Hexatronic Group AB (publ)

Good morning and welcome to this presentation of our first quarter earnings. I am My name is Richard Fröberg. I'm CEO of Hexatronic Group and with me today are CFO Pernilla Lindén and Deputy CEO Martin Åberg. As usual, we will start with a very brief overview of the Hexatronic Group. And today we are a global business with operations in over 40 countries and sales in over 100 countries. We have about 2000 employees and revenue last year was just over seven and a half billion SEK with an EBITDA margin of 10.6%. As you can see, we're quite well diversified with three different business areas, fiber solutions being the biggest accounting for about two thirds of our revenue, harsh environment and data center are smaller, but growing in importance. Just over half our turnover is from Europe. North America accounts for close to 40% and APAC sales are just over 10% of total. We have 18 production facilities covering the markets well with production in each of the continents where we're active. And it has been for quite a while actually an important strategy for us to have local production set up to be close to our customers. And obviously this is extra important and a strength in today's world where trade barriers are only increasing. So let's get to the main event and take a look at the Q1 highlights. We're quite pleased to present today a solid quarter with growth on top line and a beta level, driven by very strong performance in our data center business. Starting with sales, we landed at 1882 million sec, which is 6% higher than last year, and also slightly higher sequentially, which is in line with the seasonality we were expecting. And in fact, this was the first quarter since Q3 2023, where we saw a modest organic growth. EBITDA improved 10% year on year due to operational leverage and business mix, offset to an extent by higher freight costs. And EBITDA margin, therefore, was up 40 basis points and landed at 9.8%. As already mentioned, the main performance driver was the data center business area, which had a record quarter and 41% sales growth. Fiber solutions saw slightly lower sales with APAC up, Europe flat, and North America was lower year on year affected by some one-off shipments in Q1 of last year. Our net debt coverage is stable at just under two times EBITDA, which allows us room for future investments. And we maintain our cautiously optimistic view for the remainder of 2025. Some key events in the quarter. So first I joined the team on March 1, so I have been here about two months now. It's been a very intense induction and an absolute delight. I must say Hexatronic is a fantastic company and it's truly a privilege to lead this team. We have also implemented our three business areas and the segment reporting now is therefore following that structure. This gives us better transparency and is also well aligned with how we operate the business. We have, of course, seen quite a bit of volatility and uncertainty related to tariffs. I think it's important here to note that Hexatronic's direct exposure is quite low. It's less than 5% of our total sales that are subject to the US tariffs. Related to this and in line with our longer term strategy, we have decided to start manufacturing also of fiber optic cable in the US. And then after the end of the quarter, we were quite happy to lock in a refinancing of our bank loans. So here's an overview of our three business areas. Fibre Solutions still the biggest one, and today is about two thirds of group sales, but has a slightly lower margin. So the share of EBITDA in the quarter was just over 50%. Harsh Environment is about 15% of total, both for sales and for profits. And data center now accounts for about one fifth of sales and one third of profits in the quarter. So we continue to see diversification and increasing weight of the focus growth areas of harsh environment and data center. This is what we expect to see, and this is what we want to see. Just one note here is to remember the seasonality that we have talked about, where typically fiber solutions has the weakest quarters in Q1 and Q4, while data center has typically the strongest quarter in Q1. Now let's go through the business areas and starting with Fiber Solutions. Overall, we saw a 2% sales decline with growth in APAC, Europe was flat and North America declined. And the main factor of the North America decline versus last year is that we had some significant submarine cable shipments from Sweden in Q1 of last year. Sequentially, the sales in North America were higher than in Q4. EBITDA margins saw a slight increase with business mix and capacity utilization as positives, and this was somehow somewhat offset by higher freight costs. We continue to view North America and APAC as growth opportunities, but we also note that the recent tariff debates are increasing market uncertainty to an extent. The BEAD program looks to be somewhat delayed. However, important to remember that the bulk of the market in the United States is good. Europe continues to be a tougher market with an expectation of flat growth and continued price. focusing here on operational efficiency and cost reductions. Moving on to harsh environment, this business grew by 5% in the quarter. The efficiency improvement that we have talked about, primarily in Rochester Cable, are on plan. While we still have a lot more work to do, things are moving in the right direction with a profit improvement in the quarter of about 1 percentage point. And we've known for some time that Rochester would require a fair bit of work and also investment as it was an underinvested and I would say somewhat neglected carve out acquisition from a larger corporate business. The longer term outlook here for harsh environment is fundamentally favorable with defense and energy sectors expected to remain strong. And now we get to the star performer of the quarter, which is data center. So here I'm going to hand it over to Martin, who is leading that business area.

Thank you, Rickard. As Rickard mentioned earlier, the data business area normally has a stronger first half year due to vacation periods in both the third and the fourth quarter. In the first quarter, sales growth was 41% and EBITDA growth was 37%. And this is compared to our first quarter last year, which was also a record quarter. All businesses in the business area performed in the quarter. We had strong growth in both Europe and in the US. We grew both product sales and service sales, although we grew service sales stronger. And this was expected since we have a stronger exposure to the fast-growing cloud segment on the services side. The carve-out of parts of Icelandic Ender that we acquired in the fourth quarter of last year contributed to a strong start to the year. For Hexatronic, all these sales are, of course, accounted for as inorganic growth. But if you compare the sales of this business compared to the sales before the acquisition, they have more than doubled the sales in the quarter. And this is, of course, a fantastic start that we are very pleased with. Moving over to the outlook. At the investor update that we did a month back, March 28, we zoomed in on the service market, on the data center and customer segment. And just to quickly summarize the market outlook from research firms, the cloud segment is expected to grow at around 15% CAGR from 2025 to 2029, while the other parts of the businesses are expected to have a market growth corresponding to sales CAGR of 2% to 9% for this period. Overall, we expect market growth in all parts of the business area, but with the highest growth in the cloud segment. We're actively working to diversify the business area regarding customers, offerings, and also end customer exposure. In the quarter, we made good progress. We have a few promising new customers, which has good potential to both diversify the business and contribute to growth and development of the business going forward. If we move over to M&A, we have talked about a strong pipeline in the data center business area over the last six to nine months. And several conversations have moved forward. And our ambition to make a few acquisitions this year remains. We were a bit more specific on the investor update in March in terms of what we are searching for. And it is both within our current main focus area, which is ICT services, but it's also to broaden our service offering to other areas such as electrical and security. And to summarize, the market remains strong and we hope to come back to you about acquisitions in the data center business area in the near future. And with that, I hand over to Pernilla to summarize the financials for the quarter.

