Hi, and welcome to the second quarter and half year result, 2023 for Cyviz. My name is Espen Gylvik, and with me, I have the company CFO, Marius Skagen. This is today's agenda in brief. So we'll go through the second quarter 2023 performance, business highlights, second quarter and half year financials, give some directions and guidelines on the outlook, and then at the end, open up for questions. So just want to set the stage and reiterate, for those of you that doesn't know Cyviz that well, we are a global technology provider for comprehensive conference and control rooms, as well as command and experience centers. And we have been in this business since 1998 and created the next level collaboration spaces, assuring inclusive meeting experience for in-person and remote attendance.
We serve global enterprises and governments with the highest requirements for usability, security, and quality. The cross-platform experience Cyviz delivers to manage and control systems and resources across enterprise, makes Cyviz the preferred choice for customers with complex needs. This is just to set the type of stage on who we are and what we do for customers before we dive into the numbers. We are quite proud of presenting today the figures for Q2, and we are continuing to deliver based on the strategy that we carved out when we went public at the end of 2020, entering into 2021. Both on our revenue, our order intake, and not least the profitability that has been key for us to message over the last three, four quarters.
So this is the 5th quarter in a row, where we can stand here and say that we deliver a positive EBITDA. And this is the 2nd best quarter in the company history, with an EBITDA of NOK 11.6 million, with a revenue of 160%, which is 33% up to last year. Order intake growing less than revenue and the EBITDA, but still 4.8%, making first half order booking still the strongest half year in the company history in order intake. And not least the cash flow, which has been key during the last 2, 3 quarters. Marius would elaborate a lot more around that when we get to the details of the financials, but also proud to say that we have made a significant improvement in the cash flow compared to the second quarter of 2022.
Since we are a solution sales, project sales delivery company and not a transactional company selling, I mean, boxes and bits by bits, we also want to reiterate that things have some sort of fluctuations and goes in waves and seasonality. Hence, also why we are looking and measuring, and mapping our performance and the underlying business of the company in a twelve-month type of trend diagram. And if you look at the order intake here, it's still a significant strong growth of 42% compared to last year, which we know is a strong number, but also knowing that the underlying performance on order intake tends to like fluctuate between quarters. We also had some slippages in Q2 that moved into Q3, presumably making Q3 an even stronger quarter for order intake than Q2.
But overall, after three quarters, it would be in balance and also showcase that the underlying performance in our industry, in this company, is continuing to grow significantly. Probably even more important is our ability as a company to, like, improve the profit, the gross profit of the company by number. And it has 124 million NOK improvement if we compare to Q2 2022. It's largely driven by the effect of a lot of the efforts that has been put in place by every single employee, and also the partner ecosystem we work with when it comes to operational excellence and professionalism, from selling, to ordering, to delivering to customers. And not at least, EBITDA, 64 million NOK improvement, if you look at this in a 12-month rolling trend.
As a company and as the CEO and the CFO of the company, we are proud to present these numbers, and we are confident that the strategy that we launched will continue to deliver profitable growth on or above the type of guided numbers that we have indicated to the market. Next slide, please. Then, Marius, I give the word to you to take people-
Thank you.
through the business highlights.
I will. And, like you pointed out, Espen, we, we are now at a rolling twelve-month basis, order intake-wise, of NOK 632 million. That's a strong figure, both in absolute figures, but also the growth that we see compared to same period last year of 42%. And some of the, some of the business highlights that I want to point out this quarter is that we continue on that word we like to use, very often, diversification. If you now see the pie charts at the bottom here, you see the energy vertical, which we talked about during Q4 and Q1, or we saw continued and increased activity within that vertical. Now, you see the proof points. It's now making up almost half of the bookings this quarter, compared to last year, that was 10%.
We see that across regions, not only one region, but several regions, and making up then the total backlog at the moment for the whole company of NOK 256 million. We also, during the quarter, with pride, took on a new logo, a Fortune 100 logo, although in deal size, not that high, above $100,000, but this is an entry. This is. We are proud to sort of doing that high-end Cyviz performance and services that we can provide to their innovation center.
Yeah, and I think important to mention, it's the first breakthrough we have-
Exactly
in the consumer space among some of the top, top, top consumer brands worldwide.
Also happy to see, if you look at sort of the $3 million deal that we see on the upper middle here, that is a combination of several deal, which we now is renew and refurbish already existing Cyviz solutions that's been there for several years. And again, we're proud that these kind of companies, large global companies, again and again, choose Cyviz as their preferred partner to deliver that. Like I said, sort of one of the most words I've been using for the last 5-6 earnings calls with you has been diversification.
