Inission AB (publ)

Hello and welcome everyone to this Q&A presentation edition. My name is Henrik Winsler and I'm an academic analyst at APG for Forrester County and I'm here to give a more realistic Q&A that will take place after February 2's presentation. So if at any point during the presentation you think of any questions, please type them in the chat and I will be available later. And for the audience here, feel free to put up your hand after the presentation, as we'll have you ask your question. With that, I say please go ahead.

Thank you very much, Henrik. Welcome to our annual meeting and our Q1 presentation. My name is Fredrik Berger, and I am one of two founders and one of two principal owners of this company. Me and Olle, as he just said, we started this company 90 years ago and we are still both active. Myself as CEO and Olle as the chairman. Today I will recap 2025, both what we have been up to, very, very brief, and also the financials 2025. I will go through today's published or late evening yesterday published Q1 report. I will also talk to you a little bit about what we are actually doing apart from the numbers. What are we up to? Both in initial EMS and initial power. I will tell you a little bit about our acquisition strategy, something about our financial targets, and then we round off with the Q&A together with Henrik. So last year, We had a challenging first half year. All in all, we ended up having a total revenue of 2.2 billion, including Zetica. So there's a small growth there, but including Zetica and also a little bit of AXA revenue of 106 million. It was actually an organic decrease with 50 million or 2.3%. The slow start of the year and also initial power being loss making last year brought down the EBITDA result. If we go further down in the P&L, our earnings per share was also affected, as we have talked about, the higher valuation of the acquisition when we finalized that in November, which affected the result per production with the total result was about 20 million. So all in all, as I said, net sales 2.2 billion and EBITDA amounting to 111 million, which makes up 5% margin. Looking at this picture, I think I said that last quarter also, it sort of illustrates the total market overheated market, 22 and 23. So all in all, I think 25, both turnover and profit, perhaps sort of are in line with the normal should have been in line with the normal growth. So if we extrapolate from pre-COVID, I don't think 2025 necessarily was as bad as it looks like. So what have we been doing then during the year? We have created a new MD. Welcome in Lundfors, Mattias Neumann. He has quite a bit of industrial experience and he also directly comes from Kongsberg, previous Rolls-Royce. Kongsberg also happens to be one of our largest customers. So we are happy about that. Also last year, we leveled, we changed the listing at Nasdaq from First North to the main market, which was internally a huge project. And we came through this project, in my meaning, being more robust, more sustainable, We have a lot of the formalities in place in a totally different way because the demands and the requirements from the main list are quite different on a totally higher level compared to First North. We also have the inauguration of our initial Tunis factory. We also moved in Borås from our old location into a brand new factory that's actually rebuilt totally for us. where we have set up a very good production flow. So unfortunately, we don't have too much production there now, but from Piret's point of view, this is our most beautiful factory, if there is such a contest. We also made an acquisition last year. We acquired a super-duplifying company in Kaunas, Lithuania, called Celtica Uabir, and they have A little bit different profile, perhaps compared to our other Northern European factories, a little bit higher volume, close to even consumer products running there with very efficient flow set up in that factory. So we brought in new customers, but we have also brought in sort of a level of production where we perhaps want to be in all our factories. We've also welcomed a new managing director for our Junius operation, Ali Bled. He also has extensive industrial background and has been in charge of quite large operations in Junius. We also have applied and been approved as a member of SOF SOF is an association for Swedish companies involved in defense and security industry. We think it's important in the days now with defense industry really booming because we can be in their context together with these people and learn from them. We also in November acquired the last remaining 49.9 shares of AXE, as I said. AXE doing quite well and The value of AXE was higher when we actually closed the deal there in November compared to our original analysis, meaning that we made a book loss. It's a little bit technical, but we made a big loss there. So just showing a few nice pictures from last year, being in