Earnings call transcript: Huddlestock Q1 2025 sees revenue dip, margin up

Huddlestock Fintech, a provider of investment-as-a-service platforms with a market capitalization of $21.93 million, reported its financial results for the first quarter of 2025. The company experienced a slight decline in revenue compared to the previous quarter but saw improvements in its EBITDA margin. Despite these mixed results, Huddlestock’s stock price fell by 1.12% to close at $0.88, reflecting investor concerns about its revenue trajectory. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, despite showing impressive year-to-date returns of 94.75%. The company’s cash position strengthened, ending the quarter with approximately 13.5 million NOK, up from 11.1 million NOK at the start of the period.

Key Takeaways

• Huddlestock’s Q1 2025 revenue declined slightly from Q4 2024 levels.
• EBITDA margin showed improvement quarter-over-quarter.
• The company signed its first European customer, Gigabroker, for its investment platform.
• Organizational restructuring reduced employee count to under 30.
• Stock price decreased by 1.12% following the earnings release.

Company Performance

Huddlestock’s performance in Q1 2025 reflected a challenging environment, with a slight decrease in revenue compared to the previous quarter. However, the company managed to improve its EBITDA margin, highlighting effective cost management. Huddlestock’s focus on the European market, particularly through its partnership with Gigabroker, marks a strategic shift towards expansion and growth.

Financial Highlights

• Revenue: Slight decline from Q4 2024
• EBITDA Margin: Improved quarter-over-quarter
• Cash Position: Increased to approximately 13.5 million NOK by quarter-end

Outlook & Guidance

Looking ahead, Huddlestock aims to close its final AI transaction in Q3 2025 and is targeting the signing of a second European customer by the end of the year. InvestingPro data reveals that analysts expect both sales and net income growth this year, supporting the company’s strategic initiatives. The company is transitioning towards a more recurring revenue model, with its consulting business, Visigon, focusing on top-line growth. While current gross profit margins remain modest at 15.89%, the company’s financial health shows potential for improvement.

Executive Commentary

• "Europe is an interesting and very important part for Huddlestock going forward," emphasized the presenter, underscoring the company’s strategic focus on European expansion.
• "We are now in a controlled place where we have much better opportunities," the presenter noted, highlighting the benefits of recent organizational restructuring.
• "I am extremely excited about how far we have come," the presenter expressed, reflecting optimism about Huddlestock’s current trajectory and future prospects.

Risks and Challenges

• Market saturation in the financial services industry could limit growth potential.
• Economic uncertainties in Europe may impact customer acquisition.
• The transition to a recurring revenue model presents operational challenges.
• Competitive pressure from other fintech companies could affect market share.
• Dependence on successful platform migration and integration with partners.

Huddlestock’s Q1 2025 results reflect both challenges and opportunities as the company navigates a complex market environment. By focusing on strategic partnerships and European market expansion, Huddlestock aims to capitalize on emerging trends in the financial services sector. For deeper insights into Huddlestock’s financial health and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 8 additional ProTips and detailed financial metrics in the Pro Research Report, part of the platform’s coverage of over 1,400 stocks.

Full transcript - Huddlestock Fintech As (HUDL) Q1 2025:

Presenter/Moderator, Huddl Stock: Hello, everyone, and welcome to the first quarter twenty twenty five presentation of of Huddl stock. It’s it’s a plan to spend not more than thirty minutes. I will probably keep on until five minutes before half past one so that there might be some time for questions as well. On the top, you have a button called q and a. So so if you have questions, please type them down in there, and I will look into it on the after I’m finished with the with the presentation.

Yes. Let’s just, start. This quarter has been a very important quarter for the the the company. A lot of big, things have happened, and we have done some taken some decisions that definitely, changes, the strategic focus and also puts the company in another situation where we are much better fitted and and ready for for the way going forward. So so that is the main topic.

