Comment on Bricknode’s Q3 Report 2022

Bricknode published on November 17th, its quarterly report for the third quarter 2022. The following are some key financial metrics that we have chosen to highlight in connection with the report:

  • Net revenue amounted to 4.5 MSEK – in line with our expectations
  • Partnership with next-generation bank platform Tuum
  • Reduces the EBITDA loss Q-Q – delivering on the announced savings plan

Net revenues growth with 16 % Y-Y

During the third quarter of 2022, the net revenues amounted to 4.5 MSEK (3.9), corresponding to a growth of 16 % compared to the same quarter previous year. The net revenue was not only in line with our estimates, but also a marginal increase from the previous quarter (Q2-22), corresponding to a growth of 1% Q-Q. The increased revenues have been driven by new customers as well as growth among Bricknode’s existing customers. During the third quarter the NRR amounted to 104 %, down from 115 % in Q3-21, but in line with H1-22. The NRR demonstrates how the company grows with existing customers, e.g., by customers upgrading their functionality and/or increases their volume, hence it is an important metric in regards to Bricknode. An NRR over 100% shows growth among the company’s existing customers, which thus constitutes as a positive metric. In addition, Stefan Willebrand comments in the conference call that the company has seen a record of usage in number of transactions and orders, which in combination with new releases of modules paves the way for a NRR rate over 100% henceforth. However, the company did also comment in the interim report that the market has been challenging, which has resulted in protracted deals. On the other hand, Bricknode are about to finalize a large upgrade to Bricknode Broker core, which creates further value for existing customers and, as such, enables delivering new and future features faster. The upgrade and the extensive product portfolio pave the way for both closing more deals and enables costs savings going forward.

The diagram below shows the development of the company’s net revenues on a LTM basis.

In the beginning of November 2022 Bricknode presented a partnership with the next-generation core banking platform Tuum. Tuum is an API-first modular core banking platform that enables companies to quickly roll out new financial products, from accounts, deposits and lending to payments and cards. By partnering with Bricknode, Tuum is adding investments to its platform. Tuum has already an extensive customer base, and the partnership expands the opportunities for Bricknode to reach new customers together with Tuum, as well as open up new product capabilities for Tuum’s existing customers.

Reduces the EBITDA loss Q-Q

The EBITDA result during the third quarter amounted to -4.5 MSEK (-2.6), corresponding to an increase EBITDA loss of 1.9 MSEK Y-Y, which is mainly derived by an increase in employees. Since the IPO in November 2021 Bricknode has embarked on a more aggressive investment journey to increase efforts in sales and marketing, as well as development of the extensive product platform. In August 2022, Bricknode announced that the company is undertaking a series of measures to accelerate the path to profitability and implemented a plan to reduce fixed and variable costs by approximately 40%. When comparing the EBITDA result with the previous quarter (Q2-22), Bricknode has already decreased the EBITDA loss by approximately 34 % from -6,9 MSEK. Further, the staff costs amounted to 6.5 MSEK, down from 8.5 MSEK in Q2-22 when the company announced that the number of employees will be cut to 25 by December, from today’s 35. Analyst Group therefore expects further cost reductions and assesses that Bricknode will continue to execute on the savings plan in order to reduce the burn rate significantly going forward, as we can clearly state that the company’s implemented cost savings has shown results already.

Financial Position and Burn Rate

At the end of Q3-22, Bricknode’s cash and equivalents amounted to 7.7 MSEK, compared to 8.7 MSEK at the end of June (Q2-22), corresponding to a net change in cash of -1.0 MSEK. The company’s burn rate per month amounted to -0.2 MSEK (cash flow from operating activities). The low burn rate and the cash and equivalent balance is a result of the increase in the changes in current liabilities, where Bricknode secured a loan of 5 MSEK in August 2022. The loan is meant to be used to support the company’s plan of establishing a licensed brokerage subsidiary. For the three quarters of 2022 (Q1-Q3 2022) the average burn rate per month amounted to -1.5 MSEK. Given the present cash position and an assumed burn rate of -1.5 MSEK/month, Bricknode is financed until the end of February 2023, all else equal. Bear in mind that Bricknode has implemented the earlier mentioned savings plan, where Bricknode expects to significantly reduce the burn rate going forward.

In conclusion, we are of the opinion that Bricknode has progressed well operatively during the third quarter, given the net revenue growth of 16 % Y-Y and the cost savings that has been implemented. Bricknode is now finalizing the upgrade of Bricknode Broker which both creates greater value for the existing customers and paves the way for closing more deals and partnerships.

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