Earnings call transcript: Norbit Q1 2025 earnings surge, stock rises 12%

Norbit ASA reported a strong financial performance for the first quarter of 2025, with earnings per share (EPS) significantly exceeding forecasts. The company’s stock reacted positively, climbing 12% following the announcement. Norbit’s revenue for the quarter reached NOK 251.7 million, marking a 29% increase year-over-year, while EPS came in at NOK 1.4, compared to NOK 0.5 in Q1 2024. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.43, supported by strong profitability metrics and robust cash flow generation.

Key Takeaways

• Norbit’s Q1 2025 revenue increased by 29% year-over-year.
• EPS of NOK 1.4 surpassed market expectations.
• Stock price surged by 12% following the earnings report.
• Strong demand noted in defense, security, and offshore wind sectors.
• Revenue guidance for 2025 set between NOK 2,200-2,300 million.

Company Performance

Norbit demonstrated robust growth in Q1 2025, driven by strategic investments and innovation in product offerings. The company capitalized on strong market demand, particularly in the defense and security sectors, and continued to diversify its business segments, contributing to its impressive year-over-year revenue growth.

Financial Highlights

• Revenue: NOK 251.7 million (+29% YoY)
• EBITDA: NOK 93.1 million (31% margin)
• Operating Profit (EBIT): NOK 127.4 million (24% margin)
• Net Income: NOK 89.7 million
• Earnings per share: NOK 1.4 (vs NOK 0.5 in Q1 2024)

Earnings vs. Forecast

Norbit’s EPS of NOK 1.4 exceeded the market forecast of $1.03. This positive earnings surprise reflects the company’s effective cost management and strategic focus on high-margin products. The revenue forecast was NOK 510.76 million, aligning closely with actual performance.

Market Reaction

Following the earnings announcement, Norbit’s stock jumped by 12.03%, closing at NOK 171.4. This surge reflects investor confidence in the company’s growth trajectory and its ability to outperform market expectations. The stock is now near its 52-week high of NOK 173. InvestingPro analysis indicates the stock may be overvalued at current levels, with an impressive 130% return over the past year. Subscribers can access 15+ additional ProTips and comprehensive valuation metrics to make informed investment decisions.

Outlook & Guidance

Norbit has set an ambitious revenue target for 2025, ranging from NOK 2,200 to 2,300 million. For Q2, the company expects revenues to exceed NOK 700 million, driven by its Oceans, Connectivity, and Product Innovation & Realization segments. The company remains focused on expanding its global footprint and enhancing its manufacturing capabilities.

Executive Commentary

CEO Per Weiser Toone emphasized the company’s strategic vision, stating, "We aim for the trend and looking more than just one quarter." CFO Per Christian Reppe highlighted the company’s financial stability, noting, "Our balance sheet continues to remain rock solid."

Risks and Challenges

• Supply chain disruptions could impact production timelines.
• Market saturation in key segments may limit growth potential.
• Macroeconomic pressures, such as currency fluctuations, could affect profitability.
• Competition from other technology firms in the sub-bottom profiling sector.
• Regulatory changes in defense and security markets may pose challenges.

Q&A

During the earnings call, analysts inquired about Norbit’s M&A strategy, with management emphasizing the importance of cultural fit and margin potential. Questions also focused on the timing of defense contract revenues and the company’s capacity investments to ensure production flexibility.

Norbit’s strong Q1 performance and positive market reaction underscore its strategic positioning and growth potential in the coming quarters.

Full transcript - Norbit ASA (NORBT) Q1 2025:

Per Weiser Toone, CEO/Presenter, Norbit: Welcome to Norbid’s First Quarter twenty twenty five Presentation. My name is Per Weiser Toone. Together with me today, our CFO, Per Christian Reppe, also will support in the presentation. It’s been an eventful and positive start of the year with plenty of opportunities to prove that we live by our core value we deliver. Strategic investments in R and D, manufacturing capacity and organization has enabled us to capitalize on the opportunities that are meant for Norbit, growing the business while also improving our margins.

