Welcome to the Sensys Gatso Q4 2024 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions-and-answer session, participants are able to ask questions by dialing five on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO, Ivo Mönnink and CFO, Simon Mulder. Please go ahead.
Good morning, and welcome to Sensys Gatso's market presentation of the fourth quarter and year-end of 2024. My name is Ivo Mönnink, I am the CEO of Sensys Gatso, and I will be presenting to you, together with Simon Mulder, our CFO. In this market presentation, I will provide you with an update on our business for the fourth quarter and year-end of 2024. We then follow up with a financial update by Simon, and finally, I will finish this presentation with a summary and our financial outlook for 2025. Let's now look at an update of our business.
In this business update, I will take you through our order intake, the progress we are making with the major contracts in Sweden and the Netherlands, the recurring TRaaS revenue development, updates on legislative changes in Iowa, updates on our Saudi customer and our Ghana joint venture project, our global revenue distribution, the strategic investments we are making mostly in the United States, and finally, our margin development. Order intake and procurement awards during the fourth quarter came in at SEK 161 million, compared to SEK 212 million in Q4 2023. Of the total order intake, SEK 79 million, or 37%, is from extended TRaaS services and maintenance contracts from the state of Victoria in Australia. Year-to-date, the total order intake, including procurement awards, amounted to SEK 992 million, 32% higher than last year at SEK 754 million.
In the full year 2024, no less than SEK 655 million, or 71%, came from TRaaS order intake, predominantly from 13 new and extended contracts signed with cities in our strategically important U.S. market. The substantial share of recurring TRaaS revenue within our 2024 order intake indicates that we have successfully implemented our strategy to establish a solid foundation for recurring revenue for the future. The backlog from our two large contracts secured in our home markets, Sweden and the Netherlands, amounts to SEK 1,000 million. The development phase of the Swedish order of SEK 850 million has been completed during Q4 of this year, with final acceptance by our customer in January 2025. This followed extensive testing required to align and integrate our new flux speed enforcement system with our customer's various IT systems, some of which are also new or updated.
The commencement of the Swedish project rollout is now anticipated in the first half of 2025, encompassing the replacement of existing systems and the installation of new systems in the field. The service and maintenance component of the contract will be initiated incrementally and is projected to endure for the next 12 years. Implementation continues for the Dutch order, which is worth SEK 400 million, split between SEK 200 million in system sales and SEK 200 million in repairs and maintenance over a six-year period. The system's installation rollout started in 2024 and continues during 2025 and is expected to be completed in 2026. Service and maintenance for the Dutch order is slowly phasing in, starting in 2024 and ending in six years, with potential contract renewals for another six years thereafter.
Of the combined Swedish and Dutch SEK 1,250 million contract value, approximately 15% has been delivered today, leaving more than SEK 1,000 million still in the backlog of just these two programs in our home markets. Total revenue for the quarter arrived at SEK 192 million, whereof TRaaS revenue is SEK 100 million and system sales SEK 98 million. The decrease in system sales was mainly related to timing of deliveries in Sweden and delay of anticipated orders from the Middle East. The recurring TRaaS business equates this quarter to 51% of total sales. The TRaaS revenue is primarily driven by our TRaaS managed services business in the United States. For the full 2024, our TRaaS managed services revenues grew by 2% from SEK 363 million in 2023 to SEK 371 million in 2024.
This is notwithstanding the negative impact on our TRaaS managed services revenue caused by the legislative changes in the state of Iowa and the U.S. For the full year 2024, our recurring TRaaS business accounted for 59% of our total revenue. Talking about Iowa, as of May 2024, new legislation in Iowa led to a permitting process for automated speed enforcement systems issued by the Iowa Department of Transportation. Unexpectedly, only 11 out of 140 existing fixed speed locations permits were approved, including seven out of 75 for Sensys Gatso's customers. 95 out of 148 million speed deployment location applications were approved. Red-light enforcement cameras were not affected. We are working with our customers to find solutions to reestablish the operations of the speed systems that did not receive a permit. This process is both time-consuming and laborious, with consequently slow revenue recovery for our programs in Iowa.