Värdahamnen in Stockholm. We had a delegation there in Tunis. together with the ambassador, cutting ribbons. We did a sale in Borås, and opening this, had a very nice grand opening of our totally new premises there, together with the customers, suppliers, and board of directors. So, that much about last year. Then we'll be coming over to Q1, 2026. So reported sales increased 37.4% to 664 million. However, adjusted for Celsteca 53 million, the organic growth was 26.3%. And including in that quite high growth, I want to explain that 20 million of these was pure material sales to one of our biggest customers. which perhaps we always want to sell also, manufacturing services included, but it's a risk thing also to hand over material that does not induce customer or required to take over. That material sales also affected the EBITDA market with 0.2%, so nothing dramatic, but still. If we're looking into the Q-numbers here, and a high level of explanation here, these 127 organic new million, we also had reduced cost from our cost-cutting program in Initial Power, formerly Nedo, contributed to the higher profit. We had similar materials here actually compared to last year. So all in all, this came out as 70 turnover minus direct material, I call that net added value, come out 70 million higher. But we also had costs 41 million higher. So that builds up these 46.7 EBITDA, which is actually an improvement than from last year with 26.7 million, which comes out at 7% EBITDA margin. And then also with quite low financial cost. Last year we had high financial cost due to currency losses. This year we have some currency gains. So all in all there is a big difference there between the quarters when it comes to the financial cost. So all of that builds up to this 1.5 krona per share. Just to explain a little bit about also We talk about that we are cutting costs, and then you say, oh, 40 million hiring costs there. How does that tie together then? And then one has to remember, out of these 41 extra, 30 is coming from Celltech. So all in all, these extra 35 million NAV, like for like, costed us 11 million to run, meaning that we have quite a nice fall through there. So a lot of the extra revenue is falling all the way down to E8 level. Also cash flow I want to highlight. We had good cash flow in the quarter, 43.6 million. Quite low increase of our net worth in capital, 15 million only, compared to the cash flow before change in net worth in capital, 58.6. makes up this 43 almost 44 million which i think is good so looking at year over year it comes out quite dramatic but if you look this by looking at the quarters in sequence then you can also hear that both revenue and profit is sort of built up gradually And from our best knowledge, from what we have now, from order intake, and also when we are talking with our customer, we think this indicates that we should be able to run on this invoicing speed or sales speed. Also with the current cost structure, we are a strong believer that we should be able to maintain this profit level, given that the sales speed can be there also altogether. So then, looking at LTM numbers now, 2.35 billion, which is quite a step up from 2025 then. Also the earnings, quite a decent step up, 138 million. Actually, as some colleagues said in the industry, when we are doing so well now in sales, I actually had a hope for even better sort of gearing on this extra value, but still, So some news from the quarter. We have a new MD in what we call initial seed, meaning Borås and Malmö, Torkel Skoglösa. And it's so funny, he actually owns a lot of Skoglösa, but that is another story. He has industrial experience from Trelleborg and Sandvik. And especially interesting is his experience from Nolanto. Nolanto is also a contract manufacturer. but on the plastic industry. So we think it's a good fit to take care of initial seed. Initial Power, we have name changed Initial Enedo to Initial Power. They received a very interesting cabinet order for a cabinet-based DC battery charging system to a European defense customer, as we have announced. A little bit of breakthrough there, In my thinking, going from a component PSU and LED driver supplier, I think maybe the future for initial power will be exactly deals like this, steering over more to be a system provider where we can actually engineer out totally unique solutions for each and every customer. Then we are not really competing with the huge with this big time response, because from a cost point of view, we will not be able to compete with that. But if we scale it down and if we do customary projects, hopefully this could be the future for the company. We have also a new managing director in our Talon operation, Karl Elvig. He's coming from his industrial experience, but closest, he comes from Hansa Mechanics in Talon. Yes, to current trading, looking at the business areas separately, and then starting with business area initial, EMS. Very good sales