Pricer AB (publ)

Hello, everyone. This is Magnus Larsson from Pricer. Welcome to the quarterly presentation for the first quarter of 2024. With me today, I have Claes Wenzel, who is our acting CFO. So welcome to your first quarterly presentation with Pricer, Claes, or at least now in the 20th century or 2020. I actually do this presentation from a hotel room in London. We have a a trade show here, so in case the quality is bad, I might actually have to switch off the video just as a heads up, but we actually plan, of course, to do a stellar presentation today. Let me start as always to speak about our vision. Our vision is to be retail's first choice in in-store automation and communication. And I think with the quarterly report that we have today, especially looking at the order intake for the first quarter, we are on our way we can see that we have become and that we have been the first choice for quite a few customers and i will speak a little bit more about it um on the next slide or the next slides but it's clear this is the ambition and the steps that we're taking are actually leading in this direction so i'm extremely pleased to be able to also show it in numbers for for the first quarter For those of you that haven't followed us for a very long time or this is your first call, we're a Swedish company. We have sold our products to roughly 25,000 individual stores and a number of retailers across the world. Our top seller is the electronic shelf label, which by now I think we have done more than 320 million labels and deployed them globally. We have more than 3,000 stores on our cloud service plaza. And what we do is that we actually serve retailers across the world. We deliver services that help them to work more effectively in their stores. We help them improve the shopper experience in the store. And actually, we help them increase their revenues by giving the ability to present their products in an appealing way and do the proper promotions. So that's what we do. What do we see on the market? The first point is that over the quarter, we have had several discussions with retailers across different segments. It could be grocery, it could be general retail, it could be pretty much any segment. But we have had a number of discussions with retailers that actually did an investment in ESLs a couple of years ago, where they actually did select a competitor on a radio-based solution. quite different from what we actually do. We do it IR-based. But what they say is actually that they've experienced a lot of problems with the solution they have. As the inflation forced them to do, increase the number of price updates on a daily basis or weekly basis, as they've actually want to move into utilizing all the abilities that digitizing your store will bring, and they want to use the ESL director staff and help them find products for replenishment or for actually do picking. That is also affecting the lifetime of the radio-based ESL solution. So what they do now, they're in a phase when they realize that we need to modernize the install base that we have right now. and we have not been quite happy with what we have. So we are in discussions with quite a few retailers in the Nordic market, in the UK, in the US, and actually quite a few other markets. But this is a trend that I think I presented this in the Q1 report also for 2023. But what we can see now, it's actually moved from interesting discussions to companies actually saying that we are now really reviewing it. We know that what we have is actually being close to end of life and we need to consider should we continue with what we have or should we actually invest in something new that will actually service better in the stores. Another thing that we can actually see now is that, and here I want to really single out the UK market. It's to me, when I look at all the markets, and here we have had really good actually growth in many markets, but the UK market with the persistent inflation, and I just saw recently a report from Standard & Poor's saying that on contrary to many of the European countries, you can see that inflation is just biting itself into the British market, and it doesn't really wear off yet. After the Brexit, there is less resources, less staff available to actually work in the store. And now I think as of April, or at least as of spring, minimal wages on the UK market is actually being increased as well. So what I see on the show now, so we were here yesterday and we'll have full day today, is that there is a massive interest from retailers. Because with this environment where you have the inflation, lack of staff, and actually staff, cost salaries of staff increasing, it's hard to continue to do the business the way they want to do. If they want to be efficient and they want to continue to make money as they plan to, they need to digitize their operations because they can't manage. So I think that yesterday and today we've been discussing with most of the key retailers or several of the key retailers in the UK market, and they are all looking at what can we do? We have to do something. What can you do? What's the difference between yourself and competitors? And it's been extremely helpful that in this both, and this is the first time we do this, actually, we have made two specific sections where we have our customers present. So we have a section for ONCC that we won and announced, I think, in January. We have an ONCC section of the store where they have the logos, they have the exact ESLs and the setup they have in their