Invisio AB
STO:IVSO

Watchlist Manager
Invisio AB Logo
Invisio AB
STO:IVSO
Watchlist
Price: 281 SEK -1.06% Market Closed
Market Cap: 12.8B SEK
Have any thoughts about
Invisio AB?
Write Note

Earnings Call Analysis

Q1-2024 Analysis
Invisio AB

INVISIO Records Strong Q1 2024 Performance with High Order Intake and New AI-Enhanced Product

INVISIO started 2024 with record order intake of SEK 670 million, influenced by significant orders for its Intercom and radio systems. Revenues remained stable at SEK 308 million, closely matching last year's strong performance. The order book now stands at SEK 1.25 billion, with 80% expected to be delivered within 12 months. The company launched the highly advanced AI-enhanced INVISIO X7 headset, enhancing hearing protection and communication. Gross margins remain above 60%, though the radio order's margin is less than 10%. Continued high market activity and strategic investments are anticipated to drive ongoing revenue growth.

Record Growth in Orders

In the first quarter of 2024, INVISIO achieved a record order intake, totaling SEK 673 million, predominantly driven by a significant order for their Intercom system valued at SEK 230 million and a radio systems order for heavy armored vehicles worth SEK 235 million. This resulted in an impressive order book exceeding SEK 1 billion, indicating a robust future outlook with about 80% of this order book expected to be delivered within the next 12 months.

Steady Revenue Performance

The revenues for Q1 2024 were reported at SEK 308 million, nearly matching the previous year's record high of SEK 311 million during the same quarter. This consistency underscores the company’s ability to maintain strong revenue levels despite operating in a typically weaker first quarter. The increase from SEK 137 million in Q1 2022 to both SEK 311 million in 2023 and SEK 308 million in this quarter illustrates steady growth.

Gross Margins and Operational Costs

While the gross margin remains above 60%, it’s important to note that the new radio order will yield a lower service margin of less than 10%. This will affect overall gross margins starting Q2 2024. Operating expenses have been stable and are in line with previous quarters, reflecting the company’s ongoing investment in research and development (R&D) and sales to fuel future growth. The headcount has risen by 18%, while revenue has increased by over 30%. This growth indicates that revenues are expected to outpace operational expense growth over time.

New Product Launch and Market Demand

The launch of the AI-enhanced INVISIO X7 headset is set to significantly impact future sales. Offering superior noise reduction capabilities, the X7 allows users to be in higher noise environments for extended periods, which is a substantial improvement over previous models. There is already significant interest from both existing customers and new prospects, particularly in the sectors related to armored vehicles and demanding operational environments.

Future Guidance and Expectations

The management projects sustained high market activity driven by increased military budgets globally, although significant orders may not materialize until later in 2024 and into 2025. INVISIO anticipates delivering the majority of the current large Intercom orders in the second and third quarters of 2024, which is pivotal for leveraging future sales and maintaining momentum.

Conclusion on Investment Potential

INVISIO is poised for continued growth with a robust order book, stable revenue generation, strategic investments in product development, and significant upcoming opportunities in the defense sector. Given its strong product offerings and operational advantages, the company remains well-positioned to deliver considerable shareholder value in the coming years.

Earnings Call Transcript

Earnings Call Transcript
2024-Q1

from 0
Operator

Welcome to INVISIO's presentation of Interim Report January-March 2024. [Operator Instructions]Now I will hand the conference over to the CEO, Lars Hojgard Hansen. [Technical Difficulty]