I do that for several reasons, but I like to make fact-based, sort of points. If you now look at the same slide, just comparing this year to date compared to last year to date, first half 2023 against first half of 2022, you see then some magic evidence has been, don't we?
We do. And I think, I mean, we can, we can talk about, like, the energy sector, and we can talk about the government defense, we can talk about corporate. I think the message here is that when you work very, very focused and strategic on verticalization, to build that type of base and really go after the type of diversification, not just because someone says that's a cool word, so we should do that, but it is a part of how we as a company are building our scale-up and growth plans. But it's also a very, very strong type of tool to mitigate, because, I mean, the world is as it is, and there are type of waves and things happening within one part of the world or one part of a vertical that might have effect for a period of time when things slow down.
Having a much broader type of playing field to play with from a verticalization point of view, and diversification, allows us to move around both our efforts and our focus to compensate for that. And beyond compensating, we're still able to grow faster. If you look at this in a CAGR type of perspective, faster than the type of guidance we have given. So the energy sector is definitely now influencing very positive, both our performance, but also the balanced portfolio of verticals, compared to, I mean, previous years. So you saw that corporate had a slowdown for a period. A lot of the large international companies did some sort of adjustments and savings and organizational changes, while the energy sector, for a lot of good reasons, including high oil price and high energy prices, had a lot of money to modernize.
We do expect to see the same trend happening now into the second half of the year and 2024 in the federal business. I mean, there is a lot of activities happening and a lot of type of discussions with defense customers because they are now in a place where they have to modernize, and they have budgets to modernize. No company in our industry is better positioned than us to capitalize on that. The diversification strategy that we work with is really paying off.
Exactly. All right, let's look at some financials and some key figures, both from this quarter, but also the half year performance that Cyviz has delivered now. Revenue. Revenue is at NOK 160 million this quarter. Probably, it's not all-time high, but in my world, it is the best quarter, if you then deep dive into what is that composed of?
It is a growth in absolute figures of NOK 40 million compared to Q2 last year. And on a last 12 months basis, it is 68% up, again, above the 30% goal that we guide on to the market. Gross profit is worth sort of emphasizing a bit around, because we now, this quarter, deliver the highest gross margin we ever done, 48.7%. It's just, It's not a one-off, because you have seen that trend during Q1 and Q4 last year. It is sort of the key drivers behind it, and the effects are the operational initiatives set into life the last 12 to 18 months, within Cyviz. EBITDA, we love to see that positive figure.
We love to see that we now can also deliver fifth consecutive quarter in a row with positive figures, and is a growth of above NOK 6 million compared to same quarter last year, or in percentage points, 132. Bookings already mentioned, with delivering 123 this quarter. But again, as we both have pointed out now, this is also a half-year presentation, and to give sort of the broader picture and to look beyond just the isolated quarterly figures, we can also take a look at that. Revenue-wise, we now deliver almost NOK 300 million the first half
of 2023. Now, remember, it's not that long ago that, you and I stood in this same studio presenting the full year of 2021.
Yep.
That's almost the same figure.
It is.
During a half, half of a year now, we're almost delivering the same figure as we did in 2021, and that without the COVID effect. EBITDA-wise, it is an improvement of almost NOK 28 million compared to the same half last year. And bookings, again, said it multiple times tonight, but the energy vertical has been evident and imminent for us in terms of the performance we now are delivering this half.
Yeah, and if I can, like, just slide in a comment on this as well, because, I mean, I think personally, these are strong numbers, and it's strong numbers because we have been able to, like, execute on things we have had in our plan for a long time, and managed to get the sales organization and operational organization to work much better than we historically have done. So that also means that there is much more type of diligence and focus on every single piece of the value chain. And it also, as a consequence of that, less margin, I mean, falls between shares. We have much better control and a much better discipline in the way we execute, from we sign a contract to things are finalized and delivered.
And we see that in multiple cases now, when we have a planned type of gross profit on a case, and when the case is done, delivered, and signed from the customer, we very often now end up with 2-3 percentage points improvement on those cases, which is a very, very good indication that the control and the operational excellence at the, is at a very, very different level. And that also, of course, spills over to the EBITDA. And I think that where we are right now, the organizational size we have today, the way we work, there is a lot of capacity to continue to grow bookings and revenue and EBITDA without having to add a lot of more cost related to more people. There is still, like, room to continue our growth by continuously focusing on improving the way we do our business.
