Initiation of Coverage - Amazon S3

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Initiation of Coverage

Equity Research 2 November 2020

KEY STATS

Ticker BUSER

Market First North

Share Price (SEK) 9.0

Market Cap (MSEK) 1481

Net Debt 20E (MSEK) -335

Free Float 89%

Avg. daily volume (‘000) 600

BEAR BASE BULL

5

12

22

EPS (adj.)

2018 2019 2020E 2021E EPS (adj.) -0.2 -0.3 -0.2 0.1

EV/Sales 38.5 16.7 8.4 4.4

EV/EBIT neg neg neg 43.4

P/E neg neg neg 76.0

ANALYSTS

Forbes Goldman

[email protected]

Fredrik Nilsson

[email protected]

KEY FINANCIALS (SEK

2020E 2021E 2022E 2023E

Net sales 30 72 148 280

Adj. EBIT -38 -69 -39 29

Making Retail Go Live

Redeye initiates coverage of Bambuser, a SaaS company offering live video

solutions. We see an attractive case with rapid growth and strong operating leverage,

underpinned by a strong value proposition delivered at the right time - the stock is

perfectly positioned to benefit from potentially prolonged corona issues. Also, we are

cautiously optimistic on the pending Q3-report (November 6th), forecasting the key

sales figure to have risen to about SEK 9m in the quarter.

Corona winner and first-mover advantage

The corona crisis has had a positive impact on the dynamics of Bambuser’s end-

market. As a result of its market-leading solution and organizational size, Bambuser

finds itself in a unique position to attract large-enterprise customers and high-profile

partnerships. Investments in its go-to-market capabilities seek to further increase the

adoption of Live Video Shopping and to rapidly grow the company’s top-line.

Significant sales and margin potential

Bambuser’s customers include world-leading companies within beauty, fashion and

home furnishing. We identify three main sources of further growth: i) increasing sales

to existing customers, ii) new customer acquisitions and iii) advancing through new

and existing partnerships. We view Bambuser as a highly scalable business, with

high gross margins due to license renewals and usage-derived revenues.

Competition on the way

The anticipated growth in conjunction with the flair of the industry is bound to attract

a variety of competitors. Social media and retail giants have already entered the

space, although at a relatively low scale. If they were to flex their muscles and

capabilities within livestreaming and e-commerce, it could impact the industry

substantially.

+30% upside potential driven by phenomenal sales ramp-up

We expect Bambuser to produce impressive top-line growth going forward: our

forecasts suggest a massive lift from a modest SEK 3m in 2019 to SEK 280m in

2023E. We believe it can deliver long-term average EBIT margins of 31% (during

2023E-2030E). The combination of a solid management, positive momentum and a

clear value proposition makes an attractive case that could generate high long-term

returns. Our Base Case is SEK 12 per share.

Title

Redeye initiates coverage of Bambuser, a software as a service (SaaS) company

offering white-label live video solutions. We see an attractive case with rapid growth

and operational leverage, derived from a strong value proposition, delivered at the

right time. Near-term catalysts include M&A and customer acquisitions driven by an

international expansion.

First-mover advantage

Bambuser Sector: Live Shopping

REDEYE RATING

3 3

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8

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04-nov 02-feb 02-maj 31-jul 29-okt

OMXS 30Bambuser

FAIR VALUE RANGE

Financials

People

Business

REDEYE Equity Research Bambuser 2 November 2020

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Investment Case

Accelerated demand in light of Covid-19

Global retail has taken a severe beating this year following the pandemic and its lockdowns.

The value of Live Video Shopping becomes evident in this setting – an interactive and

innovative solution for brands and retailers to communicate with their customers. Indeed,

brands and retailers within beauty and fashion were early to adopt Live Video Shopping.

However, Bambuser’s customers to date are represented within a multitude of verticals,

including property, home furnishing and home electronics. Without a clear ending to the

corona crisis in sight, we don’t see how demand would slow any time soon.

Enterprise customers and global partners

Although Live Video Shopping was launched in late 2019, Bambuser’s customers and

partners include world-leading billion-dollar companies within their respective verticals. For

example, we believe Bambuser’s customers may include Estée Lauder Companies*, H&M

Group*, IKEA*, Oriflame* and Burberry*, among others (*not confirmed by Bambuser).

Furthermore, it has a partnership in place with Salesforce, the world’s #1 CRM platform,

enabling its customers (99 of FORTUNE 100 brands) to partner with Bambuser.

Revenue scalability

High gross margins (+90%), the result of license renewals and usage-derived revenues,

prove the business’s inherent scalability. The high operating leverage should translate into

significant profitability if it succeeds in increasing the top-line while controlling churn and

acquisition costs. Indeed, our long-term projections tell that story.

Evidence from China

Live shopping has its roots in China, where it has become a mainstream channel to

purchase items over the internet. In 2019, live shopping sales in China amounted to USD

63 billion (approx. 9% of its total e-commerce sales) and is expected to generate in the

region USD 140-170 billion by 2020, according to different market estim ates. Although live

shopping in the West may be 2-5 years behind, the Chinese example serves as an

indication of the potential for strong future growth of the underlying market.

Quality investors and financial position

Bambuser completed a directed share issue in June 2020, raising proceeds of SEK 290m.

Apart from securing an excellent financial position, Bambuser gained investment from

several institutions, including Harmony Partners, Handelsbanken Fonder, Lancelot AM, TIN

Fonder and Tenth Avenue Holdings. Long-term committed institutional investors strengthen

the case and is, in our view, a rubber stamp of its qualities.

Key catalysts

Customer acquisitions

Bambuser has, until now, handled all operations from its Stockholm HQ. With its focus on

international expansion, setting up offices in the US and UK, as well as partnering with

world-leading platforms, we believe Bambuser is improving the odds of winning new major

customers.

Top-line growth

Quarterly reports will be key in demonstrating investors and stakeholders its organizational

and financial development. In particular, Bambuser is expected to rapidly increase its top -

line, given that costs are set to increase materially.

dsfdsf REDEYE Equity Research Bambuser 2 November 2020

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M&A

Bambuser could take advantage of its financial strength and potential market cap to acquire

competitors or start-ups in possession of intellectual property. Given the ambition to

become a leading, global video house, we believe there is an M&A strategy in place.

Counter-thesis

Rising competition

Tech giants like Amazon and Facebook have already entered live shopping, although

catering to a different market segment than Bambuser. If they were to exploit their dominant

positions in e-commerce, livestreaming and data, it could certainly weigh on the industry.

Nonetheless, the market’s significant potential and attractiveness will continue to attract

new competitors, big and small. Bambuser must protect and further develop its edge.

Usage failing to take off

Bambuser has communicated that it expects usage to account for the lion share of future

revenues. If parameters affecting usage, like number of viewers, broadcast length and add -

to-cart ratio don’t achieve the anticipated levels, Bambuser will have to revise its business

model.

Possible ramp-up of costs

Full-time employees are set to increase from a modest average of 13 staff in 2019 to in

excess of 100 in Q4’20. As a result, Bambuser’s staff costs are growing fast. The opening of

offices in New York and London will add further to the cost base. If top-line growth doesn’t

materialize in the coming years, profitability will be compromised accordingly and Bambuser

could see its solid financial position eroding.


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Table of contents

Making Retail Go Live ...........................................................................................1

Investment Case .................................................................................................2

Key catalysts ......................................................................................................2

Counter-thesis ....................................................................................................3

Q3’20 Preview.....................................................................................................5

Background ........................................................................................................6

Retail, e-commerce and data trends .......................................................................9

Live shopping – big in China, new in the West ........................................................ 11

Product/Technology ........................................................................................... 13

Customers – tilted towards beauty and fashion ....................................................... 13

Business model and strategy ............................................................................... 15

Competition in a fragmented market ..................................................................... 17

Financials ......................................................................................................... 20

Valuation ......................................................................................................... 24

Summary Redeye Rating..................................................................................... 25

Redeye Rating and Background Definitions............................................................. 27

Redeye Equity Research team.............................................................................. 28

Disclaimer ........................................................................................................ 29


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Q3’20 Preview

While the H1’20 report was a breakthrough for Bambuser, we believe its positive

momentum will persist and that sales in Q3’20 will net around SEK 9m. Bambuser has

reported on a semi-annual basis but will report its first Q3 earnings on November 6, 2020.

Live Video Shopping licenses will continue to be the most significant growth driver.

Sales in Q2’20 amounted to SEK 5.4m, exceeding annual sales from the two previous

years. To a large extent, this is due to the rapid increase in sales from Live Video Shopp ing,

netting around 80% of total sales in Q2’20. As a result of the subscription -based model and

several commercial agreements materializing in Q3’20, we expect sales to continue on a

positive trajectory. Bambuser is very much at an inflexion point with growth really

taking off from a very low base.

