Stora Aktiedagen 2020

Dec 1, 2020

Good afternoon, Louis. Good afternoon. Welcome, and how are you doing? Fine. Thank you. Thank you for having me. Thank you. Okay. The senior is yours. Please go ahead. Thank you very much. Thank you, everyone, for taking the time to listen a little bit about what we are doing, what AEC Clyde Space is doing. So we are a space company. We manufacture hardware for space and we operate in what it is probably the fastest growing sector or subsector of the space industry. So we are operating in new space, in small satellites. And this is a sector that is growing exponentially right now. So what is happening is that due to a change in the technology to a new smaller spacecraft. The spacecraft we are building are about the size of a shoebox, 30 centimeters by 10 by 10. Because of that, we are being able to actually build much more complex systems and replacing satellites that used to be much bigger in the past with much smaller, much lower cost options. And what this is leading to is an all new range of applications. Things that in the past could only be done by large space agencies and large companies, can now be done by much smaller companies and can be done much more widely by many different individuals and organizations. And this is leading to a growth, an exponential growth in the number of satellites that are to launch in the next few years. And on this slide, you can actually see the growth that we have seen already and the growth that we expect to see in the next in the next 10, 15 years. And this is quite an important aspect of why we are operating in this sector. We see this as an area, as an industry that has quite a lot of potential to grow. So, IAC GlideSpace, we started as originally 2 companies, OAC Microtech in Uppsala and Clyde Space Limited in Glasgow, in Scotland. And, ISC Microtech acquired Clyde Space in 2018. And but this company is actually formed of 2 companies that started operating in 2,005, originally building components and subsystems for spacecraft that other people were then using on their own spacecraft. But we have been transitioning for the past 5, 6 years into a much more into a much more spacecraft oriented, satellite oriented company. What we are doing nowadays is we are building our own satellites, we are integrating our own components that we develop in house, and we are building them into satellites and offerings that we offer our customers, we offer to the world as products, as satellite products. We still sell quite a lot, subsystems and components that other people use, these be computers or power systems, but we are more and more doing satellites. And what you'll see is that actually of the satellites that have been launched since 1998, a large number of these carry components that we have built. And that is important because that gives us a huge amount of experience in how to build and design and operate components in space. And that is an experience we are now using when we build our own satellites. So we've got production facilities in Uppsala. We are headquartered in Uppsala. We have production facilities in Glasgow, in Scotland, and now we also have production facilities in Delft, in the Netherlands. And we are traditionally, we have been building satellites in Glasgow and components and subsystems in Uppsala and Belt, but we have now started also to build our own satellites in Uppsala. And we are a company that are growing. So our revenues this year are expected to reach around SEK 100,000,000, if not more, with the new acquisitions. Last year, we reached SEK 66,000,000 and our order backlog has grown since 2018 by 150%. And with the 2 acquisitions, so we have completed the acquisition with Iperion in the Netherlands, and we are now actually going through the final stages of closing our acquisition in the U. S. So as I mentioned, this is a very rapidly growing market. It is expected to be worth something like $42,000,000,000 between 2019 2028. And we are a company that we are very well placed to take advantage of that growth. We are present globally. We sell from Japan to Africa, South America, North America, Europe. We do actually 30% of our business in North America. It is the fastest growing market for these kind of products. And we offer a range of products. So we, as I mentioned, we offer small components that people can use on their own spacecraft and build into their own systems. But we also offer full systems. And more than that, we are offering services. We are offering fully serviced spacecraft, where we build, we design, we build, we launch, we operate, and then we actually only deliver what customers need. And this is a unique offering to the market. So to give you a summary of these products, so as I mentioned, space as a service, this is something that we see as the fastest growing component of our business. This is where we are actually offering customers not just the satellite, the technical solution hardware, we are actually offering them an entire solution for what they need. So they come to us and they say, you guys, you have lots of experience, so build me, design, build, and then operate the spacecraft. And this is an important aspect for them because the operations are usually something that for companies that are not space focused, can be quite expensive. For us, we just have the infrastructure right now. So what we are doing is we are taking care of that part space side and just allowing these companies these customers to actually focus on their core business. Of course, we also supply missions in a more traditional way that is turnkey missions, where we design, we build to a specification from our customers and then we deliver