Half year Report January - June 2023

Comments from the CEO

Executing on our guidance
In all regions, there has been robust commercial activity this quarter. Five new customers in the United States, the beginning of our first significant contract deliveries to Sweden and the Netherlands, and the restart of our deliveries to Saudi Arabia. Our recurring TRaaS business, which continues growing, had another successful quarter. Our EBITDA margin for the quarter was 15% due to a strong gross margin and high sales volume. Overall, we are on track to meet both our 2023 financial guidance and our 2025 ambition.

Five new customers in USA
The order intake in Q2 arrived at SEK 170 million, compared to SEK 240 million in Q2 2022. The order intake excludes the Middle East procurement award of SEK 152 million, which was won in Q2 2023. Including this procurement award, the order intake for the quarter is SEK 322 million, up by 34% compared to Q2 2022.

For the first half year the total order intake - including procurement awards - amounted to SEK 412 million (569), mainly driven by TRaaS order intake from the US market and system sales order intake from the Middle East. With our strengthened US sales team we managed to sign no less than five new customers in the first half of this year and we have extended one contract with an existing customer. It's encouraging to see that our stepped-up sales efforts in the crucial US market are beginning to be visible in the order intake.

TRaaS represents 65% of total Sales and grew 18%
Our TRaaS sales for the quarter of SEK 87 (74) million was up by 18%. This recurring business equates to 65% of total sales. The growth is mainly related to our US TRaaS Managed Services business and revenue from our Tasmania Police TRaaS Managed Services project in Australia. Year to date the TRaaS sales amounted to SEK 173 million, an increase of 24%. During the first half year, TRaaS sales represented 70% of our total sales, ahead of our ambition for 2025 of 60% of total sales.

Onboarding new programs in the US Market
We started executing on our plan for the US market in Q2 2022. We have since added three sales managers to our US sales force. The investment is paying off. Since the beginning of this year, we closed 6 contracts in this strategic market, of which 5 in new cities, for a total contract value of SEK 112 million. This demonstrates the effectiveness of the strategy. We are now in the implementation phase of these new contracts, which typically incurs one-off costs for installations and warning tickets that temporarily suppress the EBITDA margin in the segment.

Resuming deliveries to Saudi Customer
At the end of the second quarter we have delivered 75% of this SEK 275 million contract for our unique Vehicle-in-Motion solution to our Saudi customer. Due to our customer´s dependency on a number of external prerequisites outside of their control, such as availability of vehicles and drivers, we were asked in Q3 2022 to temporarily pause the deliveries of the Vehicle-in-Motion contract. We now agreed to deliver the remaining 25% of the contract in the second half of 2023.

On track for carrying out historical order intake
For the whole year of 2022 we received a record high order intake totaling SEK 1.5 billion. During the first half of 2023 we added another SEK 412 million. This total order intake of nearly SEK 2 billion includes two large contracts; the Swedish Trafikverket order of SEK 850 million and the Dutch Public Prosecution Services procurement award of SEK 250 million. Before revenue can be realized, the fulfillment of these orders always necessitates upfront development work and expenses. These investments will be leveraged over the anticipated twelve year contract periods.

I'm pleased to report that our implementation plan is moving along as planned. Our solutions are accepted and first revenues have been recorded at the end of Q2. It displays our in-depth comprehension of our customers' needs for automated traffic enforcement and our ability to put these needs into practice using our advanced technologies.

EBITDA margin in line with ambition
We reported in Q1 that the reason for the quarter’s low EBITDA was not structural in nature, but rather a result of implementation expenses and the additional development costs required to simultaneously complete a number of significant projects and build the new FLUX platform. Compared to Q1 we now see in this quarter a SEK 20 million higher sales level, a 2 percentage point better gross margin and our expenses improving by SEK 4 million. As a result, EBITDA arrived this quarter at SEK 19.2 million (17.7), an 8% improvement compared to Q2 of 2022. At 14,5%, our EBITDA margin is in line with our 2025 ambition. Later on, after development work for our commercial projects is finished, we anticipate a further decrease in our development costs as well as stronger revenues, which will further improve EBITDA.

Investing for Growth in the USA
Due to new contract signings in the USA we have started investing in Fixed Assets in Operations for these programs. The total investment in Fixed Assets in Operations in the quarter amounted to SEK 17 million, compared to zero in the same period last year. The investments in Fixed Assets in Operations for the first half of the year totalled SEK 31 million, or 63% of our total investments for the year. I am pleased to see that these investments are rising since it demonstrates that we are successfully expanding into the critical U.S. market.

Financial guidance for 2023
In order to attract more international investors, the AGM voted in May of this year in favour of a 1 to 80 reverse share split. In conjunction with this event we released our financial guidance for the full year 2023 to make it easier for international investors to analyse the financial performance of the company. On the back of our record breaking order intake we are targeting full year 2023 revenues in the range of MSEK 550-650 and an EBITDA margin of 10-15%. In light of the restart of the deliveries to Saudi Arabia, the beginning of the deliveries for the two significant projects in Sweden and The Netherlands, the rollout of the new programs in the USA, as well as several other smaller deliveries, I reaffirm our guidance for 2023.

Outlook
In 2022 and the first half of 2023 combined, we added almost SEK 2 billion to our order book, and we are currently executing against these orders. This temporarily increases our costs, mainly in our global development team. Our profitable TRaaS business continues to grow and our strengthened team in the USA proves to be able to push our topline in this strategic market. On top, we see our new ground breaking roadside platform FLUX coming to fruition in the market.

We therefore retain our long-term plan and ambition to, by 2025, grow our net sales to more than SEK 1 billion, of which TRaaS revenues is more than SEK 600 million. We also retain our ambition to increase our EBITDA margin to more than 15% in 2025.

Ivo Mönnink
CEO, Sensys Gatso Group

Invitation to a presentation
On 17 August at 10 am CET Sensys Gatso Group invites press, analysts, shareholders, and stakeholders to participate in an audiocast. The company’s CEO Ivo Mönnink and CFO Simon Mulder will present the financial results in English. The presentation in connection with this report will be published on the website.

The presentation/audiocast can be joined online or via telephone and will be available on the company’s webpage: https://www.sensysgatso.com

If you wish to participate via webcast please use the link below.
https://ir.financialhearings.com/sensys-gatso-group-q2-2023

If you wish to participate via teleconference please register on the link below. After registration you will be provided phone numbers and a conference ID to access the conference. You can ask questions verbally via the teleconference.
https://conference.financialhearings.com/teleconference/?id=5005239

This information is information that Sensys Gatso Group AB (publ) 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, at 08.30 on 17 August, 2023.

For further information please contact:
Ivo Mönnink, CEO
e-mail: i.monnink@sensysgatso.com
e-mail IR: investors@sensysgatso.com
Telephone: +46 36 34 29 80

Sensys Gatso Group AB is a global leader in traffic management solutions for nations, cities and fleet owners. Sensys Gatso Group has subsidiaries in Australia, Costa Rica, Germany, the Netherlands, Saudi Arabia, Sweden and the USA, and a branch office in the United Arab Emirates and has 284 employees. The Sensys Gatso Group’s shares are listed on Nasdaq Stockholm.

For further information, visit www.sensysgatso.com