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.