Omda AS ($OMDA)

Good morning, everyone, and welcome to this business update. It is a great date for Omda and for our stakeholders. Together with me in the studio today, as usual, I have Einar here, our CFO. He will go through the details today. But I also have Noor here, my colleague that runs the business unit incident within our emergency area. She will give you a lot of information with regards to what today's news really means to Omda. So what is really the business update today? I'm really happy to tell you about the upper part of this slide, the acquisition of Saab Public Safety Solutions. I have said that this is the right step for Saab and definitely a giant leap for Omda. And transaction comes in many forms and sometimes increased market share, new long-term customers, new employees, colleagues, new deep diving knowledge about our domains. But this transaction gives us all of it and even so big that U.K. becomes the biggest market outside the Nordics and also even that we got more employees in the U.K. than in Norway. So it is a great thing for us. And combined with the other elements of our business update, as you can see to the right here, our profitability outlook is intact. The current business will perform within the announced interval when it comes to EBITDA. And for those of you that have asked me before, when we do a large acquisition, how it affects us and how it dilutes our margins, don't worry too much. We will go through the details, and you will see there are a very good way to look at the development of the combined business. Really happy to say that as well. And in the bottom here, the combo of the 2 first topics gives us the possibility to continue to grow and to accelerate. And through all our recent quarters, we have been saying that we have high activity on the M&A side, although there has been a while since we signed any transactions. So not only with the great acquisition today at 7:00 this morning, but also we have others coming up. And to the left here, the topic with regards to financing. There are a couple of things there that are important to Omda, of course. One thing is to reduce the cost -- the interest cost for the company going forward, but also, of course, to fund what we're going to do going forward when it comes to M&A as well. So -- all in all, what today is about, it is a great milestone for Omda and a game-changing business update you hear from us today. So let's start talking about what this is all about before we dive into the business of it. We have, as you all know, worked with specialized health care and emergency as our 2 major approaches to the market. And both of these areas have their very complicated structures of platforms, ecosystems and value chains. And as you see in this picture, of course, everyone that experienced something like that, they know that the only thing that matters is that you will be taken care of. And there are many people involved, many organizations and a highly complex structural thing in different countries as well. And we have many customers in many countries. We have a national organization that uses our current software. But now we also strengthen today our software portfolio with SAFE, the platform that Saab has been developed over the last decade. And this software is stronger when it comes to the police and fire, as you see in this picture, in addition to our extremely strong position when it comes to the health care part. So to be able to combine these things in addition to combining everything else we have in the value chain is giving us a position in Europe, which is stronger than most vendors and competitors. So we have to talk to you about how this is happening and why. So we have a 10-year history in the emergency area. And we've always talked about the value chain, and that is what differs from other compounders is that we are actually creating something specific here. And as you will see, let's start 10 years ago. We acquired AMIS, the Norwegian so-called command and control software within health care. And then 3 years later, we acquired from Saab, which we acquired SAFE from today. So 8 years ago, we collaborated with Saab and got to acquire software related to the vehicles that pick up patients. For instance, not only the driver that needs the task to drive to the right place at the right time, but also in the back of the car where you have the health care personnel helping patients. And in 2021, also a game changer when we acquired Carmenta Public Safety, because Carmenta Public Safety is also very important when it comes to our international distribution, and it's also a multi-agency [ hub ], meaning that it's also focusing on handling both the health care side and police and fire. In the same year, we also made a carve-out from the American company, R1, where we acquired Optima. And this is an analytics software that together with the rest of the value chain software is also a planning -- initial planning and also analytics after you run the business, meaning you can actually perform better and use those models too in your business. So -- and then in 2024, we made 2 acquisitions. The first one, Predicare, which is a triaging software and also a prioritization in a way to make the right decision at the right time for patients and also Aweria, which is a highly quality software that is used in hospital intake and in the acute room. And now what happens at 7:00 this morning? Well, the public safety solutions from Saab is a new additional platform, which is extremely important in this history. And we have actually been discussing it or asking Saab for more than 8 years, and we have worked a couple of years together with them now. And when Saab now has decided to focus on defense and their customers, defense customers, of course, the best home for PSS is Omda. And to our value chain, this is a game changer. And with me here in the studio, I have the person that is going to lead not only the current incident business, but the combined business with our new acquisition of Saab Public Safety. And Noor, you and I, we were just on a roadshow meeting the important regional customers in the U.K. and even national in Ireland. And what are your takeaway from that roadshow?

