Pricer AB (publ)

Good afternoon and welcome to the Pricer second quarter 2025 earnings call presentation here at DNB Carnegie. I'm joined today by CEO Magnus Larsson and CFO Magnus Wetzel. Welcome, gentlemen. Thank you very much, Hjalmar. I figured we start right away, so I hand over the word.

Oh, sorry. Thank you. So hello, everyone. Thank you for having us today. We are here to present the second quarter 2025 with me, as mentioned by Hjalmar, we have Claes. I'd like to start with, just for those of you that might not know us that well, Pricerin Brief, founded in 1991. We are a leader within retail tech. Our vision is to be the preferred partner for in-store communication and digitalization, highlighting really the collaboration and partnership with our customers, where we believe that we are doing things quite different compared to competition. We are, from a deployment point of view, we have sold more than 28,000 stores and we have some 350 million labels that we've sold and delivered, which makes us a clear number two on the market. Going into the second quarter, let me start by first stating what I guess is the obvious. I'm not at all happy with this quarter, with the net sales that fell below expectation and where we also have a poor profitability. But of course, there are things that are also positive in the report that I will lift and highlight. I would also like to start with looking at the market. When we are looking at the future and we're looking at how will the market grow, there is nothing that has changed from what we predicted earlier, that the market will continue to grow. And over time, the growth will be around 15% annually, at least until 2030. This is what we see. We see no reason to actually change that view as well. We see that there is a real need among the retailers to actually do digitalization of the stores. From the hesitation that we've seen in terms of investments now during the first half, it's not a hesitation saying that we'll not do anything. It's pushing things into the future, waiting a little bit to see that things are actually getting more clear on the market. So you could say that the geopolitical situation have really affected us both in Q1 and also now in Q2, as I alluded to. That's a clear risk when I did the Q1 presentation. One thing that has actually developed in a maybe not unexpected way, but we can see that looking at the US market specifically, Here we have had a number of large RFQs or requests for proposals and procurement processes that has actually been paused totally. So it's not been won by anyone, but there's been several where they said that we just have to wait until next year. So it's not lack of interest, but it's the uncertainty so high reflecting the tariffs that they just simply decide to move the decision into the future. On the Nordic market, we can see that there has been low activity versus previous years. This was expected. We are now going direct. We have a new company in place in Norway. We have recruited a team of salespeople and delivery people. that are all in place as of August 1st. We have really positive discussions with all our previous customers, the one that we sold with our distributor before, and they've all confirmed that, yes, we're going to continue with Pricer, and we expect all the contracts to be closed now in August. So very positive development. Of course, here we see the possibility to actually increase sales and profitability with a new setup. I would finally like to highlight the order intake. We did actually have a better order intake than last quarter, or the quarter in Q2 in 2024. Slightly above, but if we actually take out the FX effects, it's actually growth of 7.7%. But more importantly, I would like to highlight the European market where we can see that the order intake now in Q2 is 20% better than the European market were last year in the second quarter and also 9% above the order intake in Q1 this year. So we see a positive momentum on the European market. Having said that, Claes, do you want to say something?

Yes. As Magnus said, we are, of course, very disappointed of the low sales and the low gross margin. The low gross margin is, of course, highly affected by the low sales as our fixed COGS has a bigger impact, of course, of the sales because of that. On the cost side, our operating cost includes our reconstruction cost in the quarter for about 8 million. And if you take out that, the cost is slightly lower in Q2 compared to Q1. Then if you look at the cash flow from our operations, that is quite good despite the new EBIT result. We have a better handling of our working capital. They have taken down of inventory during the period. Net debt now is at the same level as it was in the beginning of the year or at the end of last year, which is quite good compared to the cost and the losses we had during the first half of the year. If we then look at the sales and gross margin development, we can see that the order intake is up compared to Q1 with about 10%. The backlog now when we go into the second half is 660 million, which is significantly higher than a year ago. And as I said, both gross margin and the gross profit has been affected by the low sales and the bigger impact from our fixed cost. We have all our production cost in US dollars, and we have very little effect of that now in the first half, mainly because a lot of the inventory that has been sold during the period was inventory booked at a much higher dollar level when we get into this year. But this will have a positive effect during the rest of the year when we see an effect from our lower production cost. And then this slide shows that you can see our operating result over 12 months, ruling 12 months. We are now at the same level ruling 12 months as we was after Q2 last year. Now we have 106 and last year at this time we have 102. And then of course the margins are affected. Thank you, Klaus.

