Pricer AB (publ) (PRICB) Earnings Call Transcript & Summary

Hi, and welcome to the Pricer Q1 2025 presentation. We are joined today by CEO, Magnus Larsson, who will present the first quarter. As a reminder, questions can be submitted and they will be addressed during the Q&A session. With that said, Magnus, welcome, and the floor is yours.

Thank you very much, Hjalmar. I'd like to start by also saying that unfortunately, Claes could not join us today. He fell sick, but I'm pretty he's watching the webcast right now to make sure that I'm not saying anything incorrect. Let me start with Pricer in brief for those of you joining that might not know us that well. Our vision is to be the preferred partner for in-store communication and digitalization. This actually means when we updated it quite recently, we did a lot of surveys. We did a lot of insight studies with our customers, a lot of interviews. And in addition to appreciation of our technology, I think one thing that people lifted was the way we work, the way we engage and the partnership they believe that we have. And I think this is the reason why we, unlike many of our competitors, are able to get engaged customers also in the promotion to other potential customers of our solutions. Roughly 200 million people -- 200 people, 200 employees. We have delivered more than 350 million labels worldwide, which makes us #2 in terms of installed base globally. We are working actively with our SaaS service. It's called Plaza. We currently have more than 5,000 stores in Plaza, and it's one of the key objectives for the year to actually expand that number quite much. This is a slide I normally use as a context for new investors to explain Pricer of today versus Pricer of before. We have done quite a huge transformation over the last 3 years. We looked at the go-to-market, how can we actually speed up growth. We have been looking at the balance sheet, how can we actually strengthen our financing. We've been transforming the company, looking at our cost base. We've been looking at the way we work. And we concluded last year with actually being done with the transformational phase, saying that now we have set the baseline for the coming growth and incoming profitable growth in line with our financial targets. Now presenting a quarter that I've not been very pleased with on net sales, on order intake, we fell short of our internal expectation. And as with background in sales, I want every single quarter to be better than the previous one. But as a business manager, I also realize that that's not feasible. Right now, we're doing the right things. We have transformed the company. We are still working with it. We have an updated strategy with a lot of actions defined that will actually take us to the position that we want, where we actually gain market share and where we deliver profitable growth in line with our financial targets. But the business is lumpy. There will be the world where things happen affecting it, but we're doing the right thing. So even though I'm not pleased with this quarter, I am pleased with the work that we have done actually looking into the future and the future sales. I think it would be good to start also with looking at the market. Now we have a lot of input from our competitors, a lot of intel on the performance. We believe that the market will grow 15% annually over time until 2030. But we've also seen that now Q4 was a year where the market did not grow at that space. Our assumption is that actually the global market growth for ESL was below 5% which was sort of the entrance to this year. We could see that the North American market showed really good growth. We have had good progress in Canada, and we can see that the U.S. market has opened. We could also see that Europe fell behind on the global scale. We are quite convinced that last year that we were actually gaining market share on the European market, unlike most of our competitors. We feel pretty good about the European market. And for the coming future, we believe that we will continue to expand in Europe. Then it's, of course, up for us to prove it and show it. But compared to competition last year, we were actually growing our market share. What we see now also in Q1 is that given the changes of administration in the U.S., the impact on the market economy globally, this is, of course, also reflected in the way our customers behave. We haven't met any customers so far in the quarter. We're not in the discussions with the customer said that we do no longer believe in digitalization. We'll not spend money on digitalization. On the contrary, they all say that they want to do it and they need to do it. But we see an uncertainty for investments. Is this the right time? Should we wait a little bit? So what I would expect is that the timing of investments that we've seen in Q1, that's something we would most likely see in Q2 and possibly throughout the year. So I think that I want you to be prepared that we see the future, we see the possibility, we see the growth and the opportunity, but it's also good to remind ourselves that there is a lot of uncertainty right now on the global market affecting our customers. We had the Retail Technology Show in London now beginning of April. It was a fantastic show. There is a lot of customer interest. We can see that the UK market and the UK show, the retail tech show in UK, unlike the show NRF in New York is very much focused on business. NRF, you go to, of course, you do business, but maybe at larger to check the trends and see what's happening and do your plans for the coming maybe 3 years, 3 to 5 years, whereas in the Retail Tech Show in London, it's a business show. We had meetings set up with pretty much all Tier 1 retailers within grocery, but also within do-it-yourself, within home electronics. They are all one way or another looking at digitizing their stores. And I'm pretty sure that we will see the first move either at the end of this year or beginning of next year, where one of the Tier 1 retailers said that we are now decided to make a rollout across the state of ESL or large ESL rollout. So that's my expectation. That means at best, yes, there could be some revenues at the end of 2025, but more likely in 2026. I would also like to mention one of our most recent wins on the British market. It's a company called Company Shop. So why did Company Shop select Pricer? Well, the key reason is that Company Shop, what they do is that they sell grocery supply. So they -- surplus. So they buy it from all the other Tier 1s. They have -- their customers are typically people with less money. So they buy all this surplus grocery. They start with a price that is 40% below the recommended price, then they lower the price continuously throughout the day until they've sold it all out. So they're addressing waste, but they're also helping the community to make sure that they get food at a lower cost. But it would not have been possible for them to do this with anyone else than ourselves because we have the ability to continuously help them day in and day out to actually do the price changes without compromising the quality. We launched Pricer Avenue in January. We launched it on the NRF exhibition. So I thought I wanted to give you an update on where we are with the Avenue product. We have been shortlisted now for 2 innovation awards. We have a good progress in the development. We have a number of customers that have said that, "Yes, can we please do a pilot with you?" We are now in a phase where we want to decide with whom we are going to do the pilots. So -- but it's created a lot of interest. And I think that we have a global Head