Sensys Gatso Group AB (publ)

Good morning and welcome to CensusGazzo's market presentation of the fourth quarter and year end of 2024. My name is Ivo Munnink. I am the CEO of CensusGazzo 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 fourth quarter and year end of 2024. We then follow up with a financial update by Simon and finally I will finish this presentation with a summary and our financial outlook for 2025. Let's now look at an update of our business. In this business update I will take you through our order intake the progress we are making with the major contracts in Sweden and the Netherlands, the recurring trust revenue development, updates on legislative changes in Iowa, updates on our Saudi customer and our Ghana joint venture project, our global revenue distribution, the strategic investments we are making mostly in the United States, and finally, our margin development. Order intake and procurement awards during the fourth quarter came in at 161 million compared to 212 million in Q4 2023. Of the total order intake, 79 million or 37% is from extended trust services and maintenance contract from the state of Victoria in Australia. Year to date, the total order intake including procurement awards amounted to 992 million 32% higher than last year at 754 million. In the full year 2024, no less than 655 million or 71% came from trust order intake, predominantly from 13 new and extended contracts signed with cities in our strategically important US market. The substantial share of recurring trust revenue within our 2024 order intake indicates that we have successfully implemented our strategy to establish a solid foundation of recurring revenue for the future. The backlog from our two large contracts secured in our home markets, Sweden and the Netherlands, amounts to 1,000 million. The development phase of the Swedish order of 850 million has been completed during Q4 of this year, with final acceptance by our customer in January 2025. This followed extensive testing required to align and integrate our new flux speed enforcement system with our customer's various IT systems, some of which are also new or updated. The commencement of the Swedish project rollout is now anticipated in the first half of 2025, encompassing the replacement of existing systems and the installation of new systems in the field. The service and maintenance component of the contract will be initiated incrementally and is projected to endure for the next 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 started in 2024 and continues during 2025 and is expected to be completed in 2026. Service and maintenance for the Dutch order is slowly facing in, starting in 2024 and ending in six years, with potential contract renewals for another six years thereafter. of the combined swedish and dutch 1200 1250 million contract value approximately 15 has been delivered today leaving more than 1 000 million still in the backlog of just these two programs in our home markets total revenue for the quarter arrived at 192 million where of trash revenue is 100 million and system sales 98 million The decrease in system sales was mainly related to timing of deliveries in Sweden and delay of anticipated orders from the Middle East. The recurring trust business equates this quarter to 51% of total sales. The trust revenue is primarily driven by our trust managed services business in the United States. For the full 2024, our trust managed services revenues grew by 2% from 363 million in 2023, to $371 million in 2024. This is notwithstanding the negative impact on our trust's managed services revenue caused by the legislative changes in the state of Iowa and the USA. For the full year 2024, our recurring trust business accounted for 59% of our total revenue. Talking about Iowa. As of May 2024, new legislation in Iowa led to a permitting process for automated speed enforcement systems issued by the Iowa Department of Transportation. Unexpectedly, only 11 out of 140 existing fixed speed locations permits were approved, including 7 out of 75 for census customers. 95 out of 148 million speed deployment location applications were approved. Red light enforcement cameras were not affected. We are working with our customers to find solutions to re-establish the operations of the speed systems that did not receive a permit. This process is both time-consuming and laborious, with consequently slow revenue recovery for our programs in Iowa. The estimated negative impact of the legislative changes on our 2024 revenue is 20 million kroner. Adjusted for this, the full year growth of our managed services business would have been approximately 14%. In April 2024, we signed a memorandum of understanding with our customer Tahacom in the Kingdom of Saudi Arabia. Following this, our customer provided technical qualification for automated traffic enforcement solutions And during the fourth quarter, SensoCasso has signed framework agreements for fixed and mobile speed, fixed red light enforcement, as well as a framework agreement for the service and maintenance on the delivered vehicle in motion systems. With these four framework agreements in place, detailed pricing and logistic terms and conditions, SensoCasso is now in the position to receive purchase orders under these agreements. In January 2025, we received the first order for the maintenance of the in-vehicle systems in Saudi Arabia. This was a first order for one year under a three-year framework work agreement. This purchase order is worth 27 million and execution is expected to start in Q2 2025. The expectation is that we will receive new purchase orders for the remaining two years under the framework agreement, with an increased level as more systems will be added for service and maintenance. In 2022, we entered into an 11-year contract with the government of Ghana for our 40% venture share in nationwide traffic management and enforcement LTD. The contract involves the design, building, financing, operation and maintenance of a nationwide road safety program. The total revenue for the joint venture is projected to be approximately 800 million over the contract period. The project rollout is progressing well, with the first test citations issued in 2024. Social media is picking up on this in a positive way. Due to Parliament elections in December, the formal confirmation of the legal framework has been delayed. The issuance of citations is expected to commence no later than July 2025. In our financial reporting, we show results from the project as results from joint ventures. SensoGasro is a globally active European company with a balanced sales mix across different regions. In 2024, revenue was distributed amongst the Americas with 30%, Europe with 43%, and APAC-MEA with 36%. Compared to full year 2023, the region APAC-MEA contributed less in 2024 due to the completion of the deliveries to Saudi Arabia. This has been compensated by the increased revenue in Europe, mainly through the rollout of the Dutch tender. Our global presence helps us at times to even out the volatility that is inherent to the one-off system sales part of our business. As we grow our recurring trust revenue, our total revenue growth will become even more stable. During the fourth quarter, we made strategic investments totaling 75 million. This included 24 million allocated to fixed assets in operations, primarily for equipment and construction, to support our managed services programs in the USA. Additionally, we invested 44 million to repurchase a minority shareholding from former employees in our SenseCasso USA entity, securing 100% ownership of this key driver of our growth strategy. Looking at our margin, our gross margin this quarter was 36% compared to 42% in Q4 2023. This is 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. System sales margins from this project are typically lower and precede the higher margin service and maintenance recurring revenue, which is expected to continue for at least six years. The overall gross margin of the contract will gradually recoup during this phase. Year-to-date, the margin was 38.2% compared to 40.5% in 2023. Our EBDA for the quarter arrived at 28 million compared to 45 million last year. And year-to-date, 2024, the EBDA arrived at 69 million compared to 85 million last year. On that note, I hand over to Simon Melder.

