Hexatronic Group AB (publ)

Welcome to the Hexatronic Q3-2026 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 today's presentation of Hexatronic's quarterly earnings for Q3 of 2026. I'm Ricka Fröberg, Group CEO, and as always, I'm joined by our CFO, Pernilla Lindén, and Head of Investor Relations, Patrik Johannesson. And we have a strong performance to report today. Our net sales were 2.5 billion SEK, which is actually all-time high for Hexatronic, and corresponds to 17% organic growth. All three business areas contributed to this growth, and it's also worth noting that North America is now, for the first time, our largest region. Adjusted EBITDA was also a highlight at 281 million SEC, or 93% up over last year. Here, too, all three business areas contributed to growth, with fiber solutions doubling the results and data center and harsh environments both at all-time high. Cash flow was robust at 228 million SEK and together with the earnings improvement made a rather material impact on our net debt leverage, which is now down to 1.3 times. So all in all, a quarter that demonstrates that the plan that we embarked on last year is working. And I must say that I am proud to see the fruits of the hard work by everyone on the Hexatronic team. and on this next slide it shows visually quite clearly how the business has turned a corner in 2026. A revenue which was rather flat for a number of quarters and even saw a slight weather-related drop in Q1 this year is now back to healthy growth. Adjusted EBITDA on the back of the performance improvement program we launched last year now has three quarters in a row with sequential Next, I wanted to share with you today a really neat example of the difference that our products can make. In this case, it takes us all the way to the South Pole. You may have noted that the Nobel Prize in Physics was recently awarded to Francis Halston for his work on neutrinos in the IceCube Observatory in Antarctica. But what is less known, perhaps, is that over the years, Hexatronic has supplied highly specialized fiber optic cables to this facility. Each cable is 3,000 meters long and weighing about five tons. And these are cables that can withstand extreme temperatures, of course, as well as depths. And they are used to send down optical sensors detecting those neutrinos thousands of meters into the Arctic ice. So, of course, we're very proud of having played a small part in this world-leading research that is now recognized with a Nobel Prize. We've talked for a while about the diversification journey that is underway for Hexatronic, and by now we enjoy a rather good balance between our different business areas. Fiber Solutions, after the recent performance uplift, accounts for a little over half of the revenue and about 45% of the profits. Data Center continues to grow and is now close to 30% of group sales and 40% of profits. Whereas Haar's environment has stabilized after a slow start to the year. And this diversification is important. It gives us a more balanced portfolio and therefore resilience to market ups and downs. We move on to look at the business areas, each one and starting with fiber solutions. Q3 was a strong quarter for fiber solutions with 13% organic growth. and adjusted a beta that doubled over last year, albeit against a relatively weak comparable. We now see full effect from the cost savings activated last year, and therefore we're increasingly refocusing this business towards growth. Demand in North America and APAC is healthy, And in fact, we see the business growing faster than anticipated in the US and have therefore decided to cancel the previously planned downsizing of one of our facilities there, simply filling up the lines faster than we expected. The European market, however, remains subdued with low fiber to the home activity, which we expect to continue in the near term. In the Nordics, we are now beginning to see signs of increasing activity in transport network, This is a trend similar to the North American market but it's not yet apparent in the rest of Europe. Next is harsh environment. Here we have a bit more of a mixed picture. Industry and in particular the defense sector is quite healthy with demand for connectivity solutions actually starting to outstrip supply leading to strong order books and extended lead times. Oil and gas customers, on the other hand, continue to be cautious with capex due to uncertainty relating to the Middle East conflict. The business overall has stabilized as expected after soft start to the year and now showed 6% organic growth in the quarter. Adjusted EBITDA at 43 million sec was the highest quarter we have seen. And here we continue to focus on margin improvement and expanding capacity for connectivity products and assemblies. Jovo, our recent acquisition in Germany, is performing strongly, and this is one of the areas where we're actively investing in expanding capacity. Last, but certainly not least, the data center business area has had another outstanding quarter. Sales more than doubled from last year, of which 44% was organic. Adjusted EBITDA margin has, as we have discussed before, now stabilized around that 15 to 16% level. and with low CapEx requirements, this is a business that delivers strong return on capital. Obviously, Q3 was an exceptional quarter. Looking ahead, we continue to see robust demand and a project pipeline, but we know that we're entering a slower season and we cannot expect future quarters to deliver this level of organic growth. We did have a couple of bigger projects that were completed in the quarter, which gave an extra boost, but the outlook overall remains solid into 2027. We sometimes get questions about AI exposure, both as an opportunity and as a potential risk factor. So I want to give some more context here. If I can guide your attention to the pie chart at the lower left, here you can see our customer mix within the business area where the cloud segment accounts for roughly one third of the revenue within the data center business area. And in this segment, I'm including AI customers, but also more traditional hyperscalers and co-locators who are focused more on data storage. Then we have the enterprise segment, which is typically customers like financial institutions or other large corporates running their own data centers. This is just under one third. And finally, smaller customers accounted for slightly over one third. This is the segment which has been expanded with the recent acquisition to increasingly include customers like schools, airports, and hospitals. So within our data center customer base, there's certainly a fair bit of the large AI-type data centers, but also many other types of customers. And we like this portfolio mix, which provides a good diversity and balance of growth opportunities. And in the quarter, all segments grew organically. Now it's time for Pernilla to take us through the financials and some more details.