The estimated negative impact of the legislative changes on our 2024 revenue is SEK 20 million. Adjusted for this, the full year growth of our managed services business would have been approximately 14%. In April 2024, we signed a memorandum of understanding with our customer Tahakom in the Kingdom of Saudi Arabia. Following this, our customer provided technical qualification for our automated traffic enforcement solutions, and during the fourth quarter, Sensys Gatso has signed framework agreements for fixed and mobile speed and fixed red-light enforcement, as well as a framework agreement for the service and maintenance on the delivered vehicle access control solutions. With these four framework agreements in place, detailed pricing and logistic terms and conditions, Sensys Gatso is now in the position to receive purchase orders under these agreements. In January 2025, we received the first order for the maintenance of the enforcement systems in Saudi Arabia.
This was a first order for one year under a three-year framework agreement. This purchase order is worth SEK 27 million, and execution is expected to start in Q2 2025. The expectation is that we will receive new purchase orders for the remaining two years under the framework agreement, with an increased level as more systems will be added for service and maintenance. In 2022, we entered into an 11-year contract with the government of Ghana for our 40% venture share in Nationwide Traffic Management and Enforcement LTD. The contract involves the design, building, financing, operation, and maintenance of a nationwide road safety program. The total revenue for the joint venture is projected to be approximately SEK 800 million over the contract period. The project rollout is progressing well, with the first test citations issued in 2024. Social media is picking up on this in a positive way.
Due to parliament elections in December, the formal confirmation of the legal framework has been delayed. The issuance of citations is expected to commence no later than July 2025. In our financial reporting, we show results from the project as results from joint ventures. Sensys Gatso is a globally active European company with a balanced sales mix across different regions. In 2024, revenue was distributed amongst the Americas with 30%, Europe with 43%, and APAC MEA with 36%. Compared to full year 2023, the region APAC MEA contributed less in 2024 due to the completion of the deliveries to Saudi Arabia. This has been compensated by the increased revenue in Europe, mainly through the rollout of the Dutch tender. Our global presence helps us at times to even out the volatility that is inherent to the one-off system sales part of our business.
As we grow our recurring TRaaS revenue, our total revenue growth will become even more stable. During the fourth quarter, we made strategic investments totaling SEK 75 million. This included SEK 24 million allocated to fixed assets in operations, primarily for equipment and construction to support our managed services programs in the US. Additionally, we invested SEK 44 million to repurchase a minority shareholding from former employees in our Sensys Gatso USA entity, securing 100% ownership of this key driver of our growth strategy. Looking at our margin, our gross margin this quarter was 36% compared to 42% in Q4 2023. This is lower than our run rate margin of 40% and is driven by the relatively large contribution this quarter of system sales from the Dutch project.
System sales margins from this project are typically lower and precede the higher margin service and maintenance recurring revenue, which is expected to continue for at least six years. The overall gross margin of the contract will gradually recoup during this phase. Year-to-date, the margin was 38.2% compared to 40.5% in 2023. Our EBITDA for the quarter arrived at SEK 28 million compared to SEK 45 million last year, and year-to-date 2024, the EBITDA arrived at SEK 69 million compared to SEK 85 million last year. On that note, I hand over to Simon Mulder.
Thank you, Ivo. I will go through our consolidated income statement, the performance of our segments, and finally our financial position. Looking at the consolidated income statement, we focus on revenue, margins, and profitability. The revenue for the quarter came in at SEK 198 million compared to SEK 221 million. During the quarter, TRaaS sales were stable at SEK 100 million.
The system sales came in at SEK 98 million, SEK 19 million lower than last year, mainly due to delay in deliveries in Sweden and less sales from the Middle East. The full- year revenue amounted to SEK 631 million compared to SEK 624 million. The full year increase of TRaaS sales by 3% is mainly attributable to growth in the first half year in the USA . The group's gross margin arrived at 36% for the quarter. For the full year, the margin landed at 38%. Lower margins compared to 2023 are mainly attributable to a lower margin on initial system sales in projects such as the Dutch tender. The operating expenses totaled SEK 61 million, an increase of SEK 3 million compared to Q4 of 2023. The full-year expenses totaled SEK 222 million compared to SEK 214 million.