Since Covid-19, Bambuser has scaled its organization, preparing for international

expansion into the US and UK. This has resulted in a ramp-up of costs, and especially

headcount is increasing at a high pace. On average, we expect that Bambuser had around

70 FTEs (including full-time consultants) in Q3’20, which we believe may grow to some 105

in Q4’20. As a result of this strategy of investing in future growth, sound and logical, in our

view, Bambuser is likely to experience growing operating losses in a short to medium term

perspective (as our forecasts imply).

Source: Redeye Research

SEKm 2019 Q1'20 Q2'20 Q3'20e Q4'20e 2020e

Net sales 3,2 1,8 5,4 9,2 13,4 29,8

Live Video Shopping 0,0 0,8 4,3 8,0 12,0 25,1

SDK & News 3,2 1,0 1,1 1,2 1,4 4,7

Adj. EBIT -21,1 -8,1 -7,2 -10,0 -12,9 -38,2

Bambuser: Q3 preview


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Background

What originally started as a project course at Åbo Akademi University in 2006 resulted in

the technological foundation that constitutes Bambuser today. Martin Storsjö and Tom

Sundström, originally from Finland, set out to experiment with mobile phones, cameras, and

video streaming. After completing the course, Martin and Tom published the code of the

project as open source. Two Swedish entrepreneurs, Jonas Vig and Måns Adler, who had

set up a company called Bambuser, contacted Martin and Tom in 2007 to join forces. Of the

four founding members, only Tom and Martin remain in the company to this day.

Bambuser is a Swedish B2B-focused SaaS company offering white-label live video

solutions. Bambuser has since 2006, developed a livestreaming technology from mobile

devices and webcams over the internet. Historically, Bambuser’s technology was primarily

used by news agencies and journalists. In September 2019, however, Bambuser launched

its new flagship product – Live Video Shopping, catering to the demand of brands and

retailers. The Live Video Shopping product portfolio consists of two solutions, One-to-Many

and One-to-One, where the latter was launched in late 2020.

The company is headquartered in Stockholm, has an R&D office in Turku (Finland) and has

opened offices in New York and London. Since 2017, Bambuser is listed on Nasdaq First

North GM Sweden.

Historical highlights

Source: Bambuser, Redeye Research

Management, board, and ownership

Maryam Ghahremani joined Bambuser as interim CEO in March 2018 and shortly thereafter

became CEO. Under her leadership, Bambuser has witnessed a complete transformation of

both the business model and in terms of people engaged with the company. The current

management and board have vast experience from several industries, including media, e -

commerce, and technology. The involvement of the founders Martin and Tom is something

we regard very positively. All in all, we deem the existing team to be strong and credible,

Year Comment

2007

Bambuser is founded in Malmö, Sweden, and writes history when it becomes the first

to successfully livestream from a mobile device over the internet. The solution

becomes commercially available.

2010Bambuser gains global media attention as a result of the Arabic Spring. Protests are

captured and distributed to the world using Bambuser's livestreaming technology.

2014Launch of the Iris-platform, which targets B2B customers. The solution allows

customers to integrate livestreaming in applications, platforms and processes.

2017 Bambuser is listed on Nasdaq First North in Stockholm.

2018 Maryam Ghahremani becomes CEO of Bambuser.

Bambuser acquires Viddget Holding through a non-cash issue. The parties intend to

develop a one-to-one video chat solution.

Launch of Live Video Shopping One-to-Many.

Carries out a rights issue of approx SEK 101m.

Completes a directed share issue amounting to approx SEK 290m. Investors include

Harmony Partners, Consensus AM, TIN Fonder, Handelsbanken Fonder and Tenth

Avenue Holdings.

Launch of Live Video Shopping One-to-One.

Announces establishment of new offices in New York and London.

Announces new integration with Salesforce Commerce Cloud.

2019

2020


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with the right expertise to make a commercial success out of Live Video Shopping. Below

follows a description of management, board and ownership.

Source: Holdings, Bambuser, Redeye Research

Although a rather new and somewhat unproven management team, having been appointed

in its entirety since 2018, management has qualified work experience from industries

closely related to live shopping. Also, the management’s direct stock ownership is not

particularly impressive, but should increase as a result of two stock option programs

(discussed in the next section). Several board members represent some of Bambuser’s

larger shareholders. In particular, Carl Kinell is the CEO of Muirfield invest, its largest

shareholder, while Joel Citron and Mark J. Lotke are associated to US-based firms that built

exposure by participating in the directed share issue in June 2020. According to Bambuser,

the ownership of Tenth Avenue Holdings and Harmony Partners amounts to around 4% and

6%, respectively.

Senior ManagementName Position Since Ownership Experience

Maryam Ghahremani CEO 2018 2,45% Born 1981. Background within media and start-ups with leading

positions at Aftonbladet and Acast. Business and Economics

studies at Kristianstad and Lund University.

Anna Kult COO &

dep. CEO

2020 0,02% Born 1971. Degree in journalism from Mid Sweden University.

Schibsted Lifestyle Online and Venue Retail Group are previous

employers.

Linda Murray Wennberg CFO 2019 0,25% Born 1978. 15+ years work experience from the FMCG, telecom

and media industries with Coca-Cola, Telenor and Schibsted. MSc

in Business and Economics from Stockholm University.

Jesper Funck CPO 2018 0,13% Born 1979. MBA from Stockholm University. Has previously

worked as a media and digital consultant, and has held several

key positions within data and innovation at Spotify.

Sophie Abrahamsson CCO 2019 0,01% Born 1983. 10+ years work experience within digital marketing

and e-commerce with LUISAVIAROMA, & Other Stories (H&M

Group). BSc from the University of Florence.

Pontus Hymér CTO 2020 0,01% Born 1979. 20+ years experience within management and

development in the tech industry. Previous employers include

William Hill and Betsson.

Annelie Demred CRO 2020 (in

the firm

since '10)

- Born 1979. Almost two decades of experience within the tech

industry, in product and commercial roles. Previous employers

include Corsearch Europe and Yellow Brand Protection.

Board of DirectorsJoel Citron

Tenth Avenue Holdings

Chairman 2020 1,31% CEO of New York-based investment company Tenth Avenue

Holdings and has 35+ years of experience within the field.

Extensive experience from serving on public and private boards

in Europe and the US, among them Evolution Gaming Group.

Mark J. Lotke

Harmony Partners

Member 2020 - Associated to Harmony Partners, US-based venture investor,

whom gained investment through the 2020 Directed Share Issue.

Alexander MacIntyre

Associated Press

Member 2013 - VP of Associated Press and has 40+ years of experience from

international media, broadcasting and journalism. Holds a degree

from Sulzberger Executive Leadership Program at Columbia

University in New York.

Carl Kinell

Muirfield Invest

Member 2019 0,92% Holds an MBA from the Stockholm School of Economics and has a

background within Corporate Finance and Private Banking,

primarily working at Catella. CEO of Muirfield Invest AB, the

largest shareholder of Bambuser.

Mikael Ahlström Member 2018 2,67% Holds a degree from Bergh School of Communication. Previously

worked within entrepreneurship and strategy, and is a partner at

Hyper Island Capital AB in addition to serving on the Board of

Fryshuset Stiftelse.

Karin Karlström Member 2020 - MSc from the Stockholm School of Economics and has a

background within acquisitions and investments, most notably at

Carnergie Investment Bank and Telia. Has been working as an

independent advisor and Board member for over a year.


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Stock option programs

The management’s insider ownership will increase in the coming one to three years as a

result of two stock option programs established in 2020. Below we provide a brief

description:

• Stock option program 2020. Targeted to 43 employees and comprises a

maximum of 4,261,301 stock options.

• Stock option program to CEO 2020. Exclusively targeted to the CEO and

comprises a maximum of 6,010,714 stock options.

Both stock options will vest by a third each year during the period 2021 through 2023. Each

stock option entitles the holder to acquire one share in Bambuser to a price

corresponding SEK 0.05. While we are generally positive to option programs, as we

believe they will help retain important employees (nonetheless a pressing challenge for

Bambuser according to the CEO), option programs with substantial discounts usually

happen at the expense of other shareholders. That being said, the mentioned option

programs comprise around 10m shares, which would lead to a dilution of approx. 6% if all

stock options would be converted to shares.

Good mix of ownership

Source: Holdings, Redeye Research

Bambuser undertook two financing rounds in 2020 due to the surge in demand that

accompanied the corona crisis, which substantially changed the ownership structure. In

particular, the company conducted a directed share issue in June 2020, raising approx.

