Studsvik AB (publ)

Welcome to Studsvik Q3 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Carl Tedin and CFO Peter Teske. Please go ahead.

Good morning and welcome to Studsvik's Q3 earnings call. So just a short brief update again. I guess many of you know us by now, but we are a truly international company. Last year we did around $100 million in revenue or 893 million crowns. We are in roughly 15 countries. We're a little bit more than 500 employees. Key markets are Japan. Korea is very big for us. We are big in the European marketplace, of course, and also in the U.S. and Canada. So we're truly serving the nuclear market with services and products. So we try to explain... how we operate and what kind of market segments there are in the nuclear and adjacent industries. And as you can see, we talk about new build, we talk about operating plants around a little bit more than 400 in the world. And we talk about the process of decommissioning sites as well. And the fourth one is other service that requires knowledge and expertise in handling radioactive material and isotopes. I think we serve this market with a lot of different offerings and some offerings are sort of obviously fit for different parts of this market. I think the big change we all have seen over the last couple of years is the new focus on new build, both in the European marketplace, in Asia and in the North American marketplace. That is very much driving a lot of investments. Many of those investments are in early days now. Those will be increasing year over year over the next 10 to 15 years. Maybe things that we have not spoken so much about is the operating plans and the huge investments going into lifetime extension or long-term operation of the more than 400 plants in the world. We see that in terms of material testing, new fuel types being tested, obviously upgrades of safety systems and all that. see numbers of up to one billion dollar per plant to make those plants extend their lives to 80 years and beyond. Decommissioning is part of the life cycle commitment that you need to have to nuclear power and we have a big business around that mainly in the European marketplace. And last but not least, there is an emerging services requirements for cancer treatment and other type of treatments in the medical industry where our expertise is very much in demand. So I'm going to go into the Q3 numbers. We delivered what I would say a solid quarter. We have basically a flat quarter in terms of revenue. But we continue, which has been the focus during this year. We continue to improve our profitability and we deliver strong cash flows. And it's significantly better to the same period last year. If we also look into the nine year period, we have more or less doubled the profits compared to last year. And free cash flow amounted to 55 million, which is an increase of quite impressive, 114, 150 million compared to last year. So we also should know that Q3 is a quarter where it's not our strongest quarter. We obviously have the holiday seasons and we have other some seasonal variation, which means that this quarter is not the strongest, but we still deliver a better Q3 than we did in 2024. Some key milestones for our Q3 numbers. We have a very strong drive and business in our business. There are fuel, materials and waste management technology. This is predominantly the services and products that we provide from our site just south of Stockholm, just a big site. And it's continued to have a positive market environment, which is, you know, to the point I made before, very much is driven also by lifetime extension discussions with customers, testing how material is behaving after maybe 20 years under irradiation in nuclear power