Good day. Thank you for standing by. Welcome to the presentation of INVISIO Q4 report 2022. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question, you will need to press star one and one on your telephone. To withdraw your question, please press again star one and one. I would now like to hand the conference over to the CEO, Lars Højgård Hansen. Please go ahead, sir.
Thank you very much, welcome everyone to the presentation of our Q4 and year-end bulletin. I'm happy as introduction to say that we are now after a couple of very difficult COVID years, out of the woods, and we are back on the growth track with record high sales in the fourth quarter. Some of the highlights in the quarter is of course the increased sales growth that stems from a very positive market development and our own sales effort. We saw record high sales in the quarter, and we also saw an order book that was high in the quarter. For the full year, it for the first time exceeded SEK 1 billion. Actually, it was SEK 1.1 billion as order intake.
That gives us, when we leave the year, the strongest order book ever in the history of our Group. We are also pleased to see that the component situation is gradually improving, that we have been fighting with for several years. It is not over yet, but it is definitely improving. We are still paying somewhat higher prices on certain components to be able to deliver on time to our customers, but it is manageable at this point in time. Again, I think we are through the difficult years and we have, as many of you know, investing forcefully during the pandemic. Now we are a much stronger company with a lot of new products in our portfolio.
We have a very able and large R&D organization and sales organization that are able to support the continued marketing and sales of our many great products. If we turn to the financial results, we saw revenues of just below SEK 300 million in the fourth quarter, which is the highest quarter ever in the history of INVISIO Group. Also the gross profits rose dramatically with more than 90% as a consequence of sales. We are happy to see some improvement in gross margin as well.
We are still not at our ambition level between 60% and 65%. As I said, we still see that we have to buy components on the spot market for certain products where we need to deliver with a faster manner. Estimated 2%-2.5% of gross margin is because of higher costs to these spot market components. For the quarter, our EBIT margin is above 25%, and the operating margin is well above our target of 15%. It came in at 20.7%. For the full year, of course, the EBITDA margin and the operating margin were not satisfactory.
That was due to the first quarters of the year, where we did see difficulties both in revenues and in being able to deliver, while we were still investing in our organization. Order intake, as I said, around SEK 300 million in the quarter. For the full year, SEK 1.14 billion, and that gives us a all-time high order book of SEK 625 million that we take into 2023. On the following page, as we said, the order intake was about 85% stronger than the same period last year.
If you look at the first diagram here, on the left-hand side, you see the quarterly development and the rolling 12 months average for the order intake. We have marked out the quarters and the years here, where we saw the effects of the pandemic, where we were not able to visit customers in the same pace as normal, and many projects were put on hold. It is clear from this diagram as well that we are now out of the pandemic, and we are starting to see strong order intake. That, of course, on the right-hand side, manifests itself also in the order book that has been increasing dramatically during 2022.
On the next page, for sales and gross profit, both are up more than 90% in the quarter. As I said, gross margin is still affected by certain purchases that we need to do on the spot market. On the left-hand side is the sales per quarter and the rolling 12 months. Here again, we can see the period during 2020 and 2021, where the pandemic was holding us back. On the right-hand side, we see a little bit of a stable or stabilization of our gross margin, but still moving in a positive direction. In previous quarters back in 2020 and 2021, we also saw that certain quarters were very much influenced by certain individual orders with a lower gross margin or a higher gross margin for that matter.
I think due to the broader product portfolio and the higher revenue levels now, we probably see less fluctuations in the gross margin than we have seen previously. The gross profit, as you see per quarter has increased dramatically over the past quarters due to the higher revenues. On the next page the EBIT margins and operating expenses. Operating expenses, as we've said many times, have increased during the pandemic, and we did that very deliberately as investment into both a new and broader product portfolio, our many new headsets, second generation control units, our acquisition of Racal Acoustics, the new intercom, and also investments into the law enforcement police area.
