“Thanks to a strong and stable financial foundation, we have been able to adjust and continue to move forward as planned.”

Timo Pirskanen, CFO, iLOQ

When one wavers, the rest will carry the load

The financial year 2023 was overshadowed by the ongoing uncertainty around the world. We are no exception when it comes to the effects of the situation on the world’s economy. Despite the immediate hardships, we have been able to stay the course in terms of our long-term plans.

Sudden change in business landscape
The world looked very different in January of 2023 than where we are today. While our EBITDA did suffer in 2023 due to decreasing volumes while all fixed expenses remained unchanged, our gross margin on sales remained at a high level, ensuring profitability. Many of our core customer segments were hit with the effects of rapidly rising energy prices and the sudden jump in interest rates. The construction industry in the Nordics especially felt the effects overnight. The building of new residential developments virtually ground to a halt in our traditional strongholds of Finland and Sweden.

The same kind of reactions could be seen in housing associations putting investments on hold. Upgrades in access management have been among those decisions that have been postponed to a later time. Many investments in the residential and built environment sector in general are in a holding pattern, waiting for positive signs from the markets and a new stability. We hope to see many of these projects come to fruition as early as 2024.

These unpredictable circumstances that became a reality in 2023 had another major impact on our business. The target volumes we estimated at the beginning of the year were very different from how the year turned out. While previously we were forced to stockpile hardware and parts to ensure availability in a time of component shortages, we suddenly found ourselves with a lot of capital tied down in stock that wasn’t moving. Having money sitting on the shelf at our warehouses has obviously had an effect on our cash flow.

Performance outside our traditional strongholds
Despite what we experienced in the Nordics, we were able to stay on track in terms of our goals for growth. In some newer markets where we are not as strongly established, we have been able reach growth of even up to 50% in these times. In addition to continuing on a growth trajectory in Europe, we have also established new outposts in Australia, Singapore and, of course, North America.

Obviously, the upfront investments into opening such vast new territories for business have an effect on the numbers for 2023, but the large investments are justified by the enormous potential for returns in the short term as well as in the long run. Kicking off operations required extensive R&D efforts to complete our ANSI offering as well as setting up capabilities related to recruitment, personnel, ERP and delivery capabilities. We are quite far along in investigating opportunities related to establishing a logistics center in Texas to serve the North, Central and Latin Americas.

Demand for our technology remains
Regardless of the geographical market, we’ve seen that the retrofit market is still going strong. Not being as volatile a market as new builds, we’ve seen some 80% of our built environments business, which includes residential, commercial and public buildings, coming from retrofit projects. This is where an investment into smart locking is seen as something that will help reduce lifecycle costs considerably and already deliver savings in year one.

The second leg that our business stands on, critical infrastructure and industrial customers, has been strong and steady through troubled times. Demand for our technologies has remained high and our team has brought home several high-profile projects and large-scale global framework agreements on this side of the business. These large agreements also serve to bring stability and a longer view into the year ahead.

Setting our sights on the future
In summary, iLOQ was hit by many of the same adverse effects that other businesses also experienced in 2023. Thanks to a strong and stable financial foundation, we have been able to adjust and continue to move forward as planned. We have our sights set far into the horizon and hope to leave this bump in the road behind us, taking along only the good learnings.

This year has shown us that the previous choices made regarding spreading out to new geographies and building the diversity of our customer portfolio beyond the residential segment have served us well in times of turmoil. We are standing strong, ready to lead the revolution in battery-free digital access management into the years ahead.