Saab AB (publ)

Welcome to Saab, and welcome to the presentation of our full year results 2018. I'm Ann-Sofi Jönsson, Head of Investor Relations.

I also would like to welcome those of you who are viewing on the web or listening in on the conference call. We will go through a presentation today.

And after that, you here in the room can ask questions. And for those of you who are viewing on the web, you can place your questions throughout the presentation and we take them afterwards, and we will also open up for questions on the conference call after the presentation.

With me here today, I have our CEO, Hakan Buskhe; and our CFO, Magnus Örnberg. And now I turn over to you, Håkan.

Thank you so much, Ann-Sofi. I don't know if you can hear me now as we do.

I will go through a short presentation about 2018. So comment a little bit about '19, then Magnus will go through facts and figures.

And after that, we have a Q&A session. So welcome.

I'll take some highlights from 2018 and, of course, the T-X award, something really big for us and have also put us, we know that by fact now, on a higher division and on the radar screen, really, in United States. And I think that's good for us.

And we'll create also a bigger platform for us in U.S. We didn't really have any big or mega orders last year, but it's very encouraging to see that we have increased double-digit mid-sized and small orders, and that is of course encouraging also for our market organization.

Sweden ordered the next-generation radar, the G4, extremely important to have our domestic customer to take on that new technology. Carl-Gustaf, the new version, the M4, really good order intake, even though dynamics, as you probably have already read, had a, compared to '17, year with weakened sales but extremely good order intake and a fantastic Q4.

Our productivity in our major projects and going according to plan, even though that's 2019. But the first week in January, we started our serial production of Gripen E.

That's a milestone. We also had the launch of the midlife upgrade of the Gotland, the huge first project for us when it comes to reestablish the capability at Kockums, and that's also encouraging.

And we for the next year, for 2018, we suggest for the annual meeting dividend of SEK4.5 compared to SEK4.4. And the reason why that's lower is due to, of course, we have more shares now.

So the math has to be in the right way. The right issue was covered more than we can handle basically, so the real 190%.

Those money now are in the account and I will come back during our presentation a little bit more of what we're looking forward to utilize those money. So that's a little bit of the highlights.

Some market information. There are different sources, of course, that you can utilize growth of 9%.

It's not so reliable, but I think it's - the figure is not so reliable because probably more some countries doesn't really report it on the right way. But the total volume spent on defense, USD 1,780 billion, so a lot of things to be captured out there.

And different projections for the years to come, how that will grow, but more investment into new technology. The trend will continue, especially with the commitment of NATO to invest up to 2% of gross national product.

You can also see that in Sweden. That put a new pressure on defense suppliers and defense material awareness, and that's shortened lead times.

As I mentioned before 5, 6 years ago that the pressure on lead times was not so big. Now countries would like to have their equipment ordered as fast as possible with the latest technology.

And of course, it's a big discussion around the world about high technology, how will the new security environment look in the future when it comes to peace, shadow time and wartime. And with cyber and other new ways of disturbing the order in a country, you really wonder what this peacetime and shadow time nowadays.

And that will put new pressure on defense equipment producers. That's an area we are deep into.

But I think also for the defense forces around the world, new technology, high technology and the capability to instant act is the key thing to handle conflict because things go much more quicker today and you can, as I said, really put a society into a hard time utilizing cyber and other activities. So that's a key on the agenda going forward.

Strategic focus. You have seen these circles before.

And just to highlight the main thing and the way we work, of course, it's extremely important for us to have a high performance and productivity in executing our projects, in production, in our administration, to release funds, to be able to be out there on the market, to capture business, long lead times and some of these mega orders cost fairly lot of money to be involved in. And at the same time put enough money on R&D because the key thing for us, and that has shown the last years as well due to our possibility to capture the business out there, is to have relevant technology and be in the forefront and scalable technology.

And that's what we're working for. And that's why we did the productivity activity in quarter four, I will come back to that, that enable us to create funding for R&D, marketing and, of course, also increasing our margins.

