The Development of Market Environment and Business Segmentsin January–December 2024

 Defense & Security Business Segment

Defense & Security Business Segment’s net sales in January-December 2024 grew by 42.3 percent year-on-year to EUR 51.6 million (EUR 36.2 million). The growth was especially driven by the increased numbers of product delivery of Bittium Tough SDR tactical radios, and service projects.

EBITDA was EUR 13.6 million (EUR 1.9 million), representing 26.4 percent of net sales.

R&D costs decreased to EUR 6.3million (EUR 10.8 million), representing 12.2 percent of net sales (29.8 percent). R&D investments focused on the further development of the competitiveness and features of Bittium TAC WIN tactical communication system and Bittium Tough SDR radios and their related software. R&D costs capitalized in the balance sheet were EUR 3.6 million, which was EUR 1.4 million less than a year ago.

The operating result was EUR 8.6 million (EUR -3.2 million), representing 16.7 percent of net sales (-8.7 percent). The operating result improvement resulted from the measures taken to improve the efficiency of the operations and profitability, and lower R&D costs, in addition to the net sales growth.

The number of new orders in 2024 was EUR 68.4 million (EUR 38.6 million). At the end of December, the order backlog was EUR 34.5 million (EUR 17.5 million).

Development of the Business and Market Outlook

The uncertainty created by the world’s political situation has led countries to increase their defense budgets, which has affected the demand for defense industry products and services. The increased defense budgets were in the first phase allocated mainly to consumables, but in the future, the budgets will also be aimed at the modernization and development projects of the defense forces of various countries. This has been reflected in increased interest in Bittium’s tactical communication solutions.

Finland’s NATO membership is seen to have a positive impact on the demand for Bittium’s defense and security products, especially in NATO countries. NATO membership has also enabled the wide exposure of Bittium’s products and systems in NATO exercises, which is expected to increase the awareness of the products in the international market.

Bittium’s products are being piloted in several international customer trials and competitions, where customers test products for their various tactical communication needs. In the defense market, in tactical data transfer, national defense forces and other authorities need networks where increasingly more mobile network users can reliably and securely transfer increasing amounts of data. This creates demand for tactical IP-based Bittium Tactical Wireless IP Network (TAC WIN) communication system, Bittium Tough SDR tactical radios and other Bittium IP-based tactical communication solutions. The long sales cycles in the defense industry affect the development of sales and make it difficult to predict.

Cooperation with the Finnish Defense Forces strengthened further when Bittium Corporation’s subsidiary Bittium Wireless Ltd and the Defense Forces signed a Partnership Agreement for the years 2025–2036. The Partnership Services to be purchased under the Agreement apply to the life-cycle setup and maintenance of the command-and-control systems manufactured by Bittium and used by the Finnish Defence Forces. These systems include tactical communication systems and related products (Bittium Tactical Wireless IP Network, Bittium Tough SDR, Bittium Tough VoIP), as well as their maintenance and further development.

The Partnership Agreement is an important achievement in Bittium’s growth strategy and provides a framework for purchasing Bittium’s products, software and services. Procurements will be planned together with the Finnish Defence Forces for each year, and the Finnish Defence Forces will place separate purchase orders for the products and services in several batches as agreed in the Partnership Agreement. The monetary value of the Partnership Agreement depends on the needs and funding of the Finnish Defence Forces’ various projects, as well as the agreed maintenance and development services for each year.

Finnish Defence Forces started serial procurement of Bittium Tough SDR™ military and vehicle radios. The serial procurement enables expanding the usage of the new radios in all the military branches of the Finnish Defence Forces and the subordinate establishments operating under the Defence Command. Deliveries of the order began in 2024 and will be completed during 2025.

Also the Bittium TAC WIN communication system product deliveries and Tough Comnode deliveries to the Finnish Defence Forces  continued. The Defence Forces also placed a system support order for the TAC WIN and Tough VoIP communication systems. The development of a new IP routing protocol for tactical data transmission for the Defence Forces’ mobile and base-station-less networks, which began at the beginning of the year, progressed as planned.

