MilDef Group AB (publ)

Okay, good morning, ladies and gentlemen, and a warm welcome to this investor call with Mildev, with a special focus on Mildev's reporting on the first quarter of 2025. And as you know, time flies when you're having fun. So, this is Mildef's 17th quarterly report, shy four years of the IPO 2021. This call will be presented by CEO and President Daniel Ljunggren. We expect approximately 40 minutes to be sufficient for the meeting, and we end, as always, with Q&As to Daniel. At this time, I hope that all mics are muted. We will open up the mics for individual mics for the Q&A session, and also please state your questions in the chat, and I will moderate the lineup of questions. Also, for your information, we record this meeting for later publication on our website. So now, please take it away, Daniel Ljunggren, and remember to help our audience who listen in to state the number of each slide before you change them. So take it away.

Yeah.

Thank you very much, Yulov, and good morning to all of you that are joining this Q1 Conf call for Mildov. By that said, I think it's time to look into the highlights of the first quarter in 2025. If we take it from the top, number one, the positive trend continued in Q1 related to the order intake. So the demand continues to be strong across our product portfolio. I have said before that I think that we saw some kind of change in late summer in 2024 when it comes to the order intake and activities on the market. And I think that continued that positive trend within the Q1 as well with an order intake of 88% better than same quarter last year, where majority of that was organic. Number two, a very big milestone in the middle of history that now that the road acquisition is successfully closed, that will put us in a really good expansion position in Europe going forward. And right now, there is a very intensive integration phase ongoing. Late in 2024, we also announced that we will have a full focus on defense and security within the middle of, and we also then announced that we will close down the handheld operations. That has been going according to plan. The project is delivering and will be closed here in Q2 2025. And also, of course, a very super important platform for continuing to grow Middle-Earth and continue to grow the military defence sector and ramp up the European defence capabilities is, of course, the defence budgets. And I think that we have now in beginning of the year seen increased defence budget and also have seen a shift when it comes to the pace of European defence ramp up and it's increasing. And also a big highlight that I will bring with me from this first quarter is that our order backlog and order intake is supporting further growth. Order backlog increased 111% if we look year over year, which 59% is from organic. We have a so-called book-to-bill ratio the last 12 months of 1.5, also indicating continued growth going forward. And also 2.1 of the rolling 12-month sales level is in the backlog. Expected deliveries within the same year, within this year 2025, already for the backlog increased 52% year-over-year. Purely organic is 125 if we also add on the M&A part of it. So I think we have some comfort and evidence when we're saying that order backlog supporting further growth. But let us also deep dive into the quarterly numbers and we can see that net sales ended up with a plus 46% increase compared to same quarter last year. And I will say that the positive trend that we've seen in the second half of 2024 was continued in the first quarter of 2025. If we break down those 46% of the increased net sales into organic and M&A, 18% was from organic and 28% from the M&A when we now added road acquisition for one month in the first quarter. So it was not for the full quarter, it was just for one month of the quarter. Also, the order intake, as I mentioned, was probably the strongest part and data point in this Q1 report. Order intake increased by 88%, and it's a new Q1 all-time high. And of those, 88%, 56% was organic, and 32% was related to M&A. And this was to dispute the lack of a major individual order in the quarter. That also indicated that there is a strong demand underlying activities in the small and medium sized orders. If we look at the operating profit in this case adjusted EBITDA result ended up on 15.7 million Swedish krona and that corresponds to an EBITDA margin of 4.6 also a clear improvement from Q1 last year. q1 is normally in terms of result on operating profit one of the most challenging quarter during a year but i think at least now we have put ourselves in a better position than last year gross margin if we look into that also of course impacting the ebitda result a lot was good i think on the legacy business excluding the mna was 50.5 percent in q1 I think also that adjusted OPEX was good. I think that we have shown a good cost control in the company. So if we adjust for the M&A related increase, if we adjust for the restructuring cost and also for the FX related losses here in Q1, we see that we are quite close to flat if we compare to Q1 in 2025. We had a significant negative impact here due to unrealized FX loss here in Q1, minus 30 million. So if we add back that to the operating profit, I think that the operating profit adjusted EBITDA was a quite big improvement from the same quarter last year. The final data point here is the free cash flow ended up with minus 75.2. Of course, that is a big negative. a movement from the Q1 in 2024, but there is some explanation as well. And mainly the big driver behind this is the change of networking capital. And the biggest driver within that is that we had a high, uh amount of the revenues was delivered late in the q1 which means that the payment is due in q1 and that of course impacting the cash flow here in the q1 but will come in a positive way in q2 so hopefully when we look at cash flow over a longer time or period we will see that we