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Ovzon AB (market cap: $189 million) reported its Q4 2024 earnings, highlighting a record revenue of SEK 117 million and a significant order intake increase. Despite these achievements, the company’s stock fell by 4.76% as market participants reacted to the earnings call and broader strategic shifts. According to InvestingPro analysis, the company’s current valuation appears to be fairly valued based on its proprietary Fair Value model.
Key Takeaways
- Ovzon achieved record quarterly revenue and order book levels.
- The company reported EBITDA breakeven for the full year 2024.
- The stock declined by 4.76% following the earnings release.
- Challenges in the US market and reduced defense revenue were noted.
- Strategic focus is shifting towards European and Swedish markets.
Company Performance
Ovzon AB demonstrated strong performance in Q4 2024, achieving an all-time high revenue of SEK 117 million. The company doubled its full-year order intake to $48.4 million and achieved a record order book of $31.3 million. This growth was driven by the successful launch and commercialization of the OBSON3 satellite and a strategic shift towards European markets.
Financial Highlights
- Revenue: SEK 117 million (record high)
- Full Year Order Intake: $48.4 million (doubled from 2023)
- Order Book: $31.3 million (record high)
- EBITDA: SEK 17 million in Q4
- Cash Flow from Operations: SEK 60 million (Q4 record high)
- Cash Balance (January 2025): SEK 290 million
Market Reaction
Despite the positive financial results, Ovzon’s stock price fell by 4.76% to 18.9, nearing its 52-week low. This decline suggests investor concerns about the company’s reduced US Department of Defense revenue and the challenging US market conditions. However, the stock has shown resilience with a 10.4% gain year-to-date and an impressive 88.6% return over the past year, according to InvestingPro data. The stock movement contrasts with the broader market trends, emphasizing specific concerns about Ovzon’s strategic shifts.
Outlook & Guidance
Looking ahead, Ovzon aims to focus on profitable growth by maximizing the utilization of the OBSON3 satellite and concentrating on core market segments. The company plans to expand in defense, national security, and public safety sectors, particularly in Europe and the US. Estimated investments in OBSON3 for 2025 are SEK 50-60 million.
Executive Commentary
CEO Per emphasized the importance of security and resiliency in communication, stating, "Security and resiliency is very, very important in communication." He also highlighted the company’s unique positioning in the satellite communication space, saying, "We are a Swedish multinational high-tech company in a very unique space, satellite communication."
Risks and Challenges
- Decreased revenue from the US Department of Defense could impact future earnings.
- The challenging US market may hinder growth and strategic objectives.
- Geopolitical tensions could affect global defense spending and demand.
- Competition from other satellite communication providers like Starlink.
- Potential delays or cost overruns in OBSON3 investments.
Q&A
During the Q&A session, analysts questioned Ovzon’s strategy in the US market and the company’s expectations for terminal sales. The management reiterated their focus on maintaining higher volumes in terminal sales and emphasized the importance of local and collaborative solutions for NATO and EU preferences.
Full transcript - Ovzon AB (OVZON) Q4 2024:
Ludwig, Moderator/Operator: Hello, and welcome to today’s webcast with Odeson, where CEO Panerien and CFO Victor Bremmer will present the year end report for 2024. After the presentation, there will be a Q and A. So if you’re calling in and would like to ask a question, please press 9 to raise your hand and then 6 to unmute yourself when you’re handed a word. You can also submit in questions in the form to the right. And with that said, I hand over the word to you, Per.
Per, CEO, Avson: Thank you, Ludwig. Good afternoon, good morning and warmly welcome everyone. Thank you for joining us on Avsons earnings call for the fourth quarter and full year of 2024. I’m joined here today with our interim CFO, Victor Bremer.
Victor, Interim CFO, Avson: Thank you very much, Karen. Hello, everyone.
Per, CEO, Avson: Excellent. Before we start the presentation, I would like to comment on two specific things. One, probably for in the front lobe of everyone, the current geopolitical situation, which is in turmoil. We have a new world order, and I’m not going to speculate in what this means. But I can say that at Avsom, we feel extremely confident in our products and services, technology and solution, and that it fits the needs for whomever has a critical mission.
And we’ll continue to talk about that a little further down in the presentation. Number two, before we go into the numbers and so on, on the financial performance. If it’s not understood, I want to underline how excellent the performance was and how important the fourth quarter was for Avsom. This has led to a very strong finish to 2024. And the executive summary is, it’s only a year ago since we launched Avsom three.
We already have two major customers contracted on the satellite only after five months. For those that are in the satellite industry, that’s a very good achievement, I would say. We had very strong water intake on five sixteen million SIG for the year based on a couple of large orders with prepayment terms from customers of one specific reason, they want and need us to deliver our Satcon solutions fast to them. We had a 15% growth in revenue, most of what came from European customers. We delivered a very strong EBITDA.
