Rtx A/S

Hi, good afternoon. We are ready to get started with one of today's events here, so I would like to welcome you on behalf of Andersen Capital to this review of the third quarter of 2024-2025 from RTX, which came here this morning. My name is Rasmus Køgeborg. I have the great pleasure of welcoming Henrik Mørk Mogensen, CEO of RTX, and CFO Miltram Lux. A warm welcome to the two of you in the first round, Henrik and Mille.

Many thanks for that and I look forward to going through a business update and our relationship with you.

Yes, and I do too. And we have an agenda here where we start by telling a little bit about RTX for those who do not know RTX and refresh for those who know us. Then Henrik goes in and tells about the business update and gives a little insight into one of our business areas on audio, after which I take over and tell about the financial figures. And then we end with Outlook and questions.

Thank you, Mille. Yes, and I hope that you are ready and fresh and we are looking forward to if there should be any questions. It's always fun when there is a little interaction back and forth, so ask any questions. But let's just try to give an overview of what we actually do at RTX. And fundamentally, we are experts in making wireless communication that is safe and reliable. And now we mention this about challenging environments, and that is actually where we are really good. We have taken some examples with us here, if you are a fire extinguisher team that has to extinguish a forest fire. A place where team cooperation and communication is extremely important, At the same time, you can't leave yourself on the standard that the mobile phone works or that there is Wi-Fi. So to be able to have wireless communication out there that ensures that you can focus on the task is enormously important. It can also be in health, where the importance of not losing data, where our infrastructure ensures that all vital data comes out in the right hands. It can also be a concert experience, where the whole effect of the good work that is done on stage goes out to the audience. And it's about good sound. And that's what we're here to ensure. And then there are also warehouses, hotels, the detail chain, where there are people who have to work together to both have an effective working day, but also create good customer experiences in the end. That's what we're here to create. And who do we do it together with? One of the things that is a big part of RTX business is in reality our customers and our partnerships. We develop and produce headsets, handsets, infrastructure components, but we do it together with our customers. Here are some examples, HP, Cisco, NEC. All global market leaders who have an enormously strong brand. and which in reality makes it possible for our products, with their name on it, to come out globally. Their sales and channels are enormously strong and global. And that's a big part of our strength in reality. And if you then try to look a little into the engine room, what is it that we do together with our customers? We have tried to show a timeline of how a product lifecycle looks like, and above the blue line, we have our customers below, there is RTX. One example is when we, together with one of our good partners, Vokobo, are designing a new headset that is to be assigned a detail chain. It could be Netto or Spar or others. Then Vokobo comes with a deep understanding of what the problem areas are out there and what they need. We have a good understanding of both the market and of course a lot of the technology. And then we put it together. Then we put it together and design a product that meets the market needs The customer needs to understand the market and also come up with a design, and we handle all the technology. And then we allow our customers to focus on branding and marketing, i.e. to bring the product to the market and ensure that it is market-specific. And then we handle all the complexity in relation to onboarding, training, production, but also to ensure that the product is relevant in the market, both compliance-wise, but also functionality-wise over time. So what we are talking about here is long-term partnerships and deep discussions in our customer's value chain. So it's like the quick overview of who is ATX and what we do. Well, if we then look at what we actually are here for, our quarterly plan for the third quarter and the first nine months. I can only say that we are very satisfied with the development we have seen in the business sector compared to last year. We see an increasing, stable development in both our turnover and profitability, which is crucial in both parts. And that also means that we have both before the summer holidays, and now we are coming again, this time we are narrowing the guidance before the summer holidays, we have narrowed it down a little, but of course we are also so close to the end of the year that we are beginning to have a good transfer on the rest of the year and where we end up, and of course we would like to recommend that to the market as well. This development is driven a lot by our largest segment. Enterprise accounts for a size of 75% of our business. where we have seen a positive growth both in the underlying business, with what we have talked about earlier, a normalization of the demand after the supply chain crisis, which is part of lifting the level compared to last year, but also a growth in the vertical, which we call retail or retail goods trade. We also see a positive development in our healthcare business, coming back to go a little deeper into that. And then fundamentally a strong foundation when we look ahead. We also know that it is a challenging environment to make business in these days. We have tariffs that are about to find their place, but we have gone from not talking about tariffs to talking about the fact that we should be lucky if we have 15 or 19 percent cash. So of course it should find its place and we should react to it. Fortunately, we have a good setup for our supply chain and we work closely with our production partners. And we work closely with our customers to handle it. But some of what we can start to see is that our dollar rate, we are affected by the dollar rate. And when we started over, if you can remember, the dollar rate was around 7 on the other side. And now it's almost 6.4, maybe even down to 6.3 and maybe even further down. And that's a challenge that we have to navigate. But that's why it's also important that we have a solid foundation to go into both next quarter and next year. But a positive result that we are really proud and satisfied with. If we then look at each of the three segments, we have Enterprise, that is, the market for Voice over IP, telephony, telephony solutions to warehouses, to cruise ships, to hotels, to retail, which consists of handsets and headsets and infrastructure, which we do together with some of the customers that are shown here. A market that is actually quite stable, but where we have a good position in. And also to find the growth holes that retail is representing at the moment. But a fairly stable market that we have a good position in. We have a turnover of just under 300 million for the first nine months against 228 last year. A very nice growth, if I may say so myself, at 31% compared to the last year in the first nine months. I am very satisfied with that and it is positive to see that our enterprise business is on its way back to where it was. So we are very satisfied with that. When that is said, we are still working with relatively short orders and horizons, even though our customers build up more and more orders, but over the supply chain crisis, our customers have also worked with in reality to generally minimize their stocks, and that is somewhere a form of a new normal. And here we are of course also exposed to the price impact on the US dollar.

