Småbolagsdagen 2020

Jun 10, 2020

I will say a warm welcome to Mr. Luis Gomez. Are you with us? Hello. Good morning. How are you today? I'm fine. Thank you. You are the CEO of AEC Clyde Space. Indeed. Where are you situated at the moment? I'm in Glasgow, where I've been for the last 3 months. Okay. Yes. In meltdown. Are you stuck there? Yes. Yes. Okay. I'm looking forward to your presentations. So I'm leaving the screen for you and talk to you in a little while about some questions and answers regarding your company. Welcome again. Thank you very much. Thank you. Good morning, everyone. Thank you for the opportunity to actually let me explain a little bit what we are doing at AAC Clyde Space. So we are a company, we are based in Sweden, in Uppsala. We started life as AAC Microtech. In 2018, we acquired Clyde Space that was a satellite company based in Glasgow. And since then, we have merged the 2 companies and we are now AHC Clyde Space Group. We offer turnkey solutions from mission design to in orbit operations. So we build from components from we design our own components, our own onboard computers, our own solar panels, batteries and then we integrate those into making satellites. And we operate in the 1 to 50 kilogram range as well as supplying subsystems for third parties and so we have a wide range of customers worldwide using our subsystems. We've got 2 production facilities. So we work in Uppsala where we specialize in mostly 2 types of subsystems, so power systems and onboard computers. We are very successful with those onboard computers and power systems from Occella. And in Glasgow, we do a range of what we call cubesat electronics and also satellites. So we integrate them into our own satellites, usually cubesats, a few few kilograms, so 5 to 20 kilograms cubesats that are then sold to a variety of customers. We have been operating for many years in space. We of the 1500 or so small satellites launched since 1998, you'll find parts that AAC Clyde Space has built on many of those satellites, be it a battery, be it a small power solar panel or a computer. So we have done quite a lot. We have been present in many of these satellites. We have a long experience both AAC, Microtech and Clyde Space of supplying the space industry with high quality and reliable subsystems. Our growing order backlog has grown up to the end of quarter 1 from the beginning of 2018 or from the end of 2018 to 173 percent to SEK183 1,000,000 showing how this market is growing. And all of that backlog comes from our growth in satellites. So we are building more satellites. We are now moving from just supplying subsystems to supply emissions and we are actually moving more towards that side of things of the market. So our financials have been improving. So our revenue on quarter at the end of quarter 1, 2020, was substantially higher than last year, showing an improving situation. Our EBITDA has not grown as much as we wanted, but we are making progress on that. We have said that our objective is to be EBITDA positive next year in 2021. And last year, we achieved SEK 66,000,000. But as I say, things have been improving this Q1 of this year. Despite what's happening with coronavirus, we still managed to actually grow our revenues when compared to 1 year ago. And we have a share issue last year. We raised SEK 82,500,000 and we were substantially oversubscribed. So in terms of order backlog, our order backlog has been growing. And as I said, this is very much down to satellite to the growth in the satellite market. We continue to supply subsystems, components that go into a variety of satellites all over the world. But the growth that we are seeing is now on the satellite side, on the platform, the fully integrated platform. And this comes down very much to the fact that the market is actually growing. So the market for this kind of technology is estimated to be worth about $42,000,000,000 from 2019 to 2028. Of course, this includes a variety of different sectors. So this is the hardware manufacturers like ourselves. It includes the launcher business. It includes a lot of the downstream, the people that are using this data. But the fact is we are operating in a growing market. And we have a global presence, so we operate all over the world. We supply very different types of customers from institutional to commercial customers, some of which are actually very well experienced or very experienced in using space technology. And we do this by using highly standardized miniaturized high performance platforms and subsystems. So many of our subsystems you can just plug and play them together and you can actually build a variety of different satellites for different applications. And as I said, we are aiming to actually reach a positive EBITDA and a positive operational cash flow in 2021. We are a team comprised of people that have been working in the sector for many years. At the same time, we have a very young and vibrant engineering team. So we are actually bringing together the skills, the experience, but together with the innovation and the new ideas that the market requires. And as I said, this is a market that is growing. We expect an exponential growth in the number of small satellites launched, cubesats and slightly bigger than cubesats. And this is due to the fact that these small satellites can accomplish now tasks that in the past required much bigger satellites Because they cost less and because they are much quicker to build and they cost less to launch, they are actually enabling a series of applications that if you were using one single very large, very expensive satellite, you could never afford. But now that you can actually do it with smaller satellites and with more of those, you can actually start operating large constellations. And this is groups of satellites that are then used to accomplish an application that requires a distribution of satellites all over the Earth, low Earth orbit. And this has opened a whole new range of activities. So there are certain things around communications, Internet of Things, tracking of assets on the ground that really only became possible once you have these small satellites