Hello and welcome to the Sensys Gatso Group Audio Cast for Teleconference Q4 2021. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. Today, I'm pleased to present CEO Ivo Mönnink. Please begin your meeting.
Good morning and welcome to Sensys Gatso's Presentation of Q4 and the Full Year 2021. My name is Ivo Mönnink. I'm the CEO of Sensys Gatso, and I will be presenting our 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 Q4 and full year 2021. We then follow up with a financial update by Simon. Finally, I will finish this presentation with a summary and our outlook. Next slide, please. Let's now look at an update of our business. In this business update, I will take you through the positive development of our profitability with our EBITDA arriving at EUR 38 million, 61% higher than last year.
The growth of our proven TRaaS business model, the growth potential we see in the USA, driven by software development and data analytics, an update on our Latin American region, our order backlog, which is solid at EUR 840 million, and the supply chain costs, which are expected to be stable for Sensys Gatso throughout 2022. Next slide, please. Now, let's start with how our profitability has been developing this quarter. After a strong Q3, I'm proud to announce that the entire team at Sensys Gatso delivered an even better result in Q4 . The EBITDA arrived at EUR 38 million, 61% higher than last year. Our EBITDA margin arrived at 22% of net sales, seven percentage points ahead of our long-term target of 15%.
The main reason for the strong performance this quarter is an increase in the gross margin to 42% from 37% a year ago. This, in turn, relates to the increased sales of our recurring TRaaS business. On top came an outstanding uptime performance of more than 99% of our Dutch TRaaS business, which resulted in a customer bonus payout in this quarter. For the full year, the EBITDA arrived at EUR 84 million, 41% higher than 2020 and 16% of net sales. The operating profit, EBIT, landed at EUR 27 million, up 118% for the quarter. Full year 2021, we landed at EUR 46 million EBIT, no less than 4x the EBIT of last year. With this, we demonstrate a steady profit improvement and a proof of the effectiveness of our strategic focus on the profitable recurring TRaaS business.
Next slide, please. We also had a strong sales performance in Q4 with EUR 173 million, 28% higher than last year. An important contributor has been Saudi Arabia, of which we have delivered an additional 15% of the contract in the quarter. To date, we have delivered in total 55% of this EUR 275 million contract. The remaining EUR 124 million of the contract is expected to be delivered throughout 2022. For the full year, our total sales grew 11% to EUR 507 million. Our strategic recurring TRaaS business demonstrated higher growth levels with 28% in the quarter. Looking at the full year, our TRaaS business grew 14% and now represents 49% of net sales. A steady growth from the 42% share in 2019.
Most of this growth is coming from our U.S. business, where we operate a full TRaaS model. In the U.S., we added three new contracts in 2021, and to date in 2022, another three. This demonstrates the anticipated interest from cities to implement automated traffic enforcement. On top, the school zone speed enforcement programs have all been restarted after COVID-induced school closings. This will likely further help our U.S. revenue development going forward. Next slide, please. As mentioned, our U.S. TRaaS business is steadily growing as new programs are being added and efficiencies are increasing through software development. We also benefit from our speed and red light cameras we have installed across 12 states. As we execute on our strategy to transfer Sensys Gatso from a hardware company to a software and services company, these sensors generate valuable data.
Our installed base in the U.S. of nearly 270 cameras generated more than 540 million data points of cars and trucks passing by our cameras in the last three years. This vast amount of anonymous data points combined with data from other sources generates valuable information for Sensys Gatso and our customers. By using data analytics, we can optimize the locations of our cameras to help reduce traffic incidents with the maximum effect. Information from our installed database will also be an effective sales enabler to predict the impact of Sensys Gatso's automated traffic enforcement solutions for future customers. Our revised business plan for the U.S. market centers around this proactive sales model.
With the recently signed transportation authorization bill that includes, for the first time ever, explicit federal funding support for speed cameras, we also have positive momentum for automated traffic enforcement in many new states and cities for Sensys Gatso. Next slide, please. During the quarter, we announced the establishment of Sensys Gatso Colombia, a joint venture with Capatest Colombia, 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. The business model we operate in Sensys Gatso Colombia is a full TRaaS model, very similar to how our business in USA is operated.
The main difference is that contract periods are typically much longer, even up to 25 or 30 years. Two existing enforcement contracts currently operated by Capatest, supported with Sensys Gatso solutions, will be added to the joint venture once Sensys Gatso Colombia is fully operational. This is expected by the second half of 2022. These contracts, with a total value of approximately EUR 145 million, will be operated over the remaining contract period of 17 years. The Costa Rica national contract has still not started due to budget constraints at our customer. Together with our consortium partners, we have shifted the deployment of our solution in Costa Rica to municipalities. A successful implementation with the cities will possibly assist in starting the national project. Meanwhile, we have received our first order from Ecuador, a new market in the LATAM region.
