Hello, everybody. Thanks for joining us here at the last presentation of the day at the ABG Investor Days. With me, I have CEO Carsten Drachmann from GomSpace, and my name is Morten Larsen, analyst here with ABG Sundal Collier. Carsten, I'm looking very much forward to hearing what you have to tell us today. Will you take it away, please?
Absolutely. Thank you, Morten, and hi, everybody up in Stockholm or wherever you're sitting. I hope I will make this last 25 minutes exciting, so you can still stay awake here. Okay, next slide, please. I'm gonna talk you through a quick overview of GomSpace. So what are we doing? I'm assuming there's perhaps some new investors who doesn't know us, so just a little bit about what we're doing. I'll talk about the transformation we're going through, and then we had our quarter three report, interim report, just came out last week, Thursday. So I'll take you through that as well. Next slide. Next slide. Okay, so what are we doing? Very simple. New space, new space value chain. New... Why we call it new space? New space is about these smaller satellites.
It's a bit more exploratory. Sometimes understanding New Space, you need to understand Old Space. Old Space are very big satellites, $100 million, flying way out, 36,000 km out in space. When you're watching Viasat sat TV at home, it's coming from one of these Old Space satellites. New Space satellites is much faster. A satellite can cost anything from EUR 1 million, EUR 2 million, can be less, depending on how big it is. It goes up quickly. Development times is maybe one, one and a half years. It's relatively cheap to launch on a rocket today.
So just to understand, New Space is something that's moving faster, and it's catering more towards, some of the new, applications that are around the world that we will, we'll talk about that you can use, space for. So you don't have to wait 10 years, do a lot of tests, and spend $100 million. You can do it much faster. Very simple. Three key areas in order for our satellites. We, we are doing satellites, we are building satellites that fly in space, but they have to get up there, so there is bringing satellites to space. You know the name SpaceX, Elon Musk? I don't think... There's a lot of talk about that. Even if you're not familiar with the SATCOM industry, I'm sure you heard about Elon Musk.
So they are, for example, sending rockets up on a regular basis. This sending satellites into space has become much more commodity. There's a lot of offerings out there. The costs have come down a lot. It's 1/10 of what it was about 10 years ago, so it's much more accessible. Well, once the satellites are flying there, you need, it needs some help. It needs to communicate somewhere on ground. That's why you have these Earth to satellite links, so these big antenna dishes that are on the ground. You see them around in a landscape. You've probably seen pictures about it. So once the satellites are flying, they're communicating with one of these parabolic antennas. It's a little bit more advanced than your satellite antenna at home because it has quite high speed link in both directions.
You typically, you're just receiving for your TV. Okay, that's all great, Carsten. We have some data. There's some communication. What are we gonna do with it? Well, there's a number of different applications that you can use it for. It's not interesting in and of itself flying a satellite. It's interesting what a satellite can do and information you can get down to ground. Next slide. So what can we do with it? Very simple. The very simplest one that everybody will understand is communication, so voice communication, data communication. You already had sat phones for a long time. They were running via the bigger satellites further out. So communication is there. This is what Elon Musk is doing with his Starlink, and there are others now setting up communication networks.
But in addition to that, it's used for atmospheric monitoring, so weather information. It can be used for maritime communication or observation because the satellites that we have here, they're not geostationary, as it's saying. They're not just over one point on Earth. They're actually moving around. In very simple terms, every 12 hours, a satellite is passing over you, and the same satellite keeps going around, so it's keep passing the same place on Earth twice in 24 hours. So you're using that for ship observation, for example. You're using it for something called Signal Intelligence. One of our best customers right now is in France. They use it to monitor fishing boats between U.K. and France, and they have a very clear line who's can fish where.
Sometimes these fishing boat, they turn off information about who they are, and they go dark, so to speak. Not gonna work anymore. We can still see them, because the minute they use a walkie-talkie, some kind of search device for finding fishes, we can see them, and we know who they are. So this is something that the French government, in particular, are using right now. We also have aviation, so communication to aviation. I'm sure if you look back in time, a lot of sad stories about airplanes that has disappeared. You always wondered, "Well, why is there no communication? I don't know where we know where they are." Actually, because you don't have that good coverage yet in terms of satellites, but it's coming, so there's an application there, and there's a lot more application.
