Irisity AB (”Irisity” or ”the Company”) published its Q4 report for 2024 on the 25th 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.
