[Non-English content] Luis, nice to see you again. How are things in Glasgow?
Great to see you, Carlo. It's actually a very nice day here in Glasgow.
Yeah.
For a change.
For a change. Luis, last time we spoke, you guided for a very busy second quarter or a quarter ahead. As far as press releases and the figures are concerned, I would say that you've been proven right there. Please, take it away.
Thank you. Thank you, Carlo. It was indeed a very busy quarter. As I said, it was a foundational quarter. If we take a look at the presentation, we have a slide on listing those. Not only we finished signing the second part of the EPS-Sterna contract, effectively the old payload and avionics contract came into life during this quarter with the work starting in earnest on all the parts of this contract. It was a very busy quarter from that perspective. Also it is the quarter where we signed the next phase of Inflection for the 12 satellites. This is when we really start the work to build the constellation, the work to actually start preparing all the services. That is an extremely important milestone for us. Of course, we have launched VIREON-1 and VIREON-2 back in March. We are now going through their commissioning.
We announced first light on VIREON-1. We are going through the process of focusing, calibrating that camera, while we work on VIREON-2 also. What we saw was growth on both business segments, both on the Products & Missions and on the Space Data as a Service. Overall, what this has given us is a backlog that is approaching SEK 1.2 billion . So a very busy quarter. If we go on to the next slide, we can also see that it was a quarter where we achieved good numbers. We achieved good results, very much in line with what we were expecting. So we have about 51% growth on net sales in relation to last year, to the same quarter last year. We achieved a positive EBITDA of SEK 2.7 million . Again, quite a big growth in relation to last year.
Importantly, it is another strong quarter in terms of EBITDA. We have a very positive operational cash flow, something that we would expect with the kind of contracts we have got right now. It is something that we have been working towards for some time. As I said, an order backlog approaching the SEK 1.2 billion . It is very healthy. It means that a lot of our revenues are already in our order book. So that is actually a very good position to be in. If we go on to the next slide, we are now very much focusing on execution and expansion. Over the next few months, we continue to see strong demand for our products and satellites. We are working with potential customers. We are working through our pipeline of opportunities right now.
A lot of our focus is now on expanding our Space Data as a Service. So bringing VIREON-1 and VIREON-2 online, getting seven, three, and four through their build so that we can reinforce our maritime data intelligence gathering, and we can start monetizing those satellites. Of course, focusing on the Inflection program and growing our constellation on the maritime side with new services, not just tracking, but also communications and other associated services. So we continue to do that. As I said, we have strong demand, a lot of our focus now is actually on delivering Products & Missions to customers, governments, and commercial customers. We continue to do that. We see strong demand for our products. If we go on to the next slide, we keep our full year guidance.
As I said before, quarter two was in line with our expectations, so we keep our guidance of SEK 440 million- SEK 510 million in net sales for the year, with an EBITDA of 10% and a positive operational cash flow. We continue to maintain that guidance. As I say, quarter two was aligned with our expectation, so we are very happy to maintain our guidance. This is in summary the quarter. I do not know if there are some questions now, but it was a positive quarter for us.
Thank you for that. Short and snappy. In summary here, if I can just recap the first slides where you are referring to six months being foundationals here, you are talking about two separate things that will be connected. Let us see if I got this right.
Firstly, we have the EPS-Sterna orders strengthening the hardware side and proves that operating on a much larger scale, which we can see that the figures here are delivering. Secondly, you have the launch of the VIREON and progress with Inflection.
Yeah.
Driving future data and service growth.
So you have one part that is delivering and another part that will drive the growth. Do you buy into my interpretation there?
Absolutely.
Okay.
We very much have that bedrock of our business that is hardware.
But we see quite a lot of opportunities on the growth of our data and services business to expand the company, to grow the company. So, the first half of the year is very much a good example of how we operate. Building on our success as a hardware producer and then delivering on data and services as a growth engine for the future.
Mm. Would one or the other of those two developments be more important than the other?
I would say they're equally important in their different ways. When you look at something like EPS-Sterna, it's a very large contract.
It's technically challenging but perfectly achievable. We have done a prototype before on the Arctic Weather Satellite, so we are very comfortable with the design and build of this constellation. It's a big contract, but it is an important contract for Europe. It shows our ability in terms of hardware, our design engineering. That is something that we will continue to do, is something that will continue for the future. As I say, it's very much the foundation of the company, the hardware capability, the engineering capability. Then we see huge potential on the growth of data and services, and that, of course, is an area we are investing. It's an area that we expect to grow. In the long term, we expect those areas to be about 50/50 of our business. We are in that journey right now.
Mm-hmm. I have some complimentary questions here regarding this from viewers here coming in. VIREON-2, is it doing well?
We're going through its commissioning. We have focused very much on VIREON-1 at this stage because we want to start service, so we are putting more effort into that. VIREON-2 is going through its commissioning, doing its tests as normal. Yes, but the focus has been on VIREON-1 because we want to start revenue from those satellites on quarter three.
More to come from VIREON-2 then?
