Alcadon Group AB (publ)

Welcome to the quarterly presentation for Alcadon Group for the first quarter of 2025. My name is Fredrik Valentin and I am the CEO of Alcadon Group.

My name is Niklas Svensson and I am CFO of Alcadon Group.

We are pleased to take you through the outcome of our first quarter of this fiscal year. But before we go into some quarterly figures, we will repeat what Alcadon Group is for a company and what we are doing. We are active in the industry of enabling data communication between different actors and players in society. We do this in three segments. Outdoor connectivity, which is primarily fiber and broadband. Often underground, it can also be in the air. Between buildings, cities, industries and even telemarketers. Then we work with indoor connectivity, where both segments are placed. Structured cable systems. Primarily industries, schools, offices and insurance companies. Everyone who needs a strong and reliable network and infrastructure for data transfer. And of course, all the server halls that you normally have in the sources, but which are now also starting to grow up in the form of data centers, clean, large buildings that only contain data servers. We have chosen to show and present data centers a little separately because the business model there is a little different. There are more project-driven businesses in structured cabling. it is much more installers driven. So data center businesses have certain similarities with our fiber businesses, where there are large transactions. Where our customers are either tele operators who build out their tele network or fiber network for broadband at home, or operators who run large data centers. And there we are perhaps most niche towards medium-sized data centers. There are such hyperscales that are run by Google and Meta, where we are in and out of some such businesses, but primarily we focused on medium-sized and so-called co-locations of data centers. But it's almost the same products we sell in data centers as it is structured cabling. It's cable systems, fiber cables and network cables. But it's also a whole lot of pure power supply products. If we look at Alcadon Group, we have not changed structurally during the quarter. We are still a company that accounts for about 1.6 billion, with a result of about 100 million rolling 12. Of course, we have ambitions to do more than that over time, and we are working slowly but surely in that direction. We consist of about 190 employees today. We are active in eight countries, but we have prepared seven markets. With England or the UK being our largest market, where we have previously been quite Sweden and Norway focused, we have grown rapidly in Europe in recent years. And we have done that by hiring nice, well-managed companies in a number of countries. The latest was Wood Communications in Ireland, which is now celebrating its one-year anniversary with Alcadon Group here, which we bought in April 2024, which is a very nice company, very focused on data centers and with nice key numbers, if not a little volatile. But we will come back to a short overview of each company in our group. Alcadon Group has about 200 suppliers. We are a grossist and an intermediary in these businesses where we offer a little over 5,000 different products so that our customers and our customers' customers, i.e. the customers of the installers, will be able to have the best offer for their business. The joy of being a grossist is that we can help an installer find just the right supplier for the task he or she has received. Let's take a look at the market outlook from here. As I said, we operate in several segments and fiber, i.e. broadband, has been a major business for Alcadona and is still one. Today, however, 25-30% of the turnover. But we are quite involved in fiber businesses in a number of markets, and these are the markets we have entered a few years ago, primarily in Germany and Belgium, but also Denmark, where we have a large part of our business focused on broadband. And then you can ask yourself, do we believe in broadband as a business in the future? Don't all of us already have broadband? Isn't the whole world already connected? And the answer to that question is yes. These two graphs are from 2023 from the European Association for Broadband Producers. And here you see two graphs. The left one shows how many homes passed, that is, homes that are assumed to be able to get a broadband connection in relation to the number of households in the country. We have red-marked the countries that the alcohol group is active in, where Sweden stands out as the highest. And then it's a falling scale downwards. This image shows why we chose to step into Belgium and Germany, because there is still a great need to roll out broadband and fiber. Then the rollout has been slowed down in recent years, primarily due to an income need among operators who have invested enormous money in building a broadband network. And then you turn to the right graph, where you look at how many households in each country actually have broadband connection and a subscription to it. Where we in Sweden have 70% and in Norway 64% of the population has a broadband subscription. Again, two years old numbers, so these have of course increased since then. But there you see that only 10% of the German population actually subscribed to some form of broadband at home, in the form of fiber. And this is where both the potential and the challenge lie right now. For the operators, who are then our customers, you need to get revenue, that is, you need to connect a number of households to the investments and networks you have already built. And that's what's happening right now. That's why we've put in a break-in of Fiber to the Home. We think that in the future, there will be more step-by-step roll-out. Of course, the countries far below the graph on the left will need to get rid of the rest of Europe in the EU to develop digitally. We think that is exciting, and that is why we are in these countries and will continue to work in these countries. But we believe that there will be more step-by-step roll-out of fiber. At the same time, you connect a number of new customers and actually get subscribers, and then you continue to roll this out step by step. So from there, the summary is the highest. We determine that this is still a business that has both short-term and long-term potential to develop even more. If we then look at our other two segments, which are basically almost the same thing, because we sell about the same products, but different business models, we have not prevented any data centers from growing and being driven by AI's progress. where we, as I said, work mostly towards medium-sized co-locations and smaller data centers, and what was previously called server halls, which is illustrated on the right image, i.e. a company, an industry, a school or a company, everyone runs their own data hall today. And more and more, I think, we will be looking at doing this in our own direction. We have put a lot of effort into Molnät. We may not know exactly which country the server is in today. Given the current situation, we assume that there will be a wave of development where you want to ensure that you have control of your own data in your own building. So these two segments, data centers, which are a little more similar to FIBE when it comes to larger transactions, we are very active in a number of countries and there we see a good growth. And we see that it will continue to develop within what we call enterprise data centers, but also structured cable systems in buildings where you then renovate or rebuild or build new. With that said, we're going to take a look at our first quarter of 2025. I've already commented a little on how the three different segments work. We see that we do a lot of business in data centers in the markets where we are active in that segment. It is of course a segment we want to grow in, both in the countries where we already have it, but also to open up that type of business in countries where we are not yet active in data centers. So it is a positive growth that we believe will continue. Within structured cable systems, we see a nice but careful growth. It's not a big number, but it's growing steadily and there are businesses, and this is perhaps where a large part of Alcadon's bread and butter business has historically been. You have a lot of good relationships with installers who use Alcadon's competence base when it comes to knowing which solution to build for a customer. So we see a potential for development, but not as fast as it is in the data center segment. Then we have, as I mentioned, some challenges in broadband and fiber, and not because it is long-term potential, but perhaps because we see a short-term break in primarily in Germany and in some parts of Belgium, where it is more linked to a purchase that happened by one of our important customers. We estimate that these businesses will start and come back, but we will also need to make some adjustments and continue to make adjustments of our own ability and performance, like our capital binding on these markets. So the first quarter of this year, we have delivered a certain growth. However, this includes a acquisition we did in 2024. If we look at it organically and count Wood, we have a negative growth. Despite that, we have strengthened our gross margin, and we have actually strengthened it a little more than that, since we have made some adjustments to our storage levels in order to free movement capital. And that has cost a little margin, and it has flowed all the way down to EBITDA. So EBITDA adjusted, so our performance dropped from 27 to 22 million, partly affected by the fact that we have made a number of adjustments to storage in a number of markets.