GomSpace Group AB (publ)

Welcome to today's event where we have the pleasure to present GOM Space. Today's presentation, your Q3 statement, trading statement, sorry, is of course fresh off from the press this morning, so that will be the subject of today's presentation. We have a lot of questions, so I guess we will get... very far around in your company today. So that will be very interesting. So I was through this and answer the question. We are joined by CEO Carsten Rachmann. As always, you're very welcome to ask questions in the box down below. Do it in English, Danish, Swedish. I will try and translate to the best of my ability. But due to we have Swedish shareholders and Danish shareholders, then we do this in English. and we have prolonged this event because we have a lot of questions and we'll get a very a very far tour around in your company casting so we have prolonged it and we'll try and get to all the questions today but that was all the bookkeeping I will hand the call over to you now casting

Thank you, Michael. And welcome to everybody. And I'll also start by saying thank you for writing all the many questions. Yes, I do read them. And to you guys in the chat forum, yes, I do read what you're writing. I will obviously not answer there. So I'm following everything you're saying and I'm listening. So I have changed the presentation a little bit today. We'll address investor communication. You've been asking questions about that. talk about the journey you'll have a lot of repeat because the story is the same and i repeat it again and again so you're not in doubt of what we're doing a summary but i have taken out the gum space reminder you know where i go a little bit more depth with our products and background we're not throwing it away go back and watch the previous videos if you're new to this i do apologize because we have so many questions i wanted to address that and in any case you can go to our website and and get more information A couple of exciting events and then, yes, I will talk about partners and yes, I will talk about Indonesia to the extent I can. And I've already sent information out in the press release and a summary as usual. But let's get started. So clarity and communication goes internally and for us goes externally to you as investors, of course. I thought I'd recap what we are doing. I saw questions about what's your plan, how are we communicating, when? So let's just reiterate. We do quarterly reports, surprise, surprise, four times a year, and they are pre-announced. We have done it so that Q1 and Q3, as we have today, is in the shape of a trading statement. It's simply faster, it's more compressed. I believe it contains all the valuable information that you need and you get it as fast as possible. That's really been important for us. I also want to highlight here, and we'll look at the order backlog later, including the order backlog. Actually, you don't have to do that from a rules perspective, but I think it gives a lot of value for you to see the backlog and it gives me a chance to talk about it. So that we do four times a year, obviously. We also try to share more and more now externally how we run the business internally, products, programs in North America. You'll see that in the order backlog. So it's easier for you to follow the different activities and focus areas that we have. You know the rules. If you don't, just read on them. I will issue immediate press releases if there's something major that has changed that would impact the share price, positive or negative, doesn't matter. I am obliged to do that. If I have told you something about the future, if I made a statement about a project or an opportunity, as we have in Indonesia, if something changes, if something comes to my information that's changing that information, I have to share it with you, which means you can assume that if I'm not sharing anything, it's because nothing major changes has come to light. That's quite important to understand. I have to do it. It's not my own choice. Then the other thing is we do press releases as we go along, where there is information that we deem interesting for you, smaller deals, memorandums of understandings, et cetera. So we will share that as we go along, as we have already done. But there's a lot more information available that I will not share in press releases because it's not appropriate to send all kind of information out. Here, I strongly encourage you, sign up on our LinkedIn website, sign up on Instagram, sign up on Facebook. You'll see a lot of information coming out. We went to a trade show in Milan recently. There are postings from there, there's information. I met the Minister of Economy for Luxembourg. We met a major from Colombia. There's a lot of things in there that you can go look at. You will also see on those social medias, new product releases, you get a feeling for how many products are we releasing, how are we selling them, how are we positioning them in the market. So I strongly encourage you, if you feel you don't get enough information, i am sharing what i have to share and i share it immediately if it's a major change and we will issue press releases where i see things that are i think are interesting extra interesting for you we'll talk about the criteria steel we love close a couple of days ago but for everything else go to the social media and get the information there you'll have a feeling for what we're doing and who we are

That was addressing almost all the questions we have regarding this. There's one on whether you have changed anything when you communicate on orders since you went into office.