I think I would like to start to just have a recap or or a not recap, but just to to to to spend a few words about where we are post the transaction we’ve done. Huddl stock fintechs is, still listed on the Euronext stock exchange in in Oslo. Our market cap is approximately around 220 and which in a kroner. We have two, business, areas, which are both fully owned, and we have now one minority stake in another listed company, called Dun dot ai. Our cash cash position after transaction is approximately 13,500,000.0 Norwegian kroner, on our accounts.

And the the value of of our shares in in Dunn is estimated to be around 71,000,000 Norwegian kroner. We have still, or we have four offices. It’s in Oslo, Stockholm, Copenhagen, and Munich, and we are a little bit below 30 employees. So that is now our new basis for, looking forward into the opportunities that we think are very, exciting. First, let me spend a few minutes on on the the transaction that was, done just a few weeks ago where we decided to sell out the part of Huddl stock, which delivers investment as a service, platform, to the Nordic area.

The rationale behind doing so, were at least, two, in two parts. It’s on the operational side, where we see that after such a transaction, we will have much more focus on the European, landscape. We see that the European market is growing and interesting, and we are well positioned for taking, some some, what do call it, some benefits from from from from that. We have a slim organization. We are a agile organization, much more focused, and the resources we do have are now able to focus much more, on what they are doing, as a consequence of a much less complex, organization and and and business.

From the financial side, it has been an important objective for us to reduce cost and to become EBITDA positive as soon as possible. That has been an objective for at least the last one and a half year, and we have demonstrated quarter by quarter that we have been able to get closer and closer to that objective. But still, it has gone quite slow and too slow in my opinion. So during this transaction, we have been able to reduce costs significantly and also reduce our cash burn. Meaning that we are now in a financial situation where we have a much better balance sheet and we have much more freedom also in order to to take decisions and and and define what is the right source of of finance if and when needed going forward.

But in general, we have a much better financial situation and much more flexibility. A few words about the settlement process of of the the transaction. The first thing that happened was that we received 10,000,000 Norwegian kroner. That happened April 24. The next thing is that we will get paid in shares in done.

And and the the payment of shares will be done in two tranches. The first tranche is connected to two of the companies that are already on the hands of D U N, and it has been made a vendor note from from outside, which will be converted to to D U shares with a value of NOK 55,000,000, Kroners. The last the third company that was, sold out was called Huddl stock investor services, which is a licensed company within the securities area. And before that company can formally go over to the hands of them, it will need approval from the Norwegian FSA. We do not know for certain when that will happen, but we expect it will happen in q q three sometime this year.

When, the approval is, done from the Norwegian FSA, we will receive the the last part, the second tranche of of shares of, a value of 15,000,000 Norwegian krone. When all the shares are received at Huddl stock’s hands, we will distribute 20% of these shares to Huddl stock shareholders. So that means we will probably do that sometime in the q three, depending on the approval from the Norwegian FSA. So after this transaction, we are, in my opinion, in a much better position to execute on our long term strategy. We are in a European market where we see that we have a lot of larger and very interesting potential customers.

We will deliver and build our services based on our Nordic experience and Nordic knowledge where we are very digitalized and and automated. That is something that the European, players are are, screaming for now. To build a business in Europe is not longer only a dream because we have already signed up the new the first new, European customer, is a gigabroker based in in Germany, and that will take advantage of our platform and and transfer the customers from their current platform over to our new platform that is is planned to be in production sometime in second half of twenty five. We have a very much less burn of cash, lower cost. And and through this new financial situation we find ourselves in, we see also that we now have a wide range of of financing sources if we need that.

We have a profitable consulting business, Visigon. We have a revised strategy that is now during ’25 to be put in in in action. And what is important there is to take well care of of that business since it is profitable. And in my opinion, we also have good opportunities for growing that business. And last but not least, as part of the transaction with with dunn dot I AI, we have an exposure in the future value creation of that company.

