INVISIO - ABGSC Investor Day May 26

Thank you very much. Welcome everyone to a short update on Invisio. Next slide please. So the headline I have chosen for this update is that Invisio has recently unveiled the future of tactical communication. We have just announced a major update to our product portfolio, the core of our product portfolio, namely what we call control units, and I'll get back to that in just a few minutes. Next slide please.

Before that, I'll just give a quick update on our latest financial report, where we had an increase in our revenue of about 23 percent, driven by our own internal growth but also growth from an acquisition of Racal Acoustics that I will also touch upon a little more in detail. And revenue from the Racal Acoustics product line was about 20 million in February and March. We completed the acquisition end of January, so they are accounted for for two months. We had a fairly good order intake in the first quarter, and that leaves us with also a quite strong order book at the end of the period. As we have said several times during the pandemic, we had not so much impact in the beginning of the pandemic, but as it has been prolonging, we have seen many of our customers working from home, not being able to perform, and as usual, not being able to start new activities, new programs, and so forth. Therefore, our revenue and order intake has mainly been from existing customers and also a variety of smaller orders. So with that, and without large new programs, we are actually very pleased with what the situation is at this point in time with continued growth. Our gross margin is in line with the corresponding quarter last year. We are still confident that our gross margin over time is able to develop positively. And depreciation amortization is increased in the quarter, and I would like that to be addressed, talked about that on the next slide please.

So what is new a little bit to us is that we have made our first acquisition, and with that we also have to depreciate the value of the company Racal Acoustics that we bought, and this is now visible in our first quarter and will continue to be visible going forward. So we will have a certain amount for depreciation. We have also in 2020 finalized a number of large development projects that we've been working on for several years, like the new platform of control units that I just talked about, but also our new intercom system, we had our first T7 over-ear headset also finalized. So all in all, that has led to that we of course now need to advertise on these development projects that has been finalized. So this is just something that will appear in our books from now, related to Racal Acoustics and new products. Next slide please.

Also just a slide that I normally show just to remind everyone that Invisio's business is fluctuating and will vary from quarter to quarter and even between years because we work with customers that have long-term programs, and sometimes we get very large orders in one quarter and then somewhat less in the next quarter. So on the left-hand side here you see our sales per quarter, but also sales rolling average for 12 months, and you can see we have on the blue line positive development in our rolling sales. On the right-hand side you can see a little bit of a mixed development, but lately you see a sort of a decline in our EBIT margin on a rolling basis, and that is related to investments that we have made in the organization, in the product portfolio, adding more people in R&D, adding more people in sales. So this is all related to investments in line with our strategy. Next slide please.

So what happened early in Q1 was the acquisition of Racal Acoustics was completed, and for those of you not familiar with Racal Acoustics, this is a company with an almost hundred-year history based in the UK. They have for many, many years been market leader for hearing protection and communication in high noise vehicles, military vehicles, around aircrafts, and really areas where you need a very specialized knowledge and experience for how to give people the best hearing protection and communication. And we have always felt that the Racal Acoustics would be a good complement to the Invisio portfolio, and when the opportunity came about in late 2020, we were of course very keen to acquire Racal. And this is a great fit for Invisio going forward. At that point we then also expanded our group management with the CEO of Racal, so he's now part of our management team. Next please.

So just prior to acquiring, just as an information, an example of what Racal Acoustics does, just prior to us acquiring, they actually signed a large headset contract with the Danish Minister of Defense, whereby the latest Racal Acoustics headset that you see on the right-hand side here, it's called the Magna 4000, this was chosen by the Danish Army to be their headset in vehicles for the next seven years. And so Racal Acoustics won this contract with a value of up to 4.7 million US dollars. They have received some of the order value already and have delivered products to the Danish Army, but this will be an ongoing relationship over the next seven years. So this is a very exciting portfolio as I said that will complement our portfolio of existing products very well. Next please.

