Pricer AB (publ)

Hello, everyone. This is Magnus Larsson speaking. I'm the president and CEO of Pricer. With me today, I have Claes Wenzel, our CEO of Hope, to give the presentation of the fourth quarter, 2024. I would like to also apologize for my voice. I seem to have contracted something on my vocal cords, so I hope I will not end up coughing. If I do, then I will just ask Claes to help and fill in for a little while. So starting with the vision, as I always do for those of you that normally follow the presentation, we have done a lot of work on our strategy. We actually have now a strategy that has just been approved by our board. And I will start with small T, so we made a change to our vision. Our vision is to be the preferred partner for in-store communication and digitalization. Some minor changes, but rather than retail's first choice, we believe that the way and the path we're on, being the preferred partner for communication and digitalization, is the very right spot for us to be as a company, but of course also for our clients, our customers, and our partners. Looking at Pricer and Brie, for those of you that haven't followed us for a very long time, swedish company we were founded early 90s we have roughly 200 employees you will find us in in 70 plus countries we have our big ticket driver is our esls the shelf labels and we are clearly leader on the market we're a strong number two with more than 350 million labels deployed to date Out of those, we have some 5,000 stores actually connected. Well, we have 5,000 stores connected with almost 40 million labels on Plasa. So it's been a major loss on the Plasa side, as you can also see in our report. And Plasa, that's our subscription service for the management system of our in-store environment. We have had a year of transformation. We can say that when I started as the CEO, actually pretty much three years ago, we started to look at how can we restart growth? How can we re-kick it to make sure it happens? So the first target was to actually get the culture market strategy in place and to achieve growth. Next phase was to actually strengthen the balance sheet. And the third one was transformation of the company. So in December in 2023, we announced a cost-cutting program of 50 million. That was really to make sure in a transformation program, but that's also to make sure that we would be able to grow the company without actually scaling our costs the same way as we scale our net sales. And that has been a very successful transformation, as you can see from our Q4 and our 2024 figures. We're now moving into phase four, which will be a focus on doing long-term and profitable growth of the company. And you could say that we close our third phase, the transformation, by recording the highest EBIT, the highest net profit, and the highest order intake for the year and ever in the company history. So what were the events of Q4? Well, I would like to lift the fact that the retail chain group S Group from Finland, it's the Finland Cooperative, they placed an initial pilot order with us in 2023. Then they made a very large rollout where you can see also positive impact on our net sales in 2024. They choose then to do another more than 100 stores to place the order for the continuous installation. which we are now busy deploying. So I was extremely happy to get that one because it was also a clear sign of the recognition of good cooperation, performance, and a very good solution installed at their stores. We could also communicate that we expand the framework with Canadian Tire. They plan to have 80% of all their stores deployed with ESL by the end of 2025. We have a good and active discussion with Canadian Tire. Sobis, just before summer in 2024, we announced that a North American tier one grocery player placed an initial order of 90 million SEC. At that time, we could not actually name them. I'm happy to be able to announce that we could announce the 485 million order from Sobis as a continuation. We will start the deployment of these stores in April, May timeframe. We have had a very close cooperation with Sobis, but also direct with our partner, Geratech. And I think finally for Q4, it's worth mentioning the refinancing of the Turin West bond that we have, which has been replaced by a public and traditional bond with Nordea trading on the Swedish market. So very good. In general, on the 2024 program, we mentioned the cost reduction program, fully implemented early Q3. We could see it had the effect we expected. It's been a lot of work, but it's also been a lot of work that made Pricer fundamentally better and a different company compared to before. Our production facility in Germany, we have full production. We do three-color, we do four-color label, we do two different sizes. So I'm very happy to see that after it took a little bit longer to get it in place, but we can see now once we have it in place, it's clearly a competitive advantage. Finally, I would like to also highlight the order intake once again. It's the highest ever order intake. We have had two quarters in 2024 with near 1 billion order intake each. I hope that we can see more of this. I will not give any forecast. But we can see that we are having good traction with several of our customers. So it feels really good to start the year with a very strong backlog and order book to be delivered mainly in 2025. And I also want to speak about price revenue. I have alluded public a little bit before that we were to make a big announcement at the NRF show. The announcement is price revenue. It started a few years ago when me, our head of technology, and a few others of our peers, we started to discuss what would the future of ESL look like. And we were pretty sure it should not look exactly the way it had been looking. The look and feel of an ESL has been pretty much the same for the last 20 or 30 years. Thick plastic frame, some different sizes. You can virtually not tell if it's a price or it's a label from a competitor. So we know we wanted to do something differently. We have a legacy where we have been the best in the