Smartoptics Group As

Good morning and welcome to wonderful Oslo Hotel Continental. Also warm welcome to those of you who are following us online. We are here to report quarter three of 2026 for smart optics. Quarter 3, 2026, it is simply put an absolutely fantastic quarter. Everything is good. We're growing the business with 80% compared to the same quarter last year. We are also demonstrating very clearly that the operating leverage in the company is great. Our profitability is fantastic. When growth comes, we're also seeing that in a lower down in our statement of operations. So everything good. It's a very special quarter for us in smart optics because we're passing our old $100 million target. and looking back at this target, reflecting a little bit why this happened and what took us here. I want to start out by saying that when we initially put this target forward, we said 2025 to 2026, I have always claimed that The opportunity to reach this has been good, but I've also said that it doesn't really matter when we reach it. But rather, do we have a business that's running good, great or so-so? And we can conclude that the momentum in our industry and in smart optics is great when we're passing this target. So very good achievement. We achieved this in July, to be more precise, so about six months later than best case scenario that we have discussed. Why is this happening? Well, it is what we have been talking about over the past years that is taking us here. We have continuously, strategically developed our hardware platforms, our software platforms to meet a broader to meet a broader group of customers and to grow our addressable market. We have achieved this and we have not stopped. This part of our strategy remains intact. We're doing exactly the same thing. So continuing towards our next set of targets, this is going to be there contributing greatly to future success. We have also talked about the large account strategy over the years. And I have told you that we are very happy with the progress of our large account strategy so far. Our repeat customers are far bigger than they were a few years ago. There are more of them. They are very broad based in the sense of different market segments, different geographies. highly concentrated around the US but the US is a big place and there are different markets within the US too and we are now engaged in several conversations more or less developed with even larger accounts and players for new applications. Looking at the details of this The revenue in smart optics is broad based. We do not have a customer concentration problem at all in our company. The 10 largest customers represent around 31% of our revenue. So an average nine month revenue of around $2.7 million. Eight out of 10 of those are the US, two of them are Europe. Six out of ten are network operators, two out of the ten are enterprises, and two out of the ten are cloud and AI, so effectively NEO in that case. I want to comment on this a little bit further. We can see that network operators and enterprise are continuing to be both our largest market segments. also growing fastest. Enterprise is very interesting where we're seeing an enormous drive from it's actually three customers building networks in the financial industry, algorithmic trading and such globally that has been driving growth for us through this year, which is very, very nice. Smart Optics is a way stronger company today than it was when this set of targets was announced. We have our best team ever. We have a wider footprint and we have new regions that are starting to show their potential. I will comment on that further. In doing so, in growing the company over the past years, we have managed to preserve our challenger culture. We are the nimble, fast moving player in the market. There is no doubt that we are the challenger of challenger. When we compare ourselves with the four companies that we are normally compared with, We can see that in the US market, which is the most important market for us and in our industry, if we roll back the clock to 2023, that group of four companies was about seven times larger than us together. In the first half of 2026 they are about two and a half times larger. So there is no doubt that we're catching up and moving ahead of the mid-market players and to be honest everyone else too. So the challenger of challengers. I will now move into talking about the revenue and where it comes from. So, we have seen tremendous progress in Americas over a long time. This is continuing. Interestingly enough, we're also seeing MEA at very high growth and Asia at very high growth. MEA, not surprising to me, we have seen progress in our large account strategy. in the MEA for more than a year now. It's driven mainly out of Northern Europe, UK and Ireland. So not surprising at all. I want to comment on on Asia, because it's, of course, a remarkable quarter in Asia, although small compared to the rest of the company. But what's interesting is that only about 11-12% of this revenue is coming out of Australia and New Zealand, which has been, as for those of you who have been following us over time, know that when we do a good quarter in Asia, it has normally been Australia and New Zealand. This time it's a way broader geography. It is Singapore, Malaysia, Indonesia, it is the Philippines, it is Japan. So what I have been talking about for the past six months at least, building up a much stronger partner network. In Asia, simply put, much better resellers out there today and a much stronger team within smart optics is starting to pay off. And Asia is really starting to show its potential for the future as a great contributor to the company. I want to thank of course my sales teams for an exceptional performance over the past year. I also of course want to thank my operations team for delivering through the quarter. Thank you. Looking at our different areas, product areas. It is of course very, very nice to see that the areas where we are investing the lion's share of our money, solutions, software and service, is leading the way, driving the growth. That is very, very good. Business Area Devices, flat year over year, which I think one explanation in that is supply chain. We're seeing far bigger backlog even into 2027 in Business Area Devices, which is a fast moving market where we normally don't have that much backlog between quarters. Quarter over quarter, I should say that Q2 was a little bit stronger than Q3, so not the same as the rest of the company. That was due to a larger project, a larger customer in Q2. Order booking is roughly flat. So absolutely okay performance there. But the important thing, where we put our money, where we make our investments, we're also getting growth. I want to hand over to Stefan to take you through the financials.

