Earnings call transcript: Census Gatso Group beats Q2 2025 revenue expectations

Census Gatso Group (CGG) delivered a robust performance in its Q2 2025 earnings call, reporting a revenue of SEK 204 million, surpassing forecasts of SEK 192 million. This 22% year-over-year increase was bolstered by a significant rise in system sales and a steady growth in trials revenue. The company’s stock responded positively, climbing 2.07% in pre-market trading. According to InvestingPro analysis, the company appears undervalued based on its Fair Value calculations, despite facing some near-term challenges with cash flow management.

Key Takeaways

• Revenue for Q2 2025 reached SEK 204 million, a 22% increase YoY.
• System sales surged by 39%, contributing to overall revenue growth.
• The company’s stock price rose by 2.07% following the earnings announcement.
• Stabilization in the US market post-Iowa legislative changes.
• Cautious outlook due to global political instabilities.

Company Performance

Census Gatso Group demonstrated strong performance in Q2 2025, with a notable 22% increase in revenue year-over-year, building on its five-year revenue CAGR of 9%. The company has been focusing on automated enforcement solutions, which are in high demand globally. This focus has helped CGG stabilize its operations in the US, particularly after legislative changes in Iowa. While the company reported a positive cash flow from operations of SEK 22 million, InvestingPro data shows the company’s cash burn rate remains a concern, with a negative free cash flow yield of -17% over the last twelve months.

Financial Highlights

• Revenue: SEK 204 million, up 22% YoY.
• System sales: Increased by 39%.
• Gross margin: 43%.
• EBITDA: SEK 31.4 million, a 29% increase YoY.
• Positive cash flow from operations: SEK 22 million.
• Available cash: SEK 137 million.

Earnings vs. Forecast

Census Gatso Group exceeded revenue expectations for Q2 2025, reporting SEK 204 million against a forecast of SEK 192 million. This represents a significant revenue beat, driven by strong system sales and a stable US market.

Market Reaction

The company’s stock price increased by 2.07% in pre-market trading, reflecting investor optimism following the earnings report. Trading at $4.80, the stock sits 62% below its 52-week high of $7.75, suggesting potential for recovery. InvestingPro analysis reveals the stock typically trades with low price volatility (beta of 0.71), which could appeal to risk-averse investors. Get access to 8 more exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Outlook & Guidance

Census Gatso Group provided a cautious outlook for the remainder of 2025, with revenue guidance trending towards the lower end of SEK 700-800 million. The company anticipates an EBITDA margin of 12-14%, trending mid-range. Despite global political uncertainties, CGG remains confident in meeting its expectations.

Executive Commentary

CEO Lou Miller highlighted the strong global demand for automated enforcement solutions, stating, "We continue to see high demand globally with multiple opportunities in process." Miller also emphasized the company’s stable position in the US market, particularly in Iowa, saying, "The situation has stabilized, which is good because we understand what’s expected in that market."

Risks and Challenges

• Global political instabilities could impact market conditions.
• Interest-bearing debt stands at SEK 291 million, which could affect financial flexibility.
• The US market’s regulatory environment remains complex, primarily governed at state and local levels.
• Currency translation effects could influence financial results.
• Competition in the US market remains intense, posing challenges to market share growth.

Q&A

During the Q&A session, analysts focused on the dynamics of the US market, seeking clarity on the stabilization in Iowa and the impact of currency translation on financial results. The company also provided insights into its working capital conversion timeline, addressing investor concerns about operational efficiency.

Full transcript - Sensys Traffic AB (SGG) Q2 2025:

Lou Miller, Group Chief Executive Officer, Census Gatso Group: morning, and welcome to the presentation of Census Gatso Group’s Q2 twenty twenty five in

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: a row.

Conference Moderator: Welcome to the Census Gatsso Group QT twenty twenty five 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 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.

Lou Miller, Group Chief Executive Officer, Census Gatso Group: Morning, and welcome to the presentation of Census Gatsso Group’s q two twenty twenty five interim report. My name is Lou Miller, group chief executive officer. I started with the company on June 16, bringing twenty 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 Census Gatso, we have a strong history and globally recognized brand, a global footprint in core markets, the strong demand for our 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 SEK $2.00 4,000,000, 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 TRAS revenue from our Saudi maintenance contract.

The US 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 SEK 31,400,000.0 or a margin of 15.4%.

This is up from 7.3% in Q1 and a 29% increase over Q2 twenty twenty four. 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.

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: Alright. 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 Luis already mentioned, q two revenue increased by 22% to 204,000,000, with system sales increasing 39% and trials 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 EBITDA of €31,400,000 up 29%, representing a 15.4% EBITDA margin. The Q2 performance resulted in a positive cash flow from operations of 22,000,000 Looking at the segment managed services. The segment managed services mainly relates to our U.

S. Operations. We see a strong market demand with significant procurement activity. Despite that, we’ve seen a lower order intake compared to 2024 due to renewal timing and expected sales cycles. During the quarter, revenue has stabilized.

The revenue was slightly down from 48,000,000 to 46,000,000, impacted by currency fluctuations to 5,000,000, the impact of Iowa legislation legislative changes of approximately 6,000,000, and an underlying growth of our US business of approximately 9,000,000 from new customers and program expansions. EBITDA was up by twenty eight percent to 9,000,000, including a onetime insurance recovery of 8,000,000 Swedish kronas. Then moving to the segment system sales. The order intake for the quarter amounted to 40,000,000 Swedish kronas. This is from various customers, 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 finally in Warsaw. The segment system sales now has a TRAS revenue that is stable around 47,000,000 per quarter. EBITDA is up by 29% to 23,000,000, impacted by a high slowdown 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 137,000,000.

