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

Good morning, everyone, and welcome to the presentation of our H1 FY '25 results. I'm Bill Berman, CEO, and with me today is my partner and CFO, Ollie Mann. For Pinewood.AI, this has been yet another half of great progress, as we deliver on the strategic objectives and position the business for accelerated growth. Ollie will shortly walk you through the headline financials. Before that, though, I'll give you an overview of the strategic and financial progress made in the period. Revenue has grown by over 20%, driven by strong growth among our customers and by successful upselling within our existing customer base. Our new user experience has played a significant role, with positive feedback to date. On top of this, our product suite has been significantly enhanced, and a number of new products have been launched, such as our new data and analytics offering, automotive business intelligence. A key milestone in the period was the acquisition of Seez, the automotive AI company, in March of this year. Over the 6 months since then, we have made great progress bringing Seez into the Pinewood Group and integrating the 2 tech stacks to significantly enhance our AI capabilities. In addition, since becoming part of Pinewood.AI, Seez has grown its stand-alone business by over 500 rooftops, with new entries in North America as well as the U.K.

By the end of the year, those stores will be completely up and running. A central pillar of both our strategy and our ambitions is the North American market. In July, acquiring Lithia's portion of the North American JV marked a fundamental step toward building a platform that maximizes our impact in that market. We remain on schedule to pilot the Pinewood platform during Q4 of this year at 2 Lithia stores, and after that to begin the full rollout in the first half of 2026. At this point I'd like to pass things to Ollie, who will walk you through the financial review.

Thank you, Bill, and good morning to everyone. We achieved robust top-line expansion, with revenue climbing more than 20% to GBP 19.6 million. Several factors fueled this, among them revenue contributed by the U.K. Lithia dealerships, for which we rolled out the Pinewood.AI platform in the latter six months of 2024. Beyond that, we brought the system live for additional customers across multiple geographies during the first six months of 2025, and we also grew vertical sales within our current client base. Gross profit came in at GBP 17 million, a rise of 17.2% versus a year earlier. The modest dilution in gross margin was anticipated and mirrors the fact that these margins run somewhat below those of the established Pinewood.AI operation. The primary profitability measure we rely on internally as well as externally is underlying EBITDA. For the first six months of 2025, it reached GBP 7.9 million, an increase of 14.5% over the same period in 2024. Recurring revenue at 85.7% provides the foundation for this financial outcome. The small decline relative to last year mirrors the mix, now that Seez revenue is part of it. Lastly, net customer churn of 0.3% demonstrates just how highly customers regard the Pinewood.AI platform and how essential it has become to their operations. Turning to Slide 7, I'll walk you through the main movements in our cash flow for the period.

In the first half of FY '25, our operations produced GBP 8.5 million in cash. Among other notable cash movements, we got GBP 0.5 million of bank interest during that period and GBP 10 million from Lithia to settle a tax debtor. Total development spend for the first half came to GBP 6.7 million, and of that amount we capitalized GBP 5.2 million. On top of that, there was GBP 0.1 million more in PPE CapEx. For all of 2025, we anticipate development spend at just under GBP 14 million, with a gradual rise expected over the coming few years. The Seez acquisition carried consideration of GBP 32.9 million — GBP 25.7 million in cash plus GBP 7.2 million in consideration shares. Together with the Seez acquisition came the equity raise we completed in March 2025, which brought in GBP 34.1 million of cash. Those movements combined left us with a cash position at the end of June 2025 of GBP 30.3 million. Moving to Slide 8. Looking at the end of June 2025 balance sheet, the key balances include closing shareholders' funds of GBP 80.1 million, driven mainly by the March 2025 equity raise.

