Good morning, everyone, and welcome to this Q&A session for StrongPoint, where we will answer questions regarding our third quarter results. My name is Marius Drefvelin, I'm the CFO, and I am joined by Jacob Tveraabak , the CEO. We have received some questions in advance by email, mainly to our investor email, so we will start with some of those. And afterwards, we will look at the questions that are popping up in our Q&A platform. So first of all, question number one: What are the overall highlights from this quarter? That's probably for you, Jacob.
Thank you. No, obviously, we are pleased with seeing a shift in those tough quarters that we've left behind now for quite some time, and to see the strong performance, strong project performance, both in the Baltics and in Sweden, with respectively 36% and 25% revenue growth. Of course, we're also extremely pleased to have a customer in Sainsbury's, where we have now started rolling out the order picking solution. As of the end of the quarter, we were at 13 stores. However, we fully have now the minimum order quantities that the contract stipulates, which have started ticking in.
Which means that as we are then progressing towards Q1, Q2, and the remainder part of the stores will be rolled out, we will be seeing both that minimum order quantity making itself evident in the financials, but also any volumes beyond that. I should say also with very good numbers in both Baltics, Sweden, and in the e-commerce side, where we are growing from a small base, but up, of course, a staggering 176%. That is in parts the order picking uptick, but also the lockers that have been getting more traction. So those are sort of financial highlights.
Then we're, of course, very pleased to see Delivereasy ticking in as a, I'd say, a natural extension, if I may even use such a term, of the fact that we won Sainsbury's. We're getting a lot of attention from that. We're also officially live with AutoStore, with three temperature zones, which was a big announcement by AutoStore last month. We're live with our first multi temperature zone solution. And then lastly, actually sitting here now in the Baltics, overseeing the rollout of our preeminent self-checkout solution to Maxima, which is the biggest grocery retail chain in the Baltics. That's also, of course, a very, very important highlight for this quarter.
Thank you very much. That was a good, good summary. The next couple of questions, I would say relate to Sainsbury's and the order picking. So we have tried to summarize these questions into, into a few ones. Number one, regarding the rollout, you touched upon the number of stores, 13 so far. Could you comment on, on any freeze period, which is, more common for our grocery retailers now that we are going into Q4?
Yeah. So, Christmas holiday seasons is a big thing for any grocery retailer, in particular, if you are a U.K. retailer. So we are now effectively into the freeze zones. We have added some additional stores beyond the 13 since we ended the quarter, but we're essentially in the freeze period now. And so the remainder of Q4 will be a freeze period until we again start up with a continued rollout of the remainder 270+ stores in Q1 and Q2.
All right. Number two, also relating to the Sainsbury's contract. It was mentioned during the presentation that invoices were generated for a minimum number of transactions.
There's also some questions relating to what can we see as a minimum threshold? What's the plan going forward? Are we according to plan, I guess, first of all? Maybe I can touch upon that initially, and you can make some comments. I think overall, from a software as a service perspective, we have made a standard contract, which means that revenues are recognized before necessarily you start rolling out the number of stores, and we are absolutely, I would say overall, according to plan, as far as number of stores and the feedback we have received so far from the customer is very good.
Now, the more difficult question to answer or give guidelines on, obviously, is the number of stores going forward, not necessarily, but the expectations on revenue. But just to confirm that the model is based on number of transactions, which we obviously do not have any clear visibility on, although we do have some plans for that. So not sure if you would like to make any other high-level overall comments on the revenue from that perspective or plans going forward?
Yeah, no, it's again a little bit underlining what you say, Marius, the minimum order quantity is what we're now charging, as you'd expect. I think it's important to recognize that both, of course, we and as well as Sainsbury's believe and hope that the volumes will exceed the minimum order quantities once we've rolled out everything. Both with the market growing and with additional or potentially additional categories and getting into the solution. But we've started charging, as you would do with any good software contract, and any additional volume beyond the minimum order quantities, we'll have to see after Q1 and Q3.
Good. And also on the back of this contract, you touched upon it briefly in the highlights, regarding the order picking agreement in New Zealand for Delivereasy. Is the rollout currently underway? You did touch upon it.
Yeah.
Maybe.
