Invisio AB (publ)

welcome to india's presentation of the interim report january to september 2025. 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 pound key 5 on their telephone keypad now i will hand the conference over to the ceo lars hoygard hansen please go ahead

Thank you and welcome everyone. So the outcome of our third quarter 2025 is to a great degree already known since we published the key figures already some weeks ago. And therefore, I will focus on some of the operational and business highlights in the quarter. It has been a very busy quarter on all parameters. We have seen high levels of activities in all geographies and all customer areas, and we saw a result in terms of strong underlying intake of small and medium sized orders. And with the delivery delays that we announced some weeks ago, this means that the order that we have at the end of the quarter has been significantly strengthened. Even though we also still see some impact from tariffs in the U.S., we still maintain healthy margins. But the fact of the matter is that this quarter, from a financial point of view, of course, is disappointing since we have lower revenues than expected. And because of our business model, we also have manufacturing, our operation margin is But back to the operational highlights, because it has been very, very busy, and three things that stand out. First of all, the 10-year frame over agreement that we had with the U.S. Coast Guard with a value of up to 99 million U.S. dollars, or 900 million U.S. dollars. After the quarter, we also entered into a five-year framework agreement with the Netherlands, MOD, which is a defense, with an option for another two years. Apart from that, the quarter saw a massive amount of product losses from an issue in connection with the trade show GCI in London. It is probably the largest number of new products we have in the world, so I'll get back to that as well. Looking a little bit at the numbers. As I said, good underlying order intake, around 500 million almost, and on the rolling per month, we are at 1.7 billion through this corner. So continue to be good spread across our different product categories and our different user types and the other fields. So good mix across the board. And it means that we leave the quarter with an OAS of 3900 million. And as usual, the majority of the OAS are expected to be delivered in the next two quarters, June 4th, 2025, and June 26th. So, as we have already said, our revenues were impacted by delivery delays, and there were several reasons for that. One of them being that sometimes our hearing protection solutions are delivered together with the communications radio or together with a certain vehicle and so on. And if that communication radio has a different delivery time from when we wish they can deliver, then we are sometimes asked to postpone our deliveries so that we can receive system including communications radio in one go. Another reason which is becoming more relevant is the fact that over the last three or four years, the issue has developed greatly. A few years ago, our core product solutions was a hearing protection headset with a control and a few cables, meaning four or five products or order lines per user. Now, one of our advanced systems, for instance, Intercom Wireless Link, can count up to almost 100 order lines. So there are so many different parts of the delivery. And this also means that if the customer is requesting a little bit of a change to one of these 100 parts, or if there is a a slight deviation from any of our suppliers in one of these 100 pieces, then there will be a slight delay. Normally, it would be spread out over the year, but just in this case, we had a little curfew storm where several things happened at the same time. So, but all in all, as we always say, you have to look at an issue on a row of 12 agents and not on individual quarters because of the usual fluctuations. Our loss margin was still solid in Q3. We did see some tariff costs still impacting our loss margin about 4 million Swedish kroner. We also see some impact from But we think, again, if we look over a longer period of time, the last four quarters, we are close to 60% gross margin in average, excluding the third-party major deliveries. And as we have said several times, we think that our product portfolio with many new products coming into the mix will continue to support a strong cross-market for the company. Our long-term OPEX trend has been steadily growing and also now in Q3. Although at a little slow pace, our headcount is up 16% this year and as I think you all know by now, this is driven heavily by investments in new products and also in our sales team. We have in the last 12, 18 months announced a wide range of new products and additions to our sales team to be able to handle the customer contacts and sales of many of these new products. And most of these new products have not really come into the market yet, so we expect the starting point to be 2026 for a lot of these new products. So on the marketing side, yes, very clearly we have a business model with outsourced manufacturing where when revenues are lower, it hits our margins, our operating margins directly. So we ended up with a minus 1% in the quarter looking for lower revenues. Still on a rolling 12, we are at 17% margin at the end of the quarter. Inventory has been a competitive advantage for a very long time and still is, albeit in this quarter we were not able to compensate with our inventory for some of the delivery delays. is going to be a significant competitive advantage and it is a decision for us to continue to do this because it is a stand-up product and there will be many situations where customers are asking for reviews with a very short notice. cash flow operating activities, 105 against 152 comparable, and that decreases