I just have to ask a question to Enterprise when we are at this point, because there was a question about the adjustment that you came up with earlier back in June. It was, among other things, driven by Enterprise, as you wrote there as well. But there is this flat development in Q3, as we can also see on the slide here, somewhat on the turnover side in any case. You made 106 in this Q3 and 103 last year on the top there. Welcome to ask a little about this growth, so it's off now. And what exactly gave the growth earlier this year? You mentioned retail, but are there any flows within this that you are familiar with?

In any case, as you can say, I think if you have to say, you can say there is, you can say Q3 is, we see the effect of the dollar exchange rate. If we look at our business, including both healthcare and enterprise, we have seen a growth in Q3 compared to last year at 3.5%. If we correct from the exchange rate, it is called 10%. So there is of course an effect there, where our underlying business is actually growing, and that applies to enterprise as well, of course. This normalization of the doctors is also part of giving a bigger leap. where we actually come back to normal, but we see an underlying growth in the market, and that is especially what is driven by retail. So we still have a positive growth scenario, It is not expected that it will be 31% every time. We should expect something that is under 10% over time, because the underlying market is limited. It is more about how we can expand the business with existing customers, and whether there are any changes in the market and surveys. markets that we can penetrate with our technology together with our customers. So return to normal is part of the explanation of the growth here.

Amazing. Let's move on. I think it's good audio you have as the next one.

