Sensys Gatso Group AB (publ)

Good morning and welcome to SensofGazzo's market presentation of the first quarter of 2024. My name is Ivo Munnink, I'm the CEO of SensofGazzo and I will be presenting to you together with Simon Melder, our CFO. In this market presentation, I will provide you with an update on our business for the first quarter of 2024. we then follow up with a financial update by simon and finally i will finish this presentation with a summary and our outlook let's now look at an update of our business in this business update i will take you through our order intake which is up by 253 percent this quarter the strong backlog in our whole markets sweden and the netherlands Strong revenue growth of 11%. An explanation for the typical Q1 seasonality in the US market. Our gross margin, which is suppressed this quarter due to the startup of system sales deliveries in the Netherlands. An update on our enhanced relationship with our Saudi customer. And finally, an impression of our successful inter-traffic show. Order intake and procurement awards during the first quarter came in at 380 million compared to 90 million in Q1 2023, an increase of 253%. Of the total order intake, 270 million or 86% of the total order intake is US trust managed services. This is nearly eight times higher than the U.S. Trust managed services order intake in Q1 2023 of 35 million. In total, there were nine new contracts signed during the first quarter in our strategic U.S. market. Of these contracts, four are new cities with a total contract value of 154 million and five are renewal contracts with existing cities with a total contract value of 121 million. Overall, we see a strong order intake this quarter, especially when looking at our trust order intake in the USA. It demonstrates that our increased sales efforts in the strategic markets are paying off. In 2022, we received two large orders in our home markets, Sweden and the Netherlands. The combined value of these two contracts is 1.25 billion. the swedish order of 850 million is in its final development phase the rollout of this project will commence in the third quarter and will continue for the next five years the dutch order worth 400 million has started its rollout and will continue in into the first half of 2025 depending on the acceptance schedule from our customers Of the combined contract value of 1.25 billion, approximately 5% has been delivered so far. The remaining revenue for these two large contracts still is in the backlog and is therefore approximately 1.2 billion or 95%. Overall, our strong order intake this quarter and large backlog combined provide for solid revenue generation in the coming years. Total revenue for the quarter arrived at 125 million compared to 130 million in Q1 2023. This is an increase of 11%. Looking at revenue by nature, our system sales for the quarter arrived at 41 million. Compared to 27 million in Q1 2023, this is an increase of 51%. Our trust revenue for the quarter of 84 million was slightly lower than Q1 2023 at 86 million. This recurring business equates to 67% of total sales in the quarter. The trust revenue is primarily driven by our trust managed services in the US, which was up by 16% to 50 million compared to 43 million in Q1 2023. Our Tasmania Police project has contributed 10 million, or 12%, to our trash sales. We normally see fewer citations in managed services at the beginning of the year. This is due to seasonal effects brought on by extreme weather, particularly in Ohio, Iowa, and Rhode Island, our top revenue generating states. As a result of the extreme weather, people drive less and more slowly. in addition during the holiday season schools are closed for several weeks and automated traffic enforcement is deactivated by law in q2 we usually observe a return to increased citations and revenue levels our gross margin this quarter was 37.5 percent compared to 40 percent in q1 2023. This is mainly due to lower margins on deliveries of system sales in the initial phase of a new contract. We typically start the rollout of a new system sales program with the delivery and installation of systems, followed by acceptance by our customers. And only after customer acceptance, the systems go into operation and the service and maintenance part of the contract commences. This is a gradual process over a period of 12 to 18 months. The program will come to full fruition when all new systems have been installed and are in operation. The overall gross margin of the contract will gradually recover during this phase. Mid-April, the largest global show in our industry, the InterTraffic, was conducted in the Amsterdam Arrive. The day before the opening of the show, we organized our partner day in our Harlem offices. Here we presented to more than 50 invited partners and customers, our fast software-based product vision and 13 user stories. At our booth at the show, we presented a live demo of our new Flux roadside system. The show was a great success for CensusGazzo, renewing many existing customer relationships and developing promising new ones in various regions. After a successful delivery of our unique vehicle in motion solution to our Saudi customer, we are extending our relationship to potentially introduce new enforcement solutions and server level agreement to maintain the installed pace. During the inter-traffic industry show, we signed a memorandum of understanding with TahaCom, our Saudi customer. With this MOU, San Saskatchewan will collaborate with Tahacom in multiple initiatives across Saudi Green Initiative, local content, and the Road to Saudi Vision 2030, reinforcing the strong partnership between the two entities that dates back to 2016. San Saskatchewan and TACOM will provide the kingdom with next-generation traffic safety solutions which can handle a variety of smart mobility features in all environments and weather conditions. On that note, I would like to hand over to Simon Milberg.

