Ovzon AB (publ) (OVZON) Earnings Call Transcript & Summary

Welcome to today's Ovzon webcast. [Operator Instructions] Today, I'm pleased to present CEO, Per Noren. Please begin your meeting.

Thank you so much, Sarah. Thank you so much, Sarah. And I warmly welcome, everyone, to this extra called upon webcast. [indiscernible] the information that we -- the company, Ovzon, sent out on Friday evening, February 3 with regards to reschedule of the launch of Ovzon 3, secured additional financing and also our preliminary 2022 Q4 and full year numbers. I have with me here this morning, Noora Jayasekara, who is our Chief Financial Officer. Welcome, Noora.

Good morning.

Good morning. And with -- as Sarah, the operator, said, we'll go to questions and answers at the end of the session. So I think without further ado, we will welcome everyone. I appreciate that everyone participates, and we'll move to our presentation. We will start with the big task at hand, obviously, [indiscernible] Ovzon 3 and the switch from Arianespace to SpaceX as the launch provider. So let me talk a little bit about that. First of all, as you know, we have unfortunately had to delay the Ovzon 3, the construction and production of Ovzon 3 previously, mostly, frankly, due to COVID, which we most often kind of almost forget about and also some supply chain issues with regards to that, one of them being the industry-wide issue that Honeywell had with what's called reaction wheels that actually affected about 70 other satellite programs outside of the Ovzon. Since then, we've had good progress with the satellites. We've been working very closely with Maxar to find efficiencies. We've added additional resources to accelerate the production and regain some of the time that we lost in previous delays. We've also taken the -- or Maxar has taken the satellite through what's called Thermal Vacuum Test. We think with the strong results we're through that now. Despite that, the Maxar accounted and concluded -- we have concluded, with the extra efforts, we'll not have the satellite ready for the launch we had informed about, which was [indiscernible] [ September ] to February 2023. So December '22 to February 2023, which meant that Arianespace could not accommodate a launch after that date. That meant that we -- when we were informed of that we couldn't meet that time line, we worked with Arianespace to see if they could launch this somewhat later in 2023, which they couldn't accommodate. We've then immediately turned to SpaceX and, in a very short period of time, negotiated a contract where they can accommodate in the time window of July to September 2023. So you could say that the delay of the satellite is a combination of production and finding the right launch window overall. Part of this also means that there is an increased cost for the total program with approximately USD 25 million. We'll come back to what that means to us and what we've done to secure the ability to actually conclude the production [indiscernible] and the launch of the satellite. I also want to make sure that everyone understands that satellite will be operational and can be used for customer service circa 4 months after the launch and that we definitely see a continued strong demand and interest from the market and [indiscernible] for the unique capabilities and technology, including our onboard processor, et cetera, that we offer the market as Ovzon. So that's basically the foundation of why delay, how a delay, what it means, what we've done, [indiscernible] and then move to a different launch provider, in this case, SpaceX. I will now hand the word over to Noora that will talk a little bit about the additional financing arrangements that we've done to be able to conclude off the Ovzon 3 program. Over to you, Noora.

Thank you, Per. Turning to Slide 4. As Per stated, we have estimated the increased costs in the Ovzon 3 project to approximately USD 25 million. To secure financing, we have agreed with P Capital Partners to amend the existing loan [indiscernible] to USD 65 million. Also not currently drawn USD 45 million from the facilities. And with the amendment, we have made additional USD 20 million available. In addition, we have confirmed interest from several major shareholders to participate [ this ] issue. Ovzon has engaged Carnegie Investment Bank as financial adviser, and we will provide more information in the near term. We are happy to have such committed shareholders and pleased with the good collaboration with P Capital Partners. Now back over to Per for Ovzon's performance in the fourth quarter.

