Pricer AB (publ)

Thank you very much. A strong report today, so there's a lot to unpack, so I'll leave it to you right away.

Excellent. Thanks a lot, Hjalmar. So, thank you everyone for joining today's call. It's a very hot day in Stockholm today. Let's see if we manage to make the summer heat a little bit higher after this presentation of the second quarter. I'll leave it up to you. Our vision is to be the preferred partner for in-store communication and digitalization. That's what we work with, that's what we speak to our customer about, and that's actually what has been helping us with or generating today's results. I will dive straight into the Q2 highlights. And for those of you who have read the report, you can see that we have had really good commercial traction in a few of our markets. Canada, very strong, but also good growth in the US, in Scandinavia, in the Pacifics. I will come to a little bit more in detail. But one of the things, one of my takeaway, I did some digging into our archives and I realized that this is the first quarter since 2024, where actually we demonstrate growth in both net sales and order intake. So to me, this is a very positive sign that we're moving in the right direction. Another very positive aspect of what we've done is that we can see that the net sales of Plaza Our SaaS solution grew with 35% quarter-on-quarter, and we added actually more than 500 stores in Q2, and we were actually doing much more than 500 stores in Q1 as well. So as you could see from the previous slide, and I'll flip through it very fast, we have added more than 1,000 stores only this half year. So it's been quite a success. From a financial point of view, We are zooming in on historically high price levels of the gross margin. Our gross margin reached 28.1% compared to 19% in Q2 last year. So it's been a major growth. It's actually a major growth versus Q1 this year. And Claes will speak a little bit more about the gross margin later on in the presentation. We continue to show strong cash flow. We have a net cash position, so we're not in debt. The adjusted EBIT margin at 7.1% versus minus 2.8% in Q2 last year. So all in all, a very strong financial performance. Another thing that I really want to speak about is innovation. We have spent a lot of time, actually more time than money, on innovation. We're avenueing the way that we wanted to reshape ESL and the way you look at ESL as the first step. It's been... success. We have had the first commercial orders of Pricer Avenue in the quarter. We have done independent AB testing that really shows that Pricer Avenue generates shopper attention, shopper interest, and above all, it actually does increase sales when you do promotion. So all in all, it's a Q2 that we're extremely happy with. Of course, we see that there are always things that we want more of, actually most of it. But at large, we're super happy with this report. If we dip a little bit more into the order intake, we had a growth of 13%. We landed at 568 million SEC this quarter. We have a growing backlog. We have a positive book to build. which means that we can see that the company is growing from an order point of view, from a backlog point of view. The performance in America, we had a lot of orders from Sobis for the phase two installations. We have also started to install, but we'll see there will be quite intense work during autumn. We received continuous orders from IBM Federal for the deca, so the army stores. But we also start to receive orders from small but tangible increase in orders from new customers. It's with some of the announced partners that we have like MDI. But it's also some new ones. We have a small but new customer in Alaska, Alaska Hardware. But we see more of this, and I think above all, we start to see a mindset change on the market. We start to have more discussions on future digitalization. We see customers making plans, setting budgets, and some also starting to invest. And, of course, after a year where we've seen maybe not hibernation, but it's been very slow, and after the tariff discussion after the start of the war in Iran, it's nice to have seen some positive movements on the market. So this is something we definitely see on the North American market. We have a continuous commercial traction also in Scandinavia. MOVE FROM PARTNER-LED SALES TO DIRECT SALES HAS BEEN VERY GOOD. WE HAD GOOD TRACTION ACTUALLY WAY BETTER THAN LAST YEAR, BUT ALSO BETTER THAN COMPARED TO OUR OWN PLANS, SO IT'S BEEN VERY POSITIVE. WE HAVE HAD SUCCESS ON THE FIELD SALES IN SWEDEN, WE HAVE HAD SUCCESS ON KEY ACCOUNT MANAGEMENT, AND ABOVE ALL, WE ARE WORKING MUCH CLOSER NOW TO THE LARGE RETAILERS AND LARGE RETAIL CUSTOMERS THAT WE HAVE ON THIS MARKET. The Pacific market was really slow last year, but we now see a rebound. So we had good order intake and also invoicing on the Pacific market, and we see an increased interest both in Australia and in New Zealand. So at large, it's actually very positive development. And the order intake trend is now moving in the right direction, as you can see from the graph. So what else is happening? Retail industry