Pricer AB (publ)

Hi and welcome to the Pricer Q1 2025 presentation. We are joined today by CEO Magnus Larsson, who will present the first quarter. As a reminder, questions can be submitted and they will be addressed during the Q&A session. With that said, Magnus, welcome and the floor is yours.

Thank you very much, Hjalmar. I'd like to start by also saying that unfortunately, Claes could not join us today. He fell sick. But I'm pretty sure you're watching the webcast right now to make sure I'm not saying anything incorrect. Let me start with a press room brief for those of you joining that might not know us that well. Our vision is to be the preferred partner for in-store communication and digitalization. This actually means that when we updated it quite recently, we did a lot of service. We did a lot of inside studies with our customers, a lot of interviews. And in addition to appreciation of our technology, I think one thing that people lifted was the way we work, the way we engage, and the partnership they believe that we have. And I think this is the reason why we, unlike many of our competitors, are able to get engaged customers also in the promotion to other potential customers of our solutions. Roughly 200 million people, 200 people, 200 employees. We have delivered more than 350 million labels worldwide, which makes us number two in terms of installed base globally. We are working actively with our SaaS service. It's called Plaza. We currently have more than 5,000 stores on Plaza. And it's one of the key objectives for the year to actually expand that number quite much. This is a slide I normally use as context for new investors to explain prices of today versus prices of before. We have done quite a huge transformation over the last three years. We looked at the go to market. How can we actually speed up growth? We have been looking at the balance sheet. How can we actually strengthen our financing? We've been transforming the company, looking at our cost base. We've been looking at the way we work. And we concluded last year with actually being done with the transformational phase, saying that now we have set the baseline for the coming growth and coming profitable growth in line with our financial targets. Now presenting a quarter that I've not been very pleased with on net sales, on order intake, we fell short of our internal expectation. And with background in sales, I want every single quarter to be better than the previous one. But as a business manager, I also realize that's not feasible. Right now, we're doing the right things. We have transformed the company. We're still working with it. We have an updated strategy with a lot of actions defined that will actually take us to the position that we want, where we actually gain market share and where we deliver profitable growth in line with our financial targets. But the business is lumpy. There will be the world where things happen affecting it. But we're doing the right thing. So even though I'm not pleased with this quarter, I am pleased with the work that we have done actually looking into the future and the future sales. I think it would be good to start also with looking at the market. Now we have a lot of input from our competitors, a lot of intel on the performance. We believe that the market will grow 15% annually over time until 2030. But we've also seen that now Q4 was a year where the market did not grow at that space. Our assumption is that actually the global market growth for ESL was below 5%. which was sort of the entrance to this year. We could see that the North American market showed really good growth. We have had good progress in Canada. And we can see that the US market has opened. We could also see that Europe fell behind on the global scale. We are quite convinced that last year that we were actually gaining market share on the European market, unlike most of our competitors. We feel pretty good about the European market. And for the coming future, we believe that we will continue to expand in Europe. Then it's, of course, up for us to prove it and show it. But compared to competition last year, we were actually growing our market share. What we see now also in Q1 is that given the changes of administration in the US, the impact on the market economy globally, this is of course also reflected in the way our customers behave. We haven't met any customers so far in the quarter. We're not in the discussions where the customer said that we no longer believe in digitalization. We'll not spend money on digitalization. On the contrary, they all say that they want to do it and they need to do it. But we see an uncertainty for investments. Is this the right time? Should we wait a little bit? So what I would expect is that the timing of investments that we've seen in Q1, that's something we would most likely see in Q2 and possibly throughout the year. So I think that I want you to be prepared that we see the future, we see the possibility, we see the growth and the opportunity. But it's also good to remind ourselves there is a lot of uncertainty right now on the global market affecting our customers. We had the retail technology show in London, now beginning of April. It was a fantastic show. There is a lot of customer interest. We can see that the UK market and the UK show, the retail tech show in UK, unlike the show NRF in New York, is very much focused on business. And RF, you go to, of course, to do business, but maybe at larger to check the trends and see what's happening and do your plans for the coming maybe three years, three to five years. Whereas in the retail tech show in London, it's a business show. We had meetings set up with pretty much all tier one retailers within grocery, but also within do-it-yourself, within home electronics. they are all one way or another looking at digitizing their stores. And I'm pretty sure that we will see the first move either at the end of this year or beginning of next year, where one of the tier one retailers said that we are now decided to make a rollout across the in-state of ESL or large ESL rollout. So that's my expectation. And that means at best, yes, there could be some revenues at the end of 2025, but more likely in 2026. I would also like to mention one of our most recent wins on the British market. It's a company called Company Shop. So why did Company Shop select Pricer? Well, the key reason is that Company Shop, what they do is that they sell grocery supply. So they surplus, so they buy it from all the other T1s. Their customers are typically people with less money. So they buy all this surplus grocery. They start with a price that is 40% below the recommended price. Then they lower the price continuously throughout the day until they've sold it all out. So they're addressing waste, but they're also helping the community to make sure that they get food at a lower cost. But it would not have been possible for them to do this with anyone else than ourselves because we had the ability to continuously help them day in and day out to actually do the price changes without compromising the quality. We launched Price Avenue in January. We launched it on the NRF exhibition. So I thought I wanted to give you an update on where we are with the Avenue product. We have been shortlisted now for two innovation awards. We have good progress in the development. We have a number of customers that have said that, yes, can we please do a pilot with you? We are now in a phase where we want to decide with whom we are going to do the pilots. But it's created a lot of interest. And I think