Ovzon Interim Report January–March 2023

Eventful start to 2023

January–March 2023

• Revenue totaled SEK 57 million (100). Adjusted revenue totaled SEK 57 million (97)
• Operating profit/loss totaled SEK -23 million (-18). Adjusted operating profit/loss totaled SEK -34 million (18)
• Profit/loss after tax totaled SEK -19 million (-12)
• Earnings per share totaled SEK -0.37 (-0.23)
• Cash flow for the period totaled SEK -72 million (-96)

Significant events during the quarter

• Announcement regarding the delay of the launch of Ovzon 3, and switch to SpaceX as launch partner
• Carried out a directed share issue of SEK 200 million and secured additional financing through debt to finance the shift of launch provider and delay of Ovzon 3
• New provisions of SEK 34 million charged to earnings for 2022
• Extended regulatory deadline regarding orbital position for Ovzon 3
• First order in Spain via partner Aicox Solutions
   

Significant events after the end of the quarter

• Follow-up order of USD 0.6 million from French partner Nigma Conseil

Outlook
Due to the weak start of the year the company’s assessment is that the revenue for 2023 will be in line with 2022 and that the launch of Ovzon 3 will take place in the period July to September 2023, given that the final integration and tests fall out as planned.
 

SEK m	Jan–Mar 2023	Jan–Mar 2022	Jan–Dec 2022
Revenue	57	100	357
Operating profit/loss	-23	-18	-81
Profit/loss for the period after tax	-19	-11	-36
Order book	134	208	218
Earnings per share, SEK	-0.37	-0.23	-0.71
Equity/assets ratio, %	74	79	72
Share price at end of period, SEK	37.8	50.7	57.6

CEO comments
Eventful start to 2023

For Ovzon, the first quarter was intense on many levels. We were compelled to address a number of challenges during the quarter such as a delay to Ovzon 3, a change of launch partner, increased loan financing and a directed share issue as a result of the delay. Furthermore, we made additional provisions for bad debt and thus also revised our earnings for 2022. On the positive side, in late 2022 we signed contracts with new customers via partners in Sweden, the UK, and France. This was followed in January by our first customer in Spain, and at the end of the quarter we received a follow-up order from our French partner. Deliveries related to these contracts began during the quarter.

Eventful beginning to the year

Early in the year, it became clear that our manufacturing partner Maxar was experiencing further delays in the completion of our first proprietary satellite, Ovzon 3, which in turn meant we were forced to postpone the launch date for the satellite. To ensure flexibility and an optimal launch date, we signed an agreement with a new launch provider and the decision was made to switch from Arianespace to SpaceX. The work on the satellite is now in an intensive final phase. Our assessment continues to be that the launch of Ovzon 3 will take place in the period July to September 2023, given that the final integration and tests fall out as planned. However, there is still some uncertainty around the exact time of completion, which could potentially lead to some further delay.

In March, we were notified that our regulatory deadline for the use of the spectrum for orbital position 59.7 ° East had been extended – a position that is intended for use by Ovzon 3.

The delay notwithstanding, we are seeing continued strong interest from new and existing customers relating to Ovzon 3 and the unique new communication methods that the satellite enables.

Provisions for bad debt

The delay of Ovzon 3 and its consequences have increased the total cost of the project by approximately USD 25 million. Financing for these costs was secured during the quarter through an increase to the existing credit facility with P Capital Partners and a directed share issue to several of the company’s larger existing shareholders as well as new institutional investors.

Shortly after we published our Year-end report for 2022 in February, new information emerged pertaining to the ability of the company’s Italian distributor to fulfill its payment commitments to Ovzon. Regardless of the payment plan we agreed on, in addition to a pledge on the assets of the Italian distributor, we chose to set aside additional provisions for bad debt. A further SEK 34 million was charged to our income statement for the fourth quarter and full year 2022.

Long sales cycles in concluding business

Revenue for the first quarter totaled SEK 57 million. Revenue was lower than the first quarter previous year, which is attributable largely to the major delivery last year of mobile satellite terminals to the US Department of Defense (U.S. DOD). We also chose not to recognize revenue of SEK 21.8 million (USD 2.1 million) from our Italian distributor during the quarter. Order intake during the quarter totaled USD 0.4 million, corresponding to roughly SEK 4 million. We have strengthened our position in the market, and we are encouraged by the orders we have recently received. At the same time we want to reduce the long lead times we experience in concluding major business transactions.

The operating loss for the quarter totaled SEK -23 million. Our focus is on improving profitability by increasing utilization of leased satellite capacity and win new business.

Focus on profitable growth for the rest of 2023

For the rest of 2023, we will continue to focus on the completion and launch of Ovzon 3, with its unique On-Board-Processor, and on launching Ovzon T7, our latest mobile satellite terminal. This will be done in combination with continued close dialogue and engagement with distributors and end customers in order for us to generate business and utilize the increased demand we are seeing. We have strengthened our organization with key competence, with increased focus on business development, growth, and delivery of our crucial technology projects.

Our agenda for the coming year is clear. Our commercial focus will continue to be defense, rescue services, and NGOs in the US and Europe. We have advanced our market position and are now working even closer with new and existing partners in combination with end customers. We know that we will be able to meet the world’s rapidly increasing need for high performing, resilient, fast mobile solutions.

Per Norén, CEO Ovzon