Ovzon AB (publ)

Welcome. SATCOM company OBSON have reported for the second quarter of 2026 and we will now be giving a presentation of the results and the activities in the quarter. After the presentation there will be a Q&A session with equity analysts and viewers. You can ask your questions in the live chat and I'll raise as many as I can. So, now let me introduce the executive team of OBSON, the CEO Per Norén and CFO André Löfgren. Nice to see you.

Nice to see you, yes.

And, Per, a very solid quarter. How do you summarize it?

Well, thank you, Mattias. Maybe good morning and good afternoon, depending on which time zone you're in. And thank you for joining us today. To your question, the quarter. Well, maybe we start with the first slide then. I think the quarter is the headline that we chose for this quarter. Very strong execution in a transforming market. And we'll get much deeper into that as we as we move through the presentation here. But we had a very strong operational result and thereby a strong financial performance. Our revenue was 245 million Swedish kronor. That's a growth with 48% compared to the same quarter last year. EBITDA reached 87 million SEK. That's up 38% year over year, representing an EBITDA margin of 36%. And the order book at the end of the quarter was 688 million Swedish kronor. And since then, we have also received two more orders at a value of 76 million Swedish kronor. And then lastly, but not least, cash flow from operating activities was at 96 million kronor. And our net debt have been reduced to 116 million SEK. That's down almost half a billion SEK from a year ago. So we're running a very very healthy core business with solid margins. And I think to summarize maybe this in the beginning before we go deeper into other things is We have very solid execution. I think that's very, very important. What to expect from us is to continue that solid execution, but also to continue to drive profitable growth, as we've showed here. So with that, Maybe two more comments in the introduction. Order intake, I mean, we're very pleased with the quarter, but we're not fully satisfied with the order intake. That's the only backdrop that I see with the quarter. But we should note that we're also comparing with the quarter two in 2025 that had an order of 1 billion SEK. So if you compare to that, of course, everything is lower than that in comparison in the history of our company. However, there is volatility among the quarters, and I'm very pleased that we got one order in in the quarter and then two more new orders that we'll talk you through, Andrea and I here, after the quarter ended, but before this call here today. So we're on the right path and the right track here. We'll take you through that as we go forward. Let me then dive a little bit into the market circumstances that we are in and the world around us and what we are operating in and where our customers are. It's very clear to everyone, I assume, that the world around us is changing and quite at a high pace and accelerating. The same three forces that we discussed last quarter continue to reshape the strategic and tactical landscape, the geopolitical fragmentation, nation-states are reassessing their dependencies, what's important, where to invest, to have a secure and controlled society, obviously. But also through alliances, I think the European countries are foremost focused a lot on NATO, and they're also focused a lot in investing in defence. And you can see that because of the tensions that is actually quite near the European continent and in the European continent with the war in Ukraine and the tensions around Iran. That in turn then leads to sovereignty and control of infrastructure. What that means and the word sovereignty has become very, I would say very popular these days, but let me try to boil it down a little bit to what it means. Each country needs to decide what's important to them in order to have a sustained society. That's what it means. And it needs infrastructure. Infrastructure could be energy, it could be telecommunications, it could be the banking system, food, whatever you might think it is for your country. And there's a lot of work and investments going into this. That in turn then leads to that we have a society today that are very digitized. And AI plays a huge role. Data plays a huge role. And if you're going to have that digitized society, you need a very, very robust communications infrastructure, specifically for defense, national security and public safety. That is a must. It cannot be nice to have. It needs to be must have. and we play a very central role in that infrastructure and it's become very apparent as of late, of course, with that. You can also see that space gets a lot of more investments and attention. There are maybe three things I would point out that proves that a little bit. NASA's Artemis II sending humans around the moon for the first time since Apollo 17 in 1972. That's quite a long time since we did something similar. And during the NATO top meeting, most recently in Ankara, Sweden and a few other allied nations created an initiative called Halo, which means that they integrate their sovereign national satellites into a system that's going to try to protect from adversaries, et cetera, et cetera. It's very interesting, it drives investment and it drives the criticality of what we at OVSAN do as well. And last but not least of course the SpaceX IPO which is in essence a space data and AI company. So the ecosystem expands from just digital data AI to include space as the backbone for all of this as well. So I think what we've talked about for a number of years since this is our business and our industry is now becoming a reality and it drives a lot of investments and a lot of decisions by nations, allies, armed forces, emergency services, natural security and public safety. So it's very clear that we're in an industry that is growing tremendously that drives a lot of investments and that is a necessity for society and we believe that we've been right at it from the beginning and now we're starting to see the the opportunities arise from that as well as we continue to grow our business um Not so much. Most of you that follow us closely know about this, but I would like to underline again that our vision is greater than... It's a great ambition and it's also a vision that we feel very proud about. It propels us and motivates us every day to connect and protect people, society and organizations for a safer world. It's important. We are the only vertically integrated satellite communications platform in the world today for defense, national security and public safety. We'll come back to that, obviously. And of course, our financial performance is very important. It's important to run a very healthy core business. You can see that we've had quite a growth here the last couple of years under profitable forms. And we're now trending, the rolling 12 months are trending towards 985 million in revenue with very, very, very solid margins of approximately 42%. Our order book, as I mentioned in the introduction, is on 668 million. That is a healthy sign because we are delivering on that order book we had when the year started, which means we have an operational execution engine in the company. However, we do want to add more orders in, so we increase that order book while we're delivering. That's going to make us very healthy and have a very long-term growth under profitable forms. Our value proposition has not changed. It will not change, but it will expand somewhat. We'll get into that when we talk a little bit about our new products and services. But what's important to understand here is that while our industry, the satellite communication industry, is quite fragmented, in terms of you have suppliers that build satellites, you have suppliers that launch satellites, you have suppliers that build terminals or antennas, you have suppliers that have gateways, etc. We do most of this value chain ourselves and we partner with a select few partners to really control the end-to-end communication platform that we provide. It is a turnkey solution from the user, whether it's a human on ground or a vessel in the air, on the ground or on the water, up to how we design networks and satellite systems for resilient communication. where our OPSON 3 satellite is the crown jewel of course in that with the onboard processing capability that we'll come back to. And of course the signal needs to go down somewhere so that's where the gateways come into play. They are placed strategically around the world but we don't need that many because we're a geostationary satellite communication platform. We don't need that many and we're making sure that we have redundancy in all of that and