Earnings call transcript: Invisio Communications Q1 2025 sees stock drop

Invisio Communications AB reported its Q1 2025 earnings, revealing a record high revenue for the first quarter, although the results did not meet investor expectations, resulting in a 7.71% drop in stock price. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.37, despite current trading levels suggesting slight overvaluation. While the company reported a stable gross margin of 60% and a strong order book, the earnings per share (EPS) and revenue forecasts failed to impress the market. The stock closed at 395.5, reflecting a significant decline from its previous close.

Key Takeaways

• Invisio achieved its highest-ever Q1 revenue, approximately 10% higher than last year.
• Gross margin remained stable at around 60%, although slightly lower due to third-party system integrator deliveries.
• Order intake was lower compared to the previous year, influenced by a large radio order in Q1 2024.
• Stock price fell by 7.71% following the earnings release.

Company Performance

Invisio Communications demonstrated robust performance in Q1 2025, achieving its highest first-quarter revenue to date, a 10% increase from the previous year. InvestingPro analysis reveals impressive last twelve months revenue growth of 45.88%, with gross profit margins holding steady at 55.74%. The company maintained a stable gross margin of 60%, although this was slightly lower than expected due to increased third-party system integrator deliveries. The order intake was down compared to the previous year, largely due to a significant radio order in Q1 2024 that was not replicated this year. Subscribers to InvestingPro can access 15+ additional key metrics and insights about Invisio’s financial performance.

Financial Highlights

• Revenue: Increased by 10% year-over-year, marking the highest Q1 revenue to date.
• Gross margin: Stable at 60%, with slight reductions due to third-party contributions.
• Order book: Nearly DKK 750 million, with the majority expected to be delivered in Q2.

Earnings vs. Forecast

Invisio’s Q1 2025 earnings did not meet market expectations. The earnings per share (EPS) forecast was set at 1.66, but the actual results fell short. This underperformance was a key factor in the negative market reaction and subsequent stock price decline. The company’s historical trend of meeting or exceeding forecasts was not maintained this quarter, leading to investor disappointment.

Market Reaction

Following the earnings announcement, Invisio’s stock price dropped by 7.71%, closing at 395.5. This decline reflects investor concerns over the company’s failure to meet EPS and revenue forecasts. InvestingPro data shows the stock trading at 54.5x earnings, with analyst price targets ranging from $32.70 to $43.60. The stock’s performance was notably below its 52-week high of 447 and closer to its low of 217, indicating a bearish sentiment among investors. For deeper insights into Invisio’s valuation and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking forward, Invisio anticipates a strong performance for the remainder of 2025, with significant revenue impacts expected from increased national defense budgets in the second half of the year. The company is also focused on expanding its product offerings, including new wireless link systems and accessories, which are expected to drive substantial order intake.

Executive Commentary

CEO Lars Heugard Hansen emphasized the company’s strategic positioning, stating, "We expect this to happen from the second half of twenty twenty five and onwards." He also highlighted the competitive landscape, noting, "Competition is good," and acknowledged the market’s complexities, saying, "It’s still a market where it takes a long time. It is volatile."

Risks and Challenges

• Lower-than-expected order intake due to previous large orders not being replicated.
• Potential volatility in the defense market, which could impact future revenue.
• Challenges in maintaining gross margins amidst increased third-party deliveries.
• The complex and lengthy supplier recognition cycles in the defense sector.

Q&A

During the earnings call, analysts inquired about the revenue potential from the recently acquired Ultralinks product line, with the company confirming no significant contributions expected until 2026. Questions were also raised about the limitations of wireless technology in military applications and the estimated value of vehicle systems, which were addressed by the management.

Full transcript - Invisio Communications AB (IVSO) Q1 2025:

Conference Operator: Welcome to Envisio’s presentation of the interim report January to March 2025. For the first part of the conference call, the participants will be in listen only mode. During the questions and answer session, participants are able Now I will hand the conference over to the CEO, Lars Heugard Hansen. Please go ahead.

Lars Heugard Hansen, CEO, Envisio: Thank you very much, and welcome to our Q1 presentation that we have chosen to title position for an eventful 2025. And indeed, we do expect a very interesting and busy 2025. As you might recall, we come from a very strong fourth quarter in 2024 and indeed a full year 2024 where we grew our revenue with 46%. And in the late part of quarter four, we had a delivery and order intake of a large order of SEK 150,000,000 that we managed to deliver before the end of the year. Normally, that would have been played into Q1 and be part of the revenues in Q1.

