StrongPoint Q1: Strong sales but also higher costs - ABG

Good sales momentum, +21% y-o-y
Acquisition of Air Link still in DD phase - not closed
’22 adj EBITDA estimates likely down 5-15%

Q1: Strong sales momentum offset by higher costs
StrongPoint reported Q1 revenues of NOK 301m, +21% y-o-y (in Retail Technology) and +6% q-o-q. While it is still negatively impacted by components shortages and negative FX development, Q1 sales was another data point illustrating that Q3 was a low point. In particular, Payment Solutions (CashGuard) had an all-time high product revenue (+142% y-o-y), driven by both Norway and South Africa. Furthermore, In-Store Productivity is back to growth (+56% y-o-y) driven by ESL roll-out in the Nordics. The gross margin in Q1 was 38.6%, strongly down from 41.8% in Q1 last year (continued ops). This is driven by the strong ESL-related revenues which typically has lower margins. EBITDA was at NOK 12m (3.8% margin), down 15% y-o-y driven by higher costs related to product development (E-com initiatives) and higher number of employees in sales and marketing. However, NOK 2m is related to due diligence for the ALS acquisition, i.e. adj EBITDA was 14m, flattish y-o-y. The component shortage situation is still uncertain, but the company has been proactive and increased inventory to mitigate the situation. In Norway, some additional delays are expected on Cash Guard roll-out.

Acquisition of Air Link still not finalized
StrongPoint announced in February that it had signed an agreement to acquire Air Link Systems (ALS), a UK based company that provides installation and service for retail solutions (grocery lockers, self-checkout, vending systems, queue management systems, etc.). It was agreed that StrongPoint has exclusivity until 30 April, and the company is still working on due diligence and negotiation of the share purchase agreement. This is aimed to conclude shortly.

2022 estimates likely down 5-15%
Based on the Q1 report and outlook, we expect negative estimate changes mainly driven by higher opex levels than ...
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