Norbit Asa

Welcome to Norbit's fourth quarter and full year 2024 presentation. Today it's exactly one day before we can celebrate Norbit's 30th birthday. So on February 14th 1995, 154,000 Norwegian kroner was deposited on a bank account in Serbius Baribank as share capital. It's been a very interesting journey. It's a lot of revealing stuff to think about, but we cannot dwell on the past having so much exciting and opportunities in front of us. So in addition to presenting the results for last year, we will also give you insight today on our ambitions for 2025. The end of last year was a very good end so it was a new record and being a company with ambitions of consistent growth we need to have records many quarters A 40% increase from the Q4 in 2023 is satisfying and it's good to see that this comes from strong underlying growth in all business segments. We also saw a good margin improvement. So having a 26% EBIT margin, giving us then a record high EBIT on 145 million NOX is satisfying. So for the full year, so we have shown all years since we were listed in 2019 here. So coming, concluding 2024 with 1,751 million NOC, that's with an EBIT margin of 20%, giving a consolidated EBIT of 342 million NOCs. The earnings per share is close to 4 Norwegian kroner, exactly 3.93. That's a 27% increase from last year. In the board meeting yesterday, our board declared that it will propose to the general meeting to pay a dividend according to the dividend policy. The policy says that 30 to 50 percent of the net profit should be paid out and also it says that we have an intention of paying out access capital as extraordinary dividend so it's for the 2024 closing proposed ordinary dividend of two Norwegian kroner and extraordinary dividend of one yielding in total than three Norwegian kroner per share Going into the segments, Oceans had a very strong, so we saw a very good traction in Q4. It's impressive to see the organization's ability to deliver more and more and even more. so nearly 270 million NOX in revenues with close to i've been complaining a bit it was lacking 1 million should have been 100 so it's the 99 million NOX in in EBIT uh 37 margin and as you know we did for us very good acquisition last year in omar so if we adjust for that acquisition we still see a growth of 36 percent quarter over quarter Also worth mentioning, we have a big project we announced last year in the security part of the oceans, yielding 75 million NOx in revenues. It was announced in September. In these numbers there is no revenue recognition on that due to some postponement of the project. For the full year, Oceans made 745 million NOX in revenues, which is an increase of 24%. And the annual EBIT margin ended at 29%. showing the split for the last three years on the different product lines. So as you see the Strong growth is mainly from what we call other sonars. So it's the IVBMS sonar family where we continue to tailor for specific user applications. and by that opening up market so we can continue to grow. The wing head is more or less the same level as it was in 2023 and you see that we have sub bottom profilers on top of this which was not part of 2023 and this comes from the acquisition of Inomar. As I mentioned, we continue to tailor, to broaden the product offering and growing through that. Some examples, so this is... just a few, this is only two out of a range of examples what we've invested R&D funds into. But we've launched a new VBMS X. This is a new platform based on the VBMS we had in the past. The new thing in this is that we on this platform have the ability to allow clients to pick what kind of features they'd like. So it opens up for us to do a different business model. You can buy then VBMS X with base functionality and you can choose to upgrade as you need additional functionality. So it opens up for more business development and a wider range of business models. In addition, one example, a more long-range version of the i80S. With this long-range i80S, we allow clients to have a wider swat angle so that they could do a more efficient survey when mapping the seafloor. In connectivity, it was also a good quarter. So it's the second best in the history for connectivity. When I say it's good, it's because we was expecting this to be a new record. 20 million NOX in revenues on enforcement modules was pushed into Q1. due to some constraints on supply chain issues. But revenues 153 million NOX and EBIT of 44 million representing at 29% margin. And the total of the year for connectivity ended at 516 million, so you see a small decline from 2023. This is mainly, as you see, explained by lower activity on onboard units. That's the standard tolling tags we're supplying where we had a very, very strong first half year, 2023. But it's satisfying to see that we have good growth on all over product lines. So all in all, we find 2023 to be a good year also for connectivity. So in the R&D, as we said that for Oceans, we're tailoring new functionality, new features, and broadening the product offering. As we've announced in the past, we're doing for Norbit big step, making a new product. It's a satellite-based tolling onboard unit for use in commercial vehicles. and the first deliveries is under a contract 160 million NOX announced last year to start in July this year where it's our client told for Europe and the development on this continues with full force It's a lot of activity going on. Sourcing of components, preparation for high volume production is well underway. A new robotic line will be installed in our Røros factory during April. so final segment product innovation and realization for those that has followed us for a while you know that in oceans and connectivity we are doing norbit branding technology out to a global market it's our own technology and of course the margins are then good 60% approximately of our manufacturing capacity is used to make own products. Remaining capacity is sold on contract manufacturing terms to selected industrial clients. We've seen a good quarter in Q4 also in this contract manufacturing that's driven by increased demand in the defense and security sector. So nearly 150 million NOX in revenues in the quarter with 20 million NOX in EBIT, yielding 14%. And I think in a contract manufacturing term, that's a very strong EBIT margin. For the full year, we saw revenues of 543 million NOX. That's 32% up from 2023 and it's a good margin improvement for the full year. It's 10% compared to 8%. So as you see out of the 543, 460 nearly comes from contract manufacturing. And on top of that, it's some R&D services and some products that we have been supplying to some industrial clients under some private branding for them since many, many years. So with that, I leave the floor to Per-Christian to go through some financial figures.

