Hi, and welcome to the Q1 earnings call for Cyviz. My name is Espen Gylvik, and with me I have the Company's CFO, Karl Peter Gombrii. This is today's agenda. So we will talk about Q1 in brief, a bit around the performance, the business highlights, of course, the Q1 financials, and then try to put some direction on the outlook. And at the end of the call, we will open up for Q&As. So with that, let's move on. Q1, as we talked about in our Q4 presentation, is a quarter that is related to a very, very strong finish of Q4 with a very, very large deal, the largest deal the company ever brought in at the end of December. Key focus during the quarter is to build order backlog, pipeline, and focus on the profitability and the cash flow in the company.
So very happy and pleased to announce that the EBITDA for the quarter ended at NOK 5.2 million , up 88.9% from Q1 last year. And it's also a record high order backlog in the quarter. Revenue soft at NOK 107 million , largely connected to the huge deal we signed in December 2023. It's very much related as a project sales organization on when and how we ship goods. And you would see that also on the gross profit and the margin, which is significantly higher than we have had on average over the last years. Largely driven by shipping to a couple of large customers, more of the software side , and Cyviz core products and technology with higher margin than the average of a full solution.
This is obviously a temporary effect, as there are large projects which are split over multiple reporting periods.
That is a very, very good comment. So you would see when we report Q2 and into Q3, that this will level out, where more of the large type of high-cost ticket items in the solutions are delivered and installed with customers. Again, back to gross profit, 72%- NOK 72 million, up 9%, from previous similar quarter in 2023. Order intake, NOK 91.4 million, quite soft, but, again, back to a reflection of the $22 million we brought in at the end of December. That was due to be split in four orders, but we managed to pull everything in at the end of the year, which is good for the cash flow, of course, for the company. And that will also level out now when we finish the second quarter.
I think an important comment to make here is, and it's also the reflection on how is the underlying business going, and you can read that quite well out of the backlog at the end of Q1, which were at NOK 428 million, up from NOK 302 million Q1 2023. So a significant improvement in the backlog. And backlog, just for people's knowledge, is not a pipeline.
Mm.
Pipeline is like the pool of projects and cases we work with to turn into backlog and hence also revenue. So the backlog is signed contracts and the value of signed contracts that is due to largely be delivered within this year. And finally, the operating cash flow from the business at NOK 33.3 million, and free cash flow of NOK 24 million, and you would elaborate a bit more when we get to the cash flow after that.
Yeah.
So let's move-
Yeah
... to how are we doing?
Right. So since Cyviz is a very project-based business, we like to emphasize the twelve-month rolling development, as that gives kind of a better take on the underlying development. So starting with order intake, it ended up with accumulated NOK 690 million at the end of the quarter, which is a 10% increase on last year. Continued growth in gross profit ended at NOK 285 million, which is an increase of 15% compared to last year. And then lastly, an EBITDA profit of NOK 30.3 million, which is a slight increase on last year. And then, as Espen mentioned, the backlog remains strong at NOK 428 million. So I'd say from an underlying perspective, things are moving in the right direction.
Q1 had a lot of particular effects relating to large projects, which are split between multiple reporting periods, but underlying overall a desired development of the business.
Yeah, and I think if you pair the order backlog also with how the pipeline has developed over the last six, seven months-
Mm
... which has an increase of 37%, I think those two together should be relatively reliable, solid indications-
Yep
... that the underlying business is moving in the pace-
Mm
... that we anticipated, also through 2023.
Yep.
So let's look at some of the business highlights from the quarter. So I'm still very happy to, like, state that some of the large global customers we have across different regions continue to buy and invest in Cyviz software and technology. So some of the key things that happened in Q1 was also that we were able. This has been a very, very important thing for us through 2023, quite challenging, but very strategically important. Try to get into a position where we are capable and able to lift our position with key accounts around the world, from providing them with technology and software to become a strategic partner, and hence also sign what we define as more important contracts, frame agreements. So I'm pleased to, like, announce that we have, in Q1, signed a very important strategic frame agreement.
Mm
with a very large energy company in Middle East. What that does for the customer and for us, is that with a frame agreement, the customer doesn't have to do tender projects when they want to buy new solutions. They can buy directly from us.
Mm.
