Earnings call transcript: Strongpoint Q4 2024 shows revenue growth, stock fluctuates

In its Q4 2024 earnings call, Strongpoint reported a 3% increase in revenue, totaling DKK 9 million, with notable growth in Sweden but declines in Spain. The company also improved its EBITDA significantly to NOK 5 million from a previous loss, while maintaining a strong cash position. According to InvestingPro analysis, the stock appears undervalued despite falling 64% over the past year. The company’s shares saw a slight decline of 1.23% during regular trading hours, closing at 1.625, but experienced a post-market uptick of 5.59%, reaching 1.7.

Key Takeaways

• Strongpoint’s revenue grew by 3% in Q4 2024, driven by a 19% increase in Sweden.
• EBITDA improved from a loss of NOK 21 million to a gain of NOK 5 million.
• The company is expanding its self-checkout solutions and partnerships in Europe.
• Stock price fluctuated, with a post-market increase of 5.59%.

Company Performance

Strongpoint demonstrated resilience in Q4 2024, achieving revenue growth despite challenges in certain markets. The company’s strategic focus on expanding its self-checkout solutions and enhancing partnerships, particularly in the UK with Vision Group, positions it well for future growth. However, the decline in Spanish revenue indicates potential regional challenges.

Financial Highlights

• Revenue: DKK 9 million, up 3% from the previous year.
• EBITDA: Improved to NOK 5 million from a loss of NOK 21 million.
• Cash Position: Increased to NOK 82 million from NOK 39 million.
• Equity Ratio: 45%, surpassing the 30% covenant.

Outlook & Guidance

Looking ahead, Strongpoint plans to continue its rollout of the Sainsbury (LON:SBRY)’s order picking solution through Q1 to Q3 2025 and is developing the CashGuard Connect project. The company aims to improve operations in the UK and Spain, with its next quarterly results scheduled for April 29, 2025. InvestingPro’s Financial Health Score indicates fair overall health at 1.94, though analysts anticipate a sales decline in the current year. For detailed analysis and future projections, access the comprehensive Pro Research Report, available for Strongpoint and 1,400+ other top stocks.

Executive Commentary

Jakub Tharaback, CEO, emphasized the company’s commitment to integrating retail technology into shopping experiences, stating, "We are a retail technology company trying to put retail technology in every shopping experience for a smarter and better life." CFO Marius Trebelin highlighted financial improvements, noting, "We’ve had a big improvement in working capital NOK 80,000,000 during the year, mainly due to reduced inventory."

Risks and Challenges

• Regional revenue declines, particularly in Spain, could impact future growth.
• Challenges in UK shop fitting may affect expansion plans.
• Dependence on partnerships like Vision Group for market access.

Strongpoint’s Q4 2024 performance reflects its strategic growth initiatives and financial improvements, although regional challenges and stock volatility present ongoing risks.

Full transcript - Sutro Biopharma (NASDAQ:STRO) Q4 2024:

Jakub Tharaback, CEO/Presenter, Strongpoint: Welcome, everybody, to this Q4 presentation by Strongpoint. My name is Jakub Tharaback, and I’ll be joined today by our CFO, Marius Trebelin. As always, I will provide a short introduction of Strongpoint, our company. I’ll give an update into the Q4 highlights and some customer success stories and then Marius will provide additional financial information. Regarding Strongpoint, we are a retail technology company trying to put in retail technology in every shopping experience for a smarter and better life.

What that means is impacting and helping grocery retailers drive efficiency, hence, boosting margins and also providing their customers, the end consumers with a better shopping experience. To do that, we are providing a number of solutions. We have a quite wide portfolio of solutions constituting of both what we call in store solutions as well as e commerce solutions. A lot of these solutions are own IP, but in addition, we are also including some third party partners and their solutions. All of this is to ensure that our customers, predominantly grocery retailers, get the best and most efficient operations and provide the best shopping experience for their customers.

We are present in nine countries and we are serving all major retailers in most countries. Our traditional home turf is the Norway, Sweden and Baltic markets in which we serve all major grocery retailers. And in the additional countries that we have included through acquisitions, we’re already starting to get more and more of the logos for the grocery retailers in place. A vital part of what provides the best experience to our customers and providing Strongpoint with operational leverage is by not only selling solutions, but also doing the installation, the service and the support. And this full value chain ownership provides both us the opportunity to provide the best experience for our customers and the products and their achievements, but it also provides us with an excellent opportunity to create customer intimacy over time.

Actually this year, we’ve been doing so for forty years out of Norway and we are very excited about taking what we have proven to be a winning formula in the traditional markets also out to the larger markets, in particular The U. K. Now to the Q4 highlights. I will start with the revenue development for Strongpoort. In the quarter, we are experiencing a DKK9 million or a 3% growth in revenue compared to same quarter last year.