But as we always deliver according to customer wishes, we managed to do that in Q4. And this is reflecting the normal order and revenue volatility that we see in defense markets. We will go into the different details of the numbers slide by slide. And of course, when we have a quarter like this, which is a little more soft, we still have to remember that revenues are actually almost 10% better than same quarter last year and it is actually the highest revenue number ever for a Q1. Order intake a little down.

We have hard comparison numbers because we did receive a very large order last year with the radio deliveries that you might recall. But we still leave the quarter with a quite strong order book. I will dive deeper into that. In terms of operational highlights, there’s a couple of things important to mention, the acquisition of the product line, Ultralinks in

: The

Lars Heugard Hansen, CEO, Envisio: UK, the fact that we have updated our market estimates and also a few comments around the tariff discussions that are ongoing. So when it comes to order intake, we were quite a lot lower than last year. And as I said, that was partly due to the very large order in Q1 last year that included radios from a third party. And I would say there’s nothing unusual in this quarter. It’s a little lower maybe than previous quarters, but it is part of the normal fluctuations and seasonality that we see.

We still expect a very strong 2025. We can see the activity level being very high all around the globe. We can also see that many of the funds and budget increases that have been distributed in many countries have not yet reached our part of the product portfolio. So we expect this to happen from the second half of twenty twenty five and onwards. Our revenues, as I said, best first quarter ever, approximately 10% higher than last year.

So yes, not so much to comment there. We will move on to the order book, where we at the end of the quarter were at almost DKK750 million. And majority of this order book is expected to be delivered during the next Q2 quarters. We are well prepared to be able to deliver relatively fast as you will see also from the inventory levels a little bit further on. Our gross margins are stable over time.

It was a little lower in this quarter, primarily due to a couple of deliveries made through third party system integrators where we have a little bit lower margin. But over time, our gross margin is averaging over 60%. And as we continue to increase the number of newly developed products, that will continue to support a strong gross margin, but there will be a few fluctuations between quarters pending some of these deliveries where we work with large system integrators or vehicle manufacturers or others where we have a little bit lower margin. But all in all, we are happy with that when we know the reasons why. So for OpEx, we are also in line with our own expectations.

We continue to invest in product development and in the sales organization where we see fit. As you know, we have also acquired Ultralinks during the quarter, which added seven or eight headcounts to our cost base. And we have consistently and very focused been investing in a new product portfolio. And you can see some of the products that have been announced within the last four quarters, the new V60 Generation two ADP control unit, our new world leading X7 in ear headset, the Envisio Link intercom system that will be shipping from the second quarter, the Envisio Control app for the intercom, the acquisition of Ultralynx and a number of other product upgrades. And just yesterday at a large trade show in Tampa, Florida called SoftWeek, we announced two further accessory products to our intercom, a switch and a loudspeaker to further expand the capabilities of our intercom system.

So our investments in operating expenses is definitely leading to a lot of new products. We have a world leading product portfolio at this point in time and there is more to come before the year is over. Operating margin, of course, lower than last year because of the lower gross margin and as well as the higher operating expenses that we have just seen. We still maintain our financial target that the operating margin over time should exceed our target of 15%. And for the four last quarters, we’ve been around 21% in average.

So as always and said many times, our company development should be evaluated from a long perspective and not from a single quarter. Inventories continue to increase a little bit and we are now at almost DKK300 million And that is a management decision to do so, because it does enable us to deliver large volumes at speedy rates as we saw in Q4, where we delivered the 115,000,000 order very swiftly. And that is definitely a competitive advantage in the current market conditions, where a lot of customers and governments are willing to spend money and need to spend money. There, it will be a significant advantage if you are able to deliver within a reasonable amount of time. And I would also say again that the inventory is predominantly components and standard products.

So we normally do not see any risks from obsolescence or scrapping from the inventory. It is all products that are sellable. Cash flow was positively impacted due to payments of trade receivables that happened arising from sales in our very strong Q4 twenty twenty four. So nothing out of the ordinary there. Explanation is strong sales in Q4.

And from an operational point of view, well, you have probably heard by now that we acquired Ultralinks in The UK during the quarter. And this is part of our ongoing transformation towards a company where we do not only sell and offer hearing protection communication solutions, but we look a bit broader on platforms for the modern soldier system and vehicle systems. And a modern soldier system today is a very complex network of many different products, radios, weapon sites, navigation tools, sensors and all kinds of different unique standards. And all of these devices must be able to share data, audio and power in an efficient way on the body of the soldier. So with our acquisition of Ultralinks, we believe that we have expanded our value proposition considerably.