market to help our customers do savings to address their operational cost and lower it. That's our sweet spot. There's no one on the market that actually does it better right now. But one area that I really wanted us to focus on is the shopper experience. And above all, how can we help our customers make more out of the ESL? How can we make them monetize from the ESL in a different way than just the efficiency? And this was sort of a very key thing for the development of Pricer Avenue. How can we make the shelf a full merchandise space? They can either promote their own brand or they can use it to promote a brand or their suppliers and get paid for it. To date, there is no solution on the market that can actually do both until we launch Pricer Avenue. We had three fundamental principles. We wanted to have a nice looking design. because we felt that we wanted to actually be able to recognize, people to recognize, this is a Pricer label, but we do not want to take the limelight away from our customer brand. So it's important that you should see it's a Pricer, but you should still focus on the customer's message. So we wanted this sign to be nice. The second thing, we wanted to have modularity. You should be able to grow with the system in a different way. You should be able to choose, should I have it battery operated? Should it be light harvesting operated? Should it be connected to the main grid or just a battery pack? So that was another one. Then we had the sustainability. How can we make a solution that is more sustainable? And also here that has been embedded in the entire concept of price revenue. But we also see that there is more to come. With this form factor that we have done now, we choose to actually very slim frames around the cell and put some other technology at the bottom. It's a lot of place for a lot of cool sensors that we can actually add. If you want to have a sensor that feels movement, if you want to have illumination so you can actually light up the products, or if you want to have a different protocol to communicate with the world, that can be easily fitted. It's adopted to make sure it's placed. But the benefit of having this very small, thin frames is that if you slide two ESLs together, you can actually build something we call a floating canvas. In fact, you can add as many ESLs as you like and make one large ESL out of it with one conveying message. So we are looking actually, combined with this, we have communicated a totally different rail system as well. which you can actually light, you can communicate it, and it actually carries power. So we will be able to do communication on the rail. We will do it on the ESL. So we're actually turning a dead shelf space into a full merchandise area. And this is something when we presented it at the NRF show, where all major grocery retailers immediately spotted saying, wow, you created a totally new way of communicating with our shoppers, but also allowing us to present our brand and our customers' brands, our suppliers' brands. So it's a totally new thing. We have received a massive customer interest. We communicated that we are planning to do pilots in the third quarter this year with selected customers. There are quite a few that's now asked for a pilot and that we should be able to produce, in fact, our standard factories as of Q4 for deliveries. So I will stay a little bit with Avenue. We had the NRF exhibition and that's why we actually launched. We did a very different launch compared to the way we launched products before. We basically kept all information closed. There was very few people that had a complete picture on this. So it was a massive launch at the NRF. That was a massive interest. I can say out of all the years that I've been working with sales, basically since the 90s, this is the launch and this is the event where I've had most positive feedback on a specific product ever. We had customers coming saying that this is fantastic. You are really positioned as the number one innovator on the market for ESLs. We had competitors coming saying that this is fantastic, great, well done. We had suppliers, we had partners, but it was a massive interest. We actually got a call from a T1 retailer afterwards. We've had some interaction, but we haven't had any business contact. And he said, well, this was by far the most interesting announcement and product on the entire event. And he's asking now to meet with us to discuss with his technical team to see, you know, can we do something jointly? We also, we presented some of our partnerships. We have changed the way we work with partners. We will work with a very few ones. In this case, we have selected visual art that we've been working with before on digital science and retail media. We have added Focal System, which is a lead within in-store AI and computer vision solutions. And we are working much closer together with Google. Now we're available on their marketplace. Being available on the marketplace with Google does open a whole lot of doors, especially Google helps us to actually open them. But what we want with these strategic partnerships is that when we add their premium solution, we add our premium solution, that one plus one should not be two equal to, it should be three or four or higher. So we will actually work closely. We'll do a very deep integration on these partnerships to make sure it will be clearly customer value adding. As part of our strategy work, we have also come to the conclusion that we will work much closer to customers on important markets. We will either go direct or have a very close direct touch model. And one of the consequences you can see is that actually we are building our own team on the Nordic and Baltic markets now during spring. We see it's a market where we believe that we have the chance to increase ourselves compared to today. We believe that we had a chance to increase our margin. So making this position now, making this change right now feels very good. So having said that, I think it's a little bit less marketing, a little bit more financials. Klaus, over to you.