I think there is a lot of scalability in existing organization if we continue to do what we have done well so far this year.
Exactly. We are on a profitable growth journey. Last year was all about being profitable. We stated that it's gonna be 2022, would be the first year we saw positive EBITDA. This year, we would like to convert that EBITDA to cash. Let's look at the operating cash flow. In a project business, this will be lumpy if you isolate a quarter.
Yep.
This quarter is really good. It's good for several reasons, but it obviously helps that you have a net profit before tax of almost NOK 11 million. But also some wind in terms of receivables now being really high.
Yep.
Direct consequence of the operational activity seen throughout that quarter. So that's, that figure you see in the balance sheets, NOK 147 million, is then due this quarter. And a total then operating cash flow of NOK 8.1 million this quarter. But again, we like to extrapolate and to look at the wider sort of range of dates. So first half, we deliver positive with NOK 1 million.
Yep.
That is a NOK 72 million improvement
compared to the same period last year. That's an interesting fact. Then you now can sort of see that beginning of the profitable growth journey, important in my world. All right, let's start with outlook.
Okay, so let's look at the crystal ball. I mean, there is no doubt that we still stay very, very true to the, I mean, strategy of driving profitable growth and scaling our business, and growing the top line, the EBITDA, and the profit by doing more without adding more cost. And I think the key thing here, if we look one, two, three years ahead and incorporate what we see today, the trends are quite clear. The demand for solutions that help customers take steps towards next-level collaboration, we talk about more advanced solutions, is by far the ones that are driving the growth in the marketplace, and that's also where the demand is, and that hence also the increased demand in all the type of opportunities we have as a company.
No company, according to, I mean, anything I can see, is better positioned to capitalize on that expected growth within advanced solutions than Cyviz. We see already now trends from some of our key global competitors, that they are lagging behind, and they are lagging behind and having shortfall on their revenue, largely driven by a decrease in demand on more simplified solutions, the things we call hang and bang. It's like a screen with a camera and a speaker system. Because that had its peak during COVID. In a hybrid world, where people are working from home or somewhere else or in the office, the need for, like, increasing the magnitude of those type of singular rooms with simple solutions is not there anymore
But the demand for more advanced collab solutions, where people can drive innovation and work together, has increased significantly, and we see that in defense. We see that now gradually coming back in the private sector. We see definitely that in the energy sector. So I think the next 2-3 years, we should still expect to see a positive increase in requirements for Cyviz-related solutions. And of course, the operational excellence and the way we execute on the professionalism is key to enhance margins with 1-3 percentage points beyond where we are today. That will also stimulate the profitable growth, and at the end of the day, the net-net on the bottom line. You talked a lot about cash flow and cash conversion. It's still important, critical for us to have that under control.
We are a project-based business, so, I mean, things tend to fluctuate, so have eyeballs on that. Good processes and good frameworks, and not least good agreements with our vendors and our customers, and preferably longer payment terms with our vendors and shorter payment terms with our customers, is key to, like, enhance that going forward. And probably the most significant and important part I would like to just, like, highlight now, and then we can continue to, like, emphasize on that probably during some Q&A later. But we have spent two and a half years now really trying to, like, carve out and figure out something unique that will give us an access to a much broader customer base globally.
Based on trends and interest and things we see from a merge between AV and IT and IoT and sensors, I am extremely glad on behalf of the company that we will, early this September, launch our new software platform. And there might be tons of people thinking: "Yeah, but monitoring software platform, a lot of people have that," and that is correct. The interesting thing is that a very few have a software platform that can monitor and also do remote support and give customers remote access to every source of data that comes in through that platform. I don't see any company today that has that. I'm not saying there will not be anyone, because this is a multi, multi-billion-dollar future. But today, no one that we compare with have that sort of capability and platform.
So I mean, using the legacy of 25 years of experience and the quality of the existing platform that we use to enable these services to Cyviz customers and bringing that out to the whole new ecosystem, is a fantastic new type of add-on to the chapter of Cyviz. So pay attention to that. For us, it's one of the most strategic initiatives and investments we have done ever. It is a software platform with subscription-based services that will give us access to a lot more customers through a partner ecosystem, but also allow us to increase our predictability on subscription-based revenue and ARR. So those are three key elements if I think about how the world look like today and for the next two, three years. So with that, I think we have reached the opportunity for people to ask questions.
