GomSpace Q1 2023 Report and Status Update

GomSpace releases its Q1 2023, and the CEO outlines plans for bringing the company to profitability

FIRST QUARTER OF 2023

• Order intake was T.SEK 33,454 (41,497)
• Net revenues of T.SEK 78,150 are in line with Q1 2022 (78,365)
• Gross margin this quarter is positive 12%, compared to negative 26% for full year 2022
• Operating profit (EBIT) decreased to negative T.SEK 14,078 (4,166)
• Earnings per share were negative SEK 0.24 (SEK 0.06)

Main events:

• Changed model for market guidance from Revenue and EBIT, to focus on Free Cashflow. The guidance for a free cash flow positive scenario is second half of 2024
• In January, the final planned staff reduction was executed, corresponding to a full-year cost saving of approx. M.SEK 60. The staff reductions will have a full effect from the second half of 2023, with a saving of M.SEK 30 in 2023
• In agreement with ESA, we decided not to proceed to the third phase of a development contract valued at M.SEK 20 due to the high content of non-recurring engineering
• In April, the Group and SAIC signed a Memorandum of Understanding to partner for CubeSat, MicroSat, and SmallSats Systems and Solutions for the Americas market
• In March, the Group received the first disbursement of M.SEK 57 from EIB debt financing, and in April raised a total of M.SEK 101.3 in equity financing, of which M.SEK 53.6 was settled through convertible loans and M.SEK 47.7 before cost was received in May
   

TRANSFORMATION UPDATE FROM THE CEO
After a little more than two months on the job, GomSpace’ CEO Carsten Drachmann provides a status on the company and outlines plans towards bringing the company to profitability.

“Since my start in mid-March this year, I have worked with our organization on how to transform GomSpace towards a more stable financial situation. We have reviewed projects, sales pipeline, operational efficiency and more. The conclusion is clear: we need to focus more on profitability in all aspects and simplification of our operation. Going forward, we will measure ourselves against free cashflow and focus on creating a break-even situation, i.e., we want to reach a state where the company is self-funded from its sales activities”, says Carsten Drachmann.

To achieve a profitable and a free cashflow positive situation, he highlights the following key areas as a focus for the company and the organization in the near term:

1. Product Business - Increased focus on managing the product business, both with regards to stable product development and increased sales focus. The company has a healthy contribution margin from products and efforts here will improve the overall profitability of the company. Today, product sales amounts to approx.
2. Focus on project profitability and best fit - Identify what customer projects are best suited to GomSpace. The company will focus on leveraging its core strength and focus on customer mission success and profitability of projects.
3. Expand North America - Expand presence in North America through additional resources and partnerships. US represents more than half of the global accessible market for GomSpace and represents a strong growth opportunity for existing technology within a reasonable timeframe.

Carsten Drachmann continues: “This is a transformation, and we will go through several steps to reach our objective: breakeven on free cashflow. In the transformation process, we will adjust the organization to align around the three key focus areas outlined above.

When it comes to product business, our profitability is good, and we will invest more time and money on expanding the portfolio and increasing sales. As a first step, we will hire additional product sales leaders to capture a larger market share and we will align the organization around improving the value proposition of our product offering.

One of our biggest initial growth areas for products is in North America where we, amongst other activities, will leverage our recent MoU with SAIC.

On the customer project front, we are actively addressing our current project portfolio to achieve short term improvements, and we will ensure new customer programs will have a better fit to our strengths and a better profitability.

We still aim to grow our revenue over time, no change there, but in the intermediate term, profitability and cash comes before revenue”.

To align with the change in focus and priority, the company will change its model for market guidance from Revenue and EBIT, to focus on Free Cashflow.

The guidance for a free cash flow positive scenario is second half of 2024, with the assumptions that product sales will be increased, the efforts in North America will be successful, and the customer project portfolio mix will become more profitable.

Notwithstanding general market risks and based on assumptions of a successful improvement of the overall profitability of the current contract portfolio, implementation of the transformation of GomSpace, and/or revisiting of financing options, the company expects to have sufficient cash to reach the free cashflow positive objective, without raising further capital from the market.

Because of the transformation of the company and the change in focus to profitability and free cashflow, the company informs that it may take decisions and make priorities that could affect the earlier guidance given on Revenue and/or EBIT for 2023.

Carsten Drachmann comments: “I do not take changing the market guidance lightly, but it is my strong opinion that it is necessary for us to adjust our focus and way of thinking, and it therefore also makes sense to change and align our market guidance to the focus and priorities we set for ourselves internally at GomSpace.

My focus short term is on making the best business decisions for GomSpace to create a more financially viable situation. We of course want to grow our topline, but not at any cost or too high risk. The priority right now is healthy growth.

For the avoidance of doubt, GomSpace does have several larger opportunities in its sales pipeline, and we will continue to pursue those with our new priorities in mind, while considering the learnings that we have had over the past years”.

For more information, please contact:
Carsten Drachmann (CEO)
Tel: +45 40 63 40 36
E-mail: cdra @ gomspace.com

About GomSpace Group AB
The company’s business operations are mainly conducted through the wholly-owned Danish subsidiary, GomSpace A/S, with operational office in Aalborg, Denmark. GomSpace is a space company with a mission to be engaged in the global market for space systems and services by introducing new products, i.e. components, platforms and systems based on innovation within professional nanosatellites. The company is listed on the Nasdaq First North Premier exchange under the ticker GOMX. FNCA Sweden AB is the Company’s Certified Adviser. For more information, please visit our website on www.gomspace.com.

Miscellaneous
This information is information that GomSpace is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, 08:00 a.m. CET on May 26, 2023.