Welcome to NORBIT's first quarter 2025 presentation. My name is Per Jørgen Weisethaunet. Together with me today, our CFO, Per Kristian Reppe, also will support in the presentation. It's been an eventful and positive start of the year, with plenty of opportunities to prove that we live by our core value: we deliver. Strategic investments in R&D, manufacturing capacity, and organization have enabled us to capitalize on the opportunities that are meant for NORBIT, growing the business while also improving our margins. Right people, remain diversified, enhance opportunity radar, embrace agility have been bullet points on our strategy blackboard always. These strategic bullet points remain just as relevant today. They are essential building blocks in our ambition to develop NORBIT into a truly great company, able to adapt to current trends and well position us to take advantage of those to come.
In Q1, we have delivered revenue growth compared to Q1 2024 of 29%. The revenue increase is primarily driven by growth in Oceans and product innovation and realization. The EBIT ended at NOK 127.4 million, resulting in a margin of 24%. What really matters at the final bottom line on the earnings per share, fully diluted, we see NOK 1.4 compared to NOK 0.5 in Q1 last year. Also worth mentioning, after closing of the quarter, we've received some new nice contracts for product innovation and realization. It's a new NOK 125 million order for a European defense client to be delivered the second half of this year. The general shareholders meeting conducted on the six of May resulted in all resolutions being approved, including the NOK 3 share dividend, on the way to the shareholders account in a couple of days.
Looking into the segments, for those knowing NORBIT, you know that it's some lumpiness in the revenues. Q1 is usually seasonally the weakest quarter in Oceans. Despite that, we have delivered a very strong quarter in Oceans in Q1 with a revenue of NOK 233 million, which is an increase of 92%. One year ago, some of our listeners were disappointed about a weak Q1. We might have weak quarters also in the future, but as always said, we aim for the trend and looking more than just one quarter. Despite that, it's a good start of the year to have a good Q1. We announced in September last year an important contract for underwater surveillance with the GuardPoint sonars and NOK 75 million. It's been some postponements in this project.
We have not done any revenue recognition, and we will not do that until we've received full post payment from the client. EBIT margin up from 8% Q1 2024 to 35%. Also worth mentioning, this growth of 92% includes, of course, revenues from the nice company we acquired last year, which now is NORBIT Innomar, located in Rostock, doing sub-bottom profiling. If we adjust for that, the growth would be 70%. Looking into the revenue mix, comparing to Q1, you see good growth both on WINGHEAD and on our other sonars, VBMS, etc. Adding to that also the sub-bottom profiler part and the other summing up to 233. One of the good points, this slide was with us also on the Q4 presentation, but what we see remaining very important for NORBIT is to increase the addressable market by broadening the product offering.
Late last year, we introduced a new generation of the VBMS sonar named VBMS X. It's a new version with a platform where the clients can buy additional features to upgrade by adding software functionality after they bought the sonar. This has been very well taken by the customers. In the revenues on the sonars, the light blue NOK 118 million, it's a substantial part being this VBMS X. Connectivity has delivered NOK 146 million in revenues. It's a 3% decline compared to the Q1 numbers in 2024, with an EBIT margin of 28%. It's on the same level as last year. Looking into the revenue mix, we see that it's growth, especially on enforcement modules, as expected from the mobility package from the European Union. It's a need for more of the enforcement modules connected to the digital tachographs.
With some decline in standard tolling On-Board Units, we're happy to see that we could offset that decline by growth on the other products. Again, as said in the introduction, remain diversified. It is diversified business segments, and within each business segment, you have product lines that also are diversified. That is important for NORBIT. Product innovation and realization, the revenues record high for product innovation and realization, NOK 160 million, 11% increase, and an EBIT margin of 14%. In these numbers, for the first time, we have a revenue split on industries in the segment. You see that the defense and security has yielded NOK 61 million out of the NOK 161 million, and automotive has been declining from NOK 40 million- NOK 22 million. This has been a strategy for us, replacing products with low margin with products with more acceptable margin.
Yeah, so I think that's the main part of this, industrial NOK 56 million. R&D services and some products on top of that, NOK 22 million. That's quite stable. During the last period, we have received two very significant contracts. First contract of NOK 260 million will be delivered in second quarter this year. And NOK 125 million, so part of it is shown in the Q1 numbers also at that. In addition, the mentioned NOK 125 million contract to be delivered second half of this year. In total, defense-related revenues in product innovation and realization approaching NOK 600 million this year. As said in the introduction also, the strategic investments we've done in capacity and organization has enabled us to be in a position where we can take responsibility and utilize on the growing demand for technology made in Norway, Europe.
