Current status
Macro is admittedly more interesting now, with rising inflation and interest rates. We, however, prefer to have our focus on the companies and their business models.  How are the companies developing in TIN New Technology? Are digital companies still fundamentally strong? How are sales developing, and are the scalability still solid overall? Below is a summary from the Q3 reports for the 10 largest positions in the fund.

Evolution
Evolution is the live casino giant that delivers streaming experiences to gaming operators. During the quarter, NoLimit City was successfully implemented, which strengthens the business' offer in slot games.

Operating income increased by 37 percent to EUR 379 million and earnings per share rose by 42 percent due to improved profit margins.

The company handles increased costs on energy and wages excellently. Evolution repeats the forecast of an EBITDA margin of 69–71 percent for the full year and shows good growth in all regions. Evolution proves once again that they are one of Sweden's absolute most well-managed company in a growing industry.

Embracer
Founder and major owner Lars Wingefors is the CEO of Embracer, which acquires, develops and publishes PC, console and mobile games globally.

Revenue increased by 190 percent to SEK 9.6 billion. The increase in revenue is primarily driven by acquisitions but the organic growth was also solid, 35 percent. Adjusted EBIT increased by 115 percent and amounted to SEK 2.1 billion.

The company, which has around twenty AAA games in its pipeline, aims to collaborate with a partner to "improve predictability, reduce business risk and have positive effects on cash flow and profit." In addition to the upcoming cooperation agreement, Lars opened for possible spin-offs to increase shareholder value. This possible manoeuvre, combined with lowered guidance for the current financial year was met with scepticism by the market. Although the company has opened for some changes in the group, the main strategy is intact. Wingefors has "still strong faith in the decentralized business model, built on experienced and successful creators and entrepreneurs."

Surgical Science
Surgical is a world leader in robotic surgery and simulation. With Surgical Science hardware and software, future surgeons can practice operating in a simulated, realistic way. In the long term, Surgicals software used for robotic surgery could become a game-changer for operations on a global basis.

Net sales amounted to SEK 205 million, an increase of 115 percent compared to the corresponding period last year. Organically, the company grew 39 percent. Earnings per share rose by 70 percent.

Chemometec
The company develops instruments for cell counting and cell analysis. In addition to research companies focused on cancer, the customers are also universities and food companies. The case in Danish Chemometec is primarily focused on the recurring revenues from consumables, which grows in symbiosis with increased instrument sales.

Chemometec reports a revenue growth of 34 percent to 114 million Danish kroner. EBITDA rose by 50 percent, driven by the strong EBITDA margin of 57 percent.

Solid growth with scalability can summarize the company's operational development. 

Kindred
Betting operator with flagship brand Unibet. Industry leader in sustainability. The only operator in the world to report revenue numbers from high-risk customers, those at risk of addiction problems. The ambition is to eliminate those revenues all the way to zero in the near future.

Total revenue fell by 7 percent to 278 million British pounds. Underlying EBITDA decreased by 52 percent and amounted to 40 million pounds. At first glance, it looks weak. But, compared to the second quarter, both EBITDA and cash flow increased significantly. This highlights the importance of revenue growth in the digital, scalable gaming company. According to CEO Henrik Tjernström, the company has had a flying start on its return to the Netherlands and predicts a market share of 15 percent by the end of the year.

FIFA World Cup in Qatar which started on November 20 is certainly hotly debated but is nevertheless expected to be a party (at least for those of us enjoying the event on the TV sofa) and to drive growth for the entire sector during the fourth quarter.

Paradox Interactive
The company is the leading global publisher of strategy games for PC and console with loyal players. The return of the Jedi, CEO Fredrik Wester, is back. The strategy is to focus even more on the core business, which is to serve the loyal players with grand strategy games. Back to basics has paid off almost immediately.

Turnover amounted to SEK 458 million, an increase of 58 percent compared to the same period last year. Profit after tax amounted to SEK 176 million, which was a clear improvement from last year when Q3 was a loss-making quarter.

The result was driven by a few successful expansions to old games, which players appreciated. As the company has most of the sales in US dollars but costs in Europe, the currency acts as a turbo in the period. After the end of the quarter, Victoria 3, a core game developed by Paradox for many years, was released. The reviews and customer reception are above expectations, which is promising both in the short and long term.

Novo Nordisk
The Danish giant and cash flow machine Novo Nordisk, which in addition to diabetes treatment also tackles the growing problem of obesity, once again reports robust figures.

Sales rose by 28 percent to DKK 46 billion and operating profit rose by 32 percent to DKK 20 billion.

"Imagine if you could take a pill and become thin". Novo Nordisk may not be there yet. But the fact is that their drug is breaking ground in the United States and the company is closing into that wishful dream for the 650 million people who suffer from obesity globally.

