Invisio AB (publ)

Welcome to Invisio's presentation of Interim Report June-March 20th, 24. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to the CEO, Lars Heugard Hansen. Please go ahead.

Thank you and good morning everybody. Welcome to our presentation of the second quarter and first half year results. I know this is a busy day, busy week with many companies reporting, so try to make it short and precise. So the headline for our Q2 performance is that we saw strong growth with record sales and several new products launched. During the quarter it is a little bit unusual due to the fact that we have been delivering on the radio and intercom order that we received in the first quarter. So this stir up the numbers a little bit and we have tried to be as precise and clear as we can about what is the regular Invisio business and what is related to the deliveries of the radio order. So, in the quarter, as said, our sales reached record high numbers and growth was strong. We also, for the Invisio-related business, saw very strong gross margin. We saw our OPEX remaining largely stable, and it has been for the past four quarters when we exclude certain one-offs that we saw during the second quarter. We have had a very busy quarter introducing new products that definitely strengthen our market leading position. And we participated in several very, very busy trade shows. In summary, I think there is business as usual, as you can say, in the sense that the market is very, very active and Visio is well positioned. And we look forward to taking advantage of the opportunities that the market presents to us now and for many years to come. Turning to revenues, we have seen seven consecutive quarters of strong revenue. In the quarter, we ended at 553 million Swedish kronor, which is, of course, all-time high and more than double of what we did last year. If we exclude the radio deliveries, we ended at 390 almost, which is definitely also the highest level in the history of the company and with minimal currency effects. We have as usual delivered in accordance with customers requirements and this also shows the importance of our supply chain operations, our ability to deliver within a fairly short amount of time and also the importance of the inventory levels that we keep that will allow us to do fast deliveries and we believe that the market activity in combination with our broader product portfolio and our increased sales resources will allow us to continue revenue growth in line or above our targets. So 105% revenue growth, including the radio order. And if we exclude the radius, it's 44% difference. For growth margin, we have seen now that some of our newer products are starting to have an impact on the gross margin in a positive sense. We were at 63.2, almost a percentage point higher than last year when we exclude the radio deliveries. And if we take the total value of our revenues, including the radio order, then we were at 46.6%. And as we have communicated earlier, the gross margin for the radio deliveries, the radios themselves, is less than 10%. So very good development in the underlying business, the regular Invisio business with a strong gross margin. When we look at order intake, somewhat lower than the same quarter last year. There's no strange about that. This is just usual fluctuations. certain orders expected in Q2 were pulled or pushed into Q3. So we still have good hopes that the second half of 2024 will be very strong in terms of order intake. We continue to see that many customers prefer products that are tried, tested, ready made, has been in the market for a long time. And that gives us a significant competitive advantage. And as we have also said before, we can see that customers have a preference for placing multiple medium sized orders instead of a single very large order. And that's why we see less of the very large orders. But then we have quite a number of medium sized orders. So all in all, all good. We, as I said, expect to see continued strong order intake in the second half of 2024. Rapid deliveries, as I said, has become a significant competitive advantage. We have a strong order book excluding the radios. It is around 643 million and the majority of it, 80%, we believe will be delivered within the coming 12 months. And the fact that we have an inventory of 270 million, also the highest level ever, is reflecting upcoming deliveries, but also it's reflecting our flexibility. So orders that we receive now in Q3 will actually for a significant part be delivered in Q3. So we have that flexibility and we can see with the current geopolitical climate, especially in Europe, that there is a huge advantage in being able to respond quickly to needs and orders. Turning to operating expenses, we had a few one-offs in the second quarter. First of all, a cyber incident that we have reported that was related to our company in the UK, which cost us a little bit of money, but it didn't affect our business, has not affected our ability to invoice or to operate and interact with our customers in any form or shape. So that's fine. We have also taken costs related to the CRSD preparations. Quite a, I would say, majority of those costs related with the initial setup has been taken now in Q2. And last but not least, we celebrated Invisio's 25th jubilee or year anniversary with an event in Copenhagen for all our employees. But if we disregard these one offs, our OPEX level has remained largely stable over the past four quarters. Where we do increase our spendings is related to still R&D and sales in accordance with our growth ambitions and so mainly headcount is behind any increase in operating expenses. And it is driven again by the opportunities and the market activities that we see. EBIT margin has been above our target for the last seven quarters. It ended up at 18% in this quarter towards 16.8% same quarter last year. And again, the new products in the product mix and the improved gross margin is helping also drive our EBIT margin, so we are quite happy with that. When we look at cash flow, it's a little bit different story. It's not that often we talk about cash flow, but this time there is a little of an explanation to do, since it was widely negative, but