Earnings call transcript: ComSpace Q4 2024 revenue grows, stock declines

ComSpace Group AB reported a 22% increase in full-year 2024 revenue, reaching SEK 257 million. Despite this growth, the company's stock fell by 12.46%, closing at 4.3 SEK. According to InvestingPro data, the stock is now trading near its 52-week low, with a beta of 1.47 indicating higher volatility than the market. The market reacted to a mixed financial performance, including a notable EBIT loss and cautious future guidance. InvestingPro analysis suggests the stock is currently overvalued relative to its Fair Value.

Key Takeaways

• ComSpace's revenue grew by 22% in 2024.
• Stock price fell by 12.46% after earnings report.
• Improved gross margin from 8% to 29%.
• EBIT loss of $21 million, adjusted to minus $2 million.
• Positive cash flow and increased cash position.

Company Performance

ComSpace demonstrated robust revenue growth in 2024, achieving a 22% increase compared to the previous year. The company has focused on expanding its capabilities in the marine domain awareness and microsatellite sectors. Despite these advances, the EBIT loss, even after adjustments, highlights ongoing financial challenges.

Financial Highlights

• Revenue: SEK 257 million, up 22% from 2023.
• Free cash flow: $23 million.
• Q4 EBIT: Minus $21 million, adjusted to minus $2 million.
• Gross margin: Improved from 8% in 2023 to 29% in 2024.
• Cash position: Increased from $61 million to $82 million.

Outlook & Guidance

Looking ahead, ComSpace forecasts 2025 revenue between $320 million and $380 million, indicating a potential growth of 25-30%. InvestingPro analysts anticipate continued sales growth but don't expect profitability this year. The company anticipates double-digit growth in North America and positive free cash flow, although EBITDA guidance ranges from -2% to +10%, reflecting cautious optimism. The company's financial health score of 1.62 suggests challenges ahead, despite growth prospects.

Executive Commentary

CEO Carsten Wachman emphasized the company's strategic focus on marine domain awareness, stating, "Marine domain awareness is an area that is growing and fits well to what we know and what we can do." He also highlighted the importance of trust and reliability in customer relationships.

Risks and Challenges

• The EBIT loss, even after adjustments, suggests financial instability.
• Political and market uncertainties could impact future performance.
• The broad EBITDA guidance range indicates potential volatility.
• Dependence on emerging markets like North America may pose risks.
• Potential delays in contract execution, such as the Indonesia contract.

Q&A

During the earnings call, analysts inquired about ComSpace's strategy in the marine domain awareness sector and the adjustments made to warranty and inventory provisions. The company's approach to the North American market was also discussed, along with potential political and market uncertainties.

Full transcript - GomSpace Group AB (GOMX) Q4 2024:

Moderator/Host: Welcome to today's event where we have the pleasure to present ComSpace. Today's topic, the Q4 'twenty four and of course, the full year report, the result fresh from the press this morning will be the subject and of course, ending with a Q and A. And we already got a lot of questions in, so perfect. I think we will get us very wide around in your business case. So I will go through today's presentation and answer the question.

We'll join the CEO, Carsten Wachman. As always, you're very welcome to in the box down below to give to ask questions. During the presentation, we will take the main part in the end. As we already have gotten a lot in, you can try and see if it's answered in some kind of way already. That would be nice and that would make a better flow.

For now, I will hand the call over to you, Carsten.

Carsten Wachman, CEO, ComSpace: Thank you very much, and welcome back to our Q4 and 2024 results here. And happy Valentine's Day, everybody. It's today, so hope you've done what you needed to do for your family and your closest. We will today talk about okay. I can't get that presentation to move, so it should be moving now.

Here we go. A little bit about investor communication. We'll talk about the journey. You heard it before, but I'll keep repeating it. It is a journey we're on.

Highlights, of course, from the past quarter. A bit on the market guidance that we sent out before Christmas and restated here, repeated. Denmark Arctic and surveillance, I've seen there are questions and speculations online, What about that and comp space? So I'll talk a bit about that and then a summary. But first, clarity and communication, my main motto is investor communication, a little service here.

Remember, we do our we of course have quarterly reporting, but we're doing Q1 and Q3 as short as trading statements. The reason is to get information out faster to you, and we feel the information we give there is quite good guidance. New this year, 2025, is we will be guiding on revenue, EBITDA and free cash flow. Remember, in 'twenty four, we only had guidance actually ever since back since 'twenty three, we guided on free cash flow. So now revenue, EBITDA and free cash flow is our guidance.

Also remember, I will give immediately release press releases when there's something major that happens that can impact the share price or your valuation of the company. So just remember, I am obliged to do that. Whenever you're looking for information, why it's not saying anything, I'll say something for sure because I have to. And then also other press releases of information that I think it might be helpful for you to know. If you want to follow us with other messages, not everything is suited for a press release, follow us on LinkedIn, on Instagram, Facebook (NASDAQ:META), etcetera, then you'll get an update on what's happening on certain customer projects, releases, launches, etcetera.

So remember this. Okay. Remember this '1, '20 '20 '3, we had to create some clarity. We made some major decisions on the turnaround of the company. There was a big reduction of cost.

2024, much more clarity. We are working towards having business units, product business units. It's in place now and now you'll also see that we can start reporting much more specifically on that. We have a program business that is set up and we have North America. So basically, this is what we have been working towards.

It's been working all through 2024 and now also for the market, we are going to report a bit more directly in those two or three business areas, so you can follow that. We'll talk about cash later on also. There are some questions on that. But for now, my judgment is can we afford to be patient because some of this stuff takes time? And the answer is yes.

And I would also say, we're pretty well on the way. We have a more than 25% growth on the top line. That's not bad. Okay. Highlights.

Free cash flow in the quarter plus $17,000,000 that's great. It's actually making us positive for the quarter but also for the full year. Remember, that's a milestone. I'll get back to that. It's a little bit less than last year where we had $21,000,000 which is actually our first positive free cash flow quarter in a very long time, more than two years.

