GomSpace Group AB (publ)

Welcome to today's presentation where we have the pleasure to present GOM Space. To help us through today, we are joined by you, Carsten Dagmann, CEO of GOM Space. Your Q2 24 interim report will be the subject today, fresh from the press this morning. and yeah i think uh kind of delivering on all the goals you set out last year so uh but i think that will be probably be the subject where you look back and and take us where you are in that progress as always you can ask questions down in the box down below we have a lot of questions in already but do feel free to uh to to keep asking during the presentation we will take it in the end but for now i think i'll hand the call over to you carsten

Thank you Mika and welcome everybody to our Q2 2024 update. Very happy to be here again. As Mika said, please do ask questions. I'm very happy to try and answer all the questions I can, but let's try and do it. You do it to Michael and we'll take it at the end. So today, I will talk about our reporting, the guidance we gave last time. We just want to repeat that. We'll talk about the journey we are on. We'll, of course, talk about the Q2 results. That's what you're looking for as well. A reminder about Gump Space for those of you who might be new to the share and to Gump Space and have not yet really looked into the details. exciting events we have a couple of exciting events the last two to three weeks that I think is worthwhile highlighting and then a little bit of why would you invest in GOM space but let's first take clarity and communication I said from the very beginning when I started here this is really important to me I believe strongly in this communication and clarity so Let's try and keep that track. First of all, when it comes to reporting, we changed last time and told you that for the first quarter and third quarter, you will have a trading update or trading statements instead, simply to provide a faster service to U.S. investors. So we will keep that up. You also saw for this one where we are a half year report that takes a little bit longer to do. We issued a press release a little bit earlier with the numbers we were certain about at the time. Also as a service to you so we get information to the market as quickly as possible. Okay. Reminder on the journey. 2023, we had a lot of uncertainty. There was a lot of losses. We had to raise capital simply to survive at that time. There's a lot of change and we're trying to clarify the situation. Where are we? Who do we want to be? Where are we heading? That was 2023, which we worked on there. 2024, we are getting into the clarity. We know what we're doing. We have defined our business into our three business units. We know how to track our business. We have more stability. Cash flow is stabilizing. We have a cost that's better matching the current market level we have. Of course, we want to grow, but first stabilize and then focusing on the right sales, meaning we need sales with profitability. In the end, what are we aiming at? Just so you don't forget, product business is important to us. It's good business, different dynamics in terms of closing business, production, delivery, no engineering hours, no complicated contracts. We simply sell what we have. that needs to grow into a business in its own right. We have our program business emissions where we're building the bigger satellites. It's much more complicated. This is also something that we will grow in its own right. We'll have a lot of focus on selecting the right projects and we need to be patient. This takes time. We have good traction now, as you've seen in auto intake, but it takes time. And in North America, Also, capturing market share, the biggest market in the world, we have a very, very small share. There's absolutely no reason, no reason whatsoever that we cannot grow this into something more than what it is today. And this is what we are working on. Also here, it takes patience. It takes time to build a market. It takes time to close business. And it takes time to close business that is bigger. The question, which is very fair, can we afford to be patient? And like I said last time, yes, we can. very, very clear from my side. What are we aiming at? What are we executing on? And I hope you'll appreciate that the results in the second quarter here is delivering exactly on that. So let's let's dive into the numbers. Free cash flow is positive in Q2. Great. This was our really our focus. We're trying to to get into that being free cash flow positive for every quarter. We improved our cash position to 51 million, so more money in the bank basically. That's good. Our order backlog had an amazing jump up to now 299 million from 161 million, so 85% increase. This is really, really good. This is, of course, creating a platform for going forward. We have more certainty about what are we doing, what are milestones, what are the contracts and payments agreements we have in place with customers. So this is really good, a very strong development. On the key order intake side, of course, what has put this up to this level, there's Unseen Labs, where we are now starting a contract building microsatellites for them. This is new. Remember, the microsatellite market is new for us, and it's quite unique that we actually get two contracts at a time. We get Unseen Labs, our dear partner, for a long time. We're very committed to them, and we will continue to grow with them. And then we have a contract from Singapore, which is a new, so this is really, we have done business in Singapore before, but it's the first time we land a contract of this size. They visited us last week. We had some milestone reviews. It was brilliant. We have a very, very good connection with our customer here, and this is very much built on trust in both directions. And as