stores across the UK. We also have another section And I've been roaming the event. I haven't seen one so far that is actually having that kind of a presence from a customer. And I think in a market like the UK, where we see this massive interest, deciding with us in the booth, I can see that it's making, giving a lot of imprints, creates, I've seen other retail, other change that's actually been taking photos just really siding with prices, they must be happy. So it's been, I have to say, very successful point of view. And then speaking about success, historically we have very often, if you look at the top 10 customers, it's been typically on one or two or maybe three countries. It could be France and Canada and maybe the Nordics. This year on the order intake for the first quarter is quite different. So I can see that we actually have among the top 10 customers, we have seven different sales areas. We all have sizable business with us. It's the Nordics, you have Canada, you have France, you have Italy, you have the UK, you have the Pacific, and you also have Middle East. I must have named one twice because I think I counted to eight, but seven different. And I think to me, that's a very positive sign because we can see that business now spreading across it makes us less dependent on specific regions or areas or countries to be successful and and something of course when we do the sales we are with our new go-to market plan addressing these markets in a different way compared to what we've done and it's also we're aligned and we actually managed to get some of these that we've been working with for a long time and at the same time. I received a question before the presentation whether it unknown customers that placed a massive order. No, there has been known customers, but there have also been new customers that placed on the level where we said it. But we can see that there is actually quite a few names of customers. small installs and now when we actually get something major where we can see that they decided to do something across a large chunk of the stores or all stores but limited or in some case the entire store like Kupo East England as an example. Another thing I would like to highlight is that what we can see now is the I would almost call it the breakthrough for four color labels. If you look at the UK market, New Zealand, Australia and the Swedish market In the first quarter, you might remember from Q3 last year, I stated that more than, I think, 25% or 30% of the orders and invoicing was coming for four-collar. Now, in these markets, 85% of all DSL's orders in the quarter were actually coming, were four-collar. Another thing that I want to mention is the Sustainability. Sustainability is increasingly important. We can see it in RFQs. We can hear it in discussions. And when we speak about it with retailers, it's something they would really like to hear more about. When we speak with analysts from the retail media or the retail side, this is something that is getting a lot of interest. So what we did also now in the quarter, we were announcing the cooperation with a Swedish company called Paper Shell. paper shell is doing a cellulose-based composite material. And this is, of course, early phases, but we want to... We could actually do something in a different way for the future. It would be possible to replace the plastic in the ESL. I just got a message that I should turn my camera off. Bear with me. I will be right back. So we made this presentation, sorry, we announced our cooperation with paper shell. And what we do right now is that we're looking at how could we find a way to work jointly to minimize the carbon imprint with our ESLs. We have some exciting ideas. I cannot quantify them now, and I actually don't want to quantify them right now, but we are in an interesting phase of the joint research actually on what we could do. And our intention is, of course, to bring something into the market whenever we're ready, where we can clearly see this one will have a better or lower carbon dioxide footprint. Moving on to the next slide. Just one second. So new agreements, well, Coop of East England, delighted to have them in our stand today, here at the Olympia Exhibition Hall. But we also signed a frame agreement network with Max CD, which is a group of grocery retailers. They have a couple of hundreds of stores. We have 50 of them, and we're working jointly, of course, to expand that footprint. And Italy, as I mentioned before, is one of those areas where we can see that we have had a very nice order intake in the quarter. I also want to lift Prezzemolo in Vitale, which is Italian delicatessen brand. They are originally from Italy, but they have opened up a number of stores in the UK market where they have been targeting quite wealthy areas. So they have very nice stores, extremely nice looking stores. And with our four color labels, it's been actually lifting the entire store experience We've seen happy staff and we've seen happy customers. And it's in right exactly those spots in London where we actually want to be able to send our customers to say that, you know, if you want to have a look at the really nice, good looking price install, you can try this one. But now also with Coop of East England and ONCC, there will be stores in different segments across the UK where we can actually send potential customers to look. So having said all this, I hope that you heard most of it. I'd like to hand over to Klaas. Klaus, would you like to start with the market development, please?

