Norbit Asa

Welcome to Norbit's third quarter presentation. My name is Per-Jørgen Westhøne, and together with me today, I have our CFO, Per-Christian Reppe. We're going to give you some insight in the figures for the third quarter. So the third quarter of 2023 is the best third quarter in the company's history. It's 22% higher in revenues compared to the same quarter in 2022. This growth is driven by underlying growth in all of our segments. The EBITDA margin has also improved from the last quarter. So it's 21% from the same quarter last year, sorry, and ended at 68.2 million NOX. If you have a look on what we have achieved for the last nine months, our revenues is accumulated up to 1,123,000,000 NOx, which is a growth of 37%. Looking into the different segments, so in segment ocean, we have delivered a quarter with 134 million NOx in revenues with an EBITDA margin of 30%. This gives a margin of 40 million NOx. For the first nine months, we have 422 million NOx, an increase of 34%. The margin accumulated over the first nine months is 35%, spot on what's been our target for the ambition we announced to the market mid-2021. On this slide, we show you a split on the revenues and compare that with the two foregoing years. And as you can see, the major part of our revenue still comes from the sonar sales. What's been very strong this year is the growth on the IVBMS platform. that yields 222 million NOx out of the 422. The wing and sails has also been good with 136 million NOx up from 83 for the first nine months in 2022. We have recently announced an acquisition, a good extension to our oceans product offering. It's the Canadian maritime technology company Ping DSP. This is a very good company with strong technology. It's a very special side scan sonar. It's a very good extension to over multi-beam sonars. So our main wish for this company is now that the Norbit global sales and distribution platform could help lift these products out in the world and support growth. In the connectivity domain... We have delivered a quarter as expected. It's 160 million NOx in revenues, which is an increase of 44% from Q3 in 2022. And the margins on the EBITDA side is 30%. For the first nine months of the year, it's quite similar to what we've done in oceans. It's 424 million NOx, and with the EBTA margin, also for this segment, 35%, which also was the target in the 2024 ambition plan announced mid-2021. Looking into the revenue split in connectivity, you see that our onboard units has yielded quite a large share of the revenues. 269 million out of the 424 is onboard units. But you can also see a good growth on enforcement modules from 26 up to 50. And it's also growth in the subscription and ETOL segment. But this deep growth is mainly from onboard units and enforcement modules. Looking into the product innovation and realization segment, you would see a decline if you compare the numbers directly. So the segment has yielded 86 million NOX in revenues. If we compare and adjust for customer reimbursement, there is underlying growth. I will show that on the next slide. For the first nine months, this segment, I would remind you, this segment is mainly... The majority of the revenues comes from contract manufacturing of electronics for industrial clients. In the first nine months of this year, we have had 300 million NOx in revenues and an EBITDA margin of 16%. So looking into the revenue split, you see that out of this 299 million NOCs, 224 comes from contract manufacturing. And you have 69 being some proprietary products and some R&D services. In 2022, we had nearly 70 million NOCs for the first nine months in customer reimbursement, this being components procured in a challenging component market at premium prices where the additional cost was invoiced directly to the client without any margin. So it's a good sign that this is much less. That's an indicator that the component market is improving. So with that, I'll leave it to Christian to give you some more insight into the more detailed financial figures.

