Ependion AB

Welcome to Appendian Q1 Report 2026 presentation. During the Q&A session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, President and CEO Jenny Shaddoll and EVP and CFO Joakim Lorien. Please go ahead.

Thank you very much. Welcome everybody to this Q1 presentation for Appendion. The headline of this report is record order intake and strengthened profitability as you have seen. So as usual it is myself and Joakim Lorén in the call and the agenda is similar to previous times even though we have changed the format of the presentation slightly. So I will start by giving a general business update and also looking into the two business entities then Joakim will dive more into the financials and finally I will give some concluding notes and outlook and after that we will open up for Q&A as usual. So summarizing the quarter, we have seen already in the fourth quarter of last year an increase in the activity level and increase in order intake and we are very pleased to see that this quarter the activity level has strengthened further and we have an order intake increase of 41% to the record high level of 778. million Swedish kronor and I'm pleased to see that this is driven by strong bookings in both business entities across basically all our focus segments and all geographies so it's a broad uptick that we are seeing and organically and in fixed currency the increase is 32 percent. As you probably know, there is a lag in our business between order intake and sales normally. So sales increased by 10 percent, but organically it was flat. And the book to bill ratio that already last quarter was way above one is now 1.3 for this quarter. You have probably noticed that we have changed our result measure to EBITDA and our EBITDA strengthened to 75 million kronor and an EBITDA margin of 12.5% compared to a rather weak quarter last year, 9.7%. The free cash flow in the quarter negative of course that's not how we want it to be but we do see a seasonal pattern in cash flow and the negative level was due to increased safety inventories and also some higher accounts receivable towards the end of the quarter. You have probably read in the papers there is a strained global supply situation especially related to memory circuits driven by the AI boom that is driving up prices and it's increasing lead times. We have full focus in both business entities first of all on securing access to material but also of course offsetting the cost increases that we see due to this with price adjustments. And we have done, as you all know, a lot of investments in recent years in both business entities, in R&D, with acquisitions, with India establishment and so on. And there is a really strong focus across the organization now to really drive profitable growth based on these investments. And also, as everybody else is seeing, the geopolitical uncertainty remains. All right. Diving a little bit more into the two business entities. If we start with the Vestromo, we have a record high order intake with an increase of 57 percent. That is without any major project orders in the quarter. And it's driven by all our key segments. So train networks, trackside, energy networks. and also defense, but the development was particularly strong in the train segment, which is also Vestimo's largest segment, as you might know. Sales at plus 21%, driven by strong development of Elotech. And the book-to-bill Investimo for the quarter is 1.28. Profitability-wise, we have a stable development, 16.6% on the beta level in the quarter. And we were talking about the defense segment in the last report, and you know that there is a decision for Vestamo to really go after this segment now. And there's a lot of initiatives going on in the quarter towards this new focus segment. And we do see with the European increase in spend and the focus on finding regional strategic suppliers, there is an interest, an incoming interest from several players in this industry. And we have discussions ongoing and activities ongoing, even though, of course, we know that creating business out of this is, of course, going to take some time. But we also have some very well-known customers already in this industry. So that is developing in a good way. Also, the India market, very positive. The fact that we now have India. A strong local presence is very appreciated both by our existing global customers with activities in India, but also we see interest from local Indian players and new players as well. positive development there, and we know that there is massive infrastructure investment happening in India, especially in metro expansions, in long distance trains, in freight locomotives and so on. So the activity level is very high in India, so that's very good. And Yellowtech continues to develop very well as well. Also, I can mention, and we mentioned that in the report, we have initiated a strategy update in the Vestamo business entity, and that is really to set the stage basically for the next growth phase, looking at our segments, looking at our playing to win strategy, and also looking at our sales organization, how we can make sure that we have the most effective sales organization going forward. Okay, let's move then into Bayer Electronics. I'm very pleased to see that with all the work that has been going on within Bayer Electronics, with the strategy that has been put in place and executed over the last years in a business environment that has been actually very challenging, I'm very pleased to see that now we are starting to see the results of that and we see an order intake growth of 20% driven on one hand by the marine segment with lots of activities with our customers there. but also a high demand from customers within EV charging and also in a growing niche segment that we are seeing which is data centers where bioelectronics products are used for UPS equipment that is then used in data centers particularly in the US market. Sales-wise, we are at minus 6%. We have the last quarter now where we still had in the comparison quarter a small volume of phased out products, 9 million Swedish kronor. And if we look at the currency adjusted in fixed currencies, the sales development was actually plus 2%. Book to bill at 1.33 for the quarter, quite strong. And the most important part here, of course, is that we see that the profitability has moved in the right direction for sure with the increased gross margins according to what we were expecting from the new strategy with a more focused portfolio. And we came out at 11.4%. percent EBITDA margin in the quarter. The new generation of HMIs, the X3 family, we do see a lot of customer interest still, and that is really, really good. We have more than 200 customers now that have placed orders. And what I'm really pleased to see and what we are also expected, of course, from this launch is that some 20% of these are new customers, which is, of course, very promising as well. Bayer Electronics have also targeted the defense segment and we have launched a version of X3 called now Xtreme Ultra towards the defense sector where we have certified the tested the product against military standards and are now talking to potential customers and also some existing customers in the defense sector as well. So that was a summary of the two business entities. So with that Joakim, I will hand over to you.

