NCAB Group AB (publ)

the ncab q3 presentation for 2025 during the questions and answers session participants are able to ask questions by dialing star 5 on their telephone keypad now i will hand the conference over to the ceo peter crook cfo timothy benjamin and head of investor relations gunala oman please go ahead

Good morning, everyone, and welcome to today's Q3 report. So presenting will be primarily myself and my colleague, Timothy Benjamin, and also Gunilla will be supporting us. NCAB, for those who are new, we are focused on printed circuit boards, the bear boards that you see to the left in this picture. And that basically is the foundation in any electronic intelligent product. And what is a little bit particular about our industry is that while semiconductor components our standard components the printed circuit boards are unique designs for every single product so it's a highly engineered product where we work closely with our customers in defining the designs we are a company we're believing in strong local presence we are presented through 19 companies across the world serving some 50 markets and we are around 650 colleagues within the group We don't have any in-house production. We are only working with outside manufacturing partners, but we're heavily invested in the production process and securing quality and sustainability in our supplies. So out of our 650 colleagues, we have around 120 people working worldwide with our factory management and technology areas. We strive to be number one wherever we are, and we are the globally leading supplier for deserted ports today. The company, beyond focusing on demanding customers where we can help them solve potential problems, we are also directing our focus on high mix low volume segments of the market. So we are not in the high volume consumer electronic products, but typically more in industrial applications. and these might still be very large global companies but again for them the printed circuit board is a small part of the overall bill of material they have very high quality demands typically but given the fact that it's a high mix low volume business and for them even though there may be large companies their total spend in printed circuit boards is still quite minor and that gives creates a lot of problems they will struggle to have enough internal competence to to work with research boards as well as getting the right attention from the leading factories and that is where we can help them both by providing competence and guidance in the design phase but also matching their needs in factories where we by combining all the spend of our customers are in a very effective position with the leading factories We have had a couple of years. We have a company 30 years long with a strong growth history. It was an extreme growth period from the year 2000 up until 2022. And then we've seen a global decline in the market. And we're happy to see that that market is now starting to resume growth again, as we can see in our rolling 12-month revenue chart here as well. As a company, we have quite a diversified portfolio of customer segments we're serving. So the biggest part is in industrial, which of course is covering a lot of different applications. But we also have strong positions in medical, automotive, power and green tech, as well as defense and telecom. And over the years, we've seen sort of these segments counter cyclical to some extent, which has helped us to be resilient in challenging times. Manufacturing of printed circuit boards globally is dominated by Asia and China, and we have been, as a company, also working to broaden our supply portfolio to be able to offer our customers good alternatives in terms of not only technology but also in terms of geopolitical exposure. At the time of our listing in 2018, we at that time had 95% of our sourcing coming from China, And in the last year, we are around 75%. So there's been a migration and the portfolio we have in predominantly other parts of Asia could offer a significant portion to cover the Chinese current spend. Here, it's always a dialogue with our customers, whether or not they want to make a change or not. And still, China is a very strong supplier of printed circuit boards. And therefore, for many of our customers, they are happy to stay with China. So moving in then to our third quarter. So we are positive to see a gradual improvement in our order intake and revenue. And if we look year on year, we can see that our order intake continues to strengthen with very strong numbers versus what was a very quite weak second half of last year. So our overall growth in order intake is 21% in US dollars, which is our main trading currency. And excluding M&A effects, we are at 14% organic growth in order intake. And as before, it's North America and East that is leading the charge. Europe is following, and Nordics is actually quite okay. This year, it will have a comparable where Q3, we booked some larger defense orders, which distorted the trend a little bit. But also in Nordics, the development is favorable underneath. We can see positive development across several sectors, and we see it continuing in areas like aerospace and defense, but also medical and energy are areas where we see growth. Net sales are kind of following on the coattails of the order intake. We see in our numbers in the reported Swedish number, of course, the strong FX headwind from the softer dollar. But we're seeing growth in all of our regions in US dollars now. And we also see overall organic growth in US dollars. So this is a quite nice trend that we're seeing. Strongest growth here as well is in North America. Here we get some support additionally from the tariffs. We don't book tariffs into order intake as we don't know what the tariff level will be as we book the order, but we only see that when we do the deliveries. But even beyond that, we see good growth in the other regions. And the impact of the US dollar decline versus last year has an impact on an excess of 75 million SEC. EBITDA improves sequentially from Q2, and our cash flow is strong. We are up slightly in gross margin versus Q2, and with a better margin volume, we also see the EBITDA rise versus last quarter. Again, here, the FX effect on the EBITDA is around 15 million SEC that we would have seen as a high number in comparison with prior year. And again, good cash conversion on the EBITDA, but also there has been improvements in working capital during the quarter, which has helped generate a strong cash flow. So if you look upon the numbers in more specifics, we can see that the ordering take in Swedish kronor is up 11% to 9.85 versus 8.87 last year. So 21% in dollars and 14% organic growth in dollars. And the book-to-bill is still positive with 104%. Net sales are up 6% to 949 versus 898 last year. Overall, 15% growth in dollars and we hear also organically 8% growth. EBITDA is down from 118 last year to 110, providing then with a margin of 11.6%. So the gross margin is down versus last year, but it's improving sequentially with previous quarters. And again, the net impact of FX here is 50 million SEC. And operating cash flow, as I mentioned, quite strong at 180 million SEC on par with last year. And working capital has come down from 9.2 in 42 to 7.9, slightly above last year, but that's predominantly associated with the acquisitions that have been done during the year. And net profit at 60.9 versus 50 last year and EPS of 0.33 versus 0.27. Tim, over to you.