that we have a global head of ESL at the T1 retail. It's actually none of our current customers. They said that the most interesting thing at the entire NRF was price revenue. We could also see that the ability to use price revenue for merchandise in the store has been lifted in by several and also here by Parsers Venture Capital following the market. So good progress. We do expect to do our pilots during the second half and that we should have a system ready for commercialization at the end of the year. On a strategic plan, what are we doing in 2025? Well, profitable growth. We want to make sure we reach our EBIT targets. We want to make sure we reach our growth targets. We will further, actually, we have been planning to spend more on the UK market. But based on the feedback that we have on the market and the activity that we see, we will actually spend more. And there will be a stronger focus to actually capture the opportunities we see on the market. We did a structure in Australia. We separated markets. We have growth markets where we feel that we are underinvested. We will do additional investments. And there is a huge market to be captured. UK is one of those. We have markets that we say are established markets. Well, we have an established operation, and we actually believe that we pretty much have what we need. There will be growth, but it will be lower level growth. There we want to see how can we actually make sure that all these markets are run in an efficient way. So in France, we're doing a number of efficiency measures, basically then doing some restructuring on the operations. to improve the way work to work with the right thing in line with focusing on the key segments. But also, of course, to see how can we lift the corporate profitability. I think also worthwhile to mention is that the strategic shift we do now in the Nordic and Baltic markets, where we are deploying our own sales force and service force, is that we do expect to grow sales. We do expect to grow profitability and gross margin on this market. both on an EBIT level and on gross profit point of view. So this is the view we have. We have good discussions with all our current customers. We expect the vast majority to continue with Pricer and to continue to invest in new technology and new products together with Pricer. So positive outlook on Nordic. We will, of course, try to win and choose a market on the prioritized market, North America, UK, Southern Europe, mainly Italy and Spain. We will focus on hyper and supermarkets within grocery, pharmacies, do it yourself. These are the areas where I see we have our absolute sweet spot. So I'd rather spend more time on these segments and let our salespeople spend more time on these segments, since we know that this is where we perform the best. This is where our competitors have more difficult time to beat us. We are working more with the sales organization, the way we engage with customer, the way we do solution selling. And of course, we'll continue to invest in our portfolio. There's a lot of work going on on Plaza and additional Plaza applications, obviously also on Avenue, but also strategic partnerships like with Focal Systems, where we do AI and computer vision. Sales and gross margin development. So now take on the CFO hat. It's, of course, disappointing to see a declining order intake and net sales in the quarter. But what I do like about this picture is the gross profit, where we can see that we have managed to maintain a high gross margin of 23.3%. And we can also see that the gross profit is contributing on the rolling EBIT development where we actually now closer just below 8% on our EBIT level, which is the financial target. If you look at the PLL, there are a few things that I know that some of you have asked about already today. I think the first thing I would like to cover is the FX effects. Well, we've seen a weakening dollar. It's been going quite fast, so the hedging that we do have not been sufficient. We have had fairly low trade payables. And we have had more than normal trade receivables in US dollar, which means that the 7.6 million in other income and expenses are mainly or actually primarily FX expenses reflecting the weakened dollar. You also see it on the financial items where currency fluctuations have made us get an FX effect of somewhere between 8 and 9 million Swedish krona. On this one, we have also made a change in our accounting. So if you look at the administrative expenses and find them high, we actually moved quite a bit of corporate expenses that we previously reported as selling expenses. We moved it from sales over to admin where we believe that it should have been or that it should actually be. So that's the reason why if you compare Q4 with Q1, it's not been a massive increase in recruitment, but it's actually been done a shift in sales. the way we actually do the booking of these costs. On the cash flow, we have a positive cash flow and a nice cash flow in Q1. Key thing is that we managed to lower the inventory level. As you might remember from the Q4 report, we had an over-inventory, too large inventory in Q4. We're spending a lot of time of actually selling that one, which is why you can see that the inventory is down. On the trade receivables, we have also spent a lot of time working with our customers to actually make sure we get payment in time. Last year, we went from doing factoring, which means that now we have to make sure that we get all the payments in time. So we spent some extra admin on this one, and it's actually been paying off really well. So these are the key things on the operational activities. If you look at the financial activity, you will also see when you look at the report that we have a 250 million post. It's actually for the repayment of the private bond that we had with Turi Invest. So then summarizing before we move into the Q&A. So as mentioned, the net sales and order intake were not on the level that I was expecting or was hoping for. But I was happy to see that markets like Canada and Benelux did show growth. And of course, I do with the order from Sobis that is progressing well. We do believe that Canada will be a large and very important market for us also this year and next year. The sales in QN was, of course, impacted by the weakening dollar, as mentioned. But as we do all our production in US dollars, and we have a lot of the majority of sales in euros, if the current FX level or the dollar level stays versus Europe, we also see that over the year, we will actually increase our gross profit and gross margin on all products sold in Europe. There has been concern with the order intake. It's also here I want to be open that we have a number of interesting customer dialogues, customer engagements, customer pilots, and of course, customer opportunities. And it's a growing number. And of course, now with the uncertainty that we have on the market, let's see if they become real deals for us or someone else this year, or if there will be some time slippage. But the thing is, we do not see any customer hesitating on making an investment. It's primarily timing. And we are confident that we will also take part of all those opportunities that we see and that we address right now. And maybe as a conclusion, with a new go-to market for Nordic and Baltics, I would like to take the opportunity to welcome all existing customers that we have on the market, but also, of course, all the new customers that we intend to win on the market. So that's pretty much what I had to say for now. So I think, Hjalmar, over to you.

