Comment on EPTI’s Q2-report

On August 31st, EPTI released its interim report for the second quarter of the year 2023. 

During Q2-23, EPTI continued to execute its strategic transformation towards becoming a purely cultivated investment company centered around artificial intelligence, with its value creation purely focused on artificial intelligence. The new strategic direction aims to establish a prominent position within the artificial intelligence segment by exclusively concentrating on this transformative technology.

In pursuit of a more robust capital structure, enabling the acquisition of additional artificial intelligence companies, EPTI pursued divestitures within the Service division throughout the second quarter of 2023, successfully completing the full disposal of this division. Notably, transactions such as the sale of Axakon Consulting, generating approximately 10 million MSEK, exemplify the eight divestitures executed since Q1-23, all aimed at concentrating the company’s focus on artificial intelligence. Additionally, the fully-owned subsidiary Actea Consulting has been sold for a price of 15 MSEK on a debt- and cash-free basis; after adjustments for net debt, tax liabilities, and average change of working capital, the purchase price amounted to 1 SEK. Subsequent to the quarter’s close in August, EPTI announced the complete divestment of all shares in Adhype, achieving a sale price of around 9,6 MSEK, further bolstering the capital structure and augmenting EPTI’s cash position post-quarter.

Additionally, beyond the divestitures in the Service division, the company’s board is evaluating the possibility of conducting a targeted convertible bond issuance of 35 MSEK.

Analyst Group has a positive view on the efficient divestitures of businesses not aligned with EPTI’s future strategy, along with the exploration of other financing solutions to fortify the balance sheet and cash position. The promising capital allocation driven by the, so far, agile management of EPTI is believed by Analyst Group to enhance the company’s prospects of swiftly establishing a competitive portfolio of artificial intelligence companies. The adaptation to the new corporate structure is further reached by the cost-cutting measures undertaken during the quarter. The substantial reduction in group-wide expenditures, achieved through diminished personnel costs and terminated rental agreements, is also expected to facilitate the newfound form of the company in attaining a more sustainable long-term financial position.

By investing in artificial intelligence companies, EPTI can facilitate their integration into a larger organization, enhanced by the experience of individuals within EPTI who are exclusively dedicated to investing in and developing artificial intelligence companies. Consequently, Analyst Group envisions favorable conditions for promising AI companies in exciting and attractive stages to view acquisition by EPTI in a positive light, given EPTI’s expertise in commercializing AI ideas, thereby accelerating portfolio companies’ growth journeys within AI through capital infusion and experience.

The progression of portfolio company Oodash, which functions as a ChatGPT for corporate data, progressed as planned during the quarter, with the company witnessing sustained market demand and enthusiasm for collaborations and investments. Portfolio company Apotekamo, an online pharmacy, leveraged AI tools to optimize logistics during the quarter, simultaneously demonstrating robust growth. Analyst Group interprets these positive developments within the companies as validation of EPTI’s ability to harness the attractive growth in AI and scale up portfolio companies.

The artificial intelligence market is deemed highly promising, with a valuation of 137 billion USD in 2022. The market is projected to grow at a CAGR exceeding 37 % from 2023 to 2030, positioning companies within AI, including EPTI, in an advantageous position to capitalize on the high market growth.

In summary, Analyst Group views EPTI’s divestment of the Service division to fully commit to artificial intelligence as a positive step. The actions undertaken during the quarter to enhance the capital structure and contribute to a stronger cash position are expected to accelerate EPTI’s capacity to capitalize on AI market growth. As of the end of June 2023, EPTI held financial assets with a book value of 68 million plus 12 MSEK in financial assets in the companies InBanner and Oodash, which have been eliminated on the balance sheet. Hence, the total financial