So rollout has actually been completed at the end of this quarter, so the first revenues are coming in. I think it's, you know, for me, this is a brilliant example. I must confess, I think we were all a bit surprised, positively, that a New Zealand company such as the esteemed Delivereasy, the leading Q-commerce player in New Zealand, would pick up and initiate and address so quickly. Difficult to say, but I think it's fair to say that, of course, with the wind of Sainsbury's, there is certainly a very good testimony and rubber stamp for what the solution can offer.
Is the agreement structure similar to Sainsbury's?
Yeah. So all the order picking solution contracts we're doing is on a order basis, meaning there is a transaction fee per order being completed.
And final question on the order picking contract. Do we have any other countries where we are either doing pilots or, more specifically, do we see any opportunities in the U.S.?
Not gonna comment on any specific opportunities, but it's fair to say that we're observing the market very closely and are optimistic about attracting additional customers as we're not only winning Sainsbury's, but also delivering on the Sainsbury contract.
Okay, great. Thank you. Let's move over to the CashGuard Connect project. Again, a lot of questions. We have to prioritize some of the questions coming in. We will try to answer offline, retrospectively, as well as we can. I think, if you could just give an overall comment, Jacob, on the project. Talk about the expectations in the event that's possible, how the project is progressing. We did touch upon it. I think we have talked about it both in the presentation and in the report, but please give us some flavors.
Sure. So this is the CashGuard Connect project or product, we should say, is a development project, we should remember that, jointly, yes, with Mercadona. But we've also now started lining up a pretty significant interest in the product from other customers, both in Spain, U.K., and beyond. So as this is a development that takes time both to test and validate the solution properly on a grand scale. But it also requires that we are, which we are doing now, getting into a, call it industrialization phase. That means investments in molds and production sites and facilities with partners. We're not doing that on our own.
And then we need to get the industrialization and the products produced, assembled in stores before we can proceed with any large-scale rollout, which we plan. I wish, you know, we could just turn on the knob and that would happen next week. That's not gonna be the case, but we expect first orders in Q3 2025, so next year, with the first deliveries between Q3 and Q4.
Great, thank you. And also regarding the CashGuard Connect, is the U.S. also a potential market for this product going forward?
Absolutely. I'd say that any market with a cash usage of some proportion, which, you know, includes most European countries, maybe Norway and Sweden excepted, but most European countries, as well as, of course, the U.S., this would be very relevant. We should remember that, one of the many, but one of the key value drivers for the retailer here is actually to reduce the number of CIT stops and transactions. And although this might be or sound alien to a Norwegian or Swedish investor, the amount of security around cash transport in most European countries, and certainly in the U.S., involves armored vehicle, minimum two people, in some places, also armed people or armed guards.
That is, of course, a very costly business, and reducing these cash transports is of great value. So yes, we see this also as a solution that has a global potential commitment like that.
Great, thank you. Final question on this CashGuard Connect project relating to providing some numbers. I think overall, it's difficult for us to comment specifically on numbers, but there is a question. Within how short of a time can such a solution or product be paid off in the form of cost savings from the customer perspective? Again, difficult for us to comment specifically on numbers, but maybe again, from a kind of business case perspective, we could shed some light on that.
So from the customer's point of view, I mean, once you've had the CashGuard Connect installed, you could or you will be able to relatively quickly adjust the cash-in-transit stops, meaning the volume of cash-in-transit business or cost that's going out will be significantly reduced. You would also see pretty quickly the transaction time in the cash transaction going down, which means that all things equal, you'd be able to reduce the number of personnel to handle the exact same number of transactions.
And lastly, for in particular, new builds, you would also be taking this cash transaction reduction time into account, enabling any retailer to reduce the number of cash tills in total, or the number of tills from say 20 to 18 or 19. So obviously, also saving CapEx there. But the initial savings on the staff, both internally, the retailer with CIT companies internally, is relatively rapid, as well as, of course, the potential that is residing with any kind of cash transaction for theft or internal theft.
Great, thank you. So, moving on to other topics, next question: Are the financial objectives for 2025 still within reach? I think the overall answer to that question is yes, absolutely. It is a mixed picture, and I think we are fairly transparent in the report. There is still a lot of uncertainty, given where we're coming from, a lack of visibility. On the other hand, we are seeing positive signals in several markets. We have also increased customer interest, especially in the U.K., dialogues that we haven't necessarily had before. So that's on the positive side.