Then we have Pro Audio, a business where you can say in relation to both healthcare and enterprise, where we deliver full products, all headsets, infrastructure, bases and handsets. Here we have addressed this segment by taking all our know-how and knowledge and condensing it into a module that has these features of safe, reliable and seamless communication. and then allowed our customers to build their own products. And that's a change we made a couple of years ago, because we saw that the markets were too fragmented and there was too much volatility in the different sub-segments. So this was a way for us, in a standardized way, to supply a scalable product and then still address the market. And there are two sub-segments. There is what we call intercom, where something like protection and readiness lies. And then we have entertainment or sound, as in the second part, together with our customers. And so we are starting this transformation. It is also completely correct. The numbers do not lie. 56 million a year versus 92 last year. You can't run away from that. It's a comeback. We had expected a return, but there is no doubt that we had higher expectations to be a higher place than we are today. What should be said, however, is that we see that if we look into our pipeline and the dialogues we have with our customers and the pipeline we are building up on our new business model, then there is a demand for it. And we have a lot of confidence that we will, especially for next year, see an uptrend also in turnover for this area. And there is of course Defense and preparedness is actually a segment where it is possible to make it possible for teams in critical situations to have good and effective communication. There is a market fit and we work together with customers like Invisio, Savox, 3M in that market. But it is also for this type of solutions. a slow-moving market. So we will see a relatively small impact of this on the short term, but we have a belief that this could well come to fill something on the longer term. So of course it is something we are working on to get deeper into this segment. Yes, then we have Healthcare. where we deliver, together with Philips, the infrastructure that ensures that the patient can feel safe, that all the vital values come to the right place, so therefore gives the patient a sense of security, but also an efficiency for the clinical staff, so that they can get used to, or focus on, and take care of the patient when there really is something that needs to be taken care of, and not handle a lot of technology around it. And this is very much reflected in market trends around the age of the population, limited resources in relation to, and thus more complex diseases, and at the same time limited resources in clinical personnel. So it is quite important to be able to create efficiency for hospitals. So this is a positive market trend we are talking about here. And we are also happy that we again manage to grow our business 52 million on 9 months compared to 29 last year. So it's the right way. So we're starting to build this up and we see that there is a demand for our products in the market. And this transition that we have talked about earlier, in relation to going from delivering technology to taking a full product that is created in our partnership with Philips. Well, what we are also doing is a journey we are on and a transition, but we have a high willingness to go through it. And that is also what we see, that it is reflected in the results. And we expect that to continue in the next year. So that was just the three directions. Then we have tried to take a case with or dive into some area every time. This time we have chosen for audio, our smallest area, but also one of the areas where we need to see a development in a positive direction. And one of the areas that I also mentioned is the area, now we call it critical communication, it is the area that covers defense, where we have tactical teams that need to communicate together. It is also preparedness. It can be fire extinguishing, it can be police or in reality teams that need to solve a critical task in a challenging environment where you cannot expect that there is some infrastructure in place, so you have to deal with it yourself. And what you need in that situation is in reality that you have a focus on the task. That is, that you can focus on the task in good contact with your team. And that's what our technology does. is that you can build it into your helmet or headset without spending time setting it up and it works as a natural communication and it is safe and reliable and you are not dependent on that there is something in the foreground. So we see there is a pretty good fit and we also see that with the partners we work with in this area that there is a demand for it. We also see that this is something that needs to be built up over the years, but we are beginning to see a positive trend in this area. So we believe that this is something that we are more and more interested in, together with our customers. And over time, we believe that this can become a part of our business as well, which has a bigger impact. The overview of both the results, which we are super satisfied with, and a little insight into the different elements of the business. I don't know if there are any questions about that at the moment, or we can take it to the end as well.

There was a question about Pro Audio here, but it could also be that it is both of us who are going on the track, both you and Mille. But it's a bit in relation to this, there is one who asks, the development of Pro Audio shows an increased negative EBITDA level and thus draws the collected picture down. But you write at the same time relatively positively about the views here in Pro Audio, and that is also what you are not mentioning here. Is it realistic to expect a positive EBITDA return from Pro Audio in the coming year or will a turnaround be expected to take longer?

There is no doubt that it is a clear goal. All of our businesses must give a positive contribution to the business. And there is no doubt that there are two elements in the transformation we are making. You can go from selling full products to selling a module, then the price is lower. So it is there. But in return, it is a much simpler business that really has a smaller focus on our development and in reality on our sales resources. which, on the other hand, pulls positively. We have a strong expectation and believe that we are beginning to see a pro audio business that grows in turnover, And we have a clear goal that of course it should also give positive EBITDA. We are in the process of planning and looking into next year, so I can't say for sure if we will hit positive next year, but it is a clear goal. And the most important thing we can really do is to keep up with our strategy and lift the top line on this, because the business model on it works, because it is a standardized product, and then the EBITDA should come. We are not in doubt about that.

