Börsveckan 2020

Sep 16, 2020

Luis Gomez will hold a presentation in English. So without further ado, Mr. Gomez, please floor is yours. Thank you very much. Thank you for having me this morning. I would like to talk to you a little bit about our company and what we are doing, what our plans, where we are right now and where we plan to go. So for those that are not familiar with AAC Clyde Space, we are a company that focus on making hardware for space. So we make satellites, we sell components of systems that are used by other manufacturers to actually incorporate in their own designs. We tend to focus more on the 50 kilo range, up to 50 kilo spacecraft. But we sell parts for other manufacturers that are then using them in much bigger satellites. And we have traditionally supplied parts and subsystems from 2 factories. So we've got 2 factories, 1 in Uppsala and 1 in Glasgow. We are headquartered in Uppsala, but we manufacture satellites in both right now, in both facilities. But traditionally, we have developed quite a big range of cubesats in Glasgow. We have been around for quite some time. So the 2 companies that led to the formation of the AAC Clyde Group AAC Clyde Space Group were actually established in 2,005. So we have, over the years, been present in many of the small satellites that have been built around the world. Of the 1500 or so, you'll find parts that were manufactured by us on a large number of those. And we have been growing our business. So we started, as I said, with subsystems. We have evolved our business to focus more on satellites and services with satellite provided with satellites. And through that, we have actually grown our order backlog. So towards the end of Q2, 2020 compared to the end of 2018, we have grown our order backlog by 150%. This comes largely from the growth that we see in the markets, particularly the growth for platforms, for satellites and for services associated with satellites. This is a market that is forecast to grow exponentially over the next few years. We have seen that ourselves over the past 10 years. But it is expected that between 2019 2028, this market is worth something in the order of $42,000,000,000 Now this includes several different subsectors. So there is the satellite manufacturing, there is the launch and there is services that are associated with these satellites. And what we have been doing is growing our presence in those markets, in that market and particularly in the services market. We as a company, we serve both institutional and commercial customers. We are present globally, so we sell in Japan, we sell in United States, in South America, Europe, Africa. So we have quite a wide range of customers. We are supplying both those highly commercial organizations that are building business case and they're actually providing commercial services to the markets and also governments and universities, many of whom are developing new technologies or they are demonstrating some services or some technology or some science. And we supply, as I said, from the small component that is used for other satellites to be integrated in other satellites to highly integrated full solutions for our customers. And we are, as I said, we are moving very much into what we call space as a service. So this is a concept where we actually do the full space segment for our customers. And that is something that is becoming increasingly more desirable for many customers. As I mentioned, this industry is growing exponentially. So the number of satellites is expected to grow several fold over the next few years. We have been seeing that. We have we now see quite a wide range of requirements and inquiries about more satellites, bigger constellations. And this is something that is following the trend in the space markets, a trend that started probably 10 years ago, where smaller satellites are now actually taking over from larger spacecraft. And so manufacturers like ourselves that are operating in that commercial sector or small satellites are becoming more and more seen as the standard for spacecraft builds, for satellite builds. And what this is allowing is that when you do smaller spacecraft, smaller satellites, we are able to actually do them for a much lower cost, a much lower cost to produce, but they're also much lower cost to launch. And what that is doing is driving a process, is driving a new way of thinking. And what people are doing, a lot of our customers are doing is thinking, okay, now I can have a big constellation and that big constellation can do a lot more than if I had just one satellite. So by doing smaller spacecrafts, doing smaller satellites, we are effectively lowering the cost of access to space. And by doing that, we are enabling a whole new range of applications that were not possible 10, 15 years ago. And because of that, the sector is growing. There are plenty of new ideas. There are plenty of new opportunities. So as I mentioned, we supply from subsystems, components, units. These might be power systems, onboard computers, radios, solar panels. We supply those to a wide range of customers around the world. Those are then integrated into their own products, into their own satellites that then they launch. But we also supply and where we see biggest growth in the last few years has been in missions, that is full spacecraft. Satellites that we design, we build on behalf of our customers and then we deliver to them. And we refer to that usually as platform supply or turnkey missions. And those are the additional way of approaching space. What we have started is to also provide services to our customers and we provide a variety of services. So be it just supporting them through the operations of the satellites, the early operations of the satellites once they are launched, selecting a launch or actually do the full managed service for them. So what we do there is we operate the spacecraft, we take the full insurances, all the ground segments, all the ground stations, everything, and then we just provide them the data they require. And that is more and more attractive to many customers because that means that they can focus on their business. They do not have to actually focus on having specialists in the satellite side. They don't have to have the ground stations. They don't have to have the knowledge and the infrastructure to manage satellites. We can do that for them. We have those anyway. So we have ground stations, we have networks of ground stations, we have staff that know how to operate the satellites, so we can do that for them. And