Norbit ASA

OSE:NORBT

Earnings Call Analysis

Norbit Targets Revenue Growth, EBIT Margins for 2024

Norbit's fourth quarter demonstrated strong performance with revenue reaching NOK 396 million and an EBITDA of NOK 92 million, attributing to an EBITDA margin of 23%. The year concluded successfully with NOK 1,519 million in revenue, surpassing the 2024 target a year early. The board proposed a 71% increase in dividends, echoing earnings growth. Segment-wise, Oceans achieved a 35% revenue surge while Connectivity marked a 44% upswing. The PIR segment remained stable post-adjustments. For 2024, Norbit eyes NOK 1.7 to 1.8 billion in revenue and targets an EBIT margin in line with 2023's performance, reflecting continuous growth aspirations.

Norbit Exceeds Targets with Accelerated Earnings Highlights

Investors observing Norbit's progress will find its Fourth Quarter and Full Year 2023 a compelling narrative of success and forward momentum. The Norwegian technology firm, specialising in ocean-related technology, connectivity solutions, and product innovation and realization, boasted a strong final quarter with revenues reaching NOK 396 million and an EBITDA margin of 23%, contributing to a healthy NOK 92 million in EBITDA. Remarkably, Norbit surged past its set targets for 2024 a year in advance, achieving a full year revenue of NOK 1,519 million.

Impressive Margin Growth and Significant Dividend Payouts

In the financial arena, margins and dividends are of particular interest to investors. Norbit did not disappoint, concluding the year with an EBITDA margin of 26%, translating into NOK 392 million—numbers that any prudent investor would applaud. Demonstrating confidence in its financial health, the company has declared an attractive dividend. Based on an earnings per share growth of 71% from the previous year, shareholders can expect a dividend of NOK 1.55 per share, aligning with a policy aiming for a 30-50% payout. Additionally, an extraordinary dividend of NOK 1 per share has been proposed, which adds a cherry on top for the investors.

Segment-Wise Success Driven by Diverse Revenue Streams

The 'Oceans' segment leads the growth narrative with record revenues climbing to NOK 177 million for Q4, and nearly NOK 600 million for the full year, marking a stellar 35% increase from 2022. The EBITDA margin for this segment impressively stood at 35%. The 'Connectivity' segment also triumphed with a considerable 44% rise in revenues for Q4, closing the year with NOK 540 million, a leap from NOK 308 million in the preceding year. Enhanced sales in key product lines along with a strong euro have been principal drivers. Despite a global supply chain turbulence, the 'Product Innovation and Realization' segment maintained its year-end revenue at NOK 412 million and improved its margin to 13% for the full year, meeting the company's target.

Norbit's Prudent Cost Management Amidst Global Challenges

Norbit has navigated global market challenges adroitly, with Q3 revenues increasing by 14% year-over-year to NOK 396 million, and an underlying growth of 28% when adjusted for customer reimbursements. The effects of currency fluctuations accounted for a 9 percentage point growth. Despite increases in operational expenditures due to strategic acquisitions and bonus provisions, which tempered the gross margin, the company managed to post a significant increase in operating profits and net income for the period. The net income for Q4 stood at NOK 42.9 million, a healthy uptick from the past year confirming Norbit's resiliency and strategic acumen in the face of global market volatilities.

Earnings Call Transcript 2023-Q4

[Per Weisethaunet, executive]

Welcome, to Norbit's Fourth Quarter and Full Year 2023 presentation. My name is Per Jorgen Weisethaunet. Together with me today, I have our CFO, Per Reppe.

Beginning with the fourth quarter. The fourth quarter came in as a strong quarter for Norbit. We ended our revenues at NOK 396 million with an EBITDA margin of 23% and giving then NOK 92 million in EBITDA. This is a bit from underlying growth in all business segments. For the total 2023, we succeeded in delivering NOK 1,519 million, which is above what was our 2024 target. So this is reached 1 year ahead. That's the reason why we -- after the ordinary quarter presentation, we'll give you an update on the new ambition going to 2027.

So when it comes to margins for the full year, as you can see from the chart, we ended at 26% EBITDA margin, and a total of NOK 392 million. Our board has announced dividend. It's based on earnings per share for the full year of 2023 of NOK 3.1, which is 71% increase from 2022. So the ordinary dividend according to the dividend policy, which says it should be from 30% to 50% of the result to be paid out.