Thanks, Peter. So I think you heard a little bit from Peter that we have a good top line this quarter with net sales at 949, an increase of 6% versus this time last year. When we look at it in US dollars, 99 million US, up 15 versus this time last year. And then we also have EBITDA coming in at 110 million SEC, while down 7%, I would say, important to remember that there's a large FX impact there of minus 15 million SEC. So that's one of the contributors that you see there with the EBITDA margin at 11.6, which is 1.6 percentage points down versus last year. When we look at the gross margin, this is the second quarter in a row where we are increasing the gross profit margin, now up to 35.2% on a last 12-month basis and starting to come back in line with where we've been. When we look at the total top line, though, water intake up 11%, but as you heard from Peter, up 14% in US dollars when we start to exclude the currency impact. I think the thing that was nice to see is that we had positive developments in pretty much all segments. North America was up double digits, as was Eastern Europe. Nordics was stable in US dollars, but you'll hear a little bit more from us that that has to do more with timing of large orders in the prior year than anything else. Net sales up to 949 million sec, which is 8% up in US dollars in comparable units. And we still have a positive book to bill of 1.04. And we see a lot of good progress with customers in the energy and medical sectors globally. You heard a little bit from Peter that the EBITDA decreased versus prior year. But again, all of that was due to FX impacting us with 15 million SEC. Gross margins, as said, quite stable versus prior quarters. And when we really start to look into last year versus this quarter, a lot of that has to do with product mix in the different countries where we operate anyways. I think also interesting to note that the acquired companies dilute the gross margin a little bit compared to this time last year. And that's something that we work on in the medium term with them to improve. I think when we dive into the details of the FX impact, I think it's interesting to remember where the U.S. dollar was at this time last year. It was all the way up at 10.42, and it continued to climb, actually, when you start to look at quarter four and quarter one. But right now we're down to 952 on average for this quarter. I think as of right now, closer to 9.4. And what that leads to, then, as you can see on the right, is that we have a revenue impact of around minus 75 million SEC coming from the US dollar, translating to less crowns. That leads, of course, to a gross profit impact as well, which is generally margin neutral. The only thing that does impact the margin a small amount is that revaluation line that you see there when we revalue our balance sheet, specifically accounts payables and accounts receivables, otherwise generally margin neutral. We also have SG&A or operating costs in currencies such as the US dollar, but we also have it very much in SEC, Euro, GBP, among others. And there we get a little bit of an offset against the FX impact. So the total net impact from currency is about 15 million SEC. Over to you, Peter.

