Good day. Thank you for standing by. Welcome to the presentation of INVISIO Q3 report 2023 conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star one one on your telephone keypad. You will hear an automatic message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Lars Højgard Hansen. Please go ahead.
Thank you very much. Welcome everyone to our Q1 update. I have a slight cold today. I apologize if my voice is a little rusty. The headline for this quarterly report is that we see it as the best quarter in INVISIO's history. We saw a very strong order intake, sales and profit level during the quarter. It was a very strong start to the year. Both order intake and revenue exceeded SEK 300 million, and we are back to good profit level with an EBIT margin of 27%. As we've said many times before, this development reflects a high market activity and the significantly increased focus on defense and security, especially in Europe.
We also think that this development is likely to continue for a long time to come during the new geopolitical situation in Europe. We also believe strongly that the development is a consequence of our own doings in terms of the number of new products and the adjustments increases to the organizations that we have done over the past three years, where INVISIO today is a much stronger and more broadly founded company than we were some years ago. On the next page, the order intake on a rolling 12-month basis exceeded 1 billion for the Q3 in a row.
It is very pleasing to see that we have a greater proportion of medium-sized orders, and they are from all areas, dismounted soldiers, vehicles, INVISIO Intercom, and police and law enforcement, so it's well spread. We have more close to SEK 200 million in unannounced orders. Strong order intake of SEK 350 million. However, a little lower than last year, where we did have some very large announced programs in the early part of 2022. When we look at the order book, it is record high. It is the fifth consecutive strong quarter. We as a consequence of this, has also decided to increase our inventories somewhat.
We hear and see from many customers that speedy delivery is a competitive advantage and is something that is very much appreciated in this period of time. As we mainly do standard products, we see basically no risk in increasing our inventory to a little bit higher level. It also reflects the fact that our new intercom is a little more expensive and therefore the inventory values are affected by that. It's a strong part of our business execution that we have inventory and that we are able to deliver on customer requests with a fairly short notice. Turning to revenue, we saw more than 100% growth, actually 127% compared to same quarter last year, and 119% in comparable currencies.
On a rolling 12 months basis, we are at SEK 949 million, it is of course, no secret that we are aiming to get up to the SEK 1 billion target as soon as we can. Sales is definitely at a higher level than before. It's also fair to say that the sales trend is a little smoother than order intake. That is because we are very good at running an efficient production planning with our partners. Also that we of course, always deliver according to customer wishes and requirements.
I think it's a stronghold and a strong point that we from Q1 2022 to Q1 2023 are able to increase our revenues this much because it has still been a year where component shortages and some spot market buying has been part of the equation. Our supply chain has done really well in being able to increase our deliveries this much. Our gross margin is at a very good level this quarter, 62.5%. We often say that we would like to be somewhere between 60% and 65%. There is of course a number of components to the gross margin. In this quarter, the product mix has definitely had a positive impact.
We've sold a number of intercom systems and also some of our other newer products with a higher gross margin, so the product makes in itself. We can also see that due to the fact that we deliver from stock, we have not as yet seen the full effect of earlier price increases by our suppliers. Going forward, we still think that we are on the road to be between 60% and 65% without giving any further details on that. Operating expenses, primarily our team salaries, it correlates well with the number of employees. As we said before, recruiting is driven by business opportunities.
Those business opportunities are on the sales side, where we can see that more and more customers are interested in our newer products like the Intercom, and therefore in some areas, we need to add a few more salespeople. We also constantly have smaller product ideas and variants that customers are asking for that needs a few more people on this side or on the operations side. We will continue to, of course, look at our expense levels as a part of how fast our revenues are increasing. Turning to page eight on the margins, it is very clear, as we've said before, the business model that we have, sales has a direct impact on margins as OPEX is a slow moving mass.
