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 Vizu'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. If we look at a 12-month rolling scale, our order intake is now pacing around 1.5 billion Swedish kronor, also that is a record. 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 were our OPEX and 8-bit margin that remained stable. Also, our order book is now very strong and we have a high capacity for speedy delivery of volume orders given our inventory levels. 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 Rekyl 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 2025 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 customisation. 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 ,000,000 and a little more than ,000,000 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 of occasion period in Europe that sometimes impact our deliveries. Still, we managed to deliver more than 350 million. Our gross margins are still healthy, a little bit lower in this quarter mainly because of product mix. We had a little leftover 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 gross 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 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. The majority of the increase is related to people, more people in R&D and sales, which is in full accordance with our gross strategy. So far in 24, more than 40 new colleagues have joined in MISIO and 25% of them 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 defence-related industries, there is less females than males. We are trying to balance that over time with our new hirings. 8Bit 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 -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. So, yeah, 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. Our 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, audio 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 Invisio product line. We are well suited with our product line for 2025 and onwards. As you recall, one of the big opportunities for our Rekyl branded products are in the US. And here, during the course, we secured an order for 170 million Swedish kronor from the US Department of Defense for two different Rekyl headsets, the RA5001 Raptor and the 4000 Magne, 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 INVICIUS 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 Thorsen from ABG Sundial 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 order book 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. Yeah, 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 the 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.

Yeah, 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. Then 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 think we are not in a position to do that. I don't know details of all competitors, but I would think that this is... 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 Jaume Ahlberg from Redeye. Please go ahead.

Thanks. So a question on the order intake, which was very strong, I believe. You had the Rekal order, but can you give a more flavour on what drove this? Any special orders or a large flow of... 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 Rekal, is more irregular, it's more the exception now, whereas we get a lot of orders that are medium-sized, smaller-sized, 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 we have to follow up on the deliveries for Q4. Would you say that visibility is better than normal in terms of strong deliveries in Q4?

Yeah, I mean, it is clear, of course, that we have a very 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 report.

All right. And just shortly on OPEX, I mean, you told us that it is kind of trending as usual, hiring 40 people. What kind of... I mean, 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 is very much activity-driven and also where we see the sales team being stretched too thin, then we do add a little people, 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, sometimes 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 in the year.

Okay. Thank you. Welcome.

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

Thank you. Just 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 an -of-year perspective, then the US has -of-year in September. And sometimes there's a little bit of -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 -of-year in December. And then we have the UK where it's -of-year in April from a military point of view. So it's spread out a little bit. So, yeah, 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 the vacation period and so on. 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 decline 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 has 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 resale 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 is of course one of our flagship products where we of course also have a good gross margin. And selling prices varies between configurations and volume. But as a rule of thumb, our headsets are in the price range between 12 to 1400 euros.

Okay, great. Very clear. And lastly, you recently launched this wireless device for Intercom. If you could maybe elaborate a bit more on what is a new selling pattern on the vehicle product portfolio. I understand it was designed as a portable solution. Now it seems that it is more or less mounted on the vehicles. And with this new device, do you see the increase or how much increase on the value per vehicle?

Yeah, that is a good question. And you are absolutely right. When we launched 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 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 the Intercom in the vehicle. And that is a capability that we don't really have today in a smart and efficient manner. So that's why we developed the LINK product. And it's now 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, for competitive reasons and other. 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 10 users. And of course, those users would also have the in-visual 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. Is it possible to split your R&D spending to 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 don't have that number at the top of my head, but we will take that and see if it makes sense for us and we are able to do it in a meaningful way.

Okay, fair enough. Next, I'll 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 Reikl 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 Reikl products and Reikl headsets are sold together with Invisio intercoms. 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 a large order like the one we received for Reikl products now could change that split in a coming quarter. But something like that, I would guess.

Yeah, perfect. Thank you.

You're welcome.

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

Thank you and thank you all for calling in. And I 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.