StrongPoint ASA ($STRO)

Good morning, everyone. Welcome to StrongPoint's First Quarter Q&A Audio Call. Today, we have Jacob Tveraabak, CEO of StrongPoint; and Marius Drefvelin, CFO of StrongPoint, to answer your questions. Before we start, let me give you a quick recap of the highlights from this morning's Q1 presentation. Revenue for the quarter was at NOK 342 million, which was flat compared to last year's first quarter. The 12 months rolling recurring revenue increased by 3% compared to Q1 last year, ending at NOK 384 million. That's plus 3%. And year-to-date, the EBITDA is -- was at NOK 10 million, on par with Q1 2025.

[Operator Instructions] We have already received a number of questions. So we'll kick off already on some of those. First question, regarding e-commerce in Vusion. In the last quarterly report, you stated that we have launched the Shelf-Verified Order Picking solution with Vusion, integrating Vusion's on-shelf cameras with StrongPoint's Order Picking. Can you please say which retailer or retail chain this was launched with? For you, Jacob?

Okay. So thank you. Apologies right away for that pollen allergy. Yes. I mean -- so first of all, this has been launched as a product, not with a customer. I think it's important for investors to understand that, whereas Order Picking or e-commerce is getting more and more mature, and ESL is also getting more mature in the markets. Shelf-edge cameras is at the very beginning or inception of its journey into grocery stores. So there's very few today grocery stores that have shelf-edge cameras. Walmart has it now with Vusion. Carrefour has it also with Vusion. And we hope to see many more of that coming, and that's when this product will really -- or feature will come really into [ play ]. As of now, it's a launched product, but not launched into a specific retailer.

Next question also on Order Picking. In the investor update, you stated that your goal is to dominate manual in-store Order Picking. What is the current global total addressable market for this? And regarding definitions, for me, to dominate in a business context means having the highest revenue. That's from the question. Does StrongPoint use a similar definition for you as well? Jacob?

Yes. So to maybe start with the latter to dominate. I mean, yes, we want to be the preferred and as such then the biggest provider of in-store grocery picking solution. Now, if we're trying to sort of give some numbers to this and helping the audience, I think the way to think about this is, if you're a bit [ difficult to say ] conservative, if you consider the Western market, the Western e-grocery market, so North America, Europe, and we're talking in ballpark USD 500 billion, right? Now most of that, roughly 80% of that is being picked in stores. So, that means only 20% is being picked like Ocado is doing or [indiscernible] is doing, et cetera. 80% is picked in store. That means out of the $500 billion total market for e-groceries, $400 billion of revenue is picked in stores. Now, that's the revenue in stores. If you, again, ballpark use across the board, a basket size -- and here, we have to remember that markets are quite different. The basket size, ballpark, we can talk about $100. In the Nordics, it's higher. U.S. is a little bit lower. But if you use USD 100 on the in-store volume being picked in -- which is $400 billion, then we get to 4 billion orders. So there is roughly 4 billion orders being picked in store in the Western markets. Now, then the question is -- we price our product with a fee per order. And you can -- this ranges, of course, between big customers, where it's -- ballpark is closer to $0.10, to smaller customers, where it's $0.50 or $0.60, but that's per order, but let's assume $0.25 per order. Then what we're talking about then is 10 billion -- I'm sorry, USD 1 billion or NOK 10 billion. That is what you get. And that's the market we want to dominate. And it's also important to recognize that this is a market which we want to dominate that's not only static, it's growing actually across the board in Western Europe. This is a market that's growing at roughly 10% every year. So I hope that satisfies the investor question.

Okay. Another question. Can you provide any further information regarding the leading U.K.-based e-commerce retailer going to install an AutoStore? Is it their first Auto installation? And how many stores or fulfillment centers does it have in the U.K./worldwide? For you, Jacob.

