Earnings call transcript: Sensys Traffic Q1 2025 sees revenue surge

Sensys Traffic AB reported a robust performance for the first quarter of 2025, with total revenue reaching 152 million SEK, marking a 22% increase from the same period last year. Despite a negative profit before tax due to currency translation effects, the company showed significant growth in recurring revenue and system sales. According to InvestingPro data, the company maintains healthy liquidity with a current ratio of 3.27, indicating strong short-term financial stability. The stock responded positively, rising by 5.12% to 43.1 SEK in pre-market trading.

Key Takeaways

• Total revenue increased by 22% year-over-year.
• Recurring revenue constituted 94% of the order intake.
• Stock surged 5.12% in pre-market trading.
• U.S. market accounts for 40% of worldwide revenue.

Company Performance

Sensys Traffic AB demonstrated strong performance in Q1 2025, driven by a 44% increase in system sales and an 11% rise in recurring trials revenue. The company’s strategic focus on expanding its managed services model internationally, including in Australia and Ghana, has bolstered its recurring revenue stream. Sensys Traffic’s robust order book, exceeding 1 billion SEK, underscores its competitive position in the traffic enforcement solutions market.

Financial Highlights

• Total revenue: 152 million SEK (up 22% YoY)
• Recurring trials revenue: 93 million SEK (up 11% YoY)
• System sales: 59 million SEK (up 44% YoY)
• Gross margin: 37% (slightly lower than typical 40%)
• EBITDA: 9 million SEK (up 125% YoY)
• Negative profit before tax: -17 million SEK

Market Reaction

Following the earnings announcement, Sensys Traffic’s stock price rose by 5.12%, reflecting investor optimism. The stock’s last close was at 41 SEK, and it reached 43.1 SEK in pre-market trading. This positive movement aligns with the company’s strong revenue growth and strategic international expansions. InvestingPro analysis suggests the stock is currently undervalued, despite trading at a P/E ratio of 85.7. The stock has experienced a significant decline of -32.79% over the past six months, presenting a potential opportunity for value investors. The stock remains within its 52-week range, with a high of 79.5 SEK and a low of 36.55 SEK.

Outlook & Guidance

Sensys Traffic provided a revenue forecast for 2025 between 700 and 800 million SEK, with an EBITDA margin target of 12-14%. The company anticipates the commencement of citations in the Ghana project by July and plans to continue its expansion into new U.S. states and international markets. These projections indicate a positive trajectory for the company’s future growth.

Executive Commentary

"Our order book and remaining backlog of more than 1,000 million is robust and will provide solid revenue well into the future," said CEO Ivo Moenink. He emphasized Sensys Traffic’s unique position as the only provider of four traffic enforcement solutions in Saudi Arabia, highlighting the company’s strategic advantage in this market.

Risks and Challenges

• Currency translation impacts continue to affect profit before tax.
• The loss of the Iowa program poses a challenge, though mitigated by new enforcement systems.
• Expansion into new markets involves inherent risks, including regulatory and operational challenges.

Overall, Sensys Traffic AB’s Q1 2025 performance showcases its ability to capitalize on growth opportunities and maintain a strong competitive position in the traffic enforcement market. InvestingPro has identified several positive indicators for the company, including expected net income growth and sustained profitability over the last twelve months. For deeper insights into Sensys Traffic’s financial health, valuation metrics, and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Full transcript - Sensys Traffic AB (SGG) Q1 2025:

Conference Moderator: Welcome to the Census Q1 twenty twenty five Report Presentation. For the first part of the presentation participants will be in listen only mode. During the questions and via webcast, you can ask written questions using the form below. Now I will hand the conference over to speakers’ CEO, Ivo Moenink and CFO, Simon Mulder. Please go ahead.

Ivo Moenink, CEO, Senses Gatso: Good morning, and welcome to Senses Gatso’s market presentation of the first quarter of twenty twenty five. My name is Ivo Munning. I’m the CEO of Sensegrazo, and I will be presenting to you together with Simon Mulder, our CFO. In this market presentation, I will provide you with an update on our business for the first quarter of twenty twenty five. We then follow-up with a financial update by Simon.

And finally, I will finish this presentation with a summary and our financial outlook for 2025. Let’s now look at an update of our business. In this business update, I will take you through our order intake of which 94% has a recurring nature this quarter. Our first recurring revenue order from our Saudi customer, the negligible impact from the tariffs on our US business, the impact we see from a weakened dollar, the continuing growth of our recurring trials business, and finally, our margin and EBITDA development. Let’s start with the order intake.