Well, no. Well, yes and no. When I started, I realized that we have a lot of orders. We close 30, 40, 50 orders per quarter in terms of products, anything from 5,000 sec to 5 million. So we started communicating on that. But the extra service we've added on is that you actually get the backlog every quarter per product. unit you didn't have that before so actually we are communicating in the same way as before sometimes if i feel as uh you know there's been a bigger deal or accumulation that i find that you think is interesting for you i will announce it but you'll see it every quarter regardless yes perfect thanks so journey let me repeat uh 2023 i started in in march 2023 i saw uncertainty i saw a lot of change uh Lack of clarity. Obviously, we had to let a lot of friends and colleagues go. There was some level of demotivation. It was time to reinvent ourselves. It was time to figure out, what do we do now? We have great technology, but we have to figure out how we turn this into a business. 2024, we have clarity. We have much more stability. You see that in the cash flow. It's very clear which businesses we're working in. It's very clear which markets we are in. It's very clear what sales we are driving. Clarity is here. We have a clear desired state that we are working towards that I am reporting on to you. We have product business we wanted to be up and running in its own right. We are measuring it separately. Okay, what does that mean? Well, much more focused sales approach that we're having now. We're also doing a more structured approach to roadmap, really looking at where do we spend our resources so we can get return on investment and marketing. A lot more marketing. You'll also see that if you follow the social media, we are stepping up our marketing communication here. Two, program business, so building the satellites, putting everything together on contract for customers. It needs to be profitable. We need to find the right projects that fit us and our skills, not just any project, but the things that are, where we are strong and we have a higher chance of success, and it needs to be profitable. We need to stay relevant in this area. We need to select the right projects. We have to improve a lot on execution. There are some questions on how you're doing with the projects. Actually, we're doing well, but there's no doubt that the auto backlog is full. We are busy. We are really, really busy. And a lot of it is now on execution more than ever before. This is a good thing. When we go into the backlog later, we'll talk a bit about how things have evolved there. Last one, remember North America, biggest market in the world. We have a relatively small market share. This can grow. Of course it can grow. It will take some patience. We need to be present. We are hiring people there. We have about five or six people now on the ground in the US. We do it cautiously. We don't want to say, hey, let's hire 100 people and see how it goes. No, no. We hire as we go along as the business is closing, not to step into a territory where we can't provide the cash to pay for the people. It's really important. And it takes some patience and it takes partnerships to be successful. The question, and yes, I have read online some people are impatient. Sorry about that. I am very patient. Can we afford to be patient? Yes, we can. Yes, we can. We know exactly what we're doing. The direction was set in 2023. We are executing on it. The backlog is improving. The business units are set up for products. The business unit is set up for programs. The business unit is set up for Americas. We start to understand how we need to execute in those business units. The cash flow is improving. The EBIT is improving. The revenue is going up. Everything is fine. We're doing exactly as we said. Should it be better? Of course. Of course it will be. And let's talk about where we are now. And then you can see the progress and you can see where we want to go. So in summary, what have we done in the third quarter? 12 million positive cash flow, free cash flow, great. That was our ambition and target. We achieved that. Our cash position has improved with about 11 million SEC since the end of June. That's good. Our EBIT is improved compared to the third quarter last year. It's minus 8 million right now. Do I want it to be positive? Yes. Those of you saying Carson doesn't care about EBIT, of course I care about EBIT, but there's a process to it. First, we manage our cash. We make sure we get the right projects and the profitability will come with EBIT. And we're also trending in the right direction here. If you look at its year-to-date EBIT, we are at minus 44. Okay, that should be better. But it's improved 23 million since last quarter. And with a much lower revenue year-to-date, we had 192, I believe, million year-to-date last year. We have around 179 this year, 177. We see that on the next slide. And we have a much better EBITDA on a lower revenue. What does that mean? It means it's an evidence to you that the effort of improving the quality and the profitability of backlog is playing out. The effort of focusing on improving our profitability in our backlog is playing out. We are delivering more earnings per revenue than we have done ever before. That's a good thing. We're on track with that. The other backlog will also end up. So while we have revenue, obviously a revenue eats away on our backlog. It's important that we try to keep that on a continuous growing level. We managed to do that also in this quarter. So it's up with about 11 million. If you look at the key order intakes, there were actually product was a good quarter for products is actually the highest Q3 we've seen. And when we look back in time, but that's going off. And then we had unseen labs for more CubeSats, so-called bro satellites for about a 40 million sec for, I believe it was four satellites. This is really good because this is a continuation with our partner and customer in France, Unseen Labs. We are now on, I think, satellite 19, 20, 21, 22. So it's really progressing well. This is a continuation of a long-term relationship that keeps playing out. If you want to know more about Custom.AutoSatellites, then follow it on LinkedIn, on Instagram. We are showing when we're doing launches, we are showing what's happening there. If you look into Unseen Labs, you will also see they're very good at marketing and promoting what they're doing. You can also follow that. It'll give you a better hint also which, what kind of business is potentially coming, a grumps-based way when you understand their business.

I come with a small one, Unseen Lab, Google that and Bloomberg. They were on 14 days ago as one of the stars in the show of startups. And there's a very good interview with the CEO there that is giving some hints of the future.