The increase in expenses is driven by sales expenses related to Intertraffic Fair in April of this year, increased sales activities in the U.S., as well as costs relating to the acquisition of the minority shareholding in our U.S. entity. Our operating profit for the period came in at SEK 15 million compared to SEK 34 million in Q4 2023. The full year operating profit landed at SEK 23 million compared to SEK 39 million. Our managed services segment predominantly reflects our U.S. business, including the costs related to development and maintenance of our software suites: Xilium and Puls. During the quarter, the segment did not receive any order intake. However, from a full- year perspective, the order intake grew from SEK 134 million to SEK 575 million in 2024. Revenue came in lower due to less volume on existing programs, mainly related to the Iowa legislation.
The revenue for the quarter amounted to SEK 54 million compared to SEK 60 million in Q4 2023. The lower revenue has impacted the EBITDA for the quarter, amounting to SEK 7 million compared to SEK 15 million. From a full- year perspective, the managed services sales is stable, moving from SEK 192 million in 2023 to SEK 194 million, with the EBITDA amounting to SEK 23 million compared to SEK 26 million. Now, on to the segment system sales, starting with order intake. The segment has seen a good order intake during the quarter, with SEK 161 million in order intake and procurement awards compared to SEK 212 million in Q4 last year. From a full- year perspective, the order intake came in at SEK 417 million compared to SEK 620 million. The rollout of the Dutch speed and red-light project has continued in the quarter.
Due to a lower activity level in Saudi Arabia and delayed deliveries in Sweden, the revenue for the quarter came in at SEK 144 million compared to SEK 161 million last year. From a full- year perspective, the revenue has increased from SEK 431 million to SEK 437 million. On a lower revenue level in the quarter, and due to the initial deliveries on the Dutch project, the EBITDA came in at SEK 21 million compared to SEK 30 million last year. Full year, the EBITDA came in at SEK 45 million. Discussing the financial position of our company, I would like to focus on cash movements, interest-bearing debt, and available cash. The largest movements in our available cash position are increased funding through the bond issue and investments. In September, the company has secured a EUR 30 million bond to finance investments for future growth.
With this EUR 30 million, corresponding to SEK 332 million, the company has repaid a large part of its long-term debt, as well as reduced the revolving credit facility, totaling SEK 112 million. Investments during the year, mainly in fixed assets and operations for the U.S. programs, amounted to SEK 93 million. In the fourth quarter, Sensys Gatso purchased the minority shareholding in Sensys Gatso USA for SEK 44 million. The net interest-bearing debt has increased from SEK 109 million at the opening of 2024 to SEK 217 million. The available cash has increased from SEK 84 million to SEK 203 million at the end of the period. On that note, I would like to hand it over to Ivo.
Thank you, Simon. Due to recent market dynamics, such as extended customer testing phases and legislative changes in the U.S., Sensys Gatso sees a delay in achieving its ambition of reaching SEK 1 billion in revenue, with an EBITDA margin of more than 15% in 2025. Despite the delay, Sensys Gatso has made significant progress in several key areas, including obtaining first contracts in new states in the U.S., expanding the managed services business model into other geographical areas such as Australia and Ghana, and a strategic partnership in Saudi Arabia with the first quarter in hand. Our order book and remaining backlog of more than SEK 1 billion is robust and will provide solid revenue well into the future. We expect our TRaaS business to continue delivering profitable growth, driven by our strengthened U.S. team and our groundbreaking Flux roadside platform.
While we are disappointed to not meet our ambition within the original time frame, we are resolute on our commitment to achieving this goal. Our long-term strategy remains unchanged, and we are taking proactive steps to address the challenges we've encountered. We are confident that these actions will position us to deliver our ambition in the near future. For 2025, we expect our revenue to arrive between SEK 700 million and SEK 800 million, and due to additional sales investments to accelerate growth within the U.S. market, we anticipate to realize an EBITDA margin between 12%-14% in 2025. As mentioned, our long-term strategy remains unchanged, and we are taking proactive steps to address the challenges we've encountered. We are confident that these actions will position us to deliver on our ambition in the near future.
Before we go to the questions, I want to comment on the press release that was issued this morning about me stepping down as CEO of Sensys Gatso by October 1, 2025. I started my tenure at Sensys Gatso on October 1, 2017. After serving Sensys Gatso as CEO for eight years, it's a natural moment for a transition in leadership. Sensys Gatso is well- positioned for its next phase of growth, and the board is committed to finding a leader who will drive continued innovation and expansion in global traffic safety solutions. I will help with this process and with the onboarding of the new CEO. I want to thank the global team at Sensys Gatso and the board for the trust they have put in me in leading this great company.