Also, if you look at the Q3 figures that we now have delivered, with a 4% EBITDA margin, as compared to our ambition and goal of 4%-6%, we are in within that range. So, the objective for next year, absolutely within reach, obviously, assuming that the market will pick up and that all the good stuff that we are doing will materialize.
Next question: Could you please quantify the effects of the cost savings, and if it's possible to comment specifically on Q4? I think we have, well, obviously, we have done now two rounds of reorganization. Without quantifying super specifically, I think we're looking at, you know, good cost savings that have already been evident in Q3.
We expect similar savings within Q4 and going forward. Again, these are gross savings. We said up to NOK 220 million per year when we made the initial restructurings. I think any time you do reorganizations or restructuring costs, there's also a sense of building in other markets, which we're also quite aware of, because there is a huge opportunity in, especially in the U.K. So the stuff that we have done now allows us to allocate our resources in other places as well. You stated in the report that growth was held back by U.K. and Ireland. Could you provide more flavor, please? What measures are you taking to solve the issues?
In the U.K. and Ireland, it's, I think it's important to differentiate between shop fitting, which was the core business of ALS when we did that acquisition, and the product and solution sales. So, just want to take a step back, that the reason why StrongPoint acquired ALS was to get a foothold into the U.K. and Irish market, knowing very well that this was an engineering company involved in shop fitting and refurbishment, which is, you could argue, not core of what StrongPoint does. But it is and has been, can even argue, for the StrongPoint Sainsbury's agreement, very important for us to have a local presence with a personnel base and offices in both those countries.
Now, what we've seen in this quarter is a quite dramatic reduction in shopfitting. And we've not been alone. There's been actually quite a lot of rough conditions for shopfitters. There's been actually some competitors even going bankrupt or going into restructuring. But it's so we're not alone in that respect, in that cyclical business. And we're taking measures to improve that. There is, of course, also opportunities arising from the bankruptcies of competitors we've seen. That's number one.
But on the other hand side, it's also very important for me to clarify that the business opportunities on the product and solution selling side is going very well and have already starting to materialize with the likes of Sainsbury's. But in this quarter, we were massively held back by a big decline in the shop fitting business of close to 50%.
Thank you. And next question. Could you please provide some color on how you see the market now? Where do you see the most activity, either in terms of regions or segments? Has there been any change since the Q2 period, or what has not changed?
I think, generally, you could say that there is somewhat better market conditions across the markets we operate. Sorry, both us and our customers are starting to see the peak of any interest rates. So things are getting more stabilized in that respect. So, and, you know, a brilliant example is the sort of hesitation or postponement of the rollout of self-checkout here in the Baltics with Maxima. Now, we have that fully ongoing. Client is super happy, and we will continue with that through this year and next year as well as an example. But in general, business conditions are slightly improved.
We've also taken, as you mentioned, Marius, organizational measures, along with the cost restructuring, that has enabled us as a business to move faster on the opportunities as they arise.
Thank you. Next question: You have said that you have some large competitors. Who is challenging you? Who are the main competitors in the different markets? That's a very good question. With the current portfolio that we have, I guess a detailed answer would be individual competitors on each of the different products and solutions we have, so I'm not sure if it's fruitful for us to mention, you know, three, four competitors on each of our products, but maybe we could give some general flavor on the market out there. What we are seeing, if it's price or if it's positioning, for example, for Sainsbury's that we won. If you have any kind of overall reflections on the competitor side of things.
I think it's as you say, it widely depends on first of all, the products that we're looking at, and to some extent on the markets. So it's a very broad question. We could spend probably 10-15 minutes just talking about that. So I suggest that as that's not so Q3 related, we could follow up on this on a different occasion.
All right. Next question appears to be relating to Sainsbury's. Again, does the minimum fee from Sainsbury's relate to each point for the 13 installations, or do we charge the minimum fee as per the contract right now? Again, I think we touched upon it quite well initially. From an overall perspective, yes, we do have a minimum fee, again, which is quite common, normal for this kind of contract. We did say that we started the professional services and onboarding of this project springtime. So we are now, I would say, close to the minimum fee on an annualized basis, of course. And then Jacob also touched upon the potential going forward with the rollouts continuing into the first half of next year.
