Saab AB (publ)

Good morning, everyone, and welcome to the presentation for Saab's report for the first quarter of 2026. My name is Johan Andersson, responsible for the investor relations, and I will be the moderator here today. Here in Stockholm, I have our CEO, Michael Johansson, and our CFO, Anna Vikander. Michael and Anna will present the report, and thereafter we will have a Q&A session. And I remind you that you can both ask your questions over the telephone conference, or you can write your question in the web interface, and I will read it out here in Stockholm. So with that, warm welcome, and I'll hand over to you, Michael.

Thank you, Johan. And also from my side, most welcome to this quarter one report. Let's jump right into some highlights. I think we can conclude that we have started this year in a very strong way. Substantial organic growth, 23.6%, and also creating scale gives us a good profitability. Good cash flow and still very intensive in the market. The momentum is very high in the market. So we have many avenues and the order intake as we've seen is on par with the quarter one last year. So a strong quarter. A couple of examples of important things that happened, and I will come back to deliveries and stuff like that, but the contract from Sweden on the country-US system called Gute is very important. We have created an agnostic, very flexible country-US system, and I will get a little bit into that later. A very big event that happened this quarter is, of course, the delivery of the first Gripen E from the Brazilian facilities, the factories in Gavião Peixoto, which got lots of interest from the Brazilian side. And they are really proud of having this sovereign capability now in-country. And it's good for us as well, having a hub, so we can ramp up the capacity, of course, in terms of Gripen deliveries. We also see that looking at the growth that our investments in production capacity comes into play. We have still lots to do on that side, but we have now a couple of production lines that have opened in Sweden to support the dynamics business specifically. And that's very important to us since we have a substantial backlog, as you know. And then, of course, the restructuring that we've done 1st of April of creating a new business area called Naval, including now naval combat systems together with the former Saab Kokkum's business is a very important step to establish a whole offer in the market when it comes to combat system integration. design capability of surface ships, but also creating the systems of systems capabilities unmanned man teaming on the naval side. More specifically on the numbers, as I said, the order intake and the momentum is good. We increased the medium-sized orders with 28 percent, almost a book-to-bill of 1.95. And, of course, a certain quarter you can't sort of look at immediately. a specific sort of order intake volume since we have digital large contracts being negotiated you never know when they actually will happen in which quarter but this is good from a foundation perspective smaller medium-sized orders and the growth was excellent organically 19.2 billion growth in all business areas double digit numbers and specifically surveillance had a very good quarter in terms of growth Also, the EBIT growth is 32%, 1.9 billion in numbers. And that is, of course, an effect of the increased top line, creating scale effects and giving us a 10% margin, which is excellent. And also a good quarter when it comes to the first quarter, looking at the cash flow, operational cash flow of a billion, which is about, of course, deliveries and payment from the customers. And that is, of course, something that we always look into diligently. And we've guided to positive cash flow also going forward, of course. So that's where we are after the first quarter. And then I'll give you a few comments on each business area. and the growth in aeronautics is of course much from the gripping program where we have lots of intensity and and also deliveries ramping up and then we had this fantastic event in brazil now so we have two factories that can actually deliver gripping aircrafts And that will also, of course, be a good relationship increase between Brazil and Sweden when it comes to the further development of the Gripen E, which is, you know, the aircraft is incrementally possible to develop through software and so forth. So it's not only about production. Then we have a couple of contracts on the T-7, the lot three and four of the T-7, which increased the backlog, of course, but we still have a burden of not having the production ramping up quickly enough. And as I've said before, this will take a couple of years before we actually get to the right numbers, but many hundreds of aircrafts are in play for this. And in the end, there will be probably a couple of thousand aircrafts. This will be a good program, but it's a bit of a fight to get this fantastic facility delivering more aircrafts out of the facility. But they are delivering now, at least. And then, of course, we've launched the Gripen Colombian program, which is very important to us, which we did win then in December last year. Dynamics, excellent demand in the market, 1.2 book to bill. It's a good order intake and good growth as well. And a mix of ground combat orders and missile systems orders. But remember, Dynamics is support weapons, it's missiles, it's training and simulation. It's also camouflage nets, signature management, which is... A good mix of things. So all the parts in Dynamics are doing really well. And deliveries are important. And here we have the production facilities, a couple of them in Sweden, sort of now up and running in the Karlskoga area, which is really good to us. And also, I must say that the profitability is, of course, excellent in the quarter as well, which Anna will go into more detail about later. Surveillance, very strong demand in the market across the whole portfolio. We have a pipeline of discussions on the global eye with different countries. And I think that has potential going forward. And also, of course, the ramp up on the census side. And I want to highlight specifically the year of 1X. where we talked about that we actually manufactured these sensor systems on a bit of speculation rather than only on contracts. And that's good for us because we've been able to deliver a number of systems to the Middle East countries that needs to find and detect all the missiles and the drones coming in. over the territory so that's good for us and we will now aim for ramping up that production to over 300 a year so that's a good sort of volume business on the sensor side and then of course this country us system that sweden contracted us with is a big initial contract an important one which will