Our cash position has increased to $82,000,000 from $61,000,000 so we had a good positive increase there. EBIT, and I'll speak slowly because it was a bit complicated to read. I understand that. Our EBIT for the quarter is minus $21,000,000 against $26,000,000 in Q4 twenty twenty three. However, we have made approximately 'nineteen, between 'nineteen and $20,000,000 negative adjustment due to two things: warranties in relation to contracts and products and deliveries.

Why? Because I feel that this is good business practice. We have a lot more contracts than we've had ever before. They are more demanding requirements. It's normal evolution.

So we are now installing a practice of we should actually put some numbers or some figures to the balance sheet. There's no cash involved. It doesn't impact our cash flow, but we put it in our balance sheet. The other one is we are a bit harder on our inventory. We have deemed that items that are not moving, we have strengthened the requirements for how fast an item needs to move or how slow it can move before we take it out.

So we also done impairment testing that altogether between $19,000,000 and $20,000,000 If you want to compare likes for likes, we did not do that in 2023. So you can argue that our real result was minus 2,000,000 against minus 26,000,000 for the quarter. Take it as you like, it's good business practice, I think, and we are trying to do this better into the future as well. Order backlog for Doug.

Moderator/Host: And I guess the question is always here, one time items become always and that's why people can sometimes mind that. But there's no indication here. It's a cleanup on your inventory, which a lot of companies sometimes do. And the warranty will now be progressing as normally. I guess that when you

Carsten Wachman, CEO, ComSpace: Yes. As as

Moderator/Host: normal. You will make a warranty a normal standardized warranty claim for that. Is that correct?

Carsten Wachman, CEO, ComSpace: For certain deliveries, that's exactly right. We have warranty periods, etcetera, and we need to actually need to make a reserve for that, which is exactly what we have done.

Moderator/Host: So really nothing changed in the way you make contracts or anything because there is a question there. It's not something new. It's not a problem that you have found some problems in any of your satellites you send out like, let's compare it with Vestas, where when you find a fault there, it's simply because you now want to have a better standard as a lot of big auto producing companies. Is that correctly understood?

Carsten Wachman, CEO, ComSpace: That is correct. That is correct. And that's why we, as a service provider, the adjusted EBIT to say that was actually minus $2,000,000 just as a service to you so you understand our operational performance. So, order backlog went up $53,000,000 to we now have $363,000,000 in order backlog for opening for 2025, so that's good. Key order intake during the quarter, we had Unseen Labs order now two satellites, microsatellites, with $61,000,000 This is an add on to a contract we signed earlier in the year.

We also signed up a new customer for microsats in Singapore, Thirty One Million Dollars on December 8. And I think worthwhile mentioning that we actually had a record quarter for order intake on products that did really, really good. So we had $33,000,000 there. And that's actually very good. But often Q4 is good, but this was even better than before.

So these are the key highlights on the order intake. Okay. A little bit diving in as usual to the numbers. The total order intake was SEK138 million in a period. You can see less in Q2, but more than some previous quarters here.

Good trend. Our revenue was 83,000,000 for the quarter. What you can look at as a guidance is that it's always good if your order intake is bigger than your revenue in the quarter. That basically means that you keep accumulating more and more revenue for the future. So this is a good comparison right here.

We talked about the EBIT minus $21,000,000 against minus $26,000,000 same period last year, but technically, we can argue for minus $2,000,000 if we hadn't made the adjustments, which we think are the correct ones to do. 176 employees right now, it's the orange curve and then the other ones is sort of the average over time. So we have increased our staff, but we have increased our staff with the increase in orders and work that needs to be done. And I know there were some questions on how do you operationally prepare yourself. Well, it's part of it.

We are ramping up the resources, but we don't do it in anticipation of maybe something great happens next year. We do it because we need the people and resources here. And we're quite busy. We have a quite high utilization rate as it is right now. Okay.

Let's look at the full year 2024 cash flow. Free cash flow, as I said, $17,000,000 in the fourth quarter and total for full year 2024, we were plus $23,000,000 Excellent. Major milestone for us internally as well, big celebration when we reached that. This is a guidance, if I may remind you, that we set back from March 2023 when we started reshuffling the whole business and say we're going to focus on this or not. We started canceling orders that were not profitable and we reduced our costs and started managing our costs.

We said we would be actually free cash flow positive by the end of second half of '20 '20 '4. We were, and also actually for the full year. So for Gumspace, for the people here at Gumspace, you take it as you like, this is actually a major achievement. We achieved what we set out to do more than eighteen months ago. Okay.

So another strengthening here. If we look at end of twenty twenty three, the fourth quarter, we had SEK 153,000,000 in order backlog going into the year. We are now at $363,000,000 so it's quite a significant improvement. We have $210,000,000 more in backlog. Not only is it $210,000,000 more, everything we do now, we are really focused on profitability risk management.

So it should be a profitable backlog more than if you go back to mid of twenty twenty three. So quite an achievement if we look at where is that backlog coming from. Obviously, it's from programs where we have this longer contracts running for one, two, three years. So therefore, it's building up bigger and you can also see it's moving from $93,000,000 to $3.00 $3,000,000 So obviously, this is where we have the biggest increase. So you can say, hey, why is it not going up in products?

Well, the nature of products, remember, is very much quarterly. So I don't expect the backlog to be a lot bigger than this. We'd like to grow out a bit. But as soon as we get the order, we're actually practicing on delivering faster. So the better we get at delivering faster, every time we get an order, we get it out.

We get an order, we get it out. That means good cash flow. That means good profitability. But it also means that a product backlog will never go a lot higher.

Moderator/Host: The order intake we should follow year by year that, that should go up, if I should understand you correctly, more than The order intake needs to go up, correct?

Carsten Wachman, CEO, ComSpace: Yes. Yes, correct. The order intake needs to go up, but the backlog will never grow a lot. If it grows a lot, it's probably not good because then we're not fast enough in delivering and collecting.

Moderator/Host: The lead time is below one year, that's why it's the order intake you should look at and not the order backlog.