plants, as one example. We also had the eyes on a new build and we signed an MOU with Blykalla, the AMR-SMR developer out of Sweden, and Evrock, a data center provider focusing on data centers for highly secure environments. And together with them, investigate the feasibility commercially and technically to build data center, AI data centers and SMRs at our site with our competence, with our site to develop an AI nuclear driven data center in Sweden. In a 10 year time frame, this is nothing that happens very quickly. The data center can come up earlier, but obviously the development of SMRs takes a lot. So very interested. This is obviously a development we have seen in the US. We will see that also now coming to Europe and we are in the middle of that development. In business areas like Scanpower, our software business out of the US, we saw momentum for the newly acquired Blackstar tech offering. Not huge volumes, but some very interesting orders that we have taken, which gives us confidence that we have demand and a competitive product. We are now building an organization to drive us further into 2026. And on October 7th, which was just after the quarter finished, there was a very important international event hosted by the Swedish and Finnish governments in Stockholm to discuss, focus on investments into nuclear, where the government hosted and invited a lot of high-ranked banks and also the industry in general. And we were obviously In the middle of that, I have a lot of interesting meetings and it's very clear that Sweden is one of the most investable nuclear markets in the world at this time. So we do believe there's going to be quite a lot of investments into nuclear new build into Sweden. So a little bit on our business areas. As you know, we have free decommissioning, fuel materials and waste and strategic scan power. So let me take a little bit of those. So the business air decommissioning radiation protection is a business air where we have struggled this year with our profitability numbers. It's been a very competitive market. Not the market that you don't have a market. It's definitely demand, but it's a lot of competition in the market. And there's been an important show in Dresden in Germany where I attended the contact decommissioning exhibition. We definitely have products and services that are of interest, but we need to do a fine-tuning organization and focus more on the higher profitability part of that market. To do that, we have decided to do some changes in the business area management team to basically increase the speed of the changes required to get that business into the profitability levels that we require. Mentioned shortly before, business area fuel, materials and waste technology, very strong quarter. We have a total change in both our sales and our profitability numbers here. momentum in the market we have a strong order book but also we now have also a very much more efficient organization and a high engagement which means that we actually deliver produce on time to a higher degree than last year and by that also can invoice our customers so we continue to view this business era very positively going into 2026 as well. Business area Studsvik Scampower is where we have our software business, some consultancy and then also the newly acquired Blackstar Tech. Here we have a little bit softer, it's very much seasonal variations in this business as the license sales that we do throughout the year when it happens has a big impact on revenue and not to say the least margins. Here we have a bit softer but we still see very positively on this business on the profitability levels and the outlook for this business area. With that I hand over to Peter Teske our CFO please.

