The most important metric in Speqta, net customer intake, increased to 10 in the quarter, compared to 4 in Q4 2022. Our forecast was 4. Although still in an early phase, we are encouraged to see the net customer intake accelerating following Speqta’s investments in sales and marketing. Despite the strong net customer intake, ARR came short of our forecast. Management states that many customers entered in late March, limiting their ARR impact. However, we lower our ARPC assumptions somewhat, as Speqta, so far, seems to have attracted a higher share of smaller customers than we expected.

Management states that investments in sales and marketing have had a positive effect on the net customer intake. During the quarter, Speqta expanded its workforce with two key recruitments within sales and market, which could increase net customer intake further going forward.

Net sales came in somewhat short of our expectations and was negatively affected by fewer Shopello customers y/y, which aligns with the strategy of focusing on Bidbrain, with substantially higher gross margins. Also, in Speqta’s current phase, net sales are uninteresting, while net customer intake and ARR are the important metrics.

OPEX, Other external costs and Personnel expenses were lower than we expected. While Speqta has a strong cash position, even after the SEK~45m in dividend, maintaining reasonable cost control is important, limiting the need for additional funding.

During March, the number of registered stores increased by 130% compared to the monthly average in Q4 2022, and the pace increased even further in April. While registered stores are not paying users, it is the first step to becoming a paying customer and likely a leading indicator of coming growth in paying customers. The net increase of 10 stores q/q relates to paying customers.

“Given the strong financial position of Speqta, and the earnout from the divestment of Rahalaitos, the board proposes that the AGM resolves on a dividend of SEK 6.83 per share, corresponding to a total dividend of approximately SEK 45 million. The AGM will be held on Tuesday, 16 May 2023.”

While it makes sense for Speqta to pay a large dividend to realize shareholder value, as the company was trading below its net cash at the time of the announcement, it reduces the funds available to invest in Bidbrain. Especially in the current market environment, with huge discounts on most share issues in small unprofitable companies, a well-financed start-up has a significant advantage over an unfinanced one. However, at the end of Q1 2023, Speqta had a cash position of SEK~100, implying SEK~55m adjusted for the dividend. Management believes it will be enough to take Bidbrain’s cash flow neutral, while our forecast assumes SEK85m. However, given that the momentum in Speqta’s business picks up, the company will likely be able to raise capital at a fair valuation in ~2025, when the financing market might have recovered.

Also, in Q4, Speqta received a SEK37m earnout from Rahalaitos, roughly equal to the SEK45m of the dividend. Thus, Speqta’s ability to finance Bibrain largely aligns with what it would have been without both earnout and dividend.

All in all, while we find the dividend proposal reasonable, we want to point out it increases the longer-term financing risk.

As Bidbrain is a SaaS business in an early phase, targeting a massive market, we make a Bull and a Bear Case, and the Base Case is based on the likelihood of Speqta performing in line with our Bull Case. The figures below concern our Bull Case, where we assume Bidbrain will become a successful solution, showing strong growth for many years and reaching profitability in 2026. We assume Shopello will gradually decline to zero as Speqta focuses on Bidbrain.

We make three notable adjustments to our forecasts:

Although we lower our sales forecasts slightly, we believe the strong customer intake is an encouraging sign, increasing the likelihood of Bidbrain reaching critical mass.

As seen in the Financial Forecast segment, our estimates are our Bull Case, implying a 100% chance of Speqta reaching those assumptions. Our Base Case is based on the same assumptions but implies a 27% chance of Bidbrain becoming successful (increased from 25% following the strong customer intake), as assumed in the Bull Case. Our Bear Case assumes that the investments in Bidbrain fail, resulting in operations closing when 50% of the current net cash is left.

Most listed early-stage SaaS companies have not managed to grow efficiently, suggesting the odds for Speqta are bad. However, Speqta has some advantages. First, it has a substantial net cash position. Second, its customer feedback is solid. All-in-all, we believe a 27% likelihood of reaching our Bull Base is reasonable as a Base Case for now. However, if Speqta performs in line with our assumptions, we will gradually increase the likelihood.

We assume Speqta, given our assumptions in the Bull Case, as a fast-growth profitable SaaS company, will be valued at a rather high multiple of 8x ARR. This may seem high; however, looking at the multiples of high-growth profitable SaaS companies (see table below), we believe 8x ARR is reasonable.

We leave our Base Case at SEK17 (17) as the somewhat higher success rate offsets the slightly lowered sales forecasts. Hence, the Bull Case is reduced to SEK63 (69) following lower sales. Bear Case remains unchanged at SEK8 (8).