Some financial highlights. Order bookings, we didn't have any mega orders last year.

And we had fantastic development on small- and medium-sized orders, captured SEK28 billion of orders. Of course, we haven't then put the T-X frame contract.

Some of that is in there but not a big volume. And for example, if you look at our order volume or business volume, if I may say so, United States is mainly frame orders and that is not seen in those figures.

Our order backlog, SEK102 billion. We're keeping that high volume since many years.

And of course, we are aiming to grow that and there are lots of possibilities. Operating income and the result from operation, 2 point - nearly SEK2.6 billion.

Probably it is the best result since our - since we became stock-listed. And even with the onetime effect of SEK299 million, we are better than last year, and I think that's very positive for us to show that's the case.

Operational cash flow, still struggling. And as we have said the last 3, 4 years, when we are in a heavy development phase that we have now with the Gripen E, we are ending that now.

As I said, we're starting up serial production, GlobalEye. We haven't delivered that yet but that will come in a little bit more than close to two years, the A26 and the T-X.

You don't get paid from a cash perspective in the same way as you deliver. So the majority and the big volume of cash is coming mainly after - starting 2020.

So that's very much connected to the big programs, but we had also fantastic cash flow in Q4 and that also showed the swings in the cash. So very good order intake, small, medium-sized orders and good execution in quarter four.

So that shows the capability going forward also. Cash flow again.

As we said during the Capital Market Day in last year, in the end of last year, and as I just recently stated, we have a situation where the cash flow and the payments in the big programs have - are fairly low compared to the total when you're doing the engineering phase. The cash flow for 2019, we will come back more to that, will be negative but not in the same amount as 2018 but probably the same pattern when it comes to quarters.

And we foresee the start of the positive intake and really payback, if I may say so, from 2020 and onwards. So that's the way it looks.

We have a lot of market opportunities and both for small- and medium-sized orders but also large mega orders. We just turned in our proposal for Switzerland and Finland.

We are in discussion with Canada for Gripen E. Of course, batch two to Brazil and also Sweden as you probably have read statement for - from our Chief of Air Force looking for another 60 Gripen E.

So it looks promising. GlobalEye.

Now when we are doing these successful trials and tests and also the surveillance capabilities shown, we see huge interest for that as well, both the version that we have today with the 2000 platform that we called Erieye but also for the GlobalEye. We are, of course, monitoring possibilities mainly for the submarine in The Netherlands while we are waiting for Poland to decide upon the next steps.

And Carl-Gustaf in 84 is really a big - it's really a big sale on that one or those two weapon systems, mainly to United States but also to EU countries and India. As we stated and reported Q3, we have two programs ongoing, resizing and reshaping.

Both of those give the same amount of reduction on money. That's what we also said.

We started that in 2018 in end of quarter three, and of course, executed a lot in quarter four last year. So mainly all our own employee, we have handled that reduction.

And during the - this year, the consultants will also - the 550 will be adjusted. So that goes really well.

The same thing we have gone through are mainly the tail of our portfolio. We have a lot of products with small sales, another step that we are now in the focus of adjusting.

We also have mainly gone through the market setup. It's probably not big numbers there but we can see an increase of efficiency, that we can handle more big campaigns at the same time.

But also, the digitalization of daily operations where we have mainly pinpointed two areas is ongoing. So the ambition is to close that within two, hope not three years, but that's what we're saying here.

Of course, the big programs, status of Gripen E, GlobalEye, T-X and A26 is, of course, extremely important for us, not just future sales, but also profitability as we speak. And I don't know if you have read that, but in Swedish media, our material procurement agency, FMV, in Sweden stated that from 2021, Gripen E will be able to be operational in the Swedish Armed Forces, depending on the execution in the defense forces.

And as I said, we started our serial production in the beginning of January. And we have done fire testing and a lot of other things.