Carsten Wachman, CEO, ComSpace: Yes. It's actually three to four months is the delivery time. North America, we should be able to do better there and I also firmly believe we will because it's the biggest market. You can see we are more or less status quo on the order backlog, and we delivered about 20,000,000 of order intake. When I give the guidance, I've given you some indications on what I expect for 2025.

How did we achieve this? Why is it going up now? What's happening? Well, of course, there's a lot of things on how we structure ourselves and we focus and we think we're good at what we're doing. But a lot of it is in trust and reliability that we have reliable products.

We've been around for a long time. The heritage is there, so the customers know if they come to Grumstface, there's a pretty good chance that they can deliver and the quality is there. That's our track record. And the other thing that's changing in the market is that whereas eight, ten years ago, the customers, our customers did not have a business case, which means they didn't know how to make money. So this was just testing and seeing what happens.

Now they have service contracts, our good customer, Unseen Labs, they have millions of euros coming in in service contracts and obligations. It has to work when they launch a satellite. It's no longer science fiction, maybe it will work, maybe. No, no, it has to work. They stay with us because we always make it work.

So trust and reliability is important. The other thing I want to highlight, we have about $250,000,000 of the order intake is in this microsatellite space, so the slightly bigger satellites. We never launched a microsatellite before, but guess what? We're still winning ahead of our competition. Why?

Because of our heritage, because of the trust and reliability and our very high customer focus. So these are parameters that are helping us drive out the backlog here. Okay. So revenue and EBIT, also a small celebration, but we should deliver that every year. We are SEK $257,000,000.

So we have another record year growing from SEK $238,000,000 last year. We're keeping our average growth over the year since we were listed up about 22%. Market compound average growth is somewhere between SEK 15,000,000 to SEK 20,000,000 depending on which report you read. So if you want to read something into that, we are still ahead of the market. I want it to be much bigger and you'll also see the growth.

For next year, we are anticipating to be quite a jump. EBIT, we talked about, so I'll move on from here. Now let's go into the market guidance. What's going to happen in 2025? We have now we are now guiding, as I said, on revenue, EBITDA and free cash flow.

If we start from the bottom, actually, the cash flow, we are planning to be positive, the free cash flow for 2025. I don't think it's going to be very high necessarily positive. It can be depending a bit on how big orders we get on prepayments. But I do foresee fluctuations and I'm also indicating here that I think the first half, it could be a negative cash flow. Why?

Because we have been pretty good in closing orders, big orders and negotiating contracts with a strong prepayment, allowing us to have a good cash flow in the project. So this is deliberate what we have done. Now we need to close more projects and take more prepayments over time. But of course, we have to start delivering. It's about working capital as well.

So it's not really necessarily a bad thing that it's dropping below zero. We want it to be positive. But there's a very good reason because we've gotten paid last year and we are very focused on the way we do our contracts and making sure that they work for us. We don't want to work for free. We want to get paid before we do work.

That's good business practice, but it's also now, of course, impacting a bit the free cash flow this year.

Moderator/Host: Yes. Now it's the working capital for delivering on all that and where you had some of the prepayments, now you need to build up capital to deliver on that and then the payment will come after that. So that makes kind of sense that we should expect that.

Carsten Wachman, CEO, ComSpace: Yes. And of course, we're expecting to close more business all the time and we will also negotiate a good cash flow there and then it should equal out. But just my prediction for first half is that we will see, potentially see a negative cash flow, not necessarily. Let's go to the top on the green bar here. So $320,000,000 to $380,000,000 in revenue is our guidance.

If you take the low number, it's a 25% increase over last year of the $257,000,000 So that's pretty good. It's well ahead of where we have been before. And obviously, when we give a range, our ambition is not to hit the lowest number but to hit somewhere further up the scale there, and then you'll see a plus 30% growth probably. And then talking about profitability, which, of course, is important, and I keep saying we are looking at that all the time and improving everywhere we can. With the swing in revenue, we are somewhere between minus 2% to plus 10%.

If you go to the upper end of the revenue or we also have, for example, more product sales than we had anticipated, it's going to contribute well to the bottom line and the EBITDA. So we'll be tracking that over the year and reporting on that. Why are we so relatively confident on the revenue? Well, a lot of it, you saw that before. We have more than 70% of what our program business units contracted.

So it's already in contract. It's already working. We are no longer relying on we have to sell something before we can turn it into revenue. So that gives us a reasonable confidence to hit a higher number. So very different from last year if you look at that.

We had an opening backlog of 152,000,000 We delivered $257,000,000 So we actually had only 40%, forty five % in backlog going into 2024. Now we have 70%, so big difference. What do we expect from North America? A double digit growth. I'd like to call it that.

That's certainly what I expect, why the pipeline is growing and it's also a market where we have to grow and we should grow. The market is big enough, so I do expect to see a double digit growth. Product is low double digit. It's a business growing moderately over the years, very profitable. I am expecting a low double digit growth from this, which is good.

Every million earned there gives us 600,000 on the bottom line. That's great. So we want to push that up and of course, we are focused on growing that. Revenue and EBITDA, what's driving that? Products in North America sales, as I just said, if that goes up a bit, 1,000,000, for example, euros, it's going to increase the revenue.

That's obvious. And we wanted to push it as high as possible. However, because of the profitability, it has an even bigger impact on EBITDA. So our EBITDA will fluctuate probably a lot with how much we can push the bar for products and North America sales. Kastan, why don't you just predict how much it is because as I've explained, it's a quarterly business.

When we get quarters, we ship it out within a quarter. When we get orders, we ship it out within a quarter. So we can't predict the twelve months. I can't know for sure what's going to happen over twelve months. Of course, there's some volatility in that.

We are getting much better at key account management. We're starting to have some product combinations, if I can call it that, that we're selling, which has traction in the market. So of course, we are influencing the market here. The program delivering on its backlog, as I said, 70% is there. So this is a lot about execution.

