StrongPoint ASA (STRO) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to StrongPoint's Q4 2024 Q&A. Great start to this call. Give you a quick couple of highlights from the report that was published this morning. Big improvement in EBITDA. We've seen a 15% growth in recurring revenue, and we are gaining momentum in the U.K. with our antitheft Vensafe solutions in stores. And not leastly, we've just locked in a major partnership with a top French retail tech giant. It's all great news. And because of that, we've actually got a lot of questions in already, and we'll do our best to cover them or we'll cover as many as we can, more actually popping in right now as I speak. If you like to submit more, you can do so through the question system on your screen.

So to kick things off, to Jacob, first of all, summarizing quite a number of -- quite a few questions here into one, regarding electronic shelf labels, VusionGroup and Pricer, how will it work practically with VusionGroup in StrongPoint's core markets, outside our core markets? And what is expected regarding Pricer in the future?

Thank you, Dominic. I mean, if I may just start off by saying exactly like we did in the introduction, this is a major partnership for us with VusionGroup, a French company with a market cap of in excess of EUR 2.5 billion. This is a really big company and more importantly, not just big, but also highly relevant with a 50% global market share within the ESL space. That said, Vusion is a lot more. And the partnership that we have formed is twofold. On the one hand side, we are becoming or we have become an ISV, an independent software vendor, that's in effect as of immediate. That means that our e-commerce solutions and in particular, our order picking solution will be integrated to Vusion's platform, and we are able to leverage Vusion's customers and customer prospects to conduct what we call co-selling of our solution. So that's one part of the partnership. Then there's a second part of the partnership, which is a value-added reseller agreement. So a nonexclusive reseller agreement, which covers the 9 countries in which we are present, right? And that includes electronic shelf labels. And for you all, it will be important to understand that we cannot start selling or marketing other ESLs but Pricer up until the very end of June this year. But again, VusionGroup also have a lot of non-ESL solutions, including Captana cameras, sensors, retail media platform, et cetera, that we are also positioned to be selling as of now in the countries we are present. So very exciting partnership there.

Okay. Next question, again, summarizing a few questions in one. Regarding CashGuard Connect, a question for you, Jacob. What is the latest on the project and with the customer in Spain that is piloting the solution? And secondly, is there interest in the solution from other retailers?

So the CashGuard Connect project and development project is a development alongside the largest grocer in Spain, and you would know this. And we have to be honest, it's taken longer time to develop than we anticipated. And that is a two-folded reason. One, it's a complex project, but we're handling that. And then secondly is the fact that our joint venture partner, a smaller company with a 40% stake that we still have the opportunity to acquire, they've gone into what's called an insolvency process. That means there's been established an administrator to the company and our counterpart is no longer the former owner of the joint venture partner, but rather the administrator. These things means it will take -- it takes time to get clarity, but it happens, right? And we're now in the final stages of the product design and preparing for industrialization. And from what I gather, we are getting a big understanding from our customer, and we are setting ourselves up now to get the -- what's called the multi material combination. So meaning that the [ blister ] that moves around in the vaults, they can move to different parts of the front offices by June. So it's taken longer than anticipated. The insolvency of our joint venture partners certainly doesn't help, but we're progressing okay well on the project itself.

Okay. Regarding the second question, Jacob, is there any interest in the solution from other retailers?

Yes, there are. I mean we've started, you can call it, soft selling to other retailers, and there is interest and asks to be in a pilot. So obviously, right now, the focus is 100% on getting the solution right in Spain, and that's the first and foremost focus. But of course, we're also building up a pipeline of interested parties elsewhere.

Okay. Next question. Moving on to Vensafe, again, summarizing a few questions here. Jacob, we refer to 3 Vensafe proof-of-concepts in the U.K. What are the chances of those turning into full rollouts?

So let me just first say that we have 2 of those proof-of-concepts live in stores. It's no secret that that's with both Sainsbury's and with Asda, slightly different use cases. We have a third, which is an internal headquarter proof-of-concept coming out live in store with one other major grocer in not too long. And obviously, when we start these kinds of proof-of-concepts, both -- the ambition is, of course, from our end and the customers' end to get these into rollouts. And that is absolutely what we're aiming for. I believe Vensafe has a very promising future in the British market. Now as Norwegian or Swedes where the Vensafe is a very natural part of the shopping journey in store, we have to respect that, that is something that would need time to both mature with grocers, but also with their customers. But obviously, we wouldn't have started these POCs if we didn't believe in the opportunities for rollouts. And I'd love to see that being 100% of the POCs going into rollouts, but that's a bit early to say with the very early start of these proof-of-concept stages.

Okay. Moving on to the next topic, lockers. Jacob, what is the potential going forward, specifically in the U.S.? And what is the scope of these current prospects? Secondly, what are the chances of similar locker projects, but in the U.K. and other countries going forward?