SEK 290m. Among the top ten owners, Handelsbanken Fonder, Lancelot AM and TIN

Fonder entered into the stock through the directed share issue, in addition to Harmony

Partners and Tenth Avenue Holdings – although they are foreign entities. We view the

rising institutional interest as a quality signal which helps validate the case.

Stock performance – comeback at last

The share was listed on Nasdaq First North on May 5, 2017. In connection with the listing,

Bambuser undertook a rights issue, with a subscription price of SEK 9.2 valuing the

company at approx. SEK 115m pre-money. At the first day of trading, the shares took a

severe beating, closing around SEK 4.5. Indeed, distressed stock performance

characterizes the first two years of trading. Bambuser attributes the subpar performance to

low average revenue per user (ARPU) regarding the legacy products, never entirely taking

off. It is easy to agree that a small development company will have a hard time convincing

the market until revenues start to accrue in earnest.

# Owner No. of shares Capital

1 Muirfield Invest Aktiebolag 18 058 873 11,06%

2 Handelsbanken Liv Försäkring AB 12 338 081 7,55%

3 Wellstreet Partners AB 8 560 774 7,22%

4 TIN Fonder 9 430 000 5,77%

5 Futur Pension 9 324 775 5,71%

6 Avanza Pension 8 205 572 5,02%

7 Lancelot Asset Management AB 3 800 000 3,20%

8 Handelsbanken Fonder 4 850 000 2,97%

9 Tom Stendahl 4 500 681 2,76%

10 Mikael Ahlström 4 358 459 2,67%

Total 53,93%

Major shareholders


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Since launching Live Video Shopping One-to-Many the share has gained significant

momentum. The stock first saw an upswing in late 2019, after Bambuser announced its first

agreements and partnerships with brands and retailers – implying curiosity for the

technology. However, it wasn’t until the corona outbreak in March 2020 that the stock

soared, followed by a significant directed share issue, adding further momentum. With high

expectation leading up to the H1’20 report, the stock continued to climb and almost reached

SEK 15. Although the report was a breakthrough, its reality didn’t match the market’s

expectations and has since stabilized around SEK 9.

While sales continue to be in the single-digit MSEK, the market is expecting operating

losses to accrue. Quarterly reports and large customer acquisitions will be monumental in

the near-term to validate the stock’s current trading levels. At the same time, as long as the

corona crisis continues to be a global challenge, investors will perceive the stock as a

lesser-risk, given its YTD track-record. The current sentiment, in our view, reflects progress

made and excitement for the growth story ahead.

Bambuser’s share price (SEK)

Source: Bloomberg, Redeye Research

Retail, e-commerce and data trends

A brief description of the overall market for live shopping and key data trends.

Retail

The global retail market is estimated to reach USD 30 trillion by 2023, corresponding to a

CAGR of approx. 4.4% with 2019 as base. The growth forecast for 2020 is 4.1%, a slight

dip compared to 4.5% in 2019, reflecting an increased unwillingness by consumers to

spend amid the pandemic.

Ecommerce

The global e-commerce market, worth USD 3.5 trillion in 2019, is expected to experience

growth corresponding to a CAGR of 16.6% through 2023. However, in terms of e-commerce

0

5

10

15

2018 2019 2020

Bambuser OMXS30

Launch of Live

Video Shopping One-to-Many

Preferential rights issue

of approx SEK 100m

Covid-19 pandemic

Directed share

issue of approx SEK 290m

Stock market sentiment

calms after a modest H1'20 report (relative to expectations)

Acquisition

of Viddget


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as a share of total retail sales, growth is expected to be even higher. E-commerce as a

share of total retail sales was set at 14.1% in 2019 but is expected to reach 22% in 2023.

From the left: i) global e-commerce market USDbn, ii) Global e-commerce as a share of retail

Source: Emarketer

Data trends

In addition to the fast-growing e-commerce market, we believe that Bambuser benefits from

global trends relating to increased data traffic, increased video data traffic, connectivity, the

number of devices, and so on. In Cisco's annual internet report, it states that video traffic

over the internet is set to increase by 300% from 2017 through 2022. Furthermore, they

expect video to account for 82% of global internet traffic and live video to account for 17%

of all video traffic by 2022.

Implications for Bambuser

Whether you emphasise e-commerce or video data, one thing is clear – Bambuser and live

shopping will benefit from the rapid growth of its adjacent markets. An example to

demonstrate the positive spill over effects relates to the online video adverti sement market.

Advertisements connected to online videos have the highest click-through-rates of all online

advertising, at 1.8%. The US digital ad spend is further set to increase from USD 10 billion

in 2016 to USD 28 billion in 2020 (eMarketer). The growth of this industry could potentially

entail a new and significant source of income for Bambuser.

Once live shopping in the West matures, we believe that the market-conversation will centre

around live shopping sales as a share of the e-commerce market, which already is being

done in China (discussed in the next section). At this point, it is far too early to discuss live

shopping sales in a greater context regarding Bambuser’s core markets. However, we

expect to head down this road.


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Live shopping – big in China, new in the West

Live shopping, also referred to as live commerce, is the

fusion of e-commerce and livestreaming. Brands and

retailers use live shopping to broadcast live to their

viewers, usually showcasing products, trying them on,

and talking about them.

Social and interactive

The person hosting the broadcast can be a staff member

or an influencer, known as Key Opinion Leaders (KOLs)

in China. As the broadcast is running, the host

introduces new items, which are then showcased and

talked about. Compared to traditional e-commerce,

live shopping has a social component. The viewer

can hit a "like" button, which shows engagement, and

there is also a comment section, where the viewer can

ask questions. Once a new item has been introduced to

the broadcast, the viewer has the option of adding-to-

cart, without leaving the broadcast, and finally to check-

out. It isn't rare that special discounts are offered, again,

to attract viewers.

Live shopping in China – soon worth USD 170 billion

Nowhere in the world has live shopping become as popular as in China, where it has

become a mainstream and legitimate channel to purchase items over the internet. In 2019,

Chinese live shopping sales amounted to USD 63 billion, which corresponds to around 9%

of total Chinese e-commerce sales. In an article published in CNN (September 2020), a

Shanghai-based market research firm estimates that Chinese live shopping sales could

reach USD 170 billion in 2020, a staggering near three-folding of last year’s level, largely

due to a corona crisis related boost. According to the article, hadn’t it been for the

pandemic, the Chinese live shopping market would have taken 2-3 years longer to reach its

current size. A different market estimate (Statista) expects that the market will reach around

USD 140 billion by year’s end – still a phenomenal increase.

An important reason for the rapid growth of the Chinese live shopping market relates to the

number of users on China's online streaming platforms. As of March 2020, there were 560

million people watching livestreams in China. Of these, almost half use livestreams for

online shopping (CNN).

As of 2019, more than 900 live shopping platforms in China cater to the enormous domestic

demand. However, most transactions occur on a handful of them, primarily Tmall and

Taobao, both of which are Alibaba-controlled. Taobao has over 4,000 livestream hosts,

generating more than 150,000 hours of content each day. On Single's Day (November 11)

in 2019, the world's largest shopping day, Tmall generated USD 2.9 billion in sales.

Live shopping in the West – a new market in the making

Livestreaming in the West has been closely linked to gaming and social media, for instance,

through Twitch, YouTube, Periscope, Facebook and Tiktok. It is only recently that Western

companies have gained interest in using livestreaming for purposes of e-commerce. Both

Amazon and Facebook have dipped their toes into live shopping. In 2019, we saw the


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launch of Amazon Live and Facebook developing a live shopping feature inside their

marketplace product, following the acquisition of Packagd. Although it is still at a relatively

low scale, these investments validate the business opportunity. It is a new and exciting

space at the forefront.

Prior to the corona crisis, demand for live shopping solutions in the West was very modest

and the market immature and experimental. However, the pandemic has not only validated

the market; it has propelled the adoption of live shopping years ahead of time. The

lockdowns incentivized brands and retailers to offer their customers innovative online

shopping experiences. However, we still believe that live shopping in the West is at least 2 -

5 years behind China.

Besides live shopping in the West lagging behind China, there are other aspects, too. The

nature of live shopping in the West, in its current state, is vastly different compared to

China. Live Video Shopping is a B2B2C solution, while Chinese platforms, for the most part,

are C2C. An average Bambuser-supported broadcast may last around 20-30 minutes, while

live shopping broadcasts in China last for several hours. Worth mentioning are the

demographic, social, and cultural differences between the West and China. In 2019, e -

commerce in the US stood for 10% of retail sales, while the corresponding figure for China

was 37% (eMarketer). Also, e-commerce, in general, is adopted by a substantially younger

age group in China.

