Huddlestock Fintech AS (HUDL) Earnings Call Transcript & Summary

[Foreign Language] Welcome to the Q2 presentation. I just want to say some words before I leave the word to Leif Arnold. Yesterday, we sent out a news that we have a new Board member, Frank Bjordal. So I would like to welcome him. And today, we are also lucky that we have Simon Lange from GIGA Broker that' going to say some words on what we are doing in Germany. So as you can see from the numbers that we presented today, it's a lot of different in terms of what we presented the last half year in 2024. And that also shows that Huddlestock is in a huge transformation. We are a totally different company now than we were before. And I think the things that we have been doing the last year is really good for all the shareholders. So with that, Leif Arnold Thomas, welcome and the word is yours.

Thank you, Oyvind, and welcome, everyone, to this half year or second quarter presentation. I'm looking very much forward to this presentation, to be honest, because I'm a little bit proud of what we've delivered so far this year. So let me start. And as Oyvind said, it's also a pleasure to have Simon Lange with us, and he will have the floor in some minutes, but let's just start. And as I said, what a year we have had behind us so far. We have delivered and executed on a lot of, in my eyes, bold decisions and strategically important decisions for Huddlestock. And my understanding of the situation is that we are very well positioned now for the way going forward. We have an asset-light business model and service value proposition for the pan-European market. We have secured the first European customer with GIGA Broker that was signed up in March. We have divested our Nordic Investment-as-a-Service platform, which was unprofitable, meaning that going forward, we have a reduced cash burn, and in return, we have received shares, which gives us a source of funding for our expansion into the Continental Europe. Also, on the top management side, we have strengthened ourselves with the appointment of Sabine Merky that will start October 1. And she is a very experienced person, originally from Germany. And together with me, we will be the basis of the new management team that are going to deliver on the plans going forward. And as Oyvind mentioned, we have also strengthened the Board by yesterday with including Frank Bjordal as a new Board member. So for me, working close with the Board, I'm very happy with that decision as well. I have talked about the new and updated vision strategy and a growth strategy that was decided before Christmas last year. And we see already that it has started to make sense. Perhaps not in the figures for Q2, I'll come back to that. But when we look at the utilization going forward, it definitely is a right path we are on. And on top of that, when it comes to Visigon, we have also strengthened the management team with hiring Jens Woeste from August 1. So all in all, this has been a very important half year, and I'm proud of what we have delivered so far. And I think we are very well positioned now. I'm stuck in numbers, and it's easy to see that we are a different company now than we were just a few months ago. We're still listed on Euronext Growth in Oslo. Based on our share price 25th of August with a market cap of a little bit more than NOK 200 million, we have 2 clear distinct business areas. It's the consulting area within treasury system, and we are executing on that business strategy. And we have the technology and license investment area with a focus on Continental Europe and with the basis of Munich. As a consequence of the divestment, we have been able to get access to cash and Done shares that could be transferred to cash. And if you exclude the Done shares that we're going to distribute to the Huddlestock shareholders, we still have more than NOK 50 million accessible that we can use for expansion going forward. We have offices in all the Scandinavian countries, and an office in Munich, which is the center of our European expansion. What we are doing now is to apply the Nordic mindset, the Nordic DNA into a large, underserved market in Continental Europe. Together with -- what we do is to combine our licenses or our pan-European licenses for delivering these services with partners, we're able to deliver services and value to a big market in Europe. The first customer we signed up was GIGA Broker, and we'll come back to Simon Lange about that. But with this approach, we are able to deliver services to the market within a very short time, and also, important for me, with a very limited demand for investments in our service. And my experience so far, being -- working with Germans and being in Germany for several times, is that in my eyes pan-Europe and Germany are some years behind the Scandinavian countries when it comes to digitalization and automatization. And I'm sure that our background and our -- where we come from is a perfect start and a perfect place to be to offer this underserved European market with our services. We are now in a position where we are going to ramp up and prepare for the future. It's important for us to have a good cost control, meaning that our organization needs to be lean. It has been that for many years. It will still be that for the years to come. And that is important for us to make sure that we are not having more costs than necessary before that we see that we have a cost base we are building on. We are extremely happy with signing up the agreement with GIGA Broker, which we did the first half year. And we are working now, of course, in parallel with new customers. So we have the ambition of signing up an LOI with the second customer this year and to make sure that we have enough pressure and energy spent on customers and sales, we increased the team in Munich from 2 to 3 from August where the third employee is fully focusing on the customer and sales and marketing side. And our ambition is to turn the European Investment-as-a-Service platform, coming from Munich and Germany, being cash positive during 2026. And with that said, I would like to give the word to the guest speaker and my very good contact, Simon Lange. So Simon, the floor is yours.