Thank you, Martin. So our total sales for Q1 was 1.9 billion SEK with an overall growth of 6%. That was driven by a record quarter for data center and harsh environment continued to develop positively while fiber solutions were slightly down. Organically, we had a growth of 1% and a 4% acquisition driven growth, mainly from the recent acquisition Endor within our data center business. And also we had a positive FX effect during this quarter. If we're looking at a gross margin, we had a gross margin of 41.6%, which is 1.1 percentage point above last year. And that is mainly due to manufacturing efficiency within fiber solutions and the harsh environment. Our operating costs were 28.6% of net sales in the quarter compared to 27.5% in Q1 2024. And the increase of the operating cost to net sales is mainly related to increased freight cost and also the cost related to the change of CEO. Depreciation has increased compared to last year due to the capacity investments that we've made over the last years and in percentage of sales at 4.1%. An overall EBITDA of 184 million SEK up 10% compared to last year or 9.8% of net sales. Financial net of SEK 31 million and that is mainly related to interest expense. We had also a positive effect of exchange rate differences of revaluation of additional purchase price. Tax amounted to 30.3% compared to 32.4% and the lower tax rate is explained by higher portion of deductible interest expenses. Earnings per share at 0.42 SEK. If we then go over and talk about our fiber solutions. Total net sales of fiber solutions of 1.2 billion SEK in Q1 with an overall decline of 2%. Europe was flat compared to last year. Decline in Sweden was partly offset by growth in UK and Germany. strong growth in Finland and Austria. As Rick had said before, sales in North America declined. Sales in North America were lower than last year, but are increasing virtually. And we had made submarine cables that was included in Q1. The US duct business showed increased volume, but that was offset by lower prices than last year. And APAC and rest of the world increased with 16%, mainly due to orders to Micronesia and the rest of APAC. EBITDA of 167 million SEK, a growth of 3%. Depreciation at 5% of sales, and that is 0.4 percentage point higher than last year. And that is due to the capacity investments that we have made over the last years. An EBITDA of 105 million SEK, 1% growth compared to last year or an EBITDA margin of 8.5%. And that is 0.2 percentage points higher than last year with a positive effect from higher capacity utilization in the factories and that is partly offset by the increased freight cost. We had low capex investments in the quarter, only 4 million SEK or 0.3% of sales. And that was mainly related to maintenance. If we move over then to harsh environment, we had a total net sales of harsh environment of 286 million SEK with an overall growth of 5%. And growth is mainly driven by sales to APAC and rest of the world. Europe was in line with last year and North America was declining. But the companies within Hage Environment have an international customer base and the majority of revenue is related to larger projects, which is why sales per geography can fluctuate from quarter to quarter. EBTA of 39 million SEK growth with 13%, depreciation at 3.3% of sales. EBITDA of 29 million SEG or 15% growth compared to last year. And EBITDA margin strengthened compared to previous year as a result of the ongoing work with manufacturing efficiency within Rochester Cable. COPEX investments in the quarter of 3.2% of sales, which is mainly related to maintenance investments in Rochester Cable. Data Center, total net sales of 362 million SEK with an overall growth of 41%. And as Martin said, which is a record quarter for our data center business. And we are pleased to see that it's a strong development for all units and a positive contribution from the Ender acquisition business. And we had a fantastic start with Endor that was more than doubling their sales in the quarter compared to last year. EBITDA of 72 million SEG growth with 35% and depreciation at 1.2% of sales. EBITDA of 68 million, 37% growth compared to last year or a margin of 18.8%. And in the data center business, the CAPEX investments is quite low, and the quarter was 1 million or 0.3% of sales, which is mainly related to maintenance investments. If we go over and looking at our cash flow, Overall, our cash flow was not overall at satisfactory. Operating activities before changes in working capital of minus 50 million SEK. We had a negative effect of working capital of 192 million SEK. Accounts receivable has increased with 204 million SEK during the quarter and that is mainly due to increased sales and customer mix. Inventory has increased with 127 million SEK which is partly offset by increased accounts payable. Total capex investments of only 14 million SEK or 0.8% of sales and that is mainly related to maintenance investments. And as we have communicated earlier, after the heavy investment years of 2022 to 2024, we believe that we were able to grow for several years without any extensive investments in the fiber solutions business. Group financing activities amounted to 34 million, and that is amortization of lease liabilities. If we then are looking at our interest bearing net debt, which corresponds to net debt excluding lease liabilities, that is mounted to 1.9 billion SEK at the end of the quarter, which is an increase of 43 million SEK compared to last quarter. And that increase is partly offset with increase of the rolling 12 EBTA. So interest bearing net debt in relation to perform an EBTA on a rolling 12 months basis is stable at 1.9 for the quarter. At the end of Q1, we had 499 million of cash and an unutilized backup facility of 1.3 billion SEK, which gives us a liquidity of approximately 1.8 billion SEK. And we have a continued solid financial position. Now I will hand over to Rikard again.