Inission AB (publ)

to Ignition's Q3 presentation. My name is Henrik Hintze, and I'm an analyst at ABG following the company here to help moderate this call. We will start with a presentation by CEO Fredrik Berghel, and then we'll move on to a Q&A session. So throughout the call, feel free to type your questions in the chat, and I'll read them out for Fredrik later on. With that, please go ahead, Fredrik.

Thank you very much Henrik. Ladies and gentlemen, welcome to Inition Q3 presentation. My name is Fredrik Bergel. I am one of two co-founders and one of two principal owners of Inition. Myself and Olle Hulteberg, we started this company 18 years ago and we are still both active. I am the CEO and Olle Hade, chairman of the company. Inetion Group consists of two business areas, Inetion EMS, contract manufacturing of industrial electronics, and Inedo, which is a company developing, marketing, and selling power supplies. Both these business areas are operating with customized, high-end, high-mix, low-volume industrial electronics. Today, I will present our Q3 financials performance. I will go through some highlights from the quarter. I will also comment on our financial targets. And at the end there, as Henrik said, we will have a Q&A session. So, to the market and to the numbers for Q3. Reported sales increased 13.5% to 531 million SEK. Adjusted for Celteca acquisition, the organic growth was 4.1%. High-level explanation of the Q3 result. Net added value came out 30 million higher, of which Celteca contributes with 28. Higher volume, slightly higher material share, 54.5 compared to 53.5 last year. We also have a cost level significantly higher, 26.8 million SEK, but the most of that comes from Celteca with 21.1. Depreciations 0.9 million SEK higher, of which Celteca also contributes with 1.4. This gives an EBITDA of 29 million SEK, which is 2 million better compared to last year. But if we adjust back for Celteca, it's 2 million lower. If we have a look there on the cost side, if we take out Celteca and if we adjust for 3% inflation, our cost level year on year is sort of flat out, 167 to 167. We are, as you well aware of, uh doing a restructuring program especially on the enedo business area and we have restructuring cost in the period uh we also have extra cost for ip projects so if you add those together it's about six million that we have extras here i will revert further to the explanation per business area we with lower financial net of four million sick including a currency loss of 2.3 million SEK. This gives an earning per share of 0.7 krona, which is 10 öre better than last year. Year on year, as the last picture shows, we are back on the growth tracks, which we are very happy for. If we look at the quarters in sequence, as this picture shows, it shows even clearer that sales and profit are recovering. I'm as sure as anyone can be that we have passed the lowest point now and that we are increasing in revenue and in profit. So far, a lot of our cost cutting actions have been eaten up by restructuring cost as I just mentioned. Q4 will also be in this way, but then Q1 next year, it will be clean and then we see the full effect from the cost cut and we will have no restructuring cost. So hopefully the recovery will improve even further in 2026. Looking at the big picture, we are almost 100 persons less employed self-adjusted compared to last year, so it must show up in cost. If we look at the LTM numbers here, it certainly doesn't look like recovery, but I think I've proven my point with the two previous pictures. Net sales, LTM, is close to 2.1 billion SEK and EBITDA for 12 rolling months amounts to 19 million SEK or 4.3 as a margin. If we take a few, half a minute or so to zoom out, if you look at this picture, it clearly shows overheated market 22 and 23. For ignition we also had, if you remember, a really good first quarter 24, so that is a little bit ignition specific. So it illustrates the development of the market. If you look at the long-term trend, I would say that if we reach our targets now for this year, meaning that we will have between 2.1 and 2.2 billion SEC in sales and 105, 110 EBITDA. If you look at the long-term trend there, I think it aligns quite well. 2025 will align quite well with the long-term trend. So looking at the financials per business area, initial EMS did a good quarter. All in all, a really good quarter. Turnover much higher, even adjusted for Celteca, which contributed with 44 million SEK. So compared to last year, 405 over 355. And then Celteca adjusted. It gives an organic growth with 13.9%. We have higher salary cost in the period. That comes back to that we actually run, we took away a backlog that we have in our initial South company. A very interesting customer, Falcom, that at last had started to order big volumes. And now we have fallen behind. We are catching back those volumes. So we were running the South factory more or less full speed in July. We also have some different differences in the salary, vacation, debt booking, which comes out a little bit. But year to date, I think it's all correct. Perhaps it was a little bit too low salaries in second quarter then. So EBITDA amounting to 34.6 million compared to 25.3 last year, which gives 7.7% as a margin compared to 6.3, which is clearly over our target of 7%. volumes for the rest of the quarter looks stable. So this together with further cost decrease should improve EBITDA even further. So if EMF did really well, Eneado is of course a sad story. We are shipping much lower volume Q3 compared to last year, 82 million compared