So hello. Good morning, everyone. I'm Simon Lange, the Co-CEO of AVL and CEO of GIGA Broker. I'm proud to introduce myself in this meeting in the Q&A session of Huddlestock. Yes, AVL was founded in 1997 by my father Uwe Lange here in Weinstadt, near Stuttgart. It's a big -- rich with car manufacturers and technology and big companies here like Porsche, Mercedes and Bosch. And we have the mindset here to grow the things big in Germany, down here in the southern part of Germany. Yes, some words to AVL. AVL was start-up, 1997, like I have mentioned, founded by my father and was extremely successful in selling mutual funds in Germany. And the approach is to sell this product really cheap with our transaction costs and with our deductibles on buying these mutual funds. So it is a really price sensitive market here for these products. And if you don't want to be consulted by a bank, it's good to buy these funds by your own, and you will save very much money. That was the secret of our business model here in Germany. So AVL is now a leading financial broker in the discount segment for mutual funds. So we have currently about 65,000 customers with EUR 2.6 billion asset under management. And so how was the cooperation going with Huddlestock? What was the intention? We have many phone calls every week of our client base, about 500 to 1,000 in a week, and many clients asked why could I not buy crypto or tokenized shares or stock so cheap with AVL. I would like to buy this product with you, not with any other bank or a competitor. And then we thought there's a big chance to grow our business even much, much bigger. And so we found together with Huddlestock to set up a large neobrokerage offering here in Germany. We have ambitious growth here to manage. We would like to be the top 3 neobroker in Germany within 3 years. That's our goal. So we want to play in the champions league. That's our real goal. And in regard to the pricing, as I have mentioned, the customers here in Germany are really price-sensitive. And all these settings are in place. I think we have a really attractive pricing and a really attractive offering in terms of pricing. And also in the way how the apps and the web log-in will be offered, it's the best technical solution, in my opinion, you can get. And so that's why we have chosen Huddlestock. We have a first-class ecosystem with really outstanding partners in the background for the liability umbrella and also the connection to the stock exchanges. I'd like to mention at this point, we have already initial take -- also a stake in Huddlestock shares because I think, as I have mentioned, we really like to play in champions league for brokerage in Germany. And if our plan is true and it will be true in my opinion, then there's a huge chance in Huddlestock shares now for future growth in the near future. And even with the Done shares in place and the cash, I think there's also a good position to finance this expansion to Germany and Europe. That's why we have already took some Huddlestock shares. Our AVL Holdings bought them. Yes. That's from my side. I will hand over to Leif again.