That's great. Thank you so much, Magnus. And I was thinking maybe we start off with Europe and France. You mentioned streamlining operations in this, of course, important market. Is this because you are dissatisfied with the development here? Maybe you could give us some more color on what initiatives you're launching? What did you expect the impact to be? And when can we see the full impact of this?

So we are making restructuring that will be, in essence, it's lined with a strategy that we have set. So we're looking at what are the key things we want to focus on. We want to have one way of working. So it's some things that we do today that we should not continue to do. There is a fair amount of centralization where we have done things locally, but we want to have the central organization doing it. uh but but i think above all also some things that we see that we have done it and it's been good but it's not been on a level where it adds sufficient value to the company so we build we basically believe that we will be able to address the market with the smaller organization so we expect all our different markets to be able to deliver profit on their own. So then, of course, we do not believe that it will be any major impact. Of course, we expect that when we make a change, there will always be some impact and some effect, but it's more short-term. In dialogue with customers, they have not reacted. It's what you would normally do in a company to actually look at the operation. You'd streamline it and you make it more effective. That's actually what we do.

Okay, so can you provide maybe some color on, is this expected to be seen maybe on a group level on the gross margin, or is it smaller than that if we look to 2025? Do we see the full impact? Do we have to look into 2026 to see?

I would say you will see the impact into 2026. Of course, when you do restructuring, there will also be an associated cost to it. But we also, we have not done any announcement on this one because we actually do intend to continuously invest in our organization, but on other markets.