The active projects in Colombia, Costa Rica, and Ecuador are evidence of the increased momentum we see in the LATAM region. Next slide, please. During the quarter, the order intake arrived at EUR 195 million, 62% higher than last year. This is mainly driven by order intake of our joint venture in Colombia, in which we have a controlling interest and where we consolidate the revenue for the remaining seventeen years in the contract. With a full year order intake of EUR 368 million in 2021 and 788 million in 2020, we now have a backlog of EUR 840 million to be delivered mainly in 2022. Of this backlog, 32% relates to System Sales projects and the remaining 68% relates to TRaaS recurring revenue such as Managed Services and maintenance and licenses.
The System Sales order backlog is expected to be delivered in 2022 and 2023. The TRaaS order backlog has a recurring nature and will convert into revenue over the remaining contract periods. Next slide, please. At Sensys Gatso, we typically have long lead times for our sales, delivery, and operations processes. Critical components are therefore sourced way in advance and have already been secured for 2022. Assembly of our systems takes place in European factories, where most of the added value for our System Sales is realized. Our System Sales and Managed Services business models are not energy-intensive and therefore hardly affected by increases in energy costs. Today, we expect no delivery issues in our supply chain and our supply chain costs to remain relatively stable throughout 2022. On that note, I'd like to hand over to Simon, our CFO. Next slide, please.
Thanks, Ivo. I would like to take you through the following topics today. Our consolidated income statement, the performance of our segments, cash flow and available cash, our working capital position, and finally, the investments in fixed assets. Next slide, please. The fourth quarter sales at EUR 173 million are 29% higher compared to Q4 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 11% compared to 2020. The gross margin for the quarter ended at 42% compared to 36%. For the full year, the gross margin landed at 41% compared to 36%. The increased margins are mainly due to more TRaaS sales with higher gross margin in 2021.
Q4 operating expenses totaled EUR 45 compared to 36 million in 2020. The expenses in the quarter have increased due to more sales activities and expenses related to setting up the entity in, for example, Colombia. Due to a good growth profit and expenses that are in control, we've reached an operating profit (EBIT) of EUR 27 million, which is an improvement of 125%. Year-to-date, the EBIT landed at EUR 46 million, which is an increase of 318% compared to 2020. Our operating profit margin of 2021 equates to 9%. With that, we've ended the year in profit with an increase of profit for the period of EUR 31 to 35 million profit after tax. Next slide, please. Okay, let's have a look at the performance of our System Sales business.
The order intake of 2021 landed at EUR 177 million. The order intake of System Sales is volatile to a large extent, dependent on tenders coming out. Of an order backlog of EUR 840 million, approximately 32% relates to one-off System Sales and 18% relates to TRaaS, service, and maintenance to be recognized over the coming years. The total order backlog for the System Sales segment amounts to EUR 418 million. The sales for the segment System Sales in the quarter amounted to EUR 134 million, 33% higher compared to 2020. Year to date, we ended at the sales of EUR 377 compared to 333 million, an increase of 13%. The profitability in the quarter has remained high at EUR 25 EBITDA compared to 14 million for the same quarter last year.
Looking at the full year performance of this segment, the EBITDA arrived at EUR 56 compared to 39 million, with the EBITDA margin improving from 12%-15%. Next slide, please. Now moving to our Managed Services segment. The order intake of 2021 arrived at EUR 192 compared to 159 million. Of the total order backlog of EUR 840 million, approximately 50% relates to Managed Services amounting to EUR 422 million. The increased order backlog is mainly caused by the two projects in Colombia with a total contract value of EUR 145 million over the remaining 17 years of operations. These contracts will be operated in our new 51% joint venture controlled by Sensys Gatso, once that company is fully operational.
Our Managed Services sales in the quarter amounted to EUR 39 million, an increase of 12%. Looking at the full year 2021, sales arrived at EUR 129 million, an increase of 6%. The increase in sales, together with the lower onboarding costs, has led to an increase in EBITDA. The EBITDA in the quarter was EUR 13 compared to 9 million. The absolute EBITDA for 2021 arrived at EUR 27 million, which is an increase of 35% compared to 2020 numbers. Next slide, please. On this slide, I would like to take you through the main movements in cash flow of 2021, the closing cash position, and available cash at the end of the year. We started the year with a cash position of EUR 108 million.
During the year, we've added to cash the EBIT results of EUR 46 million, plus the non-cash and other movements of EUR 25 million from our operations. From our external financier, Rabobank, we secured the third tranche of the long-term financing arrangement, adding a net of EUR 7 million to our cash position. Over the course of 2021, we've increased our working capital by EUR 61 million and invested 42 million in fixed assets, consisting mainly of investments in our software platforms and fixed assets in operations. The acquisition of Gatso over here in 2015 was partially financed by a vendor loan. This vendor loan may, under circumstances, be converted into new shares in Sensys Gatso Group. In 2021, the group repaid the part of the vendor loan that was due, amounting to EUR 1 million or SEK 10 million.