EBITDA is our measure of looking at do we run a healthy core business. Very strong quarter, SEK 17,000,000, and we followed up on an on another strong quarter in Q3 for that. So that’s very, very important. And we had a strong SEK 60,000,000 in cash flow from operating activities in Q4 that landed us at SEK 126,000,000 in cash at the year end. Obviously, I would say this that EBIT, earnings before interest and tax is, is is a minus and it’s mainly attributed to, the fact that we are capitalizing on the $2,300,000,000 investment we’ve made in our technology programs.
So of the minus 18, we’ve actually spent a little bit more than 30,000,000 in capitalization. So I think that’s kind of underlying two specific things, geopolitical and a very strong quarter and a very strong finish of the year. Now let’s move to introducing Avson for those of you that are not familiar with us. We are, I would say, the world leader in the most advanced integrated and unique satellite communications solutions there is. Our mantra and the way we measure that is in performance, mobility and resiliency, meaning you can use satellite communication anywhere, anytime, in any way.
And you can bring your terminals to connect to the satellite with you. And it’s highly resilient, meaning it will not be disturbed or, you and you will have a very high uptime of your capability. Our mission and our niche is to connect the world’s critical missions via satellite. What is a critical mission? It could be for a company, but it’s foremost in our core markets, which are defense, national security, and public safety.
So it’s fair to say that Avsund is a Swedish multinational high technology company focused on integrated satellite communications. And we serve currently the core markets defense, national security and public safety. So when you think about ops and you can think high-tech and communication, but you shall you shall also think about us as the supplier, a critical supplier of critical infrastructure to defense national security and public safety customers. And defense is now a majority of our revenues going forward. Okay.
Next (LON:NXT) slide, please. Of course, satellite communications have been available for decades. However, the world changed when low earth orbit satellites was brought to light and became a consumer solution. So let’s talk a little bit about what all of this means. The geopolitical tension in the world, as I mentioned in the beginning, continues to escalate.
We have a new world order. Nations, alliances, organizations scale up investments rapidly to own defense solution and they’re modernizing their defense national security and public safety with high-tech capabilities. Countries are now shaping plans for more sovereign own capability to have a dependent independence in case of conflicts, guaranteed communication with undisturbed and continued uptime is crucial, whether it’s on land, at sea or in the air. Security. Security and resiliency is very, very important in communication.
So satellite communications is today part of the infrastructure. So think about Avsun now as part of a crucial infrastructure for a country, for a defense unit, for civil defense, or for national security, for sure. Digitization, everything we do has an escalation in terms of how much data and information is sent, received and created. So therefore, cloud solution and there are cloud solutions for governments, so called GovCloud, and AI are being used in a dramatically different way today than it was just one or two years ago. And the first and the last mile of actually being able to use that for a smarter, better society and for defense is connectivity.
Satellite communications is therefore a critical part of that. And last but not least, climate change. We have a change in weather patterns. We have a change in climate. Winds, wildfires, floodings, avalanches, or landslides, or whatever we see in the news every day are becoming the new norm.
So when land and mobile based communications are down, satellite communications system, in most cases, the only answer to quickly execute fast and agile rescue missions and in saving lives. Next slide, please. What’s unique about Avsom? So we call this the circle of life and there are a couple of words on this slide that are important. Integration is important.
We are not only providing a mobile satellite terminal or a satellite capacity or network bandwidth or a ground station or a system integration piece of it. We do it all, all the four. So at 09:00, we provide the world with the smallest, lightest and most high performing ruggedized and secure mobile satellite terminals that has ever been built. And we’re continuing to see developing them, of course. Number in at 12:00, very high performing and agile steerable satellite networks.
Stearability means we can move the beams on the satellite to a specific area and thereby thereby increase the bandwidth and the performance of it. And we can do it in minutes, not in in in in hours and weeks and so on. And with OBSON3 we now have the most advanced communications satellite in space. And we complement that with least capacity if and when we need to. In 03:00 you can see that we don’t own gateways.
We partner with very selected few resilient, world class secure gateway providers that connected to fiber in their world. And the world is in their country, I would say. And the world is changing quite a lot. It is important to most countries to have sovereignty and its own capability. So they want the signal to go down in their country.
Therefore, I think we have a smart strategy in not owning any of that infrastructure but partnering with those that have it in the countries that we serve today. And last but not least, I think what stands out for us is that we operate on very high service level agreements where we guarantee 99.5% uptime and above that. We guarantee that by having a dedicated twenty four hours a day, seven days a week and three sixty five days a year service and support from our global network operations centers. Next slide please. Now where and why is Avson positioned and where is it in the competitive where are we or is the company in the competitive landscapes?
