INVISIO : Interim Report January - June 2021

Interim report January - June 2021

Launch of new technology platform.

A gradually more active market.

		2021	2020		2021	2020		2020
	SEK in millions	Q2	Q2	∆ %	Jan-Jun	Jan-Jun	∆ %	Full year
	Revenue	154.3	123.6	25	298.1	240.4	24	532.0
	Gross profit	89.6	79.9	12	172.2	147.1	17	309.0
	Gross margin, %	58.0	64.6		57.8	61.2		58.1
	EBITDA	25.6	26.8	-4	49.1	43.6	13	108.1
	EBITDA margin, %	16.6	21.7		16.5	18.1		20.3
	Operating profit/loss	14.2	24.4	-42	26.9	38.8	-31	95.4
	Operating margin, %	9.2	19.8		9.0	16.2		17.9
	Profit/loss for the period	9.4	18.1	-48	16.1	27.5	-42	61.2
	Earnings per share, SEK	0.21	0.41	-48	0.36	0.62	-42	1.39
	Order intake	167.3	107.3	56	304.7	197.6	54	535.3
	Order book	191.7	99.9	92	191.7	99.9	92	123.2

"We can note that as vaccinations are rolled out, our markets are slowly but surely starting to return to normal.

More and more customers can receive visits and implement testing of our equipment. This trend is strongest in the USA and can now be seen in several markets in Europe, which facilitates marketing and selling. For our part, the quarter was characterized by the launch of the new technology platform with AI technology, which sets a new standard for audio performance, communication and hearing protection. It will give us an even clearer advantage in relation to our competitors."

Lars Højgård Hansen, CEO

IMPORTANT EVENTS DURING THE QUARTER

• INVISIO introduced a new technology platform with AI that constitutes the next generation of tactical communication solution - the INVISIO V-Series Gen II.
• INVISIO received an order worth SEK 40 million from an existing customer in the US Department of Defense.
• The Swedish Police Authority extended its framework agreements from 2019 for another year.

INVISIO AB | Interim Report January - June 2021 | 1

Interim report January - June 2021

Launch of new technology platform. A gradually more active market.

We can note that our markets, as vaccinations are rolled out, slowly but surely are starting to return to normal. As far as INVISIO is concerned, this is clearly apparent in that more and more customers and partners can receive visits and implement testing of our equipment. This trend is strongest in the USA and can now be seen in several markets in Europe, where increased travel possibilities and gradual opening up facilitate marketing and selling.

The trend is reflected in the order intake, which was SEK 167.3 million (107.3) in the quarter. We note that the trend towards more but smaller orders continues, which ultimately give the revenue side more stability and slightly less dependence on the really large orders.

Lars Højgård Hansen, CEO

Sales (SEK million)1

Sales in the quarter were SEK 154.3 million (123.6). Sales of products under the Racal Acoustics brand contributed just over SEK 30 million in the quarter.

At the close of the period the order book amounted to SEK 191.7 million (99.9). It is worth repeating that Racal Acoustics' deliveries may lie further in the future. It is not unusual for a first part-delivery to be within 6 months and the following deliveries within 12-18 months, in accordance with the customers' roll-out plans.

The gross margin was 58.0 per cent (64.6). The lower level, compared with the corresponding quarter in the previous year, is mainly due to the product and sales mix, which can vary over time.

Operating profit in the quarter is mainly impacted by increased depreciation /amortization, which is a consequence of the acquisition of Racal Acoustics and the fact that several newly developed products have recently been launched. All in all, depreciation/amortization amounts to SEK 11.4 million, which is SEK 9.1 million higher than the corresponding quarter in the previous year. Consequently, the EBITDA margin was 16.6 per cent (21.7) and the operating margin was 9.2 per cent (19.8) for the second quarter.

New technology platform future-proofs the offer

One of the most significant events of the quarter was the launch of the new technology platform, the INVISIO V-Series Gen II. It constitutes the next generation tactical communication solution - and in combination with our headsets it sets a new standard for audio performance, communication and hearing protection.

It is not an update of an earlier platform, the INVISIO V-Series Gen II is built entirely from scratch. All in all, this means a paradigm shift from hardware to software with AI technology (artificial intelligence).

