Inission AB (publ)

Hello and welcome everyone to Inition's Q2 2026 earnings call. My name is Henrik Hintze. I'm an equity analyst at ABG Sundell Collier covering Inition and I'm here to moderate today's call. We will start with a presentation by Fredrik Berghel, the CEO of Inition, and then move on to a Q&A session. If at any point during the presentation you have any questions, please type them into the Q&A chat and I'll read them out for Fredrik to answer them at the end. With that, I hand it over to you, Fredrik, please go ahead.

Thank you very much, Henrik, and good morning to everyone. Thank you for listening in. Welcome all to this Initien Q2 presentation. My name is Fredrik Bergel. I'm one of two co-founders and also one of two principal owners of Initien. Myself and Olle Hulteberg, we started this company 19 years ago and we are still both active. I am the CEO of the company and Olle is the chairman. For new listeners, I would like to mention that these days, or since a couple of years back, Inision is organized in two business areas. Inision EMS or Inision Classic and Inision Power, formerly Inedo. I will go through the financial performance. I will mention the few highlights for the quarter. I will also revert to our financial targets and comments where we are vis-a-vis those. And as Henrik said, we will end this presentation with a Q&A session. All in all, we had a really good quarter. Reported sales increased 18.7% to 635 million Swedish krona, where Celtica was contributing with 61 million, which gives an organic growth of 7.4%. A high level explanation of the Q2 result, net added value, invoicing minus direct material increased with 66 million due to of course higher volume but also better material share 53.5 vis-a-vis 56.3 last year Cost level with another factory and also running with higher volumes, cost level increased 49 million, including personnel, other costs and also depreciations gives an EBITDA of 41 million, which is 16.8 million higher than last year. This gives an EBITDA margin in the quarter to 6.4, which is 1.9 higher than last year. We had a similar financial net, 4.7 compared to last year, 4.5 million Swedish krona, all including currency profit of 0.4 million. This all in all gives an earning per share at 1.3 krona, which is then 0.7 krona higher than last year or also more than doubled. Year on year, as the last picture shows, is quite dramatic. If we look at the quarters in sequence, then we can see that volumes have step by step increased and profitability have followed up with the increased volume. And all of these have happened gradually. Our best guess now for the future judging from order intake and also talking with all of our customers is that this sort of new speed 210-220 per month that is the speed we should be able to maintain during the second half of this year. So that then would indicate that we will end up in the higher higher end of our interval that we have given as a financial target of 2.3 to 2.5 billion SEK. Also with the current cost structure, this indicates that we should be able to maintain the profit level that we have now. If we zoom out a bit and look a little bit more of a long-term development, We now have a last 12 month sales of 2.5 billion SEK and we earn 151 million EBITDA. And that performance is well in line with our target. I also think that this indicates that we can actually do even better with the profit margin if we can maintain this organic growth. I think also this graph really illustrate the EMS market in general, where it was really booming 22 and 23. And then we have had a sort of a hangover, especially 24, but also 25. So, but I think now 26, we will be back on track and showing sort of the underlying growth in the industry. If we look at the business areas in separate, all in all I think Initian EMS did a really good quarter turnover up 18.9% compared to last year amounting to 546 million krona. This gives an organic growth of 7.4% if we adjust for the Celteca contribution in the quarter. EBIT amounts to 36.4 million vis-a-vis 28.8 last year. And this gives a margin of margin of 6.7 versus 6.3. This is of course slightly below our target of seven, but for the first half year, we are at 7.2. and the volumes for the autumn look stable, so I think we should be able to maintain EBITDA margin level above seven. Going over to Initium Power, now name changed from Inedo, I will revert to that. They are shipping or we are shipping clearly higher volume compared to last quarter, 18%, ending up then with 80% 9 million in sales, and all of that is organic. And organic growth, we always know that that is really helpful for our margin. So this higher volume, we have the same gross margin, we have cost discipline, all of this have done that the profitability have improved dramatically. So the EBITDA for the quarter became 3.8 million compared to minus 4.7 last year, or measured as a margin, 4.3%. Compared to last year, Ignition Power are now a focused product company. And interestingly, Ignition Junies, which were their old factory, now moved over to the EMS business area. They are also profitable, so I think this splitting between the product company and production has been really successful. Volumes for autumn looks promising, so we should even be able to do more second half of the year compared to first half of the year at Initium