W5 Solutions AB (publ)

Hi and welcome to today's presentation of W5 Solutions Q2 Results 2026. I'm joined here in the studio by our CEO Evelina Hedskog who will give you a brief presentation of W5 Solutions followed by highlights and financial developments during the quarter. At the end we will conclude with a Q&A session, so please submit your questions at any time during the presentation and we will answer them one by one. With that, the floor is yours Evelina.

Thank you, Hanna. So good morning, everyone, and welcome to this presentation. So I'll start a little bit, like Hanna said, with W5, who we are and what we do. And we are a Nordic defense company delivering mission critical solutions that strengthens military operational capability. That's who we are and what we do. Right now, operations spread across the Nordics, additional sites in Finland since the last quarter, and we call Sweden, Norway and Finland our home markets, whilst the export market is primarily focusing on Western Europe. Right now, around 270 employees in the group. And looking at the customer base, it's a mix between defense agencies and industry primes. And we are listed on Nasdaq First North since 2021. So again, one group, one W5, but offering multiple capabilities. And we do this through our three different business areas, integration, training and power. And in integration, what we have there is an offering of deployable defense infrastructure and systems integration. In training, we find advanced live fire training systems. And in power, we have reliable power solutions and simulator hardware. So that's the offering throughout the group. And to give a little bit more flavor to this, we can say that we have sort of two main business models in W5. The first one is project-based contracts. that very often is related to customized solutions with smaller series. And then we have more of an off-the-shelf type of contract. We have standardized solutions and larger series. And within each of our three business areas, there's a mix between the project-based and the off-the-shelf business model. But on a general level, you can say that integration and power definitely have more of the project based whilst in training, there's a majority of the off the shelf contracts. So that gives you a little bit more info around how we operate. Okay, so the financial targets that we have and that we're striving towards are the same as they've been for the last two years. And we say that by the end of next year, we want to have a net sales amounting up to 1 billion SEK and an EBIT margin of 10%. And the journey, how to get there, is a combination of acquired and organic growth. And I think it's fair to say that today, the numbers that we will show, we can see that we are doing both. With regards to the EBIT margin, still have some way to go. But all in all, taking steps towards these two financial goals that we have. So some highlights, important events that happened during this last quarter then. But to kick off, I think the absolutely most important thing to talk about is the fact that we have closed the acquisition of KT Shelter. And what does this mean to us? Well, it means that we enhance our portfolio with deployable shelters for critical defense assets, primarily on the air side, but also more in general terms. It strengthens our footprint in Finland, as we saw on the map in the beginning of the presentation. And this gives cross-selling opportunities for the entire group. And yeah, the acquisition was closed on the 25th of May. So during June, we have KT Shelter numbers in the books, and they now belong in business area integration. So when we look at integration numbers today, it's KT Shelter numbers included there. So this closing was, of course, one of the absolute biggest event during the second quarter. We have also communicated a press release with this contract that we see in this slide. It's Business Area Power securing an order of 46 million SEK towards the Swedish Defense Material Administration. And this contract is a bit different from what we would normally do in business area power. This is a contract for fixed power installations in the training facility. And we are acting as prime with a subcontractor helping us to deliver this scope. And the scope is then for project management, system safety, and then a complete 400 Hertz power supply system for this training center. So very exciting contract and something we'll see if we see more of in the future. Then last but not least, the third thing I want to highlight from the second quarter is the very important framework agreement that we have now signed with the Swedish Armed Forces. Residing in business area training, the scope for this framework agreement is focusing on service support and equipment for training, but also for simulation systems. So it is also partly connected to the power business area. The term of this agreement is initially three years, but with an additional six years that can be added. And when the Swedish customer estimates the value of the nine-year term, they say this is probably around 700 million SEK. But so far, it's a framework agreement. So far, it's what we sometimes call a hunting license. This is a framework that will help us in our sales process. This is a framework that will help the customer in their procurement and facilitate call of orders from W5. So this is a contract vehicle that we hope to be using a lot now in the future. Okay, moving on to numbers of for the quarter and year to date. So looking at the overall picture for the group is definitely a bit of a mixed bag this quarter. So if we start with the left column and the order intake, we can conclude that yes, we had this 146 million SEK contract for business area power. But apart from that, there has been a lot of medium and small orders coming in. So the total order intake amounts to 234 million Swedish krona in the period. And yes, the arrow is pointing down because last year it was an exceptionally good order intake right before vacation. But we are, I think we feel confident with the fact that 234 in order intake this quarter, it is a solid order intake and we feel confident in the demand from the market. And this is also shown in the grown order backlog where we also have some contributions from Katie Shelter. So looking at the order book, We are now up to 865 million SEK. Moving on to net sales then. The arrow is definitely pointing up. We have a growth compared to last year, same period of 105%. And yes, acquired growth from KT Shelter, but It's actually 66% of this that is organic growth. So regardless of acquisitions, we are really showing that we can grow our production capacity this