Ovzon AB (publ)

Hello and welcome to today's webcast with Ovsson, where CEO Per Norén and CFO Victor Bremer will present the year-end report for 2024. After the presentation, there will be a Q&A, so if you're calling in and would like to ask a question, please press star 9 to raise your hand and then star 6 to unmute yourself when you're handed the word. You can also submit in questions in the form to the right. And with that said, I hand over the word to you, Per.

Thank you, Ludvig. Good afternoon, good morning, and warmly welcome, everyone. Thank you for joining us on Ofzon's earnings call for the fourth quarter and full year of 2024. I'm joined here today with our interim CFO, Victor Bremer. Thank you very much, Claren. Hello, everyone. Excellent. Before we start the presentation, I would like to comment on two specific things. One, probably in the front lobe of everyone, the current geopolitical situation, which is in turmoil. We have a new world order, and I'm not going to speculate in what this means, but I can say that at OPSON we feel extremely confident in our products and services, technology and solution, and that it fits the needs for whomever has a critical mission, and we'll continue to talk about that a little further down in the presentation. Number two, before we go into the numbers and so on, on the financial performance um if it's not understood i want to underline how excellent the performance was and how important the fourth quarter was for awesome this has led to a very strong finish to 2024 and the executive summary is it's only a year ago since we launched of some three we already have two major customers contracted on the satellite only after five months For those that are in the satellite industry, that's a very good achievement, I would say. We had very strong order intake on 516 million SIG for the year, based on a couple of large orders with prepayment terms from customers of one specific reason. They want and need us to deliver our SATCOM solutions fast to them. We had a 15% growth in revenue, most of what came from European customers. We delivered a very strong EBITDA. EBITDA is our measure of looking at do we run a healthy core business. A very strong quarter, 17 million SEK. And we followed up on another strong quarter in Q3 for that. So that's very, very important. And we had a strong 60 million Swedish krona in cash flow from operating activities in Q4 that landed us at 126 million SEK in cash at the year end. Obviously, I would say this, that EBIT, earnings before interest and tax, is a minus. And it's mainly attributed to the fact that we are capitalizing on the $2.3 billion investment we've made in our technology programs. So of the minus 18, We've actually spent a little bit more than 30 million in capitalization. So I think that's that kind of underlying to specific thing geopolitical and a very strong quarter and a very strong finish of the year. Now, let's move to introducing also on for those of you that are not familiar with us. We are I would say the world leader in the most advanced, integrated and unique satellite communication solutions there is. Our mantra and the way we measure that is in performance, mobility and resiliency, meaning you can use satellite communication anywhere, anytime, in any way, and you can bring your terminals to connect to the satellite with you. And it's highly resilient, meaning it will not be disturbed, and you will have a very high uptime of your capability. Our mission and our niche is to connect the world's critical missions via satellites. What is a critical mission? It could be for a company, but it's foremost in our core markets, which are defense, national security and public safety. So it's fair to say that OBSON is a Swedish multinational high technology company focused on integrated satellite communications and we serve currently the core markets, defense, national security and public safety. So when you think about OPSON, you can think high tech and communication, but you shall also think about us as a supplier, a critical supplier of critical infrastructure to defense, national security and public safety customers. And defense is now a majority of our revenues going forward. OK, next slide, please. Of course, satellite communications have been available for decades. However, the world changed when low Earth orbit satellites was brought to light and became a consumer solution. So let's talk a little bit about what all of this means. The geopolitical tension in the world, as I mentioned in the beginning, continues to escalate. We have a new world order. Nations, alliances, organizations scale up investments rapidly to own defense solution, and they're modernizing their defense, national security and public safety with high tech capabilities. Countries are now shaping plans for more sovereign own capability to have a dependent independence in case of conflicts, guaranteed communication with undisturbed and continued uptime is crucial, whether it's on land, at sea or in the air. Security. Security and resiliency is very, very important in communication. So satellite communications is today part of the infrastructure. So think about also now as part of a crucial infrastructure for a country, for a defense unit, for civil defense or for national security. For sure. Digitization. Everything we do has an escalation in terms of how much data and information is sent, received and created. So therefore, cloud solution, and there are cloud solutions for governments, so-called GovCloud, and AI are being used in a dramatically different way today than it was just one or two years ago. And the first and the last mile of actually being able to use that for a smarter, better society and for defense is connectivity. Satellite communications is therefore the critical part of that. And last but not least, climate change. We have a change in weather patterns. We have a change in climate. Winds, wildfires, floodings, avalanches or landslides or whatever we see in the news every day are becoming the new norm. So when land and mobile-based communications are down, satellite communications is in most cases the only answer to quickly execute fast and agile rescue missions and in saving lives. Next slide, please. What's unique about OBSON? So we call