The order intake and procurement awards during the first quarter came in at 192,000,000 compared to March in Q1 of twenty twenty four. Of the total order intake, 62% or hundred and 19,000,000 is from orders received in The US market. 65,000,000 is related to renewing a contract with our long standing customer East Providence in the state of Rhode Island, and the remaining 54,000,000 relates to three new contracts signed during the quarter in three different states, Illinois, Pennsylvania, and Colorado. The latter one is our first contract in a new state for San Francisco with the city of Longmont. Opening up a new state is a milestone that potentially could lead to new cities following suit.

Of the 192,000,000 total order intake, 94% or 180,000,000 is labeled as recurring revenue. The substantial share of recurring trials revenue within our q one order intake demonstrates that we continue to grow our stable recurring revenue baseline in line with our strategy. In January, we received a trials order from our customer, Tahacom, to the value of 27,000,000. The order is to provide maintenance and support services on the 1,200 in vehicle systems that have been delivered since 2018. The this order is for the first year of service and maintenance under a three year framework agreement.

These trial services include ensuring that the systems are always compliant with regulatory requirements, correctly functioning, and up to date. It reinforces the strategic partnership between TAKAMA and Sensus Khazu and marks a significant step towards improving road safety in Saudi Arabia whilst emphasizing the importance of supporting local content and sustainability initiatives in the kingdom. After the quarter, the US government has imposed global tariffs on most of the countries that export to The USA. Census Hasso has a significant business in The USA represent representing roughly 40% of our worldwide revenue and growing. The business model we operate in this strategic market through our wholly owned subsidiary, Census Gatsoe USA, is a so called managed services business model.

In this model, we own, install, maintain, and operate automated traffic enforcement equipment sourced from The Netherlands and Sweden. When operating the equipment, we evaluate events, send out citations, and collect the money on behalf of our customers, 55 cities, 12 states. The value added for Census Hadso in this model is generated from the operations part in the value chain. The equipment we use is typically depreciate depreciated over five years and has a negligible impact in the value chain. The recent turmoil resulting from the communication on the tariffs has weakened the dollar against the Swedish krona and the euro.

These currency translation effects naturally affect our profit before tax during the first quarter. Due to volatility in our main foreign currencies, US dollar, euro and Australian dollar, Census Gatso has been impacted through translation of its foreign currency receivables and cash positions to Swedish krona. This has resulted in a negative impact in the first quarter of approximately 6,000,000 compared to a positive impact in q one twenty twenty four of 3,000,000. Adjusting for this, our profit before tax would have been negative 8,000,000 instead of negative 17,000,000 reported. The interest on the Eurobond of €30,000,000 has resulted in an interest expense of approximately 7,000,000 krona compared to 3,000,000 krona in q one twenty twenty four.

In summary, the total financial items amounts to approximately 13,000,000 for the quarter. Total revenue for the quarter arrived at 152,000,000, 20 2 percent higher than Q1 twenty twenty four at 125,000,000. The 44% increase in system sales from 41,000,000 to 59,000,000 was mainly related to an increased rollout of the Dutch tender in q one. The recurring TRAS revenue arrived at 93,000,000 this quarter, 11% higher than q one twenty twenty four at 84,000,000. Our trust managed services revenue remained relatively stable at 57,000,000 versus 59,000,000 in q one of last year.

From this, we may conclude that our US team managed to compensate for the shortfall in revenue from the Iowa POS programs with increased revenues from programs in other states. This quarter, our recurring trials business accounted for 61% of of our total revenue. This is in line with our strategic target of more than 60% of total revenue. Our gross margin this quarter was 37% compared to 38% in q one twenty twenty four. This is somewhat lower than our run rate margin of 40% and is driven by the relatively large contribution this quarter of system sales from the Dutch project.

System sales margins are typically lower and precede the higher margin service and maintenance recurring revenue, which is expected to continue for at least six years for the Dutch project. The overall gross margin of the contract will gradually recoup during this phase. Our EBITDA for the quarter arrived at 9,000,000, 5 million higher compared to our EBITDA of 4,000,000 in q one twenty twenty four, an increase of 125%. On that note, I’d like to hand over to Simon.

Simon Mulder, CFO, Senses Gatso: Thanks, Ivo. As usually, I will talk you through our group’s financial performance, the performance of the segments, and our financial position. Looking at the group’s financial performance from the income statement, we focus on revenue margins and profitability. The revenue for the quarter came in at 152,000,000 compared to 125,000,000, up by 22%. During the quarter, trash sales increased to 93,000,000 from 84,000,000 in q one of twenty twenty four, an increase of 10%.

