AAC Clyde Space AB (publ)

Hello, Luis. Such a nice pleasure to see you again. Good morning. Good morning. So yet another hectic quarter. Please take us through your presentation.

Good morning. Good morning, everyone. And thank you for attending this brief. For those that are new to the company, we are a space technology company. We are delivering products and satellites into space, but we are also delivering data. And we have been on this growth journey for the past few years. And this quarter is part of that. We showed again robust growth of our net sales. We are continuing our positive habitat, something that was for us quite important. And delivering also positive operational cash flow from operations. What are things that have actually been important for us? There are targets. We are sticking to our targets. and uh overall here on here we we are very confident that we can continue to deliver our plan of uh double digit uh net sales growth uh positive habitat and positive operational cash flow um we have been also uh uh continue to expand and grow our business we have done some structural changes through it over the last quarter. We have seen a stabilization to some extent of our order backlog. into the numbers that we usually consider to be positive and safe for our company, where we want to be. Of course, this varies. We've got quite a strong pipeline in some areas. What might actually grow that backlog quite substantially? But mostly the story, I think, is that this continued growth that we are achieving, this ability to actually continue to to expand the company and grow healthily into a positive EBITDA environment. If we want to take a look at the next slide, please. There are a few... Things that we have focused very much over the past quarter, growing the visibility of the company, probably many of those that follow us as a company will have seen that we have been more present in the news, telling our story, explaining what we are doing a bit more. We have done quite a lot of interviews in newspapers, not just technical newspapers, not just space industry newspapers, but other publications that have a wider audience. It has been part of our reach out activity over the last quarter in particular. But also we have done, as I said, some structural change inside the company. We have merged our products and missions business lines into one business line that now handles most of what we call hardware. This is all the products that we do for other people, for other companies, to enable them to build their own satellites or the satellites that we deliver to third parties. This was done to actually bring together those capabilities across the group that handle with production of equipment, production of hardware. And this allowed us to streamline our management, streamline the way we produce, gaining some efficiency in terms of the way we produce our equipment, our hardware. And that is something that is pretty good for the company. It will be good for the future. We also increased our data on our data and services business line. The net sales increased by 86% year on year. This is a show and a demonstration of the potential growth and the real growth of this area of the business. We continue to see a huge appetite for the type of data and services that we are offering to the market. Our challenge, as always, is to have enough data, to have enough satellites in orbit to generate that data. But we are seeing that the appetite has not diminished. Quite the opposite, it is growing. And in that context, we expect in the next quarter to actually present towards the end of the quarter, to present where we expect to be, where we expect to go, updating our strategy and showing what new things we have been planning for the coming years. And particularly in the data and services side, but also on the defense side, how can we actually expand our business in that direction? And that is something that it's an exercise that we have been doing for some time, and we would like to present it to yourselves the next opportunity towards the end of this quarter. So. We also, in this context of growth and in this context of expanding, particularly our data and services part of the business, over this quarter, we did a directed share issue. We brought in one large new investor, Novo Capital, Global Fund, sorry. And this is important because this will allow us to accelerate our Virion constellation. That is our Earth observation constellation. We have always said we wanted to do four satellites. We are already building two. With this new direct issue, we can actually move on to the next two. So to build the full constellation of four satellites, and in that way actually answer the demand that we see on the market. So that is an extremely important thing that we achieved by doing that direct issue. We are also using part of that money to support our maritime intelligence business. Again, we are seeing quite a lot of interest in the type of data we are