So we can talk more about that when we get further out, but I think that's one of the key-
Yeah
Type of highlights in the quarter. Getting a strategic partnership agreement with IBM has been very important for us, because it is part of how do we extend our footprint in the market? By activating partners to bring Cyviz technology out to a lot more customers. So that has been very, very important. And of course, signing new accounts, like SWISS, among others, has been a key thing inside the quarter. So overall, we continue to delight existing customers. We continue to, like, work on strengthening the strategic relationship with those customers, making our business with them a lot more predictable for them and us by having frame agreements in place, and of course, always hunting new logos-
Mm
... to increase the total addressable market for us as a company. Then, let's look at the financials.
Yes, so we already touched upon the Q1 financials, so I'll be quite brief on this part. Revenues, as Espen mentioned, quite on the soft side, closely related to a rollover of revenue because of these large projects. On a 12-month rolling trend, we are pretty much at the same level as last year, and again, we do expect a rollover from this large project, so underlying quite happy with the development. From a gross profit perspective, a very particular quarter with an exceptionally high gross margin of 67.2%. On a normal gross profit, so just a particularity, not kind of reflecting the underlying business, which is important to emphasize.
On the 12-month rolling trend, we are at NOK 295 million on the gross profit, which is an increase of 15% on last year. EBITDA for the quarter, a doubling compared to last year, which is obviously a healthy development. On a 12-month rolling basis, we are, as also previously mentioned, at NOK 30.3 million. Bookings on the softer side for Q1 in isolation. I think the way to put it is that one should regard Q1 and Q4 in combination and compare it to Q1 and Q4 in combination last year to kind of understand how things are moving from an underlying perspective. And-
Yeah, I think you can see that quite evidently-
Yes
... on the chart here as well.
Definitely.
I mean, average type of booking by quarter, if you just like average that, would probably historically be between NOK 120 million-NOK 150 million, and then you peak, Q4 last year with close to NOK 400 million.
Yeah. It's twice as much as the highest previous.
It's largely driven by, like, NOK 220 million-NOK 230 million.
Mm
... just on one single deal. So I think your statement on looking at Q4 and Q1 together, especially on the trend on booking-
Mm
... and then also the trend we see now, I mean, halfway into Q2, indicates that we are back on what we call normality.
Mm
... as a project type of sales company on the booking side as well. So when we will report Q2, we will see a normalized type of number on bookings-
Mm
... revenue, and on the profitability as well.
I think in terms of the outlook part there as well, with the pipeline, we're seeing increased interest from areas which were slower last year, particularly from the United States, which is positive. So generally speaking, we're seeing quite strong interest from all geographies and all verticals at the moment.
Yeah, and as a final comment on that, I think last year, the market, I mean, the type of evidence in the market last year was very clear.
Mm.
Especially in the North America or U.S. market, private sector was on a standstill-
Mm
... very much. We see very good trends-
Mm
... entering into this year, that trend has changed.
Yeah.
As shareholders or potential shareholders, and also us working in the company, I think you would see good evidence on that when we get back and report the Q2 numbers.
Important to emphasize, it's still pipeline, which is not bookings.
True.
So we still need to convert it, but we're seeing the pipeline is moving in a desirable direction.
Okay, let's look at cash.
We had a positive operating cash flow of NOK 33.3 million in the quarter, which is strong. It's about a NOK 40 million increase compared to the same period last year, primarily driven by good receivable collection. Entering the quarter, there was an overweight of European customers in accounts receivable, where collection times are traditionally shorter, which obviously helped. Nevertheless, we have had, for a long period, increased focus on working capital management, and continues to have that.
I think with the present trajectory of the financial development of the company and what we're currently seeing in both the backlog and the pipeline, we think it's well within reach to achieve a positive free cash flow for the year, though we do expect variations within the year, depending on the geographical mix of the backlog and accounts receivable.
Yeah, and I think that has been a very, very, very important type of topic for us.
Mm.
I mean, we initiated last year a much, much tighter and stronger discipline around how do we collect cash-
Yes
... and what type of discipline and tasks do we put out in the organization?
Mm
to follow up and drive this faster and earlier?
Mm.
It's not just like people pushing to pull money back, but it's also how we construct the contracts.
