Ivan Mrvoš (Include): Our biggest burden is negative EBITDA, but we expect significant revenue growth

The company Include recently announced the delivery of its two-thousandth product from the factory in Solin. After three years of intensive development, during which more than two million euros were spent, it is now in a phase focused solely on scaling sales and production. We spoke with Ivan Mrvoš, the CEO of Include, about current challenges and future plans.

– The product development cycle is complete; we do not intend to develop new solutions in the foreseeable future but rather focus on increasing sales of benches, waste containers, and air quality stations. We have now entered markets that are much larger than the smart bench market, where we realistically hold 80 or 90 percent of total global revenue.

Our competitors in the waste container segment generate tens of millions of euros in revenue annually, and our task now is to capture as much market share as possible as soon as possible. We are certainly facing a dynamic period, but nothing different from the last nine years of operation, Mrvoš told Lider.

Two orders of 100 thousand euros

Their products, he explains, have been exported to as many as 61 countries worldwide, with a larger portion of those countries being one-off projects where they have no new sales activities. However, when looking at the number of countries to which Include continues to actively export products year after year, it is about twenty. This is still a quite enviable figure, as these are markets where they have made at least one product delivery annually without exception over the past five or six years.

– Since we launched new products on the market in 2021 and last year, the number of inquiries and the value of projects we are working on have drastically increased. What has remained unchanged is the fact that we operate in a very demanding market where decisions are made even over years.

The largest individual orders last year came from France and Germany. For example, just those two orders amounted to around 100 thousand euros, and these are the types of projects we hope to see in larger quantities in the future. Our largest clients are partners who then distribute the products to end customers, mostly cities and municipalities. The highest number of individual orders last year came from France and Italy, Mrvoš commented.

The largest revenues for Include still come from the sale of Steora smart benches, although Mrvoš stated that he expects revenues from the sale of Terra waste containers and Aerys air quality measurement stations to increase this year. Last year, these two new products generated approximately 15 percent of total sales revenue, and part of the revenue was also generated from the Solos platform.

Solos currently does not generate significant revenue, but as the number of delivered products increases, revenue from the platform will also grow drastically, with Mrvoš emphasizing that this involves recurring revenue, as clients pay an annual subscription per product to access the platform.

Negative EBITDA

Include ended last year with 823 thousand euros in revenue, a negative EBITDA of 440 thousand euros, and a loss of 745 thousand euros. In 2021, revenue amounted to 598 thousand euros, EBITDA was -699 thousand euros, and the loss was as high as 917 thousand euros. Both 2020 and 2019 were marked by negative EBITDA and losses, although much smaller, and the last positive operation was in 2018 when EBITDA of 324 thousand euros and a net profit of 26 thousand euros were achieved. Revenue in 2018 and 2019 was around one million euros and has not yet returned to that level.

– Revenue over the past three years has certainly been heavily marked by the global pandemic and all the consequences it has caused. Last year, we recorded a recovery in revenue, but that is far from what we had in the projections made at the end of 2019.

Our biggest burden is negative EBITDA due to high investments in R&D and operational costs, so at one point we had a loss equal to revenue. For our investors and us, this was not an unexpected situation, and we expect profitability indicators for this year. In fact, we expect that the first quarter of this year will bring positive EBITDA and significant revenue growth, Mrvoš explained.

After last year’s investment round, Include stopped raising capital, as they were primarily aware of the situation in the capital market, as well as the fact that their results do not justify new investment cycles.

– At this moment, I can say that a few months ago, the process of a significant transaction of business shares began, but it is still in a very early stage, and I cannot speak in detail about names and the transaction itself, he added.

Prices are stable, but there is no going back

In previous years, the biggest challenge for Include was business survival, given the decline in revenue and the overall economic situation. This year, considering the stabilization and growth of revenue, Mrvoš stated that the biggest challenge is timely supply of goods. On one hand, they are unable to invest significant funds in large material stocks because their cash flow does not allow it, and at the same time, they cannot delay orders, as in that case they have very long delivery times.

– This is now the classic problem faced by almost every manufacturing company trying to scale its business and needing additional capital, but I believe we will successfully overcome this challenge as well, he explained.

It is logical that an unstable economy negatively affects entrepreneurs, and Mrvoš believes that a large number of them are in constant fear of some new trouble, as new problems have continuously arisen since the beginning of 2020 until today. Inflation, he says, is much stronger in the food industry and generally in the consumer goods segment.

– The largest price jump for us was recorded in 2021 when chip prices rose by as much as 700 percent. The situation has stabilized today regarding both chip supply and prices, although they are no longer and will never be the prices as they were in 2020 or before, he concluded.