I think that the area will develop into also not only being military applications, but also protecting critical infrastructure in the total defense perspective going forward. And as you can see, the growth in surveillance was excellent, over 30%. And a couple of comments then. This is actually the country-US system is a very modular system in terms of the vehicles, the sensors to come on and control, and also then agnostic when it comes to which actually effect to use. But it is a sensor to shooter system, which we put together in a very short time since we had the different products and components of it. and integrated it to be operational extremely quickly. And that is the key. We can do this with existing things that we have to provide things that will make a change in the deterrence and the defense very quickly. and we continue then to adapt different type of effectors going forward either it's the 40 millimeter from from from bow force from ba bow force or whether it's the the track fire with the 30 millimeter cannon or whether it will be the nim bricks going forward so this is important to be flexible on the effector side and it's proven very effective When it comes to Saab Kockums, which will be the last time I say Saab Kockums, because this now will be a new business area named Naval going forward. But this is the last quarter we reported like this. And they also had good growth. And we are, of course, in intensive discussions with Poland on the submarine program. And we hope to finalize that, of course, in the next quarter. But I can't promise exactly when. but it's intensive discussions and according to plan also on the polish side there was a new the next second ship was launched in january a very important program to us of course and also good security politics collaboration thing between sweden and poland And then we have now a more consolidated business area going forward, offering a combination of naval capabilities and also being able to do the combat system integration between all the components in the same area and offering that in a different way, which I think will be very good for the business going forward. CombiTech is also doing really well. Good order momentum. And of course, it is the total defense perspective and how much we have to do in terms of creating better deterrence and processes in different parts of the Swedish society that drives growth, but also the military side and the contracts we get from the Defense Material Administration. So this is excellent performance growth of 16% with good profitability. And of course, it's all about getting sort of the competence and the skills in the organization growing, which has gone really well to grow this business. I'm really pleased with this. On the sustainability side, a couple of important things happened, of course, during the quarter as well. We have done now A compliance sustainability statement report in our year-end report, the annual report, I mean, for 2025, completely in compliance with the requirements, the CRSD requirements. And that has all the details about the metrics, the targets, and what have you, if you want to dive into that. And then we looked into a life cycle assessment when it comes to our UROP 1X, because I mean, OK, we can have control over the scope two and one and two, but scope three is also very important to how you use the system. And we have concluded and we are in discussions with end users that if they do go from supporting the system from a diesel sort of fuel perspective or going to electrical power, or a biofuel type of setup you would sort of gain a lot when it comes to the emissions of course and that is what we are pushing now and this system can be connected to any normal 220 volt sort of outlet so it's really flexible in that side so we've done something that is prepared to do a big effect on sustainability if the end customers choose to use it that way and then of course we're looking into how we when we get volumes in a production like in dynamics of course how we use the packaging and how we reuse material for that and not sort of wasting that adds lots of of savings on the emissions but also cost of course for us so we're changing that If you look at the quarter emission perspective, we have an increase due to more flight tests compared to the last quarter last year. And we have more business travel also because of the intensity in the market. But it's also a period of cold temperatures. looking at all the sites of course and how new sites comes into play you get a slightly higher footprint but we are on the right track towards our targets we are 36 down when it comes to the reference year 2020 when it comes to missions towards our targets so we're doing well on that side So with that, I will hand over to the details and Anna will walk you through a little bit more of the financial results.

Thank you, Michael. And good morning from my side as well. It is clear that we have started the year with a strong first quarter. And I will soon go into the details of the financials. But before doing that, I think it's good to look at some trend and what we have achieved so far. So, over the recent years, we have achieved strong sales growth, and that is supported by our leading offering and the trust from our customers. And consistent with our profitable growth strategy, we have scaled our operations, we have expanded our capacity, and we have continued to deliver on our customer commitments. On top of this, we also have a healthy backlog and we are continuously working on efficiency, which will support our performance going forward. So looking at how the trend has developed after this first quarter, 2026, we have now delivered an organic sales CAGR of 24% so far in our medium-term target period. And importantly to note here is that we have had double-digit sales growth in all our business areas. We have also continued to deliver profitable growth, and that has shown that we are driving our operating cost leverage, and our EBIT growth is more than our sales growth. So it's now 33% for these periods. And to note here, it's also important to say that we have increased our spendings in R&D to be able to be relevant to have future capabilities in our portfolio. So with that, we are progressing well towards our medium-term targets. With that then, now let's take a closer look at the quarter. The EBIT increased by 32%, largely driven by the sales growth and leverage on operating expenses. We can see that marketing expenses are flat compared to last year, and the administrative expenses are slightly lower. And we continue to ramp up the R&D efforts as planned. So all in all, we have an operating margin of 10% compared to 9.2% last year. Aeronautics. Here we had good sales growth of around 15%. However, we