The sales of systems came in at 59,000,000 compared to 41,000,000. The increased sales in q one twenty twenty five is mainly related to deliveries on the Dutch tender and the announced Australian order. The group’s gross margin arrived at 37% for the quarter, in line with last year. Operating expenses totaled $59,000,000 an increase of 4,000,000 compared to q one twenty twenty four. And our operating profit for the period improved by $3,000,000 compared to q one twenty twenty four and came in at negative 4,000,000.

As the average currency exchange rates were similar to q one twenty twenty four, there is a relatively small impact on the income statement on revenue and EBITDA level. However, due to large currency fluctuations since the end of twenty twenty four in the the financial performance of the group has been impacted by translation of foreign currency receivables and cash to Swedish krona. The translation impact amounted to negative 6,000,000 in the quarter and is 9,000,000 lower than the reported 3,000,000 positive impact of q one twenty twenty four. Discussing the performance of our managed services segment, it is good to understand that this segment predominantly reports on our US business and the costs associated with software development for our software suites, Xilium and Pulse. The order intake in the quarter amounted to 190,000,000, consisting of 54,000,000 total contract value over the contract period of new customers and 65,000,000 for contract renewals and expansion possibilities.

Revenue came in at 46,000,000, 4 million lower compared to last year. The impact of Iowa of approximately 10,000,000 per quarter has been partially offset by revenue growth on new and existing customers by improvement of performance. The EBITDA amounted to 5,000,000 compared to 8,000,000 for the same quarter last year, resulting in an EBITDA margin of 10%. Twelve months rolling, the sales came in slightly lower than q four last year at 191,000,000 and an EBITDA margin of 11%. Looking at the sales development from an annual perspective, the sales in The US have grown from 95,000,000 in 2019 to 191,000,000 in 2024, excluding 20,000,000 impact of Iowa on top line sales.

The CAGR over this period is approximately 15%. Moving to our system sales segment. The segment reports on results from our system sales companies with revenues from one off sales of systems, service and maintenance, and in the case of the Australian entity, also a small part of managed services revenue. Order intake in the quarter for the segment system sales is driven by orders from Australia and several repeat orders from existing customers. The order intake for the quarter amounted to 73,000,000 compared to 44,000,000 last year.

The increase in sales from 75,000,000 to 106,000,000 in q one twenty twenty five is driven by deliveries on the Dutch project and the announced Australian projects. EBITDA improved by $8,000,000 from negative $4,000,000 to positive $4,000,000 in 2025. ’12 months rolling, the revenue increased from $437,000,000 to $468,000,000 in Q1 twenty twenty five, with an EBITDA margin of 11%. During the quarter, the segment reached a recurring revenue of 44% of sales consisting of TRAS service and maintenance and TRAS managed services. 56% relates to one off sales of systems.

Then discussing the financial position of our company, I would like to focus on cash movements, interest bearing debt, and available cash. The largest movement in our available cash position are investments in working capital and fixed assets. The increased cash usage in working capital is caused by buildup of inventory for projects and timing of invoicing of customers. The investment in fixed assets for the period is mainly due to investments in our software products. The available cash amounted to 149,000,000 at the end of the period.

Due to currency volatility in the first quarter of twenty twenty five, we have seen a significant impact on the translation effects of balance sheet items, such as the €30,000,000 bond. The bond was valued at 338,000,000 at the end of twenty twenty four and at 390,000,000 at the end of the first quarter, resulting in a translation effect of €19,000,000 on disposition. During the quarter, we have prolonged the lease of our headquarters in Yonge Shopping. This has resulted in an increase in the on balance lease lease liabilities and right of use assets of approximately 22,000,000. The net interest bearing debt has increased from 217 to 274,000,000 at the end of the quarter.

On that note, I’d like to hand it over to Ivo.

Ivo Moenink, CEO, Senses Gatso: Thank you, Simon. Sensors Hotso has made significant progress in several key areas, including obtaining first contracts in new states in USA, expansion of the managed service efficient model into other geographical areas such as Australia and Ghana, and a strategic partnership in Saudi Arabia with a first order for recurring revenue in hand. Our order book and remaining backlog of more than 1,000 million is robust and will provide solid revenue well into the future. We expect our trials business to continue delivering profitable growth driven by our strengthened US team and our groundbreaking Flux roadside platform. Our long term strategy remains unchanged, and we are taking proactive steps to address the challenges we’ve encountered.