Right people remain diversified, enhance opportunity radar, embrace agility have been bullet points on our strategy blackboard always. These strategic bullet points remain just as relevant today. They are essential building blocks in our ambition to develop Norbit into a truly great company, able to adapt to current trends and well position us to take advantage of those to come. In Q1, we have delivered revenue growth compared to Q1 twenty twenty four of 29%. The revenue increase is primarily driven by growth in oceans and product innovation and realization.

The EBIT ended at 127,400,000.0, resulting in a margin of 24%. And what really matters at the final bottom line on the earnings per share, fully diluted, we see NOK1.4 compared to NOK0.5 last year in Q1 last year. Also worth mentioning, after closing of the quarter, we received some new nice contracts for product innovation and realization. It’s a new SEK 125,000,000 order for a European defense client to be delivered second half of this year. The general shareholders meeting conducted on the May 6 resulted in all resolutions being approved, including the three share dividend on the way to the shareholders’ account in a couple of days.

So looking into the segments. For those knowing Norbit, you know that it’s some lumpiness in the revenues. Q1 is usually seasonally the weakest quarter in Oceans. Despite that, we have delivered a very strong quarter in Oceans in Q1 with revenue of million, which is an increase of 92%. So one year ago, some of our listeners were disappointed about a weak Q1.

We might have weak quarters also in the future. But as always said, we aim for the trend and looking more than just one quarter. Despite that, it’s a good start of the year to have a good Q1. We announced in September an important contract for underwater surveillance with the GuardPoint sonars and NOK 75,000,000. It’s been some postponements in this project.

We have not done any revenue recognition, and we will not do that until we received full post payment from the client. EBIT margin, up from 8% Q1 twenty twenty four to 35%. Also worth mentioning, this growth of 92% includes, of course, revenues from the nice company we acquired last year, which now is Noybet Inumar, located in Rostock, doing sub bottom profiling. If we adjust for that, the growth would be 70%. So looking into the revenue mix.

Comparing to Q1, you see good growth both on winged and on our other sonars, VBMS, etcetera. And adding to that also then the sub bottom profiler part and the other summing up to two thirty three. One of the good points, so this slide was with us also on the Q4 presentation, but what we see remaining very important for Norbit is to increase the addressable market by broadening the product offering. Late last year, we introduced a new generation of the VBMS sonar named VBMS X. It’s a new version with a platform where the clients can buy additional features to upgrade by adding software functionality after they bought the sonar.

And this has been very well taken by the customers. So in the revenues on the sonars, the light blue NOK 118,000,000, it’s a substantial part being this VBMS X. Connectivity has delivered NOK146 million in revenues. It’s a 3% decline compared to the Q1 numbers in 2024 with an EBIT margin of 28%. So it’s on the same level as last year.

So looking into the revenue mix, we see that it’s growth, especially on enforcement modules, as expected from the mobility package from the European Union. It’s a need for more of the enforcement modules connected to the digital tachographs. And with some decline in standard tolling onboard units, we’re happy to see that we could offset that decline by growth on the other products. Again, as said in the introduction, remain diversified. It’s diversified business segments.

And within each business segment, you have product lines that also are diversified. So that’s important for Norbit. Product innovation and realization. The revenues, record high for product innovation and realization, 160,000,000, a 11% increase. And EBIT margin of 14%.

So in these numbers, it’s you have a for the first time, we have a revenue split on industries in the segment. So you see that the defense and security has yielded SEK 61,000,000 out of the SEK 161,000,000, and automotive has been declining from 40,000,000 to 22,000,000 This has been a strategy for us that replacing products with low margin with products with more acceptable margin. Yes, so I think that’s the main part of this. Industrial, 56,000,000. R and D services and some products on top of that, the SEK 22,000,000.

That’s quite stable. During the last period, we have received two very significant contracts. First contract of SEK260 million will be delivered in second quarter this year and $125,000,000 so part of it has is shown in the Q1 numbers also at that. And in addition, the mentioned $125,000,000 contracts to be delivered second half of this year. So in total, defense related revenues in product innovation and realization approaching SEK 600,000,000 this year.

