INVISIO Interim Report January - September 2021

Interim report January - September 2021

Good order intake of smaller orders - but continued delay in larger ones

		2021	2020		2021	2020		2020
	SEK in millions	Q3	Q3	∆ %	Jan-Sep	Jan-Sep	∆ %	Full year
	Revenue	142.7	118.7	20	440.8	359.2	23	532.0
	Gross profit	82.4	59.8	38	254.6	206.9	23	309.0
	Gross margin, %	57.7	50.3		57.8	57.6		58.1
	EBITDA	8.3	19.1	-56	57.4	62.7	-8	108.1
	EBITDA margin, %	5.8	16.1		13.0	17.4		20.3
	Operating profit/loss	-3.4	16.4	-121	23.6	55.2	-57	95.4
	Operating margin, %	-2.4	13.8		5.3	15.4		17.9
	Profit/loss for the period	-2.8	6.2	-146	13.2	33.7	-61	61.2
	Earnings per share, SEK	-0.06	0.14	-145	0.30	0.76	-61	1.39
	Order intake	164.9	212.1	-22	466.1	409.7	14	525.7
	Order book	210.4	183.1	15	210.4	183.1	15	123.2

"During the quarter we have seen a continued good intake of smaller orders, but in terms of larger orders we are still seeing a pandemic-related delay. This is mainly due to customers' purchasing processes taking longer than before, difficulties in implementing tests and temporary changes in budget priorities among some customers. However, our assessment is that INVISIO has not lost any orders or procurements. To date during the pandemic, we have not been affected by delivery problems or component shortages, but we are now seeing slightly longer lead times. This may affect our normally fast customer deliveries in the fourth quarter and the beginning of 2022. All in all, however, conditions for strong and sustainable growth continue to be very good."

Lars Højgård Hansen, CEO

IMPORTANT EVENTS DURING THE QUARTER

IMPORTANT EVENTS AFTER THE QUARTER

• INVISIO entered a sales and distribution partnership for the Intercom system with the RIB boat manufacturer Zodiac.
• The Intercom system was certified for use in some Black Hawk helicopters.

• INVISIO signed a distribution agreement with SkyRunner, manufacturer of ultralight aircraft for professional use.

INVISIO AB | Interim Report January - September 2021 | 1

Interim report January - September 2021

Good order intake of smaller orders
- but continued delay in larger ones
During the quarter we have seen a continued good small and medium order intake.
However, for larger projects and orders we are still seeing pandemic related delays.
This is mainly due to customers' more extensive purchasing processes taking longer
than before and challenges in implementing tests. In addition, some organizations
have had to make temporary changes in budget priorities that impact purchases
negatively.
In this context it should be pointed out that in our assessment INVISIO has not lost	Lars Højgård Hansen, CEO
any order or procurement. Delays and deferments have affected the entire market.

Despite the lack of larger orders, order intake in the quarter was SEK 164.9 million (212.1). The level of order intake is a clear sign of strength and a direct consequence of a larger customer base and broader offer.

At the close of the period INVISIO's order book amounted to SEK 210.4 million (183.1). To date during the pandemic, we have not been affected by delivery problems or component shortages, but we are now seeing slightly longer lead times. This may affect our normally fast customer deliveries in the fourth quarter and the beginning of 2022.

Weak sales of INVISIO products in the quarter

Sales (SEK million)

600
500		16%
400
300
200
100
0
2017	2018	2019	2020	2021
Full year	Jan-Sep	CAGR

Total revenue in the quarter was SEK 142.7 million (118.7), an increase of 20 per cent compared with the corresponding quarter in the previous year. The pandemic related challenges have mainly affected revenues from products under the INVISIO brand. Revenues from products under the Racal Acoustics brand continue to develop positively and amounted during the quarter to SEK 57 million. The difference can be explained by the fact that the market for Racal Acoustic's products is more mature and has a larger share of recurring sales.

The gross margin was 57.7 per cent (50.3). The margin level mainly depends on the product and sales mix, which may vary over time.

The operating profit (EBIT) was SEK -3.4 million (16.4), which is not satisfactory. The operating profit is in particular a consequence of the negative sales growth for INVISIO's product line and higher costs. The cost increases are due to organizational development in line with our growth strategy and consolidation of Racal Acoustics, as well as substantially increased depreciation. The higher depreciation is a consequence of launching several new products on the market in the past twelve months.