And over time, it will also help us in developing new products solutions. So it allows us to work on the body of the user to combine a number of different products that were not always developed to be able to communicate with each other and to share data and power. In itself, this product line from Ultralinks will soon start to create revenues for us of a considerable size, but it will also help sell products of our entire portfolio in a larger system. And we again believe that this is strengthening our position in the modern soldier system segment. And we will continue to do that over time.

During the quarter, as we touched upon also in the update from the fourth quarter, we have updated our total addressable markets from an estimated SEK 14 to SEK 25,000,000,000 per year. And I’m not going to go into details with it here. It’s also available on our website in details. But I think the headlines here are that this is an update based on where we are now. It’s an update towards our first estimate almost ten years ago.

And the estimate is more related to price increases and system selling than of the increased fundings that we are going to see over the coming years. So we still expect that the funding increases budget increases over the next ten to fifteen years will result in even further market sizes, and we will have to update the numbers some years down the road. But this is where we believe we are right now from a market size perspective billion. Tariffs, there has been a lot of talk about that and uncertainty. And historically, defense equipment has either been exempt from tariffs or subject to very low rates.

How that will play out in the future is, of course, a little bit uncertain at this point in time. But from a company point of view, Envisio has for quite a while been putting a couple of strategies in place, operational plans to compensate and handle potential tariff situations. And that also include preparations for manufacturing in The U. S. Related to certain activities.

We have since a long time back a well functioning manufacturing model that makes use of partners within NATO and almost entirely in Europe. We have today warehouse facilities, distribution facilities in The U. S. And have also prepared for manufacturing in The U. S.

So I think all in all, we will have to follow the situation closely, but we are well prepared for what might come not only short term but also long term effects of these discussions. So in summary, we are moving forward according to our long term strategy. Envisio is committed to playing a central role in the development of modern solar systems, and we have further reinforced that now by the acquisition of Ultralinks. We have a strong order book. We have good market conditions and we look forward to a year of continued high activity, good growth, profitable sales.

We it is still very difficult to estimate regarding National Defense budgets, but our best assessment is that they will start to have significant impact on our revenues order intake from the second half of twenty twenty five. We have consistently made very good investments in new products in our organization. And we believe that this has given us an excellent position to take advantages of the opportunities that we will see in the defense markets and public safety markets today and for the next ten to fifteen years. So we look forward to an eventful ’25, where we will continue our long term work to strengthen Envisio as a company and add value for our customers, our shareholders and for our employees. So with that, I end my short presentation of the Q1.

And operator, we are now open for questions, please.

Conference Operator: The next question comes from Daniel Thorson from ABG Sundal Collier. Please go ahead.

Daniel Thorson, Analyst, ABG Sundal Collier: Yes. Thank you very much, Lars and Thomas. Question here on Q1 started off with a decline year over year in European sales, but growth in North America. How do you expect these two regions to develop in terms of growth pace during 2025? Is it anything that differs these two given the recent U.

S. European political discussions?

Lars Heugard Hansen, CEO, Envisio: No, don’t think so. I think this is again just snapshot of a single quarter and it doesn’t give any direction. We still of course, we still expect the investments in Europe to be very, very strong for many years to come. And that will fluctuate between quarters, but will over time be significant. But we also have very strong position in The U.

S. We have very good business in The U. S. Regardless of any tariff discussion. And I’m sure that The U.

S. Market will continue to be a very strong contributor to our order intake and revenues, not only in 2025 but also onwards.

Daniel Thorson, Analyst, ABG Sundal Collier: Yes. I see. Okay. That’s clear. But then also given the current tailwinds in military spending, I assume there will come some kind of increased competition perhaps from adjacent players like potentially the radio players or other already well functioned military suppliers.

Is that something you are seeing at, for example, the Miami trade fair you mentioned in the beginning of this call?

Lars Heugard Hansen, CEO, Envisio: Not yet. And I would also think that many of the companies that are presently in the defense space have enough to do with their own product categories. And I think many will be very busy just executing and delivering on their normal core categories. There will of course be maybe newer companies that will be trying to get into the military market. But just because there is a lot of funding doesn’t mean that the market will change its dynamics.

It’s still a market where it takes a long time. It is volatile. You need to be recognized supplier for quite a while before you get any of the larger assignments. Just being a sort of really well positioned and accepted player in the industry is a competitive advantage. It’s not an easy market to get into no matter what will happen with the budgets.