Thank you Rickard. So overall we had a total sales of 2.5 billion and that is an overall growth of 33%. Organically we had a net sales growth of 17% and it's pleasing to see that it's driven by all business areas. We had a 14% acquisition driven growth from communication zone and superior fiber and data services within our data center business, and Jovo Systemteknik AG within our harsh environment business, and a small positive effect from currency in this quarter. Adjusted gross margin at 39.8%, which is 2.3 percentage points higher than Q3 in 2025. And that is mainly due to the mix between business areas, but also a positive country mix. Adjusted operating costs were 25% in percent of net sales in the quarter compared to 26.2% in Q3 2025. But it is higher in absolute numbers and the increase is mainly related to the new acquisitions we have done and increased freight costs due to higher sales mainly within the fiber solution area. Adjusted EBITDA of 281 million SEK with an adjusted EBITDA margin of 11.3% compared to 7.7% last year. The adjusted EBITDA increase year-over-year is driven by all business areas. EBITDA includes a non-recurring effect of 71 million related to the performance improvement program of which 67 million related to the reversal of a previously recognized impairment of intangible assets associated with the planned capacity adjustment in Clinton factory. The decision to reverse the earlier decisions to downsize the Clinton facility reflects, as Rick had said, both stronger than anticipated growth in the US market and expectations of continued favorable market development. Our financial items for the quarter amounted to 73 million. Of net interest amounted to 26 million. Realized and unrealized exchange rate differences of minus 18 and other financial items amounted to 29. And that includes revaluation of additional purchase price and acquisition options of 28 million. Earnings per share at 0.81 compared to minus 0.59 previous year. Go to the next slide. So total sales for Fibre Solutions is 1.4 billion SEK in Q3 with an overall growth of 14%. Organically, an increase of 13% in the quarter. And the rest is attributed to currency. Net sales, as Rick had said, continues to decrease. The decline is to weaker demand in the FDTH equipment, primarily in UK and Germany. In North America, net sales increased by 51%, mainly due to increased activity in US, both due to ongoing FTTH build-out, but also because of increased investment in transport networks as data center build-out continues. In the APEC region, net sales growth of 28%, driven by all primary markets, as well as opportunities materializing in emerging markets. Adjusted EBITDA. of 133 million or 9.4% compared to 5.4 prior year. CapEx investment in the quarter of 27 million or 1.9% of sales. That is mainly related to maintenance. If we go over to harsh environment, so total net sales for harsh environment of 393 million SEK, a growth of 25%. That is driven by both acquisition of Jovo systemteknik and an organic growth of 6%. Connectivity solutions continue to perform well on the back of increased defense spending, while dynamic cables saw muted growth in the back of lower demand for the oil and gas sector. Adjusted EBITDA at 43 million SEK which is a record for harsh environment business area and adjusted EBITDA margin at 11% which is in line with Q3 2025. CAPEX investments for the quarter 7 million SEK, 1.7% of sales and that is also related to mainly maintenance. Another record quarter with total sales for data center of 692 million SEK with an overall growth of 107% of which organic growth 44% with especially strong development in the US. And acquisition driven growth from our earlier communicated acquisitions, communication zone and superior fiber data and services. Adjusted EBITDA of 117 million SEK or 16.9 108% growth in absolute number, but in percentage in line with Q3 2025. COPEX investments in the quarter 4 million or 0.6% of net sales. Cash flow from operating activities before changes in working capital of 316 million SEK. Small negative effect of working capital of 88 million SEK in the quarter and that is mainly related to increased accounts receivable due to the strong sales in the quarter. Cash flow from operating activities 228 million SEK representing a cash conversion of 72%. And as earlier said, maintenance and capacity investments of 38 million, equivalent in total of 1.5% of sales. If we then last but not least look at net debt, which corresponds to net debt excluding lease liabilities amounted to 1.3 billion SIG at the end of the quarter, which is a decrease of 165 million SEK compared to last quarter. Overall leverage at 1.3 times compared to 1.7 times end of Q2 2026, a reduction of 0.4. The lower leverage is mainly driven by the positive cash generation driven by our higher EBTA. At the end of Q3, we had 678 of cash and 1.4 billion of unutilized backup facilities, which gives a total liquidity of 2 billion. This gives us a solid financial position.