Ovzon AB (publ) ($OVZON)

Welcome all you investors out there to this live broadcasted Q1 report presentation with the SATCOM company, Ovzon. Presenting are CEO, Per Noren; and CFO, Andre Lofgren. A Q&A will follow in which investors can ask their questions via the live chat, and I will raise them during the Q&A. So welcome, Per and Andre.

Thank you, Mattias. Good to be here.

Nice to have you here, and congratulations to a very strong quarter. We are all eager to hear all about it. So please go ahead with your presentation.

Thank you. Yes, we're very pleased to be here for the first quarter of 2026, and talk a little bit about the company and the results that we've had in the first quarter. I will, before we jump in directly into the conversation here, maybe summarize the quarter, which is very strong, as I said. So number one is we had our best EBITDA and EBIT result ever in the company's history of SEK 120 million. It's the eighth consecutive quarter where we have improved EBITDA, which is very strong. I'm also pleased to say that we got the U.S. Department of Defense or Department of War as they call themselves now, back as a customer in the quarter. It shows that we have a strong relationship. And when it matters, we get asked to provide our unique solutions. And last but not least, our ability to deliver with very high quality and high speed according to plans on the order backlog we have, I think it's the strength of a very healthy operation. And at the same time, we're scaling up all of the company as we go forward. So very, very pleased with the result, very pleased with the performance of the company and very pleased to see the U.S. back as a customer for us. But let's take it from the highest level right now. Everyone obviously follows this on a daily basis, if not hourly basis, that we, in essence, have a new world order. It's a troublesome world we live in. It's very geopolitically fragmented, I would say. Sovereignty has become maybe the most popular word, and it also are followed by actions. Specifically, I would say, in the relationship between the United States and Europe, I think Europe has, in essence, is driven by driving essential European capabilities in all aspects of industry from energy to technology, including satellite communications, obviously, for us. But in essence, being self-sustained and autonomous is very critical. Space is becoming one of the critical infrastructures for that. We'll go into that a little bit more. And when it comes to our core markets, you can see in the new world order that defense is being digitized. You can see it in Russia's full-scale invasion of Ukraine that Ukraine has actually been able to hold their ground, thanks to a lot of innovation, digitization and operational dependency on communication and unmanned vessels, et cetera. So it's fair to say that we live in a very, very new world order and era and connectivity is now a critical infrastructure and space is its backbone. If we take that down to where we stand as Ovzon, we have not changed our direction, our focus and so on. We believe in running a very healthy core business. We also believe that we're built for this critical infrastructure era. And our vision is the same. We see greater calling, connect and protect people, society and organizations for a safer world. And we believe that our integrated capability is absolutely essential with our SATCOM solutions for the markets we today serve, defense, national security and public safety. I think it's fair to say that the results that we see of staying the course, being very focused and concentrated on our customers, on our technology and our solutions and deliver of those generates a strong performance for the company as we'll go deeper into. And we live very well in this quarter also on the fact that we have a very strong order book that we are delivering on. Our value proposition, as I alluded to somewhat here, continues to be the same. And I think in the new world order, in the situation we are in today in our core markets, specifically defense and total defense and civil defense to control each part of what we call the circle of life, meaning the terminal on the ground that ensures that people, vessels in the air, on the water and on ground actually functions perfectly with the resilient satellites and satellite networks that we build that is connected to Internet, to connectivity through secure gateways and that we can manage this service 24/7, controlling each part of this. I would say that Ovzon is the only company that has both the terminal side, the satellite and network side and brings this into a managed integrated end-to-end service where we promise basically 100% connectivity to our customers 24/7, 7 days a week, 365 days a year. I think it's unique. It's our choice, and we continue to believe and show that I think that's essential in our unique value proposition that we have. How does this work in today's world? Well, obviously, since we have chosen to serve the markets we have, defense, military defense and civil defense, national security and public safety, it's all about multi-domain operation, connect your assets, your people with the right information at the right time and basically on seconds and minutes to decide where to be to protect, connect and protect people and societies and countries and organizations. So all of these aspects, whether they're in the air, on the ground or on the water with people in the loop are essential for the current, not the future, for the current defense system or rescue missions that civil defense has. And we play in all of this. We'll come to the launch of our new mobile satellite terminal here in a while. But we believe that mobility plays a role, performance plays a role, meaning data throughput and real-time decision-making and resiliency, meaning uninterrupted signals for connectivity so that data, imaging, video and decisions can be made in real time to protect societies. We also believe that there is a greater market for us out there. It's not only that space has become an essential infrastructure. The rest of the society's infrastructure also needs to be connected and protected. And more and more of the aspects of our society is being digitized as well as we can do most of our things on applications on our phones today. We believe that connectivity is the last mile delivery of an integrated protected and connected society. So any of those other aspects of society will eventually in the future, be a target for Ovzon. But we stay true to our course. We stay true to our customers, knowing the problems we're solving and delivering on those promises to those customers we have today foremost in the defense sector, but there's a big market in front of us as well. Now I talked a little bit in the beginning about the new world order, and I'm not going to dwell too much on it because we can read it in the news daily and hear it on the news daily. However, I think geopolitics was a word that we didn't use that much just maybe 4 years ago. It's