you may know, I've lived in Singapore a year also, and it was good to see familiar faces coming last time. So this is very good, and it's really helping us to stabilize the business. And hey guys, IFO approved a government export loan towards Indonesia for a big contract that we have signed the commercial terms, but the contract is still subject to a final negotiation and approval between Denmark and Indonesia for the financing. IFO has approved this. This is great. This is great. If we close this, this is what we want to. Of course, everything is set up. But there's another milestone in this. It means GAM Space is now recognized by Eiffel, by the Danish government, to be a valid and credible exporter of our technology. This is really, really important. That means we can go to other places as well. We have a good dialogue with Eiffel. We are known at Eiffel, and we can do more business like this into the future. So great for the short term. That's what we needed for Indonesia. Equally great for the future. Okay. So a couple of numbers that I usually do, I'm gonna do this a little bit slower because there's some changes here I want to highlight to you. Take a look at the order intake. So order intake in a quarter was 199 million. Very good. Look at the graph and compare to last quarter too. So now we are plus 200 million. Look at the Q2 last year, minus 200 million. What was that? This was, remember what we did? We said we only want to do profitable projects. This is where I canceled a number of orders that we had where we were not making money. We were either break even or losing money. I could simply see we are not going to lose money. So look at the difference now. We now have programs that we are actually making money on. There is profit in these programs. This is what we want. And we let go of 200 million last year where we were not making money. We may even lose money. Imagine if we hadn't done that and even still be successful today, that would mean we would need 50 people more, meaning adding to our cost base, meaning adding to the instability and the constant need of having to close more and more business. Big difference. Good decision. Sorry, I have to say that. Good decision. And now we're on the right track here to profitability. Revenue is good, stable. This will go up. I'll talk about that later. But of course, right now, stabilize the ship, get the water out, make sure that we are floating, we're setting ourselves in the right direction, and then slowly we'll pick up speed. There will be some waves in the process, but we can manage that now. EBIT also a great improvement, minus 8 million. Last year we had minus a lot more. I'm not even going to say the number because I can't read it on my screen, but it's much better. It's still not positive. There's still some way to go, but it's okay. It's not my focus right now. My focus is auto intake, managing the cash flow. Next on the agenda is revenue and then we will move towards a more positive EBITDA and profitability. Employees, we have increased from 132, I think, previous quarter to 150. So we are taking people in. Why? We actually do it because we have more work to do than we have resources right now. So this is, I suppose, a positive thing in the workload going up. And of course, we need to make sure we can still deliver on our promises. We don't want to grow. We are very careful about it. We don't want either to go too happy out on hiring. We really want to take in the good people that we need to execute and then prepare for 2025. Okay. Auto backlog. Another investor service, by the way, because we're not required to deliver this, but I want you to see this because it helps understand the business unit and the dynamics. As I already said, the auto backlog has gone up. 161 million to 299, great. The main change is obviously in the programs section where we build the full satellites. It's gone up a lot with the two orders. Products have gone down a bit. If you look at it, the first quarter, we had 16 million in order intake on products. And then in the second quarter, we have 12. This was somewhat disappointing and less than what we had anticipated. Okay, so they go up and down. It's not an exact science. But obviously it's well compensated by the larger order taking program. So that's okay. And you'll also see that in North America actually was progress on a total order backlog up to 7 million. Closing note on the product business. It was a bit slow in the second quarter, but hey, look, I sent an announcement out yesterday in the first seven weeks. So about a little bit more than halfway into the third quarter, we are at 24 million. Hello, that's pretty good. So we have doubled up already from the second quarter. So there's some fluctuations we don't totally control, but we are trending where we want to be. Cashflow plus seven, or 6.6 to be accurate, a million second positive free cashflow in this quarter. We were a little bit negative in the first quarter. We had a nice positive in the end of last year. But look at a graph here. Look at the last 12 months of free cashflow, plus 10 million. Look at the previous 12 months, minus 164 million. Again, I repeat, this is a focus. get the right business, adjust the cost base, which we have done, and manage the cash, manage the cash, manage the cash. And this is what we do all the time, every day, every week. People are getting a bit tired of me here, but we're not going to stop because this is really important. It also means it creates that stability. Yes, there will be some fluctuation. Yes, some quarters will be better than others, but we are not going to lose. What's the lowest bar? 60 million SEC in one quarter. We're not going to lose that. Not anymore. We have stabilized that. And we have a decent bank account. It's about 50 million. So we have some