Q3'23 EBITDA below expectations; 2023-26 strategy announcement
Q3'23 results are below our expectations at the revenue/EBIT/EBITDA level. Revenue was below our expectations (PLN -0.4m) mainly due to the recognition of a lower amount of grants in the current period. The company recognized higher-than-expected cost of sales (PLN +0.16m), lower R&D costs (PLN -0.23m) and higher general and administrative expenses (PLN +0.23m), which ultimately translated into EBIT/EBITDA below our expectations. The slightly lower difference on net income is a result of recognition of higher-than-expected financial income (PLN +0.1m).
Revenue. Revenues from sales of products and services were in line with published preliminary estimates (-1% y/y to PLN 3.6m in Q3'23). The product sales line posted a 76% y/y increase in revenue to PLN 2.5m, and the R&D line saw a 50% y/y drop in revenue to PLN 1.1m. Sales and rental of printers generated PLN 2.3m in revenue in Q3'23 (+71% y/y), and sales of nanoinks generated PLN 0.2m in revenue in Q3'23 (-50% y/y).
Costs. On the cost of sales side, R&D expenses were maintained at a lower level y/y (PLN -0.19m), while cost of goods sold increased (in line with the increase in product sales). General and administrative expenses increased y/y and q/q in Q3'23 mainly due to intensified efforts to commercialize the developed technology.
Financial activities and net profit. The balance on financing activities amounted to PLN 0.1m in Q3'23 vs. PLN -0.1m in Q3'22. Income tax amounted to PLN 0m, resulting in a net loss of PLN 0.8m in Q3'23 vs. a net profit of PLN 0.5 million in Q3'22.
Cash flow from operations amounted to PLN -2.4m in Q3'23 (vs. PLN 0.9m in Q3'22), which was negatively affected by an increase in inventories (stocking up for new orders), an increase in receivables (contracted equipment sales) and a decrease in payables. Capex was PLN -2.7m in Q3'23 (PLN +1.5m q/q vs. PLN -0.7m vs. Q3'22).
The company approved a strategy for 2023-26 which aims focus on two main business areas - business development and sales, and operational development to increase production capacity in all three business lines. The company reiterated the goal of increasing revenues to PLN 100m by the end of 2026 and achieving the first industrial-scale deployments of XTPL technology. In addition, it plans to expand the projects under development into new industries in the form of telecommunications and biosensors, as well as to further expand its international distributor network and establish stationary sales centers in key technological destinations: USA, Taiwan, South Korea.
NEUTRAL. We expect a neutral investor reaction to the company's results, which are below our expectations. We note that current results have little impact on the company's valuation, and in the short term, results are likely to be burdened by investments in scale growth and product commercialization. Printer sales are taking an increasing share of the sales structure, which is a positive sign. Two industrial modules were sold in Q3'23, indicating progress in industrial deployment processes. For the full year, the company should sell 13 devices. The assumptions of the published strategy are in line with previously communicated targets. Printer sales should accelerate in the coming quarters, but we expect further investment in sales development, which could be a drag on results. Important for the company's valuation in the medium term will be information on progress in implementation projects and progress in printer sales.
