A GOOD START AND FOCUS ON THE FUTURE

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.

FIRST QUARTER, JANUARY– MARCH 2022

• Net sales increased by 11.6%, or 9.6% FX adjusted, to MSEK 79.9 (71.6)
• Gross profit increased by 15.4%, or 12.9% FX adjusted, to MSEK 62.1 (53.8)
• EBIT increased to MSEK 8.9 (6.5)
• Earnings after tax was MSEK 7.9 (7.3)
• Earnings per share was SEK 1.00 (0.93)

IMPORTANT EVENTS

DURING THE PERIOD      

• As previously communicated, the monetary effects of the war in Ukraine have been limited to a few customer assignments, corresponding to less than 0.5 percent of sales on an annual basis. Nepa has no customer assignments in neither Russia nor Ukraine as per today.

AFTER THE PERIOD ENDED

• No important events to report after the period.

A WORD FROM OUR CEO

The market continued to be strong during the beginning of the year, despite increased uncertainty in the second half of the quarter because of the war in Ukraine and increased inflation concerns. Sales increased just under 12 percent to SEK 79.9 million (71.6), compared with the corresponding quarter last year.

I am especially happy to report that the recurring revenues increased with 21.5 percent to SEK 54.1 million (44.6). Nepa’s recurring revenues make up
68 percent of total revenue during Q1.

Gross profit increased just over 15 percent to SEK 62.1 million (53.8). The gross profit margin strengthened by 2.6 percentage points to 77.8 percent (75.2). Operating profit (EBIT) amounted to SEK 8.9 M (6.5). The EBIT margin in relation to gross profit increased to 14.3
percent (12.1) while profit after tax was SEK 7.9 million (7.3).

A year of transformation

The legacy clean-up of systems and processes that we have been working intensively on since late summer 2021 will, as planned, be completed this summer. At the same time, the efforts to strengthen our tech augmented advisory continues through increased investments in our technology platform. The focus is on rationalization, automation and integration of data collection and analysis where we have seen good leverage from our tech investments.

With data even more easily processed and through better modeling, we can add services that have not been offered before. Through closer integration of data and advisory services, we can forecast and recommend the best mix of marketing initiatives, durations, and timing with significantly higher precision in order to optimize the customer's ROI from marketing. The improvements result in reduced costs, increased pace and continuity of deliveries and thus higher value and quality of what we deliver. For customers, we become even more relevant.

Further development of our platform will help us reach our goals. During the first quarter, approximately SEK 7 million of the SEK 8.2 million increase in personnel costs is capitalized, derived from improvements and new development of platform modules. We expect investments to remain at this level for the remainder of the year.

In parallel, we are investing approximately SEK 3 million, whereof SEK 1 million personnel costs and SEK 2 million external resources, in improved work processes throughout the group. This work will gradually decrease and be completed during this year. Excluding these temporary efforts to build future Nepa, the running costs for the daily operations are on the same level as corresponding quarter last year, even though sales increased by close to 12 percent.

In addition to the capitalized investments in our platform, and the work with improved work processes, we are also doubling our marketing efforts after evaluating various channel options in 2021. However, this is still a rather conservative level of costs compared to our competitors. The intention is that our marketing investments will grow as we continue to expand our in-house sales capacity and success.

To further focus the organization on growth, we are also investing for the first time in clear performance-based incentives.

I expect that the positive effects of these initiatives and investments taken together will be gradual, with emphasis at the end of the current year. 

Outlook

Inflation is on the rise, but we see that we can raise our prices to compensate for rising costs, although there might be a lagging effect depending on the length and type of the customer’s contract.

In terms of market trends, we see a rapid development in our market with a changing set of tools following advances in AI and modeling. We aim to strengthen our already strong position within "brand tech", meaning methods and tools to combine marketing and brand initiatives with the power of technology to build robust brands faster and more cost-efficiently long-term. 

Companies' challenges in reaching new customers lead to generally increasing communication and branding costs. Our development initiatives aim to solve these challenges for companies and thereby take additional market share with an offering that distinguishes us from our competitors. I am convinced that our investments create value long-term. Based on our knowledge, strong track record and clear focus, we are taking Nepa to a new level.

Ulrich Boyer

CEO

For further information, please contact:

Ulrich Boyer, CEO                            Michael Wallin, Head of Investor Relations
+46 708 226 618                              +46 708 788 019
[email protected]                                 [email protected]
 

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs. The Swedish version is information that Nepa AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET on May 19, 2022.