Thank you, Per-Erik. I will spend some minutes walking you through the financial highlights of the quarter and the full year results. Financial performance in the last three months of 2024 was strong across the board. Revenues in the fourth quarter amounted to 556.1 million kroner, an increase of 40% from the corresponding quarter of 2023. Adjusted for Inamar, which we acquired 1st of July last year, the growth rate was still an acceptable 33%. For the full year, revenues ended at 1,751,000,000, up 15% from 2023, with growth driven by segments oceans and PIR, while connectivity saw a 5% point decline on rescheduling of onboard units. EBITDA for the quarter ended at 182.4 million, representing a margin of 33%. And this compares to 92.1 million at a 23% margin reported in fourth quarter of 2023. For the full year, EBITDA ended at 474 million, up 21% from that of 2023, representing a margin of 27%. Operating profit was 145 million in the quarter, translating to a margin of 26%. The quarter was impacted by our divestment of underwater lighting products to the aquaculture market. In total, this reduced operating profit by 7 million through obsolescence of inventory and 3.4 million in impairment. For the full year, operating profit was 341.7 million, up 20% from 23, and representing a margin of 20%. Net finance expenses were negative to 9.4 million, primarily explained by net interest expenses of 9.9 million. Tax expenses was 29.6 million, while net income for the period was 105.9 million and 243.3 million for the full year. In the fourth quarter, oceans delivered strong growth of 52% year over year and 36% adjusted for Inomar. Organic growth was primarily driven by strong sonar sales, in particular for winged sonars, supported by the introduction of two new sonars, which mentioned by Per-Ørjan. The gross margin was largely flat, while parallel expenses increased 11.3 million, of which Inomar explained 7.3 million. Depreciation, amortization and impairment expenses increased to 8.5 million following amortization of R&D and the mentioned impairment of 3.4 million. The EBIT ended at 98.7 million, giving a margin of 37%. Adjusted for the divestment of lightning products, the EBIT margin was 40%. Connectivity saw a 31% revenue increase year over year on higher sales of onboard units. Gross margin was 63%, flat from that of fourth quarter 2023. Operating expenses rose as fourth quarter in 2023, so a reversal of provisions made for credit losses of 3 million. The EBIT for the quarter was 43.9 million with a margin of 29%. PIR reported a solid quarter with revenues increasing 33% on strong demand from industrial clients within contract manufacturing, in particular from the defense and security sectors. Gross margin in the fourth quarter was 44%, in line with the margin reported over the last six months, reflecting a normalization following a weak first quarter of 24 and a weak fourth quarter of 23. Both quarters were impacted by sale of inventory and delivery on a low margin project. As a result, EBIT for the quarter ended at 20.4 million, giving a margin of 14%. Next, balance sheet and our financial position. Property, plant and equipment, including rights of use assets, increased 5.5 million in the quarter, following investments in machinery, equipment and lease additions of new production equipment, net of depreciations. Intangible assets rose 16.1 million, explained by R&D investments, with high activity on the GNSS OBU project in the quarter. Trade receivables were up 79.6 million in the quarter, explained by Ocean's quarterly revenue growth and intra-quarter effects as sales in Ocean were back-end loaded. Inventories increased 38.2 million in the quarter, while trade payables increased 31.5 million. Net interest bearing debt stood at 254 million at the end of December, a decrease from 352.4 million at the end of September. Our equity ratio was 53%, that's up from 51% at the end of third quarter. Our working capital efficiency continued to improve in the fourth quarter to 23% based on last 12 months revenues or 18% fourth quarter annualized. The reduction in inventory has been the main driver behind the improvement in 2024. In 2024 we have reduced inventory with more than 130 million in a period of growth. which is a result of improving inventory management and adapting purchasing strategies to a more normalized component market. We have previously highlighted that inventory turnover has been high on the strategic agenda, and I'm pleased to see that we have delivered results in 2024. Heading into 2025, we expect that the working capital will show large fluctuations from quarter to quarter, particularly concerning our inventory, which is expected to show a build-up in the first half of the year ahead of the GNSS OBU deliveries, as well as preparing for large volume deliveries in the PIR segment. Our long-term ambition however remains clear, to maintain high working capital efficiency in order to make the business more capital light. Without compromising Norbit's core value number one, we deliver. In the fourth quarter, net interest bearing debt to EBITDA stood at 0.7 times and our liquidity position was 743 million at the end of the quarter. Our balance sheet continues to remain rock solid and provides for a strong financial platform to deliver on our capital allocation framework and the ambition plans that we have set out. As for the recommended dividend by the Board of Directors, you will see that we are currently below our long-term target range of the financial policy and thus an extraordinary dividend is proposed by the Board to adjust our leverage position to the lower end of the range. Lastly, cash flow for the quarter. Cash flow from operations was 143.7 million, explained by an EBITDA of 182.4 million, a net decrease in working capital of 18 million, taxes paid of 47.4 million and 9.4 million in net interest expenses. We invested 50.4 million in the quarter, explained by 36.8 million in R&D investments and 13.6 million in investments and machinery and equipment. For 2025, we expect our R&D investments to end up around 100 million, with high activity in the first half to complete the GNSS overview. Investments in fixed assets are expected to 110 million in 2025 to support continued growth. Cash outflow from finance activities was 16.1 million in the quarter, mostly explained by 28.1 million in debt repayments and for leases, partly offset by the share issuance to our employees participating in the annual incentive program. And with that, my part of the presentation is completed. So I'll give the floor back to Per-Jurgen, who will give you the outlook section and some additional information regarding our investment program for 2025.