Exactly. Clermont is very good at that and they're doing really well. so all together uh fine we are delivering on what i was expecting for for q3 but let's dive into some of the key figures so order intake 69 million we're still trending uh positively it was more than uh it's a little bit less than the quarter same quarter last year sorry it's a little bit more than the same quarter last year overall we are trending in the right direction obviously the route to an even more successful company comes through order intake. There is no other way than doing more. So this is important that this is trending in the right direction and we continuously have a backlog that is sufficiently big so we can manage the business. Revenue, I would say steady. It's a little bit less compared to last year, more than first quarter, a little bit less than second quarter this year. I'm fairly satisfied with this. This is an okay trend and there's a backlog and we are closing more business now. We should be able to see progress in that. EBIT, I talked about. So an improvement on the Q3 compared to last year and also year to date, we're looking better. Employees, we are 185 now. We have grown a good deal. So I'll dwell a little bit with this because I know there are questions. So Carsten, why are you hiring? Are we just seeing another hiring so that next year things are going to go wrong and everything is going to be bad? No, that's not what we're doing. The recruitments we're doing right now is not in anticipation of what might happen in the future. The recruitment we're doing right now is for delivering what we have. So yes, we are increasing. We are very careful about how we do this. You'll see the little mark under the 185 also saying this is including consultants. So we want to have a flexible workforce also that we can adjust with the demand. But right now we are not hiring a lot of people in anticipation of future projects. We are hiring to where we are and we want to try and stay stable at that level so we can continue to deliver a positive result. Okay, so let's dive into the backlog. Extra investor service for you. Three business units, programs, products, North America. Let's talk about the dynamics. Program business is about building complete satellites and missions. Program business is about customer contracts. Program business require a good deal of resources. While we are having, you can see the assembly room behind me, we are putting hardware and software together. Of course, that has a price, but typically the programs involve quite many resources. It can be five people, 10 people, it can be 20 people or more involved. That is program business. It's contract-based. transactional basis contract based you commit to a certain delivery you deliver you get paid that's how it works what is the characteristic of that is well this is of course where you can get very big contracts as you see in the pipeline we get back to Indonesia The other dynamic is you need resources to do more. If you want to do a lot more in contracts business, in program business, you need more resources. Therein lies the predicament between we don't want to have too many people, but on the other hand, if you don't have the people, you can't deliver on the contract and you cannot get the revenue. So that is the dynamic of the program business. You can see, if you look at the numbers here, we invoiced around 32 million in a quarter. So revenue, recognize that. We got a bit more in backlog, about 38, 39 million. So that's good. So we get more orders in than what we deliver. That's a trend we want to be on. You can also see the development from the beginning of the year. We started with about, sorry, I can't even read it myself, about 90 million in... In backlog, in the beginning of the year, we are now at 250 odd million. That's really good. That's an incredible increase. And all the new business is with profitability and margin. So there's a dynamic on that. So if you see the resources going up, yes, if you want to grow our business, it needs to go higher. And obviously, the cost of doing that needs to be less than the money you're making. That is understood and obvious. And that's the direction we're going in. Product business, what is product business? Product business is selling things we already have created. So I said typically customer see, customer like, customer order, supply chain, production, delivery, collect cash. There's no engineering involved in that. There's no engineering involved in that. It is a more transactional business in terms of we have the products, customers see customer like we ship. It's not entirely true because of course we're working with key customers, but this is the essence of that. The R&D people we have involved in products are developing releases and new products for the future revenue to stay relevant in the market. So you see the dynamic is quite different in these two businesses, also why we have split them up. It is also why we're reporting to you separately and we'll continue to do so and improve that into 2025. What is North America? North America is primarily product business. We probably don't want to do big, complex businesses and projects in the US, except we want to do it with partners, SAIC. I'll talk about SAIC today also. So in North America, it's not about the partners. We're delivering technology, products, et cetera. If big assemblies or productions are needed, it will be done with partners in the US. So where are we? We are at 310 million in backlog, profitable backlog, unlike more than a year ago where we had more backlog, but it wasn't profitable. So that's a good trend we are on here. Okay. Free cash flow. We had plus 10 million, 12 million SEC this quarter. That's good. That's what we were aiming for. We maintain our guidance for the total second half of the year to be free cash flow positive. This is by the way, what we set out to be first quarter 2023. That's where we set the target for ourself. And I think the graph speaks for itself that so far we are delivering quite okay on this. And we maintain the guidance for the end of the year. I would say you can see the highlight in, it's not highlighted, it's more the text. How do we do that? Well, we have certain projects, big projects, for example, in Singapore, also with Unseen Labs that we need to deliver. We need to deliver on a milestone and collect cash. That's important that that's happening. We are on track on that and we are executing on that. If that slips, which I don't think it will, it just means the money comes in January. So the money is not lost, but we need to execute. Then there are a few orders that we expected. We always close business in products in North America that will also generate cash this year. So it's the sum of this, which we believe are on track that will lead me to keep the guidance as it is, which means we've got to be free cash flow positive for the year, for the second half of the year, and you can do the math probably for the full year.

So exactly, there was a question. So you're saying two stones, and this question was written before you delivered 12% here in Q3, that 12 million, that is wise to say. So you say it's execution on projects that will give you running money, and then, of course, orders coming in and prepayments. And I think you also indicated a little bit of a busy quarter in Q4, so that should also help you. Is that correctly understood?

