Welcome to INVISIO Q2 Report 2023. Today, I am pleased to present CEO Lars Højgård Hansen and CFO Thomas Larsson. For the first part of the call, all participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by pressing star five on their telephone keypad. I will hand the conference over to CEO Lars Højgård Hansen. Please go ahead. Thank you. Good morning, everybody, and welcome to our call regarding the Q2. Our highlights for the quarter is that we have continued strong order intake and a very well-filled order book. We have seen a record high order intake amounting to just over SEK 400 million, and the order book is now at almost SEK 800 million. Our revenues or sales exceeds SEK 1 billion for the first time, which is a milestone in the history of the company. We had two significant orders in the quarter, one from the US Department of Defense, which is actually the largest order we have ever seen in the group, and there was another order for SEK 90 million from a UK NATO country. The development in general reflects the continued high market activity that we have reported for several quarters now, and that we also believe is likely to continue for a long time. I think worth to note here is also that our sales growth on a rolling 12-month basis is 82%, with an operating margin of 19% on a 12-month basis. The record strong order intake is of course very, very gratifying for us to see, and there was SEK 220 million announced, the two large orders that I just mentioned, and they were both related to Racal Acoustics branded products and for use in vehicles. In addition to that, there was almost SEK 200 million in unannounced orders. The orders have been well spread across geographies and product lines, so it just reflects two things. First of all, that we are a different company than some quarters back because we have a much broader product portfolio. We have a brand new product portfolio, and we are addressing a larger number of customers. Secondly, of course, the geopolitical situation that has given rise to a very high activity level, especially in Europe. The order intake for the first two quarters exceeds to SEK 700 million, and we are at SEK 1.3 billion for a rolling 12-months period. A very strong development, as you can see. That also is reflected in the order book that now stands close to SEK 800 million. The majority of the order book is to be delivered this year, so the fact that the order book is growing is not a sign of us not being able to deliver. We are absolutely ready to deliver according to customers wishes. We have in the last 18 months, I would say, expanded and improved our distribution, also our supplier network. We have second and even a third sources on most of our product lines today, so we are very well prepared for deliveries for the rest of the year. If you look in the balance sheet on our inventory levels, you can see that that is significantly higher than previous quarters. It is almost SEK 200 million, and that just reflects upcoming deliveries. We have always had relatively high inventory levels, and that is just to be able to maintain a sort of smooth manufacturing, as well as being able to meet customer requirements in terms of deliveries. As we have almost only standard products in inventory, there is there's no scrapping, so this is a deliberate activity from our side that is also a competitive advantage that we have. The revenue for 12 months rolling is now exceeding SEK 1 billion, which is a milestone in the company history. In the Q2 we reached SEK 270 million, which is 76% higher than the same period last year and 63% in comparable currencies. For the first two quarters, we are now at SEK 600 million revenues, which is twice as much as the same period last year. Back to the inventory levels, as I just said, we always deliver according to customers' wishes and desires. That means we are not entirely able to decide what revenues we should have in a quarter. It is also so that many customers have delivery terms where they want to pick up the goods themselves. It means that even if we have the goods ready in inventory for shipment, we have to wait until the customer picks them up, and then we can recognize the revenue. That's why, a part of what is in inventory could have been turned into revenue in Q2 had the customer wanted it. That's just the nature of our business and why we have volatility and fluctuations between quarters. That's also why we think that looking at a 12-month average and development is more relevant. Sales has been well distributed across geographies, but it is clear that Europe is in the lead for good reasons. Europe accounts for approximately 50% of the total sales so far. Our gross margin is also developing well, and we are happy to report that the component supply is now back to normal. We see very few spot market buys of components, and therefore we don't have these extra costs that we saw during the Corona pandemic. As usual, the main drivers for our gross margins is the proportion of direct sales versus when we sell through partners, and also the product mix between categories. We maintain our view that we should be able to stay between 60% and 65% gross margin, and maybe increasing going forward as more and more our newer products are being adopted in the market. Our operating expenses develop in line with the trend, and it is correlated to the number of employees. The based majority of our operating expenses is number of employees, and our recruitment is driven by business opportunities. We continue to see a lot of business opportunities, driven by our close relationship with customers. We will continue to go for those opportunities when we see them, also when it is connected to hiring more people. We still believe that our revenues will grow significantly more than our operating expenses going forward, that should be a good relationship there. Our margins have substantially improved. The EBIT margin for the last 12 months, as I said, is 19%. With the operating model that INVISIO has with outsourced manufacturing, it is clear