The strategic goal of the Defense & Security Business Segment is to grow in the international defense market and win new international customers. In 2024, Bittium announced new cooperation projects with global defense players. These cooperation projects with the world’s biggest defense players are significant steps in the company’s internationalization strategy and provide a good starting point for other potential cooperation projects in the future.

The members of the research and business consortium led by Bittium signed an indirect industrial cooperation framework agreement with the US company Lockheed Martin for the F-35 fighter jet procurement. The three-year project will develop methods and capabilities for spectrum management, which will improve the ability to create a tactical situational awareness, while also strengthening the data transmission capacity of Bittium’s tactical communication systems in even more demanding combat situations. The consortium also signed another framework agreement with Lockheed Martin regarding the development of a cyber situational awareness for tactical networks. The consortium’s leadership provides a good starting point for other potential cooperation projects in the future.

In June, Bittium and BAE Systems signed a framework agreement under which BAE Systems can offer Bittium’s tactical communications products, services and systems to its customers in the United Kingdom and internationally. The agreement covers the years 2024–2027 and does not include a minimum purchase requirement or exclusivity for the sale of Bittium’s products. As part of the framework agreement, the companies intend to participate in selected tenders for tactical communications products in the coming years.

The Croatian Ministry of Defense has approved Bittium’s tactical communication system and Bittium Tough SDR vehicle radios for use by the Croatian Armed Forces. The approval follows a multi-year product piloting and deployment phase for the Croatian Navy, which was carried out in cooperation with Bittium’s Croatian partner, information technology solutions provider IntellByte INFO. In July, Bittium received an order for TAC WIN system products and Tough SDR radios for the Croatian Navy and Army. The order was part of a four-year framework agreement that IntellByte INFO signed with the Croatian Ministry of Defense for the delivery and integration of tactical communication systems for use by the various branches of the Croatian Armed Forces. The tactical communication reform for the Croatian Navy and Army is part of the command and control system reform of the Croatian Armed Forces.

In Austria, the implementation of Bittium’s tactical communication system by the local army continued and deliveries of system products, as well as their integration and testing, continued.

The awareness of the dangers of mobile security threats has grown and the interest in secure mobile devices has increased. The use of smartphones and smartphone applications is increasing in the government market, which creates demand for secure Bittium Tough Mobile smartphones and customer-specific special terminals based on Bittium’s product platform, as well as secure software solutions. Sales of terminals and software solutions are expected to develop moderately in line with the nature of the government market.

The NATO Communications and Information Agency (NCIA) has listed the Bittium Tough Mobile 2 C communications solution in the NATO Information Assurance Product Catalogue (NIAPC). The highly secure communications solution, approved for use at the NATO Restricted level, is intended for communications between government administrations and authorities. Finland’s NATO membership is believed to have a positive impact on the demand for Bittium’s defense and authority products, especially in NATO countries.

The Windows version of Bittium SafeMove Mobile VPN encryption software has received national approval for encrypting TL IV security class data. Now, authorities using SafeMove VPN encryption software can transfer TL IV classified data wirelessly over the network.

Bittium also implemented the Post-Quantum Cryptography (PQC) ML-KEM algorithm standardized by the US National Institute of Standards and Technology (NIST) in its Bittium SafeMove Mobile VPN software. This provides quantum-secure connections between a mobile device and an organization’s services, thus protecting an organization’s sensitive data from quantum computing threats.

Deliveries of secure Mexsat satellite phones developed for the Mexican government continued to Bittium’s partner Inmosat in Mexico as new government organizations adopted satellite communications as part of their communication systems.

Medical Business Segment

Medical Business Segment’s net sales in January-December 2024 decreased by 12.6 percent year-on-year to EUR 19.3 million (EUR 22.0 million). The decline in net sales was influenced by the slow progress of regulatory medical device approvals for new products and product variants, which has affected negatively to the sales growth.

EBITDA was EUR 0.7 million (EUR 0.8 million), representing 3.5 percent of net sales.