The simplest one to understand is a camera. Take a picture of Earth, a certain place, and up to a certain resolution, you can see, I guess, if it's cloudy, you can see if there are cars, if there are people. You can see a forest, how it's evolving over the seasons. You can monitor coastlines to see that, are the coastline retreating, or are they getting bigger? How is the ice melting, et cetera. You get the picture. There's a lot of stuff that you can do from space, and now it's possible to do it without a huge investment. Next slide. So what do we do at GomSpace? We have a couple of areas. We do so-called subsystems, example, compare satellite to a computer. In a computer, you have a battery pack, especially if it's a laptop.
You also have a power. You need some kind of power, so your computer can run. You do exactly the same thing, but just for satellites, so specialized towards satellites. So we have; we call it products and subsystems. We also do or rather integrate payloads. Can, for example, be a camera; it could be an antenna. The payload is defined as the application, the hardware and software that gives some meaning to this. You can't do much with a battery and a power supply, so what? It's not gonna do anything. But if you actually add other things to it, then it makes a lot of sense. Then we build full platform. So we are basically building an entire satellite. So from customer specification, we build an entire satellite, everything included. We transport it to the launch site, as it's called, where the rocket is.
It's put on a rocket, it's sent off into space. When it's released from the rocket, we are managing. To the right-hand side, it's called constellation management. We are making sure that the satellite comes up and running. You see the things sticking out there, trying to look like a satellite without looking too stupid. These are solar panels. When it's sent off, you can't have them sticking out like that when you're flying a rocket. It's not really gonna work. It's probably too much friction, et cetera. They're actually folded in there like that. So the first thing you want to do when you get up is you've got to get your solar panels released in a proper way so you can start generating power from the sun, and so forth. So this is what we are very good at.
This is our core business. Next slide. So, who are we? Where are we? We actually founded in 2017. We are the oldest New Space company. That's a contradiction in terms, so we are actually the oldest New Space company. We're the first of the kind. Our founders, we still have two of them left. They're fantastic people. They launched the first satellite at their, you know, university years in around 2000. They started building that. They created GomSpace, and now here we are, 17 years later, and we have flown a lot of space missions, which means we have a lot of technology up and flying. We have a lot... Even more products. We're also selling products. Remember, the power supplies or the battery packs, we're selling that to our competitors, partners.
So we have a lot of our technologies flying in space. And why is that important? It's important because you never know what happens when it gets out there. There's always a risk when you go into space, and we go, remember, it's new space, it's fast, it cannot cost too much, et cetera. So there's a risk, but we have tried this many times. We have a lot of technology, so working with GomSpace is quite good for our customers. We are a reliable partner. We are 130 people. I'll tell you a story about that later. Our main business right now is in Europe. These are 2022 numbers. We do see a shift. We are focused in North America, and we do see in Asia also, there starts to be more opportunities. Next slide.
What excites us as GomSpace when we go to work, and we build products, and we like being together, it's exciting. But the most exciting part is watching that rocket going up. When we last week, we had two satellites, we call them BrodE. It's as for our French customer, I spoke to you about the fishing boats. We had two full satellites going up, and actually, there were a number of other satellites, also Korean satellites going up, where we have... There's a little quote on your right-hand side there. We have a lot of technology involved. So well, we didn't build the whole satellite, but they have a lot of our components. So check mark, more technology going up, GomSpace, we know what we're doing, and it's, and, and we keep increasing presence in space.
The two exciting things in the journey here, there's first, will the rocket explode? Because they, they happen to explode sometimes. It didn't. That was great, so that was the first yay. So have you ever seen the control rooms from NASA when they send something up, and everybody is cheering and clapping? We, we do that at GomSpace. We, we're all watching it on video, so good for us, good for our customer. The next thing is, can you actually hear it? It goes up there, it's sitting up in space, and and you do, believe it or not, it's, it's super not sophisticated. It has something called a beacon. It says, "Beep," like a life support in the beep. So we are actually listening for the beep signal because that's the first sign a satellite is alive.