now maybe the geopolitical environment drives the geoeconomic environment, meaning how do you enable societies to function even though it is a harsher world out there, both from a civil and military perspective. But what it has led to is actually that defense spendings are up. So basically, all countries, not only the Western world, all countries are looking at higher defense spending. NATO is asking 5% of GDP from the alliance countries. That is -- it's a fact of life today. I think we play an essential role in that. If you go to the right here in this picture, what it means to us, I think that plays to our advantage as a company, delivering capabilities to that. I think high North or Arctic is very strategically important, not only from protecting the societies and for -- obviously, for the Nordic countries, it's very important, but it's also for Canada, the U.S., which -- and U.K. and other countries, which means there's a lot of interest there. I'm pleased to say that we have recently had an expedition, our second expedition up there, and we can provide capabilities all the way up to 78 degrees north where our satellite actually functions really well. So I think stretching the imagination of what you can do with satellite connectivity to connect and protect societies is very, very important. I think that we believe and we follow this, the explosion of unmanned vessels, vehicles in the air, on the ground and on the water is essential. Therefore, satellite connectivity to steer those unmanned and control the data and information flow from those becomes essential. It plays to our advantage with our ability. There are a few caveats to all of this defense super cycle and geopolitical situation. And it is that still in the Western world, procurement cycles are fairly long. They're not wartime decision processes. And they have to be. These are state money. Shareholders are basically those of us that pay tax in these countries. And it needs to be done in a very thorough way, so you know that you spend the dollars or the krona in the right possible way. But that means that sales cycles or decision cycles are fairly long. I think that's worth pointing out. And the last component of this is really the interest and investments in space. So in the industry we're in, one company, in particular, SpaceX has announced they're going to do an initial public offering. And there's a lot of investments from them into low earth orbit satellites. There is a lot of investment in their rival, also in Amazon LEO. There is a lot of money going into that when it comes to a European player, Eutelsat that also has low earth orbit constellations. So it's fair to say that there's never been a higher inflow of investments. There's never been a higher inflow of innovation, and there's never been a higher interest in space as the next frontier for infrastructure. I think this kind of summarizes the strategic environment fairly well. And we are well positioned in that. I've touched upon that several times now, and we believe that we can reap benefits from all these aspects while still connecting and protecting our customers in what they do. Now let's turn over to the first quarter. As I said initially in the executive summary, we had record earnings of SEK 120 million. Andre will go deeper into the numbers here. Eighth consecutive quarter with improved EBITDA. And at the same time, we're delivering on our order backlog, and we are essentially scaling the company as we go. I think that's a sign of a very healthy operation, a very healthy company. And I think the biggest aspect of what we do is to have the right people in the right roles, the appointment of one of our own that have been with the company for 18 years, Martin Eriksson to our CTO. It's a sign of strength, complemented by external key recruitment as well. And I would say the progress in our sales pipeline and development of the sales pipeline is healthy. It's disciplined and we are on the targets 24/7 basically. As I said, procurement cycles are somewhat naturally floating, not inside the quarters at times and outside the quarters, but we are not seeing any degradation in the demands and needs for the remainder of the year. So it's more fluctuations. And again, the U.S. Department of Defense or Department of War, as they call it, back as a customer, even though a short-term contract, we have optimistic views on continuing to get back to the place where we were since 2014 with that as well. And of course, last but not least, the launch of the Ovzon T8 terminal, which we'll talk to in a little bit here. And here it comes. And for the first time, we brought with us actually our portfolio of terminals that we have. So I'm going to show you that and speak for a few minutes about those. There are 2 sets of terminals. On-the-pause, which are more for control and command, not movable per se, but they can -- you can move with them as well. But -- and this is the Ovzon T6, it's our workhorse. And this is the Ovzon T7, the smallest in its class for on-the-pause terminals. You can fit them into a backpack or a brief case. Secondly, on this side is our on-the-move terminals. This is the Ovzon P20, currently the smallest on-the-move terminal in the market. Today, you put it on vessels and they can move at very high speed and with very -- in very difficult conditions as well, also state-of-the-art. But our latest, of course, is the Ovzon T8, and you can see the difference in size here. This is the Ovzon T8 that we just officially launched. This is the radome on top of it, and this is the terminal. And you can imagine if you can continue to have high data throughput, mobility component, it's Ovzon's first developed on-the-move terminal. You put this on vessels, whether they're in the air, on the ground and on the water, and it can provide you with excellent performance, data throughput, mobility and resiliency. And we can see a whole array of new use cases for this. It's basically built with the customers in mind and their needs and discussions with us about where they are. We have the first contract on this with one customer that is our development partner, meaning very fine that what we develop meets their needs. And we are going to deliver the first 10 prototype or the first prototypes this summer and then go into production, and we do all of this in our newly formed center of excellence for mobile satellite terminals. We're very excited. We think this opens up the market for unmanned, but also for other use cases that has previously not been there. So this is the birth of the Ovzon T8. Very pleased with that and very proud of our team that -- very proud of our team that actually have developed this. It's their design, it's their ambition. Phenomenal Swedish engineering technology in essence that only we can do. And it goes back to the circle of life, controlling what's on the ground in space and how you manage that integrated service sets us apart as an organization. So with that, I'm going to hand it over to Andre for the numbers.