It's within our own control. And then of course, to close the gap for the year, we need to close a few more deals, which I definitely expect that we'll do to hit our targets here. That's why I'm noticing if you sum it up and you do a little math on that, you'll see that we actually have more in backlog. But since it's a two or three year contract, some of them that we are running that we're executing this year, but we also have backlog for 'twenty six and we even have some backlog for 'twenty seven as well. And we won't be able to pull it in because we just can't execute it any faster.

There's a certain time for execution. But these are the parameters you can look for also and see when are we where is GaNS Freight going, is it up low middle. You have an idea here. Included in our budget here, we have anticipated some level of digitalization, including AI into our operation where we can. It's partly answering some of the questions about operational readiness, how to do things better.

We're definitely focusing on efficiency and reliability. That's very important for us. The quality and reliability has to be perfect in the market. So that's a big driver, and we use whatever we can in terms of IT, digitalization, AI, whatever we can, we use to improve the efficiency because that's a criteria for how we stay in the game here. So that's the guidance for next year, going up pretty well, more than 25% on the top line, hopefully a lot more than that and a good chance of hitting a positive EBITDA.

Happy with that and the cash flow we keep monitoring and trying to drive it to a positive. I don't necessarily want it to be a lot more than that because I also want to spend the money on evolving the business and invest more in sales. So it's not a goal to suddenly have $200,000,000 on the bank account. It wouldn't be in your interest and now in my interest. I will go to reinvest that.

Like for example, we do in North America, we are growing organically, but every time we do more and more, we're going to invest in more salespeople to accelerate the growth. Okay. So let's have some fun talk. A lot of questions about Greenland and Denmark. I've refrained for too many political comments and showing where I stand on all of this, but I can give you some examples.

So I repeat, key strategic for us is marine domain awareness. Marine domain awareness is looking into what's happening in the oceans and seas around us, including Greenland as an example. Why? Well, it's quite urgent. There's a lot of sea cables.

97% of all the Internet traffic at one point or another is actually going with on the sea cables that are somewhat vulnerable. We probably didn't think about it when we put it down, but they're actually quite easy to sabotage them if you want to. So there is an urgency for that. There is enough unrest and wars and people seem to have a trouble understanding which side of the fence they should stay on and somehow think it's okay to play in a neighbor fence. Many states don't like that and we need to monitor it ourselves.

Oh, and by the way, the people that might want to walk into your backyard are the ones that are selling you the pictures of what's happening in their backyard. That's not a good idea. So you will see a trend towards knowing yourself and we get back to Denmark what Denmark needs to do. There's definitely traction. Indonesia is an example.

A deal is not yet closed. I'll get back to that in a second. But it's already showing the need for this. Scaling, there's more than 150 countries when we talk about oceans and seas that has water, that has this interest and wants to control the ship traffic in and around their sovereign territory. It's addressable for us.

We know how to do this. We have all the technology and all the solutions. No matter what the speed in Indonesia, we have designed a solution. We know how to put it together and we are basically ready to repeat that wherever, for example, in Denmark and Greenland. It's the exact same system that's needed.

It's actually not very complicated. We know how to do it. And then there's definitely a long term growth. This is continuing also to regulate, for example, ship traffic, the middle icon here, 80% of all goods transported are via sea. We want to optimize that for climate reasons, for efficiency, for cost reasons, and also monitoring fishery and all the protein, the 15% of our protein is coming from our oceans.

We need to take care of them. This is also what we can do by satellites. That is why Gump Space, the main strategic focus right now is marine domain awareness. We are good at it. We see a market growth and we are growing.

We are actively positioning ourselves for more and more countries here. Now this Monday, together with colleagues from Northern Jutland, I was at the Christians Ball (NYSE:BALL). Some of you might have seen it on LinkedIn. And we had a little bit of heart to heart discussions. There were not as many politicians as we wanted, but it was a good debate.

There was about 120 people. Our story, slightly provocative, is what's next, Denmark, or in Danish, West Endeavour. Space is a battleground. NATO has already defined that in 2018. Space matters.

Space is the new frontier, also in defense. Denmark has an obvious need for maritime surveillance. We have all of Greenland as our responsibility. There's also the Faroe Islands, of course. And there are many places and we have a lot of water around, just little Denmark and our smaller islands.

We do need this. We do need this. We cannot just rely on other parties to supply us with that. We don't really have much today. We have an industry in Denmark, and this is where this is very peculiar.

We are actually, as Denmark, and I'm referring here to a larger group of companies, not just Com Space. We have competitors, friends, partners, sub suppliers, what have you. We have a pretty strong space industry. And most peculiar thing is, considering that we have such a strong space industry, we have cracked close to zero investment from the government. How about that?

Any other nation that says we want to be a space nation or we have an industry, they're actually going to get a lot of investment and interest. But somehow in Denmark, we're a bit slow. However, thanks to some other people that I'm going to mention by name, they put this on the agenda and say, we better watch out. We need to know what's going on and this is our obligation. So the message, very given very clearly to the politicians in the parliament, is Denmark and the Danish defense really need to step up.

We have the technology in Denmark. We have the need. We don't need to do some kind of EU follow-up kind of processes for tendering, etcetera. It's national security. The Danish government can decide to buy directly from the Danish industry.

And we are ready. We know how to do it. So we just need to get started. So some of you have been asking about that. I see there are discussions on the different for us.

The answer is yes, of course, Komspace should be involved in that. We're ready. We just need the politicians and the defense to move forward. And having said that, they are. They are.

And you do see that more budgets are coming. We don't have eight years to figure it out. It has to go faster than that, and I'm sure there will be solutions. So the message is we are ready. Let's go.

Moderator/Host: And maybe to just clarify all this, you are meeting with the politician. Everybody, of course, want to know, is there any pushback from the politician? Or is it on the military side, where it's a slow moving process? Do you need any pushback from anybody saying this should be drones that does this and how we would ever cover that larger space of drones? I guess, is there any pushback?

They can't have any pushback to that this is the smartest way of surveilling such a large land area as Denmark. So can you give us any no pushbacks?