Yes. And as you can see, in general, we had a very strong growth in the quarter. Order intake is up 37% and net sales is up 17.3%. We had an effect in America due to mostly timing, but also the organization change we did. But we see the potential in this market as huge. So we expect that to be a market that is going to be very important for us in the future. If we go into the next slide, you see the Q1 financial development. The order intake, you see, has grown from last quarter, Q4 last year, with 204 million. which is up actually 45%. And the backlog, I've grown the last quarter by 267 million, which is up 68%. Also, that is very important for us. It's because the gross margin, we are now at 19.1% compared to last quarter, where it was 17.7%. And we then... volumes we have, this will of course have a very big impact on our P&L. And then if we go to the next slide, it's the first time we showed this, the ruling 12-month financial development. And compared to last full year, now the ruling 12-month gross profit is up 38 million. which is strong as the sales in Q1, historically been the weakest quarter for us in Pricer. If we then go to the next one, where you have the EBIT and net profit development. As you can see, Q1 has historically been a weak quarter, as I said, but now we do an EBIT on 21 million. which also include a negative currency effect of 12 million in the quarter. So it was a really strong quarter now in Q1. You also see on the net result, we have a positive net result in the first quarter of 15 million. Also one effect there is the currency, but here we have a positive effect of a little bit more than 7 million. And then if we go to the details of the P&L in Q1, you see that our operating cost has gone down compared to one year ago, a little bit more than 11 million. It's down 11%. And the gross profit compared to a year ago is 38 million higher. Here you also see the details of the financial income related to the currency effect of a little bit more than 7 million. Then if you look at the balance sheet, you can see that our accounts receivables are up and that is of course related to the very strong sales in the quarter and especially the sales in in mars but what what is important to note here is that you see that our the cash flow is is negatively by 40 million but that is all related to our accounts payables that has come down with 150 million compared to the end of December. And that's where you have the cash flow development from. So the cash flow will be much better now in the second quarter. Yeah, minus 10 is the financial targets.

