Hexatronic Group AB (publ)

Welcome to the Hexatronic Q2 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 welcome to this second quarter earnings call for Hexatronic. I'm Rickard Föberg, Group CEO, and with me, as usual, I have Martin Åberg, Deputy CEO and Head of the Data Center Business, as well as our CFO, Pernilla Lindén, and Patrik Johannesson, Head of Investor Relations. And we have a strong quarter to present today. Net sales were 2.2 billion SEK, which is 18% growth, of which 11% organic. Now adjusted EBITDA was right on 10% margin, 224 million SEC, which is a 33% increase year on year. We will talk about adjusted EBITDA in this presentation, but I just want to mention that there are no adjustments in the quarter. This is for consistency with previous quarters. So what you see is what you get. Also, the strategic business shift continues where we see that, in particular, the data center business continues to play an ever increasing role at hexatronic. As of now, data center and harsh environment business representing about 40% of net sales and about half of the adjusted EBITDA. But also on a geographical note, there is a shift in the business that's going on. The North American business is growing rapidly, and it now accounts for 44% of the total, and it was 34% a year ago. We saw, in particular, strong organic growth in the data center business, which grew at 27% organically, and fiber solutions, which was 11% organic, as was the whole group. And four fiber solutions in particular was very pleasing to see that we turned a corner. We saw a 56% improvement in the EBITDA level year on year, as well as the third consecutive quarter of sequentially improving EBITDA. Cashflow was strong. Just over 180 million SEC with 84% cash conversion. And this is despite a seasonality where we're typically more busy in the summer half. So normally there's a bit of building inventory and accounts receivable. But this has been a focus for the organization and we're very pleased that we saw strong cash flows in this quarter. And because of that and some other factors, the net debt as well as the financial gearing was reduced in the quarter. looking at the quarterly result a little bit more in the perspective of recent quarters. On the left-hand side here, we have the net sales, where we can see that the blue bars, it's rather constant. So for a number of quarters, it's been relatively flat. But now in the last quarter here, we do see a step up in that. But perhaps more importantly, if we look at the gray line here is where we take out the effect of acquisitions and also currency. This is the underlying organic growth. And very clearly over time, this trend has been improving. There are some ups and downs in the quarters. This is, at the end of the day, this is a project-based business. And we did talk about last quarter that we saw slow start to the year in January and February with an impact from the cold weather. But since then, we've seen a gradual and pretty significant ramping up of the business activity. On the right-hand side, it is the adjusted EBITDA by quarter. And here we can see very clearly that what started as a modest improvement sequentially in last quarter now continues with a stronger sequential improvement, but also a quite strong year-on-year improvement compared with the Q2 of last year. Some of the key events in the quarter, we completed the acquisition of Jorvo in Germany. This is a defense-oriented harsh environment business that was completed on First of April, so we have a full quarter numbers in the results here today. Then in May we we raised some equity about 600 million SEC and roughly half a little bit less than half of that was used to fund the second acquisition, which was superior fiber and data services in. Texas. This is in the data center business area and was closed on June 1st, so there's one month of numbers in this quarter. Regrettably, Martin Åberg has announced his intention to leave Hexatronic after 12 years and we are working on that succession planning and we actually announced this morning an interim head of the data center business in Oskar Verme as an internal solution. and that will take effect on August 1st. We are, last but certainly not least, we're very excited about announcing a strategic partnership with the Danish company NKT and associated with this partnership there's also an investment in submarine cable production in our facility in Hudiksvall, Sweden and let's take Little bit deeper look on that one. As some of you may know, we have one production line in Hudiksvall making the submarine cables already. It's an old line. It's large and strong and big and it's called the Hulk, therefore. And we have talked for a while now about the growth in this strategic segment. It's not huge in terms of revenue today for hexatronic, but it is strategic and it's also a high margin business. And gradually we have been squeezing more and more capacity out of that one production line. But now we're at the point where we need to invest in more capacity. So with an additional line, it will be roughly the same size, but a faster line than the existing one. we will more than double the capacity from depending on a little bit on product mix and pricing today our capacities in the range of 150 to 200 million SEC we will have capacity to serve over half a billion SEC when this line is completed which will be sometime during 2028 so it creates a strong growth platform and with the partnership that we're entering with NKT we have a very good base loading for many years to come on this production line. The line is also faster, as I mentioned, and therefore we will get higher productivity in that production, which is important. But also very importantly, we'll have two parallel lines, so we can now take two projects in parallel, which will give us more flexibility and shorter lead times and better service level to NKT and other customers. We're not disclosing the exact capex amount here, but it is roomed in the previously communicated about 3% of capex to total sales plus minus 1% that we have talked about previously for fiber solutions. We're running a bit lower today, but this is one driver that we will approach that 3% going forward. I mentioned the diversification and here on this page, we see that it continues on the top, we see the group sales and. data center and harsh environment business areas now account for about 40% of group sales, which is five percentage points higher than a year ago. And on the bottom, it's the adjusted EBITDA. And here they account for about 50% of sales. So they are above average margins and also above average growth level. However, this is actually lower than it was a year ago. But the reason for that is the restoring of profitability in fiber solutions, which we will talk about in a second. So it's going the opposite way, but it's for a very good reason. So diving in then to the business areas and starting with fiber solutions, which I consider to be the over performer in this quarter, we saw 11% organic growth and we saw an EBITDA margin of 9.1%, which was 56% absolute terms of growth in EBITDA over last year. and then sequentially it was pretty much a doubling of the EBITDA but there's some seasonality here as well Q2 should always be a bit stronger than Q1 but clearly things are moving in the right direction here and we saw already a modest EBITDA margin improvement in the first quarter we talked about that and that was largely driven by the cost reduction program that we launched six months ago We see continued effect of those cost savings, but now in the second quarter on top of that We also start to see the growth in the business and that volume growth is really turning into operational leverage that's flowing through to the bottom line The growth momentum as we have talked about before and flagged is coming from the North American market where we have invested we have invested in for several years in plant capacity, but we also in the last year invested quite a bit in our commercial footprint, sales and marketing resources, new products launched, etc. And this is continuing to show. So we see strong growth in the US market and it's both in the fiber to the home segment, which is still the majority of the business, but increasingly we're also seeing strong growth in the transport network segment that we have talked about before. And what's driving this is indirectly is actually the data center build out with the almost explosive growth in data center builds in the US market. We see that simply that data traffic is growing so quickly that the digital infrastructure needs to be upgraded on a pretty big scale. This drives sales in the middle mile and the long haul segment, not only in the fiber to the home. Not yet seeing that effect translating in Europe. Europe market is still quite challenged and we expect that to continue in the short term. But we have a belief that over time, if Europe catches up on the data center growth that also we would see a similar effect here on the transport.

Moving on.