will come back to a positive free cash flow Market update. We have seen since the beginning of this year clearly signals and message from the leading European political people and this is something that we want to just highlight here and now. This is of course due to the global uncertainty that is driving the long-term defense need but we have seen initiative like Rearmed Europe or Resilient 2030 which is adding additional spending of 100 billion Euro. We have also from the Swedish government seen that they have now raised the defenseman target, and now it's the new one is on 3.5 of GDP by 2030. And recently also we saw announced from the Swedish government in this so-called spring body 2025, that they are adding additional 25 billion Swedish krona into defense procurement commitments. And we also have something to look forward when it comes to the NATO summit here in June 24-25, where we expect to see some kind of new and defined defence plan targets. We have now for many years lived by the 2% of GDP within the NATO countries, but I think that we will see a nuclear and higher target of that in the summer here in 2025. If we go down to the news instead and take it down to the Mildov level, we can see what's happening here in Q1. Of course, we talked about the very important milestone of completing the acquisition of Rhoda Computer. I will come back a little bit later on to Rhoda Computer and their performance in 2024 and how we see Mildov and Rhoda together going forward. One order was announced in the first quarter. It was a clavister order, which in the end will end up in the CV90 platform that is delivering by BOE Hägglunds. But here in April also, we have announced one single largest Westec contract. Westec is a new subsidiary to us coming into the road acquisition. They have won. largest contract so far in april and yesterday also we announced that we receive a contract from the swedish procurement agency fmv worth 126 million kronor so still i would say that the activities on the markets the request coming into middle of is is quite at the high pace By that said, I think we will go over for the financial summary, and this is a financial summary that more zoom out, meanless financial performance in time. I think it's better to look at from a performance financial development, it's better to look over a longer time of project than just a quarter because of the high volatility in the defense industry. We start with the top line, the revenues, and we can see this is, as we say, the middle of growth journey. that in the last years. We see now in the white bar here that the last 12 months is up on 1.3 billion Swedish. So it's imminent. 23 and 24 was quite similar. We're now starting to take up the pace again in the top line growth. And that is, of course, related to the strong order intake in the second half of 24. breakdown of the last 12 months revenue. We can see that it's the Nordics and the Europe that is mainly driving the growth. And it's in the Nordics and in the Europe we will see going forward, the highest growth rate as well when it comes to the defense spending. And it's also in that geographic area where Millev has a well-positioned and well-known offering, where we have a really good position. So I think we will probably see that Nordic and Europe will be the main driver behind Millev's growth going forward. If we look at the order intake, if we start from the list, that's the order intake that we now can see that it's very close to 2 billion Swedish kronor. So it's really has picking up in the last four or five years, indicating that this will continue to be able to grow the revenue side of this business. We still, if we look to the right side, the book to bill rate development, we still run 1.5 and that indicates a clear growth going forward. The backlog duration, as I said, there is a backlog that's supporting further growth of this company. And you can see in the pie chart there how it's divided into what should be delivering 25 and 26 and 27 and also beyond 27. But I want you to put your eyes on the right side of this slide and look into that chart instead, where the light green, so to say, is where we were in Q1 2024 and how the backlog looked then. And a little bit darker bar is how it looks today when we close Q1 in 2025. And that can indicate that it's a clearly higher order backlog for deliveries within this year in 2025. It's 125% more than it was one year ago, even if there is some M&A in that of course I think it's even organic is a strong development of the order backlog and we can also see in year two and year three and after year three that we have increased all the backlog showing that there will be a further growth of the company. If we look into the gross margin development, we know that there will be a negative impact from the acquisition of Rhoda. If we look at Q1 insulated, we saw that the legacy business of Mildaf were delivering 50.5% gross margin, which I think is strong. So the gross margin underlying continues to be strong, was ending up in total of 48%. So it was a little bit negatively impacted by the acquisition of Rhoda. And that is something that we will Slightly, we'll come down a couple of percentage points when we now fully integrate RODA into the middle of consolidated numbers. However, we continue to pick up with EBITDA. We are now closing the Q1 when we have a rolling 12 months, which is on an all-time high level. The improvements the last 12 months is 45%. So I think we continue to show that there is a scalability and that we'll be able to scale up when it comes to the margins as well. Working capital and net depth through EBITDA. If we look at networking capital, there was an expected increase in networking capital due to the acquisition. Of course, we're now adding all the networking capital from RODA at once, but we are spreading out their net sales over the upcoming three, four quarters here. So, of course, there will be a major