So that program, it's developing really well. And that's, of course, extremely important for the other big tender processes that are in as well.

The same thing with GlobalEye, the flight test verification. We do a lot of flight tests in Spain due to weather condition.

And the second aircraft took off in the beginning of January. The same thing with A26.

There, we have changed the production philosophy and now we're ramping up the construction and production. And HSwMS Gotland have done its first sea trials.

T-X, we are now in the industrialization phase and that will continue around three years, but we can already see there huge interest from other countries for the trainer system around the world. So it looks there also very promising.

Development, an easy thing to adjust cash flow and profitability. Normally, I have stated that the capital time during my last nine years, that it's very easy to show good result in short terms to this company just to reduce spending on R&D.

But then we will not have any operation in 3, 4, 5 years. With the digitalization, with our new possibilities out there, the defense - the R&D spending are high and will continue to be high.

That's why we need to do the reduction, increase productivity in our operation to enable us to have this type of spending going forward. So around SEK7.5 billion, a little bit more last year.

It's a big number. On the other hand, I can tell you that we are in the forefront of technology and that's why we can compete with the big competitors around the world.

Going back to the right issue and just to underline that again. I know that some, maybe not you listening or sitting here today, but some thought that was just to take cash in to cover some bad performance in our future cash flow, and we tried to state that, that was not the case.

And I hope that you have seen the Q4 with the strong cash flow. That was not the idea of bringing in cash.

The idea of bringing in cash is to increase the speed of the growth of the company with more than 5%. And we see huge opportunities with big tender processes like in Finland or in Switzerland or Canada or the other places, but also with corporations, for example, with U.K., but also in other technology areas to grow the business faster and with a higher speed than those 5%.

And we have an opportunity now. And that's where we're going to utilize these money carefully and really make a good payoff and should be shown as a good investment for our shareholders going forward.

So the outlook is basically the same. The only thing we have changed is '18 to '19.

So we will continue to grow organically with 5%. We will not put lot of efforts to try to be lower than 5%.

Of course, we have tried to really push but 5% in operating margin, we take another step now. 2016 in November, we said we had five steps.

We have taken three. And we - in the years to come now, and that's not so far away, we will reach our 10% target.

And that's not just important for us as a management team to show that for the shareholders. It's extremely for important for us, both from a cash-generation perspective but also enable us to be more active on the market with a higher productivity that generates a stronger Saab going forward.

So the situation for Saab looks very promising. And for some reasons with our new technology platforms and systems that we have and the market needs, we are now looking forward to capture even more market opportunities.

So Magnus?

Yes. Okay.

Thank you, Håkan. Let's look at some of the financial details, I can start to summarize that.

Obviously, Q4 was a strong quarter and probably one of our better quarters that we have seen in the company and very much in line with our plans or even little bit better than we had some of our internal targets, and I would highlight that as well. So if you start with the order intake, small- and medium-sized orders, very good.

And that is good not only because of the volume, of course, but also for the timing of the backlog. And I will show that shortly that we have a better support now in the near term based on the Q4 order intake.

Sales increased very much in line with our plan, 5%; organic, 4%. So we are happy about that, and the strongest quarter ever in the company on sales.

The margin, 7.7%. Adjusted for the nonrecurring items, it's also very much in line with our plan and another step, as Håkan said, towards our long-term target.

And that is - that's also very much in line with the plan. Cash flow, strong in Q4.

And here, I probably have to say that this is probably a little bit better than what we thought. We knew we're going to have a strong quarter and a positive cash flow, but we probably came out a little bit better.

And that has to do with both meeting the targets that we said in terms of milestones but also in the collection of cash. So I will come back on the full year because, of course, we still have a buildup of working capital and big investments.

The financial net impacted by changes in the market values of the derivatives, this is not really a Q4 issue. That has stabilized a bit.

It was more in the beginning of the year that we saw big changes in the U.S. dollar, Swedish crown exchange rate.