We always welcome competition. Competition is good.

Daniel Thorson, Analyst, ABG Sundal Collier: I see. Fair enough. Final question. Did Ultralynx contribute with any sales here in Q1 at all?

Lars Heugard Hansen, CEO, Envisio: Not yet. We’ve also said that we expect them not to contribute significantly until 2026. But I would expect to see revenue from it in twenty twenty five second half.

Daniel Thorson, Analyst, ABG Sundal Collier: Excellent. Thank you very much.

Lars Heugard Hansen, CEO, Envisio: Welcome.

Conference Operator: The next question comes from Jalma Alberg from Redeye. Please go ahead.

Jalma Alberg, Analyst, Redeye: Thank you. A question on your comment on defense budgets. It sounds like you’re a bit more confident that the impact is I mean, the effect is coming in second half. Is that correct? Or is it more like the same comment as before?

Lars Heugard Hansen, CEO, Envisio: It’s hard to say, Jalma. I would say, I think what most defense companies are asking for these days is some type of predictability and uncertainty from the defense organizations globally. And it very difficult right now. But we can as I said, the activity level is very high. We have many customer meetings.

There’s a high interest for testing. And so my gut feeling is that we will see some effect of that in the second half of the year.

: All right.

Jalma Alberg, Analyst, Redeye: And also I mean you commented that you can see quite high variations in quarterly deliveries. You also increased your inventory. Do you think that is there more potential for these kind of orders that you got in Q4 where you have very quick deliveries or was that kind of a one off?

Lars Heugard Hansen, CEO, Envisio: No, that could definitely be the case. And that’s also why we are preparing ourselves for these kinds of and even if it’s not for super quick delivery, I still think that many customers’ countries would like to see deliveries that are not many years out because it is urgent as we all know And therefore, deliveries are often asked to be done within at least a quarter or two. So that would be the regular norm, I think. So we are very well prepared for that. We have ample capacity to be able to meet almost any demand within a couple of quarters.

Jalma Alberg, Analyst, Redeye: And you also mentioned a bit that Q1 is typically a seasonally softer quarter during the year. Can you say anything what you’ve seen in Q2 this far? The CCR activity? Or is it similar to Q1 this far? I guess only one month, but if you can say anything.

Lars Heugard Hansen, CEO, Envisio: No. As I said also, there was some timing into some orders received. So sometimes when we are at the end of a quarter and we would like maybe a few more orders to come in. The customers really don’t care whether it’s at the end of a quarter or the start of the next quarter. And we of course always respect our customers’ wishes.

So I think this is timing more than anything else.

Jalma Alberg, Analyst, Redeye: And also you mentioned that you are potentially looking at production in The U. S. How quick could such production change? Do you need to test a lot before you actually do something? Or could

Lars Heugard Hansen, CEO, Envisio: be No. I mean, there’s a number of things related to that. And we have been preparing for that for quite a lot for a long time. It’s not related from our sake, it’s not really related to the tariffs. It’s related to other things.

So we have been preparing for it for a long time. So we and we really just need to push the button. So we could do it, I would say, probably in three months.

Jalma Alberg, Analyst, Redeye: Right. And then just a question on new products. I mean, Intercom Wireless is coming within the next month and you also mentioned two new accessories there. Will this kind of go direct to volume orders? Or do you anticipate kind of more test volume orders over this year?

Lars Heugard Hansen, CEO, Envisio: They are part of the intercom system. So I would expect the wireless link system and the other accessories to actually provide for significant order intake in 2025.

Conference Operator: The next question comes from Tom Ginciard from Pareto.

: A question on the gross margin development here in Q1. Is that driven by The U. S. Third party sales? Or is there any other geography negatively impacting here?

Lars Heugard Hansen, CEO, Envisio: In this case, as I recall, is mainly U. S.

: Are you seeing higher activity on third party sales in The US now compared to a year ago? Is it just mixed? Yes.

Lars Heugard Hansen, CEO, Envisio: We also I would say we as I’ve said before we have a very good relationship to many of the radio manufacturers, to the vehicle manufacturers, to system integrators. We work with large companies like Thales who used to be the owners of Rekle back in the day. So we have many ways to market. And sometimes a fast and good way is through one of these third parties or partners as you like. And there in those cases they take a part of the margin and we have a little bit lower gross margin.

But I would expect the opportunities to arise in all parts of the world. When we acquired Rekel, they have quite a lot of sales through vehicle manufacturers. And in the three years we have owned Rekel four years, the margins have been improved quite significantly. Some of the sales have gone direct, but we’ve also improved on the margins in general for the Rekel products.