Okay, so looking a bit closer at the different segments. So we can see that Nordic's order intake coming down by 9% versus last year. But this is in relation to a very large order being booked during quarter three of last year of longer digestion. So overall online, I think there's still continuing positive development. And we can see notably Denmark and Finland developing well in areas of the energy sector. Net sales remaining flat in Swedish kronor. However, that is, of course, strong or good solid growth, given that our sales is predominantly in dollars. So in dollars, we are growing nicely also in Nordics on the revenue side. EBITDA amounted to 25.2 versus 26.3, and the margin came down slightly to 12.4%. We still see some of the FX impacts as well as the customer product mix having some impact on the EBITDA in the Nordics. Moving to Europe, it's possible to see that also Europe now, we start to see Europe who has been the laggard in terms of sales development. We've seen the order intake increasing by 18%. Here, of course, supported also by the acquisitions. So the organic growth in US dollar is still a good 13% up, and we can see positive trends in Spain, Benelux, Italy, and Germany when it comes to order intake. Net sales are up 7% to 4.64 versus 4.35 last year. And organically, we can see in US dollars, the revenue remains stable and in SEC, slightly down or down by 8%. Automotive is, for us, showing a negative trend, but we're seeing recovery in other areas. And the automotive business do is predominantly related to the truck and bus industry. EBITDA decreased versus prior year to 45.6 versus 57.6. And it corresponds to an EBITDA margin of 9.8, which is down from 13.2 last year, but sequentially improving from 42. And we still also here see negative impact from the mix and FX. North America is where we've seen very strong development in the water intake in the quarter. We're up 20% in Swedish kronor. And it's good progress with the new product introduction model we have, which came in partly through the company phase three acquisition, which we're extending. And we see good growth in defense power as well as medtech sectors. Net sales are up. around 9% to 2.25% and 90% up in US dollar. Here, there is an impact also positively contributing from the revenue, from the tariff side. And we can also see that the trend of, say, lowering the share of product sourced from China is decreasing. Last year, we were just below 50% in sourcing from China for the US market, and that number is continuing to trend up. EBITDA increased versus last year and decreased to 34.6 versus 31.7, and the margin was stable at 15.4%. Looking at our East segment, we can see that our order intake is up 14% to 59 million sec, it was at 52. The order intake in US dollars was up 25%. I think we've been able to capitalize on growth in high-tech and we're leveraging our supply base in this area. I think a number of local companies in Asia have been struggling to get attention from high-tech factories as some of them are getting full with orders from AI applications. Then again, our relationship with the factories has given the opportunities to win with new business. Net sales increased 4% to 58 million SEC versus 56, and our revenue in US dollars increased by 13%. So our EBITDA is up to 9.5 versus 8.2, and the margin at 16.4% versus 14.6 last year. And I think we're also here focusing, as before, very much on high-tech niches. We can leverage some of our global relationships as well to win more business in the region. Back to you, Tim.

Thank you, Peter. So return on equity for the quarter at around 14% versus 21% this time last year. That very much has to do with a very stable equity and an earnings that's down a bit when you look at the last 12 months' earnings. Net debt still at a very good level of 1.6, and that is very supportive of what we'd like to do on the M&A agenda. Equity asset ratio quite stable at 41%, and net working capital In absolute terms, more than prior year, much as you heard from Peter, we have acquisitions in that timeframe and we've acquired working capital there. And then the working capital percentage itself is down relative to where we were in quarter two, but slightly up versus this time last year, again, due to those acquisitions. And available liquidity, quite good at 1.4 billion. Back to you, Peter.