That is correct. That is correct, Michael. And basic quarter, certainly with execution. This is a nice part of this. We are moving more and more into execution mode. Of course, it's challenging. You need to deliver on time. We have contractual commitments, but we are on track with that, as we should be. This is business as usual and should be good business as usual. Perfect. So let's take a look at revenue and EBIT. I came out in the Q2 report and said I think we will surpass the revenue from last year. I maintain that statement. I do expect that we'll do a bit more than we did last year. As you can see, and what I've also implied now in press release this morning, that EBIT will also be better than last year. We're very confident about that. So that is a statement I want to make. Revenue will be somewhat better than last year and EBIT will definitely be better than last year. So all to all, as I said before, really implying that the profitability in what we're doing is going up. The work that we are doing, the efforts we are spending is giving more return. Still not enough. Actually, we need to, as you can calculate easily in your head, we need to have higher revenues, and that's obviously what we're working on. But I think we've cracked a knot in terms of profitability and making sure that we make money on everything we do. Okay. Exciting events. I think super exciting events. You say, hey Carsten, there are no hundreds of millions attached to this. Well, super exciting event. We launched our Juventus satellite on the HERA mission a couple of weeks ago. It's a deep space mission. I hope you've all followed it. If you haven't, I suggest go on YouTube, go on our website and see some of the launches. So what is Juventus? Juventus is a small satellite, 6U, about this big. It's sitting inside a mothership, a bigger satellite. It's going to fly more than two years out to meet an asteroid that is 180 million kilometers out to look at the asteroid, to fly around the asteroid and figure out what it is. And then it's going to land on the asteroid, do more measures, and then alas, it will die eventually because it won't have enough energy But this is a fantastic mission and we spend a lot of time on this over the years and it's finally come to fruition. We've learned a lot. We have gained skills. We now have technology documented for how to do deep space missions. It's a very complicated and complex mission. And why is that important for Gump Space and for you as investors? Well, a couple of things. First of all, from a brand perspective, Gump space is now understood in the industry to be able to do deep space missions. That's good. Then you can say, okay, but it's only interesting if there are more deep space missions. I think there will be more deep space missions going into the future. I'm not saying it's gonna happen tomorrow, but there is clearly more and more interest about doing deep space missions from all nations. Exploring, for example, is there water on the moon? What can we do on the moon? What about mining on other planets or asteroids? This is coming, and what we have done now with Gump Space is we have positioned ourselves as a credible and reliable player when companies want to do missions in deep space. So this is very good for us. And hey, what's that? Well, I just thought that we talk a lot about these satellites and what does it look like. These are actually pictures taken from one of the ground space satellites. It's an example of what it looked like when we take the pictures with a certain resolution. What's exciting here also, and it's just a little bit more on this other than looking at it, this is not so easy to do. There's a lot of things you need to be able to do. You need to understand which way you're pointing. You need to know where you are. You need to know where the sun is and the star is. So this is great. This is a satellite we actually launched in record time. It's working perfectly and it's sending very clear pictures. So this is just a general service to you to say, hey, it actually looks really cool. And as you can imagine, engineers, when we send this up, when we start getting the first pictures down, it's celebration. It's a good thing. OK. So all right. No, I'm not going to keep you suspended anymore. Let's talk about Indonesia. I wrote it in a press release this morning. I will give you facts. You know I am obliged to give you updates if something, to my knowledge, has significantly changed from what I've said before. But before diving into this, we'll take the first line. It's a program for 20 satellites. We signed the contract together with Ellipse Projects, our very dear friends and partners in France, in December 2023. Some of you have said, hey, Karsten, why did you announce it? And maybe you shouldn't have done it. Was it just one of those stupid GAMS-based things? No. I announced it because I have to, because this was a significant event, a very significant event. One, so I actually, I was obliged to do it. I didn't have a choice. Two, it's also public on the Indonesian government website. About 24 hours after we signed it, or 48 hours, it's public information. Therefore, I have to make sure that I am sharing the information in the correct way to you. So that is the reason why we did it at the time. We also said at the time, this is dependent upon financing. So let's look at the facts. The program in 2023 was listed in a so-called green book, stating Denmark as the supplier. Denmark means supplier of financing, and then in terms, it's comp space and ellipse. We were listed in 2023. That book is updated regularly. The latest version, September, 2024, I can see some of you have already Googled it. Line 22 says, satellite systems constellation for marine fishery and surveillance. Denmark has been awarded. There's a number in there. It corresponds to what we have told you. These are facts. What is Green Book? Green Book is the Indonesian way, first you go through something called Blue Book and then Green Book. Green Book means it's approved for foreign financing. It means the Indonesian government has said, and there's a lot of projects when you go in and look at that set, for these and these projects, we have agreed and accepted and approved foreign financing. Foreign financing usually means a country that's an awarded that is also where the technology is coming from. So Denmark is listed yet again here and it is willing to the contract that we signed. Order of things. Well, it is so that you cannot do government to government financing or export guarantee without having a commercial contract. Hence the order of things. We had to sign a commercial contract first before the actual approval for financing could come into place. I've approved it in June 2024. This is good. There's a formal process going on in Indonesia. Yes, it's dragging out. Yes, I'd love it if they do it now, but it takes the time it takes. I'm not trying to stall you or anything like that. It's just going through a process. I have no information leading me to believe that this is not happening. It's not going away. I'm sure they will execute in due course. I cannot tell you how long it takes. And I'm okay with it because we've got a lot to do, so it's fine. We can actually wait a little bit. I also note fact there's a new government in Indonesia. It's not a surprise. It has been on the way for some time. Election was early in the year. Happy to see that our Our dear customer and good friend, Minister Tringono, Minister of Fishery and Marine Activities has been reappointed to his seat. So he's continuing as heading up the Ministry of Fishery, which is our customer. So our commercial contract is signed by KKP. Minister Tringono continues as he did before. Great. I don't see any changes or information that needs me to tell you anything different.

Let's do that. I think there was a lot of question regarding whether the change in government in Indonesia had any effect. And I guess what you are here saying is that the man in charge of the role is still the same person. That is your answer to that question. Is that how I should understand it? You can't say it more strongly. Also, what is missing and that is what you are saying is this is the financing agreement between Denmark and Indonesia. That is what is missing in this step. Then there's a question. Does the backlog include anything from Indonesia? Just to clarify that.

No, no.

And then Any risk of this contract going somewhere else? It might be financed. Do you need to be the partner on delivering this? I know it's speculation, but there is a question here regarding this. This gets financed and everything. Are you then secured to be the partner in this?