delivering these types of service. And what is meant is that many more commercial entities have started to come into this sector. So in the past, space was very much the preserve of large organizations and very large corporations. And what we have seen over the last 10 years is that more and more small companies with great ideas are coming into the market and are actually starting to apply those ideas to actually make a business out of those ideas. And we have been working with a variety of those. So much that nowadays we are what we are seeing is a little bit the opposite, is that large corporations, large companies with a big track record on using space And with experience of using much larger spacecraft, they are now coming to talk to us and saying, okay, we see that this sector is growing. We are very interested in your applications. And this was seen last year when we had Eutelsat, one of the world's largest satellite operators coming to us and buying 2 satellites from us for Internet of Things applications. Now those satellites are what we call a full turnkey solution. And they build and they are one of the products we supply. So we are offering, as I said, from small cube components. So you see in this slide a picture of actually of many of our components that we supply and we then also build them into full satellites, so into missions. And those can be just in terms of platforms, we can supply a platform to a customer that then integrates their payloads or we can actually do the entire turnkey mission for them. And that's what we are doing for Eutelsat. We are also doing something now that we believe it's a big change in the market and we are seeing that as one of the big growth opportunities in this market and that is Space as a Service. So we are seeing more and more an interest of many of these companies not in owning and controlling their own satellites, but actually just getting the service they require from space. This allows them to focus on their business, on their core business without actually having to have the infrastructure and the staff to actually control satellites. And as such, we are starting to offer space as a service. And our first contract for that has been with Orkom last year, another large operator of satellites in the world and they decided we don't want to actually have to operate all these satellites. So you guys, you build them, you design, you build them, you put them in space and then you operate them and you just give us the service we need. And this is a trend that we see continuing. We are seeing more and more people coming to us and asking us, can you set up a space as a service business model? And our company is transitioning. So from being a subsystems and component supplier with some platforms and missions and a little bit of space as a service to becoming a much more subsystem still, still a big part of our business, but the growth is on the platforms and missions and space as a service. That's where we see a lot of opportunity. And this is something that it's validated by the market. So we see our customers more and more coming to us and asking us, can you actually set up these types of deals? Just to give you a little bit more of information on what space as a service is, So it's a combination of missions. So we design and build and arrange the launch and do the commissioning of a satellite. And then we actually manage that satellite, that service on behalf of our customers. So in the case of Qualcomm, what they do is they get a few messages every day, a large number of messages actually from AIS, from their AIS, automatic identification of shipping terminals. So the satellite collects those and then downloads those to the customer to ORBCOMM. It could be images if we were doing that for Earth observation mission, we could just actually deliver to the service to the service user. We could just deliver them the images that they need. So it's a powerful model because it allows customers, it allows users not to have to actually think and worry about how to manage the size segment of their business. And that is becoming increasingly important because these large constellations require quite a lot of maintenance, they require actually a range of ground stations. And it is for a supplier like us, a manufacturer like us, it is fairly cost effective to actually operate many satellites at the same time. But if you're only operating a small constellation for yourself, it can become less cost effective. So hence, why asking someone like AAC Quiet Space to take on that part of the business. And this is part of our strategic agenda. So when I joined the company about a year and a few weeks ago, so May 2019, we set out to actually consolidate our business. So we quite a lot of work on the reduction of costs through introduction of standardized platform and subsystems. We focused very much on the constellation customers and how do we actually grow from just producing 1, 2 satellites to large constellations. And we started by looking at M and A options. We had some we have some there are some interesting opportunities in terms of technology and in terms of business models. So that was the first job and we continue to do that one. We also looked immediately at improving. So we looked at how to increase our production capacity. We needed more staff and so a bigger workforce with different skills, with more skills. So we have been doing that. We have been putting that in place. And all of this, of course, maintaining the high reliability, the quality and performance that we are known for. ASE Clyde Space has a long history in the space sector. We have actually demonstrated good quality, we have demonstrated reliability of our equipment and also performance and we want to keep that. So that's probably one of our unique selling points and we like to actually make sure that whatever we do, we maintain those qualities. And then of course, we are looking at how to grow. So we are currently working on growing our production capacity from 8 roughly 8 satellites a year to about 20. So this we are talking about satellites that are all slightly different, so they all require quite a lot