Thank you, Per-Christian. So looking into the future is always more exciting than explaining the past. And I'm happy to lay out our ambition for 2025. So our revenue target for 2025 is in a range between 2,200 and 2,300 million Norwegian kroner, which marks a next step for us towards our 2027 ambition. We target to improve our EBIT margin compared to the 20% reported in 2024. In addition to this, we continue to explore value of creative acquisitions to add on to the organic growth. The more short-term outlook. So as you know, first quarter is normally a weak quarter in oceans. Oceans is the segment that historically have had the highest seasonality in our business. The quarter has started with high activity and we are happy to announce that we expect a strong growth in revenues in first quarter 2024 compared to what we had last year. So we expect revenues in the first quarter to be in excess of 200 million. In this, we have not included any recognition of the previous mentioned security project for the 75 millions. First quarter and connectivity, we expect in the range of 140 to 150 million NOX. And in the PIR segment, we expect to take a step upwards to 170, between 170 and 180 million NOx, driven by increased demand and continued increased demand in the defense and security sector. Pakistan mentioned the investments, so approximately 100 millions in R&D and 100 millions in property, plant and equipment. So behind this, as Pakistan also mentioned in the R&D, a good portion of the budget is on the GNSS onboard unit. There is a lot of things also in the oceans part that takes a good piece of that budget. In the property plant and equipment, we have a new robotic assembly line for the GNSS onboard unit. As I mentioned, that will be installed in April. We have invested in some new specialized prototype SMT lines for making more rapid prototypes, speeding up R&D, but also freeing capacity for the volume production at the Zalbu factory. And we take a big step in the Røros factory and nearly doubling the capacity of that factory by both upgrading existing lines and installing new lines. in april we will start a line that currently is on the boat from japan to norway and this line is as we experience going to be europe's fastest smt line so and for those not being fully into the terminology surface mounted technology, that's components that is assembled on a printed circuit board, very highly robotized in this regard. In addition to this, we're very happy to see that we're able to expand the Särby factory. We'll increase the floor capacity by 70%. This is done through a lease from the municipality. They have decided that they will build a new expansion of our factory to us and we will lease that on, for us, good terms. Reminding you of the 2027 ambition where we plan to do more than 2,750 million NOX in revenues and as mentioned our 2025 ambition is a good next step towards that. The EBIT margin, we said that for 2025 the ambition is to have it higher than 20, so a good way on the journey for the long-term ambition. Also the return on capital employed, as Christian showed you, we have a very active relation to our balance sheet and on our working capital. So we want to have good return on the capital. And with that, we're open for questions if there should be any.