So I'll simply restate the facts. We signed a commercial contract with the Ministry of Fisheries back in December. In order to get the financing that Indonesia wants for this, you need to be in the Green Book. We are in the Green Book, 2023. We are in the Green Book in September 24. It's just a few weeks ago. So there is nothing indicating to me that this will change. Yes, there was a change in government and we didn't get any specific information that would delay the process because technically it should be independent, but hey. It's politics. Things are changing. They have 42 new ministers falling into place there. I have no reason to believe that. I did see, very careful how I formulated this, I did see that somebody started posting, hey, there's a new MOU here with some Chinese people. But I was also glad to say, and thank you, you guys are doing a lot of research. Yeah, this is an old project. It was really, to me, it was nothing new. It's always been there for something different. If you read, go and read in detail what it says. uh and then you will find out that it's probably not the same as this one that's that's the best i can do for you but i'm restating my facts we have the commercial contract we approve nobody can go in and take that away they have to be in the green book right okay perfect i i think we handle all the indonesian question as as as well as you probably are are able to do also living up to probably some ndas and so on so thank you for that uh constant okay Okay, and there were also some questions about the different partnership agreements, MOUs we have signed. So let me talk a bit about that. Starting from the top, first of all, Ellipse Projects, this is our partner for Indonesia. We have done a joint venture, EPGS Partners, to do that project. What's very interesting here is that, first of all, we love working with them. They're very skilled around the world in Southeast Asia and Africa in particular. The program, the constellation that we are now hopefully very soon closing in Indonesia, as we expect, can be replicated. This is valid for really a lot of other countries around the world. So we are working with the LIPS project, actually also discussing with AIFO what are the next candidates for this. So just to show that the Ellipse project relationship is not just for Indonesia, it's going beyond that. And we see, of course, as we should see, other opportunities out there where we're getting a bit more structured going into this. And remember, Ellipse Project's speciality is to prime, and especially to prime in, let's say, priming countries where things are perhaps a little bit more challenging politically and financially. That's why they're such a strong partner for us, and we bring the best technology in the world. So we're doing that together with them. I'm not going to say a lot more. Obviously, we're going to make announcements as things are unfolding. That's clear. SAIC North America and other patients, patients, it's a long play. They have taken technology from us. They are developing something called Prodigy, go in and read about it, which is their platform for space. They have a contract with Pentagon. Remember what I mentioned last time, you've seen it all, Gumspace names was named in connection with the SAIC contract with Pentagon. That doesn't mean that the millions of orders are going to flow in next year. That's not the point here. We're building a platform in the North Americas that will eventually grow. So this is very strong. We are working with them every day, pretty much, having strategy meetings, discussing what other opportunities are out there. But it's a long-paced place. Hopefully, be patient. Be patient. Tama? Not a lot have happened on the Tama contract. I think it needs a revival, and I note also that there's a new CEO for Tama, and I'm looking forward to soon meeting the new CEO and then revive our agreement here. Then the last one, some of you have asked, you saw recently we signed a collaboration agreement with, they call it ST Engineering, it's another company, Satsys is a space part of that. No, it is not the same company as we are right now delivering microsatellites to. It's a different company. So two customers in Singapore, to be clear. The collaboration agreement here is a mix of things. It's a commercial thinking about how can we potentially go to different markets together. It is also a technology collaboration where we are looking at how do we perhaps share technology. We have some areas where we need to go and perhaps buy technology somewhere else because we don't want to do it, but they have it and vice versa. So this is the beginning of a collaboration of building new satellites together. On customer contracts, I'm not doing anything free of charge. Just to be clear to our investors, I'm not doing anything free of charge here. We do it based on customer contracts. We're not overcommitting, overextending ourselves here. But we have a really good relationship there. For me, it's also old friends that I know from my past out there in Singapore. So it's a great progress. And I'm hoping that was some more concrete information for you coming out of that. Now, expanding technology footprint. I'll do that one and then I'll take a break. Expanding technology footprint. In addition, we have Proteus. Proteus was, we signed it a couple of days ago. It's 2.6 million. I think it's a decent product order. We like the size of product orders. It's good. It's not a partnership we have signed, not to be confused with the headline here, but what I think is really, really interesting that there was an AI question. This is for an AI-enabled rapid satellite design platform. What does that mean? It means Proteus is a company, and they are linked to defense, and they're working with defense also in the US, how to quickly design a new satellite based using AI technology to simply go through the first design phases. Why and what have they bought from Gump Space? Why they bought from Gump Space is our heritage, our quality and our ability to deliver technology that works. And what do they need it for? They're building it into their platform. So when they get customers saying, hey, I need to design my own satellite, I use this software, guess what? Out comes a technology from CommSpace and they will show it how to put it together. So this is generally the beginning of Proteus. It's a company that's growing quite quickly. I have a platform called Mercury. You can read about that also. Getting our technology in there means anybody who wants to work with Proteus and wants to design satellites are going to buy technology from Gomspace. This is great. Outside of that, as a side information for you, SAIC invested in Proteus just a week ago. So that gives you a hint of the importance of Proteus also, and there's something going on here. Again, it's a long play. It doesn't mean it's going to be millions and millions running in tomorrow. That's not the point. The point is we're starting to establish ourselves. And I think the AI part is quite exciting and potentially, potentially we can have a reverse relationship also that we might actually buy some of their software for our own designs. We'll see.

And maybe just to close and you can have a small process about what I asked the questions. Actually, here you have someone who will AI design a satellite. Are you also thinking about doing that in your own design process when you have programs? Or is that maybe more in the future to be outsourced? And secondly, are you thinking anything about AI in your implementation, on your execution, in your production process right now?

I would say absolutely. I think any company today that's not thinking about AI and how to use AI is probably going down the wrong path. So yes, it's definitely something we need to look at. There's no doubt over time we need to cut the time it takes to develop a satellite, we need to cut the cost. Right now we are focused on the quality and getting it right, so that's not so important to us. But yes, we are starting looking at a different kind of AI technologies There are many different ways of doing it, but it's definitely something that will be on the agenda going into the future.

Perfect. Yeah, that was that.

Okay. You can ask about AI in space. I can ask a question for the listeners. This is a general comment. AI in space is also quite interesting. How do you put AI on a satellite and what do you use it for? These are also things that are coming and something that we are quite interested in looking into. With that also comes cybersecurity on satellites, which is starting to be a focal area for us. How do we make sure that the satellites are actually safe and secure to operate? How do we make sure that Chinese satellites or others are not just flying up close and actually able to read the data and hack the satellite in space, if you like. There's a lot of things that can happen, and this is definitely something that's coming more and more that we are also focusing on.

