Speaker #1: Third quarter Q&A audio call. As per usual, we have Yakov Dverbak, CEO of StrongPoint, and Marius Drevlin, CFO of StrongPoint, to answer your questions.
Speaker #1: Before we start, let me give you a quick recap of the highlights from this morning's Q3 presentation. Revenue is up by 14% to $364 million NOK, 12 months rolling recurring revenue declined by 4%, and Q3 the EBITDA was at $18 million NOK, that's up 4 million NOK compared to the same quarter last year.
Speaker #1: Before we start, a quick reminder: to ask questions, there is a button on your screen—it has now moved to the lower middle of your screen.
Speaker #1: Before it was on the right, now it's on the lower middle, so to ask a question, please do so that way. And we have also got some questions in advance, via the standard investor@strongpoint email address.
Speaker #1: We'll start off with those, first of all. So, firstly, regarding order picking: could you clarify the situation with Sainsbury's? Is the entire agreement being terminated?
Speaker #1: What has made it difficult to implement STRONGPOINT's solution, and could similar challenges arise with the recent agreement in the USA? I think that one is for you, Yakov.
Speaker #2: Okay, so number one: the agreement is not terminated. That's just to be clear. We are working very closely with Sainsbury's to prepare and roll out the solution fully.
Speaker #2: I mean, admittedly, it has taken longer than both we and Sainsbury's expected, which is the background for the temporary reduction in committed order volume.
Speaker #2: But make no mistake, we're working very closely together to make sure that the solution is rolled out in all Sainsbury's stores. I see there's a reference here to the recent US agreement.
Speaker #2: I think that agreement kind of points to how quickly our solution can be implemented. I mean, the announcement of our deal with Meyer came just after Q2, so in July.
Speaker #2: And already now, as we speak today, we are live in three stores. So less than three months to sort of get into the first stores.
Speaker #2: We expect there to be continued rollouts over the next few weeks, before the holiday freeze, and then a continuation of the rollout in the first half, particularly at the beginning of the first half of next year, with Meyer.
Speaker #2: So we know for sure not just with Meyer, but other customers as well, that we can roll it out quite quickly. And in the case of Sainsbury's, obviously, being a big, big company, but also a company that has a lot of experience in e-commerce, there is, rightfully so, a lot of asks for the solution.
Speaker #1: Okay, moving on to the next question regarding EBITDA. In the presentation, EBITDA initiatives to improve profitability were mentioned. Can you elaborate more than what you said in the presentation?
Speaker #1: I think that's for you as well, Yakov.
Speaker #2: Sure. So EBITDA initiatives: basically two buckets. Number 1 is how do we lower our cost base. And that includes reducing being even more prudent on how we use external consultants, or any kind of external cost, really.
Speaker #2: But it's also about how do we ensure we continue a high pace of productivity, in some cases with the support of AI, in all buckets of STRONGPOINT, from sales, from to service, support, and not least also development.
Speaker #2: So that's on the cost side. And also, which is kind of sometimes easy to forget, is that EBITDA initiatives for us is also implementing the solutions we have more quickly and doing that in a successful manner.
Speaker #2: And in the case of order picking, we now have people doing the work, but we're not getting the full revenue potential from that, or EBITDA potential from that.
Speaker #2: From Meyer, as one example, from Iceland, another big order picking example, and also Sainsbury's that we're expecting and believing that we will be rolling out the entire solution to.
Speaker #2: So that's also an important part of ensuring EBITDA is significantly improved going forward.
Speaker #1: Okay, before moving on, just a reminder: if you want to ask a question, there is a slight delay in us seeing it, so please remember to click on the button at the bottom of the screen.
Speaker #1: Next question: regarding the increase in debt. The increase in net interest-bearing debt in Q3, what are the key reasons for this? This one for you, Marius, instead.
Speaker #2: Sure. So in Q3, there were basically 3 key reasons for the increase in net interest-bearing debt. Number 1 was the increase in working capital, which was needed to support the revenue growth that we saw in Q3.
Speaker #2: Number two is that we have started to utilize and implement a factoring facility in the UK, so we have drawn some of those facilities.
Speaker #2: And number three, we purchased 40% of the shares in the joint venture in Spain, which means that we now hold 100%, and the IP.
Speaker #2: For NOK 8 million. So these are the three key reasons. If you look at the development in net interest-bearing debt over the course of the last two years, you will see that it does fluctuate.
Speaker #2: Usually, along with the volume and the fluctuations we have in the business. If you just look at Q2, we had NOK 90 million, which is not too far off from the NOK 103 million we had this quarter.
Speaker #1: Thank you, Marius. I'm going to give you a few more seconds, in case we see any more coming in on the live system. So far, nothing.