Thank you. Before we go there, I also want to say a few words about this. Obviously, we're not -- it is not an easy task to actually communicate further delay. But as I hope, you have understood now very swiftly as quickly as we understood that, that production wouldn't be fully in place for the first launch. We had an increased cost. We needed to switch launch provider and secure the financing in order to conclude the project. So we've taken extremely strong and decisive measures [indiscernible]. So now over to the business. First of all, I'd say we've had a record Q4. We have never had such a strong fourth quarter in the history of the company. We grew net sales with 38% compared to Q4 [ 2021 ]. We improved our operating profit as well. Noora will come back to that. And the improved operating profit is because we've been able to in Q4 utilize all contracted satellite capacity in an optimal way, and we've used built-up inventory of mobile satellite terminals that we had. So that has had an effect on the bottom line, obviously. From a business perspective and market perspective, there are some significant things that happened in Q4. We did renew the 12-month contract -- another 12-month contract customer that has been with us for many years, the United States Department of Defense, with $16 million dollars over the 12 months. But maybe the most significant thing was also outside of that, that we have new customers in new geographies, such as in Sweden, through our partner Swedish Space Corporation as well as in with France through our partner, Nigma. And for those of you who remember, we also signed through a new partner in Q3 called GRC in the U.K. So we've really taken big steps towards that. If you recall [indiscernible] aligned with -- through our Spanish partner, Aicox for civil defense in Spain. So we've had quite a strong business in Q4, and it continues -- continued in January with the signing of our Spanish customer. But Noora, maybe you would want to just make some remarks on the actual numbers.

Thank you. As Per mentioned, we had strong net sales that amounted to SEK 101 million with a growth of 38% in the fourth quarter. Our operating profit reached minus SEK 9 million [indiscernible] [ improvement ] from the minus SEK 29 million in the fourth quarter 2021. For the full year 2022, our net sales amounted to SEK 357 million with a substantial growth of 87% compared to previous year. Operating profit was minus SEK 47 million, also an improvement from the minus SEK 113 million in 2021. Per will now provide you with some closing remarks.

Thank you, Noora. Yes, I think the business is very, very -- operating there, solid. We had a strong year -- strong quarter in Q4, as we said. We had a strong full year in the preliminary numbers that now we've given you. I will close the remarks and we'll go to questions and answers, obviously, with some of the following statements. First of all, our core business is not dependent on the capacity of Ovzon 3. So we today have access to satellite capacity, those that we have contracted and that we've utilized very efficiently in Q4 as well as new, if needed, for expansion in new [ geographies ] with current customers. And we're the only provider in the world with a SATCOM-integrated -- fully integrated SATCOM-as-a-Service as can be depicted on -- seen on this picture with the control over our mobile satellite terminals underperformance and mobility and resiliency of that, strong management of networks, secured strong gateway capabilities, connectivity to fiber and the Internet, obviously, and its 24/7 customer support. Others are doing this, but they mix and match to get this. We manage this on our own, [indiscernible] Ovzon 3. And lastly, I would say the following: our vision has not changed. Our mission is to connect the world's critical missions via satellite. We're focused on customers with high demands and operational needs, such as in defense, military defense and civil defense protection, emergency services, NGOs and other markets. Today, we base our SATCOM-as-a-Service on lead satellite capacity. Soon, we will have both our own with our first industry-leading Ovzon 3 satellites and related technologies as well as a mix of that with acquired satellite capacity. There is not a shortage on the capacity we need when we need it. So it will not have a -- this delay of Ovzon 3 will not have an effect on our turns business and service delivery. And [indiscernible], we continue to realize our vision of owning a number of orbital slots and then continuing to build up a fleet of our own satellites. But first comes first, it's very important, and this is where we have our focus now. It remains on launching Ovzon 3 at the earliest possible date. We're very pleased to have been able to get SpaceX to commit to work with us as well so that we can do that as quickly as possibly can after the production of the satellite. So our vision remains, our mission remains, [indiscernible] today is not dependent on it. But of course, our main focus is to finalize the satellite Ovzon 3 and continue to grow the business further. And with that, we'll hand the word over to our operator, Sarah, again, and we are prepared to answer your questions.

[Operator Instructions] And our first question comes from the line of Simon Granath from ABG Sundal Collier.

A couple of questions from me. So initially, could you break down the USD 25 million in extra costs? Or perhaps if -- if that is not possible, is it -- and that is not the case, maybe you can mention if it relates to the previous SEK 1.5 billion in CapEx guidance?

Noora?