resiliency in it as well. And then we manage this 24-7 around the world depending on where our customers are. This is a very unique, very strong satellite communication platform that has no comparison in the world today. Just to look into, potentially, a little bit deeper into what this means. In the defense sector today, the leading aspect of what we're trying to achieve, each country that has defense armed forces, is interoperability. You need to have data at your fingertips, you need to have decision-making tools at your fingertips, you need to coordinate all assets that are in movement, and you need to do it both with manned and unmanned and stationary assets that you have to your disposal. It's basically a transformation from quite of a more hardware driven defense system to a digitized AI data and connectivity driven system. So you could think of this as the internet of things, but the battlefield of things where you need to have control of all the assets at the same time. That's what this means. We play straight into this. We provide the core capability that allows this integration and interoperability and multi-domain operation to happen. So we feel very, very strongly that we are on a very strong path towards becoming a little bit more of a standard for it. Now, it doesn't stop there because it also moves towards the society. If you think about back to our vision, a stronger and safer society, it connects all aspects of the society rather than just one piece at a time. And I think this is a very important layer of thinking strategically for nations and allied as they think about how to secure society for the future. We'll come back to this in the future as well, but this is what we're striving towards becoming as well, the core asset and the core aspect of a communication platform for more aspects than defense, national security and public safety. With that, I'm going to turn focus a little bit towards the second quarter. I've already mentioned in the beginning, in the summary, quite a bit about the quarter. But I think there are a few things that stand out. The launch of the OVSON T8 terminal, which is our next generation, what's called on the move mobile satellite terminal. It's quite important. I'll come back to a bit more details on what that means from a growth perspective for us. We had the renewal, which is very important, of 74 million Swedish kronor from a European NATO customer, representing quite an important step towards a broader satellite communication coalition across European NATO countries. So think of it this way. So for anything, it might mean you control it all yourself. IF YOU DO IT IN COALITION, YOU START TO BUILD NETWORKS AND CAPABILITIES WHERE YOU CAN SHARE AND USE THOSE ASPECTS BY STILL HAVING THE UNIQUENESS THAT OFFSON OFFERS. SO WE'RE QUITE EXCITED ABOUT THE PROSPECT OF THAT EXPANSION AS WELL. And of course, it takes time. So we have accelerated stakeholder engagement. This is a relationship business as well. You might think that it's all about technology, it's all about space, it's all about something that is invisible in space. But in the end, these are relationships. It's about trust and it's about educating one another and it's about gearing the actual need of the users and the customers to the actual capabilities that we can provide. It takes time, it must take time, we're investing heavily in that and these enduring relationships I'm sure will bear fruit as we go forward. So we've invested quite a lot of that in the first half of this year and we'll continue to do so. And then after the end of the quarter, as I briefly mentioned initially, new orders from a new NATO customer, which is encouraging, of 40 million SEK, confirming this communication platform we have across the Allied nations. And then, of course, the supplementary order we received yesterday from a current European customer for mobile satellite terminals, which is also underscoring then that our products out in the hands and on the assets of our customers are quite important for them, and they continue to renew orders and supplement their existing capabilities. We launched the OBSON TI terminal, but we also delivered the first 10 prototypes. And that's in a period of six months. Come back to that in a minute. And then we also completed another Arctic exhibition. So why is this important? Well, Arctic is one of the most strategic areas in the world from a defense and national security and public safety perspective. and it is quite a complex area both to defend, surveil and manage from a countries and an allied like NATO's perspective. And we wanted to ensure that we had facts and data to make sure that we could firmly say that we can implement a communication platform now for the Arctic up until a certain point in the Arctic. Since the Earth is round and our satellite is on 36,000 kilometers up, we cannot go all the way over the Arctic, but we can go very, very far up around the Svalbard area. So we actually have a capability today that can be used by our customers and current and future customers. So excited about that as well, as we think that has a very strategic importance to our customers. So overall, I would say strong quarter, strong execution, Light on order intake early, strong in order intake late and at the beginning of the third quarter or just before this report actually and long strong execution. Let's talk a little bit about the OVS on T8. It sounds like a product launch here. That is not the purpose of this description basically, but this is a breakthrough. This terminal, think of it as a mobile phone in a way. This terminal is the smallest that has ever been produced in terms of size, weight and power. It is the smallest. It can be mounted on unmanned vessels, whether they're in the air, on the ground or on the water. And because of its size, it opens up a whole new growth prospect for Avzon. and it will drive the need for much more satellite communication capability as well as for volume production. So we see this as a growth platform and an enabler for strong growth going forward and it opens up the use cases that we've seen have actually been the most prominent one in the most geopolitically tensed areas today. So it is a starting point of something we believe could be a Trojan horse for us as it comes to growth, in essence. So very proud of it. We have delivered the first 10 prototypes in less than six months from when the customer placed the order to where it is in the hands of the customer now. And there are tests going on on those first 10. And then, of course, we have a number of deliveries to do for the rest of this year here. But we also believe that the tests will be reference points for other types of customers. So very, very pleased with the team's both design, production and delivery of this. Now, before I hand over to André and the numbers, maybe a few words on the transformation that I've been touching on here a little bit and transformation of the market. In essence, we're seeing a change from the traditional defense procurements and needs of assets, etc., etc. They are still needed, but they are traditional. They're more hardware related, ammunition related, etc., etc. But as I said, the world is transforming towards towards a more digitized defense, which requires cloud-based solutions. It requires a digital architecture. It requires very, very firm and solid communication. It requires availability of data and AI at the edge, basically. That's a whole new set of procurement capabilities that is changing how procurement organizations and defense organizations are buying things. Therefore, it takes time. We all that are in this ecosystem actually have to collaborate, educate and develop business models and procurement capabilities that are different than what they used to be. Therefore, some things when you get into longer term contracts, you get into more sophisticated systems of systems. It takes time. So what's important to mention here is that, yes, we're not satisfied with the order intake we had in the second quarter and the first half of the year. But we're not worried about it because we believe we're at the center point of the radar screen and working with those that need what we have. And we're working on ways to actually speed up this process. And it's important for those that procure, our customers, that they also do it thoroughly. So we have a joint responsibility to do that. And what's important for Avzon is that we play the long game. We have to stay in the game. We have to run a healthy core business. Then we can invest in the capabilities needed and orders will come. But this transformation is real and it's important to understand it because we play the long game. And with that, I think I'll hand it over to you, Andrea, for the numbers.