Carsten Wachman, CEO, ComSpace: No pushback. But the challenge is we need to educate the politicians a lot more. I think we have what I said to them, one thing is my opinion as a professional in the space industry of what we can do. As a citizen of Denmark, I'm somewhat disappointed that the politicians are not more caring about our national security and actually utilizing the technology we have to secure ourselves and our waters around us. That's disappointing.

So I think there is a high level of education for politicians to understand that. The other thing is that the defense, I think they know that they can do this. They're just not geared, and this is a political thing also. They're not geared to buy this kind of equipment. And we've met that several times.

So there there's a big step forward. I think our defense knows what they want and what they need in order to be able to buy it. They just have a they don't have a mechanism for buying this right now.

Moderator/Host: No, no, no. But do we need a step in partner that delivers the data into some system for integrating this? And the second part, have you made any calculation showing if you want to fly the drones, how much can they survey? What do they cost? And how much can you actually do this for?

I think everybody is now aware that we are apparently Denmark covers most of the world. If you take the accuracy, I don't think everybody knew that. I'm not sure I knew that. But have you given any estimate on how cheap can that actually be surveyed and how good can it be surveyed?

Carsten Wachman, CEO, ComSpace: No, this is all complimentary. You cannot with drones cover everything in a way you can with satellites. It's simple math. You fly one satellite that can look 20,000 kilometers left or right or you fly a drone much lower that can maybe look 50 kilometers left and right. Do the math.

It's simple. Of course. However, what you can do is that when you have the surveillance so let's talk about other investments. If 35 jet fighters is one thing, we're also building patrol boats that are supposed to sail around. Of course, we need that.

But they have the radar has a range of 50 kilometers. We have to sail a long time up around Greenland to figure out where the ice is thin or where the troubles are, right? We can see that from the satellites and we can easily send signals and say, go there, you save time, you save fuel, diesel, you will have early response, early reaction. This is what it's about. It's the same thing with the drones.

I did see the okay, now getting put in. We're not going to talk about the series patrol. We're going to say Greenland, but let's say at least we can guide the series patrol where to go, right? So don't have to travel over Greenland to figure out what's happening. So, I think it is completely obvious and it's not about us making a business case, oh, buy satellites instead of drones, buy drones and buy satellites and build a patrol boat and then multiply everything by a factor of 10 and things are much better.

So that's where we are. So for those of you who say what is accounts based doing to position yourself, we are doing a lot. We are doing a lot, I can assure you.

Moderator/Host: Okay. We will leave all the questions at that. I think we went deep enough into it to understand But take a

Carsten Wachman, CEO, ComSpace: look at it. We'll get you started. So let me show you what, Beeb, are we talking about here. So this is for our good friend, Sunstein Lab. So it's actually our satellites here.

The white dots you see is a ship saying, this is me, sending out a signal saying, this is me, this is who I am, this is who I am. So white dots we know we like. The red dots are no ID, which means they have turned off any kind of identification or signals that they can send out, but we still know they are there because they have a radar, they have a what we target, they have some kind of radio equipment. So we know they are there. The yellow thing that you see there, this is the undersea cable going up from Finland down to, I guess, it's going into Poland, I think it's there, or Germany maybe.

So this is a pretty important cable. There's a lot of traffic going that way. But look, if I remove all the white dots, oh, interesting. Where are the red dots? I'm going to help you with geography.

We have Finland up there. We have to the right hand side is Russia, Estonia. There's a lot of bright dots in there. Why are they red dots, why are they red? Why don't they want to be known?

Go figure. And you can see also out of along Denmark, North Of Zealand there, there are cob of ships that are sailing without identifying themselves, which they are right to do, they have to do. So, this is what we are talking about with the surveillance. So, we can figure out who is honest and who is not as a starting point, and then we can track them. And I'm going to show you I wanted to find there was an incident outside of Bonhomme where this cable actually recently that was cut, 25% of the traffic was damaged.

There was a Chinese vessel sailing there. Unseen Lab saw it. That same Chinese vessel was later spotted down around Gibraltar doing the same thing. So what you're seeing here is that, call it, suspicious movement pattern. A ship would normally sail in a straight line to save fuel and because it it has an objective to get from A to B.

A ship would not do like you see here, stopping and then actually going in random circles. Even if they want to wait, they would not they would either lay for anchor or they might go in a more logical pattern. They didn't. Why? Because all the cables between Africa and Europe are going right through this straight here.

So guess what? They're probably out dragging anger and trying to do that. This is what I mean. This is what we can do with the satellite networks. We know all of this information, so we can send the patrol boats or we can do whatever and say, hey, what's happening here?

And even more so, if you discover something after the fact, which was the case with the Chinese vessel outside of Bonhoeffer in the Baltics, it was sort of understood afterwards. But we have all the images, so we knew who they were. And then when they came to Gibraltar, we also knew Oedosan. So you see this, how you can use that. And then it's up to your imagination, how do you apply that information and knowledge.

You can stop a ship further out. You can stop it immediately or have real time information, but you can act on it, information that you wouldn't have without a satellite network. You're not going to get this without a satellite network. So therein lies the advantages. Okay.

Oh, and yes, by the way, when we talk about marine domain awareness, the first thing we do is radio frequency signals that I just talked about, the red and white dots. But the next thing is when we have discovered something that looks mysterious, we send in a satellite with a camera, a high resolution camera, whatever we have, saying instead of taking pictures of everything to look at all the pictures, which is a huge amount of data and data processing, we say, look at this point, and then you get very good images very quickly. So that is part of the marine domain awareness. It's a combination of different technologies at GOM Space, All Masters, and we understand how to get the data down and analyze it. This is from our little satellite flying right now, random pictures obviously, so just to understand that.

Okay. Getting to the end, let's sum it up. Full year of 2024, free cash flow $23,000,000 We increased our cash in the bank from $61,000,000 to $82,000,000 So it has gone up. We have an order backlog of $363,000,000 which is an increase of $210,000,000 since last year, including delivering a record revenue year. So that's pretty good, pretty good.