The increase we are seeing now demonstrates the scalability of the business model with our outsourced manufacturing. You can see also here that we suffered quite a lot in the COVID years, where we decided to continue to invest forcefully in both new products and organization. Now we are fortunately seeing the good effect of what we did in those years and that the market is returning back to high activity levels. I think it's quite an achievement of the organization that our EBIT margin improved from -2.8% in Q1 2022 to +26.9% in the Q1. We are quite content with that.
Turning to a few highlights from the quarter from a business point of view, we continue to see strong interest in the INVISIO Intercom, even though as always, any sales process takes time in our industry. We did get another major follow-up order from an existing customer, value of totally 40 million SEK from a European NATO country. We can now see that the combined value of the orders to this customer has exceeded 100 million. This is a really good step to and also to use as reference case towards other interested parties. This is a real proof of our products being valuable in everyday activities for our customers.
We also had a breakthrough order for our Racal Acoustics headset, the RA4000 Magna in the US, order value of SEK 42 million, here deliveries will be in first three quarters of 2023. As we have said before, a major competitor have decided to leave the military market, this has opened up opportunities, more opportunities for the Racal products, especially in the US. The new Racal RA4000 Magna headset is a state-of-the-art modern headset that can be seen as the first introduction of a new active noise reduction tactical headset for vehicles in the US for the last 25 years. This is really a technology leap for the customers.
We are quite sure that we will continue to see very good orders from the U.S. market and European markets as we go forward for the Racal portfolio of headsets. We also received a new army contract in Europe from a non-NATO country. First order worth about SEK 40 million, and this is for our newest generations of control boxes, the Gen II systems, with our X5 headset. Delivers in 2023. In this country, the special forces are already customers of ours, and we see as usual good potential for follow-on orders. The market development in general is favorable to our industry and to INVISIO.
According to official data, we have seen the largest increase in military spending in Europe in 30 years, during the last year, and this is likely to continue for years ahead. We see a great need for modern communication equipment as a part of this military spending, and we believe that the larger budgets will allow for a faster rollout of our type of products. So in the long term, we are certain that the higher budgets and the focus on modern military equipment will definitely mean an increased demand for INVISIO type products. We have a strong momentum right now, an active market due to increased geopolitical insecurity, but we're also doing a lot ourselves. We have doubled our resources within R&D and sales over the last three years.
We are taking a fast pace on a journey from only hardware to products that are based on software and artificial intelligence. We have seen a broader and wider product portfolio evolve over the last three, four years, and we are now targeting not only military customers but also police and law enforcement. We have a strong momentum, and INVISIO is a different company than what we were a few years back. Coming to the expectations for 2023, I think as a summary of what I've said, we believe that we will have a very good year. The order book that we have on hand, the strong market, mean that we are able to predict continued strong sales, order intake, and good profitability in 2023. That concludes the presentation of the Q1. Operator, we are open for questions, please.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. Please stand by. We will compile the Q&A roster. This will take a few moments. Now we're going to take our first question, and the question comes from line of Daniel Thorsson from ABG Sundal Collier. Your line is open. Please ask a question.
Yes, thank you very much, Lars, for a very strong quarter, obviously, and the positive outlook. My first question is really to understand more your investments going into 2023. Now, with the strong momentum, the scale profitability, you have the opportunity to increase more investments in both OPEX and sales activities. What are such activities that you think are gonna yield the highest results in 2023? Is it gonna be customer-specific meetings? Is it gonna be trade fairs or anything else where we will see you being more active here in 2023 to capture the market growth?
Yeah. Thank you, Daniel. I think it's a little combination of everything that you mentioned. I think the presence that we have at trade shows is dramatically increased also after the pandemic. I think in total, if we look at both smaller and larger trade shows, we participate in more than 100 trade shows during the year. Actually next week, there is a very large trade show in Florida for special operations forces that we are taking part in. We do have a different presence at trade shows with more people present and more activities.