So as I previously mentioned, our customers require and expect basically a 100% uptime on performance and connectivity. And I strongly believe and we know this from our customers that use us in very, very remote areas where there’s no other infrastructure that if you can’t guarantee this, you cannot rely on satellite communications for connectivity. So if you look at this, on the top end, we serve that market. We are complementary to what is below us, which is the low Earth orbit constellations. So we are mission critical, we’re premium, we’re guaranteed connectivity, We’re all about mobility and resiliency.
You can’t be disturbed and distracted. And, we can guarantee that we deliver that. We’re complemented by the STARLINKs of this world that many of you know about. But STARLINK is not a competitive threat to us. We don’t see it as us.
We see it as a compliment. Most of our government customers, whether it’s defense and and and public safety, use STARLINK for crew welfare, Meaning when they’re at bases or when they communicate home etcetera etcetera. There are other applications as well which they use it for but this is and and and STARLINK offers a best effort meaning when a satellite is in orbit and you can get a signal, you, you have good connectivity. But if you’re in the mission critical, you cannot wait for best effort. You have to have a guaranteed service level.
That’s where OFSON stands, stands apart. That’s where Afsane shines, and that’s where Afsane and STARLINK complement one another. I think this is extremely important to understand in the world we’re in today. So complementary, not competitive. Next slide, please.
Okay. As I mentioned in the beginning, I would say what a difference a year makes for Avson. A little bit more than a year ago, I stood with our team at Cape Canaveral, at the Space Center Cape Canaveral and saw a SpaceX Falcon nine rocket launch of Zone 3 into space. So that was 01/03/2024. In a year, we have gotten the satellites, to its designated position in orbit.
We entered commercial service on July 5. We had the first customer during the Olympic Summer Games in Paris, in 2024. It was used by Gijon, what’s the group Interventions de la General Marie Nationale, which is the world’s one of the world’s leading elite police tactical unit, then anti terrorized unit for the French National General Armory. A great use case for us. We also had our biggest for our first customer, which is our longest tenured customer within the US Department of Defense who signed a longer term contract with us in, at the July.
And then of course, at the end of twenty twenty four, we got the largest order ever in the company’s history, a 185,000,000 Swedish kroner order from Swedish Space Corporation, and we’ll come back to that in a minute. And I think what’s also important to note is that because the launch was so successful, we didn’t have to use any of the of the fuel for the satellite, which actually steers it. So it means we have fuel for more years than what was originally thought. So we have extended the lifespan to eighteen years, which has also financial, positive financial implications for us. Next slide, please.
Accomplishments, maybe repetitive, but I’ll do it again. Really strong finish of the year, order book at all time high and a solid, solid cash flow. To keep it pretty short, I talked about the 185,000,000 order from Swedish Space Corporation. That order, we delivered terminals in Q4, the majority of them. I think we could talk about this in a little bit.
But the service starts on March 1. So we have said in Q1, but it’s March 1 in this quarter, we’re in that. We also got an extension of another order from Swedish Space Corporation with additional capabilities that was needed. And that was also paid in advance because of fast deliveries. And that cash came in Q4.
I also want to acknowledge we have a separate slide on it, but a very advanced remotely controlled of an control of an unmanned ground vehicle, with the Swedish defense unit. And then after the quarter, of course, we have had some more news. We’re participating. And I think this showcases our strength that we are one of the leading providers of satellite communications in the world. We’re participating in a six gs satellite initiative, which the Swedish Foundation for Strategic Research is investing 60,000,000 kronor in for the next generation mobile satellite communication.
We’ve had a renewal from the Italian Fire and Rescue Services. This is the third time this customer renews, which is good, repetitive customers, renewed customers. We also announced that Andrea Loeffgen was appointed as new CFO. Andreas starts on May ’20 ’20 ’5. And last but not least, we also extended and amended a loan facility agreement with P Capital Partners (WA:CPAP) from expiring on 12/31/2025 to now expire on 09/30/2026.
Victor will tell you a little bit more about those terms and conditions. Just a few words on Andrea, which you will meet, of course, during the spring here. Strong international experience from CFO positions within Skanska, one of the world’s largest construction companies. It comes handy when you think about what Osen has done historically, what we will do in the future. He’s also been responsible for investor relations for Skanska globally and for North America where he’s also lived for a few years, which also comes in handy given our customer base and our company structure.
And most recently, he served as the CFO of Booklook, which was a housing concept which Skanska originally developed with Ikea and Skanska. And he has a master’s degree in finance and financial management. We’re very pleased to have landed such a prominent person to our team. Next slide, please. This is, the largest order and I think I’ve mentioned most of this already, so I don’t need to do too much more than the 185,000,000 kroner order is a twelve month contract.