insights and macro trends. I wanted to focus on the one that's been highlighted, market growth and strategy or strategic digitalization, but also tech transformation and personalization. I will speak about Avenue and I will speak about AI. The first one, so we did this AB testing. It was done by an independent third-party company called Retail Academics. This is what they do. They investigate behavior in stores. That's really what they focus on. We were working across three UK stores. We had 23 unique brands. We had Coop of East England's own brand, but then we had quite a few well-known brands. Pringles is one of them. And we had 66 different products. The real question was, what is the impact of Pricer Avenue versus the traditional ESLs when you do promotion? So in two stores, we had Avenue, and in one store, we had our regular ESLs. And of course, we got full access to the sales data or retail academics got it, but they also did interviews with shoppers. And it was in a level where you can say that the statistics is correct from a statistical point of view. And what is the result? Well, Shopper identified promotions 43% faster with Pricer Avenue. And that's the entire idea. You make a promotion, you want people to see it. 90% of the people that were interviewed, they stated that the promotion and the setup with Avenue actually increased their interest to purchase. And of course, the best part was that we could see tangible and statistically verified sales increases. So when we looked at all the 23 brands and the 66 products, we could see 2.2% sales increase. It doesn't sound like an awful much, does it? But the thing is, if you're in this world, if you're actually selling what we call fast-moving consumer goods, depending on the assortment, depending on the product that you sell, an increase of... Thank you very much. But if we then say, if we took it from more like a general picture with a price or avenue price, if we had an inspirational picture, this figure raised to 3.8%. If we added the brand logo, like you can see here in the Pringles picture, it was almost 5% sales increase. These figures are something that our retail customers want. This will be an immense help when we go out and sell Avenue. We can tell them with Avenue, you get all the benefits from the traditional ESL, but we will also, unlike anyone else on the market, help you with real sales uplift when you do campaigning. This has also led to a situation where we're now engaged to a different way than before with the fast-moving consumer goods companies, because we have something that can help them sell more in the same store, same setup, but just sell more. So this has been really good and the fact that we now have the test done by an independent third party will also be extremely helpful. Something we've also been working a lot with is our own AI platform. We've been working with AI since 2024. And more recently, our team has now spent a lot of time basically building our own tools and our own way of working. So you could say that we have an internal platform that is now We built it, applied AI infrastructure. It's agnostic from an agent point of view, which means that we can work with Gemini or we can work with Anthropix and Claude or we can work with pretty much any agent we want. So if we want capacity, we can actually use the agent that adds most capacity. If we want low cost, we can use that one. Something that actually impressed me quite a lot is that we have built our own way of training the AI. It learns through self-reflection, but it also adds to external multi-model data, whatever that means. That actually means that we can train it with YouTube. There is a lot of clips from really skilled engineers where we can actually take that and use that as a part of the process to train our AI. And we now look at the projects on the software side that we've actually done since we started to implement this project or this Pricer AI at full. We've seen that we now go up to more than 10 times the capacity in development. So as a next step, what we're doing now is actually we take this platform, we will also use it on our internal processes to see how can we improve corporate functions. same logic we have same kind of interfaces but the agents will use help us to be more efficient internally and the next step is we we have 60 million ESLs connected how can we actually use that in a different way. How can we give more power to our customers to adopt the way they work with Plasa? Here, one potential will be to see how can we use our platform to actually embed it in our tools and our products that we have customer facing. So that will be also part of the future setup. So we think with this platform that the team has built, and they've done fantastic work, we have something price-specific that we can use to improve internally, but also that we can have to improve the customer experience and the way our products are being used. So I think you will hear more and see more about what we're going to do with Pricer AI into the future. I think I'm done with the shameless selling, so Klaus, will you take the facts?