Maybe another question in relation to Pro Audio. Henrik, this one, I just noticed that you should always be careful when you put these customer and company names on, that this time there were eight with. I remember the last time we had a presentation, I think there were actually ten names on this slide. Does this mean that you have lost some customers within this segment, or does it just mean that you have just shuffled around and taken some out?

The reason for this is that we choose those we think are relevant and fill something in our business. When that is said, we make a transformation of business. So far, we have succeeded. We could take Yamaha as an example, where we have historically delivered full products. Now we change our business model, and of course it involves a risk that says, we will not trade with RTX. But we actually succeeded in bringing our existing customers with us to a new business model, where we deliver the module and technology to the full product. So no, it's not because we're losing customers on this journey. Of course, there is a little dynamic in it, but it's not something we have in the long run. customer relations also in this, so the fact that there are two missing on this compared to the last time, it is actually more an expression of a dynamic in what it chooses to show.

Yes, very nice. But it could be that we should try to jump on to the financial part as well.

Yes, you press hands on Mille.

Good. I can just zoom in a little. Mille, now I got a little back in your slides. Now I should probably zoom in so we get the right one here at least. Yes.

Yes. Well, now we come to the exciting part, and Henrik has fortunately given a good influence on where we are in terms of business, and we will see that reflected in the numbers that I go through. We go through the key figures, and if there are any questions besides that, then they are very welcome. What we can see when we look at the turnover, which is the first, is that we have lifted the turnover for the first nine months with just under 60 million compared to last year. Despite the fact that we have another rate. If we just look at the quarter, as Henrik has also been talking about, then we have a 10% growth rate per quarter if we take the standard rate. It is then 3% when we take the rate differences we have. What has lifted it, we have also been talking about, is the enterprise business, which is also quite stable from quarter to quarter, and for a business like ours with large volumes, then profitability It gives lower costs in production, so it is actually a very important parameter. We'll get to that when we look at the gross margin here on the next page. In addition, what we can also say has affected the quarter is our healthcare business, which again has had a really nice quarter, and it is a business that has a good gross margin, and it also has that because we have ownership of these products, and thus there are some capacity costs to ensure that we are at the top of it all the time. When we look at the gross margin, then we are over to date on a gross margin of about 51% compared to last year, where we had 45%. And when you look at the year-to-date figures, then you have to bear in mind that last year's first quarter was a quarter where we had a fairly low turnover. And that means that these production costs, upstart, downscale, it fills a lot. Now we have more flexibility in production. which means that we have been able to reduce our direct and indirect production costs, and this is reflected in the gross market. In addition, we have also had a lot of focus on what kind of products we make money on and also optimize the mix in the range we can in relation to cooperation with our customers. When we look at Epida, we see that last year we had at this time for the first nine months minus 20, and where we have in 2022. So that means we have actually lifted EBITDA with a good 40 million, while we have lifted our turnover with just under 60. And that says both something about the effort that has been put out and done on the sales side, but it also says something about the effort we have done in order to optimize and plan and use the money in the best possible way. Then we have chosen three other parameters that we have just highlighted in this financial overview. The first is the layer, and the reason we have chosen to highlight it is because as a starting point, the layer that RTX should have in the ideal model and in the model we are on our way back to, is that we have of course goods in transit, that is, goods on the way out to customers. And then we have a smaller component layer that should make it possible to develop and and supplement with needle components so that we do not expose our risk. We have had a fairly large warehouse at a time and we have done this because we have been able to secure a warehouse to be able to produce and thus have a nice year in 2022-23 where we could deliver to the customers. But this also means that we have built a component warehouse and the component warehouse should as a starting point be located outside with our production partners. So in the coming years, we have reduced this layer, that is to say, we have put it into finished products, out to the customers. And that is why we have seen this decline, and that is really positive. And we expect that we, on components, will go down around 40 million for it to be the right level with the turnover we have now in component layers. The next parameter we are looking at is free cash flow, and for all companies, including RTX, then cash is important. Cash again. Therefore, we have also chosen to increase it. In these nine months, we have made a positive cash flow of about 12 million compared to last year, when we had a negative cash flow. It is our clear ambition, of course, that we always have a positive cash flow, and therefore we also choose to look at it and increase it every quarter. The last parameter we increase is our liquidity, i.e. our net liquidity position or our cash balance, what we have in the bank. And there we are in this quarter, at the start of this quarter, at 120 million. And that leads us to the next slide, where we also immediately after our quarter report was published, we announced that we are launching an action return purchase program that starts on Monday. The reason we do that is that we of course have a capital policy that says what it is we should use our capital for. And there are some barriers for us to have a certain level of solidity, because we have large customers who expect us to be robust enough to stand up against some adversity, both in one way and the other. Therefore, we have set the level to 80 to 100 million with the current turnover and the current rate. If we have more than that, we would like to give something back to our shareholders, and that is why we have started this program. It is 20 million, it starts on Monday and it is under this Safe Harbor. What we expect to get out of it is of course to support trade in the business or in the stock market. And thus also, when we take some stocks out into the market, increase income per share. So when we look at our outlook, we have actually been around it, but I will repeat briefly here, then we have chosen at the end of this quarter and increase our guidance both on the top line and on EBITDA and EBIT. And then we have, in connection with the publication of this quarterly report, we have increased the bottom in our EBITDA and EBIT, so the interval now is minus 5 to 5, that is, around zero on EBIT and on EBITDA 25 to 35. That is what we have chosen to emphasize on the financial figures, and then we are ready for questions.