All right, cool. So should I try to switch on the camera again and see if it works, Cecilia? Or should I continue like this? I'll continue like this. So we reached a milestone now in March with the introduction of our two new financial targets. On its long-term targets, on the annual sales growth, it should be in line with the market or at least 15%. So our target is to always do at least 15%, but preferably in line with the market. But we have also introduced a target on profitability. And our target is to have an EBIT margin of about 8%. And this is something that we wanted to actually present. It's a really good financial target. It will make us as a company easier for you to analyze and follow and predict where will we end into the future. And now we feel after the phases we've done or the development of the company, we went back to increase our growth. We strengthened the balance sheet. We have now done the cost reduction program and we have the transformational program that it is running according to plan. So we felt that timing and the board felt that the timing is really right. So I'm extremely happy to actually be able to present this. So how will we achieve this and how would we actually achieve this in the short run? Because this is a long-term target. And I want to go back to the key things that we are doing to make 2024 happen. And this slide you will recognize from the Q4 report, but I will speak a little bit around them. The U.S. market, and thanks for mentioning it, Klaas, it's a strategic market. It's a market where we see a very high potential. but we haven't been able to address it the way we want to. We have made organizational changes. We have made an up-to-date and updated go-to-market plan. I would say that compared with my expectation, we are maybe six to 12 months behind plan, but I see the opportunities. I see that we are a key partner for people to speak with. We have a lot of interest as before, and now we are addressing it in a slightly different way than we have done So my expectation on the American market, on the US market, is as before very high. In the UK, it's happening right now. We have now announced three deals in the quarter for the UK market. Did we empty it totally? No, we are in a number of discussions. We are doing pilots. We are discussing with, once again, retailers across different segments. And given the very specific conditions on the UK market this year, we believe that there is a lot of business to be won, preferably by ourselves. Spain, Germany, Pacific and Japan, key markets where we have go-to market plans for the different markets. Germany, as before, it's a pretty small market for us, but we're waiting for the next round where retailers will actually start to reassess their investments and it's time to actually make an upgrade. In the Pacific, we have received a lot of orders from both New Zealand, but also for Australia. And we see just like for the UK, we see Australia as a greenfield market with a lot of potential. Japan, it takes time to enter the Japanese market. We are determined. We are taking our steps. We have the right partners in place, but it will take time. But we are working in a very structured way to actually address the market. So I feel very positive about the market, as you could see from the report. I do believe that we will be retail's first choice, and there will be several markets where we actually aim to be number one. On the established market, we have France still doing really well. They were making an exceptional 2023. We will do a good 2024. Italy, a lot of interest. They were part of the countries that made up the top 10 list in terms of order intake. We see a lot of interest and we see actually we've been able to capitalize from the interest and actually turn it into orders. The Nordic market also here, we announced in Q4 deployment with Felicity Open. It's being deployed as we speak. On the commercial proposition, we are now rebuilding. We have just communicated internally our plans for the future and how to work with this. We have created a new organization. It's a combined product management and product marketing, or actually marketing organization, where we are now busy building up a new capability and a new team. So the idea is that we will build a really good support organization for the sales team where they get everything they need in terms of commercial proposition, value proposition, product proposition, and things that we have done but where we might not have done it in a coordinated enough way. So I have a lot of hopes for this organization. I can see that it's already now generating some traction. On the supply leadership, we are working with our suppliers, as before. We are negotiating better pricing. We are working with them to see how can we jointly develop the way of operating. And this has been a focus area since end of 2022, where they're not only suppliers, but they are partners. Can we do something to help them do our pricing and our costing lower? And we can see that this is also paying, giving a clear payback. Interesting discussions. We are finding new ways of working, so we expect to continuously see a reduction on our costing over time. Cloud tech. Well, we're actually deploying a SaaS first, and we're moving into a SaaS-only strategy. We can see in this discussion that customers that have had our in-store solution, they are willing and interested in discussing sauce. We have customers where. Maybe we believe that they they were not interested, but when we discuss it and we bring it up, well they are. So I think we will see an acceleration in this year of the sauce and the price of plus uptake, which is really good. So a lot of steps have been taken and also on the cloud. The cloud tech side we have been doing working a lot with the transformation of the company. And as part of that transformation, we have now created product portfolio that it's a strategic product portfolio. We have outlined very clearly that these are the products. And we have also made a lot of choices saying that this is something that will be discontinued. And we have done it before, but maybe not on the scale that we do right now. And this is creating a clarity. It's actually resources. And it will give us the possibility to really get what we want out of the development team. So very good support from the entire R&D and development team and the product team, of course. So for all these points, I feel that we have a lot of traction and that we will see improvements over the year in different phases. Then the last slide before Q&A, it's the bragging slide. I'm extremely happy with the quadruple. It's the highest order of intake in price or history. It's beating the Q4 2019 quarter when we received the best buy. And this has actually been without receiving a best buy type order. We have received several large orders from several customers in several different sales areas. To me, that's a signal of strength. And that's something where we will actually, we will dig into these areas and make sure that we can see a more spread into the future. All the actions that we've done over the last, let's say, one, one and a half year, negotiation with our suppliers, looking at the design of our products, introducing new components, new vendors, new suppliers, working with the pricing, increasing pricing for customers, looking at the product mix, doing upsells. to actually move from the 15.8% we had in Q1 2023 to 19.1%. It's, of course, an achievement from the team that I'm extremely proud of. And also at the net sales of 670 million, which is the strongest Q1 net sales so far. On the cost savings program that we announced in December, it's progressing well, and it's in line with our plans. And we expect to see the full effect of the cost savings at the end of Q2 or maybe early Q3. And on the transformational activities that we're starting, and here we work very closely with the executive management team to make it happen. There's quite a few tangible actions that we've taken, and we can see now it's actually starting to generate positive results within the company. And of course, that will spill over, if I may use that word, to our customers. And then I mentioned the financial targets. Very happy. And finally, what we've done in the UK market is that now we have announced deals where we will equip more than 200 stores in the UK market with four color labels and price of plaza over the coming year. And we can see that it's pretty speedy deployments that we're looking at. And if I compare ourselves to competition, I can see there's been announcements. I've seen there's been pilot. I know there's talks ongoing. But at this point of time, I haven't seen something similar that someone is actually saying, this is actually what we're deploying. We're doing this on the market. And the fact that both East of England Co-op and ONCC were willing to be with us and side with us in our booth, I think it's a sign of strength on the local market and something visible. So I... Very happy with this quarter, very happy with the work of the entire Pricer company. And well, that's pretty much it, and it's time for questions.