Okay. So yes, we're not allowed to disclose the name of this U.K.-based e-commerce retailer, but it's a retailer. It's not a grocery retailer. Still very important for us to get traction on AutoStore in the U.K. And this is -- yes, this is their first AutoStore installation. What I can say is that they have -- 60% of their market is in the U.K., but there's also facilities outside the U.K. in Europe, in total, 3 sites that -- so I think the question alludes to, could there be more? Yes, there could be more even in the U.K., but it could also be more outside the U.K., at least today, into other distribution centers.

Okay. Next question, a bit broader. Do you see any signs of delayed investment decisions following increased macroeconomic uncertainty? Marius, this one for you.

Well, I think the answer to that is a vague yes in the sense that, yes, we are experiencing -- I would say, actually continuing to experience that we are seeing some delayed decisions. We're definitely seeing the global uncertainties, although it's not impacting our supply chain or anything as far as being able to deliver yet at least. So I think there's a yes to that question. There's also another aspect that we have talked about for a little while, where we are seeing that our customers still have to balance between investing in pricing of their own goods or giving discounts, if you may, compared to purchasing new equipment from the likes of StrongPoint. And that, with the current conditions, is probably impacting the investment decisions as well. So, to summarize, yes, but not to a large extent yet.

Okay. One final question. If you have any more questions, please don't hesitate to put them online because we will -- there is a small delay between you writing the question and us seeing the question here. Next question, how close are you to a CashGuard Connect deal in Spain? Or would you be disappointed if not reached within 2026? One for you, Jacob.

Yes. So, CashGuard Connect, first, let me just start by saying that this is a -- has been a test. I mean, it's a test of patience. I mean, certainly, we were not expecting it to take so long to develop a solution, right? And some of this is unfortunate, but it's possible to explain, first and foremost, the bankruptcy of our joint venture partner, [indiscernible], in Spain. Now, that bankruptcy is being contained and handled, and we're very positive about what we can achieve to secure those assets and what we can achieve in making sure that, that is not a question mark for both investors and customers. Now, there's a lot of customer demand for the solution that we have sort of -- that we have secured. Now, we're still in that position that we want to get the product into a, call it, industrialized mode. And it's only then that we can really take in big orders. So to [ Jorgen's ] question here, that's -- even if we did get a big purchase order, we wouldn't be able to produce that in 2026. On [indiscernible] side, it's also unlikely that any retailer would place a big order unless the product is already industrialized. So we have to give us a little bit more patience. But the customer interest is absolutely there. The bankruptcy estate is being handled, and the product is getting there.

A few more coming in. You state CapEx of NOK 7 million in the presentation. CashGuard is NOK 3 million and POS is NOK 1. What is the balance spent on? A question for you, Marius.

Right. So assuming that the balance refers to the residual, so that -- the short answer is, traditional CapEx. It's fixed assets. We have service cars in many of our countries, et cetera. So this is more what we would refer to as traditional capital expenditure.

Okay. Next question, translating from Norwegian. Is there any danger ahead of the Sainsbury's contracts for delivery, noting that the progress was delayed?

So, as we stated in the report, I mean, the rollout has taken longer than anticipated or expected, I mean, from both our side and from Sainsbury's side. And I think in retrospect, I mean, we have to remember Sainsbury's is an absolute behemoth in the U.K. grocery retail market. It's $60 billion worth -- dollars is the correct -- dollars worth of revenue being picked in stores alone, right? So, as you can understand, having also 20 years of experience of doing picking in store with that sort of sheer volume, you want to have certain features and functionalities that we have agreed upon in the contract to deliver on, that we will deliver on. But as always, there's -- it's taking more to get it across than we were hoping for. That said, we are in very good dialogues with Sainsbury's. I was at one of their stores 2 weeks ago, overseeing the early morning picking operations and seeing that there is absolute progress. So we're -- it's taking longer than we anticipated, but we are very positive about how this will evolve forward.

Staying in the U.K., are there any updates on Vensafe in the U.K.? One for you as well, Jacob.