Yeah, so, I mean, we continue focused on the M&A side of our business activities. We have no new M&A announced here during this quarter. The one we did earlier this year was B&B Life Partner Service in Germany. But I think we are... We have a good, strong balance sheet. We have made some reinforcements to our team during the year, and we continue diligently with building our pipeline as well as entertaining a number of interesting discussions. So we hope to continue to add good companies to our portfolio and hope to do so in the not too distant future. We'll see how things progress. Looking overall at our strategy, it remains stable focused. We are focusing on printed circuit boards 100% and also retaining an asset-like model where we do not invest in having in-house manufacturing. It gives us the flexibility to always provide the best solutions for our customers and also to be flexible to match geographical sourcing needs as well as different technology needs. So instead, we are investing still in the cooperation with our factories and in our own technology development and our services so that we can continuously improve the support for our customers and grow our market shares in the existing markets. Geographical expansion remains high on our agenda. There are areas where we are expanding. So the acquisition of B&B, even though you could argue that we are present in Germany since quite some time, this gives us a very strong local presence in the eastern part of Germany. And there are further geographical expansion, which we were looking to do across the world. And here we believe M&A is a good way of doing this to enter and start to get a good foothold in a new market. And then also, as we mentioned before, the printed circuit board market and the trading market is still a highly fragmented market. As manufacturing moved predominantly from Europe and North America to Asia the last, say, 20, 30 years, in its wake arose a large number of smaller trading companies, and many of these are struggling to be able to support their customers in a good way in terms of both technology requirements, quality requirements, as well as sustainability. And many of these companies are also now starting to come close to a succession situation. So there's an opportunity which we are exploring to consolidate the market, predominantly Europe and North America, but there are also things coming to arise in Asia in this area. With that, I think we'll leave it open for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Jacob Edler from Danske Bank. Please go ahead.

Hi, Peter, Tim, and Gunilla, and thanks for taking my questions, and congrats on a strong quarter. Just starting a bit on Europe. And specifically the coloring on Germany and Italy, it's gone from signs of being a positive development in Q2 to now clear signs of growth. Do you feel that there is a clear delta here in the demand from customers sequentially in these two countries specifically?

I would still say that part of the European market are not yet in a strong growth mode. So I think we have seen, as you mentioned, Germany and Italy being markets that have been trending weak and have been quite weak, say, during the first half of this year. But I think maybe we are starting to see some positive signs. I would not yet say that the German market is growing strongly. I think we're all expecting that potentially going forward, we could see positive effects of the new government and the higher degrees of investments. But I think that is something we're not yet seeing, I think. But I think there is still a small rebound from a low level.

Okay, great. And then another question on Europe. UK is the market where you highlight that demand situation hasn't improved. Is that related mainly to your truck exposure there or any more favourites out there?

say it's a combination i think the the uk economy itself uh is challenged uh overall but i think as you know as you mentioned as well we have our main automotive exposure through our uk business and therefore also the fact that say the truck industry is slowing down predominantly also for the north american side of business also impacts our business in in the uk yeah

And then just hopping over a bit to the U.S. I mean, when you look at the margins, but also the orders, it's been very strong in North America this quarter. Is there any, you know, effect that you can see that there's some kind of pull forward demand effect here ahead of, you know, potential tariffs? I don't know what's happening. You know, he's changing his mind in the U.S. every day. But anything you can see there in terms of, you know, pull forward demand ahead of potential tariff hikes? I don't know.

I don't think we're not seeing any clear signs like this. I think overall, I mean, maybe we had a little bit, I mean, also internally, we are rolling out a new business platform across the group. I think for the North America, that had maybe a slight impact on our Q2 at the end, because we went live in June, and maybe we had a little bit of carryover to July. But overall, otherwise, I'd say it's a continuous improvement. I think the strong growth numbers versus last year is also partly reflective of actually that our order intake in Q3 last year was a little bit on the weak side in the US. But also, if you look progressively versus Q2, it is a strong quarter for us. Yeah, great.

And then my second last question is just when I try to, you know, count backwards on the M&A contribution, it feels like that DBS and the BNB are at a slightly lower revenue number compared to what they entered the group at. You know, is that a fair conclusion? And is that, in that case, partially explained by, for example, you know, DBS saw the most of the truck exposure or do you agree with that conclusion, so to speak?