Power. If we have a look at the main items for the quarter, We name-changed Inedo to Inition Power during the quarter, mainly for the reason for showing to the surroundings that we are one company and we work together. Also from a branding perspective, it is of course a lot cheaper to maintain one brand, Inition. And it has been well received at Inedo. old Inedo or now Initian Power customer. They feel that now sort of it manifests that Inedo or Initian Power now belong to this bigger group, creates stability, creates trust. So I think it was a smart move. We have also bought back, or not bought back, we have acquired the minority stake of the former founder and owner of of Simpro in Norway. When we acquired that company, he wanted to keep a stake in his company. And the Norwegian company has been really growing over these years. But now we have agreed upon buying those shares back for 5 million SEK, partly. Half of that we pay with initial shares and half of that we pay in cash. Also in Isenlöken, they have started up a very interesting cooperation with a collaborative robot company, flexible collaborative robot company. And we will work together now in a real factory environment. And we will benefit from having the last newest technology there. And they will benefit from actually having not a lab environment, but a real factory environment. We are also really happy to announce, we have announced during the quarter that we have the first, no, not the first, but we have added one because our factory now in Tunis, it's mainly ignition power factory. But now we have brought in the first substantial contract there, starting small, but we have all the possibilities to grow that further. It's a Danish customer within the energy sector. So we are really pleased that we see the first small steps of converting ignition tunies to a normal EMS factory. As a base for our financial targets, I like to show the historical performance where we have outperformed the market in growth. Either way you measure, we have been growing quite rapidly and our EBITDA has been five-ish, stable five-ish, except for 2021, when we consolidated in Eneado, or initial power was fully consolidated. After now, the second turnaround of initial power, we are back on six-ish EBITDA margin, even though initial power is still diluting margin for us. looking at EMS alone extremely stable if we have a good year we earn a little bit more if we have a bad year 2024 for example we earn yeah just slightly less and and now we are on the east running 12 months and we are in seven in EBITDA margin and from this base we really think we step by step I will revert to that but we really step things step by step that we will be able to improve from that level. Mentioning our target for this year or what we think gonna happen I already have said this 2.3 to 2.5 thinking from where we are, LTM at 2.5 already. We think we will end up in the higher end of that region. Profitability, we also think we should target EMS above or around seven. And so far, Ignition Power has shown that they can earn more than two. So we think we are well on track there. We also have an order book now for the autumn that we feel confident with. Given our LTM at 6.1 and H1 at 6.6, we feel confident that we should reach the margin target. When it comes to our capital structure, we are now at 2.1 net debt over EBITDA. I feel also confident with that. When it comes to the more midterm, three, four years down the road, we really want and we really have the ambition to close the gap from our seven to the best in class. That is actually double digit, but we are reaching for nine. And then, of course, initial power have to step up and that is a longer journey, but they have shown now that they are able to do that journey. And for on initial EMS portion, we should also be able with our strategic thinking here now, actually, turning over to more organic growth. In the quarter, we have 7% organic growth and 13 acquired. If we look at the LTM numbers, we have 13% organic growth and 10% acquired growth. So far, we have stuck to the new strategy by slowing down the acquisition speed and focusing over to organic growth. And then also we are, of course, helped by the megatrends. You have heard me talking about that before, but we have the nearshoring, we have the regionalization work that formerly were sent far east, they are now staying in Europe and they are even staying in the northern part of Europe where we are active. We have the atomization, robotization, megatrend, digitalization, Also, Internet of Things is still there, you know, proceeding. And then, of course, electrification, which is a driver of electronics big time. We are also now, for sad reasons, really, we have a booming defense sector where we have growing contracts and we also have ambitions to improve there even further. So, That was all from me. Have we got any questions, Henrik?

Yes, so I will start off with a couple of questions of my own and give people a bit of time to type their questions in the chat and then I'll move on to those. So first of all, I would just like to ask on the guidance which you leave unchanged, but at the same time you flagged that the run rate in H2 should be 210, 220 per month, which when I look at it would put you above the top of your guidance range. So how come you don't raise the guidance here?