Norbit Asa

Good morning and welcome to the presentation on Norbit's third quarter results. It's a privilege to be allowed to present the result of what our dedicated colleagues has achieved. As you will see, after the first nine months of the year, we're delivering revenues at par with what we did for the full year last year and with nearly a doubling of the results. For us, this is encouraging and helps us to go to work every day and ensure that we deliver on the expectations our customers have. So then let's dive into the numbers. As you see, Q3, as always, is somewhat weaker than the other quarters. Still, Q3 2024 is the best Q3 ever for Norbit. So we came in with revenues on 505 million NOX, which is 36% increase from last year. and with a margin of 15% giving 75 million NOX in EBIT and as I already said for the first nine months of the year we are delivering at par of what we did for the full year last year 1.7 billion Norwegian kroner up 43% its growth in all three business segments with an EBIT of 377 million, which is 92% higher than what we had for the same period last year. That represents a margin of 22%. Some other events, we've announced some new contracts in the PIR segment towards the defense and security sector. It's 120 million contract. And I think in that announcement, we also said that They've had accumulated smaller orders, which also summed up to 100 million. Yesterday, our eminent Bordeaux directors decided to resolve an extraordinary dividend of 3 Norwegian kroner per share. So looking into the different segments, oceans has some seasonality. It's some vacation season in Q3. Still nearly 200 million, so 192 million knock in revenues. That represents an increase of 22%. from last year, EBIT margin of 21 compared to 19. For the first nine months, we've delivered 665 million NOX in revenues. That's an increase of 40% and accumulated margin of 32%. which is a good increase from the 25 it had for the corresponding period the year before. And as you can see, having from Q3 2020, Two, in-orbit quarterly fluctuation is expected. Some of what we deliver in the ocean segment is high-priced, high-value products. Some units in or out over a quarter, some will affect the numbers in addition to the underlying seasonality. Diving into what's behind these numbers. So this is year-to-date figures for the first nine months, 23, first nine months, 24 and 25, showing that the winghead sales is somewhat higher this year than it was last year, 120 million, and a very good growth in other sonars. And this is very much driven by increased sales of the iVBMS X, which we launched this year. I could remind you what this is. That's a sonar, which is fully equipped with all thinkable hardware features for such a sonar. And you can buy software features to upgrade according to your need. So it looks like our clients really appreciate this offering that they could buy a sonar which enables them later to buy a software upgrade for additional functionality. So that's been good. Yeah, sub bottom profilers 66 million and still on the security side which we remain very positive for in the long run. It's lower than our ambitions, but ambition remains as high as it has been. Then the connectivity segment. So it's revenues at par with Q3 last year, 108 million compared to 111 million. The decline is due to some rescheduling of onboard units and so it's some of the revenues that we were aiming to have in Q3 that has been slipping into Q4. For the first nine months, we have accumulated 70% increase, so 423 million. And I'll show you the split afterwards. And that's a marginal 27% for the accumulated year-to-date numbers. So, and as you see on the revenue split, the onboard units, it's the toll tags for mainly passenger cars. It's somewhat lower than it was last year. but it's a good growth on the enforcement modules for tachographs and the rest also a little bit growth or stable. So some status on the product we were awarded a contract April last year for making a complete new satellite-based tolling unit for trucks, a so-called 4G-based GNSS onboard units. It's 160 million NOC contract and this contract is for supply of units to the European leader in this electronic toll collection systems or toll for Europe. So volume production started in October So it's then 18 months from being awarded this contract running through the R&D phase, industrialization, assembly of a full robotic line and scaling up that. So I think it's a good job done from our colleagues. Ambition was to do it even in a shorter period, but it's satisfying to see that finally we are running a high volume assembly line in our Røros factory. This product is very much in line with our strategy to broaden both customer base and product offering. And we are eager to see how this evolves as the existing fleet of GNSS onboard units in European trucks is very much based on 2G GSM. And as we see, European countries are planning to phase out the 2G GSM network. We see that there is a need of replacement of the existing fleet in addition to the underlying growth in the market. segment product innovation and realization and also I'd like to remind you so Norbit is a very much vertically integrated company where we've believed in for many many years that making the products doing the production also in Europe and in Norway in addition to designing the products is a good thing to do. And we've seen that some spare capacity in our factories, we've decided to offer on contract manufacturing terms to other technology companies, industrial technology companies, And for a selection of such clients, we are acting as a scaling industrial partner. And it's very satisfying to see that we have really been able to scale. Some of the investments we've done has really helped us. So we announced earlier this year that from April we installed a new line for surface mounting of electronic components in our Røros factory. This is said to be Europe's fastest S&T line. And that's good, it's been running. And we have an increase from 114 million NOC in revenues in Q3 2024 up to 224. So it's a high increase and a good margin improvement showing the scalability in this business. with operational leverage and a lot of the indirect resources needed to run this is very much shared between the different segments. So for the first nine months of 2025, we've accumulated revenues of nearly 680 million NOC, which is 72% increase from the same period last year. It's an EBIT margin of 18%, which is double of the nine we had for the first nine months in 2024. And as you can see from this split, the defense and security sector is really the reason why this is growing. And as you can see also, some of the clients in the automotive industry and some industrial, we have... sort of not fully phased out but we have not been very active getting new and also I think I've said it before also that some clients we've been helping to move to other factories to free up capacity for this new scaling partners. And capacity, I mentioned and reminded you of this investment of new SMT line in our factory We are also increasing the floor space of our server factory. Very good cooperation with the local municipality. So they are responsible for project execution and financing of this expansion, which is coupled to our existing plant. Completion year-end. And USMT line is ordered and will be installed in this facility in January. So, and this is very good. We see that it helps us even increase in capacity more. And we have an option to acquire ownership of the facility if we decide to do so. So with that, I'll leave the floor for Pakistan to give you some more details of the financial figures.