At this point, goodwill on our balance sheet stands at GBP 31 million, and that rise reflects the Seez acquisition completed in March 2025. Following a purchase price allocation exercise, part of this goodwill could be reclassified into separate intangible assets. Our other intangible assets total GBP 22.7 million and comprise the capitalized software assets, which have increased as we raised resource levels and development work during the period and brought the Seez development team into the group. Lastly, cash stands at GBP 30.3 million. Beyond that cash, we hold a GBP 10 million RCF facility that is still undrawn. Turning to Slide 9, the non-underlying items are shown there. First, transaction costs of GBP 1 million arose from the equity raise and the Seez acquisition. Restructuring and transition costs of GBP 0.7 million were also incurred in the period. Our share-based payment charge came to GBP 1.4 million in the first half of FY '25. And finally, our share of the JV result was a GBP 1.3 million charge during the period. Moving to Slide 10 and our updated guidance: because we bought Lithia out of the North American JV, we anticipate a short-term accounting impact in the second half of 2025.

Before the JV buyout, Pinewood.AI counted 51% of software development for North America as revenue and profit. That is no longer the case following the buyout. Because of this, we now expect revenue this year to come in GBP 1.3 million below what we had previously forecast. On top of that, Marshalls have requested that we push the start of their implementation from quarter 4 2025 to quarter 1 2026, so it lines up with other projects they are undertaking. We still expect to finish the majority of the Marshall's implementations during 2026. Taking these 2 items together, we expect our FY '25 underlying EBITDA to be GBP 15.5 million to GBP 16 million. Neither of these 2 items has any impact on our medium or long-term profitability. Looking ahead, our earlier guidance for underlying EBITDA in FY '27 was a range in the mid to high GBP 30 million. We are updating this with guidance for underlying EBITDA in FY '28, which we expect to land in the range of GBP 58 million to GBP 62 million. This is underpinned by strong visibility from existing contracts and a significant pipeline of opportunities, including our 5-year contracts with Lithia to roll out the Pinewood.AI platform across North America.

Just to remind everyone, that contract should bring in roughly $60 million in revenue annually by the end of 2028. Now I'll turn things back over to Bill, who will walk us through the operating highlights and strategy.

Thanks, Ollie. I'll walk you through how we've been delivering against the plan we laid out at last year's Capital Markets Day. Turning to the U.K. and Ireland, our Lookers rollout began in July and August of 2025, and it will pick back up in October, after we get past September, the key month for plate changes. The joint teams have performed excellently through the early rollout phases, and we're confident that will carry on when work resumes next month. Our global Porsche dealer network keeps growing — we completed a successful installation in Canada in May, made possible by developing new manufacturer interfaces that can be deployed internationally. We're happy to report an agreement with Porsche Japan to begin rolling out the Pinewood system across all of their Porsche centers in Japan. That rests on substantial product work tailored to Japanese retail operations and on building an installation and support team focused on that country. We're looking forward to the Porsche Japan rollout getting underway in half 1 2026. Acquiring Seez has reshaped our vertical sales channels, letting us reach a far wider customer base and generate extra revenue within short lead times.

We're also continuing to broaden the selection of products we can offer to customers we already have as well as new ones. Now turning to Slide 13. Bringing the Seez team into the group in March of 2025 after the acquisition was a pivotal moment for us. In many of their markets, we've kept Seez running on a stand-alone basis so as to get the most out of the strong brand recognition they've built across a number of areas. At the same time, we've begun integrating Seez's cutting-edge AI technology with the Pinewood data stack. Just 6 months in, we've achieved meaningful progress on a number of fully integrated tools, which are now operational within the Pinewood.AI platform. This is only the start, and we're enormously excited about the integration roadmap and the new AI products that will solidify Pinewood's standing at the forefront of auto AI providers. Now moving to Slide 14, an update on our recent system implementations. As I said at the start of this section, our team has performed very well so far on the Lookers implementations, working within the Lookers team to make sure the Pinewood.AI platform rollout goes as smoothly as possible.