Okay. Yeah, so let's look at our P&L then. As you can see, our sales grow 8.5%. But if we exclude the currency effect, it was close to 10%. This was 9.9%. What also is very impressive for this quarter is, of course, the very strong gross margin. And that is driven by three things. It's low production cost. and it's also the customer mix and the product mix, but it's also a strong increase in the plaza sales. We also took a one-off cost of 9 million in this quarter, which we'll save on an annual basis. We'll start now in July, 17 million per year. And adjusted for the one-off cost, we have an EBIT of 34.5 million in the quarter, which is a margin of 7.1%. And then if you look at the cash flow, we continue to have a strong cash flow. As Magnus said, we have no net debt. We have 336 billion in cash, which is net cash of 36. But we also have available unused revolver credit of 150 million. So we have available cash for almost half a billion at the end of this quarter. As you also can see, the inventory has gone up. with more than 100 million now in the first half of the year. And that is, of course, for the upcoming sales. We have a higher inventory level now than we normally should have, so we can expect the inventory to go down during the rest of the year. And then if you look at the net sales and the gross profit development, the interesting thing here, of course, the very strong increase in the ruling 12 months gross profit. And yes, in this quarter is up more than 10% compared to last quarter ruling 12 months.

All right, so let me summarize. Strong financial performance, good net sales, good order intake, or at least it's growing. It depends on what you think is good. I think it's good. I'm happy. Increased gross margin. It's close to historical highs. And we all have a net profitability. We've executed on the organizational changes that we spoke to in the Q1 report. It's, of course, always hard when you do it in an organization like ourselves. It has a tangible impact. But also here, I have to say that our colleagues have done it really well. And we have done our best, of course, to make sure it will be as painless as possible. But it also, of course, adds to our ability to make profit into the future. So it's the right thing to do. Looking at the geopolitical situation, we start to see, as I mentioned before, that the sentiment appears to slowly improve. And we can also see that in North America, customers are planning for new investments. They are starting to invest, and we are part of many of those discussions. That's something I just wrote a little bit about in the CU update, but I want to end with, is that we need to continue and maintain our position as thought leaders. We managed to establish something with Avenue that we get positive feedback on a regular basis. On events, from customers, from suppliers, we see that also our competitors are trying to copy us. It's the position we need to maintain. So we have a few projects, new innovative solutions, and we make significant progress on these solutions. So it's something that we look forward to speaking more about later. But it's something that will keep us in the forefront of innovation, and that will maybe not cement our position, but make it stronger as thought leaders.

That's pretty much it. Are we ready for the Q&A? All right. Perfect. Thank you. Very exciting finish there. I guess there's something we will come back to in the future. I hope so. Yeah. So I figured let's start with the gross margin. We have some questions on the line regarding this. And I'm also curious because you mentioned, of course, this is the result of a lot of things working together. But if we if we look at the sales mix. You mentioned, of course, the product mix, and then there's the market mix. Is it safe to say that all markets are pulling evenly, or is this sort of expansion maybe concentrated towards certain geographies? Can you give us some details on this, maybe?

We can say that, historically, There has been tougher competition, more price pressure on the European market, and a little bit more maybe in the South and Central Europe than in Northern Europe, and less so in North America. So, yes, we can see a distinction, but that doesn't mean that there is no competition in North America. There is a lot of competition, but it's been historically on a different level. So, yes, we can see that we have a higher contribution from North American customers, generally speaking, than from European customers.

And do you feel that this is in some way connected to your direct-to-market sales approach that you adapted across some geographies here in Europe as well? Or is it just a wider shift sort of in the pricing?

I think we have been, regardless of sales method, when we move from partner-led to direct sales like in the Nordics, yes, we can see that it's been contributing to increasing our gross margins, both from a service delivery point of view, but also from a product price point of view. I think in many geographies, we've been actually quite good to maintain price and really use the pricing power that we have. We have a good solution. We have customers that want to continue. And of course, you can never be too high in price, but we need to make sure that we are careful about really addressing the value we deliver and to maintain our prices and I think you can see a lot of that in our general increase of margin as well.

One other aspect also is we have a better planning now which means that we are taking more by boat compared to plane before and that has a huge impact on the margin.

Which of course also affects the inventory.

Is that what you referred to when you mentioned production costs? Is that shipping?

Yeah, that's a part of the production cost and our cost of goods sold.