So the way we will operate now going forward is that Invisio is the group, this is our listed company, but we will have two very strong brand names to offer to the market. The Invisio brand has since 15 years stood for solar systems and portable intercom systems, it will continue to do so, whereas the Racal Acoustics brand is very well known for high noise applications like in vehicles, track vehicles, tanks, and so forth. And going forward we will operate these two brands and product lines. Racal and the team in the UK of about 50 people will continue and to be the center of excellence for what we call high noise solution. And we think that this is going to give us a very strong combined position. After now three months of ownership, we can report that the integration between the two companies is going extremely well. It is really clear that we complement each other on all parameters, being at sales, being at R&D, and also in operations we are able to find ways of cooperation that really benefits both brands. So this is so far a very happy marriage. Next please.

So apart from acquiring Racal Acoustics in the first quarter, we of course also, and after the quarter we have seen continued business. In the quarter as I said it was mainly smaller orders from existing customers that still gave us a fair order intake. After the quarter we are now starting to see some more activities in the market. We can see especially in the US that customers are returning to their physical places of work, that certain activities are getting back to where they were before the pandemic. And the first result of that is that we received an order from an existing customer in the US for about 40 million Swedish kronor. So slowly but surely we can see now that we are after some delay getting back to a more normal scenario for our business. Next please.

And in the middle of May we normally have a very important trade show in Florida, US, which is not taking place this year. We would have announced and shown our new product at that trade fair, but given it is not taking place, we decided to do it digitally. And we have now unveiled our new series of control units, which are for the soldier in the field and which is the center for his intelligence towards communication and hearing protection. The control unit is placed on the chest and it has a connection to his headset with his hearing protection, and it also has a connection wireless to a remote control that can be put on a weapon or put on other parts of the body if you need to have the possibility to communicate differently. Next please.

So this is a totally new series of control units based on a platform that we have been developing over the past years. We have been taking a lot of input from existing customers based on our first generation platform. We have been listening to their feedback, we have been working closely with them to define what is it that you think you will benefit from going forward with the other new technologies that are in the market that you work with, like radios and intercom systems and so forth. So I will not go into all the technical features of our system, but it is a lot based on our core competences around audio. Some of the features are for instance just trying to remove as much unwanted noise as possible, so that we remove some of the fatigue from the users so they don't have to listen to stuff that is making them tired or just annoying. We are removing everything that they don't want to hear, and we are making sure that they can hear what they need to hear, like their communication and also what is going on in their surroundings. We have a new patented solution also around double hearing protection where we can actually combine two of our headsets to deliver absolutely market leading hearing protection and where you can then still hear everything that is going on in the surroundings. So this is a new capability we are delivering to the market with a very high level of hearing protection. Everything we do is also made so that it is very simple, it's plug and play, and the user should not spend time thinking about setting up his system, he should be ready to go out of the box. And then of course we have also patented system around interfacing through our so-called Invisio IntelliCable, and thereby we can connect to almost anything in the market seamlessly. All it takes is a cable and then the system will adjust and set up so that the user can connect to anything, radio, intercom system, mobile phones, any other device that he needs to listen to. Next please.

So with this, the combination of our new platform for personal systems, our IntelliCable that connects everything, and by the way the new Racal Acoustics portfolio is now also being set up to work within Invisio IntelliCables, so they will be part of the entire system. And then last but not least we have our intercom system which we have recently launched and that is so far receiving fantastic reviews and we've also received the first orders for it. So we expect the intercom system to be a significant part of our business and our total Invisio group revenues over the years to come. So with this we have an absolute unique positioning, a unique portfolio in the industry. I cannot see anyone at this point in time that has a similar portfolio of products like we have for our markets for military users and for law enforcement users. Next please.