Thank you, Carl. I will start to present our financial from our three segments and then go to the consolidated group numbers and at the end talk a little bit about our financial targets. We start to look at the business area decommissioning and radiation protection services and the sales for the quarter amounted to 19.7 million and for the first nine months, 266.7 million. which is a local currency, is a decrease of 2.4% in the quarter and 1.9% for the first nine months. The operating profits for the quarter amounted to 4.4 million, which represents an operating margin of 4.9%. For the first nine months, the business area operating profits was 10.7 million. The third quarter and the first nine months of the year were characterized by continued tough competition in the market and a strong cost focus among our customers. These conditions limited statistics opportunities for additional sales. As a result, margins were lower in both the third quarter and the first nine months compared to the same period last year. To strengthen the business area, Group CEO Carl Thedén has temporarily assumed responsibility for the business area, and a strategic and organisational review is currently ongoing. If we then move on to fuel, materials and waste technology, Sales for the quarter amounted to 79.5 million and for the first nine months 284.5 million, which in local currency is an increase of 17.6% in the quarter and 8.3% for the first nine months. Operating profit for the quarter amounted to 9.3 million and for the first nine months 42.9 million. The business era demonstrated good progress in the customer projects, supported by improved productivity and a favorable mix in production portfolio. These developments contribute to a stronger competitiveness and improved profitability. Margin increased also due to the implemented cost-efficiency program, improved purchasing routines, and the streamlined delivery organization. Together, This resulted in an approved operating margin for the first nine months to 15.1% compared to 5.4% in the same period last year. And if we move on to Studsvik Scampower. And as Carl mentioned, Studsvik Scampower sales are subjected to seasonal variations, which we saw also during the third quarter. Sales decreased in the quarter to 38.7 million. And for the first nine months, we see an increase to 120.5 million. In local currency, this is a decrease of 7.3% for the quarter and an increase of 5.5% in the first nine months. The increased sales contributed to improved earnings for the first nine months, and we see that the underlying business continued to demonstrate a stable profitability. The operating profit increased in the quarter to 7.8 million for the first nine months and increased to 21.4 million, representing an operating margin of 20.3% in the quarter and 17.8% for the first nine months. And we also have a positive effect due to the quarter three. We recovered six millions from the fraud that occurred during Q3 2024. And this had a positive impact in both operating profit and the cash flow. We see now in total that the financial impact of the fraud that occurred Q3 2024 is now minimal for the group. And if we then go to our consolidated group numbers, and if we start up and look on the third quarter over the past year, we see that the development has been quite stable. We see an upward in trend and a solid and consistent performance. And the net sales in the third quarter 2025 increased to 205.8 million compared to 208 million last year. and an improvement of just over 2% or more than 5% when adjusted for currency effects. The growth in Q3 2025 was mainly driven by a strong performance in fuel, material and waste management technologies. And if we look on the first nine months of the year, the sales amounted to 660.4 million, up from 645.8 million last year. In local currency, this represents a growth of above 4%. And here we see good effects from both static scan power and fuel materials and waste management technology. And if we move on to our operating profit, And also here we start up a look in the past over the years. We see a strong performance in 2022, and that was mainly driven by license sales in Stuttgart Scampower. And in 2023, we had some land sales in FMWT. And that followed up by a dip last year as a result of the fraud that we talked about earlier. And also we had some disruptions in the FMWT. But if we then look in 2025, we see that operating profit has improved in the third quarter, rising to 13.2 million compared to a loss last year of 0.5 million. This corresponds to an operating margin of 6.4%, and that's a clear turnaround from the negative margin of 0.3% last year. And we see that improvement was mainly driven by a strong result in the fuel materials and waste management technology, and of course, supported by the repayment of the six millions related to the 2024 fraud case. For the first nine months operating profits is more than doubled to 50.2 millions up from the 25.2 millions last year. And that is operating margin increase from 3.9% up to 7.6%. And then we take a look at the cash flow The cash flow from operating activities in the third quarter amounted to 26 million compared to 38 million in the same period last year. Free cash flow showed a strong turnaround, improving to 17.3 million from a negative 18.4 million a year earlier. The improvement is mainly driven by higher operating profit, lower investment levels, and the complete acquisition of extreme bar and soak technique that was made during 2024. For the first nine months, cash flow from operating activities strengthened to 65.7 million, up from 21.2 million last year. Free cash flow improved even significantly to 55.6 million compared with a negative of 59.3 million in the previous years. This substantial year-over-year improvement reflects stronger underlying earnings, lower investments, activity and acquisition, as I earlier mentioned. Worth note is that during the same period this year, we have amortized 25.3 millions of our debt and distributed a dividend of 16.4 millions. And finally, a short look at our financial targets and year-to-date performance in 2025. We have a growth target of 6% that we did achieve during 2024 And we see that we are a little bit lower during 2025. And that's mainly due to the challenging market situation we see in Germany. But also we have the seasonal variation in Atstuttsvik's scam power sales. We see a strong improvement in the operating margins that go from 3% 2024 to now 7.6%. And in the equity to asset ratio, we see an underlying positive trend, but still we are on the same level as 2024. And with that said, I will turn over to Carl Thedin.

