Tessin Q1 2024: Softer than expected, but still no credit losses
Research Note
2024-05-06
07:30
Redeye comments on Tessin’s Q1 results, which showed lower loan volumes than expected, negatively impacting sales and margins. While awaiting the securing of institutional capital, the company maintains good cost control and has not yet reported any credit losses.
Anton Hoof
Net Sales amounted to SEK6.2m, a 38% y/y decline. This is lower than our expectations of SEK8m. Looking at profitability, Tessin’s EBITDA landed at SEK-3.6m and EBIT at SEK-4.1m, lower than our estimates of SEK-2.3m and SEK-3.1m. The deviation is due to lower sales, as opex was somewhat lower than our estimates.
| Tessin: Forecast deviations | ||||||||
| 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | Actual | Estimate | ||
| SEKm | Q4 22 | Q1 23 | Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q1 24E | Diff (%) |
| Net sales | 12.9 | 10.0 | 12.6 | 11.2 | 6.8 | 6.2 | 8.0 | -23% |
| Growth YoY (%) | -4% | 13% | -17% | -22% | -47% | -38% | -19% | -18pp |
| Gross profit | 12.0 | 9.6 | 12.5 | 11.2 | 6.8 | 5.7 | 7.9 | -28% |
| Gross margin (%) | 93% | 96% | 100% | 100% | 100% | 93% | 99% | -6pp |
| EBITDA | -12.0 | -2.1 | 0.4 | 0.6 | -6.5 | -3.6 | -2.3 | -55% |
| EBITDA (%) | -93% | -21% | 4% | 5% | -95% | -58% | -29% | -29pp |
| D&A | -3.3 | -1.7 | -1.6 | -1.3 | -0.6 | -0.5 | -0.8 | -39% |
| EBIT | -15.3 | -3.8 | -1.2 | -0.8 | -7.1 | -4.1 | -3.1 | -31% |
| EBIT (%) | -119% | -38% | -9% | -7% | -104% | -66% | -39% | -27pp |
| Net finance | -3.5 | -0.4 | 0.4 | -0.8 | -0.7 | -1.0 | -0.4 | n.m |
| PTP | -18.8 | -4.2 | -0.8 | -1.6 | -7.7 | -5.1 | -3.5 | n.m |
| Net income | -20.3 | -4.7 | -0.8 | -1.5 | -7.5 | -5.1 | -3.5 | n.m |
| Source: Redeye (estimates) |
The value of brokered loans amounted to SEK54m, a 71% decrease compared to Q1 2023 and lower than our expectations of SEK100m. The arrangement fee amounted to 9.5%, higher than our expectations of 7%. Regarding the sales mix, Arrangement fees amounted to SEK5.1m compared to our estimate of SEK7m, and rental income amounted to SEK1.1m, in line with our estimation of SEK1m.
| Tessin KPIs: Forecast deviations | ||||||||
| 0.00 | #REF! | 0.00 | 0.00 | 0.00 | Actuals | Estimate | ||
| SEKm | Q4 22 | Q1 23 | Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q1 24E | Diff |
| Value of brokered loans | 334 | 184 | 242 | 130 | 86 | 54 | 100 | -46% |
| Growth | 3% | -16% | -31% | -65% | -74% | -71% | -46% | 25pp |
| Arrangement fee | 11.4 | 9.0 | 11.6 | 10.2 | 5.9 | 5.1 | 7.0 | -27% |
| Rental income | 0.9 | 1.0 | 1.0 | 1.0 | 1.0 | 1.1 | 1.0 | 3% |
| Arrangement fee / Value of brokered loans | 3.4% | 4.9% | 4.8% | 7.8% | 6.9% | 9.5% | 7.0% | 3pp |
| Source: Redeye (estimates) |
Despite loan volumes coming in 46% lower than expected, EBIT deviated by cSEK1m, aligning the quarter with the previous one marked by declining loan volumes due to the lack of capital on the platform. The company has yet to secure any institutional capital, and while awaiting that, it continues to operate with a streamlined cost base. Currently, there have been no credit losses on the platform, and as older loans mature, more capital should become available for reinvestment, which will support future loan volumes. With the new convertible loan of SEK12m, we believe the short-term financing risk has decreased, although the dilution risk remains, considering the equity of SEK12m at the end of Q1. The primary catalyst for growth remains to secure institutional capital, and until then, we anticipate Tessin will maintain its lower cost base alongside lower loan volumes. We expect to make downward adjustments to our sales estimates based on the report while keeping our cost estimates roughly unchanged.
Following the Q1 report, we will review the case and follow up with a research update.
Disclosures and disclaimers