Per Norén: Good morning. Thank you.
André Löfgren: Good morning.
Mattias Vahlne: Morning. Per, a rebound in order intake, which rose by 65% compared to last year. I know you have high ambitions. Could you comment?
Per Norén: Yeah. We are going to go into the details of all the reporting, but we are very pleased that we have rebounded on the order intake, because we had a fairly weak H1 of the year. But we are not done yet. We have the current quarter we are in, but we will talk about the Q3 and the order intake that is to our satisfactory. But as you said, we have high ambitions and we intend to talk about that as we go forward here.
Mattias Vahlne: Okay. Please go ahead with your presentation then.
Per Norén: Well, thank you, Mattias. Good morning, everyone. I am very pleased to be joined here by my colleague, our CFO, André Löfgren. The Q3, as Mattias alluded to initially, was quite strong for us in comparison to the H1 of the year. We got new customers, we got new countries, and we got more orders, which we had actually set out the task and the objective to achieve. We will go into more details on that and what it means and what our strategy is and how we tend to operationally execute on that as we go forward. But it is worth mentioning before we go into the detail that we live in an ever so changing world, and we will touch upon that as well during the presentation.
Per Norén: In specific, in defense, national security, and public safety, and when it comes to space and space as an infrastructure, and how the unbreakable link in a digital world, meaning satellite communications, is today a must, not a nice to have. But let us start with who we are, then the market, and then the quarter. I believe we live in a time where Ovzon was actually built and designed for the era we live in. Our ambition, and our vision is, of course, to be a good global citizen, but in essence, it is to connect and protect people, society, and organizations for a safer world. We will get into how we do that.
Per Norén: I think the critical aspects of what we see in the surrounding environment in the world today, whether it's geopolitical or technological or geoeconomical, is that controlling that unbreakable link is very critical, specifically for defense, national security, and public safety. The market drivers have not changed. They are becoming increasingly apparent to everyone. Sovereignty, meaning countries controlling their own access to their own sovereignty and controlling that. Resiliency in contested environment. Likely many have seen the news of Starlink stopping use of the system with anything that goes over 160 kilometers an hour. We will talk about what that means and how we actually are not part of that. We are unique in that regard, and we can deliver in any of those cases. Then more and more data and information are driven at the edge in the future AI.
Per Norén: Well, not in the future, today already, AI will play an important role in decision support for any of this. We will come back to that. As you can see on our key numbers here, we have for rolling 12-month revenue towards SEK 1 billion. Our EBITDA margin for 12 months is 42%. Maybe most importantly, this is a very strong company, Ovzon. Net debt to EBITDA in the rolling 12 months is 0.5, so we have a very strong base to operate from today. Now let's talk about the new world order, or as I would like to call it, the new security order. I do not think we have to go into the geopolitical fragmentation that tends to be in our frontline news, if not daily, so hourly, I would say, sometimes several times a day.
Per Norén: It means that countries, alliances such as NATO or the European Union, and United States of America for that matter, need to actually both respond but not react, need to invest, but also take into consideration today's environment, the future environment, borders for countries, but also borders for alliances. Sovereignty is a well-used word these days. Sovereignty actually means that you control your own destiny. To control your own destiny, you also have to collaborate across alliances and countries. So regions and sub-regions of the world with like-minded, where you have co-investments in things becomes very important, and choices of what's important and prioritized in society as well. Then obviously, digital AI plays a very important role going forward. There are operational dependencies today, both on communication, artificial intelligence, in a more and more digitized defense environment, but also society at large.
Per Norén: So again, connectivity at the unbreakable link that it must be, is now critical infrastructure, and space has now become its backbone, and this is exactly where Ovzon plays today. Now, let's look at the environment that we operate within. So first of all, on the right-hand side, you see the picture of the three layers in orbit that make up the communication layers for satellites today. You can see LEO, which is low Earth orbit. You can see that's a lot of smaller satellites circling the globe. It requires a ground infrastructure where the signal goes down. One should know that it's almost 16,000 low Earth satellites in orbit today, and 70% of those are operated by Starlink. I repeat that, 70%. I will come back to what that means.
Per Norén: You have Medium Earth Orbit, so fewer satellites, which is important because that's where the GPS signal is managed from. You have geostationary orbit, which is 36,000 kilometers up in orbit. As the picture depicts, one satellite that has steerable beams, such as Ovzon 3, can see a third of Earth. In that sense, you need three satellites to have global reach in Earth. Of course, Ovzon operates both its own satellite with its uniqueness, as well as third-party satellite capabilities that actually gives us a good coverage of Earth. Low Earth orbit is cluttered. It will be more satellites. It will be the next generation of satellites. It will be messy, is my conclusion. It solves a very important puzzle, but it solves it for actually competing with mobile communications to a large extent, because the biggest trend with low Earth orbit is that it drives towards direct-to-device pieces.