Thank you, Per. Yes, let's dive into the financials a bit, and we'll start with the revenue. You can see that looking at -- starting with the service revenues from SATCOM, you see that continues to increase. We're ramping up our delivery of services. And also, you can see on the top there, the orange part is the terminals. It's still at very good levels. It's not as good as in the previous quarter, but still at very good delivery volumes. So we are very pleased with this quarter as well. And as you can see, terminals are a bit more lumpy between quarters. But I think the main conclusion here is that our services are ramping up, and we continue to deliver terminals at a very good pace. And then if you look to the right here, you see what services means if we would analyze this number for the quarter for the -- as a full year number, then we're actually at record levels here as well, and that's about SEK 750 million on an annualized basis. So I think we're heading into something really strong here. Moving over to the profitability portion. Here, what you see is the EBITDA and the EBIT, and they are both continuing to improve very solidly in both cases. The EBITDA is at SEK 120 million in this quarter, which is then representing a 46% margin. And that is thanks to, again, the delivery of terminals, the delivery of services, both via third party and from Ovzon 3, our own proprietary satellite, which is then helping us boost the margins in a really good way. EBIT, the same reasons for this improvement. Here, margins are at around 30%. So that is also very strong. And in absolute numbers, that's SEK 80 million. So again, we are improving and increasing our profitability while we are ramping up our top line. So it is profitable growth that we are continuing to deliver. Then one more step into the profits. This is all the way down to the profit after tax. So then we have paid our interest rates and paid taxes if there were any. And as you can see, this is at very good levels as well, SEK 70 million in the quarter, and that is then an earnings per share by SEK 0.62. So again, very good levels. The main reason for this ramp-up is, of course, the strong profits from EBITDA and EBIT, but also that we have been able to reduce our interest costs quite significantly. So that is helping us. And that started in Q4 last year, and you see the full effects of this also in this quarter and will continue as we go along here. One reason why the Q4 looks a bit better than this quarter is that we had a one-off impact -- positive impact in the previous quarter for tax reasons, which now actually have the reverse impact in this quarter. So underlying, it's a very strong development of the EPS and earnings here. So we're also very pleased with this development. Let's move back into operational level and looking at the cash flow. It continues to be very strong. We are in positive territory and quite significantly into positive territory when it comes to operating cash. We have some investments into our beautiful Ovzon T8 and other developments, but it's not very big numbers. Our free cash flow is also very, very strong. To the right, you can see our financial position. It's -- the orange line here, it's our net debt, and you see that, that is decreasing. And that has to do that we -- with this good cash flow that's actually generated from really good negotiated contracts, which we now see the results of, we can use that cash and amortize down our debt. So we're not piling up a lot of cash that's not being used in the most efficient way, but we're actually reducing our debt position, which is more -- the net impact of that is much, much more beneficial. So we are below SEK 200 million in net debt as we speak. So I'm also very comfortable with that situation. And here's a summary of the financials. I think Per, maybe you are most well-fitted to take those numbers.