Great. Thank you so much, Per. I'll do the numbers and I'll start with the revenue. And as you probably know, our revenue is based on income from or delivery of terminals and also delivery of services. And we have, as Per said in the beginning, have a pretty decent increase this quarter versus the same period last year. So it's up 48%. So the company is at a completely different level than it was a year ago. And to the right here, you also see the run rate of our service revenues, also at completely different levels than a year ago. If we focus a bit on the first quarter versus this quarter, the second quarter, you see there is a small drop in revenues. It's not from terminals. There we actually are increasing versus last quarter. It's on services that we're slowing down slightly, and it has mainly to do with what Per just described, how the market is in a transition and we are working to increase this ability to deliver more on services as well as orders are coming. And as you've seen, we have actually booked a few already in this third quarter. So we are in a good spot, I would say. That's enough about revenue. I think we move over to profitability and EBITDA and EBIT. Here again, a strong increase versus last year, up 38% on EBITDA, but actually on EBIT we're up 74%. So a strong increase. I think we should be proud about that. And we're also maintaining margins basically versus one year ago. And here again, I would like to comment on the comparison of this quarter to the previous quarter. You can see there is a reduction here, and it's mainly based on three things. First off, we have a one-off impact of You can say cost periodization between the first two quarters. It has to do with timing of a renewal of insurances. That's the only thing there. So that's a one off. Otherwise, we have the lower revenue, but we are deliberately maintaining our satellite capacity in order to be able to grow. And that is, of course, costing us some. But that's an investment as we see it and we're also investing into way much more sales activities and also ramping up the sales and marketing organization again to win orders. That's why we are doing this. So I think this will pay off as we go along here. If we dive just slightly deeper into the P&L, we can also look at the profit for the period where we've done all the amortization and depreciation and also have had the ability to cover our interest costs. You see here that we're actually up 86% versus last year. So 41 million in profits for the quarter versus 22 then in a comparable period. And if you divide that number by the number of shares, that's an EPS of 0.36 SEC in this quarter. What's helping us here really is a lot is the refinancing that we did a couple of quarters ago. And we have way much lower interest costs now than what we've had in the past. And worth mentioning, the Q4 in 2025 was a really strong quarter. We had a recognition of deferred tax assets there, which contributed a lot, and now we are recognizing those assets in these first two quarters. That's enough about profitability, I think. So let's move over to the cash flow and the balance sheet, which is really interesting and good numbers, I would say. No matter how you look at it, it's improving versus last year, definitely. It's 96 versus a negative 69. And also versus the previous quarter, it's much stronger. So we're really good at cash management and good in our contract negotiations, I must say. Then this has also led to, we're doing some investments, but actually mainly into the T8 terminal and also into our onboard processing capabilities, which we constantly can develop and do investments into. But with that said, we then have a free cash flow of 66 million SEK, which is way much better than the same period last year. And with that cash, we've been able then to amortize down our debt and also increased our cash position. So the net debt has really moved the needle on the debt situation in the company. So it's just north of 100 million in net debt versus almost 600 a year ago. So I think we are in a really good position. And with that, I will hand it back to you Per.

