Good morning, everyone. Welcome to StrongPoint's second quarter Q&A audio call. As per usual, we have Jacob Tveraabak, CEO of StrongPoint, and Marius Drefvelin, CFO of StrongPoint, to answer your questions. Before we start, let me give you a quick recap of the highlights from this morning's Q2 presentation. Regarding revenue, it declined by 2% to NOK 342 million. 12 months rolling recurring revenue also declined by 2%, in the Q2, the EBITDA was at NOK 5 million, but this also includes a NOK 4 million one-off costs. Before we start, a quick reminder that if you want to ask questions online, there should be a button on your screen in the lower right-hand corner. Many of you have already sent in questions in advance via the investor@strongpoint email address.
Please note we actually have received a large number of questions, we have deliberately tried to group them as much as possible. Firstly, regarding e-commerce, a number of different questions, trying to group them into common themes. Firstly, about our new U.S. customer, Meijer. Can you provide details regarding the rollout scope, number of stores, timing, risks, and whether we have our own staff in the U.S. to roll out the solution? Over to you, Jacob.
First let me just say, I really believe that the breakthrough, we should call it, in the U.S. with a company like Meijer, a very respected regional grocery retailer in the U.S., is really just absolutely astonishing. I understand that people or investors would like to get more details on these things. We cannot share too many details about this. As we have announced, the agreement is to basically do all the in-store fulfillment of e-commerce orders in the Meijer stores. I wish I could have shared more figures, as a privately held company in the U.S., I am not allowed to do that. With regards to own staff, we're doing this now with our own staff. We're well into the project already, having already conducted design phases and are well into the pilot phases.
We expect this to be handled within the next couple of quarters with our own personnel before we have a full rollout.
Still on the same topic of Meijer, specifically on the pricing. Is the SaaS pricing mainly per store, per order, or transaction-based? What gross margin profile should investors expect? Again, over to you, Jacob.
All the Order Picking agreements that we make, we make on a per order basis. There's a fee per order. The higher volume commitment you can make, obviously you get the lower price for that. That's what I can say about the SaaS pricing. In terms of gross margin, it's the kind of profile you would expect, I should say, from a SaaS-based solution. We're talking about 85% + gross margin on these kind of transactions.
Moving on to an existing customer, Sainsbury's in the U.K. Why is the Sainsbury's rollout delayed, and can you give more details on the revised rollout and revenue?
Yeah. Sainsbury's, just to put it in perspective, Sainsbury's, their e-commerce operation is massive. It's the second-largest grocery chain in the U.K. Very mature. Sainsbury's have been in the e-commerce business for more than 20 years and have a very high penetration. You can imagine there's already a very big apparatus to take into account. As a mature customer, Sainsbury's also have some, how should I say, very clear perspectives on what should be done and what should not be done. Us as well. We're working closely together to ensure that Sainsbury's gets the absolute best potential out of the solution. As such, it is more complex than we anticipated, admittedly. Hence today, we are not in the 300 stores we were expecting to be by this time, but rather in a double-digit number of stores.
Now, what we're doing is to work closely together to ensure that we get back on track to rolling out the entire estate of Sainsbury's stores that do e-commerce fulfillment. I guess on the same topic, I should also just pinpoint what we have said in the report, which is that because we are far away from the committed volumes that Sainsbury's were expecting to be at. We have agreed to a temporary reduction of what kind of committed volume is applicable right now. Hopefully, of course, we'll get that back up again when we have rolled out everything, but that's what there is to say about the Sainsbury's rollout to date.
Moving on to a different topic regarding CashGuard Connect. What is the status and when can we expect revenue from this solution? Jacob, as well for you?
CashGuard Connect is the solution that we have been developing out of Spain on the basis of a major customer prospect there. This is a development project. We are increasingly, of course, getting to the stage of having a finalized solution. That finalized solution needs to be put into an industrialized setting or a manufacturing setting before we can start to see the big revenues that we hope to get out of the solution. When we can promise big revenues is not going to be in this year, I can tell you right away. I know it says so on the rise, there is a question about pilots and revenue. Material revenue, we will not expect until next year.
Related question: is it true that the CashGuard Connect pilot cannot be expected until within a year?
I think I just answered that the pilot is running now. If you're talking about material revenue, that's not going to happen in this year.
Moving on to a different topic again, regarding our electronic shelf label and store digitalization partnership, couple of questions on this. Firstly, the recurring revenue base related to the former partnership was approximately NOK 52 million at the year-end 2025, with around NOK 26 million in gross profit, and is expected to decline to zero during 2026. What level of recurring revenue, gross profit, and EBITDA should the Vusion Partnership generate, and when should it fully replace the lost economics of our previous partner? This one for you, Marius.
Absolutely. Yes, we have said that the annual recurring revenue was NOK 50 million in 2025. Just as a clarification, this includes both service revenue and license revenue. There is always a distinction between the LTM recurring revenue versus the P&L effect. On the LTM, Last Twelve Months recurring revenue, the effect was NOK 20 million so far this year. As I've said a few times, this will gradually go down to zero. As far as the Vusion financials, it's not possible for us to look into the future and provide those details. I think there are two aspects. Yes, the recurring revenue base of NOK 50 million, it will take many years to replace that. However, we have already seen a lot of Vusion revenues already starting in the Q3 last year with the Vusion ESL installation revenues hitting our revenue positively in the U.K.