Mm
... we have with our clients. So we would always strive-
Yeah
... to get a lot more of the contract value-
Mm
... when customers sign contract.
Yeah.
And way less at the end of finalizing the projects, to manage that type of operating cash flow in a much better way. And I, yeah, you're right. I think the evidence we have seen over the last quarters, and in Q1 in particular, and trend into Q2, looks quite promising to have a full year of a positive free cash flow.
Definitely.
So I mentioned briefly during the highlights, I think one of the things that we have added now as a strategic type of approach in the company, and it's not something you just get, you actually need to work and deserve that with large customers-
Mm
... is to build a strategy where we work way more to get frame agreement signed with large accounts, global, regional, whatever, to provide a much more predictable type of business model for ourselves, and also-
Mm
... provide actually an easier, faster way for customers to acquire and buy, I mean, the solutions they would like to have.
Mm.
The good thing with this is that it moves Cyviz as a company up from being a provider, like all our competitors, to actually be a strategic advisor and partner with some key customers. It also allows us to have different type of discussions. It's not just a question of do you want to buy that or compete on tenders on that, but we can actually develop the solutions and services together with clients, because they don't have to do tender process anymore.
Mm.
They can buy directly. So this is a continuous type of strategic approach-
Mm
... for us as a company to gradually build that pool of customers-
Mm
... with frame agreements bigger. But happy to say that Saudi Electricity Company, ACWA Power-
Mm
... and Microsoft already are on a frame agreement with us.
Mm-mm.
That is one of those areas where we are continuing to invest.
Yeah. Yeah, as it also increases our predictability in terms of operations, and it also reduces how much effort we have to put into every contract. It's
Makes the sales process a lot faster.
Makes it more efficient. Yeah.
More efficient.
Yes.
We think that we will be able to have more of the margin left on the table-
Yeah
... because we limit, I mean, all the things that might go wrong-
Mm
... in a tender process. So for all the right reasons, it is an important thing for us to continue to drive more frame agreements with large customers-
Yeah
... into the portfolio. So, I mean, the results we're presenting today-
Mm
... and the type of indications we are trying to give you for the year is largely centered around our core business. The type of traditional Cyviz business where we are out delighting customers with full turnkey solutions, regardless if it's meeting rooms or control room or operation centers or technology centers, areas where I do believe we are the best in the industry. We have spent a lot of time over the last, I would say, 12 months-
Mm
... to look at how do we add and bring more products and services to the market, and how can we capitalize on the strong, good legacy that the company has built over years, giving customers even better products, more services, and also help us as a company-
Mm
... to improve our competitive advantage while we are moving in a direction where we want to provide more services and SaaS-based offerings-
Mm
... to customers. I'm happy to continue to talk about the development on the platform, so the management and monitoring platform. As we stated, after the Q4, in the Q4 earnings call, we had 10, 11 global and local and regional partners signing MOUs to take that out in the market. Finishing second quarter, so like May, June, we are turning those MOUs into signed partner agreements. The platform is already now at an MVP, so it's a ready solution available for partners to go out and sell.
Mm.
We do expect that we will start the commercial type of sales journey-
Mm
... with the new platform already just after summer, with a subset of key global-
Mm
... local and regional partners. This is the first type of new SaaS-based solution Cyviz as a company-
Mm
... is bringing to the market. It's built on the legacy of the management and monitoring platform we have today, which is an on-prem solution.
Mm.
The on-prem solution we have today is a fantastic management and monitoring platform for Cyviz equipment.
Mm.
The new one, which is a software-based platform, is an open platform that would allow customers to manage and monitor everything.... all their AV, regardless if it's Cyviz products and solutions or competitive products and solutions or more of the low-end type of product and solutions.
Mm.
They can now monitor absolutely everything. They can do health checks, they can do remote access, they can do remote management across all types of AV equipment, across multiple buildings, multiple countries, and multiple regions. So for us, it's a fantastic move in the direction of becoming more focused around technology and platform as a company.
Mm
...and enhancing the journey toward a much larger portion of our business.
Mm
connected to software and SaaS and recurring.
Yeah.