So 50% of the NOK 3.1 is NOK 1.55. And in addition to that, it's proposed extraordinary dividend of NOK 1, which we will explain a little bit later where it comes from. So diving into the segments, the segment oceans, where we do a lot of ocean-related technology, supplying that to a global market had a new record. So fourth quarter is, as you can see from this chart, historically, the strongest quarter.

This was also the case for 2023 where Oceans had NOK 177 million in revenues, giving also an all-time high margin of NOK 65 million in EBITDA. For the full year, Oceans delivered revenues very close to NOK 600 million, which is a 35% increase from 2022. The EBITDA margin for the full year ended at 35%.

So here we're showing the revenue mix and how this is built and how it develops from 2020 until 2023. So the main strategy remains to broaden the product offering. Norbit is tailoring and adding features to our technology to address and open up a larger market. So from the total revenues of NOK 599 million, NOK 328 million is from the first-generation technology of our sonars.

On top of that, you see the Winghead solar that was launched in 2020. And on top of that, different other initiatives, which is in the making. In the quarter, we also completed the transaction of acquisition of a Canadian company named DSP. It's a company broadening the product offering, adding to over sonar range. This is also sonar-related business.

Going into connectivity. Connectivity delivered a quarter at the same level as the quarter before. So Q4 ended at NOK 116 million, slightly better margins than the quarter before. And if you compare with Q4 2022, it's a 44% increase. As you can see for the full year, it's been a very strong growth in connectivity. So we had revenues of NOK 540 million, up from NOK 308 million in the same period last year and a margin of 34%, which is an improvement from 25% for the full year 2022.

And if you look on the full year, you see connectivity started very -- on a very high activity level in the first half, and it has remained on a very good level also for the second half. So the breakdown on the revenues coming to the mix. As you can see, it's been growth on nearly all our product lines. So the onboard units used for vehicle identification and tolling applications, et cetera has grown from NOK 136 million to NOK 296 million.

Enforcement modules used for reading, driving and resting hours remotely from tachographs has grown from NOK 37 million to NOK 80 million. Satellite-based tolling solutions has grown from NOK 48 million to NOK 60 million. And on top of that, the subscription and e-toll business, where we have a quite high percentage recurring revenues, has grown from NOK 77 million to NOK 92 million. So all in all, a very strong performance from all product lines.

So as earlier explained also, Norbit utilizes its own factories, approximately or north of 50% of the capacity is used to manufacture our own products. The remaining is sold on contract manufacturing terms. So this is what we report in the Product Innovation and realization segment, together with some R&D services offered. So the revenues came in at NOK 112 million, which is a decrease of 25% from Q4 2022. As earlier explained, we're coming from a climate where we've had a lot of challenges in the supply chain, and we've been buying some components in the broker market at extraordinary high prices, and this has been invoiced directly to our clients. So if we adjust for this effect, and we'll show on the next page also, there is underlying growth of -- no, it's on par, sorry, it's on par on the quarter before.

So for the full year, Product Innovation and Realization segment has yielded revenues of NOK 412 million compared to NOK 452 million (sic) [ NOK 457 million ]. The average margin for the full year is at 13%. It was 10% in 2022. So the average margin for the full year is on the level we have said that is our target. As you can see, we had very high margins in Q1 and Q2. And the margins isolated in Q4 is somewhat dissatisfaction.

Per Kristian will give you some more flavor to what's behind that. Yes. As mentioned, this shows the composition of the revenues, NOK 319 million from contract manufacturing, NOK 86 million from the R&D services and some proprietary products. On top of that, it's NOK 7 million in customer reimbursement. This was on the highest level in 2022, with NOK 107 million. So then I leave the floor to Per Kristian.

[Per Reppe, executive]

Thank you, Per Jorgen. Revenues in the third quarter amounted to NOK 396 million, representing an increase of 14% from the corresponding period of 2022. Adjusting for the effect of customer reimbursements, which we invoice certain customers without any margin, underlying growth was 28%. Of this 28%, approximately 9 percentage points were currency driven.

