Thinc's width creates stability

Third quarter 1 July – 30 September 2023, the Group

• Net sales for the period amounted to SEK 66,606 thousand (SEK 64,553 thousand), which corresponds to an increase of 3%.

• Gross profit (Agency income) increased by 31% to SEK 17,309 thousand (SEK 13,215 thousand), the gross profit margin also increased to 26% (20,5%)

• Operating profit before depreciation EBITDA increased to SEK 1,811 thousand (SEK 421 thousand)

• EBITDA margin for the period increased to 2,7% (0,7%)

• Result after net financial items for the period amounted to -685 thousand SEK (-1,604 thousand SEK)

• Net earnings per share after tax amounted to SEK -0,04 (SEK -0,09)

• Cash flow from operating activities amounted to -11,906 thousand SEK. The low cash flow is due to a high level of capital tied up in accounts receivable, which is significantly affected by a single receivable from a customer of 12,000 thousand SEK. This receivable was paid after the reporting date.

• Equity as of September 30, 2023 amounted to SEK 47,418 thousand (SEK 56,859 thousand)

• Cash and cash equivalents as of September 30, 2023 amounted to SEK 5,596 thousand (SEK 15,431 thousand)

The period 1 January – 30 September 2023, the Group

• Net sales for the period amounted to SEK 204,970 thousand (SEK 228,236 thousand), which corresponds to a decrease of 10%.

• Gross profit (Agency income) increased by 19% to SEK 56,555 thousand (SEK 47,501 thousand). Gross profit margin increased to 27,6% (20,8%)

• Operating profit before depreciation EBITDA increased to SEK 5,316 thousand (SEK 3,999 thousand)

• EBITDA margin for the period increased to 3,5% (2,1%)

• Profit after net financial items for the period amounted to SEK 223 thousand (-1,054 thousand)

• Net earnings per share after tax amounted to SEK 0,02 (-SEK 0,04)

• Cash flow from operating activities amounted to SEK -6,450 thousand (SEK 7,820 thousand).

The low cash flow is due to a high level of capital tied up in accounts receivable, which is significantly affected by a single receivable from a customer of SEK 12,000 thousand. This receivable was paid after the reporting date.

Important events July 1 – September 30, 2023

• Thinc Collective launches new full-service digital agency, Tundran Digital Explorers AB

• International company chooses Context Media AB as media agency partner for the Swedish market – the assignment is valued at over SEK 13 million over a rolling 12 months

• Nordic Fast Food chooses Context Media AB as its media agency partner for the Swedish market. The agreement is estimated to be worth approximately SEK 5 million.

• Safir Communication appoints Sabine Söndergaard as new Chairman of the Board

Important events after the end of the period

• Nowa Kommunikation wins renewed competition and will be responsible for the Election Authority's media strategy and purchasing for the EU elections in June 2024 to the EU Parliament. Nowa estimates the sales value at approximately SEK 12 million.

CEO has the floor

Our breadth creates stability

After a very strong first quarter, we had a more neutral second quarter again followed by a strong third quarter compared to previous years. The growth rate, measured in Agency Revenue (gross profit), is consistent and reliable over time. Thinc is also both quick to adapt internally and has offerings that stand strong in both boom and bust cycles. This makes Thinc a secure and constantly growing business and supplier.

Developments in the various operations

In the current recession, it is those in the more traditional advertising agency operations that are most clearly affected, which applies to the entire industry. Our media operations within the Performance Business Area are improving. Nowa Kommunikation has had its best year ever so far and Context Media is developing very well. 

At Thinc, it is primarily within the Creatives Business Area that we are noticing a certain decline. We are meeting this by quickly shifting to hiring out consultants, learning new skills and broadening our market outside the Nordics. 

I am very pleased that our digital investment within AO Digital Solutions is developing nicely and solving more and more complex problems. The merger of Tigerton, DNA Agency and Nowa's digital marketing department; Nowa Digital Labs which together became Tundran Digital Explorers create critical mass and volume for better profitability and increased innovation. Websearch has also entered the group incredibly well and is creating great synergies through his creativity and innovative ability that can be utilized for all of Thinc's customers.