Thank you, Per-Jørgen. I will spend some minutes walking you through the highlights of the quarter. Revenues came in at 505.4 million, an increase of 36% from the corresponding quarter of 2024, with Oceans and PIR contributing to the growth. While connectivity reported a 3% decline in revenues, on a 15 million kroner postponement of onboard units to the fourth quarter. EBITDA for the quarter was 114.7 million, representing a margin of 23%. This compares to 86.6 million and the same margin in the third quarter of 2024. Operating profit was 75.4 million, translating into a margin of 15%. And this compares to 53.7 million and a margin of 14% in the third quarter of last year. Net finance expenses were negative, 6.5 million, largely explained by 8 million in net interest expenses, partly offset by foreign exchange gains. Tax expenses, 17.2 million, while net income for the period was 51.8 million, translating into an earnings per share of 0.81%. In the third quarter, oceans delivered 22% revenue growth. Sonar sales were strong, particularly in the Americas region. We continue to see strong sales of the new VBMSX sonar platform that was launched earlier this year. On the negative side, sales insecurity and for some bottom profilers were slow in the third quarter. Ocean's gross margin declined 4 percentage points year over year due to lower sales of rental, training and consultancy services, as well as obsolescence provisions. Payroll and operating expenses increased 7.2 million on new hires, wage inflation and use of external consultants. In total, the EBIT result came in at 41.3 million, up from 30.7 million in the same period of last year. Connectivity, as mentioned, delivered a 3% revenue decrease, and compared to the last year, revenues declined primarily due to lower volumes of onboard units sold. And again, mentioned that deliveries worth 15 million kroner were postponed to the fourth quarter. The decline was partly offset by an increase in volume sold of enforcement modules for satellite-based tolling units. The gross margin fell 4 percentage points on product mix and scrapping costs. Operating expenses, including payroll, increased 3 million year over year, and the EBIT result for the quarter came in at 16.6 million, down from 28.1 million in the third quarter of 2024. PIR posted a significant improvement in revenues, close to a doubling from the third quarter of last year, primarily driven by increasing demand from the defence clients in the defence and security sector. Gross margin came down one percentage point, while payroll and operating expenses increased 13.6 million on new hires, wage inflation and activity-related costs. The EBIT result for the quarter was 40.5 million in the quarter, up from 12.2 million in the same period of last year. Turning to the balance sheet, property, plant and equipment, including rights of use assets, increased 36.5 million in the quarter. This is primarily due to investments in capacity expansion on surface mounting machinery. Intangible assets rose approximately 9 million, explained by our R&D investments, while trade receivables were down 16.5 million, explained by the sequential revenue decline from the second quarter. Inventories rose 92.7 million and this is explained by sourcing of components to prepare for the significant activity increase we expect in fourth quarter. including delivery of the GNSS onboard unit and defense and security-related products within the PIR segment, hence referring to our outlook section, which we will come back to in a few minutes. Net interest-bearing debt stood at 320.5 million at the end of August, an increase from 274 million at the end of the previous quarter. Our equity ratio was 50%, which is on par of what we reported the last quarter. We continue to strengthen our liquidity position in the quarter by increasing our multi-currency overdraft facility by 150 million, subsequent to 30.09, so that the performer liquidity stood at close to 830 million. Our balance sheet continues to remain rock solid with a net interest rate in debt to EBITDA ratio of 0.7 times at the end of the third quarter. Due to our strong balance sheet, financial position and the solid outlook, the board has resolved to distribute an extraordinary cash dividend of 3 kroner per share for the financial year 2024. Considering we are currently below the long-term target range of the financial policy, the dividend distribution is also very much in line with the policy of returning excess cash to the shareholders. And the dividend will be paid out from Norbit in approximately two weeks from now. Lastly, cash flow for the quarter. Cash flow from operations was 1.9 million negative, explained by an EBITDA of 114.7 million. A net increase in working capital of 95.8 million. Taxes paid of 14.4 million and 6.5 million in net finance expenses. We invested 40.8 million a quarter, explained by approximately 30 million R&D investments and 11 million in machinery and equipment. The R&D investment level for 2025 is still expected to be between 130 to 140 million, and there is no changes to the machinery and equipment investment guidance of around 120 million for the full year. Cash inflow from financing activities was 11.9 million in the quarter. So with that, that summarizes the financial section, and I will give the floor back to Per-Jurgen for the outlook part of the presentation. Thank you, Per-Jurgen.

