Irisity AB (”Irisity” or ”the Company”) published its Q4 report for 2025 on March 19^th, 2026. The following are key events that we have chosen to highlight in the report:

• Net Sales of SEK 18.6m (4.7) – Below our Estimate of SEK 23.0m (-19%)
• Invoicing of SEK 28.4m (38.7), -27% Y-Y – Tough Comparable from Large Q4-24 Projects
• Collections of SEK 33.0m (23.5), +40% Y-Y – Strong Q3-25 Invoicing Converting to Cash
• MRR of SEK 4.4m (4.3) vs. SEK 4.0m in Q3-25 – Continued Sequential Growth from New Customers
• OPEX Declined 34% Y-Y in Q4-25 – Simplification Programme Yielding Results
• EBITDA of SEK -13.3m vs. Estimate of SEK -8.4m, Miss Driven by Revenue; OPEX in Line
• Cash Balance of SEK 3.0m and Available Credit Lines at SEK 9.4m

Revenue Recognition Lag Weighs on Reported Growth – Underlying Commercial Activity Encouraging

Net sales for Q4-25 amounted to SEK 18.6m (4.7), representing a substantial reported Y-Y increase, but below our expectations of SEK 23.0m. However, Analyst Group emphasizes that Q4-24 was negatively impacted by a SEK 13.7m in revenue recognition reversal related to prior periods, meaning the normalized Q4-24 revenue base was approx. SEK 18.4m, making the Y-Y development broadly flat. The Q-Q decline of approx. 24% relative to Q3-25 is therefore the more instructive comparison, reflecting a seasonally softer period compounded by the Company’s deliberate shift toward partner-led and recurring revenue models, under which revenues are realized over the duration of the contract rather than at point of invoicing. Nevertheless, we had anticipated that a larger fraction of the reported Invoicing of approx. SEK 35m in Q3-25 would have translated into revenues. Furthermore, Analyst Group notes that FX headwinds are likely to have dampened reported net sales, although no specific impact is disclosed in the report.

While the lag between invoicing and recognized revenue is an inherent feature of the recurring revenue model, Analyst Group assesses this as a dynamic that will continue to weigh on reported net sales in the near term as the contract mix shifts further toward subscription-based arrangements and away from larger one-off projects. That said, the quarter saw encouraging commercial activity across multiple geographies, including a third consecutive renewal of a U.S. Government agency agreement covering approx. 1,200 AI-enabled camera channels, a new critical infrastructure win in Sweden, a workplace safety deployment in Hungary, and the first phase of a large-scale public safety engagement in Colombia, a city currently operating approx. 2,000 surveillance cameras with plans to expand to more than 6,000. These wins underpin the MRR trajectory and demonstrate that the pipeline remains active.

The gross margin of 80.2% in Q4-25 reflects the high-software composition of the revenue base and compares favorably with the FY 2025 figure of 77.2%.

Invoicing Down on Tough Comparable – Collections Up 40% Y-Y Signalling Healthy Cash Conversion

Invoicing for Q4-25 amounted to SEK 28.4m (38.7), and SEK 29.6m on an FX-adjusted basis, a decline of 27% Y-Y. The primary driver of the decline is the large projects invoiced at the end of 2024, which creates a tougher comparable.

Collections advanced to SEK 33.0m (23.5), an increase of 40% Y-Y, or approx. SEK 35.6m FX-adjusted, confirming that the strong Q3-25 invoicing cycle is converting to cash with limited delay. Collections exceeding invoicing in the quarter contributed positively to working capital dynamics. Analyst Group views the collections trajectory as a meaningful indicator of customer health and the Company’s ability to convert pipeline to cash, a key area to monitor given the relatively tight liquidity position at year-end, with a cash position of approx. SEK 3m.

Steady MRR Progression Reinforces Subscription-Driven Strategy

MRR for Q4-25 reached SEK 4.4m (4.3), compared to SEK 4.0m in Q3-25, equivalent to an increase of 10% Q-Q. Analyst Group views the sequential progression as an encouraging indicator that the pivot toward subscription-based deployment models is translating into tangible, additive recurring revenue, with the commercial wins highlighted above beginning to feed through into the recurring revenue base.

The annualized run rate implied by Q4-25 MRR equates to approx. SEK 52.8m in ARR, representing a substantial proportion of the Company’s total revenue base and underscoring the progress made in the recurring revenue transition. The directional trend is consistent with Analyst Group’s investment thesis, and the phased nature of several recent deployments, most notably the Colombia C5 engagement, which carries expansion potential to more than 6,000 camera channels over three years, suggests that MRR growth could accelerate meaningfully as subsequent phases are activated, making the conversion rate of contracted deployments into live recurring revenue a key variable to monitor.

OPEX Broadly in Line: Simplification Plan Executing, but Full Impact Still Ahead (Q2-26)

Irisity reported other external costs of SEK 7.2m (restated: 44.9m) and personnel costs of SEK 21.0m (25.0m) during Q4-25, both broadly in line with Analyst Group’s estimates. The restated Q4-24 other external costs was inflated by approx. SEK 26.9m in bad debt provisions and rights issue costs, excluding those items the costs would have amounted to approx. SEK 18m in Q4-24. Thus, the underlying decline Y-Y amounts to approx. 60% Y-Y, reflecting genuine structural improvement from the simplification programme. Personnel costs declined 16% Y-Y and 6% Q-Q, consistent with the reduction in headcount from 76 to 57 FTEs and consultants from 16 to 15. Adjusting for the one-off charges in Q4-24, adj. OPEX declined 34% Y-Y in Q4-25, a clear indication that the streamlining initiatives are materializing in the cost base.

On an adjusted EBITDA basis, excluding work performed for own account, other operating income and costs, Q4-25 came in at SEK -13.3m against an Analyst Group estimate of SEK -8.4m. The deviation is predominantly attributable to weaker-than-expected revenue and gross margin rather than cost overruns, suggesting the cost structure is broadly tracking to plan. The simplification programme is expected to reduce OPEX by 30% relative to Q2-25 levels, with the full income statement impact becoming visible from Q2-26. While Analyst Group assesses that the Company has executed well on the streamlining initiatives, as evidenced by the continued reduction in the OPEX base, the full benefit of the executed measures has yet to fully materialize in the P&L. Going forward, Analyst Group will monitor both the pace of remaining cost reductions and, more critically, whether revenue growth is converging at the rate required to reach cash flow neutrality in 2026.

Tightening Liquidity and Significant Restatements Introduce Complexity into the Investment Case

The cash position at the end of Q4-25 amounted to SEK 3.0m and coupled with the remaining available credit line of SEK 9.4m, total available liquidity amounted to SEK 12.4m at year-end. The rights issue of approx. SEK 26.1m gross provided net cash proceeds of approx. SEK 9.4m after set-offs of SEK 16.2m against the Stockhorn Capital AB loans and transaction costs of approx. SEK 0.5m. The OCF for the fourth quarter amounted to SEK -0.5m, positively impacted by WC changes of SEK 9.1m, driven by seasonally strong collections in Q4-25 following the high invoicing activity in H2-25. Analyst Group notes that this dynamic is likely to partially reverse in Q1-26, putting renewed pressure on working capital.

Analyst Group views liquidity as a key area to monitor, as the relatively tight financial position risks diverting management focus away from growth-driving initiatives at a critical point in the Company’s transition. The solid invoicing of SEK 28.4m in Q4-25, combined with further cost reductions expected to materialize in H1-26, should contribute to a lower burn rate, though the tight liquidity position remains a substantial risk to monitor.

The report also discloses a set of prior-period restatements with a cumulative net reduction of SEK 77.9m in group equity, relating to adjustments in revenue recognition, goodwill amortization, and foreign exchange translation across earlier periods. While these have been transparently addressed and align the accounts with current standards, Analyst Group notes that they may affect comparability with previously reported figures, particularly when assessing historical trends.

