Artificial Solutions International
Artificial Solutions - Solid backlog bodes well for further growth (ABG Sundal Collier)

2019-11-14 22:48
Sales -17% vs. ABGSCe, order intake +65% y-o-y
’20e-’21e sales relatively intact
41% ’18-‘22e sales CAGR, high-margin potential
Q3: sales SEK 12.8m, EBIT SEK -29.8m
Artificial Solutions (ASAI) reported net sales of SEK 12.8m, up 33% y-o-y, but 17% (or SEK 3m) below ABGSCe. Although opex was in line with our expectations, the lower sales led to an EBIT shortfall of 15%. Order intake amounted to SEK 6m (0.5 book-to-bill), up 65% vs Q3’18. The major contribution stemmed from existing contracts, with some of these having been renewed at a higher order value, but also from new customers. In particular, this relates to one of its three new customers, which has skipped the common pilot phase and made instant deployment. This shows evidence of reduced sales cycles in conjunction with ASAI’s latest product launch (launched in March 2019), which we see as positive.

Modest ’20e-’21e sales revisions
With support from a solid end-of-Q3 order book (up 101% y-o-y), we have made relatively small revisions to our ’20e-’21e sales estimates. The Q3 order book amounted to SEK 47m, while it should be noted that 31% of this is expected to be delivered in 2021 and onwards. As we have previously argued, 2019 sales continue to be hampered by ASAI’s increased sales through partners (rather than direct selling), which in turn paves the way for high margins as the company enters a mature state. Q3 partner sales of total sales were 43% vs. 38% in Q3’18.

Funding remains a short-term priority
As highlighted in the report, ASAI is in the process of strengthening its financial position (Q3 cash amounted to SEK 15.6m) in order to capture further growth in a rapidly growing market. We have already pencilled in capital injections in our estimates, and expect some sort of action to occur in the relatively near term. On our revised estimates, we forecast a 41% sales CAGR for ’18-’22e, and see the company reaching EBITDA breakeven in ’22e.


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