Bittium Oyj

Good morning everyone and welcome to this webcast on Bittium's half-year financial results. My name is Karolina Malmi and I'm the Head of Communications and Sustainability at Bittium. And with me here today is our CEO Petri Tolema, who has started leading this company in the beginning of April this year. But before I hand over to you, Petri, I'd like to remind you all we have reserved some time at the end of the presentation for Q&A. So please use the Q&A box on your screen to write us questions and we will answer them at the end. But now over to you, Petri.

Thank you, Carolina. Good morning and thank you for joining us today. So my name is Petri Tolemo. I started this 1st of April as the CEO of Bithium. I'm excited about my new role as the CEO. I was six years with the board of the directors of Bithium, and I see a lot of opportunities, especially on the defense side for Bithium to grow. Based on my background, I believe I'm in a good position to help Bittim to take ourselves to the next level. So first, a few forward-looking statements. Some statements made in this material are relating to the future circumstances and by their nature. Those forward-looking statements involve risk and uncertainty, and therefore Bittim Corporation disclaims all obligations to update such forward-looking statements. Then we will call the final sales results for the first half year. So our net sales and order grew significantly. So the second quarter, net sales grew by 15.6% year on year, and we were at 22.9 million euro. So then looking for the business segments, what we have, so the defense and security, net sales grew by 19.4%, and order intake grew significantly to 20 million euros. Medical business segment net sales grew by 4.5% and order intake grew to 4.6 million euros. Engineering service net sales grew by 6.3% and order intake grew significantly to 6 million euros, which basically doubled the order intake number. To summarize the first half, net sales grew by 11.3% year on year and was 42.2 million euros. Our order book increased by 25% year on year and is now at 43.1%, which has put us in a very good position to have the strong order book situation. Second quarter operating results was 1.1 million euro, representing 4.9% of the net sales. And which impacted then the profitability level was that we have continued to make certain investments for the growth, which made an impact on the profitability level. And also we announced earlier that we had one time cost related to the restructuring of the medical business segment, which led to 2 million euro annual cost savings, and that impacted by 0.9 million euro, our second quarter operating results. To summarise the first half, the operating results was 1.5 million, representing 3.6% of the net sales. Then going to the financial review, starting with this quarterly financial development. We are presenting here three years of quarterly development. In the second quarter, the total was 22.9 million euros, services 7.8 million euros, while the products were 15.1 million euros. And which is notable to here, if we look the last year, the second quarter, 24. So the product business side has been growing significantly here. On the right, there's operating results, and as we see, the trend is positive, 23, 24. We spent time on the turnaround on the profitability side, and that was made well. And now it's the time for the growth. And so the second quarter, so 1.1 million euro representing 4.9% of the revenue. The same comparison, but now on the half year, so 11.3% year on year. In total, 42.2 million euros, services 16.3 million, underproducts 25.9 million euros. And again, if we compare that to the first half, what we had the situation last year, the notable here is the growth, especially on the product side. And on the right, you are able to see then on the operating results curve as well. R&D investments decreased year on year, so 7.7 million euros representing 18.2% of the net sales, while we had last year in the comparable time 7.9 million euros. 2.2 million euros was capitalized, which is less than we had in the last year, 3.9 million euros. Also, the depreciations decreased to 1.8 million, while we had 2.8 million last year. So, the total R&D cost and the impact on the P&L was 7.3 million euros, while last year it was 6.9 million euros. And the investments, main focus on that is especially on the tactical communications and the radius for the defense market, but we are also making significant investments also on the medical technologies and the products and the software. Looking for the cash flow, I think the trend has been positive on the cash flow. So first the net profit with the adjustment on the first half, 4.2 million euros. Change in the net working capital, 5.2 million euros. Interest and taxes, minus 0.1 million euros. Net cash from operating activities, 9.2 million euros, which is significantly higher than the last year. Then net cash from investing activities minus 5.2 million euros and net cash from financing activities minus 4 million euros, which included the dividend payment of the 3.5 million euros and which changed to net change in cash and cash equivalents to be the zero for the first half of 2025. Assets and liabilities, so first looking at the assets, the non-current assets, 85 million euros, which included the property, plant and equipment, 19 million euros. Capitalized development cost 15.8 million euros and other assets 15.1 million euros. On the current asset side, the inventory was 24.7 million euros. trade and other receivables 28.9 million euros, and cash and liquid assets 21.7 million euros. Then on the equity and the liability side, equity 107 million euros, liabilities 49.7 