compared to last year's, but then we also, those of you that were here last year, remember that we had quite a bit of push out last year. We had some PCB problems in Norway. We had some customer that actually delayed their orders, so we were starting last year quite slow. So we have a good comparison numbers, but still we have a good sales there. And the EBITDA margin recovery for these improved sales. And then, as I said earlier, EBITDA margin could have been even a little bit higher than this 7.5 with 0.3 percentage units not having these material sales. And then we had some extra costs for covering for a backlog that created, especially in initial seed. So we have good hopes for the future there. Looking into what we now then call initial power, OEM. They also shipped quite a bit higher volumes compared to last year, 15% higher. um and there we had the cost cutting program and it's clearly seen now this higher contribution together with the cost cutting program we are back in black and also also for initial power given given our order taken order taking and the cost structure we we feel quite confident that we should be able to to maintain this uh Then I had to put in this slide, never done it before, but since we have been doing so well the last year, I wanted to show the share price development. And then I know here in the audience, there are shareholders that has been with us since we started. And then this is 660% increase from where we started compared to OMX1130. This actually has performed 173% during the same time. So that was all about the numbers. That was all about things that we have been up to 2025 and Q1 this year. Then over to what are we actually doing then? Some explanation of what we are up to. For today, as explained, our company is divided into business areas. We have initial EMS, initial classic someone calls it, and then we have initial power. And I will explain what these two business areas are doing a little bit more in detail. But first, the company history. Emission as a company is very much an acquisition story. Me and Ole, we have been since 19 years adding on companies to this structure, roughly one per year. And quite often you overestimate what you can do in short term, but you also often underestimate what you can do in long terms. And I think perhaps this is a little bit like that. We are both, me and Olu, we are both strong believers in the damage driven company. And we are constantly pushing out this message to our continuously educating all the way from our board of directors to the operators in our factories. These common values that is really for all of the ignition employees. And I think really one good example when this comes to the best that is when we have daily steering meetings early in the morning in the factory and these things are talked about. Sustainability, of course, extremely important. However, maybe sustainability and what we think about sustainability, because we have been working on that for a long time, where we have lined up the sustainability goals together with our business goals. A big portion of that type of work last year was spent on EU compliance, CSRD. So that was last year, but also in the beginning of this year. So now we are We have this sustainability report according to that directive. So, Inision EMS, we are a leading supplier of manufacturing services, foremost within electronics, but we also have resources for machine application and design. As for today, we are about 1,200 employees and the business area is organized in Head companies with 12 factories. We do everything from product development. We have our own engineering resources for that. Industrialization, building prototypes for our customer. And then of course, manufacturing. And manufacturing is the big block in these dots here. 90, perhaps even 95% of the revenue would be actually manufacturing services. If we look at the face split per geography, this picture has been looking a little bit different. Sweden has been almost half, so Sweden has been shrinking in the new group and Norway is increasing. Finland somewhere in between, but the whole group has been increasing also. Finland has been comparatively the same size there, so I think We are shifting over and our Norwegian plants or Norwegian companies, they are doing quite well. Looking at the segments, we can also see the movements there since last year. That is 25 numbers compared to 24 numbers. And as you all know, defense is increasing very rapidly around us. We don't have any of those customer where the end product explodes. We don't do that, but we do a lot of other defense related things. And as you can see here, we have been going from a small number of seven to 12% defense. We also have a, what I would say, fantastic customer portfolio, 37 key accounts building up 72% of our revenue. And we don't have here is actually 90%. It used to be ABB, but Comsberg has passed ABB now for the largest customer.