And the proposed dividend is an increase from SEK4.40 through recalculating with the new number of shares into SEK4.50. And as Håkan said, we tried to balance here between a not sort of taking in money now with the rights issue and then increase significantly dividend.

It feels that, that maybe doesn't make a big sense but still to show a progress in our sort of forward-leaning positive outlook going forward. Yes, coming back to the backlog and the backlog duration.

SEK100 billion, that's good, and the total is important. But even more important probably is the timing of the backlog.

And here, we can see that we are estimating now that we have some SEK28 billion to be executed during 2019. And that is, of course, the highest number that we have ever seen going into a year.

So that should support growth going forward this year in a good way. Probably, we executed a bit more than we thought from the backlog last year also and that sort of helped the Q4.

And we have a strong backlog in all areas and we can also see that roughly 2/3 of the backlog is now on markets outside of Sweden. And the order size, we have talked about it.

No large mega order or even large order. Very little of that is mainly just small- to medium-sized.

But then it's even more good, I think, that we have such a good order intake in Q4. And I will mention some of those areas when I go through the business areas, which I do now.

And the main order intake this year or the highest order intake we have seen in Dynamics, and that has been especially good towards the end of the year. And here, we can see especially in the ground combat business unit and Carl-Gustaf then, we see a lot of customers now moving from the current version into the new version.

But also totally new countries going for our products, which is, of course, very good. And also, surveillance, we see good order intake and this is mainly in our radar business, both from our Swedish unit but also in the U.S.

and also in the command and control area. So that is really going well as well.

And as we can see, the backlog is good in all areas and supporting the long-term growth. And what does that do for our sales?

Of course, we have a high growth now in Aeronautics and it's full speed ahead in the execution. We are gearing up for the serial production and that is starting to really show in our volumes, of course.

So double-digit growth there. The same with surveillance, starting to really execute on those programs that we have taken in, in the last years and also double-digit growth in Kockums.

And that's, of course, gearing up now in the execution of the current big programs. Also growth in IPS.

Then in Dynamics, we knew we're going to have sort of a little bit of a lower volume here in 2018 with the timing of deliveries. But we can see from the backlog now that we have a really good situation for growth in 2019.

And in support and service, it is more of a timing issue because in 2017, we got a little bit of a one-off in a large contract there. And we can see in support and service at the execution is really good because of the delivery here on the margins and pushing up results.

So that is full speed ahead on that. And - but it's also good to see Aeronautics coming up in margins.

And this is, of course, due to the fully loaded situation right now with the volume. But also, of course, a bit less spending now in T-X, moving from sort of own funded program into a customer-funded development phase now.

So that is, of course, helping out as well. Otherwise highlight could be that we have improvement in IPS but - which is very significant but from a very low level.

And of course, we are not satisfied with that and then we want to move forward to improve further this year. Kockums is very much in line with our expectation of some 5% with these first initial orders.

And Dynamics is more of a volume. This is very clear how volume dependent we are on that one, but also a bit of a mix with the - in - between the various products there.

And the cash flow, of course, one of the most important parameters for us now to manage, and this is a picture showing a bit of volatility and the increased volatility that we see in the company. And I'm very happy to see the bounce back now of cash in Q4.

So now the Q3 comes in, in a different view. Of course, if we add Q3 and Q4 together, it's basically a balanced cash flow in the second half.

And I think we have to be able to manage that and that's why a strong balance sheet is, of course, very important. Then going forward now, we will see continued volatility in 2019.

Roughly the same pattern with a little bit of a tougher start now in the beginning and that should improve throughout the year. But we will have a better cash flow altogether in '19 than in 2018.

And we are - with the current plans that we have today, we are estimating a positive cash flow in 2020. And how did we - what happened then in 2018?

Of course, good cash from operations. That's going really well.

