Net sales came in at SEK7m, representing a solid y/y growth of 56%, yet a 6% sequential decrease, surpassing our estimate by 27%. This solid growth is attributed to an increased demand for IoT services, resulting in a 125% increase in revenue for IoT services compared to the same quarter of the previous year. Revenues from the broadband services amounted to cSEK3.0m, representing a 40% share of net sales. The gross margin improved significantly by 15pp from last quarter and amounted to 53%, 15pp above our estimate. During the quarter, the sales mix was favourable, with an increase in IoT services positively impacting the gross margin. We acknowledge that the gross margin will likely be volatile from quarter to quarter, depending on the sales mix. Operating expenses (OPEX) increased 8% y/y, reaching SEK7.4m, aligning with our estimate. EBITDA stood at -SEK3.3m, exceeding our estimate by 30%, primarily due to increased net sales and higher gross margin.

In Q1, TH1NG announced the sale of its corporate broadband customer base to Bahnhof for SEK10m. The migration of the customer base began on 1 May, allowing TH1NG to concentrate fully on its core IoT business. The divestment prompted adjustments to our forecasts, suggesting an anticipated SEK12m annual sales decrease effective May 2024 onward. According to the management, the company has noted increased demand for IoT solutions, particularly from the real estate and energy sectors, which present significant potential for innovative energy management solutions. TH1NG has collaborated with energy firms for several years, forming partnerships that appear advantageous. If these partnerships result in agreements, TH1NG will provide AI-driven IoT services to energy companies like Skellefteå Kraft to resell to their customers.

Following TH1NG’s Q1 2024 report, we have positively adjusted our near-term forecast, with a 4% increase in sales for 2024e. Additionally, we have increased our gross profit assumptions for 2024e by 16%. Our valuation now includes the dilution from a SEK 10 million growth capital injection that we believe will be needed during H2. Yet, we believe that a direct share issue to the main owners, a combination of a regular and a directed issue, or a convertible loan with less dilution based on historical trends are also possible. Our new Base and Bear cases are SEK2.7(4.0) and SEK0.8(0.4). Our Bull case comes down from SEK9.8 to SEK5.0.