The platform's main strength is that it enables a considerably greater degree of flexibility when developing customized solutions and updating. We have taken a major step forward as regards applying new technology.

600
400		17%
200
0
2017	2018	2019	2020	2021
Full year	Jan-Jun		CAGR [1]

EBIT (SEK million)

140

120

100

80

60

40

20

0

2017 2018 2019 2020 2021

	Full year		Jan-Jun

The average EBIT margin for the past 20 quarters was 20 per cent.

The new platform's main strength is that it allows a considerably higher degree of flexibility.

1 CAGR refers to the past 20 quarters.

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Interim report January - June 2021

The solution includes a number of in-house developed and advanced algorithms, as well as AI, which helps the users hear what they want to hear and filter out unimportant sounds and noise. Apart from improving communication and thus contributing to increased safety, the new functions also help to reduce noise-induced tiredness among users.

AI in the new technology platform helps users to hear what they want to hear and filter out unimportant noise.

The new platform is a clear example of how we use technical innovation to continually

drive development forward in our industry. With the new technology platform in place we are increasing our lead over our competitors.

Market activity is gradually increasing

In all our focus areas in defense and security we now see increasing activity levels and a growing number of orders.

The single largest order was for SEK 40 million at the beginning of May, received from an existing customer in the US Department of Defense. The order refers to an advanced communication and hearing protection system and delivery will be in the second and third quarters.

Interest in our new Intercom system continues to be great and in the second quarter INVISIO received several new pilot orders from both military and law enforcement customers. The system is currently used by several customers in live environments, which is significant both for continued marketing and continuing development of the system.

The focus on the law enforcement and security market area is continuing. The reinforcement of the sales organization and increased number of distribution partners in the USA and Europe is yielding results. The activity level has been particularly high on the American market.

In the second quarter the Swedish Police Authority also extended its two framework agreements from 2019 for another year. The extension refers to continued deliveries of communication equipment with active hearing protection. The agreements do not guarantee any volumes, but call-off is as needed.

Good prospects of a continued successful growth journey

Increasingly attractive market conditions along with a broadened and strengthened offer mean that INVISIO has good prospects of continuing good development.

Lars Højgård Hansen, CEO

The Swedish Police Authority extended its framework agreements from 2019 for another year.

INVISIO AB | Interim Report January - June 2021 | 3

Interim report January - June 2021

Sales and profit

Second quarter 2021

In the second quarter INVISIO has experienced that the negative effects of COVID- 19 are starting to decrease. However, the company considers that there is a continued, though limited, delay in order intake.

Sales in the second quarter amounted to SEK 154.3 million (123.6), which means an increase of 25 per cent compared with the corresponding period in the previous year. In comparable currencies sales increased by 35 per cent. Sales of the Racal Acoustics product line contributed just over SEK 30 million in the second quarter.

Sales on international markets are mainly in USD, EUR and GBP. INVISIO hedges large orders to offset currency fluctuations in the short term.

The order intake in the quarter was SEK 167.3 million (107.3). The order book amounted to SEK 191.7 million (99.9) at the close of the quarter.

INVISIO's market is characterized by large procurements at irregular intervals. Lead times are often long due to extensive processes with customer tests in laboratories and among end users. This means that the order intake and sales for individual quarters may vary and also have an effect on the full year figures.

Gross profit was SEK 89.6 million (79.9) and the gross margin was 58.0 per cent (64.6). The main reasons for the somewhat lower margin are product mix and share of direct sales to end customers.

Order intake per quarter and rolling 12 months (SEK million)

300								800
250								600
200
150								400
100								200
50
0								0
Q2 2017	Q4 2017	Q2 2018	Q4 2018	Q2 2019	Q4 2019	Q2 2020	Q4 2020	Q2 2021
		Quarterly				RTM

Sales per quarter and rolling 12 months (SEK million)

250								700
200								600
							500
150
							400
100								300
50								200
							100
0								0
Q2 2017	Q4 2017	Q2 2018	Q4 2018	Q2 2019	Q4 2019	Q2 2020	Q4 2020	Q2 2021
		Quarterly				RTM

EBITDA was SEK 25.6 million (26.8), which resulted in a margin of 16.6 per cent (21.7). The rolling twelve-month EBITDA margin was 19.3 per cent (25.1).