can see that the margins decline, and that is due to somewhat increased R&D amortization, and we also have a negative currency effect impacting. Also, as Michael said, the T7 program has still challenges with profitability and ramp-up, but we have good order intake here in the quarter, but that is impacting the EBIT margin negative in aeronautics. In Dynamics, we continue to expand capacity and to deliver on our backlog. And we have a favorable mix this quarter together with the sales growth. And that drives the EBIT growth to 38% growth this quarter and an EBIT margin of 17.5%. As always, when we talk about Dynamics, it's important to remember that the EBIT margin varies between the quarter depending on mix and what delivers we have. Surveillance also had a very strong quarter with good progress across all business. And one good example of that and where we had particularly good performance was in the surface sensor area with several deliveries. So overall sales grow by 32% and the EBIT grow 52%. And that is driven by the mix and also the leverage and operating costs. Cockums also growing, but here we can see an impact of the high activities that we have in the marketing area with the campaigns ongoing, for instance in Poland. So here the marketing cost has increased compared year over year. So that is why we have a small decline in EBIT this quarter. Not visible here in the slide, but worth mentioning is also CombiTech, that has also a good development and high activity through their increased number of consultants. And they have an operating margin of 11.3% this quarter. And also within corporate, we have improvements compared to last year in our small Skelda business and also in our minority portfolio, which improves the margin in corporate. As you already know, we have established a new business area from 1st of April, the business area Naval. The purpose is to consolidate and to strengthen our total naval offerings to deliver greater value to our customers. And from the second quarter, Q2, we will report financially in this new structure. And you find more details on our website. And you can also find the restated financials to facilitate your comparison. The key change is that we have moved or transferred the business unit naval combat systems from surveillance into this business area naval. It's largely a system integration business driven by projects. And historically, they have had around 6 billion per year in sales. And since 2024, they have in average had an operating margin of 6%. When you look into the details, you will notice that there are two quarters in 2025 with significantly lower margins in this business unit. And this is due to the nature of this business. We have this product mix, depending on how the margins is every quarter, and also that we had some margin adjustments in a few projects within naval combat systems. But looking ahead, this is a business with future growth, and we see potential for profitability over time. But more details are shown in our homepage. Next slide is the income statement for the quarter. And the organic growth was 23.6%. Reported was 21.4%. Same here this quarter as last quarter. The currency impacting us negatively with 2% point on the sales growth. Gross income is increasing, but margin is flat, and that is due to mix. But if we look at the business areas, we can see that they are improving year over year in gross margin. Let's then, I talked about the EBIT that has improved, but let's then turn to the financial net. Here we have a difference since last year because we are now increased the application of hedge accounting to also include derivatives that hedge currency in the tender portfolio. So from now on, you will see currency gains and losses from the tender portfolio in the other comprehensive income and not in the financial net. So with that, we will have less fluctuation in the financial net going forward. Important to note here is that we have not changed our hedging principles. It's just that we have changed the application of how we use hedge accounting. Finally, we have growth in our EPS driven by the EBIT growth and also the net income is growing this quarter. Turning into cash flow, we had a strong cash flow from operation of 2.8 billion this quarter. Main contribution came from surveillance and dynamics. And the largest reason for that is the several customer payments, but a bit offset by inventory build up. And that is also what's impacting the change in working capital. The investments increased compared to last year, which is totally according to our plan. And they were up from 1.6 billion to 2 billion this year. And we now have an operational cash flow of 1 billion after this quarter. The free cash flow is impacted by higher tax. We have higher supplementary tax related to income taxes paid for 2025. So that's the main reason why that is negative 1.3 billion. And the free cash flow slightly negative of minus 300 million. All in all, we have an improvement also in return on capital employed, driven by our improved profitability, but also on our improved capital turnover. So it's now above 16%. And the cash conversion is 53% after this quarter. So progressing well towards our medium-term target to have a cash conversion above 60%. The net liquidity position and balance sheet is still strong. We have a net liquidity of 4 billion, almost unchanged since last quarter. Cash and liquid investments amounted to 18.1 billion. And in addition, we have an unutilized revolving credit facility of 6 billion. Let's turn to the future and our order backlog. Over time, we have built a solid order backlog, which is currently 274 billion. And this, of course, positions us for a good position for long-term growth. Compared to last year, we are in a better position and have strengthened the backlog for all years ahead. In particular, for the remaining nine months here, the backlog has increased 28% compared to where we were last year. And for next year, it has increased by 56% compared to last year. Also to note in the backlog is that we have a good balance between our business areas. Aeronautics has now increased their share, so they're around 30%. And then it's dynamics and surveillance, which adapts to most of the backlog. And the international order is around 72% of this backlog. So all in all, this underpins a good position to support for future growth going forward. And then finally, before ending my presentation, let's just remind us about our medium term target. We are going to deliver around 22% sales CAGR for the period 23 to 27. We will have an EBIT growth that is higher than organic sales growth and the cash conversion of more than 60% during this period. So thank you very much. And with that, I hand over to you, Johan, to open up the Q&A.