EBITDA for the quarter ended at NOK 92.1 million compared to NOK 66.5 million in the fourth quarter of 2022. This represents a margin of 23% compared to 19% in the same period of 2022. Operating profit was NOK 63.6 million in the quarter, while net finance expenses was negative NOK 7.6 million. Tax expenses were NOK 13.2 million, while net income for the period was NOK 42.9 million.

Moving to the segments. In the fourth quarter, oceans and connectivity were the main drivers behind the increased profitability in the quarter. Segment Oceans reported 39% increase in revenues on the back of strong sonar sales and favorable currency development in euros and dollars versus Norwegian krona.

Gross margin was 74% in the quarter, an increase of 9 percentage points compared to the corresponding quarter of last year. This is driven by a lower share of sales on commission as we acquired our distributor Seahorse Geomatics earlier this year as well as a favorable product mix. The increase in gross profit was partly offset by an increase in operating expenses primarily due to a strengthening of the organization, operating costs from Seahorse Geomatics and our latest acquisition, PING DSP, bonus provisions and a depreciating krona.

In Connectivity, revenues grew by 44%, with growth driven by increased sales of enforcement modules for tachographs and units for satellite-based toll collection. Revenues were also supported by a strong euro against the Norwegian krona with exports primarily to the European market. Gross profit increased due to higher revenue base with the gross margin being approximately 2 percentage points down.

Partly offsetting the gross profit effect was an increase in operating expenses, which is partly explained by a stronger Hungarian forint against the Norwegian krona, as approximately 50% of our operating costs are foreign-based. The EBITDA ended at NOK 38.7 million, representing a margin of 33%. In segment PIR, revenues were down 25% year-over-year. However, adjusting for customer reimbursements of extraordinary material costs, underlying revenues were on par with that of the reported figure in the fourth quarter of 2022.

Gross margin was also on par with fourth quarter when adjusting for the mentioned reimbursement effect. Compared to prior quarters in 2023, the gross margin was, however, down, largely explained by a delivery of a low-margin project, provisions for obsolete inventory and sale of inventory at cost.

The EBITDA result was NOK 3.3 million, particularly impacted by higher operating expenses, primarily due to higher payroll, following a strengthening organization to support further growth in 2024, in addition to increasing operating expenses. Overall, we are not pleased with the performance in the PIR segment in the quarter, considering our margin targets. Deliver on the low-margin project is, unfortunately, expected to have continued negative impact on the gross margin in the first quarter, although we do expect some operational leverage as we forecast sequential growth.

Next, the balance sheet and financial position. Property, plant and equipment increased NOK 37.5 million in the quarter, following investments as well as an increase in rights of use assets. Intangible assets increased NOK 6.8 million to NOK 303.2 million, explained by fair value adjustments in relation to the acquisition of PING DSP. Inventories increased NOK 16.8 million in the quarter and the increase is driven by rescheduling of onboard unit deliveries from fourth quarter to January.

Trade receivables decreased NOK 8.5 million, and trade payables was NOK 174.5 million at the end of the quarter, up NOK 10 million from the end of the prior quarter. Net-interest bearing debt stood at NOK 150.8 million at the end of December, a decrease of NOK 74.4 million from the end of the third quarter. Lastly, the cash flow for the quarter. Cash flow from operations was NOK 161.8 million, explained by an EBITDA of NOK 92.1 million, a net decrease in the working capital of NOK 83.1 million, NOK 7.6 million in net finance expenses and NOK 5.7 million in taxes paid.

We invested NOK 66.5 million in the quarter. This comprises NOK 15.3 million in R&D investments; NOK 19.8 million in Machinery & Equipment; and NOK 31.4 million in relation to the acquisition of PING DSP and investments in shares in the EV-charger company Enua.

For 2023, our total investments in R&D came in at NOK 60.2 million in the lower end of our guidance, while investments in machinery and equipment were NOK 55 million, including leased equipment in the middle of the updated guidance of NOK 50 million to NOK 60 million. Cash outflow from financing activities was NOK 78 million in the quarter, explained by repayment of debt and leases.

And with that, I give the floor back to Per Jorgen for the outlook section.

[Per Weisethaunet, executive]

So looking into 2024, which will be the starting year for our new 4-year ambition plan, which we will present afterwards. In 2024, we target to deliver revenues in the range of NOK 1.7 billion and NOK 1.8 billion. This supported by growth in all 3 business segments. First half year revenues is expected to be in line with the level we reported in the first half year of 2023.

