INTERIM REPORT Image Systems AB (publ) January–March 2023
Continued sales growth with maintained earnings
Image Systems reports a first quarter with sales growth in both business units and an EBITDA in line with the previous year. We are accelerating the rate of investment in product development in both business units thanks to an improved financial position.
| First quarter January–March |
|
Financial overview
| Jan–March 2023 | Jan–March 2022 | Full year 2022 | |
| Order intake, MSEK | 31.4 | 42.7 | 189.0 |
| Order backlog, MSEK | 74.9 | 83.6 | 81.9 |
| Net sales, MSEK | 38.3 | 31.6 | 171.1 |
| Capitalized development costs | 1.7 | 2.8 | 9.1 |
| Gross margin(1), % | 71 | 70 | 67 |
| EBITDA, MSEK | 2.3 | 2.2 | 28.4 |
| EBITDA margin, % | 5.8 | 6.4 | 15.8 |
| Operating profit (EBIT), MSEK | -4.6 | -3.1 | 9.1 |
| Adjusted operating profit EBIT(2), MSEK | -2.3 | -3.1 | 9.1 |
| Profit after tax, MSEK | -6.0 | -3.3 | 8.6 |
| Adjusted profit after tax(3), MSEK | -2.3 | -3.3 | 8.6 |
| Cash flow from operating activities, MSEK | -4.0 | 3.6 | 32.2 |
| Solidity, % | 62 | 58 | 63 |
| Average number of employees | 66 | 76 | 72 |
| Earnings per share | -0.07 | -0.04 | 0.10 |
(1) The definition of gross margin has changed from the last reporting date. The gross margin is calculated as net sales minus raw materials and consumables in relation to net sales.
(2) The operating profit (EBIT) is affected by a one-off cost of MSEK 2.3.
(3) The operating profit after taxes is affected by one-off costs of MSEK 3,7, where the operating profit is affected by MSEK 2,3 and the finance net by MSEK 1,4..
A WORD FROM THE CEO
The first quarter of 2023 is characterized by continued good development for the Group. Net sales increased by approximately 21 percent, with growth in both business units. EBITDA is in line with the previous year, while the EBITDA margin is slightly lower. We have increased the pace of product development, all according to the plan we communicated, and we can do this thanks to a strong year in 2022.
The Group’s order intake is lower than in the previous year and is explained by the lower order intake for Rema-Sawco. For Motion Analysis, on the other hand, the market remains strong, and order intake has improved compared to the previous year.
The operating profit is negatively affected by a one-off item in the business unit RemaSawco for terminating an office in Finland to optimize the Finnish operations and reduce costs.
Challenges in the sawmill industry
Market conditions in the sawmill industry continued to be weak during the quarter, with lower demand for sawn wood products while raw material prices were high. Sawmills have therefore been cautious in their investment decisions, resulting in delays in order placement from our customers. However, the outlook for the industry remains good, and we expect a return to normal during the year.
The first quarter has historically been RemaSawco’s weakest quarter. However, thanks to a good order
backlog, the business unit manages to achieve a sales growth of approximately 15 percent compared to the previous year while the profit margin grows. The organizational changes and streamlining of the product portfolio in the business unit are yielding results.
Continued growth in Motion Analysis
Motion Analysis sees continued strong demand for its product offering and delivers growth of just over 25 percent in both order intake and sales compared to the previous year. The lower profit margin is due to the increased pace of product development, which will continue to result in a higher cost base. We have received several orders in different application areas during the quarter, including a larger support contract to the US and a DIC system to Israel. Our presence with several sales offices in the Asian market has paid off during the quarter and accounted for almost half of the order intake for the business unit.
Efforts in product development
For two consecutive quarters, the Group has delivered a rolling 12-month EBITDA margin that exceeds the long-term financial objective of 15 percent and we have a solid order book. There are further areas for improvement within the Group and we see opportunities for an enhanced market outlook. This motivates continued efforts and we feel confident in our decisions to further accelerate product development in both business units. We have chosen to subcontract parts of this acceleration to external partners to improve the time-to-market for the Group’s new products and to improve the organization’s flexibility.
