Adj. sales growth of 19% y-o-y, EBIT relatively flat y-o-y

Neg. sales revisions, but fixed cost base should be set

Share trading at 100x-33x EV/sales on ’20-‘22e

Fewer licenses sold than expected
Briox’s Q3 sales were SEK 1.2m (-4% vs. ABGSCe), corresponding to y-o-y growth of 5%. However, as in the last three quarters, Briox has changed the way it recognises sales. By using the old measure, Q3 sales grew 19% y-o-y. Although sales were largely in line with our forecast, the number of licenses sold was 395 against our estimate of 700. In Q3’19, the number was 463, and we believe that one reason for the drop is that Briox’s sales efforts have been hampered by the pandemic. Opex was SEK -6.0m (-4% vs. ABGSCe), which in turn led to an EBIT of SEK -4.7m (vs. SEK -4.9m in Q3’19). Briox says that its churn remained low in the quarter, which is positive.

We lower our assumptions for the number of licenses sold
Following the lower number of licenses sold, we reduce our assumptions for the number in 2020-2022e. As a result, we cut 2020e sales by 5%, and 2021e and 2022e sales by 13% and 7% respectively. Furthermore, we believe that Briox has reached a sustainable fixed cost base for the short and medium term, and we therefore lower our opex estimates for ’21-‘22e.

Improved sales contribution from Latvia & Lithuania in 2021e
Given the firm’s solid growth for its sold licenses in recent years (now at 6,185 vs. 3,054 in Q2’18), we think that Briox has validated its product offering. Now, we believe that Briox needs to enhance its sales efforts to close the gap between where it is today and reaching FCF break-even. While the company has an established brand in Finland and Estonia, the sales contribution from Latvia and Lithuania is low so far, but we believe that this will improve in 2021e. On our new estimates, Briox’s share is trading at 100-33x 2020-2022e EV/sales.

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