We see it as the start of the beginning for something, something big. It includes SATCOM solutions based on OBSON three, including mobile satellite terminals. We delivered the majority of them in December, service starts in March. We got full payment of this order in January 2025, so we have further added cash, to our cash box. This is a strategic milestone and we have a very strong strategic partnership with Swedish Space Corporation, which we’re very satisfied with.
And this also creates good growth opportunities for us both in Sweden and in Europe, etcetera. Next slide, please. The significance of the remote control of an unmanned vehicle that we did with Swedish FMD is the following. We believe that the future holds that there the the the biggest business potential is unmanned solutions. And to have unmanned solutions that you can remotely control in a thousand kilometers away from Stockholm to this remotely controlled, unmanned vehicle in Kiruna, Sweden is a challenging task.
It’s made possible because OFSON three has such strong performance with bandwidth, very little latency, and we have terminals that are not heavy, they are robust, and we can quickly make sure that we can utilize all of this technology in one goal. Most, if not any, other supplier can do this. So we see this also as a start of the beginning for something where further applications and solutions will come out of this. Thank you. Next slide, please.
All right. So let’s turn to the financial section of our presentation. Order intake, strongest quarter ever, totaling 19,000,000 US dollars or $2.00 9,000,000 SEK for the quarter. In in and for the full year of ’24, that was 48,400,000.0 U. S.
Dollars corresponding to $516,000,000 sick, more than doubled compared to 2023. I repeat that, more than doubled compared to ’twenty three. Order book amounts to 31,300,000.0 U. S. Dollars corresponding to three forty four million sick, an all time high.
This is obviously a great foundation for 2025 where we want to be much more repetitive, predictable and strong even and even out the quarters during the year to drive towards profitable growth and an even stronger EBITDA. We’ll focus on developing our current customer base and expanding with new customers foremost in Europe and in The U. S. Now over to some more details and I hand it over to you, Victor.
Victor, Interim CFO, Avson: Thank you, Pera. I will now walk you through our financial performance for the fourth quarter and total year. The revenue of SEK117 million in the fourth quarter is all time high for a single quarter and as a result of an overall better demand and improved order intake. The increase in revenue is mainly due to a higher portion of delivered terminals of SEK43 million, which also represent the majority of the remaining terminal orders taken during 2024. The revenue out from SATCOM services in the fourth quarter was in line with the third quarter of SEK64 million.
Run rate for OBSON SATCOM services is slightly below the third quarter and ends on SEK255 million, but indicates compared to the full year revenue from OBSON services of SEK223 million that we are in a positive direction. Next slide please. The positive trend on EBITDA continues in the fourth quarter where we managed to further improve EBITDA up to SEK 17,000,000. And with that, we also break even on EBITDA level for the full year of 2024. This is an improvement of EBITDA during 2024 with SEK66 million compared to 2023.
EBITDA margin improves from minus 6.3% in fourth quarter twenty twenty three to 15.6% in fourth quarter twenty twenty four. EBIT and EBIT margin were slightly improved in the fourth quarter thanks to improved EBITDA, but still negative due to the depreciation related to the activating of Ozone three starting in the third quarter, which represent approximately SEK 30,000,000 per quarter. Next slide, please. Cash flow from operations of SEK60 million is an all time high for a single quarter due to customer prepayments. We will see a similar effect in the first quarter of twenty twenty five where we have received a customer prepayment and as January 2025 we have a cash balance of SEK290 million.
Cash flow from investments of SEK8 million is related to the finalization of OLSON three. Net debt increases from a third quarter with SEK 13,000,000 to SEK $649,000,000, which is mainly an effect of variances in U. S. Dollar. This week, we also amended and extended our loan agreement to September 2026, which was made possible thanks to our strong business momentum.
Next slide, please. The estimated investments in Ozone three for 2025 remains in the span of SEK 50,000,000 to SEK 60,000,000 and is attributed to the finalization of the onboard processor. And in summary, we show that we have a strong business momentum, improving EBITDA quarter by quarter and Ozone’s financial position is today much stronger than it was six months ago. Back to you, Per.
Per, CEO, Avson: Thank you, Victor. Well, maybe this is the first time that all these graphs point in the right direction up. But I think the key here to remember is very high levels of order intake and an order book, which is good for the future as well. Reaching EBITDA, breakeven for the full year, very important. We’ll continue that journey.
Cash flow is very strong, cash flow from operating activities. We’re good at cash management. We’re good at cost control. But in order to scale up, we also need selectively to invest in a few things. But we will do that with a steady hand on the cash machine.
