The highs of the report were continued solid net sales growth, with net sales reaching SEK7.6m (0% deviation). Q4 2023 was the ninth quarter with double-digit net sales growth in a row. OPEX came in higher than expected due to higher personnel costs and fewer vacation days. Thus, EBITDA was 13% below our estimate, reaching SEK3.6m. We expect this ‘elevated’ OPEX level to be a new normal as AVTECH invests in the organization and new product development. We expect sequential and annual growth as the SAS agreement kicks in.

AVTECH services about 6% of the number of aircraft operating globally, and we estimate that about 5% of the market is trialing or scheduled to trial AVTECH’s services. We estimate AVTECH’s pipeline (of an estimated 1,400 aircraft) to be worth SEK27m-43m, with a mid-point of SEK35m. CEO David Rytter stated in his December update that AVTECH has three legacy airlines trialing ClearPath and Aventus. We believe SAS was one of them. Hence, we believe one airline is trialing Aventus and the other ClearPath, with an expected end of the trial in Q1 2024. We expect the remaining two airlines to have a value between SEK1.9m and SEK3.0m, whether for Aventus or ClearPath. We price in about 11% of the pipeline potential to convert by the end of 2024e.

We expect AVTECH to go through an investment phase during 2024, adding support to the organization and investing in new product development. Thus, we do not believe a dividend is on the agenda. We increased our OPEX estimates and reduced our EBITDA estimates between 4.4%-7.3% between Q1 2024 and Q4 2024. We have raised our longer-term forecast. We increased our fair value range from SEK2.9-11.1 with a base case of SEK5.0 to SEK3.5-12.0 with a base case of SEK5.9. The main catalyst remains new airline agreements. The main risk remains Southwest customer concentration.