FlexQubes report for the third quarter 2023

THE PERIOD 1 JANUARY – 30 SEPTEMBER 2023

• Order intake decreased by 40.1 percent to 83.7 MSEK (139.7). Adjusted for foreign exchange rate effects between the comparison periods, order intake decreased by 45.0 percent.
• Net sales decreased by 46.5 percent to 83.5 MSEK (156.0). Adjusted for foreign exchange rate effects between the comparison periods, net sales decreased by 49.7 percent.
• Operating profit before depreciation (EBITDA) amounted to -46.9 MSEK (0.7) and operating profit before financial items (EBIT) amounted to -51.0 MSEK (-2.8).
• Profit before tax amounted to -53.1 MSEK (-3.2).
• Earnings per share amounted to –5.6 SEK (-0.4).
• Cash flow amounted to 13.8 MSEK (-0.8), of which -45.8 MSEK (-16.1) from operating activities, -10.4 MSEK (-5.5) from investment activities and 70.0 MSEK (20.8) from financing activities.
• Cash and Cash Equivalents was 44.6 MSEK (36,1) at the end of the period.

THIRD QUARTER 2023

• Order intake decreased by 20.8 percent to 29.1 MSEK (36.7). Adjusted for foreign exchange rate effects between the comparison periods, order intake decreased by 21.0 percent.
• Net sales decreased by 70.0 percent to 16.9 MSEK (56.4). Adjusted for foreign exchange rate effects between the comparison periods, net sales decreased by 71.7 percent.
• Operating profit before depreciation (EBITDA) amounted to -26.3 MSEK (4.0) and operating profit before financial items (EBIT) amounted to -27.6 MSEK (2.8).
• Profit before tax amounted to -28.6 MSEK (2.6).
• Earnings per share amounted to -2.6 SEK (0.3).
• Cash flow amounted to 26.1 MSEK (-1.1), of which -18.1 MSEK (-2.5) from operating activities, -2.2 MSEK (-1.8) from investment activities and 46.4 MSEK (3.2) from financing activities.
• Cash and Cash Equivalents was 44.6 MSEK (36,1) at the end of the period.
• FlexQube is granted a patent in Europe and USA for the innovative AMR-system, FlexQube Navigator.
• The Board of Directors resolve on a fully guaranteed Rights Issue of 75 MSEK and a Directed Share issue of approximately 9.7 MSEK.
• The company receives follow-up order for six additional AGV robots to a large Japanese company in the Automotive sector. The company is located in the US. 

EVENTS AFTER THE END OF QUARTER

• Final payment of Rights Issue and Directed Share Issue after deductions for costs related to the Rights Issue provided the company with approximately 26.7 MSEK. When finale payment was made 2 523 895 new share was registered with Swedish Companies Registration Office (Bolagsverket). After that registration, the total number of shares in the company is 13 404 152.

Link to the report for the third quarter 2023: https://www.flexqubegroup.com/secure-file.php?file=afda8559437ab7380d448512a05352c4.pdf

The entire quarterly report is also attached to this press release.

CEO LETTER

REVERSED TREND IN ORDER INTAKE AND SAVINGS PROGRAM CREATE POSITIVE MOMENTUM FOR THE COMING QUARTERS

I can state that my first full quarter as CEO of FlexQube did not go as I would have liked and many initiatives have been started within the organization to reverse the trend. Sales fell to SEK 16.9 million, which is 70% less then the comparison quarter. As always, sales are dependent on the order intake in the previous quarter and the weak order intake in the second quarter is the reason for the low sales in the third quarter. Since the second quarter, we have filled the gaps that existed within the sales organization and thus have a better customer cultivation during the third quarter. Order intake rises to SEK 29.1 million, which is 54% better than in the second quarter, but where expectations for the current organization are significantly higher when everyone is fully trained. We continue to lack major orders during the quarter which are important for overall profitability and growth is -21% compared to the same quarter last year.

The result for the third quarter is very weak and mainly driven by the low sales, lower margin and high one-off costs, as well as the fact that costs in relation to sales volume are high. The gross margin during the quarter is mainly affected by calculated accounting obsolesce in inventory as a result of lower sales, some deals with a lower margin and our cost for assembly, which is very high in relation to the low turnover. We expect margins to return to normal levels in the coming quarters.

The market in Europe is still somewhat tentative, but Mexico and above all USA show a growing trend again with a growth of 18% compared to the same quarter last year. However, we see differences between different segments within the industry. We continue to see great interest in our broad portfolio of products for material handling. Not least, we see an increased interest in automating their material flows, driven by a desire to improve safety, ergonomics and efficiency. Salary increases are also high in many countries and automation is an effective way to reduce the effect of cost increases. Our AMR Navigator has received a very positive reception in the customer dialogues we conduct, which is very gratifying. We have several projects here that we hope will lead to orders in the near future. One lesson learned is that the automation projects take longer to order than our usual trolly orders.