of ESL at the Tier 1 retailers. It's actually none of our current customers. They said that the most interesting thing at the entire NRF was price revenue. We could also see that the ability to use price revenue for merchandise in the store has been lifted by several and also here by Parsers Venture Capital following the market. So good progress. We do expect to do our pilots during the second half, and that we should have a system ready for commercialization at the end of the year. On a strategic plan, what are we doing in 2025? Well, profitable growth. We want to make sure we reach our EBIT target. We want to make sure we reach our growth target. We will further -- actually, we have been planning to spend more in the UK market. But based on the feedback that we have on the market and the activity that we see, we will actually spend more, and there will be a stronger focus to actually capture the opportunities we see in the market. We did a structure in that strategy, we separated market. We have growth markets where we feel that we are underinvested, we will do additional investments. And there is a huge market to be captured. UK is one of those. We have market that we say are established markets where we have an established operation and we actually believe that we pretty much have what we need. There will be growth, but it will be lower-level growth. There, we want to see how can we actually make sure that all these markets are run in an efficient way. So in France, we're doing a number of efficiency measures, basically then doing some restructuring on the operations to improve the way we work to work with the right thing in line with focusing on the key segments, but also, of course, to see how can we lift the corporate profitability. I think also worthwhile to mention is that the strategic shift we do now in the Nordic and Baltic market where we are deploying our own sales force and service force is that we do expect to grow sales. We do expect to grow profitability and gross margin on this market both on an EBIT level and on a gross profit point of view. So this is the view we have. We have good discussions with all our current customers. We expect the vast majority to continue with Pricer and to continue to invest in new technology and new products together with Pricer. So positive outlook on Nordic. We will, of course, try to win and choose a market on the prioritized market, North America, UK, Southern Europe, mainly Italy and Spain. We will focus on hyper and supermarkets within grocery, pharmacies, do-it-yourself. These are the areas where I see we have our absolute sweet spot. So I'd rather spend more time on these segments and let our salespeople spend more time on these segments since we know that we are -- this is where we perform the best. This is where our competitors have more difficult time to beat us. We are working more with the sales organization, the way we engage with customers, the way we sales -- do solution selling. And of course, we'll continue to invest in our portfolio. There's a lot of work going on, on Plaza and additional Plaza applications, obviously, also on Avenue, but also strategic partnerships like with Focal Systems, where we do AI and computer vision. Sales and gross margin development. So now I'll take on the CFO hat. It's, of course, disappointing to see a declining order intake and net sales in the quarter. But the -- what I do like about this picture is the gross profit where we can see that we have managed to maintain a high gross margin of 23.3%. And we can also see that the gross profit is contributing on the rolling EBIT development where we're actually now closer just below 8% on our EBIT level, which is the financial target. If we look at the P&L, there are a few things that I know that some of you have asked about already today. I think the first thing I would like to cover is the FX effects. So we've seen a weakening dollar. It's been going quite fast. So the hedging that we do have not been sufficient. We have had fairly low trade payables, and we have had more than normal trade receivables in U.S. dollar, which means that the SEK 7.6 million you see on other income and expenses are mainly or actually primarily FX expenses reflecting the weakened dollar. We -- you also see it on the financial items where currency fluctuations have made us do an FX -- get an FX effect of somewhere between SEK 8 million and SEK 9 million. On this one, we have also made a change in our accounting. So if you look at the administrative expenses and find them high, we actually moved quite a bit of corporate expenses that we previously reported as selling expenses. We moved it from sales over to admin where we believe that it should have been -- or that it should actually be. So if -- that's the reason why if you compare Q4 with Q1, it's not been a massive increase in recruitment, but it's actually been then a shift in the way we actually do the booking of these costs. On the cash flow, we have a positive cash flow and a nice cash flow in Q1. Key thing is that we managed to lower the inventory level. As you might remember from the Q4 report, we had an over inventory or too large inventory in Q4. We're spending a lot of time of actually selling that one which is why you can see that the inventory is down. On the trade receivables, we have also spent a lot of time working with our customers to actually make sure we get payment in time. Last year, we went from doing factoring, which means that now we have to make sure that we get all the payments in time. So we spent some extra admin on this one, and that's actually been paying off really well. So these are the key things on the operational activities. If you look at the financial activity, you will also see when you look at the report that we have a SEK 250 million post, it's actually for the repayment of the private bond that we had with Ture Invest. So then summarizing before we move into the Q&A. So as mentioned, the net sales and order intake were not on the level that I was expecting or was hoping for. But I was happy to see that markets like Canada and Benelux did show growth. And of course, I do -- with the order from Sobeys that is progressing well, we do believe that Canada will be a large and very important market for us also this year and next year. The sales in Q1 was, of course, impacted by the weakening dollar, as mentioned. But as we do all our production in U.S. dollars, and we have a lot of the majority of sales in euros, if the current FX level or the dollar level stays versus Europe, we also see that over the year, we will actually increase our gross profit and gross margin on all products sold in Europe. There has been concern with the order intake. So also here, I want to be open that we have a number of interesting customer dialogues, customer engagements, customer pilots and of course, customer opportunities. And it's a growing number. And of course, now with the uncertainty that we have on the market, let's see if they become real deals for us or someone else this year or if there will be some time slippage. But the thing is we do not see any customer hesitating on making an investment. It's primarily timing. And we are confident that we will also take a part of all those opportunities that we see and that we address right now. And maybe as a conclusion, I -- within your go-to-market on the Nordic -- for Nordic and Baltic, I would like to take the opportunity to welcome all existing customers that we have on the market, but also, of course, all the new customers that we intend to win on the market. So that's pretty much what I have to say for now. So I think, Hjalmar, over to you.