Concluding Remarks About the Report

In summary, Analyst Group views Q4-25 as a quarter that marks the completion of a significant transformation, with Irisity entering 2026 as a leaner and more focused organization. With adj. OPEX down 34% Y-Y in Q4-25 and continued sequential MRR growth to SEK 4.4m, the strategic repositioning is yielding tangible results. The revenue outcome of SEK 18.6m fell short of Analyst Group’s estimate of SEK 23.0m, though the miss is best understood as a consequence of the deliberate shift away from larger one-off projects toward subscription-based recurring revenue, a transition that compresses near-term recognized revenue while building a more durable long-term revenue base. The key variables going forward are whether the remaining cost reductions materialize in the P&L as expected in Q2-26, and whether the commercial momentum across the U.S., Sweden, Colombia, and Hungary translates into accelerating MRR and invoicing in H1-26. With total available liquidity of SEK 12.4m and a cash position of SEK 3.0m, the financial position leaves limited room for execution delays, and liquidity remains a key area to monitor on the path toward cash flow neutrality in 2026.

We will return with an updated equity research report of Irisity.

Irisity AB (“Irisity” or “the Company”) announced, on the 20^th of November, the outcome of the fully guaranteed rights issue of 217,157,616 shares, corresponding to gross proceeds of approx. SEK 26.1m before issue costs and set-offs. The rights issue was subscribed to a total of 92.5%, of which 86.2% was subscribed through subscription rights and an additional 6.3% without rights. The remaining 7.5% will be allocated to the guarantor, Stockhorn Capital AB. The total set-off amounts to approx. SEK 16.2m, resulting in net cash proceeds of roughly SEK 9.9m before transaction costs (estimated at approx. SEK 0.5m).

Analyst Group’s View of the Outcome

Ahead of the subscription period, approx. 49.6% of the rights issue was already secured through commitments from current shareholders. Stockhorn subscribed for its full pro-rata share (36.6%), while board members, management, and existing shareholders added SEK 3.4m in commitments (13% of the offering).

This strong pre-commitment level provided a solid anchor for the transaction and reflects continued confidence from both major and long-term shareholders. With 86.2% subscribed through rights, roughly 37% of the total offering came from other existing shareholders, highlighting broad shareholder engagement. Additionally, 6.3% of the issue was subscribed without rights, indicating incremental interest beyond the core shareholder base.

As previously communicated, net cash proceeds (excl. set-offs) were expected at SEK 3–16m depending on the subscription outcome. In this context, the resulting ~SEK 10m in net cash (before transaction costs) represents a solid outcome and supports the Company’s ongoing streamlining efforts.

With a cash position of SEK 1.6m at the end of Q3-25, combined with net cash proceeds of approx. SEK 9.4m from the rights issue, the adjusted cash position would amount to roughly SEK 10.9m, all else equal. Looking ahead, several factors support a reduced burn rate. Most importantly, the ongoing streamlining program, targeting SEK 40m in annual savings vs. Q2-25, is expected to gradually lower the OPEX base. Moreover, Irisity reported SEK 34.9m in invoicing during Q3-25, while collections amounted to SEK 19.9m, indicating that deferred payments should positively contribute to working capital in coming quarters. While we expect the operating burn rate to improve, we cannot fully rule out the possibility that additional financing may be needed until Irisity reaches cash flow breakeven.

On the debt side, the set-offs of approx. SEK 16.2m will reduce the outstanding loan from Stockhorn from around SEK 23m to roughly SEK 7m. It is also important to note that the remaining portion of the short-term loan from Stockhorn, including accrued amounts not set off in the rights issue, is scheduled for repayment in December 2026, providing the Company with additional financial headroom in the near term.

Overall, the completed rights issue results in a meaningfully healthier balance sheet than before. Combined with the Company’s initiatives to streamline the cost base and improve the invoice-to-cash cycle, we believe Irisity is taking tangible steps in the right direction.

In summary, Analyst Group believes that the solid subscription levels, both including and excluding pre-commitments, demonstrate strong underlying support from the existing shareholder base. Together with the reduced debt position following the set-offs, the improved cash balance, and the Company’s planned measures to enhance collections and lower the OPEX-base, the outcome materially strengthens Irisity’s near-term financial profile and supports the execution of the Company’s ongoing transformation plan.

Irisity AB (”Irisity” or ”the Company”) published its Q3 report for 2025 on the 3^rd of November 2025.

The following are key events that we have chosen to highlight in the report:

• Net sales amounted to SEK 24.6m (30.3) – clear improvement vs. H1-25
• Invoicing of SEK 34.9m bodes well for growth ahead
• FX-adjusted MRR declined slightly Y-Y
• Streamlining initiatives support the ongoing SEK 40m cost-saving program
• Fully guaranteed rights issue to reinforce the balance sheet

Strong Sequential Rebound Signals Recovery Ahead

Reported net sales for Q3-25 amounted to SEK 24.6m (30.3), corresponding to a decline of approx. 19 % Y-Y. The decrease primarily stems from the reassessment of revenue recognition for large-scale projects introduced in Q4-24, which rendered the comparison base particularly challenging. Sequentially, sales improved by 38% Q-Q, and with invoicing of SEK 34.9m during the quarter, we see clear signs of a recovery trajectory gaining momentum ahead of 2026.

During the quarter, Irisity secured several strategically important contracts, including an expansion with a U.S. federal government agency, a major transportation project in New York, and a competitive project takeover for a C5i 911 center in Mexico. These wins reinforce the Company’s strong positioning in public-sector and enterprise security, while supporting growth in recurring revenues.

Given the soft comparison base in Q4-24 (SEK 4.7 m in sales), following delayed projects and postponed customer payments that affected revenue timing, we expect a pronounced rebound in Q4-25 and a normalization of revenue trends into 2026.

Solid Invoicing Momentum Supports Growth Outlook

Invoicing amounted to SEK 34.9 m (35.4) in Q3-25, corresponding to a marginal Y-Y decline of 1.2%, but a strong sequential increase of 65% Q-Q. Adjusted for FX-effects, invoicing increased by 3% Y-Y and 66% Q-Q, providing a solid foundation for renewed sales growth in the coming quarters. Collections totaled SEK 19.9m (26.2) during the quarter, a decrease of 24% Y-Y but broadly in line with the previous quarter (SEK 19.8m in Q2-25). The Y-Y decline mainly reflects lower invoicing in Q2-25 compared to Q2-24 (SEK 39.3m), as cash collections naturally lag invoicing in the quote-to-cash cycle.

The Company notes a seasonal pattern in both invoicing and collections, with activity typically weighted toward the second half of the year, reflecting customer procurement cycles and partner project timing. On an LTM-basis, invoicing and collections amounted to SEK 111.4m and SEK 89.7m, respectively, indicating a solid platform for improved cash conversion going forward.

Monthly Recurring Revenue (MRR)

MRR amounted to SEK 4.0m (4.3) in Q3-25, down Y-Y but up from SEK 3.7m in Q2-25. Adjusted for currency effects, MRR reached SEK 4.2m, making the Y-Y decline modest. The past quarters have been affected by delayed renewals among certain existing customers, primarily related to Software Upgrade Plans (SUP).

Looking ahead, Irisity intends to place greater strategic focus on recurring revenues. Combined with the conversion of previously delayed renewals and a gradual build-out of the Security-as-a-Service offering, supported by regulatory tailwinds following the revised camera permit requirements introduced in Sweden in April 2025, we expect a solid trajectory for ARR growth going forward.

Streamlined Cost Base Supports Ongoing Transformation

During the quarter, Gustav Zaar assumed the role of Interim CEO, bringing renewed operational focus while maintaining continuity in the Company’s strategic transformation. The leadership change underscores Irisity’s emphasis on execution, cost discipline, and progress toward sustainable profitability.