Thank you very much Jenny and I will go into the financials and I will start with some words on orders and sales. As Jenny said, the orders were up 41%, the level 778 million actually and that is an all-time high record level. We have never been on a on the 700 million before. So it's something that we are very pleased to note. Organically, as Jenny said earlier, 32% up. The acquisition of Velotech is contributing 19%. And we have quite a strong headwind when it comes to FX that is impacting with minus 10%. And together that gives us the 41%. Sales, as Jenny pointed out, now big uptick on the sales level yet so organically flat acquisition is adding then the 16 and also here the the headwind of fx is impacting minus seven if we look at sequentially we we do see a strengthened order intake also from the good quarter in q4 last year And that was well above the 600 million. So we up 22% compared to last quarter and sales is also improving somewhat. If we then look at the profitability, the improvement is then 2.8 percentage points from the low level in Q1 last year and now to 12.5 for Q1 this year. And the main background to this uptick is that we have definitely better performance by Bayer Electronics, as Jenny pointed out before. But also the fact that Vestamo is delivering on a stable level, but being a larger part of the group now with the addition of Velotech. So two points, two folds on the profit increase, Bayer Electronics improvement and the fact that Vestamo is the bigger part of the group. So if we look at the income statement summary, we talked about the first two lines already, should mention that in the quarter, the impact of currency effects is negative and it's impacting the beta level with 6.5 million. And the main part of that is transactional variances. In between EBITDA and EBIT we have the depreciations and amortizations of excess values driven by the acquisitions and we had a larger impact of the Velotech acquisition already in Q4 and the level remains now in the first quarter this year. So the beta margin came in at 11.2% compared to the 9% in last year. There is a relatively big difference on the financial income and expenses line, and that is driven by currency effects on financial items. So net profit increased with 27% to 40.5 million for the quarter and the earnings per share is up 15% to 1.26 kroner. If we look at then the cash flow and Jenny pointed out that we have impacts of increased inventories related mainly to increased safety stocks for some of the components that we now see some turbulence in the market and we believe that it's important for us to secure our delivery of possibilities and and therefore we have increased our safety stocks that is impacting and then also our accounts receivables um phasing you could say there is more of that by the end of the quarter so that gives us the minus nine million However, if you look at the history, it is a seasonal pattern, you could say. Last year, we were around minus 12. So a negative start, but going forward, we are quite optimistic when it comes to the cash flow. Then when it comes to net debt EBITDA, we can conclude that we have a healthy balance sheet and that provides confidence that we can continue the active M&A agenda that we are having in the group. That concludes the finals. Over to you Jenny.