to them and they operate the spacecraft. And we are doing that with Eutelsat, for instance, in France, and we are doing that with a range of other customers. And then, of course, our baseline, our base product that is components and subsystems. And we build our success in other areas, in platforms and in space as a service with these ones. These are the components, these are the computers, the power systems, the batteries, the control systems that we need to build successful spacecraft. And just to give you an idea of the kind of missions we are working on, so this summer we announced actually a partnership with SAB in Sweden, ORBCOMM in the U. S. And with Traffic Verket in Sweden also. And what we are doing is a thing called VDS system. And these are VHF data exchange systems. So these are an extension of a system that you might have heard of in the past called AIS, automatic identification system, that is used widely to identify ships at sea. It's usually a navigation aid. It helps ships to be secured, to be safe, to not collide. And what we are doing now is an extension of this. And that extension actually lost communication. So you can actually, from satellites, start to communicate with ships. You can receive telemetry, you can send commands to those ships. And what this does is not only helps with not only helps with navigation, but it now actually opens the door to remotely controlled ships around the world. And also it allows us to actually develop a low cost communication system that with using technology that most chips already have installed, so VHF, VHF AIS systems, we can actually now enable a much more capable communication system that allows ships to actually send messages, receive messages, and that is an advantage over other communication systems for ships and for shipping that are very expensive. This one would be extremely low cost. So this is an example of something we are doing. We are developing the 1st satellite. We'll launch that in 2020. And the objective in the future is, if that is successful, is then to evolve into a much wider network, a constellation of satellites that can offer real time services. Another one that we are doing, and this is sometimes seen as a little bit more scientific, but the reality is it is it has very practical applications, is Seahawk. And we are doing this with NASA in the US and with the US University. And this measures the ocean color. And what we are doing there is actually identifying plankton levels. We are identifying pollutants in the ocean. And in this way, we can actually not only monitor the health of the oceans, but we can give very clear information to the to users of the ocean, being it fishing companies or being it coastal resorts, for instance, that want to know the quality of their water. And this has quite a financial impact for many communities. So this is what it does. It takes pictures of the ocean, divides those pictures, the light in different colors, and then by analyzing the different colors, the different densities, we know what's on the water. And you can see some examples there. So the light green at the bottom is actually the carol or phytoplankton. And this is an image that shows what is small satellites, and this is a very small satellite, we are talking about something that is 10 centimeters by 10 by 30 centimeters, these can do nowadays. And because they are very low cost, they are very small, you can launch lots of them, and you can have a very wide network covering the globe. So I mentioned Space as a Service before, and I'm just going through a little bit more what it offers to customers. So it is a fully serviced mission that are designed, built and operated by AEC Clyde Space on behalf of our customers. The Space assets can either be owned by us or by the customer. More traditionally, they would be owned by us. And then we actually operate them. And what we do is we just deliver a service, so the product of the service, to the computers, to the ground computers of the customer. So they can leave all the space, all the space assets to for us to deal. So all the ground networks, all the ground stations, all the control stuff, we do that for them. And that is a very appealing offering for many of these customers. Most of them are not focused in space. They have a very successful business on the ground. They want to focus on that core business. Space is just a tool, and we can take care of the entire service, the entire space segment for them. So we can't just deliver what they need. The attraction for us is that these are actually more profitable businesses. We usually can look at about 30%, 40% profit margins unlike, for instance, what we do on hardware. And actually, this is where we see the biggest growth. We are now talking to several customers that want to actually move away from just buying satellites, buying hardware, operating it themselves, and they are actually now talking to us. Can you do that for us? Can you operate that for us? Because that is something that allows them to focus on their core business and not having to be distracted with space. We have those equipments. We've got ground stations. We actually have all the stuff that we need to operate successfully these satellites, so we can do that for them. And actually, this also simplifies very much the decision process for customers. If they don't have to actually focus on that network, on that equipment on the ground, they can actually, much quicker in a much quicker fashion, make a decision. And what we are seeing now is that, actually the small satellites that until probably 5, 6 years ago were still seen as experimental are now becoming the norm. And more and more we