Pinewood Technologies Group PLC (PINE) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the presentation of our H1 FY 2026 results. I'm Bill Berman, CEO, and our CFO, Ollie Mann, is here with me today. The first half of 2026 brought strong strategic and operational progress together with continued growth. Our teams keep delivering and pushing the company forward, including in North America, where the Pinewood.AI platform roll-out is gathering momentum. In August, we announced a recommended acquisition by Ridgeway? Partners. Shareholders approved that acquisition last week, and it is expected to complete within the next month. I'll say more about that shortly. Ollie will then walk you through the headline financials in a few minutes, but before that, I'm going to touch on the strategic and operational progress from the first half of 2026. In the first half of 2026, our key priorities have been: first, progressing on our North American product and development work; secondly, continuing our system implementation with Lookers, as well as various other customers throughout the UK and Europe, as well as Porsche Japan; thirdly, working closely with Marshall's as we move nearer to starting the roll-out with them in 2026; lastly, in addition to selling the core system, selling our expanding suite of products to both existing and new customers.

Work on our North American development has kept moving quickly all through 2026 — not only on the crucial OEM integrations, but also to make sure the system we're rolling out is the best-in-class offering across the US and Canada. We've been collaborating closely with Lithia's team so that we hit our target roll-out start in Q4 of 2026. We remain on track for that, and it speaks to the hard work put in by both the Pinewood and Lithia teams. Over in the UK, we've carried on with the system implementation at the Lookers dealers and expect it to wrap up in the first half of 2027. We've also been preparing the ground with Marshall's so that their system implementation starts smoothly, and that work is well underway. Our product and development teams have built some excellent new products over the last few years, alongside the AI products we acquired with the Seez transaction last year. We're now seeing the benefits of that work as we grow sales across our existing customer base, as well as with new customers. One of the strongest proof points of the value customers place on the solution is churn. In fact, we actually had negative churn for the first half of 2026, with increased system usage from our existing customer base.

Back in mid-August, we announced a recommended offer from Ridgeway Partners for the Group to be acquired. That cash offer, at £4.48, was an attractive premium, and it gives Pinewood.AI access to deep technology expertise, long-term capital, and a partner with a strong track record of helping software businesses scale. Given how supportive our shareholder base has been over the last few years, with a firm belief in the growth opportunity for Pinewood, particularly North America, we felt it was important that we had a chance to continue to be involved in our journey. With that in mind, shareholders also had the opportunity to roll some of their stake over into the post-transaction business. We are delighted that so many shareholders took up that option and will continue to be part of the next chapter of our journey with us. Following the successful shareholder vote last Friday, on the 25th of September, the deal is now expected to complete between the 9th and the 23rd of October. I'll now hand it over to Ollie to take us through the financial review.

Thanks, Bill. Good morning, everyone. During the first half of FY 2026, underlying revenue rose 18.4%, reaching £23.2 million. Several factors fueled that growth: a favorable effect from new customers, upsells within our existing customer base, and a full 6 months of contribution from Seez — compared with the first half of FY 2025, when we had only 4 months of Seez revenue, since that business was acquired at the beginning of March 2025. Underlying gross profit came to £19.8 million, 16.5% higher than last year. The gross margin rate, at 85.3%, declined modestly, in line with expectations, reflecting the fact that Seez's gross margins are lower than those of the broader Pinewood business. Underlying EBITDA — our key profit metric — increased 11.4% to £8.8 million in H1 FY 2026. Recurring revenue has held at roughly the 85% mark, with a slight decline versus last year. Most of our non-recurring revenue comes from system implementations for new customers. Net customer churn was negative during the first half, which means usage from our existing customer base, on a like-for-like basis, actually rose over the period — showing how important the Pinewood system is to our customers.

If you turn to slide 8, that shows how our cash flow moved across the first half of 2026. In H1 FY 2026, operations brought in £1.9 million of cash. That's down from £8.5 million a year earlier in the first half of FY 2025, and the reason is heavier investment in our North American operation, which should start generating revenue shortly, once the first Lithia US dealers go live in quarter 4 2026. Within the £8 million of capital expenditure for H1 FY 2026, £6.4 million was capitalized development spend. During the first half of 2026, we finished buying out our last reseller, located in the Netherlands, for £3.3 million. At this point, every reseller we had has been bought out. Those items were the main reasons cash fell by a net £10.4 million, which left us with a cash position at the end of June 2026 of £23.9 million. Slide 9 shows the balance sheet as of the end of June 2026. Closing shareholders' funds stood at £198.9 million, and the biggest factor lifting that figure versus the end of June 2025 was the July 2025 buyout of the North American JV. Goodwill on our balance sheet now totals £54.9 million, reflecting the purchase of Lithia's stake in the North American JV, the Seez acquisition, and the buyouts of the South Africa and Netherlands resellers.

