Pricer AB

STO:PRIC B

Earnings Call Transcript 2023-Q1

[Magnus Larsson, executive]

Hello, everybody. Welcome to the quarterly presentation for the first quarter of 2023. My name is Magnus, and I'm the President and CEO of Pricer. And with me, I have Susanna Zethelius, our CFO.

[Susanna Zethelius, executive]

Yes.

[Magnus Larsson, executive]

Today, we will speak about the first quarterly result that was presented this morning, look at the market trends, the financials and the step forward. For those of you with questions, please submit as many as you like. You will be able to, at any given time, actually feed them into your system. And then we have Charlotte here that will do the moderation and take all the questions at the end of the presentation. So any questions, welcome.

So I would like to start with our vision, just like I did last quarter, and we'll do it every single quarter into the future as well until we change vision. So we -- our vision is to be retail's first choice in shelf-edge automation and communication. That means that any single interaction we have with a retailer or one of our customers, a potential customer, we want them to feel that Pricer is the best choice. We should be the first choice in every single interaction that we have, if it's the first time we meet on an exhibition, an order, the way we managed a complaint, anything, we want to be the first choice. Does that mean that we should be #1 in the market? Yes, it could do, but not automatically. We want to make sure that we are the primary choice for a retailer. And then if it makes commercial sense, then we want to make sure we're also the first in that specific market.

It's on shelf-edge, which for a retailer means in-store. We have, for a long time, been working with automation partner and we're really good in making and helping retailers to make their business more efficient from price automation, helping their store staff to do more with less people. But we're also really good in the communication part of things to actually do communication across any screen to make sure that not only can we help the retailers save money on being efficient, but we can actually help them to increase the size of the shopper basket, which is part of the communication scope. So, we want to be the first choice in shelf-edge automation and communication.

And hopefully, this has affected now the quarterly results as well. We did from an order intake point of view, the second best order intake ever, I said that actually in Q4 as well, because then Q4 was the second best order intake. And I did not expect that I would actually say it now, so now in Q1. But it feels pretty good. So I'll see if I can also do it in the second quarter. But I guess, I cannot make that kind of commitment. But of course, it would be nice. I'm happy to do it right now.

From a revenue point of view, we can see that we have grown -- continue to grow in established markets. It's in France, in Canada, also in Italy and Benelux. And here, we can also see that we had good order intake, not only revenue growth. If we look at the SEK 707 million, one thing that actually separates this quarter from Q1 in 2021, but also from previous quarter last year is that we can see a greater chunk of revenues and orders coming from large retailers and their own independent stores. So what we could see last year was a heavy increase in the growth from the franchisees, so the independent stores.

Now we can see that many of the large retailers -- last year, they saw the need to invest in ESL, but being a large company, you need to manage your budget. So now we can see that, yes, they have allocated budget. We can see that ESL is a prioritized area of investment. So from some discussions we had last year, we can see there are now being tangible revenues and tangible orders into this year, not only from the franchisees, but also from the retailers' own stores. And many of the discussions we're having right now is with large retailers saying that we want to make an investment, we see the need to make an investment in ESL. There are so many price changes now that we really have no other option.

And to give you an idea, I think last year, I spoke about a massive price increase in many stores. Now we can see that the size and the frequency of the increase -- price increases have increased even further. We have one big retailer that have been doing up to 20,000 price changes in other stores. And of course, overnight, we see other [ large ] that have between 5,000 and 10,000 price increases on a frequent basis and it's impossible to manage that using paper. So the market is growing, and we have a tangible chance to actually address it also now from a lot of the large retailers. They have the budget that they want to invest.

Profitability, we can see profitability stabilizing. I would like to say that it's actually increasing because it is increasing versus Q4. But we can see that the trend is different. We have had a decrease in gross margin. Now we have a first quarter with a growing gross margin. So I would rather say that it's a stabilizing gross margin than, let's prove it that it will continue to grow before we actually say that it's a trend.