So starting this year, we have a target of delivering 2.2 to 2.3 billion Norwegian kroner in revenues. When we presented the first half year results, we raised that target to 2.5 to 2.6. This remains our target for the full year. So we expect revenues in that range. And with that, we expect EBIT margin between 24 and 25% for the full year. So as you see, Q4, as always, is a hectic quarter. And this is expected also for 2025. In the different segments, the three last months is typically the strongest in oceans. Some of this is related to what we would call in quotes, budget flushing. That's not very easy to predict, but it really happens, so we're preparing for that. In connectivity, revenues is expected to increase sharply, quarter over quarter, and this is driven by delivery of the GNSS OBU, which started in October. And we expect revenues in the range of 200 to 240 million for this. And in the PIR segment, we expect to generate new records. The aim is to deliver between 390 and 420 million NOC in the first quarter. fourth quarter and this is driven by the same sector as I've explained earlier which is very strong also in our outlook. So that concludes our presentation. If there is any questions we're happy to answer them.

We have a few questions. One question from Olav at Pareto. Could you give some color on Q4 connectivity guidance and if this reflects some reshuffling of the GNSS onboard unit into first quarter 2026?

So what we can say is that, as I mentioned, we started this project 18 months ago and the design phase until reaching approval took a couple of months longer time than expected. meaning that start of ramp up of production also was a little bit postponed. So it's a good question and it's probably easiest to say that some of the revenues in this contract is reflected in the guidance to be expected in Q1 instead of fully in Q4. So it's a little bit annoying, but this is what happens when you have some delays. Maybe also add to that, when Norbit are looking for new projects, we like to find things which is very hard to design. Our engineers should struggle, and so we did. We did struggle, but we made it. And why is this positive? It means it's complicated to make this and it gives some threshold for others to come easily afterwards. So just want to add that.

Same question from, or a new question from Olav. The solar sails look very strong this quarter. Could you give some color on which customer groups and use cases and what is driving this? And when we are speaking about oceans. Lastly, sub-bottom profilers, it has softer this quarter. Can you give some color on this product for Q4?