We have £166.2 million in intangible assets, and those mainly came about from the North American JV buyout and the Seez transactions. The bulk of that remaining amount is tied to North America customer contracts. The majority of the tax liability on our books is connected to the US JV buyout, and it will unwind as those intangible assets get amortized. Lastly, our cash stands at £23.9 million. Beyond that cash, we also hold a £10 million RCF facility, and it is still undrawn. Moving to slide 10, we show the non-underlying items for the first half of FY 2026. A £0.3 million debit to revenue came from amortization of the Global Auto Holdings warrants. Within our North American operation, administrative expenses were £9.1 million in the first half of the year. As we guided before, those costs will be treated as non-underlying until the Pinewood system is installed in 20 North American dealerships. Once we begin our system implementations for Lithia's North America dealers in quarter 4 2026, we will start offsetting these costs as our North American revenue grows. A £2.8 million credit was recorded for the net fair value gain on the Lookers warrants. Our share-based payment charge came to £2.2 million in H1 FY 2026, and a £4 million amortization charge was recorded relating to intangibles arising on acquisition.

I'll turn it back over to Bill now, and he'll walk us through the operating highlights as well as the strategy.

Thanks, Ollie. This slide should look familiar to most of you — it lays out Pinewood's main strengths and the things that distinguish us from rivals. As I said earlier when discussing the first half of 2026, churn among our customers is very low; typically, they only depart when a bigger group using a rival system acquires their organization, or when a customer shuts down, and neither scenario occurs often. I've discussed before how important it is that we're 100% cloud-based with 1 codebase, something that remains uncommon in our sector. The fact that every customer runs the same version of the system, no matter where they are globally, gives us a significant edge. On the security side, operating as a cloud-based platform is far safer than being hosted or relying on on-prem servers. On top of that, we can roll out software updates in a controlled way, ensuring our customers stay fully informed regarding any changes to system functionality. Recurring revenue makes up the bulk of our income and typically sits at around 85%. For most of their products, our customers pay quarterly in advance. Implementation income is the primary non-recurring portion of revenue — we bill new customers, and certain existing ones, for one-off pieces of work.

What really distinguishes us from most of our rivals is having a completely embedded AI offering with several AI products. Beyond those AI products being fully embedded, new customers can also get them through a standalone business that doesn't include the main platform. We keep innovating and bringing in new talent, and the skilled, seasoned people we employ are the foundation of everything we provide. Our experience in the automotive industry spans 40 years, and a big share of that has been within an automotive retail group. Our team is one of a kind, and plenty of them have worked alongside us in both the software and auto retail sectors. Last, our ties with the OEM partners are essential to what we achieve. We enjoy strong relationships with our OEMs across the globe, and because our technology leads the market, our integrations with them run seamlessly and benefit all of our customers. I'll now walk you through how our strategy progressed during H1 2026. The Lookers implementation moved along well in the first half, and several brands that matter to Lookers are now running on the Pinewood system. The Pinewood and Lookers teams combined worked extremely effectively together on that roll-out. We're still cooperating closely with Marshall's to finish preparations for their roll-out, and we're well placed to begin it right away.

When it comes to our international markets, we recently closed a contract with our first German group, and we expect more to follow over the next several months. Over in Japan, the Porsche roll-out is progressing well. We anticipate kicking off the Japan Volkswagen implementation during the second half of 2027. We acquired our Netherlands reseller in March of 2026, which means we no longer have any other resellers. Our product suite keeps advancing at pace, with a number of products our teams have built over the last 2 years now ready to sell to customers, together with the market-leading AI offerings we now have following the Seez acquisition last year. The final pillar of our strategy, North America, is by some distance the largest automotive retail software market in the world. We are now on the verge of having the Pinewood system live in the United States by the end of 2026, which will be a huge achievement, but just the beginning of our story in North America. We have hugely ambitious plans to firstly implement the system with Lithia and Global Auto Holdings North America, but alongside this, to grow our market share as quickly and as aggressively as possible.

Moving on now to slide 15. In the UK, we'll keep working side by side with the Lookers team on the roll-out through the first half of 2027. We're eager to get the Marshall's roll-out started right away. With the Pinewood platform set to launch in the US very soon, we're heading into an exciting chapter for the company. There's no better partner for that launch than the Lithia team, and we're looking forward to building our market share in the US and Canada soon after. The acquisition by Ridgeway? Partners will also speed up our growth path across all markets, and especially in North America, where the addressable market is significant. Thanks to every member of the Pinewood team for the ongoing hard work and for pushing us forward. We want to thank all of our shareholders for their support over the last 2 to 3 years, and we're delighted that many of them are rolling their stake into the continuing journey with us. Thank you for being with us today. We welcome any questions.

Thank you. Ladies and gentlemen, should you want to pose a question by phone, please indicate by pressing *1 on your telephone keypad. Questions can also be sent through the webcast. Once more, that's *1 to ask a question over the phone. Our first question comes from Andy Wade at Jefferies. Please go ahead, your line is open.

Good morning, everyone. This is a bittersweet occasion, though I suppose congratulations are in order for a job well done. I have two questions. The first concerns Lookers as well as the US pilot stores — is there any feedback you can share with us? I'm curious about all of it, whether it comes from the dealer level or from further up the chain; I suppose my main interest is on the Lookers side, specifically how the dealers are seeing the implementation, how their day-to-day work is changing, whether things are becoming easier, and whether cost savings are now within reach. That's the first one. Second, after the US JV buyout, have there been many further conversations regarding potential future US partners? Thanks very much.

Hi, Andy. It’s a bittersweet moment. I have no doubt that you, me, Philip, and the entire team will stay involved for many years ahead, but right now I think it’s quite a happy period for the company overall.