Ependion AB

Welcome to Ependion Q2 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 Shadal and EVP and CFO Joachim Lorien. Please go ahead.

Thank you very much. Good afternoon, everyone. And thank you for joining us today. With me, as usual, I have Joakim Larén, CFO. located in Malmö. I myself am sitting in Västerås today. So the agenda is the same as usual. I will start by giving a general business update. And after that, Joakim will walk you through some more details on the financials. And I will finish off with some concluding notes and our outlook. And after that, we will open up for Q&A. All right, let's dive right into it. So we have now delivered three consecutive quarters of strong order intake growth, which is increasingly translated into sales growth and also improved profitability. So order intake up 24% or 15% adjusted for acquisitions and currency effects. We see broad-based order booking across both business entities and across most of our key segments. On the sales side, we did achieve a record sales level of 682 million. That's 22% up year on year, where of 10% organic and currency adjusted. And the book to build for the quarter ended up at 1.02%. The profitability improved despite continued investments in various growth initiatives and also despite, as we will see, some non-recurring costs in Vestimo. EBITDA grew by 30% to 84 million Swedish kronor, lifting the margin then to 12.4 compared to 11.6 last year. On the free cash flow side, we had a bit of a challenging quarter. We achieved 40 million SEK. And the main reason for working capital increase was actually that we had a lot of invoicing towards the end of the quarter, which of course affected this somewhat elevated safety inventory as well. But the main effect was actually the accounts receivable. On the inventory side, you are all aware about the memory circuit supply situation, which remains extremely strained. And we are putting a lot of effort in the whole company on securing supply. That's really our number one priority right now to make sure that we can deliver to our customers. And of course, also as much as we can offsetting the cost increases that we are seeing through price adjustments towards our customers. When it comes to defense, this is still a small segment for us, but strategically important. It's developing according to plan in both business entities, although, of course, from a low standpoint, starting point we are doing some targeted investments in both business entities especially adding a couple of sales people with a background from the defense industry and we are also we have also tested some of our products against military standards so that we can with confidence go to these customers and talk about what we can do to support them. So that's working out according to plan. As we all know, the geopolitical uncertainty is still there. I feel the organization is focused on what we can influence, focusing on profitable growth and building on recent years significant investments. All right, let's then move into the Vestamo business entity. In Vestamo, we delivered record sales and a strong order intake despite a temporarily weaker trade market. The energy and trackside segments grew nicely. There were no major project orders in the quarter, and I think most of you are aware that Our train business is relatively volatile between quarters, so it doesn't mean that the demand as such has lowered. It's just that in this particular quarter, the order bookings were somewhat lower than in a record high Q1 quarter. Energy is actually becoming a major growth driver within Vestimo, very much supported by the Velotech acquisition. Sales up 28% or 9% organically. That's a record high level for Vestimo. And I'm pleased to see that we are starting to convert the high order bookings from the last quarters into sales now. Book to build actually at one, exactly at one for the quarter. EBITDA grew by 22%, 15.3% margin. It's a little bit lower than what we would expect from Vestamo with this kind of of nice top line, but we did absorb around 8 million Swedish kronor of non-recurring cost items in the quarter. And those cost items relates to strategy work and some business improvement projects that we have been running in the quarter. And as I mentioned, Vela Tech continues to develop very strongly contributing to both growth and profitability. One thing worth mentioning in Vestamo, which is not in the slide, is that we also achieved on the sustainability side and Ecovadi's platinum status, moving from silver to platinum, And that is thanks to all the hard work that has been done in the business entity to move that area forward. And this is something that our customers actually care about. So we are happy about that. If you look at the graph there to the right, you can see that the order intake pace is well above the sales graph, which is, of course, positive. Year to date, we see a healthy order growth and also sales growth. So that's so far so good. All right, let's then move into the Bayer Electronics business entity. I'm very pleased to see that the long-term transformation work in Bayer Electronics is actually now starting to translate into increased stability, sales growth and also higher margins. And that is very, very good to see because the team has been working really hard for a long time now without really seeing clear results. But now we are starting to see the tangible results as well. Order intake up 22%, driven mainly by the energy and marine segments. Sales grew 11%, book to bill 1.05 in the quarter. As we mentioned in the report, we have established a formalized energy as a focus segment. And that's just really because we already have strong positions with key customers in this area. We have a good product fit and also we see a growing customer demand. So we are working in areas such as data centers, EV charging, carbon capturing and so on. So it makes a lot of sense for us to actually formalize energy as a focus segment in Bayer Electronics as well. The higher sales level lifted the EBITDA significantly and the margin improved to 12.3% from 9.5% in the previous year. You know that the team is working hard on the launch of the new X3 platform and that is also proceeding according to plan. We are seeing high interest from customers in this new modern platform. We see still a lot of new customers ordering this product which is very promising and the migration of existing customers from the X2 series to X3 is also proceeding according to plan. What is not mentioned here, but we mentioned it in the report, is that the R&D spend in Bayer Electronics is also now normalizing according to plan as we have launched X3 last year. All right. So with that, I hand over to you, Joakim, for the financials.

Thank you very much, Jenny. And I will take you through some more details on the financial side. And I will start with the volume development. And as Jenny pointed out, really good over the quarter, third in a row on the higher or stronger levels of the 24% growth. compared to last year, 15 is then organic. 11 comes from the acquisition of Velotech and a smaller portion of FX. If we look at year to date, we are at plus 33% or organically 23. So really good numbers for the first half of the year. Sales, as Jenny pointed out, it's all time high for Ependion as a group and also actually for Vestamo plus 22 organically is then 10% in the quarter of then Velotec is adding then the 12 to the 22. Year to date, 16 in total of what organically is plus six. If we look at sequentially compared to Q1, obviously the orders is somewhat lower. And as Jenny pointed out, The main reason is really that the train segments that we know is bumpy came in at somewhat lower levels in this quarter compared to the really strong levels in Q1. So that's the reason for the sequential downtick. But sales increased 14% if we compare Q2 to Q1. If we look then at profit, the EBITDA raised 30% to 84 million for the quarter. And if we look at profitability, we saw almost 1% or 0.8 percentage points improvement from the 11.6 to 12.4. for Q2. And also here, in terms of sequential, we basically came in on the same kind of level that we saw in Q1. And the reasons is really within Vestimo and the non-recurring cost items that Jenny just mentioned. So if we look then at the total income statement, we can conclude that the EBIT increased with 24% in the quarter. The net profit increased with 50% to 45 million for the quarter. And if we look at the first half of the year, we are up 38%. So it's quite big numbers here. We do want to point out that in the quarter we had some total negative currency impacts of minus 2.4 million of what translational transactions or transactional differences is most of that negative impact. If we then move forward, let's look at cash flow. 40 million in the quarter to be compared to the 68. Jenny also earlier pointed out that the reason for the somewhat lower is that we still sit with relatively high inventory levels related to safety levels that has been increased due to the constraints in the memory market you could say for supplying components to our manufacturing and also the major impact is actually the accounts receivables that came in relatively high due to phasing on towards the later part of the quarter. The net debt EBITDA covenant is moving downwards as improving levels. We came in just below 1.2, which is then emphasizing that we have a solid balance sheet and some financial muscles to continue our M&A agenda. That completes the financials. So back to you, Jenny.