primarily due to the results during the quarter, so not much to comment on that. Now, into the more fun part, our daily operations. The 10-year contract that we have secured with the U.S. Coast Guard, the largest agreement to date and a really comprehensive milestone. This is something we've been working on for almost three years throughout the company and a very, very team and focused effort to be able to achieve this. It is a contract that is related to our intercom system, combined with our new Link wireless solution and headsets, controllers and intelligent cables. And what the customers have told us is that they intend to install it on the last number of what they call models, where as public information is available, they have several thousand The agreement is worth up to $930 million over 10 years and we already have received the first small order from last year's project that they will be delivering to them in the end of 2025. being asked to equip the U.S. Coast Guards with this very, very advanced communication solutions. But it's also an entry point for us into a new type of users that we haven't been able to address much earlier. So we believe that this Coast Guard entry will open doors for us with Coast Guards globally and not only in the U.S. It will also open doors into our military and marine applications where our wide-league intercom system is going to be very relevant. So this is the starting point of a new application area that we see as extremely interesting all time for the region. Next, the framework agreement with the Dutch Ministry of Defense. Now, this is a contract that is for five years and includes the majority of our initial products, including headsets, control units, and magnetic cables. It's, according to the customer, worth up to 365 million Swedish kroner, five years, with an option for two one-year extensions. We do expect the first orders to be received already before the end of 2025. And if this follows the pattern for many other contracts that we've seen over the years, it will be a very long-term relationship with the Dutch MLE, and we look very much forward to rolling out this program and responding to the communications needs that they have. Then over to some of our product announcement launches. First of all, the T30, we have already spent quite some communication time on this in terms of press releases and all this. But until then, this is one of the most important product releases in the history of Invisio because it is our first home internally developed standalone over-ear headset. We have over-ear headsets before, like the T7, but that has more been especially the application headsets towards nighttime environments on the walls and so forth. sort of conclusion of everything we learned in the last 15 years. So this is really a standard state-of-the-art communications headset that are very versatile and can be used in many different situations, including those that are not equipped yet with their own communication. Radio. We are at the final stages of ramping up in manufacturing, so we expect that will be able to contribute to our significantly already in 2026. At the same time, the technology we acquired earlier this year from is now turned into the Invisio H series data hubs, and this is a very exciting area where we are able to connect many different devices that were not originally developed and intended for being connected. Through our data hub, we are able to do that. We are able to transport all the data and power throughout the entire system. This was one of our most busy areas at a recent BSI trade show in London. So we believe we have a real winning solution here, and we believe that the Indisio H series will act as a catalyst for development of future innovative and cutting edge products in the Indisio platform over time. So we also expect this to contribute to our business Turning to the Invisio Link Wireless addition to our intercom, as I said, this is what the Coast Guard has chosen, and this is definitely a solid product portfolio addition that will be a cornerstone for future growth, and it also attracted a lot of attention This is a product that is already ready and shipping to customers, so this is something that will contribute to already in 2025 and onwards. So, just an update on our shareholder structure where our largest shareholder, Manila Demon Foundation, have increased their shareholding just after the quarter, with 2%. But other than that, a very solid and strong base of shareholders, both in Scandinavia, Europe and the US, that has been supporting the Invisio case and group for a very long time. In summary, as we have said now many quarters in a row, We expect market activity to remain high for several years to come. There is so much going on, especially in Europe, but also in the U.S. Modernization needs to continue. We all hear every day in the news how this is urgent and how we need to speed up. The prices are getting increased, and even though we are a little later in the year, We can see that there is a high interest for all types of products and we are sure that we will be part of this ramp up shortly. From this decision, we now look forward to capitalizing on opportunities that we see in the market and do a very strong product portfolio, the best ever, with some new large frame order contracts in the back. We are very much looking forward to full quarter and into 2026. So this was the short summary of the quarter. I would just mention also, I'm sure there will be questions around the shutdown in the U.S. And yes, a short time has a little bit impact on us right now in October, but we cannot expect this to have any significant impact on us in EG4 going forward unless the situation escalates or gets really, really lengthy. But so far, no real impact at all. Thank you for now and I am open for questions please.

