4.0 million in Q3 2024, following cash absorption in the first half of the year. This resulted in a stable net debt position of €56.9 million at the end of September 2024.
The evolution of Seco’s financial position is shown in this chart:
Strategic Partnerships and Ecosystem
A significant portion of Seco’s presentation focused on its expanding ecosystem of strategic partnerships, which the company views as critical to its long-term growth strategy. Seco has established collaborations with major technology companies including NXP (NASDAQ:NXPI), Raspberry Pi, and Qualcomm (NASDAQ:QCOM) to enhance its Edge AI and IoT offerings.
The company’s Clea ecosystem now includes partnerships with hyperscalers like Google (NASDAQ:GOOGL) Cloud and Microsoft (NASDAQ:MSFT) Azure, silicon vendors such as Intel (NASDAQ:INTC), Qualcomm, and NXP, and various system integrators. This network of collaborations is designed to accelerate innovation and expand market reach.
The comprehensive partnership ecosystem is illustrated here:
Seco highlighted its partnership with NXP to make its Clea platform available across all NXP silicon, integrating with NXP’s EdgeLock 2GO security services. The collaboration encompasses hardware development, software integration, and joint go-to-market strategies.
Similarly, the company announced a strategic partnership with Raspberry Pi to develop a 10.1" human-machine interface based on Raspberry Pi’s new Compute Module (CM5), with Clea natively integrated. With Qualcomm, Seco is positioned as an Industrial IoT design center partner, developing solutions that leverage Qualcomm’s technology.
These partnerships reflect Seco’s strategy to position itself as a key enabler for AI at the edge, addressing the growing demand for smart, connected devices across industrial sectors.
Edge AI and Clea Platform Development
Seco presented a comprehensive roadmap for its Edge AI capabilities and Clea platform development. For 2024, the company has focused on unifying the Clea platform interface, creating a single price list, developing vertical use cases, and launching the Clea AI Studio and Marketplace. Looking ahead to 2025, Seco plans to release Clea OS on Edgehog and deploy Clea AI Studio apps on Clea OS.
The Edge AI roadmap details various product families categorized by their computational capabilities (measured in TOPS - Tera Operations Per Second), ranging from entry-level to high-performance solutions for 2024 and 2025.
The company’s Edge AI roadmap is visualized in this comprehensive chart:
Outlook and Future Growth Expectations
Seco expects revenue growth to return to positive territory in the first half of 2025, with progressive improvement throughout the year. The company provided a graphical view of its revenue progression through 2024, showing €47.2 million in Q1, €95.3 million in H1, and €139.4 million in 9M, with a target of exceeding €180 million for the full year.
The guidance and outlook are presented in this chart:
Recent earnings results for Q1 2025 (released after this presentation) confirm this positive trajectory, with net sales growing 7% compared to Q4 2024. Software (ETR:SOWGn) revenues have increased to 13% of total sales, and the adjusted EBITDA margin has rebounded to 20%, suggesting that the company’s strategy is beginning to yield results.
Seco’s investment case rests on its position as a top 5 global player in a growing market, its profitable business model with strong gross margins, end-to-end technological capabilities, fully integrated IoT offering, diversified client base, and experienced management team.
The company appears well-positioned to capitalize on the growing demand for Edge AI and IoT solutions, particularly as industrial companies increasingly seek to extract value from device-generated data and enhance user experience through improved human-machine interaction.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.