Further, we talked about the EBIT minus $65,000,000 compared to $84,000,000 There was a $19,000,000 adjustment. So if you like, take $65,000,000 and add 19,000,000 million dollars I'll leave it to you. I think we're doing the right thing here, but of course, it could have looked better. Key highlights, I thought, it's worthwhile mentioning from the year is $250,000,000 in Microsat contracts with three different customers. Very good.

This is new business area for us. We got approved by IFO for $650,000,000 export guarantee for Indonesia. That's great. Let's pause at Indonesia. Discussions are still ongoing.

There is you keep saying the same thing, Karsten. Yes, I do. Because there's a political situation also out there. We are still in. We have the contract.

I just got off the call with the ambassador in Jakarta, our ambassador in Jakarta. I'm probably going to go there in a couple of weeks to talk more with them. It's a process that's ongoing. I cannot tell you when it's going to close. But we have all agreements lined up, all the good rationale for why we work with the Minister of Fishery and probably going to meet the Minister very soon.

So, but I just cannot tell you when it's closing. So, you need to be patient. Good news. Good news, the forecasted guidance we are giving for 2025 does not include Indonesia. That is not because we don't think it will close.

And remember, I am obliged to tell you if I get information, at least we believe that it will not happen. So I will tell you and I'm not telling you now. It's not included in the market guidance. And so basically, even if Indonesia delays another six or eight months, which I hope not, but you never know, we are still committed to the numbers. We don't need Indonesia to achieve the numbers.

Obviously, if it comes in, we can probably push it even higher, but that's not how we work. So we are working with what we know and then we are working on closing the deal during 2025. We launched the Euroventas Deep Space Mission. It's our baby is flying out there. I think it's turned Mars to accelerate a little bit, still has another two years to fly.

We speak with it regularly. We get the little beeps and updates and everything is safe and it's warm inside of the main spaceship. So, so far, so good. And that was a good it was really a big project for us, like three or four years of work. And we are very proud.

We've learned a lot. And I think we will repeat it. We didn't make as much money as we should have. It's okay. And now it's completed and we can move on.

And we actually have deep space knowledge, which there would be more growth coming in that area in the coming years. We're executing in business units. And the last bullet, we have laid a foundation during 2024 for at least 25% growth in revenue with a reasonable safe assumption, especially due to the backlog. So altogether, I think it's a great 2024.

Moderator/Host: Perfect. Should we jump to questions? There's a lot and some you have answered on. I think we can lay down the Greenland. There's a specific question.

Have you invited the politicians to your facilities in Albor that we may be fast can close because that's a yes or no answer?

Carsten Wachman, CEO, ComSpace: Sorry, I had a lot of noise in the background. Ask me

Moderator/Host: Yes, yes, yes. There's a question. Have you invited the politician up to see your equipment and your capabilities? That's always a good

Carsten Wachman, CEO, ComSpace: way to Yes, we're beginning regular visits and right now we're working with Simon Karloff. I hope you were out. Thank you, Simon, for saying that maybe we should not use the EU procurement processes because this is about national security. So absolutely, we are working on politicians are coming all the time.

Moderator/Host: Perfect. Now I think we'll go a little bit up in the helicopter. I think you answered some of it. There's someone saying a Danish expert says, if you're too small in a technology company, you need to grow 100% or else you will never catch up on the R and D and you will get eaten up in the competition. Any thoughts about whether you are too small to survive the needs to consolidate this sector or maybe the answer lies and that you don't wish a big positive cash flow right now because you actually know that it's important also to grow to a certain size.

Carsten Wachman, CEO, ComSpace: Well, it's a lot of leading questions. I think I'll let that guy argue for himself. But I can tell you what we are doing. I'll repeat it. We've done clarity around our product business units, our program in our North America.

We are really driving on the product side because you know it's high profitability increasing the margin and the efficiency there. We're driving for much bigger contracts and we have stabilized our cash flow. And what we need to do now is grow the top line. It doesn't really matter if it's growing. It's great if you're growing 300%.

I actually don't care. What I care about is that we see the step by step improvements. And of course, eventually, we get more and more cash so we can reinvest because you need the cash to accelerate. So I think you're on the right track. I don't want to comment on what that guy thinks about this.

Moderator/Host: And if I should and maybe it's a leading question also. Normally, I would say it's correctly, if you're banking oils and you're fighting Phillips, it might be a problem. But I guess you're the leader in this industry. Who should take you over? Is there anybody much bigger than you?

I, of course, know the industry and there's someone a little bit bigger, but there's not a big leader and you are a small one that will always have to catch up and run R and D. Is that correctly understood? Is that also how you see it?

Carsten Wachman, CEO, ComSpace: So my focus is to take the company from where I took it in trouble, but lots of good people, lots of good technology, a growing market. So my job is to now build the value for the investors. And I do that by what I just said that we are very focused on how to we understand how to make money. We're getting things under control and we are expanding the market. We do marine domain awareness.

The market is growing a lot there. There is a need national security. So that's my job. Whatever else is going out on our inner world, I leave that to the world to come to us if they want to talk. But it's not my focus.

Moderator/Host: And there's about fierce competition. How do you distinguish comp space from the West? Is this marine domain surveillance that you want to distinguish yourself on?

Carsten Wachman, CEO, ComSpace: Marine domain awareness is an area that is growing and it fits well to what we know and what we can do. So therefore, we are focusing on that. So we're not going out to something that we don't know. We know how to do this. That's why we are focused on it.

Our competitive edge is definitely our heritage, our knowledge. We've been around for a long time. We have a lot more components and subsystems than any other of our competitors. We actually built a lot of it ourselves. That's giving us an advantage right now.

And then the customer focus and the trust and the reliability that we have in the market and the credibility is what we're building on.

Moderator/Host: I think we can jump to Greenland and then there's the Indonesia. I also think that there was something about why can't you settle next meeting. I think you already indicated that what you have set up in the future with meeting them. So I think that's over there. Then there's a question about ComSpace and American.

