Invisio AB (publ)

Thank you very much and welcome to our earnings update for the third quarter. This is one of the strongest quarters in Visio's history that we are reporting. Our order intake was in excess of 500 million Swedish kronor for the first time in a single quarter, if we exclude the exceptional order we had on third-party radios in the first quarter. And if we look at a 12-month rolling scale, our order intake is now pacing around 1.5 billion Swedish. Also, that is a record. And even our revenues were strong in the quarter, the strongest ever for a third quarter, where we traditionally have a little bit of impact from vacation periods around Europe. Our revenues amounted to 350 million. Other highlights was our OPEX and EBIT margin that remained stable and also that our order book is now very strong and we have a high capacity for speedy delivery of volume orders given our inventory levels. So all in all, we are still very well positioned to take advantage of the opportunities that we see in the dynamic market that we operate in so a few more details on the order intake our demand continues to be strong across our full product portfolio and also in our main geographical markets which are north america and europe it is very pleasing to see the continued success for the products sold under the regular acoustics brand, especially in the US, where we received a large order during the quarter. And as we have said many times before, we anticipate increases in military spending from twenty five and onwards. Very many countries within NATO are announcing and have announced increased spendings that we think will benefit our business as well. We can see that many customers are increasingly opting for solutions that are field proven and ready and that does not need any type of customization. The more than 15 years of, let's say, market experience that we have with our solutions is definitely giving us an advantage from a competitive point of view. Our order book, as I said, is high at a value of almost 870 million Swedish kronor. And we anticipate about 80% of that will be delivered within the coming 12 months. We have a high inventory of standard products to a value of around 300 million. and the strong order book we have together with the inventory level indicate significant future revenues. The inventory level is something we have built over time consistently and we think this is a major competitive advantage for us also in the given climate today both for customers in the US and in Europe that we have inventory levels close to the customers that we can deliver on short notice. Turning to revenue, revenues around 350 million, highest ever for a third quarter. And if we look in comparable currencies, it was 355 million. The revenue year to date was also seeing significant growth. We are at 1 billion, 212 million and a little more than 1 million if we exclude the radio order we received in Q1. So a good development there. And as I said, in the third quarter, we normally have a few weeks where there are some vacation period in Europe that sometimes impact our deliveries. But still, we managed to deliver more than 350 million. Our growth margins are still healthy, a little bit lower in this quarter, mainly because of product mix. We had a little left over regarding the radio systems in Q3, about 10 million with a very low gross margin. And there was also a little bit of product mix in the total here. But this is just the, I would say, normal fluctuations that we sometimes see in quarters, depending on product mix, where we still have certain products of older dates that have a little lower cross margin than the ones we have recently launched. So all good. When we look at our costs, our OPEX, it is a stable trend for the last five quarters. In the second quarter of this year, we had a few one-off costs related to a cyber incident in our company in the UK and also to ESG activities. But apart from that, the trend is stable. Our OPEX was around 145 million, so a little higher than last year. And the majority of the increase is related to people, more people in R&D and sales, which is in full accordance with our growth strategy. So far in 24, more than 40 new colleagues have joined Invisio. And 25% about this are female. And this is in alignment with our ambitions to try to achieve a more equal gender balance like many other tech companies, especially in defense related industries. There is less females than males. And we are trying to balance that over time with our new hirings. EBIT margin is above our target and has been so for the last seven quarters. This quarter we ended at 16.3% and the operating margin for year to date was 17.1%. And cash flow in the quarter was very strong, impacted by sales that we did in the last part of the second quarter and where payments were received in Q3. A bit unusually high, but again related to that we invoice in the late part of the quarter and that our customers pay on time in the following quarter. A few major activities during the quarter. largest US trade show of the year takes place in Washington DC in October every year and this year the attendance was record high more than 45 000 visitors and 750 exhibitors from more than 100 countries and as usual this is a great opportunity for us to showcase our wide portfolio of products, including the newer ones that we have recently launched, including the new Invisio X7 in-ear headset, which we believe over time will be a very important growth driver for Invisio and a great contributor to our order intake and revenues going forward. But also the new control unit that we call V60 ADP all your data and power which is designed to address the demand for digitalization is also a product that creates a lot of attention and interest and trade shows and in addition to that the I would say state-of-the-art and new product line we have across both regular acoustic product lines and individual products like we are well suited with our product line for 2025 and onwards. As you recall, one of the big opportunities for our Rakel branded products are in the U.S. And here during the quarter, we secured an order for 170 million Swedish kronor from the U.S. Department of Defense for two different Rakel headsets, the RA5001 Raptor and the 4000 Magna. which are intended for use in combat vehicles. And this order has come on the backbone of extensive product testing for a long time with the Department of Defense in the US. So we are very pleased that they have chosen our solutions and of course, hope and believe that this will lead to further orders over time. So in summary, It's a little bit boringly put business as usual. We are in an industry where significant investments are coming over the next 10 to 15 years. We expect market activity to remain very strong for many years. The market trends are definitely in our favor. with a significant need for modernization of communication and hearing protection solutions across all of our markets. And we believe that we are well positioned with our product portfolio and our customer base to capitalize on the opportunities presented in this very dynamic market. So this concludes the short summary of Invisio's Q3

report and we are now 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

Yes, hi, thank you very much Lars. I have a question on the order book here. You mentioned a number, I didn't hear that. Was it 80% of the order book is ready to be delivered within 12 months?