Thank you, Andrea. We shouldn't dwell on this. This is a very solid presentation of our numbers and hopefully very clear to everyone that this is a very healthy core business. As I said initially, our rolling 12-month revenue now stands at 984 million and our EBITDA at 407 million SEK with a margin of 42%. I think that shows that the core engine of this business is very, very solid, and we have to have that to play the long game, as I said before. But I think it's worth mentioning what André also talked about, the net debt that had been reduced by almost half a billion SEK. in 12 months. And I repeat, that's SEK 500 million. And for someone that has been in this business for quite a while and not had this position, I would say that you should view that key performance indicator as a very, very solid one for a healthy company. I think the order book provides solid revenue visibility into the second half of the year and beyond. And I think the numbers confirm that the strategy describes a scalable, profitable business with a strengthened balance sheet. So we're really well positioned for the next phase of growth as we see going forward. And to wrap things up, what to expect as we move forward and what's the path forward here? Well, we have three main pillars that we measure ourselves on. Financial performance, to deliver financial performance. Secondly, ensure commercial success. And thirdly, actively scale up the company because that investment in a smart way needs to be taken a little bit before the commercial success arrives, etc. So this is a balance between these three pillars. They are all three very important. We don't want to disturb the healthy core business and the profitable growth that we're on. But at the same time, we need to fill up the order book to ensure commercial success. But that in turn requires an investment in an organization that are capable of dealing with multiple short, medium and lengthy sales cycles and procurement cycles with customers in both current markets and new markets, which we're doing right now. And then last but not least, actively scaling up. And I think the OBSON T8 terminal is a good example of that. That might be at volumes that we haven't seen before. So they need to go hand in hand, but you can't wait for the order to do it. You have to actually invest a little bit early. And Andrea touched upon that when it came to our investments in the second quarter, that we're in a smart way, I think, investing in the right levers for us to be able to scale the company as we go forward. To summarize, I think the second quarter of 2025 is quite strong from an operational execution perspective. And the orders that came in late in the quarter and then early in this quarter, just before this webcast here today, are a solid sign of that we're on the right path and we're playing the long game. So I am not pleased with the order intake. But I am encouraged by that we do what we say and we say what we do. And I think we have good visibility into the future. We're very excited about the continuation of the year. And we look forward to seeing everyone in new quarterly reports here during the year as well. So with that, I want to thank ESPECIALLY THE EMPLOYEES ARE PEOPLE FOR OUTSTANDING WORK WITH THE EXECUTION AND OF COURSE OUR STAKEHOLDERS WHETHER THEY ARE SHAREHOLDERS OR PARTNERS FOR THEIR CONTINUED TRUST AND PARTNERSHIP AND ALSO FOR making sure that we can run this business and we can create an industrial champion out of Avzon going forward. So with that, I'll turn it back to you, Mattias, and go to questions and answers.