This kicked off in 2025 and is set to carry on through the remainder of 2025 and on into 2026. It's pleasing for us to see the Lithia U.K. team enjoying the advantages that come from having Pinewood.AI across every one of their dealerships. That comes on the back of a successful rollout at the ex-Jardine Motor Group in 2024, where better productivity and greater efficiencies have been evident. We're eager to get the Marshalls implementation underway with them in Q1 of 2026. On slide 15 you can see the solid foothold we've built in North America and how large the opportunity ahead of us is. Now that we've bought Lithia out of their stake in the North American joint venture and signed a contract with them to roll the platform out across their North American dealers, we're in a strong position to bring on more customers in the U.S. and Canada. Deployment of the Seez chatbots to the Lithia North American dealer began in September and is due to wrap up in Q1 of 2026. With 20,000 franchise dealers across North America, the scale of the opportunity is enormous, with a total addressable market of over $9 billion. In our view, Pinewood.AI is ideally placed to begin growing its share of the North American market.

Moving to Slide 16, and here's where things stand on our North American pilot. By now we've spoken with most of the OEMs that Lithia represents, along with third-party layered app providers that will need to integrate with us, and that integration effort is coming along nicely. Pinewood.AI will be piloted in 2 Lithia North American stores in Q4 this year, before the full rollout begins in H1 of 2026. Last, recruiting for our North America team is going very well, and a number of key roles are already filled. Turning to Slide 17 and how our key growth markets are progressing. Our main focus is on the geographies laid out in our strategy at last year's Capital Markets Day: Japan, Southeast Asia, Central Europe and South Africa. Last week we signed a contract with Porsche Japan to roll out the Pinewood platform across all of the Porsche dealers in Japan. That full rollout should begin in the first half of 2026. Talks are ongoing with a number of European customers, most of them based in Central Europe. Our South African business is now fully integrated into the group, following the buyout of our South African reseller, and we're examining ways to grow the business through both new and existing customers.

And lastly, we're in discussions with quite a few prospective customers across the Middle East, leveraging Seez's solid presence in that region. That comes after our buyout of the Middle East reseller for Seez in August. And finally, let's move to Slide 19. As we've laid out, our strategy has advanced considerably. Within the U.K., our priorities are the implementations at Lookers and Marshall's, along with bringing on more customers from the U.K. top 100 dealer groups. Our growth internationally will concentrate on the key geographies we've pinpointed: North and South America, Central Europe, Japan, Southeast Asia and South Africa. And finally, our FY '28 guidance for underlying EBITDA of between GBP 58 million to GBP 62 million rests on strong visibility from contracts already in place. That covers a $60 million contract with Lithia North America, plus a substantial pipeline of opportunities. Last of all, I want to thank the teams at both Pinewood.AI and Seez for their hard work and commitment. Thanks for being with us today. We're happy to take any questions.

<<operator_script>> This morning, our first question comes from Alex Short at Berenberg.

I have just a couple of questions, if I may. First, on the quite exciting FY '28 guidance: obviously, that's supported to a significant degree by the Lithia contract. Should we expect that $60 million of revenue in FY '28 to carry a margin similar to the one the company has achieved historically? And regarding visibility from existing contracts, could you quantify or elaborate a bit more on this, specifically the cross-sell/upsell opportunity around fees and the add-on products? Then one for Ollie. We obviously saw a fairly material GBP 2.3 million working capital inflow in H1 '25. Is that a sign of things to come? Should we expect a greater proportion of customers to be paying upfront in the years ahead? And essentially, how should we think about working capital dynamics and cash conversion going forward?

Alex, it's Bill here. That feels like roughly 6 questions, so I'll handle the first half and then hand the second part over to Ollie. On our 2028 call-out of GBP 58 million to GBP 62 million — and how much of that is already baked in, plus the margin it represents for North America — at a high level, for the noncore business, the margins we get out of North America will either match or surpass those of our other geographies around the world. Early on, the North American expansion will carry extra costs that exist only there. So at first, net margin will be lower. Gross margin will still be in the 90-plus percent range. Net margin, though, will be below that initially. But once full implementation is complete with Lithia and we capture additional growth opportunities beyond them, we will reach and exceed the margins we currently have. Turning to the balance sheet and that side of things, Ollie.