Per Norén: We will see 5G to 6G, we will see LEO coming into that, and it allows us in the geostationary orbit to actually stay very true to our specialized competence and capabilities. I think it has set up Ovzon really well in that regard for complementing the low Earth orbit movement as we see it. Geographical trends, which are very important. I think in general, states seek control over satellite links, the unbreakable link, as the market also consolidates. A few highlights maybe to mention here. The founder and CEO of SpaceX and other entities, Elon Musk, got the assignment from the Secretary of Defense, Pete Hegseth, to lead a 120-day project called Project Meridian to design the future warfare system for the United States. This is the same individual that manages the largest company in space. It is an interesting drive.
Per Norén: I think to some extent, it is very positive that you go to organizations, maybe I will skip individuals, organizations that have insights into how things actually work from digital connections, data flow, artificial intelligence, and using space as the backbone. But it is also a controlling function for that piece. The US continues to invest. The fiscal year 2027 budgets are almost ready now. They will increase, and they are ready to go into production in December. There are a lot of consolidation ongoing. You can also see, meaning acquisitions by companies and integration and mergers. You can also see that SpaceX is acquiring spectrums and bands to continue its strive to have, I would say, dominance in terms of the low Earth orbit and mobile communication.
Per Norén: In Europe, the answer to all of this is IRIS². It is a European Union-funded sovereign satellite communications system and linked system in low Earth orbit. A lot of investment goes into that. But that is not ready now. It will be ready from 2029 and onwards. Meanwhile, what does the world need? We believe it needs Ovzon with its specialized capability, but we will come back to that as well. But Europe is responding by investing and putting consortiums like this together. China are doing a lot in this space, pun intended. There is a lot of development. There is launch capability. There are more satellites being built and being sent up, both in low Earth orbit and geostationary orbit. So there is a lot of investment and activity in the space sector today.
Per Norén: And of course, last but not least, the conflict in the world where Russia's full-scale invasion of Ukraine and the situation in Ukraine or in Middle East with Iran and others, talks a lot about the necessity for the unbreakable link of communications, because that is how you keep control over what is going on, where you need to protect assets and capabilities, and how you do that. I think the conclusion for Ovzon is we are very well-positioned. Winning business and winning position takes time. We have to have endurance, but we are well-positioned with both our technology choices, our solutions, and our ability to deliver, as we will come back to in the financial numbers. We view the world as frightening to some extent, but also a possibility for us to connect and protect people, organizations, and society for a safer world.
Per Norén: Our solution on our value proposition is actually the unbreakable link of communication. We design, develop, and deliver our mobile satellite terminals. They are the smallest in the world. By no means is anyone even close to that. They are designed for resiliency. They are designed for an integrated capability and solution. They are designed to be both on the pause and on the move. Our latest terminal, the Ovzon T8, is now out in field and in use by the first customer. It is the smallest of its category. It is the height, basically, of an iPhone. We are working on lowering both the weight and increasing the performance of that. Our intention is to have a full on-the-move terminal portfolio in the future as well, so we control that whole piece of the equation.
Per Norén: The unbreakable link does not work if you do not control the terminal aspect of things. We sit on a very unique capability and competence and skill there. Satellites and networks, of course, play a very important role. You need global reach, but you also need layers of capability and architectures. We have our own satellite, Ovzon 3, with its own onboard processing capability that regenerates signals and can hide signals, basically, and build mesh networks on the ground, which you cannot see or hear or basically break the signal from. We also use third-party satellite capabilities in the geostationary orbit, and there are quite a bit of it available with very good performance for those satellites. We are very pleased with our partners' performance and partnership in us continuing to build out networks and layered architecture. We use a few secure gateways. This is very important.
Per Norén: These are infrastructure pieces on the ground. The fewer you have, the more you can protect those. The fewer you have, the more you can build resiliency, security, and cyber security into those. That is what we are doing. Last but not least, this is a business that is ubiquitous. It never stops. Our customers need it 24/7. The unbreakable link requires full attention, full management, and we do that 24/7 for all of our customers. This is obviously a depiction of what this means. The unbreakable link and in a fast-moving digitized world, you need data and information at the edge, and you need AI to actually help with decisions and coordinate decisions, whether things are moving fast in the air, on the ground, or on the water, or if it is headquarter functions and operational units with headquarter functions.