So I think all in all, those trends are extremely important. Now for the future, and this probably does not come as a surprise, but I’ll probably summarize with saying it in the following way. This company is a Swedish multinational high-tech company in a very unique space, satellite communication. And not any, but integrated satellite communications that we can turn on for customers commission at any time and we’re really fast in delivery and we have very high quality of delivery. That bides well for a world that requires those kind of solution.
And that world is defense, national security, and public safety. So if you should think about Avson in either high-tech telecom or defense, national security, and public safety, I would say both. That’s where we’re positioned today. And I think that’s unique and it’s good because we also have very high educational levels and we have a fairly easy task to actually recruit talent to the pool of talent we already have here. For 2025, our focus will be to deliver on the deliver financial performance, meaning continue to increase order intake, grow revenue, grow EBITDA and have a positive cash flow from operating activities.
In order to do so, we must have commercial success with the investments that we’ve made and the hard work we’ve put in the last three to four years in getting OBSON3, OBSON onboard processor and our mobile satellite terminals out. So we have to make sure that every customer stays with us. We have to fully utilize OBSON3 because that’s where the profitable growth is going to come from. We have to focus and double down on core market segments that we’re in, defense, national security and public safety. And we have to focus on relevant geographies, not trying to be everywhere for everyone, but relevant geographies.
And lastly, we have to actively scale up then by being concentrated on customers, continue to develop our talent pool, being around the clock for business, and continue to deliver measurable value with the technology we have in place. With that, I think I’d like to end with my sincere thanks to our team of Opsonians for their really hard work and smart work in 2024 that created this very, very strong result for us. And also, sincerely thank Victor for his outstanding contributions as our interim CFO at a very crucial time. We’ll work very closely together with Victor to drive profitable growth and run a very efficient enterprise because he knows the company really well. So with that, Ludwig, I’ll hand it back to you for dialogue and questions and answers.
Ludwig, Moderator/Operator: Thank you so much for the presentation, Aaron. As you mentioned, we’ll now carry on with the q and a. So if you’re calling in and would like to ask a question, please press 9 to raise your hand and then 6 to unmute yourself when handed the word. And the first caller here is Simon Granault from ABG. Well, you’re welcome.
You have the word.
Simon Granault, Analyst, ABG: Good afternoon. Thank you, operator. And good afternoon, Per and Victor. And thank you for the presentation. I have a couple of questions.
And initially, I would like to ask on the outlook for The U. S. Into 2025. Looking back at full year 2024, revenues in The U. S.
Fell by roughly 50%. And although this was more than well compensated by increased revenues from Sweden and Europe, are you seeing any stabilization signs of stabilization in The U. S. Going into 2025 or perhaps there could be prospect for normalization back to historical levels? Thank you.
Per, CEO, Avson: Good afternoon, Simon. Maybe I should ask you the question. Do you see any signs of stabilization in The U. S? No, jokingly aside, which we shouldn’t joke about this.
Listen, I think it’s a great question, obviously. We’re extremely pleased with that. We have shifted the revenue mix geographically. As you know, historically, we had over 90% of our revenue from The US and US Department of Defense. So it’s better to have a better geographical mix of revenue.
So we’re very pleased with that. What we’re not pleased with is that we have reduced the revenue base as you point out from the USDUD. Some of it has natural answers to it, because the focus of the previous administration in The US was to bring troops home, so to speak, and not invest so much out there in the field with the the number of capabilities. And it becomes a budget process and and bureaucratic process. So we saw that as a as a kind of a one off down and trying to get back.
I think it’s hard to predict exactly what’s gonna happen now. You’ve probably seen in the news, President Trump talking about 8% cuts in Pentagon and and on on military spending, etcetera, etcetera. What effects that will have? I think it’s very hard to predict. I would say this, that US is still a very important market to ops on.
It’s the world’s largest defense spender. We have a strong position with the core customers we have and our objective is to regain back to the levels we have and more than that. That’s probably the best answer I can give you today.
Simon Granault, Analyst, ABG: Thank you. And as always nice to hear all the color added. And just a quick reminder, where are we on the status on commissioning the onboard processor on of Zone three? And could you also remind us on the benefits as for when this comes into play?
Per, CEO, Avson: Yes. I’ll let Victor talk about the financials on that. But let me preface what he’s going to say with the following. The onboard processor is already in use. So if you read note eight in our quarterly announcements, that might give you an impression that it’s not.
It’s already started to be used. We have some more work to be done to make it as uniquely as unique and excellent as it is because there’s no such other thing in the world today. So there’s still a little bit more work, but the majority of the work is done and it’s starting to be used by customers today. Do you wanna comment a little bit on the on the financials for that, the notate?
Victor, Interim CFO, Avson: Yeah. When when we do take this into commercialization and then we will now also start the depreciations of the onboard processor.