Personnel costs amounted to SEK 22.3m (30.1) in Q3-25, down approx. 26% Y-Y and 11% Q-Q (vs. SEK 25.1m in Q2-25). At quarter-end, the Company employed 73 (87) full-time equivalents and engaged 16 (11) consultants, corresponding to a total workforce of 89 (98). Other external costs showed a similar trend, declining 22% Y-Y to SEK 7.7m (9.9), and 10% Q-Q. Total OPEX (excl. COGS and D&A) amounted to SEK 34.4m (45.4), reflecting an improvement of 24% Y-Y and 2% Q-Q. Despite the Y-Y decline in sales of SEK 5.7m, the streamlined cost base contributed to a notable EBITDA improvement to SEK -7.5m (-14.3). Adjusted for work performed for own account and other operating income and costs, EBITDA totaled SEK -10.0m (-14.2).

During the quarter, Irisity initiated the Company’s simplification program, targeting a 30% OPEX reduction from Q2-25 levels (SEK 33.7m), corresponding to estimated savings of approx. SEK 10m per quarter, or SEK 40m annually. The program is progressing according to plan, driven by initiatives such as R&D consolidation and organizational streamlining. The full effects are expected to materialize gradually during the coming quarters, becoming fully visible from Q2-26 onward. If executed successfully, the OPEX base would be reduced to around SEK 94m annually, aligning more closely with the Company’s current revenue run-rate.

In our view, the reduced OPEX base, coupled with the ongoing efficiency initiatives and the solid invoicing and sales momentum, indicates that Irisity is taking vital steps toward reaching break-even.

Rights Issue Key to Reinforcing Balance Sheet

During Q3-25, Irisity reported operating cash flow (OCF) of SEK -18.4m (-17.5), with changes in working capital weighing on cash generation. Including investments of SEK 5.0m (3.4), free cash flow (FCF) was negative at SEK -23.5m (-21.0). Working capital typically fluctuates between quarters, while continued investment remains essential given Irisity’s position in a fast-moving, high-tech niche where product development strengthens competitiveness.

The ongoing, fully guaranteed rights issue with preferential rights for all shareholders, running from November 5–19 at a subscription price of SEK 0.12 per share, will yield gross proceeds of approx. SEK 26 m before transaction costs (approx. SEK 0.5m) and set-offs. The issue is fully guaranteed by the main shareholder, Stockhorn Capital AB, which will subscribe for its 36.6% pro rata share and act as bottom guarantor for the remaining portion. In addition, members of the board and management, along with other existing shareholders, have entered into subscription commitments corresponding to approx. 13% of the total issue. Depending on the subscription outcome, the net cash proceeds may range between approx. SEK 3–16 m, as up to SEK 23 m of the SEK 26 m issue could be settled through set-off against shareholder loans. The remaining portion of the short-term loan from Stockhorn, including accrued amounts not set-off in connection with the rights issue, will be repaid in December 2026. Regardless of outcome, the transaction will strengthen the balance sheet by reducing interest-bearing debt. Net proceeds will be used to strengthen working capital, advance the simplification program, and accelerate the shift toward recurring revenues. As the share currently trades above the subscription price, prospects for a high subscription rate appear favorable.

At quarter-end, cash amounted to SEK 1.6m. To address short-term liquidity needs, Irisity secured SEK 20m in loans from Stockhorn Capital during Q3-25. The full amount was likely not disbursed by the balance sheet date, as cash flow from financing activities totaled SEK 18.3m for the quarter, indicating that the entire facility had not yet been drawn.

Net debt totaled SEK 37.4m (29.8), making the rights issue a key step toward reinforcing the balance sheet. While a portion of proceeds will be allocated to debt refinancing and near-term cash outflows are expected, additional capital cannot be ruled out before reaching cash flow break-even. However, with a lower OPEX base, growing sales momentum, and reduced leverage, any future capital raise would likely take place on more favorable terms.

Concluding Remarks About the Report

Overall, we view Irisity’s Q3-25 report as a meaningful step in the right direction across several key areas. The reported net sales of SEK 24.6m represent a clear improvement versus H1-25, and with invoicing of SEK 34.9m at the end of the quarter, this reflects solid underlying demand and indicates that the recovery trend is gaining momentum.

On the cost side, the reduced headcount and ongoing streamlining initiatives, such as the consolidation of R&D operations, a leaner go-to-market organization, and a shift away from high-cost one-time projects, are enhancing operational scalability and contributing to a lower customer acquisition cost (CAC). Together, these measures mark tangible progress toward the targeted SEK 40m in annual savings and are gradually aligning OPEX with the current revenue run-rate.

Looking ahead, we anticipate improving momentum, driven by renewed sales growth and continued operational execution, with the efficiency measures gradually materializing in the P&L toward break-even. In our view, the combination of a leaner cost structure, lower CAC, and improving sales activity should foster renewed investor confidence as Irisity advances on the Company’s path towards profitability.

We will return with an updated equity research report of Irisity.

Irisity AB (”Irisity” or ”the Company”) announced on October 3^rd 2025, in line with what was communicated on September 29^th 2025, the Company’s decision to carry out a fully guaranteed rights issue of 217,157,616 shares, corresponding to gross proceeds of approx. SEK 26m before transaction costs and any set-offs. The rights issue is subject to subsequent approval at an extraordinary general meeting and will be conducted with preferential rights for existing shareholders. The subscription period will run from November 5^th to November 19^th, 2025, at a subscription price of SEK 0.12 per share.

Analyst Group’s view of the Rights Issue

Analyst Group believes that the rights issue represents an important step in strengthening Irisity’s financial position and providing stability as the Company continues to execute the ongoing streamlining program. The program targets a 30% reduction in OPEX compared to Q2-25 levels, corresponding to approx. SEK 40m in annualized savings, achieved through R&D consolidation, a streamlined go-to-market strategy, increased emphasis on ARR growth, and reduced reliance on large one-time software projects.

In Q2-25, Irisity reported OPEX (excl. COGS and D&A) of approx. SEK 37m. Extrapolating these figures and accounting for the targeted annual savings of SEK 40m implies an OPEX base of roughly SEK 100m on an annualized level. Given that current sales volumes do not yet absorb this cost base, a return to top-line growth remains critical for Irisity to achieve cash flow break-even.

The market environment has remained challenging, with execution delays in larger international projects, extended quote-to-cash cycles, and FX headwinds from a weaker USD putting pressure on the Company’s short-term liquidity. However, recent contract wins, including an expansion with a U.S. federal government agency, a transportation project in New York, and a 911 Centre contract in central Mexico, highlight solid commercial momentum and support the outlook for renewed growth. With a stronger focus on faster-to-market product categories and an increasing share of ARR through a partner-driven model, Analyst Group believes Irisity is now better positioned to deliver more predictable revenue streams over time. While execution remains key, the ongoing operational progress and strengthened financial position following the rights issue will provide a more stable platform for the Company’s continued transformation.

Terms of the Rights Issue

The Board of Irisity has resolved on a fully guaranteed rights issue of approx. SEK 26m, subject to approval at an extraordinary general meeting on November 3^rd, 2025. Each existing share entitles the holder to one (1) subscription right, and ten (10) rights allow the subscription of thirteen (13) new shares at a subscription price of SEK 0.12 per share, corresponding to a total of 217,157,616 newly issued shares. The issue is fully guaranteed through subscription and guarantee commitments from the main shareholder, Stockhorn Capital AB, which will subscribe for its pro-rata share of 36.6% and guarantee the remaining portion without fee or collateral. The subscription period runs between the 5^th and 19^th of November 2025. For shareholders who choose not to participate, the rights issue entails a maximum dilution of approx. 56.5%.

After set-offs of SEK 10–23m against short-term loans from Stockhorn and estimated transaction costs of approx. SEK 0.5m, the net proceeds are expected to amount to approx. SEK 2.5–15.5m. The final set-off amount depends on Stockhorn’s allocation in the rights issue, meaning that a larger allotment to Stockhorn will result in a greater share of its short-term loans being repaid through newly issued shares.

