Saab AB (publ)

Good morning everyone and welcome to the presentation of Saab's report for the third quarter 2026. My name is Johan Andersson and I will be the moderator here today and also responsible for investor relations. With me here in Stockholm I have our CEO Michael Johansson and our CFO Anna Vikander. Michael and Anna will present the report and then thereafter we will start the Q&A session. And remember, you can both ask your questions over the telephone conference and you can also post your question via the web interface and I will read them out here in the studio. So with that, warm welcome and over to you, Michael.

Thank you, Johan, and most welcome also from my side. Thank you for joining this morning. Maybe not the best weather in Stockholm today, but still weather. Starting with the highlights of the quarter of course, we still see a huge demand in the market. and investments are ongoing in many countries. Of course, it's a bit different in different parts of Europe to start with in terms of our region. I still think they're moving ahead quite quickly in the right direction. I mean, the Baltic states, the Nordic countries and also Poland and Germany. We've had a very strong first nine months and we have been growing more than 27% organically. and also grown our EBIT substantially with 39%. So it's a strong year, and also this quarter, of course, which we'll come back to in more detail. We continue to invest heavily in production capacity, and I will sort of detail that a bit later in the presentation, but we are on a rolling investment level of above 8 billion a year. only in capacity investments, and that's absolutely necessary looking at our backlog now, which is now 364 billion. And we will show how that is stretched over time, but it's also quite a lot in the next two years, and the rest is sort of in a good way balanced over the next few years. We have a good cash flow and we are strengthening our balance sheet as we speak. Of course, the cash flow is completely dependent on good payments from our customers and we have had a couple of big ones this quarter supporting that. so we are confident about our cash conversion. And then, of course, I've done a couple of changes in my group management, supporting growth and innovation. I think we are moving into a bit of a new phase where, of course, we have to make sure that our existing products and capacity increases are coming into play, but also we are investing heavily in R&D to make sure that we are relevant in the future. That's a bit of a sort of phase change, I think, and that made it good timing to move a couple of new BA heads into my organization. So I have a new business area head for aeronautics, Marcus Vant, who used to be my strategy, responsible in corporate management and also in the dynamics business area. I moved Anders Karp, my deputy CEO, into that BA position, but he will still remain as the deputy CEO. So, looking at a couple of, not a couple, a few really strong things that happened during the quarter in terms of order bookings and contracting. This is a fantastic picture, of course, looking at a few big ones. And a major milestone was, of course, being in Kyiv in early July to sign the contract for the Gripeni. And that is something that is just the start of a journey together with Ukraine on fighter aircrafts. Having them now building up an air force with the Gripen that will suit them fantastically in terms of how dispersed you can be, how agile you can be, and how much combat mass you will get from that. Everything will start with the donation of 16 CD versions to Ukraine as soon as possible. And then we will start our deliveries of the Gripenese to Ukraine in 29. We also have contracted another country for Global Eye during the summer, which we're not talking about exactly which country. And that is really, really good as well, of course. And the interest, as you know, for Global Eye is substantial in the market. We are strong on the naval side and we have now combined the combat management area with the submarine and surface vessels capability in one business area as we talked about last quarter. And now during the summer, we got another contract for the German frigates to support or supply, I mean, sensors and combat management systems and a few other things on these vessels, which is really, really good. And I hope there will be more vessels coming of the same configuration now in the future. We also continue our future journey when it comes to what sort of complements the Gripen E aircraft and what will be after the Gripen E, but then we're talking decades ahead, and that will definitely be something sophisticated unmanned, and that is supported by the Swedish end users and the Swedish Defense Materials Organization, so we got a contract on that as well. And of course, on the product side, one important contract was from Finland, the air defense system RBS 70 during this quarter as well. So those are a few of important things that highlights, you could say, in the marketplace. Our figures then, really good order intake, huge increase from the comparative period last year, 65, almost 66 billion. And we are now at 152 billion nine months in order intake. And as I said, a huge order backlog supporting our growth going forward. Strong organic growth, above 30%, 20 plus billion in revenue. And also increasing our EBIT even more than the top line, reaching almost 2 billion in EBIT. And as I said, a very good cash flow, but of course that's connected to big customer payment, which it should be. Because when we move into the large platform contracts, the business model must be that we get early payments, early milestone payments, and sometimes you can call it advanced payments, but that's part of our business model to actually manage these contracts. So good cash flow means that we are during the period up until now at 77% cash conversion, which is excellent, above