I think we don't have any split for the different sub-segments in the guidance. But I think what we've seen is that the product VBMS X has performed very well. And as with other sonars, it has a wide range of different use cases. So I think this is what was in the Q3 also, that it's a widespread, some for ordinary surveying purposes, seafloor mapping, but we still see a very strong demand from different kind of autonomous vessels, both surface and subsurface vessels.

Good question from Jeppe at Arctic. What was the reason for the postponement of the 50 million OBU order?

Yeah, so this is partly late incoming material and partly some shuffling on capacity.

How much of the 160 million GNSS onboard unit contract has been delivered as of now?

I don't think we've given any figures on that, and I think we will keep that, for commercial reasons, we'd like to keep that a little bit low.

What is the most important drivers of the GNSS onboard unit product? In the medium term, it's the 2G switch of the most important driver.

I think the underlying market need is good but in the medium term this phase out of the 2G is expected really to generate a strong demand so I mean Switzerland has already turned off their 2G GSM the major German network providers have announced that in mid-2028, they will turn off. And so I think for the coming years, this is an important driver.

It creates a sort of a replacement need for The 2G units that is in the market. Could you share any updates on sales lead for the GuardPoint product? Progress seems to be slower than anticipated.

Yeah, so I think it remains as we've said in the past that it's a lot of sales leads, so the conclusions on the projects is not materializing as soon as expected. Our judgment is that This is the reasons we cannot see that the projects we're aiming for is lost, that there is some competitors gaining them. So we still think we are well positioned with relevant technology. So we remain safe under pressure and continue to work hard every day to get these orders.

And lastly, any comments regarding the development of InnoMar in the quarter?

Yeah, so the revenues is somewhat weaker in the quarter than we expected and looking into this we expect improvement of that again. looking into next year. So what we see is that proactive activities in the market generates more interest. So the Norbit global sales and market platform now carries the bottom profiler offering from our daughter company Inomag. So, we feel that this will increase and be a good addition to our continued growth also going forward.

Question on the dividend. So I will combine these, I think. Does the additional dividend suggest no M&A in focus? And did you consider any... Potential acquisitions before deciding on the payout or was the dividend your first priority? So I'd like to remind you that we have a financial policy of having a need to EBITDA ratio between one and two and a half and as we reported in this quarter at 0.7 times which means that we are below the policy and For us also going into a record fourth quarter as we see it currently, There is room for both. There is room to pay out the dividend and there's also room to explore M&A. And as always, each individual M&A case has to be assessed. The capital structure of that investment has to be decided solely on the investment size itself. So it means that... No, M&A is not off the table. It's actually a very high topic on the strategic agenda. But to summarize again, our balance sheet allows us to do both. So it's not either or. So a question regarding PIR. How is the visibility in PIR entering 2026?

So I think as we've spoken about in the past also with several of our clients, we're working very closely, we're taking measures to secure material and secure scalability. So we can act as orders materializes. I think if you look on the announcements we've done in the past and the lead time from we announce until we say we should deliver, which is quite significant. narrow that's a indicator of what you could say is that the visibility if you look from a order backlog perspective but the visibility for us to make decisions and to be prepared having sharing and working closely with with these clients is for us satisfying but it remains that we need to We need to work together to prepare so that the time from announcing an order until we deliver is an agile way of running Norbit.

What is the potential for onboarding new customers in the PIR segment or are you expecting existing customers to demand all of the production capacity in the short term?

Also for us, we are working to onboard new customers, but very cherry-picking when looking what kind of customers that fits into this. It needs to be some customers where they see the advantage of having Norbit as a scaling partner rather than just an alternative for any other EMS. And with the capacity build up we've done and are doing, we plan to invite others also to take to join the party.

And then a question on our partnership with Mechanicals, Öresund Machining and Nomec. What are your ambitions here and what's the driver that led you to invest in that partnership?

