Bioinvent International

Arise

Bredband2

Starbreeze

Heliospectra

BrightBid

* Currently unprofitable with negative cash flow, indicating financial vulnerability and dependence on capital markets.
* Operates in a fragmented market with fast-moving technology, making it challenging to establish and maintain sustainable competitive advantages.
* Significant dependence on the CEO and founder, Gustav Westman, for business success, presenting key person risk.
* Limited historical data on customer churn and employee satisfaction, creating uncertainty about long-term retention and company culture.

* Strong recurring revenue model with 80% of sales from SaaS, indicating business stability and scalability potential.
* Benefits from secular tailwinds in digitalization and automation of marketing and ad spending, positioning for long-term growth.
* Operates independently of commodity prices and with minimal regulatory interference, reducing external risks to the business model.
* Demonstrates commitment to environmental sustainability through digital meetings and encouraging eco-friendly commuting practices.
* Works closely with customers to innovate and improve product efficiency, fostering strong customer relationships and product development.

* Operating margin (EBIT) below 20% and not showing consistent improvement over three years, suggesting potential operational inefficiencies.
* Return on Equity (ROE) and Return on Assets (ROA) underperforming industry averages, indicating suboptimal capital utilization.
* Lack of consistent earnings growth above 10% over the last five years and unstable earnings growth over the last 10 years.
* Operating Cash Flow and Free Cash Flow conversion below 80% over the past five years, signaling potential issues in cash generation.
* No dividend payments or growth, limiting income potential for investors seeking regular payouts.

* Strong gross profit margin exceeding 40%, indicating profitable product mix and pricing power.
* Revenue growth consistently above industry average over the last five years, suggesting market share gains and competitive strength.
* Net Debt less than two times Operating Cash Flow and five times Free Cash Flow, demonstrating good debt management.
* Sufficient cash and short-term investments to cover expected cash burn for more than two years, indicating financial stability.
* Efficient inventory and accounts receivable management, with both ratios below 20% and their respective 5-year averages.

* Challenges in delivering on financial targets: The 2025 profitability targets seem challenging, raising concerns about management's ability to consistently meet promises.
* Inconsistent reporting metrics: BrightBid has shifted between different CARR/ARR definitions recently, potentially confusing investors and analysts.
* Potential over-reliance on stock-based compensation: Current option programs amount to about 4.4% of outstanding shares, which may lead to dilution concerns.

* Strong founder leadership: CEO Gustav Westman demonstrates deep industry knowledge, commitment to innovation, and a focus on long-term value creation.
* Lean organization with empowered employees: BrightBid promotes self-direction and accountability, fostering a culture of innovation and adaptability.
* Significant insider ownership: Management and board members hold substantial stakes, aligning their interests with shareholders and indicating confidence in the company's future.
* Transparent communication: Management is candid about mistakes, provides timely updates, and focuses on long-term business value in its communications with investors.
* Board expertise aligned with strategy: Directors bring relevant experience in software, finance, sales, and entrepreneurship, supporting BrightBid's growth ambitions.

Yesterday Speqta announced that its strategic review had been completed. In line with previous statements, Speqta will now focus on e-commerce and the SaaS solution Bidbrain. The remaining operations have been or will be divested. Also, the board proposes a dividend of SEK 4.80 per share (SEK 316m), which, relative to the current share price of SEK 3.53, is a game-changer.
In conjunction with the announcement, Speqta announced the divestment of Vinklubben (including MyTaste and Matklubben) for SEK 120m, equal to an EV/EBITDA of 9.6x. In 2021, Vinklubben had sales of SEK 22.5m and an EBITDA of SEK 12.4m (excluding management fees). Although Vinklubben had solid growth and strong margins, we believe it is a fair price, especially considering Speqta’s new focus on e-commerce. After the divestment and before the dividend, Speqta will have a net cash position of SEK ~420m.
Following the sale of Vinklubben and the divestment of Rahalaitos in November 2021, resulting in a positive net cash contribution of SEK 384m plus a potential earn-out of up to EUR 8m, Speqta now consists of Bidbrain (and Shopello) and Affilijet.
Speqta intends to divest Affilijet, which had sales of SEK 19.7m and an EBITDA of SEK 1.4 (excluding management fees). According to management, the expected return on divesting Affilijet is limited compared to Rahalaitos and Vinklubben. We find that statement very sensible and assume a valuation of SEK ~7-10m is reasonable.
Assuming the proposed dividend and the divestment of Affilijet take place, Speqta will consist of Bidbrain, SEK ~105m in cash (equal to SEK ~1.6 per share), and a potential earn-out of up to EUR 8m. Thus, considering the proposed dividend of SEK 4.8 and the remaining SEK 1.6 per share in cash, we raise our Bear Case to SEK 6.4.
Next week, we will get back to our revised Base and Bull Cases, following Speqta’s <a href="https://www.redeye.se/events/836413/speqta">presentation and Q&amp;A</a> on Friday 10:00. However, even though we need more information about Bidbrain before we can set any meaningful valuation on the business, considering the Bear Case of SEK 6.4 and the earn-out of up to EUR 8m, our current Base Case of SEK 7.5 is likely safe.
We like Speqta’s decision to pay a substantial cash dividend, which is higher than the current share price. We are also cautiously optimistic about the focus on Bidbrain, which we believe has a much larger potential than the divested businesses. However, it is still in an early phase, and we need more information and channel checks.