Okay, first question is from Jeppe at Arctic. Does the 25 revenue target include the 75 million guard point project?

As we have talked about that, it's been some postponement now and no revenue recognition so far. So we don't rely on doing revenue recognition on that to reach our target.

Could you provide a segment breakdown of your full year revenue targets? We haven't provided any split for that, but as a general remark and what we have stated in the report is that we expect a solid growth in all of the three business units and that will be supportive towards the target in 2025. You mentioned a strong start to the year within oceans. What products are driving the year over year growth?

We haven't given any split on that either and I think I would like to remind that in the oceans segment we are continuously broadening the product offering but still that the products inside it's this is low volumes But all product lines have a good contribution margin. So we're not going to give any accurate split on that today. So what I can mention is that the mentioned VBMSX, which we introduced lately, has had a very good start. Better than expected.

What's your expectations for enforcement modules for tachographs in 2025?

Maybe you would comment on that?

No, I mean, so based on what we're currently seeing, we do expect that modules for enforcement will increase in 2025 compared to 2024. The primary effect of that is due to the fact that the regulatives of the EU has either been implemented to replace all the trachographs or is in a transition period to be replaced. So what we're currently seeing in the market is a very strong growth, at least for the first half of this year. And that should be supportive for also the full year target that we are announcing for the group, given the prospects that we see on that product line itself.

And probably also it's fair to say that we did expect higher revenues on that last year. It was some postponements, but as we experience, these postponements was for all the big players in the market. So we expect that our prime client still remains the same market share. So then it's postponements and not that losing market share.

And a final question. How scalable is the ocean segment?

the scalability is good uh and um so i mean for uh i mean that's that's proven uh in the numbers you've seen that uh the the revenues has uh increased more than more than the the salary expenses relatively and um i think we we have good scalability in operations uh with We'll need to continue to staff the organization, but we have a very good setup now that is capable of absorbing more people. And it's been amazing to see when we've been out to recruit people into this part of the business also that it's a lot of good qualified people that want to work with us and work on these products.

Question regarding PingDSP, which we acquired in October 23. How has this integration into Norbit's organization impacted PingDSP sales and opportunities so far?

I'm glad to get that question because that's a very satisfying story. What we've seen is that bringing Ping into the Norbit family has helped to get traction on the product in the market. So Ping being a fairly small company had limited market resources being standalone. Now being plugged into our global sales and distribution network, we see that it's been satisfying and with a good growth.

And just to comment on that as well, I think this is a very good example of how we can utilize our own market and distribution network to accelerate and create synergies within the company that we acquire. And I think Ping DSP has outperformed well above expectations since the acquisition was made. So I think the growth story is definitely there.

And it's good to see that after a while, we do need to support on the operational part. And I think that's how we want to do integration also. It should be when the company we acquire sees a need for support. If you can generate the momentum in the market and then they need support on other parts, we should be ready and it's a good way of integrating.

