Hi everyone, and welcome to W5 Solutions Q3 2026 results presentation. I'm Hannah Falkenström, Director of Communications and Investor Relations at W5 Solutions. Joining me today is our CEO, Evelina Hedskog, who will take us through our key developments, financial performance during the quarter, followed by priorities going ahead. We will finish with a Q&A session, so please feel free to submit your questions through the chat at any time during the presentation. And we will do our best to answer as many questions as possible. And with that, over to you, Evelina. Thanks, Hannah. Good morning, everyone, and welcome to this presentation. I will, as always, kick off by giving you a short introduction to W5, who we are and what we do. And after that, we will dig into the numbers. So W5, we are a Nordic defense company with home markets in Sweden, Norway, and Finland. As of today, around 270 employees in the group, and they are working within our 3 business areas: integration, training, and power. Looking at our customer base, it's a mix between defense agencies and other defense industry. So on the agency side, it could be armed forces or procurement agencies that we are selling to. And on the industry side, it's many times the bigger primes such as Saab, Kongsberg, or BAE that we are selling to. So W5 was founded in 2018 and was then a merger between 3 companies, and ever since we've made a number of acquisitions. And today, the result of that is the fact that we have 8 different product areas within the group, and the product areas are then divided into business areas, the business areas that we see here on the slide. So starting with integration, the offer we have there is deployable defense infrastructure and systems integrations to go with that. In training, we have advanced live-fire training systems, And within business area power, we offer reliable power solutions and simulator hardware. And generally speaking, the absolute majority of what we do is hardware products, and important to know is that we design, develop, and manufacture them. in-house at our different operational sites in the Nordics. So a broad range of products within the group, and with that comes also slightly different business models in how we operate. In this slide, we're trying to describe 2 of these, and I would say the absolute majority of the business models is either the customized and project-based selling or the more standardized and scalable. And both these models are present within each and every business area. But on a general level, Business Area Integration and Power, they have the majority of their products and also their contracts is customized and project-based, whilst in Training we have more of the standardized and scalable business model. So this means, and we will see this in later slides as well, that the order-to-delivery is much shorter. The turnaround time in training is much shorter than it is in integration and Power. So that was the very short description of the group. Financial targets, we communicated these 2 years ago and they are still valid, and we are aiming at having net sales of 1 billion SEK. And a profitability of 10% in EBIT margin by the end of next year. The strategy how to get to these targets is a mix between profitable organic growth and acquired growth on top of that. And when we set out to meet these targets, we said that we would have at least 20% organic growth to support this journey, and I think it's fair to say that we are definitely meeting that target and exceeding it, and we will come back to growth rate later in this presentation. So with that introduction to W5, I will now talk about the financial performance for the 3rd quarter and year to date. So looking at the key figures for the 3rd quarter, we can see that the order backlog remains strong. The order intake was mainly small and medium orders that came in during this quarter, but we see continued great interest We have a lot of interesting prospects in the pipeline, so we feel confident with the situation with the order backlog and demand going ahead. Net sales, we had a huge increase. It increased by 75% compared to the same period last year, and 51% of this was organic growth. So this is good, but given the estimated growth rate that we have, it's still not good enough. And the reason for why we're not reaching the prognosis in terms of net sales is that we have unfortunately been late in our project deliveries. And why is that? Well, it's primarily due to late design changes and also delays in deliveries from sub-suppliers. Going down to the gross margin, for those of you who follow us, you know that the gross margin was down to 42% in the second quarter. We are now up to 49%, which is great, and this is reflecting some initial effects of the measures that have been taken to strengthen the gross margin. But important to know is that gross margin will always vary between quarters. And of course, this has to do with the project mix. And the project mix can be both within business areas and between business areas. So that's important to keep in mind. And then last but not least, the EBIT margin, then of course impacted by these delays, and it ripples down together then with an insufficient gross margin, and that gives us the EBIT result that we see in this quarter. Some words on the operating cash flow, down to minus 44 million SEK here, and it's more or less entirely connected then to the delays in deliveries where we have a lot of capital tie-up before we can deliver these projects to the customer. And this is the slide I always show to show the seasonal variations that we have within the industry, where Q1 and Q3 are normally a bit slower. And I think that's fair to say that that's applicable also for the 3rd quarter this year. Diving down into the 3 segments, then our business area, start looking at the backlog. We can see that Integration and Power, they have significantly grown their order backlogs since last year. Whilst Training is down from last year. And you remember in the beginning I talked about the different business models, and this is