: All right. Perfect. Thanks. And just a question on the new products here for the WILEM infra. Is that customer driven?

Or have you sort of instigated the development?

Lars Heugard Hansen, CEO, Envisio: It is definitely customer driven. So but we are the owners of the technology and everything included in it. So but there are strong customer demand around the Wireless Link solution. So we expect shipments to be good already in 2025.

: Perfect. And just a final one on follow-up here on Q2 expectations. Can you give us anything on the mix here moving forward? Should it be margin accretive here year on year adjusted for the radio deliveries?

Lars Heugard Hansen, CEO, Envisio: Yes. I think again we are seeing a very active market. And then as usual, it is very hard for us to decide or to influence exactly when the orders will come in. So Q2 has the possibility of becoming really, really good. But some of these expected orders could also be pushed into Q3.

That’s what always happens. But again, the underlying activity and interest and so forth is definitely positive.

: All right. Perfect. Thank you.

Lars Heugard Hansen, CEO, Envisio: You’re welcome.

Conference Operator: The next question comes from Yiwei Zhu from Please go ahead.

Yiwei Zhu, Analyst: Hi, thank you for taking my question, Lars. Also I want to ask about the new product and it is interesting that you continue to broaden your offering the wireless technology. But I still recall that you mentioned a few years back the wireless is bent in the military use. And what happened here given you are sort of continue to launch here in the wireless? Is it a new industry standard or change in the regulation?

Or you still expect the wireless communication to be a niche segment only for selected user case?

Lars Heugard Hansen, CEO, Envisio: Right. That was a good question Wei. And it is complicated. There’s not an easy answer to this. I think when we talked about no wireless back in the days, this was a question where we were talking about on the body of the soldier where the question was why are there so many cables between the radio and the communication headsets and so on?

Why isn’t it wireless? And there the answer still is that you are not allowed to have wireless on your body as such between devices because you can be jammed or intercepted and so forth. So there is a good reason for that. When it comes to an environment like a vehicle or a boat where we can use the intercom and the wireless link, there you are talking about a little bit of a different wireless scenario because there you are in a a controlled environment where you can operate wirelessly, let’s say, a 50 or 100 meter around a vehicle and where maybe the risk of being intercepted is less. And there, some users, probably not everyone, but some users will allow the use of wireless around the vehicle.

We are actually also using wireless technologies a little bit related to the soldiers because we do have a wireless PTT that you can put on your weapon and then you can PTT back to your radio system wirelessly. But you still have your body worn cable system at the same time. So it’s a little bit of a double edged answer here. But in general, wireless on the body is not allowed, whereas around vehicles and inside vehicles it is allowed to a certain extent.

Yiwei Zhu, Analyst: Okay, great. And could you also maybe comment on the competition? Do you have do you see like similar technology from the competition already there or maybe some new product launch from the competition? I

Lars Heugard Hansen, CEO, Envisio: would say on our portable intercom with the wireless link, I do not see any direct competition. There might be other types of products like a radio that can do something similar but in a totally different way. But the way we do it, where it is part of the Envisio system and if you have an Envisio intercom and Envisio control unit, Envisio headset, then you are able to create this ecosystem where you are also wireless around the vehicle. I cannot see anyone that can do that.

Yiwei Zhu, Analyst: Okay, great. Could you also indicate the value per vehicle per solution, I mean entire system? How is it going to change with all those new products?

Lars Heugard Hansen, CEO, Envisio: Yes. It’s a little high. I mean if equip an entire vehicle with the whole system with intercom, with control units, with a number of headsets and cables and wireless products and so on, then the system will probably end up in the EUR 20,000 to 25,000 area per vehicle.

Yiwei Zhu, Analyst: Okay, very clear. Great. And I just want to clarify that in the press release yesterday you mentioned that the new system would be ready for ship in the second half of the end. Should we expect any like large order announcement before that?

Lars Heugard Hansen, CEO, Envisio: You asked clever questions. Just wait and see.

Yiwei Zhu, Analyst: All right. Fair enough. Thank you, Lars.

: I’ll jump back to the queue.

Conference Operator: There are no more questions at this time. So I hand the conference back to the CEO, Lars Hoegard Hansen, for any closing comments.

Lars Heugard Hansen, CEO, Envisio: All right. Thank you everyone for your interest and listening in and for your great questions today. So we will end the conference here and we will be back with our Q2 report on July 18. Thank you. Bye for now.

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