Thank you, Per and Andrea, industrial champion. That sounds really like something. So let's start off the Q&A by inviting Jakob Andersson, equity analyst at Danske Bank. Hello, welcome, Jakob. Please go ahead with your questions.

Thank you for the presentation. I just have a few couple of questions, starting off with the recent orders are quite short in duration. I understand that annual budget cycles and a need to validate the service before committing longer term can drive that. But do you expect future orders and renewables to be longer in duration? And is that something you actively push for in your negotiations or?

Yeah, thank you, Jakob. Good to see you. Absolutely good question, obviously. Yes, you're right. They're a little bit short in duration. You should see the first one that we took on June 30th as an extension of the one we got on December 19th in 2025. So that then goes until the end of this year. you could draw the conclusion that has to do with budget cycles to do. So we're not promising anything, but we believe that that actually rolls us then into a good situation for an extension of that. And I would say that the natural length should be at least 12 months on those kind of services contracts that we have. So I think that's to set some expectation. The second order was also short. Think of that fairly short six months, but think of that as a new customer. And that's also a proof of concept. So it's quite sizable to be a proof of concept because it includes a number of terminals and so on. So it's an entry point in that we're now working with our customer on building out the proof of concept and the use cases. hopefully bring that into a longer term contract as well and then the third order that we just saw come in yesterday is on terminals from a customer that we already have which means it's a repetitive customer that sees the need to have inventory and use of our terminals which will then also drive the need for more services so I think they might not be the average normal norm of contracts, but I think you will see a mix of short-, mid-term- and long-term contracts as we move forward.

Okay, perfect. Thank you for that. And just the second one. So, as you described, the Satcom servers were down 9% quarter over quarter, and you mentioned the renewals have taken longer than expected, but could you give us some sort of update on the Swedish contract that expired in February? What is causing the delay, and when or if you expect it to be resolved?

Yes, I can mention a bit without going into the details I can't go into, but I would say that that was something that I personally would have thought we would extend. But on the other hand, we also have in-depth conversations. it might have turned to a direct procurement rather than an indirect procurement through a partner, which also means that we're in deeper conversation with the customer and user group there of looking at what the experience was for the first year they had the service and how that could actually expand into other things. So there are discussions ongoing. They have taken longer than we anticipated. But I have good hopes that that will lead to something that is more extensive than what we have had. But I cannot promise any of that because the discussions needs to be concluded and the business case needs to be concluded as well. That's what I can say.

Yeah. Okay. Yeah. Thanks for that. And just the last one. So the new native custom order of 40 million that is based on the third party capacity rather than also free. But could you just clarify why did it not go for also free? Was it a geographical coverage issue or how did the customer resonate there?

Also a very good question. To be clear about it, we could have used OPSON 3 because it's in the area. It's a European NATO customer. So we could have used it, but for the use cases that we saw, it was solid to use third-party satellite capacity. And also because of other things we're working on, we don't want to... contract up OBSON 3 if there are other things in discussions that might be more lucrative for that customer and for us in doing so. So we make choices on this all the time to ensure that we have the right solution for the customer, but also the possibility to grow with the capabilities we have.

Yeah, perfect. Thank you. No more questions for me.

Thank you, Jacob. Thank you, Jacob, for that. And now I will invite Mikael Lassén, equity analyst at DNB Carnegie. Hello, welcome, and please go ahead with your questions, Mikael.

Thanks. Yeah, you mentioned, Per, in the report that this 74 million renewal order is strategically significant and it's adding additional European NATO countries in some way. Can you elaborate what you mean with those comments and the way we have the right expectations?

Yeah, I can. I will try to. I will attempt to try to, Mikael. Good to see you. Yes, I think up until now, as you know that I follow us closely here for quite some time, we've done country by country or customer by customer and they have in all cases actually have their own networks, their own sovereign networks, their own controlled networks that we manage for them. In this case it is as well, but there is also a further collaboration between allied nations to create an integrated network system where they can actually utilize, they have an agreement between one another on if you for example move a beam, who has the right of doing that, this has always been the with the steerable beams and antennas we have on most of our satellites that we have access to. That has always been the key for customers to be able to say, I want to move it here, I want to move it here, I have the use case here. Now they have an agreement between a few countries that they will utilize a coalition network and combine their users on those, and they have an agreement on how to actually deal with a potential move of beams, etc. I think that's the significant portion here. that it is a sovereign capability that can also lend itself to more integrated networks between allied nations and within NATO, for example. So I think if we can showcase that to NATO countries, it will be easier for us also to actually become a core aspect of a NATO capability. That's why it's important. That's why it was mentioned in the CEO word in the report.