So looking at the market, what are the key macro trends and what are the key insights? Well, in addition to the tariffs, of course, being affecting the general sentiment of the market, we see that the market will grow. We see that digitalization of the store is highly strategic. It is something that we do discuss with a lot of our retailers. In fact, we actually discuss it with more customers now than we did before. We have a lot of new discussions, very much related to price or revenue. But they all go to how can we improve the in-store experience, which is also here as point number four. The operational cost, we do not really meet any retailers saying that we're happy with our fixed cost and our operational cost. On the contrary, pretty much everyone is looking at how can we actually address it? How can we get more work done by our store staff without actually increasing the cost or even decreasing the cost that they have today? And of course, since we are the masters of store efficiency, we do have a really good story here. Another thing that when you digitize the store, and I would say after getting the operational cost down, Getting the inventories right and getting the on-shelf availability is something that is a clear interest. When we've been conducting service with a customer, it's one of the key things where there will be investments. So anything computer vision, AI, do I have a product on the shelf? If not, how fast can we get it there? Do I have it in my stock? So here we see a lot of development, and that's, of course, positive for us because here we do have the solution to address it. In-store experience, how can we make sure that the shopper appreciate being in the store? How can we make them buy more? How can we make them actually buy more high margin products? Here we come into the dimension of signage, but once again, something we also address with price revenue. Sustainability. There is a lot of interest still, despite some of the reporting being pushed into the future in Europe. But fundamentally, many retailers want to do good. They want to actually push down the climate impact of their operation. Here we are in really exciting collaborations with Epishine to use light harvesting, which will be one of the features for price revenue, but also with companies like Paper Shell to see how can they use cellulose-based material in our products. I think I'll jump, having said that, I'll jump to the next one. So what do we do? Well, I guess many of you know it, but I would like to highlight utilizing, capitalizing from our installed base. We are number two on the market with more than 350 millions deployed by the end of last year. We have a premium position in all the stores where they actually have our labels. So one of the key things from a strategy now, it's to connect all this or every single store connected will be an ability for us and eventually you as an investor to get all the benefits of additional sales into the future it will give us the possibility to upsell software features it will of course give us the recurring revenues but it will also give us the possibility to very quickly see when is there a possibility to do additional sales of different sizes new esls so this is quite fundamental Connecting all stores is something we're pushing our salespeople to do right now. We have discussions with most of the large retailers now saying if they haven't done it yet, we are now in tangible discussions with several and actually moving from the in-store server to actually something that we have on SaaS. I realized when I was about to make a presentation to Carrefour, to their management team, that we have a fantastic strategy, but we hadn't really done it for the customer, what's actually in it for them. So if I would take the strategy work that we've done and compile it into three areas, it would be these three ones. And the first one is focusing innovation. I think I've said it before, but we need to be perceived as the most innovative company within our space. and not only be perceived, you actually have to deliver on it. So one thing will be that the work that we've done with Avenue, we target to come out with new additions, new functionality, new benefits of using Avenue continuously. So in addition to the stuff that we will actually launch now and do the pilots within Q3 and later launch, we are looking at the next generation. What do we want to add? We have created an architecture where it will be easier for us to add added functionality. Sustainability will be important. We have a setup, especially with paper shell, where we believe that things, if they develop as we hope, it will help us to radically reduce the carbon dioxide impact of our ESLs. And we will continue to expand and work actively with our patent portfolio to protect our customers, but also to protect ourselves. And here we have radically changed the way we work with patents over the last two years. So anything we do now, we file a battery of patent applications to make sure that what we do is something that we can actually defend. We also need to continue to develop solutions that will really deliver real customer value and ROI. There's a lot of talks from competition as well on they can do whatever we do. The fact is they cannot. And we need to make sure that it's tangible, that the value that we deliver is real. And when they buy something from us, they get a better ROI than buying it from someone else. So it will be about price or avenue. We will continue to deliver ESL system that will clearly outperform competition. But we will also work and extend the partnerships we have with companies within computer vision, AI, retail media, while we bring the market-leading expertise. And finally, and this is something that we are now doing actually in many different ways, we're building now a customer advisory board where we let our T1 customers meet and see how, you know, what do they want, how do they use the system. I don't see any of our customers, other competitors doing it really this way. They seem to be quite reluctant to meet the customers meet. We are quite happy to let our customers meet. Co-creation of solutions with select strategic customers. We are especially for Avenue in discussion with a new tier one customer where they visit us in Stockholm. They will come back very soon again. And they have a lot of tangible input to Avenue, not only the hardware, but also the software functionality on top of it. So here we're actually moving quite fast into discussions where they are giving very, very tangible input and building up for strengthening our relationship. And now it's time for the summary before Q&A. As mentioned, this is a quarter that we're not happy with. We can see that sales and profitability has clearly been affected by the macro geopolitical situation. We have had a slight improvement on cash flow. And I'm happy because we've been actually emptying the overstock that we've had that Klaus spoke about. I mentioned the American processes that we've seen several retailers pausing or actually stopping altogether the procurement processes that they've been in and we've been in. Not because they do not believe in what we do, but there's too much uncertainty on the U.S. market right now. So they said that, okay, let's continue discussion next year. uh what i didn't highlight on the first slide that i sort of wanted to end on maybe not a high but a little bit more than high is that there's been some some questions on on ourselves in carrefour and i can just say that the uh out of the growth in in sales and order intake on the european market carrefour was actually positively contributing they uh we put the budget in place in in december we got it approved by the board We had a pretty positive view, but actually the sales, the order intake that we got out of Carrefour was much higher than we actually planned for. So from a Carrefour point of view, we had a really good order intake now in the first quarter. And this was only Carrefour France I'm talking about, so also from other Carrefour countries. So having said that, I guess it's time for Q&A.