But we have a buildup of working capital if we look at the full year, and that is mainly, to a very large extent, probably 90%, a timing difference between the buildup of working capital in relation to the milestone payments. And many of the cash that we are building up here now should start to come back starting from next year when we start to deliver.

Then we are also investing heavily and probably the highest level that we have seen and that is, of course, the gearing up for production in Gripen E. We are gearing up for the production in Kockums.

But we are also investing in our Gripen program, in our export version, as we have discussed earlier quarters. And that has also increased in speed during the second half, in light of all the opportunities that we have.

And the financial position, yes, that has been a big change during the year, of course. We had a net debt of some SEK9 billion at the end of Q3.

And we ended up now at a level of minus SEK1.5 billion and that is, of course, due to the positive cash flow that we managed to do in Q4 and also the rights issue, obviously. And worth to highlight is that we still have an impact of the change in net pension obligation.

The low interest is impacting that, but that is a pure accounting issue, obviously. But there is probably another SEK400 million or SEK500 million impact on the net debt for Q4 on that one and altogether some SEK4 billion.

But of course, that is entirely due to the low interest level that you discount the debt with at the moment. So equity-to-asset ratio of some 35% ending the year.

And focus, yes, we are a long-term running with our strategies. And of course, to build - continue to build our order backlog in selected areas and markets is more important than ever, and we have the strength to do that.

We have the products. We have the balance sheet and to really go after this, as we have talked about, throughout the day here today.

Of course, continued execution in our projects is going to be as important, and we are - have a very interesting year ahead of us when it comes to the large projects and to move out now and getting even closer into the delivery phase. And then, of course, to drive efficiency and improve the margins.

That goes without saying, we are executing on all those plans that we have now, and of course, in order to drive cash. So with that, I open up for Q&A.

Okay. So we'll start with some questions here in the room.

Douglas Lindahl of Kepler Cheuvreux. So starting with your outlook, you said it yourself, Håkan, you keep your previous outlook and just changed the year.

So you lifted the EBIT margin by 60 basis points, 2018 compared to '17. Do you want to give some sort of indication what this would mean in terms of 2019?

No, we haven't ever done that. And I - we have said 2016 that we will take five step to come to 10%.

We will take a step this year. So I rest my case there.

Okay. But in terms of volatility, 2018 was also a very back-end loaded year.

Is this something we should expect for 2019 as well?

I mean, one of the reasons that we were very back loaded, and we are always, you can see that, is mainly due to dynamics and also surveillance last year. We will see, of course, a very strong Q4 this year as well, but not in the same range.

It would be more divided into other quarters as we've foreseen it now anyway.

Maybe a little bit more balanced, I would say. Yes.

Yes.

And a final one for me. Håkan, you mentioned additional traction from T-X potentially in other countries.

Can you comment some more on that?

No. But I told you so that the interest for having these type of capability for not just the initial training of pilots but also to keeping up the flight hours due to many of our competitors are selling very expensive aircraft or cost per hours.

So that's a huge or very big need. And now when we were awarded, there are - well, I've personally been at least a handful of countries to discuss this type of - to discuss T-X.

And of course, Boeing is doing the same. But first of all, of course, we focus on the U.S.

and to deliver that. But of course, we are creating a capability to take more order and deliver to others as well.

So I'm looking forward. And Boeing stated 2,600 aircraft.

That's their estimate. And well, they - it's a good number.

Agnieszka Vilela, Nordea. Can you tell us what's the status when it comes to your reshaping and resizing program?

And also, when I look at the number of employees in Q4, for example, it's still growing. So what's happening there?

And can you be a bit more specific about the expected savings from this program?

Thank you. I mean, those programs that we launched during the second half of last year and also the efficiency gain when it comes to reducing personnel in certain areas is going very well.

Our own employees, we have already handled that. And during the year, it will come, the consultants that we will reduce.

I think it's important to know that we are growing in many other areas. So it - we never said that you will see those figures when you accumulate everything into the numbers.