Yeah, Alex, that's a fair question. You're right to flag the working capital point. And as we expand over the coming 3 or 4 years, that working capital effect is going to grow in a favorable way. You're absolutely right that nearly every one of our customers pays quarterly upfront. So as the customer base expands, the advantage from that expands too. So yes, we're looking at, as you move into '26, '27, '28, there's going to be roughly GBP 7 million or GBP 8 million per year of benefit from those working capital inflows. Yeah, that's a fair question, good call out.

Roger Phillips from Investec will be asking the next question.

Let me return to that 2028 guidance of GBP 58 million to GBP 62 million. How much of it depends on converting your pipeline — what sort of assumption have you built in about what's needed to reach that figure? Or does it rest entirely on what you're seeing today regarding what has to be rolled out over the next couple of years for existing customers? That's my first question. My second question concerns the South African and Middle East transactions: do you expect more channel deals of that kind to occur across the group over the medium term? And finally, I may have missed this in the results — apologies if so — but could you give it a shot on net revenue retention and how you'd expect that to trend, please?

Great. So Roger, regarding the first piece, we're expecting GBP 58 million to GBP 62 million. For the most part, that figure consists of contracts already signed and in the pipeline. Marshalls, Lookers, Lithia, the business we're winning out of Japan, along with the usual historical growth rates we have there. So at that point in time, this isn't what I'd call a very aggressive target. And if we get a bit of a tailwind plus a couple of other big contracts, hopefully ones we can pull forward, there's more room for upside there. As for what we've done in the Middle East and South Africa, wherever we're able, we always want to keep as much control as possible over our front-facing customer interactions. With that in mind, we'd examine each and every one of our resale agreements. And any where we believe we could move to a more direct pathway, we certainly explore that. That said, if we were entering a region where, culturally or language wise, we might not be the best qualified, we'd seek more of a partnership to help facilitate it.

Honestly, the reseller model isn't something I particularly like, though a joint venture along the lines of what we set up in North America would certainly be a route we'd consider and explore.

Roger, regarding net revenue retention — yes, look, the brief answer is that we anticipate it being positive. Historically, customer churn for us has run between 0% and 2%, and we definitely expect that to carry on. Then, on top of that, we have our annual price increases that we implement, which are usually tied to CPI. So on average, that's coming in at 3% or 4%. You get that built-in uplift there. So look, we'd expect it to be positive moving forward for the foreseeable future. Is that fine, Roger? Are you — anything else you want to raise from your side?

No, that's great.

<<operator_script>> Next, we'll hear from Carl Smith at Zeus Capital.

I've got two things I want to ask. First, on gross margin: do you believe it's possible to return to 90% at the group level, and which levers are available to you to lift it back up? Second, could you give some sense of how long it will take in total to implement the Lookers and Porsche Japan contracts? Should we be assuming full implementation by the end of H1 '26, or is a bit later more likely?

Turning to the margin topic, Carl, we haven’t really discussed it yet. Where margins are concerned at present, there’s going to be some fluctuation. To begin with, 90% margins are certainly at the elevated end for this sector. Much of that will hinge on the amount of growth we achieve from Seez’s direct-to-consumer sales beyond the Pinewood platform, as they sell into geographies where Pinewood doesn’t exist yet. So there will be some fluctuation there. In the core Pinewood business, we will reach or be capable of surpassing that kind of margin. Once you begin to combine, there will be some modest pullback, but it won’t be dramatic in any way. Regarding the rollout schedules with Japan, Marshalls, Lookers and so on, Marshalls and Lookers, we expect those to be fully completed by the end of next year. We’ll begin the Japan rollouts at the end of this year, in the first part of next year. Those will likely be gradual rollouts, given how that market is set up and established. And that will likely carry us into mid-2027, based on how they’ve currently laid out that piece.