Thank you, Peter. Let's discuss a little bit on the market developments as we can see it. First of all, there is a move into the new generation of how to build reactors, small modular reactors. Some of those are, most of them are light water, but also emerging trend of other type of fuel types also coming cold. advanced modular reactor for AMRs. And here you see a snapshot of some of the announcement that was done during the quarter. Maybe for us in Sweden, the most we know was Vattenfall's announcement to shortlist GE Vernova and Rolls-Royce. All three parties in that consortium, Vattenfall and GE and Rolls-Royce, are business partners of Studsviks already. And we obviously look forward to support that project as it goes into building reactors in 2030. We also ourselves announced our partnership for data center powered by SMRs and you can see some other examples of developments that you see around the world. So definitely a trend that that this is happening. We should also say that there are obviously also large reactors being built, not to say the least in China, but also in the US, in the UK and so on. So that is also still very much a very competitive way of building nuclear power. Yeah, we talked about this. We have mentioned it. It's an early investigation of how to do this. Data centers, when they are deciding on sites, they want to have a route to 200-300 megawatts of power that they can get hold of. They can obviously get that from the grid, but sometimes that's not possible. So having a possibility to develop a solution where they can rely on the grid, but also on nuclear power in close to where they set these data centers up is very important for them. So the trend on AI data centers is very much driving the renaissance for nuclear, specifically in the U.S., But I think we will see that more and more also as a trend here in the Nordics and in Europe. A little bit on the markets. We are obviously in many markets. I took a snapshot here on three of them. You can see in the UK, for example, you have nine plants in operation. There are two plants currently under construction. And there are small modular reactors that's going to be built initially by Rolls-Royce, but also Holtec are building together with EDF UK. So very much a huge investment and commitment from the UK government to build and increase the share of nuclear power in electricity production in If we then go into the US, there's been several announcements by the new administration in the US how to support this. There are 94 operating light-water reactors and there has recently been completed two large power plants. There's a lot of lifetime extensions and actually refurbishments of sites that had been closed and now being refurbished to be open again. Two of them here, Three Mile Island, the former Harrisburg site and Palisades around Lake Michigan. There is a lot of developments of new technology for AMR, SMR technology that will also be built here and very much driven by the AI data center built up in the US. In Japan, obviously, market was severely changed after the tragedy in Fukushima. But we now see that it's so important for the nation of Japan to have independent power production. So they are now set to restart up to 36 of the 60 that they had when Fukushima happened. And there are also now developments in 300 sites under construction, new sites. And we are active in all these three markets, United Kingdom, United States and Japan. very much obviously a lot of things happening in these markets. A little bit more data, 30 countries are actually thinking about of course considering nuclear data centers is expected to triple by 2028. There is a commitment to a 2.5 increase of the global nuclear power And 25 of that will be added through SMRs under these studies. So, yeah, very much a trend that is happening. But we should also keep in mind that this trend is investments for a long term period ahead, starting from now, but going 10, 20, 30 years from now to build up this increased capacity at the same time as we're also investing in keeping the existing power plants for many, many years to come. So how are we taking it? We obviously have our existing service, but we are also investing for the future. And here are some examples of innovation that we are driving to market. We have developed, and here is our test facility of the Indram, where we can significantly reduce low and medium radioactive waste. that are kept in drums where we can in a very environmentally friendly way reduce the waste meaning leading to significantly lower final repository cost for containing the waste. We have also launched new software for the SMR market called Peacock that can also handle new type of fuel that is coming into play in the advanced modular reactors. We have acquired two companies, Blackstone Tech, giving very advanced power and safety solutions, where we now see that that is starting to kick off with some interesting orders in the quarter. And EBS, our advanced tool, is for cutting and sawing through reactor tanks and big concrete parts when doing decommissioning, and that is something we are relying on them will drive harder to increase the profitability of our decommissioning business. So final comments. Q3 in summary, solid quarter, improved profitability and cash flow. We delivered improved profitability compared to Q3 last year, and we continue to do a better year than in the first nine months, where we doubled profitability compared to last year. We are in a very dynamic and changing market, positively changing with more investments coming and we are in the middle of that. We have a very strong brand name and we have a strong offering that we are improving as we go quarter by quarter. We have done a lot of things to improve the way we operate, the way we discuss with customers, the way we do sales. We have an M&A organization set up, and we do a lot more business development. Together with financial discipline, this continues to deliver the increasing stakeholder value that we are set to do. So with that, I think we can open up for questions. Thank you.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Lara Motadi from ABG Sundal Collier. Please go ahead.

