Hello, and welcome to the Sensys Gatso Group audio cast with Teleconference for Q3 2021. Throughout the call, all participants will be in listening only mode, and afterwards there will be a question and answer session. Today, I am pleased to present CEO Ivo Mönnink and CFO Simon Mulder. Please go ahead.
Thank you, Simon. Welcome to Sensys Gatso's presentation of the Third Quarter 2021. My name is Ivo Mönnink. I'm the CEO of Sensys Gatso Group, and I will be presenting our Q3 results to you together with Simon Mulder, our CFO. Next slide, please. In this market presentation, we will provide you with an update on our business for the third quarter. We then follow up with a financial update by Simon, and finally, I will finish this presentation with a summary and our outlook. After the presentation, there will be a possibility for you to ask questions. Next slide, please. Let's start with an update of our business. In this business update, I will take you today through our operating profit, which at SEK 28 million is up by 119%. More information about our solid order backlog of SEK 850 million.
The order intake, which is picking up after the quarter. Our SEK 109 million investments in future growth. The U.S. TRAS sales, which is up by 40%. The push we are creating to further grow our U.S. TRAS business. A bit more information on the Buffalo school zone contract. The important Saudi Arabia contract, of which 40% is now delivered. I will talk about Sensys Gatso Colombia, which was recently established. Next slide, please. Now, let's start with how our profitability has been developing this quarter. Due to the excellent gross margin of 49%, together with our steady cost structure, the EBITDA reached SEK 38 million, close to 30% of net sales. This underlies the credibility of our long-term EBITDA goal, indicating that with the right product mix, our ambition to target at least 50% EBITDA by 2025 is realistic.
Year- to- date, our EBITDA is up by 28%, from SEK 36 million in 2020 to SEK 46 million in 2021. During the quarter, we invested in the development of our software platforms, Puls, Xilium, and Flux. We also invested in fixed assets, which is equipment necessary to operate our TRaaS programs in the U.S. Taking the depreciation of these essential investments to support our future growth into account, we nevertheless reached an operating profit level of SEK 28 million, 119% higher than last year. Year- to- date, our EBIT is at SEK 19 million, 17% higher than full year 2020. Next slide, please. End of 2020, we communicated a record high 12-month rolling order intake of SEK 788 million. The conversion of order intake into revenue is dependent on our customer needs and ability to implement our solutions.
Since 2017, we have recorded an order intake of SEK 2.35 billion, of which to date SEK 1.5 billion has converted into revenue. As of Q3 2021, we have a solid order backlog amounting to approximately SEK 850 million. Of this backlog, 46% relates to system sales projects and 54% relates to TRAS recurring revenue such as managed services, service and maintenance, and licenses. The system sales order backlog of SEK 390 million is expected to be delivered in the near future. The TRAS order backlog of SEK 460 million has a recurring nature and will convert into revenue over the remaining contract periods. Next slide, please. The order intake arrived this quarter at SEK 64 million, compared to a record-breaking SEK 324 million in Q3 last year.
This difference is mainly due to the SEK 270 million Saudi contract won in Q3 2020. We are pleased with the regional spread of the order intake this quarter, with orders coming from Australia, the Middle East, as well as two new TRAS contracts in the United States. We also benefited this quarter from our global existing customer base that placed repeat orders and ordered for parts and system calibrations for a total of SEK 33 million, making up 52% of our Q3 order intake. After the quarter, in Q4, the order intake announced in press releases amounted to SEK 181 million, mainly relating to the TRAS recurring revenue contracts in our 51% joint venture, Sensys Gatso Colombia. The TRAS recurring revenue part in this Q4 announced order intake to date is 95%.
Next slide, please. Third quarter of last year, the company raised SEK 75 million in a directed share issue to support our future growth. This capital has been employed in our fixed assets in operation in U.S., supporting our TRaaS management service programs for the amount of SEK 23 million. In the same period, we have significantly invested in the core development of our software platforms to the amount of SEK 17 million. A further SEK 69 million has been employed in working capital to finance larger orders. This will convert into cash in upcoming quarters. In total, of the last four quarters, the company has invested SEK 109 million for future growth. Next slide, please. Net sales for the quarter arrived at SEK 130 million, an equal level compared to last year. More importantly, our total TRaaS business increased by 28%.
Year to date, this strategic growth pillar now represents 52% of our total sales. Within our total TRaaS business, the full TRaaS business model, which we operate in the United States, is a strategic growth pillar. This US TRaaS business reached SEK 37 million in the quarter, up by nearly 40%. Compared to the previous quarter, our U.S. TRaaS business showed an increase of 15%. The continued growth of our TRaaS business in the USA is in line with our strategy and business plan and indicates a normalization of this important recurring revenue stream after the COVID-related school closings in 2020 and 2021. Next slide, please. During the quarter, we reevaluated our USA business with the objective to further enhance growth.
