Tagmaster financials show record gross margins & sharpened offering

Stockholm, Sweden

Jonas Svensson makes positive comments about the latest Tagmaster results.

Tagmaster has released details of its latest interim report covering the financial quarter from July - September 2021, and the results show an increased in net sales and gross margin despite a difficult component situation. CEO of Tagmaster, Jonas Svensson, has commented on the company's performance and sounds positive about the results and the future.

"During the past quarter, a further gradual opening has taken place in several of our markets, while the global component shortage has to some extent held back development. Despite the challenging component situation, the gross margin for the quarter is the best in Tagmaster's history in combination with a robust EBITDA result. During the quarter, we continued our investments in data solutions for Smart Cities based on advanced sensor technology. The acquisition of Citilog, which was completed in the second quarter, added additional expertise in AI and Deep Learning. Tagmaster's solutions contribute to the necessary transition to a more sustainable transport system, which gives us a very interesting position.

During the quarter, we worked intensively with proactive and continuous measures to ensure that a robust supply chain is maintained and have managed to avoid serious disruptions to customer delivery. We estimate that the loss in sales of inhibited deliveries as a result of the component shortage amounted to 4-5 percent of sales during the third quarter, corresponding to just under SEK 4 million.

During the quarter, we also experienced increased costs for both components and input goods, which affected the gross margin. We have compensated for these increasing component costs through price increases, which partly had an impact during the quarter, but where there is a delay effect of one to two quarters. We expect continued challenges in the coming quarters and we will proactively implement measures to limit the impact.

We continue to invest in technology leadership in all our areas to further increase the competitiveness of our offering. The focus is increasingly on solutions that can contribute to a more sustainable transport system and where analysis, AI and Deep learning is crucial, which thus take us up in the value chain.

The acquisition of Citilog during the second quarter has sharpened Tagmaster's offering on the technology side and adds value in the form of synergies on the sales and customer side. Citilog also contributed to an improvement in the Group's gross margin during the quarter. Citilog's products are included as part of several different ITS (Intelligent Transport System) applications such as Incident Management, Traffic Signal Control and Infomobility. During the quarter, a programme for cost optimisation was implemented, the work of creating a joint sales force for Citilog and Sensys Networks was launched and the work of integrating development roadmaps between these two companies began.

The Group's sales during the third quarter amounted to SEK 80 million, which is an increase of 12.7 percent, of which organic by 0.5 percent, compared with the corresponding period in 2020. Our Traffic Solutions business amounted to SEK 68.9 million, which is an increase of 7.6 percent compared with the corresponding period in 2020. During the quarter, Traffic Solutions accounted for 86 percent of sales while Rail Solutions accounted for 14 percent.

The gross margin for the quarter was 72.0 percent with an adjusted EBITDA result of SEK 8.4 million, which corresponds to an adjusted EBITDA margin of 10.4 percent. Cash flow from operating activities amounted to SEK -5.3 million and the Group's solvency ratio was 52.1 percent at the end of the period. Efforts to reduce working capital have continued to focus and inventories decreased slightly during the quarter compared with the corresponding quarter in 2020. However, accounts receivable increased during the latter part of the quarter, which largely explains the negative cash flow.

Tagmaster is today well positioned in a market with long-term good conditions for growth and good profitability. The fact that we work to improve the traffic environment in cities and metropolitan areas around the world gives us a very good position in the face of the massive restart packages that are being launched in Europe and the USA and which are largely focused on green investments. Our investments in growth through innovation, commercial focus and acquisitions mean that we have a positive view of the company's development for the coming years.


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