Engagement a reason to invest in live shopping

Bambuser has released engagement data from Bambuser-

supported broadcasts on some occasions. Although the data

is early and will gain accuracy with time, we see that

Bambuser-supported broadcasts have significantly higher

engagement rates than comparable technologies. Highlights

include the following:

• The average watching time per user is more than 11 min,

while the corresponding figure for an average desktop or

mobile website is between 4-5 min.

• On average, regardless of segment, 12% of viewers used

the add-to-cart feature. The average add-to-cart rate for a

US e-commerce website is 4% (Littledata).

• Looking at the beauty segment, where Bambuser has the

most experience, the add-to-cart rate is 36%. An average

beauty website has an add-to-cart rate of 7% (Littledata).

Engagement drives sales, and for Bambuser to announce metrics of this sort will surely

keep customers satisfied. Several customers have reported that sales from Bambuser-

supported broadcasts were better than expected. One example comes from Kjell & Co – a

broadcast generated, on one occasion, more sales than its average store does in two

weeks. However, we recognize that it is highly individual how Live Video Shopping will

affect sales and that some customers won’t achieve the desired levels.

What happens when a corona vaccine is market-ready?

Without a corona boost, it would have been hard to imagine Bambuser’s sales growth and

stock performance to date. Brands and retailers have seen first-hand how exposed their

businesses are to government-imposed lockdowns. The innovation that live shopping

presents in the traditional retail industry is truly ground-breaking – it is the closest you get to

an in-store experience, while being remote. We believe that retail regards live shopping as


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such, and not just a short-term mitigant to mobility restrictions. In our view, even if a vaccine

would be announced before the end of year, our growth estimates stand. The challenge, in

our opinion, was to bring live shopping to the mass market, but now that is has been done,

we believe it is here to stay.

Product/Technology

At the core of Bambuser’s offering is the proprietary livestreaming technology, which has

been cultivated since 2006.

Live Video Shopping One-to-Many

One-to-Many is a white label solution that customers integrate into their website to pursue a

livestream. It allows customers to broadcast a livestream from their device to potentially

millions of viewers while minimizing latency. The solution is made to look as if the customer

is undertaking the livestream on their behalf, so Bambuser’s logo isn’t visible on the

product. One-to-Many contains interactive applications such as live chat and other features

(e.g. like-button and add-to-cart). Since the launch of One-to-Many in late 2019, it has

become Bambuser’s flagship product. The business model is based on a monthly licensing

fee and a variable fee tied to usage.

Live Video Shopping One-to-One

One-to-One relies on WebRTC (Web Real-Time Communication). WebRTC enables direct

peer-to-peer communication, by allowing audio and video communication to work inside

web pages. One-to-One can be described as a digital, video-based customer service. A

retailer’s representatives can communicate with their customers through an easy-to-use

video chat, with no installations or plug-ins needed. Bambuser laid the foundation for One-

to-One in connection with the acquisition of Viddget. Bambuser currently has a One-to-One

agreement with Kjell & Co, who offer consultations on their website. The business model is

based on a monthly licensing fee and a variable fee tied to agent volumes.

Live Streaming SDK & News – legacy products

Software Developers Kit, SDK, is the foundation and the engine behind Bambuser’s product

offering, on which One-to-Many and News have been built on. SDK and associated

applications enable creating high-quality live video experiences with ultra-low latency.

Bambuser claims to have developed a world-leading livestreaming solution. The business

model is based on three different subscription models relating to usage.

News is part of the legacy offering and is no longer advertised on the website. However,

customers include journalists and media companies. Associated Press has been a

customer for an extended period of time.

Customers – tilted towards beauty and fashion

The current customer base comprises brands and retailers from a wide range of industries,

but with a focus on beauty and fashion. In a Swedish e-commerce report from 2019, we

learn that fashion and beauty products are the most popular categories to purchase through

e-commerce, very consistent with Bambuser’s strategy.

Bambuser has started to enter commercial agreements in additional verticals, however, and

is by no means restricted to beauty and fashion. It has agreements with the largest property


14

portals in Sweden and Switzerland, a world-leading home furnishing retailer, and a leading

Swedish home electronics retailer, to name a few. We believe the corona crisis has

triggered expansion into new verticals years ahead of what was previously intended.

Source: Bambuser

Large enterprises – increasing customer segment

Bambuser has announced several commercial agreements with world-leading companies

within beauty and fashion. With their presence in global markets and many underlying

brands and companies, large enterprises represent the most exciting customer segment,

with significant sales potential. Bambuser’s disclosed large -enterprise customers to date

include the following:

• One of the world’s largest beauty companies. US-based, with a portfolio of approx.

30 brands and net sales amounting to USD 15 billion for FY19.

• One of the world’s largest and most established retail chains. Extensive brand

portfolio, employing 179,000 employees and net sales amounting to SEK 233

billion for FY19.

• World-leading social selling beauty company established in over 60 countries with

sales of EUR 1.3 billion for FY19.

• One of South Africa’s leading retailers, with total net sales corresponding to SEK

6.8 billion for FY19.

• Australia’s leading beauty company.

• Asia’s largest cosmetics group.

• A world-leading home furnishing retailer.

• An iconic British luxury fashion label.

Expansion into the US and UK to accelerate customer acquisition

Bambuser announced in late September 2020 the establishment of new companies in the

US and UK, with offices in New York and London. The expansion began with the

recruitment of César Bravo de Rueda Sandoval, VP of Sales, who spent his last three years

as business development and partnership manager at Amazon. We believe that geographic

proximity to potential large-enterprise customers will benefit Bambuser. The US and UK

represent two of the largest e-commerce and therefore live shopping markets in the world.

To establish sales teams in the respective nations is a natural procedure at this point.

Bambuser’s customer base further strengthens our belief that large enterprises are

prepared and willing to implement Live Video Shopping solutions on their platforms. Apart

from financial strength, large enterprises have the necessary resources and capabilities to

implement Live Video Shopping. Given the rather impressive customers that Bambuser has

managed to gain out of its headquarters in Stockholm, we believe that more exciting news

will follow from the New York and London offices.


15

Business model and strategy

The Live Video Shopping business model is based on three revenue streams, of which two

are recurring. The go-to-market strategy is, however, focused on gaining broad commercial

agreements with large-enterprise customers.

Scalable business model

The business’s inherent scalability in the long-term is due to its high margins (+90%) for

license renewals and usage-based revenues. Once the live shopping market (outside

China) matures and usage starts to become significant, we expect revenues to increase

exponentially and usage to drive operating margins. Here follows a description of the three

revenue streams.

Initial fee. Billed at the start of each contract. Proceeds are primarily used to onboard the

customer and to tailor the solution to the customer’s preference in terms of appearance and

features, as well as integration to the website/broadcaster.

Licenses. A fixed monthly recurring revenue (MRR) that the customer is billed to enjoy the

right to exercise Bambuser’s streaming technology.

Usage. A variable monthly recurring revenue (MRR) driven by a combination of different

parameters. In the majority of cases, these include the number of viewers and view length,

broadcast and broadcast length, transmitted data volume, stored data volume for previously

performed broadcasts, desired video quality, and additional services. However, we have

seen that the usage model can be adjusted to include parameters that are personal to each

customer. As in the case with a world-leading social selling beauty company, the number of

activated beauty consultants affects usage. Bambuser has yet to disclose estimates

concerning usage revenues – only that it expects usage to account for the lion share of

future sales.

Disclosed commercial agreements

On several occasions, Bambuser has disclosed the fixed contract value with some of its

customers. The fixed contract value refers primarily to the license revenues and does not

take usage into account. The table below provides a summary of those agreements.

Source: Bambuser, Redeye Research

Disclosed agreements with fixed contract value

Date Company Months Lifetime value Value SEK SEK / mo Note

Apr 2020 US beauty giant (Estée Lauder Companies*) 3 USD 210 000 1 890 000 630 000 Six brands

Apr 2020 HomeGate AG 12 EUR 55 000 550 000 45 833 -

May 2020 Brandsdal Group 9 SEK 510 000 510 000 56 667 -

May 2020 Radicalbit 3 EUR 20 000 200 000 66 667 -

June 2020 Global fashion group (H&M Group*) 3 SEK 350 000 350 000 116 667 One market

June 2020 Frame LA Brands 4 USD 10 000 90 000 22 500 -

June 2020 MOOD Disctrict 3 SEK 175 000 175 000 58 333 -

June 2020 Leading South African retailer 2 USD 13 000 117 000 58 500 -

Oct 2020 Leading home furnishing retailer (IKEA*) 3 SEK 1 120 000 1 120 000 373 333 Three markets

Oct 2020 FARFETCH 6 GBP 35 000 402 500 67 083 -

Oct 2020 British Luxury Fashion Label (Burberry*) 3 GBP 35 000 402 500 134 167 -

*Not confirmed by Bambuser

Exchange rate assumptions: USD/SEK 9, EUR/SEK 10, GBP/SEK 11.5


16

We distinguish between two categories of commercial agreements; those with large

enterprises and those with SMEs. Large enterprises are billed in the region SEK 105,000 -

135,000 per license in fixed monthly fees, while SMEs, on the other hand, pay around SEK

60,000 in fixed monthly fees. Another comment on the table above relates to the number of

licenses being deployed per customer. Large enterprises in particular, are deploying around

three licenses on average – where each license covers either one market, or one brand in

several markets. However, we take into consideration that most of the agreements above

are pilot agreements, and that once they are extended to full commercial agreements, we

expect the number of licenses per customer to increase.