it's a much more cost effective manner of operating a constellation for customers. And for us, it just means that we reuse a lot more our equipment, we reuse our ground stations and our stuff. And that actually also has advantages for both sides. So that is driving very much a change in the way of thinking. And in terms of space as a service, so this is a combination, as I said, of fully operating missions. And in this case, we actually build we design, build and launch and then operate the spacecraft. So one example of this contract is a contract we signed last year with ORBCOMM, one of the world's largest operators or providers of machine to machine systems from or communication from space. And we signed a contract with them for, to supply them with AIS data. So that's automatic identification system data from ships around the world. And what these 2 satellites that we are building will do, we will own these satellites, and these satellites will be basically collecting data over the oceans, downloading that data. We download it, we get it to the ground sessions to the ground. We then actually process that data a little bit, just strict the communication packets and then send the data, the messages that the customer wants to their computer. So they will receive on their servers the final product, and then they will use it for their own purposes. So that allows them to actually focus on their core business that is supplying information and not having to deal with the satellites. So we will actually own this spacecraft. We are actually doing the build right now. And this is a model that we see more and more becoming more and more popular for the future, towards the future. And that is driving our growth as a company. So as we are transitioning from just being a subsystems and component supplier, more emissions and to more space as a service, we see that market becoming dominant. And that is already can be seen on our order backlog. It is dominated by the platforms and space as a service business. This is not so that we won't continue to do components and subsystems. We actually see that as the bedrock of our business, not only for the business side, but also for technology allows us to remain a vertically integrated company. But also because we see this as the natural progression. So we are going to see us growing more into the Space as a Service business. So we have a range of many of customers. These are a mixture of what I would say, startups, but also very well established companies. And many of these are actually transitioning very quickly from the startup to the established market leader right now. And as you see, we are not just supplying for universities or to governments. We actually have quite a big commercial drive as a company. And we see this as the future of space. We believe in changing the economics of our services, our data is provided from space. And as such, we are engaging more and more with commercial organizations to actually achieve that. So we have a plan. We started with a plan this year that actually comes from last year. We started our thinking about how to grow the company, how to consolidate the business. We had a few legacy projects last year that we had to address. So We started by sorting those projects out. So consolidating our business, we have been looking at how to reduce costs. We have actually done quite a lot of work on reducing the number of, for instance, streamlining the number of versions that we have of products and components and also looking at standard platforms, standardized offerings that we can bring to the market without requiring quite a lot of non recurring engineering every time we have to operate, every time we have to change the payload or the customer is interested on something slightly different. We are increasing our production capacity. We have been looking at ways of growing what we can do in the current footprint so that we don't have to have great capital expenditure in new facilities. And we have done quite a lot of this. You have seen that recently we have announced that we'll start producing satellites also in Uppsawa. And this comes as a result of one project, but it's also something it's a name that we have had for some time to actually start using our facilities in Uppsala to also produce satellites. And that will increase just by doing that, we'll increase our production capacity by about 20 percent per year. But what we want to grow is from the current 8 satellites a year we are producing. These are different satellites, so these are satellites that all require quite a lot of engineering associated with it. With them, we want to grow that capacity to about 20 satellites per year. And then of course, if we are talking about a constellation that is all exactly the same, so exactly the same satellites, we can do much bigger bills and we could do runs of up to about 100 satellites per year. But if we have actually exactly the same design, that becomes more a production, just production exercise. But currently, we are still doing very much what we call 1s and twos, that is 1 or 2 satellites. And they're all slightly different. They all have slightly different payloads. They require quite a lot of engineering. But we are increasing that capacity. We also want to expand geographically. We have long said that we want to expand among others to the U. S. Market. We see the U. S. Market a is the biggest space market in the world. It's very active. There are plenty of things happening there. We have always had an objective of being present there. We are already quite successful in U. S. Market. They account for about 30% of our revenue. But we believe we can grow it and particularly we can grow that market into the mission side. So we continue to look at U. S. Manufacturing facility. We have recently joined the OTC Q Rex market. This is an ambition that we had for some time so that our shares are more accessible to the U. S. Market. And we'll continue to do that. We are looking also at other M and possibilities. We look at those to supplement not only our geographical footprint, but also our technology and our products. So we want to actually sell more current sets of products. And of course, one of the things we are doing right now is to develop more space as a service offerings. And particularly, we are looking at how we can serve several customers using the same satellite. As we make payloads smaller, as satellites are smaller, it does open the option that one satellite can now serve several different customers. And we believe that that is