And and Dun is a definitely a very, very interesting company with big ambitions. And, hopefully, the products and services and and the people, we have now divested to DONE, we will also indirectly become a part of the success story of DONE since we are contributing with the important ingredients of of their business. Europe is a in is an interesting and and very important part for Huddl stock going forward. As I have mentioned, a gigabroker is our first European customer. And instead of delivering all product services technology, everything on our own platform and risk and and ownership, we have decided to use, partners as an important part of that strategy.

For delivery to to Gigabroker, we definitely are using TradeVest and, DevExperts as as two examples. But, also, it’s very nice to see that we can use also other parts of of Huddl stock and put in the Visigon logo here to show that the the project manager for that project from our side is actually one colleague from the WSIGON part of Huddl stock. The good thing with the partner model is that we see that we are able to reduce time to market enormously compared to if we were to deliver everything ourselves. Also, the the requirement of of capital and investments is very, very much smaller and also the risk. So so even though a partner model delivering the services to to GIGABROKER, means that, some margins may go a little bit down, this is a way for us within very, very short time to to demonstrate for the market that, Huddl stock in in Europe and in Germany, firstly, is a player that is, able to deliver, quality products.

Europe is, important for us. And, if you look at sector we are in, the financial services industry, I’m not the first one saying that that this industry is one of the largest and most profitable segments in in the global industry. If you narrow it down to to Europe, we see that a lot of the European financial industry is still very manual or semi manual. At the same time, almost everybody has their own mobile phone. So so things are happening, and, the players and the the vendors that would like to provide investment services to to investors, they need now to rethink about how they are to deliver.

Mobile phone is, of course, one thing, but also the the way, the traditional, players are delivering, services needs to to be, reviewed. And, a survey done by Finch Capital, indicates that to, start to use more modern platforms will reduce their costs significantly. And, as this seem to be a very interesting market, we have seen it for a long time, but more and more, we’ll find this very interesting. It is expected that there will become new players into the market, and that is also why time to market is so important so that we can be in place and have customers working and do as and use as showcases for for other the customer number two and number three and number four and and so on. Mega Broker, which is a fully owned company by ABL, was signed up earlier this year, and we started up the project in April.

Nothing new, of of any significance needs to be developed. It’s more about to put together all the different pieces so that it works in a good way for ABL. ABL has been in the industry since 1997, a solid, customer base, strongly focused on, customer service, and and have a significant also AUA, on their platform. The challenge of from ABL is that, in 2025, your customers needs to they would like to to access more, products than only funds. And from the ABL side or gigabroker side, they will need to have a platform that is so cost efficient that it is possible to to be have a competition competitive advantages also in the years to come.

The project is, so far, running along the the timelines and the plans we have, set, in Italy. We we have, three streams we are, focusing on. It’s the technology stream, marketing, communication, and customer service, and legal and compliance. And the the plan is to launch the platform in the second half of twenty five. The good thing with working with partners is not only that you’re able to get access to to products and services and technology that makes yourself go faster forward.

But as the Tradebase example shows, they are in this market. And and as they get to understand and know Huddl’s talk more and more, not only are they an important part of our delivery model, but we also see that prospects are coming from our partners. So so a following consequence of the partner strategy is that we see that we are now receiving interesting prospects from the European space that they, of course, now are are focusing on so that we can can utilize the first customer and success story of of Gigabroker as a showcase to also other potential customers out there. The revenue model from from our delivery to to Gigabroker is mainly based on transaction and assets under administration. But what is important to say is that to make sure that this process of onboarding gradually 65,000 customers onto the new platform will not do that as a big migration project during a weekend.

We will do it one by one to make sure that each and everybody of the customers are onboarded in a smooth way into a platform with no history. And in that way, we will have a very controlled way of of getting new customers. And if and when we see small hiccups on that process, we’re able to solve it smoothly and controlled. So that means that revenues will come little by little and grow steadily. But but the the good thing is that we will do it in a very controlled way.