Per Norén: You need the same data and the same decision support throughout all of this, and you need fast communication, and you need a guaranteed connectivity. That is what Ovzon offers today. Let us turn to the quarter. As I said initially, we believe we have just finished a very strong quarter, and we broke the somewhat weaker H1 in the order intake. We got new customers, we have new countries, and we got more orders. Why is this important? Well, the base for our business is a broad customer base. The broader it is, the more we can serve many customers. We can also then advance upsell and cross-sell capabilities that they do not have today. But it takes longer time to win new customers than it does to actually work on renewing a sustainable customer base that we have.
Per Norén: We have to do both at the same time. Basically, we have to double down on both investing in the sales organization to get more countries in, and we have to, at the same time, ensure that we have the right customer success organization to deliver to the current customers so that they can continue to expand the use of us. We got a new NATO customer for Ovzon's integrated communications platform on SEK 40 million. I am very pleased to report we got a new US government customer on a 12-month order worth SEK 90 million, and that is on Ovzon 3, so utilization of Ovzon 3. We have broken in through new partnerships into Europe's largest defense market, Germany, and that is the first initial installation that we have there, which we are very proud of. Existing customers, as I talked about, have renewed.
Per Norén: For example, the Italian Fire and Rescue Services have renewed for 12 months for the fourth consecutive year as well, and we see that as a very strong evidence that we are doing a good job with that customer. I think overall, you can see on the right-hand side in the graph here, of course, order intake is fluctuating over quarters. I think our answer to that is to try to get longer-term contracts with current customers. Often government budgets are on 12 months, so it is a hard thing to do. We have to have endurance. We have to come in and prove ourselves. We have to show the results, and we have to beat expectations in what we deliver in the Unbreakable Link. But you can see that our Q3 this year is actually quite good compared to other Q3s, other years.
Per Norén: There is one key anomaly here, and that is the big order we got in Q2 2025. It was a 2-year contract. The order was on SEK 1.04 billion, and that contract continues to go. We deliver on that, but that is the biggest anomaly in this quarterly depiction that we have here. Our goal is obviously to try to go for those larger contracts, but the expectations that we want to address here is that that will not happen every quarter, obviously. But we are working on renewal of that, and we will come back to that a little bit later. So a strong quarter with new customers, new countries, and more orders, and we march into Q4 with that in mind. I will hand it over to André now to take us through the numbers a little bit more in detail.
André Löfgren: Great. Thank you, Per. Referring back to that order graph that you saw, our revenue is built up on that order intake and that backlog that we then have in orders and how we execute on that. We have done that really well, as you can see. Revenue has been increasing over the past couple of years. If you look at this quarter isolated, the growth is actually 9% versus the same period last year. We see services revenues being pretty solid and also then terminals being the main growth driver here in this isolated quarter. You can also see that it is slowing down maybe a bit from two quarters ago, and that has to do with, as we were on to, the order intake in the first half was not that particularly strong.
André Löfgren: But now with Q3, we will see the proof of that in the coming quarters, because that is not in the revenue numbers yet. We still have to deliver on those, which we are looking forward to. You can see the same picture on the right here on that graph of service revenue that is analyzed, then the quarter times four, basically. We think that we are at good levels, but we will continue to grow this as we go along here. If I move over then from revenues to EBITDA and EBIT profitability, it is the same word. Here you see that we have pretty strong, actually, we have really strong margins on both these key parameters. So we are at an EBIT margin or EBITDA margin of 43% and then an EBIT margin of 24%.
André Löfgren: They are at really good levels, and that has to do that we have been growing, but we are doing that with a very strong discipline on cost control, and that is something that we see here is paying off quite a lot. If you compare to the same period last year, the margin is slightly lower, but that has to do with the mix in sales or more terminals in relation. Also, actually, we have more cost for third-party capacity, which is a good thing because that is fully sold out and something that we are using and that is more showing that we have capacity to grow this business going forward as well. So in all, very good profitability. Another line of profitability is the bottom line, and here we see we have really strong growth. It is moving up almost 70% versus the same period last year.
André Löfgren: The main driver here is that we have much lower interest cost versus last year. We have done a refinancing a while ago, a year ago, and we also amortized debt quite a lot. So that is a really big difference here. You also see that we have really spiking in Q4 last year. That has to do with realization of tax assets. So that is more of a one-off impact in that particular quarter. I move over to cash flow. Here you see a historic trend of our cash flow to the left, and then you have a rolling 12-month line in orange on that same graph. If we start with orange line, it is at more than SEK 200 million, so we have a really strong cash flow.
André Löfgren: If you draw out the timeline a bit, in the isolated quarter, it is a -90 million operating cash flow, and that is very much a temporary thing. We have been delivering a lot by the end of the quarter, and we are then increasing our receivables for that reason. It is a change in working capital that is impacting here. It is temporary, and I know that because we already received a lot of payments in October, and we are expecting more to come in this Q4. There is nothing to worry about here. I think also another proof of our strong financial situation, as Per alluded to earlier, you can see the orange. No, it is not orange. It is gray or white or yellow, depending on your eyesight here.
