Research note


Talkpool Q2’18: First comment

Talkpool's net sales amounted to EUR 5.5m in Q2, which was lower than our forecast (EUR 6.5m). The company, however, reported a gross margin of 27%, which was higher than expected. Selling and administrative expenses were at the same time in line with our expectations, resulting in EBITDA of EUR 0.4m (estimate EUR 0.4m).

Talkpool reported sales of EUR 5.5m in Q2, which came in below our forecast of EUR 6.5m. We primarily expected higher sales within Pakistan, Haiti, and Benelux.

Talkpool once again reported an increased gross margin (27%), which exceeded our forecast. The company mentions that this was achieved by an increased focus on niche projects and reduced costs of sales for existing projects. The gross margin of 27% resulted in a gross profit of EUR 1.47m (forecast: EUR 1.49m).

We can thus state that we have had too high sales expectations while simultaneously forecasting too high costs of sales. Regarding its sales, Talkpool mentions that its integration of LCC Pakistan has led to increased opportunities in the Middle East. An example is Saudi Arabia, where the company has initiated several projects during H1’18. Talkpool mentioned that its business in Saudi Arabia reached break-even in June and the Q2 report reveals that the sales in Saudi amounted to EUR 0.14m in Q2.

Selling and administrative expenses totaled to EUR 1.1m, on par with our forecast (EUR 1.1m). This implied that the company reported EBITDA of EUR 0.4m, which also was in line with our expectations. Its financial costs and income taxes were, however, larger than expected, ultimately resulting in a net loss of EUR 0.06m (estimate: net profit of EUR 0.15m).

The cash flow from operating activities amounted to EUR 0.13m while its investing activities totaled EUR -0.27m. Talkpool held EUR 1m in cash by the end of Q2. The company has, however, announced a debt issue of SEK 24m in August.

To summarize, we have had too high sales expectations during the recent quarters while also forecasting a lower gross margin. We will summarize our thoughts and look into our sales forecast and gross margin assumptions. We will get back with an update shortly.

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