Hi, and welcome to the Q3 earnings call for Cyviz at Carnegie in Oslo Sentrum. I am Espen Gylvik, and with me I have my CFO and the company CFO, Karl Peter Gombrii, and we will try to take you through today's earnings call. The agenda looks like this: we'll go through the quarter in a brief, and then, of course, performance from 2020 to 2024. I think it's been a while since we did a comparison to some of the things we put on the table when we went public and the ambition we set as a company. So I think it's in due time to do some sort of recap on that. Some business highlights for the quarter: Q3 and year-to-date financials. And then, of course, try to look a little bit ahead and talk a little bit about new products and the market in general.
And at the end, opening up for questions. So with that, let's kick it off.
Yes.
I think overall, it's like a quarter since we did our second quarter earnings call, which was slightly softer than we anticipated as a company. And I think we also stated quite clearly that we expected the third quarter to be reasonably better and also to catch up some of the deficit we pulled with us in Q2. And I'm happy to say that Q3 has landed more or less on all those types of financial KPIs we set as a company. Very strong order intake, and I just want to highlight that. That is like the key KPI when it comes to the underlying business performance. So that's where we build our order backlog and also give some sort of direction on future revenue development as a company. So, significant up from third quarter last year. The same with gross profit.
We are still happy to see that we continue to collect effects, not just from delivering good solutions to customers with good margin, but also starting to see effects on a lot of the activities we have started a year ago internally when it comes to professionalism of the company and the way we do our business and how we also organize our business, and it starts now gradually to have an impact also on the profitability of the company. EBITDA 9.1, up NOK 15.6 million from Q3 last year, in line with the expectations we had going into Q3 and also what we said after Q2, and again, just want to emphasize close to NOK 200 million in order intake, and the trend looks quite positive also into Q4 when it comes to bringing in new deals, so with that, let's move to the next quarter.
Yes. So Espen's Q3 comments also translate into the 12-month rolling trends, where the order intake currently stands at NOK 775 million, which is an increase of 50% compared to the same period last year. Gross profit up 9% to NOK 306 million, and then EBITDA as an extension of that, up NOK 11.1 million to NOK 36.4 million on a 12-month rolling basis. Those of you familiar with the company also probably recognize this slide, and we added a little extra CAGR figures top right. Espen, do you want to?
Yeah, I can say something about that. I mean, we went out and gave some sort of directional statement regarding the ambition for the company when we went public. And it's been a while since we have made some sort of internal analysis on how do we track versus what we said when we went public. We talked about 30% CAGR on key financial KPIs. And as of today, if you look at order intake, we are close to 40%. So that means that the underlying business performs slightly better and slightly faster than what we anticipated when we went public. Very happy with that. The revenue number is more or less in line with the 30% CAGR we talked about. And on the type of profitability or gross profit, we are just south of 35% CAGR.
So it's important for us to show this because we really, really strive to be as predictable as possible with whatever we commit or comment to the marketplace. And it also is very well incorporated in the way we build our budgets and our strategies and priorities. And I'm quite happy with that development, also knowing that we have spent maybe 18 months in parallel doing really, really good business for a lot of customers around the world by trying to transform the company much more towards like a software-based and technology-driven company with the launch of a brand new software platform and also looking into completely new product development and packages of our core technology to reach a much larger audience going into 2025. So I think we have a good solid base. We are on track to the type of commitment we said when we went public.
I think we are heading into an interesting period in 2025 with also new products and solutions.
All right.
Just some key highlights. And for those of you who see the slides, we try to bring a balance between what is strategic, important wins for us and those that have sizable financial impact. So it will never be a slide just with those large deals. It will also be a slide where we try to highlight some important wins. And as you can see, even though small, really happy to have managed to poke hole with Equinor. It is by default the largest Norwegian company. It's been a long journey. We have tried. I mean, the company had tried even before I joined the company six years ago. Really happy that we have managed now to get inside, delivering in the US the first type of Cyviz solution into Equinor. And I think there is a good traction for multiple rollouts with Equinor across the world.