I think the trademark and the hallmark of INVISIO has always been to work very closely with our customers and listen to their needs and really try to develop products and variants and other things that are catering to their needs. We, we continue to do that and have a very close dialogue with a large number of our customers to see where there are opportunities for us to further expand our product portfolio, both on a shorter term but also on a little longer scale. We will probably continue to invest in more product solutions. I talked about having four legs, dismounted soldier and then, and the vehicle systems and the intercom and police and law enforcement.
We could be adding one or two more legs to that over time, both in terms of product solutions but also in time of customer, in terms of customer groups, so to speak. It will be a broad range of activity going forward.
Yeah. Yeah, that makes sense. How are the plans related to that? How are the plans in increasing the organization in 2023, given the strong momentum? Do you feel that you have a lack of sales people?
No.
Because product development is quite large, I guess.
Yeah. Yeah. No, absolutely. No, we don't have a lack of people. I think we and again, the many investments we took during COVID was to prepare ourselves, so we wouldn't be in a situation when things started to go back to normal. I think we do have a very strong sales organization and R&D and operations for that matter. But as activity increases, there will continuously be a need for a few people more here and there. Again, it is activity driven that we add a few people to the organization. I think that's well under control. We are in a fortunate situation that we are able to find, good people in all areas without too much hassle. That's.
Yeah.
That's positive.
Yeah. That was actually my second question. You have mentioned difficulties to recruit people in the last few years. Has that become less of a problem today, given your good momentum, but also the fact that some of your competitors are leaving some markets here and there?
Yeah.
Maybe you can find.
Yeah.
Some new people in the U.S. with relevant experience.
Yes, we can. We don't see any difficulty in recruiting good, strong people with the right background and also in the R&D organization in Copenhagen and in Hadlow, in U.K. We, there are other industries and companies that are reducing somewhat.
Yeah.
There is a possibility for us to recruit good people.
I see. I see. I had a question on the deliveries here in Q1. It looks really strong, both in Europe and the U.S., and we knew some of the deliveries from previously announced orders, obviously, but the rest of them, are there any short-term implications causing this very strong quarter from budget year impacts in a specific country or any specific customer deliveries that eventually landed within this quarter that is good to be aware of for us?
Not really. I think, of course, a lot of it, as you know, when we left the Q4 of last year, we had an order book of more than SEK 600 million. You can say it's about half of that we have delivered. Then we have been able to get a similar amount of new orders. And the new orders is again, it's spread across geographies, it's spread across product areas. It's a good mix also between existing customers and new customers. There will always be some variance between quarters. Even if we have now had four quite strong quarters in terms of order intake, there could still be variations between quarters due to certain delays or certain customer orders ending up in one quarter instead of the other. In general, I think we are at a higher level than we used to.
Okay, that makes sense. My final question is on the military budget, increases in 2022. I guess that we haven't really seen that is not causing a strong momentum right now, and we will see that in the future. How long are the lead times really for this? When do you expect to see the effects of the yield into firm orders from the increased military budgets in Europe last year?
Yeah, I think this will be a progression that could be very individual from country to country, also in terms of what type of products do they intend to procure first, and so forth. I think, again, we're not gonna see any sort of catch-up effect at our end. It will be a progression of increase. Almost every day, we hear about new increases in certain countries and so on. We know it takes time, so it won't be.
Yeah.
it could also be that in one country, it could be the vehicle market that progresses first. In another country, it could be the dismounted market. Yeah, it's quite individual.
Okay. Sounds, sounds promising. Thank you very much.
You're welcome.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. Now we're going to take our next question. The next question comes to line of Hjalmar Ahlberg from Redeye. Your line is open. Please ask your question.
Thank you. I can start with a follow-up on the last part there, and then maybe if you see anything, if you compare, like, the sales pitch to final order, currently compared to, I guess, both recently, but also before COVID, maybe is the kind of, do you see an effect on the budget increases that the sales pitch is to final order is quicker than it was?
Yes, Hjalmar, I think, we do see that, but that's more related to smaller and medium-sized orders. We also see a little bit more demand for faster deliveries than we did before.