Well, I was very impressed by the Saab SAFE team and what they have accomplished with these customers. You really can see what they have worked together for many years in terms of the solution and that the relationship with the customer, but also to hear the customers talk and the trust they put in these kind of solutions. And that is very interesting and very informative to me to learn. So I'm eager to come back and learn more from these customers. So just to give you an insight regarding how we work, Sverre is mentioning regarding the value chain, and we try to mirror that value chain in the real life, meaning that we would like to see that we have solutions that are supporting their complete value chain in that emergency ecosystem. And for us, it's important that we can offer the whole value chain, meaning that customers can be offered the complete suite of systems, but also that is nothing that is required. We can also give you parts of the solution, meaning that you can integrate with the solutions you already have and making your own ecosystem. So looking at this, triage, at this value chain, you can see there that it all starts with the planning and preparedness. We have solutions for that, making sure that resources are planned, resources are being put in the right place at the right time, making sure that they are available. Then moving on to calls and dispatch. The 112 call seeker, there is national systems for that. The CoordCom system is taking care of that, making sure that the help seeker is getting the assessment right, making sure that the right kind of help is being dispatched. And on the scene response and transport and care, we do have systems for -- in the front of the ambulance and back in the ambulance and making sure that the medical aid is being given as soon as possible. And as you know, this is a crucial time frame here, every second matters. So as soon as possible that care can be given to the health seeker is, of course, of importance. And then taking over the patient to the hospital, making sure that the flow goes smoothly there without having papers, without having any administrative [ flaws ], making sure that the focus is on the patient. And then the same system as the planning and preparedness is following up on the improvements part, making sure that is there right things to do and how we can follow up going forward. So this is how we support every step of this emergency response, mirroring what's out there in the real life. And just to give you an insight of our business area emergency. This is how we work and giving you the insights regarding how these 4 different areas are working. Readiness and performance are handling the analytics and resource optimization system. Acute care is the AMIS part, the health care dispatch in Norway and incident, which is my area. And with this acquisition, we will have two platforms here. We'll have CoordCom and also SAFE. And CoordCom is focused on 112 authorizations. And now with SAFE, we will also have the opportunity to offer police, fire and rescue and transport organizations. Response is responsible for the emergency in the ambulance and then follow up again with the readiness and performance. So in the U.K., we have already several clients and also globally. And on the left side, you can see our footprint in U.K. These are the customers that we already have prior to this acquisition. And also to the right, you can see the customers we do have alongside Europe. These are 112 authorizations and to give you a footprint of how that looks like. Going forward, regarding these customers to the right, you see that they are mission-critical operations. These are national customers mainly. There are also regional customers, of course. And these customers are public safety organizations and their main focus is having platforms that rely on stability, rely on systems being available and responsive. And with this acquisition of Saab Public Safety, as Sverre mentioned, U.K. becomes our largest market outside the Nordics, acquiring all of these customers and giving us a larger footprint in the U.K. market. And to the right, you can see the 112 authorizations that we do have within CoordCom, they are sensor alarm. It's the 112 authorizations in Greece, in Croatia, Moldavia and so on. But there are also regional customers such as the sea and rescue department in Sweden and also a regional customer in Spain, such as the General Thoughts of Valencia. So Einar, would you like to give us a picture of the transactional part here?