L
Lars Hansen
executive

Thank you very much, and welcome to the INVISIO Q1 presentation, which we have named a strong start to 2024. So some of the highlights of the quarter is that we received a record order for our Intercom system worth about SEK 230 million. And along with that, we also received an order for radio systems for heavy armored vehicles to a value of about SEK 235 million and that resulted in a record high order intake of SEK 670 million and an order book exceeding SEK 1 billion.We also had a very significant product announcement or launch in the first quarter by our new AI-enhanced INVISIO X7 headset, that I will come back to, and that offers groundbreaking performance. Our revenues in line with Q1 last year and our profitability remains good. And as stated now for many quarters, we expect market activity to remain high for several years to come and we are well positioned to continue to deliver profitable growth. As said, we saw record high order intake during the quarter of SEK 673 million, whereof SEK 438 million were our INVISIO revenues, excluding the radio order. And of that, the Intercom system was SEK 230 million and the third-party radio order about SEK 235 million.What we saw and continue to see, have seen for quite a while is that customers in these geopolitical uncertain times are increasingly favor solutions that are tried and tested. We benefit from that as the market leader and where customers know that what they buy from us INVISIO-branded or Racal-branded products that have been in the market for quite some time and are tested and tried in the most difficult conditions.Our order book remains robust and we have a strong delivery capability. Our order book now stands at SEK 1.25 billion at the end of the quarter or almost SEK 800 million if we exclude the radio order. And we estimate that about 80% of the order book will be delivered within 12 months. We keep a high inventory of standard products. We have always done that. And now it is also a little bit higher than what it has been traditionally, partly due of course to increasing revenues, but also reflecting some of the upcoming deliveries in the coming quarters. Rapid delivery has become a significant competitive advantage and we have the possibility and the financial stability to keep a decent inventory and be able to react quickly to customers' needs.When looking at the revenues, as stated, they are in line with Q1 2023. And then you have to recall that last year's first quarter was the best in the company's history with very strong order intake, sales and profit. The first quarter last year was relative to a weaker 2022 where revenues were only SEK 137 million. So we went from SEK 137 million to SEK 311 million last year and now SEK 308 million. You can say that we are reaching the same high level as last year. And traditionally Q1, at least historically, has been a little bit of a weaker quarter. But we always deliver according to customer requirements.As you can see, we have high inventories. If customers have wanted, we could have delivered more in this quarter. But this is, as I said, according to what our customers have agreed to. So higher market activity, broader product portfolio and our increased sales resources will enable continued revenue growth in line or above our targets. That's what we have planned for with our investments in the organization.Our gross margin still remains above 60%. And we have also communicated in the press release that the gross margin for the radio order we received will be less than 10%. This is a service margin for us handling the entire delivery. We expect this effect on gross margin and to the result in general to be visible in -- starting in the second half -- second quarter of 2024 where we will report both revenues with and without the radio order and the same for the gross margin.Our operating expenses, the trend remained stable. They were largely in line with the prior quarter, Q4 '23, but of course, higher than first quarter of 2023. And the increase, as usual, is related primarily to our focused investments in R&D and sales in accordance with our growth strategy and the opportunities in the market. We can say that headcount rolling 12 months has risen by 18%, while revenue has increased by over 30% and OpEx in total with 24%. So that is the general idea over time that our revenues will increase more than OpEx and investments in headcount.Thereby, our EBIT margin is at the satisfactory level. As stated, we are more or less in line with the last quarter of 2023. And we still see fluctuations in sales between quarters, whereas the trend for operating expenses and headcount is more stable as you saw from the previous slide. Therefore, there will be deviations in our earnings. But over time, we expect, as I said, revenues to grow more than operating expenses.Back to the order, the very large Intercom order. It is quite some years ago since we announced and launched the Intercom system for the first time, this very innovative portable product for communication in vehicles. And as usual, in our type of markets and environments, it takes time before products are fully accepted and evaluated and budgets are available and so forth. So I think we already in 2023 saw good progress for the Intercom system with revenues totaling over SEK 100 million. But now in the first quarter of '24, of course, this is a record-breaking order for the Intercom system with SEK 230 million.And what is also unusual here is that we have been asked to act as a prime contractor and system integrator for the entire communications system, including vehicle radios. And therefore, we will also deliver the vehicle radios to the end user. Total order value of SEK 465 million. We expect deliveries to start now in Q2 and will be concluded by the fourth quarter of this year. The agreement, however, also entails a maintenance and spare parts package, which will be delivered during '25 and '26. So about 1/3 of the total order value will be delivered in '25 and '26.So as we said, the vehicle radio order will have an impact on the total gross margin as INVISIO will only receive a service margin for this delivery of less than 10%. But we will report that separately going forward. This is part of a trend where customers increasingly favor solutions that are complete and that are tested and proven in different situations. And while we might not think that this is going to be everyday business that we deliver such a whole system, then I will not rule out that it can happen again going forward.Our new INVISIO X7 headsets is really a breakthrough in hearing protection and communications. Many years ago, we were the innovators of the first really tactical in-ear headset with the INVISIO X5 that is still the market-leading in-ear solutions worldwide and that has served us well for many years. Now for quite some time, we have developed and tested the new INVISIO X7 with key customers, and it is ready for launch and we have had it tested also with independent test houses in Europe to verify and accredit our hearing protection level. And here, we have an industry-first level of hearing protection superior to all other tactical headsets for dismounted use. We have levels which in technical terms, SNR, signal-to-noise ratio is amounting to 20 -- sorry, 39 decibels, and this is about 10 decibels better than standard headsets in the market that are currently in use.What does that mean? It means a lot for the users because these 10 DB extra attenuation actually means that a user of the INVISIO X7 headset can tolerate 3x higher noise level than a standard headset. But more importantly, also that you can cope with 8x longer exposure to that noise. It means that if you are allowed to be in a certain noise level or environment for 1 hour with a standard headset then you can actually stay in that same environment for up to 8x longer, 8 hours with the INVISIO X7. And I'm sure you can imagine what that means for the operability and the way that you are able to communicate and yes, perform your duties with this type of superior performance. We are ready to deliver this new product. It is in manufacturing. And we expect good sales from it already in '24, and of course, for many years to come.Apart from that, we continue to see very high activity in our markets in Europe and globally as a high interest from both existing, but also many potentially new customers. And we see a very high interest for solutions also related to armored vehicles and vehicle environments in general where you are exposed to consistently high noise level. We expect this market activity to be high continuously for many years to come. And with our total portfolio in fueling the Racal Acoustics portfolio, we are very well placed to continue to profit from that.So with that, I conclude the presentation of our Q1 report and we are open for questions, please.

