Pricer AB (publ)

Hello everyone, this is Magnus Larsson speaking. I'm the president and CEO of Pricer. With me today, I have Klaus 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 Klaus to help him and fill in for a little while. Starting with the vision as I always do for those of you that normally follows the presentation. We have done a lot of work on our strategy. We actually have now a strategy that's just been approved by our board. I will start with small teaser. 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 reach this 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 pricing and brief for those of you that haven't followed us for a very long time. Swedish Company, we were founded early in the 90s. We have roughly 200 employees. You'll find us in 70 plus countries. We have our big ticket drivers, our ESLs, the shelf labels. We are clearly leader on the market. We're strong number two with more than 350 million labels deployed to date. Out of those, we have some 5,000 stores actually connected. We have 5,000 stores connected with almost 40 million labels on Plaza. It's been a major growth on the Plaza side, as you could also see in our report. Plaza, that's our subscription service for the management system of our in-store environment. We have had this year of transformation. We can say that when I started as a 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? The first target was to actually get the quarter market strategy in place and to achieve growth. Next phase was to actually strengthen the balance sheet. The third one was transformation of the company. In December in 2023, we announced the 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 cost 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 for 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 clear sign of the recognition of good corporation 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 the stores deployed with E-Sale by the end of 2025. We have a good and active discussion with Canadian Tire. So this, 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, Geritek. And I think finally for Q4, it's worth mentioning the refinancing of the To Reinvest 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, in 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 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 the, 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. We're not given 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. So that's it. And I also want to speak about Pricer revenue. I have alluded public a little bit before that we were to make a big announcement that the NRF show. The announcement is Pricer 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 VSL 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 Pricer 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 is no one in 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 what they can use it to promote a brand or their suppliers and get paid for it. So today there is no solution on the market that can actually do both until we launch Pricer App. We had three fundamental principles. We wanted to have a nice looking design because we felt that we wanted to actually be able 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 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 a 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 about battery pack? So that was another one. Then we had sustainability. How can we make a solution that is more sustainable? And also here that has been embedded in the entire concept of Pricer revenue. But we also see that there is more to come. With this form factor that we have done now, we choose to actually make 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 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 for all major grocery retailers immediately started saying, wow, you created 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 factory or 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 were launched products before. We basically kept all the 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 since basic, since the nineties, this is the most important thing and 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. 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 say, 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. We've been working with before on digital science and retail media. We have added FocalSystem, which is a leader 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 door, especially Google helps us to actually open them. But what we want with the strategic partnerships is that when we add their premium solution, so 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 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 a stable growth each quarter. And this is due to better product mix, but also good procurement. If we go to the next slide, where we showed EBIT development ruling for a month. 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's depends on of course the product mix, the customers, but also lower prices and a 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. 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. I've also have a new credit facility set up in Odea now in the beginning of this year, this 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 in here.

I think that's the most important thing

when we look

at

cash flow. Thank you very much, Klaus. 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. 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. 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 announced to pursue this, if we're not number one yet, we will be number one this year. So it's focused on the US. We will invest on the US 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 UK 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 to 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 wanna 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 will 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 as the most innovative on the market. We just launched a third generation ESL and 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 look on add-on plus applications. We will focus on the partnerships that we have announced. And of course we'll 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 Vinell 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?

Klas, start 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 cost 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 of revenue and recurring revenues. So will price of revenue allow for greater share of recurring revenue compared to our ordinary electronic shell labels? Or is that more connected to the increase of price of Klasa?

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 Givor. 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 to 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 the 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. 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 has shown now over the last years, that has also been a really good way for us to win more. When we look at what 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 emphasize was our way of working in partnership mode.

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

Yes, is there any specific question I should start with?

I'll just start.

Yeah, so we have had some over the last year, our session strong point had a lot of management meetings. And I think we could say that none of us was very happy with the result of our partnership and the results of our partnership. And 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 a 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 to choosing to investing 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 passed the US when it comes to number of engaged 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'll see some, some bigger announcements on the UK market and best cases towards the end of this year or in 2026. But I think that we'll see one or two or three on the tier ones making decisions on how to proceed with digitizing the stores. So I have a huge belief in the UK. This is why we will also invest more in the UK market.

And there's a follow-up questions on the strong point and price of building a new sales organization for the Nordics questions about the cost and when we'll 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 strong point, 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 US and potential import due 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 or not. 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 food stuff, it might actually mean that the retailers would have to discount food to make sure that they still get these sales 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, 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 retailers.

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 Pricer systems. So a potential customer, why would they choose Pricer system and not the Vusion system? What are the differentiations?

I think that key thing is the reaction time, infrared light ensures a fast reaction time. There is no disturbance interference due to from a technical point of view also. We can simply, if we want to 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 a customer that want to use the system. They should really embrace 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 are head of commercial is that we should in average always be 10% higher or more on the price side.

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

We expect of course to continue to that. 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 is 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, 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. It gives us the opportunity to get recurring revenues but above all also to do upsells. We see that there's a lot of interest for some of our partnerships with, for example, Focal Systems. So I believe that will be some business there as well.

Thank you. You mentioned South, Southern 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 if you 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 market with future potential but right now there's no commercial potential because to make the ROI work in Indian store, the price of the ESLs would have to be much lower.

Thank you. And another price or avenue question and on batteries. So one of our advantages is the long battery life but if we remove batteries, 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 viewshin win on Walmart that there is an acceptance for powered rails whether we like it or not. And actually we choose to embrace it and we've found a way of taking the rail and make it into something different. I spoke of modern 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 rail and get 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 large display which is also then moving really well working very well with the sustainability part. So now I believe with Pricer 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 Magnus and thank you Klaus. 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.