We have taken a lot of measures to make this happen. Of course, there's been benefits from some costs going down globally, transportation, also components, but we have also done a lot of negotiation with our suppliers. We are looking at the way we do the sourcing. We are looking at our vendors. We are looking at the component suppliers. That's one part. We're looking at the way we design our products to see how can we actually continue to actually improve gross margin over time. We are doing customer price negotiations, and it's been successful as well. The product mix is also beneficial. We can see that this trend and the measures we'll take will lead. And I think Susanna will speak more about it, so I will not steal your thunder, so -- but we have a good outlook.

What I would like to mention also is on the U.S. market. I've spoken about the pilots. Now we've seen that we move from winning only pilots also winning initial store installations, which is the next step. And winning a large account is a process that takes time. It's a process that takes time until you actually can do a major press release. But I see that we're taking the necessary steps, we move from lab, we move to pilot. Now we can see initial store installations where you have 1, 2 or a handful of stores, to really -- for a retailer to really test the concept. If we're successful with that, next step will be that they will actually consider larger installs.

So from my point of view, we've set the foundation for the growth that we expect in the U.S. market. We have also started to announce a little bit more new customers. I was really happy that the customers we announced now in the quarter. They were across segments, they were across geographies as well, [ jumped slightly ] immediately. So we won Rimi. For those that have been with us for a while, you know that we did actually announce Rimi before the pandemic. Then due to the pandemic, it was decided to actually redo it, there was no real installation. But now we have a frame agreement in place. It will be for Estonia, Latvia, and Lithuania. It's in grocery.

We have Pinalli. It's an Italian beauty store chain. So we haven't been very strong in beauty stores before. So it was very nice to also win Pinalli. It's a good brand. It's a good customer, but it's also a starting point within the more of the beauty chain format. We won a French Do-It-Yourself chain. They went from paper to ESL. They have more than 100 stores, and they plan actually to do all the installations now this year, and we have had the initial orders as well. And even though we don't say in the release that we will do it on Plaza, they will all use our SaaS solution Pricer Plaza for their communication in the stores.

Then on the market side, what's happening. I probably spoken about 4-color until your ears fallen off your heads over the last year. Now we can actually say, now we can say that it's moving from hype, from interest, from attention to actual orders and to installations. And it's across several retail segments. It's across several countries. We've seen now grocery, Do-It-Yourself pharmacy. The interests seem to be the same across all these segments. We have interest also, even though we don't have orders yet, but also from home electronics. We could announce today actually that we together with our partner, StrongPoint in Sweden won 5 4-color stores or actually 6 4-color stores, I believe, in Skane in Sweden, Southernmost region for [indiscernible].

So -- and it's not a very large order from, it's not 100 stores, but it's important. I'm happy to share that they have decided to invest in the 4-color, and they will be away for them to actually promote -- kept promote themselves and make sure that they hopefully also increase the shopper basket with being able to do interesting ways of presenting the products.

We participated in the EuroShop exhibition in February. It generated a whole lot of leads. It generated orders. And it also gave us the opportunity to present a product that we've been speaking about for quite some time, but we actually now have in place. It's the hang tag, we call it. I don't know if we have the formal name yet. But this is -- was specifically tailored for the Do-It-Yourself sector. It's a very small label. It's supposed for these where you have the shelves where there is an immense amount of products that you should be able to take a package with a small holder and just push it over the ESL without having to move the ESL and actually take it back over the ESL. And we managed to do that in a format that's appealing, and I understand that I spoke to one of our competitors, not name anyone. But they said that this label was something that was the talk of the town in their stand at the exhibition.

We can see there was a large interest from customers, not only the Do-It-Yourself customers, but also retailers in other segments as well, saying that, wow, this form factor is exactly what we need. So let's see how that works. You can also see that the inflation has been driving a massive increase of price changes. I spoke in the Q4 report about the effect on the battery life, if you have a radio ESL system. All this has led to that there is now a number of retailers that are looking at the better life, looking at the lifetime of ESL. And I can see that there's a sense that they want to be feel better safe than sorry and are now looking at our premium models where we can actually offer an exceptional performance where our standard ESLs, we have the longest lifetime in the market with our premium models that offer more battery capacity, we have an exceptional performance.