I'm not sure I am, but we know them both of you fairly much inside and out by now. I think Andre points to the most important things here, profitable growth. We continue to grow top line, as you can see. Secondly, the cash. So we continue to be in a healthy situation with cash, and we're using them in a very intelligent way, I think. I also feel comfortable with how we do that, and we continue to operate positive cash from operations. And EBITDA, as we said, again, worth repeating, I think, the record quarter when it comes to EBITDA and -- but also the eighth consecutive quarter of continuing that. And it's part of our focus is basically profitable growth, and running a healthy core business and doing it while we also scale up is quite an achievement by the team, I would say. So we feel we have a good business model. We have a good focused way of running the business. We can launch new products in the middle of actually delivering on that. And we have a strong order book that we deliver on as well. So very strong numbers all over, I would say. But if we're going to try to summarize then the situation and the quarter, I think there are probably a few things to repeat, but very strong execution, and we have a very clear path forward for where we're heading. You could tell on the numbers that we have improvement in profitable growth. We have a strong financial position. We have U.S. customer reestablished. Yes, the timing variability in order intake is actually noted by us, obviously. We work very hard on bringing things into the quarter. But if they fall into the next quarter and the full year and beyond that looks good, we are not nervous about that. We see that as a positive sign that we have good and deep dialogue in developing the sales pipeline. And we're also in parallel building out. We're investing in building out our sales organization. We bring good people on board, and we reallocate some of our very, very good engineers to also do sales engineering and support in helping customers understand the use cases. How do we actively scale up? Well, I think the strong execution helps that we have solid financials and strong execution. There are -- there was a contract. We noted that in my notes to the report. We've had a contract that we've had for -- that we signed in December 2024 that started in 1st of March '25, that was for 12 months. It has not been renewed, but we are in dialogue with that customer around how they want to actually utilize the system going forward. So we think that's a healthy conversation to have, and we believe that there is an outcome there in one shape and size and form that will have a positive outcome in the future. Organization is strong, as you can see on the strong execution. And of course, when your CFO says beautiful about one of your products, you know that you've done something right. We can innovate and scale up during a period of time of a very strong ramp-up of the business. So strong quarter, clear path forward, a strong team that actually continues to work around the clock to deliver to customers and deliver financial results and enable commercial success. So with that, I think we are done with our formal part of the presentation and look forward to questions and answers.