Okay, thank you, Ivo. We have three topics for today. Our consolidated income statement, the performance of our segments, and finally, our financial position. Looking at the consolidated income statement, we focus on revenue margins and profitability. The revenue for the quarter came in at 125 million compared to 130 million, an increase of 11%. The trust revenue has shown a decline of 2% compared to Q1 2023 due to a one-off impact on additional repair and maintenance requests in Sweden resulting from demolished cameras in late 2022. 12 months rolling, the trans revenue is up by 10%, driven by growth in our US and Australian managed services programs. The group's gross margin is impacted by lower margins on initial deliveries of the Dutch project, with the expectation that this will return to normal margins on this project once the project is in full operation. The gross margin amounted to approximately 37.5%, 12 months rolling, the margin is at 40%. The operating expenses totaled 55 million in line with Q1 2023. 12 months rolling, there is an increase of 6 million related to investments in the organization in the US mainly. Our operator profit for the period came in at negative 7 million compared to negative 9 million in Q1 2023. Our managed services segment predominantly reflects our U.S. business, including the costs related to development and maintenance of our software suites Zillium and Pulse. During the quarter, we've had high activity in contract signings, with $275 million in total contract value over the contract periods. The start of these programs depends on receiving legal and construction permits. Revenue has grown by $7 million to $50 million in the quarter. The growth in revenue is driven by new programs contributing in full to the top line. In comparison to the fourth quarter of last year, revenue has declined by 9 million, which is due to seasonality. As our revenue is largely dependent on volume, weather has an impact on the output of the programs. The managed services segment has realized an EBITDA of 8 million, a growth of 4 million compared to the same quarter last year. On a 12-month rolling basis, revenue has grown from $178 million to $199 million, a growth of 12%. The EBITDA from a 12-month rolling perspective has increased by 15%, from $26 million to $30 million. During 2023, we have invested in our US organization in the operational as well as sales teams. We can now see these investments paying off. Now onto the second system sales, starting with the order intake. Order intake during the quarter landed at 44 million, mainly due to repeat orders of existing customers. During the quarter, we have continued to deliver on the Dutch project, for which we communicated an additional order intake worth 150 million in the fourth quarter, bringing the estimated contract size to 400 million in total. Revenue has increased by 6%, growing from 71 to 75 million in the quarter. Due to the initial deliveries on the Dutch project, we've seen a lower gross margin impacting our EBDA. This has resulted in a negative EBDA of 4 million for the quarter. 12 months rolling, our revenue has increased from 317 million to 436 million, a growth of 37.5%. with our EBITDA increasing by 24 million, approximately 70%. Discussing the financial position of our company, I would like to focus on cash movements, interest-bearing debt and available cash. The largest movements in our available cash position are working capital and investments. During the first quarter, we have received payments on deliveries to Saudi of approximately 60 million, improving our cash position and lowering our working capital in trade receivables. Due to the pre-financing of big projects, we have invested 70 million in inventory and work in progress. These investments are mainly related to signed projects. The net improvement in working capital amounted to 40 million. The USA has continued rolling out unsigned contracts of 2023. resulting in investments in fixed assets and operations of 16 million. In the first quarter, we have demonstrated Flux as a new product to the market. On our platforms Flux, Pulse and Zillium, we've continued to invest to the amount of 8 million. In 2023, we started investing in our Ghana joint venture. The investment in the quarter amounted to 3 million. Our total investment in fixed assets amounted to 27 million in the quarter. The adjusted net interest bearing debt has decreased compared to the closing balance of 2023, mainly due to replenishing the credit facility through the receipt of the payments from the Saudi project. The adjusted net interest bearing debt at the end of the period amounted to 61 million. The available cash has improved from 84 million to 112 million by adding the operational cash flow of 50 million and taking the largest movements in our cash position into account. And on that note, I would like to hand it over to Ivo.

Thank you, Simon. Our order book is strong with a revenue backlog of nearly 1.2 billion from two large contracts in our whole markets, Sweden and the Netherlands. Our profitable trust business continues to grow and our strengthened team in the USA proves to be able to push our top line in this strategic market. On top of that, we see our new groundbreaking roadside platform Flux coming to fruition in the market. We therefore retain our long-term plan and ambition to, by the end of 2025, grow our net sales to more than 1 billion, of which Thras revenues is more than 600 million. And we also retain our ambition to increase our EBDA margin to more than 15% by the end of 2025. On this note, I now open up to questions.