And is this restructuring sort of impacting your ability to capture the European market or is this mainly, I mean, the order intake in Europe, is this mainly a result of a weaker market where customers are more cautious towards placing orders?

I think we've seen it's mainly been cautiousness. But on some market, we still see an appetite to invest. And actually, we have seen France has been slow. You could see it in Q4, and we believe that it will be the same. It will be lower sales this year than compared to previous year, which is, of course, also affecting the decision to say, OK, why do we want to have our staff here? We should be in a market where we can actually deploy them in a way to get as much money out of the team as possible.

And you mentioned, of course, the lumpiness and you have such a long time in the market, but based on your experience, do you think that Europe will catch up gradually or can there be like a lumpy catch up effect as well? Like what can we expect looking ahead and based on the based on the sort of experience in relation to the market that we're seeing right now.

I wish I could give you a really intelligent answer on this point, but it's a lot of uncertainty. We see that certain market, I'm quite confident about the Nordic market. We know there are some customers that have been hesitant now to invest in the first quarter, given the announcements made by our partner or previous partner. Now that has been clarified. We know I expect them to catch up. We know that for some of our market, there are a lot of projects where we will see positive development. But once again, why do I want to be cautious? With all the macroeconomic factors that we see right now, it is really hard to be certain.

And this macroeconomic environment, does it have any impact on large procurements, pilots as well, or is it mainly the day-to-day sort of sales activity that you see impact on currently?

I see that retailers, they look at it differently. I was with some executives in Canada one and a half months ago. And they said that even though they do not have any tariffs, they see that the impact on tariffs between the US and Canada, or potential tariffs, they simply expect that there will be less money for the consumers to spend. So that could be like a secondary effect. And then... In this case, this is Canadian Tire. They said that they actually choose now to invest in the strategy. So they will spend more money on store digitalization. They want to utilize all the ability they have to take current club card holders. What can they get out in the store? So they want to improve the store experience. Whereas some other retailers, they choose to then wait and see. So they will halt the investments. They will not stop them, but they will delay them. So I think it will differ from market to market.

Yeah, thank you. And speaking on tariffs, if we look at the US market, is the tariffs impacting the ROI in any way? I mean, we know that most providers are outside of the US, so they will maybe be impacted equally. But what impact does this have on the sort of ESL ROI for the US market?

It might be a bit too early to say, but with current tariffs, anything produced outside China, they will have a 10% tariff on the markets that we supply, at least for the coming three months period. Then we have whatever is done in China, we'll have a much higher tariff, but we'll... So if it's only a 10% tariff, well, then I don't really see that there will be a problem with the ROI. Our existing customers have not been very concerned, and we've been also clear that we will not cover the cost of the tariff, that there will be something that we will give on them. That doesn't seem to have been a concern so far, but once again, it remains to be seen, because if there will be other tariffs that will be higher affecting the products they sell, they might feel differently into the future. So to me, we will still invest in the US market. We will actually grow the team. But that's, of course, to plan and make sure that we capture the opportunities we see going into 2026 and into the future.

Thank you. And on the Sobis order, the Sobis rollout, can you provide us some updates? Are there anything new to add here or... Do you expect the rollout to be in line with what you previously communicated, looking ahead for the remainder of 2021?

I think we feel very good about Sobis. We have a good discussion. The R&D development that we do, which is the key reason why we're actually not starting the rollout until now in in April, May. It's been progressing. Everything is in place. It's been working well. Indications from our customers is anything that they would like to speed up things. We see a lot of interest from their franchisees. They have a lot of different formats and franchisees organization. So we can see that the news... of the first initial 50 stores that we deployed is spreading across the entire Sobis chain with 1,500 stores. And there seemed to be a lot of interest and more stores that want to have ESL deployed from basically the French-speaking part of Canada to the English-speaking part of Canada.

All right, thank you. And on the sourcing, can you give us some updates on your sort of like production capabilities, anything on the development here, any new initiatives that you're planning in the future?

We are setting up our second fully automated production line. This time it's in Thailand. We can see that it will have, of course, a very positive impact on the cost levels that we have today. So we see that we are able to push the cost down further on production. Then, of course, once again, referring to the uncertainty of global economy, let's see what happens with the components. But if you look at the manufacturing part, yes, we see that here we will be able to start once again using this concept and duplicating it, lower the cost even further compared to what we've done before. And we have the capacity we need. We see that based on even the sunny side scenarios that we have for the year, we have the ability to deliver everything as we please.

