Header - hero image Bittium in 2023
Bittium in 2023

CEO´s Review

The year 2023 was a year of changes at Bittium. There were changes in the Company’s Management Group, we updated our strategy, and started a large-scale process with the aim of turning the company onto the path of profitable growth.

The updated strategy focuses on the years 2024 and 2025 and has three very essential priorities: 1. change from R&D organization to a customer- and growth-oriented operating model through segment organizations, 2. focusing on current products and increasing their market shares, and 3. increasing efficiency and lightening the cost structure, which is expected to improve the company’s profitability and cash flow significantly.

In accordance with the updated strategy, Bittium has three Business Segments: Defense & Security, Medical, and Engineering Services. We reorganized our operations to optimize the operations of the independent Business Segments and went through change negotiations in the Finnish subsidiaries. In addition, previously centralized group functions are now largely divided into Business Segments, meeting the needs of each Segment best. As a result of the reorganization and change negotiations, the number of personnel in group operations dropped from approximately 130 to 50. In connection with the transition to the new reporting structure, we decided to separate the remaining group functions into own Segment in order to further improve transparency into the development of the company’s Business Segments. Financial reporting based on these – altogether four segments – will start this year.

The net sales and operating result in 2023 decreased from previous year. The fourth quarter was the strongest, as typical, but also there the net sales remained lower than in the corresponding period the year before. There were also non-recurring costs of EUR 0.7 million resulting from the change negotiations and a non-recurring write-down of EUR 2.5 million due to the impairment of inventory both scheduled for the fourth quarter. With non-recurring costs the operating result of the fourth quarter was EUR 1.0 million positive. The annual cost savings of EUR 6.0 million, resulting from the change negotiations, will fully affect the 2024 figures.

The net sales of 2023 decreased by 8.8 percent. The financial development was affected by Medical business’ delays in product deliveries in the beginning of the year, caused by the component shortage, and slower than estimated sales development outside of US markets, as well as by the slowness of medical device regulatory approvals. Also, the slower-than-estimated progress of multi-year projects in the Defense business last year, and thus the timing of the product orders affected the 2023 net sales.

In the Defense & Security business, pilot projects with our customers abroad progressed well, but slower than expected. With the Finnish Defense Forces we renewed a significant framework agreement regarding the tactical communication system and products. This cooperation is very important for Bittium in terms of the development of the entire tactical communication product portfolio, and this framework agreement confirms the continuation of the cooperation in the coming years. The deployment of Bittium Tough SDR™ software-defined radios has progressed according to the plans of the Defence Forces, with the aim of ensuring the performance of the equipment during 2024 to start a wider deployment of the radios. NATO adopted the ESSOR waveform developed by the a4ESSOR consortium as a standard for tactical communications, which enables faster and more secure data transmission of NATO member countries in both national and coalition force operations. Our Tough SDR radios also use the ESSOR waveform.

The importance of secure communication has emphasized, and the interest, especially among authorities, increased. We delivered secure Bittium Tough Mobile™ phones and secure software solutions to several European countries. We applied for a NATO information security listing for the Bittium Tough Mobile 2 C solution last year, and according to the feedback we received, the solution meets all the necessary requirements, but the listings are delayed due to the work backlog of authorities.

In medical technology products, we continued our good cooperation with our key customer Boston Scientific regarding ECG measuring devices. In the beginning of the year, we joined forces to solve the challenges related to the availability of components of the devices and were able to deliver all product deliveries planned for this year. We signed a distributor agreement for Bittium Respiro™, a home sleep apnea test and analysis solution, with ResMed, a leading provider of innovative medical devices and solutions to improve respiratory health and well-being. The piloting of Respiro solution in Europe has progressed well, and recent clinical studies have shown positive feedback on the solution’s technical properties, analysis quality, and ease of use. We have an ongoing process for medical device sales license from the FDA (Food and Drug Administration) needed for the US market. The regulatory requirements have tightened and increased during the last couple of years. The duration of these new studies is estimated to be at least one year. We expect the good development of the remote diagnostics market to continue, positively affecting the development of Bittium’s net sales and profitability during 2024.

Despite the prevailing cost-saving needs in the markets among our customers, the sales of Bittium’s R&D services grew during 2023. The growth was driven by the accelerating digitization in various industries increasing the need for design services in several industries, as well as the increase of European companies’ product design work in Europe. We were able to win new customers, and I am particularly pleased with the work we have done in the past year to increase sales, especially in the international markets.

Bittium’s goal is to be a major international supplier of secure and reliable communication solutions for the defense and security markets, a leading supplier of industrial connectivity solutions and R&D services, and a major supplier of measurement and remote diagnostics solutions for measuring and analyzing biosignals.

In this context, I would like to thank our customers and partners for the past year and for the trust that prevails between our companies. I thank our personnel for their good work, commitment, and resilience, especially in the middle of all these changes. I would also like to thank all our shareholders for their trust and perseverance.

In 2024, we will focus on achieving the goals set for us in the new segment organization model, along with new operating methods and processes. We have published our main strategic focus points for the next two years to get the company on a healthy profitable growth path. With systematic work and the right prioritizing, we have every opportunity to achieve the goals set for us.

Johan Westermarck

Johan Westermarck