Sensys Gatso Group AB (publ)

Good morning and welcome to the presentation of Census GATSO Group's Q2 2025 Interim Report.

Welcome to the Census GATSO Group QT 2025 Report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to speakers CEO Lewis Miller and CFO Simon Mulder. Please go ahead.

Good morning, and welcome to the presentation of Census GATSO Group's Q2 2025 Interim Report. My name is Lew Miller, Group Chief Executive Officer. I started with the company on June 16th of this year, bringing 20 plus years of industry experience in various senior leadership positions in global markets. Joining me this morning is Simon Mulder, the group's chief financial officer. I'll be speaking briefly on joining the company and then provide an overview of our strong quarterly results. I'll then turn the discussion over to Simon to review the group's financial results in greater detail before addressing our financial outlook for the remainder of the year and opening things up for questions. First and foremost, I'm thrilled with the opportunity to join the company and would like to thank Ivo, our prior CEO, for his excellent guidance of the company and smooth transition. Here at CensusGazzo, we have a strong history and globally recognized brand a global footprint in core markets, the strong demand for automated enforcement solutions, including in Europe, Asia Pacific and North America. And we have innovative technology backed by a talented and dedicated team. In short, we have a very strong foundation from which to grow. And again, I'm very excited for the opportunity to lead the company. Now, into my third month, I've been focusing on engaging with our global teams and stakeholders to better understand what drives our performance, assessing our markets to support good investment decisions backed by strong business cases, and evaluating our technology and go-to-market strategies to ensure we are positioned for success. All of this is with a clear goal of driving profitable growth and efficient operations. With that said, let's take a look at our financial results for Q2. Focusing first on our strong revenue results for the quarter, we achieved 204 million Swedish krona, representing a 22% increase over the same period in 2024. This included significant revenue from our core Swedish and Dutch projects, as well as the commencement of trust revenue from our Saudi maintenance contracts. The U.S. business is recovering nicely from last year's legislative changes in Iowa with incremental revenue from new contracts and program expansions. Overall, we continue to see strong demand in our core markets with numerous opportunities in process. Turning next to EBITDA, we are also pleased with our Q2 results. EBITDA for the quarter amounted to 31.4 million Swedish krona, or a margin of 15.4%. This is up from 7.3% in Q1 and a 29% increase over Q2 2024. Overall, our EBITDA margin for the first half of the year is 11.8%. We believe our Q2 results better reflect our underlying operational performance heading into the second half of the year. With that, I'd like to turn things over to Simon to speak to our group financial results in greater detail.

All right. Thank you, Lou. As always, I will take you through group financial performance, go into detail on our segments performance, and look at our cash position. To start with the group financial performance, as Lou has already mentioned, Q2 revenue increased by 22 percent to 204 million, with system sales increasing 39% and trust revenue increasing 7%. The increase is mainly driven by Swedish and Dutch projects, as well as Saudi revenue. We've seen a good gross margin, gross profit margin of 43%, positively impacted by Saudi revenue. This has resulted in a strong EVTA 31.4 million, up 29%, representing a 15.4% EBITDA margin. The Q2 performance resulted in a positive cash flow from operations of 22 million. Looking at the segment managed services, the segment managed services mainly relates to our US operations. We see a strong market demand with significant procurement activity. Despite that, we've seen a lower order intake compared to Q2 of 2024 due to renewal timing and expected sales cycles. During the quarter, revenue has stabilized. The revenue was slightly down from 48 million to 46 million, impacted by currency fluctuations to 5 million, the impact of Iowa legislative changes of approximately 6 million, and an underlying growth of our U.S. business of approximately 9 million from new customers and program expansions. EBITDA was up by 28% to 9 million, including a one-time insurance recovery of 8 million Swedish programs. Then moving to the segment system sales. The order intake for the quarter amounted to 40 million Swedish kroners. This is from various existing customers with smaller and repeat orders. Revenue during the quarter was up by 33%, driven by deliveries on the Swedish project and the Dutch project, as well as Saudi Arabia final imports. The segment system sales now has a trust revenue that is stable around 47 million per quarter. EBITDA is up by 29% to 23 million, impacted by a high flowdown of the Saudi financial invoicing, but offset by the provisioning of the LATAM receivables. Then moving to our cash position. Our available cash ended at 137 million. During H1, we've invested in fixed assets and in working capital, both to approximately 40 million Swedish kronor. The investment in working capital relate to project related inventory buildup and receivables that will convert the cash. Several items has impacted our interest bearing debt that ended at 291 million, such as increased lease liabilities related to the prolongation of our headquarters to 22 million, translation effects on our bond of 10 million Swedish kronors, and increased credit facility usage of 20 million. With that, I would like to hand it back over to Lou.