Yes.
We have another viewer question here. For the Products & Missions revenue, how much of the revenue came from EPS-Sterna for the quarter?
A large amount. It was a big part of our revenue, but it was not the only one. Yes, it was. I couldn't tell you an immediate number.
Off the top of my head, but it was an important part, and it will be the case for the next two years.
It will always be a big part of our revenue for products, because it is our biggest contract. It is the dominant contract on our Products & Missions business line.
I can see that we have some questions about SKAO here. I am coming to that a little bit later because I would like to stay on VIREON satellites. When will VIREON start generating revenue following commission, and how would the investors think about the commercial ramp-up for the first revenues to a more meaningful contribution? If you can elaborate a little bit of that, and then we jump into South Africa.
We expect revenues to start in quarter three. As I said, we are already capturing imagery. We are already doing some of the work in preparation for our customers. So we expect, as I say, Q3 to already start delivering some revenue. Then we expect a normal ramp-up on a project. We have customers lined up. We have people wanting to take on contracts on the satellite. We expect what would be a normal ramp-up on a Space Data as a Service contract. We expect to be in full revenue for those satellites towards next year, so there will be a ramp-up from here until then. It is difficult to go into that detail without going through the detail on contracts and customers.
But it's what I'd expect the normal approach for a data and services satellite that we see also on our maritime side, for instance.
Mm-hmm. If we go back to a press release from last week, I think, if you could elaborate a little bit about the SKAO project. What is SKAO and what to expect going forward? I have some detailed questions here, so we'll see
how much you can answer here. Just in round things here, this is a large organization as I understood.
Yeah. SKAO stands for Square Kilometre Array Observatory. Square Kilometre Array is a telescope that basically That's several antennas in places in South Africa and Australia. We are working on the one in South Africa. So we provide one equipment, one part of the network of antennas, and the receivers for a specific band. The objective is to look at the universe and measure certain amounts of microwave radiation coming from different stars and different celestial bodies. It's a big international organization, so it's actually headquartered in the U.K., but it's financed by many different countries. As I say, the antennas and the telescopes are based in South Africa, the ones we are working on. We are supplying the feeds for those. We are building them in Gothenburg. It is a project that has been running for quite some time.
What we announced is that we shipped the first of the prototypes of those feeds to South Africa. We are very much dependent on the timelines of that large international organization. They have to build antennas. They have to expand their site in South Africa. We have been working on that, and we are very happy to have those feeds there. They are now being tested. We will have results later this year for those tests. It just shows the progress that we have done. The design is pretty much done. We are now in a phase where we are just waiting for our customer to say, "Okay, start delivering these units." We have quite a lot of those units to deliver. It's a great start. It's great progress. We are very much on the timelines of our customer on that.
We have a more granular question here regarding it, I'll just read it through. You recently delivered the first pre-production band one feed systems to the observatory as a part of the EUR 12 million contract. How much revenue remains for the project? What can you say?
I would say that there is still substantial revenue on that program. We have done the design phase and the production of the first unit. The bulk of the production is still to be done. I won't go into the detail of the numbers, but I would say that a large amount of the revenue is still to come.
Coming into the future here, though, large European satellite programs like IRIS² are increasingly moving towards procurement. How well-positioned would you say that AAC Clyde Space power and data handling products would be for larger LEO and MEO platforms?
I think they'd be the ideal, but we will only do that work if it's actually profitable.
What we have seen in many of these very large constellations and very large programs is that margins are usually expected to be quite low. They are usually very commercially aggressive. They also tend to attract lots of people, of course, lots of suppliers. So there is huge competition because they are seen as large programs, what depresses margins. We have walked away in the past from one or two of these opportunities because when we get to the negotiation, the discussion with the customer, effectively, they want us to do that at ridiculously low margins that would barely pay our costs, and if there are any problems, any issues on the design, we could actually lose money. So although the promise is good, the reality is that in some cases, this is just not what it seems. We will, of course, we are in the discussions.
We are talking to these potential customers, but we'll only actually do that if the business makes sense. It has to make sense. In some cases in the past, for these kind of things, we prefer to negotiate, for instance, a license agreement with the customer. If they are going to build a lot of satellites, they might be more interested in doing these things themselves, the production themselves. These are things that we are in discussion right now. But as I say, we are part of this conversation. We are talking with the different potential customers, so we are in that phase. But as I say, we will only do it if it makes sense for us. I think we have a very strong product, actually probably the best for what they are looking for. But we'll have to see if the business makes sense.
Mm-hmm. Well, coming away not having an order doesn't necessarily mean that, well, it could mean that you will not suffer margins going forward.
Yeah. As I said, we have in the past, we have been approached for other constellations.
We have been asked to bid, and technically, we of course offer a very compelling offer to the customers, but the kind of prices they are looking for, the kind of conditions even that they impose on us are such that it is a risky business, and you can actually lose quite a lot of money. In those cases, we walked away. We have got a few others that we are ongoing, not on IRIS². We have got a few other discussions ongoing on products for constellations of tens, probably not hundreds, but tens of satellites. But again, it has to make sense. It is something that it is very appealing because the number is very large. A lot of revenue with a loss makes no sense. That is what we are always looking for. Does it actually make sense for us to bid on this or to win these things?