The remaining part of the vendor loan amounts to EUR 840,000 and is due on July 31, 2022. The closing cash for the year amounted to EUR 72 million. Adding the EUR 13 million of available credit facility, the total available cash at the end of the year was 102 million. The availability of cash has remained stable over the quarters by managing our profitability and timing of our investments in working capital and fixed assets. Next slide, please. When analyzing the working capital position, we typically look at net working capital without and with cash and borrowings. Big projects such as the Saudi project in predominantly our System Sales business have a high impact on net working capital. Working capital assets such as trade receivables, inventory, and work in progress related to these one-off project sales are mainly impacted.
During 2021, we've delivered approximately 40% of the Saudi project. In total, 55% has been delivered, resulting in a lower inventory and work in progress position at the end of the year, amounting to EUR 97 million. Because a large part of these deliveries took place in Q4, we see an increase of trade receivables to EUR 141 million. Combined with receivables on other deliveries in Q4 , such as deliveries under the procurement award of Belgium. We expect these trade receivables to convert into cash in 2022. With relatively low trade and other payables, we have secured and paid a large part of our inventory to be able to meet delivery demands in 2022.
All in all, the net working capital in 2021 has increased by EUR 27 million from EUR 188 to 250 million, including cash and borrowings. Next slide, please. The Managed Services business is a CapEx business model, where investments in fixed assets and operations support the future growth. In 2021, we invested EUR 42 million in fixed assets, of which EUR 21 million was invested in fixed assets and operations supporting our U.S. business. During 2021, we've also significantly invested in our software platforms, FLUX, Puls and Xilium, for the amount of EUR 18 million. We will continue to develop on these platforms in the future with improved and additional functionalities. The continued investments in fixed assets and operations has driven the growth in Managed Services sales.
The sales have increased from EUR 55 million in 2017 to 129 million in 2021, equaling an increase of 135% growth. The year-on-year growth rate of the segment amounts to 24%. On that note, I would like to hand it back over to Ivo.
Thank you, Simon. I am proud of the outstanding result the global Sensys Gatso team has delivered in 2021. In challenging COVID circumstances with lockdowns in many countries, the team realized an EBITDA of no less than EUR 38 million this quarter, 61% higher than last year and 22% on net sales. For the full year, we arrived at EUR 84 million EBITDA, 71% higher than last year. This result is driven by the steady growth we see from our higher margin TRaaS business. It proves that our strategic focus on this recurring business segment is paying off. Our financial position is solid with more than EUR 100 million cash freely available. Further, we have EUR 161 million of our working capital assets connected to active contracts and deliveries.
With investments of EUR 39 million in our software platforms and in fixed assets in our TRaaS operations in USA, together with a new data-driven sales approach, we are gearing up for future growth in this important market. We're ending the year with a backlog of EUR 840 million, most of which will be delivered to our customers in 2022. Based on this, we retain our long-term plan to grow our net sales to more than EUR 1 billion, of which TRaaS revenue will be more than EUR 600 million in 2025. We also retain our ambition to increase our EBITDA margin to more than 15% in 2025. On this final note, I'd like to finish this presentation and open up for any questions. Next slide, please.
Thank you and if you wish to ask a question please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel . We have one question from the line of Jesper von Koch from Redeye. Please go ahead.
Good morning, gentlemen, and congrats to the strong quarter.
Good morning.
Good morning. Starting with Costa Rica, you say that you will commence like a rollout on municipality level first and then hopefully convert that to national level. Could you just elaborate on, like, how are your discussions going and what is your plan going forward?
Well, first of all, I think we have to realize that Costa Rica is a country which is highly dependent on the influx of tourism and the funds which are generated by that. Because of COVID, fewer tourists were coming to the country, and that has actually caused the government to postpone this project. We have a totally valid contract there. We expect it to start, but the timing of the contract execution is at this moment not sure. We took a different angle to it, and we started talking to the municipalities. They have their own budgets, and we presented them with the very same model we were going to implement nationally.
The reactions up to date have been very positive. I mean, these are of course processes that will take time, but the initial reactions are positive, and we'll be starting to in the first phases of creating these projects and then thereafter implementing them. We believe because we will demonstrate the success of these, hopefully the success of these programs, that will help the national government also to starting the project on a national level.
All right, good. Can you say anything about, like how many municipalities or like how big a part of the country have you like convinced to start with these project on a municipality level?
Yeah. Right now, and that's all I can disclose. Right now, we're talking to three cities.