Johan Friberg, CEO and President
THE GROUP’S DEVELOPMENT IN THE FIRST QUARTER
Order intake, net sales, and profit
Order intake amounted to MSEK 31.4 (42.7). Order backlog as of March 31, 2023, amounted to MSEK 74.9 (83.6).
Net sales amounted to MSEK 38.3 (31.6). Capitalized development costs within the Group amounted to MSEK 1.7 (2.8).
Gross margin amounted to 71 (70) percent.
EBITDA amounted to MSEK 2.3 (2.2). Other external charges increased compared with the corresponding period last year, mainly attributable to the costs related to the increased pace of product development.
Depreciation/amortization amounted to MSEK -6.9 (-5.3), of which MSEK -2.3 is attributable to a one-off item for a write-down in connection with the termination of a rental contract for office and production premises in Finland. This termination is carried out in order to reduce rental costs in the RemaSawco business unit when parts of the operation are centralized to the head office in Linköping.
Net financial items amounted to MSEK -1.5 (-0.3). The change in net financial items is linked to a one-off item of MSEK -1.4 for a write-down of a receivable from Digital Vision relating to the purchase price established when the business unit was divested in 2014.
Result after taxes adjusted for one-off items amounted to MSEK -2.3 (-3.3). Result after taxes amounted to MSEK -6.0 (-3.3).
Financial position, investments, and cash flow
The Group’s investments in non-current assets during the quarter amounted to MSEK 3.0 (3.0), of which MSEK 1.7 (2.8) is
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 -7.0 (0.6). Solidity as of March 31, 2023, amounted to 62 (58) percent. Net indebtedness amounted to 0.0 (0.2) times.
Available liquid funds, including the undrawn part of the overdraft, facilities amounted to MSEK 30.4 (21.7) as of March 31, 2023.
The Group has seen a positive trend in performance for several quarters, and for the second consecutive quarter, the Group delivers a rolling 12-month EBITDA margin exceeding the long-term target of 15 percent. To achieve the long-term objective, this level must persist over time. Therefore, we continue to improve our product range and organization.
RemaSawco
RemaSawco supplies measurement and optimization systems for the sawmill industry. The product range, based on proprietary measuring products and software, addresses everything from timber intake, sorting, sawmill lines and board handling to modern automation solutions.
Performance in the first quarter
The first-quarter results are slightly better than the previous year, both in terms of net sales and EBITDA. The quarter has been characterized by a turbulent market where demand for sawn wood products has remained low while raw material prices have been high. RemaSawco’s sales activities have been focused on major upgrade programs, resulting in a slightly longer business cycle. Combined with continued market turmoil, this has resulted in a lower order intake than the previous year.
Due to the weak development in the construction industry and the general economic situation, most sawmills are still reluctant to make any large investments. However, we expect demand to recover over the next few quarters gradually. We note that many of our customers in the Nordic region continue to implement upgrade projects and show strong interest in expanded and improved service offerings.
| MSEK | Jan–March 2023 | Jan–March 2022 | Full year 2022 |
| Order intake, MSEK | 20.9 | 34.4 | 151.8 |
| Net sales, MSEK | 30.0 | 25.9 | 137.2 |
| Capitalized development costs | 0.8 | 1.2 | 4.7 |
| EBITDA, MSEK | 1.7 | 0.9 | 17.8 |
| EBITDA margin, % | 5.5 | 3.3 | 12.5 |
Product development
Basic development continued during the quarter in three main areas: harmonization of functionality, user interface, and product upgrades. The business unit maintains a high rate of investment in product development to create scalability and develop key capabilities for the digitalization and optimization of sawmills and their processes.