We have added costs predominantly in the form of many more colleagues. We think that is the right thing to do to support our continued growth. That had an impact, as you see on the diagrams on both EBITDA and EBIT during the pandemic years. Again, happy to report now that from the second quarter this year, the curve has turned upwards and we are back on good profit levels in our business now in the Q4. Turning to some of the business highlights during the quarter, we received an order for SEK 40 million from an existing customer. For this customer, they decided to upgrade to the new Gen II system and with our new INVISIO T7 headset included.
Most of the deliveries will be made in the first half of 2023. I did not say that when we talked about order book, out of the SEK 625 million order book that we have right now, the majority, probably 85% of that will be delivered during 2023. Regarding the order for SEK 40 million, again, that is a little lower than what we normally announce. In this case, it was an important order for us because it is an upgrade from our Gen I system to the Gen II system that we see with many customers. There's also a little bit of a change in customer behavior where in the past we sometimes got quite large, three-digit orders from certain customers.
We see less of that now, but we see more what we call, medium size orders, meaning from SEK 20 million-SEK 30 million, SEK 40 million, and so on. One of the reasons of that is simply that for the customers it is easier from a logistic point of view to order in smaller batches so they can plan their rollout and training and so on, rather than having a huge inventory themselves. They just place more orders with us, but smaller orders. I think that's a pattern we will see going forward as well. Now, we also saw volume orders for the new INVISIO Intercom system, which is of course very pleasing. There was an order for SEK 40 million announced, and this is a NATO country that has previously placed more orders with us.
This customer have ordered for more than SEK 70 million. This also shows that the intercom system has a great potential, and we expect this to continue in 2023 and in coming years. The intercom system has been somewhat delayed due to the pandemic. It has been difficult for us to visit customers and introduce the product in an appropriate manner. Now we are definitely seeing a very high interest for our solution and very much put together with our control units and headsets.
We also are very happy to report, even though this was after the end of the period, that we received a first major order for the Racal RA4000 Magna headset in the North American market, and this time with an order value of about SEK 2-42 million. As we acquired Racal a couple of years ago, we knew that Racal was very strong in the European and areas in Asia and the Middle East, but less strong in the North American market. The teams from Racal and INVISIO have worked very diligently and very good together on getting the Racal brand back on the U.S. market.
I think this is the first result that we see, and actually I think this is also the first time in more than 20 years that there is a new ANR tactical headset being introduced on the U.S. market that is actually designed for armored vehicles. I think we are off to a very good start in the U.S. now with the Racal Acoustics products portfolio, and we expect to see continued good business from that.
We also know that a competitor has decided to leave this market in the U.S., which further enhances our market opportunities on the U.S. market. Law enforcement and security continues to be a high priority for us, and I think we are seeing good development in this area as well, both in the U.S. and in Europe. This is not where we see huge orders in one go, but this is more like a number of smaller orders that are coming in at regular pace. During the year, we saw a continued very good cooperation with the Swedish police force. We saw a new framework agreement with the Danish police authority and with several U.S. and European police departments that we now have on the client list.
Good development there. The development all in all for Q4 and the full year has led our board of directors to propose a dividend unchanged, SEK 0.70 per share for 2022. Our dividend policy is that over time, it should be between 25% and 50% of profit after tax. In the last five years, we have distributed about SEK 157 million to shareholders, which is a payout ratio of about 55%. Including the proposed dividend, the ratio is 57%, so a little higher than our objective, but again, the objective is over time.
On the outlook side, we continue to see as we have said now for quite a while that there are many opportunities for INVISIO Group. We see a substantially increased defense budget in many countries, especially in Europe. We also see that these budgets are making it possible to upgrade equipment at a faster pace than we have seen in the past. The need for our type of solutions, modern communication equipment with hearing protection is very high in many countries, and there's definitely a high focus in this area.
We have said that in the short term there is a limited impact because many of these investments are longer term, but there's no doubt that already from 2023, we will start to see investments in this area that benefits us directly. This is a longer term trend where larger budgets and definitely also more soldiers will mean an increased demand for our type of solution. In summary, we see a very strong 2023. We are much stronger as a company and more stable as a result of the product portfolio we have, the acquisition of Racal Acoustics and the strengthening and investments in both R&D and sales organization that we have done over the past years.