Magnus, and I was thinking maybe we start off with Europe and France. You mentioned streamlining operations and this is, of course, important market. Is this because you are dissatisfied with the development here? Maybe you could give us some more color on what initiatives you're launching? What do you expect the impact to be? And when can we see the full impact of this?

Yes. So we are making a restructuring that will be -- in essence, it's line with the strategy that we have set. So we're looking at what are the key things we want to focus on. We want to have one way of working. So it's some things that we do today that we should not continue to do. There is a fair amount of centralization where we have done things locally, but we want to have the central organization doing it. But I think above all, also some things that we see that we have done it and it's been good, but it's not been on a level where it adds sufficient value to the company. So we basically believe that we will be able to address the market with a smaller organization. So we expect all our different markets to be able to deliver profit on their own. So then, of course, we do not believe that it will be any major impact. Of course, we expect that when we make a change, there will always be some impact and some effect, but it's more short term. In dialogue with customers, they have not reacted. It's what you would normally do in a company to actually look at the operation, you streamline it and you make it more effective. That's actually what we do.

So can you provide maybe some color on -- is this expected to be seen maybe on a group level on the gross margin? Or is it smaller than that if you look to 2025? Or do we see the full impact? Do we have to look into 2026 to see?

I would say you will see the impact into 2026. Of course, when you do a restructuring, there will also be an associated cost to it. But we also -- we have not done any announcement on this one because we actually do intend to continuously invest in our organization, but on other markets.

