Interim report Image Systems AB January-June 2024
Growing order intake and increasing share of subscription agreements Planned strategic investments yield results in both business units, with continued growth and a strong order backlog at the end of the period. The growth has also strengthened the Group’s cash flow. The sawmill industry is showing confidence in RemaSawco’s solutions with increased order intake as recognition of this. In the Motion Analysis business unit, the transition of the business model is accelerating, towards an increasing share of subscription agreements. This ensures a more stable revenue flow and performance going forward.
Second quarter April–June | Interim period January–June |
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Financial overview
Apr–June 2024 | Apr–June 2023 | Jan–June 2024 | Jan–June 2023 | Full year 2023 | |
Order intake, MSEK | 37.3 | 20.5 | 93.4 | 51.9 | 150.0 |
Order backlog, MSEK | 83.4 | 52.5 | 83.4 | 52.2 | 73.3 |
Net sales, MSEK | 44.3 | 44.7 | 82.5 | 83.0 | 160.7 |
Capitalized development expenditure, MSEK | 4.1 | 2.1 | 7.3 | 3.8 | 10.0 |
Gross margin, % | 67 | 70 | 68 | 70 | 70 |
EBITDA, MSEK | 4.1 | 4.8 | 8.5 | 7.1 | 15.5 |
EBITDA margin, % | 8.5 | 10.3 | 9.5 | 8.2 | 9.1 |
Operating profit (EBIT), MSEK | -0.5 | 0.3 | -0.4 | -4.3 | -5.3 |
Profit after tax, MSEK | -0.3 | 0.1 | -0.4 | -5.9 | -6.8 |
Cash flow from operating activities, MSEK | 12.9 | -6.8 | 21.5 | -10.8 | 1.7 |
Solidity, % | 59 | 65 | 59 | 65 | 63 |
Average number of employees | 70 | 68 | 69 | 67 | 67 |
Earnings per share | 0.00 | 0.00 | 0.00 | -0.07 | 0.08 |
A WORD FROM THE CEO
Growth in both of the Group’s business units continued in the second quarter, with order intake rising by 82 percent. The growth is partly due to a normalization in the sawmill market as well as general growth in both business areas during the quarter. During the first half of the year, order intake increased by 80 percent to MSEK 93.4 (51.9). Net sales are in line with the previous year and EBITDA amounted to MSEK 8.5 (7.1). At the same time, cash flow was strengthened.
I am pleased to note that the Motion Analysis business unit is rapidly undergoing the planned and previously communicated business model transformation towards an increased share of subscription agreements and support services. During a transition period, an increased share
of subscription agreements will result in lower revenues as these are distributed over the entire agreement period. It will also temporarily decrease the operating profit. However, in the long term, the transition to subscription services is desirable, as it guarantees increasing reve-nues. The higher the pace of the transition, the faster we will achieve the desired outcome.
The RemaSawco business unit continued to experience favorable order intake in the second quarter, while the delivered product mix resulted in a significantly higher EBITDA margin.
Sawmill market stabilizes
In recent quarters, we have seen several positive signs in the sawmill industry, including an increased willingness to close contracts. We assess that the market continues to face challenges, but in the longer term the forest industry plays an important role in the green transition and the need for modernization will increase.
RemaSawco invests to be positioned as the preferred partner, delivering the most advanced and value-creating equipment so that our customers can be profitable. Therefore, during
the quarter, the business unit launched a new
timber sorting product. The product combines the company’s extensive experience in optimization early in the sawmill process with new technology and modern analysis tools. This takes sawmill production to new levels of busi-ness management, efficiency and profitability.
