Huddlestock Fintech AS (HUDL) Earnings Call Transcript

Hello, everybody, and welcome to Huddlestock Fintech's Q3 '25 Quarterly Presentation. Today, I have with me our Chair of the Board, Oyvind Hovland, that most of you probably have met before; and the new face, and that is Sabine Merky, our new Group CFO. So perhaps, Sabine, you would like to introduce yourself with a few words.

Yes. Thanks a lot. I'm very happy to be here with you. And very shortly about myself. As you maybe already have heard, I'm German, grown up in Munich actually. And I lived and worked in a couple of European countries in France, Switzerland, Sweden and Norway. And my background is from a diversity of tech companies, multinational most of them, and in different industries. And I have an experience both from working at group level and also at country level. And I'm looking forward to be part of that great journey together with you and Huddlestock.

Thank you very much, Sabine. And for those who have not met me before, my name is Leif Arnold Thomas. And I'm the group CEO of Huddlestock. Let's start. This year has been a very interesting and a very good year, I would say, and a lot have happened during the year. And of course, the most important thing is the restructuring we have been through and divested all our Nordic Investment-as-a-Service business. So, just as a recap of who we are today. Well, we are a company with an asset-light model for expansion of our services in Continental Europe. We have already started with the first customer signed. The second, LOI signed. Following the divestment of the Nordic IaaS platform, we find ourselves in a better position when it comes to finance, reduced cash burn and more financial flexibility. We have strengthened the market -- the management with appointing Sabine as the new Group CFO. And we've also strengthened the Board with two new Board members. One of them is German with network in Germany, where our European business has starts from. We also have a Visigon, a consultancy business, and we have strengthened that organization with a new commercial resource, and we are now working on delivering on the new growth strategy that I will come back to later on. Huddlestock is a company listed on Euronext Growth. We have two business areas: one within technology and one within consulting. We are represented in all the Scandinavian countries and also in Munich, which is our base for our European expansion and European business. We are 24 FTEs. So we are a small company when it comes to headcount. And our market capital cap is approximately NOK 200 million. So, we are working with a model that we find very attractive. It's a combination of our own licenses within the securities area in combination with partners, which we call an ecosystem. And when we combine the licenses with products and services from our ecosystem, we are able to deliver attractive services to our customers, what we call B2B partners. And we are constantly working on both sides of this model. We are working with sales to attract new prospects and new customers in the European area, but also on the ecosystem side. So for example, now, we are happy to announce that a company called Modern Finance Nation is our newest -- new ecosystem partner. And that is, for the first time, a partner that will be able to deliver products through our platform to our customers. This model is attractive, because it is -- demands little investments from outside, and it's easier for us to always be able to put together the services that our customers would like to have. So time to market is short, and we see a little need for heavy investments. And the good thing, this is a model that is quite familiar for the Nordic region. And what we see now is that as the European landscape are also becoming more and more automated and demanding more and more automated solutions, we are now in a position where we can reach a market that is much, much higher and bigger than we see in the Nordics. So, we find ourselves with a good model in a big and growing market. We create value for our B2B partners, our customers by providing them with a combination of licenses and technology so that they can be in business and have an attractive value proposition for their customers without having their own license or having their own technology. That makes it possible in this -- in 2025 and going forward to move fast in a changing environment. And we, from our side, find it's attractive, because then we are able to have different partners, meaning that we can support different needs and use different systems and not being dependent on only selling and defending some investments we have been doing before. We have two main areas of where we get our revenues, of course, is the number of customers. That is one source of revenues and important for us. But also -- and that is even as its important and perhaps, in some cases, and it could be in many cases, even more important. And that is, that our customers, direct customers, they have end customers. So the more the end customers of our customers are asking for more products are providing more AUM or whatever, that will also be part of our revenue model. We signed the first customer in Q1 this year. And just very lately, I think it was this week actually, we published that we had entered into an LOI with a customer #2. And what we do expect is that as we are going forward and are demonstrating for the market that we are getting more and more customers, the timeline for getting new customers will also shorten down between the different customers. So, we have a start and we are very positive about the way going forward. From before, we have built our business on the licenses under the MiFID regime, which is -- makes it possible for us to handle traditional securities. I'm very happy to announce also now, this has been mentioned -- announced in the market very short time ago that we also have received confirmation from the German FSA, BaFin, that we now are accepted to -- both accept and transmit orders within the crypto space. And Huddlestock is one of the first