If you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question please dial pound key 6 on your telephone keypad The next question comes from Adrian Almland from Nordea. Please go ahead.

Hi, guys. Hi, Lars and Thomas, and good afternoon. I just want to say that I think there might be some technical issues with your mic, Lars. I have at least had some hard time hearing, unfortunately, but I'll shoot my questions anyhow and hope that you haven't answered them already. But first off, Could you quantify in any way the magnitude of the order that was pushed from Q3? What sales would have been if these orders were delivered in time?

Hi, Adrian. I'm really sorry about the speech quality. Can you hear me okay now?

Yeah, it sounds better now. Thanks.

Okay. So, well, we have not really quantified that because... It is in a sizable, let's say, we are talking more than 100 million at least that were moved, but I don't have the exact number because there have been dreams we were able to move forward as well to compensate a little bit. So it has been a little bit back and forth, but at least 100 million.

Okay, and also another question here, I guess. Could you give any sort of comment into sort of the current trading at the Q4? I think that you mentioned that at least the majority of this order should be delivered in Q4, right? And we also have seen the underlying order intake here in Q3 was really strong. I suppose that that will continue, and I think that you previously this year said that you expect kind of a stronger end to the year. Does that still hold?

Yeah, I think so. If nothing else happens, yes. I think, as usual, the order book that we hold, we should be able to invoice the majority of that in Q4 and Q1. So I think I can stick my neck out and say that Q4 will definitely be better than Q3.

Okay, perfect. Thanks. Kind of a question here regarding the supply chain risk. Do you think it is fair to say that it is systematically higher now following the huge influx in volumes in the entire sector in the last couple of years? Or is this just normal cost of business that you have to deal with being in the defense sector?

I think for us it is more the consequence of the complexity of having so many more product lines in one system, but we don't have any manufacturing issues. We don't have any component issues, and we still have a large inventory, so it's more matching the exact inventory to the customer orders, and then also just the timing of making sure that all products in one system are delivered at the same time. So it's more the complexity of timing. At the same time, we are also, of course, constantly updating and reviewing our supplier setup to make sure that our capacity is adequate for the business that we see going forward. So I see this more as being a short-term thing.

Okay, perfect, but it kind of sounds to me at least that we should expect, you know, I guess a higher risk going ahead, or is there anything you could do to kind of mitigate this risk going forward?

Yeah, there is, and I think part of it is also because we have been balancing deliveries together with making all of our new products ready for deliveries and sales. It always takes longer when you are in the ramp-up phase of a new product line rather than just manufacturing what you already have running. So it is a little bit of a perfect storm that also includes the many new products that we are making ready for shipment.

Okay, perfect. Thanks for answering my questions. I'll get back into the queue.

Thank you.

The next question comes from Jacob Marken from Danske Bank. Please go ahead.

Yes, hello, guys. Same as the previous speaker, I had some issues hearing you during the conf call, so I'm sorry if I ask any questions that you've already mentioned. No problem.

I apologize for that.

So first of all, I was wondering if you can say any comments on the geographical sales split. I mean, it's the lowest sales to U.S. in a very long time. Is it fair to assume that a lot of the push deliveries was related to U.S., or is there anything else happening there?

No, some of it is definitely related to the U.S., but also to Europe. So it is a combination. But there was delays in both geographies. But from an order intake point of view, I think we have seen good order intake from both North America and from Europe.

Okay, thank you. And then I had sort of a question on the H series, which you talked briefly about. You said before that you expected, you know, significant impact also from that in 2026. Is that something that still holds? And how is the sort of... Yes, absolutely.

I would say that the interest has been very, very high for the data hubs. It was one of the stars of the show in London and we are in talks with several customers and several programs about the hubs. So whether the orders will be in early 26 or in the later half, I don't know, but there's definitely real business potential.

