Guideline Geo AB (publ)

For any newcomers to us, this is who we are and what we do. We design and manufacture non-destructive geophysical solutions for any type of subsurface survey. Our main customer applications are to find utilities subsurface, doing surveys for any type of ground investigation targeting specifically the infrastructure market, and groundwater management, finding new groundwater or monitoring groundwater aquifers. We're a stock listed company listed on Nasdaq First North growth market. We have a history. We were founded in 1923. And as you can see on the map, we have a truly global reach through our direct sales offices in orange and the black dots are our partner network, our distributors across the world. And we are on a growth journey and you can see our growth journey in the chart below. Let's move our focus into Q3 numbers. This is a financials in brief. If I start with Q3, the net sales and order intake was down compared to the same period last year. The positive highlight in this quarter that we significantly improved our profitability, both EBITDA 6.1 versus 5.1 and EBIT 2.1 versus 0.9 for the quarter. We had a negative cash flow of minus 3.6, but our solid net cash is at 16.5. So we have a solid net cash situation. We know that we have quarter-by-quarter fluctuations. You can see that in our past. So if we look at year-to-date numbers to even out the quarter fluctuations, we can see that we're flat on net sales. We are a bit down on order intake so far. And over the year, we can really see a Good and strong trend on EBIT on the profitability. EBITDA is 11.6 versus 8 last year. And EBIT is positive 0.1 versus minus 5.5. And I'll elaborate a little bit more on all these numbers in the presentation. Okay. Let's start with profitability. If we look at Q3 first, EBITDA was around 14% and the EBIT was around 5%, which are good numbers for this quarter. The highlight for me is that If you look at the net sales, which was down minus 8%, we still managed to grow EBIT and EBITDA in absolute numbers. So despite the lower net sales, we increased our profitability for the quarter. And the same goes if we look throughout the year. Our work to improve our profitability has given results. So despite somewhat lower net sales, it's close to flat, the EBIT has improved from minus 5 to 5.5 to plus 0.1 million for year to date for the first three quarters. So we are now, after three quarters, positive on EBIT. And it's the first time since our record year 2023 that we have that situation, which is very promising for the rest of the year. What's behind this positive trend in profitability? It is a result from quite a long time of systematic cost control measures in all parts of the company. It's also a result of measures to secure solid product margins. And you have to work on all ends to make that happen, on pricing, on cogs, on manufacturability. So it's really hard work by many people within the company to make this happen. And I've talked to you before about the restructuring of our U.S. subsidiary that we initiated early this year when we closed down our Charleston office in South Carolina and moved and consolidated into a new office in Denver, shutting down our smaller office in Denver and moving to one facility where we now have We have sales, we have service, we have support, we have our warehouse and administration for the US team in one office that you can see in the picture. And this is, of course, a lot of hard work. It's the right thing to do. It strengthens the team and it saves us cost. And it also included some staff changes to make it happen. So really happy to see that it's starting to give the results that we expected. If we look at cash flow, the operating cash flow for this quarter is negative, minus 3.6. And there are many factors playing into this. Pretty normal, I would say. But in all, we... First of all, if you look at sales in Q3, we had... It was kind of... We've been strong in the last month of the quarter and we ship a lot in September and thus we haven't got paid from our customers. So we have an increased accounts receivable. For those of you that follow us, you know that our Q4 historically is the strongest quarter in terms of sales. Typically, we also order material to be able to ship according to forecast in Q4. So that means that we have decreased our accounts payable. We have ordered and received material to be able to build products for Q4. The comparable number for last year is when we worked heavily to get our stock levels down to more healthier states. It is now at a healthier state, but that can affect the comparison number from last year. And if we look at the net cash situation, it's also being affected that we have increased our capitalization of our development cost. And the reason for this is that our EU-funded project that I've talked about prior calls, the GeoHEAT project, is now decreasing. And that means that we're spending more hours on R&D development projects that we activate instead. So that's a natural step. And if we look at January to September, the cash flow was 9.1 versus 13 last year. Let's shift our focus to currency impact and how that impacts our net sales. We sell mainly in US dollars. In Europe, we sell in euros. And in Oceania, we sell in Australian dollars. On the cost side, our supply chain is mainly Swedish krona, and two-thirds of our employees have their salaries in Swedish krona. That makes us very vulnerable for dramatic currency changes. And for this quarter, when I said that the net sales is down, Minus 8%. If you would have had a comparable currency to last year's Q3, it would have been down minus 7% instead. If we look January to September, the net sale is minus 1% that we report out. But in comparable currency, it would have been plus 6%, which means that we ship 6% more instruments from our productions. If we break down sales per region, and we all know that our quarters do vary in sales. But if we look at Q3, it was a strong quarter for APAC. And I'll come back to why and what happened in APAC this year or that quarter. We were down both in Americas and in EMEA. If we look over the year so far, Q1 to Q3, America is more or less flat, and America is both North and South America. EMEA is... Thank you very much. And when I say that APAC has had a strong Q3, it's mainly Asia that has had a strong Q3. If we look at market highlights for Q3, we continue to see a strong demand from infrastructure and utility sector. And that means that we sell our model portfolio of products, instruments and software. On the ABEM side, we continue to see a pretty strong demand from the groundwater sector, and we are also getting more and more requests from the defense sector across the world for our systems. When I talked about the strong Q3 in Asia, We got two large and strategic orders delivered in Q3. The first one from South Korea, from KALIS, which is Korea Authority