Thank you so much. And I figured we could start by touching back on the gross margin here a bit. Because, I mean, you went into the impact from those various factors, but could you just maybe touch back on those and maybe sort of like reflect on whether or not like volumes were the main driver of the gross margin pressure and how much of the gross margin pressure year over year was actually from FX that we saw. Maybe if you could just split up those different factors and how they impacted the gross margin in the second quarter.

I don't have exact details, but one big impact is of course the depreciation related to the whole of the production. All our tools and so are in there and they are fixed and depreciated over the year regardless of how much we are selling. And we have also everything else regarding inventory handling rent and things like that so so that of course has a big impact and the other thing as i said that will have a positive effect during the rest of the year is that we will have an effect from the lower production costs related to lower dollar

And looking at the sort of geographical mix, has there been any recent shifts in pricing points maybe that you are experiencing towards your customers, maybe in the market? Is there like a general price pressure? Do you feel confident that you can maintain the pricing premium that you have?

We can see that with this uncertainty in the market, there are less opportunities. And especially in Europe, we've seen that there's been a lot of attention and a lot of push to win these deals, and there are fewer deals. Of course, that will impact the sales price. Then it's up to us to defend our position, saying that when you actually buy a price resolution, you will get much better value. You will get a higher ROI and a better total cost of ownership. So, yes, we see it's tougher because there are less opportunities. But I feel confident that from a margin point of view, the gross margin that you see now in this quarter, this is not, from our point of view, the starting point of a new level of gross margin. We do expect, and I guess you can say that, Klaus, a similar level of gross margin this year as we had last year. So we expect to defend our gross margin.