Yeah, so three years ago Norbit acquired a small mechanical factory in Trondheim running with five-axis milling machines etc. doing components to our sonars. So the founder of that company was about to retire and looking for some new owners, and we were by far the largest customer. And for Norbit, this is important capacity to have. It's not very important for Norbit to have mechanical factories as part of our full operation, but it's important capacity to have. And when we saw how could we grow this and ensure that this grows with Norbit. And it should then also be in a position where it could grow on other clients so that Norbit is not too large part of the full operation. And that's why we saw this other factory in Trondheim, Nomec, doing very much the same. And we saw that this is a good fit for some consolidation and Norbit is not in a need of being a controlling owner. We'd like to be a strategic owner to ensure that the necessary preparedness is in the strategy of this supplier. So we teamed up with a local investor. They have 51% of the shares and Norbit 49% of this merged operation between the factory we had and this Numec. And we work together now on the owner level to have some ambitions for this factory to lift out from regional focus to a Nordic focus. And I think that will be good for securing supply and scalability for Norbit in the long term.

So a question on valuation multiples for potential targets. Does that make it more challenging to execute acquisitions? Well, I mean, it's not the valuation multiples or the expectations on the valuation multiples that matter. is the reason why we haven't announced an acquisition itself. I think it's more relating to the fact that we haven't found the right company to invest in. We have spent a lot of time trying to educate on what we are looking for and what are the criteria that needs to be fulfilled in order for us to do an investment. And it has to do with cultural fit with the target. It has to do with accretion, of course. So, you know, multiples are, of course, one of the criteria. But it also has to be relevant to the strategy that we are pursuing in which we are building a technology company. So it has to be related to advanced technology. And finding those companies is not easy. I mean, it's quite challenging. So we rather spend time maturing those ideas. And the list of ideas is quite long, but it's far from ideas to actually put your pen on the paper. So that's why it's taking time, but we will make sure to... announce any investment when it comes, but not for today, maybe for tomorrow. Okay, when it comes to AI, is that something you use or can you start to use in your business? Yeah, that's the question.

So AI is important in our business. It's important in our administrative operation of the business. We've seen good advantage of using that technology for instance in the HR domain where we have built routines which is much more effective and self-service solutions reducing the need for increasing staffing in that part. And in the products also. And you can imagine working with image processing and target recognition. AI is very suitable for that. So, yeah, that's very relevant for us.

Last question, could you guide on consultancy fees related to M&A for this year? Well, I think that's close to zero. I mean, we don't use necessarily consultants to map out our M&A ideas. And we have an internal team for that, which is also driving the project. through the execution phase and also is working in the integration phase if we decide to invest in a company so we try to limit those costs to to a bare minimum of what we need to drive those ideas forward.

And maybe to add to that, one of the advantages we see of having an in-house team working with M&A is that they can also be very relevant working on strategy for the business units. They're living the Norbit life every day and understands the Norbit DNA and becoming even more relevant in the M&A work as well.

And could you provide some guidance on the effects of tariffs? I suppose this is the US tariffs on the results here today. We haven't seen any material impact of tariffs in the oceans business. So when it comes to our revenue composition, we have virtually no sales to the U.S. in connectivity and in PIR, but we do have exposure in oceans. And U.S. is, of course, one important market for us. But as of this year, and also as we stated in the report in Q3, America was quite a strong region for us and was actually showing the highest growth year on year in the ocean segment. So we don't think, or we haven't seen any impact in the numbers of the tariffs per se. So I think that summarizes the question. Jonathan, unless you want to add something? No, fine. Okay. Is increased geopolitical uncertainty driving higher demand for your R&D services? Does your PIR customers typically start out as R&D clients before transitioning to contract manufacturing?

I think this geopolitical unrest creates more demand in the long term, both for designed in Europe and made in Europe customers. And in our factories, in the contract manufacturing, we have clients that has done the R&D work themselves. And we have clients that have been utilizing the Norbit R&D pool also. So it's a mix.

What drove the increased ocean safes to Americas in the quarter? Well, it's a mix of different drivers, I think. It's hard to pinpoint the sort of exact driver or one driver. It's many things. And as Per-Jurgen said in his presentation, I mean, one large order could also impact a quarter. But generally seeing quite good momentum in America's region. We are making progress in all regions, being North America and South America. So I think Again, it's a mix of different drivers, but also good business development efforts by the team in America's region.

