Sensys Gatso Group AB (publ)

Good morning everybody and welcome to SenSysGazzo's market presentation of the second quarter and first half of 2024. My name is Ivo Munnik, I am the CEO of SenSysGazzo and I will be presenting to you together with Simon Mulder, our CFO. In this market presentation, I will provide you with an update on our business for the second quarter and the first half year 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 37% this quarter and 86% year to date. The large backlog in our home markets, Sweden and Netherlands of 1.14 billion. Strong revenue growth of 26%. An explanation on the legislative changes in Iowa. An update on our enhanced relationship with our Saudi customer. Our investments in working capital for the large contracts we signed in our home markets, Sweden and the Netherlands. And finally, our improving EBDA, which is up by 28%. Order intake and procurement awards during the second quarter came in at 418 million compared to 306 million in Q2 2023, an increase of 37%. Of the total order intake, 276 million or 61% is from Trust Management Services contracts in the United States. Part of the order intake this quarter is the signing of our first contract in the town of Stratford, Connecticut, worth 73 million. This state just recently opened up for voter enforcement. Getting our first contract in this state is an important milestone for CensusGETSO USA. For the first half year, the total order intake, including procurement awards, amounted to 736 million, compared to 396 million in the first half of 2023. No less than 551 million, or 75%, came from cross-order intake from the U.S. market. With our strengthened U.S. sales team, we managed to sign 12 contracts in the first half of this year, of which 5 new customers and 7 contract renewals and extensions. It's encouraging to see that our stepped up sales average in the strategic US market are clearly visible in the order intake. In 2022, we received two large contracts in our home markets, Sweden and the Netherlands. The combined value of the two contracts is 1.25 billion. The Swedish order of 850 million is in its final development phase. The rollout of this project is now expected to start 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 into the first half year of 2025, depending on the acceptance schedule from our customer. Of the combined 1.25 billion contract value, 9% has been delivered to date. The remaining 1.14 billion is still in our backlog. Total revenue for the quarter arrived at 167 million, compared to 133 million in Q2 2023, this is an increase of 26%. Looking at revenue by nature, our system sales for the quarter arrived at 190 million, and compared to 90 million in Q2 2023, this is an increase of 32%. Our trust revenue for the quarter of 88 million was slightly higher than in Q2 2023 at 87 million. This recurring business equates this quarter to 53% of the total sales. The trust revenue is primarily driven by our trust managed services sales, which was up this quarter by 30% to 59 million. Year to date, our Trust Managed Services revenue grew by 16% from 102 million in 2023 to 118 million in 2024. The revenue from newly signed contracts in the USA this year is not yet part of this. We expect these new contracts to start contributing by the end of 2024. As of May 17, 2024, the state of Iowa in the United States enacted legislation that provided guidelines for automated speed enforcement programs. The aim is to bring Iowa legislation in line with other states, mostly regarding permitted locations, maximum fire amounts and speed thresholds. As communities navigated the changes, some programs were paused between May 17 and late June. We estimate that the pause of the programs will have a limited effect on our revenue for 2024 in the United States. The changes include the catch-up period through the process of restarting the mailing of citations and the timing for payments thereafter. We do not project that the Iowa legislation changes will have an effect on the delivery of services or revenue in future years other than a pause on the start of the implementation of three new programs in Newton, Granger and Grenoble. Our US sales team will continue to work with partner communities to ensure the effective finish of their driver safety programs while adhering to the new regulations. In April this year, we signed a memorandum of understanding with our customer Tahacon in the Kingdom of Saudi Arabia. With this MOU, Saint-Segasso will collaborate with TACOM 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. Saint-Segasso and TACOM will provide the Kingdom with next-generation traffic safety solutions that can handle a variety of smart mobility features in all environments and weather conditions. Next to the successful in-vehicle solution, Tahacom has now technically qualified Sensegazo as a supplier of fixed speed and fixed red light solutions, creating the possibility for a more in-depth relationship in the future. The available cash at the end of the quarter came in at 65 million, compared to 84 million at the beginning of the year. Financing of big projects such as the Swedish and the Dutch contracts has temporarily increased our investments in working capital. On top, we have continued investing in fixed assets and operations in the USA, as well as in our software platforms Flux, Pulse and Scillium. With the rollout of the projects in Sweden and the Netherlands, we expect a gradual improvement of our available cash. Our gross margin this quarter was 42%, the same as in Q2 2023. This is mainly due to higher margins on system sales from our Saudi customer. At the same time, and as we planned, we faced lower margins on deliveries of system sales in the initial phase, specifically from the new large contracts in the Netherlands and Sweden. We typically start the rollout of a new system sales program with the delivery and installation of systems, followed by the acceptance by our customer. Only after this 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 typically 12 to 18 months. The program will come to full fruition when all the new systems have been installed and are in operation. The overall growth margin of the contract will gradually recoup during this phase. 