Per, CEO, Avson: So that’s basically the reason for the writing in note eight. And maybe it’s confusing, but it’s already developed in majority. We have more than the minimum viable product starting to be used. And but but depreciation is not starting until we’re fully done with the scope that we had originally set out to do. And also to mention that that the test that we the demo that we did with the FNB in in November was with the onboard processor.
So it’s which proves
Victor, Interim CFO, Avson: that it’s fully functional, but it’s, but it’s there are still some small items to to adjust.
Per, CEO, Avson: And the uniqueness with the onboard processor is is, of course, we’ve I would say we we I call it a switchboard in in in in space. So basically, we’ve moved the intelligence of this, it’s software enabled, so we’ve moved the intelligence from the ground to the space. So when a, for example, a teleport where the signal comes to the satellite and down to the user, if that’s not functioning of any reason, if the infrastructure is out and so on, we can make one of our terminals a teleport and create a closed loop communication system. So you will have a guaranteed uptime. There are many more unique features of it.
But in essence, this enables us to have this service level agreements and unique uptime that no one else can do in a very high highly secure and resilient environment.
Simon Granault, Analyst, ABG: Thank you for clarifying that. Appreciate it. And then on terminal revenues, which have historically been relatively lumpy but have been strong for several consecutive quarters. Is it fair to expect such revenues to normalize a bit going into 2025? But at the same time, we know that the SATCOM backlog is particularly strong.
So all these boils well for margin improvements, particularly on the back of a better mix. Thanks.
Per, CEO, Avson: Yes. I would say this. I think the introduction of OBSON3 and with our SACCON solutions that we have, the need for having an adequate number of some mobile satellite terminals increases. So what you’ve seen now during the past year, a year and a half, I would say, is probably the new norm, but it’s not gonna be as predictable as every quarter there will be x, y, or z. It is all dependent on when customers want service to start and when customers thereby want terminals in their hands, both to make sure that they’ve trained their uses on them as well as having some in kind of reserve and inventory for themselves, etcetera, etcetera.
But I do believe, so you will recall maybe Simon that maybe three years ago, we basically bundled the terminals into the subscription contracts we then were outselling, which meant that we owned the inventory, but it was out on lease on lease kind of in the in the bundled business case. Nowadays, given the customer base we have in defense, national security, public safety, there’s no guarantee in what shape or form the terminals would come back. So we shifted about two plus years ago into selling them outright. But we don’t sell them as stand alone. We always sell them when we sell the Satcon solution.
So the increase in sales of terminals actually means that the demand of the services also increases and the amount of users increases, which should be positive for the future as well. So that’s a long answer to it can’t fully do equal between what you’ve seen in the last maybe year to what’s going to be in the future. But but I believe we’re going to have a a higher level of volume than what we had previous years, two, three, four, five years ago, more in line with what you’ve seen during the last year.
Simon Granault, Analyst, ABG: Thank you so much. It makes a lot of sense. That’s all for me. So thanks for having my questions.
Per, CEO, Avson: Thank you, Simon.
Ludwig, Moderator/Operator: Thank you so much for the question. We’ll carry on now. And the next caller is Mikael Lasien from Carnegie. You’re welcome. You have the word.
You can press 6 to unmute yourself.
Mikael Lasien, Analyst, Carnegie: Okay. Thank you very much. I hope you can hear me. Yes. I have a couple of questions here.
The first one is a follow-up on the permanent question here. Can you say, of how much of the orders that you have received in the second half that you have delivered in terms of permanent sales and how much you still have in the order book for delivery in 2025?
Per, CEO, Avson: Yeah. Hey, Michael. Very good question. I’ll let Victor answer that, but we’re going to try to be as precise as we possibly can for sure.
Victor, Interim CFO, Avson: As I mentioned, we have delivered the majority of all the terminal orders that we received and we have about $2,000,000 of terminals remaining in the order book.
Mikael Lasien, Analyst, Carnegie: Oh, great. Thanks.
Per, CEO, Avson: It should
Victor, Interim CFO, Avson: be during 2025.
Mikael Lasien, Analyst, Carnegie: Yeah. Okay. And another one here regarding the mix. How much of the revenue in Q4 now are based on also three? Is it only the USDOD contract or do you have only started the SSC contracts which was including the
Per, CEO, Avson: Yes. Another excellent question. The answer is very straightforward. It’s only the US DOD plus some of the smaller contracts we had during the second half of the year obviously, but they’re already, they’re already consumed. So it’s only the US DOD, the Swedish Space Corporation contract of 185,000,000 that that bigger order starts on March 1.