During h one, we’ve invested in fixed assets and in working capital, both to approximately SEK 40,000,000. The investment in working capital relate to project related inventory buildup and receivables that will convert to cash. Several items has impacted our interest bearing debt that ended at 291,000,000, such as increased lease liabilities related to the prolongation of our headquarters to 22,000,000, translation effects on our bond of 10,000,000 Swedish kronors, and increased credit facility usage of 20,000,000. With that, I would like to hand it back over to Lou.

Lou Miller, Group Chief Executive Officer, Census Gatso Group: 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 a 100,000,000 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% from The US. In light of this, we are reaffirming our 2025 financial guidance. At midyear, we’re trending to the lower end of our revenue guidance of SEK 700,000,000 to 800,000,000 and the midrange of our EBITDA guidance of 12% to 14%. 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.

Conference Moderator: If you wish to ask a question, please dial pound key

Ariel, Analyst: Yes. Hello, everyone, and very welcome to to the financial world of Census Gatsu, Lewis. We’re looking forward to to to work with you. I I will start with some financial questions for Simon, and then I’ll turn over to some more market oriented questions to to you, Louis. Simon, if I understand correct, the net one off impact on result is plus 4,000,000 minus 18 plus and 14 minus.

Is is that correct interpretation?

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: Yes. That’s correct.

Ariel, Analyst: Okay. Thank you. Second question is on this the the FX items. I suppose that that is that is non cash. That is just a revaluation of different balance sheet items.

Is that is that how I interpret it? This is correct.

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: Yeah. You’re absolutely right. So we we know that we have euro bonds, we have various receivables and payables in different kind of currency. And and these translate at at end of the month, end of the quarter, and are largely unrealized translations of of those currencies.

Ariel, Analyst: Okay. Thank you. Another question is on the investment in fixed assets. They they were quite high in the quarter. What would what was that?

And and what is the outlook for your CapEx budget for the rest of the year?

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: Yeah. To start with the first question, Erian, is that in in the in the presentation of of the managed services segment, we elaborated on the underlying growth of that segment related to The US business of approximately 9,000,000 in the quarter. Of course, that that revenue buildup or increase is driven by new investments in fixed cost assets and operations. That is ongoing for us throughout the year. So I would expect it to be similar during during h ’2.

I hope that answers your question.

Ariel, Analyst: Okay. Yes. Thanks. Thank you much. And and the final final question to you, Simon.

The cash flow from working upsell, what’s the timing of the conversion into cash? Is it within the next weeks, or is it within the next years?

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: Yeah. If if we look at if we look at the inventory work in progress buildup and especially the work in progress with buildup, that, of course, needs to convert to 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.

Ariel, Analyst: Okay. Okay. So it’s more more of a little bit longer term term duration rather than a very short term duration. Is that the correct interpretation?

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: That’s the correct interpretation. Yeah. As long as we have big projects, and and thankfully, do, this this is what we see in our balance sheet. Yeah.

Ariel, Analyst: Okay. Thank you. Okay. I’ll turn over to you you, Luis, and and it would be great to hear hear your thoughts, especially on The US market. You have a long experience there.

And and if you just could you know, there is a lot of news flow coming out of The US that is that is hard to hard to filter for us that are are are not based there. What would you say is the overall, general view of of the willingness to expand into automatic traffic control if you start from a really high level?

Lou Miller, Group Chief Executive Officer, Census Gatso Group: Yeah. Sure. And 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 US market at a high level, we continue to see 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 US, Automated enforcement is regulated largely at the state and local level in The US. That doesn’t mean it’s entirely immune from some of those political instabilities that are going on, but but we continue to see strong demand and growth in The US market.

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

Lou Miller, Group Chief Executive Officer, Census Gatso Group: Certainly. Yeah. I would say that where we sit today in Iowa is good. A lot of the uncertainty around the alleged slate of environment was resolved with some of the changes last year, and 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 has 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.

Ariel, Analyst: Okay. Thank you. If 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 in your view?

Lou Miller, Group Chief Executive Officer, Census Gatso Group: Yeah. We 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 of the country as well. So probably at this time, would would like to to not specify particular locations. Right?

But I think across the country, we continue to see strong demand, and the continuing opening of markets.

Ariel, Analyst: Okay. Thanks. And and you touched upon the the kind of the the dynamics between federal and and and state level. But is it it fair to to to to say that most most of the leggies legislation is actually based on a state or even lower lower levels, or do you foresee any big changes on the on the on the federal level at the horizon.

Lou Miller, Group Chief Executive Officer, Census Gatso Group: Yeah. That’s correct to say that from from a in a regulatory environment, it it’s it’s it’s done largely or 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 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 which is very positive for us.

Ariel, Analyst: And and, final question, where where do you see competition, when when you’re out, selling a product? What what is your view or the competitive landscape of and and in particular, how is Census Gaps positioned relative to other players?

Lou Miller, Group Chief Executive Officer, Census Gatso Group: Yeah. In light of in light of the the growth opportunities in The US, I think there’s strong competition. I 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 and to compete successfully.

Ariel, Analyst: Okay. Thank you very much. That was all from me.

Simon Mulder, Group Chief Financial Officer, Census Gatso Group: You’re welcome. Thanks, Ariel.

Conference Moderator: As a reminder, if you wish There are no more questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Lou Miller, Group Chief Executive Officer, Census Gatso Group: Well, think we’ll wrap things up and thank thank everyone for your time today.

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