this the circle of life. And there are a couple of words on this slide that are important. Integration is important. We are not only providing a mobile satellite terminal or a satellite capacity or network bandwidth or a ground station or a system integration piece of it. We do it all. All the four. So at nine o'clock, we provide the world with the smallest, lightest and most high performing, ruggedized and secure mobile satellite terminals that has ever been built. And we'll continue to see developing them, of course. number at 12 o'clock, very high performing and agile steerable satellite networks. Steerability means we can move the beams on the satellite to a specific area and thereby increase the bandwidth and the performance of it. And we can do it in minutes, not in hours and weeks and so on. And with OPSON 3, we now have the most advanced communication satellite in space. And we complement that with least capacity if and when we need to. In three o'clock, you can see that we don't own, of course, a network of so-called gateways. We partner with a very selected few resilient world-class secure gateway providers that connected to fiber in their world and the world is in their in their country i would say and the world is changing quite a lot it is important to most countries to have sovereignty and its own capability so they want the signal to go down in their country therefore i think we have a smart strategy in not owning any of that infrastructure but partnering with those that have it in the countries that we serve today. And last but not least, I think what stands out for us is that we operate on very high service level agreements where we guaranteed 99.5% uptime and above that. We guarantee that by having a dedicated 24 hours a day, seven days a week and 365 days a year service and support from our global network operation centers. Next slide, please. now where and why is offs on position and where uh where is it in the competitive where are we or is the company in the competitive landscapes so as i previously mentioned our customers require and expect basically a hundred percent up time on performance and connectivity and I strongly believe, and we know this from our customers that use us in very, very remote areas where there is no other infrastructure, that if you can't guarantee this, you cannot rely on satellite communications for connectivity. So if you look at this, on the top end, we serve that market. We are a complementary to what is below us, which is the low Earth orbit constellations. So we are mission critical. We're premium. We're guaranteed connectivity. We're all about mobility and resiliency. You can't be disturbed and distracted. And we can guarantee that we deliver that. We're complemented by the Starlinks of this world that many of you know about. But Starlink is not a competitive threat to us. We don't see that as competitive. We see it as a compliment. Most of our government customers, whether it's defense and public safety, use Starlink for crew welfare, meaning when they're at bases or when they communicate home, et cetera, et cetera. There are other applications as well, which they use it for. And Starlink offers a best effort, meaning when a satellite is in orbit and you can get a signal, you have good connectivity. But if you're in the mission critical, you cannot wait for a best effort. You have to have a guaranteed service level. That's where OBSON stands apart. That's where OBSON shines. And that's where OBSON and Starlink complement one another. I think this is extremely important to understand in the world we're in today. So complementary, not competitive. Next slide, please. Okay, as I mentioned in the beginning, I would say what a difference a year makes for Afton. A little bit more than a year ago, I stood with our team at Cape Canaveral, at the Space Center at Cape Canaveral, and saw a SpaceX Falcon 9 rocket launch Afton 3 into space. So that was January 3rd, 2024. In a year, we have gotten the satellite to its designated position in orbit. We entered commercial service on July 5th. We had the first customer during the Olympic Summer Games in Paris in 2024. It was used by Gijon, the group Intervention de la Gendarmerie Nationale, which is one of the world's leading elite police tactical unit and anti-terrorist unit for the French National Gendarmerie. A great use case for us. We also had our biggest, our first customer, which is our longest tenured customer within the US Department of Defense, who signed a longer term contract with us at the end of July. And then, of course, at the end of 2024, we got the largest order ever in the company's history, 185 million Swedish kronor order from Swedish Space Corporation. And we'll come back to that in a minute. And I think what's also important to note is that because the launch was so successful, we didn't have to use any of the fuel for the satellite, which actually steers it. So it means we have fuel for more years than what was originally thought. So we have extended the lifespan to 18 years, which has also positive financial implications for us. Next slide, please. Accomplishments. Maybe repetitive, but I'll do it again. Really strong finish of the year. Order book at all-time high and a solid, solid cash flow. To keep it pretty short, I talked about the 185 million order from Swedish Space Corporation. That order, we delivered terminals in Q4, the majority of them. I think we could talk about this in a little bit, but the service starts on March 1st. So we've sat in Q1, but it's March 1st in this quarter that we're in now. We also got an extension of another order from Swedish-based corporation with additional capabilities that was needed. And that was also paid in advance because of fast deliveries. And that cash came in in Q4. I also want to acknowledge we have a separate slide on it. a very advanced remotely controlled of an unmanned ground vehicle with the Swedish defense unit. And then after the quarter, of course, we have had some more news. We're participating, and I think this showcases our strength. that we are one of the leading providers of satellite communications in the world. We're participating in a 6G satellite initiative, which the Swedish Foundation for strategic research is investing 60 million