Pricer AB (publ)

Hello, everyone, and welcome to the presentation of the second quarter, 2024. My name is Magnus Larsson, and I'm the CEO of Pricer. And with me today, I have Klaus Wenzel, our acting CFO. We are delighted to be here and get the opportunity to present the quarterly result. It's a pleasure that we get once a quarter, and so far, I've been enjoying it every time. I would like to start with our vision. for those that have followed our presentations you know that this is something we do all the time our vision is to become retail's first choice in in-store automation and communication that basically means that when any retailer speak about your suppliers within the retail tech community we want them to say that out of all the suppliers price is number one we want them to get this feeling from every single interaction they have with us from the first meeting to the first offer that we send them, to the first deal that we make, to the first delivery. When the way we conduct support, we send a faulty invoice and the way we handle it. We basically want them to say that through the entire journey they have with Pricer, from day one until the day they, well, hopefully not decide to do something else, but we see it's a continuous journey, that they say that out of the vendors that we work with, within the ESL business, display business, within anything retail tech, Pricer is the first one. Then what does that mean from our point of view? Does that mean that we want to be number one in every single market? Well, that would be nice, but actually we want to be number one in selected markets. So first we want our customers to say that Pricer is our first choice, and then we will actually say that these are the conditions under which we would actually conduct business jointly. So that's our vision, but what about Pricer? We've been around since the 90s. By today, we have deployed and equipped more than 25,000 stores with our technology. uh since last time i presented we have grown the number of stores on our sauce service which we call plaza so we have more than three and a half thousand connected stores and having the stores connected is one of the fundaments to be able to do the upsells and continue to work with the customer and give them more and more products and more services and more functionality to actually serve their customers in a better way and to make more profit um Looking at the market and the market development, I would like to start with the North American market. It's a market that we've been following for a long time and that we can actually see that um it's about to happen i think one one year ago or one and a half year ago i started to speak about the north american market that something is happening and i think we can conclude that during the first half and more importantly now in the second quarter we can really see that there are big changes on the north american market we see it in the us we see it in canada as well we see that large retailers and especially grocery retailers with ourselves and with others are actually starting to move from planning into actually doing. It was really nice and it was after a lot of hard work that we could actually announce the major tier one grocery retailer in North America. There's now placed an initial order for 50 stores with us. It's actually the first and the largest store deployment of its kind. It's an initial order of 50 stores. It's based on our SaaS, plus a SaaS service. And it's also based on full store deployments of four-color labels, which probably makes it the largest four-color deploy of this kind in pretty much any market. But it's definitely the largest one on the North American market. Ambition is actually to do the full deployment of these 50 stores by the end of the year. So it's a highly strategic win. And to us, it's a sign that what the work that we've done, it's now leading to really win the kind of customers that we do want. Of course, we want to have any segment. But if we look back on history, the retailers that actually been the first to adopt the ESL technology have been the grocery retailers because the gain they get out of using them has been so obvious. So it's extremely pleasing. But we also, it's not only that, we see that there are more movements on different places in the North American market, on different markets within the US, on different markets within areas within Canada, and also across different segments. So expect more on the development in North America. In the UK, two years ago, we could conclude that we had this retail technology show in 2020. And it was not a lot of attendance. It was actually very poor attendance. 2023, we could actually see that it really changed. The deals that we announced in the first quarter, the co-op stores, the ONCC stores, they were the result of the interaction in 2023. What we can see now after the retail show that we had now in April is that there is ongoing discussions with pretty much every single leading UK retailer. We speak to the largest grocery retailers. We speak do-it-yourself retailers. We speak general retailers. I've rarely seen this much interaction and this fast uptake in these kind of discussions. And, of course, as much as I want to land it all, that will probably not happen, but we can actually see that the chances are that we will, ourselves and others, will be successful in the market are very high, given the fact that the market call it, I should probably not say revolution, but the development is very fast and it's been driven by the inflation, which is still high in the UK market. It's been driven by the lack of resources, especially after Brexit, but also the