We also target to deliver EBIT margins which you will see going into our new ambition plan that we will increase the focus on EBIT margin and less on the EBITDA margin. So -- but the target for 2024 is also to have an EBIT margin in line with what we delivered for 2023.

In addition to this, we still continue to explore value-accretive acquisitions to add to these targets, which is purely organical. So that being said, Norbit yesterday was 29 years since we were established. And I think all these years has been just the preparation for what should come. And I feel it very motivating now to announce to you a new ambition plan, which will make life worth living for all our colleagues to be eager to get to work and deliver on these ambitions.

As earlier shown also from 2010 until today, we've delivered a good growth. It's revenue CAGR on north of 30% per year. As you see, it's not been a straight line. There has been years where it's been -- I mean, Norbit has also been exposed for several different crisis from as the same for the whole business universe. But our way of doing the business has helped us just to be robust during the crisis and to be agile, so we're able to continue to grow afterwards.

When announcing this plan, this is the third plan after our listing. So in 2018, we made the plan, which was the basis for the IPO in 2019. When we came from revenues of NOK 438 million, we announced the target of 25% annual revenue growth and a target of more than 20% in EBITDA. What we delivered in the period 2018 to 2021 was a revenue growth of 22% and an average EBITDA in the period of 19%.

So summer or middle 2021, we announced our 2024 ambition of NOK 1.5 billion in revenues with the EBITDA margin more than 25%. This -- we just now announced that we reached last year. I think on this slide, you can see what we strongly believe that has helped us to be able to deliver on these plans. We have a very strong corporate culture. Under the logo, it says explore more. This is really at the core of the identity of all our colleagues.

Our #1 priority in the history and also going forward is to recruit and refine the right people. We have a very opportunity-driven mindset, but it's also we're entrepreneurial and commercial. We always start in the market being a technology company, we could be tempted to think that the technology is the important part, but it's the challenges, the problems you should solve for someone and it should be someone that are willing to pay for this, so you could get some profits to continue to grow your business.

So we're fully market driven in all our aspects. And we are very cherrypicking in which applications we take on. We are tailoring our growth strategy, and we are very agile and dynamic the diversified business model with the 3 business segments being very little correlated has also been very helpful during some periods where maybe one of the business segments has some challenges, then the others could take more responsibility and carry us through. I mentioned the corporate culture. I'm not going to explain that today.

But it's been very important for us. to spend lots of time on the culture to maintain and develop the culture. And so today, Norbit is 500 employees, and we strongly believe that working on the culture, ensuring that all managers inside Norbit is working as leaders, executing leadership much more than management is what should underpin and enable us to deliver also on this ambition plan.

So we see that with a lot of challenges in the world, there is a strong need for technology. Some of these challenges trends are well suited for Norbit, especially the blue economics. We see that the geopolitical unrest also requires technology. And some of the niches, some of the applications in this segment is well suited for Norbit. Renewable energy, safe and green mobility, digitalization operations and the demand for technology made in Europe and made in Norway is strong.

So also when going into a new period, we made some strategic priorities. These strategic priorities is of a nature where they could be shifted faster. The culture lays fast, the core ideology is the same as it was many years ago. The strategic priorities, we adapt much more agile. Priorities as of now is to continue to broaden the product offering and remain market-driven with tailored technology.

As we accumulate references and as we grow, we also accumulate skills, enabling Norbit to take on larger opportunities, which we express as going from niche to notable. We will remain diversified and in addition to focusing on broadening the product offering, we will focus on broadening customer base. This is especially attractive in the connectivity segment, which is the segment that has the highest customer concentration.

Being slightly larger company year-by-year, we see that focusing also on operational excellence and focusing on scalability is utmost important. We see a strong potential in getting even better margins by focusing on scalability. This will give good results in the in the planned ambition period. But also, this is what enables us to deliver a new plan with further growth also after 2027.

So inside Norbit, we highly regard the autonomy as very important, meaning that we have strong business units, which are allowed to make good decisions every day. But still, we also build a strong Norbit overall identity to ensure that we prioritize the opportunities which is the best overall for Norbit.