Thank you very much, Simon, for sharing. And I know that this is interesting for the investors as well because GIGA Broker is and our relationship with you is something we have been talking about for months. So having your face and your voice is very nice. So thank you very much for contributing, Simon. Okay. Going from the Investment-as-a-Service area with a focus on the Continental Europe, we also have another leg of our business, and that's our consultancy business. I'm very happy to see that our consultancy business and revenues coming from Visigon still deliver a profit in line with market standards, and that is a basis, but what is more interesting, I think, and I'm very happy to see is that the updated and new strategy, and the work we've been doing during this first half year are starting to pay off. Well, revenues for the second quarter was a little bit lower than last year, affected by consultants working in one project, then one was stopped and then another started again. So that's how life is. But if you look forward and if you looked at our predictions for the rest of the year, we have already contractually signed up utilization of approximately 80% for the rest of the year, and we expect the utilization to be above 95%, excluding August, meaning that going forward, we expect a strong second half of '25, and that is a big and important result of the new strategy that we are working on. In addition to the new strategy and to do whatever we can to strengthen the growth going forward, we are happy to announce that Jens Woeste was hired as part of the management team from August 1. Jens has experience from this industry and from growing businesses within this treasury and Calypso area. So he has already started, and it's good to see, and expectations are high to -- also to Jens, when it comes to his deliveries together with both the management team and the rest of the organization when it comes to the growth going forward. And the objective is, of course, to make this business grow substantially. Then, since it's a quarterly or a half year presentation, we need to go through the figures. And as Oyvind mentioned, and that is actually one of our main points, it's very difficult or it in some way would not probably make sense to compare first quarter to the second quarter, first half this year with the first half year last year. And the reason for that is easy to understand. During this half year, we made an agreement with Done, where they were to acquire 3 companies of ours, two of them were divested and out of our books from April '24, while the last one, Huddlestock Investor Services, was in the books for the full half year. So to compare those 2 half years is not easier, doesn't make much sense. But anyway, just quickly go through it. Revenue is a little bit down, naturally, because of the divestment. Personnel costs from first half last year to this year going down, of course, because of divestment, and we didn't have all the employees for the full half year. Other operating revenues, a little bit up, very much affected by the transaction and divestments that always comes with some cost one-offs that we see also in this year compared to last year. And then we have some net financials that has gone in the negative way, and the main explanation for that is some losses related to the sales of the shares of the divestment and also some nonrealized value changes in Done.ai because we need to book the value of the share price at a certain day, and this was booked on the last day in June. So if you look at then what I think is more important is to focus on in which position we are when this half year is finished, and we are now looking forward. During the half year, we have started with approximately NOK 10 million in cash, and that is also where we ended in this half year. We have had during the period some operational costs, mainly connected to the Nordic Investment-as-a-Service business area that is now divested. On the investment side, we definitely did some investments in the Nordic EIS business. But at the same time, we received cash from subsidiaries that was divested and sold out. We have had some inflow of cash from conversion of warrants of approximately NOK 11 million. And what then is interesting when you go out of the quarter or the half year is that we see that we have a market value of the Done shares excluding the value of the shares that we're going to distribute of approximately NOK 41 million. So going out of this half year or out of this second quarter, we find ourselves in a very good position when it comes to funding for our strategy going forward. We have tried also, as we did in last quarter, to do a comparison with the last quarter and where we try to take out extraordinary costs associated with the transaction and also with the companies that has been divested or is to be divested as Huddlestock Investor Services is an example of. The revenues for the second quarter then is actually the revenues coming from Visigon, and I explained that the revenues for that quarter was a little bit below last year with these explanations because of projects starting and stopping and some of the consultants being between that was affecting the revenues. And personnel costs, of course, lower, and the same with other operational expenses. So going forward, including the interest expenses for this quarter, we have had a normalized cash burn of around NOK 6 million. And going forward, it's important for me to emphasize that the transaction we've done was not finished by the end of June. It has been, as you all know, also going into Q3 during July and August, and so the cost and the cash burn will be affected also in the last half year of '25. The progress of the divestment has gone through its -- followed its plan. It started with an announcement in the mid of April, where we announced the sale of the Nordic Investment-as-a-Service platform. We received the last shares, the tranche #2, August '25, which was also announced in the market. And what will happen now going forward is to do the distribution of 20% of these received shares to Huddlestock investors. And the distribution will happen no later than the start of Q4 this year, and we will send out information in due notice about the details on that. But that is the plan. And when we are finished with that, then I feel that we have brought together everything and finalized a very important part of our history and made self-access to a source of funding for our European expansion that we are all looking very much forward to see. So to close it all up, looking forward, I'm looking very much forward to have Sabine on board together with me with her experience, both when it comes to language and where she comes from. She's grown up in Germany and many years of experience from the Nordics. We are to distribute 20% of the Done shares to existing Huddlestock shareholders. I think that will be very good. We have a business now with a reduced cost and cash burn, and we are ready to do the expansion into the Continental Europe starting with the GIGA Broker launch and working hard on the sales and the commercial side together with extended German organization with a new employee with a full focus on customer and sales. And our ambitions for the Continental Europe is to turn the European EIS business positive during '26. And as I also have mentioned, we are starting to deliver on the growth strategy on Visigon, not very visible in Q2, but our utilization going forward, it looks very nice. And with this new colleague of ours in the management group, I'm sure that we are going to see some results also from that area in the time going forward. So margins and profitability when it comes to Visigon, I have the expectations of that we will be a good journey ahead of us. Thank you.

Okay. Leif Arnold, a very nice presentation.

We have 1 question regarding, is the value of Done shares calculated based on execution price, SEK 14 for share price in the end of the quarter at SEK 9.9? So...

SEK 9.9. The value of the shares in this presentation is based on...

The closing.

Yes, I think it was -- I think so. It was 25th of August. It is not based on the SEK 14.

So some of the finance loss is actually because of the share prices have been going down. The receiving price was SEK 14, and then, we used the closing last day of the quarter as a closing date. So hopefully, next quarter, hopefully, the Done shares will go up again, and then, we can have a finance -- a good finance number. Is it any other questions? So please just write it in the chat or in the Q&A section, and we will try to answer. If not, please also contact me or Leif Arnold or the company, and we will try to answer the questions that you all have.

Okay. If nothing more, also from my side, just to conclude, I started with it, and it's important for me to emphasize, I'm very, very pleased with the place we are now. And I'm so pleased with what we have been doing this last half year. And also from my perspective, representing the administration, I must say that the cooperation with the Board and what we are able to do together has been demonstrated this first half year. It makes me very optimistic for the time going forward.

Good. Thank you. Okay. With that, we close the Q2 presentation. Thank you.

Thank you very much.

Bye-bye.

Bye.