It has reached, it is where it is, and then we can start talking to it and say, "Unfold your wings, your, your panels," and then move on from there. Super exciting. Next. Okay, so let's talk a bit more about the company. We are the oldest startup in the world, is what I used to say. I started in, in March this year. I worked in telco industry, Nokia for many years. I've been 10 years in Satcom, done a number of turnarounds before, and I joined GomSpace in March. GomSpace has great technology, great people, et cetera, but has been struggling making money. That's why I'm here, and that's what I'm focused on. Next. So just checking why it's...
My perspective is when I, when I went into this job realizing, "Hmm, there's a challenge here, but let me just check. Is, is this something we can work with?" Absolutely. Technology and people, yes, we have that. Global brand, yes. One of the oldest brands. 10 years ago, there was almost only GomSpace around, so everybody called. It was call it aggressively waiting by the phone kind of sales. Obviously, that changed because there are more. So great brand. Are we in a growing market or declining market? Absolutely growing market, no doubt about that. Is there an evolution in customers' applications? Do we see more and more different customer segments seeing a need for using space? Yes, there is, definitely growing.
Look, if you look a bit on the financial evolution here, okay, actually, we've had a nice growth, 24% CAGR. That's quite decent. The dark ones below is unfortunately the EBIT, so we haven't really made much money yet. Actually, we haven't made anything since we were listed in 2016. It's okay for a period of time. It's okay. You're a startup, you're going out. This is New Space. It does require investment. It's a market that's maturing. That's also why it's fun to be here also as an investor. This is a market that's developing. However, my commitment to the shareholders from the beginning of the year, don't worry, I will be focused on making money. We need to start sustaining this so we can build a healthy business.
What you see on the last little green one here is what we reported Thursday. We have actually reached the first three quarters, SEK 196 million revenue. So even though I haven't had any focus on revenue, nevertheless, we achieved the same revenue as last year, and we also without hesitation predicting that our 2023 is gonna be a record year from a revenue perspective. Okay, EBIT needs to improve. Absolutely focused on that, but we are moving in the right direction. Next slide. So what are we focusing on? Profitability and cash. Cash and profitability, absolutely the focus. I don't have to be careful how I formulate it. I'm not so worried about revenue. I'm not so worried about EBITDA or EBIT. All of that is gonna come.
We manage our cash, and we make sure that we focus on profitable business, so profitable products or projects. No more, this is really strategic and great, and, you know, we'll do it even though we'll lose money. Those days are over. We've done that. We have the experience. We don't need to do it anymore. We are gonna focus on our product business. This has been under prioritized. Product business is, where we have, high volume. We have a good range of products. They're competitive in the market. Customer see, customer likes, customer order, supply chain production, ship, collect money. No engineering involved. Good business. It scales easily without having to add resources to it, and we already have huge production facilities in Aalborg, in Denmark, so no problem. Focus on project profitability. We cleaned up during the year.
I stopped a couple or exited contracts on a couple of projects that I could see we're not making money, or we're not going to make money. It's just not gonna help us. It's just gonna consume our valuable resources, but we are not making any profit for ourself or for the shareholders. So we are very much focused, and it's also focused on the new projects coming in. We're really only doing something where we believe that we are gonna help our focus on profitability and cash. The last one is I call it almost a no-brainer. Nevertheless, it's not that easy: expand in North America. North America is about 60%-70% of our addressable market, and we are hardly present. We have a couple of guys there now.
We signed a good contract with a big company in the U.S. that can help us. So that's our transformation. That's what we defined at the beginning of the year, and this is what we are focusing on. Next slide, please. Oh, and by the way, I'm not gonna take any credit for that at all, and I'm not being sarcastic. This happened just likely before I came in. 29%, 29.9%, to be exact, of the shares are owned by a guy called Hargreaves, Peter Kendal Hargreaves. He's a billionaire in pounds. There was the other side of my due diligence, first trying to understand, is there something here that can work? Can I help this company turn around? So I thought, "Yeah, I can," but what about capital? What about access to capital?
It can be difficult to turn around and grow a business without having a little bit of backing. We do. We have one of the richest men in the U.K. He's not quite as rich as Elon Musk or Sir Richard Branson, but nevertheless, he's up there, and as all slightly eccentric billionaires, sorry, Peter, if you're listening, space is of interest purely because it's just cool and because he can. So to me, this has a huge value, and we can talk with him when we want to. So just adding to the transformation story, the company has been put in a good shape to execute. We've shaped it up. We have defined clear focus areas.