And of course, we will continue to explore value-accretive acquisitions. So to the target coming from 2023, NOK 1.5 billion. Ambition for 2024, NOK 1.7 billion to NOK 1.8 billion. And ambition now for 2027 is NOK 2.75 billion in revenues yielded from organic growth. In addition to that, we've added a number to say that with some targeted acquisitions, we should be able to deliver revenues north of NOK 3 billion in 2027.

Per Kristian will give us some more flavor to the different financial figures in this, but I want to point your attention to the target on EBIT margin, that we plan to have in the range of 20%. So with that, I leave it to Per Kristian to give more details.

[Per Reppe, executive]

Thank you, Per Jorgen. In the strategy period ahead, we aim to deliver 16% revenue CAGR and EBIT margin around 20%; return on capital employed of around 30% and; and maintain a conservative leverage policy, in which our net debt to EBITDA over the cycle target is 1 to 2.5x. Since 2019, Oceans and Connectivity have been the main 2 segments where growth has been the highest and where we have focused our R&D investments to scale. In our ambition plan towards 2027, we are targeting equal growth across the 3 business segments.

Growth within Oceans and Connectivity will continue to be driven by a broadening of the product portfolio by innovating new technology solutions. We see several untapped opportunities that provides foundation for continued growth in these segments. In segment PIR, we have set a target of NOK 750 million and PIR consists of both R&D services that we sell externally and internally to the other 2 segments as well as contract manufacturing.

We definitely see that there is an increased need for more R&D services in order to grow oceans and connectivity, which fuels revenues in the PIR segment. But in addition to that, the growth in contract manufacturing, we see a lot of interesting and attractive market opportunities, but the growth in PIR is largely dependent on that. We are able to deliver an attractive return on that investment.

In the ambition plan, our group blended EBIT margin is around 20% in 2027. This compares to 19% we delivered in 2023. In the two segments of Oceans and Connectivity, where we base our offering on Norbit intellectual property, our ambition reflects that we are able to -- our ambitions reflect that we believe it's an attractive margin for developing advanced high-technology solutions.

Over the next years, we are targeting an EBIT margin between 25% and 30% in these two segments. And in both segments, we were in the range in 2023. In segment PIR, we are operating in a fragmented competitive landscape. Around 75% of our revenues in this segment is related to contract manufacturing. Thus, the ambition of having an EBIT margin between 8% and 10% reflects what we think is possible to achieve in this landscape with a combination of R&D services.

In 2023, we delivered 8% margin in this segment. In 2023, we delivered a pretax return on capital employed of 29% after consistently improving the return since the trough in early 2021. Our return on capital employed targets moving forward is around 30%. We aim to deliver that return through a combination of maintaining our margins as well as working actively to optimize our balance sheet. This includes prioritizing the most attractive investment opportunities and managing our working capital in the growth phase.

In terms of working capital, we aim to deliver an improvement with a target of 25% of revenues compared to 30% average since the start of 2021 and 27% last 12 months. After a period with a very challenging supply market for raw materials, we see signs of improvement, which allows us to work harder on optimizing our inventory turnover, where we see room for improvement.

This slide summarizes our approach to capital allocation and how it supports our growth ambitions. As part of the capital allocation framework, we will continue to remain a financially robust company. Supporting the flexibility needed to grow towards the target set by investing and employing capital in accretive R&D projects and expanding production capacity. In order to accelerate growth beyond the organic target, we will continue to explore value-accretive acquisitions through our defined criteria, which Per Jorgen will say a few words about later on this presentation.

Capital left shall be distributed to the shareholders, subject to the dividend and the financial policies. Priority #1 is to maintain a solid balance sheet and protect our financial flexibility, making sure that we at all times have a prudent capital structure. With a net debt-to-EBITDA ratio of 0.5 and a liquidity buffer of NOK 530 million as per the end of the fourth quarter, our balance sheet is rock solid, allowing us to invest to pursue strategic acquisitions as well as distribute dividends to our shareholders.

Our financial policy is to maintain a net debt-to-EBITDA ratio between 1 to 2.5x. The interval allows us to dynamically prioritize how we allocate capital. In a scenario where we are above the interval, we were prioritizing allocating our operational cash flow for debt repayments. In a scenario where we are below, like today, we will have capacity to allocate additional capital for investments, acquisitions and dividends to our shareholders.