Thank you so much for that, Mille and Henrik. We went through some of the questions in the review, but I think there's a little bit about share buyback here. partly one who asks why you send money back to the shareholders. And there is also a question here, you are starting a new stock return program of 20 million. Does this have to do with canceling stocks at a later time? Or do you also use your own stocks for, for example, incentive programs or for, for example, possible purchases in the market?

Yes, well, we We use stocks for incentive programs, and that can be read more about in our remuneration policy. In addition, we can use stocks both for investment and we can cancel stocks. And a cancellation of stocks is something that is foreseen at the General Assembly, so it would be something that we would propose at that time. As Henrik also said, we are also in the process of a strategy process, where we look at where we would put our strengths, focus and investments. So it also has a meaning for what the board decides to do with these shares.

But I hope that answers the question. The simple answer is that it is about our capital policy, as Mille says, and therefore the board has also decided that this is the right thing to do. And then it gives it a chance to say when we work with a long-term ambition, then we also have the opportunity to use it actively in that context.

Glimmering. And I can just go back a little bit to your slide, this one to healthcare, because there is also a question there in relation to how this large strategic agreement in the previous announced within healthcare is going. And I could also supplement with the next one here and say, is it just one of the things that is affecting this transition we see here on the numbers?

There were actually two questions. You can say yes, it is clearly the journey we are on, where we take on greater responsibility for our products, which is also part of raising prices for the individual products. So it helps the growth at the top and for that reason also on the bottom. In terms of transition and the program we have agreed on, we have good progress on it. There is no doubt that there is We have, it is actually a process that is actually agreed right into 27, so it is a long process with many steps in and we are well on the way with it, but it is something that in reality, yes, we were all the way to the beginning of 27 before we can say now it is full ownership and product ownership. It's about the complexity of the products. and that deeper knowledge of the way to a hospital room, which is also under construction here at RTX.

Yes, and then you might also add that the world is developing around us and our customers, their products are developing and therefore there are always new needs and more things that we put in together with this process.

Good. And then a question we also had last time in connection with your second quarter, where these messages came out, but there is no one to ask here. Have you seen any further effects of tariffs and fines, which were also up and coming with your plans for Q2?