I certainly will. Thank you, Noor. Yes, let's have a look at the structure and the -- what I call the transactionals. So in short, we are -- with SAFE, we are acquiring between, say, SEK 80 million to SEK 85 million in what we call continued revenues. The quality of earnings is high. So it's approximately the same as the rest of Omda, 80% recurring software revenue and 20% professional services. And when I say continued revenue, so there is some extra additional revenue that will be there in Q4, but that is -- that will be phased out. So that is -- and we will manage that phase out. But for the next year for 2027, expect SEK 85 million as a base continued revenue. Approximately 75 employees. And then speaking of revenues, Saab, they expect a substantial order intake for the rest of 2026, and that will lead to an additional earn-out component. But for the base revenue for the SEK 85 million, there's a base consideration of NOK 15 million, and it will increase to up to NOK 60 million, so additional NOK 45 million if all of the revenue is intake is realized in 2026. That said, there -- so this is a solid foundation. But that said, there are also room for improvement of various parts of the business. Again, as Sverre mentioned, the Omda is probably a better home for a software business than Saab has been as focusing on defense. So this is a win-win situation for Saab, for Omda, for customers and for employees. We have said in the past that transactions and M&A, it doesn't happen overnight. On the contrary, overnight success takes 20 years of hard work. We have been in dialogue with Saab since 2015, and we have had discussions on about SAFE for several years, as a matter of fact. But we signed the asset purchase agreement or business transfer agreement, whatever you want to call it, today this morning, and we will close it in Q4, conditional upon FDI and NSIA approvals and a lot of transfer of things that will take place. But around the start of the fourth quarter, that is the plan, that's where we plan to close it. And this is a business primarily focuses on U.K., Ireland and Sweden. The structure, this is an asset purchase transaction. So this is a pure asset transaction. It will reduce any legacy exposure that you could have think of. But we are -- as always, we are purchasing customer, we're purchasing code and we are purchasing competence. So same thing all over again. The acquired business will be put into a separate legal entity that will be a subsidiary of Omda Emergency AB with its own use of -- U.K. daughter. And the acquired business will be part of Omda Emergency and as a unit within Noor's business unit. This will change some of the key performance indicators. So say, sales per country, Sweden, again, is the -- by and large, the biggest country, but you see also that U.K. will now be a permanent slice of the pie. So it's the third biggest country, U.K., Ireland after Sweden and Norway. And so we've separated the rest of -- taken U.K. out of the rest of the world. And per business area, emergency, by far the biggest business area, more than half of the sales is related to emergency and then Connected Imaging and LIMS on the second and third. But emergency is really a very big part of Omda. Also when it comes to employees, as Sverre mentioned that there are actually now more with this transaction, more employees in the U.K., not only for -- we had some before. And then when we add the people from SAFE, we will actually be more people in the U.K. than in Norway. So U.K., this is definitely a step into the U.K. market. Speaking about profitability, I know that we have been -- in the past, there have been discussions about when you look at the numbers here, will -- how much will this dilute the margin? et cetera, et cetera. If this is on the light blue on the bar chart -- on the light blue or the light petrol, you see the total sales of the organic sales as we have projected it. And then on the top there in the dark petrol, you see the sales from Sonett. And then you see the dark green line, that is the combined EBITDA, including the SAFE business. And the light line there, the low line is the EBITDA stand-alone before the acquisition. So what you see here is not dramatic, a speed bump should be expected in the fourth quarter on the EBITDA, on the numbers in Norwegian kroner and on the margin in the fourth quarter. But again, it's not like -- it will not be walking in the desert for 2 years. It will be a speed bump in the fourth quarter. And then it will be -- we will be actually increasing EBITDA compared to a stand-alone business in 2027. And when it comes to leverage, that is also a question, will this change the leverage dramatically? No, it will not. This is the bar chart we showed you during the Q1 presentation. And you see leverage, including the SAFE acquisition will still be going forward in the band that we -- that is our target band between BB+ and BBB+. So that is the band where we want -- where we aim to be. And again, what would it be stand-alone versus this acquisition? Again, you see a little bump in the fourth quarter this year that should be expected. Leverage goes slightly up. And then it evens out. And at the end of the fourth quarter 2027, actually will be below what we would have been without the acquisition. So it doesn't really change [indiscernible] a lot when it comes to financing debt leverage and reported margin speed bump, but nothing dramatic. Okay. So to sum it up, this acquisition really strengthens Omda's position in mission-critical emergency software. There's no doubt about it. And speaking about an entry into the U.K. market, we're not a marginal player. We are there with a big bang. And it would have -- just imagine how long would it have taken to acquire this position organically. It's a very strong strategic fit between incident CoordCom and the SAFE solution. And again, this is another very attractive buy, integrated, build opportunity. There will be things to do. We will improve the business, and we're not buying the old business. We are buying customer code and competence and we'll include it in a decentralized Omda. There is some, but a very limited EBITDA margin during the improvement phase, and the leverage will remain within the targets and interval that we have set out. And again, combine this with a very limited upfront payment and only paying an earn-out if a substantial order intake is realized and I might add a substantial profitable order intake is realized. So with this, when we presented the results for the first quarter, we said that our ambition of organic growth of 5% to 10% and inorganic growth of 10% to 20%. We maintained and restated that target. Today, that is realized. And so -- so far, but it's only beginning of June, mission accomplished and the year definitely isn't over yet. A little update on refinancing. I think the 2 main drivers and investors have been asking us about 2 main things. M&A, when will you do some more M&A? And what about refinancing? Well, we just announced the M&A and refinancing. Again, we have a financial strategy. We are refining that and make sure that the financial strategy supports the overall Omda strategy. And with special focus on M&A, we are addressing and prioritizing flexibility, of course, cost, margin, how much we pay for interest, this overall structure and also to make sure that we have financing in the right currency. So no one should be surprised if the -- if this Swedish business that we are now managing is also financed in Swedish kroner. And again, on M&A, just let me rephrase, and this is from the Q1 presentation. We said we would maintain our goal of 10% to 20% organic growth, bolt-ons and larger transformative deals. This is a large transformative deal, although we are paying like it was a bolt-on. And -- but the current market provides, again, opportunities and challenges, and this is one of them, and we will continue to explore these opportunities. And again, so we will -- this is not the end of M&A for this year. There -- we are still working on more of this. So we are building on the past and looking to the present, and we are looking to the future and the future, that is what lies ahead of us. And with that, let's drop into Q&A.