We also do a lot of box-built, important to know.

Box-built is an enabler for us to provide more services to the customer. And then just a couple of customer examples. defense customer. They are doing the communication equipment and ear protection equipment. Extremely high demands and reliability and of course, extremely rough environment for this electronics. We also have an industrial customer, Epiroc, old Atlas. They're making equipment for mines. Same goes here. having an industrial company's requirement on efficiency and O2D is extremely important, but also the environment for these electronics in a mine is also quite extreme. So coming over to ignition power, in difference to ignition ENS, which is contract manufacturing services. Initial Power is a product company. They have their own products, their own IBMs, OEM company. So they are designing their own products. And the history is telecom related. Back in Finland in the days, they have shifted over from telecom being two figures competition, being the scale is totally different. acquiring a company in Italy called RAL, and then later acquiring a similar type of industrial power supply company in Finland called Powernet. Out of these two companies, they created Eniro and what we now have transferred the name to, to Enition Power. If Enition EMS is quite a Nordic company, Initial Power is much more a multinational company, having a lot of EU customers, US, we have our biggest customer for both Initial Power Italy and Initial Power Finland, and their biggest customer in the US. And here you also see the split on product level, 65% of what they're doing is power supply and then we do this DC system that I have talked about and the shrinking but still important and big portion of what we're doing is lead drivers and out of these three lead drivers is really where the competition is lost looking at the segment here quite stable since last year there are not not so so much movements really And then just a couple of examples. They do these for the US customer for Daktronics. These enormous video screens or LED screens. We do numerous of power supply units are needed to power up this type of big video screens. And here, of course, reliability. You don't want to do this because if one of our power supplies goes down, it comes out as a black dot there. And that is just common. So reliability is extremely important for that customer. In Finland, we do more system sales. Here we do for trains. We do battery charging, DC systems for trains to even if the train loses the currency from the top, It should be able to communicate, it should be able to be liked, there are these sort of backup systems. That is what they typically provide for training installations. So that was initial EMS, initial power, and then a few words about our acquisition strategy. We normally buy customers. We have this idea about geography. But what really buys when we acquire a company that is customers. So that is when we do our duty, it's called that is to really try to understand if we like the customer because it's everything it's going to be judged at the end of the day by the customer. If we have successful and good customer, we will ourselves have a good journey, of course. Financial stability, financial potential. And then also not the least, of course, management culture. How are these people performing? And normally that is not an issue because most of the companies that we come through, they are driven by the owner or the family. So normally it's really down to earth people that we meet there. So it's very seldom that we find something strange. Talking about the two business areas here, we are so far only focusing our acquisition on the EMS side. We will hopefully later on start also on emission power, but that will be for later. In our acquisition model, we also have this idea of when we do the due diligence that we also identify improvement things, and then when the acquisition is done, we can start implementing these improvements from day one, more or less. As I said earlier, our latest acquisition was this company in Kavanaugh, Slovenia, Celedeca. Last year, about €16 million turnover, making 8-9% EVDA with 230 employees. Really, really nice company. Normally, There are synergies. They shouldn't be over-dramatized, but there are more. We can do better together on sourcing. We almost always implement quite directly our IT platform. We, financial structure, we put together. We also, of course, implement our KPI structures and things like that. And then we try to cross-setting. And here we clearly already have done a handful of quotations from Finland, because they are competitive in price. We are positive to this industry. Growth is there. Underlying growth is clearly higher than GDP growth. So it's a good market to be in all in all. And there are these mega trends driving this electronics being an enabler for a lot of our industrial customers. We have this shift from near sourcing. We have the robotization and optimization. We have machines talking to other machines and all of this is driving the need for industrial electronics. So the last portion here now in my presentation, that is our financial goals, targets, and before I go into that, I want to explain what we have been doing in the history. And here you can see that we have been growing since we became public in 2015. We have been growing quite rapidly, 23%, and we have been reasonably stable in our earnings. If we exclude emission power, the earnings is even more stable. And we are moving seven percent, a good year eight and a bad year five or six. Extremely stable, even when we are reducing a lot, we don't do a lot much more. And if we do produce less, we don't lose out that very much. So quite stable. And here, with that as a base, we have the target for this year to actually have a sales between 2.3 and 2.5 million. And as I said earlier there, talking about our order book and the start of the year, sort of indicates perhaps the higher end of this interval, 2.3, 2.5, closer to 2.5. Also the margin, we have an idea of, or our target is that EBITDA margin should be above 6%. And then EMS portion is more profitable compared to initial power. We also have a capital structure target, net debt, EBITDA, not the below one. Maybe you could say also, why should you have a lower there? Yeah, it's smart. We shouldn't be over consolidated. That hasn't been our problem historically though, but now we have introduced a floor, which I think indicates a good thing. And then we should be below 2.5. Our covenant with the bank is three, but being able to borrow money from the bank, we should be below 2.5. Otherwise, we have no room to play with that. We also have this dividend policy that we want to distribute to our shareholders 30% of the earnings of the tax. Long-term targets, growth, 15% growth. means that we will double our size in five years, which we actually historically never have failed with. We have sort of always been running faster than that. So one portion of that we're going to lift our earnings and it's actually that we're going to slow down. So one of the portion of the strategy, we're going to slow down the acquisition speed. So acquire higher quality, little bit less. So out of these 15 growths, 10% are going to be and 5% with acquisition. That is the strategy for the future. And then also the other items that I talked about here, media trends will help us with the market.

And it was lucky that I was down there because that was my last picture.

I was just picked out. That's about it.

Excellent. Right, so like I said, if anyone is listening in, the webcast has a question, it's just a chat, and I'm going to ask. And if anyone in the audience has a question, just raise your hand, and someone will give you a microphone. But I'm going to have to think about that, but it's on my own at this. So you still have this wonderful video, this is wonderful, it's fine, but it's very sponsored as well.

No, I would say over the month. If there is something to add there, maybe the emission power is slightly stronger still, and has been the last two quarters. We have been reasonably stable, Q3, Q4, 1.1-ish, and we are still there on Q1. Yes, quite stable.

Pretty good. And I want to start to say that you mentioned in the report three areas that were going to be driving demand a bit more than others. You mentioned the finance supports and data centers and most importantly the computing. Could you maybe walk us through your exposure to these sectors and how much of your growth is excluded by the higher demand we're seeing in these areas?