André Löfgren: That is the gross debt that we have, interest-bearing debt, and it has been almost at SEK 800 million and now only SEK 260 million. So we have really been good at amortizing down debts, and that has been done then with the strong cash flow. So we are in a net debt position that is just above SEK 200 million, and the cash position as well that we are comfortable with, given what will come during the Q4 here in cash flow. All right. If I summarize all of this and look at also a bit at the long-term trends when it comes to the financials, you see the trend is that we are growing revenues. You also see a trend of strong profitability.
André Löfgren: We have a cash flow that is on rolling 12 months and, as I said, about SEK 200 million with this temporary drop in this quarter. All in all, that means that we have a strong financial situation. Also, when it comes to order backlog here, it is at SEK 570. A lot of that will be realized in the rest of this year, but also a substantial part goes into 2027, and that part is something we will definitely continue to grow here, and it is a focus that Per mentioned as well. I think also you will talk a bit about how we will do this going forward as well. So hand it over to you.
Per Norén: Yes. Thank you, André. Good review of the numbers in more detail. Maybe I will just stop here for a second and maybe reinforce a few things. Quarters are important, but years are more important than that. While we, as we said, had a bit of a weaker H1, Q3, this quarter, has really positioned us well with new customers, new countries, and more orders for the remainder of the year. Our goal is, as Andreas said, if you look at on the order book, our goal is to deliver on that order book. That is a healthy sign of a company that is very good at operational execution. I do not want that to go unseen or unheard. Our goal is also, in parallel, to deliver on it and then to fill it up at higher levels. Q3 steps us up in that direction.
Per Norén: As I will talk about in a second, Q4 will be important in fulfilling that expectation that we both have and our colleagues on the leadership team have for the remainder of the year. Last but not least, cash is king and queen in our world. You have to have longevity, basically, as a business. Cash gives you that longevity. A lower debt gives you that longevity. Being able to reinvest in the business by being profitable gives you that longevity. That is the name of the game when you are in the space industry and when you are in the defense tech industry as well. So I view this financial summary as an evidence of a strong company performing very well that is not satisfied with where we are. We know we need to move faster forward as we go. So what does that look like?
Per Norén: The clear path forward here. There is nothing strange. I think we have already mentioned all of this. We need to continue to ensure that our current customers are utilizing our capabilities to the optimum. That means they are satisfied, that means that they will extend contracts, and we can work on new applications with them. Secondly, we need to get more customers. We have six countries now. We intend to continue that strive to have more customers. Initially, those customers will have potentially smaller installations. So think big, start small, act fast in ensuring that they understand the value they get from our integrated communication platform. So extend current customers and then build on the new customer base and get more customers.
Per Norén: I think this quarter actually marks a healthy view on that investment we have made in a balanced cost control way in building up our commercial and sales organization is starting to show return on investment. Main focus is Europe and North America for the moment being. I think I am very pleased with the expansion in Europe, specifically Germany and the NATO countries. It enables growth for us, as I mentioned. I have to mention this, that to get a US government customer in this environment for a Swedish company is quite a feather in the hat. It is a good contract. It is SEK 90 million and it is on 12 months. It is not a shorter-term thing. I view that as a great win in the quarter.
Per Norén: Last but not least, maybe on that, the Ovzon T8, which is our first on-the-move terminal, smallest in its category, smallest in the world, is performing extremely well with the first units that are out in field with the customer. We have positive perspectives on what that would mean for us in terms of ramping up volume and production of that. Now, the priorities in Q4 and beyond are the same, really. Renew current customers, extend them, expand them, and then win new customers. We need to continue to optimize our satellite utilization, as André was talking about, including Ovzon 3. So we view satellite capability and capacity as a very important inventory and asset for us, and it needs to be optimized as a totality, not only focused on Ovzon 3. Understand one thing, which I think we will get questions on here, probably.
Per Norén: Ovzon 3 is utilized to 100%. Not paid for to 100%, but we utilize it to show new customers in new countries and new capabilities and applications what the power of that capability is. That is quite an important aspect. That is why third-party satellite capacity plays a very important role in delivering the service to the customers we have today. But our goal obviously is to have full utilization of everything, but understand that we also make deliberate choices in how we actually utilize that. Then we need to ensure that we have adequate satellite capabilities over time, whether that is through third party, more expanded satellite capacity that Ovzon controls with onboard processing or other. We are working on that continuously to ensure that we have the best of breed in an integrated environment.