We are starting to go in the right direction, cash, and we have access to capital when we need it. Next slide, please. Okay. Profitability and cash, I've said that. Next slide. Let's talk about Q3. Next slide. We achieved three key goals in the third quarter. Some of you have followed our story. Some of you are new, so let me repeat it a little bit. In the third quarter, we've been focusing on the turnaround and transformation plan that I just showed you, so really focused on how do we improve our cash situation. We have reorganized ourselves into some clearer organizational structures. I call them business units because we can actually start measuring much more precisely our business. Our free cash flow is trending positively.
We actually, you see on the right-hand side, we had SEK -6 million, and say, "Okay, Carsten, you're still losing money." Well, yeah, it's to me, it's close enough to zero. We actually started our beginning of the years having SEK -47 million. We had SEK -28 million in the second quarter, and in the third quarter, SEK -6 million. So we're trending in the right direction, and I'll show you in a second, what our goal is so, so you understand that. And then we also had good improvement on product order intake. Remember I told you about this is, this is a quick turning. It's good cash flow. It doesn't require us a lot of extra work. We already have the production capacity. So we are starting to improve on that. We have a lot of focus with salespeople.
I mentioned the revenue, highest to date. Didn't have a focus, just realized when we're doing a report, oh, actually, this is looking pretty good because I have my eyes on one thing and one thing only, cash and profitable projects, but this is good. And then, part of the story of becoming free cash flow positive is also the cost reduction plan we kicked off in January. We were actually more than 200 people in the beginning of the year. We have laid off 70 people, sadly, sadly, but necessary. We have now reached our target, which was around 130. We have stabilized it at that level. You also see that it's a much more healthy level to—for us to work from now, and we are cautiously recruiting. We're cautiously recruiting because there is-...
Actually, there's a lot of questions to us. There's a lot of opportunities out there, and you're not going to win anything without engaging. So we have a lot of demand for our skilled resources to engage with customers to understand opportunities, hopefully for this year and 2024. Next slide. Key figures, I want you to focus on the orange graphs and the green ones. The green ones are from the third quarter. The first one is order intake. So, even though it's not a big order intake, it's highly profitable. You see it's trending upwards. The revenue is trending upwards. The EBIT is trending upwards. The employee is trending downwards. That's a good thing because that means lower cost. So overall, the trends are there.
I'm not by any measures claiming that we have an excellent, you know, Q3 in the sense of if you look at it isolated, see it from a trend perspective, we're doing the right thing, it's working, and we're moving in the right direction. Next slide. Okay, so where are we heading with all of this? I have told the market early in the year, I'm not gonna tell you about revenue or EBIT forecasting it, because I'm not really interested in it, but I'm interested in the free cash flow, because that's gonna help us stabilize our business. So look at the trend here. As I mentioned, we are working toward second half of 2024.
That's our objective, and by latest by then, we want to be free cash flow positive, which means we have more cash coming in than going out, so we, we're okay, and we can keep building up our bank account. You see the trend here from the last five quarters. We are definitely moving in the right direction. The company has lost in Q3, Q4 last year, more than SEK 40 million per quarter. We improved it in Q2, and now we are improving it also in the Q3. Next slide. So to sum it up. Next slide. So just checking again, we are building satellites and components for satellite. We have the technology and the people. We have a global brand. We are in a growing market.
I see a positive evolution on customers and applications of what we're doing. We build both satellites, and we have parts for satellites, so we are not only doing satellites and for ourself, we are also helping our competitors and others doing this. We are in a transformation mode, which focus on cash and profitability. We are trending in the right direction. You can see that in our interim report in Q3. There's a demand for our products going up, so we have to cautiously hire, and we have a very strong principal investor in Peter Hargreaves. So I have a little bit of wiggle room, so when I need some capital, I'm pretty sure I can get it. Thank you.
Thank you, Carsten. That was a very interesting and clear communications on the turnaround that appears to be going in the right direction. A couple of questions from me. I believe we have time for a couple. We are coming out of this turnaround, or we're still in it, it goes the right direction. How should we, as investors, look at what kind of... You're not commenting on profitability, but how should we look at, at what kind of company we have after the turnaround?
Yeah.