Thanks, Simon. To conclude our presentation, I'd like to address our financial outlook for the remainder of the year. In doing so, we need to recognize certain instabilities in the global political environment, which pose challenges for forecasting our full-year results. However, our strong base of long-term recurring revenue helps to mitigate risk. We achieve approximately 100 million Swedish krona in recurring revenue quarterly from long-term contracts with high renewal rates, with contributions from each of our core markets, including approximately 50 percent from the US. In light of this, we are reaffirming our 2025 financial guidance. At mid-year, we're trending to the lower end of our revenue guidance of 700 to 800 million Swedish krona and the mid-range of our EBITDA guidance of 12 to 14 percent. We'll continue to closely monitor market developments and are confident in our ability to deliver in line with expectations. To summarize our interim report today, the takeaways are as follows. We continue to see high demand globally with multiple opportunities in process. For the quarter, we had strong revenue growth with improved EBITDA margins, and we're reaffirming our 2025 financial guidance. With that, I'd like to open things up to questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Yes, hello everyone, and we're welcome to the financial world of Census Gatsby Lewis. We're looking forward to work with you. I will start with some financial questions for Simon, and then I turn over to some more market-oriented questions to you, Louis. Simon, if I understand correct, the net one-off impact on the result is plus 4 million, minus 18 plus and 14 minus. Is that correct interpretation?

Yes, that's correct.

Okay, thank you. The second question is on the FX items. I suppose that is non-cash, that is just re-evaluation of different balance sheet items. Is that how I interpreted this correctly?

Yeah, Erjan, you're absolutely right. So we know that we have Euro bonds and we have various receivables and payables in different kind of currency. And these translate at end of the month, end of the quarter. and are largely unrealized translations of those currencies.

Okay, thank you. Another question is on investments in fixed assets. They were quite high in the quarter. What was that, and what is the outlook for your capex budget for the rest of the year?

I have to start with the first question, Erjan, is that in the presentation of the managed services segment, we elaborated on the underlying growth of that segment related to the U.S. business of approximately 9 million in the quarter. Of course, that revenue buildup or increase is driven by new investments in fixed assets and operations. That is ongoing for us throughout the year. So I would expect it to be similar during H2. I hope that answers your question.

Okay, yes, thank you very much. And a final question for you, Simon. The cash flow from working capital, what's the timing of the conversion into cash? Is it within the next weeks or is it within the next years?

Yeah, if we look at the inventory and work-in-progress build-up, and especially the work-in-progress build-up, that, of course, needs to convert the receivables and convert into cash during 2025. Of course, we have big projects ongoing, so we will see working capital remain to be high for a while. But of course, these positions will convert into cash.

Okay, so it's more of a little bit longer term duration rather than a very short term duration. Is that the correct interpretation?

That's the correct interpretation. Yeah, as long as we have big projects, and thankfully we do. This is what we see in our balance sheet.

Okay, thank you. Okay, I'll turn over to you, Luis, and it would be great to hear your thoughts, especially on the US market. You have a long experience there. And if you just could, you know, there is a lot of news flow coming out of the US that is hard to filter for us that are not based there. What would you say is the overall general view of the willingness to expand into automatic traffic control if it starts on a really high level?

Yeah, sure. And first of all, thank you for the warm welcome to the company. It's much, much appreciated and to the call today. In terms of the U.S. market at a high level, we continue to see a significant procurement activity in the opening of new markets at a rate that is significant compared to what I would say in my experience over the last several decades. So the rapid opening of new markets with significant procurement activity. In light of the more, I would say, global political situation or broader political situation in the U.S., Automated enforcement is regulated largely at the state and local level in the U.S. That doesn't mean it's entirely immune from some of those political instabilities that are going on, but we continue to see strong demand and growth in the U.S. market.

Okay. If we turn to the Iowa situation, could you expand a little bit or elaborate on on your view of what has happened and would you expect in Iowa going forward?

Certainly. I would say that where we sit today in Iowa is good. A lot of the uncertainty around the legislative environment was resolved with some of the changes last year. And we now know the environment that we're working in. And we continue to have in particular mobile locations approved with enforcement continuing. So I would say the situation is stabilized, which is good because we understand what's expected in that market. And we anticipate continuing to renew with our existing customers in the state.

Okay, thank you. If you were to If you were to rank the states where we are active right now, where would you see the biggest potential in your view?

Yeah, I think we continue to see opportunity across multiple states. That includes what we've seen in terms of recovery in Iowa, a strong position in Pennsylvania. other positions in the northeast of the country as well. So probably at this time, would like to not specify particular locations, right? But I think across the country, we continue to see strong demand and the continuing opening of markets.

Okay, thanks. And you touched upon the dynamics between federal and state level, but is it fair to say that most of the legislation is actually based on the state or even lower levels, or do you foresee any big changes on the federal level at your horizon?

Yeah, that's correct to say that in a regulatory environment, it's done largely or almost exclusively at the state level. And that then can carry down to local municipalities as well. So that's the primary driver. There is negative activity in some states, but not where we have significant exposure. And net, I think we see an expansion of the market as opposed to the market contracting, which is very positive for us.

And final question, where do you see competition when you're out? selling a product, what is your view of the competitive landscape of, and in particular, how is CensusGap positioned relative to other players?

In light of the growth opportunities in the U.S., I think there's strong competition. I think we see that in our markets. But I also think that we're well positioned to capture our fair share of the market and to compete successfully.

Okay. Thank you very much. That was all from me.

You're welcome. Thanks, Arielle.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

Well, I think we'll wrap things up and thank everyone for your time today.