Ovzon AB (publ)

Hello and welcome to today's webcast with OBSON, where CEO Per Norén and CFO Victor Bremer will present a report for the third quarter of 2024. After the presentation, there will be a Q&A. So if you're calling in and want to ask a question, press star nine to raise your hand and then star six to unmute yourself when you're handed the word. You can also send in questions via the form to the right. And with that said, I hand over the word to you guys.

Thank you, Ludvig. Good morning, good afternoon and warmly welcome. And thank you for joining us today on OBSON's earnings call for the third quarter of 2024. I'm here today with our CFO, Victor Bremer. Thank you. You're welcome. The first nine months and especially the third quarter of 24 has been very busy and exciting for OBSON. As you all know, hopefully, we successfully launched the OBSON 3 satellite in January earlier this year. And since July, it's in commercial service with signed contracts with some of our core customers. And we are in intriguing sales pursuits and commercial dialogues with current and potential customers. We will for sure get into more details in a few minutes. But before that, as always, let me provide a short introduction to OPSOM. Next slide, please. Good. Ofsun is a leading provider of the most advanced, integrated, unique satellite communication solutions. We're spearheading the progressive development of the most sophisticated and resilient SATCOM solutions in the world. We continue to be fully dedicated to our vision, connecting the world's critical missions via satellite, and what we see as our greater calling of connect and protect. meaning connect and protect nations alliances organizations people and the environment the company was established in sweden in 2006 and is traded on nasdaq stockholm today awesome provides unique satcom solutions with unparalleled levels of connected mobile and resilient performance we work very closely with customers partners and end users currently across the united states sweden europe and south america We have invested over 2 billion Swedish kronor in a new revolutionising technology platform during the past years, resulting in a cutting edge solution we call OPSON 3. Next slide, please. To put everything in context, satellite communications have been available for decades, but in recent years, the demand for and the investments in technology advancements to progress satellite communications have accelerated considerably. There are several structured drivers behind that. First of all, the concerning geopolitical tension in the world continues to escalate. Nations, alliances and organizations are therefore accelerating their development and investment in total defense, natural security and public safety. Countries with little to no satellite infrastructure are now shaping plans for more sovereignty and dependent independence. In case of conflicts or natural disasters, guaranteed communication with undisturbed and continued uptime is crucial on land, at sea or in the air. Secondly, Secure and resilient communication is becoming a very important requirement in all parts of society, especially for our target markets and customers. Cyber violence is becoming more advanced and progressively developed and strongly protected systems is a must. When land and mobile based communication are down, satellite communications is essential and will provide secure communication across the networks. The third driver is simply digitization. Our lives and all types of organizations are today powered by improved digital processes and quick access to data and information is expected. Satellite communications is therefore becoming an integral part of the integrated communication infrastructure globally. And finally, climate change. most recently we saw the terrible situation and pictures from valencia in spain a couple of weeks ago the same in florida and southern parts of the united states with the change in weather patterns and increased flooding storms and wildfires satellite communications is in most cases the only answer to quickly execute fast and agile rescue missions and saving lives next slide please What's unique about OPSON is that we deliver a solution where we manage and control the entire value chain. With OPSON 3 now in operational service, we manage the most advanced communication satellite in space, also as a satellite operator, controlling our own capabilities and capacity. We complement that with least capacity when and if and where needed, a very powerful and strong position for OPSON. This picture shows that we deliver SATCOM solutions with immediate connectivity from one, left to right here, the smallest, lightest and most high performing mobile satellite terminals to two, managing high performing and agile and steerable satellite networks. Three, we partner with a selected few secure gateways providers where we implement our own hardware and secure racks to manage and control our service delivery. And last but not least, we manage all of that through our dedicated 24-7 support from our network operation centers globally. Our customers require continuous communication and expect 100% uptime and performance. Only Ovsum can guarantee resilient connectivity in contested environments. It is positioning us as the premier solutions provider. Next slide, please. Here's a graphical description of our positioning and the way to read this is mobility on the X axis. Performance meaning data