with very good reasons. First of all, we accepted to prepay the radio supplier for the radio order, where we also received a cash compensation to prepay. We also paid out dividends in the second quarter, 59 million, which adds to the negative cash flow. And last but not least, we invoiced quite a lot of customers at the end of the quarter, which of course, will be paid within the usual 30 days. So I think without giving any prognosis, I can say that the next quarter will be very strong in terms of cash flow. So nothing strange about this. This is just because of a prepayment and a lot of invoicing to customers in the last part of the quarter. So, as I said, the quarter has been very, very busy. We participated at Eurosatuary in Paris, one of the largest defense and security exhibitions of the year. And as you can see on this picture, we had a very large and impressive presence at the show demonstrating our many new products. And I would say that this is the busiest show I have ever been to. There was packed with people in the Invisio booth all days throughout the show, and there were even people lining up to test our new Invisio X7 headsets and to look at the new Intercom products, the Invisio Link and the Invisio Control, but also to try out the regular portfolio as well as the Invisio Control, including the ADP. So a very, very successful show that just adds to the market activity level that we have seen for quite a while. Don't want to go too much into the product details, but the new InvisioControl app is something that has been asked for by our customers, and it makes it much easier for them to manage their tactical communication. So in a simple, intuitive interface, It gives a real-time visualization of all the radios that are connected to the intercom system. And it makes it possible for the users or the squad leader or the radio commander to also decide who can talk to who, which radios are connected, etc. So it's a very easy way of changing the settings and the setup and also having an overview of how the intercom system is set up. So all as usual related to customer demand. So is also the wireless intercom capability that we are adding to our intercom. This is also something that has been asked for for quite a while. The intercom system is very, very popular still in many tests globally and in sort of in the same way that many vehicles are being replaced and are being ordered for deliveries over the next years, we believe that our intercom system will be relevant in many of these tenders for vehicle intercoms. So the wireless addition here makes it possible to move around a vehicle within a certain distance and be able to communicate wireless back to the vehicle and still be able to listen to the radios that are connected to the vehicle. So again, a new capability that allows you to move around freely around any vehicle that has the Invisio Intercom inside. The product in itself is now for test and demo with key customers and we expect it to be available for sales and invoicing in the first half of 2025, but definitely a new capability that will add to the success of our Intercom so far. And in general, we have never had a product portfolio line up as the one we have today with best in class and all brand new products from the RA4000 Rachel Magna for vehicles, the Invisio X7 that is definitely state-of-the-art and provides the best hearing protection of any tactical headset in the market. We have started taking orders for it already and we expect this to contribute to our revenues in 2024. Our Invisio V60, the audio, data and power control unit also is in high demand. We have shipped thousands already and it is in great demand in different parts of the world for many types of users. So again, a brand new and market leading product portfolio. So one of the success factors for Invisio has always been our strong company culture, which we believe is a foundation for continued growth. In a simple way, our shared values and vision has definitely contributed to a very high employee engagement and loyalty and have also over the years made it easier for us to recruit the different types of skills that we need, not only in Copenhagen, but also elsewhere where we operate. And we constantly get very high scores on our internal employee surveys when we make them. So it was very natural for us in June when Invisio celebrated its 25th birthday that we invited all our employees for a gathering where apart from having a party and having fun, we also spent time talking about the new product line and having product trainings for everybody and many different important meetings took place. So definitely a strong culture driver for the company. In rounding up, I just want to mention the large order we received for intercoms, including third-party radios. We have delivered the majority of it in the quarter. For the radius, as we have communicated earlier, there was a service margin of less than 10%. For the Invisio Intercom part, there was a normal good gross margin. We expect another part of the delivery of about 10 million to be shipped in the second half of 2024. And then the remaining part will be shipped in 2025, probably in the third quarter, with a value of approximately 70 million, which will impact the gross margin by then. But this has been a great success for us, not only from an order intake and revenue point of view, but also being able to demonstrate to the customer and to our partners here that we can manage such a large order and shipment in a relatively short period of time. Finally, said it many times now, the market activity continues to be very high in our markets. There is a strong interest from both existing and new customers in our different types of solutions and systems for vehicles, but definitely also for our dismounted solutions. So in summary, we believe we are exceptionally well positioned and with the investments coming into the defense markets over the next 10 years or more, we are definitely ready to capitalize on the opportunities presented to us. So with that, I will end the presentation and open for questions, please.

If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Daniel Thorson from ABG Sundal Collier. Please go ahead.