Mm-hmm.
That's also why we have now decided to increase our inventory levels, because we can see that when customers make a decision, they are asking us if we are able to deliver somewhat faster than what we normally have as standard delivery terms. Yes, there is definitely a little bit of a need for that.
All right. And the gross margin, you did mention product mix, but also supply price increases. Just want to check if that, I mean, has a big impact, or do you feel that you can maybe push this on to customers when you
Yeah.
See the increase in demand.
Yes. Again, I think we are a little reluctant to give any indication for coming quarters.
Mm-hmm.
We always have been because there are many ingredients in how the final gross margin turns out. I think in the general trend is that when we launch new, more advanced products, and.
Mm-hmm.
We will have a better gross margin, especially in the beginning. In general, we should be moving from where we have been at 58%, 59%, up towards somewhere between 60% and 65%. There will be maybe bumps sometimes because of certain contracts or product mixes, but in general, I think the trend is towards a higher gross margin.
Right. Right. You had a highlight in the quarter report that you are increasing more software compared to hardware. Is that also something that drives the gross margin, or could that be additional upside from the level of.
No, we see it as a package today. We don't sell software separately and it is part of the product and the solution that the customers get. Software is not as easy to upgrade in our customer areas as it is, for instance, for consumers. It is a little bit of a different dynamics there, but it's more a statement that the products are much more advanced than they were previously.
Right. Maybe just one more on the, on the cost level. I mean, you said that you have pretty much what you need in the short term at least. Are there any other things to think about going into the next quarters here? Will you see kind of a wage increase maybe in Q2, stuff like that, or any input there, maybe?
Yeah. We will, our annual increases in wages is in from April and onwards. I, yeah, I think that we will see a natural progression in the OPEX that is related mostly to the activity level and should also be covered by the increase in revenues that we see, so yeah.
I mean, taking a longer-term view, and now we have a very strong margin compared to your target or, in the very, a lot higher than the lower range, shall we say. Do you think that you kind of have raised the bar for the lower range or, yeah, any input there to think longer-term?
A little too early to say. I think, just.
Yeah.
Just coming out of a couple of difficult years where we were definitely far below target. I think we're just happy now that we've had two quarters in a row with very strong EBIT margin. That's also, I think we need to be at a good level in order to sustain the continued levels of investment and innovation that we do. We will, of course, do our utmost to be at good profit levels.
Yeah. Just thinking about your total addressable market, I mean, you mentioned that you're a larger company, you have more products, you have Racal. I guess I can look just in general your annual reports, but could you kind of discuss the kind of total addressed market over the next couple of years compared maybe to pre-2020, pre-COVID?
Yeah. I think we need to. We probably ourselves need to do that assessment or adjustment at some point in time. It's probably a little early, but I think from the market sizes we have described in the annual report, that there's no doubt that in the, especially in the mounted area, the Racal products, we first of all have a competitor that has left the scene, so therefore more market is accessible to us. We can also see that vehicles has a very strong importance for many countries in their purchasing decisions now. The vehicle market is definitely interesting to us.
It's also clear that on the Intercom side, we, the market size has probably not changed, but we can see that we are selling more, Intercoms to, be in vehicles that than in the portable solution that we thought from the beginning. Which is a positive because the, in-vehicle market is much larger than the portable. So there are some good upsides in that regard, but we have not updated the addressable market, yet. It is something that we will look at at some point in time when things have maybe settled a little bit more.
Okay, great. Thank you very much.
Thank you, Hjalmar.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. Once again, if you wish to ask a question, please press star one one. Now we'll pause for a moment just to give the opportunity for all the participants to press star one one if they wish to ask a question. Dear speaker, there are no further questions at this time. I would now like to hand the conference over to yourself for any closing remarks.
Thank you very much. Again, thank you for calling in, to this Q1 conference and talk to you again after Q2. Have a great day.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.