Sales Revenue Grow By Nearly 50%

Q3 2023 consolidated results

4 January 2024

  • Shelly Group marked another outstanding quarter with growing sales beating their own forecasts. Sales revenue marked an impressive growth of 49.4% reaching BGN 86.3mln, which was due to the focused sales strategy, which was implemented in 2022. A decrease in Additional revenues, consisting predominantly of financial revenues attributable to FX effects, which dropped from BGN 2.7mln to BGN 0.9mln, resulted in Total revenues growing by 44.1% YoY to reach BGN 87.3mln.
  • The company gives greater disclosure about their sales performance (channels, products, markets) in their annual reviews. However, on 11.10.2023 they announced estimated breakdown of sales for the 9 months. In that, the Shelly devices sales were shown to reach BGN 84mln or 97.3% of product sales. In the same time, the tracking devices MyKi were not able to garner the necessary demand and revenues from them decreased 31.5% to BGN 2.2mln. Considering the focus of Shelly group on IoT solutions and such for smart homes, MyKi’s contribution was marginal and declining. For that purpose, the management decided that its results would not be included in the future sales expectations announcements, as they were deemed insignificant.
  • EBITDA increased 66.8% to reach BGN 23.9mln, which is the result of the increased investments last year in the sales channels and RND processes. This affected the largest account COGS, which increased just by 28% to BGN 37mln. Even the serious hike in administrative expenses by 64% to BGN 22.9mln, predominantly due to employee compensations and external services, was not able to affect EBITDA seriously. We notice a very positive shift towards efficiency from the management of the company.
  • Net profit of the group increased 65.6% to BGN 19.5mln as a result of the abovementioned improvements and the fairly constant amortization and the Net margin improved by 2.9% to 22.30%.
  • The positive Net Profit changes affected ROA, ROE and ROIC, which reached the highest values in the last 3 years.
  • Current ratio halved to 6 from 2021 results due to the increase in Current Liabilities, which is largely due to the increase in Trade Payables (payments to suppliers as a result of increased sales) and increased tax liabilities for corporate tax.
  • Cash ratio’s decline is explained by the same large leap of Current Liabilities.
  • The company remains very liquid and stable with cash representing nearly 14x total debt and 34x short term debt.
  • The company lent EUR 280,000 to Expat Capital for 1 year at 1% p.a.
  • In July 2023 the company increased the capital with 50,946 shares of BGN 1.00 each allowing greater ownership by employees of the company and those of subsidiaries within the group. The new share count is 18,050,945.
  • On 06.12.2023 the Group announced the results from the “Black Friday” campaign, which confirmed their expectations for the year end results for 2023. Main outtakes were:

    • Growth of “Black Friday” sales by 115% compared to the same period last year to reach BGN 28.4mln.
    • Number of home automation devices more than doubled to 1.1mln items.
    • Products for reporting and reducing energy consumption, as well as plug-and-play devices, considered to be key in future growth.
    • Confirmed FY 2023 sales growth forecast with 51.0% to BGN 140.8 mln and an increase in EBIT by at least 63.5% to BGN 33.2 mln
    • Expectations are that in the mid-term, by the end of 2026, the company will be able to generate sales of over BGN 390 mln and EBIT of over BGN 98mln.
    • Dimitar Dimitrov, executive director of the group, expects to ramp up sales and RND efforts in the upcoming 2 years and increase their market leadership with new functions in their Gen3 products in 2024 and Gen4 products in 2025.
    • Wolfgang Kirsch, executive director of the group, confirmed that reporting energy consumption and finding ways to save, is a trend, which will become even more important for individual as well as corporate clients. According to him, Shelly Group is well positioned to reap the benefits of it.

Ivaylo Valchev
Equity Analyst
Tel.: +359 2 937 9862
e-mail: valchev@sis.bg

Svetozar Abrashev
Senior Managing Partner
Tel.: +359 2 937 9869
e-mail: abrashev@sis.bg

Sofia International Securities
Sofia 1000,
140 G. S. Rakovski Str.
Tel.: + 359 2 937 98 65
e-mail: info@sis.bg

Disclaimers and Required Disclosures

Sofia International Securities AD is a member of Bulgarian Stock Exchange (BSE) and the Central Depository of Bulgaria. The company provides brokerage, investment banking, equity research, portfolio management and other services. Sofia International Securities AD is regulated by the Financial Supervision Commission of Bulgaria.

Analyst Certification
The individuals responsible for the preparation of this report certify that: (1) all of the views and opinions expressed in this report are their own and reflect their personal views about the issuer(s) and the securities subject of this report, and (2) no part of any analyst’s compensation was, is, or will be directly or indirectly related to the specific views or recommendations expressed by them in this report.

Regulatory Restrictions
Sofia International Securities is not registered as a broker or dealer with the Securities and Exchange Commission or NASD in the United States of America and the information may be distributed in the US only to individuals who by acceptance hereof confirm that they represent “major institutional investors” as defined in Regulation 15a-16 of the Securities Exchange Act of 1934. Notwithstanding this, no publication of Sofia International Securities AD shall be construed as an offer (or solicitation of an offer) in any jurisdiction in which such offer or solicitation would be illegal.

Financial Interest
Sofia International Securities may or may not own shares of the company that is subject of this document. The individuals who are responsible for the preparation of this report may or may not own shares of the company that is subject of the report. Sofia International Securities is not a market maker in the securities that are subject of this document. In the past, Sofia International Securities might have provided corporate services to the company that is subject of this presentation and may seek to provide such and other services in the future. As of the date of this document Sofia International Services provides brokerage services to the company subject of this document.

Equity Valuation and Risks
The value estimate(s) stated in this report is (are) valid only in light of the valuation methods used to derive this estimation. The use of other or more comprehensive approaches could result in other estimates of value that could diverge substantially from the results presented herein. With regard to the above, when making our conclusions about the intrinsic value of the Company’s share capital, we have not considered or evaluated any possible tax, legal or other effects that might arise from engaging in transaction(s) with the shares of the company. The document should not be regarded by recipients as a substitute for the exercise of their own independent judgment and they should seek and obtain independent investment advice is necessary. Any facts and/or information stated in this document are subject to change without notice and Sofia International Securities is not under any obligation to update or keep current the information contained herein. Any opinions expressed herein are only correct as of the stated date. Past performance is not indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any security.

General
The report is prepared solely for informational purposes and is not to be construed as a solicitation, recommendation, investment advice or an offer to buy or sell any securities or related financial instruments. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. The document is based on information obtained from sources believed to be reliable but Sofia International Securities do not warrant its accuracy, nor that it is a complete summary of the securities, markets or developments referred to in the report. This report does not intend to provide assurance on the value of the company’s shares or on the achievability of the projections, statements and assumptions used by us. Actual results achieved in future periods might differ substantially from the projected ones because events and circumstances frequently do not occur as expected. Sofia International Securities accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. Additional information will be made available upon request.