Motion Analysis accelerates transition to subscription agreements
Motion Analysis continues to reap success in its market segments. In the first half of the year, order intake increased by 47 percent compared to the same period last year. The transition to subscrip-tion sales kicked into high gear in the second quarter, and around 70 percent of the quarter’s order intake consisted of subscription and support services. These are recognized as revenue monthly over the agreed contract period, resulting in a decrease in net sales and EBITDA during a transition period. The period's EBITDA was also burdened by continued expansion of the sales organization. Cash flow is maintained as agree-ments are invoiced in advance. From now on, we will keep separate accounts for the order backlog for subscription and support services within the business unit. I believe that this metric, together with the order intake, illustrates both short- and long-term development of the business unit. At mid-year, the order backlog for subscription and support services amounted to MSEK 14.3 (8.7), an increase of 65 percent compared to the same period last year.
Continued investments
The development in the first half of the year encourages us to continue on our current path, with investments in the product portfolio, the business model, and organizational improve-ments. The market rewards us for the invest-ments we make, and a rising order intake gives us proof of a job well done and is a carrot to continue on our current path.
Johan Friberg, CEO and President
THE GROUP’S DEVELOPMENT IN THE SECOND QUARTER
Order intake, net sales, and profit
Order intake amounted to MSEK 37.3 (20.5). Order backlog as of June 30, 2024, amounted to MSEK 83.4 (52.5).
Net sales amounted to MSEK 44.3 (44.7). Capitalized development expenditure amounted to MSEK 4.1 (2.1) and relates to both business units.
Gross margin amounted to 67 (70) percent.
EBITDA amounted to MSEK 4.1 (4.8). Other external costs decreased, which mainly is attributable to an increase in capitalized external consultancy costs related to the RemaSawco business unit’s product development. An increased share of subscription agreements will, during a transition period, result in lower operating profit for the Motion Analysis business unit, which delivers high-margin services. An expansion of our own operations in North America increased personnel costs slightly.
Depreciation/amortization amounted to MSEK -4.6 (-4.5), and net financial items amounted to MSEK 0.0 (-0.4).
Result after taxes amounted to MSEK -0.3 (0.1).
Financial position, investments, and cash flow
The Group’s investments in non-current assets during the quarter amounted to MSEK 7.4 (2.2) of which MSEK 4.1 (2.1) was related to capitalized development projects. Capitalization of development projects takes place in both business units.
The operational cash flow during the quarter amounted to MSEK 5.5 (-9.0). Solidity as of June 30, 2024, amounted to 59 (65) percent. Net indebtedness amounted to 0.1 (0.1) times.
Available cash and cash equivalents including the undrawn part of the overdraft facilities amounted to MSEK 26.0 (19.0) as of June 30, 2024.
THE GROUP’S DEVELOPMENT DURING THE INTERIM PERIOD
Order intake amounted to MSEK 93.4 (51.9). Order backlog as of June 30, 2024, amounted to MSEK 83.4 (52.5).
Net sales amounted to MSEK 83.4 (52.2). Capitalized development expenditure amounted to MSEK 7.3 (3.8) and relates to both business units.
Gross margin amounted to 68 (70) percent.
EBITDA amounted to MSEK 8.5 (7.1). Other external costs decreased, which mainly is attributable to an increase in capitalized external consultancy costs related to the RemaSawco business unit’s product development. Personnel costs increased as a result of the expansion of our own operations in North America.
Depreciation/amortization amounted to MSEK -8.9 (-11.4). The difference relates mainly to a write-down in the first quarter of 2023 in connection with the termination of a lease contract for office and production premises in Finland.
Net financial items amounted to MSEK -0.3 (-1.9). Most of the difference arises from a one-off item in the first quarter of 2023 related to a write-down of a receivable.
Result after taxes amounted to MSEK -0.4 (-5.9).
ROLLING 12-MONTH ORDER INTAKE, REVENUE AND EBITDA
The Group’s rolling 12-month EBITDA margin during the second quarter amounted to approximately 10 percent. The Group’s long-term EBITDA target of delivering a stable 15 percent EBITDA margin requires growth in net sales. The pace of the ongoing change in the Motion Analysis business unit, to a higher proportion of subscription and support agreements, may also affect how quickly the long-term goal is achieved. The changed business model will eventually translate into growth in both net sales and EBITDA results.
