Hexatronic Group AB (publ)

Welcome to the Hexatronic Q1 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers, session participants are able to ask questions by dialing pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Reichard Froberg. Please go ahead.

Good morning, everyone, and very welcome to this Hexatronics Irving's call for the first quarter of 2026. I'm Rikard Fröberg, Group CEO. I have with me today Camilla Lindén, our CFO, Martin Åberg, Deputy CEO and Head of Data Center Business Area, and Papi Grandesson, Head of Investor Relations. Before we dive into the presentations, just commenting on this beautiful picture that we have here. It's an aerial footage of our flagship site in Hudiksvall, about three hours north from Stockholm, where we are today. And you see in the background, you can see the factory. And in the foreground, there's a ship that has docked here, and it's clearly loading submarine cable from the factory. And these are big cables, and the only way that you can really transport them is via ship. So with that said, let's dive into the numbers and the presentation for the quarter, which was in line with expectations overall. We had revenue of 1.7 billion SEC, which was an organic decrease of 2%. And this decrease was entirely driven by fiber solutions in Europe, whereas most other areas saw organic growth. Adjusted EBITDA at 146 million SEC, or 8.6% margin. which is sequentially slightly higher than the last couple of quarters. And we see that the strategic shift in our mix continues, with data center and harsh environment now contributing over 60% of adjusted EBITDA. And for the first time, the data center business in this quarter was the biggest profit contributor to the group. For fiber solutions, we saw a soft quarter revenue-wise, where market conditions in Europe continue to be weak. However, the cost reductions are now coming through and adjusted EBITDA margins strengthened somewhat over the last two quarters. Data center continues strong margins and growth and harsh environment again, so good organic growth, but a margin that in the quarter was impacted by some unfavorable product mix. Operating cash flow was modestly positive, which is consistent with our typical seasonality and our net debt saw a slight increase as expected. Significant events in this quarter. We finished the first phase of our performance improvement program, the phase that was announced already in September of last year. And we made an acquisition in harsh environment, or rather the acquisition was announced in the quarter, but it was actually closed as of April 1st. So it's not included, Jovo, that is not included in the numbers of the quarter. And we made some leadership changes in fiber solutions. So we now have a clear regional commercial structure, as well as created global teams for product management and supply chain. This slide, you've probably seen it if you follow us. We use it consistently because it's an important one. It clearly shows the ongoing transformation of Hexatronic. So we take fiber solutions, which few years ago, and it still continues to be the largest business area in revenue, now accounting in this quarter for 58% of sales and 39% of adjusted EBITDA. Parts environment continues to grow and has increased a couple of percentage points to about 70% of sales, and including the Euro 1 pro forma basis would be roughly 20% of total And the biggest change is data center that's increased to 25% of sales and 46% of our adjusted EBITDA. And that, again, makes data center, for the first time now, our biggest profit contributor in absolute terms. And this shift is important. Of course, it's partially driven by the challenges that we've seen in fiber solutions, but the bigger factor is the growth. of the smaller business areas that now make up 44% of net sales pro forma. So they're starting to become very meaningful and changing the makeup of Hexatronic as a company. And this gives us increased diversification, but also, I would say, improved portfolio mix as harsh environment and data center have higher margins and higher growth. And as a reminder, we have set a target that these two business areas are to account for at least half the business by 2028. So you can see here that it's a target that we feel we are well on track to accomplish. Diving in then to the different business areas one by one and starting with fiber solutions. The sales number, as noted, was week in the quarter. And again, it really is market conditions in Europe that are challenging. And in this case, We also saw that unusually cold weather in the beginning of the year was an added headwind. Consequently, we had a January that was very slow. Some picked up in February and a rather strong March. So there was a positive ramp within the quarter, and we see that continuing with what looks to be a pretty solid April. If Europe was off, the U.S., on the other hand, was a positive. And we have now for some time, we've set an expectation, I think, that sometime during 2026 that We will see momentum gradually pick up. And we actually saw that clearly in the quarter. And already in Q1, our organic U.S. sales were growing nicely, with a positive trend also exiting the quarter. You don't see that in the North American number, which is in effect one major customer in Canada that had very low sales in the quarter. But for the U.S., we are now back to growth, which is very encouraging. It was also encouraging to see that despite a revenue drop year on year, the adjusted EBITDA margin improved sequentially. And there are two main drivers for this. So one is business mix. There was some impact where the APAC business, which is typically higher margin for us, had a strong quarter. But it also shows that the cost reduction program is effective. In fact, we're ahead of plan here, meaning that we saw most of the savings from the initial 110 million SEC on annual basis. We saw most of that already into this quarter a little earlier than expected. We also saw some rapid developments when it comes to input costs. Resin prices and fiber prices are both going up. The drivers are different, where resin is really related to oil price and what's happening in Iran and the Middle East, whereas For fiber, the main driver is really the root cause here is the booming demand for hyperscalers, which means that supply and demand thing where supply is getting increasingly high. And we're responding, of course, with price increases. And we are confident that these costs will be fully passed on. We also see competitors raising prices. However, there might be a temporary underabsorption on the way up. We have Of course, we have existing contracts and already placed orders that we need to honor. But in totality, we're pretty confident that the costs will be fully passed on on an absolute basis. Overall, in terms of market demand going forward, we expect the Europe headwinds to persist. No worse, no better at this point. while the U.S. momentum for growth continues or even strengthens. So, in summary, a lot happening in fiber solutions, some challenges and increased, I would say, volatility, but also really encouraging to see the expected improvements in the important U.S. markets is materializing, and also an adjusted EBITDA margin that after five sequential quarters of decline is now moving in the right direction. Moving over to harsh environment then. Here, the organic sales were strong, 9% growth, following the trend from prior quarters. A beta margin was hampered a bit by unfavorable product mix, and it's mostly defense orders in our U.S. business, where, as we have flagged, there's now an impact from the U.S. government shutdown that we saw late last year. This product mix was affecting dynamic cables, whereas The connectivity segment and the sensing segments were both performing strongly. And I think we've said this almost every quarter, but this is a pronounced project business. It's not unusual to have some swings between the quarters, and we need to look at, I think, the full year or the longer-term trends. Still, I think it's fair to say that for this quarter, we're pleased with the top line, but not necessarily with the margin. And on the outlook, we do see the effect from the government shutdown also spilling into Q2, but not beyond that. Longer term, we're bullish about the space. It's of course difficult to really predict what would happen geopolitically and the macro outcomes at this point. But fundamentally though, our two largest customer segments, which are defense and oil markets, If anything, we expect to be positively affected. For example, there's a lot of optimisms about Venezuela becoming a potential market. Still early days, and we're not seeing any orders, but quite a lot of optimism among some of our customers there. And then, Jovo System Technik, and we are absolutely delighted about this acquisition. employees in northern Germany. And the core business is connectors that you see on the picture here and connector assemblies. And they're sold mainly to defense applications. We see this business as a proven market leader, attractive prospects, both long-term and short-term. And in particular, it supports our strategy to grow into leading player in connectivity solutions. And we see opportunities to expand this business. Today, they're very strong in Germany and I would say central Europe, but we see that through the broader reach of Hexatronic, we can expand across Europe and potentially worldwide. And with this deal, Haas Environment Business will be approaching 1.5 billion SEC against our stated 2 billion SEC target for 2028. So it's an important step towards that ambition. Therefore, we feel good about this one. The business trend and momentum is strong, and the deal has a good value, too. And I will now hand over to Martin to give a bit more color on the specific deal and the terms.

