Sensys Gatso Group AB (publ)

Good morning and welcome to CensusGazzo's market presentation of the third quarter of 2024. My name is Ivo Munnink, I'm the CEO of CensusGazzo and I will be presenting to you together with Simon Melder, our CFO. In this quarter presentation, I will provide you with an update on our business for the third 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, where we now year to date have 13 new contracts in the USA. Our backlog, which includes 1 billion of large orders in our home markets. Our recurring trust revenue, which is 70% of total revenue this quarter. Unexpected legislative changes in Iowa. An update on our Saudi customer where we entered the next phase in our relationship. Our available cash position that increased this quarter to 295 million due to a successful bond issue in September. And finally, our margin, which is stable at 37%. Order intake and procurement awards during the third quarter came in at 95 million compared to 145 million in Q3 2023. Of the total order intake, 25 million is from a new Trust Managed Services contract with the city of Montgomery Town in Pennsylvania, USA. Year to date, the total order intake, including procurement awards, amounted to 831 million, 55% higher than last year at 541 million. In the first three quarters of 2024, no less than 576 million or 70% came from trust order intake from the US market with 13 new contracts, including renewals and extensions. This translates to an average revenue per contract of 44 million. In 2022, we received two large orders in our home markets, Sweden and the Netherlands. The combined value of the two contracts is 1.25 billion. The development phase of the Swedish order of 850 million is nearly completed and our customer traffic fair get is in the final phase of acceptance. We are jointly targeting successful completion of an extensive test program of both the hardware and software of our solution in Q1 2025. This extensive test program is required to align and integrate our new flux speed enforcement system with our customers' various IT systems, some of which are also new or updated. The start of the rollout of this project is now expected to commence in the first half of 2025 with the replacement of existing systems and the installations of new systems in the field. The service and maintenance part of the contract will gradually kick in and continue for an expected 12 years. Implementation continues for the Dutch order, which is worth 400 million, split between 200 million in system sales and 200 million in repairs and maintenance over a six-year period. The system's installation rollout has really taken on in the third quarter, with approximately 145 million delivered year-to-date. We expect to continue installations into the first half of 2025, depending on the acceptance schedule from our customer. Of the combined 1.25 billion contract value, approximately 12% has been delivered to date, leaving more than 1 billion still in the backlog of just these two programs in our home markets. Total revenue for the quarter arrived at 141 million compared to 157 million in Q3 2023. This is a decrease of 10%, mainly driven by lower system sales, which arrived at 42 million 40% lower compared to the 71 million in Q3 2023. Our trust revenue for the quarter of 99 million was 15% higher than Q3 2023 at 86 million. This recurring business equates this quarter to 70% of total sales. The trust revenue is primarily driven by our trust managed services business in the USA. Year to date, our trust managers services revenue grew by 10% from 156 million in 2023 to 172 million in 2024. The revenue from newly signed contracts in the USA this year is not yet part of this. We expect a number of these new contracts to start contributing by the end of 2024. As of May 17, 2024, The state of Iowa in the USA 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 fine amounts, and speed thresholds. As communities navigated the changes, some programs were temporarily paused between May 17 and late June. As part of the new legislation, each location where automated speed enforcement was already being used had to receive a permit through the Iowa Department of Transportation. The Iowa Department of Transportation has now released its decisions on submitted permit applications for automated speed enforcement systems. Unexpectedly, only 11 out of 140 fixed speed locations permits throughout the state were approved. For Census Gatso's customers, 7 out of 75 fixed speed system location permits were approved by the Iowa DOT. In addition, 95 of 148 submitted mobile speed and deployment location applications were approved. The legislation and permitting process did not apply to automated red light enforcement cameras in the state. Each of those 52 installed systems will continue normal operations. All city authorities are investigating the appeals process, allowing for reconsideration of all sites not permitted in the unprecedented decisions by the IOI DOT. Our leadership team is in communication with our customers to see how we might be able to provide assistance to fill the void in their traffic safety programs. In the interim, Sensegatso, including our local consultants and legal counsel, will work with the partner communities to seek all options that would re-establish the operations of the speech systems not receiving a permit. In April, we signed a memorandum of understanding with our customer Tahacom in the Kingdom of Saudi Arabia. Following this, our customer provided technical qualification for fixed and mobile speed, fixed red light solutions. After the quarter, CensusGazzo has signed framework agreements for these three types of enforcement, as well as a framework agreement for service and maintenance on the delivered vehicle in motion systems. With these agreements in place, CensusGazzo is now in the position to receive the first purchase order under these agreements, which will cater for supply of enforcement solutions during the period 2025 through 2027. With the signing of these new framework agreements, a year later than initially anticipated, we have entered the next phase in our relationship with TACOM in the Kingdom of Saudi Arabia. In September of this year, CensusGadzo successfully raised €30 million for the issuance of senior unsecured bonds with a four-year tenor and the floating rate interest of Euroboard three months plus 4.75% per year under a framework of 60 million euro. The net proceeds from the bond issue have partly been applied to refinance existing debt and primarily towards general corporate purposes, including investing in working capital and fixed assets in operation to accelerate further growth of CensusGazzo. At the end of this quarter, the free available cash amounted to 295 million compared to 84 million at the start of the year. After the quarter, the company has successfully applied to have the bonds admitted to trading on the corporate bond list of Nasdaq Stockholm. Our gross margin this quarter was 37% compared to 38% in Q3 2023. This is somewhat lower than our run rate margin of 40% and is driven by the relatively large contribution this quarter of system sales from the Dutch project. In a contract like the Dutch tender, we start with the installation of the enforcement equipment alongside the roads. When our customer accepts the individual sites, we recognize the revenue in our system sales business segment. Margins on system sales are typically lower and precede the higher margin service and maintenance part of the contract. This recurring revenue is gradually phasing in with the installations of the system and is expected to continue for a minimum period of six years. The overall gross margin of the contract will gradually recoup during this phase. Year-to-date, the margin was 39.1% compared to 39.9% in 2023. Our EBDA for the quarter arrived at 12 million compared to 90 million last year. A year to date, the EBDA arrived at 40 million, similar to last year. On that note, I'd like to hand over to Simon Mulder.