So I think it's important to just lift that up. That Visa is continuing to buy our core technology, and that is part of one of the new elements of strategy and into 2025 by enabling partners to bring Cyviz technology out to a lot more customers than we are capable of doing with our own people. So I think that's an important win for us. Really happy to see that some of the large customers in the Middle East continue to buy significantly large order. And I want to iterate that this is built on the first frame agreement we have done with a large customer in that order. So it's not a one-off deal. It's the starting point of a frame agreement that allows us to continue to work with that customer without participating in tenders.
So it builds a lot more predictability for the customer and, of course, for us as a company as well. And Microsoft continues to invest in Cyviz technology for their most important arenas. They're Envisioning Theaters where they bring their executives and customers and partners. So I think that's a sentiment of the quality and technology we bring to the table. And then lastly, quite interesting to see that we now start to pick up with IBM as a partner, more focused into the cybersecurity and the security element of our industry. So with that, let's move to the next slide. This is a recap of some of the same deals Microsoft this year. Just want to show that when we say that they invest, they invest significantly, and we are very happy with that.
And I think during the capital market day that was planned for today, but will come in January, we will also have much more in-depth evidence and information around why Microsoft buys and why they continue to invest in Cyviz and why our technology helped them do a better job with their customers and partners. So that will be an interesting thing for those who will come. And then, of course, strategic alliances with new partners like Avanade, IBM, et cetera, is important for us. So overall, good quarter, quite good balance. If you see the order intake by region, we are starting to level out in the three regions we have. So just as an information to you, we had four regions previously with APAC, Middle East, Europe, and North America. We have now merged the APAC and Middle East region into one.
Going into 2025, we will roll out a regional setup with three regional EVPs running those three regions. And that will also help us get much more type of bandwidth, competitive advantage, et cetera, closer to where competitors and customers are compared to how we have originally built the company with much more corporate-centric focus. Happy to see that some of the regional EVPs are here, both the guy, Chris, running the North America one, and Anas running Middle East and APAC. I think we expect to get a lot more out of that setup than the previous setup. Thank you, Karl Peter.
Moving back to the financial side, I'll be brief on the quarterly figures since Espen already mentioned many of them at the beginning of the presentation. Revenues up 33.1% for the quarter. I think worth noting is that on a 12-month rolling basis, there is a slight decline in revenue, but it's offset on gross profit and EBITDA. This is related to what we discussed quite a lot in Q1 and Q2, where we have multiple large projects where there's a mix of shipped goods that transcends over multiple financial periods, where we've had a quite high share of high-margin goods shipped at the beginning. It also affects to some extent Q3, but less than the previous quarter. So things are stabilizing on that end.
So moving to EBITDA for the quarter, up NOK 15.6 million on a 12-month rolling basis, NOK 36.4 million, which is quite significantly higher than Q3 last year, which came in at NOK 25.4 million. Bookings, that's kind of the, I think, the core of how things are developing for the company. It's up 107% compared to the same quarter last year. And the 12-month rolling trend is at NOK 775 million compared to NOK 517 million last year. So fairly good speed in the underlying business looking at order intake.
Yeah, no, I think the key message here is that despite that revenue on the 12-month rolling is a bit down, we have been able to offset that by improving the profitability on everything we do. Hence also that we see a much stronger type of development on the gross profit side compared to Q3 last year.
Okay. Moving over to year to date, similar development to the slide we just looked at where we mentioned the LTM, 12-month rolling development. Revenues slight decline for the same reasons, and then gross profit and EBITDA with a healthy development and bookings with a strong development as well. I don't think that's worth kind of digging into deeper details there beyond what we just mentioned on the 12-month rolling.
No, I think maybe might be a good time to just set expectations for the Q4 type of ambition. I think Q4 on bookings last year was an exceptional quarter. Just want to highlight that. We had one single deal entering in at December 29th with Accu-Tech of close to $20 million, so NOK 200 million on one single deal. There is no NOK 200 million single deal in the pipeline in Q4 this year, so I just want to really set the expectations right. We still believe and we still see the trend and traction that we will deliver a very strong Q4 when it comes to order intake. But offsetting one single deal of NOK 200 million at the end of December is going to be quite tough. So I just want to set the expectations right.