Thank you Joakim. With that I will try to summarize this and conclude the call. Again the geopolitical uncertainty is bound to remain as it seems right now with potential impact on our business in the short term. It's really hard to to predict right now what's going to happen, but that's how we see it. Very pleased to see an increasing activity level among our customers in all our key segments and across all our geographies. And it's also very encouraging to see the improved profitability level in the first quarter. as i mentioned before across our organizations there is a very strong focus now on on driving profitable growth based on the significant investments that we have made in recent years in the x3 series in the velotech acquisition in the india establishment and of course also the the general r d spend the new product development that that we are continuously doing in in both business entities As we have said before, medium and long term we are confident about our ability to continue our profitable growth journey because the segments and areas that we are in are driven by very clear global trends such as digitalization, electrification, sustainability and so on. But regardless of business conditions, we are of course committed to creating value regardless of the market conditions. Alright, and then the financial targets. You have seen this before. The growth, we are targeting an organic growth level of at least 10%. That has been a struggle of course in the last years with the business conditions that we have seen. Now we are looking at a little bit more stronger market development going forward. profitability level, the EBITDA measurement that we have now introduced should be at least 15%. And we are moving towards that target now. And that's what we are committed to achieving going forward. And we shall be a dividend paying company. When it comes to the outlook, as I said, we do operate in attractive markets with strong underlying growth over time, although it has been a bit sluggish in the last couple of years. But medium term, we do see a possibility, a good possibility to achieve both growth and profitability targets. And again, geopolitically, economically, the uncertainty will remain, but we are cautiously optimistic regarding our development now in 2026. So with that, we would like to open up for Q&A.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Daniel Linkovist from Danske Bank. Please go ahead.

So, hi. Just a few quick questions from my side. Congratulations to begin with on a really strong report in all senses. But my main question is basically on the duration of the order book. If we look at Bay Electronics and Velotech specifically, what can you say about the order book duration for those two entities?

You want to take that one Joachim?

When it comes to Bale Electronics, we have an order book of the level of one, two, up to three months in the backlog normally. And the orders that we have received in general, I would say, is within that range. We did write in the report that there is a small portion of the volume of customers prolonging their order horizon. We mentioned in the report 15 million. And that is related to some customers placing orders that's longer than the horizon that I just said, with the ambition to secure their volumes, giving the turbulence on the component side. When it comes to Velotech, they had a good quarter, and their position or their backlog is looking healthy for the targeted sales in 2026. So quite stable. Longer duration on the Velotech. Say again. Say again.

So a longer time frame for the deliveries of the Velotec.

They have a three to six months backlog horizon in Velotec.

So shorter typically than the average in Västermoor you can say but still quite reasonable.

Perfect and then I mean we've gotten used to a bit of fluctuations in the train orders So really nice with this one, safeguarding quite some future then, I would guess. Was there something else to keep in mind with the order intake in Vestamo this time around?

No, I think what stood out was the strong water intake in the train segment and as we have been talking about before, there are quarters where we have very low bookings in the train segment and there are quarters where we have strong bookings and this was a particularly strong quarter. But what was encouraging to see is that it wasn't just that, it was also the energy segment picking up nicely, strong order bookings in real tech, of course, contributing to that, but also track side and to a smaller extent, of course, because it's still a small segment, also the defense sector increased. So it was broad across all our key focus segments.

Excellent. And then just the final on Velotech and then on Velotech combined with your energy offering. On Velotech, you have some postponements from Q4 into Q1. Should we expect that the full postponements was delivered in Q1?

Yeah, we had a little bit of delays in Vialotech in Q4, that's correct. But yeah, all of that has been delivered now in Q1, so I don't expect any effect on Q2, so to say, in that sense.

