Invisio AB (publ)

Thank you and good morning everybody. Welcome to our conference call and for the Q2 report we have chosen the headline high levels of market activity continues. That is definitely what we see and which is also to some extent reflected in our reporting. So our financial highlights for the quarter is Revenues around 430 million SEK, order intake around 400, operating margin 14%, and the order book at the end of the quarter, 705. A couple of things have impacted us during this quarter. We had a little delivery of remaining third-party radio sales from last year with a low gross margin. We have also been impacted by the strong Swedish krona towards both dollar and British pound. And we have also had a little impact by the US tariffs. We'll get back to all of those in due order. The operational highlights during the quarter is first of all a significant order from a new large customer entailing our world leading new X7 India communication solutions. We have also this morning updated our financial target regarding the Avis margin. And as we have said several times, we see strong opportunities for Invisio due to the increases in defense investments that are ongoing and will be accelerating in Europe and within NATO over the coming years. So if we start with the revenues, our revenues are close to 430 million in the quarter. And of that, there was a small portion close to 30 million remaining of the radio order we got last year. So if we exclude that, the revenues was around 400. a little higher than last year, but then we had the currency effect mainly due to dollar and pound, as I said, and in comparable currencies, our revenue would be 450 million as compared to 390 last year, including the radio order. So we are quite content with that. On the order intake side, we saw an uplift from 245 last year to 401 in Q2 this year. And that takes the rolling 12 order intake to about 1.7 billion. This is led still by a good continued inflow of small and mid-sized orders and then one large order on top. I think this again illustrates the seasonality we have between quarters in our industry but on and on we are quite satisfied with the 400 million in the second quarter. The order book, turning to that, most of the order book as usual will be delivered within six months and this means that the Current order book of about 705 million is due to be delivered in the second half of 2025. We have a little bit remaining of the third party radio order. That's about 38 million still remaining where deliveries still are not confirmed. So by that we have about 670 million to be delivered in the second half of the existing order book. So gross margin is also impacted by a few things. Again, the third party radio deliveries were with low gross margin, just over 10%. So that impacted our gross margin somewhat. If we exclude that, the gross margin was close to 60 as compared to 63. Then we have the currency effect and then we also have about 4 million Swedish kronor in tariffs that is pulling the gross margin downwards in this quarter. Then there's the usual product mix sometimes. But in general, we are a very Pleased with this, we can see a good stable gross margin on our key products and also expect that to continue. We have a product portfolio that is almost now exclusively consisting of newly developed products and that will continue to support a strong gross margin going But as usual, fluctuations will occur between quarters. On the operating expenses, we are following our trend. Here again, there's a few smaller fluctuations between quarters related to hirings. Mainly, we have grown our headcount about 15% in the last four quarters. Some of that related to the acquisition of Ultralinks in the first quarter, but others also related to our expansions according to plan in primarily R&D and in sales. And we have a very impressive list of new products that have been introduced to the market within the last 12 months. like our V60 Generation 2 audio, data and power control unit, our new world-leading X7 In-Ear headset, the Invisio Link control intercom system app, our intercom switch, intercom loudspeaker, of ultra links and so forth and then many many smaller product variations and customer specific cables etc that are not included on this list so the development is level is really really high and we of course expect to get a good payback from this over the coming years Operating margins a bit lower than last year, mainly explained by the lower gross margin and a little higher operating expenses. But if we look at the rolling 12, we are at 19.9% at the end of the quarter, just shy of our new target of 20% EBIT margin over time. So just turning to that, we have had our existing financial targets for 10 years, and we have been reviewing them continuously, of course, with our board of directors. And now the financial target for the operating margin has been updated so that it is to achieve an average annual operating margin of at least 20% over time. the other financial targets remain unchanged. And this change on the EBIT margin reflects how we have been performing over the last years, but also our expectations to an increasingly active market environment where we think the future sales will grow at a faster rate than the total cost base. This is an evolution for the company. As always, our industry, our company performance should be evaluated over an extended timeframe as we see significant volatility between courses. I guess