As said in the introduction also, the strategic investments we’ve done in capacity and organization has enabled us to be in a position where we can take responsibility and utilize on the growing demand for technology made in Norway, Europe. I think during the IPO process five, six years ago, a lot of people we met were a bit uncertain why do you bother manufacture in Norway. Today, we see it was a good strategy, and we’re happy to see that the further expansions also is in progress and progressing according to the plan. So with that, I’ll leave the floor to Pegdistan to give you some more flavor to the financial

Per Christian Reppe, CFO, Norbit: Thank you, Peruga. I will spend some minutes walking you through the financial highlights of the quarter. Operating and financial performance in the first three months of twenty twenty five was strong across the group. Revenues in the first quarter amounted to NOK251.7 million, an increase of 29% from the corresponding quarter of 2024. Adjusted for Innamar, which we acquired first of July last year, the growth rate was still an acceptable 22%.

EBITDA for the quarter was million, representing a margin of 31%. This compares to NOK73.1 million and an 18% margin in the first quarter of twenty twenty four. Operating profit was NOK127.4 million, translating into a margin of 24%. This compares to NOK 41,100,000.0 and a margin of 10% in Q1 twenty twenty four. Net finance expenses were negative NOK 10,000,000, explained by net interest expenses of NOK 4,100,000.0, while the rest, 5,900,000.0 by foreign exchange losses and net other financial items.

Tax expenses were 27,700,000.0, while net income for the period was NOK 89.7 In the first quarter, Oceans delivered a quarter with strong sonar sales supported by rental companies renewing their fleets. Growth from first quarter twenty twenty four was 9270% when adjusting for Inomar. Gross margin increased to 74%, largely in line with the prior quarters, but up from 68% in the first quarter of twenty twenty four, a quarter impacted by fewer winged sales and higher share of low margin third party equipment delivered. Payroll expenses was up 12,300,000.0, of which Inamar explained roughly half, and the rest was new hires and wage inflation. Operating expenses was up NOK 3,600,000.0, while depreciation and amortization expenses increased NOK 2,100,000.0.

In total, this gave an EBIT of 81,400,000.0 for the segment, and the margin was 35%. Connectivity saw a revenue decline of 3% year over year, but reported a two percentage point increase in the gross margin, making the gross profit for the quarter largely flat from that of first quarter ’twenty four. Payroll expenses increased 2,400,000.0, but was partly offset by a decrease in operating expenses and depreciation and amortization. Hence, the EBIT result for the quarter was 41,500,000 and the margin was 28%. PIR posted a marked improvement from a weak first quarter last year, driven by improved operational performance.

Revenues grew 1123% when adjusting for sale of inventory in first quarter of ’twenty twenty four. Growth was driven, as explained by Perrigan, by strong demand from the defense sector. The gross margin increased 11 percentage points to 44%. Part of the increase in gross profit was offset by an increase in payroll and operating expenses on higher activity, resulting in an EBIT of 21,800,000 for the quarter and a margin of 14%. Next, balance sheet and financial position.

Property, plant and equipment, including rights of use assets, increased NOK 6,000,000 in the quarter following investments in machinery, equipment. Intangible assets rose NOK 12,500,000.0, explained by R and D investments, with continued high activity on the GNS’ OBU project in the quarter. Trade receivables were down NOK 23,100,000.0, explained by Ocean’s sequential revenue decline, while inventories increased 1,000,000 in the quarter on purchases relating to the announced defense and security orders in PIR, of which a majority of the largest contract will be delivered in the second quarter this year. Cash flow impact was, however, reduced on million increase in trade payables. Looking ahead, we expect that the inventory level will fluctuate from quarter to quarter, given the anticipated growth this year, combined with the delivery schedule.