Background and Rationale Behind the Rights Issue

The rights issue aims to strengthen Irisity’s financial position and provide flexibility to execute the Company’s ongoing simplification program, which targets SEK 40m in annualized cost savings and a shift toward a more scalable, recurring revenue model. By partially repaying short-term loans from Stockhorn through set-off, Irisity reduces balance sheet pressure while preserving liquidity to support continued operational efficiency and growth initiatives. Assuming sales volumes develop as planned, the proceeds are expected to finance operations over the next twelve months and help Irisity reach cash flow break-even in 2026.

In summary, Analyst Group believes that the fully guaranteed rights issue is a necessity to strengthen Irisity’s financial foundation and provides a more stable platform to execute the Company’s efficiency program and return to growth. However, successful realization of the targeted cost reductions, consistent conversion of the project pipeline into ARR contracts, and a sustained recovery in sales will be decisive to reach cash flow break-even. While challenges remain in terms of market timing and operational execution, the strengthened balance sheet and recent commercial progress provide improved conditions for Irisity to restore growth momentum and move toward long-term profitability.

During September 2025, Irisity AB (“Irisity” or “the Company”) has announced three notable contract wins and an operational streamlining initiative. On the 15^th of September 2025, the Company reported an expanded project within New York’s transport sector valued at approx. SEK 6m. Two days later, Irisity communicated an expansion with a U.S. federal agency worth SEK 1.6m ARR, alongside the consolidation of R&D resources from Tel Aviv into Gothenburg and Budapest. Most recently, on the 22^nd of September 2025, Irisity disclosed a new contract for a C5i 911 emergency operations center in Mexico valued at SEK 2.6m over two years.

Analyst Group’s View on the New Projects and Streamlining Initiatives

The recent contract announcements highlight Irisity’s ability to win business in complex public-sector environments and broaden the Company’s presence in both the U.S. and Mexico. Together, these deals diversify the Company’s recurring revenue base and demonstrate the attractiveness of the IRIS+ Enterprise platform in large-scale security projects.

The Mexican contract isn’t huge in immediate numbers (SEK 2.6m over two years), but it is strategically important. First, Irisity displaced an incumbent competitor, underlining the competitiveness of the Company’s offering. Second, it reflects a growing customer preference for scalable enterprise AI platforms over hardware-heavy alternatives. Third, it provides a clear entry point for multi-phase, multi-year expansions in the Mexican public security sector, which could become meaningful over time.

Meanwhile, the expanded New York transport project and extended agreement with the U.S. federal agency emphasize the durability of Irisity’s customer relationships. These projects show that once the Company establishes itself with demanding clients, it is able to build long-term partnerships and recurring revenue streams.

On the cost side, we believe that the announced restructuring of R&D resources is a natural step toward lowering OPEX and streamlining the cost base. Savings are expected primarily from reductions in personnel and external contractors. Analyst Group estimates that the initiatives announced on the 19^th of August 2025, including efforts to reduce CAC, create more efficient R&D units, optimize resource management, and refine customer-success and product-planning processes, will result in personnel costs of approx. SEK 79.1m in 2026 and SEK 71.4m in 2027, compared with SEK 113.2m in 2024.

It is encouraging to see solid momentum in terms of contract wins, especially when coupled with the ongoing execution of streamlining initiatives. However, we view these measures as crucial to reducing the burn rate and creating a cost base that is better aligned with the current level of net sales. Consequently, we still regard securing a sustainable long-term financing solution as the key value driver going forward, as this would allow the Company to focus more fully on growth initiatives.

IRIS+™ Enterprise Software Selected for C5i 911 Center in a Central Mexican State

On the 22^nd of September 2025, Irisity announced that the Company, together with partner Seguritech, has won a competitive takeover to supply its IRIS+ Enterprise AI platform to a C5i 911 emergency operations center in a central Mexican state. The first phase covers 400 cameras and a two-year support agreement valued at SEK 2.6m, with deployment planned for Q3-25. The project replaces a legacy Windows-based AI system and allows the customer to reuse existing CCTV infrastructure, avoiding costly hardware upgrades. This marks the first step in a planned multi-phase rollout and illustrates a broader trend of customers favoring scalable, cloud-based enterprise platforms over site-based or hardware-driven solutions.

U.S. Federal Agency Expands Its AI Installation of IRIS+ Enterprise

One of Irisity’s current customers, a U.S. federal agency, has expanded its AI installation of IRIS+ Enterprise with a fifth surveillance site, alongside a one-year extension for the existing four locations. The deal, valued at SEK 1.6m ARR, of which SEK 1.2m was recognized as revenue in Q3-25, marks the fourth consecutive year of cooperation with this customer. Due to strict IT-security requirements, the software was customized to meet the agency’s specifications and to run on Red Hat Linux instead of the Company’s usual Ubuntu platform.

Consolidation of R&D Operations in Tel Aviv into Sweden

Irisity also announced a consolidation of the Company’s R&D operations, moving activities from Tel Aviv to Gothenburg, Sweden, and transferring embedded AI development to Budapest. This initiative is part of the previously disclosed cost-reduction program (19^th of August 2025), which targets a 30% OPEX reduction based on Q2-25 cost levels. Management expects the savings to be implemented during Q3 and Q4-25, with estimated annual savings of SEK 40m once fully realized by the end of Q1-26.

Project Within New York’s Transport Sector and Extension of Software Support

On the 15^th of September 2025, Irisity reported a substantial project expansion in New York’s transport sector, including an extension of a three-year software support agreement. The project, valued at approx. SEK 6m over three years, will be delivered during Q3/Q4-25, with SEK 1.5m recognized as net sales starting in Q3-25. It involves delivery of Irisity’s video analytics platform IRIS+™, hardware, and support services to secure bridges and tunnels. The goal is to reliably strengthen safety protocols and reduce potential risks for heavily trafficked commuter routes.

In summary, Analyst Group believes that the recent contract wins demonstrate Irisity’s strengthening position within U.S. public-sector and infrastructure markets, while the new Mexican C5i project highlights both international expansion and long-term growth potential. At the same time, the consolidation of R&D resources should support a leaner cost base and improved scalability. Successful execution of the cost-savings program, together with securing a sustainable long-term financing solution, remain key catalysts going forward and will be essential for restoring investor confidence.

Irisity AB (”Irisity” or ”the Company”) published its Q2 report for 2025 on the 15^th of August 2025.

The following are key events that we have chosen to highlight in the report:

• Net Sales Amounted to SEK 17.9m (25.8) – Decline of -31% Y-Y
• Invoicing Down Sharply Y-Y Due to Tough Comparables
• MRR Declines Sequentially – Regulatory Tailwinds Expected to Drive Gradual Recovery
• OPEX Reduction Efforts Underway
• Strained Liquidity Suggests Additional Need for Capital

Q2 Sales Challenges Persist, but Positive Signs Emerging during H2-25

Reported net sales for the second quarter of fiscal year 2025 amounted to SEK 17.9m (25.8), equivalent to a decline of approx. -31% Y-Y. This trend is consistent with the previous quarter and is primarily attributable to delays in large-scale international projects, notably within city and security infrastructure, as a result of ongoing global trade tensions and a weakening USD.

Despite these near-term headwinds, management notes a clear uptick in commercial activity from both end-customers and partners, resulting in a healthy pipeline of new leads and opportunities. Notably, Q2-25 saw the addition of several key customers, including a large state government project in Mexico valued at roughly USD 0.3m (~SEK 2.7m). This bodes well for H2-25; however, global tensions and uncertainty remain, potentially causing further delays to larger-scale projects as customers await a more stable macroeconomic environment.

A further highlight was the signing of a new OEM partner for the Kingdom of Saudi Arabia. This agreement not only secures Irisity a local presence and a Saudi-based engineering team but also grants access to well-established partnerships in the region. The OEM will work closely with the Budapest R&D team to localize the Irisity Professional product for the Saudi market. The agreement includes an annual revenue commitment and a co-investment in engineering, a structure Analyst Group views positively as it enhances both market access and product adaptation potential.