quarter. On the negative side, then, the EBIT margin is not what it should be, and there are two main contributors to this. The first one is the fact that we have some transactions-related one-off costs that amount to a little bit more than SEK 17 million in this quarter. So if we adjust the numbers by that, we end up with an EBIT margin of minus 3%. That should then be compared to the minus 7 last year. So in that sense, we have a progress. That said, we are also struggling with direct costs, direct raw material costs in the deliveries this quarter that are hampering the gross margin and also then giving a negative effect on the EBIT margin. So these are the two major contributors to the fact that the EBIT margin is not what it should be in quarter two. Operating cash flow, something we are, well, the entire working capital is something that we are keeping a close eye on now with the very intense growth that we find ourselves in. And we're happy to report that we had a positive operating cash flow of 41 million this quarter. Okay, moving on, looking at the historical development. Every time we look at this slide, we talk about the seasonal variations, and I think it's fair to say that we see them this year as well. And again, remember that we also have transactions related one-off costs reflecting in the negative EBIT margin here. But in terms of net sales, we see the same pattern as we normally do. Okay, a little bit more then about our three different business areas and operating segments. Starting with order intake and order backlog. I said earlier that we had exceptionally good order intake this quarter last year, and we still think that we have a solid and stable order intake this year. But as you can see, none of the business areas have the same order intake in quarter two as they did in the corresponding period 2025. Even so, both integration and power have increased their order backlog, whilst training are not reaching the same numbers as last year. But then please keep in mind, order to delivery is a much shorter cycle in training, so we can see fluctuations over time to a larger extent here when it comes to order backlog. And again, the framework agreement signed with the Swedish Armed Forces before the summer, that is really a tool to work with now in order to build backlog and order intake for training in the coming months. Moving on to net sales and EBIT per business area. So starting with integration, here we can see numbers then including KT Shelter. But for integration and also for training and power, these numbers include the corporate costs and also then the extra 17.3 million that we see connected to the acquisition of KT Shelter. So numbers here are hampered across the line because of transaction costs. That said, let us look a little bit at the different aspects then of what we see in front of us. So in integration, here we have more than a doubled net sales and the absolute majority contributed to that is Katie Shelter. and if we look at the profitability it's lower than last year again some transactions cost but we do have the a positive contribution from KT Shelter for the net profit and then we have again the gross margin problem with two high direct costs that we see in integration So there are some plus and some minuses that gives us this result in the quarter. So definitely lower gross margin than normal for a business area integration, which is then reflected on bottom line. Moving on to training. Here we see a very healthy development in organic growth. But again, big downside in the profitability. And again, it's the direct costs that is hampering the result. And moving on to power, I think this is an amazing proof of the fact that we can scale up productions. We have more than 100% organic growth in power this quarter compared to... last year. And even though we have some transactions costs that the power absorbs, they are moving in the right direction when it comes to profitability. And we have seen this over the last quarters now that power is still not contributing to profitability, but they are moving in the right direction. So I think that's something to keep an eye on going forward. Okay, so we've now talked about the quarter two, and this slide is really just summarizing year to date. The first quarter was, for those of you who remember, it was a net zero result. So I think the aspects of profitability within the business areas that we have talked about, it is more or less applicable to the entire first half of 2026. But again, looking at net sales for the group amounting to 357 million. It's a big step up from last year, same period. And looking at the EBIT then, we're now in minus 24. And for the full half year, First half of 2026, we have 18.5 million there related to transaction costs. So also in absolute numbers, we are doing better than last year if we adjust for the transaction costs. But again, we are not nearly close to the 10% EBIT that we are striving for. So more work needs to be done. So to summarize then, what are the key takeaways from this quarter? To start with, I think that we can, it's fair to say that we have a continued strong market demand and this is reflected both in the order intake and in the order backlog. We have a record high net sales. We grow 105% and remember that 66% of this is organic growth in the quarter. So that's quite amazing. The downside is that we have profitability challenges. We've seen it before, but we haven't really seen it before connected to the gross margin. So a lot of work needs to be put into this now to understand what we can do to make sure this is not a trend that is continuing in the future. So priorities, of course, cost control and efficiency improvements, mainly connected to gross margin. and growing the way we do. Capital tie-up is a big enemy, and we are working very, very diligently on the working capital and making sure that we keep an eye on this. So we need to continue that focus. Again, it's been there during the spring. I think we see positive effects of it, but it needs to be very closely watched. And last but not least, getting KT Shelter fully integrated into the group. We're taking good steps already, but this fall will be all about having them fully integrated into the W5 group. So I think that summarizes our second quarter and year to date. Thank you.

Yes, it's time for Q&A, the fun part. Well, I've looked into the chat and we got a couple of questions to go through. The first question is, like you said, this first quarter, shelters is included. It's the first quarter for us. How should you think about the business dynamics in terms of order backlog duration, lead times from order to delivery and working capital?