Per Norén: Last but not least, we know that we have hit a home run with our Ovzon T8 terminal. We intend to control our own portfolio of mobile satellite terminals with both on the pause and on the move only from Ovzon, by Ovzon, at the right scale at the right time. That is what you can expect from Q4 and beyond. It is quite a full plate. It is a wonderful plate to have. We leave the third quarter with an optimism and a strong drive into Q4 and beyond. With that, I think we close the formal presentation and we can go to questions and answers, Mattias. Thank you.
Mattias Vahlne: Thank you so much, Per and André, and great to hear about the T8 performance. I am happy to have a group of really sharp equity analysts prepared to ask a few questions. We will start off with Mikael Laséen, equity analyst at DNB Carnegie. Please go ahead with your questions. You can hang on a minute. We cannot hear you right now. Can you try again, Mikael? No, we cannot hear you for the moment. Let me ask my colleagues here. Should we invite some of the others or is there a technical problem?
Per Norén: We can.
Mattias Vahlne: Okay. All right. Mikael Laséen, DNB Carnegie, please go ahead with your questions.
Mikael Laséen: Can you please take others before me? Thank you.
Per Norén: We go to the next.
Mattias Vahlne: Oh, we go to the next.
Per Norén: Yeah.
Mattias Vahlne: Oh, okay. We move to Jacob Andersson at Danske Bank. Are you with us?
Jacob Andersson: Yes, I am with you. Thank you, Per and André for the presentation. Just a few questions starting off with, OpEx came down quite a bit from Q2. Could you talk about what drove that decline and is Q3 a reasonable level to use going forward or?
Per Norén: Yes sure. Well, there is a bunch of things actually that is going in our direction. That is the result of a comprehensive cost control in general. We have been able to cut costing in different levels. There are no really big one-off impacts that changes the picture big time for the fourth quarter, but there are a few smaller ones that is impacting. They are on some personnel costs, they are on some consultancy costs. There are some capitalization being made, et cetera. There is a bunch of everything, so it is hard to give you one answer on that one.
Jacob Andersson: Yeah. Okay. Thank you. You also previously mentioned keeping some capacity available on Ovzon 3 for larger, longer-term contracts. Is that still approach or are you now focused on filling the available capacity sooner or regarding that, what you said about Ovzon 3?
Per Norén: Yes. Good morning, Jacob. Good question. I mentioned that deliberately. It has been a deliberate decision, obviously, but I think going forward we have to drive. Our margins will go up when we utilize Ovzon 3, and we will have customers that have the actual need of the onboard processing capability and so on. As you could see, the US customer we just signed up, that is on what we call the Ovzon Orion service, which is onboard processing capability combined with some third-party capacity.
Per Norén: Long-winded intro to say, "Nah, we are going to focus on basically trying to get 100% utilization of Ovzon 3." It comes with a caveat that you really want to do in demonstrations and showcases. You want to show that. I think our strive is to get towards full utilization. We are not holding back on that right now because it is going to drive business performance, and it is going to drive financial performance.
Jacob Andersson: Yeah. Fair. Going back to the FMV contract there. Based on those discussions, could the length or size of those new contracts differ from the current agreement? What are your best guess there on a potential another contract with FMV?
Per Norén: You mean-
Jacob Andersson: In terms of length and size.
Per Norén: The SEK 1.04 billion contract that we signed in.
Jacob Andersson: Yes.
Per Norén: May?
Jacob Andersson: Yes.
Per Norén: Yeah, okay, I understand. Yes, I think I mentioned it in one of the sentences in the CEO word to the report as well. Our goal is obviously to extend this contract, and we continue to deliver on it, and it is going very well. The goal is to extend that contract. The SEK 1.04 billion contract was both services and terminals. I think terminals set them aside for a while. The service part of that contract, yes, it is our objective to extend it. It is hard to tell whether that is for another 24 months or 12 months, but discussions are ongoing.
Per Norén: You know that it goes until sometime mid-2027, so we do not expect to have any news on this this year, and it is likely going to be in the first couple of months in 2027 that we can say anything more. Our objective is to do it. We are in the dialogue with the customer, and we continue to have high performance in delivery, and that is going to set us up to have the right conversation about that extension.
Jacob Andersson: Yeah. Thank you. Just the last question before I let the other go. Given the concerns around the reliance now on Starlink in Ukraine, have you seen more concrete demand for your services, especially the T8 terminal, either from Ukraine or from other European countries supporting Ukraine?
Per Norén: You know that we've been supporting Ukraine's sovereignty almost since the full-scale invasion of Russia into Ukraine. We do not comment really on operational use cases and so on at all. We see a great interest in the Ovzon T8, though, in general from countries that we already have as customers or from new countries that are looking at, "How do I get the unbreakable connectivity link on anything moving?" It's such a small piece, so it's easy to actually integrate on any type of platform, whether it be a large vessel on the ground or a boat or a ship, et cetera.
