Huddly AS “We build things that see”

Stocks
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I’ve been meaning to start a thread for Norwegian Huddly for a while now.

This is a recent IPO case from Norway, listed on the Norwegian Merkur Market in February of this year. Before this, the company was on the (N)OTC list.
ISIN: NO0010776990

In all its dullness, the company manufactures cameras. It’s worth getting to know the company by reading their latest company presentation, which can be found here: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwjekI-8yMbvAhXk-ioKHYakAdwQFjABegQIBBAD&url=https%3A%2F%2Fwww.huddly.com%2Fcontent%2Fuploads%2F2021%2F02%2F080221-Huddly-Investor-Presentation.pdf&usg=AOvVaw1xY2Fau52ENMxbkcD0EpDi

Q4 report here: https://www.huddly.com/content/uploads/2021/03/Huddly-Q4-2020-Report.pdf
Q4 presentation here: https://www.huddly.com/content/uploads/2021/03/Huddly-Q4-2020-Presentation.pdf

Information document available for download here: https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjAn5HsyMbvAhXt-yoKHdQuDIAQFjAAegQIBBAD&url=https%3A%2F%2Fwww.huddly.com%2Fcontent%2Fuploads%2F2021%2F02%2FHuddly-AS-Information-Document.pdf&usg=AOvVaw2gyoHJ8J2aUOhLYc0wRn95

Nowadays, it seems to be the custom not to bother opening links, so here are a few screenshots.

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2021 guidance

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Today, a partnership with Mersive Technologies was announced: NewsWeb

Previous news

I own shares in the company. This is not an investment recommendation, etc.

Edit: @III21 It’s here :slight_smile:

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Ostin/myin juuri äsken -ketju (Osa 2)
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Thanks Jaska for the opening! One might quickly think that such camera solutions are quite a bulk commodity. However, what I myself have had time to learn about the company, there are differences in these camera solutions. For example, the company presentation itself already gives a basic understanding of the technology used by Huddly.

To my eye, Huddly products seem to be technically high quality and the company even owns patents for its solutions: https://patents.justia.com/assignee/huddly-as

However, I can’t say myself whether these patents still constitute a significant competitive advantage. In any case, these also strengthen my belief in Huddly’s products, together with the fact that Google has chosen the company as a partner.

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Thanks, Jaska! From a technology standpoint, I can’t really assess how Huddly’s cameras compare to competitors. The prices are at least several times higher than others, and is features like Genius Framing something people are willing to pay for? I don’t think many others had a 150-degree wide-angle either?

Here are the patents the company holds:

https://patents.justia.com/assignee/huddly-as

I’m also in with a small stake, mainly based on the numbers; the valuation seems cheap, especially if they can hit their guidance.

The partners are certainly impressive; here’s the press release for the B&O partnership agreement:

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The number of partnerships says something about the quality of the product. A really large number of great partners whose bundles include cameras!

The most significant, in my opinion, is the collaboration with Google. Taking into account that sales of the Google Meet series have started in Q3-4 2020, significant growth will still be generated from there.

And this is not bulk camera sales; software and AI are included in these cameras, and they are seeking a bigger competitive advantage in configurable cameras with them. As Huddly itself says, these are not web cameras, but collaboration cameras :wink:

In my opinion, people often forcefully look for a specific competitive advantage in these situations, etc. However, the figures and guidance tell the raw fact of how the product performs in the market.

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I often find that these cases tend to force the search for a specific competitive advantage, etc. However, the numbers and guidelines tell the raw fact of how the product performs in the market.

I completely agree with Bansku. Potential competitive advantages are not the key to this case. However, it’s definitely a plus that the products stand out positively from many of their competitors.

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If the company achieves its 2021 guidance, the P/E ratio will reach 17. Even if the growth rate drops to, say, only 25% of the current rate after that, I still consider it a relatively affordably priced company.

As always, do your own due diligence. I am not a financial advisor.

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Huddly apparently uses at least two different contract manufacturers. Flextronics was announced in at least the Q3 report:

Huddly signed a contract manufacturer (CM) agreement with Flextronics Industrial in Poland in Q1 2020 and has started manufacturing in Q3 2020, as Huddly’s second CM.

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Nah, I don’t think it’s that low, with the given range and the same result percentage, the P/E would be 21-26?

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Thanks @jaska1 for starting this thread. I’ve been going through the company’s financials and materials for the past few days, and in terms of numbers, it’s a very promising case. What’s interesting here is that the share price has occasionally dropped below 15.50 NOK, which was the IPO listing price in February.

A few points:

  • Huddly’s team is very experienced and has a background with Cisco (Cisco acquired Tandberg, a Norwegian video conferencing technology company, in 2010).
  • Huddly focuses on small and medium-sized meeting rooms and their technology. Especially small meeting rooms, “huddle rooms,” are growing at a tremendous pace due to future hybrid work, i.e., partial remote work.
  • The products are not webcams (except for the Work From Anywhere kit), but cameras intended for video conferencing. Their prices are around a thousand euros. Based on a quick Google search, Huddly’s products are even very competitive in terms of price.

I see a major risk in the concentration on a few partnerships (Google, Lenovo…), but Huddly is trying to grow the potential market by offering additional products that support its product portfolio (e.g., Whiteboard camera). The company has communicated that they are constantly developing new products, and I believe this was also mentioned in the IPO materials.

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Yes, especially when you see how sales costs haven’t really grown at all even as revenue increases.