So if I understand you, and I'm not a technical expert, but I think AI on the edge, meaning that you move the AI and not, instead of beaming it down and being smarter every time you put the algorithm up on the edge, you know, chips and everything. So is that what you are looking into right now, if I understand you?

Yeah, of course. No, what I'm saying is that this is what we will see coming in the industry. And yes, we are looking at that. And if you go in and read about SAIC, what they're doing, it's something quite similar to that. So there you go. We have a partnership, by the way. I didn't say that. So there's opportunity that way as well. Perfect. Thank you. All right, coming to the end, and there might be other questions that have come in, so we'll have time to take those. So I want to summarize. maintain focus, clarity, and accountability. We really set up an organization that accountability is very clear. Product business, North America, program business, important. I also, and I know you've seen this slide quite many times. Actually, you've seen it exactly six times now, because we announced it in the first quarter, 2023, and this is what we're gonna do. And I will repeat, this is what we're gonna do. This is how we're executing it. This is how we are going to build our business into a profitable business into the future. It's very, very clear to me. I have absolutely no doubt about this strategy. So backing this up, we have been through the journey. I've highlighted for you the desired states. Can we afford to be patient? Some of it takes time, and yes, we can. Why do you say that, Karsten? Well, the example is North America. We are not just hiring 20, 30, 40 people just like that and spend a lot of money. We're actually trying to grow organically with the business that we can close over there. It's quite important to us. The resources that we're hiring now to a large extent is to cover the demand we have, the contract we have for programs. So it's good. It's a healthy recruitment. It's a healthy cost increase. Eventually, the equation will turn positive. So summary for the quarter, we have a positive free cash flow. The cash position is improved. The order backlog has slightly increased. We are maintaining our guidance for free cash flow for the full half year. Sounds weird, but the last six months of 2004. We expect the revenue for 2024 to surpass that of 2023. I'm expecting the EBIT to also be better than 2023. And I have no information that compels me to say anything has changed in Indonesia. I just cannot give you an exact timing. Thank you.

Let's jump into some questions. And I'm sorry, but if you already have answered, I'll try and dig a little bit deeper into it. But the first one is Yeah, it's regard that you are saying EBIT and patience and everything. And if you can't be EBIT, you can't be cash flow positive. And I don't think I have ever heard you say you don't want to be EBIT positive. And I also think you expressed that you understand the connection between those two. So maybe if I should ask a question and you're probably not going to answer it, but will the profitability targets be a part of your future goals when you need to set up a market? Is that in your thinking of adding that? I am not asking you whether you will do it in 25 and so on, but is it in your thinking that you will put profitability targets in your guidance?

I think I sort of answered that we are always focused on profitability and have been focused from the beginning. For me, the most important thing in a short term was cash. Cash is king, cash is black and white. Basically, this is what we're doing. And you also see part of the process of setting up these businesses, which has also meant a lot internally in terms of business systems, how are we able to track the businesses as they are? Eventually, we are already looking at what's the EBITDA, what's the EBIT, etc. So we see the profitability. But a lot of it, you can measure a lot of that and try to guess, but a lot of it starts with you need more orders and those orders have to be profitable. That's step number one. I need to have enough cash to go from the next quarter to the next quarter. And I think we have established that our profitability is better. And our cash flow is where I wanted it to be right now.

So if anybody should ask what is going to bring to you, look at the order book. If that is growing, then it should bring you the perfect. Then there's some concern. And this is about the Q2 numbers that you had some rise in admin cost. We can understand you hire people to produce and so on. But can you talk a little bit about the increase in admin costs?

Absolutely. And I can see the admin cost has not increased. And I do understand that the way it's reported, it looks like it has increased. Actually, it has not. But it's to do with that we have reshuffled into these new business units. So while I understand and I do apologize, I can see that you're reading that out of it. But that is not the case. We have not increased with admin staff in this context. It's just a question of how we classify the resources. Two of the people I think it's worthwhile noticing that will show up in this as admin cost, these are two founders, Morten and Lars, which I have basically set free. I like telling that story. Morten and Lars, they're the reason we are here. They're the reason that you have something to invest into. They're the reason that Denmark is a leader in space and we are a leader in space technology for small sets it's the last and modern so i have said guys you've been here long enough you've done your work do whatever you want to so they are basically working and very very happily working wherever they can add value in the company so that comes as an overhead cost if you like so that's part of it so just to say it's not it's not all overhead costs that may smell like bad cost But it's correctly read, but the interpretation is different. We have not increased it.

So where you have increased staff and where you have increased cost is in your production capabilities to execute that.

Absolutely.

And those costs that we can see increased was maybe at some point in time or wasn't that more allocated into the gross margin?

No, exactly. It was just allocated into overhead costs in a different way. So that's why. without making it a long answer, well read. No, we are not increasing the cost. No, I'm not doing anything stupid without having the revenue and the cash flow. Don't worry about that.

And then there is, of course, as you stated, it was important to reduce, to reduction and get profitable part of the connection with the increase. And I guess you can't see that on the staff. I guess a big part of this reduction and reconstruction program was that also to get profitable orders you know that i guess it's it wouldn't matter anything whether how much you you cut down your staff and everything if you didn't clean up your balance sheet before for that i guess that's a little bit hidden is is that correctly understood yeah that's correct absolutely yes michael correctly understood it we needed we need simply to turn the

The order backlog has to be profitable. And if you go back, I refer to what I've done before. We canceled almost half of the order backlog in Q2, Q3 last year. Why did we do that? Because I just could not see us making money on it. If I hadn't done it, I would contractually have been obliged to deliver a lot of work with a lot of resources. I would have had to have even more resources, but I would make no money on it. So I had no money to pay rent, overhead costs, anything like that. probably I would have lost money. So that's why we did it. And it's evidence that I think you see now that we are delivering a better EBITDA year to date on actually quite a revenue that's lower, right? So you can read it in there that it starts to work. It starts to work.

