OptiCept Q2’24 flash comment: Strong revenue growth but slower than our expectations

OptiCept released its Q2’24 report this morning, showing increased revenue, a reduced operating loss, and a slowdown in cash burn. These results were mixed compared to our expectations. We had anticipated higher sales volumes, especially in PlantTech, but EBIT was relatively in line. In conjunction with the report, the company announced it would no longer provide EBITDA forecasts, which we interpret as an indication that it is unlikely to meet its previous target of achieving a positive EBITDA for the full year 2024. Our current forecasts predict the company will reach positive EBITDA in 2025, so this aligns with our expectations. We will update our estimates, valuation, and recommendations by tomorrow.

High revenue growth but slower pace than expected

OptiCept's revenue increased by 117% to 4.8 MSEK, falling short of our 9.4 MSEK estimate, mainly due to lower-than-expected sales volumes in PlantTech. PlantTech revenue (~0.2 MSEK) was well below our forecast of 2.8 MSEK, and we were surprised to see that the ongoing commercial contracts in cut flowers and cuttings have not yet contributed more significantly to revenue. On the other hand, FoodTech revenue (~4.6 MSEK) continues to grow, although at a slower pace than anticipated, likely because the company has not yet started to deliver its breakthrough order from FPS. The order book stands at 61.3 MSEK, which is roughly in line with our expectations, as a significant portion is tied to undelivered OliveCept systems and orders from FPS.

Overall, OptiCept’s investment case remains focused on long-term commercial success, so we are not overly concerned about weaker revenue in a single quarter. Instead, we are more focused on the progress of key partnerships that can drive large orders and eventually convert them into deliveries and revenue. In this context, OptiCept performed well in the first half of the year, making significant progress toward broader commercialization within FoodTech for solid foods, including securing its first large-scale order (60 MSEK) from partner FPS. Additionally, the company has several ongoing evaluations with global companies like Dole and Chrysal, which we believe are critical to its growth prospects. We expect updates on these projects in the next quarter.

Cost control improves, but profitability remains negative

OptiCept's Q2 EBITDA and EBIT remained negative at -6.3 MSEK and -9.7 MSEK, respectively. However, the company managed to reduce its fixed costs by approximately 14% year-over-year through cost-saving measures, roughly in line with expectations. Regarding cash flow, the report met our expectations, with a negative operating result and continued investments in technology putting pressure on free cash flow. The 18.7 MSEK loan received in June partially offset this negative effect.

OptiCept ends EBITDA forecasts

In connection with its Q2 report, OptiCept decided to stop providing EBITDA forecasts, which we interpret as a sign that the company will likely not achieve its previous goal of positive EBITDA for the full year 2024. Our current forecasts predict the company will achieve positive EBITDA in 2025, consistent with expectations. Our full-year revenue estimates for 2024 and 2025 are approximately 47 MSEK and 89 MSEK, respectively. To meet these estimates, OptiCept must ensure timely deliveries to FPS, increase order intake, and successfully convert more of its order backlog into deliveries. Based on our initial assessment, there do not appear to be any major unexpected setbacks concerning the delivery to FPS or ongoing evaluations. Therefore, we initially see no immediate need to make major adjustments our expectations regarding the timelines for OptiCept’s projects in the short or longer term, at least for now.