In combination with our current order book and the market conditions, we continue to see strong sales and order intake opportunities in 2023. Before we turn to questions, there was just couple of things I wanted to comment in the balance sheet. There was a couple of questions yesterday on that, so I'll just take that up. One is related to inventories that is a little higher than what we had previously. There's two reasons. There's a couple of reasons for that.
First of all, we believe that inventory is a barrier to entry because we are probably one of the few companies in our industry that have inventory where we can deliver with short notice, and that is required by many customers at this point in time. That is important for us. It's also sometimes varies quarter by quarter because we keep inventory, of course, up until the last day where we can ship. There is a fluctuation by quarter in this. Same goes for trade receivables, which is fairly high, but that is has a very natural explanation. It's simply because we invoiced a lot in the second half of the fourth quarter.
Most of our customers have about 30 days payment terms, so we will be collecting that money in Q1. This is just a natural fluctuation in our business. With that, I will end the presentation here and open for questions please, operator.
Ladies and gentlemen, we now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one and one on your telephone. To withdraw your question, star one and one again. We are now taking the first question. The first question from Hjalmar Ahlberg from Redeye. Please go ahead.
Thank you. The first question is maybe just if you can give some more flavor on perhaps, what you see in terms, I mean, you repeat that you see strong revenue potential for 2023. If you look at Q4, I mean, this is a exceptionally strong quarter, but would you say that this is kind of re-representative for the current capability that you have in terms of deliveries? And also what the demand that you see out there, if you can give some flavor on that?
Yes, I would say when it comes to deliveries, I think we are demonstrating in Q4, compared to not only the same quarter last year but also Q3, that we can ramp up quite rapidly because we have high capacity in our manufacturing network.
We have worked with the same partners for 15 years. We have a very robust model now for ramping up manufacturing. I would say deliveries is normally something that we are really good at. The challenge has, of course, been the component situation during a pandemic where I think we are at a point now where, as I said, we can get the components we need. We just maybe have to pay a little extra for some of them, but we are able to get, we continue to build inventory again to make sure that we are able to deliver with short notice. Delivery situation in the coming quarters I think looks really good.
For the order book we already have, we have of course already, we are in the process of manufacturing and planning and securing components. That looks quite well. For order intake in 2023, as I said, the activity level is still very high globally. We see many things going on. Whether they turn into revenue in coming quarter is always difficult to say because there are still long lead times in our industry with customer projects. At least we can see the activity level is high, and with increasing budgets, that also makes it easier for our customers to make decisions.
We can also see that many customers are actually wanting to buy products from suppliers that are well respected in the industry and always have a good footprint. They are not taking any chances with new solutions. They really want to buy something that is already proven and that has been in service for quite some time, and that is, of course, to our advantage.
Right. Sounds good. The question on you mentioned, that there are some cost increase due to incentive program in Q4. Should you say that some cost there as a one time, or do you think the cost will be similar, looking over the next quarters or so?
It will not be the same. We there was a little bit of a fluctuation in that program in 2022 due to the quarters being very uneven. Normally we accrue for incentive programs throughout the years, but we didn't do that sufficiently in the first half of 2022. In 2023 we will accrue for estimated costs related to that throughout the year.
Got it. You also mentioned that you increased the capitalized development cost this quarter. Is this, that something that was more for this quarter, or do you think you will have a increased level going forward as well?
I think this is, just fluctuations between quarters, that is a little bit related more to rules around what can be capitalized and what cannot, and how we. For certain activities in 2022, we have been focused on just selling variants and modifications of what we already have rather than new development. That just influences the rate of capitalization. That's just yeah. That varies a little bit depending on what activities we do with customer, and whether that is capitalizable or not.