Thank you, Rikard. So let us have a look at the transaction structure and the purchase price. The acquisition was structured as a charity, where we acquired 100% of the shares in the business. A closing, which occurred after the end of the quarter on April 1st. The fixed purchase price of €11.8 million was paid. And in addition to the fixed purchase price, there is an earn-out that is capped at €7.6 million, depending on the future performance of the business. And it is structured in a way that is self-funded from the cash flows from yoga. The potential earn-out is paid from the average EBITDA over the next five years and will be paid out in the second quarter in 2031. If we then zoom in on the transaction multiples, the fixed purchase price represents an EV-EBITDA multiple of 4.6 times, and this is based on the 2025 profitability. Adding the earnout to the EV-EBITDA multiple, it can increase from 4.6 to a maximum of 7.6 times the 2025 EBITDA. In order to reduce the valuation risk, we have based the earn-out on a long period of five years. It is also based on the average or the accumulated profitability of the full period, to avoid the risk of paying an earn-out if a single year has an abnormal profitability level. And finally, in order to achieve the full earn-out, the company has to achieve a strong increase in profitability from where we are today. If we then move over to the development of our data center business area for the first quarter. The first quarter was another record quarter in terms of sales and profitability. We were pleased with a strong organic sales growth of 20%. Geographically, it was especially a strong U.S. market that grew the strong sales growth. Looking at the adjusted EBITDA, it ended up at is a record. The adjusted margin is higher, or in line with the last two quarters, but it is two percentage points below the corresponding quarter last year. And there are two main reasons that we would like to highlight behind the cyclical margin. The first is that our organic initiative to expand our service offering is loss-making, but we expect that to be breakeven level within the next three to six months. And the second reason is strengthening of our organization to be able to continue to grow, and that's not only this year, but for several years to come. Looking at the second quarter, we expect a slightly higher probability than we had here in the first quarter. And then moving over to our market outreach. Same message as we had last quarter, and that is generally a very high activity in the market. The market is expected to be driven by the hardware scalers or the wider cloud segment. And if we look at our business mix, the cloud segment remains the largest segment, followed by the data center enterprise segment. Approximately 30% of our sales is towards customers with similar and high requirements. And this is also a focus of our growth journey in order to have a balanced and resilient business mix. If you look at our M&A, we are very active and have a strong pipeline with targets in different phases. And finally, to summarize the quarter, our focus is to continue to strengthen our offering and to grow the business organically and via acquisitions. And with that, I hand over to Kanila to summarize the financials for the quarter.