Given Bambuser’s focus on large enterprises, which is discussed further in the next section,

we estimate that large enterprises account for the majority of sales. In addition to premium

license revenues, large enterprises can potentially generate large usage-based revenues,

as a result of their ability to draw large crowds to their broadcasts, in addition to generating

broadcasts on a regular basis.

Strategy powered through large enterprises

Bambuser’s go-to-market strategy focuses on some of the world’s largest brands and

retailers, so-called enterprises. In addition to demanding a high-quality solution, enterprises

are keen to protect transaction data, website traffic and the brand narrative. On a final note,

enterprises are less price-sensitive and willing to pay for a solution that corresponds to their

criteria. Bambuser is the market leader in the enterprise segment partially due to limited

competition and excellent timing. Below follows a brief description of the commercial

agreement with the US beauty giant – and why the enterprise route offers attractive upside.

The frequently mentioned US beauty giant, which we presume to be Estée Lauder

Companies* (*not confirmed by Bambuser) has a portfolio of close to 30 brands within

skincare, make-up and perfume, with sales amounting to USD 15 billion for FY19. One of its

brands, Clinique, has commented on its partnership with Bambuser, validating our claim.

The initial three-month pilot agreement covering six brands was extended to a full-year

commercial agreement. The agreement is designed in such a way that each of the Group’s

brands decide whether to license the technology.

While Bambuser doesn’t communicate if and when additional of the Group’s brands license

the technology (perhaps something to look out for in the Q3-report), there is significant

upside as a result of this agreement. If Bambuser manages to gain half of the Group’s

brands as customers, its ARR from this specific large-enterprise customer acquisition

could amount to around SEK 20-25m – excluding usage. At this point, Bambuser has

around eight large-enterprise customers, however, the majority on pilot agreements. This

example highlights the strength of its go-to-market strategy.

Partnerships as a tool to gain new customers

Some of the strategic partnerships Bambuser has entered in H2’20 include:

Aftonbladet. Sweden’s largest news provider, generating 36m page-views daily. The

partnership allows Bambuser’s customers to broadcast live from their site and d irectly on

Aftonbladet’s site simultaneously, so-called simulcast.

Relatable. A global influencer marketing agency whose clients include, among others,

Fortune 500 consumer brands. As a result of the partnership, Relatable’s operating system

includes Live Video Shopping as part of its software tools suite. The partnership has

resulted in Samsung becoming a customer. Samsung Live is a concept developed in close

collaboration with Relatable and Bambuser.


17

AMF Fastigheter. One of Sweden’s largest property investment and development

companies, with a property portfolio market value of around SEK 73 billion. The parties will

be launching The Lobby Live, which is set to be a unique retail experience with Live Video

Shopping. Rolling out in MOOD Stockholm, brands and retailers can build innovative

shopping experiences combining online and offline interactions. The first phase of this

partnership is expected to generate around SEK 0.8m in revenue. The partnership

establishes Bambuser in physical retail, a critical vertical.

Salesforce Commerce Cloud. The world’s #1 customer relationship management (CRM)

platform, with a market cap amounting to USD 233 billion. Bambuser launched Live Stream

E-Commerce Experiences, which is a new integration with Salesforce. Brands will be able

to deliver unified experiences for customers through the plug-in available on the Salesforce

platform. 99 of FORTUNE 100 brands partner with Salesforce, indicating the immense

potential that could arise in light of this partnership.

Dept. An award-winning international digital agency of experienced thinkers & makers. The

partnerships will marry together Dept’s digital experience and Bambuser’s industry leading

technology, to bring interactive live shopping to consumer brands through integration with

Salesforce. This marks Bambuser’s expansion into DACH and Benelux.

Growth

We expect revenue growth to be driven by the following factors:

• Increased sales to existing customers.

• Large-enterprise customer acquisitions.

• Advancing through new and existing partnerships.

Increasing sales to existing customers can entail i) converting/extending pilot agreements to

annual commercial agreements, ii) increasing the number of outstanding licenses with each

customer, iii) cross-selling different Live Video Shopping solutions to existing customers,

and iv) increasing usage revenues.

Large-enterprise customer acquisitions, in our opinion, is the most critical growth channel

going forward. Bambuser has already managed to close some of the world’s largest brands

and retailers. By partnering with global platforms like Salesforce, Bambuser cements its

market leadership and Live Video Shopping as the natural choice for large enterprises

willing to enter the live shopping space.

Live Streaming SDK and News – continuing to work behind the scenes

SDK and News accounted for 20% of net sales in Q2’20. While we expect SDK and News

to grow at a modest pace y/y, it will inevitably make out an increasingly smaller percentage

of overall future sales.

Competition in a fragmented market

Bambuser is operating in a fragmented market comprised of early stage start-ups, as well

as some of the world’s largest e-commerce and social media companies. We believe the

competition can be split into the following categories:


18

• Players that license their livestreaming technology and offer B2B customers a white -

label solution. Bambuser is the most established and accomplished player in this

space, where competition mostly consists of start-ups, e.g. Livescale and Hello LiSA.

• Some of the world’s largest e-commerce and social media companies, including

Amazon, Facebook and Instagram. These players have live shopping capabilities

embedded in their platforms, which we call third-party solutions. B2B and B2C

customers broadcast live from third-party solution platforms, usually against a revenue

share pricing model.

The fundamental difference between the two categories relates to which platform the

broadcast is streamed on. In Bambuser’s case, the broadcast is streamed on the

customer’s own app/website (so-called white label), while for instance Amazon Live

customers, stream their broadcasts on Amazon’s platform. The table below summarizes the

key distinctions between Bambuser One-to-Many and third-party solutions.

Source: Bambuser

Avoiding conflicts of interest regarding GDPR

As a result of the growing big-data trend, brands and retailers see value in harvesting and

analysing consumer behaviour and transactional data – subject to GDPR. Bambuser’s

customers own this sort of data, while Bambuser stores and analyses data relating to the

broadcast (e.g. avg. watching time, add-to-cart ratio and engagement) – not subject to

GDPR. Third-party solutions also induce interest in analysing consumer behaviour data,

entailing a conflict of interest with their customers. In our opinion, this is a critical USP that

will become increasingly important, especially for large enterprises.

Third-party solutions as enablers

Companies like Facebook and Tiktok have been instrumental in creating and validating a

“video behaviour” culture that has become normalized in our societies. Without social

media, it wouldn’t have been possible to roll-out live shopping. However, now that those

companies are entering the live shopping space, they could potentially constitute a threat to

Bambuser. However, given the large discrepancies between Live Video Shopping and third -

party solutions, we don’t expect the threat to materialize in the short term. Furthermore, we

expect that third-party solutions appeal more to SMEs, mainly due to the revenue share

pricing model, which is less expensive compared to Live Video Shopping.

However, we recognize the threat that global social media and retail companies would

represent if they launched a white-label solution, similar to Bambuser’s offering. Although

these companies have astounding resources and capabilities regarding livestreaming

technology and probably could launch a similar solution, we don’t expect this materializing

any time soon – to retain traffic on their own platforms.


19

Fierce competition around SMEs

Competition in the SME segment is becoming increasingly crowded by third-party solutions

and white-label start-ups. We regard these solutions as relatively standardized, which

results in price-based competition. When incumbents fail to differentiate from one another,

competition is based on price, where competitive advantages are gained by continuously

undercutting. For this reason, we view it positively that Bambuser has limited presence in

the SME segment and can instead view from the side-line how this landscape evolves.

Limited competition around large enterprises

In the large-enterprise segment, however, competition is minimal. Bambuser is the clear

market leader, both in terms of commercial agreements and organizational size.

Bambuser’s initial differentiation strategy has paid off, whereby it charges premium prices

for a premium solution.