And it's actually on the production cost. We are continuously working with optimizing our cost of the products. We reduce the number of products that we have so it's more effective. We look at the way we do the transportation, but it's also manufacturing costs, component costs. So it's a constant negotiation to make sure we have the right cost levels.

Yeah, okay. Thank you so much. And of course, like you mentioned, the strong development in the price of Plasa contributed to this as well. Do you see additional, I mean, you previously, you had a recurring sales target for the Plasa. Can you give us some, maybe some soft values or what do you see for the type of potential for keep upselling, you know, the Plasa platform and the recurring revenue?

I see good opportunities. We have worked a lot with Plaza. We actually have a number of larger customers that are still on an on-prem version that are planning to move over to Plaza because they see the benefits. So the customers we have, they are really happy, and we are spending... Probably the same amount of money developing PLASA, but now we don't develop PLASA, we develop the add-on functionalities. Some of them will be to make sure we maintain a really good base level. Some of them are functionality that we will judge for, that we can say there's a clear value add, there will be a clear price for this functionality as well. So you could say we moved a lot of the development from the maintaining the platform to actually building new functionality, which has also been fueled basically by the AI advancements that we've done.

All right, perfect. Thank you so much. And if we move on then to the sales and the order intake, could you elaborate a bit on the SOBIS, the framework agreement that you have, the latest one at least? Was this strongly contributing to the order intake in this quarter? Did you... start the deliveries? You know, I believe you mentioned sometime around May that you anticipate the deliveries to start. Is this, was this? Yes, it has all materialized. It's materialized.

So we can say that, yes, we have had a lot of order intake. It's, I mean, it's a big contributor, but we have started deployment in May according to plan. We see that we said that we will deliver over six quarters. We're trying to squeeze it. It's actually Sobis that say they want to do it as soon as they can. So it's actually together with Sobis and our partners plan store by store. So we really try when we get an order now, we know it will be delivered fairly soon. So it's not unlike 2024 when we got this very large order and it would be spread rapidly. across basically six quarters or four quarters at the time. So now every single order we get is something we plan to deploy quite fast.

Yeah, okay. So quite a little bit different deliveries approach this time, which is something I guess to bear in mind here. Yeah.

And I can say also that the volumes will depend. So they have a lot of different formats. They have their own SOBIS format, but then they have a few others. And they are of different sizes. So you can see that volumes might depend on actually which format they prioritize the deployment of.

Thank you. And I believe maybe you addressed this, but it was a very interesting comment, so maybe we could deep dive into it a bit further. You mentioned that you're noticing activity or digitalization activity in the North American market today. Could you describe maybe what you're referring to? Is it mainly among, you know, your existing collaborations? Is it also new customers running evaluations?

It's both. And of course, from our point of view, we want to serve our existing customers. So we have, with a large chance, we have very good dialogue and good discussions on What are the next steps? How do they want to transform from what they have now until the next generation of ESL avenues? We have avenue discussions with quite a few of the really large retail customers we have in North America. How can it be utilized to push their promotions and help them sell more? But then it's also new customers and, of course, new opportunities. And there is sales also to some of the partner agreements that we signed last year.

Yeah.

But, of course, it's exciting to see what's going to happen with the new opportunities. And, of course, at the end, they are binary. But we can see that there are opportunities. We can see that there are interests and that they actually plan to do the investments.

Yeah, yeah. I think one interesting partner that you work with in the region is the MDI, and you referred to that earlier. Do you have any more sort of clarity regarding the scope of this deal or what could be the potential of the agreement?

They have a huge number of stores. I can't recall the exact number right now. It's 500 or 600. They're a distributor of foods, but they're also a distributor of IT services to their stores. So here we're working together with them. We go to their events. We discuss when they make promotions. And, of course, we reach out to the stores associated with MDI. So it's something typically with these kind of partnerships you can see that You need to win the first stores, and then you start to build traction, and then you can see that the speed will just basically speed up and go faster and faster. So it's a combination of you need to bring the message out to the market, you need to show that there are a few first movers, and there will be a lot of internal talking. So we've seen it with quite a few retail chains that can start slow, and then it gains momentum.