Yeah, I presented this customer, Falcom, here and they are doing well. They are a little bit project oriented and they have been doing in high speed. We have had quite a bit of deliveries to Falcom all the way from last half year, the second half last year, but also starting this year. But we also have other defense customers that we have hopes for the future, Kongsberg not the least. We are doing some business with KDA, the defence division within Comsper. So far, a little bit of triage. In Løkken, we have a decent business there, but also now we have triage units from Halland. So there we have hopes to deliver more to Comsper within defence. When it comes to this, really especially with computers, We have two very interesting customers in Finland, both actually delivering to these quantum computers. And one of our, I just said it earlier, one that used to be our biggest customer, ABB, they are sitting in a perfect store there on account of these data centers. They provide a lot of infrastructure to that.

And ABB is our second biggest customer.

And maybe specifically on energy and power, there's a lot of growth in the United Nations, with a bit of long-term free sales growth, more than now, over 3%. Given all this, would you say that there is room for additional sales growth acceleration throughout the year, and should that enable further mortgage tax recovery from this level?

Yeah, I think it's like this. Since we come in 2021, at first as half owner and then a couple of years later as the main owner and now 100% owner, this has been a surviving journey. Now we have been cutting costs to make sure that we have income in line with the, or expenses in line with the incomes. But now we really think that we have stabilized the situation and now we have focused over from these is to actually more strategic, long-term, out of all the products, initial power, where do we focus? Systems. That is the board of the company's conclusion. We should go into the system. We let the drivers, we let go. PSUs, we already have really good products, but perhaps we shouldn't overdo that either. We should steer over that. And then we have a fantastic set of customers. A lot of what you see now coming back, it is actually the same customer base coming out of this post-COVID or whatever you know, the better economy. So now it's a matter of for initial cloud to find a new customer, to actually start new growth with totally new customers. And we are positioned like, so we should be able to do that. Perhaps not this year because sales cycles in the industry is very, very long.

Moving on to some questions from the chat then. What would you say are the most important drivers for getting a mini-coaster to the 9% margin target that you have for the longer term? One more please. What do you think are the main drivers for getting a 9% margin target that you have for the longer term?

The best thing is... Organic growth, when we grow organically, that is fantastic for herbs. Because we have what I talked about earlier, we have this fallout that is always happening. So that is the strongest thing. And then I'm normally referring to what you have to do in this industry, because we have companies doing fine, we have companies doing double digits. It's a matter of adjusting the 12 wheels, normally I say, So when you are in a stable position, you can use these wheels and then we should be able to do this nice. But then also you have to have a respect for the history. We haven't been there yet, so as a group. So then we had one of the directors, one of our big colleagues in the industry said, yeah, but you always have to realize that sometimes it's falling out of the pattern. You know, everybody's doing well and we should have this problem. But so we all have to live in the lowest level. But then I really, again, said, you know, we have to be, we have to be more disciplined and more careful about acquisitions. We shouldn't do AXA and we shouldn't do so much in England.

because that maybe it's not more difficult than myself and my board of directors are more disciplined and it may be extremely high level all right and the two percent more than targets that we have for this year or the the

We invented this early this year and of course we want to have our financial targets for our emissions. We want them to be bottom, you know. We don't want them to see that perhaps that is something we achieved. It should be interpreted as So they have all the chance in the world to do that too. Absolutely.

So considering the strong start of the year here in Q1, would it be fair to say that the guys' portfolio might be on the conservative end?

Yes, that is how I look at it also. But we start there and we set that and we improve the target for the goals for next year. That's how we think about it.

And you wrote a bit in the report about the Tunis factory and how you're trying to attract new customers to the production there.

Do you have a bit more on how it's going? Yes, we don't have any substantial business there yet, but we have actually two deals now. We have one trial order and now we have one another also trial order, so if we can If we are successful with these tryout orders, we should be able to ramp up the business. But again, as I said earlier here, it's long-term. And the lead time in this industry are known. So from the first call, we had a decent business ongoing two years. So we have to be patient and we have to work steadily. But there are opportunities that we are already quoting. don't make it from if they don't bother about going to jewish and look at our factory because the factory standard there is same same as anywhere in england so we have a fantastic nice looking factory with good potential so they have to go there to show that they are interested and then in court so so we we will get there all right do we have any questions in the room

more accurate in that case. I think there are no more questions in the chat. I'll be happy to answer those. So, I think I'll hand over the opportunity to Axel.

Okay, thank you Henrik, and thank you all in the audience here that has listened, and also all that we have on the web. And that's it for now. Thank you very much.