The operating result was EUR -0.9 million (EUR -0.9 million), representing -4.5 percent of net sales (-4.0 percent). The operating result was affected by the measures taken to improve the efficiency of the operations and profitability, and lower R&D costs. Further, additional costs of approximately EUR 0.7 million, cumulated from strengthening the in-house regulatory medical device expertise and from using external experts, affected the operating result.

R&D costs were EUR 5.3 million (EUR 7.7 million), representing 27.4 percent of net sales (35.1 percent). R&D investments focused on the development of the existing devices and diagnostics software and systems to even better meet the market development and customer needs, as well as the stricter demands of authorities. R&D costs capitalized in the balance sheet were EUR 1.4 million, which was EUR 0.5 million less than a year ago. The number of new orders in 2024 was EUR 19.9 million (EUR 23.1 million). At the end of December, the order backlog was EUR 6.1 million (EUR 5.5 million).

The Development of the Business and Market Outlook

The healthcare technology market is undergoing significant developments in patient monitoring. The prevention of diseases and health problems is being invested through early diagnostics, patients are being discharged at an earlier stage to reduce hospital and treatment days, and the need for remote monitoring is growing. Reducing hospital days significantly increases the efficiency of healthcare, reduces costs, and improves the care experience.

Both the prevention of health problems and early discharge require accurate monitoring and measurement outside the hospital, which makes specialist diagnoses available regardless of time and place. These needs are met by Bittium’s Bittium Faros ECG measuring device intended for long-term measuring and monitoring of the heart, Bittium Respiro intended for home sleep apnea testing (HSAT), EMG measuring device for muscle activation measurement, and diagnostic software offered by Bittium. Bittium BrainStatus EEG measuring device is used in intensive care units, but the measurement can, however, also be monitored remotely.

The development of medical device sales is affected by insurance policies related to the reimbursement of treatment, which vary from country to country, affecting the development rate of the remote diagnostics market. This has led Bittium to focus its sales efforts geographically on countries where insurance reimbursement is at a good level.

In connection with the strategy update at the end of 2024, Bittium announced that it would bring a new EMG device for measuring the electrical activity of muscles to the market. EMG measurement has been in the company’s product portfolio before, and this new product version is currently used by the company’s customer to identify Parkinson’s disease. Other application areas of the device intended for remote diagnostics include monitoring the progress of rehabilitation and identifying various muscle or movement disorders. Bittium continues to explore the market options and potential partners to provide a complete solution for its customers. The EMG measuring device is a medical device that complies with MDR requirements and does not require assessment by a notified body, which makes the sales process of the product easier in different countries.

Bittium continued to implement its partnership strategy and expanded its ECG analysis software offering to include artificial intelligence-based cardiac diagnostic software.

The long-term cooperation with Boston Scientific Cardiac Diagnostics (CDx) has continued well, and a significant part of the sales of Bittium’s ECG measurement device resulted from devices delivered to CDx. CDx is one of the leading service providers in the United States providing ECG measurement services. Bittium Faros ECG measurement devices were also sold in Europe, Asia and Australia, but in these markets the market for ECG measurement devices is significantly more fragmented, which is why increasing the sales volumes requires continuous work.

In addition to the EU’s Medical Device Approval (MDR) Bittium has applied for additional country-specific regulatory approvals in Europe for its Respiro HSAT device, and these approvals have been largely received. In line with its strategy, the company is now focusing on the sale of Respiro in Europe. Fulfilling the requirements for obtaining the necessary sales approvals for the US market by the Food and Drug Administration (FDA) has continued in the background. These include, among others, the development of product algorithms and extensive clinical tests, which is why obtaining the authorization can take years. Respiro’s sales are expected to strengthen and form a significant growth driver in the Medical Business Segment in the future.

The use of the BrainStatus EEG measuring device, which measures the electrical activity of the brain, in intensive care has continued and the feedback on the product is positive. Based on the feedback results, the product has been further developed to be more suitable for the operations and systems of intensive care units. The change towards more demanding recommendations for electroencephalogram measurement in intensive care units is expected to have a positive impact on the demand for BrainStatus.

