• '24e-'26e EBITDA cut by 7-8%
• Intends to divest the subscription businesses...
• ...to focus on hardware sales

Q2 results and intended divestment

Q2 revenue and adj. EBITDA were 26% and 28% below our estimates, respectively. The large deviations were driven by larger costs associated with the business model transformation and hardware-related sales that were delayed to Q3. Qlosr announced that it intends to divest its subscription-related business for SEK 165m (of which 20% is an earn-out). The subscription business represents approximately half of sales (SEK ~300m, according to our estimates), and the remaining half, which is intended to be the future Qlosr, is the hardware sales business, which earns an EBITDA margin in the range of 4.0-4.5%.

Estimate changes

We cut '24e-'26e revenue by 7% and lower adj. EBITDA by 7-8% based on the report. Given that the intended divestment does not entail a closed transaction and is therefore associated with risks, we do not incorporate it in our estimates. Our revised estimates imply that Qlosr in its current structure (i.e., including the subscription business) should reach an adj. EBITDA margin of 4.5-5% for '24e. The current business transformation (transaction model to subscription model) leads to lower margins, but that is partially compensated through hardware-related sales. We continue to expect 2024 to be back-end-loaded, as the company is increasingly compensating for the incremental sales losses stemming from the business transformation with hardware-related sales.

Valuation

Based on our revised estimates, the company is trading at ~16x '24e EV/adj. EBITA, which is in line with the average Nordic IT service peer but 30% above Swedish micro cap serial acquirers.