Okay. Does that mean that you also will have to work closer with the defense primes or other companies in the satellite value chain to collaborate more closely as a part of a larger system?

Yeah, but the first step will be, I would say that the first step will be that we continue to do what we do and what we do very well to manage this for the customers. But if you think about what's the big project in Europe is Iris Square, which is really a sovereign network for European countries, for Europe. and making sure that it's on European technology, et cetera, et cetera. This lends itself to be a proof point in that that works and we could be plugged in basically in that capability and that solution that is already existing today instead of waiting until 2030 and beyond. So I think we have the possibility of do what you alluded to, but it's not a given yet. But this lends itself to do that. Yes.

Okay. I have more questions, but I'll get back in line.

Thank you, Mikael. And let's move on to Simon Granat at ABG Sundal Collier. Please go ahead with your questions, Simon.

Thank you. Hi, Per and André. Thanks for the presentation and good to see the both of you. I had a question. Do you have any assessment on why procurement processes are that much longer now? Is it a question of budgets, other market alternatives, or could it be something else? And I'm particularly wondering whether the IPO of SpaceX has impacted these processes to an extent, whether the customers have then simply prolonged the processes due to that.

I'll answer it this way. Hi Simon, and good to see you as well. I'll answer the question in the following way to see if you follow this answer. I think one, When you chase new customers, it takes longer time. You're not in their system. You are not a proven supplier in their system. You might not even be in their enterprise system to click a button and say, yeah, this is an already recognized supplier. So just that process takes a little bit longer period of time but I think the process leading up to that takes time as well. So it's two steps in that. So that's with new customers. With existing customers, if you're in discussions about scope, widening of the scope, and how to utilize Afton's capability and communication platform, more organizations, more people, and more decision makers, and more experts will be involved in that process. That takes time as well. Some of it is educational, some of it is fairness in procurement, which I think we all should applaud, and that's the right thing to do. These are taxpayer money that you need to invest in things that are essential for a country or for armed forces, etc. So I think that that's the second. The third on your point about SpaceX, I would not say so with one exception. I think that has to do with the US market because I think SpaceX or Starlink, they've actually taken quite a number of contracts in the US context. So I think what you see is the geopolitical EUROPE FOR EUROPE, US FOR US, YOU MIGHT SEE A LITTLE BIT OF THAT AS WELL. THIS MIGHT ALSO TAKE LONGER TIMES AS WE ARE COMPETING MAYBE WITH THE US AMERICA FIRST PRODUCT SO TO SPEAK. So all of these three in combination, I would say, are there. But I would say that SpaceX, their major contracts have not been, they've been more infrastructure, launch capacity and other things in the US, where they won a lot of contracts is in the commercial sector for aircraft connectivity, for example, for airlines. very insightful answer. Thank you for that. And we have also for now

for some time seen a strong period of terminal sales and just last evening you announced another order and only one year ago we spoke about this 30% of revenue perhaps being a bit elevated but now we have seen for several consecutive quarters and you're continuing to announce new orders. So we see this 30% of revenue as a normalized level or what do you think about the current run rate that you're seeing?

I think, I mean, you've seen it also fluctuate quite a bit between the quarters, depending on delivery, timing, etc. But it's becoming a more and more significant portion, I think, of our business. And especially, I would say, without some T8 coming to the market, that would bring more volumes of terminals, definitely. And that itself then brings more need for connectivity. So I think it's... you will hopefully see both growing. But it might be that the portion of terminals might be increasing slightly. That's my view.

Thank you. And just finally, is the cash flow profile relatively similar with the recent agreements as the one you announced last year, i.e. prepayments even?

Yes, exactly. It's the same beneficial payment terms that we're working with, yes.

Encouraging. Thank you so much for having my questions.

Thank you. Thank you, Simon.

Thank you, Simon. And let's move on to Finn Kemper of Kantor Equity Analyst as well. Please go ahead with your questions, Finn.

Yeah, thank you. And thanks for the presentation. Hi, André. Hi, Per. Hi, Finn. Hi, Per. I would have a question regarding the margin once again. So maybe you can give us a little bit more flavor on what was driving the slightly lower margin in Q2. Was it the revenue mix shift towards the terminals versus SETCOM services, higher lease party capacity effects, or if there are any other cost items that we should consider?