Yes. Yep. Moving to cash. Year to date, we have a positive operating cash flow of NOK 3.5 million. Looking to the quarter, it's negative NOK 25.8 million. It is driven by the pre-tax profit where we are recognizing a loss. It's related to estimate changes to Agio from Q2. So that takes us to minus NOK 9.5 million for the quarter. And we have a negative development from accounts receivable. This is related to slower collection in parts of the business. We are very focused on that part where we have signed a letter of credit with our largest partner in the Middle East for $8 million. So we do anticipate this metric to improve. We have also seen a quite significant inventory buildup, particularly in Q2, and kept it stable in Q3, again related to those very large projects, which requires us to build inventory.
And it's also related to parts of the business in regions where speed to market is quite significant. Do you want to?
Yeah, I can elaborate a little because I think, I mean, we have an ambition of being as transparent as possible. I'm really happy that we finally have managed to sign the LC of $8 million. That would level out the cash, I mean, the cash challenge in certain parts of the market where we have done a lot of work to try to collect within reasonable time. And the culture in some of those markets is not necessarily the same as we have in our backyard here. That's just a fact. So if you want to play in that playing field, you need to play smarter. And one of the elements of playing smarter is actually to enforce with partners the opportunity to have letter of credits where we can put our hand in and bring cash back to our company much faster than we historically have.
Really happy to have that in place. That actually levels out a lot. The other side of this type of industry is if you want to be the provider of solutions to large companies, that drives large volumes, and I can talk specifically about Middle East and maybe more specifically around Saudi. When you run on frame agreements, there are expectations from customers that they suddenly want three new control rooms within the next three weeks. If we think that we can ship third-party components and our components from different parts of the world, gather that and get it into the market and install within three weeks, we're out, so to give ourselves the ability to say yes to every single interesting deal, we have made a conscious choice together with our partners to start building up some specific inventory on core components with low risk because they're core components.
They can be reused in multiple places if something happened to allow ourselves to have a chance to say yes to as many deals as possible. I think it's a very, very poor strategy to say no, especially when it's good margins and a lot of volumes. So what we are working on now to offset some of those types of inventory buildup is to work with those third parties to extend the payment terms. So I spent nine days in the Middle East last week working with partners, and we are now trying to aim to get 120 days payment terms with some of our core partners to offset the risk and the cost of having inventory in the marketplace. So I think during Q1 next year, I think we have that in place and have leveled out whatever risk that might come with buildup of inventory.
So it's a short-term type of challenge if you look at it from this perspective. But in the long run, it's a definite competitive advantage that allows us to compete much better and win more deals.
But overall, cash is a high focus for us. We're working closely with the regional leaders as well to tighten the grip on cash management, particularly in the more challenging regions from that perspective.
And the regional EVPs will have cash and cash collection as one of their key KPIs in their bonus plan for next year, just to be very clear. So it's not just something Karl Peter and his finance team are working on. It's across the whole company to make sure that we drive this as good as possible.
With system support as well.
Of course.
Yes. All right. Outlook.
Okay. That's mine.
Yeah.
So, for those of you that saw Q2 presentation, good thing. Nothing has changed. It's the same slide, same topics. The ambition is to drive this business even more profitable as we grow going into 2025 with core business as well as adding new products and services. Hence the topic around the new software platform and also the type of packaging of new products and core products through a partner ecosystem, and we will talk a lot more in depth about how we're going to do that and what it potentially would mean financially during the capital markets day in January, and of course, also the way we professionalize and cost optimize the internal organization, and we have done a lot on leveling out the internal cost. We are fewer people on a running type of 12 months now in the company, but we are still doing more.
So profitable growth and cash management, number one priority. All the type of levers and building blocks needed to do that are starting to get in place. We are soon ready with support systems internally that would help us both get better traction, automate stuff, and also being able to reuse our physical resources much more to delight customers and drive the business rather than controlling the business. So that's important for us. It's been a long journey, but I think within Q1, we should be quite close to have a well-functioned system in place.
We have a lot of manual processes today, which takes a lot of capacity, which definitely will change. And the project is well underway, so it's.