So yes, here we have some questions from the audience. So when it comes to factoring costs, are the factoring costs getting lower?

Yes, they are. We had 3.6 million in cost in Q1. We are reducing the factoring now, and it will continue to go down for each quarter going forward.

Thank you, Klaus. And maybe you can comment on the recurring revenue. Are there any calendar-based effects, as these seem to be an increase in the first quarters?

You take that, Magnus?

Yeah, so in essence, no, there is no real seasonality when it comes to the recurring revenue. And I understand what the question is from. We can see that there has been an increase in Q1 previously as well. I think it's more, it's been specific customer wins and opportunities that have actually created that scenario. That's not something I would say is... seasonality effect that I would expect. Since we take all our recurring revenue and we have to spread them across the full year, it's probably more related to specific wins.

Yeah. And talking about recurring revenue and price of plaza, is it easy for existing customers to switch to cloud-based solutions? Magnus, maybe you can comment on that.

Yeah. In general, yes. If you have a customer with a very old price resolution, it might be that some of the ESLs, the really old ones, are not actually supported, which is, of course, a perfect opportunity for us to sell Plaza and renew actually the installed base. I'm really happy that our products last for a long time, but I'm even happier if you can actually help them and modernize the store and then sell them something new when we do this migration. So when we have our migration planning, this is something which is actually part of the dialogue we have with the customers as well. It's time for you to actually move over to our SaaS solution. And here we have actually done an end-of-life announcement on our server-based product. So they know they will have to do it, and then we'll be their guide in making sure that we do it. Then you have customers that, if you take one of our large customers, when we had this dialogue with them, they said, I want you now as part of our deal to actually migrate existing stores over to Plaza. And they said, well, excellent, because actually what we do, we want everything cloud-based because we take all the data and we collect it into one big data lake. So we're even looking at the amount of applications we're executing in the cloud versus in the store somewhere. And we want it to go closer to a hundred percent because that gives us all the data that we want to be able to actually better address the market and our customers. So I would say that, When I joined Price in 2019, we didn't have the cloud solution or SaaS solution. Retailers at that time, they were a bit conservative. Coming from telecom and media business before, it was a little bit difficult to understand. But I can see that that concern has actually disappeared fully. With few exceptions, all our new customers are Plaza-based. It would only be if they already had a legacy in store with Price or Server, where they will actually add new source with Price or Server. But with most of those customers, we're actually having ongoing dialogues on doing a transformation and migration.

Thank you, Magnus. There seems to be an interest in recurring revenues. So can you comment on the level of recurring revenues, which was earlier a financial target?

So we will continue to report it in every quarterly report. And I believe, and I might be wrong here, but I believe, and Klaus, please correct me if I'm wrong, that the recurring revenue for Q1 landed on 3%. We are continuously, even though we will not report it as a financial metric from the company or actually have it as one of the public targets, it's still an internal target. So our target is, of course, to increase the recurring revenue because increasing the recurring revenue will actually help us increase our gross profit and our gross margin. So even though we might not communicate it the same way before, it's still one of the key targets that we follow internally. And just like the number of all connected plaza stores.