The second topic that we have spent some time trying to, like, crack a code around is the Cyviz core products and technology. Those three, four pieces that actually makes our solution-
Mm
... working better than competitive solutions, and see if we can package that-
Mm
... in a way that enables a partner ecosystem to bring that out to customers, in markets and customers where we are not-
Exactly
... present today. So how do we, like, expand and build the total addressable market-
Mm
... in an easy, efficient, and good way for ourself? And we believe that with the right packaging, the right partners, the right type of training and onboarding on these partners, this is a key area for us to continue to drive, I would say, revenue growth, and not at least margin growth. Because these are the products with by far the highest margin components-
Mm
...we have also in a complete solution. That is due to be, like, rolled out during second half of the year with some partners to test the market, get some feedback, do the right adjustments-
Mm
... and then a full-scale type of commercial rollout-
Mm
... entering into 2025. So just to give people the right perspective and the facts around what we are doing on new product innovation and new services, this is what is coming.
It's important to emphasize it's coming. It's not a material part of the numbers that you're seeing today, and it probably won't be this year either, but it's kind of the strategic development of the company and where we see growth and margin be coming from in the future.
It's a valid point. We are not basing our performance this year-
No
... regardless of order intake, revenue-
Mm
... or EBITDA, largely on any impact on this.
Exactly.
Whatever comes on this-
Mm
... will come on top.
Mm.
But this is, like, for 2025 and beyond-
Yes
... to really accelerate the recurring revenue, the stickiness with customers, and the expansion of Cyviz as a company way more globally-
Mm
... through a partner ecosystem, through these two things-
Mm
... than we have ever done before.
Yep.
Okay, then let's just do a quick look at how we think about outlook. I think we have said a lot with the new products.
Mm.
It's definitely part of the new future for the company. No doubt that the key focus this year and into next year is around profitable growth.
Mm.
This year it's still gonna be driven by growing our core business-
Mm
... but launching and adding new products and services for 2025-
Mm
... and beyond, and of course, continue to manage cost and cash flow.
Yes.
So the focus this year is around profitability through cost optimization. So we have already done a lot-
Mm
... I mean, through second half of last year and into this year, on balancing the cost base-
Mm
... of people across corporate functions, local functions, and regional functions.
Mm.
We will continue to do that. We are definitely looking into how effective we can bring new services and new products out in the marketplace, as we said, to drive revenue and profitability. We are very comfortable still regarding our medium-term target of an EBITDA around 15%-20%. There is still a growing demand for more advanced solutions.
Mm.
That is a benefit for companies like us, because we don't deliver those type of light touch, easy, simple things.
Mm.
We do develop and sell and deliver things that adds value: multipurpose rooms, mission-critical control rooms, technology centers that enable customers to, like, showcase their stuff in a much better way than they historically have done. And we are investing in that, and we do see, both in the order backlog and in our pipeline, that the development of demand is continue to increase, not just across all the regions-
Mm
... I mean, our Middle East APAC region, our Europe region, or North America region, but we are also now seeing, as you said, a positive uptake across private sector.
Yes.
We see a positive increase on demand across all verticals.
Yeah. I think that's the... of this slide, the material change, one, two, and three are basically the same as we said before-
Yep
... but number two is kind of more on the positive note in terms of both the geographical and the vertical interests.
Maybe you just wanna comment on the third one.
So, cash management remains important. That's why we have it as a highlight. We touched upon it in quite a lot of detail on a previous slide. Cash flow in this quarter healthy. We do think positive free cash flow is within reach for the year based on what we're seeing right now. But we do expect some variations within the year, depending on the geographical mix of accounts receivable and the backlog, which we're managing with a tight focus. So yeah, I think that's.
Yeah, I think just as a final note, I think, I mean, a lot of people are aware that we have our Cyviz Experience Centers, which has been very, very important-
Mm
... for the company to showcase solutions. Just wanna emphasize that the expansion going forward, regardless of whatever market we enter, would only be with partners.
Mm.
We will not do any Cyviz Experience Centers by ourselves. We will piggyback on Microsoft Technology Centers, which are fantastic centers delivered by Cyviz, bring customers in, use that to, like, attract new customers.
Mm.
For any type of expansion, regardless if there are new products-
Mm
... new solutions in new markets or us as a core-
Mm
... will only happen with partners. So it's also important to understand that that's part of the cost optimization and the drive for increasing-
Mm
... our profitability when we are growing our business significantly over the next years.