However, compared with the second quarter of 2021, operating expenses are at approximately the same level, with the exception of acquisition related non-recurring costs.

CAGR refers to the past 20 quarters

EBIT (SEK million)

140

120

100

80

60

40

20

0

2017 2018 2019 2020 2021

	Full year		Jan-Sep

The average EBIT margin for the past 20 quarters was 18 per cent.

Sales of products under the Racal Acoustics brand continue to show positive growth.

INVISIO AB | Interim Report January-September 2021 |2

Interim report January - September 2021

Well-equipped for utilizing market opportunities

The demand for our world leading products is growing as requirements concerning communications equipment grow and as awareness of the consequences of hearing loss become increasingly known. Through the efforts we have made in recent years we are now better equipped than ever before. We have further developed the product portfolio, broadened the customer base, established ourselves in new geographies and strengthened our sales organization.

We have also developed a new, AI-based technology platform. This enables a considerably higher degree of flexibility in developing and launching new functions and customized solutions. The AI-platform is a clear example of how we use technical innovation to continually drive development forward in our industry and thereby increase our advantage over our competitors.

Great interest in the Intercom system

We note continued strong interest in the recently launched Intercom system:

Cooperation with two partners

INVISIO has initiated sales and distribution partnership with Zodiac and signed a distribution agreement with SkyRunner for the use of the Intercom system in RIB boats and ultralight aircraft.

The Intercom system is used in Black Hawk helicopters

Interest in using the Intercom system in helicopters is strong. During the third quarter the system was certified by a number of customers for use in Black Hawk helicopters and is already in use today in live environments. The successes constitute an important reference in future marketing.

Evaluation projects are currently ongoing with several potential customers in Europe and the USA and with several manufacturers and outfitters of transport vehicles, boats and helicopters. It is worth remembering, however, that when it comes to volume orders, considerable time often passes between initial tests and an order.

Strong growth opportunities despite short-term challenges

Despite this year's development, we are convinced that our long-term investments in organizational structure and broadened product portfolio will take the company to the next level.

As regards market development in the short perspective, we see clear signs that the situation, as vaccines are rolled out, is starting to return to something more normal. We are also noticing considerably increased activity as regards physical trade fairs and exhibitions. One example of this is that the two large trade exhibitions, AUSA in Washington DC and Milipol in Paris, could be arranged now in October. All this in combination of course facilitates marketing and sales work quite significantly.

The pandemic impacted sales in 2020 and 2021 negatively - but the underlying conditions for strong and sustainable growth continue to be very good.

Lars Højgård Hansen, CEO

The underlying conditions for strong and sustainable growth continue to be very good.

NATO country orders 40 Intercom systems.

Clear signs that the market situation is beginning return to the more normal.

INVISIO AB | Interim Report January-September 2021 |3

Sales and profit

Interim report January - September 2021

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

Third quarter 2021

Sales in the third quarter amounted to SEK 142.7 million (118.7), which is an increase of 20 per cent compared with the corresponding period in the previous year. Adjusted for exchange rate effects, sales increased by 22 per cent. Sales of products under the INVISIO brand amounted in total to SEK 85.7 million (118.7). Sales of the Racal Acoustics product line continued to show strong growth, contributing SEK 56.9 million in total.

The order intake in the quarter was SEK 164.9 million (212.1). The decrease compared with the corresponding quarter in the previous year was mainly due to the absence of major orders. As regards small and medium-sized orders, intake continued to be good.

The order book amounted to SEK 210.4 million (183.1) at the close of the quarter. Most of INVISIO's deliveries take place in the two quarters directly following receipt of orders. Deliveries of products sold under the Racal Acoustics brand may, however, lie further in the future. It is not unusual for a first part-delivery to be within six months and the following deliveries within 12-24 months, in accordance with the customers' roll-out plans.

Gross profit was SEK 82.4 million (59.8) and the gross margin was 57.7 per cent (50.3). The growth was mainly due to changes in the product mix and an increased share of direct sales to end customers.