We achieved a lot with a new strategy and a new organizational structure, delivering strong double-digit revenue growth and consistently positive EBITDA. With an experienced leadership team in place and a company on solid footing, Sensys Gatso is in a good place to accelerate growth further under the leadership of a new CEO. As mentioned, our long-term strategy remains unchanged, and we are taking proactive steps to address the challenges we've encountered. We are confident that these actions will position us to deliver on our ambition in the near future. On this note, I now open up for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Örjan Rödén from Carnegie Investment Bank. Please go ahead.
Good morning, Örjan. Örjan?
Yes, hello, everyone.
Örjan is from Carnegie Investment Bank. Your line is now open
First question is relating to the order to. Good morning. Sorry. To the traffic market order. Do you see any changes in the rollout plan right now, or is the rollout plan intact?
Yeah, the rollout plan is intact. As I mentioned, the major obstacle has been the approval we call the golden sample, so the technical approval by the customer.
Okay, there were some strange things happening here. Repeating the question, the order to traffic the rollout plan, yes.
No, the rollout plan remains unchanged. Do you hear me, Örjan? Just please confirm. Hello?
Hello?
Hello? Can you hear me, Örjan? Operator, can you please step in?
Yes, yes, now I hear you.
No, the rollout plan remains unchanged. The major hurdle we had to overtake was the acceptance of the golden sample, and from there on the rollout plan
Hello? Yes, now I hear you.
I'm not sure, Operator. Can you step in if there's an issue with the line?
Yes, there seems to be some delay between the questions online and the speakers. Örjan, can you please try to repeat your question one more time? There seems to be some problems on the telephone line.
Okay. It was about the rollout plan for the traffic market order, if there are any changes to that, as you see today relative to before.
The short answer is no.
Okay, let's try with the next question and see if the line is working better.
The next question comes from Tim Ehlers from Kepler Cheuvreux.
Okay, let's keep it like that.
Please go ahead.
The second question, the reason for the buyout of the U.S. minority stake.
Okay. Okay, Örjan. Maybe check with another.
Hello, good morning, gentlemen. Can you hear me?
Yes, we can.
Can you hear us?
Hello.
We have a problem with the telephone line, so I think we hand the conference back to the speakers for any written questions at this time.
Okay. Yeah? Okay, great. Yeah, I think there's a little bit of a delay, but okay. I'll just ask my questions and then step back.
Yes.
Tim, can you just repeat your question and see if we can have the speakers answer? If that doesn't work, I think we go over to any written question, but let's try one last time.
Okay, I have three questions that I'm going to ask them and then step back. The first question would be, you already mentioned the investments you've done in 2024, especially in the U.S. Could you elaborate a little bit where we stand with the investment plans, or what can we.
Now, let's go to any written questions. I hand the conference back to the speakers.
Okay. I hope you can hear me. Let's maybe go first to the question Örjan was asking, which was about the rollout plan of traffic fair gate. I answered there are no delays, or the delay is caused by the acceptance of what we call the golden sample by the customer. We are past that gate now, and from there on, the rollout of the installation of the systems and the service and maintenance part of the contract will remain unchanged. That will start happening; the rollout will start happening in Q2. On the U.S. minority shareholding, what needs to be understood here is that these were former employees. They were holding a minority share.
We had a call option to buy the stock, so it was not an obligation, but we decided to execute on that call option and paid SEK 44 million in order to get 100% ownership in this very strategic entity for us. There was another question: are there any one-off costs related to this? The answer there is, of course, there are. There are in the P&L. I would say that's approximately SEK 5 million in Q4. On the investment plan, on the fixed assets in operation, I guess in the United States, maybe that's something you can talk to, Simon?
Yeah, Tim asked that question, and he fell off, so I presume he was wanting to ask how do we see the investments for 2025 happening. Yeah, I would say that we will continue in a similar level of investments like in 2024, with the expectation, of course, of new orders coming in. We will need to invest in construction and in technical equipment to support those programs in 2025 and thereafter. I hope that answers your question.
Please put your questions in writing. That probably works due to the bad line, probably better.