that both revenues and margins are heavily impacted on whether we ship products just inside the quarter or whether they are pushed into the next quarter. That's again, why it makes more sense to look at INVISIO on a longer perspective than just a single quarter. Yeah, good development here as well. To the larger orders that we received during the quarter, as I said, the largest one in the history of the company, $130 million for hearing protection systems under the Racal Acoustics brand, and this is to a customer in the U.S. This system will be used in heavy combat vehicles, and most of it will be delivered during the current year. Our second order announced, was also for Racal branded products, at this time for a European NATO country. This is also to be used in heavy military vehicles, and similarly, most of the deliveries will take place during the current year. I think it's fair to say that our acquisition of Racal Acoustics a couple of years ago has been a success. The integration between INVISIO and Racal has been close to flawless. We are a well-integrated group now. We work together. As we said early, when we acquired Racal, the combination of the Racal products and the large INVISIO sales organization is a winning combo. This is what we see now, that the outreach to our current customers, especially in the U.S., is adding a lot of sales to the Racal products. In addition, of course, the geopolitical situation, where a lot of vehicles are now being replaced and new vehicles ordered, is giving a great outlook for our vehicle-related product solutions over the next many years. When we acquired Racal, we define as the acquisition partly by loan, and that we have repaid now during the Q2. INVISIO Group is again debt-free. We also introduced a version of our second-generation control unit, V60. This one is called the ADP, and that stands for Audio, Data and Power. It is a very advanced PTT hub that provides more functionality and flexibility, and also allows certain features, integrating systems and data to reduce the number of devices that a soldier normally has to carry. It is built on the platform of our generation two control units, the V-Series, and it adds the capability, as I said, to enable audio cues from other devices to headset, as well as distributing power to other devices in the system. By this, it will reduce the complexity of the system that a user has. This is a variant that is at this point in time a niche product, but we believe that certain customers will start to adapt this type of solutions going forward. In summary, what we have been mentioning during the past quarters, there is a change, there is a new level for our type of business. We have seen the largest increase in military spending in Europe in 30 years. There is no doubt that there is a massive need for modern communication equipment as part of that. The larger budgets will allow for faster rollout. We are seeing that now. The record high order intake is absolutely also a result of those larger budgets and the need to change behavior fast. In the longer term, as also reported by other companies in our industry, there's no doubt that the higher budgets will mean an increased demand, and that this will continue for many years. This is not a short-term situation. This is something that will be for many years to stay, that we are in a growing and larger market than we were just a few years ago. The many forward-looking investments that we have carried out in recent years is starting to pay off, and that in combination with a substantial order book and a generally very strong market, it means that we predict continued strong sales, strong order intake, and good profitability for the rest of 2023. That concludes the presentation, and we are now open for questions, please. If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Daniel Thorsson from ABG Sundal Collier. Please go ahead. Yes. Hi, Lars and Thomas. Thank you very much. I missed 5 minutes in the middle of the call here. I ask my questions anyway, and we'll see if you answer them in the call here. I had a question on rest of the world growth, which looks pretty promising here in Q2. Can you explain what drove that? What markets, any new countries you have expanded to, or? I think, this is, within our, current, business. I do not have the exact details here, but we have a strong position both in Australia and in other parts of, that region. Australia is definitely a contribution to that. Okay. Yeah. Not a single large. No ... order or delivery to a new country, which you are expanding into? Okay, second question on the gross margin here. It was down a little bit versus Q1, which you flagged already in April or May. Is anything in the gross margin here in Q2 that turned out differently versus your own expectations? Also, how we should think about the gross margin going forward, driven by the purchase prices from inventory, Etc. It is just the fluctuation that we see. We had a very high gross margin in Q1. It is down to individual orders and whether they are sold direct or, as you know, quite a large part of our regular business traditionally has been sold through partners, vehicle integration partners and so forth. It is just that mix that they continue to. Yeah to make the gross margin fluctuate, and but I think the direction is going upwards, as we can see now, compared to last year. Yeah. just about 60% is reasonable to assume ahead as well? Yeah. Okay. On OpEx, it came in pretty much in line with our expectations, but still up quarter-over-quarter and year-over-year. You mentioned salary inflation, some new recruitments recently. Where are we in the OpEx growth now? Should we see a stabilization around these levels, or do you have any new investments coming up we should be aware of? No, I think the fact that the revenues will look and the order intake looks promising, that in itself will of course drive some OpEx. We still believe that the growth in revenues will be higher than the growth in OpEx, but in order to continue to grow order intake and also