So that's pretty much what we can say about that right now. All right, other questions, there's one question relating to the U.K. market. I think it's more of a general question on Vensafe, especially relating to the U.K. Do we see any expectations on sales of Vensafe, especially in the U.K., within the next six to 12 months?
Brilliant question. So Vensafe, of course, a very, very well-known solution in the Norwegian and Swedish market. We're seeing a very increased interest in particular in this theft prevention solutions across the board. U.K., as the question points to, is of course in that respect very interesting, because theft is a big and rising concern with any kind of retailer in the U.K. Someone has actually labeled it as an epidemic. When you look at the size of theft being an issue.
And as a consequence, we've had very good discussions with a number of retailers, and we are happy to confirm that we have three confirmed proof of concepts on the Vensafe in the U.K. with tier one customers. The use cases are quite different, so these are three different customers. The use cases are quite different, ranging from the traditional tobacco sales that we see in Norway and Sweden, to other theft-prone items. These proof of concepts typically take six months before you get a comfort from the retailers about whether this is the solution to solve the issue.
We feel very strongly about that, having very good references and experience from the Nordic markets, and so we're very excited about these opportunities. Whether or not these proof of concepts convert into bigger rollouts is yet to be seen. But we've never had three proof of concept on the Vensafe confirmed in StrongPoint before. So of course, that gives a certain amount of optimism when it comes to what the Vensafe can deliver in the U.K. market.
Thank you very much. We will try to round off at 11:30 A.M. We have a few questions remaining relating to ESL and self-checkout. As far as ESL, some questions overall relating to the potential of revenue increase or increased sales of ESL in new countries, for example, the U.K. And I guess secondly, a current status on the installations in Finland and other countries, relating to service and the implementation work. So maybe again, Jacob, if you could give some flavors on what's going on with ESL, potentially in some of the other countries that we're in, including the U.K.
So just in case we have new investors or ESL, e lectronic shelf labels, which is so dominant in Norway and Sweden. And where we are going between being the single largest and second largest Pricer partner. We're also, of course, seeing, as anybody in the ESL market, a interest for this kind of solutions in all markets, but the U.K. in particular. U.K. being a very sophisticated market, but yet with very low ESL penetrations. Starting to see more and more confirmed orders coming in across the different vendors. So what StrongPoint is doing, in most cases, in these events, is to do some installation work.
There's yet to be seen any of the major tier one players going heavily into ESLs, but we're awaiting that and seeing what kind of role we could be playing in that aspect. When it comes specifically to Finland, obviously, we had Pricer winning a very significant deal with the SOK, the Coop of Finland. As part of that deal, Coop themselves saw this as a strategic initiative and chose to actually invest in doing the investments themselves with their incumbent installation partners. So for it all, for StrongPoint's point of view, there was no, and has not been any financial benefits from exactly that solution.
Thank you. So, I guess final question relating to self-checkout. What about self-checkout sales, and the expectations for the next six to 12 months, either in the existing markets where we do have a good presence, or in the not necessarily newer markets, but in our core markets, where we could have some expectations on self-checkout going forward?
So first of all, we expect to continue our, I should say, dominance and very strong position in the Baltics. Again, that's why we're here in the Baltics, to oversee the rollout of self-checkout to Maxima. So we feel very confident that we have a solution which is both cost efficient and not least have the right kind of features, including security features that the market is in demand of. When it comes to exporting, if you may use such a term, our brilliant self-checkout solution and our competence and expertise to other StrongPoint countries, we're slower than we were hoping for, we have to confess.
Whereas the integration with the point of sale, the POS, sounds like a small thing, that's actually quite or perceived as a hassle, although we have remedies to that, but it's perceived as a hassle to grocers, and as such, you know, we just have to confess that we've been slower and than we were both hoping and expecting to see in both Norway and Sweden and in the U.K. market, as well as Spain. We're constantly working to both increase the number of POS integrations that we have, but we have to acknowledge that that's going to take some time before we are at the same kind of presence and situation as we are in the Baltics.
Great. Okay, that's it for now. Thank you very much for listening in, and also thank you for sending the questions in advance. That's also always very helpful. So please don't hesitate to contact us if you have any other questions, and we'll see you next time. Have a very good Friday.