In addition, we have won the first product deal in the Baltics. We are already starting to see the effect that we otherwise would not have seen with the previous partner. To quantify and to specify as far as timing, it's simply not possible.
Okay, a related question. How many active sales opportunities currently combine Vusion technology with StrongPoint Order Picking or software? When would we expect to see the first contracts to be announced? Over to you, Jacob, this time.
Sure. I'll say like Marius, it's difficult to be super precise on exactly how many sales opportunities. I think what I can say is that we know that the combination of the Vusion platform, in particular the EdgeSense platform and StrongPoint's Order Picking solution, that value proposition is very strong. We should also remember that, in particular for EdgeSense, there's really just a handful of customers globally that have started with EdgeSense, and Walmart is the most famous one, I should say, following with Carrefour in France. It'll take time for also for Vusion to sell in that solution and as such for the combination of EdgeSense and StrongPoint's Order Picking solution to really come to its full effect. You just have to be a bit patient with regards to how it rolls out.
We consider this kind of next generation Electronic Shelf Labels to be the future, and combining that with the Order Picking solution that we know in its own is already very strong, we kind of foresee that to be a very strong value proposition to customers going forward.
Another related question on Electronic Shelf Labels, but also connected to Sainsbury's as well. Can you quantify the underlying recurring revenue growth, excluding the former ESL partner headwind and the negative Sainsbury's effect? One for you, Marius.
To help you out on the calculation of that, what we did say is that the effect of the Pricer recurring revenue on the LTM recurring revenue was NOK 20 million. 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 +5% to +10% on the underlying recurring revenue growth.
We have 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? A question for you, Marius.
Pretty much on the same topic. I don't necessarily recognize that figure specifically, but I have to assume that this refers to the license revenue. There's two things. It's the license revenue component of the Pricer 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. That's number one. Second is the effect that we have touched upon with the temporary reduction in the minimum order volume with Sainsbury's. Those are the two reasons.
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? Question for you, Marius.
Three things that we will 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 three super important, good implementation projects, they will definitely contribute positively. Number two, similarly in the U.K. business unit, capitalize on what we have done, meaning getting more volume, this will increase the EBITDA, at least in absolute terms. Finally, number three, to increase the efficiency in product development. Because as you see from our quarterly reporting, we have two segments. We have the Nordics and we have international, including the product division, which is essentially the development part. These three reasons or actions will definitely contribute to reaching the question of a sustainable 5% margin.
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? Does management expect the organization to be through the main restructuring phase without further material one-off costs over the next 12- 18 months? Question for you, Jacob.
I guess what's referred to here is the fact that we said we had approximately NOK 4 million one-off cost in the quarter, that's related to severance pay. I think what there is to say, first of all, we just have to sort of acknowledge that if you look past the last few quarters and strictly speaking a year, we had a flat top line. If we have a flat top line in a general inflationary regime, we have to take cost measures. 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. Should very quickly be to say, obviously, we are doing a lot of work to grow revenue with new customer contracts coming in.
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.
We don't report on the order reserve, and I will answer the question afterwards. 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 if we were to report on that. That plus the big CashGuard order that we announced previously, all of these h ave contributed to a good start of the year as far as the order reserve. I would say, generally speaking, a positive momentum on the order reserve without having specific figures.
Okay, on the topic regarding Vensafe, what is the likelihood of a major rollout in the U.K. this year? Question for you, Jacob.
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 are some pros and some cons, right? Let me just start with a con. In the U.K., there's been a recent hearing of a new tobacco legislation, and that tobacco legislation does not seem to approve dispensing tobacco in the way that we're used to in Norway and Sweden, where Vensafe would've been perfect. That said, the level, and this is the benefit, is the number of thefts and the continued rise of theft and protection of high-value items in the U.K. is high and growing. As you would all know, Vensafe is very suitable for any kind of high-value item. We're very positive about getting Vensafe into the U.K. market.
However, not in exactly the same way as we have been used to in a Nordic setting. 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. 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 Norway, pant. What kind of solutions do you offer for depositing bottles in the U.K.? Will deposits be allowed in 2027? Do you have your own deposit machines?
Yeah. The U.K. has finally, I should say, come to the conclusion that they will have pant or a 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 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 with work with Sielaff. In any case, we are really not reseller of machines, but rather doing the housing and the preparation.
You should recognize that when you put in a DRS machine, there is lots of shop fitting 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 shop-fitting 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.
Yeah, let me just say that here live. At the same time, I understand the question with regards to the rollout with Sainsbury's having taken longer. Let me answer the question in twofold. One is 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 fully roll out. We're doing absolutely everything that we can, and observation from our end is that that motivation is absolutely there with the clients themselves. For everybody else, including Meijer, including Iceland, including Sonae MC , all these other implementations that we're currently doing. First of all, 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 well.
The rollout is expected to be happening now for all these three in the quarters to come and to have a full effect of these projects in the first half of 2027. Yeah, there's 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. That's all the questions we have. Just waiting a few more seconds just in case. No, that looks like it is it. Thank you everyone for joining us, and wishing you a good Friday. Goodbye.