Perfect. And then just the Vialotech, you've discussed earlier that the Vialotech acquisition has also strengthened your energy offering in Vestamo. Could you elaborate on that and if that has had any effect in this quarter?

Yeah, I think it has not yet had a huge effect on our sales or even our order intake as such, because as we know, there are relatively long business cycles in this industry, so that the activities that we are doing now will typically result in orders in six to 12 months or even longer. But what is very positive is to see how the teams are collaborating, how we are visiting customers together with a broader offering, using the relationships that Velotech came in with, very strong relationships with several large system integrators, but also grid operators, both in Europe and outside of Europe. And also the Vestamo relationships, how we can leverage from that combined, those combined customer relationships now in a much better way. And I think the teams are collaborating extremely well. And we see a lot of opportunities arising from that in the medium term.

Perfect. So once again, congratulations on this report, a really strong data point in my view. So I'll get back in line.

Thank you very much, Daniel.

The next question comes from Marcus Almarid from DNB Carnegie. Please go ahead.

Yeah. Hi, Jenny. Hi, Joachim. It's Marcus here from DNB Carnegie. My first question is on the train side. Is it It sounds to me like when you're describing it, but it's quite broad based and there are no big orders which are driving this. Is it anything that any market customers, et cetera, sticks out? Is it India which is driving it or is it, and what do you say about underlying demand? Has demand changed or is the strength just a normal course of business?

I think it's several things. We are seeing India starting to contribute with new business, so to say, on the rail side, which is very positive. And again, massive investments happening there. But we are also seeing that projects are moving ahead in Europe and in other places. And you can ask yourself what has happened, because nothing has changed in terms of the geopolitical situation. But I think that You know, you can only push projects that long, so to say. At the end of the day, we still need infrastructure upgrades and so on and so forth. So I think that is what we are seeing, that projects are finally moving ahead, getting financed, and that is driving the increased activity level that we are seeing.

But you wouldn't see, because you know also that trains... Train orders are very bulky and have been very bulky, but it seems like this is more of a bigger movement that it gets kind of, if you talk about projects which are moving ahead, that we kind of reaching new level or it's catching up to demand. Is that the right interpretation you think?

Yeah, that is, of course, what we are hoping to see and what we are to some extent seeing now. But again, we know that the order intake in the rail segment, train segment can be quite bumpy from quarter to quarter. So you need to look at it longer term, how it is kind of gradually increasing year by year rather than quarter by quarter.

Mm-hmm. And then, next, a follow-up on Daniel's question on the duration of the order book. So the duration in Beltec is about three to six months, which is lower than the average investment. What would you say is the average investment?

Six to 12 months.

Yeah, six to 12 months is, you could say, the average. Perfect.

And then on Venotech, how is integration in Venotech? I think it's continuing well, but the cross-selling that you started to see some of, is that accelerating as well or is it moving along? What do you see as the cross-selling opportunities and progress?

No, I definitely think that the cross-selling activities are increasing all the time as we get to know each other, as we start to figure out where we have customers in common and where we have customers that VeloTech know well and customers that Vestimo knows well. So I think that the collaboration has been strengthening all along, actually, since the acquisition, since the closing in June of last year. And I think that we are seeing that the Velotech offering to some extent when it comes to digitalizing substations is attractive to customers. It's a door opener to a larger extent, actually, than the networking equipment that Vestimo offers. originally was offering. So it's clear that we now have a much stronger combined offering and a better way, an easier way into the big grid operators, for example, getting to the table and actually talking about the whole Vestum offering.

Would you say it's a key factor to energy segment growing nicely? Is it too early?

I think it's a little bit too early to say. Of course, Yellowtech, that was the whole idea actually of the acquisition, is adding nicely to that. But I don't think that we have seen a big effect as of yet of the cross-selling because, again, the business cycles are quite long. Customers need to test solutions and so on. But it's looking positive.

