Invisio AB
STO:IVSO
Invisio AB
Invisio AB, a Swedish firm, has carved out a specialized niche in the world of communication solutions, becoming a critical lifeline for professionals in arduous environments. Born out of an era that demanded innovation in tactical communication, Invisio specializes in advanced audio products, particularly for military, law enforcement, and security forces globally. With its roots deeply embedded in providing clear communication amid chaotic scenarios, the company blends intuitive design with high-end technology. Invisio's solutions include systems that integrate state-of-the-art headsets and advanced control units, allowing for seamless and intelligible communication while offering hearing protection. This blend is crucial in environments filled with noise that can jeopardize mission success or personal safety.
Monetarily, Invisio’s business model thrives on the recurring sales of both hardware and long-term service contracts. They cater to a market that values reliability and top-tier performance, often entering into substantial agreements for both supply and future support. The firm’s revenue streams are robust, thanks largely to strategic positioning in regions that face significant defense and security needs. By focusing on markets with increasing budgets for defense and security communication technologies, Invisio not only ensures its financial sustainability but also reinforces its reputation for excellence and reliability. Their ongoing innovation, often backed by feedback from users on the ground, ensures a steady update of product offerings, featuring adaptabilities that continue to appeal to both existing and potential clients.
Earnings Calls
In the first quarter of 2025, Invisio achieved record revenues, marking a 10% year-over-year increase, despite lower order intake due to last year's exceptional performance. The company's order book stands at nearly SEK 750 million, expected to boost Q2 revenues. Invisio's gross margins are stable, averaging above 60%, though slightly lower this quarter due to third-party sales. Key strategic moves include the acquisition of UltraLYNX, anticipated to enhance future revenues significantly, with expectations for increased defense budgets impacting sales from the second half of 2025.
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Welcome to Invisio's presentation of the Interim Report January to March 2025. [Operator Instructions]
Now I will hand the conference over to the CEO, Lars Hojgard Hansen. Please go ahead.
Thank you very much, and welcome to our Q1 presentation that we have chosen to title position for an Eventful 2025. And indeed, we do expect a very interesting and busy 2025. As you might recall, we come from a very strong fourth quarter in '24 and indeed a full year '24, where we grew our revenue with 46%. And in the late part of quarter 4, we had a delivery and order intake of a large order of SEK 115 million that we managed to deliver before the end of the year. Normally, that would have been played into Q1 and be part of the revenues in Q1. But as we always deliver according to customer wishes, we managed to do that in Q4. And this is reflecting the normal order and revenue volatility that we see in defense markets. We will go into the different details of the numbers slide-by-slide.
And of course, when we have a quarter like this, which is a little more soft, we still have to remember that the revenues are actually almost 10% better than same quarter last year, and it is actually the highest revenue number ever for a Q1. Order intake, a little down. We have hard comparison numbers because we did receive a very large order last year with the radio deliveries that you might recall. But we still leave the quarter with a quite strong order book. I will dive deeper into that.
In terms of operational highlights, there's a couple of things. Important to mention the acquisition of the product line, UltraLYNX in the U.K., the fact that we have updated our market estimates and also a few comments around the tariff discussions that are ongoing. So when it comes to order intake, we were quite a lot lower than last year. And as I said, that was partly due to the very large order in Q1 last year that included radius from a third party. And I would say there's nothing unusual in this quarter. It's a little lower maybe than previous quarters, but it is part of the normal fluctuations and seasonality that we see. We still expect a very strong 2025. We can see the activity level being very high all around the globe.
We can also see that many of the funds and budget increases that have been distributed in many countries have not yet reached our part of the product portfolio. So we expect this to happen from the second half of '25 and onwards. Our revenues, as I said, best first quarter ever, approximately 10% higher than last year. So yes, not so much to comment there. We will move on to the order book, where we, at the end of the quarter, were at almost SEK 750 million. And majority of this order book is expected to be delivered during the next Q2 quarters. We are well prepared to be able to deliver relatively fast, as you will see also from the inventory levels a little bit further on.
Our gross margins are stable over time. It was a little lower in this quarter, primarily due to a couple of deliveries made through third-party system integrators where we have a little bit lower margin. But over time, our gross margin is averaging over 60%. And as we continue to increase the number of newly developed products, that will continue to support a strong gross margin, but there will be a few fluctuations between quarters pending some of these deliveries where we work with large system integrators or vehicle manufacturers or others where we have a little bit lower margin.