Safir Communication is our largest acquisition in 2023 and has made our AO Strategy stronger and its offering broader. Overall, the business area is developing very well, but Q3 is significantly weaker than both Q1 and Q4 for seasonal reasons.

Our global partners are also discovering us more and more and we are receiving more inquiries than before about challenges to be solved in the Nordics. Some of them we are honored to actually work with and others do not quite reach the goal, but the awareness, attraction and courtship are growing. Overall, Thinc and Thinc's various companies have concluded many new customer agreements over the year; more than ever. The industry is decreasing by a total of 6% accumulated this year (22% in August alone) according to the Swedish Media Agencies' report 2309, while we are increasing agency revenue by 19% during the same period. The signal about our solution power towards customers' needs is thus clear. A decline in one area is thus more than offset by growth in others.

AI integration enhances Thinc's offering and productivity

AI is, in short, a more self-taught system/program code/tool ​​than we have seen before. Artificial Intelligence is in reality a system that learns from itself. And that in a short time takes in infinite amounts of information to learn from. A double-edged sword is spreading all over the world about AI: it is both the enabler and the greatest threat of our time. Regardless, AI is here and Thinc has focused on mastering the tools for the best benefit. Whatever the systems give us, we need to be one step ahead to develop and use the tools and not the other way around. And who is better at using communicative AI tools than very experienced and innovative communicators? No one, we believe and aim to be the best at AI in our industry. We also see the danger around integrity, lack of work and manipulation, but by using the tools early in development and by taking the dangers into account in parallel with use, Thinc becomes a desirable supplier. A partner that can and will continuously be able to do even more.

With AI, it becomes even clearer that our media business will soon consist largely of technology, i.e. Mediatech* means that our analysis, strategy and PR departments increasingly use technology and digital solutions, and thus become MarTech**, and that we use systems, technology and AI across the board to package, productize, and make simpler and better solutions. Comtech*** technology and productization are therefore a large part of Thinc and our success. AI strengthens Thinc's total offering. 

Measures focused on increased profitability

Thinc is and has always been quick to adapt when the market changes. With our breadth, we always have disciplines that are in demand and we utilize the internal labor market and work with resources in layers upon layers that make it easy to scale up or down. A savings program initiated this summer and with the greatest leverage from Q4 onwards reduces approximately 3,5 MSEK on an annual basis in our total cost base without slowing down our growth in any way. We will continue to adapt the business as needed, and work to build larger and more profitable units through the synergies that arise from co-location and critical mass. As a step in this work, we hope to be able to present a solution for co-location in Stockholm soon. A broad but well-connected portfolio and a vigilant awareness of the market, our customers and what is in demand mean that Thinc has the right staffing and cost picture.

Our immediate future

2023 is the first year for the Thinc Group with performance management linked to incentives all the way from the Group CEO to every employee in subsidiaries and associated companies. It is a first step towards consistency and focused power. The accumulation of power is noticeable in the results and we look forward to our evaluation. 

As always, we are in dialogue with potential acquisitions. In a recession like the current one, we are extra responsive and extra attentive to opportunities.

In the previous report, I described how we are working on staffing reviews, synergies in economies of scale and continued intensified new customer work. The work described in detail above has already had an effect in Q3, but the effects will become clearer in Q4 and especially in 2024. We are focused on creating shareholder value through results, cash flow and dividends together with innovative use of technology. We will continue to develop our business optimally and deliver increasing results that are made clear through good communication to the market. I am convinced that this will be reflected in the share price in the long term.

Anders Wallqvist, CEO

Gothenburg in November 2023

*MediaTech (media consulting is integrated with technical solutions and productized)

** MarTech (that marketing solutions are increasingly based on AI, digitalized collection of analysis and that the solutions are as much technical products and services as previous strategic advice)

*** ComTech (that the entire communication chain is connected in a digitalized value chain where technology and advice go hand in hand)