300								800
250								600
200
150								400
100								200
50
0								0
Q3 2017	Q1 2018	Q3 2018	Q1 2019	Q3 2019	Q1 2020	Q3 2020	Q1 2021	Q3 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
Q3 2017	Q1 2018	Q3 2018	Q1 2019	Q3 2019	Q1 2020	Q3 2020	Q1 2021	Q3 2021
		Quarterly				RTM

Operating expenses in the quarter were SEK 85.7 million (43.7). The increase refers to a larger organization in accordance with the growth strategy, consolidation of Racal Acoustics and substantially increased depreciation/amortization.

Compared with the previous quarter operating expenses are at approximately the same level, with the exception of acquisition related non-recurring costs.

Depreciation/amortization in the quarter amounted to SEK 11.7 million (2.7). The higher level is mainly due to depreciation of several completed development projects. During the period this depreciation amounted to SEK 4.9 million, compared with SEK 1.2 million in the corresponding period in 2020. Of the remaining SEK 6.8 million (1.5), SEK 3.0 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 (leases) of SEK 2.1 million (1.1) is also included, as well as depreciation of property, plant and equipment of SEK 1,7 million (0.4). For further information, please see Note 3 on page 15 of this report.

EBITDA was SEK 8.3 million (19.1), which resulted in a margin of 5.8 per cent (19.1). The rolling twelve-month EBITDA margin was 17 per cent (25).

The operating profit was SEK -3.4 million (16.4). The operating margin was -2.4 per cent (13.8).

During the quarter development costs of SEK 1.5 million (4.0) were capitalized.

Net financial income was SEK 1.0 million (-8.2).

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

100								30%
80								25%
60								20%
							15%
40
							10%
20								5%
0								0%
Q3 2017	Q1 2018	Q3 2018	Q1 2019	Q3 2019	Q1 2020	Q3 2020	Q1 2021	Q3 2021

Operating expenses

EBITDA margin, RTM

INVISIO AB | Interim Report January-September 2021 |4

Interim report January - September 2021

Profit/loss before tax amounted to SEK -2.3 million (8.2) and profit/loss for the period was SEK -2.8 million (6.2). Earnings per share were SEK 0.06 (0.14).

The period January to September 2021

Sales in the period January to September 2021 amounted to SEK 440.8 million (359.2), an increase of 23 per cent compared with the corresponding period in 2020. After currency adjustment growth was 27 percent. In the period February to September Racal Acoustics contributed SEK 112.0 million.

Gross profit was SEK 254.6 million (206.9) and the gross margin was 57.8 per cent (57.6).

Operating expenses for the first nine months of 2021 were SEK 231.0 million (151.6).

During the period development costs of SEK 10.9 million (15.1) were capitalized. Operating expenses include depreciation of capitalized development costs of SEK 14.0 million (2.9). The higher level is mainly due to amortization of a number of completed development projects and amortization of other intangible assets arising in connection with the acquisition of Racal Acoustics. This also includes amortization of rights of use (leasing) and amortization of tangible assets. For further information, see Note 3 on page 15 of this report.

EBITDA was SEK 57.4 million (62.7), which resulted in a margin of 13.0 per cent (17.4).

Operating profit for the period was SEK 23.9 million (55.2) and the operating margin was 5.3 per cent (15.4).

Net financial income was SEK -2.1 million (-9.1).

Profit before tax amounted to SEK 21.4 million (46.1) and profit for the period was SEK 13.2 million (33.7). Earnings per share were SEK 0.30 (0.76).

Cash flow, investments and financial position

Cash flow and investments

The Group's cash flow for the period January to September 2021 was SEK -40.1 million (-22.0), of which cash flow from operating activities was SEK 67.9 million (35.2) and cash flow from investing activities was SEK -188.0 million (-17.8). Cash flow from financing activities was SEK 80.0 million (-39.4), of which SEK 90.0 million (-) was loans taken up including amortization.

During the period the Group's investments amounted to SEK 188.0 million (17.8), of which SEK 185.6 million referred to investments in the subsidiary Racal Acoustics and SEK 10.9 million (15.1) was capitalized development costs and SEK 3.4 million (2.7) 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 out 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 117.6 million (143.8)

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-September 2021 |5