Thank you. You talked about the organization earlier, and this is a question about the sales organization. Do you think you will be able to meet the increased demand with the current sales organization, or do you see that you need to invest more in sales during the coming year?

It will be a combination. So if we separate the established market from the strategic market, in an established market, our We believe that we actually have the right size of the organization. We have the team in place to actually be able to handle increased demand. If, for example, it would be much more than expected, well, then we will add people. And as part of our plan, also, it's included despite the cost restrictions. After the cost restriction, we have actually still included recruitment, especially within sales, but also within the sales support organization in product and marketing. And there will be some investments in R&D as well. But yes, on the strategic markets, we do expect to increase the amount of sales or customer supporting staff to reach the full sales potential as required. So we are following this constantly.

Thank you. And you mentioned the interest in four-color labels. What proportion of your revenue do you expect from four-color labels in the coming years?

I think we will come to a point. It's probably like when we moved from segment ESLs, segmented ESLs to digital ESLs. the high-definition ESLs, that they coexist. But we could see that the high-definition ESLs were increasing because, of course, they were giving something brand new or added value. But we still had customers that were using the segment, and they just did not want to change overnight because they might have been looking strange in the store. But we can see a clear trend on the four-color. And at one point in time, four-color will be the new normal. So then we'll see that it will primarily be four-color that we sell. If exactly when that will happen, it's a little bit difficult to say. We have some interesting ideas for the future that we are currently having on our drawing table when we look forward that might actually speed things up.

Thank you. And about the manufacturing, has the manufacturing capacity in Germany been a favourable selling point?

It has. Speaking to European retailers and saying that we have supply in Europe, where they feel that transportation will be beneficial, but also the lead times, it's something appreciated. And also speaking about German quality and made in Germany, it's of course something that many retailers like.

Thank you. A question about Canadian Tire. Has Canadian Tire resumed their installations?

That's a good point. Thanks. I should have brought it up on Canada. We can see that we have had a number of meetings with several of our Canadian customers. It's a market that we actually believe a lot in. We see if the U.S. has not developed as per our expectation, we can see that there are possibilities that Canada might actually develop better than our previous expectations. In discussions with Canadian Tire, they are, of course, they are looking now, when I referred earlier on to, there has been some, I think, administration or internal things they're looking at. They are considering what would we need to do to see if we can actually speed up the deployment. They need to look at the internal processes. They need to look at the way of working. But they clearly see the benefit of ESLs. And they also clearly see that managing an environment where you have a large installed base of ESL and a large base installed, well, actually, where the ESL installed base across the state is higher than the paper, well, they cannot fully get all the benefits out of having ESLs. Because if you would have ESLs across all stores, that would change the possibility to work with pricing and pricing strategies. Right now, they want to have the same pricing strategy for all stores. Well, if they would want, let's say, to change the pricing over Christmas, well, it's a no-go if you're a paper-based store. If you're an ESL-based store, absolutely, no problem. And this is something they would want to do, but they also need to make sure that they create a setup where this is possible. So I think this is one of the key things. And this is why we have seen a slowdown. It's not that they lost the interest. It's that they're planning for really the next phase of deploying to start spreading ESLs across all stores and more towards full deployments.

Thank you. And we have a last question on e-paper. Are all your displays based on e-paper technology?

Yes, they are.

Thank you, Magnus.

Well, thank you. And if there are no more questions, I would like to thank everyone for dialing in. I have to apologize immensely for the poor quality of my internet connection. I hope that you have at least, if you couldn't see me, I hope that at least you heard the messages. So thanks a lot for this quarter's presentation and for joining. And I look forward to doing the Q2 presentation and give you a new update.