Organic investments have been the primary driver for us to reach our revenue targets in the period behind us. We will continue to invest in R&D projects with an attractive risk-adjusted return profile in order to continue broadening the product offering in Oceans and Connectivity. In 2024, we expect to allocate between NOK 65 million and NOK 75 million in R&D investments. Over the strategy period, we anticipate that the nominal level will increase each year with a target to be between 3% to 5% of revenues.

Investments in machinery and equipment are expected to increase this year to NOK 90 million to SEK 100 million. This is well above the historical average, partly as a result of under investments in 2023 and also due to expanding SMT capacity with 2 lines as well as investments in a new production line for the tachographs enforcement modules in segment connectivity. The investment level in machinery and equipment will heavily depend on our product road map and the strategic priorities that we make.

As a reference point, the nominal growth we have experienced since 2019 to what is our target in 2024 is approximately the same as what we target in the strategy period from '23 to '27. Since 2019, we have invested an average of NOK 50 million per year in machinery and equipment. In terms of floor capacity, our last investment made was in 2020, where we doubled the size of the Røros factory. Due to certain capacity constraints in production, we expect to invest between NOK 50 million and NOK 75 million to expand our factories to be able to deliver on the ambition plan.

Now with that, Per Jorgen will say a few words about our approach to M&A as well as our amended dividend policy.

[Per Weisethaunet, executive]

Since the IPO, we have done a couple of acquisitions. And we've chosen some of them to show the dynamics in the focus. The acquisition of iData, which is our Hungarian daughter company, which for Norbit was the jump start in the connectivity segment to get a more subscription-based business, where we do fleet management and toll service activities.

As mentioned in the last quarter, we included and welcomed PING DSP, a Canadian company, having a very strong technology in the solar segment. We welcome them into the Norbit family, where we see lots of synergies in the market. The Norbit global market platform for ocean-related technology will and has already started to enable PING to grow through this extended market access.

Talking about market access, it's worth mentioning Seahorse Geomatics. That has been our North American distributor for sonars since many, many years. During last year, we chose and agreed with the owners of Seahorse. They also should be welcomed into the Norbit family. So we now do direct distribution with these brilliant colleagues in the North American market. And through that, we see that we've been able to further strengthen the footprint and broaden the market and gain more traction.

So the acquisition of CPS, a company working on IoT-related products was acquisition, where we really got hold of top talent in the connected IoT space, which is very important for the future product portfolio inside connectivity. So when working on these acquisitions, we have some focus areas. There should be some clear synergies as shown either on the technology side or on the market side or both. We are very focused on that we should believe that it should be a strong [ clusteral ] fit. There should be a clear synergy and the acquisition should always be value accretive for all our shareholders.

As Per Kristian showed in the capital allocation framework, then number 4 -- at the bottom of the list was distribution of dividends. This chart shows what's been paid of dividends after we IPO-ed and became listed in 2019. As explained earlier, the proposal from the Board of NOK 1.55 per share in ordinary dividend for 2023, an extraordinary dividend of NOK 1.

We've been asked some questions in the past given that in the capital allocation framework has shown a range that we should have a NIBD or EBITDA in the range of 1 to 2.5, where we've been way below. So it's proposed some clarification in the dividend policy. The policy itself remains the same, but its amended wording to show that access potential access capital could be distributed to the shareholders. So I think with that, we conclude our presentation, and we could see if there are any questions.

[Per Reppe, executive]

So we have a few questions here. And I think the one here at the start, at least, this is probably to you, Per Jorgen . So in Oceans, could you elaborate on the end user split and what will drive revenue growth in the Sonar segment the next 4 years?

[Per Weisethaunet, executive]

I think it's a very interesting question because the end user space is a combination of a lot of different users. I think we addressed a lot of different segments. We see that we have Scientific segment. We have construction. We see an increase in the renewable, see a increase in security and lots of different segments. So it could -- it's both private, it's public, the sub bottom profiling part has also been attractive for us -- sorry, I mean the seabed mapping has been a very strong part of what we have delivered since these many years. So going forward, what should drive the growth is to continue to broaden the product offering. We have a couple of sonar platforms where we tailor new features to open up the market for new users. In addition to that, we will launch new products as we did last year also with the Guard Point Surveillance sonar.