I mean, the growth is out there, but how should we sort of think about cash generation versus margins, returns in this company?
Yeah. So what you should look at is, like I said, it's the oldest startup in the world. Typically, the first part of a life of a startup is about getting reference cases, getting technology traction, proving that you can do it. Investors are happy to give you more money, so you can do that. We are turning away from that now. So look at this as a turn away from, "Okay, we are now getting a little bit too old. We are in the teenage years, and we should actually start to have at least an income from, you know, doing bottles in the supermarkets." So you should look at it as once we get our cash flow in control, the other things will follow.
If we can manage our cash flow, do the math, EBITDA is probably gonna be positive for following that. Top line, doesn't really matter so much. The top line is gonna come because we're gonna grow with the market. We have a good market position. What I need to do right now is to make sure that the cash is coming okay, and then you'll also see the growth will follow the market as a minimum.
Your principal investor, Mr. Hargreaves, has been out in, I believe it was Jyllands-Posten a couple of weeks ago, talking about, "Well, I'm not so focused on the near-term profitability in this, as long as we make money in the long term.
Mm-hmm.
He sort of says three to five years times kind of thing-
Yeah
... which does not coincide very well with sort of the strong momentum that you're showing in the turnaround. And now you're beginning to do cautious rehiring. Are you beginning to turn a little bit more towards reinvestment mode? And where should we possibly see this going? Or is this-
Yeah
... What is happening here?
Yeah, first of all, I don't think actually it's contradictory because I think when Peter Hargreaves talks about that, he's also about-
Sure
... talking about his return, right? He doesn't. He's not the investor, and yes, I read all your comments online, wherever you put them, that says, "What... Wonder what's happening on Friday, if I can get rich on Friday." He's not that kind of investor. He has a much more longer-term perspective for this, understanding that it takes some time. But at the same time, he is, of course, focused that we're doing well. It's not about just putting more money in just because. So I think it's quite well aligned.
I apologize to Mr. Peter Hargreaves, if he listens in on me calling him out.
Yeah.
Final question for me. GomSpace was a very big Danish investments industry success. Then it became has had trouble in the last couple of years.
Mm-hmm.
What do you think we as investors should take away and have learned from this journey that the company has been going through, and where, what are we gonna take from this going forward in the company and for the whole space adventure?... Yeah, what are the lessons here?
What, what are the lessons? Let me, maybe I rephrase the question a little bit towards why, why did I jump, into this? Well, I've done it—I did it because I've done a couple of turnarounds before, so I had an idea what needed to happen. I've also run a listed company before. I saw it as, this is possible to do, but it's taken too long to get to the point of, of focusing on making money. So from my point of view, what you should expect, from the company is that it's basically moving, three years too late from, positioning technology, you know, a growing presence to focusing on cash and, and revenue and, and EBIT. So look at it as, as we're sort of three years late. So we went, you know, we went...
We, we took the class seventh and eighth grade a couple of times, but we're getting there now, so we are, we are moving into the high school. So I think that that's, that's, that's how to look at it. And I wanna say also on a very personal note, when I looked at this, I've been, I lived in Singapore last year. I've been living in many different parts of the world. I've always been looking if I ever work in Denmark again, where do I wanna work? So I had a couple of companies, and GomSpace was on my list because I thought, "How cool is that?" This is, this is absolutely New Space. It's a global brand, and it's in Denmark. Not even Denmark, it's from Aalborg. I moved to Aalborg for this. Who knew?
From Singapore, by the way, and then London and Stockholm before that. So, okay. My attitude was, "It just cannot be. It just cannot be that we can't make this work." It is absolutely possible to make it work. The market is there, the people are there, technology is there. We have more capital now. We have access to more capital. Of course, we can make this fly. So expectations, you can put it to GomSpace. You put it to me is that I am totally committed personally to make this work, and I am very convinced now that it's possible. Beginning of the year, always a bit shaky. I know what to do now. So you hopefully can expect a positive journey.
Carsten, thank you very much for joining us here today and presenting GomSpace. Very interesting and super cool to hear the turnaround story from you. With that, I think we'll close up today's Investor Days with ABG. And, Carsten, thank you very much. It's been a pleasure.
Thank you, Morten.
Thank you, Carsten. Talk soon.