Safello pre-announced key metrics for its Q4 2024 report due 21/02/2025. Net sales were in line (-1%) with Redeye Research Estimate (RRe) and increased 40% y/y. EBITDA and EBIT were 45% and 50% above RRe’s adjusted measure. Increased orders and volumes, as well as burgeoning cryptocurrency prices in the quarter, drove strong results. Redeye favours the result but awaits the full report before making estimates and valuation changes.

Safello Group

* Safello's revenue is primarily transaction-based and heavily influenced by crypto sentiment, making it vulnerable to market fluctuations.
* The company has limited geographic diversification, having closed operations in Norway and currently focusing only on Sweden.
* Safello's revenue base is not diversified, with most income likely coming from Bitcoin transactions and withdrawal fees.
* The company operates in a highly competitive global market with numerous crypto exchanges, potentially limiting its ability to dominate the market.
* Safello's earnings are significantly affected by crypto market sentiment, which is considered a risk-on asset and subject to broader market fluctuations.

* Safello has meaningful reinvestment opportunities, including geographic and product expansion, indicating potential for future growth.
* The company can scale up without expensive reinvestment, leveraging its core platform to add functionality with minimal development costs.
* Safello's regulation-first approach provides a sustainable competitive advantage, particularly as the crypto industry faces increased regulatory scrutiny.
* The company operates with minimal regulatory interference, positioning it well in the evolving crypto regulatory landscape.
* Safello actively works with customers to innovate, as evidenced by the launch of its monthly savings function based on customer feedback.

* Poor profitability metrics, with gross profit margin, operating margin, and Return on Equity (ROE) falling below desired thresholds, potentially indicating competitive pressures or inefficient operations.
* Lack of consistent earnings growth, with no evidence of stable EPS growth over the past 5-10 years, suggesting potential challenges in maintaining long-term profitability.
* Weak historical stock performance, failing to achieve 10% compounded growth since IPO, which may indicate underwhelming investor returns.
* Limited dividend growth and consistency, with no evidence of increased dividends over the past three or ten years, potentially reducing attractiveness for income-focused investors.

* Strong short-term liquidity with current assets 1.5 times greater than current liabilities, indicating robust financial health and ability to meet short-term obligations.
* Low debt levels relative to cash flow, with Net Debt less than two times Operating Cash Flow and five times Free Cash Flow, suggesting effective debt management.
* Sufficient cash reserves to cover expected cash burn for more than two years, providing financial stability and reducing the need for immediate fundraising.
* High-quality earnings indicated by efficient inventory and accounts receivable management, low one-time charges, and strong Operating Cash Flow and Free Cash Flow conversion rates.

* Lack of extensive management team tenure, with senior team in place for less than 5 years.
* Inconsistent profitability and unclear return on investments, raising concerns about capital allocation efficiency.
* CEO compensation not clearly aligned with share performance, and lack of sustainability-related incentives in executive compensation plans.
* Management team's ownership stake is relatively low, less than their annual salary.
* Uncertain lean organizational structure, with the lowest net sales per employee among peers, potentially due to compliance requirements.

* Strong leadership with clear long-term vision and deep industry knowledge, focused on becoming the Avanza/Nordnet of the crypto economy.
* Commitment to innovation and transparent investor communication, with consistent storytelling and focus on long-term business value.
* Significant insider ownership, including founder involvement as chairman, demonstrating alignment with shareholder interests.
* Gender diversity in leadership, with strong female representation in management roles.
* Board members with extensive experience in finance and crypto economy, aligning with the company's business strategy.