Yes. Yeah, if we start to look to the left side, the order intake and the sales, the order intake has been very good the whole year. And it is the strongest order intake ever. We are up 13%. When it comes to invoicing or net sales, we are a little bit down. This is mainly related to that we had a couple of big customers that were buying or were invoicing a lot in 2023. If we take that away, the growth of the rest of the companies or the customers has been very good. If you look at the gross profit, you have had stable growth each quarter, and this is due to better product mix, but also good procurement. If you go to the next slide, where we showed EBIT development, rolling 12 months, this is the highest result ever in the company. All quarters has delivered a strong EBIT. And we have now operating margin of 7.4%. If you look at the next slide, which is the P&L, the margins are, as I said before, up a lot, and it depends on, of course, the product mix, the customers, but also lower prices and good procurement. So that combined with that our cost is down as much as 73 million compared to last year and more than 30 million the fourth quarter our result boost net and operating result is up 180 million and if you go to the next slide and look at the cash flow and the cash situation we have a Good cash position now after the new obligation. And we also... The new bond. We also have a new credit facility set up in Rodea now in the beginning of this year. It's 150 million. The cash flow has been affected that we took away the factoring we had last year. That has affected the cash flow with 169 million. We have higher inventory now than we expected, and that is due to some pushed sales. And so that we do not expect the inventory to grow as much as the sales to come here.

I think that's the most important thing when we look at cash flow. Thank you very much, Claes. So then, going forward, what are we focusing on? Well, we will clearly continue to focus on profitable growth. We have restored profitability. You can see it in the result of 2024. You can see it in all the quarters. uh but we need to make sure we do it also with a clear growth of sales and net sales i want to make sure that when we leave the year that you can say that this has been work well done also on the sales side um but we want it to be profitable here of course the product mix will have a clear importance i will cover it a little bit we will win in choosing markets there will be prioritized market segments it will be we have a very strong position in canada I would argue that with the announcement of Zubis, if we're not number one yet, we will be number one this year. So it's focused on the U.S. We will invest on the U.S. market in additional resources to capture all the opportunities where we're currently in discussions, but also all the upcoming ones. We will invest in the U.K. and we will invest in some of the countries in Southern Europe. From a segment point of view, we will focus on our sweet spot. It's the hyper and supermarket. It's large pharmacies, especially North American ones. And it's do-it-yourself. It's a market with enormous potential and where we see that our ability to win and our hit rate and our win rate is high. So we are streamlining our efforts. Of course, if someone has a hard discount or someone with an electronic store want to buy from us, we will do it. But we're also looking very much now on how to, in a proactive way, face the customers we want to win. And we will spend more time on that than we have done before. So it's been very important to really look at the segments. we will spend more time on the sales organization and more money on the sales organization we will look at moving from product to solution sales that's something that's ongoing but we'll work more with it we'll move into the area now with 5 000 connected stores and more to come we will move more into what's called by software companies as customer success, but also more on up sales to really make sure that we get as much money as possible out of existing customers. I do not want to leave any money on the table. And I think there's a lot of opportunity here to both get additional sales, but also to of course sell products with higher profitability. We will create a market leading solution portfolio for in-store solutions. We will broaden our portfolio Pricer Avenue will of course be a spearhead product. It's now positioned us as the most innovative of the market. We just launched a third generation ESL in Pricer Avenue. And we'll capitalize on that one. It gives us a lot of opportunities to look at merchandise, merchandise solutions, but also IoT solutions with the help of all the sensors that we can add. We will not go and add on plus applications. We will focus on the partnerships that we have announced. And of course, we will do more on our own R&D. So also, just like we're looking at making investments within sales, we are looking at making investments also on an R&D side to really make sure we capture the traction that we have on the market. So having said that, I would like to open for Q&A. And we have Cecilia Vinel here facilitating. Cecilia, do we have any questions?

Yes, we do. So, first of all, can you comment anything on the OPEX growth heading into 2025?

Klaus, one for you. Well, we don't make any forecast, but of course, there is inflation. We will increase

our employees a little bit so we will have higher cost of course the next year but not any huge things that I think maybe we can add that what we have done during the transformation is that we have changed the way we work there are a few processes that we've changed we do not expect our OPEX to grow at the same pace as our net sales and profitability. We do not need to add people the same way to get the results that we want after the transformation of work.