Thank you. And going back to the markets, I guess Europe, I mean individual markets, of course, with different sort of like temperature right now. But if we look at the Baltics, could you say anything about this? Are you expecting cautiousness there as well? Or what do you see right now?

Not really. We have actually, on the contrary, seen that there are some of the larger grocery retailers that are now looking at saying that, yes, we are interested in actually doing something and deploying our stores full with retail tech stuff, including ESLs. So no, I don't really see any cautiousness on the Baltic market. I see positive signs in basically the markets where we're active in the Nordic and the Baltics. Then once again, whenever there's a new deal, it's up for us to win it. So it's not won by any means yet, but we see there's a lot of opportunities.

Yeah, thank you. And on the cost side, do you have any planned initiatives that would impact the operating expenditures ahead? I mean, if you look to the maybe short to medium term, anything on the sales side, maybe that... We plan to recruit within sales in a couple of markets.

US, UK to name two markets, but a few others. But also we're doing restructuring in France, as mentioned, even though impact will come later. So we try to balance it. We are investing more also in R&D, but it will be capitalized cost most of it. So there won't be any, there will be increases, but not very large increases.

And you mentioned that you invest in the US, and I believe you referred to this earlier as well. You still plan to go ahead with these sort of investments, considering the environment in the US. Could we interpret that as like a position of maybe optimism regarding US for the midterm, maybe?

I would say for midterm, long term. So I think I've communicated earlier that we believe in the US market, but we see that it's been progressing slower than, for example, UK market. So the plans that we had, we will adjust them slightly so that we will invest a little bit less. But we think it's important. So we have a number of opportunities where we need more staff to actually maintain the right way. And it takes time, but we're taking it step by step by step. So to see, you know, I think there will be nothing this year or nothing major this year in U.S., Even though I have some colleagues that are, of course, confident that it will be different. But I would say that 2026 and onwards would be where I would expect something. So then I would do some investment now to make sure that we can actually win deals next year. That's my target.

Okay, thank you. And you mentioned Plasa and the potential in recurring revenue and you sound very optimistic. Could you give us some more flavor on this, maybe some number? What can we expect? You see great potential ahead. Maybe share of revenue that could be recurring for the medium to long term or something like that?

I don't have those figures right now, and some of them I can't share either. We can see with some of our large customers where we have a large installed base, now we're starting to get traction on the transformation, actually the migration from in-store server to SaaS. So actually, it's growing quite fast with some of our customers. We have a number of customers where they said, OK, let's do it. So now we're planning. We're doing the project together to actually make it happen. We have launched new versions that we actually now. It's pretty funny. At the Retail Tech Show, we were demonstrating Plaza Live. It was the first time we did it. And of course, we showed all the benefits and how it's working. And of course, then we link and unlink the labels, and we update prices and changes. I think we were the only one at the show that could actually do that because the radio interference was so bad at the show that if you had a radio system, they were hardly trying to make a live demo. because it was so unreliable, whereas we could do it all the time. And I think that's something that also I think many retailers, it stuck with them. They remember that we were actually able to do live demos. So this is still the base, but it's a very nice-looking base. And now the software team is working more on, OK, what can we do next? We're spending more time also doing a deep integration with especially a company called Focal System. They have by now the largest deployment of computer vision AI cameras globally at the Morrisons retail, where they have actually covered the entire estate of more than 500 stores. And we can see that when we combine the benefit of their camera with the benefit that we deliver, we actually almost increase the ROI for a retailer with 30% to 50%, depending on the case.

All right. Thank you. Thank you so much for coming here and presenting the first quarter today. And I'll leave it to you for any concluding remarks.

All right. Thank you very much, Alma. So thanks, everyone, for joining. I know that the quarter was not where you were expecting. I hope that you've given you some hope also for the future. Of course, also with the caveat that there are a lot of things happening in the world right now, so it's really difficult to assess what will happen next. But I hope you leave the call with the feeling that we have a plan. We are taking the right steps forward. And there will be growth. But it could take some time. Thank you very much. See you in Q2, if not before.