Looking ahead, Q3-25 will be challenging from a comparative standpoint, given the revenue of SEK 30.3m reported in Q3-24. We therefore expect a Y-Y decline in the upcoming quarter, in line with the trend observed in H1-25. However, into Q4-25, we forecast a rebound relative to an easier comparable period following the revised revenue recognition last year, as well as an anticipated, albeit cautious, recovery of delayed international projects into booked sales.

Invoicing and Collections

Invoicing amounted to SEK 21.2m (39.3) in Q2-25, representing a Y-Y decline of approx. 46%, but a Q-Q increase of approx. 28%. The sharp drop Y-Y is due to many large projects closed in Q2-24. Collections reached SEK 19.8m (22.0) during the second quarter, equivalent to a Y-Y decrease of 12% and a Q-Q decrease of approx. 25%. Given the Company’s strained liquidity position, optimizing the quote-to-cash cycle and strengthening cash flow remain key priorities. In this context, it is encouraging to see collections holding at a relatively stable level, with LTM collections fluctuating between SEK 90–98m over the past six quarters. That said, further improvement in collections will be critical, particularly as invoicing has trended downward through H1-25.

Sequential Decline in Monthly Recurring Revenue (MRR)

MRR amounted to SEK 3.7m (4.3) in Q2-25, down approx. 14% Y-Y and 7% Q-Q. The sequential drop is mainly attributable to FX headwinds and renewal delays from certain existing customers, linked to the U.S. government agency’s Software Upgrade Plans (SUP). We had anticipated a partial offset from the regulatory tailwinds introduced in April 2025, which revised camera permit requirements in Sweden and were expected to drive incremental demand within the Security-as-a-Service segment. While management previously noted increased sales activity tied to this regulation, the absence of updates in Q2-25 suggests that the conversion of these opportunities is taking longer than expected. We continue to see the regulation as a structural driver of MRR growth, but now expect the impact to be more back-end loaded, with material contributions likely from H2-25 and 2026 onwards.

Strategic Review of the OPEX-base From Q2 and Onwards

Examining OPEX in more detail, personnel costs amounted to SEK 25.1m (29.9) in Q2-25, representing a decline of approx. 16% Y-Y but a sequential increase of 7% Q-Q, compared to approx. SEK 23.6m in Q1-25. The sequential increase primarily reflects vacation pay accruals and the recruitment of full-time employees to replace external consultants. At the end of Q2-25, the Company employed 73 (91) full-time equivalents and engaged 13 (12) consultants, corresponding to a total workforce of 86 (103). This compares with 88 in Q1-25, of which 20 were consultants. Given both the reduction in total headcount and the substitution of higher-cost consultants with full-time employees, Analyst Group expects personnel costs to decline in the coming quarters. Other external costs increased by 9% Y-Y, totaling SEK 8.5m (7.8) in Q2-25, but decreased with 27% Q-Q. Total OPEX (excluding COGS and D&A) amounted to SEK 35.1m (42.1), representing an improvement of 16% Y-Y and 6% Q-Q. In summary, the EBITDA result amounted to SEK -12.0m (-11.4), and when adjusting for work performed for own account and other operating income and costs, EBITDA totaled SEK -19.5m (-18.3).

During the period, Irisity initiated a strategic review of personnel costs alongside other cost-optimization measures, with the stated objective of achieving a cash flow–positive quarter in the near term. While this initiative is considered a positive step in light of the Company’s current financial position, we remain of the view that achieving and sustaining positive cash flows is unlikely in the immediate term.

Financial Position Remains Strained

During Q2-25, Irisity reported cash flow from operating activities (OCF) of approx. SEK -7.4m (-13.4), corresponding to an average OCF of approx. SEK -2.5m (-4.5) per month. The drastic Y-Y improvement was primarily driven by favourable changes in working capital. Including investments of SEK 4.5m (10.3) during the quarter, free cash flow (FCF) was negative at SEK -11.9m (-23.8).

While the improvement in the working capital cycle is encouraging, the persistently negative FCF continues to exert pressure on liquidity, forcing management to prioritize short-term financing measures over growth initiatives. Given Irisity’s scalable business model and relatively fixed cost base, a return to top-line growth will be critical for achieving sustained positive cash flows.

During the quarter, Irisity completed a fully secured rights issue of approx. SEK 21.1m before issue costs and set-offs, priced at SEK 0.40 per share. To address near-term working capital needs, the Company had drawn SEK 15m under a credit facility, which was largely repaid through set-off against shares issued in the rights issue, leaving SEK 1.4m outstanding at quarter-end. Subsequent to Q2-25, Irisity secured an additional SEK 5m loan from Stockhorn Capital AB, carrying interest at STIBOR 3M plus 4% p.a.

At the end of Q2-25, cash amounted to approx. SEK 6.5m, while interest-bearing liabilities totaled SEK 20.7m, resulting in net debt of SEK 14.1m (21.1). Adjusting for the post-quarter loan, net debt increases to SEK 19m. Given a current burn rate exceeding the quarter-end cash balance, the financial position remains highly strained. Analyst Group therefore considers it likely that Irisity will need to secure additional capital in the near term to strengthen the Company’s liquidity position.

Concluding Remarks About the Report

Irisity’s Q2-25 report reflects a business navigating near-term headwinds, with continued pressure on revenues, MRR, and a liquidity position that remains strained, implying elevated financial risk. That said, there are encouraging signs, including a marked increase in commercial activity and the addition of a strategically important OEM partner, which strengthens the Company’s regional presence and supports long-term growth potential. Looking ahead, maintaining liquidity, executing planned cost reductions, and converting the growing sales pipeline into revenue will be critical in driving a return to sustainable growth.

We will return with an updated equity research report of Irisity.

Irisity AB (”Irisity” or ”the Company”) published its Q1 report for 2025 on the 13^th of May 2025.

The following are key events that we have chosen to highlight in the report:

• Net sales declined -34.2% Y-Y due to project delays and timing effects
• Challenging Market Conditions Likely to Persist in Q2–Q3 2025
• Regulatory Changes Support Growth Ahead
• Collections increased 39.4% Y-Y, mitigating negative OCF
• OPEX Reductions Reflect Ongoing Streamlining
• Fully Secured Rights Issue of SEK 21.1m

Challenging Sales Trajectory – Downward Trend Expected to Continue Near Term

Reported net sales for the first quarter of fiscal year 2025 amounted to SEK 18.1m (27.6), equivalent to a decline of -34.2% Y-Y. The negative sales development can partly be attributed to the revised timing of revenue recognition for larger projects, which was also the case in Q4-24. Moreover, international project sales weighed on overall net sales for the quarter, partly reflecting delays stemming from a more complex and evolving global business climate and a weakening USD. The broader turbulence in the geopolitical and economic environment has thus resulted in project sales being delayed in Q1-25, such as large city and security infrastructure projects in the US and CALA (Caribbean and Latin America). Given the revenue deferrals in Q4-24, Analyst Group had anticipated a partial bounce back in sales, as we expected realization of the order backlog. However, the reported net sales fell short of our estimates.

Looking ahead, Irisity expects a decline in net sales over the coming two quarters as a consequence of the reassessment of the timing of revenue recognition for larger projects. However, the Company guides for a much stronger performance in Q4-25.

On the positive side, management reports a notable uptick in sales activity following recent regulatory changes concerning camera permit requirements, which came into effect in April 2025. In essence, the change means that entities previously required to apply for a permit to install CCTV cameras for surveillance in Sweden must now independently conduct a balancing of interests between the need for surveillance and the individual’s right not to be monitored — a process previously handled by IMY. This development is expected to streamline the deployment process for surveillance systems and is likely to act as a catalyst for growth within Irisity’s municipal-focused Security as a Service segment.