I think during the IPO process, five, six years ago, a lot of people we met were a bit uncertain why do you bother manufacturing in Norway. Today, we see it was a good strategy, and we're happy to see that the further expansions also is in progress and progressing according to the plan. With that, I'll leave the floor to Per Kristian to give you some more flavor to the financial figures.
Thank you. Per again.
Spend some minutes walking you through the financial highlights of the quarter. Operating and financial performance in the first three months of 2025 was strong across the group. Revenues in the first quarter amounted to NOK 251.7 million, an increase of 29% from the corresponding quarter of 2024. Adjusted for Innomar, which we acquired 1st of July last year, the growth rate was still an acceptable 22%. EBITDA for the quarter was NOK 162 million, representing a margin of 31%. This compares to NOK 73.1 million and an 18% margin in the first quarter of 2024. Operating profit was NOK 127.4 million, translating into a margin of 24%. This compares to NOK 41.1 million and a margin of 10% in Q1 2024. Net finance expenses were negative NOK 10 million, explained by net interest expenses of NOK 4.1 million, while the rest NOK 5.9 million by foreign exchange losses and net other financial items.
Tax expenses were NOK 27.7 million, while net income for the period was NOK 89.7 million. In the first quarter, Oceans delivered a quarter with strong sonar sales supported by rental companies renewing their fleets. Growth from first quarter 2024 was 92% and 70% when adjusting for Innomar. Gross margin increased to 74%, largely in line with the prior quarters, but up from 68% in the first quarter of 2024, a quarter impacted by fewer WINGHEAD sales and higher share of low margin third-party equipment delivered. Payroll expenses was up NOK 12.3 million, of which Innomar explained roughly half, and the rest was new hires and wage inflation. Operating expenses was up NOK 3.6 million, while depreciation and amortization expenses increased NOK 2.1 million. In total, this gave an EBIT of NOK 81.4 million for the segment, and the margin was 35%.
Connectivity saw a revenue decline of 3% year- over- year, but reported a 2 percentage point increase in the gross margin, making the gross profit for the quarter largely flat from that of first quarter 2024. Payroll expenses increased NOK 2.4 million, but was partly offset by a decrease in operating expenses and depreciation and amortization. Hence, the EBIT result for the quarter was NOK 41.5 million and the margin was 28%. PIR posted a marked improvement from a weak first quarter last year, driven by improved operational performance. Revenues grew 11% and 23% when adjusting for sale of inventory in first quarter of 2024. Growth was driven, as explained by Per again, by strong demand from the defense sector. The gross margin increased 11 percentage points to 44%.
Part of the increase in gross profit was offset by an increase in payroll and operating expenses on higher activity, resulting in an EBIT of NOK 21.8 million for the quarter and a margin of 14%. Next, balance sheet and financial position. Property, plant and equipment, including rights of use assets, increased NOK 6 million in the quarter, following investments in machinery equipment. Intangible assets rose NOK 12.5 million, explained by R&D investments, with continued high activity on the GNSS OBU project in the quarter. Trade receivables were down NOK 23.1 million, explained by Oceans' sequential revenue decline, while inventories increased NOK 137.1 million in the quarter on purchases relating to the announced defense and security orders in PIR, of which a majority of the largest contract will be delivered in the second quarter this year. Cash flow impact was, however, reduced on a NOK 102.6 million increase in trade payables.
Looking ahead, we expect that the inventory level will fluctuate from quarter to quarter, given the anticipated growth this year, combined with the delivery schedule. Net interest-bearing debt stood at NOK 191.8 million at the end of March, a decrease from NOK 254 million at the end of the previous quarter. Our equity ratio was 52%, down from 53% at the end of December. In the first quarter, our net interest-bearing debt to EBITDA ratio decreased to 0.5 times, and our liquidity position stood at NOK 791 million. Our balance sheet continues to remain rock solid and provides for a strong financial platform to deliver on the capital allocation framework and the ambition plans that we have set out. A strong balance sheet also enables us to return cash to the shareholders.
In a few days, our shareholders will receive a cash dividend of NOK 3 per share, including a NOK 1 per share extraordinary dividend distribution, given our healthy financial position. Lastly, cash flow for the quarter. Cash flow from operations was NOK 101.3 million, explained by an EBITDA of NOK 162 million, a net increase of NOK 10.4 million in working capital, taxes paid of NOK 40.3 million, and NOK 10 million in net finance expenses. We invested NOK 47.8 million in the quarter, explained by NOK 36.6 million in R&D investments and NOK 11.1 million in investments in machinery and equipment. The R&D investment level is expected to be maintained in the second quarter. Cash outflow from financing activities was NOK 5.8 million in the quarter, explained by repayment of leases. With that, I'll give the floor back to Per again for the outlook section.