On November 15th, President Joe Biden signed into law a transportation authorization bill that includes, for the first time ever, explicit federal funding support for speed cameras. This represents a major win for the photo enforcement industry in which we operate. With this federal monetary and political support, the U.S. market for photo enforcement is gaining positive momentum, also for Sensys Gatso. There are now 25 states that allow for automated traffic enforcement. Within these states, hundreds of cities potentially qualify as customers for Sensys Gatso. Currently, we serve 35 cities in 11 states with our TRaaS model. With a targeted data-driven sales approach, investments in our organization, in software developments to drive efficiencies, and of course, in traffic enforcement equipment to support the growth of our TRaaS operation, we feel confident that we can further push our profitable recurring revenue growth in the dynamic U.S. market. Next slide, please.
During the quarter, the Buffalo school zone program was suspended due to heated political discussions surrounding the mayoral elections. This suspension was an unprecedented event in the 15 years we have operated our business in the U.S. Subsequently, the incumbent mayor under whom our automated school zone speed enforcement program was awarded won the Buffalo mayoral reelections. To date, we have not received a termination letter from the city authorities, and therefore the program could be restarted following the reinstatement of the elected mayor. Next slide, please. Year to date Q3, we have delivered 40% of this SEK 270 million contract for our unique Vehicle-in-Motion solution. The slower than initially expected delivery schedule is related to complexity at the side of the end customer.
After having visited our customer in early November, we expect another 50% of the systems still to be delivered this year and the remainder throughout 2022. Next slide, please. After the quarter, we announced the establishment of Sensys Gatso Colombia, a joint venture with Capatest Colombia SAS, a leading local provider of automated traffic enforcement solutions. With this joint venture, we combine our TRaaS business model with the local knowledge and experience in traffic enforcement from Capatest. As part of the agreement, Sensys Gatso will provide back-office processing software, Xilium, Puls, analytics software, enforcement hardware, and the Sensys Gatso brand name. Two existing enforcement contracts currently operated by Capatest for the amount of approximately SEK 145 million over the remaining seven-year contract period will be added to the joint venture once Sensys Gatso Colombia is fully operational.
This is expected by the H2 of 2022. With this new venture, we deliver on our promise to grow our TRaaS business in new regions. Simon, can you now please take us through the financial update? Next slide, please.
Sure, Ivo. Thank you. I'd like to take you through the following topics today. Our consolidated income statement, the performance of our segments, our available cash and working capital position, and I would like to go through our investments in fixed assets. Next slide, please. The third quarter sales at SEK 130 million are at a similar level compared to Q3 last year. The sales in this quarter is mainly from our order backlog and new repeat orders from our existing customer base. Year-to-date, our sales is up by 4% compared to 2020. The gross margin for the quarter ended at 49% compared to 37% in the comparative quarter. Typically, our margins are influenced by sales mix between one-off system sales and TRaaS recurring revenues. The increase in margin is caused by lean operations and execution of the backlog on existing solutions and services.
In the quarter, we received the final 10% payment from the first Saudi project, contributing to SEK 6 million in revenue and margin. Overall, this has led to an increase of 29% in gross profits compared to Q3 last year. The third quarter operating expenses totaled SEK 35 million compared to SEK 36 million in 2020. Typically, we see that third quarter costs are slightly lower than other quarters due to the summer holiday periods. Due to a good gross profit and expenses that are in control, we have reached an operating profit of SEK 28 million, which is an improvement of 119%. Year-to-date, the operating profit landed at SEK 19 million, which equates a 6% operating profit margin. Next slide, please. Sensys Gatso reports into two business segments, system sales and managed services.
On this slide, you can see the performance of our system sales segment. The 12-month rolling order intake of Q3 2021 landed at SEK 164 million. The order intake of system sales is volatile and to a large extent dependent on tenders coming out. Of our total order backlog of SEK 850 million, approximately 46% relates to one-off system sales and 17% relates to TRaaS service and maintenance to be recognized in the coming years. The total order backlog for the system sales segment amounts to SEK 540 million. The sales for the segment in the quarter amounted to SEK 93 million, in line with previous quarter, but 11% lower compared to 2020. Year-to-date, we ended at a 12-month rolling sales of SEK 345 million.
Despite a lower revenue, we have maintained the profitability for this business segment on 13% EBITDA twelve months rolling. For the quarter itself, the EBITDA arrived at SEK 27 million or 29% EBITDA margin. Next slide, please. Moving to our managed services segment. The managed services segment mainly consists of our U.S. business, including our development department in Europe, which develops and improves our analytics platform, Puls, and our back-office software processing software, Xilium. Looking at order intake, the 12-month rolling order intake arrived at SEK 130 million compared to SEK 126 million in Q3 2020. Of the total order backlog of SEK 850 million, 36% relates to managed services, amounting to SEK 310 million.