For those that haven't been on our webpage, looking on the oceans part of the webpage, there is a lot of videos showing different applications, different use cases that's made together with some of our clients. I recommend that you have a look to that as well.

Are the core chips used in the PIR segment proprietary Norbit design or primarily off-the-shelf components integrated into your own modules?

So when it comes to ship design, this is very limited activity in Norbit. We do have very few Norbit proprietary ships, and where we have that is in the connectivity domain. For all the rest, it's components off the shelf from a global market.

Yeah, and maybe to remind that the PRI segment is R&D services partly, but mostly contract manufacturing. And in the contract manufacturing part, we are not the product owner. We rely on the design of our customers and do the manufacturing as one of our services. Of the four percentage decline in the gross margin, how much is attributed to mix effect? and have much less obsolescence provisions in oceans. And should investors view these effects as one-offs or recurring going forward? I won't necessarily comment on the split between the two, but what I can say is that the gross margin in oceans has been quite stable. It fluctuates some percentage points up and down, but largely it's been in the area of 72 to 74%. Today we are reporting 71%. it's not a material change but of course in Q3 last year we also had a quite large rental project having installed surveillance sonars in the sign during the Olympics so of course that has a very good margin so it made the 75% be a quite tough comparable this quarter at least so I think you should look at the margin over time and sort of extrapolate an average based on that to indicate what the normalized margin in oceans is as we see it. You highlight a 120 million contract post quarter defense sector following an earlier 100 million award. Can you confirm whether the full 220 is tied to defense customers or if the 100 million contract was unrelated to that sector?

No, this was related. It's the same client space and it's just that the separate orders was not in a scale that it was above the threshold we have for making stock announcements.

Are sales to AUV customers becoming material for Oceans? It seems you are involved in a lot of exciting projects.

Sorry, could you repeat that?

Are sales to AUV customers becoming a material part for Oceans? It seems you are involved in a lot of exciting projects.

Yeah so that's a very relevant driver and it's a significant or it's a relevant part of the business and the numbers presented also and I think still it's more to come. I agree it's a lot of interesting things going on and a lot of interest all over the globe for different kind of solutions. And I think, I mean, the more headline macro on this, so the globe is covered 70% by water and only five, 6% has been explored. How can we explore all this? Autonomy is a important part of the answer.

Final question, do you have any plan to get more recurring income?

So it depends what you mean of recurring income. So I would say we do have some recurring income based on having a high degree of repeat clients. But if the question is that if we are aiming to have more subscription-based revenues, I think, so when we come back in February and we present how this year ended and we will announce what we aim for in 2026, and also when we come back after the summer and probably announce our 2030 target I think also looking to 2030 Norbit will very much be a company where the invoices is based on a number of units mainly but As with the IVB-MSX, where it's now possible to pay to get some upgrades, software components is increasing and the subscription-based revenue part of connectivity, which we have from our daughter company Norbit iData, is expected to grow. In a world where AI generates more code more efficiently, we think it's also good to remain a hardware company, to be delivering hardware that the software could run on.

Good. Oh, final question here. Do you expect new GNSS onboard unit orders to come in the near term? What is the addressable market for the product?

I think the addressable market for the product, that's the European market. In Europe, there is six and a half million commercial trucks on the road. Over the last 10 years, there is an average of around 400,000 trucks being made per year. more and more countries are picking up according to the the push from the European Union to finance roads by having the truck driver to pay per driven kilometer. And my understanding is, I'm not an analyst, but my understanding is when European countries are doubling their investments in defense equipment, the need for financing roads is increasing. And this is a preferred way of doing it. We're now working with the leading player in this market. We've been in this domain for many years, and it seems like our reputation in the market is good. So probably we should be able to take a good part of this business. And yeah, I think maybe that's our take on that.

Yeah, and maybe to add to that, you also said in the presentation that we have delivered approximately 2 million enforcement modules for these GNSS onboard units over the last five years. So that also says something about the potential market.

And that's prior to any replacement. Yeah.

Okay, that was the final question.

Thanks a lot for good and interesting questions, and thank you to all that took the time to follow this presentation.