Per Norén: So I think that's going to actually drive the need for more services, and it's going to drive the need for more production of those terminals. I think that's what I could say. I think if I had a concrete thing, we would have written it and said it today. We don't, but we see great interest, and we have several parallel conversations around that across our core markets today.
Jacob Andersson: Okay. Thank you so much for my questions.
Per Norén: Thank you.
Mattias Vahlne: Thank you, Jacob Andersson at Danske Bank, and we will move on to Simon Granath at ABG Sundal Collier. Please go ahead with your questions.
Simon Granath: Thank you. Hi, Per and André. Hope you are well. Can you talk on your assessment as to how governments are currently reasoning when it comes to resiliency of Satcom? Earlier this week, we read some news about Ukraine. Starlink is having some connectivity issues. So I am wondering how governments are reasoning and waiting on multi-orbit networks. Do you see this trickling into your pipeline, those discussions? Thanks.
Per Norén: Yes. Good morning, Simon. Very good question. We do see an increased volume of inquiries about what we could do in several aspects of this in our core markets. That is the number one answer I would give. Secondly, I believe that most countries that are looking at this are looking at, if you are in Europe, you are looking at can IRIS² fill the gap? That is what they first look at because it is a lot of EU money, and the larger countries in Europe are involved in that.
Per Norén: Then when you go one step, we click one level down, there's a realization that that's not going to be be available until 2029 and onwards, which means you then turn to your own country and say, "Do we have a capability that could fill the gap already now?" Most don't, which means if they know about Ovzon, which most of them do, the question come to us, "How can you fill the need we have today?" That's the sequence of things. Then they also tend to look at if they have an urgent need, sometimes money is not the object. Process length is the object of procurement, is the object to get it done immediately. I think in general, we are positioned so well in not competing with either Starlink or IRIS², but a complement to it that they can actually use today and integrate today.
Per Norén: I foresee a continued slowness in procurement, but I can see an increased need given the news the last seven days of control of the network. I think that gives our customers and future customers a greater insight into that. With Ovzon, they can actually control their own sovereignty and resiliency, and I think that's exactly what they want, and I think that's going to potentially speed up some of the conversations.
Simon Granath: Very clear. Thank you. It makes a lot of sense. Then, of course, the announced US-related order is a milestone, partly as it relates to a new customer, and I understand that it will be a mix of Ovzon 3 and third-party capacity. Could you help us understand the balance between these, and is it so that you have bought more third-party capacity already in Q3 to be able to deliver on this contract, which is potentially then weighing a bit on the reported figures?
Per Norén: Yes. Thank you. Very good question. Yes, it is a milestone. It is an important US government customer. The reason why we have both Ovzon 3 and third-party capacity is actually twofold: layers of architecture of communication, so networks, and secondly, coverage areas. If there are areas where this customer wants to use this that Ovzon 3 does not reach, it could be a sliver of a geographical area or so on, we fill that with third-party capacity. So it's basically taking the requirement of the area they want to be in, looking at how we fulfill that with Ovzon 3, and then complementing with third-party capacity and layers of networks under it.
Per Norén: So it's a pretty clever network management design that we've done there with the customer. That's the answer to that. On your question, if we bought it, yes, very late in Q3. Very late. When the contract really started, we acquired that capacity. I will let André correct me if I am wrong, but it has not weighed materially on Q3 results. The cost will be taken now in Q4 and onwards. Yep.
Simon Granath: Very clear once again. Just a final question, encouraging to hear your comments that the T8 has been a home run. Can you talk a bit about the gross margin profile on the T8 terminal and also relating to these couple of last terminal-related contracts. Should we expect any gross margin trajectories on the terminal-related sales going forward, or is there anything else worth mentioning that could impact those levels?
André Löfgren: *Well, actually, not that much to mention, actually, because the margins, if you look at our portfolio, this will not change the balance when it comes to margins percentage-wise. We are still at good, satisfying levels when it comes to margins from terminals. They differ a bit between the different models, of course, but all in all, it is, I would say, almost supporting to the margin mix that we have.
Per Norén: *Potentially with volume and that we control the full on-the-move portfolio ourselves in the future, not now, there could be a margin development, but that is not for now, and that is not an expectation we want to set. It could be with volume that it is, but it is not now.
André Löfgren: *Yeah, the average price per terminal, since this one is a bit cheaper, it will go down. But in percentage, we are still defending margins.
Per Norén: Correct.
André Löfgren: Yeah.
Per Norén: Yep.
Simon Granath: Excellent. Thanks for having my questions.
Per Norén: Thank you.