And it's -- I guess they see it a little bit like in house insurance, better safe than sorry, they want to make sure that they actually have the capacity to do all the price changes, all the changes, always be reactive as they please to make sure that we truly give them the added value of the ESL in the store. And this is, of course, also helping us with profitability. That product mix is very welcome. And the same actually goes for the 4-color where we can see it is possible to get better profitability or we actually do get better profitability from the 4-color labels.

Our factory in Germany is up and running. Finally, customers can buy "Made in Europe" or "Made in Germany." Of course, they see the benefit from a commercial point of view. They have the availability, less transportation costs, but also from a sustainable -- sustainability point of view, the carbon dioxide footprint will simply be less with the German factor delivering ESLs to the surrounding countries than doing it from Asia.

We have also announced a strategic partnership with a Swedish-based company called Epishine, working with solar cells. We -- at the EuroShop, we were actually demonstrating a few prototypes, and there was a lot of interest. It's an early-stage engagement. We want to work together with Epishine to see how we can develop solar cells as a mean of producing ESLs with different power sources than batteries. But it's initial phase, but it's a really interesting area, and we'll continue to update on the development on this side.

And I think as it says here on the side on slide, there is a continued strong demand for ESL solutions, and it's in all region, obviously, it's very strong.

So having said that, I think it's over to you, Susanna.

[Susanna Zethelius, executive]

Yes. Thank you. So a couple of comments about the numbers, and some of it will be a repetition, but I don't think that's a problem. So starting with the demand side and market development. Like Magnus said and like you've read in the report, we had the second highest order intake ever, SEK 707 million for the quarter, 28% growth versus the same quarter last year. And as you can see here, the distribution or the growth for each of the areas is strong, especially so in Europe. The top 3 markets is France, Canada and Benelux. And there has also been a strong contribution during the quarter from independent stores in France. And another notable thing on the order side, like Magnus also mentioned here is that we have started to see orders come in from Sweden regarding 4-color.

And moving to the next slide. So we already talked a bit about the order side, which is the left-hand chart, in the middle, we're looking at the net sales. So net sales for the quarter was SEK 571 million, up 23% versus the same quarter last year. It's slightly down versus Q4, which is partly due to the fact that we had a lot of deliveries end of Q4 and therefore, a bit slower pace in the beginning of Q1. It's also got to do with the installation pace, which has been limiting the revenue somewhat. But looking at the pacing on the order side, it looks promising for the revenue for the quarters to come.

And then finally on this slide on the right-hand side about the gross margin. So like already mentioned, we still see the pressure on the gross margin. There is a slightly positive sign, and we believe that it has flattened out and is starting to increase. So it landed on 15.8% versus 15.5% in the fourth quarter. And I mean talking about the component costs, I mentioned that last quarter that we had started to see component costs come down. We have seen them come down further in the first quarter and we're expecting them to come down even further during the second quarter. As there is a delay before we can see these in the numbers, we expect this to start to show from the summer and have effect in the second half of the year. And then also contributing to the strengthening of the gross margin is that we have closed price -- or decided on price increases with a few major customers. And an additional factor is the increased demand for 4-color ESLs where we have higher margins. So good trend and good effects expected towards H2.

Next slide, please. So to summarize here on the operating profit side, I mean, the main drivers here is what we already talked about. So it's revenue, it's the gross margin and what we can see comparing the first quarter with the same quarter 1 year ago is that the profitability is -- where the gross margin is negatively impacting also the operating profit. So despite that we had higher revenues, we didn't get a better operating margin. What has also happened during this time is that we have kept investing in the organization in order to capture the future growth, I mean, that investment or the growth in OpEx has been careful and well selected, but there is still a growth that we see is necessary in order to capture the future potential revenue growth.