Thank you. There's a few questions on price avenue and recurring revenue. So will price avenue allow for greater share of recurring revenue compared to our ordinary electronic shelf labels? Or is that more connected to the increase of price of plaza?

I think that with the... It's a bit too early to say. It's something that, of course, we wish. It will definitely be generating more solution-related revenues and higher gross profit type solutions, but I do believe that there is clearly a possibility to also increase the amount of recurring revenues. So what we've done, we have launched the concept. We plan to have it ready for pilots in Q3 and then deliveries in Q4. So we're working on the operational models. We are in dialogue with several customers on what they want to get out of it, what are the benefits they see. And of course, that will also be leading in the way we do the commercial setup It should be something where they make a lot of money and where we make a lot of money.

So this is a question about us having the vision previously being retail's first choice. But the person asking this question says that the competitors are growing faster. So can you comment on retail's first choice?

now we felt that focusing on partnership was more relevant um of course we always want to be the first choice for any customer but we really wanted to elaborate on the partnership aspect we work in partnership with our customers we work in partnership with our suppliers and other partners and i think that's has shown now over the last years that has also been a really good way for us to win more when we look at the uh But our customers think about it. We have done a customer survey. We had closer to 25 customers returning, both customers that we've lost and customers that we won. And we got very, very good feedback. And one of the things they really emphasized was our way of working and partnership mode.

Thank you. And I know that in the quarterly report in the CEO letter, you comment on the on a reseller strong point. There are several questions on strong points. So maybe you can comment a bit on that.

Yes. Is there any specific question I should start with or? Yes. Yeah. So. We. We have had, over the last year, a lot of management meetings. I think we could say that none of us was very happy with the result of our partnership. And the results of our partnership. I think that this was the expected way forward. We did not communicate on their announcement, since from our point of view, it was actually not a material, not from an order intake point of view, and it was not material from a net sales point of view. And in addition, we do expect that all the Nordic and Baltic customers with the Pricer solution installed, they did select Pricer. We do expect that we will continue to serve them. We will continue to also sell to them. We see a good future in the Nordic-Baltic market, which is why we're actually now choosing to invest on our own.

Thank you. And on that note, how do we see the UK and how do we plan to take market shares in the UK?

So just like before, I see UK like extremely hot market. It's almost past the US when it comes to number of engage tier one and tier two retailers. I think that all tier one retailers are in discussions. We are certainly speaking with a few of them or most of them. It seems like there are budgets in place. There are plans. And whereas in the US, it feels like the lead time is still a little bit longer. So we have time to capture that market. I do believe that we will see some bigger announcements on the UK market. in best cases towards the end of this year or in 2026. But I think that we'll see one or two or three of the tier ones making decisions on how to proceed with digitizing the stores. So I have a huge belief in the UK and this is why we will also invest more in the UK market.

and there's a follow-up question on strongpoint and price of building a new sales organization for the nordics questions about the cost and when will it be up and running and the rationale behind this I don't know if that's anything you can comment on I cannot comment on the timing or the cost more than we will actually start building the team in 2025

We're of course always mindful of cost. We do what makes business sense. And to us, it will make a whole lot of business sense to make this kind of investment. Time-wise, I think that after having had a fruitful partnership with Strongpoint, Now it's time for us to go direct. So it also feels good.

And I think that what we can add there regarding strong point, if we go direct to the customers, of course, we will have a margin on that. So if we increase the sales organization, that's something that will be paid by itself with a margin.

Thank you. There's also a few questions on the U.S. and potential import of European goods from Europe. What would be the effect on prices, sales?

If there are tariffs?

Yes.

It's very hard to say, of course, since we don't know if there will be tariffs. But I would imagine like this, if there would be tariffs, let's say 10%, I am sure that the ROI that we show a customer will still be appealing enough for them to actually make an investment. They will still make good money. If it's 25%, well, it's hard to say. Above all, I think it's more about the uncertainty than tariffs could create. If there are tariffs on foodstuff, it might actually mean that the retailers would have to discount food to make sure that they still get these cells volumes that they need. And of course, that could affect their ability to invest. We are producing in Vietnam, Thailand, Germany. We have competitors actually doing the manufacturing in some of these markets, but also depending on Mexican market. So depending on what tariff or if there will be tariff on the Mexican market, that could of course have a huge impact also, which might or might not be to our benefit from a competitive point of view.

