Total revenue was SEK68m, -7.1% Y/Y, and -6% below our estimates of SEK72m. The decline was partly due to the communicated shutdown of Nepa APAC. Net sales from Recurring clients were SEK42m, slightly below our estimate of SEK45m. ARR grew +2% Q/Q, which bodes well for stronger quarters ahead. EBITDAC adjusted for restructuring costs was SEK1.3 m, compared to our estimate of SEK1.6m. Due to considerably less capitalized expenses than last year, we strongly argue that EBITDAC is the preferred metric to follow the company's underlying profitability.

Nepa enters 2024 with a slim organization focusing on organic profitable growth, with the possibility of smaller acquisitions. The underlying market is still under pressure due to geopolitical uncertainty and interest rate cuts pushed into the future. Nepa expects demand to pick up sometime in H2, but adds that it could just as well wait until Q1'25. When that happens, we argue that Nepa is in a strong position with its slim cost base and ability to deliver on much higher revenues. Moreover, focusing on go-to-market activities should improve sales growth, especially toward year-end.

Due to soft quarterly growth and increased uncertainty, we are trimming our growth forecast by 4% for 2024 and 5% in the following years. We also raise the gross margin by 1-2p.p and lower OPEX by c2%-5%. All in all, this results in estimating an EBITDAC (EBITDA-CAPEX) margin of 6% in 2024E to then gradually improve towards 11% 2027E. Redeye estimates Nepa to be trading at EV/EBITDAC 9x and 4x for 2024e and 2025e, respectively incl. cash build-up. Following our changes, we lower our fair value range to SEK22 to SEK75 (previously SEK24-80) with Base Case at SEK45 (SEK50).