And if we're comparing operating profit versus the fourth quarter last year, the main effect between the difference here is the difference in revenue. And I think just to summarize on the financial side for the quarter, the strong order intake that we're seeing, for us, it's a sign that we are on track -- on track towards the financial targets that we have launched. The other side is that we're still seeing the pressure on the gross margin, but we also see the positive indications that make us expect this to turn around and improve for the second half of the year.

Over to you, Magnus.

[Magnus Larsson, executive]

Thank you very much. So what are we doing then to further fuel the growth? We are continuously as -- and I think you've seen this before. We are strengthening key markets, and U.S. is one of those to make sure that we have all the stuff required to sell and to deliver an above all invoice what we've done. So we have the complete teams and it's U.S. and a few other markets where we said that here we need to strengthen the team. Given the demand that we see in the market and the possibility to grow, we are now developing or we have actually started the recruitment and put the team in place in APAC. It's expected to be fully operational during the second half. It will add considerable capabilities. So it will be a sizable team that we will build. But also having a team in Taiwan and having a team in Sweden will allow us to actually do this at a lower OpEx per head.

So you will get access to a lot of really skilled good people in Taiwan. But of course, the Taiwan is engineered slightly cheaper than engineered in Sweden. So we see that this will be -- give us the opportunity to grow the necessary R&D team without actually growing the OpEx per head.

Supply leadership, I think Susanna and myself, we have covered it, but we will focus on the production, the supply to make sure that we have the best possible pricing. We are actively working with a number of programs actually to further improve profitability on the supply side. In cloud tech, all R&D work right now is actually adding cloud elements to our hardware that target to actually do configuration of functionality of the systems in the cloud rather than on site or in actually the embedded firmware. So we're moving the stack up into the cloud.

And as communicated before, the target is to get all the new customers into our Plaza to SaaS solution, and we will actively or actively working to actually get existing customers migrating from an in-store solution to a cloud solution. And here, we see once we achieve that, then we're actually on a good way. It will give good opportunities to do upsells on all the different services that we can actually add from a recurring revenue point of view.

So concluding, we see a continued strong market growth. We see it from the number of incoming customer inquiries. We see it from the number of pilots, we see it from the number of installations. We see it from the number of customer requests and tenders that we are responding to. We see it in the number of orders. The market is growing. And I -- it feels like we're now moving into a pretty fast-paced growth in the market that will probably remain for a number of years. We can see that the behavior also from a customer point of view, it could be a procurement or the way they address it that it's been moving very much on IT side more into the domain of business management and also procurement is behaving in a different way. And to me, these are all good signs. There are signs of retailers saying that this is important, this is something we need to do and this is something that will fundamentally help us.

We are capitalizing on the market development, we are growing -- and we have this -- I guess, as we said, we have SEK 707 million in order intake for this quarter, the second best ever. Gross margin has been stabilizing, and we do the necessary investments now to be able to continue to grow. So, all in all, I look very positive at the year. And Susanna, you mentioned, there is no reason to believe that we would not reach our set targets.

So I think that's what we have planned to say. So now let's open for the Q&A. And here -- so a lot will help us with your questions. So [ Charlotte ]?

[Unknown Executive]

Yes, please submit them on the web. We have some already on the Asian market, talking about both the Asian market as such and also order intake. Was it exceptionally good or is ESL penetration accelerating in the Asian market?

[Magnus Larsson, executive]

It's a good question. I would say it's probably more a sign of the ESL penetration growing. I'm happy with the order intake to say that it's exceptionally good. That would be much higher from my -- I would like to then say that maybe it's 30% to 40% growth. But it's good. And I think it's a sign that the market is growing. And we can see actually growth from many markets. We see interest from many markets, we see from Japan, we see it from Taiwan, Thailand, Malaysia, Indonesia, Australia, New Zealand, if I actually may include those in the greater APAC market. We can also see interest from Middle East Africa as well. So, yes, I would say there is a general growth in that region, and we are here to actually capture that growth.

[Unknown Executive]

And on the pilots, they are growing a lot, but do they have a very low margin? So how do they impact profitability or pilot program?