delivering. We are seeing a growth in that side of the business. And for that, we need more satellites. In the form of inflection, we actually have our first big user for our constellation of maritime services, the UK government and the European Space Agency, the inflection service. So we effectively were already able to finance a substantial part of our future constellation. But what we are doing now is helping with some of the money from issue, but also looking at contracts, advanced contracts with customers to actually finance the construction and the deployment of our new Maritimes constellation. And this is again an area where I see a huge amount of potential and we see quite a lot of demand for the type of data and services that we are delivering. And of course, ultimately, this funding will also help us in addressing the European defence environment. We are seeing a huge amount over the last few months, we have seen a huge amount of interest in Europe for space, for defence. And for that we need to invest, we need to actually create new products, many of which are based on what we already have. They have to be adapted, they have to actually They have to be able to actually supply the type of data in the environment that defense and security organizations demand. So those are areas that we are going to invest in. And that was the reason of this direct share issue. If we go on to the next slides, we'll be able to look a little bit at the objectives for the rest of the year, for the next 12 months. Some of you will see that Virion, the launch was delayed. This was due to a third party subsystem that we use on the satellite. The supplier found some issues. These have led us to have to redesign part of the satellite. forces us to actually delay the launch not something we like um now we had some we had some uh we had some margin on our launch in terms of delivering data to our customers um but of course we are eating into that margin we are compressing it so so that will put more pressure on our teams to actually deliver a satellite quicker once it is in orbit to leave it operational Not a situation we like, but it is a situation that we find ourselves in through someone else's problem. But we will handle it. We will manage it, as we always do. We continue to work on the EPS STERNA, so we have submitted our proposals. UMATSAT and the European Space Agency are analyzing those. UMATSAT is finalizing the agreements so that they can approve the project and move forward. We were very happy to see the progress that was achieved back in July. uh of course we i believe that we would all have liked to have had a 100 positive decision at that point to move forward uh but that these big international programs always have this all of these uh uh milestones that have to be achieved and negotiated. And so we are now waiting for UMETSAT to meet again in September. And then hopefully at that point, they will be able to reach a consensus and move forward with a full mission. But nevertheless, it was very encouraging to see that they decided to move with parts of the project. They decided to actually decided on some authorizations to proceed. And in parallel to that, the negotiations on on the contract are already ongoing, so any discussions, there are many much work is already being done to do that. And. we're also. Continuing with inflection phase one so that work is going well, we are. running towards the next phase. We are preparing to go on to the next phase. Again, in discussions with the agencies, showing the results, working with our partners, that's a very important part of inflection. So again, work that is in progress, but that it is going well, it is achieving its objectives. And on that point, inflection and the whole maritime intelligence, we also saw with some encouragement that back in May, the the international maritime organization as uh one of its committees as as finalized the draft for approval in 2026 of the introduction of as the alternative to AIS. So this will mean that in the future, ships can actually carry one or the other systems to deliver their obligations and their tracking and safety at sea. So we see that as an extremely positive objective that will make it possible for vessels to actually replace their current AIS systems with VDAS systems. And there are rules of the game and rules of engagement and rules of use for VDAS systems in the maritime domain. So that will come into force. It will be approved next year, this year or next year, to come into force on the 1st of January, 2028. So we look at that also with much encouragement. So, as you can see, this has been a busy quarter, as always for the company. We continue to expand our footprint, to grow into new markets, particularly on the data and services, but we continue to see a positive environment for our business and a growth environment. I will open the floor for any questions that there might be. I think there will be some questions, so I'll let you ask me.