And that is very important for me, and it’s very important. I know also from Gigabroker because of their their need of of taking good care of of their loyal customers over many years. And with this approach of of using partners as an important part of our delivery strategy, I said that it it reduces the need of building up a big organization, big investments, big time, and our plan will be also going forward the same as it has been so far to make sure that the organization we have in Germany is as small and lean as possible. Also, we see that if, and when needed, as we do in this project, to utilize competence and resources from other play, parts of the the the the group, In this example, Visigon is also some something that we really would like to do and you would see it more of. Our ambitions for ’25 is, of course, number one, to make sure that AVL end customers are onboarded in a good way on the Gigabroker platform and and see that everything is working smoothly so that, Gigabroker and AVL are happy and, even more important, their customers because that will be our showcase.

So I’m also personally heavily involved in that project to make sure that we we have full focus on on that. In parallel, we are working with, other prospects, and and that is why also it is important for us. And I said that, to to at least have a letter of intent with with a second customer in the European or or German space is is important important for us. And, of course, to expand our network. And that is important because even though in some way, I would like to see that all next customers is exactly the same as Gigabroker, I know that will not be the case.

There will be differences in in their setup, which custodian they would like to use. It could be on front end and so on. So to have a network with participants who can fill in the picture so that we are able to deliver exactly what the customers would like to have is important. That is why expansion of the our partners will still be of priority. In addition to our European and and and German opportunities, we have a profitable consulting business.

It’s Visigon. The good thing with Visigon is that the revenues has been demonstrated over years to be very steady. We are able to deliver better margins than their competitors, so that’s also very good. So the challenge is to make it grow faster than we have been able to do so far. And and that is also the rationale behind, deciding a new growth strategy that we decided just before Christmas, and we now, during ’25, will deliver activities on.

So as ’25 is going through, I expect we also will see a start of a growing top line for the consulting business at the end of this year and into the next year. An important part of the revised strategy of Isagon is to not only deliver hours and into a project. And when the project is finished, then the revenue stream is stopping. What we’ll do is to in addition to delivering traditional consulting hours is also to deliver components. It could be technical components, or it could be services of of being part of of their, running business afterwards so that we’re able to also, in addition to our traditional, consulting, hourly based revenues, also, we’ll see more and more recurring revenues as part of the revenue stream from Visigon.

So in that way, we will be able to both, get more revenues out of each customer, but also we’ll be able to to, have more and more part of our revenues from that business coming from recurring revenues and not only based on on hours delivered. Then, let’s go to the financial review of this, this quarter. And let’s start on the top. Revenues, if you compare q four last year to q one this year, it’s a a a slight decline in revenues. It must be said that the q four figures that you see here that are the revised one, the audited audited ones, that was finalized and closed in a couple of weeks ago.

Meaning that, as normal, there are always some adjustments that has been happening during the year that needs to be corrected in by the end of the year. Meaning that some of the revenues here in in in reported for q four is actually something that should be, during the whole year. Anyway, the the challenge is is demonstrated here. As I have said many times before, I need to see a revenue and top line to grow more than we have been able to demonstrate during the last year. So, with revenues, going almost flat, then it had that’s an important important for for me to work on the cost side.

I have said, since I started in this position in February 24 that to become EBITDA positive is an objective. We have from, I think, from quarter to quarter since I I started in this role, we have demonstrated that the EBITDA has steadily going in the right direction. And it is also something we see here from q four to q one. Even though the top line has been decreased, we see that EBITDA margin has improved. And that is a very, very good sign.

And also, in in my eyes, demonstrates that, the long time work we’ve been doing, has also happened during q four and q q one. Still, I am impatient. I think it goes too slow. And and that is also why one of the arguments for for doing the transaction we’ve done was was was was done, was to to improve the the capital burn and the cost situation even more. So since the the transaction we’ve done is quite significant for us, we decided to set up an adjusted pro form a figures for q one.

How would the the figures look like if we had done this transaction last year? And in q one, only have what we will going with forward. And what we can see then on the the EBITDA, that improvement has gone even a bit been even better than the 6.4 we ended up in q one. That means we have a profitable consulting business that is contributing positively, And we have a very lean, but still, cost, demanding business in in Germany. Without any outlook to any customers, that would be a big challenge.