kronor in for the next generation mobile satellite communication. We've had a renewal from the Italian Fire and Rescue Services. This is the third time this customer renews, which is good. Repetitive customers, renewed customers. We also announced that Andrea Löfven was appointed as new CFO. Andreas starts on May 1st in 2025. And last but not least, we also extended and amended a loan facility agreement with P Capital Partners from expiring on December 31st 2025 to now expire on September 30th 2026. Victor will tell you a little bit more about those terms and conditions. Just a few words on Andrea, which you will meet, of course, during the spring here. Strong international experience from CFO positions within Skanska, one of the world's largest construction companies. It comes handy when you think about what Avsan has done historically, what we will do in the future. He's also been responsible for investor relations for Skanska globally and for North America, where he's also lived for a few years, which also comes in handy given our customer base and our company structure. And most recently, he served as the CFO of Boklok, which was a housing concept which Skanska originally developed with IKEA and Skanska. And he has a master's degree in finance and financial management. We're very pleased to have landed such a prominent person to our team. Next slide, please. This is the largest order, and I think I've mentioned most of this already, so I don't need to do too much more than the 185 million kroner order is a 12-month contract. We see it as the start of the beginning for something big. It includes SATCOM solutions based on OPSON 3, including mobile satellite terminals. We deliver the majority of them in December. Service starts in March. We got full payment of this order in January 2025, so we have further added cash to our cash box. This is a strategic milestone, and we have a very strong strategic partnership with Swedish Space Corporation, which we're very satisfied with. This also creates good growth opportunities for us, both in Sweden and in Europe, etc. Next slide, please. The significance of the remote control of an unmanned vehicle that we did with Swedish FMD is the following. We believe that the future holds that the biggest business potential is unmanned solutions. And to have unmanned solutions that you can remotely control and a thousand kilometers away from Stockholm to this remotely controlled unmanned vehicle in Kiruna, Sweden, is a challenging task. It's made possible because OPSON 3 has such strong performance with bandwidth very little latency, and we have terminals that are not heavy. They are robust, and we can quickly make sure that we can utilize all of this technology in one goal. Most, if not any other supplier can do this. So we see this also as a start of the beginning for something where further applications and solutions will come out of this. Thank you. Next slide, please. All right, so let's turn to the financial section of our presentation. Order intake, strongest quarter ever, totaling 19 million US dollars or 209 million SEG for the quarter. And for the full year of 24, that was 48.4 million US dollars, corresponding to 516 million SEG, more than doubled compared to 2023. I repeat that, more than doubled compared to 2023. Order book amounts to 31.3 million US dollars, corresponding to 344 million SEK, an all-time high. This is obviously a great foundation for 2025, where we want to be much more repetitive, predictable, and strong, even out the quarters during the year to drive towards profitable growth and an even stronger EBITDA. We'll focus on developing our current customer base and expanding with new customers, foremost in Europe and in the US. Now, over to some more details, and I hand it over to you, Victor. Thank you, Per.

I will now walk you through our financial performance for the fourth quarter and total year. The revenue of 107 million SEK in the fourth quarter is all-time high for a single quarter and as a result of an overall better demand and improved order intake. The increase in revenue is mainly due to a higher portion of delivery terminals of 43 million SEK, which also represent the majority of the remaining terminal orders taken during 2024. The revenue from SATCOM services in the fourth quarter was in line with the third quarter of 64 million SEK. Round rate for Ops on Satcom services is slightly below the third quarter and ends on 255 million SEK, but indicates compared to the full year revenue from Ops on services of 223 million SEK that we are in a positive direction. Next slide, please. The positive trend on EBITDA continues in the fourth quarter where we managed to further improve EBITDA up to 17 million SEK. And with that, we also break even on EBITDA level for the full year of 2024. This is an improvement of EBITDA during 2024 with 66 million SEC compared to 2023. EBITDA margin improves from minus 6.3% in fourth quarter 2023 to 15.6% in fourth quarter 2024. EBIT and EBIT margin were slightly improved in the fourth quarter thanks to improved EBITDA, but still negative due to the depreciation related to the activating of Osun 3 starting in the third quarter, which represent approximately 13 million SEK per quarter. Next slide, please. Cash flow from operations of 60 million SEK is an all time high for a single quarter due to customer prepayments. We will see a similar effect in the first quarter of 2025, where we have received the customer prepayment and this end of January 2025, we have a cash balance of 290 million SEK. Cash flow from investments of 8 million SEK is related to the finalization of OSON 3. Net debt increases from a third quarter with 13 million SEK to 649 million SEK, which is mainly an effect of variances in US dollar. This week, we also amended and extended our loan agreement to September 2026, which was made possible thanks to our strong business momentum. Next slide, please. The estimated investments in Olsson 3 for 2025 remains in the span of 50 to 60 million second, and is attributable to the finalization of the onboard processor. And in summary, we show that we have a strong business momentum, improving EBITDA quarter by quarter, and Olsson's financial position is today much stronger than it was six months ago. Back to you, Per.