But all in all, we are happy with that and we know the reasons why. So for OpEx, we are also in line with our own expectations. We continue to invest in product development and in the sales organization where we see fit. As you know, we have also acquired UltraLYNX during the quarter, which added 7 or 8 headcounts to our cost base. And we have consistently and very focused in investing in the new product portfolio. And you can see some of the products that have been announced within the last 4 quarters, the new V60 Generation 2, ADP [Technical Difficulty] INVISIO Link, Intercom system that will be shipping from the second quarter, the INVISIO Control app for the Intercom, the acquisition of UltraLYNX and a number of other product upgrades and just yesterday at a large trade show in Tampa, Florida called SOF Week, we announced 2 further accessory products to our Intercom a switch and a loud speaker to further expand the capabilities of our Intercom system.
So our investments in operating expenses is definitely leading to a lot of new products. We have a world-leading product portfolio at this point in time, and there is more to come before the year is over. Operating margin, of course, lower than last year because of the lower gross margin and as well as the higher operating expenses that we have just seen. We still maintain our financial target that the operating margin over time should exceed our target of 15%. And for the 4 last quarters, we've been around 21% in average. So as always and said many times, our company development should be evaluated from a long-term perspective and not from a single quarter.
Inventories continue to increase a little bit, and we are now at almost SEK 300 million, and that is a management decision to do so because it does enable us to deliver large volumes at speedy rates as we saw in Q4, where we delivered the SEK 115 million order very swiftly. And that is definitely a competitive advantage in the current market conditions where a lot of customers and governments are willing to spend money and need to spend money there, it will be a significant advantage if you are able to deliver within a reasonable amount of time. And I would also say again that the inventory is predominantly components and standard products. So we normally do not see any risks from obsolescence or scrapping from the inventory. It is all products that are sellable.
Cash flow was positively impacted due to payments of trade receivables that happened arising from sales in our very strong Q4 2024. So nothing out of the ordinary there. Explanation is strong sales in Q4. And from an operational point of view, well, you have probably heard by now that we acquired UltraLYNX in the U.K. during the quarter. And this is part of our ongoing transformation towards a company where we do not only sell and offer hearing protection communication solutions, but we look a bit broader on platforms for the modern soldier system and vehicle systems. And a modern soldier system today is a very complex network of many different products, radios, weapon sites, navigation tools, sensors and all kinds of different unique standards. And all of these devices must be able to share data, audio and power in an efficient way on the body of the soldier.
So with our acquisition of UltraLYNX, we believe that we have expanded our value proposition considerably. And over time, it will also help us in developing new product solutions. So it allows us to work on the body of the user to combine a number of different products that were not always developed to be able to communicate with each other and to share data and power. And in itself, this product line from UltraLYNX will soon start to create revenues for us of a considerable size, but it will also help sell products of our entire portfolio in a larger system. And we again believe that this is strengthening our position in the modern soldier system segment and we will continue to do that over time.
During the quarter, as we touched upon also in the update from the fourth quarter, we have updated our total addressable markets from an estimated SEK 14 billion to SEK 25 billion per year. And I'm not going to go into details with it here. It's also available on our website in details. But I think the headlines here are that this is an update based on where we are now. It's an update towards our first estimate almost 10 years ago, and the estimate is more related to price increases and system selling than of the increased fundings that we are going to see over the coming years.
So we still expect that the funding increases, budget increases over the next 10 to 15 years will result in even further market sizes, and we will have to update the numbers some years down the road. But this is where we believe we are right now from a market size perspective, SEK 25 billion.
Tariffs, there has been a lot of talk about that and uncertainty. And historically, defense equipment has either been exempt from tariffs or subject to very low rates. How that will play out in the future is, of course, a little bit uncertain at this point in time. But from a company point of view, Invisio has for quite a while been putting a couple of strategies in place, operational plans to compensate and handle potential tariff situations. And that also include preparations for manufacturing in the U.S. related to certain activities. We have since a long time back, a well-functioning manufacturing model that makes use of partners within NATO and almost entirely in Europe.
We have today warehouse facilities, distribution facilities in U.S. and have also prepared for manufacturing in the U.S. So I think all in all, we will have to follow the situation closely, but we are well prepared for what might come, not only short term, but also long-term effects of these discussions. So in summary, we are moving forward according to our long-term strategy. Invisio is committed to playing a central role in the development of modern soldier systems, and we have further reinforced that now by the acquisition of UltraLYNX. So we have a strong order book. We have good market conditions, and we look forward to a year of continued high activity, good growth, profitable sales. We -- it is still very difficult to estimate regarding national defense budgets, but our best assessment is that they will start to have significant impact on our revenues or order intake from the second half of '25.