Thank you, Peter again. I will spend some minutes walking you through the financial highlights of the quarter. Revenues in the third quarter amounted to 328.6 million kroner, representing an increase of 22% from the corresponding period of last year. Adjusting for the effect of customer reimbursements of extraordinary material costs, which we invoice certain clients in the PIR segment without a margin, the underlying growth for the group was 32%. Of this growth, currency impacted revenues positively with 10 percentage points from the third quarter of last year. EBITDA for the quarter was 68.2 million compared to 47.2 million in the third quarter of 2022. This represents a margin of 21% compared to 17% in the same quarter of last year. Operating profit was 41.4 million in the quarter, while net finance expenses was negative 11 million. Of that number, 7.3 million relates to net interest expenses. Tax expenses were 8.3 million, while net income for the period was 22.1 million. In the third quarter, connectivity and oceans were the main drivers behind the improved EBITDA compared to the corresponding quarter of last year. Segment oceans reported 29% increase in revenues on the back of strong sonar sales and favorable currency development in euros and dollars versus the Norwegian kroner. Gross margin was 69% in the quarter, an increase of 4 percentage points from the corresponding quarter of last year, largely due to lower share of sales on commission as we acquired our distributor in North America, Sears Geomatics, earlier this year. The increase in gross profit was partly offset by an increase in operating expenses, primarily due to a strengthening of the organization, operating costs from the seahorse geomatics operation, as well as integration costs. In connectivity, revenues grew by 44% in the quarter, with growth in all product and service verticals compared to the third quarter of last year. Revenues were also supported by a strong euro versus Norwegian kroner, with exports primarily to the European market. Gross profit increased due to a higher revenue base, with the gross margin being largely unchanged with that of the third quarter of 2022. Partly offsetting the gross profit effect was an increase in operating expenses of 7.2 million, which is partly explained by a stronger Hungarian forint versus the Norwegian kroner, as approximately 40% of the cost base is forint-based. The EBITDA ended at 34.2 million, representing a margin of 30%. In the PIR segment, reported revenues were down 11% year-over-year. However, adjusting for customer reimbursements of extraordinary material costs, underlying revenue growth was 14%, driven by higher sales in contract manufacturing, particularly towards industrial clients. Gross margin declined 4 percentage points, adjusting for the reimbursement effects on customer mix. Combined, this resulted in a marginal increase in gross profit, and with operating costs offsetting the gross profit effect, EBITDA ended at 7.9 million for the quarter. Next, balance sheet and financial position. Property plant and equipment decreased 3.9 million in the quarter following a reduction in right-of-use assets. Intangible assets decreased 1.4 million to 296.3 million. Inventories increased 37.8 million in the quarter. Growth in inventories is partly a result of an expected activity increase. Inventory management remains a key priority in the group, with focus on increasing the inventory turnover and rebalancing the security stock level as the component market improves. Trade receivables decreased 2.5 million in the quarter, and trade payables was 164.5 million at the end of the quarter, up 9.3 million from the end of the prior quarter. Net interest rating debt stood at 242.5 million at the end of September, an increase of 6.6 million from the end of second quarter. And our equity ratio was 53%. In the third quarter, our net interest-bearing debt to EBITDA ratio decreased to 0.7 times. Our balance sheet remains strong, and we have a solid liquidity buffer of approximately 458 million to support organic growth ambitions, pursue strategic acquisitions, as well as distribute dividends to our shareholders. Lastly, the cash flow for the quarter. Cash flow from operations was 13.9 million, explained by an EBITDA of 68.2 million, net increase in 41.6 million in working capital, 11 million in net finance expenses, and 1.8 million in taxes paid. We invested 27 million in the quarter. Of that, 15 million was invested in R&D, and 12 million was invested in machinery and equipment. For 2023, we reiterate the expectation of investing between 60 and 70 million in R&D, primarily allocating capital to the oceans and connectivity segments for new product innovations. Investments in fixed assets are guided to between 50 and 60 million this year. Cash inflow from financing activities was 4.9 million in the quarter. I will then give the floor back to Per-Jørgen for the outlook section.

Thank you, Per-Jørgen. Before going into the outlook, I'd like to notify you that if anyone of you have any questions, they could be entered into the chat. I see some questions coming in already. So after we've concluded the presentation, we will look into the questions Q&A part, but you're warmly welcome to key in any questions you might have. So as for the outlook, we are well on track on delivering on our guidance to deliver in excess of 1.5 billion Norwegian kroner in revenues. This was initially our target for 2024, but as communicated previously, we decided to increase our guidance for this year and aim to reach our 2024 ambition level in 2023. All this is supported by growth in all business segments, and as Per-Christian said, we continue to explore value accretive acquisitions to add to this organic growth. So the short-term outlook, and I will remind you what we've said already in the more long-term outlook. We've said that since we have... in reach to deliver on our 2024 ambition already in 2023 we are working on a more long-term perspective and we will during our q4 presentation in february next year announce some 2027 ambitions For the short term, we expect that the ocean segment to deliver growth compared to the same period last year. The fourth quarter has started very strong for oceans. For connectivity, we expect to deliver revenues in the range between 115 and 125 million NOX up from 81 from the corresponding quarter last year. And in product innovation and realization, we also expect to deliver revenues in the range from 115 to 125 millions, up from 112 for the fourth quarter last year, and then adjusted for this customer reimbursement, which we already talked about. So with that, I think we would be ready, Peggy Stone, to look into some of the questions in the Q&A.