And the reason for that is that we have huge growth, for example, in U.S., Australia and in other areas within Saab. And if you take, for example, the ramp-up of production now, well, we are employing a lot of technicians for assembly and production of Gripen E at the same time we are reducing.

So we are measuring productivity per area, so to say. And to capture that, what we said, if you add those 300 and 550, those 850, you can assume a cost that we never told you about, but I think you can calculate that as well.

That is something you will capture over the time. You will not see that, as I said, in 2023 directly in the P&L.

It will help us in the P&L because we are doing POC, percentage of completion. So that's - how will that affect then calculation?

But you will see more of that of our cash flow going forward.

But you do expect net savings from the program.

Yes, of course, that's why we're doing it.

Okay. And then my second question is on the - these big procurement programs that you are approaching.

Can you help us and tell us where are the decisions expected to be taking these programs? Do you expect decisions to be taken already in 2019?

If we start with Gripen E, the final selection for Finland and Switzerland will be around 2021, according to the plans right now. We are in discussion on next batch for Brazil.

When that will materialize, I don't know, but probably 21, '22 or something like that. If we look at submarines, the big - well, the big campaign or the - it's in Netherlands for the time being.

And there will be some kind of a selection during this year. But the final contract will still wait until '21, '22.

That's a short time for us. So that's how it looks like.

But it fits very well those time lines where we are today with a boost on production, the utilization already booked up in our production without creating big step effect that cost us a lot.

Go ahead.

Okay. Mika Laséen, Carnegie.

I have a few questions also. The first one, a quick question about North America.

That market really increased significantly in Q4 greater than year-on-year. Can you explain what that is?

Well, it's both T-X and especially Carl-Gustaf. But our radar and sensor activity in U.S.

is doing fantastically well as well.

They must be the best year.

I think it's the best year. We can track at least four Saab in the shape that we are now in United States.

And it's very promising, and it seems that we are in the right technology path to attract more business in U.S. going forward as well.

Okay, got it. And when it comes to Gripen E, serial production start here in January.

Can you talk about the implications in general, how you are planning this? And we already talked about net working capital and things like that, but can you reach even high margins in the aeronautics segment during this time when you're doing this?

Yes. I mean, it will be - when we are up in production, of course, that - it's a possibility, I will not promise exactly per business area.

But to reach the 10, of course, you need to perform in all business areas. Then you can have years going up and down.

And the setup right now is that we start with a detailed production with all the components because you need to start there. Otherwise, you don't have anything to put together in the end.

So that's full speed ahead. That will build up capital, of course, until we start to deliver the first aircraft.

And at least if we look into the aircraft built, it looks very promising due to how it fit together, that we haven't done in a construction that is from the beginning and so on, but like to start first to come back. But as I said, I mean, we are aiming not so far away to reach those 10, then some areas needs to perform more than 10 and someone.

But the aim is, of course, to lift everyone but especially the cash flow. I expect a lot when it comes to aeronautics going forward.

Okay. And the final one regarding the sales growth guidance for 2019, your SEK28 billion in the order book expected to be executed and that 80% of the sales guidance for the year.

Last year, we had 76%, more or less covered. So what is the difference?

Are you more uncertain in the timing of this SEK28 billion or is it maybe more uncertainty regarding sort of ongoing orders? Or is it just cautious?

It's like this. I mean, each and every year when we try to guide, I can tell you it's the most difficult thing you do because you don't like to promise too much and not too little.

The guiding itself is try to give you what we believe is the most, well, accurate thing how we can do things. You have done your math.

Of course, it looks very promising for this year. But we also need to convert some bookings to sales this year as well.

If we have the same rates here as last year, well, you can calculate. It looks very promising.

But I stop there. I mean, we have, especially on the small- and medium-sized order, it looks very good.

We have some small mega orders that we hope for during this year and looks also promising. Some of that will, of course, help us, but then you have support and service.

You have Combitech and others and air traffic management that have a much faster pace. And that also looks promising.