are seeing companies with very, very experienced in space coming to us and wanting to actually use these small satellites as their core product to deliver their service. So last year, we signed a contract with ORBCOMM. ORBCOMM is an asset tracking company. They have a machine to machine communication system, So they're very successful. They've been operating for many years. They have a very well established business model. And they came to us actually with a request for a space as a service product for AIS. And we are building an AIS mission, 2 satellites for them, again, very small satellites, these 10x10x30 centimeter satellites, and we are building them as a space as a service for them. We're also working with Eutelsat, and these are slightly bigger satellites, these are 20x10x30 centimeter satellites, These are designed not as a space as a service, but as a turnkey mission. And they're building them as the beginning of their IoT, Internet of Things constellation. And they are probably one of the world's biggest satellite operators. And the fact they came to talk to us actually shows the confidence and trust they've got not only on these new technologies, but also in us as a company, AIC, client space as a company. And we continue to work with many space agencies, many universities, many companies that are in the startup phase, they are demonstrating a new capability, they are demonstrating a new business model. So we continue to work with them, growing the future basis of our business. And competitors, we do have a variety of competitors. I like to hear probably the ones that are more present on day to day. And as far as I know, we are the only ones that actually currently now have a space as a service contract. And this makes the big difference. It is actually takes a certain ramp up to actually go from signing a contract and actually be able to deliver it. We are already ahead of that. We are ready to launch these satellites. We are already working with our customer ORBCOMM on this product. So we are well advanced. And this is something that we see as a key differentiator for what we are doing. This ability to understand what is needed, how do you actually make Space as a Service contract a success. And this is something we are already working, and that is opening us the doors to many other conversations with customers around space as a service as the future for our business. And just to give you an idea, we have had a busy 2020. So although we actually have been in the midst of COVID-nineteen issues, The fact is we have continued to actually win new contracts. We have continued to actually develop our business. And we have some spacecraft contracts. Got some grants actually from the Scottish Enterprise, so that's the Scottish government that gave us a grant to develop our next generation next generation satellites and next generation avionics solutions that we will be using on next year. What we have, we have actually done, as I said, we have started this agreement, this joint work with Saab and Orcom and Traffic Vericut to develop a new technology and a new system in space, to demonstrate a new system in space. And recently, actually, just a couple of weeks ago, we signed an agreement with European Space Agency and the UK Space Agency to develop a whole new way of implementing constellations, these big networks of satellites. And that is a very, very important thing for us that is actually transformational in the sense that will prepare us to supply a whole new generation of spacecraft. And we, as I mentioned, we acquired Hyperion Technologies. This is a company that actually brings to us a whole new range of avionics components that we needed for our own spacecraft, but also very exciting capabilities in propulsion, something we didn't have in house, and also in laser communications. This is very much the future of space space communications down to Earth and between satellites. And we are in the process of acquiring Space Quest. The company in the US gives us the footprint in the US, and also what it gives us is a space as a service capability. So they have been doing this for a few years, and they already bring that experience. They already bring the ground stations to actually do that and satellites with them. So in terms of our strategic agenda, so we are improving. So we set up last year to actually do some improvements in terms of reducing our costs, bringing standardized products. This is a process that we continue to do. We are focusing on customer constellations, so that is building large networks of satellites, increasing our production capacity, grow and improve our capability to provide services. We're going to do space as a service successfully. We have to actually build that capability. We have been building it. We are acquiring Space Quest to improve that. And of course, we want to maintain our high reliability and quality. Those are important steps for many of our customers. We have a track record of showing that we can do it and we can operate in space, and it's very important. And then we are growing the company. So we also have an agenda to grow the company. We are increasing our production capacity. We do about 8 satellites a year, then these are all slightly different satellites. So they require quite a lot of engineering time, reengineering, so we are increasing that capacity to about 20. Our opening our facility in Sweden to do that is part of that plan. Of course, we can build large constellations. We could build about 100 spacecraft if they're all the same already. Already have the capability to do that. But we are growing our ability to do slightly different variants, but some customers want