Briox: Outlook promising despite sales miss - Introduce
COVID-19 impact larger than expected
Briox posted Q2 sales of SEK 1.1m, down -4% y-o-y and -13% vs. ABGSCe SEK 1.2m. It should be highlighted, however, that Briox has changed the way it recognises revenue and adjusted sales grew by 32% y-o-y using the old measure. The number of licenses grew by 518 q-o-q to 5,790 (vs. ABGSCe 5,972). We believe that the miss vs. our forecast was primarily due to a larger-than-expected negative impact from COVID-19; as a smaller company, Briox remains partly dependent on physical meetings. Furthermore, EBIT was SEK -5.4m (vs. SEK -4.7m in Q2’19). This was ahead of our forecast at SEK -6.4m, chiefly explained by lower ‘other external costs’. Briox has not implemented any short-term layoffs.
Opex growth should slowdown
Briox states that the negative impact from the pandemic started to dwindle by June. Even so, we cut our ‘20e-‘22e sales by 11-9% on the back of the softer Q2. We now forecast that Briox will grow its number of sold licenses by 2,484 in 2020, up from 1,585 in 2019. Although we reduce our sales growth assumptions, we raise our ‘20e-‘21e EBIT by 2-6% amid lower costs. We note that Briox has grown its headcount by 11 (or 69%) since Q2’19, and now think that it will keep its headcount flat in the coming quarters. This means that opex growth should decelerate.
New CEO has now announced his first earnings report
Briox’s new CEO, Johan Nordqvist, is now in place and we believe that his initial focus will be on 1) growing its ARR, 2) expanding its number of subscribers and 3) intensifying the firm’s focus on the accounting bureaus. Its share is currently trading at 82-27x EV/sales on our new estimates for 2020-2022.