Now with the signature of a gigabroker and the project going on and expectations of the first revenues coming in the second half, I think that this is a place where we are not you should never never come you can never be comfortable when you have negative figures. But it is based on two legs where the leg which is losing money is now in a situation where we are working on a real customer with real revenues that we expect it will come in. So that is what I think I will say on this slide. That is we are now in a controlled place where we have much better opportunities for also from the financial situation looking forward. Cash flow.

Yeah. Make it short and sweet. End of last quarter or at the start of this quarter, approximately $1,111,000,000 Norwegian kroner on our accounts going out of the quarter with approximately 12. What is interesting or important to say is that is that out of these 11,800,000.0, 8 point 3 million is part of the companies that has gone out of Huddl stock. So a big portion of this $8.11.0.8 is not connected to the remaining whole stock.

But at the same time, we see we have received 10,000,000 Norwegian kroner as part of the first settlement from from a deal. So so post done a ideal, as I mentioned on the first slide, we have approximately 13,500,000.0, if I remember correctly, as a cash position going forward. So last but not least, looking looking forward into the future, we expect the the final closing of the the AI transaction to be done in q three twenty five, and we are there dependent on approval from f the Norwegian FSA. We are in a much better financial situation. We have reduced cost.

We have reduced cash burn, and we have ownership in in in done with a value of of 71,000,000 Norwegian krone as well. When it comes to our business areas, we have the we will be the number one investment as a service provider in Europe. The first customer is achieved, and and we expect to that the first end customers will be onboarded in second half of twenty five. In the same time, it is important for us to use this first customer as a stepping stone for our future future business. That is why it is so important for us to still to work hard on on sales and the commercial side so that we can, attract, more customers on our platform.

And, since we now have a lot of of, prospects that we are working on, we have set up as an ambition for ’25 to at least sign an LOI with the second customer. Music on business, healthy, profitable, but with a challenge of of top line growth. We are not sitting still. We have decided the strategy, and we are now executing on that strategy during ’25 and expect to see some some positive effects of that from the last part of ’25 and into ’26. And that is the slides I had planned to share to all of you.

I see that we still have a few minutes left if some of you have questions. And if not, please feel free to to contact me directly or through our our email investorrelations@huddlstock.com. Let me see. It’s a question here in the chat. Hi.

Could you please elaborate on the revenue agreement with Giga? Is it commission based or on each trade? Or what basics Huddl stock will get paid? Yeah. In in we have a we have a profit sharing model.

And and the the way payment is done is through through a combination of capital and number of trades and and so on. We have we have a model where we will get paid. I I think it is a per per trade and per month. I don’t remember how exactly how we are counting it. And and we will split the revenues and split the the p and l with the with the Gigabroker.

One thing I think it is important to to mention or to to emphasize is that, in my eyes, Gigabroker and ABL are are very professional thinking because they they they are aware that if Gigabroker is not a good customer of us and we do not earn any money, then we will not be a good supplier for them. So it’s important for them as well as it is to us to make sure that success is shared between between the two of us. And that is the the the best I can say in order to remember that you have an gigabroker and an AVL that has been in the business for many, many years, and they are having a good business. They are now transforming their business or moving it over to our platform. And, of course, they still would like a need to have a good business, and they will do it together with us.

So so it will be a a shared shared model when it comes to to profit sharing. Okay. Then I think I will say thank you very much. And also to end end this this presentation saying that, I am extremely excited about how far we have come, during this, this last year. I am grateful to the board being supportive to to take necessary actions.

And and now in the situation we are, in my opinion, we are very, very well prepared prepared for for our journey going forward. And and, yeah, I’m I’m looking so much forward to this, and I’m very energized. So sorry for being that that that positive, but I think at the same time, it is important to to be that. And this is not a easy work in the park going forward, but with a good team, good board, and and some management that is energized and motivated, I am sure that this will be a a good journey for all of us and also for our investors. Thank you very much everybody for participating.

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