Okay. So let's start with the U.S., where we, again, have a major grocery retail chain. We're not allowed yet to disclose, but it's a major grocery retail chain with tens of lockers in operation, which is working quite nicely. We were and still are at the proof of -- not just concept, but proof of economies stage. We are expecting that proof of economies to sort of increase in scale. That said, just within the last few weeks, we've had a new President in the U.S. There are lots of discussions about import tariffs and to what extent that's going to impact the project is a bit too early to say. But the project is rolling on nicely. The U.S. is, of course, a big market. Groceries is a big -- and grocery e-commerce is in big growth in the U.S. And we're experiencing that not only this one client, but other clients as well are looking to reduce the delivery costs. So we're prosperous about that. Then to your second part of the question, the U.K., somewhat similar, right? We -- lockers is not a new thing as such in the U.K. It's currently very much a home delivery market. That's what customers are used to getting their e-groceries delivered to. But again, we believe that there is a big value for grocers and for consumers in having the opportunity to get their groceries purchased online but picked up in lockers. As we've seen in the Vensafe case, I mean, we have to accept and recognize that we're seeing slightly different use cases based on how the market is. So as an example, in the U.K., it's a very much bigger quick commerce or a Q-commerce market than what we've seen in Scandinavian markets. And so we're right now exploring how we could adapt lockers to facilitate for Q-commerce players. But lockers is certainly a very interesting also opportunity in the British market.

Okay. We have a couple of very specific financial target questions. So moving specifically to you, Marius. First question, the financial targets for 2025, what are the chances of those being reached?

Absolutely. So to repeat what we said in the strategy update April last year was to have revenue ambitions of NOK 1.5 billion to NOK 1.8 billion in revenue. 2024 came out at NOK 1.3 billion. So obviously, there is growth to be seen. I think to answer the question, it's obviously a little bit early to say given that we are in the beginning of the year. But the 2025 target remains achievable. But it's also on that note, important to emphasize that this is based on the assumptions that some of the core markets still will have to improve as we are commenting quite in detail and specifically about, I think, both in the presentation and the report. So orders needs to be won, both within in-store and e-commerce. But it will be more natural for us to comment on this as we go along, obviously, next touch point being the Q1 at the end of April.

Okay. Actually, you have a follow-up question, which is related to the previous one. And what are the financial targets for 2026?

So we haven't commented or specifically detailed out any ambitions for 2026. There will be a strategy update session later this year, where we naturally will talk about the future ambitions. And the date for this has not been concluded yet, but we will inform the market when this has been decided, and it will be natural to talk about this -- the ambitions going forward.

Okay. And taking a few more questions that have just come in. One for you, Jacob, regarding order picking. The question is, do we have more pilots? And have we had any traction in other markets, for example, in the U.S.?

So yes, we have other opportunities. I mean it's rare that we do sort of pilots, we do showcasing of the order picking, and we're doing so in different parts of Europe. We have yet to see any pilots or demonstrations in store in the U.S. And I'm hopeful that our presence that we just had at the NRF in New York will also see us materialize some of the leads coming in there into demos and essentially not just pilots, but also firm deals and rollouts. But it will be more natural for us to comment on that once we have something that we can actually communicate to the market. But yes, there is a lot of interest for order picking.

Okay. I'm just picking up a few more questions that have come in online. Should we interpret your comment regarding CashGuard Connect that there is a material non-zero probability that you will exit the joint venture during this year?

So I'll have to do a little bit of interpretation of the question, but we own 60% of the joint venture, and we have an option to purchase the remaining 40% at what we would call a favorable price. Now that agreement that we have to purchase that 40% is still valid. I mean, even though the joint venture partner is now into an insolvency process, that -- those, call it, remains of our joint venture partner are now in the hands of an administrator. So we still have the opportunity to purchase those 40% to gain the 100% of the joint venture. So we're not going to exit the joint venture. I mean we are a majority stakeholder. And if anything, we'll be exercising our option to acquire 100% of the JV. So my comment is more to sort of be interpreted as any kind of insolvency process with a partner. It's not favorable for the timing of the development and deployment rather than anything else.

Okay. A couple more questions going back to a previous topic, which we touched at the beginning regarding electronic shelf labels. Will the change of ESL provider from Pricer to Vusion affect your -- so our in-store productivity sales in H1 2025?

So we have a partnership with Pricer that runs until June 28. And both we and Pricer are committed to getting the most out of that partnership. So we will be acting as a good partner as we've always done and push and promote Pricer solutions on ESL up until the partnership ends June 28. So we're absolutely hoping that and believing that the partnership with Vusion doesn't change the projections that we've been having for ESL from Pricer being sold to the market.

Okay. I think that is it. I think all -- we had quite a lot of other questions, but I think we've actually covered them in the answers you've given to other questions. So I'm just going to check one last time, just in case there's very often there are some questions in the last second. Okay. I think that's it then. We're going to call it a day. Thank you very much to everyone for listening in. I hope you have a pleasant day. Otherwise, we'll call it a day right now. Thank you very much, everybody.