satellites to be different. We continue to acquire companies, so we have done that this year, and we want to acquire companies that bring value to the business. We believe that some companies are out there that actually bring something we don't have right now and those are the ones that we are interested in. And we continue our geographic expansion, acquisition of Space Quest is part of that. Joining the OTC market in the U. S. Was part of that this summer. And we will continue to do when it makes sense to expand our footprint. And of course, we are developing new Space as a Service offerings. As I mentioned, we are working now with several customers in that possibility, and we see that as the strongest growth path for our company. So in terms of key takeaways, what I'd like is just for you to say that to take away from this brief introduction to us is that we are actually we are a company that we have the ambition, we have the capability, and we operate in a market that is growing exponentially. We are very well established to take advantage of that growth. Our revenues are growing faster than costs, what is good for our profitability. We are actually offering offerings to the market or solutions to the market that they demand, that they require. We have that ability in house, we can do all aspects of design, we own our own IP, we can actually build our own solutions to customers, and we can adapt them to customers. And we get that very quickly. And we have a clear path to plan to grow. So we have already shown this year that we are doing that, and we want to continue to do that. And ultimately, we want to become the world leader in commercial small satellites. So I would like to leave you with those takeaways. I've got some slides on the revenues. These are this is just a summary of what you can read on our quarterly report. So you can see there, but you can see that we have been growing our revenues. Our order backlog, despite this year being a slower year because of COVID early in the year, it's still holding nicely. So we look forward to now when things improve. But thank you very much. Great. Thanks for a very interesting presentation. And we now will start the Q and A session. You said you had growing revenues and your costs are sinking. But when do you expect a positive cash flow? So we had expected them in 2021. So our objective was to actually, in 2021, to deliver a positive cash flow and positive EBITDA, operational cash flow. Of course, with COVID, we had to delay we had some delays early in the year. So around mid of the year, we had some delays in terms of projects and things that we were delivering. And as such, we have delayed that forecast. And we are now expecting that to be 2022. There is a chance that it could be it could still be in 2021, but we will have to see how fast we recover how fast the economy recovers from the impact of COVID-nineteen. Is the positive cash flow scenario that you have outlined, is that dependent on a certain critical mass of space as a service satellite in commercialized? It is dependent on a mix of things. So we have different routes to achieve that. So we have been looking at different routes. Of course, space as a service is one part of that mix. It's not I wouldn't say it is dependent. There are different routes where we could actually do turnkey missions that achieve that number. Actually to some extent Space as a Service usually takes a little bit longer to actually show its impact on our day to day operations. But nevertheless it is part of that mix, but it's not the only thing. So I would say there is a critical mass that we need to achieve in Space as a Service to get to that position. And how is the current picture of how much does each segment give generate for revenue, so to speak? Can you elaborate a bit on that, please? So we are coming from a background where subsystems and components were selling were about 70%, 80% of our business. This year, they are actually becoming much smaller than that. So they will be about 39% of our business, 56% will be turnkey and the rest will be effectively or next year, sorry, next year will be space as a service. So what I expect is the growth of Space as a Service is much faster than on the other components of our business. And I expect that at some point it will become the majority of our business. Is it correct that space as a service will require more capital since you have to build and keep those satellites and then in turn get paid back through the payments we have? I would say that there is it can be done like that. We have been fortunate enough for the contract that we've got right now in space as a service. We actually receive quite a lot of the capital ahead of the launch. So we actually pay for a percentage, a large percentage of the contract ahead of the launch before it's the revenues. Yes, there is a gap. There is a gap, but I would say that right now we are actually in a fortunate position where we are doing quite well out of that in terms of cash flow. It then depends on how quickly we want to grow that part of the business. You can be more aggressive and you can actually take more to provide more investment or you can just keep a more conservative approach to those deals. And how many satellites do you have in orbit now as space as a service business? Right. So the service we launched the first two next year. So we'll be launching the first two next year. Okay. Sorry. I will say that also, I should say that actually our Space Quest, the company that we are acquiring already has a few of those satellites in orbit, so they've got 5 satellites that are operating right now. So once that transaction is going, we will have