RemaSawco has developed improvements in the service offering that will be presented to customers from the second quarter of 2023. The Company has also focused on ensuring that the first delivery of the new X-ray inspection product RS-LogScanner3DX can be delivered and installed at the customer's premises during the third quarter.
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. TEMA customers are predominantly found in
the civil sector and TrackEye customers in defense-related testing and the aerospace industry.
Performance in the first quarter
Motion Analysis starts the year with good order intake and sales. The Asian market remains strong, accounting for about half of the order intake during the period. The business unit has also received important orders in various application areas from both the United States and Israel. The lower EBITDA margin for the first quarter compared to the previous year is due to an increased investment pace in new products. The business unit’s strategy for growth is partly based on developing new product categories that can be sold to our existing customers, where Motion Analysis has a strong brand and a good position.
| MSEK | Jan–March 2023 | Jan–March 2022 | Full year 2022 |
| Order intake, MSEK | 10.5 | 8.3 | 37.2 |
| Net sales, MSEK | 8.3 | 5.7 | 33.4 |
| Capitalized development costs | 0.9 | 1.6 | 4.9 |
| EBITDA, MSEK | 1.6 | 2.0 | 15.2 |
| EBITDA margin, % | 17.4 | 27.4 | 39.7 |
Product development
During the quarter, the business unit worked intensively on a series of customer-specific configurations of the TrackEye software for various defense customers, including in the US, Australia, and France. The product development work with the new platform has progressed, and new functionality was implemented in both DIC and 2D and 3D measurements. MotionCloud, the new cloud solution the Company is implementing in parallel, has now passed the first development phase and is undergoing validation.
Other information
The Parent Company
The Parent Company’s net sales for the first quarter amounted to MSEK 1.1 (1.0). Operating profit amounted to MSEK -1.0 (-0.7). Result after taxes amounted to MSEK -1.8 (0.7). Investments in fixed assets amounted to MSEK 0.0 (0.0). The Parent Company’s available liquid funds, as of March 31, 2023, amounted to MSEK 0.1 (0.2). The Parent Company’s equity as of March 31, 2023, amounted to MSEK 103.3 (138.9), and the solidity was 98 (93) percent.
Significant events after the period
There are no events to report.
Personnel
The average number of employees was 66 (76). The number of employees at the end of the period was 66.
Number of shares
The number of shares on March 31, 2023, amounted to 89,207,818.
Annual General Meeting
The Annual General Meeting will be held on May 4, 2023, at 14:00 at the Company’s premises at Snickaregatan 40 in Linköping, Sweden. The 2022 Annual Report has been published and is available on the Company’s website.
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 14, and relevant reconciliations on page 13.
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 2022 Annual Report. No significant new or changed risks
or uncertainties have been identified during the quarter.
Audit
This interim report has not been reviewed by the Company’s auditors.
Financial Calendar
Annual General Meeting 2023 May 4, 2023
Interim Report April–June 2023 August 23, 2023
Interim Report July–September 2023 November 10, 2023
Year-end Report 2023 February 9, 2024
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
Linköping, May 4, 2023
Johan Friberg
CEO
This disclosure contains information that Image Systems AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 04-05-2023 13:00 CET.
For further information, please contact:
Johan Friberg, CEO, tel +46 13-200 100, e-mail johan.friberg@imagesystems.se
Image Systems is a Swedish high-tech company and a leading supplier of products and services in high-resolution image processing. By constantly challenging the market's concept and instead offering new and more efficient solutions, we help our customers achieve increased success in their businesses. The company caters to a large number of industries globally and operations are conducted in two business areas RemaSawco and Motion Analysis. Image Systems has approx. 70 employees in offices in Sweden, Finland and Norway. In 2022, the group had a turnover of SEK 180 million. The share is listed on Nasdaq Stockholm Stock Exchange's Small Cap list and trades under the ticker IS. For further information visit our website www.imagesystemsgroup.se