companies in Germany that has received that confirmation. That marks a milestone for us, and I'm very proud of it. And the reason why it's a milestone for us is because then we can be even more relevant for our existing customers. And of course, the market opportunity for us opens up even more. So, now we have a full range of licenses that cover even more. So, that license will broaden up the market for us even more. And that is very, very important, and I'm very proud of that achievement. Working with Europe as are now not playground, but our area we would like to succeed. We have our first customer GIGA Broker, which will have a soft launch of their -- with the platform that we provide, and with selected products and selected investors. And the launch is -- the soft launch is, as I mentioned, planned mid-December. We are then putting on more and more products and more and more investors. And the broad launch of that platform in the market is planned to be during the first half of '26. And as I have mentioned before, that will be combined with a marketing campaign from GIGA Broker. And they have from before 65,000 investors that will be introduced for the platform, of course, including potential new customers. We have said before that we have had an ambition to sign a second LOI within this year. And I'm very happy to see that we made that achievement. We entered into an LOI with a German financial company in November. We will probably say more when final agreement is in place. But already now, I would like to announce that we have an ambition to sign the third customer early in '26. So the work we've been doing now over the last months with prospects and leads and being present and network and everything, now we see that it starts to pay off. And that is very -- and I'm very happy to see that. We have a -- it's very important for me to have a lean organization and keep costs down. Of course, when the business grow, we probably need to enlarge that organization. That is a natural consequence of having success and having more customers. But for the time being and always going forward, we will have very, very strict cost control. Ambition is to turn the European IaaS platform, meaning the Huddlestock GmbH cash positive during '26, probably late '26. So, it's a clear road map to profitability on that -- on the European business of ours. We have two business areas. I've now talked about the technology side of it, but we also have a very interesting consultancy business, and the name of that company is Visigon. Visigon is a company that are important for our financials. They have been in the business for many years. And they have now together with the management have together with us worked with the strategy for the next coming years. And happy -- what is so interesting is that we see that we have a lot of potential in that business. Visigon has a lot of very well-known financial institutions. You can see very strong brand names. These customers have shown loyalty over many, many years. So, it's a sticky business. And what we now would like to do is, of course, to enlarge and get these existing customers to buy more services from us. But also, of course, to attract new customers in the market. That is both in the Nordic region, but perhaps even more interesting in Continental Europe. In addition to grow our business at our existing customers, it has been, what should I say, we have been working on the business model and started to turn our revenues from hourly based rates. And if I can say it that way, until take more responsibility, what we call managed services. And doing so, some different things happens. Number one, the revenues become more recurring. That is one thing. We see that we are able to increase margins. That's also another thing. And we are also becoming a more important provider of services to these customers. So, both working structure with sales and also to change and shift a little bit about how we are delivering our services is one of the backgrounds for a growth strategy. When we grow, it will be important to have enough manpower. And the plan is, of course, to support this consultancy growth with some new employees at Visigon, but we also want to do that in a combination with using sub-consultants. And that is especially important when we are talking of an expansion out of the Nordic region. We do have a lot of experience and insight from the Nordic region, where we are very optimized. But we see also a need for our services and our experience in the Continental Europe. So, being there already with our business in Germany, with our basis in Munich, that's a very good bridge to introduce also Visigon business into the German market or other European markets. So, we will use our strong footprint and experience in the Nordics, good relationships and long-term relationships with big and well-known and recognized financial services to expand our services in Continental Europe, combining own employees and also using subcontractors to keep costs down. We believe based on where we are today, our history, our skills, feedback from customers, long-term relationships with customers that we are able to double our current business in '28 compared to '25. In addition to that, we see a lot of products and services close related to the services and the business we are able to deliver today that also has the potential. So, if you combine these two things together, we have decided that it is fully possible to reach NOK 100 million in '28 and increase our EBITDA margin from today's at 10% until 20%. So, this is a clear goal that we are looking forward to deliver on. Of course, what is very important for me to emphasize is that from today until '28 will not be a straight line. It will be periods where we have lower performance, lower EBITDA, but the objective in '28 is clear. So it would not be linear route to that objective. But the objective is very clear. And I'm very proud of what we have achieved through that process and our analysis and see that this is fully possible to reach. Then I will give the word to you, Sabine, on the financials.

