Interim report, January–September 2020

January–September 2020

• Revenue amounted to TSEK 126,844 (166,327).
• Operating profit amounted to TSEK -28,958 (-2,247).
• Operating profit excluding non-recurring costs amounted to TSEK -28,958 (10,050).
• Profit after tax amounted to TSEK -48,366 (34,677). The result includes currency conversions and financial transaction costs of TSEK 22,351 (43,577).
• Earnings per share amounted to SEK -1.19 (1.13).

July-September 2020

• Revenue amounted to TSEK 32,285 (56,979).
• Operating profit amounted to TSEK -17,000 (2,142).
• Operating profit excluding non-recurring costs amounted to TSEK -17,000 (2,142).
• Profit after tax amounted to TSEK -30,180 (26,259). The result includes currency conversions and financial transaction costs of TSEK -13,044 (27,835).
• Earnings per share amounted to -0.55 SEK (0.78).

Significant events during the period

• New order from IGC on behalf of the US defense of MUSD 3.9. The order includes, among other things, the capacity of a steerable antenna on IS-39 and will be delivered from September 2020.
• Agreement with Intelsat regarding capacity on IS-39 and IS-37 that substantially increases capacity and reach for the Ovzon service.

Significant events after the period

• Ovzon set a new benchmark for high bandwidth to rotary wing aircraft.
• The Nomination Committee for the 2021 Annual General Meeting announced.
• Agreement with Hellas-sat on capacity in Europe and the Middle East.

Key figures

Comments from the CEO

Despite the effect that the pandemic has on our marketing activities it has been an eventful quarter with important events that strengthen our offering for the future. The development of our own upcoming satellite Ovzon 3 is progressing according to plan and we are seeing more and more clearly what opportunities that will open up for us.

Quarterly outcome as expected

Our marketing activities continue to be limited by Covid-19 during the quarter. However, in September we were able to start meeting customers and business partners once again. The trade fairs that are so important to the industry continue to be canceled or postponed.

The turbulent situation in the world economy after the eruption of Covid-19 and the lower six-month contract from the US DoD signed in March means, as we previously communicated, that sales and profitability weakened in the short term. The quarterly outcome was in line with our expectations but lower than last year.

The lower turnover has a direct impact on our gross profit as it means that we have a lower utilization of our leased satellite capacity. The contract with US DoD was renewed at the end of July and runs on a slightly higher level from September, when we expand the service with a steerable antenna on Intel’s IS-39 satellite, on which we lease capacity for our service.

New deals for increased capacity and technical progress

To secure additional capacity and coverage in the important Ku30b frequency band, we agreed in August with Intelsat on access to three powerful steerable antennas on the Intelsat 39 (IS-39) and Intelsat 37 (IS-37) satellites. The agreement replaces and expands the previous agreement regarding capacity on IS-39. Through this agreement, we commit to rent capacity for about USD 10 million per year over four years. This new capacity enables us to build a network where, with the controllable antennas, we can offer satellite capacity over virtually the entire world. The agreement with Intelsat is therefore an important step for Ovzon in that it expands our opportunities to serve customers with demanding services with high bandwidth and high availability, and it thus paves the way for our upcoming satellite Ovzon 3.

In October, we entered into an agreement with Hellas-sat, where we will have access to their satellite capacity across large parts of Europe and the Middle East and share revenue from sold capacity. The agreement is like the agreement we have with Hispasat and complements it since it secures capacity for an expanded geography. Through the agreements with Intelsat, we secure capacity similar to the upcoming capacity on Ovzon 3 and through the agreements with Hispasat and Hellasat, we can also offer almost global reach.

In September, a successful demonstration of Ovzon’s capabilities was carried out on board a helicopter. During flight with a Blackhawk helicopter in heavy rain, transmission speeds of up to 17 Mbps were recorded on both reception and transmission, with the possibility of transmitting HD video and video conferencing on board the helicopter. The transfer of this bandwidth through the rotor of a helicopter is unparalleled and will have a major impact on the use of our technology on both manned and unmanned platforms in the future.

Ovzon 3 on schedule

Ovzon 3, which is now under production at our partner Maxar in the US, is planned to be launched during the fourth quarter of 2021. The satellite construction is progressing according to plan. With Ovzon 3, our capacity will be multiplied, and the satellite gives us the opportunity to offer even better performance and expanded functionality. Ovzon 3 is the first of a number of planned satellites for global reach for our service based on our own satellites.

We are preparing for growth in 2021

External factors continue to be challenging and we do not expect any improvement in 2020. This affects our ability to take new business and the turnover during the final quarter of 2020 will thus be in line with the turnover during the second and third quarters, which means that sales for 2020 will be lower than for 2019.

We continue to see strong signs that the market for satellite communications services, which require high mobility and  performance, will continue to develop positively. Ovzon has a strong balance sheet and an excellent position to capitalize on the very large revenue opportunity that Ovzon 3 entails. We expect to contract new customers during the year who will also be interested in capacity at Ovzon 3, and we are preparing to be in a position to grow in 2021.

Magnus René, CEO

FNCA Sweden AB, +46(0)8 528 003 99, info@fnca.se, is the company’s Certified Adviser.

This information is inside information that Ovzon 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 below, at 08.00 CET on October 21, 2020.

For additional information please contact

Magnus René, CEO, mre@ovzon.com, +1 781 266 6957

Johan Brandt, CFO, jbr@ovzon.com, +46 70 369 33 00