Innofactor Q3 on Tuesday: We expect slightly slower performance but still at a reasonable level

Translation: Original comment published in Finnish on 10/22/2023 at 7:32 pm EES

Innofactor will publish its Q3 report on Thursday at 9:00 am EEST. Innofactor’s latest year has been good operationally. In Q2, however, uncertainty in customer demand started to materialize and we estimate that it will gradually slow down Innofactor’s performance. We expect Innofactor’s organic net sales growth to have slowed down, but been at a good level, considering market uncertainty. We estimate that profitability has decreased driven by utilization rates but been at a satisfactory level for the company considering the market. We are interested in comments about the market, the outlook and the development of the order book. Our extensive report on the company published in September that is still very topical is available here.

We expect growth to have slowed down but continued as good considering the market environment

The company’s latest year has been operationally good, which creates some confidence in the short term. However, the previously discussed uncertainty materialized in Q2 in a few areas, especially in software development, even surprisingly strongly. In the market, concerns have since also spilled to the public sector, where they have partly been reflected as strong price competition. We expect that uncertainty will gradually start to show also in Innofactor figures. We estimate that Innofactor’s net sales growth has slowed down to 5% in Q3 and is EUR 17.5 million (Q2 organic 11%). In addition, we are interested in comments concerning the market, the outlook and the development of the order book.

We expect profitability to fall and be at a satisfactory level

We expect EBITDA to fall to EUR 1.4 million (Q3'22: 1.9 MEUR) depressed by slower growth and weaker utilization rates. Thus, we expect EBITDA-% to fall to 8.2% in Q3 driven by utilization rates (Q3’22 11.6%). Profitability is weakish with Innofactor’s structure, but considering the market situation, we believe it is at a satisfactory level. In other result lines, we estimate that depreciation is EUR 0.2 million and lower than in the comparison period. Thus, we expect EPS to remain at the level of the comparison period in Q3 at EUR 0.02.

We expect the company to reach its guidance, despite market uncertainty

As usual, Innofactor’s guidance indicates that net sales and EBITDA will grow from the year before. Ahead of the Q3 report we expect that Innofactor's net sales will grow by 12% to EUR 80 million in 2023 (organic 8%) supported by the Invenco acquisition and EBITDA will reach EUR 8.3 million or be 10% of net sales (2022: 11.5% of net sales or 7.8 MEUR). In the market uncertainty, Innofactor is supported by the company's high 60% share of net sales from continuous agreements compared to project suppliers.