Yeah, good question. And it's, as usual, a mix of things. It is, as you say, we had the mix is as we saw that services came down a bit, but terminal revenues increased. So there you have a mix that also impacts since margins are slightly lower for terminals versus services. But then, as was said, that even though we saw that revenue came down. We are deliberately keeping the capacity for services given that we have a healthy pipeline and want to make sure that we can deliver to customer promises. So that is eating some of the margin as well. And I think very importantly also is to note that we had this one-off impact as well of cost distribution between the quarters that has a pretty significant impact actually. I think that those are the main things here.

All right, thank you. And maybe one more question. I mean, we briefly spoke about the utilization on Office Zone 3, but now how should we think looking into the second half of the year and maybe even early 2027, is the share going to rise for least capacity and is, I mean, I assume that you can still grow meaningfully with least capacity, Has there anything changed in terms of planning with maybe bringing up another satellite yourself in the near term? Yeah, any flavor on that would be great.

Yeah, I can take that question, Finn. Listen, I've said this for quite a while now, that I think the right question to ask, as you're asking it actually, is the total available satellite capacity for us. Is it a growth constraint or not? IT IS CURRENTLY NOT. THERE ARE CHOICES WE CAN MAKE. WE CAN UTILIZE THREE ON SHORT-TERM CONTRACTS, BUT THEN IT'S OCCUPIED MAYBE FOR OTHER CONTRACTS OR CUSTOMERS THAT WE SEE A LONGER-TERM CAPABILITY AND SOLUTION WITH. SO WE'RE CONSTANTLY MAKING CHOICES BETWEEN WHAT ASSETS TO USE WITH OUR CUSTOMERS. AND IT DEPENDS ON THEIR USE CASES AS WELL. So just in general, that's why, as Andreas said, we've kept satellite capacity even though we didn't have a contract on part of it, but we've kept it because we see a growth prospect for it. So we knew we were going to take a little bit of a hit actually because we had the cost for it, but we didn't have revenue on it. We knew that and we were working very hard to kind of minimize that impact by terminal orders and other things, right? So we saw this. I think it's important for us to have third party capacity for a foreseeable future that is balancing our portfolio of capability. And therefore, the contract with the new NATO customer, for example, is on third party. We could have, as I said before, utilized Office on 3 there as well. But we see that in the visibility we have of what the possibilities are for us in this year and the beginning of next year, we want to ensure that we have enough of Office on 3 available so we could quickly turn on contracts and services. And thereby, we know that our margin will also have a positive effect on that. This is almost like our core engine of how we actually look at how to optimize both financials, customer performance, as well as utilization of capacity and ensuring that we have a good balance between third-party capacity and OPSON 3 capacity. And yes, we see growth in the future and we see that the ability for us to do smart financing solutions for more satellites, which is still in our objectives to make a decision on in in a near foreseeable future. We need to showcase that we have utilized OPSON 3 in a good way so you can see return investment there. And then we can push the button to build more own satellite capacity and thereby not have as much dependency on third party capacity. So long answer, but this is our, if you come into our cockpit, that's exactly what we work with every day.

Makes sense. And maybe one last question regarding the pricing for the third party capacity. I mean, I assume that pricing has come down a bit now with higher volumes of NEO satellite constellations, but what is, I mean, how quickly do prices change in regards to the demand that you see and what is the visibility over the next, maybe 12 to 18 months, how stable the pricing could be?

Yeah, really good question. Yes, it is true that the prices on KU, JO capacity has come down. So we've reaped some benefits of that. We have quite solid margins on third party as well, as you know from our numbers. So that has come down. I believe that there is more LEO satellites being built and launched as we speak, both from the normal suspects such as Starlink, OneWeb and also then Amazon LEO and Telesat to mention a few. So there will be enough or Yeah, there will be a lot of LEO-based satellite capacity for consumer and other types of applications, aviation, as I mentioned, etc., which means that there is likely a positive market for us to buy third-party capacity at similar price points as we have today. And there will not be a shortage the way we see it currently.

Okay. Sounds good. Thank you, guys.

Thank you.

Thank you, Finn, for your questions. And we have a bunch of questions from the viewers, so I will start off by This one's saying, I would like to hear more about the Arctic and the tests going on there.