CINT
The company is active in digital market research. With 4,800 customers and 252 million connected consumers, the platform is scalable, and the company is dominant in a growing niche.

Net sales increased by 117 percent to EUR 74 million, of which 24 percent organically. The gross margin rose to 63 percent (51).

The company prioritizes continued growth over profitability but shows signs of scalability that needs to be actualized going forward. So far, however, net profit is around the zero mark. Positive tendencies are rising gross margins and the strong increase in revenue in new geographies, which could accelerate growth going forward.

Take-Two Interactive
The American developer and publisher of video games with iconic IPs such as Grand Theft Auto and NBA 2K. Revenue rose 62 percent to $1.4 billion, but the company was unable to capitalize on the large revenue increase contributed by major acquisition Zynga and reported a loss during the quarter.

The company also lowers expectations for the full year and refers to a tougher mobile game market. In the long term, however, CEO Strauss Zelnick is "very optimistic about the large, long-term growth potential of mobile gaming." With that said, we have not even mentioned the future release of GTA6, which is a huge event for most of the gamers out there. Many of us share the passion for GTA, and even we at TIN Funds have crashed a few digital cars in the game over the years.

BioGaia
The company develops, markets, and sells probiotic products. Are perhaps best known for the colic drops that help both parents and babies cope with everyday life by relieving the stomach pains of the very smallest. 50 of those daily doses costs SEK 199. We suspect that the willingness to pay for those drops are significantly higher for parents who are desperately comforting their screaming child.

Net sales rose by 48 percent, partly thanks to favourable currency effects, to SEK 258 million. Acquisition of Nutraceutics contributed, but organic sales growth was strong and totalled 21 percent. Earnings per share rose by 52 percent.

Summary
The performance of the positions, with a few exceptions, are solid. The trend from previous reporting periods holds up – the health of the digital business community is still good. The companies are growing both organically and via acquisition. A handful of the companies above reported satisfying scalability, despite a tougher environment. 

Joel Forsberg

Q3 reports in TIN New Technology summarized

Markets around the globe have had a rough couple of months due to hardware shortages, rising inflation, and incresing interest rates. Add to this a terrible and recklessly war in Europe and it's starting to look like a perfect storm. Stock market indices are experiencing high volatility (mainly downwards), and tech and real estate have been especially volatile. However, investing in a fund is much more than just numbers on a screen. You're taking part in proven business models and strong cash flows.

So, how have the holdings of TIN New Technology developed? Have the growth and profitability plummeted as the prices on the stock market would suggest? Or are software businesses that are independent of hardware shortages not affected? Below, we're summarizing the Q1 financial reports of the top ten holdings in the fund.

Evolution offers live casino experiences to casino operators. Except for classic games like Roulette and Blackjack, Evolution has developed several new games that have been very successful, some of these are Crazy Time and Lightning Roulette.

The company grew its revenue by 39 percent in the quarter and earnings per share rose by 50 percent. The CEO Martin Carlesund says they do not have the capacity to meet the enormous demand, which confirms our belief that there's still room to grow. They have previously communicated that they're playing to release 88 new games during 2022. They presented some of these games on the 8th of February and they look very promising.

Founder and major shareholder Lars Wingefors is CEO of Embracer Group which is acquiring, developing, and publishing PC and console games globally. The company has a huge portfolio of brands and a vast pipeline of games in development.

Net revenue was reported at 5,229 MSEK which was an increase of 117%. Operating EBIT increased by 17% to 1052 MSEK. Since the start of the year, Embracer has emitted shares at a premium and acquired more studios. The latest series of acquisitions included: Crystal Dynamics, Eidos Montreal, and Square Enix Montreal. According to experts, the pricing was chocking low considering the well-established brands that were included.

"The stars were aligned, under other circumstances, the price could have been a lot higher", CEO Wingefors says about the deal.

Surgical Science is number one in robotics for surgery. One of their business areas is giving soon-to-be surgeons the ability to practice in a simulated environment. Doing this decreases the number of incidents during surgeries, fastens recovery, and makes our healthcare system for efficient. In the long term, Surgical Sciences' software can change the way we think about what surgery is.

The company's revenue increased by 328 percent to 159 MSEK. Of that growth, 32 percent was organic. Profits grow by some 1000 percent from low numbers and amounted to 16 MSEK. Surgical reiterates that it seems likely they'll reach their financial targets of having 1.5 billion SEK in revenue by 2026 and an EBIT margin of 40 percent.

The company is active in digital marketing surveys. They have more than 3000 customers and 149 million connected consumers to their platform. The platform is scalable and the company is in a strong position in a growing niche market. By using CINTs' services it's never been easier to acquire relevant data about buying habits and demand for products and services.