Yeah, and you definitely trigger some attention on the new platform. A lot of questions around that, but also if we can, l et me take just 2 minutes past on that one, and bolt this into first the business questions, and then we can go to the new platform, because we have some questions related to OpEx and some to the bookings. I can comment quickly on the OpEx part. A question from Eric: "Your cost base is increasingly quite heavily or increasing quite heavily. Can you give some color on why?" Yes, we also write about that in the report. There are some one-offs. I normally do not like to talk about one-offs, we don't do adjusted EBITDA, we'll never do that.
But, as long as you ask, I can answer. We have one-offs in terms of the dollar-NOK currency at the moment. So if you look at the pure salary and personal expenses, that is up NOK 2.5 million, just as a dollar effect. All other things alike. We also have projects related to the Norwegian Transparency Act and ESG ballpark, and some other legal fees. So ballpark, we're looking at NOK 2.9 million there. So then you have, like, NOK 5 million-NOK 6 million that you can sort of adjust for, in that picture. Also, can you, l et's take order intake. Where is that? Yeah. "Do you view the lower order intake only as lumpiness, or could it be a sign of lower demand due to, for instance, macro?" Monsieur Pisani-
Okay.
Would you like to-
Yeah,
Take this one home?
That is one of my favorite questions. So again, the underlying business of Cyviz is going very well. There is absolutely no signal that there is any sort of slowdown, rather the contrary. I mean, without like sharing too much, I have some sort of decent visibility around Q3 and what we look at for Q4. The core reason for why we have a slightly softer type of order intake in Q2 than also we plan, is largely driven by one large slip-off of a federal deal out of U.S. That is now coming into Q3. So absolutely no reason to be, like, scared that things are slowing down. Rather the contrary, we, we see a massive increase in requests across U.S., Europe, and Middle East. So I
Yeah, and just following up as well, can you comment a bit on the Q3 business environment as is and
Yeah.
You are actually.
Yeah, I mean, Q3 looks, I mean, from an underlying- I mean, again, back to like order intake and underlying performance, the dialogues we have, the projects we are working on, the pipeline looks better than we ever had. So I definitely don't see any reason why Q3 and Q4 shouldn't be very, very strong quarters when it comes to order intake.
Good. And one other sort of business or P&L question related to gross margin. Let's use this as a segue to the new SaaS platform. Do you believe the current gross margin is a run rate, or could there be additional upside ahead? Well, interesting question. You can go at that at several angles. Business as is, project business, I think we are now sort of, w e're hitting that close to 50% mark that we can deliver. But then, what happens to new services, new platform-
Yeah, but-
Increased ARR, et cetera?
I agree. You can tweak like marginally here and there. I mean, there are still some small opportunities for us to, I mean, tweak here and there on the operational excellence. We can probably squeeze out the lemon here and there or from our partners, but we also have to, like, be very transparent and clear that we are selling solutions with a margin, gross margin, that is way higher than any competitor on the planet today. We are able to pull out a lot more margin and value of our solutions that we sell in competition with others because the system works better. Our salespeople are doing a good job. The arguments are more on the cost of ownership of the solution than the investment by itself. So I think, yeah, you can
There, there is like maybe little room for 1% or 2%, but I do not expect with the current product portfolio and the way we do business to squeeze out a lot more on the gross margin on that side. Hence, also why we have spent a lot of energy and time looking at how do we bring value of the legacy and what we do well today into new areas and new solutions? I mean, there is a couple of things that are important and will definitely help us enhance the profitability by itself. There is the thing called Cyviz Core Technology, which is what we call an integrated pack, that contains our platforms and our software and our controller and our video processor. Highly sought after by any competitor in the marketplace and a lot of partners.
I think that we will gradually, before end of this year, open that Pandora's box in markets where Cyviz do not have presence, with the right partners, allowing them to take that and build solutions around that to deliver Cyviz-related solutions to more customers. These are the products where we, in the overall solution, by far have the best margins. So of course, that, if that is successful, it will have a positive impact on the overall margin picture and the profit. But probably the most important and most interesting piece is the launch of the new platform.
Because that platform is unique. The architecture on that platform is so different from anything you find in the AV industry. It's not built for AV industry. It's built for monitoring and give remote access and services to any sort of building, regardless if it's a company building or a museum or 300 cinemas that wants to, like, trace and track data points and aggregate that and monitor that and connect alerting to that if anything happens, that no one else can deliver today.
Good, good. And, and, let me just sort of curb your enthusiasm, because Eric needs to ask his three questions, too
Sure.
on that platform. He's starting off with, are all customers going to convert to the new platform? Good question.