That is always a discussion, and we will see what terms, what conditions we are offered, and then we will decide.
Mm-hmm. We have another question here regarding this quarter and the EPS-Sterna projects, and I think that you have partly already replied to on a previous question. The question is, how much revenues during the quarter is related to the EPS-Sterna project? Could I just add then and say, are you happy with the contribution so far in comparison with other revenue streams on the EPS-Sterna project well, this quarter and so far?
Yes. We are broadly on target on EPS-Sterna. In general, yes, we are where we plan to be with EPS-Sterna, and we expect that to continue. Yes, I am happy with that.
Mm. I will tie in that to another question, which is easier perhaps to say than answer, and what is the full revenue potential for VIREON-1?
That would be giving too much information about our business plan. I will not answer that one.
I would say that it makes economic sense. We only invest in it because we believe that it will actually make us quite a good revenue and quite good profit.
Okay. You are reiterating your full year guidance, as you did in the previous quarter, and that is just to remind people, SEK 440 million -SEK 510 million, and a margin of 10%. I will ask you more or less the same question as I did the previous quarter. What gives you the confidence in the guidance, and what are the key things that you would like us to look for and that you need to happen in the second half?
Largely where we are is, we are delivering on our plan. Second quarter was quite good, gave us confidence that we are delivering as expected. The third quarter continues to deliver. That is what is giving us the confidence on the guidance. We expect to continue to deliver. We have got the backlog. We have got a strong backlog with most of the revenue already booked. If not close to all, a large part of the revenue is already on the books. We have a few more things to do throughout the year that we need to do, but we are pretty confident on where we are right now.
Mm-hmm. Would you be so bold, you could give us an expectations of revenue for 2027? It is a viewer question.
No, not yet. Too early for that one.
Okay.
Too early for that one.
Then I will come back here on Products & Missions and customers here. How well positioned would you think that AAC Clyde Space would be for the U.K. Coastal Maritime ISR Service procurement?
We are always well-placed. It depends very much. Many of these things have a variety of different technologies that are required. So we can actually deliver part of those, together with others. Together with other partners, we can deliver full solutions. So yeah, we would be placed to be part of that, but we would have to see what exactly requirements we are being asked to do and in which parts it makes sense for us to invest in development and development of capability.
It's a little bit of the IRIS² here. You are discussing, and you think you're well positioned. But it takes two to tango here as well.
It depends. Most of these solutions are. First, if you look at Inflection, that is already part of that type of technology. If you look at Inflection, we have different partners delivering different parts of the system. So it depends very much if the requirements, if the demand on us, we can fulfill it all ourselves, if we need to work with partner, in partnership with someone. So it depends very much. These are discussions that are always happening. In some cases, we can lead, in some cases, we can actually be a follower, can work with someone else. These are all part of live discussions.
Until a contract is defined, it's something that we just have to continue talking and discussing.
Just as a, what, more or less a wrapping up question here. When you said you have to continue discussing, could you just give us a feel for the timeline from, let's say, initial discussion to actually signing on the dotted line? Are we talking six months, six years, and?
Depends. Depends very much on the type of contract.
The type of customer. It can be very quick. It can be very long.
Contracts like EPS-Sterna, as everyone knows, take a few years
to actually happen. From first discussion up until you have got a contract, it can take quite a long time. Other contracts with particularly commercial customers can be much quicker. I would say one year is a good average, one to 1.5 years-
Okay
between first discussion and a contract.
That's an average.
Yeah. Of course.
There are quite extreme cases, particularly if it involves government and governmental organizations. It's not unusual to have a two, three -year timeline between the first contact and actually having something black and white.
Yeah. On the other hand, it is more of a question. If it takes a long time to negotiate, particularly with the state, if you have it, then you know you have it, and you know you have a-
Yes
you have a solid customer who-
Exactly
will actually pay the bills.
Exactly. That is why we do it, because ultimately, that is why we actually like those contracts, and we like to work with government, because ultimately they are a good customer. Once we actually, although the negotiations can take quite a long time, as you point out, usually you know very early on if you are the one that has been selected.
Then you just have to go through the process. But those are good. It's good business.
Okay. Excellent. Thank you for that. Last time you predicted a very busy quarter, so could we expect a very busy coming quarter as well?
They're all busy. Very rarely we have a quarter that is not busy. If it's not new contracts, it's delivering on the ones that we've got. So yes, quarter three will be busy. Quarter four will be very busy.
Okay.
We expect the momentum to continue.
All right. Okay. Thank you for that, Luis.
Thank you.
And we will thank anyone who asked the questions. If you feel that you need more meat on the bone, take contact with the company and its IR. With that, I would say thank you so much.
Thank you.
[Non-English content] , and see you later. Bye.
Thank you. Bye.