The regulation of the authorities has a strong significance when bringing medical devices to the market and the requirements vary in different countries. The processes are demanding and long-term, and Bittium has invested in increasing the necessary expertise over the past year. Bittium has several development projects underway that aim to obtain medical device approvals in different countries. The most important development projects are obtaining European MDR (medical device approvals) for Bittium Faros ECG measuring device and Bittium BrainStatus EEG measuring device. The approvals must be obtained by the end of 2028, after which the products’ current medical device approvals will no longer be valid.

During the past year, the company has invested in strengthening the necessary regulatory expertise through recruitment and using the expertise of external experts. This has resulted in additional costs for the company totaling approximately EUR 0.7 million during last  year.

Engineering Services Business Segment

Engineering Services Business Segment’s net sales in January-December 2024 decreased by 15.6 percent year-on-year to EUR 14.3 million (EUR 17.0 million). The decrease was mainly caused by the challenging market situation especially in the manufacturing industry, where customers have had to postpone or even cancel R&D projects due to the cost saving pressures. While the number of R&D service projects have been lower, some of the specialists of Engineering Services Business Segment have been working on customer projects in the Defence & Security Business Segment throughout the year, and this has enabled the personnel’s employment situation to remain at a good level.

EBITDA was EUR 1.2 million (EUR 1.7 million), representing 8.3 percent of net sales.

The operating result was EUR 1.2 million (EUR 1.7 million), representing 8.2 percent of net sales (9.7 percent). The operating result was affected by the lower number of R&D projects and measures taken to improve the efficiency of the operations and profitability.

R&D costs were EUR 0.5 million (EUR 0.3 million), representing 3.5 percent of net sales (2.0 percent). R&D costs in Engineering Services Business Segment were related to the development of operations and competencies with the focus on radio technology and software.

The number of new orders in 2024 2024 was EUR 14.0 million (EUR 14.6 million). At the end of December, the order backlog was EUR 4.5 million (EUR 4.7 million).

Development of Business and Market Outlook

In mobile communications, the implementation of 5G technology is progressing on both the network and terminal side. The large number of radio frequencies allocated to 5G technology increases the number of frequency versions of the products needed and thus creates demand for the development of product variants. Various satellite communication solution needs and new technologies increase the demand for Bittium’s product development expertise as new players join the traditional supplier network. In 2024, Bittium began developing a satellite system terminal for testing purposes for its customer based on a new standardized satellite technology.

Many of Bittium’s customers develop their own products and services according to their needs varying seasonally. The need for a R&D partner varies in the same cycle, causing large annual differences in the number of projects carried out with the customer.

Cooperation with existing key customers has continued to be good. Customer projects included medical devices, embedded wireless IoT devices as part of a larger overall system, network-side radios and satellite terminals, a remote-controlled overall system and its connectivity solution, connectivity components for traffic control systems, and professional measuring devices and their connectivity solutions. We completed a project for our customer, who manufactures smart digital locking systems, and won new customers, including from the electric vehicle charging market.

In accordance with the updated strategy, the Engineering Services Business Segment will also seek growth from the defense industry market, where engineering service expertise is offered for products and services that require embedded wireless device design expertise. These include, for example, various sensors, data links and antennas. Bittium’s long-term experience in the demand of defense industry’s requirements regarding challenging conditions of operating environment and experience in the industry’s regulated environment combined with strong industry expertise provides a good starting point for Engineering Services business to offer cost-effective solutions to customer needs.

With digitization, the secure Internet of Things (IoT) is a significant development area in almost all industries. Demand for Bittium’s R&D services and customized solutions is created by the growing need for companies to digitize their operations, collect data wirelessly, transfer data to the internet and cloud services, and monitor and control devices and systems remotely. For this, the market needs secure devices intended for both demanding industrial use and leisure applications, which collect the information brought by the sensors used by the device and create a reliable wireless connection for the device to the internet and cloud services. With the deployment of 5G and IoT radio technologies, the number of digitized devices is constantly increasing. The devices will also have new and more advanced features, which will create demand for design services. The integration of various systems and technologies plays an important role in enabling the overall service offered to the customer.