[Magnus Larsson, executive]

The pilot does not impact the profitability. We typically sell those at normal conditions. Sometimes what we have done is that we have actually done the most as rented version where they pay for the time they use it. But normally, the number of pilots is high, but compared to the total volume of ESLs that they will -- it's still a small fraction because it's typically one store, and we deliver a lot of stores in here. So it does not affect margin other than building for the possibility to sell at good margins into the future.

[Unknown Executive]

So there was a question you did talk a lot about the gross margin, but could you please again just elaborate a bit on the stabilizing gross margins?

[Magnus Larsson, executive]

Yes, is that for you Susanna or?

[Susanna Zethelius, executive]

Yes, I mean, I think we commented quite a lot. But just to repeat, the component costs, we have started them to see -- we have started to see them come down quarter-on-quarter. And like we also mentioned, we have this COGS reduction program that we have initiated, which is one reason why we have already started to see the effect, but we're also launching a number of different strategic initiatives in order to keep improving the COGS going forward. It's about reviewing the whole supplier base. It's about renegotiating all supply contracts in order to keep improving the COGS. Then we also had the price increases that has been agreed by couple of major customers. We have the 4-color ESL. So I mean, there are many things that we see as indicating the gross margin is turning the other way or the good way.

[Magnus Larsson, executive]

Yes, nothing to be tangible, because I think we mentioned it also in the report, we have examples where we have good tangible cost reductions that are in effect in production as of April 1, which means that we will see the impact as -- I think I mentioned in the report that by summer, that could be late June, but it could also be early August, a little bit depending on the time it will take from the factory out to customer. But here, we can clearly see that this is something that's been negotiated. It's in place, it's agreed, and it will have an impact on the gross margin. But we also see that there are several more areas where we are working to see what more we can actually get and at many different tools.

[Unknown Executive]

Follow up on that. Can you come back to 18% by the end of the year for the gross margin?

[Magnus Larsson, executive]

We haven't made any commitments on specific numbers, normally don't forecast it.

[Susanna Zethelius, executive]

I think we wouldn't maybe answer that question.

[Magnus Larsson, executive]

We have our targets and we have an idea, but we can probably not answer. But what we can say, we have a positive view on the gross margin development, can we put it that way?

[Susanna Zethelius, executive]

Yes.

[Unknown Executive]

Do you think that the increasing revenue coming from the U.S. could have a positive impact on the gross margin?

[Magnus Larsson, executive]

Yes. Very short answer, yes.

[Unknown Executive]

So could you elaborate a bit on the U.S., how you see that when you get more sales in the U.S.? What effect does that have?

[Magnus Larsson, executive]

Pricing is always, of course, based on market, and it's based on segments. Certain segments are willing to pay more for specific products and certain segments are willing to pay less. You have different competitive situations that we see right now that the possibility to actually make better margin in the U.S. seem likely. With the growth, if we -- when we move into this hyper growth that we foresee for the American market, that will affect profitability is, of course, hard to say. But I do believe that we will see, generally speaking, higher margins in the Americas market than we will see in, for example, some of the European markets. So I have also here a very positive feeling about both the revenue growth but also the ability to actually make money on that market.

[Unknown Executive]

If you look at the large contracts announced over the last 6 months, how many will be on Plaza?

[Magnus Larsson, executive]

The vast majority.

[Unknown Executive]

The vast majority. South America and Mexico is very attractive markets some years ago, but now we don't hear that much.

[Magnus Larsson, executive]

No. We can see that things are happening in Latin America in general. We see an increased interest in Latin America, just like everyone -- everywhere else. They are suffering from the inflation. They see the need of ESLs. We are in discussions with a lot of interesting retailer chains, some really big ones. We can see there is a lot of movement in Mexico specifically. And yes, we do sell in Mexico. And we do install in Mexico. We see Mexico growing. We actually expect Latin America to grow as well. And I hope that I can come back on that one later -- this year.

[Unknown Executive]

After the strong quarter, how large is your installed base in number of labels and the number of stores?