BUSINESS UNIT: REMASAWCO
RemaSawco provides solutions to optimize production in the sawmill industry. The product portfolio includes proprietary software that, with the help of laser, 3D scanning, X-ray, and automation, measures and analyzes timber and boards throughout the sawmill process to maximize value exchange, minimize waste, and thus increase customer profitability.
Performance during the period
Order intake continued to increase in the second quarter compared to the previous year, and we can see a doubling in order intake in the first half of the year. Capitalized development expenditure is increasing as a consequence of intensive work related to the development of new products and concepts. Net sales increased slightly and EBITDA increased to MSEK 7.4 (3.0). The improved result is partly explained by the delivered product mix with a higher share of license sales, which means a higher EBITDA margin, and partly by lower costs for external consultants. The market continues to be characterized by higher timber prices and low timber availability, which negatively affects our customers’ profitability.
Apr–June 2024 | Apr–June 2023 | Jan–June 2024 | Jan–June 2023 | Full year 2023 | |
Order intake, MSEK | 26.8 | 15.1 | 70.0 | 36.0 | 110.6 |
Net sales, MSEK | 37.8 | 34.0 | 64.8 | 64.0 | 121.2 |
Capitalized development expenditure, MSEK | 1.9 | 0.9 | 3.2 | 1.7 | 4.0 |
EBITDA, MSEK | 7.4 | 3.0 | 9.0 | 4.7 | 7.0 |
EBIDTA margin, % | 18.6 | 8.6 | 13.2 | 7.2 | 5.6 |
Product development
As part of our basic development, the business unit has implemented improvements on all product lines. The business unit’s focus on further developing the timber sorting product and creating a new service concept has continued with high intensity. RemaSawco places great emphasis on developing the range of products in timber sorting. This will be the focal point of the RemaSawco ecosystem in the future. RemaSawco launched a new solution for timber sorting to the market during the quarter.
BUSINESS UNIT: MOTION ANALYSIS
Motion Analysis Systems offers its customers software for the analysis of high-speed film, a niche where the Company is the world leader. The software is sold under the product names TEMA and TrackEyeⓇ.
Performance during the period
The business unit has intensified its efforts to shift the business model to subscription sales. Furthermore, the business unit has strengthened its organization in North America to enable a higher proportion of in-house direct sales. Market conditions have been favorable, and order intake during the first half of the year increased by almost 50 percent compared to the same period last year. In case of sales of subscription and support agreements, the revenue is distributed over the entire agreement period, where the agreement period may vary. This will lead to a temporary decrease in net sales and operating profit EBITDA, while the business model ensures increasing revenues and results in the longer term. The period's EBITDA has also been negatively affected by increased costs for expansion of the sales organization.
Due to the effects of the change in business model, management has decided to keep separate accounts for the order backlog of subscription and support agreements for the business unit. We assess that this metric, together with the order intake, shows the development both in the short and longer term. The part of the business unit’s total order backlog that relates to subscription and support services has grown by 65 percent compared with the same period last year to MSEK 14.3 (8.7).
Apr–June 2024 | Apr–June 2023 | Jan–June 2024 | Jan–June 2023 | Full year 2023 | |
Order intake, MSEK | 10.5 | 5.4 | 23.4 | 15.9 | 39.4 |
Order backlog subscription and support services, MSEK | 14.3 | 8.7 | 14.3 | 8.7 | 8.6 |
Net sales, MSEK | 6.5 | 10.7 | 17.7 | 19.0 | 39.5 |
Capitalized development expenditure, MSEK | 2.2 | 1.2 | 4.1 | 2.1 | 6.0 |
EBITDA, MSEK | -1.8 | 3.9 | 2.3 | 5.5 | 14.2 |
EBIDTA margin, % | -20.7 | 32.8 | 10.6 | 26.1 | 31.2 |
Product development
The business unit remains focused on delivering the first commercial release of the new platform by the end of 2024. The business unit has started implementing machine learning algorithms in its software to effectively adapt to new requirements and improve the performance of its products.