We are confident that these actions will position us to deliver on our ambition in the near future. For 2025, we expect our revenue to arrive between 700 and 800,000,000. And due to additional sales investments to accelerate the growth in our U. S. Market, we anticipate to realize an EBITDA margin between 1214% in 2025.

On this note, I now open up for questions.

Conference Moderator: The next question comes from Orianrhodian from Carnegie Investigment Bank.

Orianrhodian, Analyst, Carnegie Investment Bank: Good morning, everyone. Orianrhodan here. First question, can you give us a brief update on the work with the order to traffic market, how that is progressing? My second question is relating to The Netherlands that where you seem to be doing quite well. Are there any new tenders coming up that you are aware of?

And the third question is relating to The U. S. Business. Can you describe how your managers have actually worked to compensate for the Iowa shortfall? That was all for me.

Thanks.

Ivo Moenink, CEO, Senses Gatso: Okay. The first question is on traffic, Ferge. Yeah. We’re progressing there according to plan. Communicated earlier, we will start the the deliveries in in q two.

So this is about to happen. So we’re there there is no, let’s say there’s nothing actually preventing us from from doing that. So we executed there on plan. You will see that in the numbers going forward. I think the second question was related to The Netherlands.

We recently won three tenders in The Netherlands, EG 36, EG 39, and EG 37. We’re now in the process of rolling out e g 36 has been rolled out. E g 37 is what you see in the numbers now in the increased system sales in The Netherlands, and e g 39 will be rolled out towards the end of the year. So that’s where we stand in The Netherlands. If there’s any new tenants coming up, we will definitely participate in in those.

And then regarding Iowa effects, the team has been working hard with the with the communities to address the situation and helping them also to protest against what has been decided by the the the Department of Transportation. That is a, unfortunately, slow moving process, but it’s going ahead. So we’ll we’ll know the outcome of that in in in the months to come. Meanwhile, you probably remember that a number of the mobile locations were are still operational, so we can still use those. And we acquired new mobiles, trailers to move our enforcement around these around these positions so that will help us mitigating some of the loss, on Iowa.

And, also, don’t forget that the red light systems are still in operation as well. So that’s it on on The US. So no news compared to what I’ve mentioned there before.

Orianrhodian, Analyst, Carnegie Investment Bank: Okay. Thank you very much. And can you also give an update on the Ghana project, how that is progressing?

Ivo Moenink, CEO, Senses Gatso: Yeah. We had elections in December. The opposing party won the elections. That was also the party that initially started, with the project of automated traffic enforcement, so that’s favorable for us. There is some minor changes to the legislation, that is being implemented right now.

The, expectation is that the the the law will be laid in front of parliament, in May, and then it needs to be, late for twenty days, seating days of parliament, and then it will pass automatically. We stick with our our projection that we will start issuing citations, in, in July, say, second half of the year. The company’s all set up. The the systems have been tested. The the staff has been trained.

So we are in a in, we can be in operational mode fairly quickly.

Orianrhodian, Analyst, Carnegie Investment Bank: Okay. Thank you very much.

Conference Moderator: The next question comes from Tim Ellers from Kepler Cheuvreux. The

Tim Ellers, Analyst, Kepler Cheuvreux: first would be about the project and the Dutch contract. And with the Q4 results, you had a slide with a graph saying talking about the backlog of the project. And then in this slide, you could see that for the Dutch project, were only expecting TRAS revenues going forward. So the system sales revenues you mentioned, are those a new project? Or is it still the old one?

Could you maybe explain that a little bit?

Ivo Moenink, CEO, Senses Gatso: Yeah. It’s it’s still it’s still the old EG 37 project. So it is still system sales from that project falling into q one. Once they have been delivered, then, of course, the the the service and maintenance parts starts kicking in, and that will be the trust trust revenue you were referring to.

Tim Ellers, Analyst, Kepler Cheuvreux: Okay. So could there still be more systems sales coming up or now that they’re now on trial?

Simon Mulder, CFO, Senses Gatso: No. The project is almost done. There’s a there’s a there’s a few still left, on on that project, which is e g 37. And then we have another project, EG 39, which will kick in towards the back end of the year.

Tim Ellers, Analyst, Kepler Cheuvreux: So it’s plus Okay. But it’s in in addition to the 400,000,000

Orianrhodian, Analyst, Carnegie Investment Bank: No. No. That’s that’s fine. Or is that

Ivo Moenink, CEO, Senses Gatso: That’s the 400,000,000 relates to the e g 37. Simon was mentioning the e g 39 is is a whole new project. So that’s not in that number.