The company reported revenues of 67 MEUR which was an increase of 139 percent. The organic growth was 28 percent. The gross margin increased to 61,3 percent and the EBITDA margin decreased slightly partially due to the acquisition of Lucid. The bottom line was close to zero.

The company develops instruments for cell counting and cell analysis. Their customers are research companies, universities, and food companies. What makes Chemometec interesting is the recurring revenues they have from consumables. If a customer has bought an instrument they'll have a need for consumables for that machine in the future. The sales of instruments increased by 76 percent in the quarter which is a good sign for an increase in sales of consumables going forward.

Their revenue increased by 60 percent to 112 million DKK. EBITDA was reported at 59 million, that's an increase of 86 percent from the previous year, which says a lot about the abilities of the company to scale.

Novo is a giant in pharmaceuticals and number one in the treatment of diabetes. They also have promising pharmaceuticals for obesity.

Sales increased by 24 percent to 42 billion DKK and operating profit increased by 28 percent to 19 billion DKK.

Paradox is the global leader in the publishing of strategic games for PC and console. Their games are known for having high quality and being challenging, which has given them a loyal community of players. 

Their revenue increased to 476 MSEK, that's an increase of 31% from the previous year. Profit after taxes was 169 MSEK, which was an increase of 120 percent. The CEO Fredrik Wester states in the report that except for reporting a record high result they have the strongest pipeline of projects in the company's history.

Operatore in the casino business and owner of brands like Unibet and Maria Casino. They're a leader in sustainability and is the only operator in the world to report the share of revenue that's attributed to high-risk customers, that is customers with a risk of problematic gambling.

Their revenue decreased by 30 percent to 247 million British pounds and underlying EBITDA decreased by 77 percent to 25 million pounds. The falling result was primarily explained by a temporary ban in the dutch market. On the 8th of June, the company published a press release saying they've secured a license, and that unibet.nl will launch within a few days.

Their primary business is supplying innovative treatments for rear diseases.

Their revenue increased by 35 percent to 4.9 billion SEK. Adjusting for restructuring costs and loss of customers in Russia their earnings rose by approximately 50%.

The American developer and publisher of video games with iconic titles like Grand Theft Auto and NBA 2K. At the start of the year, they announced the acquisition of Zynga, for a price tag of 12.7 billion dollars. The rationale behind the acquisition was to broaden their business and getting a cut of the fast growing mobile gaming market.

Revenue increased by 11 percent to 930 million dollars, and their profits decreased by 49 percent and amounted to 111 million dollars.

Overall the reported figures of the top ten holdings have been predominantly positive. Admittedly, Kindred's results were lower than excepted. And you might have expected more from CINT but we're giving them some time to incorporate the acquisition of Lucid. However, the number of companies that exceeded expectations was far more. Chemometec, Paradox, Novo Nordisk, and Evolution all reported solid growth and showed they can scale their business.

The average growth rate of the top ten holdings was 69 percent. Acquisitions make up a large part of the growth, but the organic growth was impressive as well. Like we've said before, in the long term we're convinced that stock prices follow profits. In 2020 share prices rose faster than the profits. In the last five quarters, we've seen the opposite happen. 

Summary of the reporting period

TIN Fonder has assessed the public cash offer for Swedish Orphan Biovitrum AB. In the assessment of the offer, we have also incorporated an opinion of valuation from external valuation providers and expert networks. Our conclusion is that the current cash offer does not fully reflect the mid-term improved outlook for the ongoing business and long-term growth prospects of the Company.

Public cash offer by Advent and GIC of SOBI

Following the recent change of management in Admicom where Antti Seppä is to leave as the company CEO we think there is a need for structural quality steps in the governance of Admicom.

We see great potential in vertical software traveling well and are optimistic about Admicom’s possibilities to grow internationally, not least via acquisitions. In this effort we think the below is necessary to set the direction going forward and ensure value for shareholders:

1. We would view the institution of a nomination committee for selecting board members as a very positive step in the direction of quality and maturity of the company. A nomination committee should be instituted by the AGM and consist of the four largest shareholders at a cutoff date during the fall.

2. We would like to see the following people on the board:
• Matti Häll
• Pasi Aaltola
• Sami Kettunen
• Simo Huvila
• Olli Nokso-Koivisto

3. To balance the interests of all shareholder groups, we think it would be best with an independent chairman. Among the independent candidates above we think either Sami Kettunen or Pasi Aaltola would be the two best candidates to act as independent chairman as they already are members of the board.

4. All investor information should be available on both Finnish and English starting from Q1 2021.

We believe that Finland needs a stronger cluster of digital champions that can grow internationally and acquire US, European including Swedish companies. We hope that the days are over where a Microsoft acquires a significant part of a Nokia – it should be the other way around! We want to actively promote more successful international Finnish software companies. In this effort we think the above steps are crucial in the realization of those ambitions.

Statement Admicom Ahead of AGM