Thank you, Ivo. I will go through 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 198 million compared to 221 million. During the quarter, trust sales were stable at 100 million. The system sales came in at 98 million, 19 million lower than last year, mainly due to delay in deliveries in Sweden and less sales from the Middle East. The full year revenue amounted to 631 million compared to 624 million. The full year increase of trust sales by 3% is mainly attributable to growth in the first half year in the USA. The group's gross margin arrived at 36% for the quarter. For the full year, the margin landed at 38%. Lower margins compared to 2023 are mainly attributable to a lower margin on initial system sales in projects such as the Dutch tender. The operating expenses totaled 61 million, an increase of 3 million compared to Q4 of 2023. The full year expenses totaled 222 million compared to 240 million. The increase in expenses is driven by sales expenses related to inter-traffic fare in April of this year, increased sales activities in the USA, as well as costs relating to the acquisition of the minority shareholding in our US entity. Our operating profit for the period came in at 1450 million compared to 34 million in Q4 2023. The full year operating profit landed at 23 million compared to 39 million. Our managed services segment predominantly reflects our US business, including the costs related to development and maintenance of our software suites, Zillium and Pulse. During the quarter, the segment did not receive any order intake. However, from a full year perspective, the order intake grew from 134 million to 575 million in 2024. Revenue came in lower due to less volume on existing programs, mainly related to the Iowa legislation. The revenue for the quarter amounted to $54 million compared to $60 million in Q4 2023. The lower revenue has impacted the EBTA for the quarter amounted to $7 million compared to $50 million. From a full year perspective, demand and services sales is stable, moving from 192 million in 2023 to 194 million, with the EBTA amounting to 23 million compared to 26 million. Now on to the segment system sales, starting with order intake. The segment has seen a good order intake during the quarter with 161 million in order intake and procurement awards compared to 212 in Q4 last year. From a full year perspective, the order intake came in at 417 compared to 620 million. The rollout of the Dutch speed and wetland project Due to a lower activity level in Saudi Arabia and delayed deliveries in Sweden, the revenue for the quarter came in at $144 million compared to $161 million last year. From a full year perspective, the revenue has increased from $431 to $437 million. On a lower revenue level in the quarter, and due to the initial deliveries on the Dutch project, the EBTA came in at 21 million compared to 30 million last year. Full year, the EBTA came in at 45 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 has secured a €30 million bond to finance investments for future growth. With this €30 million, corresponding to €332 million, the company has repaid a large part of its long-term debt, as well as reduced the revolving credit facility, totaling €112 million. Investments during the year, mainly in fixed assets and operations for the US programs, amounted to €93 million. In the fourth quarter, CensusGazzo purchased the minority shareholding in CensusGazzo USA for 44 million. The net interest-bearing debt has increased from 109 million at the opening of 2024 to 270 million. The available cash has increased from 84 million to 203 million at the end of the period. On that note, I would like to hand it over to Ivo.