Yeah, that's approximate, yes, correct.

Excellent. Can you also elaborate a little bit how much of the order book is ready to be delivered in Q4 here? given that deliveries in Q3 were a bit lower than I expected at least and the audiobook is strong and inventory is up as you mentioned.

Yeah, so as you can see we have good inventory and we are well prepared so lots of the time is actually also more related to customer requirements and when they are ready to receive the goods and the products, pending training activities and what else they have. So I don't have a number in my head, but I would say a good part of the existing order book will be delivered in the fourth quarter. But we work very closely with customers and try to meet their requirements as close as we possibly can.

Yeah, understood. And then on the gross margin, the underlying adjusting for this radio order was just below 60%. Anything to be aware of? Just about mix or the new products you mentioned that typically have lower gross margins or anything else that we should keep in mind?

No, it's more related to older products that sometimes, as you might recall, also partly, sometimes we have a little bit of third-party sales. There's also when we required a regular acoustics at the starting point, the gross margin for regular products were somewhat lower than in Visio. We have brought that up now. to comparable levels, but there are still products in the portfolio from the past where the gross margin are a little bit lower, also sometimes because they have been sold through system integrators for that reason. But the new product lines we have launched recently all have very good gross margins.

Yeah, I see. So based on what we know as of today, a gross margin in 2025 just above 60% is still reasonable.

Definitely possible, yes.

I see. Okay, good. Then just a technical question here. Net financials, that was negative in the quarter here, despite your net cash position, and that has not been negative before. What was that, if you have the details?

Currency. That's because of currency.

Okay. Okay, I see. And then a final question on the competitors here. It seems to be a competitive advantage for you to have a short-term notice on deliveries. Do you see any signs in the market of competitors also being able to deliver with shorter-term notice than half a year ago or so? Or is that still an important edge?

No, I don't know details of all competitors, but I would think that this is a I don't know of anyone in our industry that has comparable inventory levels to what we have. I think that is a very strong advantage we have. And also from planning purposes, from a customer point of view, it is a great help that we are able to deliver within a reasonable short amount of time.

I see. Thank you very much.

You're welcome.

The next question comes from Jalma Ahlberg from Red Eye. Please go ahead.

Thanks. So a question on the order intake, which was very strong, I believe. You had the Rakel order, but can you give more flavor on what drove this? Any special orders or a large flow?

Yeah, I think the development we have seen over the last... Actually, after the COVID pandemic is that... The very large orders, like the 170 million for Rachel, is more irregular. It's more the exception now, whereas we get a lot of orders that are medium size, smaller size, 10 million, 20 million, 30 million in that ballpark. So I think this is a very good sign for us because it's a really broad customer base that we have. across all geographies, but also across all of our product lines. So even though it is maybe a little more cumbersome for the sales team than getting large orders, I still think it's strong for the company that we are not so depending on individual large orders, but we can actually, yeah, we really have a broad customer base now.

Got it. And you already partly answered it, but just to follow up on the leverage for Q4, would you say that kind of visibility is better than normal in terms of strong leverage in Q4?

Yeah, I mean, it is clear, of course, that we have a very... a strong order book and we have good inventory so unless customers decide that they don't want to work before christmas and only want to start working in january i think there's a good likelihood of a very interesting all right um and just short on opex i mean you told us that it is

Kind of trending as usual, hiring 40 people. Do you see the same kind of hiring need in 2025 or anything to consider looking forward?

Let's see. I think we take it a little bit step by step and it's very much forward. activity driven and also where we see the sales team being stretched too thin, then we do add a little more people there. And also on the R&D side, when we see that the support for certain projects or activities are a little thin, then we add a few people more. So it is very activity driven. So I think we take it a little bit quarter by quarter and follow what order intake and revenues we have and then follow up on the activity side.

All right and maybe just the final one Opex. I mean sometime you have had this kind of impact from bonuses when you deliver strong numbers and considering the deliveries this year. Have you set off all costs for that or could that be something that impacts in the short term?

I think so, depending on of course what happens in the last three months of the year, but it is of course something that we accrue for during the year.

Okay, thank you. You're welcome.

