W5 Solutions AB (publ)

hi and welcome thank you for joining w5 solutions presentation of q4 and full year 2025 results i'm joined by our ceo evelina hedskog who will take us through the key highlights and financial performance during the quarter as well as the full year after the end of the presentation We will conclude with a Q&A moderated by me. The chat is now open, so please feel free to submit your questions at any time during the presentation and we will address them one by one. With that, the floor is yours, Evelina.

Thank you very much, Hanna. Welcome everyone to this presentation. I will kick off by giving a brief introduction to W5 as a company and then we will move on to the numbers after that. So at W5, our vision is to become the leading global provider of sustainable defense technology. And our mission, what we do at work every day, is to deliver cutting edge solutions to empower own and allied forces. That's what we do. And when we talk about sustainable defense technology, what do we mean? Well, to us, we see this in four different perspectives. First and foremost, it's about defending democracy. And our products and services should support the defense of free, open and democratic societies. And why is this? Well, it's because that we need these democratic societies in order to have sustainable development. Second perspective is responsibility by design. And our products are always engineered for long life and resource efficiency. Thirdly, we care about people and partners. So we strive to have safe, inclusive workspaces and responsible supply chains. And the fourth perspective is to be guided by standards and regulations. So we always strive to have certified compliance across every delivery. So these are the aspects that we think of when we talk about sustainable defence technology. W5 in brief then. The business is divided into three business areas, integration, training and power, and I will dig a bit deeper into them in a bit. Our operations sites are spread across Sweden, Norway and Finland, and our headquarter is in Stockholm. Right now, we are around 220 employees in the group. And if we look at our customers and the markets where we find them, the customer base is a mix between defense agencies and other defense industry. And it's a bit of a 50-50 split between them. And they are primarily based in the Nordics and in Western Europe. And we are listed on Nasdaq First North since 2021. A couple of years ago we announced our long-term financial targets and we say that by the end of 2027 we want to have a net sales turnover of 1 billion SEK and we want a profitability of 10%. And how to get there? What's the strategy? Well, it's a combination between organic and acquired growth, put it simply. And the aim is to have at least 20% organic growth every year and then add on acquired growth to that in order to reach this billion sec. And as of today, we can see that the growth from 24 to 25 was 27%. So we're definitely moving in the right direction there. And we're also working continuously with M&A and looking for the right target out there. So hopefully we could add on to this growing turnover with also acquired growth. So that's the strategy. That's how we plan to get there. So I said before three business areas and together they have seven product areas and I mean we're still quite a small company and you can wonder why do we have such a broad product portfolio and this comes from the fact that when W5 Solutions was founded in 2018 it was a merger between three companies And after that, we have acquired four more businesses. So that gives us the broad product portfolio that we have today. So if we start by looking into business area integration, where Gunilla Stomberg is head of business area, we have two product areas there, systems integration and shelters. Within systems integration, we have systems integration services, but we also have products such as special purpose harnesses and intercom solutions. Shelters, that's where we design and build really high-end customized container modules for the military customer. So products focusing on mobility and scalability. So that, in short, is business area integration. Moving on to business area training, headed by Toralf Johannesson. Here we also have two product areas, live fire training, defense and security, and the equivalent for sports and hunting. And these two product areas are, as you can tell, also divided into customer segments. Within the two, we have a full range portfolio of any type of hardware or software that you would need on either your shooting range or for more tactical training out in the field. And there are definitely commonalities between the product portfolio in these two product areas, but the route to market is different. So that's what constitutes the training business area. And the third one is power, where we have Tobias Johansson as head of business area. And Tobias has three product areas within his business area. And the first one is batteries and chargers. We come from a history of being experts in battery chargers for the military customer, have now also moved into battery manufacturing. On the Genset side, we are specialized in both generic power supply for military units, but also more tailorized solutions for specific systems. It could be a tailorized power supply for, for example, a sensor or a certain weapon system. And last but not least, simulation, where we have our expertise within the hardware. And as you can see here in the picture, it's a tank simulator. But we do different types of hardware all the way down to, for example, joysticks for cockpits. So that was the very short run through of what we do in W5. So now moving on to the numbers. And... Of course this is a very happy moment for me as CEO to be standing here and show arrows pointing in the right direction all over. We've had a fantastic last quarter of 2025 and that also gives us a really really good result for the full year 2025. We see extreme margins in this quarter and that has to do with the fact that we more than double the turnover compared to the average quarter for the rest of the year and that has a result on bottom