StrongPoint ASA (STRO) Earnings Call Transcript & Summary

So to help you out on the calculation of that. What we did say is that the effect of the price recurring revenue on the LTM recurring revenue was NOK 20 million. So if you detract the NOK 20 million, and you add an estimate on the effect of the Sainsbury's, we would probably go from a 2% decline as we have on the reported figures to somewhere between plus 5% to plus 10% on the underlying recurring revenue growth.

Okay. Then we have a question regarding -- a specific question regarding service revenue. Service revenues on e-commerce have fallen by NOK 10 million in the quarter compared to the same quarter last year. What is the reason for this? Question for you, Marius.

Yes, pretty much on the same topic. I don't necessarily recognize that figures specifically. But I have to assume that this refers to the license revenue. And then there's 2 things. It's the license revenue component of the price recurring revenue, which is a good part of this annual effect that we have talked about, i.e., the NOK 50 million on an annualized basis. So that's number one. And second is the effect that we have touched upon with the temporary reduction in the minimum order volume with Sainsbury's. So those are the 2 reasons.

Okay. Now moving on to some specific financial questions. International revenue has grown strongly, but the EBITDA margin was only approximately 1.3% in Q2. What is currently limiting operating leverage and which commercial gross margin and cost milestones are required to reach a sustainable 5% international EBITDA margin? The question is for you, Marius.

So 3 things that we would highlight. Number one is to capitalize on the investments that we have made and that we are still making within Order Picking. We have now 3 super important good implementation projects. So they will definitely contribute positively. Number two, similarly in the U.K. business unit, capitalize on what we have done, meaning getting more volume and this will increase the EBITDA at least in absolute terms. And finally, number three, to increase the efficiency in product development. Because as you see from our quarterly reporting, we have 2 segments. We have the Nordics, and we have international, including the product division, which is essentially the development part. So these 3 reasons or actions will definitely contribute to reaching the question of a sustainable 5% margin.

And another related question, what sustainable annual savings are expected from the latest cost measures? When will the full run rate benefit be visible in the P&L. And does management expect the organization to be through the main restructuring phase without further material one-off costs over the next 12 to 18 months? Question for you, Jacob.

So I guess what's referred to here is the fact that we said we had some NOK 4 million or approximately NOK 4 million one-off costs in the quarter. That's related to severance pay. I think what there is to say, I mean, first of all, we just have to sort of acknowledge that if you look capacitive last few quarters and I think, it's being a year, right, we had a flat top line. And if we have a flat top line, in, I mean, general inflationary regime, we have to take cost measures. And we have done that. We have recently done that, and we will continue to do that also going forward. That's just a natural consequence of that observation. It should very quickly be the same. Obviously, we are doing a lot of work to grow revenue with new customer contracts coming in. But at the same time, we need to and will continue to take cost steps without necessarily calling it a restructuring phase, because it's not a restructuring phase. This is a part of operations, ensuring that we have an appropriate cost base and following the recent revenue development that we've had.

Okay. A very general question on our customer pipeline. Can you comment on the total order backlog and its development? Question for you, Marius, this time.

So we don't report on the order reserve, and I will answer the question afterwards. But the reason for that is because we have a lot of, I would say, quick hardware product sales, which doesn't go through the typical order reserve funnel. However, to try to give a more general answer to that question, we have announced a couple of deals now so far this year on AutoStore, on ESL installation in the Baltics, which all-in-all have increased the order reserve in the sense that we would -- if we were to report on that. So that plus the big CashGuard order that we announced previously. All of these have contributed to a good start of the year as far as the order reserve. So I would say, generally speaking, a positive momentum on the order reserve without having specific figures.

Okay. And on the topic regarding Vensafe. What is the likelihood of a major rollout in the U.K. this year? Question for you, Jacob.

So I'm not going to give specific likelihoods or will it happen this year. I think what we can say about Vensafe in the U.K. is that, there's some process on comps, right? The one -- let me just start with a comp. I mean, the -- in the U.K., there's been a recent hearing of a new tobacco legislation. And that tobacco legislation does not seem to sort of approve dispensing tobacco in the way that we are used to in Norway and Sweden, where Vensafe would have been perfect. That said, I mean, the level -- and this is the benefit, is the number of thefts and the continued rise of thefts and protection of high-value items in the U.K. is high and growing. And as you will all know, Vensafe is very suitable for any kind of high-value items. So we're very positive about sort of getting the Vensafe into the U.K. market, however, not in the exactly the same way as we have been used to in a Nordic setting. But I will not be answering the specific questions of major rollout this year or anything like that. That will obviously come in a stock notice if that were to happen. But we're still pushing to get the Vensafe in the U.K. market.

Final question regarding the bottle deposit scheme in the U.K. or as you say, in your way, the pant. What kind of solutions do you offer for depositing bottles in the U.K.? Will deposits be allowed in 2027? And do you have your own deposit machines?

So yes, I mean, the U.K. has finally, I should say come to the conclusion that they will have pant or DRS, deposit return scheme as it's called in the U.K., where all sellers of bottles and cans would have to be compliant within September, October next year. That means there is a massive work ongoing in the U.K. to ensure that they have the appropriate both machinery and pant machines, as you would know them, and processes in place for -- to handle that. Now we at StrongPoint do not have our own deposit machines. We do work with the major DRS suppliers out there. Most prevalent for us has been we worked with Sielaff. But in any case, we are really not a reseller of machines, but rather doing the housing and the preparation. You should recognize that when you put in a DRS machine, there's lots of shopfitting to be done around that, if you put the machine in the store itself. In the U.K., though, we're seeing a lot of space outside in specific or dedicated housing being used for DRS machines. And that's actually playing quite well on the shopfitting competence that we have in the U.K. with the acquisition of ALS a few years back.

Another question came in on the live system. Just came in now. Any execution risks regarding the picking, the Order Picking solution, I presume, Sainsbury's and the others? Question for you, Jacob.

Yes. Let me just say that the question is -- I mean, there's -- nothing is without risk here in life. And at the same time, I understand the question with regards to the rollout with Sainsbury's having taken longer. Now let me answer the question in twofold. One is sort of with Sainsbury's, we're working very closely with senior leadership team and teams out in the field, in the stores to ensure that we get this to a solution that Sainsbury's would see fit to sort of fully roll out. So we're doing absolutely everything we can, and we're kind of observation from our end is that, that motivation is absolutely there with the clients themselves. Then for everybody else, including sort of Meijer, including Iceland, including Sonae MC, all these other implementations that we're currently doing. I mean, first of all, they are in a -- they're big, but they're on a different size and scale than Sainsbury's, which is massive. With all of these, the observation is that the implementation is going very, very well. The rollout is expected to be happening now in -- for all these 3 in the quarters to come and to have a full effect of these projects in the first half of 2027. So, yes, there is risk in life. Execution risk on picking is one of those that we can absolutely handle in that respect.

That's a wrap for today. It's all the questions we have. Just waiting a few more seconds just in case. No, it looks like it is it. So thank you, everyone, for joining us, and wishing you a good Friday. Goodbye.