Okay, we have questions from Tim. What can we expect with regards to the investments in 2025? Similar levels than 2024 or lower? I think I just answered that. It's going to be similar levels, and let's hope that it will be similar levels because it means that the order intake will continue as it has done. Saudi Arabia, is the in-vehicle project already part of the new agreement? Is it fair to assume that if you have agreement about the other systems, it will be very substantial? Are the projects already secured and signed?
Okay, let me take that one. It's actually three questions. On the Saudi project, the in-vehicle project, that is the first order we got under a framework agreement for the service and maintenance of the 1,200 in-vehicle systems we have delivered to Saudi Arabia. The order was SEK 27 million for only one year, with a fairly limited amount of vehicles under that. The framework is for three years, so we would expect year two and year three to come in, but also a somewhat higher value there because more vehicles will be under the framework agreement.
It is for three years, but you can imagine that that might be prolonged going forward because the technical lifetime of our products is typically quite long. Okay, so that is one question. Is it fair to assume that if you have agreements about the other systems, it will be very substantial? I commented to that before. There are four framework agreements in place: one for the in-vehicle, one for the fixed speed, one for the mobile speed, and one for the red light. Saudi Arabia is right now in a phase of investing in their infrastructure, all part of their Vision 2030. Whatever they do will be very substantial because they almost start from zero.
We are one of the few suppliers that are qualified to deliver, and we have the framework agreements in place, meaning that all the pricing, commercial, logistics obligations, and commitments are already agreed upon with the customer. It is waiting for the orders, and that is a timing thing. I think that also answers the other question: are the projects already secured and signed? No, the framework agreements are signed. From that perspective, yes, signed. The orders will come under these framework agreements. lowa, a re there plans in place already? How to overcome the issues here and any updates on the timeline? Yes, there are plans in place. As with any governmental customer, you can imagine that these processes are not very swift, so it takes time for these to be executed.
But concretely, we are installing or actually ordering new trailers that can go on the mobile locations, which are still open, and we have the red-light enforcement still in place. There are some recoveries going on, but I do not expect us to recover the full business in Iowa within 2025. I cannot say anything about 2026, but 2025, we will see part of the shortfall in revenue in Iowa. Notwithstanding that, we have grown our managed services business in 2024, and I do foresee this also to happen in 2025.
Another question coming from Silver Schneimann: could you give some more color on what the drivers are behind Iowa and the higher end of your lower end and higher end of your guidance range, and that we should watch out during 2024?
Yeah, I think if you look at the guidance, we say we arrive between SEK 700 million and SEK 800 million, but also we retain the ambition for the SEK 1 billion going forward. It's all about timing. I think the most impact is actually coming from the Saudi orders when they will come in and the size of those, of course. We will also see the impact of the timing in traffic fare gate. Yeah, that's it. The recovery we see in the new cities and the going live of the new cities in the United States.
Yeah, I think, Tim, you asked the question that in the guidance, we don't mention the part of the TRaaS recurring part of the revenue. That's right. We didn't provide any guidance on that, but I would say that in the ambition, we have 60% of TRaaS recurring revenue.
We are at that level almost when you look at 2024. That is still something that we are targeting very much. Of course, that being said, if we end up on the higher end of the guidance, you can imagine that is more system sales driven. That could push down that metric towards the end of the year, potentially. On average, I would say similar kind of revenue distribution between recurring and non-recurring.
I believe those were the questions in the—
I think so. Operator, if you do not have any other people waiting in the queue and there are no more written questions, then I want to thank everybody. Hold on. There is a new question coming in last minute here. Do you think the market is overreacting? I guess you are talking about the stock market. How are you going to get the stock to increase and not fall like it has in recent years, 56% in the last five years, and 16% today? Yeah, Matthias, I haven't looked at the stock price, quite frankly. We have a strategy in place, a plan in place how to grow this company in a sustainable way, a profitable way, focusing on our recurring revenue. We keep to that strategy because it's creating value for basically our shareholders, our investors. Overreacting, I don't know. We will see what happens in time. No more questions?
There are no further questions at this time, so I hand it back to the speakers for any closing remarks.
Okay, yes. Thank you very much for attending this meeting, and looking forward to meeting you again in the next quarterly report. Have a nice day.