After the quarter, we have received a contract extension for Puls and Xilium in Northern Cyprus for five years with a total contract value of SEK 6 million. The sales in the quarter amounted to SEK 37 million, which is an increase of 37%. Looking at the 12-month rolling perspective, sales arrived at SEK 124 million, an increase of 6%. The increase in sales, together with low onboarding costs, has led to an increase of EBITDA. The EBITDA for the quarter was SEK 11 million compared to SEK 3 million. The 12-month rolling absolute EBITDA arrived at SEK 24 million, which is an increase of 60% compared to Q3 2020 rolling numbers. Next slide, please. The available cash at the end of the period totaled SEK 104 million compared to SEK 169 million for the same period last year.
During the quarter, we had a break-even cash flow from operating activities. For the first three quarters of the year, the cash flow from operations amounted to SEK -2 million. Since the third quarter of 2020, net working capital has increased by SEK 69 million, which is mainly caused by pre-financing of the Saudi project. The company has built up inventory to accelerate deliveries once payments on previous deliveries have been made. Our current track record with our Saudi customer is that payments come in, albeit at a slower pace than we typically see with other customers. Based on the receipt of the final payment of the first Saudi project, we are confident that we will be able to continue shipping in 2021 and 2022. Next slide, please.
In the third quarter of last year, the company raised SEK 75 million in a directed share issue to support our future growth. This capital has been employed in our fixed assets and operations in the U.S., supporting our TRaaS managed services programs for the amount of SEK 23 million. In the same period, we have significantly invested in the core development of our software platforms to the amount of SEK 17 million. The continued investments in fixed assets and operations has driven the growth in managed services sales. The 12-month growing sales has grown from SEK 84 million in Q4 2019 to SEK 124 million in Q3 2021, equaling an increase of 48% growth. With this, we see our investments paying off. On that note, I would like to hand over to Ivo. Next slide, please.
Thank you, Simon. Our sales outlook is strong. Our costs are in control, and we demonstrated this quarter an improving profitability development. We see that our TRaaS business is back on its growth track. This is especially due to the COVID school closings in the U.S. that for now seem to be behind us. With our positive TRaaS development momentum in the new LATAM region and our overall solid margin development and order backlog, we feel confident about our future. We retain our long-term plan to grow our net sales to more than SEK 1 billion, of which TRaaS revenues will be more than SEK 600 million in 2025. We also retain our ambition to increase our EBITDA margin to more than 15% in 2025. On that final note, I'd like to finish this presentation and open up for any questions. Next slide, please.
Our first question comes from Jasper von Kosch with Redeye. Please go ahead.
Hi, guys, and congrats to the strong quarter. The profitability you had of 29% in EBITDA, with a 49% share of TRaaS, which means that it was kind of a similar product mix that you expect to have in 2025, but where you have a profitability target of 15% EBITDA. Why should we need to expect increasing OPEX levels at a higher rate than the revenue growth? Yeah, if you just could elaborate on this.
Yeah. I mean, I think first of all, we're targeting a 60% TRaaS part of our total business. That's maybe the first comment. The second comment to make is that, we've set the ambition to be at more than 15% EBITDA, much rather than 15% EBITDA. I also believe that indeed if the volumes will grow, then and our cost structure remains in control, then the EBITDA margins will improve. This is called the lower border of the profitability levels we expect. I think also, this quarter we demonstrated that if the costs are in control, the margins are good, we can deliver a very high EBITDA margin. I think that answers the questions.
Yes. Great. Regarding the Saudi order, you have so far delivered 40% of the total and expect another 15% to be delivered in Q4. The remaining 55% would be delivered during 2022. You previously mentioned that you believed it to be completed in early 2022. Do you have any idea of when in 2022 it may now be completed?
That's a very good question and difficult to answer because our customer is called Tahakom, and they are the procurement department of the end customer, which is the Saudi government. They are depending basically on orders coming, the demand coming from the end customer and that will drive then the deliveries by us. The timing of the delivery of this order is somewhat uncertain. I think the most important takeaway for you is that we will deliver this full order in full because we have a contract in place, and we have a customer that is very keen on retaining a good relationship with us, which proved when Joris Lampe, our CCO, and myself were present in a meeting with Tahakom executives early November.
We feel rather confident about the deliveries. On the timing, it is really depending on what the end customer requires from Tahakom.
Regarding Costa Rica, you say that you expect the order backlog of system sales almost amounting to SEK 400 million to be delivered shortly. Does this imply that you still have good faith in delivering the Costa Rica contract quite soon?