to 115. That is 29 percent down And of course, anyone understands that it's difficult to sort of catch up with the shrinking in a situation like that. Compared to last quarter Q2, however, it's slightly up, 7 million higher or 9%. Gross margin a little bit lower. This together with the volume drops, drop gives a net added value decrease of 15 million. Costs are coming down. We have a cost saving of 7 million. However, of course, not enough. But then we also have the restructuring cost included here, which I talked about earlier of 3.7 million. We will also take a restructuring cost during Q4 about this magnitude, 3, 3.5 million SEK. From Q4, the factory in Tunis will be included in the EMS profit reporting. For Enedo volumes, however, look improving to the future. Q4 looks good, still lower than last year, but we are constantly building our order book here. Book to build have actually been both year to date and in the third quarter, 1.3. So we are on a, from a low level, also on an improvement track with Enedo. So we are glad to report that our latest family member, Celteca, have performed really well in the quarter. So I just report some numbers from last presentation. We acquired 100% of UAB Celteca last June, which is a company that had a turnover last year of 16 million euro. Earning on EBITDA level, 8.9%. The plant and the factory is located in Kaunas, Lithuania, with 260 employees. And we really think that we have an interesting acquisition here. Very complementary and very interesting customer base, stable financial history, complementary geography in Northern Europe, which means for us a new market partly, A good size of the company. It's 16 million euro, but they have very little material share because one of the bigger customers is providing material. So if you count that back, it corresponds more to a 300 million operation. Strong and very efficient lean culture and very efficient production. We also sympathize a lot with the management culture and values in the company. We are also, as I have said, I'm very happy that the seller took a big portion, 25% of the value in Ignition shares. So Arunas have become one of the biggest shareholders in Ignition Group in this way. So some other highlights for the quarter. Now the factory in Tunis is also formally owned directly under Ignition AB, and that also means, as I said, we will report in the operations in the segment, in the EMS segment from next quarter, Q4. We have also appointed Ali Blell as the new MD for the Tunis factory. Ali has a very relevant production and management background. He has been operational responsible for quite big operations. So we really hope Ali will be a good contribution there. So, to our financial targets, and as a background to our financial targets, I would like to show this picture, our long-term performance. Since we became listed or public in 2015, we have been growing in average 25%, 15% measured to 24%. And we have, as you can see on this picture, been like a five-ish company, EBITDA. Then we have this severe drop, counting in the Eneedo losses, 21, and then the turnaround of Eneedo, and now we are sort of back on the five-ish track here. So two weeks ago, we sent out the PM, the board of director decided to revise the targets somewhat. It's no drama, but somewhat for 2025. compared to what it was earlier. So we have taken down the revenue from 2 to between 2.1 and 2.2 billion. And we think now, so close to the end of the year, we think it's going to divide between the business segment here as 1.82 billion for initial EMS and 330 million for Enedo. We took down also the EBITDA target here. Now we're talking about reported numbers, no adjustments in this. So we think EBITDA will come out close to or very around 5%. And the split there, the EMS, not follow the track 7 over 7 compared to the old target, but we revised them, the OEM or the INEADO target, quite a bit as you can see. They will not be able to do black numbers this year, unfortunately. The other targets are unchanged, meaning that we target for a net debt EBITDA ratio of 2.5, having now including I want to say also 2.9 and where the of course the Celteca acquisition is included and then we are if we count back on Proforma Celteca we are a little bit lower 2.8 equity ratio 30 same same and also we want to be a company that pays out dividend of course if the financial situation allows for that So over to our long-term targets, or not, sorry, mid-term targets, and there are no changes. And we really think with organic growth, 10%, and we top up with acquisitions, 5%, meaning that we will have a total growth over the years of 15%. If we can stabilize around there, Organic growth is extremely helpful, of course, for the profitability. And then moving now from our five-ish up to this nine, having in mind that we are doing the strategic changes that we are doing, we think that should be really doable. From capital structure, equity ratio point and dividend, mid-term targets are the same as the short-term targets. So over then to you, Henrik. Have we got any questions for today?

Yes, we do. I'll start off with some questions from the chat. If anyone else listening in has a question, feel free to type it in the chat now. So first question. You have previously talked about a medium term goal of achieving an EBIT margin of around 9%. What would be required to get there? I assume a better market and higher volumes, but in terms of your own performance and company structuring, what would be needed to reach a 90% EBIT margin, given that historically you've been lower than that?