Invoicing and collections

Invoicing amounted to SEK 16.6m (16.3) in Q1-25, representing a slight Y-Y increase of approx. 1.4%, where the limited growth is mainly attributable to several projects being postponed to Q2-25. Collections, on the other hand, showed strong momentum, increasing by 39.4% Y-Y to SEK 26.5m (19.0) during the quarter.

Looking ahead, Irisity expects to finalize two major projects and collect the associated receivables in Q2-25, delayed from Q1-25, a development of particular importance given the Company’s current financial position. Analyst Group has previously emphasized that improvements in collections are a key KPI to monitor, as they contribute to shortening the quote-to-cash cycle and strengthening cash flow. In that context, the solid increase in collections during Q1-25 stands out as a clear positive in the quarterly report.

Flat Sequential MRR Development Q-Q

The MRR amounted to SEK 4.1m during Q1-25, reflecting flat development Q-Q and a decrease Y-Y, compared to SEK 4.4m in Q1-24. The outcome in MRR is a direct result of a postponed renewal of a U.S. government agency’s Software Upgrade Plan (SUP), which Irisity expects to be realized in Q2-25.

With regulatory tailwinds driving positive momentum in the Security as a Service segment, combined with strong expected performance from the newly launched IRIS+ Professional software and large projects entering production throughout 2025, Analyst Group believes the Company has favorable conditions to improve MRR going forward. This is particularly important given the shorter cash conversion cycle associated with SaaS revenues, which contributes to a reduction in overall DSO.

Cost Base

Examining OPEX in more detail, personnel costs amounted to SEK 23.6m (28.2) in Q1-25, representing a decrease of 16.4% Y-Y and 5.8% Q-Q, compared to approximately SEK 25.0m in Q4-24. However, when adjusting for personnel from Ultinous, personnel costs decreased by 24% Y-Y, indicating that the Company’s streamlining initiatives are yielding results.

At the end of Q1-25, the Company had 68 (81) full-time equivalent employees and 20 (11) consultants, resulting in a total workforce of 88 (92). While the reduction in total headcount (including consultants) is not as significant, the increased share of consultants provides a more flexible cost base, which can be downsized more efficiently compared to permanent staff.

Other external costs increased by 13% Y-Y, totaling SEK 11.7m (10.4) in Q1-25. Total OPEX (excluding COGS and D&A) amounted to SEK 37.2m (40.5), representing an improvement of 8% Y-Y. It is important to note that Ultinous personnel are included in the Q1-25 figures, meaning the underlying reduction in the cost base is in fact more substantial. Irisity has emphasized that cost-cutting measures will continue to take effect in the coming quarters. In summary, the EBITDA result amounted to SEK -18.8m (-3.3), and when adjusting for work performed for own account and other operating income and costs, EBITDA totaled SEK -23.1m (-15.8).

Fully Secured Rights Issue

Irisity is currently conducting a fully secured rights issue of approximately SEK 21.1m before issue costs and any set-off, at a subscription price of SEK 0.40 per share. The subscription period runs from May 16 to May 30, 2025. The rights issue is intended to strengthen Irisity’s financial position by supporting efficiency improvements, product development, and growth initiatives in key markets. It also addresses temporary liquidity pressures resulting from delayed customer payments. To bridge short-term working capital needs, Irisity has secured a credit facility, which will be repaid through set-off against newly issued shares. Upon full subscription, the Company expects to receive gross proceeds of approximately SEK 21.1m. After estimated issue costs of around SEK 1.0m, the net proceeds will primarily be used to repay the credit facility, up to SEK 15m, with the remaining minimum of SEK 5m allocated to general working capital. The rights issue is fully secured by approximately 52.5% in subscription commitments and 47.5% in guarantee undertakings, neither of which incur any cost for Irisity.

Increase in Collections Somewhat Mitigates the Negative OCF

During Q1-25, Irisity reported cash flow from operating activities (OCF) of approximately SEK -13.6m (-12.7), corresponding to an average OCF of approx. SEK -4.5m per month. Despite the sharp decline in sales during the quarter, reduced OPEX and increased collections had a mitigating effect on OCF.

Taking into account investments of approx. SEK 2.3m during Q1-25, negative free cash flow amounted to SEK -15.8m (-21.5). We anticipate that the lower investment level stems both from the strategic reorganization aimed at enhancing innovation efficiency within the R&D function, as well as from advancements in generative AI, which have significantly accelerated Irisity’s R&D process.

The working capital cycle improved markedly in Q1-25, reaching its lowest level in the past three years, primarily driven by a reduction in receivable days. The shortened cycle reflects improved cash conversion, which is particularly positive in light of the Company’s ongoing efforts to optimize liquidity and reduce net working capital tied up in operations.

Concluding Remarks About the Report

In conclusion, Irisity’s Q1-25 performance reflected continued topline headwinds, a trend expected to persist over the coming quarters due to macroeconomic uncertainty and a weaker USD, which have contributed to delayed project deliveries.

Amid these challenges, the 39.4% Y-Y increase in collections helped partially offset pressure on operating cash flow and contributed to a more efficient working capital cycle. Additionally, the reduction in OPEX indicates effects from cost-saving initiatives, though Analyst Group argues that additional reductions may be necessary given the persistently challenging market conditions.

While recent regulatory changes are estimated to support future growth in the Security as a Service segment, the near-term impact remains uncertain. Against this backdrop, the ongoing rights issue is a critical measure to address liquidity constraints. Going forward, improved execution, cost control, and collection discipline will be key to navigating the current environment.

Irisity AB (”Irisity” or ”the Company”) published its Q4 report for 2024 on the 25^th of March 2025. The following are key events that we have chosen to highlight in the report:

• Revised Timing of Revenue Recognition and One-Off Effects Put Pressure on Financials
• Strong commercial activity in Q4-24 is expected to carry over into Q1-25
• Invoicing Grew 24% Y-Y – Collections Still Lagging
• MRR Decline Attributed to Delayed Renewal of SUP
• Q-Q Reduction in Personnel Costs
• Credit Facility (SEK 15m) and Rights Issue (SEK 21.1m) Aimed at Addressing Near-Term Liquidity
• Growth in Collections: a Key KPI to Monitor Going Forward

Revenue Deferrals and One-Off Charges Weigh Heavily on Q4 Performance

Considering delayed projects and postponed customer payments, Irisity has revised the timing of revenue recognition for several partner contracts, leading to a reassessment and reversal of previously reported net sales amounting to SEK 13.7m. As a result, reported net sales for the fourth quarter of fiscal year 2024 amounted to SEK 4.7m. Adjusted for the revised revenue recognition, net sales would have reached approx. SEK 18.4m, compared to SEK 27.6m in Q4-23, materially below Analyst Group’s estimates of SEK 34.2m for Q4-24. The deferred revenue of SEK 13.7m has been added to the order backlog and is expected to be recognized as revenue in 2025.

Solid Finish to Q4-24 with Over SEK 10m in New Project Orders

Irisity highlights that the quarter concluded on a positive note, with several project agreements totaling an incoming order value exceeding SEK 10m, which Irisity expects to convert into net sales during the coming months. The new projects include, among others, the first project in India for a Diamond Bourse, a municipality in Tel Aviv, a papermill in UAE, an airport in Honduras, and a US Government agency support contract renewal.

Invoicing Surges 24% Y-Y – Collections Lag Highlights Working Capital Pressure

Invoicing amounted to SEK 38.7m in Q4-24, representing a robust Y-Y increase of approx. 24%. However, collections declined by around 23% compared to Q4-23, totaling SEK 23.5m (30.3), highlighting a notable gap between invoicing and actual cash inflow. Given that the majority of sales stem from project-based revenue, typically associated with longer cash conversion cycles, this discrepancy exerts pressure on near-term cash flows. Project revenues generally exhibit a higher Days Sales Outstanding (DSO) compared to service-based revenues, inherently leading to a temporary buildup in working capital. Analyst Group views the strong invoicing growth as a positive indicator of underlying business momentum. However, improving the level of collections will be crucial going forward, as it will strengthen operational cash flow and provide greater financial flexibility to support the Company’s ongoing growth initiatives.

