The total ARR in Q1 2023 amounted to SEK52.1m compared to SEK51.9m in Q4 2022, meaning almost flat development q/q (approximately 2% annualised q/q growth), which was 6% below our expectations. At the same time, the gross margin fell short of expectations at 62.9% versus an estimated 67.0%, while the total OPEX aligned with our expectations and amounted to negative SEK13.5m, decreasing c33% y/y. Notable, the peak in Q1 2022 includes expenses that could be seen as one-off items affecting the comparables. Consequently, the EBIT came in lower than expected at negative SEK9.1m versus an estimated negative SEK8.0m. Overall, we like that Hoylu saw continued stabilisation of its expenses while, on the flip side, the ARR growth was softer than anticipated.

In the quarter, it was mainly Hoylu’s core ARR-SaaS segment that came in below expectations deviating negative 13% while remaining relatively flat q/q. At the same time, the ARR-Mobile products segment grew c2% q/q and c8% on an annualised q/q basis, deviating positive 1% compared to our expectations. As also was the case in Q4 2022, we would have preferred to see Hoylu’s core ARR-SaaS segment as its primary ARR growth driver. However, management states that Hoylu will continue focusing on its construction segment and has concentrated on regions with a large share of such projects, such as Norway and North America. Moreover, Hoylu has expanded its sales resources in Sweden and expects a growing pipeline of current and new customers ahead.

We make minor forecast adjustments following Hoylu’s Q1 2023 report. We decrease the ARR forecast by c7% for 2023e-2024e while we cut our gross margin assumptions somewhat due to a slower ARR mix change than previous expectations. Despite a decreased OPEX forecast of 4-7% in 2023e-2024e, this leads to a slightly reduced EBIT forecast. Consequently, our DCF gives rise to a new Base Case of SEK0.09 (0.10) and a Bull Case of SEK0.40 (0.50), while our Bear Case of SEK0.02 is intact.