The growth is predominantly driven by Sweden, which is having a quite nice growth of 19% or NOK 14,000,000. So what’s holding back the revenue development is really a decline in Spain, where we’re seeing a NOK 9,000,000 decline in revenue. Other markets are more stable. It should be said also that if we’re looking at our recurring revenue and a twelve month recurring rolling revenue, we’re seeing a quite nice increase of 15% up to $46,000,000 or with CHF46 million. Marius will explain more what the details of that recurring revenue is, but that is an important part of understanding how our business is developing, getting more and more recurring revenue.

Looking at the EBITDA of Strongpoint, we have a NOK26 million improvement. Obviously, this is coming from a very poor quarter last year with minus NOK21 million. And the improvement now leads us to NOK5 million. Obviously, with the top line we’re having, this is far from satisfactory profitability levels. That said, we should also note that in the traditional markets Norway, Sweden and The Baltics, we are now approaching the targeted profitability levels that we’re aiming at.

As you can understand, there are things holding us back. Specifically in the quarter, it’s again been shop fitting specifically in The U. K, but it’s also been the Spanish operations. Both those elements are obviously or those two areas are obviously key for us to improve and do something about and that is also focus now and into the rest of 2025. Now as we’re going into customer success stories, there are three elements or three parts of that that we’re highlighting.

Obviously, lots happening, but three things we want to highlight. I want to start off with self checkout. Self checkout in The Baltics have been a smashing success for a long time. Last quarter, we announced that we’re rolling out and we’re continuing to roll out our self checkout solution to the largest grocery retailer in The Baltics, namely Maximo. Now this quarter, we are announcing both the sale of self checkout solutions to REMI, part of the IKA group and IKI, part of the REVE group in The Baltics.

I’m super proud about this solution because we have developed both our own software and hardware, and we’re seeing customers in The Baltics applying either one or two of those solutions, both hardware and software. And we’re also continuing to be both hopeful and with persistency working to get these brilliant self checkout solutions into the other markets that we operate in Norway, Sweden, The U. K. Most notably. The fact that we’re again winning self checkout solutions in The Baltics is for us a testimony of the high quality level solutions that we have, both on theft prevention, on userability and on cost levels.

So stay tuned. The second thing we want to highlight is Vensiv. So our Norwegian and Swedish investors would hopefully know about and be familiar with the Vensafe product. It’s been around in the market for many, many years. Now it’s starting to gain traction in The U.

K. In this quarter, we had two live proof of concepts with Sainsbury’s and Asta with slightly different use cases. One, using the Vensafe as the traditional tobacco dispensing machines that we typically see in Norway and Sweden. The other one, using non tobacco products only. And with a third major grocery retailer very soon coming into stores as well, we are very hopeful again about the promise that Venseth can give to U.

K. Retailers where theft is really a big issue nowadays. We know it will take time to get customers and end users accustomed to a solution like Vansafe. So we should expect these proof of concepts to take both one and two and perhaps even three quarters before we get to a proper rollout. But we are very excited to see the Vansafe landing in The U.

K. With these very esteemed grocery retailers. Okay. So the final bit I wanted to highlight in this quarter was the announcement of our multifaceted partnership with Vision Group. So Vision Group is a French stock listed company.

It’s a leader in digitalization of solutions for physical commerce. Now what does that mean? The Vision Group have a platform to which you can tag on very specific solutions. One of these solutions is electronic shelf labels. The electronic shelf label business of Viushion Group used to be known as SAS Imago TAG.

It has a 50% global market share of ESLs. It also has its platform Kaptana cameras and sensors. It has a retail media platform. And now with Strongpoint, we are integrating our e commerce offering, in particular our order picking solution. And that is actually one of the two parts of the partnership, the first being Strongpoint as a ISVA independent software vendor where StrongPod will be able to access Vuzion’s platform and its customer to do selling of our order picking solution.

The second bit of the partnership is the value added REIT seller or a VAR partnership where we will be selling Evusian Group’s entire portfolio, including its electronic shelf labels to customers in the nine markets we operate. And the selling of and marketing of electronic shelf labels is something we’ll be able to do at the very June this year. I want to contextualize Vision Group SomoTO. This is a major leap for Strongpoint. It’s a major company in the digitalization of physical commerce.

Nutrition Group has a 2,500,000,000.0 or more than €2,500,000,000 market cap. It has a sales annual sales of approximately €800,000,000 And it also recently announced its 1,000,000,000 deal with Walmart (NYSE:WMT), the world’s largest retailer. So needless to say, we are very excited about this partnership and what we can achieve together. Finally, I wanted to provide the investors with an update on two significant projects that we have been providing some update on all along. One of them is the Sainsbury’s order picking robot.