Thank you, Magnus, and nice to be standing here presenting those great numbers. We see revenue increase by 80.4% to a record high of 34.3 million compared to 90 million last year. We see strong growth over all regions, primarily driven by business area solutions. The gross margin was 49.5% for the quarter compared to 49.5% the same last year and 48% year to date. Gross margin recovered from Q2 where it was affected by lower initial margins and breakthrough deals with two customers. So in Q3 gross margin returned back to a more normal level. Year-to-date gross margins is in line with the full year 2025, which remains a useful reference for future quarters. We have a record EBIT of 7.1 million compared to 1.6 million last year, up 340% year-on-year and demonstrating our operational leverage. The employee benefit expenses increased 31% and that is reflected by a 21% increase in full-time equivalents from 134 last year to 162 this quarter. Inflation, higher variable compensation and other factors contributed to another 10% increase in employee benefit expenses. Other operating expenses increased to 2.6 million compared to 2.2 last year and that's reflecting the business growth and organizational expansion. Total operating expenses decreased to 26% of revenue. Thank you very much. The EBIT margin for Q3 improved to 20.6%, which is record high, compared to 8.5% last year. On a year-to-date level, the EBIT margin increased to 14.5% compared to 7.7%. and if we exclude the non-recurring costs last year for uplisting and this year's cost for production relocation, the EBIT margin year to date was 15.1 compared to 9.2%. Profitability improved despite continued investments to support future growth. The operating cash flow in the quarter was 7.6 million compared to negative 0.4 last year and the strong operational cash flows was driven by higher profit before tax and a modest release of working capital. The equity ratio was 45% compared with 55% a year ago and 42% last quarter. The lower year-on-year ratio reflects growth in the balance sheet, where we see on the asset side the total amount is 74.7 million, and compared to 50.7 last year. And the increase is mainly related to higher trade receivables and cash, as well as the right of use assets for the new Stockholm office. Inventories has also increased to support the continued growth. The increase in assets was mainly financed by higher liabilities and equity, and that including the liability related to the Stockholm office lease, higher trade payables as well as deferred revenue and retained earnings. Despite the dividend we paid out in Q2, the total equity increased to 33.5 million. We have cash of 7.5 million end of quarter compared to 1.7 last year. And during the quarter we have increased our credit facilities from 75 to 200 million NOC, now equivalent to USD 20.8. And this change is to support our growth strategy. Working capital decreased to 15.8 from 18.4 last year and slightly down from 16.8 last quarter. Inventory continued to increase at 22.8 compared to 20 last year and up from 21.3 in the previous quarter. The year-on-year increase is primarily driven by longer lead times for components and reaching higher inventory levels is part of our strategy to strengthen product availability and support future growth. Inventory quality remains high with limited inventory risk. Trade receivables increased to 25.6 from last year where it was 19 million, but it's down from 26.4 last quarter. The year-on-year increase reflects the higher sales. Invoicing was less concentrated at quarter end this quarter than in the previous quarter. and strong invoicing in the first months contributed to a slight quarter-on-quarter reduction in trade receivables. The collections remained normal with no increase in credit risk. Trade payables increased to 12.3 million from 6 million last year, down from 12.7 last quarter. And the balance reflects substantial inventory purchase towards the end of the quarter. We have payment terms of mainly 60 days but some suppliers have 30 days. Net other short-term liabilities increased to 20.4 million from 14.6 last year. Deferred revenue, which is the largest component here, increased to 14.2 million compared to 11.1 last year. and tax liabilities increased to 2.1 million due to higher taxable income. Thank you and Magnus, welcome back.

Thank you. I will now talk about our long, longer term financial aspirations. I want to start by repeating that our revenue is broad based. We are seeing, of course, AI being a very important component in all our market segments. Our network operator customers are selling a lot of bandwidth to Hyperscalers, Neoscalers and Enterprises for supporting the AI infrastructure. We're seeing our enterprise customers investing into their application layers and IT infrastructures to support future generations operating models. And of course, we're seeing an emerging market for us coming on board with Thank you very much. The investments we're now doing going forward is, as I said, to continue to grow our addressable market. We see a fantastic opportunity in renovating For the lack of a better term, the Internet to support future generations of optical transport demands. A lot of the networks out there are built for things like broadband rollout. 5, 10, 15 years ago and needs higher capacity and better performance. We're tagging on to that so more performance in our products, longer reach in our network solutions will broaden the addressable market for the company to probably around 2x as we have discussed earlier. Other investment areas for us, of course, AI driven automation in our products and in our software platforms to address our customers operating expenses in a more effective way. That's another area where we are investing. And last but not least, of course, investing in our own operations and all of our processes. to drive more automation into how we do things, what we do and so on. So we're going through a very, very interesting phase in the company now, building everywhere. which is for me as a company builder is super fun to be perfectly honest. And I think that my colleagues in the company agree with me. It's all very positive. I also have to say that the mid-term financial aspirations that we introduced about half a year ago to grow the company to three to four hundred million dollars and to achieve an EBIT margin long-term sustainable with upside potential of 16%, Quarter three is a data point that is, of course, indicating more. But it's one data point. So when it comes to our midterm financial aspirations, we are staying firm for now and we will come back as the longer term results trickle in. With that, I want to hand over to Q&A and Mr. Burman. Perfect. Any questions in the room?