Yeah, I think it's a fair conclusion. I think the numbers we presented on the turnover was also sort of historical data from 23. So I think the general market decline in 24 has, of course, also impacted these companies. So that is a fair interpretation. Yes. It does not change our view on these companies in the longer term perspective. And as we start to see now, Italy also started to move a little bit in the right direction. It also impacts our DBS business.

Perfect. Just a last question then, coming back to the US. But on margins, you know, it's been hopping around a bit all over the place here the last couple of quarters. And this quarter, we have a bit stronger margins. Is that partially also a bit more favorable mix than we saw, for example, in, let's say, Q1? And when we look ahead, should we expect it to still be a bit, you know, lumpy between the quarters?

I think that if we look back, I mean, we had a weak Q1, but that was also related to actually quite significantly lower sales. So I think we were at 187 sec in sales in Q1, and now we are at 225. So a lot of that was volume driven, but there can of course also be some mixes in terms of gross margin, depending on bigger projects, which can have different margins. But otherwise, if you look back, we have been quite stable around around 15% in the North American business, with the exception of Q1 this year.

Yeah, okay. Thank you so much for your answers, guys.

Thank you. The next question comes from Gustav Bernebled from Nordia. Please go ahead.

Yes, good morning. It's Gustav here from Nordia. Maybe to start off here on the IT platform maybe if you can just help us here where you sort of rolled it out this quarter and where you expect costs to be ahead there.

No, I would say for this quarter, we were fairly stable. We were finishing the US, as you heard from Peter, at the end of last quarter, and we've been doing a lot of pre-work. Even if there is a bit of a summer period here, it's still a lot of intense pre-work for doing Norway and Sweden later this year. Later next year, we'll do France and Spain and then China in the second half of the year. So our expectations here is that we keep a fairly stable cost for this program through at least the back half of next year. And then we could see some trailing off of cost in the back half of next year, but China is a complicated country with all the legal requirements to do. So that's roughly what we're expecting.

And is it possible to say if the majority of this quarter was negatively impacting in North America specifically, or how should we look at it?

For the IT class itself?

Yeah.

No, I wouldn't say that. I wouldn't say that.

Well, you may have, say, kind of hyper care after just after going live, which, of course, is maybe that was predominantly versus North America. But at the same time, you're preparing for the next rollouts and the development work or adaptations to meet the legal requirements in those countries. So it is kind of spread between different regions.

That's quite true. There was quite a bit of local work and adaptation to make the system work in the quarter in the Americas. But yeah.

Can you just elaborate a bit on what you are actually doing with the IT platform? Why it is sort of taking so long and driving so high costs? It would be very helpful.

I mean, we are having a quite integrated business model where we are both buying and selling as well as we are configuring products. So it is an advanced model where we want to be able to provide good service for our customers as well as handling the technical configuration design options. What we're doing is that we are now implementing the program country by country. So we're setting it up. So it follows a rollout program where we, during last year, okay, we started with the first pilot company being UK End of 2023. And then we went live with five entities during 2024. And for each country that you enter, you need to sort of review. We are checking, say, are there any specific customer requirements that we need to adapt to and fulfill if we have, say, certain consignment stock solutions or specific business needs that we need to cater for in the new system? But predominantly, it's also adapted to legal and financial reporting requirements in the different countries. And that requires both an adaptation and then of course you have a training activity, transfer of all the data because we're migrating all the running business from our old system into the new system. So you have a lot of that data migration of live orders, which is kind of activity consuming.

Okay, that's very clear. And I mean, now when you have sort of implemented it in several regions, you know, almost a year back, I mean, can you say anything about sort of the payback time you've seen or can you say anything about what we should expect going forward?

