Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sensys Gatso Group AB (OSTO:SGG, Financial) secured 13 new contracts in the USA, significantly boosting their order intake.
- The company's recurring TRaaS revenue accounted for 70% of total revenue this quarter, indicating a strong and stable income stream.
- Sensys Gatso Group AB successfully raised EUR30 million through a bond issue, increasing their available cash position to SEK295 million.
- The company has a robust backlog of over SEK1 billion, providing solid revenue visibility for the future.
- Sensys Gatso Group AB entered the next phase of their relationship with their Saudi customer, signing new framework agreements for enforcement solutions.
Negative Points
- Total revenue for the quarter decreased by 10% compared to Q3 2023, primarily due to lower system sales.
- Unexpected legislative changes in Iowa led to a significant reduction in approved permits for automated speed enforcement systems.
- The Swedish contract rollout has been delayed, now expected to start in early 2025, affecting short-term revenue timelines.
- Gross margin slightly decreased to 37% this quarter, impacted by lower-margin system sales.
- EBITDA for the quarter dropped significantly to SEK12 million from SEK90 million in the previous year.
Q & A Highlights
Q: Can you summarize the Netherlands and Swedish orders and when the remaining amounts will be booked?
A: The Dutch order is SEK400 million, with SEK200 million for system sales and SEK200 million for repairs and maintenance over six years. SEK145 million has been installed to date. The Swedish order is SEK850 million, with 60% for system sales and 40% for maintenance. Installations are delayed due to testing, expected to start in 2025. Combined, over SEK1.1 billion remains in the backlog for these contracts.
Q: What is the outlook for gross margins?
A: Gross margins typically hover around 40%. Short-term fluctuations may occur due to system installations, which have lower margins than maintenance. However, the expectation is to maintain around 40% going forward.
Q: Are there any anticipated changes in the US business due to the upcoming elections?
A: Historically, there were no changes during Trump's first term. The expectation is similar for the upcoming term, although no guarantees can be made.
Q: Regarding the cash position, how much will be used to repay debt and how much for investments?
A: After the quarter, SEK10 million in long-term debt was repaid. The remaining debt is classified as short-term, and efforts are being made to minimize interest expenses by paying down the RCF facility at Rabo Bank.
Q: Can you explain the recent agreement in Saudi Arabia for service and maintenance work?
A: Previously, maintenance was done by the customer. Now, Sensys Gatso will handle maintenance for 1,200 in-vehicle systems, providing recurring revenue. This is an add-on to existing agreements.
Q: What impact did the Iowa legislative changes have on revenue, and is there a risk of similar changes in other states?
A: The Iowa changes were unexpected and unprecedented, causing a short-term revenue impact. However, the company is working on mitigations and appeals. Other states are not expected to undergo similar changes, as Iowa was catching up with existing regulations in other states.
Q: Are the financial targets for 2025 still in place despite uncertainties?
A: While there is some timing uncertainty, the company remains confident in its long-term growth trajectory and maintains its ambition for profitable growth.
Q: What will drive the company's value in the future?
A: Profitable growth in recurring business is key. The strategy focuses on securing recurring maintenance contracts with system sales and expanding managed services, particularly in the US. This model is also being applied in other regions like Australia and Ghana.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