The next question comes from Tom Ginchard from Pareto. Please go ahead.

Thank you. A question on the geographical sales split. Can you remind us if there's any specific seasonality across the geographies or products that you're selling currently?

It's a little hard to say. I don't think there is that much. When we look at it from a end of year perspective, then the US has end of year in September, and sometimes there's a little bit of end of year money being spent in September in the US, but it's not to an extent where it makes a huge difference. And then, of course, as you know, most European countries have end of year in December, and then we have the UK where it's end of year in April from a military budget point of view. so it spread out a little bit so uh yeah so so there's not that much seasonality we sometimes as i say see a little bit of effect on the deliveries in q3 because of vacation period and so but other than that there's not a clear seasonality pattern all right thank you

The next question comes from Yiwei Zhu from SEB. Please go ahead.

Hi, Lars. Thank you for taking my questions. I have three. Firstly, looking at the US business, the revenue declined in a quarter. Do you see any reluctance among your customers' procurement during the election period?

No, not more than normal. I think what we have seen in the US for quite some time is that in October-November there has been disagreement between the two parties around coming year's budgets and then it has taken a bit of time to resolve that and that sometimes have a little bit of an impact, but normally there is what they refer to as a continuing resolution, which means that the military can still continue to spend at the same level as the previous year's budget. So it is more that they do not normally start a lot of new projects during this period of time until the new budget is approved, but they can still buy from something similar to the old budget.

Okay, great. Very clear. And secondly, regarding X7, could you indicate the reselling price and also the gross margin for this product?

The gross margin is definitely in line with our... For competitive reasons, I am not going to give you that number, but it's, of course, one of our flagship products where we, of course, also have a good gross margin. And selling price is... uh varies between uh configurations and volume but as a as a rule of thumb uh our headsets are in the price range between uh yeah 12 to 1400 euro okay uh great very clear and lastly uh you recently launched this wireless device for intercom

If you could maybe elaborate a bit more on what is sort of a new pattern or selling pattern on the vehicle product portfolio. I understand it was designed as sort of a portable solution, so now it seems that it's more or less just mounted on the vehicles. And with this new device, do you see sort of the increase or how much increase on the value per vehicle?

That's a good question. And you're absolutely right. When we launched the Intercom, we thought it would be a portable solution mainly. But we have found out that our customers have other ideas and they would actually like to have it in vehicles. And most of what we have sold so far of Intercom has been in vehicles. It doesn't mean that they have to drill and screw into any vehicle, but it can be mounted in a safe way inside a vehicle. And that's what many do. And then luckily, many of our customers are also very, very helpful and innovative. and they've come back and said to us that hey the product is great but it would be fantastic if we could also be allowed to move around the vehicle wirelessly and then talk back to to the intercom in the vehicle and that is a capability that we don't really have today in a in a in a smart and efficient manner so that's why we developed the link product and it's now in in testing with several customers and we expect it to be commercially ready somewhere in 2025 and I would say yes definitely it does add to the total value per vehicle if you can get the wireless part there as well it's a significant value add to each system but also a significant performance addition to the system

Is it possible to indicate a bit about the selling price range?

No, again, we would have to do that later, but for competitive reasons and others, we will not release any price. But it is a significant amount of business because you would be able to have up to eight to ten users And of course, those users would also have the Invisio headsets and control units and everything with it. So the average price per user will be significant. Great.

If I can ask one more question regarding your R&D spending. So is it possible to split your R&D spending to sort of upgrade on the existing product lines

and then a completely new device or new solution as this wireless device or the maintenance let's take that question with us and look into it i am i don't have that number at the top of my head but let's we will take that and see if it makes sense for us to and we are able to do it in a meaningful way

Okay, fair enough. Let's jump back to the queue.

Thank you.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. The next question comes from Jacob Marken from Danske Bank. Please go ahead.

Hello Lars, thank you for taking my question. Most questions already answered, but if I can maybe take a final one. If you could help us with this split on the order book, that would be very helpful. So, between Rachel and the rest of Invisio. Thank you.

Yeah, I mean, we don't normally disclose that because some of it is tied together where Invisio products are also sold together with Rakel products and Rakel headsets are sold together with Invisio Intercop. So for us it's not that important whether it's one or the other, but if I should just shoot from the hip, it is probably, I don't know, 60-40 in the favor of Invisio at this point in time, but of course it varies between quarters and And a large order like the one we received for Rakel products now could change that split in a coming quarter. But something like that, I would guess.

Perfect. Thank you.

You're welcome.

There are no more questions at this time. So I hand the conference back to the CEO, Lars Heugard Hansen, for any closing comments.

Thank you and thank you all for calling in and look forward to talking to you again in February when we have our fourth quarter and full year report ready. Thank you. Bye for now.