In H1 2023, being the first time Binero reports on a half-year basis, net sales amounted to SEK48.7m (54.5m), corresponding to an approximately -11% y/y growth and were 20% below our expectations. The lower-than-expected sales can be explained by the fact that Binero has made planned restructuring and streamlining efforts regarding its product portfolio directed to its core business while the company has seen increased uncertainties in the market and among customers.

H1 2023 OPEX (other external costs and personnel expenses) was also affected by these restructuring initiatives and amounted to negative SEK48.1m and thus decreased c21% y/y, coming in 17% below our expectations. As such, EBITDA came in clearly lower than our expectations at SEK0.6m (-6.0m) compared with our estimate of SEK3.0m, which led to a softer EBIT than anticipated (negative SEK6.3m versus the estimated negative SEK5.5m).

Annual recurring revenues (ARR) amounted to SEK53.4m in H1 2023 compared with SEK55.2m by the end of 2022, while cloud-based revenues increased to SEK11.6m (6.0m). Furthermore, the cash position was SEK10.7m, compared with SEK10.1m at the end of 2022, as the improvement stems from the recently completed directed share issue.

According to management, Binero continued its transformation during the half-year, including both financial and organisational aspects and made planned restructuring and streamlining efforts regarding its product portfolio. Moreover, and as mentioned, the company has seen increased uncertainty among customers through longer sales cycles for new consulting assignments and cutbacks in ongoing projects with existing customers, which of both these factors affected sales and margins in H1 2023.

H1 2023 net sales amounted to SEK48.7m (54.5m), corresponding to an approximately -11% y/y growth. According to management, the outcome stemmed mainly from two factors. First, Binero has made planned restructuring and streamlining efforts regarding its product portfolio directed to its core business, such as towards its public cloud, container technology and observability. As such, Binero has increased its efforts around its core business while discontinuing minor business segments and services not being a part of future investment plans, temporarily affecting sales.

Second, Binero has seen increased uncertainty among customers through longer sales cycles for new consulting assignments and cutbacks in ongoing projects with existing customers, which has also affected sales in H1 2023. However, we note that Binero has seen an ongoing demand from its core business, such as within its public cloud and its user-based revenues, while we believe that it is natural that the more cyclical consulting business is affected by external market conditions. While we believe these two factors had a negative short-term impact on the sales in H1 2023, we argue that the first-mentioned factor, i.e. streamlining its product portfolio towards its core business, is reasonable and the right thing for the long term. Notably, the H2 2021-H2 2022 growth figures in the graph below were boosted by the RedBridge-acquisition.

Total OPEX in H1 2023 amounted to negative SEK48.1m and decreased c21% y/y. According to management, the OPEX was also affected by the previously mentioned restructuring initiatives while Binero continues to review the cost side in the wake of the RedBridge acquisition, although most of the cost synergies have already been taken. For example, in the spring, Binero started the work regarding moving RedBridge customers to Binero’s platform, which will lead to lower costs regarding data centres, data communication and servers. As such, we believe cost synergies from RedBridge will continue to materialise ahead, although not as comprehensive as previously. In addition, management has stated internal efficiency and cost reductions at the top of its agenda to improve profitability.

EBITDA amounted to SEK0.6m (-6.0m) compared with our estimate of SEK3.0m, thus lower than our expectations, while EBIT amounted to negative SEK6.3m (-14.1m) versus an estimated negative SEK5.5m. As such, Binero saw y/y improvements and continued to have a positive EBITDA, which has been the case since Q3 2022. However, both EBITDA and EBIT were lower than our expectations. According to the management, this stems from the recently increased market uncertainties and subsequent impact on its consulting business, affecting sales and margins in H1 2023.

We make forecast changes following Binero’s H1 2023 report as we decrease our sales forecasts by 14-16% for 2023e and 2024e while we lower our OPEX forecast largely by the same magnitude. This stems from both the streamlined product portfolio and market uncertainties that affected the sales in H1 2023, which makes us decrease both our sales and OPEX forecast for the remainder of 2023e as well as 2024e.

Overall, the lowered sales and OPEX forecast in 2023e-2024e leads to an 18-16% decreased EBITDA forecast for the period, which makes us believe that Binero can reach full-year EBIT break-even at 2025e. Moreover, given the recent directed share issue (and the rights issue) that together brought in proceeds of cSEK11.3m, we believe Binero is well-funded until reaching stable profitability. See the tables below for more detailed estimate revisions and the updated forecast.

Following the estimate revisions, our DCF gives rise to a new fair value range with a Base Case of SEK4.2 (4.9) and new Bear and Bull Cases of SEK1.6 (2.0) and SEK6.5 (7.6), respectively. With a share performance of approximately -25% YTD, Binero is currently trading at an EV/S of 1.1x based on our 2023e.