Thank you so much, Pat. And Andre, very, very, very satisfying quarter for you, of course. And thank you for showcasing the terminals. Very interesting to see them as well. I'm not sure if we have the equity analyst now, he's not on board. So we'll start with some questions from some viewers. And with Ovzon's profitability and U.S. presence, is the Board considering a U.S. dual listing to better align with global defense peers and access deeper capital markets for future projects?

I can answer that question. This is nothing that as management team, we have talked to the Board about. I think our listing on NASDAQ Stockholm is quite adequate. It's a very strong capital market to be on. So I -- that's my answer to that question. I think we have adequate availability of capital if needed, where we're listed today.

And also may just add, a dual listing comes with a lot of reporting requirements and costs, et cetera. So I'm not, I don't think it would be actually such a wise decision.

Okay. And if you -- if it's possible to get some more details on orders when it comes to Department of War order for evaluation is for Ovzon 3 premium services, or if it's a renewal of SATCOM as a Service?

Yes. Very good question. Thank you for that. No, this -- so first of all, we have to kind of come back again and say we have had this customer since 2014. That's a long period of time. They have a fairly large inventory of Ovzon's mobile satellite terminals that they -- that are in perfect shape and can be -- start to be used immediately. So basically, this is our old, old customer that needed to turn the network on to utilize it for their needs. So we normally don't sign that short term of contracts of 3 months. But since this is a long-term customer, this was a reignition of that relationship and use. And it's not on Ovzon 3. It is on third-party capacity. They have Ovzon T7 terminals that are equipped with our onboard processor modem that can be used on Ovzon 3 for the onboard processor. They also have terminals that can be used on the Ovzon Pegasus Services, which is the non-onboard processor network on Ovzon 3. But we believe that you have to crawl before you walk, before you run here. So the reentry with the U.S. DoD and U.S. Department of War and the utilization of our SATCOM as a Service now will initiate more discussions on what's in hold for the future.

Yes. And a comment to that order, it's relatively limited in size and duration. How do you see your opportunities going forward here with this client?

I think this client is a huge client. The U.S. Department of War, U.S. Department of Defense, huge client. This is our core customer that knows us very well and knows the system very well. So I think that's a good sign of coming back in. And my view is that we should do everything we can to work with them on extending what they do today and expanding that. There are also other groups within the U.S. Department of War that I believe are clear targets for the kind of SATCOM Solutions that we have. So we're working intensely on those as well. But it starts with the reference point and then you expand from there.

Thank you. And here's another question from an investor, and it starts congrats for the new Ovzon T8 terminal. Being in GEO, do you think your OTM solution provides sufficient latency compared with LEO solutions? Or is this a limitation?

Very good question from a very insightful person that asked the question. Number one is, yes, we believe our GEO satellite services, GEO-based services are absolutely adequate given how we design networks, given how we have the terminals fitting those networks. So we see that as a strength. It complements any LEO. We also believe that latency is not a problem, specifically not if you use the onboard processor. So the connection of the Ovzon T8 terminal on-the-move terminal with the Ovzon 3 integrated SATCOM system that we have in space will not be an issue when it comes to latency. There are differences in latency. Yes, LEO obviously is closer to earth and therefore, not as much latency. But we don't see that. There's a picture actually here on one of our slides that -- and that was the test we did with FMV, the Swedish Materiel Defense Administration up in north of Sweden with an unmanned vessel on the ground with going through Ovzon 3 and the onboard processor with very, very strong performance and very, very low latency. So we see that as an opportunity for us to continue to be specialized and GEO is actually a strong area to be in.

Very common question when it comes to Ovzon. What are the plans for more of your own satellites? And how do you intend to finance them if you do that?