you are all very familiar with that by now. Inventories, inventory value a little higher than last year and now around 300 million. so this is a result of first of all expected deliveries with short time frames in the second half of the year we also did move a little bit of inventory to our facility in the us prior to tariffs being put in place but this is mainly for deliveries in the second half of the year. And inventory, again, is also almost predominantly standard products plus some key components. And we think this gives us a significant competitive advantage in the market environment that we have, where speedy deliveries is very appreciated. Cash flow, not too much to say around that. There's a couple of things impacting us more from an IFRS perspective. We have a new office in Lund, which I'll come back to. You can find the details in the cash flow statement. So operation wise during the quarter, we had a significant order from a new European customer that includes control units, cables and our new Invisio X7 in-ear headset solution, which is a new standard for comfort, weight and situational awareness and of course, hearing protection level where No other headset in the market can match the hearing protection levels that we provide with the X7. And this new European customer is of significant size, and we would expect further orders also to come from this customer over time. Deliveries of this first order will happen during 2020. and it's of course very important for us now to have statements with our new in-year solution and as always new products takes a bit of time to get established in the market but we've seen really good traction with the X7 headset so far and we expect this to be one of our front runners in the years to come. We have also expanded the capability of our intercom system with the new wireless link, Invisio Link, that we talked about also in the Q1 update. So our next upcoming trade show of a major size is in London in September, the DSCI, where the Invisio Intercom with Link and the rest of our product portfolio will be displayed in a updated marketing setup and an updated booth and we were very excited to be present there and talk to many of our European customers. So we have also added an intercom switch and a loudspeaker to the intercom family of products to give even more capability and functionality within vehicles. So as you are all aware, there are very strong increases in defense investments in Europe happening over the coming years. NATO have now agreed to the 5% GDP target of which 3.5% will be invested into equipment and capabilities. And as I said several times before, we of course expect this to be a driver and a business opportunity for Invisio for many years to come, along with the European Defence Readiness 2030 initiative, which will also mean high focus on defence investments in the European Union. So all of these are underlying strong drivers for our market. And as we haven't yet seen the impact of this, we have said also many times before, we expect this to happen from the later part of 2025 and onwards. Now, the tariff discussion and negotiations are ongoing. We do not have any more information than anyone else about where that will land. We have had a negative impact of about 4 million SEK in the first six months of the year. Historically, defense equipment has either been tariff exempt or having very low taxes. We don't know where this will end yet as negotiations are ongoing between the EU and the US. We are preparing ourselves for different scenarios. We have done that for quite a while and that includes also manufacturing in the US as well as other initiatives, depending on where these negotiations will land. We acquired Rachel Acoustics four years ago, and we have now fully integrated the operations of Rachel into Invisio. So we are one company with two brands. We are a modern high tech company in the defense industry. And in line with that, we are now operating our facilities and also preparing for growth in the UK. We will be relocating our UK office to a new, more modern facility in Broxley, just outside London. And this will happen in the second half of September. So in summary, we are pleased with Q2. It is in line with our own plans and expectations. We think we have reported good revenues and order intake. We saw a new large order from a new customer with future potential. But it is the long-term perspective that we always take. We continue to invest into the product portfolio and into the organization as we have done in recent years. And by that, preparing ourselves for the strong market activity leading into large upcoming spendings and giving us a solid platform for continued growth. So we are forward to the second half of 2025, where we will continue to strengthen Invisio and hopefully see a very strong set of results when we talk later in the year. So that will end my presentation 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 Jacob Marken from Danske Bank. Please go ahead.

Yes, hello, guys. So just a couple of questions from my side. Firstly, maybe on order intake, you ended last year with underlying order intake that was very strong in both Q3 and Q4. And then you could say that it's been a little weaker here in Q1 and Q2 this year. I'm just wondering if you can give us any more color on that, if there's anything particular you've seen or if it was anything particularly strong in H2 or how we should think about that going forward?