Any thoughts about new administration tariffs? How it is going in this region?

Carsten Wachman, CEO, ComSpace: I have a lot of thoughts on that, but I'll tell you what we think about it at GOMPSPACE. I think it's great. It's actually doing two things. I think Trump is going to make sure that there's going to be more investment into also in his national security. We are present there.

We have partners. There's no particular reason why we couldn't continue, and we will continue to build our business over there. So I think The U. S. Market continues to be great for us.

I don't see any major challenges in that. The other side is that because of the rhetoric and the way that, let's say, North America is behaving right now and the uncertainty in general in the world, it is also, unfortunately, I have to say, unfortunately to our advantage because it does call for the solutions that we can provide by satellites. And if it was somewhat interesting and maybe a little bit urgent before, it's become really, really urgent. So altogether, it's whether I disagree or disagree doesn't really matter, but it's not a bad thing for ComSpace.

Moderator/Host: And you are building if I understand you correctly, you're also building a lot of your presence in U. S. Through partners, right? I know you're also building your presence, but it's partners, right, which is, I guess, often American companies.

Carsten Wachman, CEO, ComSpace: Yes, we partner and we do that. We can just spend thirty seconds on that. How do you do business in North America? Well, there are some commercial customers you can try and win. That's one thing.

That's fine. But the other thing is a lot of what we are doing is going to be with government contracts, DoD, Department of Defense, Pentagon, CIA, FBI, if there's any of them left in a year, I don't know about that. But they are the people that need this. And in order to have those U. S.

Government contracts, it's not so simple for a small Danish company to do that. So we do need partners. And those partners that we are working with are having so called IDIQs and contracts of reference. So when we team up with them, they already have access to the government. That's why it's a smart strategy for us.

If we really grow and North America become the biggest part of our business, which could happen over time. Maybe we want to build our own factory, maybe we want to do something else. But right now, I think my job for the organization, for everybody here, for U. S. Investors is to step by step taking all the fantastic technology we have, turn around the cash flow, which we've done now, and then gradually building out the order backlog so we grow.

That's my job. And then let's see in two, three years what the world looks like.

Moderator/Host: Perfect. That was a last question. I think you clarified very clearly what was inside the EBIT and why you showed this. There's a related question saying, did this disappear in Q4 or building up through the year? And if I understand you correctly, it's normal that you go through your inventory and it's not something you suddenly have built up.

It's just a new way for you to report that you want to take these warranty provisions in. Is that correct? So it's not something that is built up. It's just simply you change the standards?

Carsten Wachman, CEO, ComSpace: Yes. The warranty part is more about being more I think you are muted

Moderator/Host: Karsten. I

Carsten Wachman, CEO, ComSpace: don't know where the button. Sorry? Now? Yes, perfect. I'll turn it to my headphones.

That's great. It was a trick, gave me time to think about your question. What was your question, by the way? No. We're freezing here also.

Can you hear me? Yes. Now I hear you. Yes. Perfect.

Moderator/Host: So it was more it's not something that had built up. It's not something you're seeing build up or suddenly. It's simply a change of principle to take in more seriousness when you make larger contract that is more complicated. Is that correctly understood?

Carsten Wachman, CEO, ComSpace: Yes. A larger or smaller contract, yes. It is a warranty, which is basically the service you provide, the guarantee you provide to your customers. We haven't really used the balance sheet for that before. You need to make a software provision for that.

So we're doing that as a good business measure. In terms of the inventory, no, it's not something that just happened, but we've basically gone in and said, okay, but there are certain parts and components. If they don't move within a certain time period, we should consider them obsolete. They may not be, but we are being a little bit more stringent on that. That's why we have this $9,600,000 adjustment on that part.

It's no drama, but we think it's a good thing to do,

Moderator/Host: yes. And then there's a question around the cash flow. It's nice with that, but there's also, is there any problems in the contract at all? I think the question is asked because we have heard for some large auto producing companies that if you have a prepayment, it's not necessarily on your book yet. It should it is in your bank account, but you also need to deliver something.

So the banks might not see as you have a stable bank account. So can Eiffel cover this when you need to make guarantees and so on during the last contracts? Are you comfortable with that?

Carsten Wachman, CEO, ComSpace: Let me answer what's happening. I think it's somewhat convoluted making reference to other things that I don't know. So when we get prepayment from our customers, it goes to our bank account. End of story. It sits there.

It's got nothing to do with whether the bank thinks it's our money or not. That's how it is. I did say to you that the working capital has built up. So yes, we've been really good in having good contracts and collecting money. Last year, we'll see some impact on that because, of course, we're delivering and payments will come maybe in second or third quarter, the next payments on the contract.

So that's okay. In terms of putting out guarantees, etcetera, we need to do that on certain contracts and so far we are managing that.

Moderator/Host: Perfect. The question is around the solidity and you need, of course, to make sure that you are a solid company when you make these big contracts because you have guarantees. And Eifor is a good coverage of that. Is that correct?

Carsten Wachman, CEO, ComSpace: No, but I think Eifor has got nothing to do with that. Eifor is doing export guarantees to show that we make sure that we get paid from the other side. So it's a guarantee, it's a help to us. In Indonesia, it's a government to government direct loan, which is a little bit different. So I've always got nothing to do with doing guarantees for us.

What they're doing is that they're making sure we get paid. So two different things. I think you're mixing it up here.

Moderator/Host: Perfect. Then there's what measures is taken to improve operational scalability. I think you touched a little bit upon it using the AI. And if I might say it, you have some swing factors on the Indonesian order. And how do you prepare for and it will always be like that in your company for an uncertain timeline.

You don't know when things will accelerate. So some thoughts about how you build up to handle this?

Carsten Wachman, CEO, ComSpace: Yes, yes, yes. I'll answer that with like hedgehogs are meeting it carefully. So I told you before that we are not overhiring. We're not saying, oh my God, we're going to have this huge contract next year. Let's hire 100 people see how it goes.