And there is a question here, and this one -- first one is for you, Noor, and it's about the technology stack. And the question is, are there any long-term plans to merge the technology stack of SAFE and CoordCom? I mean, maybe it's a bit premature to ask that question, but I still can understand why it is asked. But I mean -- and if possible, is it a quick fix? I mean, it's something you could do overnight? Or tell me about it.

No, of course. I mean, there is, of course, many, many years of experience and building in these both platforms. So going forward, we will have to learn from each other and understand these -- the platforms and how they are built up. And of course, this means that we will learn from each other and see how the synergies can be, first of all, be taken care of. We see there are a lot of areas that we can learn from each other. I see that the Saab SAFE team has built a lot of amazing functions and architecture that we can learn from and vice versa. So I would say that this is something that we will look into the future if we will do that.

Okay. Thank you. And again, we have questions coming in. Just type in the questions as we address the other ones, just keep them coming, and we will attend to them. Okay. There is a question about -- that is more related, I think, to me. And one of the question is, does Saab Public Safety carry any debt? If yes, how much? No. We are buying the assets on a cash-free and debt-free basis. So again, this is a bare asset transaction. There's no debt included in that apart from normal net working capital elements. Okay. And I'll archive that one. And again, if there are any more questions, just type them in. And this is a question about -- the next question for you, Sverre. And that is about the duration of contracts from public safety. What is typically the duration of contracts? I mean -- and maybe on that note, we are -- this is -- we have been in ambulance, and this is police and fire. So we are kind of expanding the emergency definition here. Maybe that's why we renamed the business area to emergency a couple of years ago. What do I know? But I mean, is it very different police and fire from ambulance?

I think it's, first of all, a very good question. And what I normally answer when I get this question for our current business, we have 750 contracts in our previous business before this acquisition. And normally, I answered the question that some of those contracts have been valid for 40 years. Some are very long, some are renewed every year. But what we measure is actually more the customer relation and that, again, the stickiness of the system based on the criticality on the customer side. So the real answer to this question is that normally, these are 4 years and then renewed, et cetera, as an ordinary tenders. However, being on a roadshow last week before signing, which was a very good experience, meeting all those regional governmental customers in the U.K. and also the national position in Ireland, we saw that the relation over time here and the importance of the software gives me the -- I'm convinced that the relation will last for many, many years, independent of who -- where in the life of the contract it is. So it's a standardized situation as we have in the Nordics, where you normally have 4 to 6 years and then renewals that you do. So in that sense, I'm not worried about the contract length to put it that way. That was a long answer to a short question.