Tim Ellers, Analyst, Kepler Cheuvreux: Okay. Yeah.

Orianrhodian, Analyst, Carnegie Investment Bank: Okay.

Tim Ellers, Analyst, Kepler Cheuvreux: You? Then yes, maybe talking about Iowa a little bit more. So could you maybe update us on the status there? I mean, you already had a slide now that explains the impact on the order backlog. How are you looking at it?

Do you consider the probability of recovering the revenues and eventually restarting it at some point as high, or do you now really consider it a loss and it’s gone?

Ivo Moenink, CEO, Senses Gatso: No. We don’t consider it a loss. I mean, first of there’s, of course, politics involved, so it’s it’s hard to to make a fair a fair adjustment on what’s gonna happen. I think I I look at this as a so call it a test period. It it will be a longer test test period going into ’26.

At that point in time, there will be new evaluations on new on new contracts. So I think that’s one one thing. The other thing is that, hey. The the cities are pushing the the Department of Transportation on on letting these getting these systems back up. There’s a good reason for it because we all know that the Trump administration has has made quite severe restrictions on on federal funding also towards, cities, and and these programs have helped, the cities in the past to fund their budgets.

So, there is political pressure, at at at city level towards the state. So where that will go, it’s also depending on, how successful lobbyists will be and and our our how successful our appeals with the or the city’s appeals with the DOT, the Department of Transportation, will be. But we haven’t written it off. Absolutely not. I think also the one comment I meant mentioned before, red light enforcement is still up and working, and and mobile enforcement, speed enforcement in certain locations is also functional.

So, and we can you know, by investing in new trailers, we can actually mitigate some of the loss of the of the, the revenue through that, that operation. The the number we mentioned is that the impact is roughly now on Iowa only 10,000,000 per per quarter Swedish krona.

Tim Ellers, Analyst, Kepler Cheuvreux: Very helpful. And you already answered one of my follow-up questions partly. So on the the political landscape in The US and how that has impacted your business. So you’re basically saying that you do see an impact from the travel administration in the sense that they cut funding. Yeah.

I would other

Ivo Moenink, CEO, Senses Gatso: Yeah. We we we do. I mean, talking to the team in The US, that’s their expectation. We don’t see it going We see it going more more likely going in in a positive direction than in a negative direction. Yeah.

Tim Ellers, Analyst, Kepler Cheuvreux: Okay. Clear. And then one last question about Saudi Arabia. So you already mentioned that you started the first trust contract with them. Any updates on potential new contracts there?

Or it’s still more or less the same as in in q four?

Ivo Moenink, CEO, Senses Gatso: No. No. Updates are that we are going through the the motions of type of proofing and and and validating our our systems. As you probably know that we are out there with three solutions. Next to the vehicle emotion solutions, there is fixed speed, there is mobile speed, and there is red light.

And all of these projects in various phases are ready for or getting becoming ready for the customer to actually give us an order for. Now when that order will fall, that’s always very difficult to to predict with governmental customers, but, you know, we are in a good position. We’re the only provider to to to the to the government in Saudi Arabia that can provide all four solutions they they need. And so it it’s very likely that we will receive orders for those, certainly because our solutions technically qualify. So, yeah, whenever there is gonna be an update, we’ll we’ll keep you posted, of course.

Good news is that we did receive the the first recurring revenue order, which is this is the part which I like about system sales is that once you sell system sales, there’s only one party that can maintain these systems, which is the supplier. In this case, this is us. So we sold 1,200 in vehicles to Saudi. Six Hundred of those have been installed. 600 are still waiting to be installed over time.

But meanwhile, we reserved received the an order of 27,000,000 under a three year framework agreement. So that 27,000,000 is only for the first year. You can anticipate that there will be further orders, of course, for filling filling a in year two and year three. But it tells you something about that business model and the fact that it it always comes the system sales, order always comes between brackets because it’s not, of course, always, but very likely comes with a a service and maintenance recurring, order. So we’re really, really happy with that.

So we set up shop in in in Riyadh, and we hired a few people to do start executing on that on that new order, which will start in in May of this year.

Conference Moderator: At this time. So I hand the conference back to the speakers for any written questions and closing comments.

Simon Mulder, CFO, Senses Gatso: There are no written questions at this point in time.

Ivo Moenink, CEO, Senses Gatso: No. We don’t see any written questions here. Okay. Then, in that case, we will thank you for attending this this call, and hope to see you back in the next presentation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.