Operator

[Operator Instructions] The next question comes from Hjalmar Ahlberg from Redeye.

H
Hjalmar Ahlberg
analyst

First, maybe a question on the Intercom order. I wondered if you could give some more input on the deliveries here? I mean, you say Q2 to Q4 should you expect kind of a linear delivery there or will it be more in the first part of the period or in the later part of period?

L
Lars Hansen
executive

I think we will be delivering the majority in Q2 and Q3. So planning is still underway. It's quite a sizable delivery. So -- but majority would be in Q2 and Q3.

H
Hjalmar Ahlberg
analyst

All right. And in the last report, you mentioned that you see potential for several large Intercom orders. Is this still the case?

L
Lars Hansen
executive

Yes, absolutely. And I think, of course, this order is also being used as a reference for other customers. And we have also during the past several years been in constant trials and tests with customers that are evaluating the Intercom. And as I said last year, we saw revenues of about SEK 100 million. I think slowly but surely now, we're going to see a good progress for the Intercom. It is a very innovative solution. And that with -- as we can see in many markets, growing sales of new vehicles and also pulling existing vehicles out of inventory and putting new into service gives us a lot of opportunities for this Intercom because it's very easy to install. It has a very good price value ratio for many customers. So I'm confident that we will see continued good orders for the Intercom system.

H
Hjalmar Ahlberg
analyst

All right. And you mentioned that there is also spare parts for this delivery coming in '25, '26. So this order will first deliver the SEK 465 million we delivered and then you have 1/3 of that in potential spare parts during the next 2 years. Is that correct?

L
Lars Hansen
executive

Yes. The total is SEK 460 million something. So SEK 300 million something delivered now and then the remains in '25 and '26. And it's not totally defined, yet they have a possibility of making adjustments to that. And when we say spare parts, it could be entire systems. It's not spare parts as such, it is actually more systems mainly.

H
Hjalmar Ahlberg
analyst

All right. And in terms of the order intake, excluding this large order, it was roughly SEK 200 million, maybe a little bit lower than seen in the past few quarters. Is that the sign of -- I mean, I don't know, a slower flow of smaller orders or just general fluctuations?

L
Lars Hansen
executive

It's just timing and general fluctuations. I don't think that there's any -- as we are trying to explain, there is a very, very high activity level in most parts of the world, but it's also very difficult to estimate exactly when specific orders will come through. We -- as I've said before, we think that some of the budget money that is being mentioned in many countries, increased military budgets, will not come into play until later this year and into '25. So it's very hard for us to see exactly when certain orders will be placed. But apart from that, there are still fluctuations. So there's no slowdown in activity level. That's for sure.

H
Hjalmar Ahlberg
analyst

And you also talked a bit about the X7 headset. And you mentioned that this improved the noise cancellation. Will this drive upgrades from existing clients of X5 or so or is it more of the -- that you can reach more...

L
Lars Hansen
executive

Yes, both. I think that this will be customers that are already using X5 will definitely be looking at upgrading at some point in time when their contracts and everything else allows. And for new customers, I think this is -- we have also taken some of the -- or a lot of the feedback we received on the X5 first-generation into improving and putting more options into the X7. You can utilize it now with different types of passive protection. There is phone blocks, there are silicone tips and there are even custom modded variants. So there's a higher level of opportunity to adapt to both to military and public safety, law enforcement environments. We have made it easier to put on and off.So yes, just a number of performance improvements also with the utilization of AI algorithms. So quite -- it's a second-generation product, but not trying to say that the first-generation was not good. And I'm sure that some customers would just stay on the first generation for a while. And it's also an opportunity for us that it can be combined in a good way with our T7 over-the-ear headset. So you have the possibility of achieving double protection with an X7 in-ear and the T7 over-ear, you actually get double protection for really, really high noise environments.

H
Hjalmar Ahlberg
analyst

Got it. And then my final question, Lars, then you mentioned that -- I mean, you see that the demand for [ persistent ] designed for heavy armored vehicles and then Racal has benefited from this. Is this kind of what has driven Racal demand or is it still -- I mean, growing demand for this Racal Acoustics products?

L
Lars Hansen
executive

I'm not sure I understood that question. Please repeat.

H
Hjalmar Ahlberg
analyst

I mean, are you more relating to what has driven the demand for Racal products or is it something that will continue to drive Racal demand with this heavy armored vehicle...

L
Lars Hansen
executive

It will continue. I think we've only seen the beginning of that. No, no, we expect to see a really good vehicle business for many years and definitely for our vehicle portfolio to benefit from that. Absolutely.

Operator

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the CEO, Lars Hojgard Hansen, for any closing comments.

L
Lars Hansen
executive

Thank you very much. Thank you everyone for calling in and listening and look forward to speaking to you again after our Q2 report. Thank you. Bye, bye.

All Transcripts

Back to Top