And is this restructuring sort of impacting your ability to capture the European market? Or is this mainly -- I mean, the order intake in Europe, is this mainly a result of a weaker market where customers are more cautious towards placing orders?

I think we've seen it's mainly been cautiousness. But on some markets, we still see an appetite to invest. And actually, we have seen France has been slow you could see it in Q4, and we believe that it will be the same. It will be lower sales this year than compared to previous year, which is, of course, also affecting the decision to say, okay, why do we want to have our staff? What should be in the market while we can actually deploy them in a way to get as much money out of the team as possible.

And you mentioned, of course, the lumpiness and you have such a long time in the market. But based on your experience, do you think that Europe will catch up gradually? Or can there be like a lumpy catch-up effect as well? Like what can we expect looking ahead and based on the sort of experience in relation to the market that we're seeing right now?

I wish I could give you a really intelligent answer on that point, but it's a lot of uncertainty. We see that certain market -- I'm quite confident about the Nordic market. We know there are some customers that's been hesitant now to invest in the first quarter given the announcements made by our partner, our previous partner. Now that has been clarified. We know -- I expect them to catch up. We know that for some of our markets, there are a lot of projects where we will see positive development. But once again, why do I want to be cautious? It is with the -- all the macroeconomic factors that we see right now, it is really hard to be certain.

And this macroeconomic environment, does it have any impact on large procurement pilots as well? Or is it mainly the day-to-day sort of sales activity that you see impact on currently?

I see that retailers they look at it differently. I was with some executives in Canada 1.5 months ago. And they said that they -- even though they do not have any tariffs, they see that the impact on tariffs between U.S. and Canada or potential tariffs, they simply expect that there will be less money for the consumers to spend. So that could be like a secondary effect. And then in this case, this is Canadian Tire, they said that they actually choose now to invest in the strategy. So they will spend more money on store digitalization. They want to make --utilize all the ability they have to take current club cardholders, what can they get out of the -- in the store. So they want to improve the store experience, whereas some other retailers, they choose to then wait and see. So they will halt the investments. They will not stop them, but they will delay them. So I think it's -- and it will differ from market to market.

And speaking on tariffs, if we look at the U.S. market, is the tariffs impacting the ROI in any way? I mean we know that most providers are outside of the U.S., so they will maybe be impacted equally. But what impact does this have on the sort of ESL ROI for the U.S. market?

It might be a bit too early to say. But with current tariffs, anything produced outside China, they will have a 10% tariff on the markets that we supply, at least for the coming 3 months period. Then we have whatever is done in China, we will have a much higher tariff. But we'll -- so if you have a very -- if it's only a 10% tariff, well, then I don't really see that, there will be a problem with the ROI. Our existing customers have not been very concerned, and we've been also clear that we will not cover the cost of the tariff that will be something that we will give on them. That doesn't seem to have been a concern so far. But once again, it remains to be seen because if there will be other tariffs that will be higher affecting the products they sell, they might feel differently into the future. So to me, we will still invest in the U.S. market. We will actually grow the team. But that's, of course, to plan and make sure that we capture the opportunities we see going into 2026 and into the future.

And on the Sobeys order, the Sobeys rollout, can you provide us some updates? Are there anything new to add here? Or do you expect the rollout to be in line with what you previously communicated looking ahead for the remainder of 2025?

Yes, I think we feel very good about Sobeys. We have a good discussion, the R&D development that we do and that -- which is the key reason why we actually -- we're not starting the rollout until now in April, May. It's been progressing. It's everything is in place. It's been working well. Indications from our customers if anything that they would like to speed up things. We see a lot of interest from their franchisees. They have a lot of different formats and franchisees organization. So we can see that the news of the first initial 50 stores that we deployed is spreading across the entire Sobeys chain with 1,500 stores, and there seem to be a lot of interest and more stores that want to have ESL deployed from basically the French-speaking part of Canada to the English-speaking part of Canada.

And on the sourcing, can you give us some updates on your sort of like production capabilities, anything under development here? Any new initiatives that you're planning in the future?

We are setting up our second fully automated production line this time. It's in Thailand. We can see that it will have, of course, a very positive impact on the cost levels that we have today. So we see that we are able to push the cost down further on production. Then, of course, once again, referring to the uncertainty of global economy, let's see what happens with the components. But if you look at the manufacturing part, yes, we see that here, we will be able to start once again using this concept and duplicating it, lower the cost even further compared to what we've done before. So -- and we have the capacity we need. We see that based on even the sunny side scenarios that we have for the year we have the ability to deliver everything as we please.