I think for us right now, I think the main driver is right now to get onto the common platform. We've chosen to go with, say, vanilla functionality as starting point to secure a smooth transition. Then we have to remember that our old systems have been systems that we had had for some 15, 20 years where you have done a lot of local adaptations and tweaks. So those kind of tweaks will not be there from the start, but are being added in. And of course, we'll have a lot better opportunities in our platform, both for automation We're starting to see areas where this is already starting to flow through. But also the biggest benefit is the ability and availability of the data we have. I mean, no one does more business transactions than we do in this industry. and we have a unique opportunity of leveraging that data. That was historically quite tricky for us because we have different systems and data and different pools, which made it hard for our people to really access the full group know-how when quoting new projects. now with this platform and potentially also with the use of ai on top of it we can leverage that strength even more so these are things that's going to gradually come into play i mean we're shifting from during when going live with the us this summer we've now passed the 50 border of implementations we i think we're right now around 60 and we aim to be around three quarters at year end So the importance now of ramping up the functionality and leveraging the investment is growing. So we'll see that grow during 26 and during 27 and onwards.

That's very clear. Should we expect these type of costs also throughout? You said China was going to go live in late next year. So should we expect them sort of evenly at around 8 million for every quarter during 2026?

I would expect pretty stable costs from what you've seen over the past couple of quarters, continuing in through at least the first half of next year. And then it just really depends on how complicated China is. It could trail off a little bit in the second half, or it could remain a little bit stable. We'll know more once we really get into the pre-study of China.

Yeah, okay, perfect. And then just, sorry, the last one here, if we then move to orders and and the dynamics in the order backlog. Can you just comment a bit of how much you expect to deliver during 2026 and 2027, what we can consider sort of a backlog today?

I mean, we don't give long-term forecasts, but I mean, during the last few quarters, we have had a positive book to build. And so there is a building up of an order backlog for us, which is positive, but I cannot quantify what those numbers will be in 26 and 27 right now.

Okay, perfect. That was all for me. Thanks.

Thank you.

The next question comes from Thomas Blixted from Pareto Securities. Please go ahead.

Thank you and good morning, Peter, Tim and Gunilla. Strong numbers in North America here. I understand that the order intake was not affected by tariff increases, but does this mean minimal impact from tariffs on top line in the segment in Q4?

uh we don't give guidance um for q4 per se and if you look at q3 and q2 however we were pretty stable okay but it's impossible right now

And maybe just one more. Right now, there's no change to the tariffs per se. So, I mean, we right now, we have been impacted from the added tariffs versus last year in both Q2 and Q3. And if nothing changes, we will still continue to see contribution from tariffs in Q4 as well. but the fact that we're not booking it into our orders is that we cannot we don't know if tariffs would change we will only know what the tariff is actually when we bring the border wouldn't bring the products into the us and therefore we are not reporting it as part of our order right now okay and and is it possible to sort of try to quantify the underlying growth in in north america without these

impact from tariffs this quarter?

It's a bit lower, but we don't publish those numbers on the tariffs exactly.

That's fair. That's all the questions for me.

Thank you. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. The next question comes from Gustav Bernebled from Nordia. Please go ahead.

Yes, sorry, just one last question here. When you sort of look at your operations today, would you say that So all risks, I mean obviously you can guide but all risks you see now currently are in full effect with sort of tariffs, FX, IT platform etc. Do you see other risks ahead such as price pressure from factories or customers or higher freight rates or what's your view there?

I mean, right now, it is still a very uncertain economic environment we're operating in. And as we know, a few weeks back, the US government announced potential new higher tariffs on China. So it is still volatile from that perspective. But I think we are in a situation where we are managing tariffs. We are running our IT program. And I also mean, we've been is also quite successful. I mean, if you look upon the rollouts we have had, every single rollout has gone to plan. So we don't foresee big risks in our continued business platform rollout. So in that perspective, I think it's fair that we think we have the current risks under good control. What may happen in geopolitics, that we cannot speculate in, but I think for us, I think our model overall has flexibility built into it, so we will be trying to sort of then adapt to those new circumstances.

All right, that's perfect. Thank you very much.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

So there are no questions, written questions either. So I would like to thank you very much, Peter and Tim, and remind you that our Q4 and full year report will be published on 13th February. So welcome back and thank you. Thank you very much. Thank you.