Thank you, Ivo. I will take you through the consolidated income statement, the performance of our segments and our financial position. Looking at the consolidated income statement, we focus on revenue margins and profitability. The revenue for the quarter came in at 141 million compared to 157 million. Year to date, the revenue amounted to 433 compared to 403 million. During the quarter, trust sales has increased by 13 million. The 12-month rolling increase of trust by 3% is mainly attributable to growth in the first half year in the USA. The group's gross margin arrived at 37% for the quarter. Year-to-date, the margin landed at 39%, and from a 12-month rolling perspective, the margin came in at 40%. The operating expenses totaled 49 million, a decrease of 3 million compared to Q3 2023. Year to date, the expenses totaled 161 million compared to 156 million. The increase in expenses is driven by sales expenses related to the inter-traffic fair in April of this year and increased sales activities in the USA. 12 months rolling, the expenses are at a comparable level. Our operating profit for the period came in at 1 million compared to 8 million in Q3 2023. Year to date, the operating profit landed at 8 compared to 5 million. From a 12 months rolling perspective, the operating profit came in at 42 compared to 49 million. Our managed services segment predominantly reflects our US business, including costs related to development and maintenance of our software suites, Zillium and Pulse. With an order intake during the quarter of 25 million, we have a similar order intake level compared to Q3 last year. Revenue came in lower due to less volume on existing programs. The impact compared to Q3 last year is 3 million. EBITDA came in at 2 million for the quarter. From a year-to-day perspective, the managed services sales is stable, moving from 203 million in the previous quarter to 200 million. With 12 months rolling, the EBITDA amounting to 31 million compared to 34 million for the previous quarter. Now onto the segment system sales, starting with the order intake. Order intake during the quarter landed at 70 million, mainly from smaller repeat orders from existing customers. The rollout of the Dutch speed and red light project has increased velocity during the quarter. Due to a lower activity level in the Middle East compared to Q3 2023, the revenue came in at 99 million compared to 112 million last year. On a lower revenue level and due to the initial deliveries on the Dutch project, the EBTA came in at 10 million compared to 15 million last year. 12 months rolling. Our revenue has moved from 468 million to 455 million, with our EBITDA moving from 59 million to 54 million. 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 increased funding through the bond issue and investments. In September, the company secured a €30 million bond to finance investments for future growth. With this €30 million, the company has repaid a large part of the long-term debt during the quarter and the remaining after the quarter. On a net balance, the securing of the bond and repayment of the loans resulted in an increase of €263 million in our available cash. The investments year to date amounted approximately 62 million, of which 33 million in fixed assets and operations for mainly the USA. The company has continued to invest in its products, adding 21 million to the intangible fixed assets. The net interest bearing debt has increased from 109 million at the opening of 2024 to 159 million at the end of the quarter. mainly due to investments in working capital and fixed assets. The available cash has increased from 84 million to 295 million at the end of the period. On that note, I'd like to hand it over to Ivo.

Thank you, Simon. Our robust order backlog of over 1 billion provides solid revenue visibility well into the future. We expect our trust business to continue delivering profitable growth driven by a strengthened US team and a groundbreaking flux roadside platform. However, we also recognize that recent market dynamics such as extended customer testing phases and legislative changes may temporarily affect our timeline. The Swedish contract rollout is now anticipated to start in early 2025, and we are addressing recent Iowa program suspensions alongside our customers. Additionally, commercial timelines in Saudi Arabia are shifting into 2025. While these factors affect short-term timing, they do not impact our long-term ambition. We remain confident in our growth trajectory with our strategic initiatives on track to deliver sustainable, profitable growth. On this note, I would like to open up for questions. Operator?