Short-Term MRR Decline Driven by Delay – Recurring Revenues Set to Accelerate

The MRR amounted to SEK 4.1m during Q4-24, down from approx. SEK 4.3m during the last quarter. The decline in MRR Q-Q is attributed to delayed renewal of a US government agency software upgrade plan, which is expected in early 2025, paving the way for solid MRR growth during the coming quarters as many large projects will go into production throughout 2025. Analyst Group believes that the expected MRR growth will be important not only for increasing the predictability of long-term sales and cash flow generation, but also due to the shorter cash conversion cycle associated with SaaS revenues, which contributes to a reduction in overall DSO.

Moreover, the Company launched IRIS+ Professional in Q1-25, a significant milestone in scaling Irisity’s AI Products segment. The launch is expected to play a central role in shifting the product mix away from large-scale projects with high customer acquisition costs (CAC) and long sales cycles, toward smaller, more scalable projects that support a shorter cash conversion cycle.

Cost Base

Examining the OPEX more in detail, the personnel costs amounted to SEK 25.0m (27.0) during Q4-24, an improvement of 17% compared to Q3-24 when the personnel costs amounted to approx. SEK 30.1m. As the acquisition of Ultinous was consolidated during 2024, comparing the Y-Y numbers is somewhat misleading. Analyst Group believes it’s encouraging to see that the streamlining activities, aimed at reducing the headcount for both R&D and service personnel, are bearing fruit. Moving ahead, Irisity expects additional savings in the range of SEK 1-2m per quarter starting in Q1-25, with annual cost savings of SEK 15-20m for the full year 2025.

The EBITDA-result for Q4-24 was negatively affected by a total of SEK 40.7m in non-recurring items, including the SEK 13.7m revenue reversal, a SEK 14.7m provision for doubtful accounts receivable, and an additional SEK 12.2m provision due to delays in three major projects. Consequently, the reported EBITDA came in at SEK -63.6m, and adjusted for these extraordinary items, EBITDA amounted to approx. SEK -23m, which could be compared to the same period last year when EBITDA amounted to SEK -12.7m. It is worth noting that the above-mentioned effects are non-cash accounting adjustments and therefore do not have a direct impact on the Company’s liquidity position.

Liquidity Measures: Credit Facility and Fully Secured Rights Issue

To address the near-term liquidity needs, Irisity has secured a SEK 15m credit facility from the Company’s largest shareholder, Stockhorn Capital AB, following arm’s-length negotiations. The facility carries an annual interest rate of STIBOR 3M + 4 percentage points, with no additional fees.

In parallel, Irisity has announced the intention to carry out a fully secured rights issue of approx. SEK 21.1m at a subscription price of SEK 0.40 per share. Irisity recently completed a rights issue in Q4-24, which generated net proceeds of approx. SEK 56m before off-sets and issuing costs, with off-sets amounting to approx. SEK 15.3m. The proceeds before transaction costs totaled SEK 41.2m, and after the repayment of the bridge loan (SEK 21.9m), Irisity retained approx. SEK 19.3m before transaction costs. Despite the recent capital injection, the delayed projects and weaker-than-expected cash flow have placed further pressure on liquidity. The upcoming capital raise is expected to support operations until collections begin to accelerate, while also providing financial flexibility to execute on the Company’s strategic initiatives.

Cash flow

During Q4-24, Irisity reported cash flow from operating activities (OCF) of approx. SEK -16.2m (-15.2), corresponding to OCF of approx. SEK -5.4m per month. Taking the investments of SEK 11.3m during Q4-24 into account, the negative free cash flow amounted to SEK -27.5m (-17.7), as strategic initiatives across all business segments weighed on cash flow. These included the advancement of generative AI capabilities and the launch of IRIS+ Enterprise (self-service Personalized AI), as well as the rollout of IRIS+ Professional and the introduction of a new partner portal for reseller partners. While the elevated investment level temporarily burdens free cash flow, these initiatives are seen as critical to supporting long-term growth.

Although Q4’s burn rate stands out as a negative, the growing discrepancy between invoicing and collections in H2-24, along with a rise in accounts receivable to SEK 35.3m (from SEK 26.8m at year-end 2023), suggests significant potential for improving collections. Strengthening this area will be key to reducing the burn rate and enhancing cash flow efficiency going forward.

Key KPIs to Monitor Going Forward

As the Company navigates short-term challenges, Analyst Group highlights the following KPIs as particularly important to track in the coming quarters:

• Growth in Invoicing: While revenue recognition is subject to timing differences, invoicing serves as a more immediate indicator of the underlying business momentum, as it reflects progress prior to collections and cash conversion.
• Growth in Collections: Larger project-based contracts have contributed to longer DSO, which has weighed on overall cash collection. As such, an improvement in collections will be essential to strengthening cash flow and driving more efficient working capital management. The notable gap between invoicing and collections observed in 2024, combined with a high accounts receivable balance at year-end, suggests that Irisity has strong potential to accelerate cash collections in 2025.
• Monthly Recurring Revenue (MRR) Growth: Recurring revenues provide a more stable and predictable cash flow base. Given that MRR typically exhibits a shorter cash conversion cycle, i.e., lower DSO, continued growth in this area will support an overall improvement in cash flow dynamics. A key catalyst in H1-25 will be the conversion of the delayed renewal for a U.S. government agency software upgrade plan into recurring revenue.

Concluding Remarks About the Report

In conclusion, Irisity’s Q4-24 performance was marked by temporary setbacks stemming from revenue deferrals, delayed collections, and one-off provisions, which weighed heavily on reported results. However, underlying business momentum remains intact, as evidenced by invoicing growth of 24% Y-Y and new project wins exceeding SEK 10m by the end of Q4-24. Analyst Group believes that consistent operational delivery, improved working capital management, and enhanced transparency around revenue timing will be essential to regaining investor confidence. As 2025 unfolds, key KPIs to monitor are continued progress in project execution, increased collections, and sustained MRR growth, factors that will ultimately determine the Company’s financial trajectory, capital efficiency, and potential for a valuation re-rating.

Irisity AB (”Irisity” or ”the Company”) announced, on the 28th of November, the outcome of the rights issue of units which was announced on October 1st, 2024 (the ”Rights Issue”). The subscription summary shows that approx. 56.8% of the issue was subscribed through unit rights (4,773,602 units), and an additional 2.1% (178,579 units) was subscribed without unit rights. Guarantee commitments account for the remaining 21.1% (1,770,813 units), bringing the total to approx. 80% of the rights issue being fulfilled through subscription and guarantees. Hence, the Company initially receives approx. SEK 56.5m before off-sets and issuing costs, and upon full exercise of all included warrants of series 2024/2025:1 within the framework of issued units, the Company could receive an additional maximum of approx. SEK 10.1m. The exercise period for the warrants runs from May 27^th, 2025, to June 10^th, 2025, with a subscription price of SEK 1.50 per share.

Analyst Groups view of the Outcome

“The outcome of the rights issue means that Irisity will receive approx. SEK 56m before off-sets and issuing costs, with off-sets amounting to approx. SEK 15.3m. Consequently, the proceeds before transaction costs total SEK 41.2m, and after the repayment of the bridge loan (SEK 21.9m), Irisity will retain approx. SEK 19.3m before transaction costs.

The secured funding through the rights issue enables Irisity to capitalize on the Company’s strong market position and the growing demand for AI-driven video analytics solutions. Apart from repaying the bridge loan, Irisity intends to allocate the net proceeds to support growth initiatives toward market expansion, including new generative AI applications, as well as general working capital needs. Irisity can now shift focus towards the execution of the strategic initiatives, which include a stronger emphasis on a partner-based go-to-market strategy aimed at shortening the working capital cycle, reducing the opex cost base through streamlined R&D operations, as well as a clear focus on expanding the recurring revenue streams.