Yeah, absolutely. Thank you. You have previously spoken on your growth in relation to the market, maybe mostly for the previous year, but of course, your own growth targets also align with the market growth. Could you elaborate a bit on how do you feel that you have developed so far this year? Are you losing market share or are volumes down in a similar manner for the sort of wider market? And how do you feel that your position has developed maybe for this year and what we could expect for the full year 2025?

I feel that when I look at ourselves and I look at competition and I know that it's harder for investors to actually get the figures from our Chinese and our Korean competitors, but when we were looking at their reports, we can see that they did not have any growth in Q1. They were also reporting, especially one of them then extended or a very heavy hit on the profitability. We believe that the market share has been flattish, but when we look at what we do, if we look at our order intake, we see that we are growing from an order intake point of view on the European market. And that's something I don't really see from competition. So are we taking market share? Yes, possibly. We are at least not losing market share on the market when we look at the order intake and most likely on the net sales as well. So we can see. It's generally speaking, the market will probably be last year. I said that we believe that at least it didn't grow more than 5%. It might even be much lower. It seems likely that it's been the same. It might have been negative growth for the market this first half. That's what I would imagine.

Yeah, and you mentioned the order intake in Europe and also Carrefour. Is there reason for optimism here? This is, of course, a very important account for you. But what could we expect going ahead? And what do you currently feel? Is it reason for optimism on that end?

Given our report, I would still be careful by being too optimistic and using strong words. We have a good relationship with Carrefour. We have more than 1,700 stores together with them. They are placing orders continuously, both for their own stores that they have, own, and operate, but also for the franchisees. We have good dialogues with them, so we have a good customer relationship with Carrefour, and I expect that to continue.

Yeah. Okay. And looking at North America, you mentioned that you see the potential maybe for some additional customers outside of Sobeys in Canada. Could you elaborate a bit on this? Do you feel that there's a positive momentum going on here?

We do. And this feels a bit odd because there's a fairly big difference between Canada and the US where we see a strong... interesting investing now this year, whereas in the US market we see that it's really quiet. When we now start to deploy the Sobi stores, full four-color stores, really nice, we see interest from other retail chains and some of them like Metro Group we have since before, but we see there is a renewed interest and it's within many different formats where we're not active yet. And new categories we see from a pharmacy point of view, we start to see more interest from a do-it-yourself, but also within traditional grocery. So I believe that the Canadian market will be a good market for us and possibly a growing one over the coming couple of years.

Yeah, thank you. And on the Dan Sobis deliveries, you mentioned some delays. Could you quantify this a little bit? Is the full deliveries pushed back? Or is it just mainly some initial delays that we're experiencing? And what is the current sort of pace of installations of the Sobis order?

It's been a small initial delay. We don't see any pushback of orders. We don't see any major changes to the schedule. So we have developed a brand new ASIC that they are taking in use. It's fully encrypted. We're delivering as per plans now. So we expect to continue to deliver these Orbeez orders as we planned.

All right, thank you. And looking into France and the restructuring measures, could you maybe elaborate a bit on the progress here and what could be expected maybe going ahead for the second half in terms of both, I mean, efforts, but also costs, I guess?

So from the cover, we didn't make any announcement on the French restructuring. That's because what we did here is that we want all the markets to really stand strong on their own. And I felt that we, as an executive team, we felt that We were simply too many staff, given the business that we've had in France and the local profitability. So it was clear. And I think also we did have some inefficiency. So it's positions that we are letting go. They've actually all left, but we are not replacing. So I think that now we have the right size for basically delivering the business we see over the coming period of time. The money that we save is something that we've also planned to actually reinvest in other markets. So we haven't done it to actually be more profitable. We've done it to be able to actually release resources to grow where it makes a whole lot of sense.

And you also previously mentioned that you are reviewing the way to market in a wider sense that you try to maybe have a more direct approach on maybe more of a larger scale. Could you elaborate a bit on this? Is there any risk for some traction when you're going towards a more direct sales approach or do you think that this sort of conversion can work smooth?

