We are encouraged to see an uptick in ARR growth in Q1, growing 18% annualized q/q, following a soft Q4 report. Underlying, the Engineering and Construction segment delivered continued progress posting ARR growth of 98% y/y, while the online whiteboard segment continues to face churn, which is expected to continue into 2024.

Following Hoylu’s Q1 2024 report, we decrease our ARR forecasts by 1-2% for 2024e–2025e while we increase the gross margin driven by a change in product mix. We expect Hoylu’s ARR-SaaS segment to remain the primary growth driver, which gradually will improve the gross margin ahead. In addition, we raise the decrease in 2024e–2025e OPEX forecasts by 2-3% driven by a few fewer employees. All in all, this leads to an improved EBIT forecast for the period which is mainly derived from lower costs
We expect Hoylu to reach breakeven in 2025. As such, we believe external financing challenges continue as the largest risk before the company reaches stable profitability, considering our current estimates, Hoylu’s cash burn, and current cash position.

We argue for a Base Case of SEK1.8, and a Bear respectively Bull Case of SEK0.5 and SEK7.5. The share trades currently trade in line with our base case, at low valuation multiples like 1.5-2x sales for 2024e-2025e. We argue that that the company has become increasingly attractive from a risk perspective as the near-term financing situation is settled, while its continued financing need remains our key concern.