Thank you, Louise. Yes, we received a lot of questions ahead of this presentation. Some of those I think you already run through. And as we speak, there are questions that are coming in and I will try to sort them into the same subject here in order to make it easier for you to reply and for anyone who's asking the questions to put it in the right space. I will start with referring to the direct share issue, and this is a writer question. You emphasized attracting long-term investments, and you mentioned one of the big investors there. However, with no lockup in place, some participants sold their shares shortly after allocation. What is your reflection on this? And I know that we did touch upon that on the latest or the last broadcast.

Indeed. I think, like I said on the last broadcast, actually having a lockup in place, the only thing it does is that it actually creates one day where everyone is expecting people to actually sell their shares. So I think ultimately that it fits to some extent the purpose of having a lockup. What we saw is that we have a very dynamic market. So some of the new shareholders decided to sell their shares. As I say, it's a very dynamic market. I look at some of the shareholders that have not sold their shares, and that is encouraging. Those were the ones we wanted to build a long-term relationship with. So we take that as a positive. Some of the shareholders, some of the new investors will always do that. As I say, we could have put a lockup in place, but that would just create one threshold that everyone knew something was going to happen. So that probably, it would have been counterproductive. So that was our logic. But we will, of course, analyze. And we will see what happened. And were we to do something similar in the future, we would then actually take that lesson into account, of course.

But then again, this report and the reaction in itself could probably be a little indication here. So let's move on to some questions here. The UMass Tellsats project, you mentioned that, but could you be a little bit more granular? How many units do you expect, short and long term? Could you just repeat the beginning of the question, please? Yes. The status of the U-Metal SAT project, could you be more granular on how many satellites or units, I should say?

So the UMATSAT, the Sterner project, currently UMATSAT has publicly stated they would like to procure 20 satellites. But that is originally we have quoted for 16 units. So we supply the avionics, some of the avionics for the satellites and supply the payload to OHB Sweden, that is a prime contractor. to those satellites. So we originally, they were talking about 16, and now they're asking us to build on 20 units. And of course, there are always backup units, so the number is always a little bit bigger than this. As these big programs, you usually tend to build more than you need just in case something happens. But that is the number. And the plan is to build 20 satellites. I believe the plan for UMetsat is to have six satellites in orbit at any one time. So some of the satellites are replacements for the other ones when they reach end of life.

And also a technical question here, but the planned launch of the first satellite was initially planned to be launched on the first of 2025. And as you mentioned, it's been delayed. Any chance both of the first two satellites can be launched at the same time? Is that a technical possibility?

So it is a technical possibility, definitely. It's a question of some debate internally if we want to do that or not. There were reasons why we separate the launches. We wanted to watch the first one, see how it was operating, if there was any corrections we wanted to do on the second one. But it's subject to some internal debate right now if we want to do the two at the same time or if we want to separate them. So that's an ongoing internal discussion. It's possible, yes. Do we want to do that? We haven't decided yet.

Okay. And regarding the revenue and EBITDA for the data segment, and you started more or less the presentation with data segment and quite interesting growth and margins here, but how much is attributable to inflection?

A fair amount, indeed. So, of course, we are actually doing that work. As I say, that effectively is about the service that our systems will deliver. There is quite a lot of work going on through that. But then when those satellites are in orbit delivering services, then of course, then we replace what is currently development work with real data delivery and service delivery. But Trudeau will be seen already as part of the same thing. It's the same teams that are preparing that. It's effectively we are being paid to develop a service. from space and from the data. So that's quite a nice way of actually doing this. I mean, it requires a lot less investment to do the maritime domain, to do the maritime domain system or satellites. So that is all. We see that as quite a positive.

Okay. And I guess this would be a sort of follow-up question coming in here, and I think that referring to potential bottlenecks here, but how are you investing in digital engineering to accelerate delivery timelines?

Very much. So a lot of our work actually on the data and services uh over the last few months over the last year or so has not actually been on the satellite so much we are doing quite a lot of building new satellites but a lot of the work has been on the ground on developing the tools that allow us to process or distribute the data the acquisition of space metric is part of that at the last year that's exactly why we did that this is a specialist in the processing in the storage in the management of the data for our Earth observation satellites. So that's exactly where we are going when it comes to the future of data is how do we actually use that on the ground? How do we interact that with the analytics tools? How do we interact that data with the AI tools that are now becoming so prevalent? So a lot of the current work is on how we do that.

And we will continue on the technical sides here. Is there a high demand for software development connected to the SDAAS side of the business, or is the data primarily distributed through APIs or similar?

A bit of both. So we've got some data that is distributed through APIs directly to our customers. In some cases, it's actually just deposited on the server. In other cases, we are developing software ourselves. We are developing applications. If you look at something like the Canopy service, that will be something that we do with our own software. So it's a mix. It's a mix, and it depends on the type of customer and the type of data. Looking ahead, looking for the future, I see us doing a lot more of that processing, a lot more of the extraction of the information from the data in-house. But it's a mixture.