We have consistently made very good investments in new products in our organization. And we believe that this has given us an excellent position to take advantages of the opportunities that we will see in the defense markets and public safety markets today and for the next 10 to 15 years. So we look forward to an eventful '25, where we will continue our long-term work to strengthen Invisio as a company and add value for our customers, our shareholders and for our employees.
So with that, I end my short presentation of the Q1. And operator, we are now open for questions, please.
[Operator Instructions] The next question comes from Daniel Thorsson from ABG Sundal Collier.
A question here on Q1 started off with a decline year-over-year in European sales, but growth in North America. How do you expect these 2 regions to develop in terms of growth pace during '25? Is it anything that differs these 2 given the recent U.S., European political discussions?
No, I don't think so. I think this is, again, just a snapshot of a single quarter, and it doesn't give any direction. We still -- of course, we still expect the investments in Europe to be very, very strong for many years to come, and that will fluctuate between quarters, but will, over time, be significant. But we also have very strong position in the U.S. We have very good business in the U.S. regardless of any tariff discussion. And I'm sure that U.S. market will continue to be a very strong contributor to our order intake and revenues, not only in '25, but also onwards.
Yes. I see. But then also given the current tailwinds in military spending, I assume there will come some kind of increased competition perhaps from adjacent players like potentially the radio players or other already well-functioned military suppliers. Is that something you are seeing at, for example, the Miami trade fair you mentioned in the beginning of this call?
Not yet and I would also think that many of the companies that are presently in the defense space have enough to do with their own product categories. And I think many will be very busy just executing and delivering on their normal core categories. There will, of course, be maybe newer companies that will be trying to get into the military market. But just because there is a lot of funding, it doesn't mean that the market will change dynamics. It's still a market where it takes a long time. It is volatile. You need to be a recognized supplier for quite a while before you get any of the larger assignments. And just being a sort of really well positioned and accepted player in the industry is a competitive advantage. It's not an easy market to get into no matter what will happen with the budgets. But we always welcome competition. Competition is good.
I see. Fair enough. Final question, did UltraLYNX contribute with any sales here in Q1 at all?
Not yet. And we've also said that we expect them not to contribute significantly until '26. But I would expect to see revenue from it in '25, second half.
The next question comes from Hjalmar Ahlberg from Redeye.
A question on your comment on defense budgets. It sounds like you're a bit more confident that the impact is -- I mean, the effect is coming in second half. Is that correct? Or is it more like the same comment as before?
It's hard to say, Hjalmar. I would say I think what most defense companies are asking for these days is some type of predictability and certainty from the defense organizations globally. And it is very difficult right now. But we can -- as I said, the activity level is very high. We have many customer meetings. There's a high interest for testing. And so my gut feeling is that we will see some effect of that in the second half of the year.
And also, I mean, your comment that I mean you can see quite high variations in quarterly deliveries. You also increased your inventory. Do you think that -- is there more potential for these kind of orders that you got in Q4 where you have very quick deliveries? Or was that kind of a one-off?
No, it could -- that could definitely be the case, and that's also why we are preparing ourselves for these kinds of -- and even if it is not for super quick delivery, I still think that many customers, countries would like to see deliveries that are not many years out because it is urgent, as we all know. And therefore, deliveries are often asked to be done within at least a quarter or 2. So that would be the regular norm, I think. So we are very well prepared for that. We have ample capacity to be able to meet almost any demand within a couple of quarters.
And you also mentioned a bit that Q1 is typically a seasonally softer quarter during the year. Can you say anything what you've seen in Q2 this far? Do you see higher activity? Or is it -- it is similar to Q1 this far? I guess only 1 month, but if you can say anything?
No. As I said also, there's some timing into some orders received. So sometimes when we are at the end of a quarter, and we would like maybe a few more orders to come in, the customers really don't care whether it's at the end of a quarter or the start of a next quarter. So -- and we, of course, always respect our customers' wishes. So I think this is timing more than anything else.
And also you mentioned that you are potentially looking at production in the U.S. How quick could such, yes, production change? Do you need to test a lot before you actually do something or could be...
No, I mean there's a number of things related to that, and we have been preparing for that for quite a lot -- for a long time. It's not related -- from our sake, it's not really related to the tariffs. It's related to other things. So we have been preparing for a long time. So we -- and we really just need to push the button. So we could do it, I would say, probably in 3 months.
And then a question on new products, I mean Intercom wireless is coming within the next month, and you also mentioned 2 new accessories there. Will this kind of go direct to volume orders? Or do you anticipate kind of more test volume orders over this year?
They are part of the Intercom system. So I would expect the wireless link system and the other accessories to actually provide for significant order intake in '25.
The next question comes from Tom Guinchard from Pareto.