No, no. So of course, it puts some demands and requirements on us that we are improving our processes. We're looking at how can we quickly scale up with manpower if that's the limiting factor, which typically it is. So that's how we are handling it. We are also very conscious about our demand supply planning.

So we're looking at I told you earlier, I said earlier, we're very busy in the first and second quarter here. We actually we don't want too much more work. We like to have more work in the second half of the year. So we are very conscious about how we're building it. It's tempting to just go ahead and hire a lot of people and I hope you appreciate when I say this, it's tempting if you get the contracts.

But I think that has been perhaps some mistakes of the past going a little bit too fast. We don't want to go through so either. But a lot of it is in the process, it's in the training, it's preparing for that big uptake that will come eventually so we can handle it.

Moderator/Host: And I think that's a good question here. What is the most important factor, one factor to win a marine domain awareness surveillance contract? Is that the technology behind it or is it that you have proven track record? So you need to choose one. Well, if you only have to say one thing when you are negotiating with states, what would you point to?

Carsten Wachman, CEO, ComSpace: Yes, very good. Now I'm not a politician, but try and answer to a politician. So what we are doing is trust. We're building trust with the customer. We have a reliable story.

We have the heritage. Again, remember, the brand is playing for us. And then it's knowledge about the end to end solutions because it's correct. When you go up to this marine domain awareness end to end. It's not so much about the technology, it's the ability to use the technology and put it together and make it function as a solution.

So, this is where our strengths lie and that's how we approach the different markets. And typically, different nations buying, you can't expect that there are experts sitting on the other side saying, oh, I need this, this and that and then I put it all together and it's working. They don't know that. So they're looking for somebody who can help them define what they need to solve the pain points that they have defined, for example, climate or pollution or managing fishing control, etcetera. So trust being that reliable partner with the heritage that we have and then understanding solutions end to end because that's really what the customers are buying.

They're not buying a satellite, they're buying a solution to a problem, and that's why we are focused.

Moderator/Host: That's a very specific question regarding something you don't guide on, so I'm not sure you want to say it, but talk about it. If you adjusted gross margin, it reached 30% actually, the EBIT minus 2% adjusted, but it reached 30% in the quarter. Is that a level you are satisfied with? And is the 30% enough in total to deliver on your EBITDA guidance or will be more required? We need more top line.

So I think the question is, are you satisfied with 30% gross margin and maybe a little bit trying for you to guide on it and I'm not sure how you want to do that.

Carsten Wachman, CEO, ComSpace: Well, thank you for asking the question. No, but the am I happy? No, I think it's not that I'm unhappy. I think we can do better, but you'll also see that it's quite an improvement. Even with not doing the adjustment, you'll see that our gross profit, if I remember correctly, was 8% in 2023, which is 29% in 2024.

That's pretty good and that is a consequence of the focus we've had on profitability and managing cost. Should it be better? Yes, that would be good, but I think it's going, trending towards the right level. Then it's a question of scaling the top line because we can stay at that percentage as long as I can grow the top line and our overhead costs will not grow at the same rate as the top line growth. So therefore, do the math, you will have more profitability.

As the CEO, they will be happy, always want to make more money. But I'd just say we're trending in the right direction. We're trending in the right direction.

Moderator/Host: And then a little bit up in the helicopter again. How would you describe your current tender activity in the programs? It should all the macro is pointing to that, that should increase. But is that also something you see in the tender activity?

Carsten Wachman, CEO, ComSpace: By tendering, let me translate it as we are working on opportunities and making proposals for customers all the time, of course, and we're increasing our sales force. So, and we don't, I don't guide on pipeline as such, no, but we are absolutely, we are busy nonstop. We still need to win. And of course, it's a better winning combination is, like I said, trust, reliability, solution knowledge and then also, of course, being competitive in the market price wise, which is what we're working on.

Moderator/Host: And then there was a little bit of what is included in your guidance. And I think you stated that the Indonesian order is not a part of your guidance. This is that would come on top. This is your normal business you expect to drive big guidance.

Carsten Wachman, CEO, ComSpace: Let me answer it this way that when we, of course, on the budget, we have exact numbers for top line and bottom line that we use to guide the organization and make our actions. That can go up and down or upside down side. So when you give a range, that's because things can go up and down. I can't control everything, but of course, we are working towards a specific target. What I'm telling you is that in that internal budget, we have not included Indonesia.

We haven't factored it in. So that's a better way to look at it. And then the ranges I've given you is, of course, because things can go up and down. Indonesia comes in early enough in the year, yes, great. If Indonesia comes in, in December, who knows?

So it really depends. But the message is without closing Indonesia, we can deliver the guidance I have given to you.

Moderator/Host: Do you see a need for being more than a component supplier, I. E. Integration with other systems in marine awareness, moving more into a larger part of the value chains to be able to do that? Or do you feel comfortable living on scene lab and all the other ones do this and you being the component supplier?

Carsten Wachman, CEO, ComSpace: Yes. It's divided our component suppliers. So it's somewhat it's a broad question. I said marine domain awareness is about solutions end to end. That's why we want to be strong and we understand how to build it.

We have some of the building blocks. We don't need to have all of it. We don't produce cameras ourselves. We buy cameras, but they're also part of the MDA. Working with Unseen Labs, they're running a service business.

Will I go into service business anytime soon? No. I don't want to step on the toes of my customers. That would be stupid. So we are going to work with them in evolving it.

Would we do a partnership at Unseen Labs to build marine domain awareness somewhere maybe? Will we partner with other companies to plug the holes maybe. So we are a provider of subsystems and products for satellites. We are a provider of satellites and we also a provider of broader solutions. Going into service business is different.

Perfect.

Moderator/Host: I think we are running out of time. So let me end up. Thanks for doing a great job and explanation looking forward for the ongoing working year in the future. I think we will end with that comment. I don't think you need to answer on that.

So thank you, Carsten, for taking us through your results and answering a lot of questions and giving us really a walk through your company once again.

Carsten Wachman, CEO, ComSpace: Okay. Well, thank you very much. Thank you for listening, and enjoy your

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