And we have a project question here. Project Oscar, how is it progressing? What's the status? Next step for that project?

It's progressing well. The next step is actually getting that to a state where the potential customers, the partners that are partners now actually want to use the data. So it's very much about demonstrating capability of using AIS data for offshore energy production. progressing well, is doing what it is supposed to do. The next phase is something that we are in discussion with partners. We are saying what they want to do once that project is concluded.

All right. And we continue with, well, let's say a granular question here. Why MIR-1? Is that the way to pronounce it? Which one, sorry? YMIR1. YMIR1. Yeah. Now demonstrating VDS capability. What kind of a customer interest do you see and what's needed to move from interest to actual orders?

So we are seeing quite a lot of interest. So we are seeing lots of organizations that want to try VDS. In MIR1, it's always going to be... a demonstrator, so it's not capable of providing a service, but we have quite a lot of demand from people wanting to try. Some are government organizations that are asking for trials, others are private companies. What is needed to actually move forward will be to have enough satellites to provide a service, a VDS service, and to have the terminals on the ground. So what I mentioned earlier of the International Maritime Organization, Their current decision, they're moving forward with VVS, the expected approval next year, and entering into the regulations, the SOLUS regulations in 2028 of VVS as an accepted equipment on ships. That is very important. That will actually create the demand on the ground. And then we need enough satellites in orbit that allow us to actually start providing that service. So through the work with one of our customers, there will be 12 VDS-enabled satellites in orbit towards the end of this year and beginning of next year. Those will be the first ones. We will put our own constellation by 2027, 2028 in orbit. So we need to have a critical mass of those satellites to actually be able to provide the services, the VVS enabled services. So these things all start staying together. But right now we see a lot of demand, a lot of interest from organizations that are trying to understand how they can use VDES on their day-to-day. And as I say, it's a range of customers, from governments that want to understand what kind of benefits VDES is going to bring, but also how they are going to use it, to companies and organizations that want to understand how they incorporate VDES to their day-to-day maritime operations.

Well, thank you for that. And we have a question regarding organizations and hardware. And I will tie in that question to one of the questions that we have received before. So how are the recent U.S. tariffs changed? Well, the changes in tariffs, if there are any. affecting AAC Clyde in terms of sales to the U.S., the supply chain, and your ability to pass on costs to customers?

So, in general, they have had some effect. I wouldn't say it's so much the monetary effect or the cost. It has been more the uncertainty. So the major problem that we face, as most companies, is the uncertainty. All this is working. and what is going to happen next week, what is going to happen next month. But when we are doing contracts that are six months in duration, how is this going to evolve? We are in a good position because we have companies in the US, we have companies in Europe, so we can actually choose where to manufacture, where to produce things, and that way avoid certain levels of tariff. But as I say, the main problem has been uncertainty. We have There was some uncertainty, for instance, in the U.S., when we were selling from our U.S. facility to other countries. That was actually creating some difficulties, mostly because of the uncertainty, the lack of understanding from many operators about what the terrorists actually mean. That was more of a question, more of an issue. Our protection is we are an international company. We can actually distribute production where it needs to be to mitigate the impact of tariffs. So we are fairly relaxed about that. But like most companies, we don't like the uncertainty. It does affect the business. It does create barriers. It does create some difficulties and some issues with planning forward. So we prefer not to have that, but we are ready.

So in short, at the moment, at least, it's more that, let's say, your customers are sitting a little bit on their hands, but that doesn't mean that any contract has been canceled. But when they understand the situation and you think you can handle that.

Exactly. But we did have one or two that threatened at some point, saying, well, we might have to actually kill a contract because we don't know. But with time and better understanding, that hasn't happened. But there is the uncertainty, yes. But so far, we have been able to do the business. the business.