Hi, just a couple of questions from my end. The first one is on the fuels and materials. The turnaround has been impressive with improvement both in sales and margins year over year. You mentioned that this was driven by both structural efficiencies, but also a favorable mix. Can you maybe help us understand that split? How much of this would you say is from efficiency gains versus this temporary favorable favorable mix that you imagine?

Well, this is basically a factory or very advanced factory of doing testing in hot cell environments, doing analysis on the tests, writing the report, having the dialogues with the customer. And that's a very tight process that needs to work. And we have worked a lot on making that more efficient and taking away some stops and starts that you have in that process. So I think that's a big part of it. The other thing that we sit with a very solid order book is we can plan more efficiently, you know, quarter by quarter since we have the orders already. But also we have a very strong competitive position here. There is not. We are the only lab in the world that is operating on commercial terms, which means that customers can go to us. and order things and get things delivered on time. All the other labs of this kind are in state control which means they also support other interests like academia and others so they have more difficulties to to commit to timelines, for example. This means that we have also been effective by charging and increasing our prices for what we do, which is also part of being more commercially guided than we have been in the past. I think that's some of the reasons this business is doing significantly better.

Okay, thank you. And also in decommissioning, you've mentioned margin pressure for some time. With Carl, you're now leading the segment temporarily. What would you say is your go-forward strategy? Will you pursue structural changes to maybe lower your cost base or seek new partnerships? Or maybe could you just walk us through some initiatives that you may put into place to increase your profitability in the segment?

Thank you for the question. I mentioned EBS, the tools that we have acquired a year back from Sweden. We have not yet been so successful as I wanted to include those kind of materials and services in our offerings, mainly in Germany. That is something that we need to do because that's a margin improvement and it gives us another competitive position as well. And the other thing is that we are operating basically three business units under the business area, radiation protection, decontamination services and dismantling. And there are in that there is a margin mix and some of those are better than others. And we will review how to move our attention more to the higher margin business out of these three business units, if you like, or product units.

Okay, great, very clear, thank you. And a bit on your geographical split, you saw a significant drop in Germany, which you've also mentioned has been a bit weaker, and also a drop in Asia, but this was offset by stronger growth in Sweden and North America. What would you say the specific market dynamics or major projects are that are driving this, what would you say, divergence between your key regions?

Well, this is very seasonal variations, I would say. I think at this time, the snapshot for now is that we have a lot of very interesting discussions in Korea. Korea is obviously both an interesting market per se, but also have a lot of strong vendors into the nuclear industry. So we are supporting them. So very interesting. In terms of our software business, obviously, the US is where we have the strongest foothold. And there's a lot of developments there with SMR vendors as well. Whilst the FMT business, you know, proximity to the site is important. So it's slightly easier for us to support FMT business for, you know, for customers closer to Europe, if you like. But so no big change, I think, in terms of where we operate and where we see opportunities is just more of a seasonal variation than anything else.

And just my last one, you talked about the good momentum in Black Star Tech. But as you mentioned, it's not huge volumes yet. Just on Black Star Tech, what would you say the typical, how are the typical sales cycles? How long does it take to turn the interest into a contract? And for the mentioned signed contracts, when should we expect this to translate into material revenue for the segment?

That's a good question. So I think to get the first order, which we have some of the smaller orders with interesting customers in this quarter, that's probably a three to six months period. But then it's a little bit similar to my former industry telecoms is that you go in there and then before they really build it out, you know, for many power plants or full scale in one power plant, that takes time because they need to test first, need to be comfortable with the technology and then they roll it out. So I think for the full potential of some of these customers that we assigned in Q3, there's probably at least 12 to 18 months to get the full potential, maybe even more sometimes. So it is, you know, go in there, you start in one area and then you are happy with the solution and you build and you build and you build. So I think we should see these wins as a starting point for a longer rollout period.

Great. That was all from my end. Thank you very much.

Thank you. The next question comes from Frederick Reuterhall from SEB. Please go ahead.

Good morning, and thank you for the presentation, Colin Peter. Do you hear me?

We do, yeah.

So I have a few questions as well here. Scampower net sales was down 7% instead of local currencies, but up 6% last nine months. I saw that between 2021 and 2024, Scampower had a CAGR of 22%, which is driven last year of the Gardel, which is important. But can you talk more about your expectation and main sales drivers of Oskal Power coming years?

