In this Research Note, we examine Irisity AB, a Swedish provider of AI-powered video analytics solutions. This analysis highlights their financials based on the 2023 Annual Report, the acquisition of Ultinous announced in February 2024, and the subsequent streamlining of group operations.

Irisity AB is a public company listed on Nasdaq First North Growth Market. Founded in 2006, the company serves customers in more than 90 countries with headquarters in Gothenburg, Sweden, and offices in Malmö, Israel, USA, UAE, and Singapore.

The firm operates through a global network of resellers, partners, security companies, and camera manufacturers. During the full year, the company's average number of employees amounted to 77 (83).

Irisity 2023 Financial Overview

• The Group’s net sales amounted to MSEK 117.6 (87.7), a growth of 34% YoY.
• Gross margin amounted to 85.9% (79.7%).
• EBITDA amounted to MSEK –16.4 (–32.0) – an improvement of 49%.
• The year's result after taxes amounted to MSEK –132.5 (-136.9).

Acquisition of Ultinous

In February 2024, Irisity announced its intention to acquire Ultinous, a Hungarian startup specializing in Nvidia-based AI video analytics.

The listed company signed a binding term sheet to acquire 100% of the shares of Ultinous Zrt for a consideration of SEK 45 million, on a cash and debt-free basis and assuming normalized working capital, that will be paid through an issue in kind entailing 9,000,000 new shares in Irisity at a subscription price of SEK 5.00 per share.

Founded in 2014, Ultinous is a Swedish-Hungarian company with offices in Budapest and Malmo. The Ultinous AI Suite, a video analytics tool, addresses safety, security, and video-to-data analytics needs. Ultinous offers both forensic and real-time video analytics, adaptable for on-prem or cloud environments.

Ultinous is expected to strengthen Irisity’s current platform and product offering by incorporating sophisticated video analytics, as well as unlocking future revenue and cost synergies.

“We are pleased to announce the closing of the acquisition of Ultinous, which allows us to immediately address the significant AI software growth potential in industrial safety use cases while enhancing our development capabilities with a new hub in Budapest. This strategic acquisition, combined with our ongoing streamlining initiatives, is expected to save costs and improve profitability by optimizing resource management and development efficiency” says Keven Marier, CEO of Irisity, on 29th May 2024.

Streamlining of Group Operations

On 27^th March 2024, Irisity announced plans for a strategic initiative in streamlining group operations ahead of Ultinous Zrt acquisition closing. This planned initiative’s objective would allow for the consolidation of the Ultinous Zrt operations in Q2, while also lowering the combined Irisity Group’s overall operating costs by 5-10% which amounts to an estimated MSEK 7 to 12 per year savings.

Key streamlining opportunities will be identified in all group operational areas. To achieve the expected cost savings, the company plans on simplifying company operations, consolidating IT/financial systems, cross-group resource sharing, and improving individual product line profitability.

The planned streamlining initiative of the group operations will improve resource management, increase development efficiency, lower service delivery costs and increase innovation speed. The combined impacts would accelerate their pursuit to achieving positive quarterly cash flow and EBITDA results.

If Irisity can execute on it's growth plan, it will increase annual sales from around $11m USD to between $30m and $40m USD in the next 5 years.

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.