I would say eventually that is probably the case. First and foremost, when we launch this, and I want to iterate, we are thinking about this as a soft launch, I mean, from September, because there is a lot of learnings, and there are still, like, a long journey to add the right level of integrations and plug-ins. I mean, if you think about any sensor IoT device or whatever AV or IT thing that is in buildings today, all of these have to be plug-ins. We need to, like, build them as plug-ins into the platform. Not all of that is in place by early September, but over time they will be. Hence, also why we want to take feedback from the first customer so that we, when we are working in that plug-in factory, we are doing deployment on the right plug-ins first.
And of course, as long as this adds a lot of significant value, in general, we will also convert that over to the Cyviz clients. So I think looking ahead, that might be the platform we also offer as an integrated part of the overall Cyviz solution. But first and foremost, right now, it is a launch run by partners. They can build because it is a scalable architecture, their own managed service on that platform, and through that, also enhance the value to customers. So that's where we start, but in due time, yes.
That is his follow-up, actually. Can you give examples of what kind of IoT the new platform will communicate with?
Largely, any IoT device. There would probably be very few to no type of exceptions. That's the beauty of the architecture of the platform we have built, i t actually doesn't discriminate IoT devices or sensors or IT sockets or AV equipment. It can do anything from sound, video, speakers, to coffee machines, if the beans are out or whatever. So, I mean, compared to the platforms that is in the industry today, which is very, very locked to either doing AV monitoring or some sort of IT socket monitoring or server building management type of things, this platform, with its architecture, can bring all of these things together, which makes the opportunity for us as a company to reach much broader and also enable partners with a much more interesting type of business case, a completely different starting point.
And then it sort of concludes with, all right, what about the cost? Will the R&D and CapEx increase next year and onwards?
I would say that's marginal. What would increase is, like, four or five relatively low-cost resources out of our R&D center in India, that are not, like, on our payroll, but as an offshore, nearshore type of concept. That is the concept of the plugin factory. So they are the ones that will actually just, like, feed all the new type of things to monitor into the system. I think the other element of increased OpEx, hence to that platform, would be as many salespeople that understands how to sell this to partners as the market would like to consume. But, I mean, we are still launching this in September. We have four interesting global partners already signed MOUs, so the interest around this platform, even from our biggest competitor, is quite interesting.
Excellent. One final one before we conclude the broadcast, from Sven. "With increased cost, we now see the OpEx part, how will you reach that EBITDA target on midterm?" It's a volume game, definitely. As is, it is a volume game, so you can sort of extrapolate 48%-49% gross margin and then add revenue. You have just told., y ou don't have to repeat the, the whole story, but adding the new platform definitely can be that catalyst to see that.
If people need to be calmed down, I can give you the three things that would likely add up to this. As I said, I don't see a big need for adding a lot of new OpEx-
Yeah
to continue growing the core business in 2024. I think we have bandwidth inside the current organization to do 20%-30% growth without adding a lot more cost on the existing business. Then you have whatever opportunity that might come out of opening up the door in markets where we are not present, which still is a lot, with the right partners on this core Cyviz technology. That would drive a lot of improvement in margin because we have a much higher margin pitch on that than the third party we integrate in our own systems. And of course, again, depending on how fast and how big the success story might be on the new platform and the new services and integrations, that is a pure subscription-based, including the platform.
It's not just the services, the platforms are also subscription-based, will drive repetitive income with much higher margin than the traditional business. I think those three by itself should serve as more than enough proof point that we will be more than capable of delivering on our committed targets on 15%-20%.
Yeah. And on that note, just to sort of f or those of you doing those analyses by your own, the OpEx part, do it also currency neutral. On average, we are in the range of 70%-80% of our cost in US dollars.
Yeah.
When the US dollar NOK is, or weaken, as we have seen, 20%, that needs to balance out. So that, that would be sort of my final comment. And that concludes the broadcast and questions. Final remark?
No. Again, I mean, I'm very happy with the results we present in Q2. The underlying business is going very well. The trends in the market, the signals we have, the pipeline, and the funnel looks better than ever. I don't see a lot of hiccups. I mean, if there should be another COVID hitting the market, we can't plan for, but besides that, I think we are in control of our own future and extremely excited to now gradually prove. I mean, the stuff we have talked about for a while, how do we move more of the company into a technology platform company? How do we, like, really drive and increase recurring revenue and subscription revenue?
Knowing that four global partners already have signed up to join for the launch and more to come, quite confident that we are heading into a good 2023 and a fantastic future. Thank you all for joining the call and for providing a lot of qualified, valuable questions. I wish all of you a great day. Thank you.