All right, perfect. Thank you. And then we have some questions on the line as well. A lot of them are actually about the gross margin as well. So if you don't mind, maybe we jump back into that. Regarding the product mix, could you elaborate a bit on this? I mean, maybe aside from the plaza versus remainder of sales, if we disregard plaza, for example, the remainder of the product mix, how does that impact the gross margin maybe on a wider level and maybe specifically for Q2 as well, if you can give us some bit of information on this. What else should we say, Claes? What would be your take?

We have fewer products, which means that it's easier for us to plan. And that also means that we have been able to reduce our cost to produce the products we have now compared to Yeah. So maybe it's actually more customer mix than product mix. Yes, I would say that. But we can see we have the positive contribution from Plaza, where also we made...

We made changes to the software, so actually we need to pay less to use it. So we have less cloud cost with the new software. But then also we have the non-recurring services. We have a lot of installation services that's also contributing to the gross margin.

All right.

Yeah, it's a combination.

Yeah, that's very clear. Thank you. And then on the avenue, there's a question on the line here where you could give some additional details to potential orders here, maybe on the sort of like financial profile that you're expecting. Would this be dilutive to the margin or could it be even accretive? What is your best hope for the pricing of this?

So my hope is, of course, that if we show that we can deliver additional value, and now we showed it in the AB testing, that we take part of it. So if anything, I would expect that we make more money out of it. And I do not expect that we will do full stores with Avenue, but I see that Avenue will be a complement for what high impact zones, so basically zones where you have product with high gross margin or product that you want to campaign or product where you have a very high churn. But Thank you very much. Thank you very much. Thank you. Many of these customers, the FMCG companies, the local teams have a relatively high degree of freedom to actually choose the way they do their local promotions. So I think this is an area where we will spend more and more time because we believe that could be a very rapid way of getting Avenue into stores. But then it's a new product. Retailers are quite conservative. I'm sure that I'm an optimistic guy. I want it to go fast, but it will probably not go as fast as I have in my mind. Introducing new technology, even though it's great technology, typically takes some time. But yes, I do expect it to contribute positively to margin. I expect it to contribute positively to the profitability of our customers. And we should take part of that.

And considering the tests that you've been running and the results you've been getting now, what conclusions can we draw regarding the timeline, maybe looking forward towards a sort of wider scale product launch?

I think so. I mean, from our point of view now, we have products we are selling, but it will probably take some time. So we shouldn't expect any volumes this year, but I'm carefully optimistic for next year.

Yeah. And then we have a question regarding the plaza. Could you provide us maybe a little bit more on the sort of pricing that you have for this service? Is it sort of a subscription fee? What does the customer pay for? And what is sort of driving the growth?

So it's a pure subscription fee. And the fee is basically based on several parameters. What is the size of your store? What is the functionality you want to be included? That's the base. And then we're working more on now the added functionality, which also will be then subscription-based, but then on top of what we have. So we see that with the installed base of 7,000 stores, we have a pretty good market to actually do upsells and further upsells.

Yeah, sounds good. Thank you. Then we have a question on the inventory. Is it some sort of maybe, you know, inventory effect reflected in the gross margin that we see now in Q2, considering, you know, I guess, effects on purchase pricing? I guess what most of these questions boil down to is whether you feel, you know, that the current level of gross margin is sustainable going forward, maybe?

It means what will be sustainable. One quarter can be higher margins than the other quarter, but of course we have significantly higher margins than we had last year, and that will continue.

All right, super. Thank you very much. And then I guess on the cost savings, of course, you have communicated the scope of these and we saw the one off here in the second quarter. Could we expect, you know, the full sort of run rate of this savings to start now in the second half or is there sort of a ramp up process towards?

No, it's what we said. The savings that is related to the one-off cost of 9 million, that's going to be 17 million on a yearly basis, that will have effect from the 1st of July because these people will not get any more salary. And we have taken the cost.

Yeah. Okay, super. That's very clear. Thank you so much. And I believe we have addressed most of the questions that we have on the line now. Yes, I believe that's everything for now. So I'll leave it to you for any concluding remarks.

All right. Thank you for having us, Hjalmar. Thanks everyone for joining today's call. I certainly hope that we managed to increase the summer temperature a little bit with this presentation and the report. I look forward to our next presentation. And until then, I wish you a very pleasant summer. Bye.