Thank you, Per Kristian. Looking into the future, we announced that for this year, our target is to deliver revenues in the range of NOK 2.2 billion-NOK 2.3 billion, with the EBIT margin improved compared to the 20% reported last year. Based on the current outlook, these targets are considered to be conservative. According to our policy, we update targets for the year during the second quarter. A bit more specific on the short term, in Oceans, we're moving into a seasonally stronger period, and the quarter Q2 has started out well. We would like to state that we expect revenues for the quarter to be in excess of NOK 220 million. In that, no revenue recognition of the mentioned NOK 75 million security project is included in that guidance. For the second quarter, we expect a higher activity also in connectivity.
We give a range from NOK 160 million-NOK 180 million in revenues. This is supported by strong demand for enforcement modules for tachographs and satellite-based units. In the product innovation and realization segment, we expect to deliver revenues between NOK 330 million-NOK 350 million. This is driven by the growth and the contracts mentioned towards defense and security clients. All in all, we're targeting revenues in excess of NOK 700 million in the second quarter. That concludes the presentation. If there are any questions, we're open to try to answer them.
If I can stand here and you can get on the floor.
Yeah, we do have a good couple of questions. Maybe I can start out. You present a margin target of 8%-10% for PIR.
Last year. The last couple of quarters and the Q2 guidance has been a bit over that. Is this more of a short-term spike or is it a structural shift? Is this primarily driven by the increased defense mix?
I think we will come back to new targets coming into August. I think I mentioned during my part of the presentation that we have reduced volumes on some clients with lower margins. That was a bit dilutive to our margins and adding on others, whilst we also have some benefit from running on higher volumes. As we speak, I think we mentioned it during the Q4 2024 presentation, that NORBIT is investing in a new line for surface mounting of electronic components. According to the Japanese manufacturer of this, this is supposed to be Europe's fastest line. We can then also get some benefit from that. As we speak today, the first boards are running in this line. That helps us going forward.
Sounds good. Just another question from me on that. You're currently undergoing the capacity investment or working on that at Selbu, right? Is this primarily to open for defense customers? Is it a mix, or could you provide any color on how you think about that capacity investment?
It's a general capacity increase. I think, as we've always done, NORBIT is allocating money to R&D in own proprietary technology to be sold under NORBIT branding in a global market. We build up capacity to meet increased demand. Also, with some key selected industrial or key selected clients, we grow with them as a contract manufacturer. Scaling both to have the relative between them is interesting for us.
Got you. I'm going to open the floor to Reppe. Revenue in PIR came in slightly below expectations due to delayed startup on large defense contracts. Wasn't these contracts anticipated for Q2 2025? And how much revenue from these contracts had you expected to book in Q1?
You're the one booking.
I think we had anticipated that a smaller share of the largest contracts we announced would occur in late March. However, we had some capacity issues in those weeks, so we had to sort of postpone the production startup. That is more of a timing effect. That was the main reason for why revenues came a little bit short of our guidance given in Q1. However, they are not lost. I think that is important also to say. I mean, those revenues will come in Q2, and that is also reflected in the guidance.
Perfect. The last question on PIR is from Petter Kongslie. What is the revenue capacity within PIR given the current footprint?
That's a very challenging question because it really depends on what you assume, what kind of products that we are selling out of the factories. In general, what we can say with the investments that Per made and the investment program itself for this year is that we have a lot of capacity to increase revenues. Again, it depends if we are running high volume production with the SMT line that we just bought and also new investments made this year. High volume production will have a significantly higher capacity utilization, hence higher revenues, whilst more manual work, of course, has less sort of potential and requires more investments.
Just to add to that, being simple engineers, we try to manage the company to have a utilization of the capacity that the normal day should be two shifts so that we could have both the ability to jump on opportunities with the third, but also if you have some delay, that you could catch up on that again.
Okay, perfect. We have some questions on Oceans. We could start with Reppe again. Oceans' revenue exceeded expectations, driven by strong sales of new products, including to rental companies renewing their fleets. How should we view this going forward? Is it a recurring revenue stream or more of a one-off boost?
I think, as Reppe knows, the visibility in Oceans is always challenging. From receiving an order until we have delivered, it's a matter of weeks. It is very, very hard to say. As we've said also for Q2, it started out very well. We see that the new products we've introduced are very well regarded in the market, and we really see good opportunities for continued growth.
There are two questions on the GuardPoint contracts. You mentioned that the original client or integrator failed to meet the payment terms and that the new buyer has been secured. Will the GuardPoint system still be used to protect the same assets, or does this represent a completely new sale or geography?