buffer. If things are going up and down, it's okay. We can handle it. And there will also be some fluctuations between deliveries and cash flow from the customer and payment plans. It's okay. It's part of running a business. But I would say we are on a pretty good trend here in the right direction. Oh, and I should also say we are keeping our guidance for positive free cash flow for the second half of the year. Reminder on Gomspace for those of you who haven't been here before or maybe listening for the first time. So we were founded in 2007. We've been on NASDAQ since 2016. We are a global, really well-known brand. We have a lot of mission experience, means we have flown a lot of satellites. One of the biggest satellite launches in the world where customers are launching our technology. We have a lot of products from our products business flying every day. And then we'll get back to that in a second because more went into space recently. We live in Aalborg and we have one of the largest facilities in Northern Europe for building these small satellites. We have a global footprint. We have customers in more than 60 countries. That's a lot. So we are all over the world. We have business in North America and South America, in Asia. We have business in Africa, the Middle East. We have business everywhere. Really good. We are a global brand. This matters. What are we building? We are building these smaller satellites, the so-called CubeSats, which are sort of from five kilos up to maybe 20, 25, a little bit more. And then we are entering into this new business, which are Microsats. Microsats are a bit bigger, 50 to 150 kilos. The first ones we can take up and lift by hand. The second ones, we need perhaps a little lifting device in our AIV room, which you see in the back. This is where we assemble the satellites in a dust-free environment. And why are we moving there? Why is the market moving towards that? They're not leaving the small sets that will continue, but they're moving into the slightly bigger satellites to get more energy, more power, and more room for adding advanced payloads. So it's simply a return on investment is bigger. You get a better performance out of that. We're in that business now. This is good. The products, the product business unit, these are these small components are used to compare it to. It's like battery packs for your laptop. It's a hard disk. It's a microprocessor board. This is what we do just for satellites. Very good business for us. And we also, we're doing this for the CubeSats, the smaller satellites. Our products can be reused in a microsatellite. Hey, exciting events. Let's see what has happened outside of talking numbers, but there's things that are happening which is worthwhile noticing. Two very unique anniversaries we have had recently. We have one which is the so-called GOMX4 satellite. We launched two satellites actually six years ago together with the Danish government and the Danish defense. They have now flown for six years. We've learned a lot. We have done weather observation. We have done imaging. The Defense Department, Danish Defense, has been working with this. Really, really great. We have learned a lot as a company because we've been able to run a lot of tests, verify things, make observations. And the sad story is it's dying. Very sad, actually, because it's a baby for us. It's going through the atmosphere. It's probably already crossed. And it will burn up, as they do when they go into the atmosphere. But we are very happy that it flowed for this long. That was not known when we launched it. So now we know that this is a really, really good platform that we have. And it works very well. There's another anniversary, five years of our first broad satellite. The broad satellite are the satellites we sell to our dear partner in France, Unseen Labs. We have been with them for a very long time. We launched their very first satellite five years ago. Big anniversary celebration, it's still working. And oh, by the way, make the link, market hint, how long time does a satellite work? About six years. When was the anniversary for Unseen Labs? About five years. You connect the dots. I'll leave that to you. We have a significant footprint with the latest SpaceX launch. We launched three satellites on that platform. Unseen Labs had two satellites that are up and flying now. And then we launched a satellite for Indonesia. It's called KAKA-1. I believe KAKA means satellite in Bahasi. We launched that as part of the contract discussion we've had with Indonesia. And here I'll pause and say, this was part of an original agreement that we signed in December as we announced it, that we would launch a first satellite as fast as possible for... It's operational and we will use it, of course, in Indonesia. We'll also use it for learning, for training, for setting up the operational readiness that needs to happen as part of a big program. And this is something that we have agreed also on a side contract. We do this now, even though we're still waiting for the big contract. The big contract needs to have the full financing, including financing from Denmark. So that is still in negotiation. But this first part, we have agreed separately with Indonesia. We need to launch this to keep our timelines. It's flying. We have a connection to it. And right now it's going through the so-called Liobs-phase, it means there's two, three, four weeks, depending a bit of setting it up, folding out the wings, getting connection, and then before it starts becoming operational and we can start taking pictures with it. great achievement, but wait, there's more. It's not only three satellites that successfully were launched. We actually had, it's close to every satellite. You can see it here on the picture on the right, how many different satellites from other