Mm-hmm. And then on the strategic update that you mentioned, Investimo, if I read you right, it's an offensive strategic review rather than to save costs.

It's more of an offensive strategy, yes, looking more on the front end side of things rather than the back end. In the back end, when it comes to supply chain and all that, I think we have been doing and are doing quite a lot of activities to, you know, to optimize our footprint and so on. So that's ongoing. So this is more market front end looking for sure.

And then on electronic. and on the X3 orders. We talked about last quarter about most orders were still small, and they were mostly for evaluation purposes, and you hadn't really seen the volume orders taking off yet. Are we still there? So we still know volume orders, but still the same kind of orders.

I think as we move along, the customers that placed orders early to test have now been placing larger orders so that we can see that customers are moving towards replacing X2 or new customers starting to use X3 to some extent. So step by step, we are seeing that pattern, so to say, as we move ahead here. The launch and the introduction of this product range is really going according to plan, I would say.

Okay, perfect. Well, that's all for me right now. Thanks. Thank you, Marcus.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Henrik Alveskog from Red Eye Ab. Please go ahead.

Hello, and well, congrats on the very strong numbers. So, first of all, I'm interested to hear if you have seen any, like, shift in market sentiment lately considering what's happening in the Gulf, the Persian Gulf. yeah if we have seen any effects from that well yes in terms of I mean you described basically the strong order bookings during the quarter but considering How you usually refer to macroeconomic uncertainties and market hesitation. I'm interested to hear if you've seen that coming back a little bit now.

I think we can say that, of course, the war in the Gulf is not helping in any way because it's keeping the geopolitical uncertainty high. But on the other hand, this has been the case now for quite some time. And despite that, we are seeing an increased activity level in basically all geographies and business segments. The Gulf crisis has not had any direct impact on our business. We don't have any organizations in that area. We do very little business in general in that area. So from that perspective, it's neutral for us at this point. However, of course, we are following the development when it comes to cost increases and so on and so forth.

Yeah. Great and then just a couple of questions on Bayer Electronics. You mentioned the charging infrastructure as well one segment that has been positive for you lately. Is this relating to rollouts in specific countries or is it like in general in several countries?

We have a few customers that are delivering into that market and they are having a positive volume development and the demand for our panels to them is increasing. Then on what particular markets they are successful, that is a bit uncertain for me actually.

They are active on a global market, actually. It's Asian-based companies, but active on a global market.

Okay. And then, well, the Bayer Electronics business in the US, I'm interested to hear if you, I mean, the industry there is, moving towards buy American, build American suppliers and if you could just say something about that how it possibly is affecting you if you see anything coming for those reasons and also you have said before that You have raised prices there to mitigate the tariffs. Have you been able to compensate fully for the tariffs? If you could elaborate a little bit on that.

Well, if we start with the tariffs, as you probably know, they are hitting the Bayer Electronics products, not Vestimo. And Bayer Electronics have right away implemented price increases to mitigate that. And we don't see any major pushback from our customers regarding that. And we don't see any effect either on our volume. So I think that has worked quite well. When it comes to the Buy America impact, of course, this is a discussion that is coming up more and more, I would say, in discussing with the North American customers. So far, there have been ways around it with our customers. It hasn't been a big issue. It's not preventing us from selling in any way, but it is, of course, a factor that we are monitoring and looking at to see, if and when we need to take some measures because of that. If that answered your question, Henrik. Hello?

Maybe we lost Henrik.

Yeah, yeah.

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Yes, thanks for that. So we do have one written question here. How large is your data center business? Well, today it's actually a relatively small business and it's Bayer Electronics that are one of their or a couple of their customers that are active in this industry. But we all know that it's a growing industry, especially in the US. We see a big growth. interest so we expect this business to to grow going forward and we can grow with our existing customers there so the that was there were there are no more written questions so with that we will conclude this call thank you all for for listening in and have a great evening thank you