So we have a well laid out strategy that we defined some years ago and that we have been executing very diligently, and we're going to continue to execute on that also in 2021. Some of the focus areas in 2021 is of course to make sure that the continued integration of Racal Acoustics is going according to plan as it is. And then for our entire product portfolio to intensify our market penetration in existing markets. We still have a lot to do in our existing markets in North America, in Europe, and also a high area of focus for us is the police and law enforcement which we for the last four years have been putting increasing focus on. We are doing well. We can see that police customers in many countries are having the same needs as our military customers, and we have been successful in a number of countries already, including the Swedish police where we have delivered a large amount of systems for the Swedish police. So police and law enforcement is a sort of prioritized area for us also alongside our intercom and other product areas. Last but not least, we will continue to address selected countries in Asia, Middle East, and South America. This has been very, we were on a very good track before the pandemic, but the pandemic has put most of these activities on hold because it has been impossible to travel and meet customers in the region. So we expect that as soon as things are now hopefully soon opening up slowly but surely, we will continue some of these successful activities that we have initiated in this region. This is a long-term activity and something that we also believe will be beneficial to Invisio over time. Last slide please.

So as I said, we believe that some of our activities with customers and larger projects and new activities has been on hold because of the pandemic. It has not been possible for our customers to conduct user trials and field tests and so forth, but it has only been on hold, it has not been forgotten. So as soon as people go back to their normal working conditions, we will also start to see a rise in activity level among our customers and a continuation of the global modernization trend for communication equipment and hearing protection. There's no doubt that the need for our type of products, hearing protection and communication in high noise, is still there, still very valid. So we have every reason to take a positive view of the continued good development of Invisio. So with that I conclude my presentation and questions please. Thank you.

Especially yes, absolutely. I would say though that it is slowly but surely going in the right direction. It is not like the ketchup is out of the bottle yet, but we can slowly but surely see that things are starting to improve in many areas, even in certain parts of Europe we can see a higher activity level. So this is definitely positive, but it will, yeah, we will see a gradual positive development hopefully up until the end of the year.

No, no, it's similar. And I think that many, we can see that many of our customers when the pandemic hit and many were forced to not be at work, they were not really set up to work from home, so many have not had the possibility from an IT structure and others to actually perform their work from home. So we've been trying to be very innovative in ways of being in contact with customers and continuing, but again, many of our customers are doing this as a long-term modernization trend, there's no urgency, so therefore they have delayed certain activities for good reasons. And we can now see that hopefully it's starting to pick up again.

I would say that it is an entirely new platform. I'm not really sure how to compare it with because most people are used to getting new mobile phones every year, it doesn't go that fast in our industry. New platforms in our industry is maybe every five years or so. So this is an entirely new platform that can, it is with a new engine inside the control unit and it can do a lot of things. We will of course have a lot of customers that have already bought our first generation, they will continue with that. We will also have customers that think that the first generation is sufficient for them. But the second generation now is a totally new level, it is a real leap in technology that gives a lot of new flexibilities and competencies and features. So we can go now of course and sell it to new customers, but we can also go to existing customers and make them interested in upgrading to the next generation. So this is the platform that we will live with and benefit from over the next five, six years at least. So this is a really big step for us.

Yes, and it's also related to some needs that are appearing in certain areas. It can also be law enforcement. There are actually law enforcement customers where some of the features we have in the next generation now are features that you also benefit from greatly if you are law enforcement customers. So it has a lot of applications. And some of the features are, I would say, innovative and secret that we don't want to reveal them for anyone except our customers. So I think there's a lot of good things in this platform that we can benefit from over the next year. And it's also optimized for working with our intercom platform, which came after generation one, so now it is all technically optimized to work together in the best possible way.

Yeah, I would say that the level we have seen in Q1 is probably the level we will see throughout the year. So we won't increase right now more than what we have seen already. This is related to the Racal acquisition predominantly, and then also to some, it is timing wise you can of course say it's a little unusual that we finalize three big development projects in the same year. And always the development projects are more expensive at the end because that's where you have external costs like testing and tooling and everything else that cost more than just our own internal R&D organization. So I think the level we have now is what you will see in 2021.

Thank you, always a pleasure. Thank you.