Now we won the project beginning last year, And we started the rollout at the end of Q2 last year and well into Q3. Now in Q4, there’s been a freeze period for any rollout of IT or IT related project at Sainsbury’s as any other major grocer in The U. K. Or elsewhere for that matter. Now we have started again rolling out our order picking solution to evermore Sainsbury’s stores.

We continue or we expect to continue this rollout in Q1, in Q2 and also probably into Q3 in order to be complete with the rollout to all e commerce stores or all stores being used for e commerce fulfillment in Salisbury during Q3. Feedback so far has been very good, and we are very much on track to deliver on this very important project. The second project I wanted to provide an update on is CashGuard Connect. So CashGuard Connect is a revolutionary cash project for grocery retailers specifically. And it’s been a project that we have co developed with the largest grocery retailer in Spain.

The project has taken a lot longer than we anticipated and expected. This is due to a high complexity of the project itself, But it’s also been made more taking more time due to the fact that our joint venture partner has now been going into a insolvency process. We believe that insolvency process will be solved. There’s been established an administrator in Spain to handle that. And in parallel, we’re working to continue the development and the industrialization of the project itself.

But it’s taken a lot longer than we anticipated and we now need to have full focus on getting the project back on track and getting it out in the market. But there is absolutely very much focus now on ensuring that we have a product we can take out to the market. That will be absolutely key both now in Q1 and Q2. And with that, I’d like to hand over the word to Marius Drevili.

Marius Trebelin, CFO, Strongpoint: Thank you, Jacob. I will now go through some of the other financials for the fourth quarter and the year 2024. To start off, we had an earnings per share in the fourth quarter of negative NOK NOK 0.05. Although a negative number in itself, this is a significant improvement compared to the fourth quarter last year. As shown on the figure to the right, the twelve months rolling earnings per share has improved, particularly during the second half of twenty twenty four due to better operational performance.

At the end of the fourth quarter, the rolling twelve months EPS was negative NOK 0.72. That was our earnings per share. But what about the recurring revenue? So these figures show the recurring revenue on the twelve months rolling basis. This consists mainly of two parts: first, service agreements, which relate to maintenance and support agreements plus field services and spare parts on our products and second, our license revenue, which includes both third party licenses and our own IP.

In addition to these two core components, our recurring revenue also includes rental revenue of cash cards in Spain. Compared to the fourth quarter last year, the total recurring revenue increased by 15% to SEK $358,000,000. This growth is fueled exclusively by a 60% increase in license revenue, mainly from our order picking and self checkout solutions. So moving from our recurring revenue, what about the cash flow movements for 2024? We started the year with NOK 39,000,000 in cash, which has improved to NOK 82,000,000 at the end of the year.

The change in EBITDA was minus NOK 2,000,000 for the year, so limited impact on the cash flow movement. However, we’ve had a big improvement in working capital NOK 80,000,000 during the year, mainly due to reduced inventory. Furthermore, we completed the refinancing in the fourth quarter and have currently withdrawn NOK 120,000,000 on our revolving credit facility. And this added approximately NOK 30,000,000 in cash. On cash outlays, we spent NOK 40,000,000 on CapEx, of which NOK 28,000,000 relates to the development of the CashGuard Connect project in Spain and NOK3 million on our own post solution in The Baltics.

These are planned investments. All other development costs are expensed over the P and L. The other main cash item was leasing payments of NOK 29,000,000. Now let’s move further into some of the key components of the working capital development. And as you can see, the working capital level has decreased significantly during the year, freeing up cash.

The main reason for this is a reduction in inventory due to rollouts of ESL and self checkouts as well as reductions of lockers and cash cards. Moreover, we have improved the balance between accounts receivable and payable. And this is due to the working capital financing that we started to implement during the second half of the year, reducing the debt collection period and hence, the accounts receivable. And as we have noted in previous financial presentations, some of our revenue is still project based and therefore, working capital levels will depend on the volume and type of projects that we deliver. So turning from our main working capital changes this year to the development in net interest bearing debt.

Now during the fourth quarter, we have reduced the net interest bearing debt by NOK51 million to NOK58 million. This is due to the improved operational performance, working capital improvements and the new financing arrangements that I have covered earlier. And this left us with NOK102 million in disposable funds at the end of the year, up from NOK 61,000,000 at the end of Q3. And we are now seeing the results of the work done, both operationally and financially, to improve the headroom. We will continue to monitor this closely going forward and improve wherever possible.

But more importantly, this allows us to support the ongoing growth initiatives, particularly in The U. K. Finally, we had a 45% equity ratio at the end of the quarter as compared to our covenant of 30. Later today, there will be a Q and A call at eleven CET. Please log in through the link on our website where we can post your questions.

The next quarterly presentation will be on the April 29 with our first quarter twenty twenty five results. So with this, I thank you for your attention and wish you a pleasant day.

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