While there appear to be a few start-ups launching solutions similar to Live Video Shopping,

they face an uphill struggle when approaching large enterprises. Large enterprises expect

dedicated teams to support them with everything from integrating the solution to data

analytics. Bambuser’s typical start-up competitor consists of just a few employees and lack

the resources to seriously approach large enterprises. For this reason, start-ups are

referred to the SME segment, where barriers to entry are significantly lower. As a result, at

this point, Bambuser seems to be left in relative peace in the large-enterprise segment.

Below follows a brief description of two start-ups that have developed white-label solutions:

• Livescale – Canada. Founded in 2016 and has a team of approx. 16 people.

Livescale has come relatively far in commercialization and offers a solution with

similar features: in-video purchase and brand-owned experience control. It

provides its solution in the Shopify App Store and has gained a few high-profile

customers like Kiehl’s and Lancôme. While functionality isn’t as sophisticated, it is

less expensive.

• Hello LiSA – Germany. The team consists of four people, and they have gotten

some attention in connection with the 2019 Retail Week Tech. Features are similar

to Bambuser, including in-video buy, browser-based on the brand's domain, and

engagement features. No press releases or significant customers have been

announced since May 2020.

Competition going forward

Although competition is limited at this point, we believe it will increase in the future. While

Bambuser has a first-mover advantage in its preferred segment, it has to continue investing

in human capital, new technology, and gain new commercial agreements and partnerships,

in order to stay clear of competitors.

In the SME segment, however, we expect Bambuser to continue watching from the side-

line, perhaps with different intentions than solely looking for new customers. Given

Bambuser’s financial strength and market cap, it may be in a position to acquire the ultimate

winners in the SME segment. Indeed, in connection with the acquisition of Viddget in 2019,

Maryam Ghahremani announced the ambition to broaden Bambuser’s offering and become

a leading, global video house. Therefore, we assume there is an M&A strategy in place,

and remind ourselves that global tech companies rarely are built entirely organically.


20

Financials

In this section, we present our financial estimates and historical financials. Detailed balance

sheet and cash flow estimates are provided on page 26.

Bambuser’s key financial target: Black Figures in 2022

Bambuser announced in January 2020, in connection with the rights issue, the ambition to

achieve profitability in 2022. Other financial targets have not been communicated.

The pandemic has positioned Bambuser uniquely, providing the most sought-after product

at the right time. Rather than actually achieving profitability in 2022, we believe the main

focus has shifted towards increasing top-line growth at an accelerated pace. Bambuser’s

international expansion, ramp-up of costs and excellent financial position support this claim.

We instead predict Bambuser to reach break-even in 2023.

Bambuser: Net sales & EBIT, ’18-‘23e, SEKm


Sales

Live Video Shopping has propelled Bambuser’s sales to unprecedented levels. Quarterly

sales for Q2’20 amounted to SEK 5.4m, exceeding annual sales for both 2018 and 2019.

We expect sales to continue to grow at an accelerated pace, mainly due to the following

factors:

• Market leadership. One-to-Many is the most advanced white-label solution on the

market. Competitors’ solutions are still in an early stage, while they, at the same

time, lack resources to approach large enterprises.

• Increasing sales with existing customers: i) extending proof-of-concept agreements

to commercial agreements, ii) increasing the number of outstanding licenses, iii)

cross-selling One-to-One to existing One-to-Many customers, and iv) increasing

usage revenues.

• Investments in the go-to-market capabilities. Bambuser will be opening offices in

New York and London, which will create geographic proximity to potential

customers. We expect this will translate to enterprise-customer acquisitions.

• The substantial tailwind stemming from the corona crisis at this point shows no

sign of abiding. On the contrary.

4 330

72

148

280

-20 -21-38

-69

-39

29

2018 2019 2020e 2021e 2022e 2023e

Net sales Adj. EBIT


21

Bambuser: Sales composition, ’18-‘23e, SEKm


Legacy products – SDK & News

Before 2020, revenue streams were exclusively derived from SDK & News. We expect that

SDK & News will grow at a CAGR of 20% through ‘23e, although starting from modest

levels. We believe SDK & News benefits from the commercialization of Live Video

Shopping, increasing traffic to Bambuser. Already this year, we have seen y/y growth from

the legacy products, while all marketing has focused on the core business.

Usage – point of uncertainty

Bambuser expects that usage will account for the lion share of future revenues, but given

the many parameters in question, size and timing are difficult to estimate. Little information

has been disclosed about usage, and it remains unclear whether Bambuser already has

started to receive its first usage-derived revenues.

We estimate that Bambuser will report its first usage-derived revenues in 2021. What truly

sets our three scenarios apart is the growth at which we expect usage to increase. By 2023

we estimate in our bull case that usage will amount to 50% of licensing sales, while the

corresponding figure in our bear case is 10%.

Licenses – the main growth driver

We expect licenses to be the main growth driver in the near term. In contrast to usage, the

licensing model has been tested and validated by the market during 2020, and we have

confidence that it will continue on a positive trajectory. Bambuser has released some

information concerning the nature and pricing of licenses, although several details continue

to remain unknown.

As mentioned previously, we believe there are two categories of licensing agreements, one

for large enterprises and one for SMEs. Given that Bambuser’s strategy targets the large-

enterprise segment, our estimates our based on large enterprises accounting for the

majority of revenues. We expect that large-enterprise customers, on average, pay around

SEK 1.4m per license per annum. Furthermore, we forecast a slight decrease in the price

per license, largely due to increased competition. By 2020e, we expect that Bambuser has

eight enterprise customers, using three licenses on average. We estimate Bambuser will

increase its number of outstanding licenses to around 160 by 2023e, an impressive growth,

albeit from a low base.

4 3 5 6 7 825

60

117

218

623

54

2018 2019 2020e 2021e 2022e 2023e

SDK & News Licenses Usage


22

Bambuser: Sales forecast, ’20-‘23e, SEKm


Costs

Bambuser incurred losses amounting to approx. SEK 20m in 2018 and 2019, which they

attribute to low ARPU from the legacy products. However, we expect losses to increase

further, as a natural consequence of the current strategy to prioritise top-line growth and

take advantage of the very strong demand. In particular, we expect to see a ramp-up of

staff-related costs.

Bambuser: Cost base, ’18-‘23e, SEKm


Staff costs

As previously mentioned, Bambuser’s cost base will increase materially. From the 13 FTEs

that were registered in 2019 (excl. consultants) Bambuser expects to surpass 100 FTEs in

Q4’20. We expect headcount to continue to increase further through 2021 in connection

with the establishment of offices in New York and London. In our forecast, we estimate that

Bambuser will establish at least one additional office in 2021, most likely to cater to the

0

100

200

300

400

500

2020e 2021e 2022e 2023e

Base Bear Bull

-300

-250

-200

-150

-100

-50

0

2018 2019 2020e 2021e 2022e 2023e

D&A CoGS Other external costs Staff costs Total costs


23

increasing Asian demand. By 2023, we evaluate in our base case that Bambuser, on

average, has around 200 employees.

Of the soon the be 100 FTEs, the majority are stationed in Stockholm. The newly

established offices will become regional sales offices to gain geographic proximity to

enterprise customers. For this reason, they won’t be as densely populated as the Stockholm

HQ, which takes care of all administrative tasks.

R&D

Given the early stage of Live Video Shopping and the rapid development in the industry, we

expect R&D costs will increase significantly in the future. A ramp-up in R&D will be

instrumental in maintaining long-term technological competitiveness. The vast majority of all

R&D costs relate to products with significant future revenues and are therefore capitalized

and then written off over five years.

Detailed financial forecasts

The table below shows our detailed financial forecast in our base case.


Financial position

In the most recent H1’20 report, Bambuser’s cash and bank amounted to SEK 145m.

However, this fails to reflect the SEK 221m received through the Directed Share Issue in

July 2020. Bambuser thus now finds itself in a very comfortable financial position, whi ch

allows for an expansive strategy entailing necessary incremental losses in the near to

medium term. We expect Bambuser will become profitable without raising additional

funds.