Yes. I will switch on the camera again. Well, as we've heard a lot has happened so far this year. So, the reported figures are still very much impacted by the restructuring. We are now today a completely different company than we were 1 year ago. And still during the different quarters, there was a lot happening. So the comparability is very limited. In the first part in Q2, we had the first part of the transactions in April, and then in the end of August in Q3, we had finally the final part of the divestment of Investor Services. So that makes the quarters not really comparable to each other. And just I'd like to mention anyway, when it comes to the net financial items line here. And please keep in mind that these are very much driven by the volatility of the market value actually of the Done.ai shares. And that's also something that will continue going forward. So -- and if we look at the pro forma figures then, we are much -- we are happy actually to see that we are now at a more sustainable cost level going forward, very much in line with our asset-light strategy that Leif Arnold was mentioning before as well. After adjustments and eliminations now here on the revenue income level, we see that this is on the right-hand side in the pro forma figures, mainly consisting of Visigon revenue, which still was impacted by the summer months now in Q3, and therefore, on a slightly weaker level than normal. So, with the positive top line contributions now looking forward, we are now really moving into the right direction when we look at this slide. Right. Thanks. And after all, we see ourselves now in a strong position, both financially and operationally as when we started the year, actually. We started the year with NOK 11 million in cash. And since then, we used around NOK 24 million in cash from operations and that was mainly driven still by the divested companies. The investment part here is mainly R&D related to Nordic IaaS, which was not divested as well. The financing part of NOK 12 million was done by conversion of warrants. And all of that now left us with a cash of NOK 2 million by the end of September. However, with the divestments, we have now access to liquidity through tradable shares from Done.ai with a market value of around NOK 40 million by the end of September. And out of this NOK 40 million, we will now distribute 20% to our shareholders. So altogether, we are having a better cash position now than in the beginning of the year and especially if we take into account the decreased cost base now already in Q4 and especially also going forward.

Yes. I started to say that we are now finished with the divestment process of the Nordic IaaS platform. It was announced in April, and there have been some closings and activities during -- really from there. And now in Q4, the last part is being delivered, and that is to distribute the Done.ai shares to Huddlestock shareholders. And as Sabine said, it is 20% of the received shares that will be distributed. And the main part of it will be distributed start of December this year. We estimate December 2. And then the rest is distributed in April next year. So, and the reason why it is divided into two is that we need some information from all the investors that we need to receive in order to be able to deliver and distribute these shares. So, the main portion will now be distributed very soon, and the rest will be then distributed in start of April. But anyway, this is the last part of the divestment process. And my point of view is now, this is -- this company now is finally or final restructured after that transaction. So, now everything is looking forward, and that is where we use all our energy. Meaning that we are -- have now set some clear targets for the consulting business in '28, targeting NOK 100 million in revenue and EBITDA margin more than 20%. We have a European IaaS platform that we now are on-site to scale. The first customer is signed and we are about to do the first soft launch. We have been able to sign an LOI with customer #2 and the ambition is to have a final agreement within this year. We are working hard on sales in Europe and in Germany, and we expect to see results of that work soon. And we have a clear ambition to turn the European business of ours to turn that cash positive late in '26. So that is now putting everything behind us on the history. Now looking forward, two clear business legs, and already, in my opinion, a good way, a good part on that road already. So with that said, I will do like this. Sharing. Go back to the meeting. If there are any questions?

Yes. Joachim. And we forgot to mention that in the beginning. So please go on the Q&A section, if you have any questions. But [ Joachim Blumenthal, ] he have two questions. So one of them is, he is asking about the uniqueness of what we are doing in the German market. So in short terms, the uniqueness is that we are delivering investment-as-a-service to the B2B market. So we are delivering a space where a lot of different companies can come to us, and we can serve them in terms of license, back office technology and front-end technology. And now we can do tokenized trading, we can do equities, and we can do a crypto. So, we have everything. So, we think that the offering that we have is -- we know that it's unique in that term. And we also offer a revenue split. So, it's easy to come to us. And going forward, I think when we can talk more about the new customers that are coming and so on, we will see that we will use this platform to widen our reach. So I hope that's okay question. Do you have anything to add in, Leif Arnold?