definitely an example of this. We have Integration and Power, in their backlogs, we have business for the years ahead, whilst Training has a much faster turnover. The number in backlog for Training in Q3 last year was exceptionally high. We had 2 main contracts coming in during the summer and right after summer. So of course, we are striving for a bigger backlog for Training, but overall it will probably always be lower than we have in the other 2 business areas. Moving on to net sales and EBIT per segment, you can see that they are all reflecting the overall picture of strong growth. But insufficient profitability. And the reasons behind the results in the different business areas varies a little bit. Looking at Integration, I would say that the profitability in Integration is suffering both from delays in important deliveries, big delivery programs, and also suffering from a project mix which is driving the gross margin down. In Power, it's more or less only connected to delays. So as you can tell, also the growth is not as big in Power. as in the other 2. And this is reflected on the bottom line as well. So in Power, the main problem behind the red figures is definitely the fact that we are not able to deliver as much as we, we want to this quarter. And in training, Of course, compared to last year, a very high turnover here, but still seasonal aspects to it and in order to be profitable in Q3, we would have had to have a higher turnover here. But in this case, it's not connected to to delays in deliveries. It's more just the seasonal effect of a lower turnover in Q3. If we look at the year-to-date figures, I think also here you can say the same thing. I mean, it's reflected all over. We have a huge increase in net sales, but the EBIT is is not where it should be. Looking at the group figures, important to remember is the one-off cost that we had during last quarter in connection to the acquisition of Katie Shelter. So we have 20 million SEK in the cost base this year that is a one-off connected to the acquisition. Okay, so to summarize this situation then and to talk a little bit about the measures implemented to mitigate the position that we're in and also talk a little bit about what's happening going forward then. Um, One of the main reasons that we find ourselves in the situation that we do now in Q3 is lower-than-expected net sales. So despite the very strong growth, it's less than expected and less than what we need. The reasons behind these delays, they are driven by late design changes, customer-driven late design changes, and also late deliveries from sub-suppliers. And you might say that, okay, are we saying that this is not our fault? No, absolutely not. But it really exemplifies, I think, the fact that we are now W5 has now sort of moved up in the food chain. We are delivering much larger and more complex projects than ever before, and with that things like late design changes and a more complex sub-supplier chain, that naturally comes sort of with the package when we take on these programs. And it's up to us to be able to manage that in a good way. But nevertheless, these are the reasons behind the late deliveries. When it comes to the gross margin, last quarter we talked about this and it's of course still valid. We see increased costs in the supply chain that we haven't been able to yet mitigate with increased prices. And it's also a little bit about the project mix and the timings in terms of higher and low margin contracts and when we are to deliver them. And of course, then it all boils down to or ripples down to the EBIT level where all these aspects gives a negative effect on the profitability. So what have we done to make sure that we get out of this negative position as soon as possible? We have and are continuously increasing prices where we can. And this is both about making sure that when we hand out new quotes that we have the prices needed in them. But it's also a lot about renegotiating framework agreements that we might have over time. And I think we see a lot of positives there. And it is possible for us to make these price changes, of course, depending on the fact that we have a very good, high-quality portfolio of products. that the market is interested in, and hence it's possible to make these price adjustments. But hard work has been done there, and it will be reflected in the numbers going forward. We're also intensifying the efforts around improving the efficiency in our supply chain, and that goes for both the procurement side and the production side. So a number of initiatives there that we are now intensifying during the fall to make sure that we get as much effect as possible there. And then last but not least, as was presented in the report today, we have introduced a savings programme, and we are cutting 30 million in indirect costs. from the current cost base. These measures have already been taken. We don't see the immediate effect of it, but that's something that we will also see going forward. So all in all, we see some improvements already here. For example, the gross margin is getting a bit better than before the summer. And we have implemented a lot of changes now that will come to effect during next year. So, um, To conclude this, I mean, the position right now is not sufficient, but going forward, we are confident that we have identified the problems and we have implemented measures to mitigate this and make sure that we can do better next year. And we are still confident that if we execute this in the right way, it is possible to reach our financial targets for next year. So we, we keep to the promise that we will do our utmost to reach the 1 billion SEK and 10% EBIT next year. And it is doable if we execute these measures in the right way. However, Q3 has been challenging and we need to be transparent with the fact that these delays in deliveries will unfortunately transfer into Q4 as well. And as you know, we had a preliminary earnings update in September. And in today's report, we are revising those numbers somewhat. So the projected net sales growth year on year is now 50 to 