Operating expenses - including depreciation/amortization were SEK 75.4 million (55.4). The increase refers to a larger organization including Racal Acoustics, increased activities in line with the growth strategy and substantially increased depreciation/amortization.

Depreciation/amortization in the quarter amounted to SEK 11.4 million (2.3). The higher level is mainly due to the company starting depreciation/amortization on several completed development projects. This depreciation/amortization amounted during the period to SEK 4.7 million, compared with SEK 0.7 million in the corresponding period in 2020. Of the remaining SEK 6.7 million (1.6), SEK 3.1 million (-) refers to amortization of other intangible assets (customer relations, technology and trademark) arising in connection with the acquisition of Racal Acoustics. Amortization of rights of use assets (leases) of SEK 2.1 million (1.1). is also included, as well as depreciation of property, plant and equipment of SEK 1.5 million (0.5). For further information, please see Note 3 on page 14 of this report.

The operating profit / EBIT was SEK 14.2 million (24.4) for the second quarter of 2021, resulting in a margin of 9.2 per cent (19.8).

Operating expenses per quarter (SEK million) and EBITDA margin rolling 12 months (per cent)

80								30%
60								25%
							20%
40								15%
20								10%
							5%
0								0%
Q2 2017	Q4 2017	Q2 2018	Q4 2018	Q2 2019	Q4 2019	Q2 2020	Q4 2020	Q2 2021

Operating expenses

EBITDA margin, RTM

INVISIO AB | Interim Report January - June 2021 | 4

Interim report January - June 2021

During the quarter development costs of SEK 5.0 million (5.1) were capitalized.

Net financial income was SEK -1.1 million (-0.5).

Profit before tax amounted to SEK 13.0 million (24.0) and profit for the period was

SEK 9.4 million (18.1). Earnings per share were SEK 0.21 (0.41).

First half year 2021

Sales for the first half year 2021 amounted to SEK 298.1 million (240.4), an increase of just over 24 per cent, compared with the corresponding period in the previous year. After currency adjustment growth was 30 percent. In the period February to June Racal Acoustics contributed SEK 55.0 million.

Gross profit was SEK 172.2 million (147.1) and the gross margin was 57.8 per cent (61.2).

Operating expenses for the first half year 2021 were SEK 145.3 million (108.2). During the period development costs of SEK 9.3 million (11.1) were capitalized. Operating expenses include depreciation of capitalized development costs of SEK 9.2 million (1.7).

EBITDA was SEK 49.1 million (43.6), which resulted in a margin of 16.5 per cent (18.1).

Operating profit for the period was SEK 26.9 million (38.8) and the operating margin was 9.0 per cent (16.2).

Net financial income was SEK -3.2 million (-0.9).

Profit before tax amounted to SEK 23.8 million (37.9) and profit for the period was SEK 16.1 million (27.5). Earnings per share were SEK 0.36 (0.62).

Cash flow, investments and financial position

Cash flow and investments

The Group's cash flow for the period January - June 2021 was SEK -39.7 million (50.4), of which cash flow from operating activities was SEK 59.4 million (101.6) and cash flow from investing activities was SEK -185.6 million (-12.9). Cash flow from financing activities was SEK 86.6 million (-38.4), of which SEK 100.0 million (-) was loans taken up.

During the period the Group's investments amounted to SEK 185.6 million (12.9), of which SEK 185.6 million referred to investments in the subsidiary Racal Acoustics and SEK 9.3 million (11.1) was capitalized development costs and SEK 2.6 million (1.8) was net investment in property, plant and equipment.

During the period the Group sold the rights to a product line that had previously been licensed by Racal Acoustics. The selling price was SEK 12.1 million and has a direct impact on cash flow. The sale did not affect profit.

The inventory value at the close of the quarter amounted to SEK 118.0 million (135.0)

14%

Investments in R&D for 2016-2020 amounted to an average of 14 per cent per year of the company's total revenue.

INVISIO AB | Interim Report January - June 2021 | 5