The focus going forward is to increase sales, reduce our operational costs and to shift the focus from development to sales of our AMR system.

To increase our sales, we do a number of activities. First of all, we now have a complete sales organization in the US, which is our largest and most important market. In Europe and Mexico, we still have open positions. We are working on simplifying our sales process, training the sales force in our products and improving our digital marketing. We can see a clear increase for our pipeline of prospects and orders. We also assess that the quality of our prospects is better than before. Here it feels like we have gained a positive momentum and continue to work tirelessly on the set path. As a single data point, it can be mentioned that we had our best October ever in terms of order intake, which we are very satisfied with and continue to build on.

Since August, we have worked to reduce our costs. We have reduced costs for consultants, reduced overheads, chosen not to replace certain open positions and unfortunately also a small number of people have had to leave us. This overall has led to a smaller cost structure. Total savings amount to approx. 17 MSEK in the form of both reduced operational costs and significantly lower investments in development for 2024. The quarter has been affected by non-recurring items of approximately 3.8 MSEK mainly related to the savings program and we expect to see effects already in the fourth quarter with full effect from the first quarter of 2024. During the third quarter, we closed a Rights Issue and a Directed Issue, which increases our cash by approximately 75 MSEK after issue costs. I thank both existing owners for your continued faith in the company and welcome new investors into the company.

The Rights Issue and Directed Issue gives us strength and opportunities to continue investing primarily in our AMR concept, but where the focus is scaling up towards sales and less on development. Our target is to reach a positive cash flow by the end of 2024 with the implemented cost savings and to exceed the sales volumes we had in 2022. To realize the latter, we have a continued need to have a strong sales organization, a well-adapted product and development organization as well as an efficient supply chain to deliver on our plan to significantly increase the share of our AGV and AMR solutions while increasing overall sales.

AMR
During the quarter, in addition to the already approved EU patent, we have been granted a patent in the USA for our innovation with a non-load-carrying AMR that is lifted off the ground when connected to its motorized load-carrying carts and together form an autonomous mobile unit. The patent enables a standardized robot to move materials with a large variation in size and weight, which is estimated to have a large commercial advantage. Our pipeline of interesting procurements is growing, above all with existing customers in automotive and heavy equipment.

We are working on the final details regarding pricing and packaging of the product offering. We have a big focus on customer value when the product is packaged, where efficiency, flexibility and safety are a big part. Clearly packaged solutions for different types of customer user cases will help further convince our customers of the value that FlexQube's AMR system can bring.

In addition, work is being done to establish partnerships with system integrators who will sell and install the AMR system to end customers.

AGV
The product has now proven to be the solution for multiple kinds of customer challenges. We have designed solutions with the AGV system as an active load carrier in picking and assembly, as well as to solve transport between warehouse and production. We have also made solutions where we used the knowledge and modularity of our trolley concept, where the AGV system enables both transport and an ergonomic and customized material presentation. Most of the investments gradually transition from product development to scaling up sales. During the quarter, we have seen increased interest from our customers and an improved order book.

In summary, I can state that with reduced costs, increased sales activity and our strong product portfolio, we are now well positioned to deliver on our plan, which involves a greater share of AGV and AMR sales in our total sales, greater total sales than in 2022 as well as positive cash flow and profitability by the end of 2024.

Mårten Frostne

CEO FlexQube AB (publ)

About FlexQube

FlexQube is a technology company headquartered in Gothenburg, Sweden with subsidiaries in USA, Mexico, Germany and England. FlexQube offers solutions for cart-based material handling using a patented modular concept. FlexQube develops and designs customized solutions for both robotic and mechanical cart logistics. Through the own developed and unique automation concept FlexQube can offer robust and self-driving robotic carts. FlexQube has more than 1000 customers in 37 countries with primary markets being North America and Europe.

FlexQube’s customers can be found within the manufacturing industry, distribution- and warehousing. We represent some of the most successful companies in the world with a significant share being represented on the Fortune 500 list. These companies exist within automotive, electric vehicle manufacturing, online retail, heavy-duty trucks, industrial automation and retail logistics.

For more information, contact:  
CEO, Mårten Frostne
marten.frostne@flexqube.com
+46 721 55 19 37

CFO, Mikael Lindbäck
mikael.lindback@flexqube.com
+46 761 04 10 28

The share (FLEXQ) is traded on Nasdaq First North. FNCA Sweden AB, telephone +46 8-528 00 399, is the Company's Certified Adviser. Read more at www.flexqube.com

This information is insider information that FlexQube AB (publ) is obliged to disclose in accordance with EU Market Abuse Regulation. The information was provided by the above contact persons for publication on Nov 8, 2023, at. 08:00 CET.