Yeah.
So with that, I think we should open for questions.
Yes
... if there are.
Yeah, there are. Start with the first one. Your comment about reiterating the revenue growth CAGR of 30% since the IPO has disappeared from this and last quarter's presentations, and .... So it's in terms of the guiding and the medium-term target of 15%-20% EBITDA, and then the CAGR 30% growth, which is not there anymore.
No. So I think, yeah, and that's, of course, good observed.
Mm.
It's also... I mean, really, if you look at the trend over the last three years, you would see, revenue growth, CAGR-wise, that is higher than 30%.
Mm.
With the type of enhanced focus and strategy that we applied during 2023 and are strengthening now into 2024 around profitability, positive cash-
Mm
... working cash capital from the operations, and development and launching SaaS-based platforms and solutions that will drive higher margin, better profitability, increased reach in the market, and building up a much larger portion of recurring business.
Mm.
It will have some sort of impact on how fast we can continue just focusing on growing the top line.
Mm.
With that said, it doesn't mean that we are not having ambitions and internal targets of growing our top line year-over-year, but we are trying to, like, balance, like, the steep top-line growth that also drives a lot of cost-
Mm
... to fuel it-
Mm
... with the fact that we are gradually trying to move the company more in a direction-
Mm
... for SaaS-based solutions, more recurring-
Mm
... high-margin type of ticket items-
Mm
... to make sure that the overall profitability of the company over the next-
Mm
... 2, 3 years increases significantly faster-
Mm
... than just the top line on revenue.
Yeah, and obviously, the base that we're calculating the growth on is a lot bigger. So having-
Sure
... 30% growth on NOK 100 million turnover, which was the case in sort of NOK 200 million turnover in 2019, is a different story than having a 30% increase on NOK 600 million, which is where we're trending now. So it's reflecting that as well, but primarily what you're saying, which kind of takes us to the next question here as well, which is: What kind of gross margin do you expect on the SaaS platform sales? I think from our perspective, this is something that we need to provide guidance more upon as we are nearing 2025. As we just mentioned on the previous slide, these are high-attention areas for the company, but it won't materialize financially, at least not with a substantial effect until next year.
So in terms of margins, kind of what percentage or what share will be recurring revenue or a kind of a recurring base is-
I mean, your job is to be, like, pragmatic and political. My job is to, like, put a little bit more color into this without, like-
I'm the conservative one.
... saying too much.
Yeah, true.
So-
Yeah
... since I'm, I mean, the type of realistic optimist. So we have just finalized internally the pricing scheme for the platform, I mean, for the platform as such. And there will be two variants, depending on, like, the customer type of installation, and also, of course, pricing on all the type of software and applications that will be incorporated based on customer needs. So we have a good view on what, like, a yearly type of value by installation, not by customer, because a customer might buy multiple type of platforms to run this, but by installation. What I can say is that the margin picture on a platform that is built as a software application or software platform, it's not a physical thing, it's a software thing-
Mm
... you can actually turn it on/off. If you keep development cost to get to a place where we are now, where we have a platform ready to be launched, will have a significantly higher margin by itself, by default, than our traditional business that have been-
Mm
... between 45% and 48%-49% year after year. But more precise than that, it's a bit challenging to say, because we are building this platform to enable a vast partner ecosystem, and we have built it with an architecture that allows partners to build their own managed service on top and around that platform to make it more attractive for partners-
Mm
... to see that they can earn good money, not just by applying and giving customers the best platform to do A, B, C-
Mm
... but also to build their own business around it, to motivate them to do more and go out to a lot more customers-
Mm
... hence creating a bigger market opportunity for us. So significantly higher average margin than the traditional business, without saying more than that.
All right. That was the end of the questions.
Yeah, if there are no more questions.
No
... we would like to thank everyone that watched and listened in and shared questions, and wish everyone a happy National Day tomorrow.
For the Norwegians, of course.
For the Norwegians that are watching-
Yeah
... and for anyone that is here but not Norwegian, you should still go downtown and see what this type of crazy thing is all about. So Happy 17th of May, and thank you for watching and listening and providing questions, and looking forward to see you again when we present our Q2 earnings numbers.
Yes.
Bye-bye.