Then there is some comments on your correlation with is this progressing as planned and whether the goal is a meaningful constellation of plus 100 satellites? So a little bit about that.

Yep, I can talk about that. So for sure, there are two questions in that. So let me just answer the one first. Is it on track what we are doing, the contract we have? Yes, it is. We are delivering on the contract milestones as we should. So that is on track. And I believe it means also that Static Curl, we are not responsible for the launch. Static Curl is on track for launching this. called IOD, so it's a one satellite, right? It's an in-orbit demonstrator, so it's one satellite to demonstrate the technology for airplane communication and understanding where airplanes are. That's the first part of the question. The other part of the question, is this still going to be a big constellation? That's not for me to answer. This is Statical and Interbusiness and the airport entity in Spain, who is the co-owner here. It's for them to say. So I suggest you go read their predictions, look up Statical, see what they're saying. We are delivering right now on the contract, so I can confirm that. We're on track. Everything is fine. how they want to do that after that is something we need to hear from them.

And I guess you having been the test, sorry, the first ally, that should position you very well if they go on. Is that correctly understood?

I think that is your conclusion. Good.

That was not mine. It was one of the very skillful listeners and answers of questions. there was a question about your cash flow but i think we covered that pretty well that we gave the three uh three parts that that is giving you what you want to do on cash flow then uh about your elevate your evaluation and gump spaces position in the market versus five years ago and i I know it's a very broad question, but if you can make it short, then yeah, I'm not even sure if I want to make it short because there is a good long answer, but I will.

I wouldn't know. I will make it short. I will make it short. I would maybe make it even shorter by saying that's something we can talk more about later because there are changes that are dynamics in the industry. If I answer, how do I feel we are positioned today? I think we are quite well positioned. I think you can go find me. There's a video where I was in Paris some weeks ago for satellite business week. We were talking about that on stage with some of our colleagues and competitors. um there is definitely a trend for more uh i see a trend towards those who manage well their business will be the ones that will all be successful in the future managed business means financially but also means reliability quality understanding that you're relevant in the market that's really really important there's not a lot of companies that are making money in the industry What did we believe in as an industry, not just Gump Space? Six years ago, now it's started becoming a bit longer, but I want to talk about it maybe later, maybe next year. The expectations for how many satellites would be launched were huge. Actually, they weren't completely off, but reality is Elon Musk and SpaceX launched 60% of those. So there were an optimism about what would happen that perhaps across industry was a little bit on the high side, I would say. But where we are now is I feel we are really starting to feel the heritage that we have. We've been around for a long time. People know our brands and know our products. They know that if they buy from us, it's proven technology. It really works. It really works. And you can go in and look at the LinkedIn. We were to Milan a couple of weeks ago. The 75th Aeronautical Space Show was really, really interesting. Our booth was full. Everybody comes and I want to see what we have because they know come space. And by the way, they heard about the Juventus launch, so they also wanted to come in because we had this deep space launch.

Even if you say there are not many, that must be more technical. This needs to survive in some cube for four years and unfold. I guess it is much more system critical that it works after four years than shooting something up. Okay, it breaks. Then we shoot another one up in the strategy. Yeah.

So I would put it this way. I think we are fairly well positioned in the industry. As you can see, we're starting to manage our financials. That's important. We want to start playing with the bigger players. We also need to have a better balance sheet, which gradually is coming. So that's a key. Forward looking into in a couple of weeks, there's a big show in Bremen where we will be. We have a big booth there. And also there, we're already getting fully booked with meetings. Everybody wants to come and talk to us. So that's all good.

Then I actually think the next question is about any signs of key customer reducing their engagement with you. I think that that is a good follow up to what you ended there.

The answer is no. What are you going to do about it? I'm not going to do anything about it. No, there's no trend to be losing any key customers. On the contrary, if you look at it, we're getting more and more new customers. And what we do, especially on the product side, we have these key accounts. I talked a bit about it. We have a selection of eight to ten customers which we want to have a more longer term partnership with. So we are really grooming those to make sure that they are working with us and we have more predictability in our in our forecasting.

Then a little bit about engineering and you went in and answered a lot, maybe a little bit. Is that giving you a doorway into Asia? And is there any projects that you are dreaming of could be realized through this?

Yeah, great. That's always a dream, isn't there? There's always a dream. So ST Engineering are building typically satellites from 250 to 300 kilos and up. That's what they've done, mainly delivering to Singapore customers. uh our as you know our range right now is from whatever five kilos up to perhaps 150 kilos a bit more so we're sort of closing a gap with them so together we might be able to deliver a broader selection of satellites so that that's a bit the idea I see it's a partnership where we are able to qualify ourselves better together towards opportunities that are coming up. Of course, it's opening up for business in Singapore, where we already are, but it could open up for even more business. And it's also giving us a hop into Southeast Asia, no doubt about that.

Perfect. Then there's a little bit about competition and potential price pressure. Are you seeing anything about that?