non recurring engineering. So they take a bit longer than if we were just building the same satellite over and over again. Because if we were building the same satellite over and over again, we probably could ramp up our production to about 100 satellites per year already quite easily. But if we are actually doing a variety of satellites, we are actually limited by the number of by the number of engineering hours that you need to put to those, but we are increasing that capacity. We're also looking at geographic expansion. We have said many times that we see the U. S. In particular as a market of great interest for us. We are actually quite successful in U. S. Market. We supply quite a lot of components and subsystems and satellites for commercial entities. But if we want to actually supply the more institutional markets in the U. S, we need to be present there. We need to have a facility there. And we are working on that. And we have said this many times, of course, we need to find the right deal. So we have looked at a variety of options from setting up a facility there to actually acquiring a company in the U. S. We have looked in quite a lot of depth, but we need to do that in the right way. So we are looking quite carefully at the opportunities. And then of course, the growth, as I mentioned before, the growth path the company is developing space as a service offerings. As I said, we see quite a lot of demand from the market for these kind of offers, and we are actively working with customers on this. So our key milestone in 2020. We are finalizing our fully in house test capability. We are acquiring test facilities and test equipments that will allow us to actually do our test in house. We already do quite a lot of it, but it allows us more flexibility, reduces our costs and also allows us not to be dependent in terms of schedule, not to be dependent of third parties. And we do enough satellites to actually justify having these capabilities in house. We are opening a new satellite integration facility in Uppsala and this will increase our production capacity by about 20%. We have the space, we have the facilities, we have the people, so it actually makes sense to use that. It reduces our needs to expand to new premises with all the associated costs. And also allows us a geographical distribution, so we can operate in different territories and that sometimes has advantages. And as I said, we are growing our workforce, so across the board by about 20%. We will be producing about 8 satellites towards the end of this year and that requires an increase in our skill base and manufacturing capacity and we are also introducing our 1st iteration of the platform functional unit. You might have seen that we received the support of the Scottish government to develop this unit. This is a new highly standardized, highly flexible satellite control unit. You can use it for 1 kilo cubesat all the way to probably 300 or even 500 kilo satellites. It's a very small unit, but extremely powerful and very configurable. So you can just by changing the software, you can reconfigure the way it works. And so it will allow us to very quickly reconfigure our satellites without having to actually change massively the hardware. And that is one of the reasons why satellites cost a fair amount of money, but also take time to build. And that is also one of the reasons why, for instance, have limitations on our capacity, on our yearly delivery of satellites is because we need to do quite a lot of changes when customers ask us for different missions for different kind of applications. With something like the PFU, the Platform Functional Units, we can very quickly reconfigure the entire satellite to have a different payloads, to have a different instrument to deliver a new format. And that is becoming increasingly more important as we see not only the communication sector where we are already quite active and quite successful, but we are also seeing quite a lot of demand from the environmental monitoring sector, all the issues around climate change, around environmental threats. And those payloads usually are more complex and require different types of satellites than communication payloads. Not so much complexity in terms of its workings, but in terms of the needs of the satellite. They require pointing, they require a series of other capabilities. As such, I think the PFU will be a very important thing for the future. So as just key takeaways, the market for small satellites is growing. We are an established player and we are very well positioned to capitalize on the growth. We offer full end to end solutions and state of the art small satellites to both industrial, commercial and institutional clients and these offer quite a lot of opportunities for recurring revenues. And we have quite a clear plan to grow both organically and through bolt on acquisitions. That plan is for the next 5 years and we are working on it very actively. So we just want to become the world leader in commercial small satellites. Thank you. Thank you so much for this presentation. What would you say are the main risks for your operation to come to develop? The main risks are always the operation in terms of the global market is we are always dependent on the customer flow. So for instance, financial big financial upsets in the market might actually force some of the customers in these big markets to delay their plans. We are not yet seeing that happening, but that is always a risk that exists. There is also the risk of new regulations, new demands on the sector. I think actually those are very well controlled right now. And so in terms of looking forward, I don't see a particularly risky I see a growth path. I think the industry is growing and I think the industry is actually quite buoyant despite the current price. And what do you think about the possibility or the risk that your customers will withdraw their orders due to the COVID-nineteen crisis? Well, so far, we haven't seen that happening. So far, we actually believe that, that is not happening. I don't know of other companies in the sector, but it has happened. It has happened in other sectors, I think, but