increase increase in networking capital when we look at this excluding the road acquisition we see that it's around 30 32 percent something like that so quite similar to what we have seen in the past quarter we have been able to come down a little bit here since uh since starting of 2024 so let's see i think that this will of course starting to go down again below 40 and be able to reach 30 maybe in the end of 2025. The net depth through EBITDA, of course, will also impact here, through the acquisition of Rhoda, when we now have added all the credit facilities in Millev. We see that 2.6 is the current number, and this is also something that will go down during 2025, when we're adding on the EBITDA that is coming from the acquisition as well. But so far, we are just just over the target of 2.5%, but we know that we can be there on a temporary time of period, but now we will see that come down again. Now I will just give you some status of the acquisition of Rhoda. You maybe already have picked this up, but on March 6th this year, we successfully closed the acquisition of the Rhoda computer, GmbH. a German company. So that is now consolidated from March 6th in this year. Rhoda continued to show good development in 2024. They grow their top line with 16% and they had showed a good profitability in 2024, 7% EBITDA. So I think if we look at the purchase price of the company, we're down somewhere around six times EBITDA on their performance on 2024, which I think is a really good value based acquisition. The integration project is now ongoing with full force and focusing on the commercial synergies. There's a lot of activities going on and initiative to make this happen. So it's a very intensive time in this integration project right now. And this finally, when Millef and Rhoda is coming together, sets the start of building a Millef with a really increased footprint in Europe. And we're trying to do that very rapidly. We think that with Rhoda's help, that is something that we really can do. Future outlook. This is some picture we have shown before as well. And this is just to set the scene and the tone and the context that we are living in right now that we are seeing a lot of increased military spending going forward. And of course, also very important for us now to look at what is the signal from Germany, what are the signals from Central Europe when we have RODA in the group as well. Germany is really picking up and will close towards this 3.5% of the GDP. But in total, in Nordic and Central Europe and North Europe, we will see this increased defense spending going forward, and that is the same context and same picture that we have seen now for a while. Maybe since the year started, we can see that the ambition in the speed has gone up a little bit. If we listen to the um procurement agencies they are really clear about the messages now that things needs to be happened quicker and quicker but still also i want to give you this picture in the differentiated defense procurements we are still in in this different ways where we saw that way one was about operational effect it's about getting the ammunition the fuel the drones up and running but we also saw after a couple of 12 to 18 months, something like that, that they're starting to placing order at the big platform providers. And in the second wave, and after that we see the three wave where Millef is coming in, where the Millef content is starting to get relevant, where this kind of platform needs to have some kind of equipment, intelligence equipment, IT equipment installed into them. That is where Millef comes into play. So we still think that we're quite early in this defence, European defence ramp up, and we think that it's starting us in the beginning for a company like Mieleff, and we will continue to see high activities on the market for quite many years out from now. Near and long-term objectives, this is just a summary, but as I said, the market expects to remain strong for more than 10 years, I guess. Now we have also in this year realized that europe needs to build their own strong defense capabilities and that is something new where we can't really rely on us so for a european defense company like miller i think we will have a strong situation and strong markets in the upcoming 10 years We have also seen more and more that now are really focusing on digitalization and data-driven defense system. That is something we see in the dialogue with the customer. We also see it in different media and news that this is something that will be very important for the future defense capabilities. And that is something that will really, really impact Mieleff as well, because that is where the sweet spot for Mieleff is around the digitalization of the army. But as number three said, a very important platform for this is, of course, that it will continue to grow in the European defence budget. And what I have seen in the last couple of months is that just adding on more and more money into the system, and that will be something that will give an effect in the long run for the defence industry within Europe. And also, as I said, all the backlog really supporting the further near-term growth there is a lot of deliveries and commitments already in 2025 we have so there will be a lot of things to deliver and commitment that needs to be sort out here in near term and finally maybe the one that is really a key takeaway from Q1 that we now have finally have been able to welcome Rhoda into the middle of world And now we are accelerating this, aiming for becoming a leading European player within this military IT equipment and solution. And I think we have all the right puzzle pieces to do that now. So it's, yes, come together as Miller from Rota and really make sure that we can grow our market share in Northern and in Europe. And that was the final slide. So I think that we will open up the floor and see if there is any questions from the audience.