speed and throughput on the Y axis and integrated and built in is the ability to deliver continuous and resilient communications. These three components performance, mobility and resiliency are what set different services and service providers apart. Our next generation platform on the Office on 3 satellite has moved us even more up to the right in this picture, enabling us to add even more value as a niche solution provider for critical missions. The Office on 3 platform is lifting the customer experience to totally new levels. Next slide, please. Now, that's OVSON in a nutshell. Let's go to the accomplishments of the quarter. But I want to highlight a few personal reflections on the quarterly report, as I'm especially pleased with three things. One, the increased EBITDA result. It's now on positive levels. Very, very important and pleasing to see. Two, the revenue growth for the quarter. And last but not least, the migration of the first customers to OVSAN 3, which sets us in a very, very good position for continued growth and expansion. Okay, I'll walk you through some of the most relevant accomplishments in more detail on the following slide. As I mentioned earlier, OVSAN 3 was launched in January this year. In June, the satellite arrived at its designated position in space, its orbital slot, And on July 5th, the satellite entered into commercial service. For those that are not familiar with our industry, this is quite an achievement by our company. In August, we announced our first large order on OPSON 3 from our long-term customer, the United States Department of Defense. And a couple of weeks later, we also received an order of additional OPSON T7 terminals from the same customer. In August, we signed an initial limited but still important order from the Swedish Space Corporation for use of OPSON 3 for specific mission. In September, we received a 12-month renewal for OPSON Satcom as a service from Swedish Space Corporation at 115 million Swedish kronor. This order was thereafter expanded in November with additional offs on the move terminals and the order value thereby increased from 115 to 132 million Swedish kronor. The total order value will be paid before the end of 2024. We'll go into more details on the Swedish-based corporation order in just a few minutes. This morning, we also announced an extended estimated lifespan for OPSON 3 after new data and analytics and information from the manufacturer. The lifespan has increased from 15 to 18 years. This will have positive economic effects for us. Next slide, please. Some words about the commercialization of OPSON 3. As previously mentioned, OPSON 3 arrived in June in its dedicated position, 59.7 east after a five-month journey and orbital racing. After successful in-orbit tests, OPSON 3 was on July 5th ready for commercial service, all according to our plans. The satellite covers a third of Earth with its six high-power steerable spot beams and is equipped with our patented solution and unique software-enabled capability, what we call the digital hub in the OVSAN onboard processor. A quick summary of what makes OVSAN 3 unique. It's purpose-built to the smallest mobile satellite terminals on ground. It has an all-steerable antenna architecture. It's industry-leading in transmit and receive performance. And the offshore onboard processor is enabling single-hop communication between ultra-compact terminals, something no one else had been able to do in the world previously. And as mentioned, the launch and commercial start of OpsOn3 have been conducted optimally without incidents based on data and information from a manufacturer and our own and their experts now assess the lifespan of 18 years compared to 15 years previously. This means that... This is good news for our company, basically, and our customers and investors, as it improves the return on investment with a reduced depreciation of 20 million SEK annually on this extensive and highly strategic investment. Its end of life is now expected to be 2042, but satellites can live longer. Slide eight, please. Let me turn to order intake. I think that's the wrong slide, actually. I'm on order intake here now. Oh, no, no, correct, correct. Let's see. The first order from the OPSON 3 from the U.S. DOT. We received our first large order on OPSON 3, what we call OPSON Pegasus services from our long-term cluster within the U.S. Department of Defense. We started delivery on August 1st. The contract is for 12 months with an order value of $6.2 million. And for those of you that follow us closely, you will recall that we received an eight-month order from the USDOD in December 2023. That contract ended at the end of July this year. The contract was re-scoped in December compared to previous years. But it's very positive that we now transition without any gap over to a 12-month contract on August 1st to shift from least capacity to the powerful OPSON 3. With that, we've also further strengthened our position, and it allows us to continue to add value to the United States Department of Defense with SATCOM solutions based on OPSON 3. We can go to the next slide, please. During the last two plus years, we've purposely rebalanced our geographical revenue distribution. That means that we really established our position in Europe. About 40% of our revenue in the quarter comes from Europe, which equals about 55% year to date. During the past 12 months, we've initiated a very solid partnership with Swedish Space