Okay. Perfect. Thank you. And the last question was just on order intake size. Of course, a very strong quarter on small and medium-sized orders. I think you said, if I heard you correctly, that you've been working on the U.S. Coast Guard order for three years now. I'm just wondering how many or if you could say anything about the amount of discussions in that magnitude in the U.S. Coast Guard or the Netherlands order or the framework. How many of those kind of discussions are you in currently?

Well, there are several. I don't want to put a number on it for competitive reasons, but there's definitely an interesting number of similar, maybe not similar to the , but at least similar to the and others where we are in constant talks and preparation. So, yes.

Thank you. Thank you.

The next question comes from Daniel Thorson from ABG Sundal Collier. Please go ahead.

Yes, hi, Lars. Two questions from me, please. First one, gross margin 57%, a bit below ambition, but also expectation. So can you share any picture on the gross margin profile of the order book? Would be highly appreciated. And then secondly, do you see any hiring risks in the sector, given that basically all competitors and players in the market are trying to grow significantly right now? Do you see any strong salary inflation to keep employees or hire new ones?

Thanks, Daniel. And first, on your last one about hiring, you know, I think given the fact that we are where we are geographically are not really under pressure from competitors. So I think we have not seen any issues with hirings and we have not seen any high pressure on salaries or anything yet. So we're in good shape and I think we have several So I think they have a good mix of tools to be able to retain our people, plus the fact that according to our surveys, People actually like to work here. I've stayed here for a long time, so it happens in a big issue. Regarding the gross market, well, yes, I can't really share the profile of the economy, but I can say that in this quarter, there was probably a couple of percent impact from currency and from the tariffs. So without that, we would have been close to 60.

Okay, that's helpful. Thank you very much.

You're welcome.

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

Hi. Thank you, Lars, for taking my question. Also two from my side. Firstly, Lars, if I recall correctly, You had, like, almost nine large contracts won in 2019, and most of them have, like, five years term. Now we are almost finishing 2025. Could you give an update on those contracts? Is there, like, any re-tendering coming up or ongoing, or you have at least tended them?

Without having gone through them one by one, I would say the majority of them has just been prolonged, which they are able to do. So the past has just continued and prolonged the contracts even longer. So I would say just from my gut feeling is that they are all still in force.

Any of them are put out for re-entry, if you can confirm.

Not at this point in time. We have had one which was the Swedish police, but we got that as well. Again, so I can't recall any one of those that has been put up for retail, no. Okay, cool. Thank you.

And next question on EBIT margin. You just raised the long-term target 20% flow. And when I'm looking at the first nine months and you have to deliver a extremely good quarter in Q4 to meet the 20% economic target this year, should we assume that this year you will not be able to meet that target?

I don't know. That will depend, of course, on what happens in June 4. But I would say, as we say, when we look at the last four quarters rolling, then we are 17.9. So we are close. And I think when we decided to increase from 15 to 20, it is because we have been above 15 rolling for a long time. and therefore it would make sense to raise the bar to 20. That doesn't mean that we need to 20 all the time because then the target is too low. So I think the target is still something we have to work for to meet, but Q4 will tell whether we do it in the calendar year. Again, for the rolling 12, we are 17.9. So close. Okay, fair enough.

Yeah. Okay, fair enough. Thank you, Lars. I'll jump back to the queue.

Thank you. Thanks.

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

Thank you. Two questions from my side. First of all, the sort of split on the gross margin here going into Q4, we have more FX headwinds. Should we expect... continued dilution on the gross margin for the coming quarter driven by FX, or can you compensate with a positive mix here in the delivery schedules?

that would be my expectation that we can compensate with the product mix. Without having all the details at hand, I would say yes, unless the FX headwinds start to return really, really bad, then I would say yes, we can compensate.

Perfect. And just to sort of follow up on that on the tariffs here, 4 million Swedish for the quarter, Any changes to that in relation to volumes moving forward? I mean, of course, depending on who you're selling to, but if we look at the U.S. isolated.

No, I think most of the sales we have to the U.S. is actually related to contracts where it is duty-free entry. And that also goes for the new contract with the COVID-19. So I would still think that the majority of our revenues from the U.S. will be without tariffs. Tariffs are hitting us now when we are selling to public safety, police, law enforcement, firefighting, and selling to individuals from our warehouse in Atlanta. And prior to the tariff discussion, we decided to move quite a bit of inventory over to the U.S. to try to compensate some of it. I would say the majority of our sales in the U.S. will be duty-free.