the 60% guiding. A few highlights from the four business areas to start with. As we talked about, the Gripen Ukraine contract was, of course, a major thing happening. So now Aeronautics is having a backlog of over 100 billion. And also adding the new contract on the future systems from Sweden is very important to us. We have more than 600 people working the future of what's complementing Gripen E and also beyond the Gripen E contract already just to create sort of a sense of that this is a really substantial project. And we have had good execution and a couple of very important milestones to us is to fly the first two-seater version of the Gripen during the quarter and we also saw the first Gripen E from the Brazilian factory flying during the quarter. Very important to ramp up capability also in the Brazilian hub that we have, of course. And then we have now started to show how we see the future when it comes to the unmanned sophisticated capability, which we call and have named the fantastic name A3. It might be called something else in the future, but that is an uncrewed aircraft, which will complement the Gripen E, of course. Aeronautic is still affected by under-absorption and ramp-up costs when it comes to the T7, as we've said before. But in a way, they are improving the profitability despite these facts. Dynamics, very good demand in the market across the portfolio and the growth was 10% and the EBIT was roughly 15%. And I get questions on why is it not so much higher than that? And this is a mixed business. I mean, we have batch deliveries and every quarter is looking a bit different. So I still say nine months is 24% growth and almost 18% EBIT. So this is sort of not something that is a trend looking at this quarter. We have a huge backlog of over 90 billion. So I see a solid year for Dynamics and a strong quarter going forward. We talked about the large order from Finland when it comes to air defense systems, and we also have collaboration projects like the IRIS-T air-to-air missile, which we also got a rather large contract on that. And we have still product contracts coming from US, both on the 84 system, anti-tank weapon system, and also Carl Gustav, very important sort of product coming all the time. Still, high book to build, too, and we have, of course, a continuous implementation of the capacity investments we're doing in Dynamic, lots of construction projects to build new capability, and I'll come back to that. Surveillance, extremely strong quarter, very well-positioned portfolio on the census side with, of course, the global eye, which is really attractive in the market. As you know, we have NATO selecting Global Eye. We're negotiating a contract with them, roughly 10 aircrafts. And also Canada have selected in May the Global Eye. And we have signed now during the quarter term sheet sort of scoping the contract parameters. We are entering into a real contract phase now for Canada for six aircrafts. and the idea is to set up a hub in Canada to build these aircrafts in Canada still Saab taking the responsibility for the delivery to the customers of course but also during the quarter we had Netherlands selecting Global Eye so they want to add one system to be operated from Sweden together with the Swedish Air Force and that is a government to government agreement but we of course will deliver the aircraft to on a contract with the Swedish FMV so that's going to happen hopefully now shortly and during the year and there's a big big push and execution positive thing having happening within surveillance and and the sensor business is really going in a good direction including of course on top of that we have the airborne warning business so that drives the substantial growth of 65%, and also in nine months they have a fantastic growth. We had a big splash last week when we rolled out the first Swedish Global Eye. That was not in the third quarter then, but in the fourth quarter, and that is now coming in there shortly. Sweden will get this capability early 2027 in operation. Naval we as I mentioned the important contract for the German navy when it comes to the frigates with momentum to get more on that side so we have a substantial naval business now in Germany and both for the frigates that are called one two three very special name which is almost a very substantial contract refurbishing the whole ships and also adding our equipment and now this contract that I mentioned which is supporting the census and the combat management systems and fight control system to the German frigates named 128. And we have of course started the submarine project together with Poland and already started our expansion on the Landskrona site, not only in Karlskrona, so we have capacity expansion also on the naval side. to manage both the Swedish and the Polish contract. And this is going according to plan. And a very important milestone for the future is that we have now demonstrated a fully autonomous underwater vehicle. that will be an ISR sensing capability underwater complementing and acting together with the manned submarines and that is of course a demonstrator but that also in the underwater domain we will see autonomous systems in the future so this investment that we've done on R&D and then supported by FMV is very very important to us. Good growth, over 40%, and a huge backlog, of course, dominated by the Polish submarine contract. Also, CombiTech has had a very good quarter, growing again, and good sort of momentum in the defense and telecom segments, of course, and also a couple of specific contracts when it comes to weather systems and military radio system integrations. And CombiTech is a very skillful workforce that are involved in the AI development for Saab, working using the spherical data center that was inaugurated a week ago roughly, which Saab is a part of together with other industries. So we have compute capability to