So with your math, yes, you can say that - you can claim that we are conservative. But we are - it's early bird, early time.

And I think it's also 5% of something that is bigger than it was 2018.

Yes. And I think also the good growth in Q4 and our analysis now on how much of that was sort of things that we should get in early here.

So we - a bit of a cautiousness but, of course, a good base for growth in '19.

We will not step on the brake, I can promise you.

No, no.

Okay. Do we have any further questions here in the room?

No? Then I would like to open up the conference call to see if we have any questions on the call.

No questions.

Perfect. Then we take a few questions from the web.

Okay.

The first question is from Stephan Radoslav [ph] and he has a couple of questions. So I start with the first one and what is the status on the Gripen sales to Croatia?

It's a good question. I mean, we - that acquisition turned out to be ending up with the most modern aircraft that you can buy and fly today, the Gripen C/D.

We've met all new sensors. But they choose to have - they used F-16 from Israel that turned out they couldn't do that deal in the end.

And now we're waiting for what will be the next step.

Okay. On that Gripen note, he has another question, which is related to the FCAS Corporation and then he has means France and Germany or - so his question is if Saab will be interested in working on the FCAS project or Tempest, which is then a U.K.

project for a future fighter?

Well, if I take a step back and look what type of cooperation strategy do we have because it starts there, it's not just a question to work a little bit there and work a little bit here and there. We - our strategy is that when we cooperate, for example, if we take the T-X, it needs to build our capability going forward, not draining our capability.

And that's extremely good example when it comes to T-X. So that's the key thing.

We haven't really seen the outcome of the French and the German setup. So there, right now, we can't really see our part in that.

On the other hand, we have very fruitful discussions with U.K. and partners.

So let's see what that will be.

Okay. The next question is related to T-X.

He wonders if we can say a little bit more about when we will decide on how we will do the production site in the U.S.? And also, how Sweden will be - how the production in Sweden will be impacted by the T-X production in the U.S.

So for example, if we will produce any parts in Sweden, so how it will impact the Swedish operations.

In the first half year, we will decide - this year, we will decide upon where we will allocate our production. And of course, there will be [indiscernible] as well in United States.

So it's a process ongoing, as we speak, with high intensity. The production of the T-X from Saab perspective will be in United States, could be that some components, but mainly it will be United States.

And I think that's good also for Saab and Aeronautics to have that capability in United States, building up an Aeronautic capability and come also closer to U.S. customer.

And that's the key thing we're looking forward to.

And next question is from Matt Johnson. And he wonders if we have seen any changes or if there is a new type of competitive challenge on the market due to Israeli products entering a global defense market as he puts it here.

No. But I mean, the Israelian companies have been active and very active going forward, highly competitive, no doubt about that.

The competition around the world is extremely tough. When you're in Asia, in some countries, you see the whole spectra, Chinese, Russians and everyone, Europe, normally the Western and Israelian and South American companies.

So it's not a new kid on the block and - so of course, it's - they're a strong competitor, no doubt about that, but that's also good. We like to play in the highest league with good competition.

Good. The next question is from Sandy Morris of Jefferies.

This is related to the cash flow and balance sheet. He would be grateful for any insight into how much the full year 2018 cash flow resulted from the cash from the consumption of advance payments.

And the second question is if the increase in receivables is a result of higher sales booked in the fourth quarter.

Okay. Basically, you can say that the main portion of the cash flow in Q4 was pure payment of milestones.

So that was work done and we got paid for it. So that is the main portion of that.

And he is absolutely right. The increase in receivables towards the end of the year is due to the fact that we had so much high sales, of course, late in the year.

So that should be a positive going forward, yes.

Perfect. So with that, there are no more questions.

Okay.

And I would like to thank you for coming here and for listening in to this presentation. We look forward to welcoming you back in April when we present the first quarter 2019.

Thank you very much.

Thank you.

Thank you.

Thank you.