Regarding the customer bonus from the Netherlands that you received, how much was that bonus payment of?
EUR 4.4 million.
Four?
Yeah.
Also, if we move on to Trafikverket in Sweden, like could you talk a little bit about the ongoing procurement from Trafikverket, and like what sums are we talking about, and over how long time are those deliveries supposed to go on?
Are you talking about the tender coming out? Is that what you're talking about?
Yeah, exactly.
Okay. Yeah, what we can say there is that obviously it's a very large tender. It regards 4,000 systems plus maintenance for quite a long time. We talk about six years, + 2, + 2, + 2. The total length of that contract potentially is 12 years. Yeah, I mean, it's clearly a focus area for the entire company to win that tender and bring it to us. You can imagine that this is taking up quite some resources internally as well because it has all this focus. Is there anything else you want to know about this?
No, I mean, also, like, what is your view on your chances of winning this? I guess you have a good track record in Sweden and good relationships ongoing.
Yeah, absolutely. I think we have a very good relationship with Trafikverket, and we've been delivering up to their very high standards over the past contract periods. It puts us in the best position. Still in the end, it's a tender, so the tender rules apply, which means that if other participants also qualify with the requirements, then in the end, the lowest price bidder will win. Obviously, Jesper, that is gonna be us, right? We have all intentions of winning that tender, clearly.
Good, good stuff. All right. Moving on to Saudi, I mean, it feels like from an outside perspective, it seems like everything is going to plan there. Like you delivered as much as you said you would, like in Q4. What is your projections for 2022? Like, will it be like front-heavy or back-heavy, the delivery?
Yeah, I mean, I think we explained before that in the end, it's the customer of our customer that you know drives the timing of the deliveries. That's depending on their needs, and their needs are driven by the amount of vehicles they can outfit with the system and or the number of drivers they can find to operate the systems. That's how the dependencies lie. We're ready to deliver. I mean, the relationship with the customer is very good. We have very regular contact, and we travel there as well, even during the COVID period in the past two years.
Yeah, it's not the fastest rollout that we've seen in other situations, but it is a steady pace and also with a steady pace, the payments from the Saudis . We're very happy with that. If you recall, we had a first order from the Saudis for 200 systems, and that was paid in full, like 100%. That gives us also a very good level of confidence of how the payments will evolve for with this new order of the 1,000 systems.
Good. Moving on to Managed Services, did you have any rollouts of new programs during the quarter? If not, like how much of an impact on gross margin does that have, like, compared to, like, say, two rollouts, for example?
You want to take this one?
Yeah. Jesper, Simon here. The cost of a rollout typically depend on what type of project it is and the need of, for example, warning periods or marketing campaigns that we agree upon with our customer. We didn't have any big events like those going on in this quarter, right? That's why I also stated that the lower onboarding costs also led to a better EBITDA performance. Typically, you know, we want to have those costs because it means that there's a build-up. Sometimes some programs don't have these additional costs with them. You especially see that with takeover contracts, right? That those don't need a marketing campaign, don't need warning periods. Those have a lower cost to begin with.
Those costs depend on the size of a city, right? How big is the campaign? How big is the number of violations or warnings that we need to send out beforehand? That heavily impacts the onboarding costs.
All right.
Is that-
Yeah. That's good. How big of a part is, like, how large of a percentage is the like your takeover contract wins compared to like just new wins to cities that have not had it before?
Yeah. I don't know that number exactly. I mean, sometimes we have takeover contracts, sometimes we have completely new ones, right? I don't have that percentage readily available, so.
Yeah. Is it like 50% 50% or is it like 90% 10%? Like what's the ballpark are we talking?
Yeah. It's difficult to say that, Jesper, because it's also dependent on the size of the contract. A contract could be large with many cameras, or it could be small with just few cameras, and then the impact will be different, frankly. Hard to say. We get the question. We'll dive into that, and maybe we're able to get back to you with a bit more analysis on that one. Statistically-
Right
With the number of cities we have, I don't think it's gonna be something you can actually model.
No. All right. Moving on with Managed Services. We saw the Biden initiative with the big initiative for speed cameras announced in Q4. Are you experiencing any positive effects on this so far?
Well, I mean, there's definitely a lot of talk around it in our industry, but for instance, we see the state of Massachusetts opening up now, having political discussions about implementing automated traffic enforcement. There's definitely activity, political activity around it.
All right. Good. Thank you guys. That's all for me.
Thank you, Jesper.
Thank you, Jesper.
As there are no further questions, I'll hand it back to the speakers.
Okay. Well, thank you everybody for attending this presentation, and I hope to see all of you back on the next quarterly report presentation. Thank you. Have a nice day.
This concludes our conference call. Thank you all for attending. You may now disconnect your lines.