The end client, the user, the asset owner remains the same.
Okay. Yeah. Petter then again asks if there will be progress on the NOK 75 million GuardPoint contract, but I guess you've been into that. I have a question as well on the Innomar. It's been a NORBIT company for a couple of months now, a good six months, if I remember quickly. Could you remind us on the synergies with Innomar and maybe also how has that materialized compared to your previous expectations?
I'm very proud of having Inomar as a fully integrated member of the NORBIT family. For sub-bottom profiling, it's a market-leading position. I think what we see of synergies that already has become relevant is that NORBIT's global market footprint is also bringing Innomar out. Whereas Innomar in the past has been a bit more reactive in the market, we're now supporting and bringing it more proactive. I think seeing engineers from Trondheim, Hungary, and Rostock working closely together on new generations also for sub-bottom profiling shows that engineers are engineers.
Sounds good. Then we have two questions from Erik Stangland. The first is, can you leverage your customer relationships within defense customer built through FLS integration in IVs to market GuardPoint? It was a bit of a rough one.
I didn't get it fully.
He says, can you leverage your customer relationships with defense customers built through the FLS integration in AVs to market GuardPoint? I guess in one, he tries to see the synergies between PR and Oceans.
I think any client relation is a way into a new one. I mean, it's all built on relevant references and a good reputation. I think the clients and the market for GuardPoint and the forward-looking sonars, the FLS, are slightly different. It is important to do a good job in all segments.
Got it. Then more of the cyclical part of Oceans. Erik asks, a good portion of your clients in the Ocean segment serve the offshore wind industry. Are you seeing signs of a slowdown in demand from those?
It's a bit hard to answer. I think when we saw, call it the first wave from the rental companies buying WINGHEADs, our take was that this was primarily driven by the offshore wind trend. In Q1, we had very good sales towards rental companies again. What kind of trend that is, I'm not fully sure, but the orders are well received.
That's good to hear. There is also a question on M&A. Is it getting harder to find attractive acquisitions in Ocean? Presumably, that valuation multiples have expanded for those companies as well. Maybe if you just could provide some color on how you think about M&A these days.
Yeah, so maybe a little bit more general answer to that. I think it's always very difficult to find good targets for M&A. That's because we're very cherry-picking. I mean, we have a very long list of companies we have decided not to try to buy or decided not to buy. What we're looking for to do strategic acquisitions like with Innomar, we want to see companies where it's clear synergies, positive synergies. It should be in the market or on technology. Also, we need to see that these companies have the potential to deliver margins in the range that NORBIT want to. I mean, there are a lot of companies with cool technology, but simply too low margins. Then it doesn't fit. The largest criteria underneath all this is that we need to see a cultural fit.
I mean, we're very much focused in NORBIT on the company culture. Then we think that the company we should include into the family expanding NORBIT need to benefit from this culture and want to be part of it.
Perfect. Before we move on to the general questions on connectivity, a question from Petter Kongslie. In the guidance on connectivity for Q2 2025, how much of the NOK 160 million contract you won last year have you included?
I guess Petter is referring to the GNSS OBU contract. There is very little of that in that guidance that we are providing Q2. Most of the volume production will start from Q3.
Okay, yeah.
I think that's communicated before also that this is primarily second half.
Yeah, because his second question there is, is it correct to assume that the NOK 160 million contract within connectivity is based on six months of volumes from that customer?
I say second half.
Okay, good. Reppe has a question. In your Q2 revenue outlook for connectivity, you mentioned one of the drivers being the satellite-based tolling product. Is this including the new GNSS OBU?
No. This is enforcement modules for satellite-based tolling that we've been delivering also previous years.
Perfect. I guess then we have two questions to wrap it up. Knut Martin Karlsson has a question on more of a strategic level. How does NORBIT ensure that the managers of each business segment have a clear understanding of the cost of capital relevant to their operations? Is that incentivized or structured in a way that reflects the varying levels of capital intensity across segments?
I think we're, as a management team, we manage NORBIT as one NORBIT. In the corporate management, all segments are included and prioritizing as one NORBIT. I think it's easy for everyone to agree that we should allocate most capital where it pays best off. Also ensuring that we remain diversified.
I guess a question that you can't really answer, but Reppe tries. You describe your financial business as conservative, yet you're choosing to keep them unchanged. What's the rationale behind maintaining the current guidance?
I'm not sure we said that they're unchanged. We said that this was the targets we have announced. We say that we consider them conservative. We say that according to our policy, we will give revised guidance or targets as part of the first half numbers being presented.
If there's not any questions here in Oslo, I guess thank you. We look forward to see those targets in Q2.
Thank you.
Okay, thank you.