We see a definite clear growing demand for, I mean, advanced solutions. I think just to be very clear, going into 2025 with all the turbulence in the marketplace, I mean, with wars and this and that and elections and political battles between this part of the world and that, the demand for advanced solutions specifically around operation centers and control rooms, those type of mission-critical solutions where customers are willing to pay a lot with good margin is increasing and will continue to increase. There's been a complete stop in the U.S. market over the last four months, maybe five months in federal, solely driven by the election process in the U.S. So not one federal customer has really applied for a budget to buy anything during that period.
Now when the election result is done and we start looking into the type of pipeline for federal projects and opportunities in the US market in particular for 2025, it looks a lot better than it did five months ago. So we do expect to see a continuous demand for these solutions, and we also see a positive demand for our technology in general. We talk a lot about the new software platform, something we have developed over the last two, three years. It's built on 25 years of legacy, and it's also built on the existing platform, which is very specific for Cyviz technology. The new platform would be able to provide the same services as today's platform across any type of collaboration system, regardless if it's Cisco, Cyviz, Neat, whoever.
So for large customers with multiple types of solutions across multiple locations, they can run all of that through the new platform, get remote management, monitoring, support, bug fixing through the new Cyviz platform. And I think as of today, we have 10 partners signed. Is that correct? And we have a long list of partners on MoU that we are now gradually working to convert into formal commercial partnerships before the end of the year and really look forward to see how that can capitalize when we enter into 2025. And that's a pure software subscription-based platform where all the services connected would be subscription-based revenue as well as the platform itself. So I think we are in a good place. Tons of opportunities to become better.
I'm much more happy with room for improvement than trying to be in a place where we struggle to find areas or opportunities to do things better or smarter or more, so I think the outlook for 2025 looks still quite promising. We are a small company compared to some of the large giants in our industry, but I think we are a lot better, and we have a much more type of homogeneous, strong customer base with very strong advocates promoting Cyviz to other clients, and Microsoft is selling Cyviz to other customers. Accu-Tech is doing the same. We are starting to see that sort of ambassadors among our customers promoting our technology to their customer base, and we're going to capitalize and piggyback on that as much as we can in 2025 as well, so with that, I think we say thank you and open up for questions.
So we got both people in the room. And we have this to start with if there's any questions from you guys. Do you?
Just the microphone.
Is it on or is it?
Thanks.
Yes. Which companies do you look upon as your major competitors?
Good question. So I think we will have to do it in the same way we always do. We need to look at it in two axes. So on one hand, we have competitors on what we call the integration side, so the delivery of things. And those are anywhere from large global to regional to local competitors. So you have some large American that are somewhat global, like AVI-SPL, Diversified, AVI Systems. And then you will find regional ones like Kinly and others across Europe and into the Middle East. And I think in the Middle East, it's a mix, some global, but not many, but a lot of strong local, very tightly connected to customers. And in the US, I mean, you have some of the global ones that are very, very big in the US.
The interesting thing is that even though we see them as competitors, they are in certain customer cases also a partner. And we see more and more of those large global ones that we have defined as competitors on the delivery side also now starting to at least have an interest in the new platform as a partner. So I think during 2025, you will see probably even more of those what we have defined as competitors becoming more partners for us. On the technology side, I mean, there are two groups.
It's Cyviz that builds relatively standardized technology built on Microsoft technology in the bottom with solutions that are more or less similar regardless of the customer name and where you are in the world, where you can configure the solution to fit the purpose you have if it's like a control room or a meeting room or an envisioning theater or whatever, while the others have historically and over many, many years built their business model on programming for customer specific, where their margin largely has been driven by people coming physically to your place and doing the job. I don't think that scaled that well. I think our model scales better, and it's easier to enable a partner ecosystem to go out with a standardized solution rather than a programmable, so those are the type of groups of competitors.
But it's a very, very, I would say, unconsolidated, somewhat fragmented part of the IT tech environment still. So we are starting to see consolidation. And I think that will even increase in 2025. And it looks like the big ones continue to like to buy other big ones of the same category. And I think for us, that's a competitive advantage because that will slow them down for a while. So we need to take advantage of that type of pause. So that's like the view we see today. Yes? More questions.
Thanks, Oliver Pisani, Carnegie. I wanted to touch upon the financing situation again. Could you comment upon how comfortable you are with the current liquidity situation because you're running a fairly tight ship and perhaps also touch upon if you find that this limits your growth because you've been doing that for quite a while now?