Yes. That's a very good question as well. We have previously said all the way from our Capital Markets Day in September 2025 throughout the quarters that we have reported here that our goal is to have a fleet of owned satellites. We believe that is based on one thing, first of all, the success of Ovzon 3, the ability of the satellite to perform to the standards that we and our customers have set for it and the onboard processing capability, the regenerative signal ability. So based on that, we believe we should have a fleet of satellites. We actually have a request for information out in the market where we look at what kind of satellite designs are there out there that meets the needs that we have and what we have learned from Ovzon 3 and the onboard processing, what's the cost of producing, what's the cost of launch and how are the lead times for this. So both technology, economics and solutions for customers. The RFP work is going very well. So we have a very good view on the market and what it can offer us. We believe that during 2026, can make a decision on more satellites. And the financing will come from the most adequate way of doing it, our own cash, regular bank financing, maybe a share issue, but it -- and customer financing. It depends on what fits the needs of the customer and us and our shareholders best. If you have any?

We're not bound to any of these solutions. We have the full [indiscernible] support of various ways of funding it, which is a really good thing, I think. So we can -- we will take the most optimal solution to our financing.

Great. You are now launching Ovzon T8. How does that differ from T7 and T6? And what do you expect existing customers to upgrade?

Yes. So that's another good question. So as I tried to explain in a very short period of time when I showed the terminals, this is the first development of a terminal that Ovzon has done in the on-the-move space. So Ovzon T6 and Ovzon T7 are on-the-pause terminals that we design and develop, and produce ourselves basically. This is the first on-the-move terminal. So it's somewhat different. It needs to have -- needs to track the satellite, point to the satellite at very high speeds and so on. So it's not going to replace the Ovzon T6 and Ovzon T7. It's going to complement that as you build an integrated SATCOM system between the satellites and the terminals. So you will actually need both. It might replace other on-the-move terminals that we have in our portfolio you are looking at. But that seems to be seen when we have developed the prototypes and how well they perform. But it looks to be something very unique that we have in development right now that we think complements our on the pause terminals and revolutionizes the on-the-move terminal market.

Okay. And could you point out what you think is the most important takeaway from the first quarter?

Yes, of course. I think the first takeaway is this company has a very strong ability to perform, to execute. We deliver on our promise of delivering a plan to our customers. We utilize the order book we have to do that. That's a key takeaway. Very strong financial results. We grew with 189% top line, and we have a record SEK 120 million in the quarter in EBITDA. Very strong financials, very strong execution, running a very healthy core business. Secondly, the reestablishment of the U.S. as a customer is very important in a time era where I think many companies have a hard time finding its path with the U.S. DoD and the U.S. Department of War. I think it's a very strong signal. And lastly, I think you could trust that we have a core focus on driving profitable growth. We have healthy financials. We're spending them in the right way or utilizing them in the right way. And we're not less resting on our laurels because we can actually innovate and launch a new terminal while we scale up. So I think those are the takeaways. This is a very strong company operating at a very good high rate.

Thank you, Per. One last question. Can you please elaborate a little bit on the order backlog versus the order intake?

Do you want to talk about that?

Yes, sure. Yes, order backlog, that's what we have already booked and order intake, of course, what we are looking at or what we have in the pipeline and what will turn then into orders. I think we have a very solid backlog where we stand now with visibility into 2027. And I think, as Per mentioned, we see really good potential in the dialogues that we have. So it might fluctuate between quarters. Q1 is a seasonally slow quarter in bookings. So I'm comfortable with what we have ahead of us.

I think it's all about timing, as Andre said, we are not very nervous about the year. It's where does it fall in the quarter 1 or quarter 2 or quarter 3. I think we have a solid pipeline, and I think the order intake, you always have to be concerned with order intake when you run a growth business. We want to increase the order backlog to be at that level we had when 2025 ended. So that's our target, our goal, but it's also essential to win the right customers with the right solutions as quickly as you can, but not force it because then you might give up on your pricing premium. So I think stay the course, focus, work around the clock and good things will happen.

Okay. Great. So let me first point to the investors and viewers and say thank you for the huge interest in this broadcast. And of course, Per and Andre, thank you so much for the presentation, and we are already looking forward to the next quarter presentation.

Thank you so much, Mattias, for a well-run webcast.

Thank you.