[Magnus Larsson, executive]

We believe that our installed base is somewhere around SEK 280 million globally and 22,000 stores is [ what we ] communicate and then it's not an exact science, but it's give or take that that should be roughly right. Was there an additional question there?

[Unknown Executive]

No.

[Magnus Larsson, executive]

No, good.

[Unknown Executive]

And so talking about German manufacturing, can you tell us about the impact of that ramp up? And also, do you think that you will sell more now that you are in Germany?

[Magnus Larsson, executive]

I certainly hope that we will sell more now we're in Germany. We expect the -- to have full capacity in the factory in August. It will be a manufacturing where we actually do 24/7 manufacturing, so it will be a high throughput. We see an interest. And so now we will have actually inauguration and internal inauguration early May and then we're looking at doing some kind of customer event. And it seems like there's quite a big interest to actually visit the factory to see it, but also to have labels made in Germany, and they will have made in Germany stamp.

I do believe that it will affect business positively. And I probably indicated and hinted before, I haven't been happy with the development in the German market. I know that a lot of shareholders have been disappointed with the development as well. We have been there for a long time. And today, I can see that the German market, there has been a lot of installations. I can see that within the coming 2 years, there will be a lot of the existing contracts for many of the biggest retailers is about to expire and be renewed and we can see an increased interest. We are actually and not all honestly, behaving in a different way compared to what we've done before, we are more ready to meet the specific demands of the German customers.

We can see that they've had a lot of specific demands when it comes to size and format of the ESLs. I would say that we are -- we have the ability to produce the sizes they expect at the cost level and profitability that they that -- cost level that they require and the profitability that we require. So it's about the way we communicate, the way we actually work with them. We can also see that coming with the infrared solution that will actually ensure longevity and initial lifetime. In combination with "Made in Germany" will be very appealing for the German customers. So I would be very disappointed if we do not have some bigger business over the coming couple of years. I cannot make any commitment, but that will be a personal disappointment.

[Unknown Executive]

Could you say how much you're invoicing in Swedish krona and in other currencies?

[Magnus Larsson, executive]

Swedish krona, I guess that's 0 or close to 0. Am I stepping into your domain now for some…

[Susanna Zethelius, executive]

Yes, I mean, it's very, very small, yes.

[Unknown Executive]

And the other currencies?

[Magnus Larsson, executive]

The most common currencies are U.S. dollars and euro, right?

[Susanna Zethelius, executive]

Yes, exactly.

[Unknown Executive]

So could you elaborate on why you think the U.S. will be at a higher margin than Europe? You touched a lot.

[Magnus Larsson, executive]

I think it's -- I think there are probably a number of reasons. One could be a competitive situation. One could be also -- it's hard to say really. We can see the effect and we see that we have good discussions, and we end up on pricing that are satisfactory to both us and the retailers. I think that the U.S. customers have been used to also paying more for premium service, and we deliver premium service. I think they've been used to also pay more for premium products. So I think that might have been a general acceptance. Then it's difficult to say over time, will we see that the market price level will slowly deteriorate? Well, I guess that's likely. But I -- right now, from what we see and from what we predict they will not end up on the same level as we see in, for example, some of the most competitive European markets. But I might be wrong, but I think -- I do believe that we'll be able to maintain a higher margin in the U.S. market.

[Unknown Executive]

And do you have a feeling about your market share in North America versus your largest competitor?

[Magnus Larsson, executive]

Yes, I actually do have that. Our largest competitor is -- well, you probably all know it is SES. If we look at what they've communicated, we are roughly the same size, which would indicate that I think we have more or less a 50%-50% market share right now. It's between us, SES and [indiscernible] we believe that are the 3 leading players in North America.

[Unknown Executive]

You're saying that the vast majority of your new contracts is on Plaza. What will be the recurring revenue from, say, a SEK 100 million order today?