We have to be careful because you need to remember that our competitors, which are the people that you don't like as investors are also listening in here. So no, we don't see, we actually just increase our prices. So we don't see a pressure as such on the product side. On the program side, we always have to be vigilant and relevant in what we're doing. Need to listen to the customer demands. I would put it this way. I see a trend towards, it's becoming less and less about price price is always important in the end but it's becoming more about reliability ability to deliver on on a mission ability to deliver in time something that works example unseen labs have been around for such a long time the service they are delivering is really good monitoring official fishing boats remember or other boats it's a global service When they started the business, they weren't exactly sure what was gonna happen. Now they've come so far that they have service contracts well into the future that requires more capacity for them, which means they can now measure a failure in a satellite or an inability of a supplier to deliver they measure it directly in their revenue and potential loss of service contracts that already have. That's not good, right? So you see more and more in trend in that direction, which is also why I see a trend towards higher reliability is a key. Working with suppliers that has a heritage and a high chance of delivering is what the customers are looking for. it's the best time for fooling around and you know testing and another university student building a satellite is over you start moving into those who can other ones are going to win and we can

So you answered the second part of that question, that was the differentiation. And of course, there's a lot about technology advances and where you are going, but maybe we should make that as a subject where we also do some Q&A, where we actually look into that at some other time, because I guess that I will not ask you to answer, because I think that's a very interesting journey that doesn't deserve a short answer. So we will put that on the table for doing that. a board question the biggest challenging in in in in in in closing the orders and the final finalizing existing ones you know so fly up into the helicopter what are the biggest roadblocks is that still financing and what are the biggest roadblocks in in in in executing on your orders

Let's divide it up a little bit. What is a roadblock? In closing orders was one part of the question. Execution is a completely different question. I wouldn't say there, I don't know if roadblocks is the right word. I would perhaps reformulate the question into how are we winning? Well, we are winning. I already explained that by focus on reliability, a lot about relationships. We are focused on the customers more and more need a solution. They don't need a piece of technology because it doesn't do anything in itself. So how are we winning? Well, we'd rather focus on that is simply by having relevance, technology, understanding the customers, providing a solution, and very much be interactive with our customers. We've learned that when we speak with the customers, we listen to them, we have a much higher chance of winning. And you see some of the deals that we are closing, including I'd say of Singapore microsatellites. I think I said it before. I highlight it again. The whole world wanted to win that. Gamspace won it. We don't have a microsatellite flying. All the others did. Why? Well, because we are working with the customers. We're listening to them. We're actually able to provide a solution that suits them. And we were designing it together with them. That's the answer. That's how you do business. So much more focused on the solutions. Second part of the question is execution of contracts once you close them. Hey, but it's execution of contracts. We have a process we follow. You have contractual commitments. There are no obstacles per se in this. It's what we do. It's what we have to be good at. And in order to keep our profitability From the outset, we need to deliver. So it's quite simple. And the other part of that is, of course, if you execute and you deliver the customer, you have a happy customer. It's like in any other business, happy customers generate more happy customers and more sales. So that's a key. You find reliability in that again, right? You close the business, you deliver a customer trust. It will be reliable. You get more business. That's what we need to do.

So you feel you have the people and the capacity to execute?

we have plenty of capacity yes uh we are as i said we are fully booked uh right now with terms of people i know we have increased a lot i i am and i want to say of those of you who are cost conscious i am worried uh we have to be careful with a number of headcount we have, so we are using more and more flexible resources also, having consultants outsourcing as much as we can, so we're not trapped with too high a cost. But having said that, everybody we have hired, we need. And it's not for a future expectation of orders, it's for what we have right now.

There was also some question about goals on employees, and I know I will never get that out of you, but I think you kind of expressed how you're now setting up your system. It's for realizing things and setting it up a little bit more flexible, which probably is necessary if you want to have a lot of big program execution that is more lumpy.

But let me answer a little bit anyway. I get that question often. So how many people do you need to be? And my answer is, you know my answer. Who cares? It's not about the number of people we need. We need to have skilled people, we need to have the right people to do the business, and then we need to deliver eventually a profitable business for the shareholders, profitable business for the shareholders, happy customers, ability to deliver. Nowhere in that equation to say anything about how many people. It's a bit futile asking about how many people you want to be. I don't know if I could do this with 50 people, I would do it with 50. It's not really important. The important thing is that we are relevant, we can execute and we build that. customer relationship that they trust us. That's what we need. So that's how many people we need. I don't know how many that is.

final question then i think i hopefully we came through all and you can deservely drink a glass of water and get your voice back but the last question do we have any consideration on on maybe being on both stock market the swedish and the danish market you know it it it makes it a little bit easier for danish investors so and and you are a danish-based company and i guess some part of your investor base is danish so any thoughts about that and

I think I have the question before I ask a little bit of a smile. I think with US investors, it's not that hard to invest in Sweden and buy from there. US investor, you don't want me to spend time on that. You want me to spend time on delivering a result. I saw the questions on how do you attract more investors, et cetera. I can tell you it's very, very simple. We deliver on the profitability eventually. And this is the journey we are on right now. So I am not even shaking at all. We know exactly what we're doing and where we're heading. The investors that you want, they will come. You don't want me to fool around and think about maybe if I list in Denmark, everything is going to be better. It's all the same. It doesn't really matter. So I think I leave you with that message. You don't want me to spend time on that. It's not going to help you.

Perfect. Yeah, but then I will not take any more of your time. I think you should go out and execute and do your business. But thank you very much for answering all these questions. And thank you.

And thank you for all the questions. Yeah, and I do encourage you, please do write the questions in advance as you've done. Do write on the chat for us. I'm not promising you I'm answering one to one, but I am listening. So keep talking. I am listening. And I'll try to do as much as I can with insight, what's reasonable and what's allowed.

Perfect. Thank you, Carsten. May everybody have a nice day.