Corporation, what is called SSC. On this slide, we've highlighted and explained a little bit of the business outcomes of that partnership so far. In December 23, we received our first large order from SSC of 135 million kroner for the delivery to a critical end customer. This order was for OPSON SATCOM as a service, including a larger amount of OPSON mobile satellite terminals. In September 2024, the service part of this contract was renewed for 150 million SEK for 12-month delivery of Afsan Satcom as a service. This renewal did not include any terminals as they were already delivered. And yesterday, we received a further expansion of the same order by adding Afsan on the move terminals to a value of 17 million kronor. That means that the total order value is 132 million. Another important dimension to note with this expanded order is that we'll receive full payment of the total order value of 132 million before the end of 24. That improves our liquidity and enables us to continue to focus on growth and to concentrate on the solidification and capturing of new business opportunities. Next slide, please. We'll now turn to the financial section of the presentation But let me begin to talk a little bit about order intake, which is very important. The continued development for Offsun during and after the third quarter signals a commercial breakthrough. Our order intake has accelerated since our first own satellite, Offsun 3, was put in commercial service during the summer of 2024. Our order book has clearly improved during the last quarter, providing us with much better financial predictability. This means that we expect the company's growth rate, profitability and cash flow to strengthen in the coming year. The order intake for the quarter amounted to 17.8 million US dollars, which equals 173 million Swedish kronor. The rolling 12-month order intake was at 47 million US dollars at the end of the quarter, translating to 474 million Swedish kronor. Looking at our order book, it was at 22 million US dollars or 222 million Swedish kronor at the end of the quarter. Our deliberate and decisive shift in focus to customers in defense, national security and public safety is proving to be the right strategic move. It has and can lead to larger and potentially longer contracts. I will, however, note that this market with very strict government procurement and evaluation processes are somewhat cumbersome, complex and time consuming. But as we start to see, definitely worthwhile when you have a unique value proposition and can deliver fast as we can. I would now like to hand over to our CFO, Victor Brimmer. He'll provide some more detailed information on our P&L. Over to you, Victor. Thank you, Per.

I will now give you some details on the financial performance for the third quarter. The revenue of 95 million SEK in the third quarter is split between Ovsons Satcom as a service of 65 million SEK and Ovsons Terminals of 29 million SEK. We can see that the revenue from Ovsons Satcom as a service is recovered from a dip in the first and second quarter and now back on the same levels as in 2023. In addition to this, we managed to deliver a higher portion of Ovsons Terminals as well. When we are looking at the run rate for Ovsons Satcom as a service, we are continuing in the positive trend from last quarter and the run rate is up to 259 million Swedish kronor. Next slide, please. As mentioned during the second quarter, EBITDA was gradually improving and I'm now glad to be able to present the positive EBITDA of 12 million SEK in the third quarter. The improvement is a result of revenue from off-zone terminals, but also reduction in operational cost compared to the second quarter. The reduction in operational cost is a result of harsh cost control and seasonal effects. Jone Peter Reistadler, EBITDA margin improves from minus 31% in a third quarter 2023 to plus 13% in a third quarter 2024 as we communicated in a second quarter EBIT and EBIT margin are in a third quarter affected by increased depreciation due to the activating also on three. Jone Peter Reistadler, Next slide please. Cash flow from operations amounted to minus 14 million Swedish kronor. Even though EBITDA has improved substantially, the third quarter is affected by payments of interest following the activation of Oslo 3. Total amount of paid interest affecting cash flow from operation was 23 million Swedish kronor in the quarter. Cash flow from investments amounts to 27 million SEK and are mainly related to the finalization of some three. And I will come back to this subject in a minute. Net debt increases from the second quarter with 75 million SEK, which is mainly a consequence of net negative cash flow for the period, but also effect of activation of O3 and deferred contractual payments as explained in note 10 in the quarterly report. Next slide, please. We have received questions of how much that remains to be invested in O3 before the project is finalized. And we can now narrow down this figure. During 2024 to 2025, remaining part of 24 and the whole 2025 we estimate the total remaining cost to be 62 million sec and in note 10 in the quarterly report you can also read that we have deferred contractual payments to suppliers involved in those on three projects which amounts to 60 million second total and will be we will be paid between 2028 and 2023. volume 2033 uh sorry All amounts are subject to variations in currency rates, mainly in US dollar and euro. Back to you, Per.