vendors that were there, competitors, other partners. I believe there is a piece of gum space in almost every one of those single satellites. So not only did we launch three satellites, but our product subsystems, the hot disc, the battery packs, were somehow included in all of these other satellites as well. So from How much technology flew from GOM space? The answer is a lot. So this is really good. Very good news. Now, why invest in GOM space? We've been through that one before and I will do it again because I think it's important. First of all, there's a demand. Very clear. There is a compound average growth of 19%. So it's a growing market. Check. The demand is evolving. It's starting very much from NASA, ESA, the space agencies funding this for science and research, where we've also been involved, remember, and the hero mission that's going to fly for two years beyond the sun and more. But we see more commercial applications coming in and even more, even more so now the government, the sovereign state, the desire for every government to actually control and own the assets that are going to monitor what's happening in Denmark, what's happening around Greenland or if you're ukraine what's happening in ukraine what's happening everywhere we want to be somewhat independent in states even though we're together in eu and nato and we believe in being together we still want to have some control that is a driving factor that we see we have in the lower right hand corner the existential societal issues as we call it global climate infrastructure redundancy we can go space we can go fiber there's a need for that and like i said the national security is a big trend here So market trends are good. Customers are there. The business cases, the use cases are there. Why are we competing? Okay. Well, we've been here for a long time. We've been around for 17, almost 18 years. We're one of the oldest companies in new space. And we have a very strong technology platform and flight heritage, which I just shown you how much technology was actually flying. So it means we have a lot of experience with having technology in space. I can tell you it's not the same as building it on ground and thinking it works. It's not until you launch it that you start learning. Last one, journey to profit. This is what we're talking about here. I told you what we're focusing on. We have done, we started a turnaround in my book, in my timeline, beginning of last year. We have stabilized the cashflow as I have documented to you. Our market cap has grown. That's up to you, what you think we deserve or how you value the company. We have strengthened our leadership team and we have a very strong structure in place to execute. Market is good. Trends are good. We have the experience and heritage to do it, and we are on a very good track in terms of executing. Revenue and EBIT, new little service announcement here. So you saw the revenue was for the first half 116 million. I am expecting that we will deliver for the full year more than what we did last year. Last year was a record year of 236 million. With the order backlog we have taken in now, we have a more certainty that we believe we're going to do better than last year. Profitability, it will also come. But like I said, first, order intake, cash flow. Now we start turning to revenue. And as that starts growing, the EBIT will follow. So it's not a focus in and of itself. But we need to manage the first three ones first. A summary here. Cash and profitability first. I can say it seven times and then you all remember it. So this is what we're focusing on. Product revenue, expand North America, profitable programs. We keep that focus. We need the clarity and we need the accountability. Do we have the accountability? Yes. We have skilled people with industry knowledge. We have our founders are still here. So we have this whole accumulated knowledge since 27 actually goes even back to 2000. So our founders has been in this for 25 years. So we have that. knowledge, we have the heritage, it's still here with us. And we have very strong executives now in place that has executed before in similar environments. And they are accountable. And we have really clear accountability. Frank Tobin is responsible for North America. Oliver Schieve for our programs and Henrik Kallstrup for our products. So for me, it's very easy to follow up because I know exactly who needs to do what and they know what they have to deliver good stuff. All right, trying to wrap it up here as a summary. Positive free cash flow, check. Very, very strong order intake. I'm very happy with that in the second quarter. It was not easy. It's a long, long process and we are prevailing here. We're expecting the revenue for 2024 to surpass that of last year. IFO has acknowledged Gump Space as a worthy company for export credit and help with financing. That's great. We have the first satellite launched for the Indonesian customer, Czech. And, okay, you want to know more, I will give you an update at the end of the quarter, as promised before, on a bigger contract. And we maintain our guidance for positive free cash flow for the second half of 2024. With that, I'll repeat for you the question that you might ask me, but can we afford to be patient, Carsten? It takes time. And yes, we can. Thank you.

Perfect. Let's jump into some questions, Carsten. The first one is around one of your big owners, Peter Hartwich. When he invested in GUMX, he stated that GUMX was well in line with some of his other business. Does he have a part in decision making or does he have a positive impact on order intake? Does it mean that some of his connections can have actually helped you? So it's a little bit of a comment on whether he's how active he is in the management of the company and whether you can use some of his network.