OTHER INFORMATION
Parent Company
The Parent Company’s net sales for the second quarter amounted to MSEK 0.8 (1.0). Operating profit amounted to MSEK -1.5 (-2.1). Result after taxes amounted to MSEK -1.5 (-2.1). Investments in fixed assets amounted to MSEK 0.0 (0.0). The Parent Company’s available liquid funds as of June 30, 2024, amounted to MSEK 0.2 (0.0). The Parent Company’s equity as of June 30, 2024, amounted to MSEK 105.8 (101.2) and the solidity was 99 (99) percent.
Significant events after the period
The RemaSawco business unit has received an order of approximately MSEK 7.5 from a larger group. The order of just under MSEK 2.2 communicated on July 1 was received from the customer, a Canadian partner, on June 30 and is included in the order intake for the second quarter.
Personnel
The average number of employees was 70 (68). The number of employees at the end of the period was 70.
Number of shares
The number of shares on June 30, 2024, amounted to 89,207,818.
Accounting policies
Image Systems applies the International Financial Reporting Standards (IFRS) as adopted by the EU. The interim report for the Image Systems Group is prepared in accordance with IAS 34, Interim Financial Reporting, and the Swedish Annual Accounts Act. Disclosure in accordance with IAS 34, Interim Financial Reporting, is provided in notes as well as elsewhere in the interim report.
The interim report for the Parent Company, Image Systems AB, is prepared in accordance with the Swedish Annual Accounts Act as well as the Swedish Financial Reporting Board’s recommendations RFR 2 Accounting for Legal Entities.
Image Systems applies the ESMA (European Securities and Markets Authority) Guidelines on Alternative Performance Measures. Definitions of indicators are provided on page 15 and relevant reconciliations on page 14.
Risks and uncertainties
The Group’s significant risks and uncertainties include business risks related to agreements with customers and suppliers as well as other external factors such as currency fluctuations. The Group’s significant financial and business-related risks are discussed at depth in the management report and under Note 3 in the 2023 Annual Report. No significant new or changed risks or uncertainties have been identified during the quarter.
This interim report has not been reviewed by the Company’s auditors.
Financial calendar
Interim report January–September 2024 November 8, 2024
Year-end report 2024 February 7, 2025
Long-term financial objectives
Image Systems aims to create long-term value growth for its shareholders. To achieve this,
the Board of Directors has set long-term financial objectives:
EBITDA >15%
Solidity >50%
Dividend: 20% of the profit after taxes
The Board of Directors and the Chief Executive Officer confirm that the interim report provides a true and fair overview of the Parent Company’s and the Group’s operations, financial position, and performance and describes the material risks and uncertainties facing the Parent Company and the companies included in the Group.
Linköping, Sweden, July 19, 2024
Anders Fransson Jörgen Hermansson Catharina Lagerstam
Chairman of the Board Director Director
Jan Molin Matilda Wernhoff Johan Friberg
Director Director Chief Executive Officer
The information in this report is disclosed pursuant to the EU Market Abuse Regulation (MAR) and the Swedish Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at 08:00 AM on July 19, 2024.
Financial reports are available on the Company’s website http://www.imagesystemsgroup.se
Questions will be answered by:
Johan Friberg, CEO and President, telephone +46 (0)13-200 100, e-mail johan.friberg@imagesystems.se
Image Systems AB, Snickaregatan 40, 582 26 Linköping, Sweden. Corporate registration number 556319-4041
Links and Media
Latest Press releases
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Image Systems affärsområde RemaSawco erhåller beställning från Moelven Wood AS på knappt 3,8 MSEK
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Image System's business area RemaSawco receives an order from Moelven Wood AS of just under SEK 3.8 million
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– Regulatory
Delårsrapport Image Systems AB januari-juni 2024
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Image Systems affärsområde RemaSawco erhåller beställning från större koncern inom skogsindustrin på strax under 7,5 MSEK