Yes, it's a cold and harsh place, honestly. No, but I think this was a strategic investment we did. It's not a big investment. We paid for it with operational expenditure. I got a question on that from someone as well. It has been important for us to understand how far could we reach with OPSON 3 and where would there be a degradation in the signal. For those of you that follow us, you know we have our OPSON coefficients performance, meaning data throughput, mobility, MOVABILITY OF BOTH THE ANTENNA BUT ALSO ON THE GROUND OR IN THE AIR AND ON THE WATER AND THEN RESILIENCY MEANING UNINTERRUPTED SIGNAL FOR ANY REASON AND WE WANTED TO MAKE SURE AND REMEMBER OUR SATELLITE IS AT 59.7 EAST IT'S BY THE HORN OF AFRICA So you have to reach with above, you know, the Nordic countries all the way into the high north and the Arctic. And we have managed to do so. We've gone from in three expeditions further and further north. And we have literally had no degradation in the service. We've proven to both ourselves and the customers that have followed these data points that there is actually an available capability through OVSON already today. So you don't have to wait and invest to get to a certain point in the Arctic. You can actually build a solution and a capability right now. that's what we've learned and it operates in the most harsh environments that was not a joke in the beginning of my answer where other things actually break so both the terminals that have been used in those conditions as well as the satellite capability and signal and our onboard processing capability has proven to be Very unique from the performance mobility resiliency perspective. So that's what we've tried to prove We're now going to we have taken this or we're taking this to talk to Those that have an interest in that region and for connectivity of it So that it's our own business case proof proof point that the solution is available today

Thank you. And what would you consider a typical order size for Avsson? Is the scale of the FMB contract a historical outlier that we should not expect to see repeated in the future?

Oh, really good question. Let's balance this answer a little bit. The ambition obviously is to have those kind of connects. So remember that was a two-year call networks and a quite large volume of terminals included in that and the managed service that we have obviously. so our ambition is to continue to build those kind of contracts at least 12 months but 12 to 24 to 36 months and beyond contracts you won't get there though in the first go you have to prove your point you have to prove your case you have to be a reference point so you won't we won't get there country by country here and think that it's going to be popping up a billion kroner every second quarter, every year. But the ambition and the goal is to get that. The average contract length, I think, to expect should be 12 months and beyond that. But if you enter a new country, you might, as the new NATO customer we have, get a first six-month contract, work with them on building out the capability and the use case of it. and then roll into longer term contracts. So again, a mix of short to longer term contracts.

Great. How should one interpret the fact that there are no extensions immediately after an order has expired? Is it a missed order or is it a negotiation going on?

Yeah, another very good question. Something we also work with every day obviously. In our case, I will answer in our case, there has not been any missed order yet. We would tell you if that customer had not done so. The discussions we have on the renewals we have now, the longer-term renewals, I would say, are leading into more advanced discussions about size, scope, and shape of the partnership with the customer, and those might take longer time, as I alluded to in another answer here, where you have more people, decision-makers, and funding needs involved in it, and that, in a way, takes time. because the market is this procurement is not a classic and traditional one that have been done before so it's a Maybe it is a classic innovators dilemma that we are so advanced in the capability we have and until it's been tested and proven. And when it has been, how do you then utilize it for other parts of the organization? So I think we'll see a little bit of this, but our goal is definitely not to have a renewal, not renew on the date of the renewal or before.

Okay. Let's move over to the T8. Concerning ABSON's T8 characteristics, when you say it has the lowest SWAP characteristics, are you comparing with your own products or the full market?

It's a very good question. I am comparing with our own product, which is the industry norm for performance, mobility and resiliency. And we do not know of any terminal of that sort, on the move sort, that is of that size, weight and power.

Good. How do you work with customer traffic when the order has expired? Do you let the customer continue to operate terminals during negotiation or do you shut down the service immediately?

Okay, so there are two questions in one there. The terminals these days are acquired by the customer. So if they have an inventory of terminals, they keep their inventory of terminals. It's their asset that they have. They can also buy service from us to repair it or replace it or so on or add another modem to it as we do with some. So that's one thing. They own it. In our previous history, we bundled the terminals into the service. Today, we don't in most cases. The second part of that question, remind me what that was. Oh!

Do you shut down the traffic immediately?

Yes, if the customer says we don't need it anymore, we will shut down the traffic. We're not a freebie or a research institute, we are a commercial business, so we do that. However, we have some customers where we have letter of intents or memorandums of understanding that they need it and that they commit to potentially paying for the service when they sign for it. But it cannot be six months or so. It's got to be shorter term aspects of that or else we will have to shut it down.

All right, and time's up, so it's time for us to shut down the broadcast as well. Thank you so much, Per and Andrea, for the presentation and all your answers.

Thank you, Mattias. Thank you for a good session.

Thank you to all the viewers as well. Thank you.