Thank you, Simon. Due to recent market dynamics, such as extended customer testing phases and legislative changes in the US, Census GATSO sees a delay in achieving its ambition of reaching 1 billion in revenue with an EBITDA margin of more than 15% in 2025. Despite the delay, Sans Grasso has made significant progress in several key areas, including obtaining first contracts in new states in the USA, expanding of the managed services business model into other geographical areas such as Australia and Ghana, and a strategic partnership in Saudi Arabia with the first order in hand. Our order book and remaining backlog of more than one billion Swedish kronor is robust and will provide solid revenue well into the future. We expect our trust business to continue delivering profitable growth driven by our strengthened U.S. team and a groundbreaking flux roadside platform. While we are disappointed to not meet our ambition within the original timeframe, we are resolute on our commitment to achieving this goal. Our long term strategy remains unchanged and we are taking proactive steps to address the challenges we've encountered. We are confident that these actions will position us to deliver our mission in the near future. For 2025, we expect our revenue to arrive between 700 and 800 million. And due to additional sales investments to accelerate growth within the US market, we anticipate to realize an EBITDA margin between 12 and 14% in 2025. As mentioned, our long-term strategy remains unchanged, and we are taking proactive steps to address the challenges we've encountered. We're confident that these actions will position us to deliver on our ambition in the near future. Before we go to the questions, I want to comment on the press release that was issued this morning about me stepping down as CEO of CensusGazzo by October 1st, 2025. I started my tenure at CensusGazzo on October 1st, 2017. After serving CensusGazzo as CEO for eight years, it's a natural moment for a transition in leadership. CensusGazzo is well positioned for its next phase of growth, and the board is committed to finding a leader who will drive continued innovation and expansion in global traffic safety solutions. I will help with this process and with the onboarding of the new CEO. I want to thank the global team at CensusGazzo and the board for the trust they have put in me leading this great company. We achieved a lot with a new strategy and a new organizational structure delivering strong double digit revenue growth and consistently positive EVDA. With an experienced leadership team in place and the company on solid footing, CensusGazzo is in a good place to accelerate growth further under the leadership of a new CEO. As mentioned, our long-term strategy remains unchanged and we're taking proactive steps to address the challenges we've encountered. We're confident that these actions will position us to deliver on our ambition in the near future. On this note, I now open up for questions. Let's maybe go first to the question Erjan was asking, which was about the rollout plan of TrafficFairgate. I answered there is no delays or the delay is caused by the acceptance of what we call the golden sample by the customer. We are past that gate now. And from there on, the rollout of the installation of the systems and the service and maintenance part of the contract will remain unchanged. And that will start happening in Q2. On the U.S. minority shareholding, what needs to be understood here is that these were former employees. They were holding a minority share. We had a call option to buy the stock. So it was not an obligation, but we decided to execute on that call option. and paid the 44 million in order to get 100% ownership in this very strategic entity for us. There was another question, are there any one-off costs related to this? The answer there is, of course, there are. There are in the P&L. I would say that's approximately 5 million Swedish kronor in Q4.

the investment plan on the fixed assets in operation I guess in the United States maybe that's something you can talk to some yeah Tim asked that question and when he fell off so I presume he was wanting to ask how do we see the investments for 2025 happening yeah I would say that we will continue in a similar level of investments like in in 2024 with the expectation of course of new orders coming in we will need to invest in construction and in technical equipment to support those programs in 2025 and thereafter. I hope that answers your question.