of Land and Infrastructure Safety. We won a large tender, and you can see the shipment in the picture below. And we also won a public tender from Malaysia, 3.0 million Swedish kronors. And both of these tenders are multiple GPR solutions, are modern GPR solutions, both 2D, the smaller ones, and 3D, the larger array solutions, and the software solutions that go with them. These two are strategic wins and they also they're a good proof point of the value of the broad and modern GPR product portfolio that we have that is specifically targeting the utility infrastructure market across the world. They're also a very strong proof point of the strength of the global partner network. We sell in Asia mainly through our indirect sales channel, our distributors, our partners. And that really is a strong, unique selling point for us. And it really helps in this type of larger tenders. So we continue to develop our sales channel. And our strategy is to move the needle to even more indirect sales. Typically, we have two thirds of our sales is through the partner network and one third through our own direct sales offices or salespeople. But we are moving the needle to even more indirect sales. The short-term effect of moving that needle is that we sell to our distributors. And they add their markup and they sell to their end customers. So obviously we get a lower revenue than if we have sold directly to the end customer. And we also lose on profitability when we go indirect. So that is a short-term effect. So when you analyze our... results, moving that needle has that impact on sales and profitability. So why do we do this? We strongly believe on the long-term effect that this is a way for us to scale. This is a way for us to actually have that global reach that we have and want to continue to defend. We are confident that this will help us grow faster and grow the market faster. And we believe that we bring stronger customer value in being local through our partners. In Q3, we added one new partner in Brazil, a huge country with a lot of potential, so always needs to fill the gaps where we have gaps or find strong partners that can help grow sales. In Q3, we also gathered our European partners. We gathered them in Athens this time. We got partners from all across Europe and someone from Middle East as well to join us for sales training, for demo trainings, and we also got the chance to get market feedback from their customers. If we look at what products we sold in Q3, on the Marlowe side, I've talked about two large orders. It's our modern GPR solutions that go well. And Marlowe is the GPR portfolio is the strongest portfolio also in Q3. For ABEM in Q3, we have solid sales of all three. for the quarter. And the orange on top is what we call other, but it's mainly Reutek sails that we sell to the monitoring, slope stability monitoring radars to mining industry in North America that goes really well, where we've just recruited our first dedicated salesperson to grow this business even further. Let's shift focus to innovation and the highlights for this quarter. We are operating in an industry that moves fast and technology develops fast. And when I was at Intergeo, an important trade show in our world in Munich in September, we could see that multiple of the GPR players introduced major product launches this year. And that proves that Things are moving fast. To be part of this, we need to continue to develop our solutions too. American GSSI, they introduced a new 2D radar for the utility sector. Swedish Impulse Radar, they introduced a smaller version of a 3D solution. Norwegian Contour, they introduced their first hand pushed solution. They've been previously focusing mainly on road scanning with mobile solutions. IDS, owned by Hexagon, they introduced a major feature release on their software. And we didn't introduce something new at InterGeo because we decided to launch our big new thing in the US, in Austin, because the product that we launched is targeting the US market specifically, even though that we launched it worldwide. and our news is called the Malu Easy Locator Light and you can see that in the picture in the middle. It's designed specifically for utility avoidance and markout where you don't want to do the software processing. You need to in the field avoid any utility and do a markout with a spray can. So the We want our customers to go from truck to locating in seconds and it's extremely easy to use and it's also the most affordable in the industry. Another important release for us in the quarter is a feature release of our Mahler Vision desktop solution where we improved positioning, data positioning. We improved data processing so you can do the data processing faster and you can easier share projects between the project team that work with this. So two important releases. So to summarize Q3 for us, the key takeaways are we significantly improved our profitability. It's been a trend and I'm really happy to see the result here on profitability. We continue to see a strong trend, strong demand from the infrastructure and utility sector for our solutions. And we got two large and strategic orders from this sector, from Asia. And with that, I'm happy to take any questions that you may have. Yes. Please type it in the chat if you have any questions.

We had one question coming in here. I assume you're not happy with the order intake and the net sales. Can you elaborate the reasons behind the drop in sales?

Yes, obviously, we're not happy with the order intake or had hope for stronger growth. But it's also an effect of what we see. If we start with the U.S., I've talked about the restructuring of our U.S. sales subsidiary and that in a small sales subsidiary, when the sales... Team needs to make sure that we get new landlords and make the move and taking care of our staff, the ones leaving and the ones onboarding. That, of course, takes hours away from customer meetings and sales activities. So, of course, the decision to restructure our U.S. operations has affected our sales efficiency in North America. And we can see that in the Q3 numbers. I'm still 100% behind the change. It's a good change. It was necessary and it will give results, but it has affected the Q3 sales. It's now done, so now we are again shifting focus back into sales and closing the year in a good way. in another region. I think I've talked about China before in Asia. If you go back just a few years, China was Thank you very much. Are you still actively reviewing potential acquisitions? Yes, we are. We have acquisitions and partnerships as part of our strategic agenda, and we are continuously looking at and searching for acquisitions or partnerships. It has to be right. We're not acquiring just for the sake of it. It was a while since we did an acquisition, but we have looked at quite a few along the way and we have stepped out of them for different reasons.