You can't say that you can see directly into the numbers, but you can say that where we can see the effect is in reality. We have had a production strategy throughout a long period of time, a footprint strategy on our production, which has actually been quite diversified, both with production in Denmark and also in Asia. And of course, we have also had and still have a significant part of production in China. And that's why we have been working for the last 5-6 years with what you could call a China plus one strategy, which I think many other companies have also worked on. And of course we have accelerated that. And of course we enjoy the fact that we have a very similar setup compared to our production partners. So together with our customers in hand, we move the production out of China. Then you can say all this tariff, maybe there has been a little more attention, but there are still no final agreements about where the toll is going. for the given locations. We probably have a feeling that no matter what, China is probably a place that is high. But where should you place yourself? Now it looks like Europe is 15 percent. Yes, so there is a big dynamic in it, so it is a lot together with our customers and our business partners. We actually work the most about this. We can't, we don't see, I don't think we see any emissions in the withdrawal yet. Apart from maybe a general uncertainty and then of course the impact on the exchange, which has something to do with the whole tariff talk as well.

Yes, then we are so silent that it is the customers who understand the tariffs. So that's where it hits to start with. But it is such that it is a collaboration, so no, sorry. Well, it can happen. So it becomes a part of the deal, these tariffs. So we can't say that we will not be affected by it at all, but immediately we try to find the best solution together with our customers.

So we are sure that there will be a price pressure and that there may be an increased decline in some product categories. And the better it is, it is fantastic to be able to look at a business where we have control over our BICS, i.e. in relation to that we are now on positive numbers, we generate cash and we are also on the way to generating black numbers at the bottom. It is enormously important and also for our customers, because it will require a solidity to ensure that you can handle that uncertainty. So of course we are very happy about that.

Very nice, and the time is running out, but the last question, and it could be that I should address it to you, Henrik, because there is one who asks a little here. What is the potential you see in RTX? It's a little interesting. Now you have been sitting in the room here for half a year now, and the first of March you arrived, as I remember it at least. And I think you have probably seen the potential before, since you said yes to the position here, but it could be a little fun to hear what you have also become a little wiser about here in the last six months and what you see as the further potential in RTX from here.

Basically, I have been confirmed in what I imagined before I stepped in the door, that we have a super solid company that has some good long-term relationships with our customers, that has a solid base in some really talented people with a high degree of know-how and some IP around it. Where I see the potential, it is actually when RTX comes tættere på markedet, ikke bare på vores kunder, men i virkeligheden tættere på markedet, så vi kan begynne at målrette både vores investeringskroner i innovation, ud mod direkte markedsbehov, for eksempel healthcare eller andre markeder. Retail er også et eksempel. So something that we have worked a lot with, and we are still working on, is actually to dive into the markets we are in and where it is. So where is it that we are going to invest our investment money in the future? Of course, for a positive impact on the long run. And how far can it go? And what are the other markets we should be in on an even longer scale? So without getting into it, because we are still in the process, it really is about getting rid of what our technology can And I think we do that by getting closer to the market. So right now we are investing in understanding markets even better than we do. What are the market dynamics? What are the movements in the market? And how does the value proposition of our technology fit into those markets? So where should we invest our sales, investment and development money to get the greatest possible trust and growth? So I think there is potential in that. and link the market and even more strategic commercial leg to what we are really good at at X and run businesses around complicated technology in long-term partnerships with our global customers.

Glimmerne. Ja. Meget fint. Jeg tænker, at det er også noget, vi kan snakke lidt videre om næste gang, vi mødes i forbindelse med, det er jo så et årsregnskab, og dermed også udsigter for de kommende år, kan man sige. Så, men tusind tak til jer, Henrik, for at stille op her i dag. Tak, og tak for mange gode spørgsmål. Det vil jeg også sige herfra. Tak til jer, der lyttede og så med og stillede spørgsmål. Vi ønsker bare god dag.