60%, and the prognosis for the EBIT for the full year is minus 25 to minus 35 million. So before I conclude this brief, also some words on the directed share issue that was conducted in September. Where we raised $165 million. And that cash is, of course, extremely important to us in the growth that we are now finding ourselves in and that we see will continue going forward. So part of this capital raise will be used to handle the working capital situation, because even though we are very diligent when it comes to working with working capital and trying to reduce the capital tie-up, as much as we can, it will, in absolute number, it will grow over time when we grow. So we need this cash injection for that. And also, we will use the proceeds from the share issue to repay debt and make sure that we have some more flexibility, financial flexibility. So to sum things up then, I think I've said all this before, but it's worth repeating. The delays in deliveries, they not only hit us on the top line, but all the way down to EBIT this quarter. And these challenges will remain during Q4. The growth is strong and we see continued strong growth going forward as well. Gross margin has improved from last quarter, and I think that that's important that we see improvement from the different measures that we have now implemented. And we have strengthened the cash position through this directed share issue that I just mentioned. So priorities ahead, or I mean priorities as we speak, of course, is the project execution and deliveries. Everything every day right now to make sure that we have as many deliveries as possible before New Year's. And at the same time, we are working really hard to strengthen the profitability through price adjustments, through more efficient sourcing, and also the cost savings program for indirect costs. So a lot of work is ongoing. We might not see all the effects of it right now, but we feel confident that we will get effects of this in 2027. And again, we're still aiming at the €1 billion and 10% EBIT for next year. So that concludes— to the Q&A. Yes. Yeah, it's time to start with the Q&A session. And it has— we have several questions already, so I'll start right away. So first one, Evelina. You mentioned continued challenges for Q4. Given that it's already the 5th of November, how are things progressing? Yeah, I mean, it's really day to day. We check how we're doing. And as I said in the briefing, we can conclude that even though it's I mean, according to the prognosis, this will be the most— it will be the highest net sales in a quarter for us ever. So of course, it's extremely high pace in the organization right now. And for each day, we're sort of tracking what's happening. So I'd say that we have a good pace. It will be a fantastic quarter. Isolated, the quarter will be fantastic, but we still see some things that will slip. into January. Moving on, because we have quite a few here. When will you see the effect of the measures you've been talking about? Yeah, sorry, I'll read the question again. When will you see the effect of the measures you have taken to improve profitability? Yeah, as I said, I think we see a little bit on the gross margin now, and we have sort of pushed the button for many of these activities, especially on the cost-saving side, already. And of course, it will take some months before we see the effect of this. But hopefully some small effects during this year, but the absolute majority will come in 2027. Thank you. And staying on this topic about the measures, what measures have you taken to prevent the same quarterly variations from recurring? Yeah, that's a very good question. I think we will always have variations between quarters. I think, number one, because that's how the market behaves. But it also has to do with the, again, the broad portfolio that we have, different types of products, different types of business models. And this reflects a little bit in that sort of natural volatility in key figures as well. Gross margin, for example. So we're working hard to try to stabilize it, but you need to look at it in a longer time perspective than maybe just a quarter to to analyze it. And then, of course, it's also about, I mean, accounting principles. And if we're using percentage of completion or point in time and so on, that can also have an effect on the stability of a certain key figure. Looking at— there's a question about our costs. Have you made any organisational changes, and how would these affect operating expenses? So in this cost-saving programme of 30 million SEK, the absolute majority is other external costs. And in that lies costs for consultants. And of course, it's a little bit sort of It is per se indirect costs, but many of these consultants are used in the delivery of our contracts. But on a general level, the cost cuts are cutting dependency on consultants, and hence we haven't done any reorganisations. But we have prioritised different areas. Areas where we might have used consultants to a larger extent, and we're slowing back on that and then pushing other areas where we can use our own personnel more. Yeah. Thank you. Here's another question. To reach your target of a 10% EBIT margin in 2027, how much of the improvement will come from stronger gross margins versus improved operational efficiency? Efficiency. I mean, it's a numbers game and we definitely need to have rigid cost control and make sure that the cost savings program works. We also need to make sure that the measures taken to increase the gross margin gives effect. And overall, I would say it's probably a 50/50 in terms of where we should find the the profitability to reach the 50%. So they're equally important. 