Sales beat, but weaker order intake than expected

We raise ‘20e sales by 7%, but reduce ’20e-‘22e by 4-5%

11x ‘21e EV/sales, 51% ’19-‘22e sales CAGR

Better sales and EBIT than expected
Artificial Solutions (AS) achieved sales of SEK 15.4m in Q2, +22% y-o-y and +26% vs. ABGSCe. While we had expected non-usage revenue (which includes services sales) to be hurt amid COVID-19, these sales proved resilient in Q2 and posted 2% y-o-y growth. Meanwhile, usage sales grew 85% y-o-y, accounting for 36% of total sales. The solid sales, together with good cost control (opex declined 14% q-o-q), lead to EBIT of SEK -23m, which is so far the smallest EBIT loss for AS since it became a listed company.

Order intake hurt by project delays
Although most of its numbers showed good progress, the order intake was soft and amounted to SEK 6.5m (-71% y-o-y). This was below both management’s and our expectations, hurt by project delays amid the pandemic. Management cites that some of the orders that it expected to receive in Q2 were eventually signed after the end of the quarter, and we therefore chose not to extrapolate the weak order intake into our forecasts. Even so, we cut our ’20-‘21e sales forecasts by 4-5% on slightly reduced sales growth assumptions.

Near-term funding secured
Since the beginning of the pandemic outbreak, AS has seen substantial growth in the number of interactions on its platform. While this number is not directly correlated to its usage sales, we think that it proves that the company holds a robust platform and that the demand for its solutions should increase once the dust settles. Furthermore, the firm completed a SEK 27m share issue during Q2, which has secured its near-term funding. While we estimate that profits will remain in the red for 2020-2022, the company has a scalable business model that bodes well for high margins once it matures. At the current share price, Artificial Solutions is trading at 16-6x ‘20e-‘22e EV/sales.

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