Net interest bearing debt stood at million at the March, a decrease from NOK254 million at the end of the previous quarter. Our equity ratio was 52%, down from 53% at the December. In the first quarter, our net interest bearing debt to EBITDA ratio decreased to 0.5 times, and our liquidity position stood at $791,000,000 Our balance sheet continues to remain rock solid and provides for a strong financial platform to deliver on the capital allocation framework and the ambition plans that we have set out. A strong balance sheet also enables us to return cash to the shareholders. In a few days, our shareholders will receive a cash dividend of three per share, including a NOK 1 per share extraordinary dividend distribution given our healthy financial position.

Lastly, cash flow for the quarter. Cash flow from operations was NOK101.3 million, explained by an EBITDA of million, a net increase of million in working capital, taxes paid of NOK 40,300,000.0 and NOK 10,000,000 in net finance expenses. We invested NOK 47,800,000.0 in the quarter, explained by NOK 36,600,000.0 in R and D investments and NOK11.1 million in investments in machinery and equipment. The R and D investment level is expected to be maintained in the second quarter. Cash outflow from financing activities was $5,800,000 in the quarter, explained by repayment of leases.

And with that, I’ll give the floor back to for the outlook section.

Per Weiser Toone, CEO/Presenter, Norbit: Thank you, Pegrestian. So looking into the future, we announced that for this year that our target is to deliver revenues in the range of NOK 2,200,000,000.0 to NOK 2,300,000,000.0, with the EBIT margin improved compared to the 20% reported last year. Based on the current outlook, these targets are considered to be conservative. According to our policy, we update targets for the year during the second quarter. So a bit more specific on the short term.

In Oceans, we’re moving into a seasonally stronger period, and the quarter Q2 has started out well. So we would like to state that we expect revenues for the quarter to be in excess of NOK $220,000,000. And in that, no revenue recognition of the mentioned 75,000,000 security project is included in that guidance. For the second quarter, we expect a higher activity also in connectivity. So we give a range from NOK 160,000,000 to NOK 180,000,000 in revenues.

And this is supported by strong demand for enforcement modules for tachographs and satellite based units. In the product innovation and realization segment, we expect to deliver revenues between million and NOK350 million. This driven by the growth and the contracts mentioned towards defense and security clients. So all in all, we’re targeting revenues in excess of 700,000,000 in the second quarter. So that concludes the presentation.

If there is any questions, we are open to try to answer them.

Moderator/Analyst: Get on the we do have a good couple of questions. Maybe I can start out. You present a margin target of 8 percent to 10% for peer last year and the last couple of quarters and Q2 guidance has been a bit over that. Is this more of a short term spike or is it a structural shift? And is this primarily driven by the increased defense mix?

Per Weiser Toone, CEO/Presenter, Norbit: So I think we will come back to new targets coming into August. I think I mentioned during my part of the presentation that we have reduced volumes on some clients with lower margins that was a bit dilutive to our margins and adding on others, whilst we also have some benefit from running on higher volumes. And as we speak, I think we mentioned it during the Q4 twenty twenty four presentation that Norbit is investing in a new line for surface mounting of electronic components. According to the Japanese manufacturer of this, this is supposed to be Europe’s fastest line. And we can then also get some benefit from that.

And as we speak today, the first boards are running in this line. So that helps us going forward.

Moderator/Analyst: Sounds good. And just another question for me on that. You’re currently undergoing the capacity investments or working on that at Selby, right? Is this primarily to open for defense customers? Is it a mix?

Or could you provide any color on how you think about that capacity investment?

Per Weiser Toone, CEO/Presenter, Norbit: It’s a general capacity increase. And I think as we’ve always done, Norbit is allocating money to R and D in own proprietary technology to be sold under Norbit branding in the global market. And then we build up capacity to meet increased demand. But also, with some key selected industrial or key selected clients, we grow with them as a contract manufacturer. So scaling both to have the relative between them is interesting

Moderator/Analyst: for us. Got you. I will open the floor to Jeppe. Revenue in peer came in slightly below expectations due to delayed start up on large defense contracts. Wasn’t these contracts anticipated for Q2 twenty twenty five?

And how much revenue from these contracts had you expected to book in Q1?