Perfect. Thanks. And just a final one on the two new frame agreements. Do you have any gut feeling on the timing of deliveries here?

Yeah, I think regarding the Dutch MOD, it will probably happen within the, I think the majority of the deliveries and the orders will come in the first half of the five-year agreement. That's what we often see at least. When it comes to the Coast Guard, we are a little bit more new to this area. We think they have a huge need. They've been asking for this type of solution for many years, so they're really happy that they now have it. We also know that there is a logistical thing into this because you need to get votes into how you need to install certain things and get people trained and so on. So it's a little longer process of making training and installations. So we'll have to see, but I'm sure that The need is very high among the Coast Guard folks, and we are quite sure that they will be spending a large amount of money relatively early into the 10-year period.

So you would assume 27 should see larger volumes from the Coast Guard order then, taking a year to implement?

And 26 as well. I would hope 26 would also show good orders, because once the Once the lockdown is over, the shutdown is over, they should be going back to normal 26 projects. As you know, they started in October, the new projects in the US. So we should start seeing all of us already coming into 26, is my guess.

Okay, perfect. Thanks a lot.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Jaume Ahlberg from Red Eye. Please go ahead.

Hi. A few questions for me. Maybe first on the U.S. Coast Guard framework there. I think you mentioned that you had something like 16 competitors, if I understood correctly. If that's competitors have met before or it seems like a lot of competition for that order. Can you talk a bit about that?

Yeah. This was information that came from U.S. Postcard when they also was part of forming the press release and we are actually not totally involved or informed about who all these companies were. I would expect that some of them might have been hopeful uh small uh startups or similar that was trying to see if they could get a foot in the door because i'm not really sure i can come to 16 competitors who no matter what i do so no i'm not really entirely sure who they are they got it um and i think i mean you kind of asked this kind of question before but looking at framework agreements going forward

This was your new record size here. Do you see more of this kind of large long-term framework again in common? So it's in a trend in longer term, a larger contract in your sales pipeline, I would say.

They are definitely present, but I wouldn't call it a change. I would think, in general, the order sizes, when we talk about small and medium, these are the ones we would call large orders five years ago. The fact that we are now selling a much larger, broader system, the average price for an intercom system with accessories is so much higher than what we need to sell for a solar system. So I think in general, there will be larger order sizes even for what we call a medium size. But Coastal size framework agreements, there are more, but there are not that many of that size.

Got it. And as you highlighted, you have several new products that seems to get a lot of interest. I mean, if you look at the market uh the potential for growth from here i mean you do see high market activity you have this new product portfolio with more products what do you think is most important for for achieving your growth target of next five years is the new products more important than market growth or if you can elaborate on that a bit

I think as always we have been driving market growth ourselves with our ever increasing product portfolio and I think the product portfolio we have now will to a large degree drive our growth but it will also open up the market even further because as I said with for instance, with the solution for the Coast Guard, this is something that no one has had before. And there will be many customers around the globe that will be looking at this and say, hey, this is a totally new... In the past, we used to have cables lying around in the bottom of the boat. Now we can have a wireless solution moving around freely and we can hear everything and talk with it. It's very witty and noisy. And so it's a totally new capability that we haven't had before. So I think to a large degree, we are driving the growth with our continuous development, our new product.

Thanks. And maybe a final question. I mean, you do say high market activity. Can you also give up the kind of defense budgets? I think you said earlier that you hope to see some clear indication that these are affecting the demand. Do you see anything there yet?

I would say the framework agreement we got in the Netherlands is definitely a response to that. So it's a different kind of a ramp up in the Netherlands that now everyone needs to have a very good communications and human protection solutions both on the ground and in vehicles. So absolutely, that's the first result of that.

Right. Thank you very much.

Thank you.

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

Yeah, thank you all for listening in. I apologize if the sound quality of the microphone has been poor. We will definitely make sure that this is corrected before next time when we speak in February when we have our annual Q4 report. Thank you.