Thank you. And on Pricer Avenue again and the gross margin. So is the gross margin on Pricer Avenue similar, higher or lower than our normal ESLs?

We can put it like this. We intend to position it as a premium product. We are unlocking the ability to actually get the operational benefit, but also to get the benefits associated with actually selling merchandise space in the store, which is a very big spend and very big wallet at the retailer's level.

And another follow-up question on the US. Are you considering open some production facilities in the US due to Trump's decisions?

It could be an opportunity. We haven't planned it yet, but yes, we are looking at the potential.

And here's the question on the advantages with prices systems. So a potential customer, why would they choose prices system and not the fusion system? What are the differentiations?

I think the key thing is the reaction time. Infrared light ensures a fast reaction time. There is no disturbance interference. from a technical point of view also. We can simply, if we want a label to flash, we can make it flash within sub-seconds, whereas from a radio solution, it would be harder to do it. It will not act the same way all the time. That's one. The other one is the battery life. So our sweet spot customers where we have a tendency to win is the stores with very high density, supermarket, hypermarket, do it yourself, to name three, But we also want to find the customer that want to use the system. They should really embrace the digitalization. So we want them to do frequent price updates. We want them to do frequent template updates. They should have a Halloween template, an Easter template, and they should work with campaigns So they should use the display a lot. They should use the label to direct the staff as well to actually use the flash to help them find a product when doing replenishment or picking online orders. That time saving, which could be from five to 30 seconds per pick, is a major case of the ROI model, and which is why we actually are able to demonstrate really good ROI for our customers. This is also the key reason why we're able to sell at a higher price. As I mentioned before, our target is that the instruction to Mats, our head of commercial, is that we should in average always be 10% higher or more on the price side.

Thank you. A question on France. What are you expecting from customers in France this year?

We expect, of course, to continue. We have I'm still quite certain that we are number one on the French market. So we have a lot of customers to serve. So focusing on selling more to existing customers, there's still a lot of stores actually without labels, but there are also a lot of stores that's moving into the need to actually buy new labels. We will look a lot, since we have such a large install base, how can we work with upsells? So if I would say one priority area, I would say upsells, selling more to existing stores and making sure that as many as possible are connected. Every single connected store will have a very high value to us. gives us the opportunity to get recurring revenues, but above all, also to do upsells. We see there is a lot of interest for some of our partnerships with, for example, focal systems. So I believe there will be some business there as well.

Thank you. You mentioned South and Europe as one area of interest. Why South and not markets like Asia or India?

So we see that on the Asian market, there is not really the kind of growth that we would be interested in. You might actually be able to do something in one country, but it's still comparably small. New Zealand, Australia is different. So I'd call them the Pacific. But for Asia in general, the volumes has been comparably low. We don't really see other competitors addressing those markets very aggressively or very actively either, possibly with the exception of Japan and India. It's a market with future potential, but right now there's no commercial potential because to make the ROI work in an Indian store, the price of the ESLs would have to be much lower.

Thank you. And another Pricer Avenue question on batteries. So one of our

advantages is long battery life but if we remove batteries are you are we not losing the competitive edge then i think with price revenue we're gaining a competitive edge because actually we're presenting something new to the market that doesn't exist we can see that with the vision we know walmart that there is an acceptance for powered rails whether we like it or not and actually choose to embrace it and we found a way of taking the rail and make into something different I spoke of modularity, so you can even start with battery if you like. We have actually built the avenue esl like a sushi so you have the display is very thin and then you can connect it either directly to the railing at power or you have a small battery pack if you actually choose the battery pack and then you want to increase the size of the display well you keep the battery pack and you just get a larger display which is also then moving really well working very well with the sustainability part so no i believe with price for avenue we did open a totally new potential revenue source and we created a lot of interest. So I think we managed to establish a competitive edge that competitors do not have yet. And I might actually add that we have submitted a lot of patent applications from everything from the design to the way we do the communication, to the way the rail system is working, some mechanics, software, the whole lot.

Thank you, Magnuson. Thank you, Klaas. These were all the questions.

Thank you very much. And thanks for everyone listening into our quarterly presentation. I hope you found it interesting. And I do look forward to do the Q1 presentation this year. Take care. Thank you very much. Thank you.