Per Weiser Toone, CEO/Presenter, Norbit: You’re the one booking.

Per Christian Reppe, CFO, Norbit: Think we had anticipated that a smaller share of the largest contracts we announced would occur in late March. However, had some capacity issues in those weeks, so we had to sort of postpone the production start up. So that’s more of a timing effect. So and that was the main reason for why revenues came a little bit tad short of our guidance given in Q1. However, they’re not lost.

I think that’s important also to say. I mean those revenues will come in Q2, and that’s also reflected in the guidance.

Moderator/Analyst: Perfect. And the last question on peer is from Petr Consley. What is the revenue capacity within peer given the current footprint?

Per Christian Reppe, CFO, Norbit: That’s a very challenging question because it really depends on what you assume, what kind of products that we are selling out of the factory. But in general, what we can say with the investments that Perjugen made and the investment program itself for this year is that we have a lot of capacity to increase revenues. But again, depends if we are running high volume production with the SMT line that we just bought and also new investments made this year. High volume production will have a significantly higher capacity utilization, hence, higher revenues, whilst more manual work, of course, has less sort of potential and requires more investments.

Per Weiser Toone, CEO/Presenter, Norbit: And just to add to that, so being simple engineers, we try to manage the company to have a utilization of the capacity that the normal day should be two shifts so that we could have both the ability to jump on opportunities with the third, but also if you have some delay that you could catch up on that again.

Moderator/Analyst: Okay, perfect. And then we have some questions on Oceans. We could start with Jep again. Oceans revenue exceeded expectations driven by strong sales of new products, including to rental companies renewing their fleets. How should we view this going forward?

Is it recurring revenue stream or more of a one off boost?

Per Weiser Toone, CEO/Presenter, Norbit: I think as Jep knows, the visibility in oceans is always challenging. From receiving an order until we have delivered, it’s a matter of weeks. So it’s very hard to say. But as we’ve said also for Q2, it started out very well. We see that the new products we have introduced are very well regarded in the market, and we really see good opportunities for continued growth.

Moderator/Analyst: And then, of course, there are two questions on the GuardPoint contracts. You mentioned that the original client or integrator failed to meet the payment terms and that the new buyer has been secured. Will the GuardPoint system still be used to protect the same assets? Or does this represent a completely new sale or geography?

Per Weiser Toone, CEO/Presenter, Norbit: So the end client, the user, the asset owner remains the same.

Moderator/Analyst: Okay. And Petter then again asks if there will be progress on the NOK 75,000,000 Gardpoint contract. I guess you’ve been into that. I have a question as well on Inmar. It’s been an orbit company for a couple of months now, a good six months if I remember quickly.

Could you remind us on the synergies with Inmar? And maybe also how has that materialized compared to your previous expectations?

Per Weiser Toone, CEO/Presenter, Norbit: So I’m very proud of having Indomar as a fully integrated member of the Norbit family. It’s for sub bottom profiling, it’s a market leading position. I think what we see of synergies that already has become relevant is that Norbit’s global market footprint is also bringing Inomar out, whereas Inomar in the past has been a bit more reactive in the market, we’re now supporting and bringing it more proactive. And also, think seeing engineers from Frondheim, Hungary and Rostock working closely together on new generations also for sub bottom profiling shows that engineers are engineers.

Moderator/Analyst: Sounds good. And then we have two questions from Erik Stangland. The first is, can you leverage your customer relationships within defense customer built through FLS integration in our Versus to market GuardPoint? It was a bit of a rough I

Per Weiser Toone, CEO/Presenter, Norbit: didn’t get it fully.

Moderator/Analyst: So he says, can you leverage your customer relationships with defense customers built through the FLS integration in AVs to market GuardPoint? So I guess in one, he tries to see this in just between

Per Weiser Toone, CEO/Presenter, Norbit: PR and Oceans. Any client relation is a way into a new one. So I mean it’s all built on relevant references and a good reputation. But I think the clients and the market for GuardPoint and the forward looking sonars, the FLS, are slightly different. So but it’s important to do a good job in all segments.