So ScanPower is a combination of consultancy services, rollout services, maintenance and software licenses. Software licenses is typically around 60% of the revenues in any given year. So it can differ from year to year, maybe more importantly from quarter to quarter. We see the biggest sort of software module that we're opening for in the near, more near term is Gardel. That's our monitoring where we monitor the reactor burnout, if you like, and making sure that we have done the right, all the customers have done the right simulations and scheduling. how they work with their fuel rods and that is where we see the pickup at the moment and then we also have launched new software models like the Peacock which is a similar to but for other type of reactors and so I think we'll see growth but it will be in a seasonal and it's a little bit difficult to say exactly which quarter they will hit But I think we have a good opportunity to harvest specifically Gardena. There's a lot of focus in this lifetime extension of improving fuel efficiency and increasing also power percent by percent in the existing power plants. So I think that will lend itself very much to work closer with us to use our tools for that. Then the further point on that is obviously Black Star Tech, but that's maybe another question because that's obviously a totally different set of products with much higher growth opportunities.

And then I have a follow-up question on the RPS. I'm a bit more interested about the competition going forward. I mean, you mentioned it. that it's very tough out there. But do you think the competitive landscape will be even harder in the future? And how would you address this?

I was down there to meet customers last week. I think there's going to be a consolidation. There are some smaller, quote unquote, not so competent players that are around that have been fighting. I think that will go away because it's also a market that demands high safety standards and you know high professionalism and it requires native german-speaking people and all that and so i think that there will be fewer but still high competition going forward uh but i also think that we we the things we do now reviewing where we should focus uh and making sure that we have the right management in place will also be important part of driving the change it's definitely possible to make better margins than we do today. But of course, this is not the business that will deliver the margins that we see in FMWT or ScanPower, but it should be substantially better than we are today. And we saw last year, I think the same period, we had around seven, 7.5%. So there you can see a little bit where we are heading.

Yeah. And my next question is regarding M&A. And I mean, do you see yourself doing some acquisitions in the segment there? Or, I mean, if the market is not as small

So M&A is definitely of interest and we're working closely with the board and we have a team set to scout for M&As. At this time, there could definitely be that we are buying ourselves and consolidating that. But I think the Blackstar Tech is more of an acquisition that I'm keen to do. It gives us growth opportunities that are more imminent. it gives us a possibility to both support existing plans and new build and i think that's a lot of where the focus for investments is going to be and i think we have a pretty strong setup and decommissioning in the market we operate anyway we are 250 people in germany with high competence we have the tools we have the partnerships so i think we need to do better with what we have there in terms of profitability and then focus more our m a on on the new build and operating plants okay

And my last question is regarding, I mean, with the new management team in place, can you talk more about your strategic vision coming two to three years? I mean, a change in the DRPS is ongoing, as you said, but will it make any major changes? How will you structure and run the other business areas? I mean, you talked last starting course regarding some positive synergies, but I'm more interested in a more overall strategic vision there.

Well, of course, this market is changing pretty fast for being in the nuclear sector with a lot of new initiatives and opportunities for us. I think one focus we discussed is the US. There's going to be significant build out and a lot of this market is a US market. So capitalize on that. So becoming significantly large in the US is one key milestone or cornerstone of what we want to do. And then to make sure that we now, which I think is very interesting, this port that we are going into and thanks to where we are, Sweden is one of the best places to be to really come into new build and really learn that industry. So to be a key player in the early phases and the build out of new nuclear, I think it's going to open a lot of opportunities and maybe for certain areas that we have not been in for a long time. closer to building, understanding how you run a reactor, things that we did 15, 20 years back will also be of interest. So I think that's really the interesting part of this quarter that we are both the Vattenfall announcement, where we are closer to those vendors that they are talking to, and the thing we announced on Blytka and Evrock are proof points that new build will be super important for us to be take part of. And we are in the position in the market that we will be part of these projects and learn and take advantage of that. Taking advantage of that and making sure that we capitalize more on the U.S., including M&A in that market.

Thank you very much. That was all for me.

Thank you.

As a reminder, if you wish to ask a question, please dial poundkey5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.

Okay, thank you very much for listening into our earnings call of Q3, and we look forward to meeting you all again when we report our Q4 results. Thank you.

Thank you.