Key takeaways from the report:
Northbaze reported sales of SEK 28m in the third quarter, slightly below our expectations of SEK 32m. Sales from the Audio & Sound segment came in at SEK 9m slightly above our estimate of SEK 8m, which represents a 1% growth y/y. Sales from the Smart mobility segment with Adiante included came in at SEK 19m, representing a flattish development y/y, despite the negative effects from the pandemic.
In recent times, the business has shifted significantly from sales within Audio & Sound and Smart Mobility to the newly formed business unit Adiante. The newly reshaped unit now represents about 46% of the group’s total sales in the quarter. In terms of profitability, the gross margin was 44% in the quarter, slightly below our estimate of 48%. However, cost savings have materialized nicely, with an OPEX of 13m in the quarter vs. our expectations of 15m. The combined figures result in a positive EBITDA in line with our expectations.
To summarize, Northbaze has performed better than our expectations during the pandemic, both with sales and OPEX savings resulting in a breakeven result for the last three quarters. The solid order book of SEK 25m also strengthens the company’s position for the important Q4. Some uncertainty remains, but with a maintained cost profile, we believe we are looking at a solid Q4 with a few million in positive EBITDA. We will get back with revised estimates.
We believe there are good prerequisites for Northbaze to grow the business from this point with an overall, maintained lower cost profile. Anyhow, the current financial situation makes us more cautious to the stock in the near term as we believe the company will need additional financing or a few material orders leading to positive cash flow in the near term as the cash position amounted to SEK 8.5m. At this point, we maintain our base case valuation of SEK 0.5 per share.
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