• Linguacom files for bankruptcy following recent embezzlement
• Q2e results affected by SEK -23.6m, no effect on cash flow
• '23e sales affected by -6%, adj. EBIT by -3.6%, minor impact

Linguacom files for bankruptcy, no effect on cash flow

Following the recent announcement that Linguacom's CEO is suspected of embezzling over SEK 20m by purchasing a large amount of phones on behalf of the company and then stealing them, Seafire announced today in a press release that Linguacom is filing for bankruptcy. For Seafire, this means Q2 results will be affected by SEK -23.6m, due to lost goodwill and other assets. There will however be no effect on cash flow.

Minor financial impact on Seafire

In 2022, Linguacom had sales of SEK 69.1m and EBIT of 3.5m. Removing Linguacom from our '23e estimates would affect sales by -6% and adj. EBIT by -3.6%. Seafire has a directors' and officers' liability insurance and is currently in discussions with its insurance company regarding compensation for the losses, and while we deem it likely Seafire will receive some compensation, it is still very uncertain how substantial this compensation will be. We note that Linguacom has been one of the least promising companies within the Seafire group, and all in all we judge the financial impact on Seafire to be relatively minor.

Some reputational damage, but outlook still strong

While the recent events are unfortunate and have damaged Seafire's reputation somewhat, we deem them to have been caused by the likely unforeseeable, illegal actions of a single individual within the company, and therefore reiterate our positive view on the company as a whole.