fact that they have now increased the minimum salaries for example, store clerks and store staff in the UK. So we do expect to see much more on the UK market over the coming couple of years. So it's a very positive development. The third bullet is something we've seen over the years that once a retailer actually do a full store deployment of ESLs and once they do the start to store digitalization, they very rarely go back As a matter of fact, I cannot think of one single customer that has done a full store deployment that's gone back to paper unless they said that we will actually do it, a trial for the entire chain. If we cannot find the findings, we might actually take it off. And normally, the few times where I've seen that happen, the store staff has been extremely unhappy because they have experienced firsthand the benefits of doing it. But just like we know that anyone with an ESL deploy will stay on ESL, what we see now is that chains where there's been a partial chain deployment, let's say that out of 1,000 stores, they've had 500 deployed. On the headquarters side, they see the benefit of ESL. They see the use cases they can do. They see the benefit of the store digitalization. They see how they actually can do more with less staff. They see how they get the efficiency up and the cost down. They also now see the ability to get control and visibility of what's actually happening within these stores from a headquarter point of view. So we can say that we see two different movements here. One is that these stores with a big chunk of of the stores, the chain with a big chunk of the stores on deployment. Let's say they have half of their stores deployed in the chain. They are now taking measures to actually make sure that all stores will be deployed with ESL. Because managing paper and ESL at the same time, it's both difficult, but it also is taking away some of the benefit they get out of it. This is something I expect that we will see more of and that there will be an acceleration in this kind of changes. But we also see that there are a lot of franchisees chains or chains that are actually turning their own operated source into franchisees that they want to have them connected. And they want them to have the stores digitized and they want to have ESL because that gives them a visibility of whatever is happening in the store. It gives them the possibility to do central pricing. It gives them the chance to actually see what are the products that sell well. Do they follow the planogram design? So basically how they plan on a central level that the store should be built. So I think over the coming couple of years, we'll see from the existing retail customers that have done a lot of deployment but not near being fully deployed in the chains, that they will actually take this action. And the way it will happen is probably that through changes of the way they run their in-store processes. Sure, it's your choice. You can do paper or you can do ESL, but you will get more out of an ESL deploy because we're changing some processes. It could also be that it's mandatory, saying that now we're moving on and we will actually do it this way, so you will actually have to comply. It's part of our standard setup for a store. Something we've seen as well is that many of the traditional grocery retailers, some of the large chains, They are facing an increased competition from hard discounters. It could be hard discounters like Lidl or someone else. And to meet this and meet the lower consumer pricing, they, of course, in some market, they lower the prices as well to make sure they do not lose out on the market share. The way they do it is actually they look at the cost, they do maybe cost reduction programs, they try to see how they can actually minimize the overall spend to be able to also then fund some of this or discount the actual prices on their consumer products. So does that mean that they don't see the value of what we do or competition do? No, not at all. It merely means that we can see that it's actually delaying some of the investments they are planning for. We can see that in these areas when it happens, we still have really good dialogue with our customers. And we know when they actually will start to deploy again. But I think we will see more of this one. It will be interesting to see at large how grocery retailers, the traditional ones, will actually respond on the hard discounters. We can see that some are starting to have their own hard discount form as a low price every day type format. But right now, we have seen that this has been affecting some markets. We've seen it in France, we've seen it in Spain. To a certain extent, you can also say that we've seen it in Sweden. But what we've also seen is that the need for four-color labels, which from our point of view delivers, of course, a better experience in the store, a better shopper experience, it delivers a better ability to promote, a better ability to sell for the retailer. For us, it means also better profitability. So we're, of course, that's a development we're happy to see. So what we do to actually meet this increased need is that we add capacity now in our production facility in Germany. So by the fourth quarter this year, we will actually produce four-color labels out of the factory in Germany, which also now is running on full speed. So a lot of good news here. and interesting market development movements. So now you heard a little bit about the future and then reflections on the markets. And now I will hand over to my colleague, Claes, who will actually go through the highlights, the financial highlights of the second quarter. So Claes, over to you.