Please put your questions in writing. That probably works due to the bad line probably better.

Okay, we have questions from Tim. What can we expect with regards to the investments in 2025, similar levels than 2024 or lower? I think I just answered that. It's going to be similar levels. And let's hope that it will be similar levels because it means that the order intake will continue as it has done. Saudi Arabia, is the in-vehicle project already part of the new agreement?

and is it fair to assume that if you have agreement about the other systems it will be very substantial and are the projects already secured and signed okay let's let me take that one it's actually three questions on on the Saudi project the in-vehicle project that is the first order we got under a framework agreement for the service and maintenance of the 1200 in-vehicle systems we have delivered to Saudi Arabia. The order was 27 million Swedish kronor for only one year with a fairly limited amount of vehicles under that. The framework is for three years, so we would expect a year two, a year three to come in, but also a somewhat higher value there because more vehicles will be under the framework agreement. And saying that it's for three years, but you can imagine that that might be prolonged going forward, because the technical lifetime of our products are typically quite long. OK, so that's one question. Is it fair to assume that if you have agreements about the other systems, it will be very substantial? I commented to that before. There is four framework agreements in place, one for the in-vehicle, one for the fixed speed, one for the mobile speed, and one for the red light. Saudi Arabia is right now in a phase of investing in their infrastructure or part of their efficient 2030. Whatever they do will be very substantial because they almost start from zero. And we are one of the few suppliers that are qualified to deliver. And we have the framework agreements in place, meaning that all the pricing, commercial logistics obligations and commitments are already agreed upon with the customer. So it's waiting for the orders, and that is a timing thing. Okay, so that I think also answers the other question, and are the purchase already secured and signed? No, the framework agreements are signed. So from that perspective, yes, signed. The orders will come under these framework agreements. uh are okay iowa are there plans in place already how to overcome the issues here and any updates on the timeline um yes there are plans in place as with any governmental customer you can imagine that these processes are are not very swift so it takes time for these to be executed but concretely we are installing or actually ordering new trailers that can go on the mobile locations which are still open so we can and we have the red light enforcement still in place so there is some recoveries going on but i do not expect us to recover the full business in iowa within 2025. i cannot say anything about 2026 but 2025 we will see a part of the the shortfall in the revenue in iowa notwithstanding that we have grown our trust service managed services business in 2024 And I do foresee this also to happen in 2025. Another question coming from Silver Schneiman. Could you give some more color on what the drives are behind Iowa and lower end and higher end of your guidance range and that we should watch out during 2024? Yeah, I think if you look at the guidance, we say we arrive between 700 and 800 million, but also we retain the ambition to 41 billion going forward. It's all about timing. So I think the most impact is actually coming from the Saudi orders when they will come in and the size about those, of course. And we will also see the impact of the timing in traffic circuit.

yeah that's that's it and the recovery we see in in the in the new cities in and in and the going life of the new cities in in the united states yeah i think tim you uh you asked the question that uh in the guidance we don't mention the part of the the trash recurring uh part of the revenue. And that's right, we didn't provide any guidance on that. But I would say that, you know, in the ambition, we have 60% of trans-recurring revenue. We are at that level almost when you look at 2024. um so that that that is still something that we are targeting uh very much of course that being said uh that if if we end up on the higher end of the of the guidance you can imagine that that is more system sales driven so that could push down that that metric towards the uh towards the end of the year potentially but but on average i would say a similar kind of uh revenue distribution between recurring and non-recurring

okay yes thank you very much for attending this meeting and looking forward to meeting you again in the next quarterly report have a nice day