Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Order intake increased by 37% in Q2 2024 and 86% year-to-date.
- Strong revenue growth of 26% in Q2 2024 compared to Q2 2023.
- EBITDA improved by 28% in Q2 2024 compared to Q2 2023.
- Successful signing of the first contract in Stratford, Connecticut, worth SEK73 million.
- Enhanced relationship with Saudi customer Tahakom, including a memorandum of understanding for future collaborations.
Negative Points
- Available cash decreased from SEK84 million at the beginning of the year to SEK65 million at the end of Q2 2024.
- Operating expenses increased by SEK7 million in Q2 2024 compared to Q2 2023.
- Gross margin remained flat at 42% in Q2 2024, the same as in Q2 2023.
- Legislative changes in Iowa caused a temporary pause in some programs, impacting TRaaS revenue growth.
- Initial phases of large contracts in the Netherlands and Sweden faced lower margins, affecting overall profitability.
Q & A Highlights
Q: Regarding the Saudi development, is there more payment to come for the second half, or was that the final payment for the Saudi project?
A: It's not the final payment; there's more to be received. As part of the terms and conditions for the contract, we will receive a final payment after a certain period of completion of the project. Additionally, Saudi Arabia is opening up for automated traffic enforcement, and we are the only supplier capable of delivering on all tenders.
Q: Is it fair to assume that potential follow-up projects in Saudi Arabia will be significantly bigger than the previous project?
A: The total demand for these projects is significantly higher, but competition will determine the share coming our way. We do expect more than one solution next to in-vehicle speed control, but the exact numbers are not known yet.
Q: Regarding working capital investments for the Dutch project, will the rollout of the Swedish project in the second half of this year lead to another significant working capital increase?
A: The Swedish tender is structured differently from a payment perspective, so we are better aligned with outgoing and incoming funds. Starting up any project takes up working capital, but we don't expect a similar impact as with the Dutch project.
Q: Are the current levels of investments in new software and hardware expected to be stable going forward, or are they part of a bigger investment plan?
A: We foresee the current level of investments in intangible fixed assets and software suites continuing. Investments in fixed assets and operations were lower in the second quarter, but we expect them to come back in the second half of the year.
Q: Do you see the strong order intake in the US as an exceptional quarter, or is it indicative of a structural trend?
A: It's a combination of both. With an expanded sales team, we have a higher chance of bringing in new contracts. Additionally, markets like Connecticut, Florida, and California are opening up for automated speed enforcement, indicating a positive market trend.
Q: How do you see lead times in Managed Services evolving in terms of sales growth and EBITDA margin?
A: Typically, it takes 6 to 12 months from signing an order to going into operation. This timeframe includes obtaining permits, installation, a warning period, and then issuing citations and collecting funds.
Q: Do you expect a reversal in working capital this year, or will it take longer?
A: We expect available cash to restore gradually as we roll out the Swedish and Dutch tenders further. We have a strategic inventory position to maximize sales in the Dutch tender, and we expect to return to more normal levels.
Q: Can you guide on margin development for the second half of the year with the rollout of the Swedish project?
A: If system sales are higher, margins might be lower; if Managed Services are higher, margins might be higher. We prefer to look at the 12-month rolling gross margin, which is around 40%, plus or minus.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