The demand is there.

We are too much this rupture.

So the demand is there. So do you foresee significant changes in where you are building and developing your hardware as you further integrate the organization that you have acquired? So more or less the same question, but focused on a different problem, I would say.

We foresee some optimization. We'll have to optimize. We, as I say, we We will most likely have to produce more in the US for certain applications. We have to produce certain things more in Europe for other products. So we are going through that process of actually choosing, setting up facilities in different countries. We already have them. We already have that possibility. But we see some work needed there. And in parallel, we are optimizing our production. Having many small production facilities is usually not very efficient. Focusing production, that most of it is actually subcontracted these days anyway. But focusing it in local sites is probably the way to go. And then use the strength in our individual sites, design centers. There is a lot of knowledge, a lot of experience in those sites. So we will use that to grow that capability. But the production function, we will tend to optimize it to look at where we can get the best performance possible. So that's where we are going.

Right, thank you for that. And conscious of time here, I will wrap it up, but I will have one of the questions that will require a forward-looking statement perhaps from you here. But the current value of the pipeline, potential business, that is, if you compare that to last year, and feel free to answer as much and as granular as you like, but if you compare the potential business that you now can envisage to last year, What would you like to comment?

I will make a distinction in here because sometimes it's used backlog and pipeline. I was coming to that. And I'll make the distinction. The backlog is one thing. I find it fairly comfortable. As I said, it is something that is for the kind of numbers in terms of revenue and net sales that we are planning to do. The pipeline is a different story, and in some areas is extremely big. Our pipeline is huge in some areas. In other areas, there are more challenges. We have made no secret of some areas that there are more challenges. The pipeline is also very binary in some of the areas. When it comes to satellites, in some cases, you might have a large contract in terms of constellations, but it either happens or it doesn't happen. So you have a big number or you have nothing. So that is always the challenge with pipelines in the space industry. It's not unique, it's not new, it's not unique to us, it's not a new thing to any in the industry. So that is part of it. Part of the reason that we have been moving towards data and services is because there the pipeline is more granular. So looking at company, the contracts are smaller, much more, many more contracts, smaller value, a bit like we do on the products. And that allows us to actually have a much more stable, much more predictable backlog out of the pipeline, because the contracts are small, there are many more, so you always have people coming through. As I said, for instance, on the satellite side, you tend to have very large contracts, but they either happen or they don't. There is no halfway house. There is no, you do 50% of the contracts in the pipeline. If you have a very large contract, you either 100% or zero. When it comes to data and products, it's different. So we have big pipelines and you always have a certain percentage that will come in. So that's the difference. But the pipeline remains strong. The pipeline remains strong. And now we are very much focusing on conversion. So some of the changes we are doing internally in the company have been to focus us on conversion. How do we converse pipeline into backlog? So that's very much a focus for the company right now.

Yeah, exactly, because I know that you have on previous occasion been pretty confident when it comes to the order backlog, which gives you, let's say, a visibility going forward. So obviously, you may not be able to comment secondary opinions in the market, but as I mentioned, well, I asked you in the Q1 here, If there are anyone who would have a sales estimate north of 450 Swedish million SEK, do you think that given the fact what you can envisage in your backlog, would that be far-fetched or is it more or less in line what you can expect?

For 2025?

Yes.

Net sales? We stick to our prediction that we'll do double-digit growth this year, and we will do positive EBITDA and positive operational cash flow. That's what we stick in terms of forecasts for the year. I will not comment. I have my view.

and uh but i will not i will not comment further than that yeah and uh that's fair enough well luis uh it's uh truly a pleasure and uh there was a lot of questions so there's there's a lot of interest and to all of you who have asked your question and feel that you need other answers or any other questions we will forward those to the um to the company and to the ir in that So with that, I thank everyone who's been watching and a special thanks to you, Luis. Thank you.

Thank you very much. Thank you, Carlo. Thank you, everyone.

I wish you a great rest of the day. See you later. Bye.