Yes. We're not commenting specifically on any updates. I think in general, I want to say that, yes, there's absolutely a continued interest for Vensafe. We are -- what's -- there's a pro and a con, right? The pro, unfortunately, I should say, is that theft is already high and still on the rise in the U.K. That makes the Vensafe solution very, very suitable to handle those sort of challenges. The con for Vensafe, if you may use such a term, is like there's -- the tobacco legislation in U.K. is a bit more strict than in Norway regarding dispensing of tobacco. So, sure, it's possible to dispense, but there's a little bit more cumbersome process. So these are immediate and present challenges to get Vensafe out in the market, but there's absolutely interest to get it out in the market. And we're still working with many, many of the grocery retailers there to make sure that we get Vensafe out in the market, although at a slightly different use case than we anticipated regarding tobacco, but then on the other hand side, more on other types of theft-prone items.

Okay. Next question. In cash flow movements, it is stated minus NOK 11 million in other prepayment. What is this referring to? A question for you, Marius.

Yes. So that's referring to a combination of many, many items in the balance sheet, and we have this every quarter and every year. Essentially, these are prepayments to anything that could be public duties, suppliers, rent, et cetera. Now, we have specified some of this in working capital, et cetera, but it's not possible to be super-detailed on that, but it's generally prepayments. It could be a project that requires some prepayment before we get the payments back to us. So this is more of general prepayments on both suppliers and operational costs.

Okay. Next question. I think I'm going to elaborate a little bit on the question. I think the question is, are there any opportunities, or are we seeing any opportunities for self-checkouts outside the Baltic region? I think a question for you, Jacob.

Yes. So I think the question also comes from the fact that we are the #1 player when it comes to self-checkout in the Baltics, whether that's with our own hardware and software or our software and third-party hardware, right? Are we able to replicate that elsewhere? That's certainly the ambition and the goal. We should be aware that these are long sales cycles to get in and look forward to the day that we can shop in self-checkouts in Norway personally. That is a StrongPoint self-checkout. But it's taking some time. What I can say though is that we have already had success with our self-checkouts outside the Baltics in Iceland, for instance. And that is a case that we're being able to also showcase externally, and that's with Pris, which is one of the grocery retail chains in Iceland. And I hope you'll be able to see that we have super-happy and satisfied customers also outside the Baltics with our solution. And of course, the ambition is to -- as we get more known for offering this solution, to see that coming into the market, both in the Nordics, in the U.K. and Spain.

Next question. We take large contracts on CashGuard in Norway, but why isn't CashGuard good enough for larger customers outside the Nordic region? What's the difference? What's the reason, I think, that means?

Yes, I can take that. I think, first of all, we do have some great partners outside both Norway and Sweden. We've had a South African partner, Irish partner, French partner that have been selling our CashGuard solution for many, many years in a very successful manner. But -- and do I believe that our current CashGuard solution is good enough for other markets? Yes, absolutely, I believe that's, right? And whilst on the [indiscernible] side, it's important to recognize that there are some subtle differences in the different countries. And I'll give the most relevant one, which is sort of Spain. I mean, for those of you that have been following StrongPoint for a while, we do -- we did and we do deliver CashGuard solution or traditional CashGuard solution to Alimerka, which is a regional grocery player in the Spanish market. That has been very successful. However, it's also the only grocery retailer that has really embraced a cash management solution. Default in Spain still is to use manual cash drawers that you saw in Norway in the '90s or maybe even '80s. So that's kind of what we're competing with. And why is it taking so long? I think we have to recognize that, at least in the Spanish market, there's a huge volume and huge velocity of cash that needs to be handled. And we can argue all we want with customers, why don't you also go the path of Alimerka? But this is also the reason why we started developing the CashGuard Connect solution, which is more tailored to a very cash-heavy market. Now, as for CashGuard, just to go back on that, I think absolutely, there's still potential. It sells in Norway. But Sweden, of course, we're already selling CashGuard. I'm hopeful of what we can do in Finland. As I said on a number of occasions, thanks to Mr. Putin, cash is not going away anytime soon, and nobody knows this better than the Fins. So I'm hopeful for what we can achieve also with the traditional CashGuard.

Okay. I think that is it. We haven't received any more questions. So I think we will call it a day, just giving a few more seconds just in case there's one more coming in. No, then I think we'll call it for a day. Thank you very much.