Yeah, you can start.
I'll start. Being a project business, things tend to fluctuate quite a bit. If you're looking at the balance sheet date, we had an RCF draw of about NOK 57 million. It's less than half of that today. It changes quite a lot with particularly these large projects with milestones. We also have this letter of credit in place, which are for future projects, which we also think will alleviate the situation. Obviously, our operating results and how we perform is kind of the key driver. But as it stands now, that looks to be in place. We have also a higher limit on the credit facility because of these collection issues that we saw in Q3. It now stands at NOK 83 million. That's kind of the roof. The current draw is, I believe, about NOK 25 million. I think for now, it's okay.
Yeah. I mean, 2024 has also been a year where we actually have reshuffled cost. We have invested significantly in R&D. If you look at the R&D setup today compared to a year or two years ago, it's like 3x. It's the only clever investment you can do if you want to be a technology company and move in a direction where you develop new products and new solutions and a software platform. So it has some sort of initial cost for future benefits. Despite that type of investment, I think we are still capable on today's type of capital base to do all the types of bets we set when we started 2024. Do we have enough cash to go out and be aggressive in the acquisition market? No. We will not have that today. Do we have a balance today?
If you look at it in a 12-month period that allows us to continue to invest in the bets we have defined as a company? Yes, we have. And I think the $8 million, which is NOK 85 million LC, if you think about that on top of the credit we have with DNB and how the type of payment rolls through the next 12 months, I think we have predictability enough on the cash side and capital side to still do all the stuff we want to do next year, maybe with an exception of acquiring companies. So we don't see any flag or any type of risk that we need to do an emission in the current state to do what we have defined to do. If we had more cash, could we do things faster? Probably. But that's a different discussion.
I mean, you touched upon it, but how do you think about hiring going into 2025 then?
Good question, so we are in the last part of our type of internal budget discussion. It's also partly why all these executives are physically here in Oslo now, so we will take those types of conversations and discussions and agree on where we invest for 2025. I think from an overall point of view, we don't plan to have a significant increase in OpEx for 2025. It's more a question on continuing to see how do we shuffle costs around internally to support the changes we do in strategy or enhancement of the strategy. I do believe that we might hire a few, we talk about a few people. We talk about maybe three, four people.
Because if you want to work with partners, especially when you take the package Cyviz solution and you want them to go out and add third party and sell that, it's a different type of sales profile than the ones that sell complete solutions. So if you think about a relationship-driven solution salesperson versus a transactional one working with partners, they look very different. We don't have a lot of those. We might convert some, and we might hire some to support the strategy. But we don't expect a massive increase in OpEx for 2025.
I think for the strategic part and how things might change, that's something that will be addressed in the capital markets, then explain in more detail what our thinking is in terms of need for kind of longer term in terms of manpower and the whole setup that's required to support it.
Yeah. And I think we have learned and developed. Historically, I think this company, as a lot of companies, invested upfront hoping that the investment would start to pay off at some point. We have done a lot of internal, I mean, adjustments on the OpEx base. And if there are opportunities that we see that we can turn around into cash quite fast, we will, of course, take the opportunity to add people to go after that. But we will not invest in a lot of new people hoping that they will create a lot of revenue six months from now. So it's a reverse type of strategy when it comes to investment in people. If there is a golden type of ticket lying there and it's quite easy to go after, but we need people, we will find people to do it.
But we are not planning to ramp up hoping that that will drive revenue. So hoping is a strategy we don't talk about.
Thanks.
Any other question or anyone online?
We got one question, but Oliver just asked it about liquidity, so I think we addressed that at length.
And other than that, no. No, then I just want to say thank you and hope as many as possible have the opportunity to join the capital market day in January. We will bring in some customers and customer evidence as well in that. I think that is in due time for us to allow customers to actually tell anyone with interest of the company what we actually do for customers. I think they can do it better than we can do, and we will talk much more in depth on the new bets, the new platform, the partner strategy, and we will also give you some sort of number direction, some sort of directional view on how we think this will pan out financially so that you have something to calculate from, so I hope to see as many as possible on that day.
So thank you to everyone in the room and everyone that participated digitally. And see you in January. Thank you.