That was a long answer to a short question. But here's another long question. And I'm not sure I can promise a short answer, but let's give it a try. And the question is, why is NOK 80 million of turnover acquired so cheaply and a huge amount of earn-out. Why is it structured as an asset purchase? And could you give more color on the context of the transaction? So that was actually three questions in one. Let me break it up in parts. First, the NOK 80 million of turnover and a huge amount of earn-out. The thing is what we're paying is NOK 15 million for approximately NOK 80 million, NOK 85 million in sales. That is correct. And that is definitely on the low side of previous EV sales interval. It definitely is. And again, we see that there are areas for improvement in the current operations. So if there is no additional order intake realized, we have a business -- a continued business of approximately SEK 85 million with 75 employees and a cost structure and the COGS structure that will need to be improved. So I think it is a reflection of the continued business. But again, we are running things more -- running things differently in Omda as a software business. So we can probably be a bit lighter on our feet. And then why is it structured as an asset purchase? Well, the simple answer is this is a part of Saab. So -- and we have no ambitions to buy the whole of Saab. This hasn't been structured as a separate company within Saab. So it hasn't been a subsidiary in Saab. It has been a part of their business. So we are carving it out. So an asset transaction is the only natural way to do that. Same thing we did with PARATUS back in the days and Optima. So this transaction is the way to do it. And on the context of the transaction, the thing is we signed today. There is a time between signing and closing where we will do the regulatory filing, any change of control clauses, and we will prepare for taking over the business, setting up the infrastructure, et cetera, et cetera. So there are a lot of nitty-gritty things to be done. So the real work starts now, and we expect to take over around the first -- in the beginning of the fourth quarter. So that is the context, if that was answered to your question. And if it wasn't, just type in another one. And there is another question from the same person here. And could you elaborate on the nature and visibility of the expected future order intake that drives the earn-out structure? We have said that the earn-out structure will be -- it will be a substantial order intake. And by substantial, we mean at least the amount of the continued business, at least that amount. And it will be -- come with a demonstrated profitability that meets our expectations and our guidance. So that will be -- it will be substantial if we pay the earn-out. And the thing is it's a good thing because if it comes, it's worth paying for. If it doesn't, we have a smaller business, but we have paid less. So we think that's a good balance between reward and risk and what we pay. So -- and it's fair for us, it's fair for Saab. So this is what we both agreed on. And there are more questions, I guess, is of a financial nature. So Noor and Sverre, you will have me excused for taking the center stage here. And one question is about the margin. What is the current margin of the business you are buying? It hasn't -- so the complicated answer is it isn't set up as a separate business. So you really couldn't tell. But the reason why I said we will have a speed bump on the margin in the fourth quarter is that we will need to either improve the cost structure or we will need to realize the order intake. So one of the two. But this is definitely what we could call a turn better candidate. And again, for here, more questions about profitability and margins. What multiple are you paying for the profits generated with the profitable order intake at NOK 45 million -- paid at NOK 45 million? We -- again, it is what we pay for the continued business, coupled with what we pay for the order intake, but we will be well below the communicated level EV sales 1 to 2, we will be well below that. And -- this one, Saab -- from Saab Public Safety revenue per employee is well below Omda's and sector norms. What are the levers to improve? I think I've touched upon that already, but there is always a combination of the sales per employee. And the base assumption is that it will be, to a large extent, covered by the order intake that is expected. There is nothing inherently different in the SAFE business from the rest of Omda's business. So sales per FTE of around NOK 2 million per FTE is also what one should have as a target for this business. It isn't very different in nature. But we need to run the business differently. And then there's one question remaining here and still pending. If you have any more questions, any of you, they are topped in another one. So keep them coming. This is from Torbjorn. Do you see the margin potential of the acquired business, excluding potential profitable order intake as in line with the rest of Omda? And the simple question -- the answer is yes, we do. One more question remaining. If anyone more, just keep typing them in. What do you say are the key challenges with this acquisition? Anything you're not used to? I guess maybe this first will go to you, Sverre, and maybe Noor later, you can elaborate from your more operational side. But from your perspective, Sverre, what are the key challenges with this acquisition compared to other ones that we have done in the past?