million euros, which included the trade and other payables 24 million euros, interest bearing debt 20.8 million euros, other liabilities 4.9 million euros. So our equity ratio remained at the excellent level being the 70.7%. Basically, we are a net debt-free company at the moment, and our capability to finance the operations is at the excellent level. Then we are going to look at the business segments, starting first on the defence and security business segment. So last year, defence and security business had an excellent year. We did grow. Now, even if we have tough comparison points from the last year, on the second quarter, we grew 22.2% year on year and on the half, 19.4% year on year. And also the backlog, like mentioned, it grew significantly. So looking at the market development on the defense and security business side, the first, our important customer, the Finnish Defense Forces. So we ended with the partnership agreement over the last year. With them, we have been ramping up that one. We received the new TAGFIN and TAFCOM node orders. On the second order, that was more than 7 million euros. That was a big deal for us. Also, we did continue the deliveries for the SDR tactical radios. Also, we did demonstrate the hybrid network, where the tactical network is communicating with the commercial 5G network, creating the 5G bubble together with the Finnish Defence Forces and Nokia. On the international customer side, we did continue to receive orders from multiple countries, being Croatia, Estonia and Austria. Also, we have received new customers or been able to acquire new customers for the TUF SDA radios in Europe. And also, it was announced that there is a negotiation ongoing now with Indra, which is one of the largest technology companies in Spain. which is operating in more than 100 countries, so we are negotiating them regarding the SDR radio as well as the production technology deal with them. Also, we have received new orders for Securcall, SafeMob and ToughMobile too. Then on the medical business segment, so second quarter 4.5% year-on-year and first half minus 2.6% year-on-year. Net sales increased, but the operating result, it would have been positive, but due to this one-time cost, 0.9 million euros, the results went to negative side. which was significant on the medical business segment on the second quarter, is that we were able to close the deal with our long-term partner and the customer, Boston Scientific, for ECG devices for the next three years. And that also included the joint development, a new product for the US market. So ECG device sales outside of the US remained moderate to the more fragmented markets, which is typically in Europe. Respiro sales were lower than estimated, and we have activities ongoing. We will update more on our CMD, which is happening in September. Niina Huikuri started as the head of the medical business segment, bringing a lot of background, understanding and knowledge for this EGG market. Engineering services business segment, it has a pretty challenging market situation, but we managed to grow 8.5% on the second quarter and 6.3% on the first half. The ongoing customer projects are proceeding well and we have one new extension for the projects. Also, the order intake increased significantly year on year in the second quarter, like mentioned earlier. There were several defence sector service projects we have won. This was a new thing we defined for the growth strategy that we want to also focus on the defence sector in our engineering service side, and that has started well. Also, we have won new customers from the manufacturing industry as well. And we announced also the cooperation with the Terrestar regarding the creation of this new 5G, NG and non-terrestrial networks. Supporting Vario's defense and security business segment project continued through the first half, and the challenging market situation continues. There are some past budget constraints for the new R&D project, but I would say it's an excellent start still for the year, which helps a lot that we are dealing with a lot of international clients, not just with the Finnish customers only. Then as we see how we summarize the trends, so we believe that the megatrends are supporting the growth, especially in the defense and security side. And there's some budgets being increased for the defense at the moment. We are seeing more and more activities with respect to kind of the new opportunities in the defense market, the size and amount of the new opportunities has increased. And this is something we are working very intensively at the moment to capture the growth for the BIT team. Also this EGC and home sleep apnea testing device market is growing and we are now focusing on to win the new customers, building the new market channels and optimizing the go-to market at the moment. Also, like mentioned in this engineering services, despite of the challenging market situation, we believe it's in the good track this year. which is important for us, especially on the defense sides. We have to continue to make investments for the production scalability, which is important to be able to deliver higher volumes in the future to meet the kind of the demands in the defense segment. We have also strengthened the organization, bringing new leaders, and we have excellent and committed, highly skilled people, which is supporting our growth strategy. We will have the CMD 23rd of September, when we will provide the strategy updates during this fall. And the outlook, we are going to repeat the same outlook, keeping the outlook. So we expect the net sales this year to be 95 to 105 million euros, operating results to be in range of the 10 to 13 million euros.