What insights have you gained from partnership with companies such as Bedrock and Cellula, who's developing these autonomous underwater vehicles?

I think for Norbit, it's very important to work closely with players in the underwater vehicle domain. We strongly believe that for many applications we will see an increase in autonomous mapping so both underwater and surface unmanned vessels will need a lot of instrumentation and for Norbit We want to be the technology partner to be able to be a relevant technology partner. We need to work closely with them to understand their needs and then going back to our laboratory to tailor functionality that fits into those needs.

Can you elaborate on the software services Norbit offers? How big percentage of your customers end up using your software revenue potential?

I think as of today, it's in the connectivity part. We have some subscription-based revenues. Apart from that, most of our revenues when it relates to software is in the way where software is a sales enabler rather than being the product. But with this VBMS X, as we recently introduced, We will then have a price tag on different software functions so that you could choose to upgrade your sonar prior to doing a new survey. But still mainly software as a sales enabler.

What is your production capacity for your sonars?

The production capacity for sonars is good and the scalability is also good. The number of sonars is not that many. I mean the high volumes is in the other two segments. There is some manual processes that requires clever hands in the manufacturing, but as I mentioned earlier, we've been able to staff up and expand and we're not cautious or not afraid that it should be a limitation in that regard.

Also another question relating to oceans. Are you seeing further increased interest in the ocean security sector? Is there an opportunity in pipeline monitoring?

So it's a lot of interests. I think that the world has realized that we do need to take more care what's going on underwater. It's a lot of critical infrastructure underwater that has been without any kind of surveillance. That being said, pipeline monitoring, that's challenging because it's very very very long pipes. But we do expect that some of these suppliers of unmanned autonomous underwater vehicles will succeed in making applications for underwater pipeline surveying, but you need to do it quite differently than it's been done until today.

Okay, same topic. Do you see long-term growth in the defense manufacturing divisions? Are the good results in this area new products from customers or a general lack of capacity in the sector across Europe creating an opportunity for Norbit?

I think generally when it comes to security and defense related technology, the demand or generally also any kind of technology that is needed that Europe needs. It's a strong demand to have made in Europe. I think we've talked about it before that made in Europe, made in Norway, the demand is increasing for that. And yeah, so I'm not going to comment any on what kind of products and what kind of clients we have in that domain, but we see a good demand in long term for that also.

Question from Marcus at Pareto. Could you provide some color on how you think about around 20% EBIT margin target for 27 now that you have done and will likely continue to do margin and creative M&A?

Yeah.

So I think with respect to the margin, I think what we have stated is that we have an organic plan. So we are building the margin target out of the business that came out of 24, sorry, 23. And Inomar is an addition to that. So obviously, the margin, what they will end up in 27 is... is a combination of what we will deliver on the organic part, but also a contribution from M&A, which we will continue to also look for into this year and also moving forward. Okay, a question with regards to Guardpoint, so security options. How does the sales process for Guardpoint differ from that of your other Sonar products?

It differs in the way that it's completely different. So the other Sonar products are mainly sold as standalone systems. where underwater surveillance system where we deliver guard points is more a system solution or a more a complete solution offering and the sales process is very different in some occasions it's more like a typical tendering process and it's a some portion of engineering linked to it

Then a question with regards to, again, Inumar. Are you taking an initiative to position Inumar towards the unmanned vehicle market?

So we explore more in all of our product lines and tailoring technology to fit into and fit in line with the trends we see.

How do you see the long-term growth potential for connectivity?

So for connectivity, it was an important milestone to get this contract on the GNSS onboard unit to broaden. And going forward, I think it's important in the connectivity to continue to broaden the product offering and also continue to broadening the customer base. In connectivity, very strong in in microwave communication secure communication and when broadening the product offering we really are open to to explore more without giving any comment to what that could mean but it's in our dna to see how can we broaden this even more I think the name connectivity could have a wider meaning.

Okay. There are some questions regarding pricing of the sonars. I don't think we will be very detailed on that. So I think with that, there's no further questions.

Okay. So then thank you for taking the time and following this presentation and hope you will continue to follow us also on the next 30 years of our journey. So thank you.