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Huddly has today released a new product called L1, which is a conference camera specifically for large meeting rooms. A peculiar move, as they previously stated they would focus on smaller spaces.

Pre-orders begin in April, with deliveries in June.

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Here’s the stock exchange announcement on the matter

Edit: Let’s add this quote as well

“Huddly does not expect significant revenue impact from the new camera in 2021 and does not change guided revenue for 2021.”

My gut feeling says that this year’s guidance is likely on the low side. New products, new partnerships, but no impact? Either these are very well predicted in advance or the guidance has been given conservatively.

Hopefully the management’s guidance is “underpromise, overdeliver” :slight_smile:

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I also slightly doubt that new products and partnerships wouldn’t affect sales. That same sentence is in every previous stock exchange release :smile:

This new product also responds to a slightly different kind of demand, namely for larger spaces.

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{“content”:“Could those who have followed the company longer explain what happened to the share price at the beginning of the year? I understood from the opening post that they listed on the stock exchange from Merkur Market. Is it like Norway’s Privanet, where there was a split upon listing?”,“target_locale”:“en”}

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From NOTC we came to the stock exchange, Merkur Market. NOTC is a bit like Norway’s Privanet, but in my opinion, of higher quality.

Edit: Darn it! Merkur Market no longer exists since Euronext acquired Oslo Stock Exchange, and now Merkur Market is Euronext Growth.

Regarding the split:

Huddly AS – Share split

Posted 02/02/2021

At the extraordinary general meeting of Huddly AS 29 January 2021 a decision was passed to split each of the Huddly AS shares at a ratio of 1:16 (1 existing share gives 16 new shares).

After the split, the share capital of the company is NOK 119,517.14 divided into 191,227,424 shares each having a nominal value of NOK 0.000625.

Last day for the Huddly AS share before the share split is Tuesday 2 February 2021.

First day after the share split is Wednesday 3 February 2021 (Ex. date).

Record date: Thursday 4 February 2021.

Date of approval: Friday 29 January 2021.

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The market seems to have really high expectations, seeing as new products and partnerships are being rewarded with this kind of stock reaction. Well, it’s only March, so there’s plenty of time to raise the guidance for 2021 if/when things continue to go well.

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Found from Shareville.
ABG out with analysis on Huddly. Target NOK 24

Excerpt from the analysis; Huddly is trading at ‘21st and’ 22nd EV / EBIT of 22x and 13.5x, respectively, which is ~ 50% below Nordic high-growth tech peers. This is despite having significantly higher growth. This discount is unjustified, in our view. Hence, we initiate coverage with a BUY recommendation and TP of NOK 24 per share, corresponding to a '22e EV / EBIT of 23x and a ~ 70% upside to the current share price.

Edit: Here’s the confirmation: https://twitter.com/ResearchPool/status/1375390585733844992?s=20

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Assuming the midpoint of the revenue range is 550 MNOK and the gross margin is 50%, that’s 275 MNOK. Subtracting the indicative sales costs for 2020 of 100 MNOK gives an EBIT of 175 MNOK. With 20% taxes, the net profit remaining is 140 MNOK, resulting in a P/E of approximately 23.5 for 2021.

This includes the assumption that sales costs will not increase at all, and all other costs will remain as they are. Of course, the company intends to invest in R&D, meaning costs will increase, which is good for continuity but doesn’t make this investment cheap based on P/E. Perhaps Sillinkutoja calculated it exactly this way, because this results in precisely the P/E range of 21-26.

The company says that the growth is not due to the coronavirus and that they would have grown this way anyway. I, myself, would argue that it’s okay to be skeptical :smiley: Doesn’t the fact that video conferencing has become practically mandatory affect the sales of conference cameras? And won’t the gradual fading of the coronavirus reduce demand for these cameras at all? Yeah…

An analysis like “this should be paid more because others are more expensive” is quite weak when earnings-based valuation won’t catch up for a while. Perhaps revenue will almost double in 2021, but what then? Surely they have quite good sales, but such an EV/EBIT 2022 forecast requires strong growth even after the coronavirus. There’s only room for gross margins to mostly go down and for other operating costs to mostly go up.

Plus, this is retail, not tech, insofar as the company gets its revenue from selling cameras. That’s okay in itself, as long as money just keeps coming in, and this doesn’t seem like a bad company at all. Plus, their cameras in my opinion are good. In particular, I would argue that now, with video conferencing being very in, such a high-quality product could have practically sold itself, but of course, sales costs will now increase in retail as sales grow somewhat normally.

It just ought to be a tiny bit cheaper in case the coronavirus genuinely boosted video conferencing camera sales significantly and temporarily. I don’t think this risk can be ignored, because it leads to projections like ABG’s being misleading.

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In a way, your claim is not very convincing if we’re talking about setups designed for conference rooms. The corona era has hardly increased the demand for those, because offices’ meeting rooms and other spaces have been underutilized due to remote work. Instead, video conferencing will 100% certainly grow in the post-corona era, as it has finally been realized that things can and should be done remotely.

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This is of course my personal experience and as such not necessarily representative. However, I have previously experienced “ordinary” meeting rooms, lecture halls, etc., being equipped for video conferences due to the desire to avoid travel and the desire to hold more video conferences.

At the same time, it may also be true that spaces originally intended for video conferences are emptier on average than before. These are not even mutually exclusive things. In addition, it is certainly likely that growth will continue after corona, but the slope of the curve is more concerning.

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