And finally, we have the investor calendar.

To welcome all of you to join the CMD, we look forward to providing more updates on our long-term targets and also the strategies for the corporation and the business segments. And third quarter results will be published on the 24th of October, 2025. And I believe that's now time for the Q&A.

Yes. Thank you, Petri, very much. I have quite a bunch of questions here. So let's start. And let's start with defense and security and our latest news about cooperation, possible cooperation with Indra Group. So what's behind this cooperation and this licensing programs? What exactly do they need from Petti?

So in overall, I think this intra and this pain opportunity is very interesting for us. It looks like that that Spain wants that there's a lot of domestic kind of content while they are building this national radio. Bittim is in an excellent position because one of those rare companies which actually have the kind of software defined radio both commercially and technically ready and available. So we are in the discussing with them to provide the both our technology of our product as well as the manufacturing technology which would help them to manufacturer than the radius in the Spanish market and the negotiations are in a very early phase. Our discussions are continuing in a very good manner and I believe that it's excellent and a very sizable opportunity for Pitti in the future.

Thank you. That sounds good. Is there any how you can comment on the Spain's trying to get rid of Israeli radios or cooperation with them? Can you comment on that?

This is interesting and this is something we have also tried to figure out what is exactly the official statement at the moment. Looks like that there's discussions in the media and the media statements that Spain is not going to use the Israeli and our competitors at all. But this is something we have not been able to confirm. But how I see is that because Bittim with Intra is in an excellent position in Spain to negotiate about this future Spanish radio opportunity, I believe there might be some truth behind this market news. But like I said, we have not been able to confirm it.

Okay, good. Is there anything you can comment on the size of the potential that lies behind this cooperation?

Like I said, we are in the very early phase of the discussions and we don't have yet any numbers, but if we compare the opportunity for Bittium and both Intra, it's very sizable for Bittium especially.

Okay, thank you. So let's move a bit north and go to our cooperation with BIE, which we signed in summer, last summer, 2024. So is there anything you can tell about the status of the cooperation at the moment? Have you been, have we been able to participate in tenders together with BIE?

So we were expecting to join this NS3, this RFQ round in the tender in the UK, but this has been postponed, not because of us or because our product is more the political reasons and this is something that we'll work with together with the BAE and we are ready to tend to kind of provide the updates and participate the tender when it becomes reality but as you have seen today we announced that we are launching the new kind of office and and there is a new leader in the UK, so we are taking this UK seriously. We are believing there's significant opportunities, and that's why we are investing to have a stronger presence in the UK.

Yes. How about Austria? We have provided our core backbone network there, related products. How about the radios? Is there any tender ongoing or upcoming?

So in overall, if I look at Austria and the customer, the relationship with the customer has been excellent for the long time. We have been able to deliver the core network for a long time and deliveries are ongoing. At this stage, I'm not able to comment about the radius, but we and I personally expect that our business with the Austrian customer is going to grow.

Okay, good. How many countries has Bityum made pilot deliveries? And how big opportunities these are? Pilot deliveries meaning the very initial phase before tendering.

We have not published the exact amount of the countries. This is not because of us. Many of our customers are government. military sites and they are not letting us to announce the kind of the discussions or the deals with them therefore we have said that of course we have this spain discussion ongoing we have also announced that we have delivered to one european country what the special forces this is something Then we have announced our public references, but beyond that, there are several countries in Europe and Asia that we have been able to deliver the pilots. And we look forward to grow the business. And like I said earlier, Bittim radios are both commercially and technically ready, and we are in an excellent position now. to capture the wave of this modernization and digitalization of these radio and tactical communication systems.

Yes, that's great. But then about the outlook. Are you able to open the drivers behind for different business segments? So what needs to happen in order to be able to deliver what's said today?

So typically the second half is stronger for Pitti and the first half. And I think we have a pretty solid plan for the second half. Of course, the defence being the most important there and the largest one, but I was referencing earlier that we have excellent order book situation now. I would say that we have almost all needed orders in place to deliver the results for the defence and security business for this year. So I think that there's a solid possibility to deliver the expected outlook.

Good, thank you. Then about profitability. After significant progress of profitability during the last two years, it appears that the profitability is yet again taking a step or two backwards due to growth investments and recalibration of MediGal. Can Bithium still grow fast and scale profitable up at the same time? Or is this eating every profitability?

We don't want to just grow the top line. We also have to be able to grow profitably. That's true that we have made certain investments after this turnaround. When we made these reductions in 2023 and 2024, We reduced a lot of the costs, but we knew that once we are going forward for the growth path, there are certain investments we need to add and do, especially going for the international market. And that's typically what happens in the product business, that you have to invest first. But of course, we are very carefully making all the investment decisions. Of course, we want to grow profitability and this medical segment, we actually reduced to 2 million euros of the annual cost. And this is an example that we are not, doesn't just want to grow the top line.

Okay, thank you. Actually, there is one more question about the BIA and the cooperation, but you answered this already. I think this question came at the same time or something. But yes, that's all for the questions today. But thank you very much.

Thank you, everyone.

Thank you.