more satellites in orbit, yes. Okay. And that was also a question. Those latest acquisitions you have made, what is the key things they have, so to speak, brought to the table for your business? So in the case of Iperion, what I bring very much to the table is a set of avionics that complement what we already have. But that is onboard data control systems that are helping us. There were systems we were already using, we were actually customers for them. And those will complement that in our satellite. So they improve our satellite business. They also bring to the table a propulsion system that is something we have been looking for a while. We need to start using it more on our spacecraft. And then also they are using they are working quite extensively on laser communications. That is something that we see as a quite a potential new technology, quite a key technology for the future of this business. And because of Space Quest, what they are bringing to the table is not only some important components, parts for satellites that we need, but also the fact that they've got already a network of ground stations and they've got satellites in orbit and they've got quite a lot of experience in delivering services from space and operating spacecraft, operating a constellation of satellites. So we are bringing all these things together and they will help us in our current activities. Okay. And we have a question from the viewers. It goes as, do you compete with SpaceX? No. No, we don't compete with SpaceX. We are actually quite I would say almost quite the opposite. We are very keen on using some of SpaceX's launches. Several several of our satellites are being manifested on SpaceX launches or possibly will manifest it on the on SpaceX launches. So we are very keen that they are very successful because we actually want them to launch more. And the kind of satellites we are making are not operating in the same are not delivering the same kind of services that they are delivering from Starlink. So I would say that, no, we are not competing with them quite the opposite. We are using a lot of their success. And you touched on earlier, you talked about that in the presentation, but we could spend some time on that. What do you think is what is the main, would you say, driving force behind this growth of the space market? Is it 5 gs or Internet of Things or Dump's maybe into the twin, so to speak? Or I think it's a variety of things. I think many of those if space can deliver a solution for them, of course, we will and it will be successful. So 5 gs, for instance, for trunking of data, but also for direct distribution of communications might be something that will become very important in the future. Internet of things as a clear appeal is something that we have been doing Effectively, my first work in 2000 and 1 was on a mission that was effectively doing a form of Internet of Things. And already then it was obvious that satellites are an ideal solution for those kind of things. Environmental monitoring is something that we see now as quite an important aspect with the challenges of climate change and particularly the management of its impacts like weather forecasting. As the climate becomes more unstable, we actually need to do better forecasting. And those are things that satellites can help and are already driving. You see already an appetite from users, from governmental agencies, but also from private companies about those things. So I show the example of Seahawk. One of the things that Seahawk does is helping fishing industry understand where the fish stocks are. So those there are several drivers. I think the technology is an enabler. The fact that we are making spacecraft smaller and cheaper to build and cheaper to launch and easier to operate is actually developing a series of applications. And I'd say that it's difficult right now to say which one is going to be exploding into the market. There are several that are growing very fast. Is there any risk that space will become like overcrowded with small satellites? Could they be a danger for space missions due to the high velocity if they collide with something? And do you have a responsibility also for bringing down each satellite that you bring up? How does this work? How is it regulated? Maybe not so much time left, but please. We are a good space citizen. So when we actually build our spacecraft, we build them in such a way that we minimize the amount of debris. There is a risk. There are many satellites. Space is pretty big, so the probability of collision is nevertheless quite low. But there is a risk and we have to acknowledge that and we have to manage it. So we our satellites are designed so that they reenter in the atmosphere and they burn in the atmosphere after a few years when they stop working. So we are in we are operating in that mode. And of course, we are regulated. So far, our satellites have been regulated and have been licensed in the U. K. And the U. K, the United Kingdom has quite strong rules and regulations on a good space citizen and not actually polluting too much the environment. So we are doing that. We have a responsibility, of course, our licensing conditions depend on us behaving. For instance, one of the reasons why we are so keen on having propulsion on our satellites is because we want to be able to reenter, force a reenter into the atmosphere. So we are actually operating that nodes and we have our 3rd party liability insurance, all those things that we need to operate safely in space. Okay. And unfortunately, we have run out of time, but you very much for a very interesting presentation. Thank you very much. Thank you. Thank you. Bye. Bye. And next