I see. Maybe last one from me regarding financial targets. I mean, you had a really strong profitability this quarter, and as you say, you are now a stronger, larger company than before. Are you looking over your kind of long-term profitability goal or is that still what makes sense, how the company look today?
I think I will not comment on this at this point in time. I think this is also a question for our board of directors. This is of course, something we look at with regular intervals and just coming, as we say, coming out of two difficult COVID years, now we are back on track. I think we will, we'll probably be discussing this with the board at some point in time, but I have no further comment at this point.
Okay. Thank you very much.
Thank you.
Thank you for your question. We are now taking the next question. The next question from Tom Guinchard for Pareto Securities. Please go ahead. Your line is open.
Yeah. Hi, Lars. It's Guinchard from Pareto Securities.
Hi, how are you?
Yeah. How are you doing? A couple of questions, please. Firstly, you mentioned a Racal competitor in the U.S. had discontinued product lines. Can you say who that was or give a bit more color as to what the opportunity might be due to that?
No, I can't go into details on that because it's not.
Yeah.
Really not for me to say. I just wanna say that, of course, the competitive landscape for Racal is a niche industry. There's only a few players, and if somebody leaves, then of course there is more room for the rest. This is a market with very long industry relations, and once you have contracts with vehicles, they are often for 15-20 years. That's also why I say that it's been many, many years since there were new products introduced into the U.S. market in this area. The fact that we are now seeing that happen with the Racal products is of course to our advantage.
I think that the Racal branded products have a strong and interesting future, not only in the US, but also in other parts of the world.
Okay. You can't name it, but could you say whether that frees up, you know, 10% of market for the remaining players or 20% or anything like that?
Yeah, probably 20.
Yeah. Okay. Okay. Thanks.
Plus.
Yeah. Okay. On margins, obviously that was, it was a really good quarter. Your sort of goal is 15%. If 2023 goes well and you're above the 15% in theory, are you more likely to just invest more to sort of keep the margin down or have you done enough investments, so it would flow through to sort of the margins?
That I don't think we have a general policy for that. I think we've always been very. One of our most important values is that we work very, very closely with our customers, and we listen to the needs they have and try to see how we can best solve that. That's also how the new intercom category came about. That was actually by a number of countries telling us that if somebody could do something like this, it would be very interesting for us. If a similar situation occurs, then of course we would look at it again and say, "Does it make sense for us to go and invest in this area?
Is there here something else that we can do to help our customers? That's one part of a possible investment. When we acquired Racal Acoustics, it was also a fantastic opportunity for us to get a market leading product portfolio into our group. If another opportunity comes up like that, then of course we would also look at it. I don't think there's no. We don't have a policy of trying to keep the margin down or anything, but it's more that we also said to ourselves that there needs to be a threshold which is 15 for our EBIT margin. We cannot run so fast and invest so much that we fall below that, which we have done during the pandemic. Yeah. Does that answer?
Okay. Okay. Yeah. No, no, I understand. I guess it's, you know, if you got, you got a bit of, got 1 or 2 percentage points, hopefully from gross margin this year, you've got obviously a well-filled order book, a lot of expenses. I guess some will, you know, be full year expenses this year from hiring. It's hard to see a reason why the margin would, you know, maybe it won't be 20% this year, you know, who knows? It's hard to see why it'd be below 15% this year, unless, you know, what would be the risk to make it below 15%?
Right. No, I mean, again, the reason we fell below 15 during the pandemic was the simple fact that we. Revenues disappeared. We couldn't meet customers and we still decided to continue on our investments. Of course, now we, as I've said before, our main target is to get orders and get revenues. We get that up with the current cost base that we have. With the current order book and so on, we should see a good year in 2023.
Yep. That's great. Thank you, Lars.
Welcome.
Thank you for your question. We don't have any other question at the moment. I will hand back the conference over to the CEO for closing remarks.
Okay. All right. Thank you very much everyone for attending and listening today. Hope to speak to you again after the Q1 report in May. Thank you all for now. Bye-bye.
That conclude the conference for today. Thank you for participating. You may all disconnect.