I hope that it will work smooth. And so what we have done is this is something we started already last autumn. We started to look at all the markets to see how do we address them and how well does it work with our resellers? And we realized with some it hasn't really been working as well. So we we are minimizing the work together. And that's also part of selecting which markets we want to be on. But it's also for some of them where we can say that we haven't been happy with the performance. We haven't been been happy with we believe that they've been trying to get too much overhead or margins on top of it without actually delivering a very clear customer value which is the fact it wasn't communicated that way but it was sort of from our point of view on the nordic market we decided that we will need to go direct This was also something we communicated with our partner on the Nordic market that we want to do things in a different way. So we believe that this gives us the opportunity on this market to actually improve our revenues and improve our profitability. And we believe that we'll also be able to serve our customers much better. And we can see in the dialogues now that we're having to get direct contact on the Nordic market, we are getting very positive discussions and there are some input and some new opportunities that evolved that we didn't see before. But also then we can see on some markets like Canada and the Pacific market, we are very happy with the partners that we have. Here we're actually strengthening the way we work together. we found a way where their value add is not actually affecting the business. So here in Canada, we're super happy with our partner and the way they address the market.

Okay. Yeah, that sounds great. We also have a few questions on the line. So if we could just touch back a bit on the order intake in Europe, could you just remind us, is this sort of like a wide growth or is it accentuated towards certain markets or customers? What is mainly driving the strong order intake that we see?

it can say with strong order intake on the nordic market we have strong order intake on the french market strong order intake on the uh benelux market um so so those are some where you can really see that they are doing more than expected um but then we've seen good order intake also or on the level that we expected on the italian market as an example as well So at large, it's been a good spread, but if I should name three, well, not two, but I would say Nordic and France has been standing out.

Yeah, okay. And then maybe if you could elaborate a bit on the wider impact from trade tensions, I mean, naturally, like you mentioned, there is a cautiousness among US customers here. But is there something additional that you would like to add? Maybe some, like ballpark outlook, what we could expect looking ahead, of course, the future is uncertain, but but if you were to provide the best guess,

It's very hard to say. In the Q1, I said that the cautiousness that we see that might spill over to Q2 and possibly to the second half, that could still be the case. There is a lot of opportunities, but we see there is some hesitation. Orders that we thought that we would get in May They have still been decided for implementation, but will they come now in August or will they be pushed to September? Hard to say. So I would say that many customers are still a bit careful. But once again, we have deals where we know that we have won it, but we haven't received any orders yet. And the question is then when will they come?

Yeah. And then on the opportunity then for recurring revenue and maybe specifically on the installations of Pricer Plus, could you just remind us of how is the current momentum and do you feel optimistic maybe looking into 2026 on the recurring revenue side and what are your initiatives for maybe upselling on existing customers this service?

So if you look at, you start with installed base. So we have reported back at the end of last year that we have 5,000 plus stores on Plaza. Now that number is much higher. We have an issue with Carrefour as an example. We have converted more than 300 stores from Pricey Server to Pricey Plaza now in the first half. We are in discussion with many of the large customers that we have that are historically on Price to Server, but now we are planning for the migration. So that will be with a number of retail chains, both here in the Nordics, in Canada, Italy, France, and basically on most markets. But some will have, of course, bigger impact than others. We are constantly working now with PLASA and additional functionality on PLASA. When we work in partnerships, let's say on the computer vision and AI, we make sure that we have a deep integration where we can actually also charge for the integration. So it's not just a giveaway. It's something where we can say that when we do this, we will add a price to actually do this integration. And then we're looking, driven by Plasa, we're looking a lot on our design tools, where you actually do the design of the ESLs to do something that is market leading. So, and of course, this is something that we intend to sell as well.

All right. Thank you. I think that's all on my end and there are no additional questions on the line, so I'll leave it to you for any concluding remarks.

All right. So thanks for having us, Hjalmar, and thanks to everyone on the call for joining. As mentioned, we are not happy with the result, but of course, we see there are some positives. The order intake growing in Europe, the fact that Carrefour is contributing positively to this order intake. And we look forward to come back to do the Q3 reporting