So the service starts on March 1. Why we didn’t write that originally in the press release was that it wasn’t clear to us. The customer wanted to start quicker and earlier. It wasn’t quite clear if they were ready to do so and also how fast we could deliver the terminals. We were obviously, as you understood now, very fast in delivering the majority of the terminals in that order.
And there and then with a little delay, the service starts on March 1.
Mikael Lasien, Analyst, Carnegie: Thanks. That was clear. And when it comes to the SSC contract that you received in December, can you talk to us about, I mean, what it means for for you to sell Orion and take us to services this customer? Is this the first, I think?
Per, CEO, Avson: It’s absolutely correct. You’re absolutely correct. It’s the first that has both Opson Pegasus and Opson Orion services in it. Therefore, the mix of terminals kind of indicates that too because they, both the Opson T7 obviously is equipped for, with its dual modem is equipped for the Opson Orion services and are on the move terminals are now also being equipped for that step by step for with a dual modem, etcetera, etcetera. So it means that the end customer is looking at a variation of use cases, I would say, where they need ops on Pegasus services straight on, you know, similar to ops on SouthCon vessel service concept and where where they’re gonna deploy, the ops on Orion service, for what mission, for what which kind of units and which kind of use cases.
So it’s a little bit early days because this is the first as you noted, and we’re working very closely with both the Swedish Space Corporation and the end customer that’s gonna use this, also in terms of how to set this up. What we see is that I think the first the first installations that’s gonna happen here will actually showcase how broad and how deep and how and how they will layer the different of Saint Pegasus and of Saint Orion services and the combinations thereof. So I think during this year we’ll be able to provide a little bit more granularity into that because we’re working kind of through that with the customer as well here as we kick off the service in March 1.
Mikael Lasien, Analyst, Carnegie: Okay. Got it. And maybe also a follow-up here. Can you maybe clarify what the onboard processor is capable of right now and what you’re working on during 2025?
Per, CEO, Avson: Yes, we can. And in general, it’s capable of everything that it was designed to do. It’s just that when we’ve also used it for the unbanned solution with Swedish FMV. When we have used it for some other demonstrations, we have seen that we could actually add some features and capabilities that we maybe had thought of but not made part of the kind of base package of it. So that’s what we’re actually doing here.
So the more it’s gonna be used, the more we’ll develop it. And that’s the beauty with having a software enabled capability really is to go deeper and deeper into how it can be used. And I think that’s gonna provide layers and potentially new applications and and and services around it too. But it’s a little bit too early to say, but it’s being used both in demonstrations and with the customers that they’re now gonna start to use it. So it’s more of an incremental development of features and capabilities that we think will make it even more unique honestly.
Mikael Lasien, Analyst, Carnegie: Okay. Interesting. And another maybe basic question, can you say something about how you’re marketing Olufsen three to customers and what feedback you have received so far?
Per, CEO, Avson: Yes. I can I can shed some light on that? I think the way to portray it is probably this is not a, I call it four colors and glossy paper kind of sending people a catalog and pick and choose from the catalog kind of thing. It is a lot of education insights on many layers of from the end user that is just gonna use it in kind of in in field to also decision makers about investments in short, mid and long term SATCOM solutions. So, it requires very much of a consultative solution selling approach and how we position it.
It requires in many cases that we do very tangible hands on demonstrations and we are out doing that with the customers. Actually, the the recent trend is that more and given the, I would say, the geopolitical tension, more and more of the end customers are actually looking at this as a way to also find a way to work together a little bit on, if we have this solution, what could the combined efforts look like? What would the onboard processor actually mean to us if we could have interoperability without disturbance, etcetera, etcetera. Where would we use that? How would we use that on land, at sea, and in the air?
How can this play into unmanned? So the FNB test is an unmanned. I think the potential for unmanned. And you know a little bit about our company. We’re very, very good at antenna and RF development, right?
So the lighter and smaller antennas can be, they can sit on smaller on demand as well. So you can have a range of applications here with manned and unmanned and people using our solutions. So I think that describes it pretty well. We address the customer in multi layers of their organization. We go in and do both presentation and demonstration.
And we also do some demonstrations actually with other capabilities like STARLINK and so on, where STARLINK is used for certain use cases and where they can’t meet the demands, of course is the mission critical thing on top of that. So you do kind of a mesh network capability. So that’s how the discussions and the entry into the customer goes.
Mikael Lasien, Analyst, Carnegie: Okay. Can I ask a final one?
Ludwig, Moderator/Operator: Yes, last question, then we have the one to add.
Mikael Lasien, Analyst, Carnegie: Okay. Final one, important question here. What actual additional steps are you taking to secure larger and longer term contracts with The U. S. Defense agencies?
Per, CEO, Avson: Yeah. I think that’s the 10,000 million dollars question maybe. The way to do it is, first of all, to secure the customer base we have today. It starts with that. They normally operate on you know, twelve month budgets, or so on.