The abovementioned initiatives are estimated to drive cost reductions, including operational optimization and resource reallocation for the R&D units. Analyst Group projects that these measures will enhance efficiency and reduce the burn rate going forward, aligning with Irisity’s broader strategic objective of achieving profitability and positive cash flow.

In light of challenging market conditions, where many smaller companies face difficulties in raising capital under favorable terms, Analyst Group considers the outcome of the rights issue reasonable, particularly given the significant amount of capital raised.

In summary, the completed rights issue enables Irisity to execute on the growth initiatives ahead, leveraging the scalable AI platform and the advanced AI capabilities of the Company’s subsidiary Ultinous, thereby advancing towards profitability, step by step. With the Company’s global footprint, diversified customer base, strong portfolio of AI-driven video analytics solutions, combined with a clear roadmap towards profitability, Irisity is well-positioned to capitalize on the expanding AI market ahead.”

Irisity AB (”Irisity” or ”the Company”) published its Q3 report for 2024 on the 4^th of November 2024. Irisity reported a solid performance, with strategic initiatives now fully implemented, bringing the Company one step closer to becoming a profitable growth entity generating positive cash flow. The strategic initiatives include a more commercially oriented organization, a stronger emphasis on a partner-based go-to-market strategy aimed at shortening the working capital cycle, reducing the opex cost base through streamlined R&D operations, as well as a clear focus on expanding the recurring revenue streams. Overall, these activities are expected to create a solid foundation for further growth. With a more efficient cost structure in place, Analyst Group believes that Irisity is making significant progress toward profitability.

Robust growth in invoicing and collections Y-Y

Irisity’s net sales came in at SEK 30.3m (32.3) in the Company’s third quarter of fiscal 2024, marking a Y-Y decrease of -6.3%, but a 17% increase Q-Q. It is worth noting that the quote-to-cash process varies substantially across different segments, as the level of complexity is reflected in the sales cycle. Additionally, Irisity generates both one-off revenues and recurring revenue streams through pre-payments and accrued income. Therefore, analyzing the invoicing and collections provides a more comprehensive view of the underlying business development, as it offers a more nuanced perspective of the full quote-to-cash process. The invoicing amounted to SEK 35.4 MSEK during Q3-24, a solid growth of 11% compared to the same period the previous year, while collections demonstrated a 53% growth Y-Y, reaching SEK 26.2m during the third quarter. In light of the strong invoicing during the previous quarter (Q2-24), which stood at SEK 39.3m, it is positive to observe the conversion into collections.

Solid Pipeline Exceeding SEK 180m

An additional factor to examine further is the sales pipeline, including 650 opportunities with a total value exceeding SEK 180m. This KPI could be derived from potential deals that Irisity is currently processing, spanning various stages of the sales funnel. Analyst Group believes that the pipeline serves as a testament to Irisity’s strong customer offerings, indicating robust demand and a solid growth runway ahead.

Concerning recurring revenues, the MRR amounted to SEK 4.3m (4.5), representing a flat sequential development Q-Q. The Y-Y decrease was attributed to FX-effects as well as delays in enterprise customer project installations. The Company expects that investments made in 2024 will yield results in terms of MRR growth during 2025, as Irisity plans to place stronger emphasis on central monitoring stations, enhance its Security as a Service offering in Sweden, and focus on increasing Software Upgrade Plans (SUP) for existing customers.

Strong Gross Margin and Short-Term Increase in Personnel Costs

During Q3-24, the Company achieved a gross margin of 85.2% (82.4), which is an improvement both Y-Y as well as Q-Q, where the gross margin reached 82.4% and 75.2%, respectively.

Examining the opex cost base, personnel costs amounted to SEK 30.1m (24.1), where the Y-Y increase is attributed to the acquisition of Ultinous being fully consolidated during the quarter (SEK 2.2m), as well as one-time effects stemming from layoffs, impacting the personnel costs with additional SEK 2.8m. All in all, comparing the numbers with a normalized Q2-24, the personnel costs in Q3-24 were SEK 5m lower, indicating that the streamlining activities are bearing fruit. For the full year 2025, Irisity expects that the reduced headcounts should yield annual cost savings of SEK 25m, related to both R&D and service personnel.

Regarding R&D, the Company has optimized and reorganized the development hubs into three leaner and more focused teams, specialized on specific customer business segments. Apart from shifting personnel from Tel Aviv and Gothenburg to Budapest to reduce costs, the focus on generative AI is expected to speed up innovation and improve the reliability of product delivery, which in turn is expected to yield a greater ROI on future investments. The impact of these streamlining activities is also seen in the reduction of capitalized work for own account, which stood at SEK 4.2m during Q3-24, down from SEK 9.6m during Q3-23.

Other operating income, as well as other operating costs, represent non-cash related line items which is attributed to currency revaluation of the loan to Agent Vi, which is unrealized and varies, depending on the exchange rate. During Q3-24, the net effect of the FX-effect amounted to a negative SEK 4.2m, hampering the EBITDA result in the P&L. The Company are planning on converting the loan to Agent Vi into equity, which will reduce the fluctuations stemming from the currency effect, and thereby increase the predictability of the cost base.

All in all, the EBITDA for the third quarter amounted to SEK -14.3m (1.4) and adjusted for capitalized work and currency revaluation effects, the EBITDA result amounted to SEK -14.2 (-8.2).

Rights Issue will Strengthen the Balance Sheet

Following the end of the third quarter, Irisity announced a rights issue which, if fully subscribed, is expected to raise SEK 70.6m before transaction costs and set offs. The rights issue is guaranteed to approx. 80%, and the net proceeds are intended for the repayment of a bridge loan (SEK 21.9m), working capital needs (SEK 20.7m), as well as SEK 5m allocated for market expansion initiatives, including a focus on generative AI. Additionally, approx. SEK 15.3m are intended for set offs, from Stockhorn Capital AB and Anders Trygg, via company.

During Q3-24, Irisity reported cash flow from operating activities (OCF) of approx. SEK -17.5m (-10.9), of which SEK -9.4m was due to changes in working capital, corresponding to OCF of approx. SEK -5.9m per month. Given the cash balance at the end of Q3-24 of SEK 3.8m, along with available credit lines of approx. SEK 3m, the rights issue is essential for reinforcing the balance sheet and providing additional financial flexibility to support growth initiatives. As the Company ramps up growth efforts in segments with shorter sales cycles, such as AI Products and AI Services, Analyst Group anticipates a shorter quote-to-cash process, thereby reducing the working capital cycle.

Concluding Remarks About the Report

In conclusion, Irisity’s Q3 report highlights the effective execution of strategic initiatives implemented over the year. With a streamlined cost structure, more efficient R&D teams, and a clear partner-driven go-to-market strategy, Irisity is well-positioned to leverage the Company’s scalable platform and gradually move towards positive cash flows as the strong pipeline of potential deals converts into revenue. The current rights issue is expected to further reinforce the Company’s financial position, providing a solid foundation for continued growth.

Analyst Groups view of Irisity

Irisity is a leading provider of AI-driven video analytics solutions, specializing in advanced software that transforms conventional security cameras into intelligent detection systems, all while upholding stringent privacy standards. With a presence in more than 90 countries, Irisity addresses a global market through the Company’s three primary segments: AI Solutions, AI Products, and AI Services. With the strategic acquisition of Ultinous in H1-24, Irisity has enhanced its AI capabilities, integrating cutting-edge generative AI technologies aimed at capturing opportunities in the mid-market segment, which paves the wave for substantial growth potential in the coming years. Additionally, the consolidation of R&D units is expected to yield a more efficient cost structure, which is estimated to reduce the opex cost base. With a highly scalable AI platform and a clear roadmap towards positive cash flows, Irisity is well-positioned to capitalize on the expanding AI market. The Company has implemented several key initiatives with the objective to drive profitability and achieve positive cash flow, including the appointment of a commercially focused leadership team, a strategic shift towards faster-to-market segments to expedite the quote-to-cash cycle, and an increased focus on recurring revenue streams.