A question on the gross margin development here in Q1. Is that driven by the U.S. third-party sales? Or is there any other geography negatively impacting here?
In this case, as I recall it, it is mainly U.S.
Are you seeing higher activity on sort of third-party sales in the U.S. now compared to a year ago? Or is it just makes over the quarter?
We also -- I would say we -- as I've said before, we have a very good relationship to many of the radio manufacturers to the vehicle manufacturers, to system integrators. We work with large companies like Thales, who used to be the owners of Racal back in the days. So we have many ways to market. And sometimes a fast and good way is through one of these third parties or partners, as you like. And there, in those cases, they take a part of the margin, and we have a little bit lower gross margin. But I would expect the opportunities to arise in the -- all parts of the world. When we acquired Racal, they have quite a lot of sales through vehicle manufacturers. And in the 3 years we have owned Racal of 4 years, the margins have been improved quite significantly. Some of the sales have gone direct, but we've also improved on the margins in general for the Racal products.
All right. Perfect. And just a question on the new products here for the wireless Infra. Is that customer-driven? Or have you sort of instigated the development?
It is definitely customer-driven. So -- but we are the owners of the technology and everything included in it. So -- but there are strong customer demand around the wireless link solution. So we expect shipments to be, yes, good already in '25.
Perfect. And just a final one on -- follow-up here on Q2 expectations. Can you give us anything on the mix here moving forward? Should it be margin accretive here year-on-year, adjusted for the radio deliveries?
Yes. I think, again, we are seeing a very active market. And then as usual, it is very hard for us to decide or to influence exactly when the orders will come in. So Q2 has a possibility of becoming really, really good, but some of these expected orders could also be pushed into Q3. That's what always happens. But again, the underlying activity and interest and so forth is definitely positive.
The next question comes from Yiwei Zhou from SEB.
I also, I want to ask about the new product. And it is interesting that you continue to broaden your offering the wireless technology. But I still recall that you mentioned a few years back, the wireless is banned in the military use. And what happened here given you are sort of continue to launch here in the wireless? Is it a new industry standard or change in the regulation? Or you still expect the wireless communication to be a niche segment only for selected user case?
Right. That was a good question, Yiwei. And it is complicated. It's not -- there's not an easy answer to this. I think when we talked about no wireless back in the days, this was a question where we were talking about on the body of the sodium where the question was why are there so many cables between the radio and the communication headsets and so on? Why isn't it wireless? And there the question -- the answer still is that you are not allowed to have wireless on your body as such between devices because you can be jammed or intercepted and so forth. So there's a good reason for that.
When it comes to an environment like a vehicle or a boat where we can use the Intercom and the wireless link, there you are talking about a little bit of a different wireless scenario because there you are in maybe a controlled environment where you can operate wirelessly, let's say, 50 or 100 meter around the vehicle and where maybe the risk of being intercepted is less. And there some users, probably not everyone, but some users will allow the use of wireless around the vehicle. We are actually also using wireless technologies a little bit related to the soldiers because we do have a wireless PTT that you can put on your weapon and then you can PTT back to your radio system wirelessly. But you still have your body-worn cable system at the same time. So it's a little bit of a double-edged answer here. But in general, wireless on the body is not allowed, whereas around vehicles and inside vehicles, it is allowed to a certain extent.
And could you also maybe comment on the competition? Do you have -- do you see like similar technology from the competition already there or and maybe some new product launch from the competition.
I would say on our portable intercom with the wireless link, I do not see any direct competition. There might be other types of products like a radio that can do something similar, but in a totally different way. But the way we do it where it is part of the INVISIO system and if you have an INVISIO Intercom and INVISIO control unit, INVISIO headset, then you are able to create this ecosystem where you are also wireless around the vehicle. I cannot see anyone that can do that.
And could you also indicate the value per vehicle or per solution, I mean, entire system, how is it going to change with all those new products?
Yes, it's a little hard. I mean if you equip an entire vehicle with the whole system with Intercom, with control units, with a number of headsets and cables and wireless products and so on, then the system will probably end up in the EUR 20,000 to EUR 25,000 area per vehicle.
Very clear. Great. And I just want to clarify that in the press release yesterday, you mentioned that the new system would be ready for ship in the second half of the end. Should we expect any like larger order announcement before that?
You ask clever questions. Just wait and see.
There are no more questions at this time. So I hand the conference back to the CEO, Lars Hojgard Hansen, for any closing comments.
All right. Thank you, everyone, for your interest and listening in and for your great questions today. So we will end the conference here, and we will be back with our Q2 report on July 18th. Thank you. Bye for now.