That's a good question. And I think that, first of all, I don't think there's anything here that we are not used to. And I think what was my initial thoughts about the risk here was the type of customers and how the product was handled on the customer side and how happy they were. So what I did together with Noor was to visit these customers and as long as that risk was handled, meaning meeting them face-to-face, listen to them about their long-term plans. I'd rather say that we discovered more like possibilities together with them in the future rather than the opposite. So that was the biggest important risk that we looked at. So of course, there's always a challenge when you move together people. However, we will, when we go forward, make sure that Noor and she is planning to work in the period between now signing 7:00 this morning and the closing in the fourth quarter. So we have a very, very, very long and fruitful time together where we also have organized groups with the great team of Public Safety Solutions and with Noor's team. So maybe, Noor, your thoughts about this, the challenges you see ahead.

Well, being part of an acquisition myself, 2021 coming from Carmenta, I know a bit about the thoughts and ideas maybe with the staff that they might have now. I think it's so important that the transition runs as smooth as possible. And that is something that we are really planning for, making sure that everybody feels welcome and that we have the tools needed in terms of just computers and telephones, but also making sure that everything is up and running regarding the platform and the solution so that we can support our customers from day 1. And that is, of course, a challenge, but I think that is something that we have done in the past. This is the 19th acquisition that has been done within Omda. So there is experience from this. So I'm quite confident that we will do this as smooth as possible.

Great. Any more questions, Einar?

There is actually one more question. I'm not sure I see it is displayed on the screen now. I don't know -- there it is. I'm a bit uncertain what the author is thinking. What is a competitive sales process? I'm not sure if you are thinking about the sales to the customers in the U.K. and I mean, the SAFE customers or if you think about the process with M&A and acquisitions. But I think if I interpret the question correctly, I understand to be corrected here, so type in an explanation if I'm not interpreting correctly. Here it comes actually, and that was linked to the asset transaction, like were other people trying to acquire the assets? I do not think so. We have had a bilateral discussion with Saab for a number of years. We have actually been discussing this transaction in particular for years. I think -- and we have had, as I said, we have been in dialogue with Saab and communicated with them for more than 10 years. We did one acquisition in 2018 by the Ambulance Journal and the Map solution in the front of the ambulance back in 2018. That was the first acquisition and transaction we did together. And we were aware of the SAFE solution actually from back into 2015. I think it was the first time we were made aware of the solution after we acquired AMIS. So we have been in dialogue with them. So I think this comes back to the way we handle the transaction and the acquisition of PARATUS and the way we will handle this transaction. So this is based on -- bilateral discussion based on trust and confidence and long-term relations and also understanding that this is -- this baby is better raised in Omda than in Saab. And last year, this is not really a question, I should -- but this is a comment. So if there are no more questions, and it doesn't seem like there is Mr. Mamun or Ms. Mamun, you have raised a lot of questions. Thanks for your answers and congratulations for the acquisitions. Well, thank you very much, and congratulations to all the shareholders and bondholders of Omda because this is really your day. Okay. If there are no more questions, I think it is time to round it off. And I will. Okay. So ladies and gentlemen, thanks for watching. This is a great day for us. We are upbeat as you probably noticed about this. And just keep following us, keep watching your mailbox from the next time we send out a newsletter. And again, we are on the little teasing page that we had there, you could see that we had a Latin phrase. And looking to the past to the present and to the future, it's all about what we want to do is we want to learn from history, and we want to be mindful of the present challenges and conditions and opportunities, and we are planning for the future and what lies ahead of us. Ladies and gentlemen, thanks for watching, and have a great day. And if I might add, take care and stay safe.