2027? So, I mean, the order book, we saw that one, then that one is good. We have not communicated any larger order intake this quarter. So of course, the question is what happens going forward? And I would say that we have a very good pipeline of both small, medium, and large-sized prospects. We have them for all 3 business areas, so I'm confident that there will be some bigger contracts as well down the line, and that we will continue to build the order book. Staying a bit here on to foresee the 2027, how does the order pipeline look for Q4 and into 2027? Here's another question. When do you expect to see the first call-off orders under the FMV framework agreements announced in Q2? within training? So again, we haven't published any big news this quarter, but actually the majority of the order intake that Business Area Training had this quarter was through the framework agreement, and there are a lot of ongoing discussions on new call-offs as well. So we slowly start to see that it's The work is progressing and this framework agreement will be very important towards the Swedish market for the foreseeable future now. Thank you. Next question. How realistic is the 2027 targets at this stage? What needs to change over the next 4 quarters? to achieve an EBIT margin of 10%? I think we've referred to it in different ways, but yeah, I mean, it's the cost control needs to be there. We need to do more with less resources than we have done this year. We need to work actively with the— and we are now, but we need to keep the focus on the increased prices and the efficiencies in the supply chain. And of course, also to continue to win business because we don't have a billion SEK yet in the order book for next year. So of course, we need to win business as well. So it's not easy. It's never been easy. I mean, it wasn't easy when we set these targets 3 years ago either, but we are getting there and we We know that it's possible and it will require a lot of us, but it is doable. And again, the combination between cost control and efficiency and then some more selling. So We're all very excited about reaching this target. So I'm going to do everything we can to do it. Yes. Next question, moving on. It's quite long here, so I'll read it for you. Okay. W5 is described as being largely project-based. How is this handled in the financial reports? How do products and work in progress affect earnings and the balance sheet? For example, inventory has increased by approximately 100 million SEK. Is this reported as a cost? In your opinion, how does this affect the accuracy of the financial reporting? Oh, that's a CFO question. Yeah. Yes. I mean, a lot of questions. Yeah, but, but yes, it's, it's an inventory as work in progress. until we have delivered. And of course, then it's a cost. But it's also depending on if we use a percentage of completion. for a certain project or if it's point in time. So it depends a little bit how we report. And it's true that we have this mix of both. sort of more product-based, the fast-moving off-the-shelf products, and then the development projects that might sometimes be only hours that we spend on that for years before we then finally come to a small series production of a simulator or whatever it can be. So there are different models, and of course this makes it a bit tricky to sometimes interpret the numbers, and there is some volatility as well. Hopefully I answered the question to some extent at least. Yeah, so it has to do with the delays. Well, in this case, the inventory buildup is due to the delays because it's connected to that. Yeah. I think that's a good question. Otherwise, the person has to— Yeah, we can always come back to writing if it was— if we need more clarity. Yes. Another question, moving on. Increasing prices in quotes and tenders tend to decrease top line. How do you view the price increases affecting growth ahead? Yeah, of course. I mean, it's always a risk of people not coming back if you increase the prices. But I think that what we've learned over the last months, where we in some instances have made quite significant price increases, is that again, our products, they keep— they have a level of quality that the customer is ready to pay for. So, so far, when it comes to increases in already sort of framework agreements or something that we have already negotiated at some point with the customer, we've been successful in increasing the prices. And of course, we might lose one or two new contracts because we've increased the prices, but again, we see a huge demand from the market and the prospect pipeline is really, really good. So hopefully it shouldn't have a an effect on the top line. Thank you, Evelina. Moving on to the next, it's actually the last, pretty much the last question in the chat at the moment, but of course you can come in more. Yeah, will the directed share issue be enough if the delays continue? Mm. Um, I mean, we've— it won't last forever. I mean, it depends on what happens in the future. But the way we look at it, our absolute aim is to make sure that this share issue is sufficient to help us with the working capital needed up until reaching the financial goals that we have communicated. Yes. Well, I'm giving the listeners time to maybe add some questions. But otherwise, I would say that it's time for wrap-up. But just one final question before we do that. We talked about looking into the future here. So I'd like you to— if we look into 2027, what are the key priorities for W5? As a final wrap-up? Yeah, again, it's the year that we should reach our financial targets. And if I were to choose between the two, of course, the profitability is now the absolute focus. We want to reach the billion as turnover, but it is the profitability that we are focusing on. And that's what we— that's where we obviously need to make the most progress. So it's all about profitability. And with that comes a broad range of activities and we're implementing them, we're following up on them and Yeah, so, so a lot of work going ahead, but we have the order backlog and the prospect pipeline to support it. So yeah, so in short, profitability focus for 2027. Okay, thank you, Evelina. Thank you, Hannah. And thank you all for listening in today. If you come up with a question or you feel that we didn't get through with your questions, uh, please contact us at ir@w5solutions.com. This presentation is being recorded, so it will be available on our website. Until then, we wish you a great day and take care.