line due to economies of scale. Also, the product mix in this quarter is, I would say, with a focus on deliveries from our training business area. And we will look at that a bit later. And within training, we have revenue recognition as a point in time. So we recognize the revenue when we deliver and we had a lot of deliveries this last quarter. So that is also contributing to an extremely good margin in this last quarter of the year. So moving on to the segments then and a bit more in-depth quarter four numbers for them. As you can tell, then integration and power keep on winning business. Training was a bit slower on the order intake side. Instead, they were outperforming the others in terms of net sales, as we just talked about. And as I said, for training, it's a point in time when it comes to revenue recognition. And for integration of power, it's more percentage of completion, which might give them a more stable net sales over time. I think the most important to highlight in this slide is, however, the profitability in power. We've talked a lot about the entire group and especially business area power having a top line problem, which has resulted in in a negative profitability earlier but now when we see power gaining momentum starting to turn the order backlog into deliveries and getting top line up we also see that they start being profitable so I think this is it's really something that is positive going forward now. If we dive into the order backlog and have a short look at the booked bill, you can tell by the pie chart to the left that the absolute majority of what we now have in the order backlog is to be delivered this year. So of course, what we want our sales department to focus on now is also to keep on building backlog for the years to come. And related to the 20% organic growth that we think we can manage or that we should manage every year, at least 20% to reach our long-term financial targets. As you can tell, the book to build for 2025 was 1.5%. Of course, also for deliveries after 2026, but it gives you at least a bit of a feeling of the growth that we are facing now going forward. A bit more in depth then on the order intake and backlog. Order intake for the full year was 730 million SEK. And when we closed 2025, we had 566 million in the backlog. Orders won during the year was more or less evenly distributed almost 200 for integration up to 314 for power training somewhere in between. But we do see that the backlog is different for the different business areas and this has to do with the different business models. So training has a much shorter order to delivery cycle compared to, for example, power that can have larger contracts ranging over multiple years. So the nature of the deliveries are a bit different between the three. And I think that's also reflected in the backlog. However, I think it's important to emphasize that if we look in the pipeline, we see equal interest for all three business areas. So this slide is to show a little bit the season variations that we see within the defence sector. Quarter two and quarter four are normally strong. For us this year quarter four was exceptional but as you can see it is the season variation that we expect as well. A bit extreme this year, but we've had a good quarter two and quarter four more or less every year historically as well. And diving into the P&L, also for the segments. For the group, we had a total net sales of 492 million SEC this year. And that gives us a 27% growth, as we talked about earlier. That's fantastic but I think what's even better is that we ended up with 38 million SEK in EBIT and that gives us almost 8% on bottom line and as you remember 10% is what we're aiming for so also here we're taking really the step in a step in the right direction. Net sales more or less comparable between the three. On the profitability side, integration is doing extremely well. Training is doing as expected. Power is struggling on the full year. And this is really due to too low returns. The turnover was too low in the first half of the year and before summer we managed to win a number of big contracts and I would say since August it's been full speed ahead down in Elmhult where power resides and as we could see in the quarter four numbers it is showing results also on bottom line. So this year negative numbers for power but it's not anything that we would expect going forward. So to summarize, both for the quarter and for the full year, we have strong results and they are really in line with the long term targets that we have. Net sales is record high, profitability in absolute numbers are also record high. We are now using our organization to its full extent. So in short, we are progressing according to plan and that feels really, really good. Looking ahead now we need to really focus on sustainable and profitable growth. It's fantastic to have this huge interest in what we do and a huge influx of orders but it comes with a big responsibility and we need to make sure that we deliver on time and with quality to our customers and we at the same time need to take care of our employees. It's good challenges that we see ahead but it's still challenges that we will have to handle. And in that then working proactively to prepare for these increased order volumes that we see coming. And last but not least, the backlog. Of course, if we ramp up production and deliver on our contracts, we need to backfill the backlog. So making sure that we work continuously with our sales organization and keep on having as good backlog as we have now or even better is key in keeping stability and visibility in operations going forward. So, yeah, with that, I give the word to you, Anna.

Thank you, Evelina, for that presentation. Like you said, it's time for, you didn't say that, but it's time for a Q&A session now. Yes. And we have received several questions through the chat and I will read them out in turn. So the first question I have, you mentioned earlier it's about that the demand remains strong between the product areas and you also secured several contracts during Q4. Could you elaborate on the new integration contract and what that means?