actually one of the areas of Space as a Service that will become quite attractive in the near future. So we have some key milestones that we have set out for ourselves this year, one is to actually do finalize our in house desk capability. Our objective there is that we are very vertically integrated. Of course, we always look at if it makes sense to be in house or just acquire or just buy parts or components. But most times, we can do it in house for less than we can buy. So we do many of these things in house. Testing, in particular, is an area that we feel that is underserviced in the market. So actually having the ability to do it in house makes our business stronger. We are opening the new satellite integration facility in Uppsala. We actually might be ahead of schedule there. We will probably be doing it towards the beginning of quarter 4, not at the end. And we are growing our workforce to increase the breadth of skills, but also our manufacturing capacity. And one thing that is quite important for us is the first iteration of the platform functional unit, this is what we call the PFU. And this is IO integrated, pretty much software defined onboard control system that will allow us on a very small volume. This is a unit that is very small. It's about 1 U, so 10x10x10 centimeters. And this will allow us to control satellites from 1 kilo satellites all the way to 300, 500 kilo satellites using the same onboard computer. And what that will make is, it will make it much easier to reconfigure our platform. So when we have a different payload, when we have different requirements from our customer, we can actually very easily reconfigure the platform without having to go through the redesign of Avionics. So we can just by changing the software, we can actually provide them a new solution. So as key takeaways, I'd just like to say that we are operating in a market that is growing exponentially. We are a very well established and well positioned player in this market. We have a long heritage and we have shown that we are capable of not only designing satellites for space, but actually make them work in space. Our components and our subsystems have proven over the last 15 years that they're reliable and they are very high performance offer a very high performance to our customers. We are offering end to end solutions and state of the art small satellites. We operate both in the industrial, commercial and the institutional side of the business. And we have a clear and final plan to grow both organically and through bolt on acquisitions. And so our objective is to become the world leader in commercial small satellites. I will finish there. I will take some questions now. I will just leave you with a summary of our financials from last quarter. But so that's I will finish there. Thank you. Thank you very much, Louis. I will start with a couple of questions from the listeners. And the first one is about a potential listing on NASDAQ's small cap. Do you see that in the foreseeable future moving up? It is we have considered several options and we consider to look at them we continue to consider them, sorry. We can be able to look at different options in terms of our listings in the future. Yes, that is one of those. We have decided that right now we would do a joint OTC Q Rex. We need to shareholder base. So but it is one of the things that is in our future, yes. We want to move to different markets as the company grows. That sounds good. And speaking of listings, perhaps you can say a few words about the pending listing in the U. S. Market as well. I guess you target retail investors there or is there an institutional investor base that you see as potential shareholders in AEC as well? Both. So we in terms of raising awareness about AEC Hyattspace. In terms of raising awareness about AEC Hyatt Space in the U. S, in the investor community. But we also see retail. So our objective in the future is that we will have a variety of investors in the U. S. As I said, it's in the world's biggest space market. So there is quite a lot of appetite for the kind of for this kind of business. We are working on that right now. So we have as I said, we have done quite a lot over the last few months with institutional investors in U. S. We have a campaign planned for the fall, for the autumn. So we'll be doing quite a lot of work in the U. S. In terms of joining the OTC market, this is a first step. This is to raise awareness to actually start putting our share make our shares available to the U. S. Investors. And as I said, we are targeting both. I would say in the first phase, we are probably more we're interacting more with institutional investors. But as the business develops, I think we'll get interest also on the retail market. And speaking about share price, we have a couple of questions from the audience as well regarding share price of AAC, which despite a very large order inflow and orders booked is trending downwards. Can you say something about that? Perhaps there is a communicative issue or what do you kind of arguments do you hear when you speak with investors about pros and cons with investing in your company? So the market makes the price. Our ability to control that is limited. What we can do and what we do every day is focusing on managing the company well and grow it, grow the company, grow our business. That's our objective. And there has been traditionally some volatility on our price. We still have a little bit of there is a lot of transactions. I would think that I would like to see a higher price for our shares, of course. But as I say, that is the market that makes that. My job is to manage the company, is to actually ensure that there is growth that is sustainable. And that's what I'm focusing on and that's what we are focusing on. We are also doing more we are reaching out more in terms of communication to the markets. We are doing events like these today. But also, as I said, we have engaged very much with institutional investors over the last few months, both in Europe and in U. S. We want to do more over the next over the coming few months to actually put across what we are doing, what are the plans that the company has. We have changed our message slightly. We are trying to be more forward looking on our communications. We believe that's an important aspect of communicating our plans for the future. There are more questions from the audience in this particular matter. For instance, speaking about M and A, you say you have a plan to grow both organically and through acquisitions. And I mean, with the