Let’s talk to myself again about my thoughts on the potential of Panostaja’s CoreHW. This is not a sales pitch or an investment recommendation, but rather my own thoughts on why I am involved in this and what I perhaps see in it that others don’t believe in.
CoreHW employs an exceptionally high number of doctors (PhDs) and high-level experts with long experience in similar undertakings. This creates a unique moat in this niche industry.
The IP portfolio is extensive and has its own value. Design and customization ensure more flexible operating models. They don’t just sell bulk.
The number of employees has been increased by 20% over the last year, and there’s an open position being sought again. Would this be done if they weren’t preparing for a significant increase in workload and demand for their own product?
The RTLS (Real-Time Locating System) positioning product is ready, which has been a long-term effort. In my opinion, CoreHW has handled this exemplarily. They have researched the market and responded to demand with this product. Certifications have been obtained, although it has been mandatory as they are required in several countries before deployments. CoreHW also has an extensive collection of ISO certifications for this indoor positioning.
- ERAI Member
- ESD Association ANSI/ESD-S20.20
- AS 9120B Certified
- ISO 9001 Certified
- ISO 13485 Certified
- ISO 14001 Certified
- ISO 22301 Certified
- ISO 28000 Certified
- ISO 37001 Certified
- ISO 37301 Certified
- ISO 45001 Certified
This set of certifications covers quality management, environmental responsibility, occupational health and safety, information security, supply chain management, medtech requirements, as well as regulatory and ethical systems. It supports CoreHW’s ability to work with global Tier1/OEM customers, especially in the RTLS and IP product model.
Not much has been written about this, but I believe CoreHW has the potential for very high hardware margins.
The software side, as I understand it, has been outsourced to Unikie, which is responsible for the software, API interfaces, software development, and maintenance. I suspect that compensation for this is handled through SaaS revenues, the distribution of which between Unikie and CoreHW depends on agreements. This implementation can be a SaaS, hybrid, or on-premise model. In any case, Unikie will take the lion’s share, if not all, of these revenues. There may also be licensing; for example, a customer might pay for software usage rights, updates (e.g., for tags), cloud service, maintenance, technical support, integrations, cybersecurity, etc.
What does this mean for CoreHW? CoreHW can focus on what’s essential: design and hardware. Scaling is handled with a fabless model, i.e., through TSMC. Furthermore, the design services themselves have so far covered virtually all costs, from office rents to salaries. This means that the hardware margin generated from future sales could very well be with a very high margin and EBIT.
A pilot project base of about a million is large, and depending on the scale of deployments, very significant sales revenues can be achieved. How will these potential sales be distributed? Will the entire lump sum come in the same year, or will it be spread over several years? I believe that at least for the largest orders, it will be spread out. Is this a good or a bad thing? I believe it’s primarily a good thing. Investors value a pipeline where predictability and accelerating growth are important. It would be worse if sales came in all at once and then collapsed the following year, even if the start was strong but then sales didn’t pick up in the same way. Predictability also often boosts those multiples.
Several pilot projects have been ongoing for a long time. Is this a bad thing? In my opinion, no. If the products were weak, the pilots would have already been discontinued. In different sectors, these pilots can last up to 3-18 months.
The message I’ve linked before is that pilots have progressed, and customers have moved them into production. This is encouraging.
Tommila’s statements that the fiscal year-end in Japan falls in March-April are true. It is very likely that major decisions will be made around that time or at the latest before summer.
This RTLS is not even the only sector where CoreHW is lurking and working. Automotive and collaboration with a Fortune 500 company could still bring more interesting prospects. The radar was already ready, but also other things.
They operate in an industry that is currently hot. Growth prospects in these sectors are very good. Compared to that, the valuation is ridiculously cheap in my opinion. There is risk here, somewhat limited by their existing design business which already generates revenue, but the potential to truly hit the jackpot is there.
Everyone sees things from their own perspective, but I see the earnings potential here as such a good opportunity that I have carefully increased my risk. Perhaps by summer, it will materialize in one direction or another.
I am attaching the relevant text from an article I previously linked. And what does this mean in practice? At least for me, it means that pilots have partly moved forward. They have practically moved into production, even if it hasn’t brought a volume increase yet. It probably depends largely on whether the pilots were initially conducted in a real production environment, and how long these will still be tested in production.
Longer validation periods in production are often associated with conservative industries such as hospital environments or, for example, the defense sector.
“The certification of our Tags and Locator validates years of R&D and comprehensive testing,” said Mika Jäsberg, VP of RTLS and Devices Business at CoreHW. “We’re thrilled that several customers are now entering production with these solutions – demonstrating that the technology is not only proven but ready for real-world, large-scale deployment.”
With the certification now in place, CoreHW has begun fulfilling commercial orders for Tag and Locator units. Early customers – including partners in industrial automation, logistics, and healthcare – are now launching production systems that rely on CoreHW’s high-accuracy Bluetooth AoA technology platform.
.