train our models and CombiTech is quite involved in that together with our common tech organization. And we've had growth and also a good profitability level of almost 11% during the quarter. On the sustainability side, yes, our business is growing substantially. And so during the quarter, we actually had an increased emission, mainly due to lots of flight tests, both for Global Eye and the Gripen side of things. But all in all, over time, looking at the scientific-based target objectives, we are on a good path, meeting our objectives on that. We now have reduced our emissions 34% since we started this in 2020. And we have been recognized by Time Magazine and Statista as the world's most sustainable aerospace and defense company. And this is exactly what we have said. We want to be a market leader in the sustainability area as a defense company. So that's really nice to see. And then we have also published a climate transition plan showing how we will reach our scientific-based targets and eventually net zero emissions. So things are moving in a very nice way in this area as well. A few comments sort of lastly on this capacity expansion, which is not only the product side of things, We talk a lot about all the constructions that we're doing in the western part of Sweden, but on the aeronautics side, we're moving from roughly 15 aircrafts to be here to between 25 and 30 aircraft per year. So lots of initiatives to grow capacity on that side. And also, of course, making sure that when we now start flying sort of the autonomous systems, which are the future capabilities, they must also be industrialized and manufactured. And T7 production is still ramping up. I mean, the levels we have to reach there is sort of very high. I mean, it's somewhere between 50 to 80, depending on contracts going forward from the US Air Force and others. So we're investing doing that as well. Dynamics, you know, it's all about missile production and capacity and ground combat expansion. And we will soon inaugurate now shortly the U.S. facility in Grayling, Michigan, and a bit later the India facility outside Delhi to support our growth here. So that's moving in a good way. Surveillance has said that we have to go from two aircraft per year to six aircraft per year, looking at the market interest and also on the contracts that we are now getting into the business. And a huge capacity ramp up for your off-radars. I mean, we're talking hundreds of radars every year now, which has not been the case for a defense company earlier. And that's good that we have production capacity both in Gothenburg, but also in the UK. And of course I said that we're moving on to another site to do things also on the submarine side because we have to in parallel now work with the Polish contract and the Swedish contract. And there are also other type of businesses within the naval side as the combat boats. So we're building a completely new facility in the northern part of Sweden to support expansion on that side. So all in all, as I said on a rolling 12, above 8 billion in only capacity investments. This is important, but we have also grown our R&D investments 47%. DURING THE FIRST NINE MONTHS COMPARED TO THE SAME PERIOD LAST YEAR SO IT'S BOTH THINGS YOU HAVE TO DO SIMULTANEOUSLY OF COURSE TO BE RELEVANT IN THE MARKET GOING FORWARD AND I THINK WITH THAT I THINK YES IT'S CORRECT THAT WAS MY LAST SLIDE AND I WILL HAND OVER TO ANNA THEN THAT WILL DIVE A LITTLE BIT DEEPER INTO THE NUMBERS

Okay, thank you, Michael, and good morning, everyone, from my side as well. As you have heard, this was another quarter with high business activity. We closed several large platform contracts, and we continue to increase our deliveries to our customers. That is also reflected in our financial performance this quarter, with strong order intake, strong sales growth, EBIT growth, as well as record high operational cash flow. We will soon dig into the details in the financials, but I will start with looking at some trends and taking a more long-term perspective and see where we are in terms of the period where we have guided for in our mid-term targets. So let me start by sales. We now have reached sales of 93 billion on a rolling 12-month basis. And we have a compounded average growth rate during this period of 24%. The adjusted EBIT margin reached 9.6 billion SEK, and that corresponds to an even higher CAGR of 33% for this period. So we're growing the EBIT more than we grow the sales, as we have said that we are going to do. And also, our operational cash flow for the last 12 months, rolling 12 months, correspond to 14.1 billion, a substantial increase this last year. This is despite that we have increased our investments to 8.1 billion. So the cumulative cash conversion is now 77% for this period. A significant increase in our cash flow this quarter was related to large customer advance payments, which we now are going to use in our operations to make sure that we deliver on our customer contracts. So with that all together, we continue to deliver a profitable growth while also maintaining a strong cash flow profile. Turning to the third quarter earnings and the development, gross income increased by 32% and the gross margin improved to 23.4% compared to 22.9% last year, the same quarter. The improvement was mainly driven by sales growth and also the business mix reflecting a higher share of surveillance this quarter. The group EBIT reached 1.95 billion SEK. That's an increase of 42% year on year. and the EBIT margin increased to 9.5% compared to 8.7% in Q3 2025. The main drivers here are also sales growth, but I also want to mention that we are leveraging on our sales and administrative expenses, and they contributed by 1.7 percentage points in the quarter. However, as we have said, we continue to increase our R&D investments in future capabilities, which is, according to our strategy, to continue to be relevant in