Mattias Vahlne: Thank you, Simon, for your questions. Let us move on to Finn Kemper, equity analyst at Cantor. Please go ahead.
Finn Kemper: Yeah. Good morning, guys. Thanks for taking the question. A lot has been asked already. My question would be on the cash flow and on the timing, because if I look correctly, operating cash flow was -90 million SEK in Q3, and most of this was driven by build in receivables from September deliveries. With that, cash fell as well compared to Q2. I would be interested in how much of the receivables build will you collect in Q4, and if prepayment terms on the new contracts are as favorable as you reported last year. Then maybe lastly, on the cash flow, just looking at where you stand now after 9 months, free cash flow stands around, I think, 49 million SEK. What is a realistic range you would feel comfortable in terms of free cash flow for the full year? Maybe you can give me some indication there.
André Löfgren: *Yeah, sure. I will try to, and also try to remember all your questions. Where to start? Let us start with payment terms. They are not changing much. I think we are still in a good position in our dialogues and discussions with customers, given the need and the speed that is needed. I think they realize what we need to be able to deliver. I think we have good cooperation with our customers. What actually happened in Q3 was, as you said, a lot of deliveries in September. With our payment terms, that means that that cash is coming in already now in the Q4.
André Löfgren: As also mentioned, some cash has already come in now during October, and we expect more to come. I think also we have discussed and described how the big contract that was won in May last year with the milestone payments from that. From that, I think you can also derive that Q4 will probably be pretty strong. In cash flow.
Finn Kemper: All right. Clear. Thank you, guys.
Per Norén: Thank you.
André Löfgren: Thank you.
Mattias Vahlne: Thank you for that, Finn. Do we have any questions from Mikael Laséen?
Mikael Laséen: Yes, can you hear me?
Mattias Vahlne: Yes.
Per Norén: Yep.
André Löfgren: Yes.
Mikael Laséen: Good. Just wondering if you can say something more about the order pipeline, contract discussions. Be maybe a bit more concrete what you see there and the opportunities that you have on the table.
Per Norén: It is the $1 billion question, isn't it, Mikael? I think, as I showed on the order intake graph that we had on one of the slides, it is probably one of our most difficult areas to be very predictable on. Because when you deal with new customers and new countries, you go through procurement processes that take quite a while. I will try to be a little concrete with it. First of all, I will mention the SEK 1.04 billion contract. As I said on another question here from Jacob, I think we are working very hard to continue to deliver and have dialogue. My expectations are that we will know more on that extension. Our objective is to extend it for the same period when it expires.
Per Norén: But it is very difficult to predict exactly if that is going to happen or not, but that is our objective. We will not know anything, I believe, in Q4, but we will know a little bit more when we go in the H1 of 2027. I think that is the biggest effect on our financials and then on our order intake. I started there. Secondly, I believe the order intake for, you saw that on the US customer contract, which is 12 months, we only accounted for SEK 34 million of those SEK 90 million, because of budget availability in that process. Our expectation is that we will gain the SEK 56 million of that contract eventually here. But the contract now and the money now is there to deliver throughout this year, so likely early next year, if I am being more tangible as you requested.
Per Norén: The German contract and the new NATO customer contract are shorter, foot in the door, prove your case contracts. They are very important. It is really difficult to predict if they go tag on to when that first initial contract ends, and if it comes immediately after, or if there will be a little gap between that and a broadening of that service. That is the comment I can make on those. Our goal is obviously to connect the end of the first contract with a longer-term contract after that, but it is hard to predict as they are testing and evaluating the capabilities first. Then, of course, our strive has been, and you know as well, to extend in those countries that we have. Being back in the US is important to continue that journey with other type of customers there.
Per Norén: This will be a reference point for that. Very hard to predict if that comes. It will not come fast, but it will come within the period we are in. Last but not least, then continue to expand in those countries we have, and then pluck a few more countries to expand the base on. Those countries will probably be like the German and the NATO country. We got an initial start if they have not used this before, and then an expansion. It is a very mixed bag of capabilities. What sprinkles on top of that is obviously terminals, more terminals to current customers. If we see evidence of that is going to drive more the need of more service. I would look for that. More terminals means more need for services and longer services contracts going forward. That is what I can say.
Per Norén: We work it every day. Of course, it is difficult for you and others to understand this, but we are working it every day. Our goal is still to be a program of record as we say in the US, meaning long, long-term commitments from customers where we then add things to it. But for now, I think the 12-month period is a natural that we look for. Then with first customers, new customers coming in, they will be shorter and then extended to that.
Mikael Laséen: Okay, thanks. I have a couple of more. Just wondering here about the operating cost in Q2. I think you talked about it also. Did you have any positive one-off effects in this quarter?