And going back to the markets, I guess, Europe, I mean, individual markets, of course, with different sort of like temperature right now. But if we look at the Baltics, could you say anything about this? Are you expecting cautiousness there as well? Or what do you see right now?

Not really. We have actually, on the contrary, seen that there are some of the larger grocery retailers that are now looking at saying that, yes, we are interested in actually doing something and deploying our stores full with retail tech stuff, including ESLs. So no, I don't really see any cautiousness on the Baltic market. I see positive signs in basically the markets where we're active in the Nordic and the Baltics. Then once again, whenever there is a new deal, it's up for us to win it. So it's not won by any means yet, but we see there's a lot of opportunities.

And on the cost side, do you have any planned initiatives that would impact the operating expenditures ahead? I mean, if you look to the maybe short to medium-term, anything on the sales side maybe that.

We plan to recruit within sales in a couple of markets, U.S., UK, to name 2 markets, but a few others. But also, we're doing restructuring in France, as mentioned, even though impact will come later. So we try to balance it. We are investing more also in R&D, but it will be capitalized cost, most of it. So there won't be any -- there will be increases, but not very large increases.

And you mentioned that you invest in the U.S., and I believe you referred to this earlier as well, you still plan to go ahead with these sort of investments considering the environment in the U.S. Is that -- could we interpret that as like a position of maybe optimism regarding U.S. for the mid-term maybe? Or how should we look at?

I would say for mid-term, long-term. So I think I've communicated earlier that we believe in the U.S. market, but we see that it's been progressing slower than, for example, the UK market. So the plans that we had, we will adjust them slightly so that we will invest a little bit less, but we think it's important. So we have a number of opportunities where we need more staff to actually maintain the right way. And it takes time, but we're taking it step by step by step. So to see -- I think there will be nothing this year or nothing major this year in U.S. even though I have some colleagues that are, of course, confident that will be different. But I would say that 2026 and onwards would be where I would expect something. So then we do some investment now to make sure that we can actually win deals next year. That's my target.

And you mentioned Plaza and the potential in recurring revenue, and you sound very optimistic. Could you give us some more flavor on this, maybe some number what can we expect? Do you see great potential ahead? Maybe share of revenue that could be recurring for the medium to long-term or something like that?

I don't have those figures right now. And some of them, I can't share either. We can see with some of our large customers where we have a large installed base. Now we are starting to get traction on the transformation, actually, the migration from in-store server to SaaS. So actually, it's growing quite fast with some of our customers. We have a number of customers where they said, okay, let's do it. So now we're planning. We're doing the project together to actually make it happen. We have launched new versions that we actually now -- it's pretty funny at the Retail Tech Show, we were demonstrating Plaza Live. It was the first time we did it. And of course, we showed all the benefits and how it's working. And of course, then we link and unlink the labels and we update prices and changes. I think we were the only one at the show that could actually do that because the radio interference was so bad at the show that if you had a radio system that they were hardly trying to make a live demo because it was so unreliable, whereas we could do it all the time. And I think that's something that also I think many retailers, it stuck with them. They remember that we were actually able to do live demos. Then we -- so this is still the base, but it's a very nice-looking base. And now the software team is working more, okay, what can we do next? We're spending more time also doing a deep integration with especially a company called Focal System. They have by now the largest deployment of computer vision AI cameras globally at the Morrisons retail where they have actually covered the entire state of more than 500 stores. And we can see that when we combine the benefit of their camera with the benefit that we deliver, we actually almost increased the ROI for a retailer with 30% to 50% depending on the case.

All right. Thank you. Thank you so much for coming here and presenting the first quarter today, and I'll leave it to you for any concluding remarks.

All right. Thank you very much, Hjalmar. So thanks, everyone, for joining. I know that the quarter was not where you were expecting. I hope that you have given you some hope also for the future. Of course, also with the caveat that there are a lot of things are happening in the world right now, so it's really difficult to assess what will happen next. But I hope you leave the call with a feeling that we have a plan. We are taking the right steps forward, and there will be growth, but it could take some time. Thank you very much. See you in Q2, if not before.