And if you start to the left, while we have the order intake, and as you can see, it can vary a lot between quarters. We had very strong order intake the first quarter. first quarter and now it's 500. it's still up six percent compared to last year and the order intake is of course very dependent on all the projects we have and when these projects are turning into real orders if you look at the sales then it Even there, we can see that we see some pushed sales from some of our big customers. That's why it's maybe a little bit lower in this quarter. But after the first half, it's still up 4% compared to last year. But the most important thing for us just now is that we have much better control over our margins. As you said, the gross profit is up. And it's, of course, related to long genuine work with our suppliers. We have also an effect from the product mix during the quarter. And now after the first six months, we have a margin of 21%. Then we can go to the next slide. And here you see our EBIT result. each quarter, and you see it continue to go up. And it's related to margins improvement, lower cost, much better cost control. That explains the main part of what we can see, this very positive development in the company just now. And if you go to the next slide, you see the early 12-month result. As you can see, the ruling 12 months now, it's up 52 million compared to what we had last year. And you can also see that this is the fifth quarter in a row where the ruling 12 months results continue to go up. And the same goes for our net profit. Here, if you look at the P&L, and you see the margin, of course, but we have also an effect As you can see from our operating cost, we started a project already last year, but we have effect of it now in the first half year, but not full effect yet. But the cost is down compared to last year by more than 8%. So it's 18.8 million this quarter. And if we then look at the next slide, you see the strong crash flow we had the first quarter. The first half of this year is, of course, driven by the high result. But it's also much more focused now on our operating capital and on our accounts receivables. One thing to note here is also that we had a lot of factoring historically, and we are lowering our factoring part all the time, and we will go all the way out of it now during Q3. And even if the factoring is going down significantly, we have been able to increase our cash flow. So that's really strong.

Yeah. All right. Thank you, Klaus. So let me then summarize our second quarter. I'll do the popular summarizing of what Klaus has said. I think that the cost reductions that we've done, it's been a long-term work. We started already in 2022. We've been looking at our suppliers. We've been looking at the products that we use. We've been looking at the design of our products. We've been minimizing the number of variations and products with very little difference. Well, we could actually just replace it with one or actually more products into one. We have been spending a lot of time looking at the uh the pricing how we set the pricing for the customers when we do the sales uh very often when you do sales it's easier that your sales people cannot end up in a cost discussion it's banned within the company we always speak about investment because if it wasn't an investment from the customer point of view well they shouldn't do it at all if it's just a cost So from that point of view, we have changed the way we also communicate with the customers, which is helping us to also defend our pricing, because that forces us to be more vocal about the benefits our customers will actually get from using our technology. And as I said before, my ask to our head of sales is that we should always be 10% on top of the market price, or in average, we should be 10% on top of the market price. And with that mentality and spending a little bit more time on the sales, well, that will have a good impact also on the gross margin. Then, of course, selling our last generation for color labels is also improving gross margin, just like the recurring revenues are. So very nice, and I was very happy to have the 22.8% gross margin in the quarter. But of course, when we look at gross module, we should look over several quarters to see the development over time. The cost control, Klaas mentioned the cost reduction program, that we are aligned with it and that we expect now early Q3 to have the full effect of the program. That together with the cost control together with the gross margin improvement, led to the third highest EBIT and net profit in price history in absolute terms. So after last year's losses, it feels good now for three consecutive quarters to have actually delivered an EBIT profit and now this year a net profit as well. And order intake was, of course, disappointing, looking only at the quarter. But yet I'm actually here presenting without looking too concerned. We see that two of our largest customers, they have had delays. We are in discussion with both of them. We are doing joint plans and we know how the year will play out. So we do expect orders, good orders from them now during the second half. So what I see now is that this has been more of a I wouldn't like to call it a lumpiness. I don't really like that word, but it's clear that these are orders that could have come now into this quarter. Now they will come during Q3 and Q4. The corporate transformation... I've communicated before, so we've had the cost reduction, but the corporate transformation is equally important. That's the part that will actually will ensure that we don't start to build cost the same way, organizational cost the same way as we did before. So we have a very hard focus on just cost management in general, but we have been looking a lot at the organization. We made a larger reorganization from a management point of view to really clarify roles, responsibilities, and mandates. And we concluded by having a kickoff for the new expanded leadership team in June. I feel a lot of confidence. I feel that we're on the right way. We are all marching in the same direction. We have the same mindset and we know what are the key things, what are the key triggers that we need to do in order to successfully ensure the long-term profitability and competitiveness. And it was well received also by the managers and for some of the older timers, they said that this is the first time that we do something on this level and it was really appreciated. And of course, finally, I would like to end with Just reminding and do some additional bragging on the deal that we got with these North American grocery retailers. 50 initial stores. They have 1,500 stores. It's one of the tier ones in the North American market. It's full deployment of four colors. It will be the largest deployed to date when it's done. So extremely good, very strategic, and I look forward to actually develop the relationship with this customer. It's been, as you've seen from the press release, it's a deal that we've taken together with our partner, but it's It's also what I would call a direct touch deal. So our partner together with our local and actually global salespeople have been working jointly to make this deal happen. So that's pretty much what I would like to present. And I would actually now like to hand over to Cecilia for some Q&A.