[Per Reppe, executive]

And there's a question with regards to Connectivity as well. OBUs have been the main contributor to revenue growth in 2023. What is the main driver here? Could you quantify the revenue growth expected from EU's third mobility package in relation to the tachographs and what your [ BDOs ] market share is?

[Per Weisethaunet, executive]

Yes. So to the final part first, on the Tachograph side, where we have I think we could point back to announcement we did our frame agreement with a German blue chip client that is the market leader in the tachograph space in Europe. So estimates we've seen is that they have like 80% market share. The question related to EU's mobility package is -- I mean, for those not being familiar to this, EU's mobility package is the addition to the directive on tachographs, where we see that it's now increased utilization of the tachograph, not only for driving and resting hours, but also for registering cabotage activities, et cetera. And through this, it comes a demand for retrofitting tachographs also then with this enforcement modules from Norbit. So this expands the market, the speed of that and the magnitude of that is not quantified as I'm not going to quantify that, but this is significant for Norbit, as you could see from the frame agreement announced last year.

[Per Reppe, executive]

And in relation to the OBUs, what's the main driver for the revenue growth in '23?

[Per Weisethaunet, executive]

So the main driver for the revenue growth in 2023 on OBUs has been -- as you saw that first half year, we had a very strong growth. We had some very good contracts from some European clients. This has been a result from our drive in migrating the business from pure tendering activity to more business-to-business relation. And this comes from a shift where we see that several countries in Europe is adapting to a more private toll tag issuing activity where the insurance companies enter this arena. And Norbit is very well set up to work as a technology partner for these insurance companies. So that's been very vital to this growth.

[Per Reppe, executive]

So this is a question you probably would like to answer as well. R&D is obviously for you, as a company, to reach your targets, probably important, I guess. Why work for you and not another company? How do you attract talents?

[Per Weisethaunet, executive]

Yes. I think it's a good question, why work for Norbit? I think it's also a matter of if you're good enough as an engineer, you would be accepted among the colleagues and you could blossom and be a world-leading engineer. But if you're not really, really eager to be a champions league player in electronics design, you should rather work for someone else.

[Per Reppe, executive]

How do you differentiate yourself from competitors in Oceans when it comes to sonar production? What is the key difference?

[Per Weisethaunet, executive]

So if the question is related to production, I think what's special for Norbit is that -- so we say that, okay, we'd like to be in control of our own destiny. That's why we have virtually integrated our business. So we do our own in-house manufacturing. So making a sonar, it's a lot of applied physics. So instead of then depending on lots of external companies to do this. We've built up capabilities in-house so that we control also the manufacturing process. The beauty of that is that we're in a position where we can be much more agile than we would have been if we did, as some others choose to do and manufacture externally.

[Per Reppe, executive]

Question regarding financials. On the planning to 2027, could you say something about cash flow and targeted cash conversion rate?

So when it comes to cash flow, I think -- so what we have said is that we aim to deliver an EBIT margin of around 20%. And I think based on that, it's possible to read what would be the implicit EBITDA margin based on our reported numbers as well. And we have also said what our target is when it comes to working capital. So I think based on those two metrics, you should be able to draw up our cash flow profile for the company, in addition to the guidance we have provided for investments. So I think that was the answer to that question.

So question to you, Per Jorgen. Could you elaborate on the move from niche to notable?

[Per Weisethaunet, executive]

Yes. So we've had, as a clear strategy tailored technology in carefully selected niches. And for Norbit, what is the right opportunity. So it's a question of choosing the right opportunities. And for Norbit, we've said that if we could find a problem in the world that we can apply technology and make something to overcome this problem or make life easier for someone in a way so that they're willing to pay us lots of money to do it, then that's one good criteria. The other criteria is that the scalability in this niche should be in the right level compared to Norbit scale. We're not looking for opportunities that really could quadruple Norbit the next half year. Some opportunities are too big. They're meant for Google and Microsoft and companies like that. But as we grow, what is the right level of scalability in a niche for Norbit also will grow. And what we see is that maybe we're at a scale now where you could see that some opportunities is -- they are of a size that it's not worth calling it a niche. So I think that's really the difference.

[Per Reppe, executive]

Okay, good. I don't think there were any more questions on the web..

[Per Weisethaunet, executive]

So okay. So then thank you.