Moderator/Analyst: Got it. And then more the cyclical part of Oceans. Arik asks, a good portion of your clients in the Ocean segment serve the offshore wind industry. Are you seeing signs of a slowdown in demand from those?

Per Weiser Toone, CEO/Presenter, Norbit: It’s a bit hard to answer. I think when we saw the, call it, the first wave from the rental companies buying wing heads, Our take was that this was primarily driven by the offshore wind trend. In Q1, we had very good sales towards rental companies again. What kind of trend that is, I’m not fully sure, but the orders are well received.

Moderator/Analyst: That’s good to hear. And then there’s also a question on M and A. Is it getting harder to find attractive acquisitions in Ocean? Presumably, that valuation multiples has expanded for those companies as well. And maybe if you just could provide some color on how you think about M and A these

Per Weiser Toone, CEO/Presenter, Norbit: Yes. So maybe a little bit more general answer to that. I think it’s always very difficult to find good targets for M and A, and that’s because we’re very cherry picking. I mean, we have a very long list of companies we have decided not to try to buy or decided not to buy. And what we’re looking for to do strategic acquisitions, like with InnoMal, want to see companies where it’s clear synergies, positive synergies.

It should be in the market or on technology. And also, we need to see that these companies has the potential to deliver margins in the range that Norbit want to. I mean there is a lot of companies with cool technology but simply too low margins, and then it doesn’t fit. And the largest criteria underneath all this is that we need to see a cultural fit. I mean, we’re very much focused in Norbit on the company culture.

And then we think that the company we should include into the family expanding Norbit need to benefit from this culture and want to be part of it.

Moderator/Analyst: Perfect. And then before we move to the general questions on connectivity, a question from Petty Konshle. In the guidance on connectivity for 2Q ’twenty five, how much of the NOK160 million contract you won last year have you included?

Per Christian Reppe, CFO, Norbit: So I guess Petter is referring to the GNSSORBU contract. There is very little of that in that guidance that we are providing in Q2. Most of the volume production will start from Q3.

Moderator/Analyst: Okay, yes.

Per Weiser Toone, CEO/Presenter, Norbit: I think that’s communicated before also that this is primarily second half.

Moderator/Analyst: Yes. Because his second question there is, is it correct to assume that the NOK 60,000,000 contract within connectivity is based on six months of volumes from that customer?

Per Weiser Toone, CEO/Presenter, Norbit: I said second half.

Moderator/Analyst: Okay, good. And then, yes, I have a question. In your Q2 revenue outlook for connectivity, you mentioned one of the drivers being the satellite based tolling product. Is this including the new GNSS Obu?

Per Weiser Toone, CEO/Presenter, Norbit: No. This is enforcement modules for satellite based tolling that we’ve been delivering also previous years. Perfect.

Moderator/Analyst: I guess then we have two questions to wrap it up. Knut Martin Carsten has a question on more of a strategic level. How does Norbit ensure that the managers of each business segment have a clear understanding of the cost of capital relevant to their operations. And that incentivize our structure in a way that reflects the varying levels of capital intensity across segments.

Per Weiser Toone, CEO/Presenter, Norbit: So I think we’re as a management team, we manage Norbit as one Norbit. And then so in the corporate management, all segments are included and prioritizing as one Norbit. I think it’s easy for everyone to agree that we should allocate most capital where it pays best off and also ensuring that we remain diversified.

Moderator/Analyst: And then I guess a question that you can’t really answer, but you’ve described your financial business as conservative, yet you’re choosing to keep them unchanged. What’s the rationale behind maintaining the current guidance?

Per Weiser Toone, CEO/Presenter, Norbit: So I’m not sure we said that they’re unchanged. We said that this was the targets we announced. We say that we consider them conservative. And we say that according to our policy, will give revised guidance or targets as part of the second half of the first half numbers being presented.

Moderator/Analyst: And if there’s not any questions here in Oslo, guess, thank you. And then we look forward to see those targets in Q2. Thank you. Okay. Thank you.

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