[Magnus Larsson, executive]

It's a little -- I don't have any exact figures. So -- and to explain a little bit what we're doing right now, our focus is not to get the Plaza out. Plaza is the management system for the Pricer service, so here for the Pricer solution. So what we're doing on top, once we have that installed, we're now adding functionality, its functionality, like premium features of Plaza, its additional functionality. It could be the digital signage. We actually added on Plaza as recurring revenue, computer vision, the same thing. So we'll be adding up a lot of that to -- and what we can see when we look at the 10% target that we've done, we have internal plans or we can say this is the number of stores that we should have by this year.

We know very well what is the average price that we should have for store and what the split between these different product areas are. I cannot share it right now. We need to look at if there's something we could do into the future because it is an interesting area. And I would like to give you more about it. But we have the plans internally. I cannot share them right now, but they are on a level where I feel confident in the 10% commitment that we've given.

[Unknown Executive]

Have you had any guarantees lately? Did you have any problems with Best Buy since you installed? And can you use Best Buy as a reference?

[Magnus Larsson, executive]

My problem with Best Buy is that I want them to buy more, but we've equipped all their 1,100 stores. And yes, we can use Best for -- and that's, of course, always a trick question. They are very positive. We have a very good relationship with Best Buy, and we are in constant dialogue about the future, what do they need next. And they have equipped all the stores with ESL, but what about 4-color. And for select customers, we ask them for -- to act as a reference as well.

[Unknown Executive]

And have you had any guarantees to others?

[Magnus Larsson, executive]

Not really. There will always be -- we know roughly what our expected, we call expected return rate would be. And we're on that level. When we look at the allocations, we do as reserves for warranty. We are not using the reserves that we have allocated. We use them, but not -- we're not using [indiscernible] that we have actually reserved. So, no, I see that it's working. What I can say is that I get a lot of feedback from especially once again, retailers have been using competitive systems where we see that they have problems with ESLs tying with battery. They run out of battery or they need to put them in slow modes. They cannot flash as frequently because it consumes too much better.

And that's a question actually I get from quite a few retailers that have -- they've used ESL for a while, and now they're looking at possibly changing. And very often, I get a question about how -- what is your warranty process like? How do you deal with this one? And I said, well, how do you equip -- how many people do you have working with warranty? Well, it's not a problem, so…

[Unknown Executive]

Good. So R&D, it's -- it could be a tricky question because it's about your competitors as well. But do you think that you're in the forefront compared to competition in developing new techniques?

[Magnus Larsson, executive]

I would say in certain areas, I feel that we are in the forefront and especially within the domain of ESL and how we managed ESL. I feel that competition are ahead of us in an area like computer vision, but still, that's also an area where we haven't -- we have developed our products, we have a portfolio, but we haven't seen the market uptick yet. So far, it's a relatively small market. It's an interesting market. I believe it will be a key market, but the question is when it will be a key market. And this is the key reason why we are -- we've allowed ourselves to be a little bit behind competition because we haven't really seen the revenues yet.

[Unknown Executive]

So now there is a last question here. So if you want to ask more questions, please send them now. Otherwise, the last question is, could you take us through the movement in working capital over the past quarters?

[Magnus Larsson, executive]

Yes, we can. And Susanna?

[Susanna Zethelius, executive]

Yes. So I think the key thing that stands out for this quarter versus the previous quarter is that we had a good -- the operating working capital for the fourth quarter was positive. And now we see a negative operating working capital. And the reason behind this is that we had some issues with working capital during last fall. As a result of that, we did different measures that were slightly short term, while we were finalizing the loan agreement towards the end of Q4. One of these initiatives were renegotiating terms with suppliers. And that sort of boosted the effect in Q4, and now we're seeing the opposite side of that. So now it's been a normalization of the operating working capital during the first quarter. So I think that's the key movements.

[Unknown Executive]

I think we're out of questions now. Thank you very much. We even got a thank you from the chat.

[Susanna Zethelius, executive]

Thank you.

[Magnus Larsson, executive]

Thank you very much. Thanks for spending this almost, I guess, an hour with us. It's been a pleasure. I look forward to our next quarterly report, and thank you very much. Bye.