falling share price, the sort of value of potential limiting factors for transactions going forward? We it doesn't make it easier, but it doesn't stop it. So we as I said before, and I keep saying on my presentations, we have a plan for that. We will continue to look into how we can grow the company by acquisition. When it makes sense, we will be looking at companies. And of course, if the share price was higher, it would be easier to do it. With the share price a bit lower, we have to actually choose our targets more carefully and choose what we are doing. And we can't probably grow as fast as we would like. But so far, it's not it has not been an obstacle. It has not been what has stopped us. The reason why we haven't announced something, why we haven't done an operation in the past is because we haven't found the right targets. There is like a slight or perhaps major operational transition here going from delivery of components and products to the space as a service concept. Do you see that, that entails higher capital expenditures and investments? And if so, how are those plans in relationship to current balance sheet and cash requirements? It is it requires investment. I'd say that in the long term, when it is sustainable, it's actually probably when it is operating, when we have several of these constellations or several of these satellites, several space as a service deals going on. It's actually a pretty sustainable business. At the beginning, it requires a little bit of investment. Of course, we are being cautious with that, but also we are looking at alternative ways of financing that. So for instance, some of our developments, we got a grant from the Scottish Enterprise recently that is one way of financing some of our developments in technology and new products. In terms of space as a service, we also have ways of financing that, some of which might be might involve some participation of the customer in that. So sometimes there you can actually do some of that financing like that. So we will always have to evaluate our needs as we go along. And the deals will always be we'll always look into the deals in terms of do they make sense for us. So in terms of financing, yes, we are investigating different ways of how we can finance that change in our business makeup. Does that possibly entail a new share issue? Would you see that as an option going forward? We are looking at different options. We are looking at different options. That's one of them. We are looking at different options. Time to move away from the share price and look into some operational questions. I think the VDES project together with Saab and your other partner there ORBCOMM sounds interesting. And you're targeting marine communications. Does this mean that you need to build the complete infrastructure like worldwide coverage of satellites? Or is it possible to take this project piecemeal like launching a few satellites in certain regions and then building upon that? Can you just give us some flavor of that project? It is a system that can grow. So it can be it is already useful with a few satellites because part of that system will deliver effectively AIS next generation. So that is about the navigation side. With that, we can already offer a few services. Companies like ORBCOMM already have a very strong business in AIS. We are working with them on 2 satellites for that purpose. So there is already quite a lot of work going on in that area. So we can actually build we can build a few satellites and provide a service. The communication side can already operate like that because there are some communications that are mostly around navigation ability and safety at sea. So those can already be provided with a few satellites, if you're talking a very small constellation. But of course, then there is quite a large interest in the scalability because that system actually can then be scaled to a much bigger system, providing not only the navigation services, but also a range of new services, for instance. I look very much at this VDES project as a key enabler in the future of autonomous navigation. So when we want to have actually fleets of vessels all over the world without crews, we are going to need a way of communicating and ensuring that they are safe to control them, but also to make sure that they are not colliding with other ships. And this offers a very simple system once you've got enough satellites in orbit, a very simple system of doing that. So much less dependent on broadband communications that are always going to be difficult to implement. So what this allows is, you can then allows us to grow a system that can take into account the new needs of the shipping industry. But as I say, we can start with a small one, so providing the kind of AIS services that are already provided these days with some enhanced capabilities. You can start actually using the same, ground technology. So the same vessel technology that we use for AIS now for also receiving small information like weather charts or navigation charts, you can do that using this system. But then we can grow into a much bigger system. And I actually see I think that in terms of interest given the interest on the new technologies, maritime technologies, This is a system that has enormous potential for growing in the To finish off, I see that we're running out of time. But can you tell us a little bit about how this project is structured? I mean, do you have, for instance, cost sharing agreements with Saab and ORBCOMM for the development or the project? Or how is it structured, the partnership? Of course, some of the details are confidential, so I won't go into those details. What I can say is that we have formed a consortium between the 3 parties, and we are actually working together. So we are all actually investing on this project and we are working together to deliver the 1st satellite, the demonstration service. And then we will decide what we do next. So we see potential, but we need to see we want to do this the right way. So we want to actually work not only with the technology, understanding the technology, implementing it, but then also look in terms of what is the business, how we can do the how we can make it work. But right now, what we have is this consortium, and the postpart consortium. And we'll be working with Trafficwarecat. So we are working with them on delivering this first satellite. Great. Thank you very much. Luis Gomez, CEO of AEC Clyde Space. That's all the time we have. So thank you for an interesting presentation and have a great day.