the future. And this increase is also going to be continued in the future. Turning then to the business areas, and let's start with surveillance and dynamics. Surveillance more than doubled its operating income this quarter, from 446 billion SEK to 939 billion. And the EBIT margin improved to 13.7%, up from 10.8% Q3 2025. This improvement was driven by the surface sensor business and the global eye in particular, with higher volumes and good project execution. Looking ahead into Q4, I want to mention two things that you should remember. Last year in Q4, we had a capital gain from a divestment of the transponder tech business of SEK 336 million. We also had impact in Q4 last year at surveillance from the pre-start of the global eye contact to France. So this means that we are entering into a more challenging comparison period for surveillance. Dynamics then reported, as we heard, a bit lower margin this quarter, 14.3%. And last year, we were at 19.3%. And the lower result, this is reflected by the mix and also somewhat higher R&D expenses. And this is very visible in the graph that the margins within Dynamics is varying a lot depending on mix and deliveries and something that we are used to see. But all in all, we have a strong momentum in Dynamics. And as Michael said, this momentum supports a solid end to the year for Dynamics as well. Moving to aeronautics and business area naval. Both these business areas increased their EBIT compared to last year. Aeronautics delivered an EBIT of 331 million SEK compared to 212, and the EBIT margin also increased to 6.8% compared to 4.8% last year. This was supported by good, strong product execution, also a favorable mix in this business area, and we have also seen an impact from our export contracts impacting this margin expansion. Continuing, we have the T7 program, which is impacting our profitability negatively within aeronautics. We have said that before that we are in the ramp up phase and we are currently now also running on a bit higher negative impact from that program than the previously guided 100 million per quarter. In business area naval, the EBIT margin was 6.1% compared to 7.5% the third quarter last year. A bit lower, though, but the underlying project execution remained good, and now with all the backlog that we have, we have a strong foundation for naval's continued development. The lower margin this quarter is related to somewhat higher R&D expenses, as well as some startups' costs related to our capacity expansion within Naval. Altogether, this both business area increased EBIT while continuing to ramp up output to secure customer deliveries. Let's turn to our cash flow. For the first nine months, we have delivered a strong cash flow. Cash flow from operations before changes in working capital amounted to 8.6 billion. And the change in working capital this first nine months contributed 5.7 billion. and it was driven by large customer payments, and that is including the advance payment that we have received for the Polish submarine contract, as well as the advance payment for the Global Eye contract. At the same time, we continue to invest significantly in our capacity expansion, and we have investing activities amounting to 6.5 billion during this period. and the operational cash flow by then end at 7.7 billion SEK year to date. After financial items and tax, our free cash flow is 5.1 billion. So altogether, a good cash flow and also further strengthen financial position. Also worth mentioning is the improvement in our return on capital employed that is now amounting to 16.7%. That is both driven by higher profitability, but also as better capital turnover. The strong cash flow is further strengthening our balance sheet during the quarter and the net liquidity now amounts 8.7 billion SEK at the end of Q3 compared to 2.5 billion SEK at the end of the second quarter. And the cash and liquid investment totalled 26.1 billion SEK. And also, I would like to mention that during the quarter, we did our first euro-nominated bond transaction of €300 million with a seven-year tenor. And this represents an important step for us in the company's funding strategy to further diversify our financial platform. In addition, from a financing perspective, we have an unutilized revolving credit of 6 billion SEK as well. And the net debt EBITDA ratio was negative minus 0.6 times on a rolling 12-month basis. So all in all, a solid and strong balance sheet. Let's turn then to our order backlog of 364 billion. It's well balanced today across our four business areas, with almost a quarter in each business area. And looking at the delivery profile, we have increased the backlog to be delivered in the final quarter with 18% compared to last year. And for the next year, we are up 63%, amounting to 102 billion to be converted into sales. We also see growth across all the delivery period, which is reflected by the larger platform orders that we have taken. So altogether, the backlog provides good visibility, both in near-term and long-term growth. Finally, let me turn to our medium-term targets. We remain confident in the targets for the period 2023-2027. They are supported by strong market demand, increasing defence spending, as well as our large order backlog. We are also seeing benefits from higher delivery volumes and improved scalability across the company. So all in all, we continue to invest in production capacity, technology for future capabilities and that will support our longer term development. So, before we take the questions, I would also like to announce a final date in your calendar. And that is that we would like to provide an early notice that we will have Capital Markets Day, the 12th of May, 2027, in Linköping. And further information and registration details will be provided when we come closer to the event. But save the date for your calendar. And with that, I hand over to you for the Q&A, Johan.