André Löfgren: Yes. There were a few smaller ones, as I think I already answered from questions from Jacob, I think it was. OpEx has been favorably developed thanks to cost control, and there are many on different lines across that we have been able to cut cost or maybe to capitalize cost, et cetera. I cannot give you some. It is not a big one-off that was in this quarter, but smaller ones.
Mikael Laséen: Mm-hmm. Okay. Otherwise it was seasonality, I think, maybe changing provision, something like that.
André Löfgren: Exactly.
Mikael Laséen: Okay. Another one here on terminal deliveries and sales. They were a bit below my expectations. Can you say something about how we should expect delivery timing ahead in Q4 and going into 2027?
André Löfgren: On terminals, you say?
Mikael Laséen: Yes, please.
André Löfgren: Well, we don't give guidance, so it's hard to give you much more concrete than, it will fluctuate with deliveries. You can also look at the order intake that we had, and a few of those has been terminals, and terminals only, and quite big amounts, and that will, of course, be delivered as soon as possible. If you had lower expectation on Q3 and then that might indicate that there might come more in Q4, but that remains to be seen.
Mikael Laséen: Okay. Thanks.
Mattias Vahlne: All right. Okay. Thank you, Mr. Laséen, for that. We have a few minutes for some questions from the viewers. We will start off with, how do you bridge the mismatch between long-term satellite investments and shorter customer contracts? What cash flow visibility is needed before committing to the next satellite?
Per Norén: Yep. That is a very good question. We have seen with the use of Ovzon 3 and the onboard processing that we have something highly unique. So our strive is to continue to have that highly unique capability available for our customers across the globe. That indication should tell you that we are looking at what that would be, meaning what kind of designs of satellites, what kind of production, and what kind of launch capability are available. So we are very well-versed in that, and we have a deep and good understanding of it. Our goal has always been to have global reach with own capability. It will be a timing question on the risk profile of the business. We are not going to risk the business because we can live fairly good on third-party capacity as well.
Per Norén: We are not going to risk the business, but we also believe that we have a good financial situation, and we have solid cash flow coming in, and we have banking facilities available today. We believe in the future that could help us make a sovereign decision, so to speak, on our own on it. But the best thing is also to have a customer with you on that journey. So all these aspects needs to play in, but our objective is to get to that point, but we are not going to risk the core business by doing it too early and at a time where we risk the continuation of the business because we have third-party capacity available to us to deliver.
Mattias Vahlne: Thank you. Would you be able to comment on the progress of the collaboration in Germany?
Per Norén: Yes. It has started well. It has just initiated the collaboration between the parties that are involved, end user, our partners, and ourselves is set up to be very good. We have not seen any results yet, but I think the whole coalition and partnership is a very solid one, and Germany is a good buyer of capability. We have a positive view on it, but we cannot say more than that. We will come back to that when we have more results from the project.
Mattias Vahlne: Thank you. With only approximately SEK 228 million of the current order backlog scheduled for 2027, how confident are you in maintaining the current revenue run rate next year? If so, what gives you that confidence?
Per Norén: Okay. We are very confident for the H1 of 2027 in our current run rate. Absolutely. We see no deterioration in that. I do not do that. It is the H2 of the year that is more of a question mark for those that follow us closely. I think Q4 and the beginning of 2027, we will come back and comment more on that then. I think this quarter and the beginning of 2027 will show the confidence. I am confident that we are in the right dialogues with the right customers on the right projects for now. The hardest thing we have is to put our finger on the line and say, "This is when this closes, and this is when this comes in." But we are confident in the dialogue we have, and we will come back in Q4 and early 2027 on more on that.
Mattias Vahlne: Okay. I think we got 2 minutes left, so one more question. Do you think Ovzon products and services can be a NATO standard of communication?
Per Norén: I do believe that it should be a NATO standard, not could be. I think it will happen. Standard is an interesting word. Standard is one of the key attributes in NATO when you deliver to NATO. That's a defined standard. I think we can become a de facto standard. You do that by actually having more customers and more use cases, maritime operational interoperability, things between the marine units could be one of the areas with Ovzon T8 drone capabilities and combined exercises on the army side and on the air force side.
Per Norén: I think it happens because collaboration happens. Sweden's and Finland's entry into NATO has actually put those two countries in a very important position within NATO. I think the interoperability aspect can become the standard when you see how well it works. I think it's hard to force yourself through the door and say, "This should be the standard." Most others are doing that. I think you become the de facto standard when you prove that it works.
Mattias Vahlne: Okay. Thank you so much for today's presentation and answers, Per and André. We are really looking forward to the year-end report. Thank you.
Per Norén: Thank you. Thank you, Mattias.
Mattias Vahlne: Thank you everyone that has been participating.
