Company
Nakes
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Which has developed a system for clearing payments in beverage and food machines reports results for the fourth quarter of 2021, which are slightly better than those who expected the preliminary results it published. Revenues totaled about $ 34.4 million, an increase of about 40% compared to the corresponding quarter in 2020. However, the erosion of gross profitability in the shadow of price increases along with continued investments and employee compensation expenses led to a jump in operating losses from $ 350,000 to $ 10 million in the quarter The reporter.
Nakes first of all sells its food machines, etc., as well as recognizes revenue from clearing fees and the management programmer. The latter segment is in the SaaS method, and as in software companies it is recognized as ARR (short for Annual Recurring Revenue) revenue that reflects future revenue from existing customers based on current software licenses.
Nakes, on the one hand, emphasize that SaaS revenues, together with growth fees, grew by 66% and now account for 60% of the quarter’s revenues (51% a year earlier), because this is a more profitable sector for them. 40% of the revenue comes from machine sales – and there gross profitability has eroded. Gross profit stood at 35% “and was affected by the continuing global shortage of components, and rising commodity prices, offset by continued strong profitability from recurring revenues,” explain Benaix, who told investors about the negative trend in previous reports. Gross profit itself in the quarter rose by 11%, a much lower rate than that of revenue growth.
Nakes also reported that the number of connected and managed points of sale grew by about 40% compared to the corresponding quarter in 2020 to more than 517,000 in annual summary. The number of transactions cleared in the quarter increased by 84% compared to the corresponding quarter, to 247 million transactions. The total value of transactions cleared in the quarter increased by 89% from the corresponding quarter last year, to $ 428 million.
Adjusted EBITDA for the quarter was negative by approximately $ 3.9 million, compared to positive adjusted EBITDA of $ 2.4 million in the corresponding quarter in 2020. The change is mainly due to an increase in sales costs, as well as an increase in operating expenses. Neutralizing a bonus program first implemented in the third quarter for non-sales employees, and neutralizing the effect of an increase in product cost – Adjusted EBITDA for the quarter improved and was negative by approximately $ 0.9 million.
The net loss for the quarter was $ 10 million ($ 0.0152 per diluted share), a deepening loss compared to $ 3.1 million ($ 0.0124 per diluted share) in the corresponding quarter a year earlier.
The company raised its medium-term revenue forecast to an annual rate of about $ 220 million, with support for organic growth alongside mergers and acquisitions. The accelerated growth rate target also rose to 35% in the medium term. In the long run, the gross profit margin is expected to reach 50% by providing financing options for product sales (IoT POS) and increasing the revenue segment of SaaS and the clearing fees out of total revenue. The long-term adjusted EBITDA margin forecast is around 30%.
Nakes is already implementing its merger and acquisition strategy – and may be scrambling for an IPO on Wall Street, in which a draft prospectus has already been submitted to the SEC (US Securities and Exchange Commission). Nakes will acquire the Israeli company On-Truck (OTI) for $ 4.5 million, which is also involved in the field and has run into difficulties. In the first nine months of 2021, On-Truck generated about $ 10.7 million (of which $ 1.2 million was recurring revenue from existing customers), reflecting an annual revenue rate of about $ 14 million. On Track, which operates in 55 countries, has developed alongside payment systems for vending machines, also terminals for ATMs, self-service kiosks and payment stations for public transportation, as well as fuel solutions for gas stations and vehicle fleets.
Nakes issued in Tel Aviv in the second half of last year at a value of $ 930 million before cash, and $ 1.137 billion after that ($ 207 million was raised). Although this was a time when sentiment in the markets was much more positive than it is now, at BizPortal we criticized the value offered in the IPO and concluded that on Wall Street, to which the company now addresses, it could not have received such a value.
And here, results have improved, more machines are being sold, the more profitable part is taking up a larger share of revenue, and even acquiring new activities. Nevertheless, since the start of trading in May, the stock has lost close to 40%. In other words, it will come to Wall Street with better numbers but a lower value than what the investors in Israel gave it.
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