Briox - Positioned for growth, but lacklustre Q4
Soft Q4 below our expectations We cut our ‘21-‘22e sales forecasts by 19-26% 56x-23x ‘21-‘23e EV/sales Sales +29% y-o-y, but -8% vs. ABGSCe Briox reported Q4 sales of SEK 1.2m. This corresponded to y-o-y growth of 29%, but was a -8% miss vs. our forecast of SEK 1.3m.
The primary explanation was a lower-than-expected number of sold licenses (-53 vs. ABGSCe +550). The report stated that the growth rate is below management’s expectation, and that the pandemic has hurt new sales.
EBIT was SEK -7.2m (SEK -5.9m in Q4’19). Although opex of SEK 38m (+5% y-o-y) was in line with our forecast, weaker sales combined with lower-than-expected capitalised development costs led to an EBIT miss of SEK 1.4m (or 23%) vs. our forecast.
Estimate changes We reduce our ’21-22e sales forecast by 19-26% after the report, mainly reflecting lowered assumptions for the number of licenses. Our opex forecasts are relatively unchanged. Good foundation for growth, but execution needs to improve Briox has an attractive business model, with recurring software revenues that are generated with high incremental margins on the back of the firm’s accounting agencies upselling Briox’s solution to their customers.
As of Q4, Briox had 182 connected agencies, which gives the firm a solid foundation for growth, in our view. However, we think that its operational execution needs to improve going forward, both in order to drive sales and to reach FCF break-even. Encouragingly, CEO Johan Nordqvist should be starting to find his footing, given that he has been in the role for about six months.
Cash at hand was SEK 2.3m at the end of Q4, and we therefore do not rule out a capital injection in the near-term. On our new 2021-23 estimates, Briox’s share is trading at 56-23x EV/sales..