12 months rolling, our margin is stable at around 40%. Our EBDA for the quarter arrived at 25 million, 28% higher than in Q2 2023 at 19 million. Year to date, the EBDA arrived at 28 million, 37% higher than the first half of 2023 at 21 million. On that note, I would like to hand over to Simon Melvin. 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 167 million compared to 133 million, an increase of 26%. For the first half year, the revenue amounted to 292 million compared to 246 million, up by 19%. The increase in sales is driven by strong system sales deliveries during the quarter and the first half year compared to 2023. The trans revenues have shown an increase of 2% compared to Q2 2023. From a half year perspective, trans revenues are in line with 2023. Trans growth in the quarter has been impacted due to Iowa legislative changes. that are expected to have a minimal impact on the full-year projected revenue of trans-managed services in the US. 12 months rolling, the revenue is up by 5%. The gross gross margin arrived at 42% for the quarter. The first half year, the margin landed at 40%. The increase in margin is related to higher margin on the latest Saudi deliveries. 12 months rolling, the margin came in at 40%. The operating expenses totaled 57 million, an increase of 7 million compared to Q2 2023. The first half year, the expenses totaled 112 million compared to 104 million. The increase in expenses is driven by sales expenses related to the inter-traffic fair in April of this year and increased sales activity in the USA. 12 months rolling, the expenses increased by 3%. Our operating profits for the period came in at 40 million compared to 6 million in Q2 2023. For the first half year, the operating profit increased from negative 3 million to positive 7 million. 12 months rolling, the operating profit amounted to 49 million, a margin of 7%. Our Managed Services segment predominantly reflects our US business, including the costs related to development and maintenance of our software suite, Zillium Impulse. During the quarter, we've had a high number of contract signings, with 276 million in total contract value over the contract periods. Revenue has grown by 3 million to 48 million in the quarter. The Managed Services segment has realized an EBITDA of 7 million, also a growth of 3 million. On a 12-month rolling basis, revenue has grown from 178 million to 203 million, a growth of 14%. The EBITDA, from a 12-month rolling perspective, has increased by 79%, from 19 million to 34 million. During 2023, we have invested in our US organization, in the operation as well as the sales teams. The EBITDA is in an upward trend since the second quarter of 2023. Now on to the segment system sales, starting with order intake. Order intake during the quarter landed at 142 million, mainly due to the win of the Dutch EG39 tender for average speed enforcement on Dutch highways worth 84 million. Of this total amount, an estimated 48 million relates to cross service and maintenance over a six year contract period. On top of that, we have received several repeat orders from existing customers and extensions on Dutch service and maintenance contracts during the rollout of the Dutch tenders. The rollout of the Dutch speed and red light project has increased velocity during the quarter and now has several sites waiting for acceptance by the customer. After that, invoicing and payment is expected swiftly. Revenue has increased by 35%, growing from 88 million to 119 million in the quarter. Due to the initial deliveries on the Dutch project, we've seen a lower gross margin impacting our EBTA. But with higher margins on our latest Saudi deliveries, the EBTA came in at 18 million, or 15%. 12 months rolling, our revenue has increased from €324 million to €468 million, a growth of 44%, with our EBITDA increasing with €18 million, also a 44% growth. 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 half year, we financed big projects. On a balance, working capital has increased during the year with 24 million. The USA has continued rolling out on signed contracts of 2023, resulting in investments in fixed assets and operations of 19 million. Investments in our platforms Flux, Pulse and Zillium have resulted in an addition to the amount of 16 million. And in 2023, we started investing in our Ghana joint venture. The investment in the first half year of 2024 amounted to 4 million. The adjusted net interest bearing debt has increased compared to the closing balance of 2023, mainly due to the investments in working capital and fixed assets. The adjusted net interest bearing debt at the end of the period amounted to 124 million. The available cash has decreased from 84 million to 65 million by adding operational cash flow of 35 million and taking the largest movements in our cash into account. With the rollout of the projects in Sweden and the Netherlands, we expect a gradual improvement of our available cash. And on that note, I would like to hand it over to Ivo.

thank you simon uh our order in book is strong with a revenue backlog of 1.14 billion from two large contracts in a whole market sweden and the netherlands our profitable trust business continues to grow and our strengthened team in the usa proves able to sustainably grow our top line in this strategic market on top we're pleased to see our new groundbreaking roadside platform flux now launched in our whole market sweden and the netherlands We therefore retain our long term plan and ambition to, by the end of twenty twenty five, grow our net sales to more than one billion, which revenue is more than six hundred. We also retain our ambition to increase our day margin to more than 15 percent by the end of twenty twenty five. On that note, I would like to open up for questions.