deliveries for that matter, there is a need for more people. Just by logic, when you double the revenues, there will be more orders to take care of. There will be also other internal activities that requires more resources. We will continue to see development in OpEx. Again, I am of the conviction that our revenues will grow faster than our OpEx. I see. Finally, on, future product development and product pipeline, have you met customers in discussions where they are demanding products which kind of don't exist today? That they tell you that we would like to have products like XYZ with the, these features, et cetera, can you help us develop this? Which could sustain a long-term growth and, also make your competitive advantages better versus competitors? Yeah. Driven by the increased military budgets, I guess. Yeah. They are demanding more advanced products. Yeah. No, absolutely. That is a constant sort of positive effect of the fact that we are very close to our customers, and we get a lot of input and ideas. Yeah ... what they would like. There's also, it's also very clear that there is a, a broad variation of the maturity level between customers and countries, where certain customers are still at a more standard basic level for what they require, whereas other customers are going very fast in a technology direction, where products like the new V60 ADP, that I just mentioned, is relevant. Yeah. There's a very widespread, and the good thing about our situation in the market is, of course, that we have solutions to cater for any of those needs. There's no doubt that there is a lot of good ideas out there that we are trying to capitalize on, and that's also the reason for some of the increases in our OpEx. This is related to also people in R&D, where we think that this would benefit us and give us new products for coming years, where we can see good revenue potentials. Yeah, I see. I see. Thank you very much. That's all for me. You're welcome. The next question comes from Mads Quistgaard, from Carnegie. Please go ahead. Yes, thank you. I have 3- 4 questions. I will take them one by one. First, coming back to the order book loss, can you be a bit more specific around the timing for this year? Yeah, I would say, the vast majority, more than 50%, and quite a lot higher, I would say, is due for delivery this year. Okay, what can we think about the Q3 which, you know, from a seasonality perspective, is usually your slowest quarter? As you can see in our inventory levels, we have a good possibility to deliver good numbers also in Q3. Again, the reason I'm hesitant to give indications is the fact that it is the customer sometimes that decides, even though we are ready and we have everything ready to ship, if the customer is not ready to receive because they need people in for training or whatever the reason, then certain revenues could easily be pushed out some weeks and into the next quarter, and there's not much we can do about that. What we do is we make sure we have inventory, and we make sure we are ready, and then we try. I would say the vast majority of the SEK 800 million in the order book is for delivery in 2023. Makes sense. Coming to the order intake. Is it any way possible for you guys today to quantify the effect from the increase in the defense budgets? What the impact is on your order intake? No, that I think would be very difficult. I would also say that I don't think yet that it is so much related to defense budgets. It is more related to, as we take them one by one, if we look at the hearing protection systems, there is of course, a little bit of pent-up demand from the pandemic, but then there is just a continued need for updating capabilities in many areas. We have, of course, also seen countries where not everyone in the army has had the type of system that they would require, and that they have realized that we need to speed up now. More people need to have the same capability simultaneously. When we look at the vehicle market, yes, a lot of vehicles have been shipped over to Ukraine, which means that vehicle needs to be replaced, but that takes time. Even though many orders have been placed with new vehicle manufacturers, it will take time to get those delivered... We can just see, that there is a very high activity level around that. I don't think it's the budget in themselves, it's more, just a general, very high activity level, in many countries, and that includes, that there will be recruited, more soldiers and just the capabilities in general, if you take them country by country, are being upgraded to higher levels. That makes sense. I'm just, you know, just thinking of looking in the past, we have seen, you know, a number of customers being quite hesitant to acquire your products. I guess, you know, the increase in defense budgets would make them more resilient, you know, more, you know? Yeah. Okay. Absolutely. Okay. My last question is on the cash position, which is quite strong today. Can you put some comments around what you're thinking about potential M&A, cash distribution, and so on, going forward? Yeah, the thinking so far is we have taken the first step in terms of repaying the loan regarding the Racal acquisition. Then, we are of course in discussions internally and with our board of directors in terms of where we see that being used going forward. As we said before, it's not a market that is full of acquisition opportunities, but there will always be certain opportunities. The fact that we are growing into a broader company, addressing more types of product solutions, will mean that there might be other opportunities that we haven't sort of looked at before. I think it might be a combination of the opportunities or the possibilities that you described. There has not been any decisions made on how we will allocate the cash. All right. Thank you so much. You're welcome. The next question comes from Hjalmar Ahlberg from Redeye. Please go ahead. Thanks. Maybe, Jan, just one more on the cost going forward. I mean, you just said that you expect revenue to grow faster