Well, quite soon, that might be too big of a word here. Here as well, we're dealing with a governmental customer. We're dealing with a situation where budget needs to become available. It's not something which is entirely in our control, you can imagine. But once that's the case, we see we have a strong contract in place. We see there is a large willingness from the partners in the consortium to execute this. So, timing of this is, you know, we take that by basically when we get further information from the customer about this. That's, I think, most I can say about this. So.
Okay. Basically the same status as in last quarter?
Yeah. Exactly. Exactly.
Great. And also, what you also mentioned just one or two weeks ago, we saw the major regulatory change in the U.S., which appears to subsidize speed camera related services. You mentioned it somewhat, but have you received any more insights in this and how it will benefit your business and when also?
No. I sign up to the comment you made about this. This creates momentum for the automated traffic enforcement business or as they call it in the U.S., U.S. photo enforcement. We now, for the first time, have federal support, meaning national support, for investments in these programs, which is a really important support we're getting from President Joe Biden. With that, also the fact t hat's the political support. The fact that there's also federal money made available to states and therefore to cities to start automated traffic enforcement could turn out to be very positive for the industry and therefore also for us.
I underline the word could, because we really don't know at this point in time what that will mean, because the budget is available both to the cities as well as to the vendors, being us in the states that have automated traffic enforcement. How that turns out is something we are investigating at this point in time. We'll find out. Once we know more about this, we will feed that back into the market. I think the summary of this is that I'm really excited about the momentum automated traffic enforcement is gaining in the U.S. I think that's the key takeaway we have from this statement from the presidency.
All right. Do you have any sense of if it would imply perhaps new states regulating or like legislating automated traffic enforcement like raising the bar from the current 25?
Yeah, I think it will because in the end, if there is funding available to research automated traffic enforcement, for instance, it's money which is available to them. If they would consider doing it would be the right timing to do so. That's one thing. Now the traffic enforcement is happening now in 25 states across the states. It could be a good timing for other states to look into this. I agree with you.
Good. Regarding the potential in the U.S., you seem to have, I mean, reevaluated the potential in that space and with a more precise, like, TAM, if you will. Could you just elaborate on your efforts to get this market for the managed services business?
Yeah. I think if you go back to the numbers, 25 states in which automated traffic enforcement is allowed, we are operating in 11 states, maybe for good reasons. There is another 14 states to look at. We operate, we serve 35 cities. I would assume there's several hundreds of cities that would qualify for automated traffic enforcement. The sales model we have now in place is a little bit, I would say maybe, not aggressive enough. Maybe that's the right way of putting it. We are taking a more proactive data-driven sales approach, where we will, instead of wait for cities or via referrals approach cities, use a more aggressive active sales approach.
That means that we will do more, invest more in data analytics, bearing in mind that we have all these cameras in place and they generate a lot of data. We can use the objective part of that data to analyze situations and mirror those through target cities. Taking into account all other data resources, we can actually build a much more active sales approach in convincing cities to go with automated traffic enforcement and preferably, of course, with Sensys Gatso's hardware. That means investments in front end capacity in order to build a large sales pipeline.
If you combine that with the messaging from the federal government about making a budget available, actually the momentum of, you know, taking this approach is actually a lot of positive, I would say, a lot of good timing.
Great. Sounds perfect. Also in line with your strategy to expand your managed services business into other countries, you recently re-launched in Colombia. Could you just tell us more about this market and this opportunity and perhaps how big of a share you expect this market to be for your managed services in just a few years?
Yeah, I mean, that is a rather good question. I can't give you the answer to that. I can tell you that, well, there's a couple of points that I think make this a very interesting market. First of all, it is a large country, Colombia, with a high level of incidents. A lot to be gained. We see that the payment rate on the citations is high. In the end, almost all of the citations will be paid. Another thing we see is that the contract lengths are extremely long. I mean, they're like typically 20 years of agreements we have with the government, with the cities we operate in.
That is all very positive to us. I think the other thing to point out here is that it is a new territory for us. It's difficult standalone to operate in such a territory. The choice of selecting Capatest, a well-known party in the Colombian traffic enforcement market, I think is a win-win. Capatest wins from the fact that we have the technology and we have the brand name, which is extremely important in the Colombian market to have, and they have the local presence and can do the maintenance and the operation. For us it's a really good combination working together with Capatest.
You would be only the software providing. Would that be like no extra full-time employees for you there, which would be like better margins for you? Is that a correct observation?
We operate together in the joint venture, right? We operate together. We are providing the brand name first and foremost, the equipment, the Puls analytics software and the Xilium back office software. They're providing the operation, the maintenance, support and the operators in the office. That's how we're setting up.
Good. That's all from me. Thank you very much for the answers.
Thank you.
As a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. As of right now, we have no further questions. I hand back the word to our speaker.
Okay. Thank you, Simon. Yeah, thank you everybody for attending the call and asking the questions. I'm looking forward to meet you all again on our Q4 market presentation or anytime sooner. Bye-bye.