and your financial situation at the moment, how would you describe it? You've done some you've taken in some money recently. And how is the Financial situation, I would say, is stable. As a CEO, I always like it to be better. I can't say it is bad. We are well financed. We have taken measures anyway during this period to actually take cash flow like I think most companies did, but we are in a good position, I feel. So for how long are you financed, would you say? Well, we are financed for the next few years if we actually meet our plan. So we have always been have a long term plan. So of course, I can't see what the future holds for us, but I don't see a problem. You seem to be very positive regarding the growth in the market, but you're doing so many things. You are like detecting pollutions in the sea. You are helping actors to improve their weather prognosis. And well, you do a lot of things. But where do you see that what is the main drives? What kind of operations will you earn the most money, would you say, in the near future? I would like to have a good crystal ball to tell me exactly where, but Yes, but I'm sure you've been talking to the customers. You know who are the most eager to cooperate. We see a great opportunity still in the communications and the machine to machine Internet of Things environment. That's a business vertical that is growing very quickly. And it's also a business vertical that has quite a lot of potential to grow further. Could be more concrete, international things could be a lot of things, but in what way could you contribute there? We can provide a lot of monitoring of assets, so asset monitoring and tracking around the world, some of which can be ship tracking. We are doing that with ORBCOMM, for instance. But there are also lots of other deals in Internet of Things around monitoring for instance gauges in the reverse, gauging monitoring performance of engines in factories. So there are all sorts of activities and in that sense the space based internet of things and the space based machine is a very flexible platform. It allows you to try many different things. So you can use it for cars, autonomous cars, autonomous ships, even autonomous planes in the future. So we see that as an area. And then we also see the environmental monitoring. Monitoring of the oceans, monitoring of crops, pollution, forest fires. Yes. And what about safety in terms of border controls and other safety issues? What do you what can you say about this sector? We have a variety of applications. Again, some of these applications that are generic in nature also then can be applied specifically to border control. So there are certain aspects of IoT, for instance, and machine to machine that allow you to have detectors and sensors on borders, drawing crossings, for instance. And you can do in remote areas where you it would be difficult to use, for instance, 4 gs or something like that. So you can actually do a lot of that work using space based assets. And of course, we have a role to play in there. I think there is a variety of solutions for that and we can definitely work on that. Would you say that the competition is about at the same level in all those sectors that we talked about? Or are you stronger in any of those compared to your competitors? Or are there competitors at all parts of the market? We operate in a diverse environment and so we actually have competitors that are specialists in certain areas. We tend to compete specifically with a few that in the IoT area and the machine to machine communications and the broadband also. So comparing us to themselves, I like to think that we have some competitive advantages and we have some success. I'm sure they will say similar things about their business. I'm sure that we have a good position in this market, particularly in the communications. We are one of the leaders when it comes to small satellites and we continue to And looking at your main shareholders list, do you have any comment on the structure of your composition of your shareholders? We are very happy with our shareholders. They have their own strategic objectives and so we always aim to have a diversified base of shareholding and we are always very happy to actually support our shareholders and to see how we can support them in their investment. Do you have any institutional investors? We have some institutional investors. We have some institutional investors, but they are fairly they are not a large number of them, although they do have big shareholdings in the company. But it's they've got their own strategy. So we are aiming to actually So listening to variety of share. I take it as you don't think that there's anything important things to do regarding the shareholders or you're not aiming to change it in any way? We are not. I think some of the shareholders have indicated that they would like to divest, others would like to invest. So it's a normal day to day operation, but we are not aiming to make big changes. Okay. But you are not a big shareholder yourself, but I understand, but you are a shareholder or I am shareholder. I'm a growing shareholder. You're growing shareholder. That's good. Any plans for the stock for changing of the list or anything? We have looked at actually changing to the main market. This is still an in quite some detail. We could see that the costs associated with that didn't actually justify yet a move. So this is something we are continuously evaluating and depends on the growth of the company. So no new no moving to the main market in the near future, I take it? If the conditions improve, if we grow and if we actually see that, that is something we have done most of the work, we have actually done most of the work, the groundwork in preparing for it. So we'll see how things evolve, but it's something it's an ambition. It's something that we want to do, but the conditions have to be right. And as always, it has to do with what is best for the business. Okay. Thank you so much. I hope we have the possibility to come back to this question later on. So for now, I wish you all the best, and thank you so much for your presentations. Thank you very much.