than cost. If you look, I mean, a few years out and potentially doubling sales, would you still see the kind of linear cost growth, or could it be a step up? I mean, would you need a new office or something if you double sales from here, so to say? I think, I mean, if we double sales, I don't think we will double OpEx to do that. Again, they are not 100% correlated because due to the fact that manufacturing is outsourced, we can easily increase our revenues substantially without the need for more people. I think the continued investment in the organization is twofold. It is in R&D to continue to develop new products that you haven't seen before, and also to continue to update and upgrade what we have already, and generally supporting our customers in all aspects. On the sales side, to be able to address the many sales opportunities we see in all areas, in the dismounted systems, in the vehicle systems, in the intercom system, in the law enforcement. We are just getting broader and broader, and that sometimes requires a few more people. The increase in OpEx is very closely linked to the business activities that we see. Yep. Got it. Maybe one more on the gross margin. I mean, you do see the potential for 60%-65%, and you also mentioned, I mean, Racal, might have a bigger mix, in the near term at least. Historically, I think you said that it's been slightly lower gross margin on those products, but, are those products similar gross margin compared to INVISIO's products, from now on? Yeah, absolutely. Again, in certain deals or big programs, there is just a requirement to work with a system integrator, and where we share some of the margin, and that will impact that level. That's just a part of the business. It is so for Racal products. It is also sometimes for INVISIO, that we are part of a bigger system, and where we then need to share some of the margin with a larger player in the market. Right. Also a question on intercom product. What does the pipeline look here? Are you discussing with new potential customers here, or, yeah, any input on the potential order here? Yeah, absolutely. I mean, intercom is developing well. Again, there is a lot of activities going on, and we see repeat sales from several customers that have already ordered. I think there are also some interesting larger opportunities in the pipeline. Again, it's always difficult to say exactly when that will happen, but there's definitely a very high interest. I think that many of the new vehicles that are now being ordered in many countries and will come, be delivered over the next five, six years, will be relevant for the intercom system. This. Right. This is a light and easy-to-use system that for some of the more basic vehicles will be relevant rather than installing a very complicated and large and expensive traditionally intercom system. Right. Right. The final question, I mean, you did mention higher budgets as we see all over the globe, basically. Do you also see that this might drive any increased competition because maybe, I mean, competitors see potential to grow in new products? Maybe. We have not seen it yet. Of course, that is always a possibility, but we have not seen any signs of that yet. I also still think that even though our part of the market is growing and growing well and so on, it is still a niche market. Mm-hmm. -compared to some of the other things that the different customers are buying. And we have a strong position. I think we always welcome competition, but we also know that we have a very strong position now after 15 years in this area. Okay. Thank you very much. You're welcome. The next question comes from Yiwei from SEB. Please go ahead. Thank you for taking my question. Hi, Lars. I have 3 questions here. Firstly, on the order intake, which has been sort of increasing quarter-over-quarter. Even though you don't guide for the current year, could you give us an indication, what is your expectation for the second half? As we say here, we expect a continued strong market, and that means order intake, sales, and profitability. As usual, it could fluctuate between quarters. Some quarters a little more, some quarters a little less, but the general 12-month trends will continue to be positive, is our belief. There is a very high activity level, but as usual, it is difficult to estimate exactly when orders will be received. But the trend has now been positive since, I think, the Q3 of 2021. I have no reason to believe that this will not continue. Great, thank you. I have two more questions. Next question is relating to the larger rec order in the US. Could you remind us the timing of the deliveries for this order? Also your expectation for the margin level. I think for the deliveries, we do believe, it is for deliveries in 2023, the majority of the order. I think for this particular one, it is, it is sold, I think that was sold directly, so it is a, in the normal ballpark of where our margins are. It's probably. Okay. a customer where we can see opportunities for future orders as well. Okay. It's just sold through... Just want to clarify. This is sold through your own sales force and Yes. system integrator Correct. related? Okay. Yeah. Cool. Maybe just a follow-up here. Can we understand this large order was the market share winning as your main competitor of Racal exceeding the market, or this was relating to the budget increase? it was probably a market share thing, but or a combination. I don't. We are not told whether this is related to budgets or anything, but this was a requirement for a new headset in this area, and we were the best offer quite simple, and the best product to meet their requirements. Yeah. Okay, great. I answered all my questions for now. Thank you. I'll jump back to the queue. Thank you. As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time. I hand the conference back to CEO Lars Højgård Hansen for any closing comments. Okay. That will conclude our presentation for today. Thank you everyone for dialing in, and talking to you again soon after the Q3 report. Thank you. Bye-bye.