SEKm 2018 2019 Q1'20 Q2'20 Q3'20e Q4'20e 2020e 2021e 2022e 2023e

Net sales 4 3 2 5 9 13 30 72 148 280

Capitalized costs 0 1 1 1 2 3 7 12 18 25

Other income 1 0 0 0 0 0 0 1 2 4

Total income 5 4 3 7 11 16 37 85 168 309

CoGS -2 -1 0 0 -1 -1 -2 -5 -10 -20

Other external costs -8 -8 -4 -5 -7 -8 -24 -43 -56 -72

Staff costs -12 -13 -5 -6 -11 -16 -38 -86 -108 -137

Total OPEX -22 -22 -9 -12 -18 -25 -64 -134 -174 -229

EBITDA -17 -17 -6 -5 -7 -9 -27 -49 -6 80

Adj. EBITDA -18 -19 -7 -6 -9 -12 -34 -62 -26 51

D&A -2 -2 -1 -1 -1 -1 -4 -7 -13 -22

EBIT -19 -20 -7 -6 -8 -10 -31 -56 -19 58

Adj. EBIT -20 -21 -8 -7 -10 -13 -38 -69 -39 29

Net financials 0 0 0 0 0 0 -1 -1 -2 -2

EBT -20 -20 -7 -6 -8 -10 -31 -57 -21 56

Tax 0 0 0 0 0 0 0 0 0 -11

Net income -20 -20 -7 -6 -8 -10 -31 -57 -21 44

Bambuser: Profit and loss, at base case, '18-'23e


24

Valuation

We use a WACC of 13% across our three cases. While Bambuser has an M&A strategy and we see deals as

likely in the near-term, future transactions are not factored into any of our cases. We only include these in our

forecasts for companies that have extensive M&A track-records.

Bear Case 5 SEK

Increased competition from global

tech giants and cheap “copycats”, in addition to postponed usage weighs heavily on the industry. Under these circumstances, Live Video Shopping will not sustain its current competitiveness over the medium and long term. The most profitable revenues will not materialize, negatively affecting operating leverage.

Bambuser’s current customers continue to use Live Video Shopping, however, at a relatively limited extent. Customers employ a small number of licenses in order to use the technology for a specific brand or region. Bambuser continues to gain a handful of new customers through the new offices in New York and London. However, the expansion is expensive and Bambuser scales down its operation and focuses on a number of core markets.

The live shopping industry

becomes relatively crowded and Bambuser becomes a niche player in the premium segment. It manages to control costs and becomes profitable in 2024.

• Sales ’23: SEK 122m

• Sales CAGR ’23-’30: 15%

• Terminal growth: 2%

• Avg. EBIT-m ’23-’30: 14%

• Terminal EBIT-m: 15%

Base Case 12 SEK

Bambuser takes advantage of its

market leadership and unique position to continue attracting large-enterprise customers and high-profile partnerships. Demand for live shopping solutions continues to be high in the light of the current macro environment.

Bambuser experiences a positive net inflow of customers and maintains its competitiveness over the medium term. However, most customers continue to employ relatively few licences, waiting for the general live shopping market to mature.

The international expansion is

successful and results in a ramp-up of customer acquisition. During ’21, Bambuser announces it will be opening an office in the APAC region, to cater to the increasing Asian demand.

Incumbents, in particular cheap white-label solutions, force prices to decrease slightly each year. Usage revenues start to materialize, although not as quickly as Bambuser had hoped, due to the cautious approach by customers. Licenses continue to be the main growth driver and Bambuser becomes profitable in 2023.


• Sales CAGR ’23-’30: 23%


• Avg. EBIT-m ’23-’30: 31%


Bull Case 22 SEK

Determined to avoid a corona-like

crisis again, large enterprises invest extensively in their online user experience, and pursue a live shopping strategy. Bambuser sees an exceptional inflow of customers, in part, due to a successful partner-led strategy.

Convinced that live shopping will account for a significant share of future shopping, large enterprises extend their agreements to cover a substantial number of their brands and/or markets. Regular broadcasts, with many viewers tuning in, results in an accelerated maturity of the market – in addition to generating significant usage-based revenues.

Regional proximity to potential customers leads Bambuser to continue the international expansion by setting up additional offices around the world.

Bambuser creates a sustained competitive advantage and competitors fail to catch up to their size and technological know-how. Some of those incumbents that do survive are acquired by Bambuser. Usage becomes substantial and Bambuser capitalizes on its most profitable revenue stream, becoming profitable in 2022.


• Sales CAGR ’23-’30: 29%


• Avg. EBIT-m ’23-’30: 35%



25

Summary Redeye Rating

The rating consists of three valuation keys, each constituting an overall assessment of several factors that are

rated on a scale of 0 to 1 points. The maximum score for a valuation key is 5 points.

People: 3

Although a rather new management, having been appointed since 2018, we see the relevant sector experience in

a positive light, heavily coupled to media and tech. The management’s focus on long-term value creation is also

evident as a result of its investment, acquisitions and incentive programs, which help strengthen the core

business and retain key personnel. The large outside ownership on the board in conjunction with the current

involvement of the two founders is something we regard positively.

Business: 3

Bambuser's current competitiveness follows its strong value proposition, delivered to a clear target group, in line

with a well-defined strategy. The large portion of recurring revenues, together with its strategic partnerships and

business scalability adds flavour to the case. However, the future uncertainty surrounding the competitive

landscape gives rise to concern.

Financials: 2

Bambuser's excellent gross margins (+90%), together with a strong growth outlook and comfortable financial

position are regarded as very positive. However, the rating's retrospective nature limits Bambuser from receiving

higher scores, as it has yet to achieve profitability. We estimate that Bambuser will become profitable in 2023.


26

PROFITABILITY 2018 2019 2020E 2021E 2022E ROE neg neg neg neg neg

ROCE neg neg neg neg neg

ROIC neg neg neg neg neg

EBITDA margin neg neg neg neg neg

EBIT margin neg neg neg neg neg

Net margin neg neg neg neg neg

Please comment on the changes in Rating factors……

DATA PER SHARE 2018 2019 2020E 2021E 2022E EPS 0.00 0.00 -0.20 -0.31 -0.17

EPS adj 0.00 0.00 -0.20 -0.31 -0.17

Dividend 0.00 0.00 0.00 0.00 0.00

Net debt 0.00 0.00 -336 -277 -235

Total shares 0.00 0.00 164.50 168.00 171.50

INCOME STATEMENT 2018 2019 2020E 2021E 2022E Net sales 4 3 30 72 148

Total operating costs -22 -22 -64 -134 -174

Depreciation & Amortization -2 -2 -4 -7 -13

Adj. EBIT -20 -21 -38 -69 -39

Net financials 0 0 -1 -1 -2

Tax 0 0 0 0 0

Net income -20 -20 -31 -57 -21

BALANCE SHEET 2018 2019 2020E 2021E 2022E Assets

Current assets

Cash in banks 8 16 340 284 265

Receivables 0 1 9 14 22

Inventories 0 0 0 0 0

Other current assets 0 0 0 0 0

Current assets 8 17 349 299 287

Fixed assets

Tangible assets 0 0 1 2 3

Associated comp. 0 1 1 1 1

Investments 0 0 0 0 0

Goodwill 0 1 1 1 1

Cap. exp. for dev. 0 0 0 0 0

O intangible rights 3 7 14 23 37

O non-current assets 0 0 0 0 0

Deferred tax assets 0 0 0 0 0

Total (assets) 12 26 365 326 328

Liabilities

Current liabilities

Short-term debt 1 1 4 7 27

Accounts payable 3 3 10 20 30

O current liabilities 0 0 0 0 0

Current liabilities 3 4 14 27 57

Total Liabilities 4 4 15 28 59

Deferred tax liab 0 0 0 0 0

Provisions 0 0 0 0 0

Shareholders' equity 7 22 351 298 269

Minority interest (BS) 0 0 0 0 0

Minority & equity 7 22 351 298 269

Total liab & SE 12 26 365 326 328

FREE CASH FLOW 2018 2019 2020E 2021E 2022E Net sales 4 3 30 72 148

Total operating costs -22 -22 -64 -134 -174

Adj. EBIT -20 -21 -38 -67 -35

Taxes on EBIT 0 0 0 0 0

D&A 2 2 4 7 13

Gross cash flow -18 -19 -31 -50 -23

Change in WC 2 0 -1 5 2

Gross CAPEX -6 -7 -8 -13 -19

Free cash flow -22 -26 -41 -58 -40

CAPITAL STRUCTURE 2018 2019 2020E 2021E 2022E Equity ratio 63% 84% 96% 96% 96%

Debt/equity ratio 19% 4% 1% 1% 1%

Net debt -6 -15 -336 -277 -235

Capital employed 1 6 15 21 33

Capital turnover rate 0.4 0.1 0.1 0.2 0.5

GROWTH 2018 2019 2020E 2021E 2022E Sales growth 0% -29% 830% 142% 105%

EPS growth (adj) 0% 0% 0% 61% -46%

VALUATION 2018 2019 2020E 2021E 2022E EV n.a n.a 1,145.0 1,203.9 1,245.1

P/E neg neg neg neg neg

P/E diluted neg neg neg neg neg

P/Sales n.a n.a 49.7 21.0 10.5

EV/Sales n.a n.a 38.5 16.7 8.4

EV/EBITDA neg neg neg neg neg

EV/EBIT neg neg neg neg neg

P/BV n.a n.a 4.2 5.0 5.5

SHARE INFORMATION Reuters code

List Nasdaq First North

Share price 9.0

Total shares, million 164.5

Market Cap, MSEK 1480.5

MANAGEMENT & BOARD CEO Maryam Ghahremani

CFO Linda Murray Wennebrg

IR Simon Saneback

Chairman Joel Citron

ANALYSTS Redeye AB

Forbes Goldman Mäster Samuelsgatan 42, 10tr

[email protected] 111 57 Stockholm

Fredrik Nilsson

[email protected]