So it’s hard to kind of change, pardon me, to change that rhythm. The second thing we’re doing is we are partnering with others that sit on so called program contracts, so longer large frame contracts. They can be up to five years on those. So we are targeting partners that sit on those. And thirdly, we’re also working a little bit more with opening doors into higher levels of management, whether it’s Pentagon or even senators and congress, women and men, that sit on the, you know, on defense kind of interesting defense aspects of things.
So we actually have to broaden and The U. S. Is a huge country obviously as you know. But we’re taking step by step and measures to work through the whole value chain of decision makers and influences and those that can allocate funds and to that. But I think the big portion is that working with those that sit on frame contracts and becoming part of that, then you can have get longer term contracts.
But I think at in parallel, we gotta be snipers. So we gotta be what we’re good at, we’re good at. And, there are other units out there that needs us. And those sits on either yearly budgets or they sit on longer contracts and they might test us for a year with only in The US but in other countries as well but, but US is for sure a focused area.
Mikael Lasien, Analyst, Carnegie: Okay. Thanks.
Ludwig, Moderator/Operator: So thank you so much for the questions. We have some questions as well that have been sent to us. Now when the Ovidsson three is in operation, what are the r and d activities focused on what on and what future product and service it will it result in?
Per, CEO, Avson: We’ll take a deep breath here. We’ve spent the last five years developing these technology platforms and and so on. But I’ll give you a couple of examples that we’re focused on. One is the satellite of Sun Tree shows that it’s performing at par with or better than design and the requirements we have in the first cases we have with the first customers. That is very encouraging.
Therefore, we’re looking into can we produce, should we have one or more of the similar kind of satellites, meaning think of it as ops on four and five and so on. And what would that mean? Would we change anything in the design and technical requirements of it or not? So we’re working on that in the background here to build a case for that. Secondly, the same with the I answered the onboard processor is in continuous development here.
So we’re looking at that. That’s an effort we’re underway. And thirdly, we know we’re unique with the smallest, most ultra light project, ruggedized and high performance terminals, mobile satellite terminals. So, we’re looking at how can we get the right kind of antenna and performance of antenna and in those terminals and modems, etcetera. So those efforts are also underway that I would say we are measured and we are customer driven in how we build those solutions and capabilities.
But that’s kind of the R and D. But right now it’s all about getting return on investment on the technology programs we’ve invested in.
Ludwig, Moderator/Operator: Thank you so much. How come you’re not profiling more towards the defense industry?
Per, CEO, Avson: How come we’re not profiling more towards the defense industry? Yes. Okay. We are profiling ourselves purely against defense, national security and public safety, and the majority of our revenues is in defense. So we are profiling towards defense.
Ludwig, Moderator/Operator: Very clear. Where are the terminals produced? And do you see any risk of sourcing problems due to free trade restriction, etcetera?
Per, CEO, Avson: Very good question. One, I don’t see any problems with the tariffs discussion that is going on. We we we will always have a chance to, to adjust the pricing of the terminals if there are tariffs tariffs. So that’s what we’ll do. We’re not synced into any of that.
What we will do, we’ll also look at if we can reduce costs for certain things. That’s number one. Number two, the majority of the terminals are produced in Sweden. Some are third party that we work with, but they are produced in an EU country and then taken to Sweden for a factor acceptance test and making sure that they fit the quality normal also. So we see that within Sweden and within EU, that’s where we produce.
Ludwig, Moderator/Operator: Thank you so much. Moving on to the last question here. Do you see that NATO and EU countries prefer European supplier rather than, for example, a USA One to keep it locally, so to speak?
Per, CEO, Avson: That’s one of those difficult questions. I would say this, every country prefers to have their supply base close to themselves. So Sweden prefers to have defense industry suppliers that are Swedish, but they cannot only rely upon that. So they look at Europe and collaboration. But I would say The US is a very important country in terms of aerospace and defense capabilities.
Sweden, for example, as a country has a lot of exchange there between aerospace defense contractors, technology contractors etcetera etcetera. So I would say you can shift overnight. Most countries that have a strong technology and innovation culture, a strong base of academia, the kind of what we call the triple helix. So academia industry and government, they try to produce as much as they can by themselves, but they also know that the important is to have collaboration with others. So I think the answer is yes, but, there needs to be global collaboration specifically between NATO countries including The US.
Ludwig, Moderator/Operator: Thank you so much. This was all the questions we had. Thank you so much, Perovic, for the presentation and answering all our questions. And thank you all for tuning in. I wish you a pleasant weekend.
Per, CEO, Avson: Thank you, Ludwig. Thanks, everyone. Have a good weekend.
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