SHARE PERFORMANCE GROWTH/YEAR 18/20E 1 month -8.7 % Net sales n.a

3 month -6.4 % Operating profit adj n.a

12 month 328.6 % EPS, just n.a

Since start of the year 438.9 % Equity n.a

SHAREHOLDER STRUCTURE % CAPITAL VOTES Muirfield Invest 11.1 % 11.1 %

Handelsbanken Liv Försäkring 7.6 % 7.6 %

Wellstreet Partners 7.2 % 7.2 %

TIN Fonder 5.8 % 5.8 %

Futur Pension 5.7 % 5.7 %

Avanza Pension 5.0 % 5.0 %

Lancelot Asset Management 3.2 % 3.2 %

Handelsbanken Fonder 3.0 % 3.0 %

Tom Stendahl 2.8 % 2.8 %

Mikael Ahlström 2.7 % 2.7 %

DCF VALUATION CASH FLOW, MSEK WACC (%) 13.0 % NPV FCF (2020-2021) -121

NPV FCF (2022-2028) 430

NPV FCF (2029-) 1307

Net debt -336

Fair value estimate MSEK 1952

Assumptions 2020-2026 (%)

Average sales growth 65.7 % Fair value e. per share, SEK 12

EBIT margin -19.7 % Share price, SEK 9.0


27

Redeye Rating and Background Definitions

Company Quality

Company Quality is based on a set of quality checks across three categories; PEOPLE, BUSINESS, FINANCE.

These are the building blocks that enable a company to deliver sustained operational outperformance and

attractive long-term earnings growth.

Each category is grouped into multiple sub-categories assessed by five checks. These are based on widely

accepted and tested investment criteria and used by demonstrably successful investors and investment firms.

Each sub-category may also include a complementary check that provides additional information to assist with

investment decision-making.

If a check is successful, it is assigned a score of one point; the total successful checks are added to give a score

for each sub-category. The overall score for a category is the average of all sub-category scores, based on a

scale that ranges from 0 to 5 rounded up to the nearest whole number. The overall score for each category is then

used to generate the size of the bar in the Company Quality graphic.

People

At the end of the day, people drive profits. Not numbers. Understanding the motivations of people behind a

business is a significant part of understanding the long-term drive of the company. It all comes down to doing

business with people you trust, or at least avoiding dealing with people of questionable character.

The People rating is based on quantitative scores in seven categories:

• Passion, Execution, Capital Allocation, Communication, Compensation, Ownership, and Board.

Business

If you don’t understand the competitive environment and don’t have a clear sense of how the business will engage

customers, create value and consistently deliver that value at a profit, you won’t succeed as an investor. Knowing

the business model inside out will provide you some level of certainty and reduce the risk when you buy a stock.

The Business rating is based on quantitative scores grouped into five sub-categories:

• Business Scalability, Market Structure, Value Proposition, Economic Moat, and Operational Risks.

Financials

Investing is part art, part science. Financial ratios make up most of the science. Ratios are used to evaluate the

financial soundness of a business. Also, these ratios are key factors that will impact a company’s financial

performance and valuation. However, you only need a few to determine whether a company is financially strong

or weak.

The Financial rating is based on quantitative scores that are grouped into five separate categories:

• Earnings Power, Profit Margin, Growth Rate, Financial Health, and Earnings Quality.


28

Redeye Equity Research team

Management

Björn Fahlén

[email protected]

Håkan Östling

[email protected]

Technology Team

Jonas Amnesten

[email protected]

Henrik Alveskog

[email protected]

Fredrik Nilsson

[email protected]

Tomas Otterbeck

[email protected]

Oskar Vilhelmsson

[email protected]

Viktor Westman

[email protected]

Forbes Goldman

[email protected]

Mark Siöstedt

[email protected]

Editorial

Mark Siöstedt

[email protected]

Life Science Team

Gergana Almquist

[email protected]

Oscar Bergman

[email protected]

Anders Hedlund

[email protected]

Ludvig Svensson

[email protected]

Niklas Elmhammer

[email protected]

Mats Hyttinge

[email protected]

Filip Einarsson

[email protected]

Fredrik Thor

[email protected]


29

Disclaimer Important information Redeye AB ("Redeye" or "the Company") is a specialist financial advisory boutique that focuses on small and mid-cap growth companies in the

Nordic region. We focus on the technology and life science sectors. We provide services within Corporate Broking, Corporate Finance, equity

research and investor relations. Our strengths are our award-winning research department, experienced advisers, a unique investor network, and

the powerful distribution channel redeye.se. Redeye was founded in 1999 and since 2007 has been subject to the supervision of the Swedish Financial Supervisory Authority.

Redeye is licensed to; receive and transmit orders in financial instruments, provide investment advice to clients regarding financial instruments,

prepare and disseminate financial analyses/recommendations for trading in financial instruments, execute orders in financial instruments on behalf

of clients, place financial instruments without position taking, provide corporate advice and services within mergers and acquisition, provide services in conjunction with the provision of guarantees regarding financial instruments and to operate as a Certified Advisory business (ancillary

authorization).

Limitation of liability

This document was prepared for information purposes for general distribution and is not intended to be advisory. The informat ion contained in this

analysis is based on sources deemed reliable by Redeye. However, Redeye cannot guarantee the accuracy of the information. The forward-

looking information in the analysis is based on subjective assessments about the future, which constitutes a factor of uncert ainty. Redeye cannot guarantee that forecasts and forward-looking statements will materialize. Investors shall conduct all investment decisions independently. This

analysis is intended to be one of a number of tools that can be used in making an investment decision. All investors are therefore encouraged to

supplement this information with additional relevant data and to consult a financial advisor prior to an investment decision. Accordingly, Redeye

accepts no liability for any loss or damage resulting from the use of this analysis.

Potential conflict of interest

Redeye’s research department is regulated by operational and administrative rules established to avoid conflicts of interest and to ensure the

objectivity and independence of its analysts. The following applies:

• For companies that are the subject of Redeye’s research analysis, the applicable rules include those established by the Swedish Financial

Supervisory Authority pertaining to investment recommendations and the handling of conflicts of interest. Furthermore, Redeye employees are not allowed to trade in financial instruments of the company in question, from the date Redeye publishes its analysis plus one trading

day after this date.

• An analyst may not engage in corporate finance transactions without the express approval of management and may not receive any

remuneration directly linked to such transactions.

• Redeye may carry out an analysis upon commission or in exchange for payment from the company that is the subject of the analy sis, or

from an underwriting institution in conjunction with a merger and acquisition (M&A) deal, new share issue or a public listing. Readers of

these reports should assume that Redeye may have received or will receive remuneration from the company/companies cited in the report

for the performance of financial advisory services. Such remuneration is of a predetermined amount and is not dependent on the content of the analysis.

Redeye’s research coverage

Redeye’s research analyses consist of case-based analyses, which imply that the frequency of the analytical reports may vary over time. Unless otherwise expressly stated in the report, the analysis is updated when considered necessary by the research department, for example in the event

of significant changes in market conditions or events related to the issuer/the financial instrument.

Recommendation structure Redeye does not issue any investment recommendations for fundamental analysis. However, Redeye has developed a proprietary analy sis and

rating model, Redeye Rating, in which each company is analyzed and evaluated. This analysis aims to provide an independent assessment of the

company in question, its opportunities, risks, etc. The purpose is to provide an objective and professional set of data for owners and investors to

use in their decision-making.

Redeye Rating (2020-11-02)

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physical or legal entities that are citizens of or domiciled in any country in which such distribution is prohibited according to applicable laws or other regulations.

Copyright Redeye AB.

Rating People Business Financials

5p 21 16 3

3p - 4p 108 88 40

0p - 2p 5 30 91

Company N 134 134 134

CONFLICT OF INTERESTS

Goldman owns shares in the company: No Nilsson owns shares in the company: No Redeye performs/have performed services for the Company and receives/have

received compensation from the Company in connection with this.

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