Kitron Stock

Good morning, and welcome to Kitron's Third Quarter 2026 Presentation. I'm Peter Nilsson, CEO of the Kitron Group. And with me, as always, is our CFO, Cathrin Nylander. Over the past year, Defense & Aerospace has led our growth. In the third quarter, Electrification, Connectivity and Industry stepped forward alongside it. That's what we mean by broadening the base. 9 months into the year, Kitron is a much larger company than a year ago, and our margins have improved as we've scaled. That's the story I want to leave you with today.

I'll cover the quarter, our operations, program wins, sectors and backlog. Cathrin will then take you through the financials. I'll close with our medium-term ambition and 5 takeaways, and then we'll open up for questions. Next slide, please.

Six numbers frame the quarter. Revenue was close to EUR 267 million, up 59% from last year and 49% of it organic. EBIT was EUR 25.2 million, and the margin held at 9.5% as it did for the first 9 months. The order backlog reached EUR 843 million, up 41% from a year ago and 6% from the second quarter with a book-to-bill of close to 1.2. Year-to-date, revenue is up 66% and the EBIT margin is 120 basis points higher than a year ago. Growth has come from our own sites and from Kitron Eltech, which joined the group at the start of the year.

Operating cash flow for the first 9 months were just over EUR 55 million. Cathrin will explain the quarter. The short version is we built inventory for deliveries in the fourth quarter and into 2027. Revenue was 10% below Q2. The supply chain stayed very tight as we expected midyear. Together with normal summer seasonality, we delivered a quarter in line with our expectations. What matters more is the shape of demand. Now orders outside Defense & Aerospace rose 63% from the second quarter. Electrification, Connectivity and Industry all booked more than they delivered, and that's what we mean by broadening the base. Next slide, please.

Three points on operations. First, execution. The margin held at 9.5% through the quarter with lower volume than the second. That's manufacturing discipline. 10 of our sites now built for Defense & Aerospace. In Horsens, the construction of our new facility starts early next year. In Ornskoldsvik, the site has now been cleared and construction will begin soon. All of our teams have moved between sites to ramp up production which's been needed the most. One operating model makes that possible. A flexible and well-trained workforce is one of our real strengths, and it showed again this quarter. Second, supply. Electronic supply chain stayed tight, and we expect that to continue into 2027. Third, new business. Electrification led the order intake with a book-to-bill of close to 1.9. Connectivity, almost 1.5 and Industry close to 1.3. Next slide, please.

New programs wins -- new program wins show where the future revenue comes from. We had over EUR 57 million of wins in the third quarter measured as annual run rate. That brings the first 9 months close to EUR 259 million. Connectivity gave the quarter -- gave around half of the quarter's value and Defense & Aerospace a little over 40%. Most of the value came from existing customers. And when a customer gives you more of its program, that's the vote on our execution. Winning a program is where the work starts. Our engineering teams now industrialize these programs together with our customers. Most of them reach volume over the next 1 to 2 years, and that's how today's wins becomes revenue in 2027 and beyond. One reminder again on the definition, wins are estimated run rate, not booked revenue and not part of guidance. Next slide, please.

Let's review how the market sectors have developed. 4 out of 5 sectors grew. Defense & Aerospace was close to EUR 124 million, more than double of last year and 46% of group revenue. Organic growth in the sector was 126%. This is European rearmament arriving as production orders, unmanned systems, missile programs, combat vehicles, naval hardware and tactical communications. Industry grew 32%, of which 16% was organic. At the midyear report, we described the industry as softer. It has turned with a book-to-bill of close to 1.3. Connectivity grew 26%, all organic with a book-to-bill closer to 1.5. Electrification grew 16%. The bigger signal is the orders or EUR 84 million in orders in the quarter, a book-to-bill of 1.86. Investments in power grids and power conversion are long term and our customers order on that basis. And although Medical Devices declined 5% to EUR 12.6 million, the book-to-bill rose to over 1.2. Orders were ahead of deliveries and several customers are growing -- are showing very strong growth into 2027. Next slide, please.

The order backlog, that's where our visibility comes from. At the quarter end, the order backlog was over EUR 843 million, up 41% from a year ago and 6% from the second quarter. Organic backlog grew 30%. As a reminder, our order backlog is firm customer orders plus 4 months of committed customer forecast. It's a measure of near-term visibility, not the full year. The mix is changing. Defense & Aerospace is 54% of backlog from 60% at midyear. Defense backlog is still up 38% from a year ago. The orders, however, do come in lumpier. And the other sector simply grew faster. Electrification backlog is up 54%. So now let's take a peak at defense orders.

After a very strong first half, Defense & Aerospace book-to-bill was just over 0.8. Our established defense primes ordered in line with deliveries with a book-to-bill of just over 1. The adjustment is with new Defense Tech. Several new defense technology companies are introducing new capabilities to counter emerging threats. We expect orders to pick up again as new capabilities are launched and industrialized over the next few quarters. Our 6-month demand outlook is EUR 613 million. That's the value of our customers' orders to us, slightly above the second quarter. And EUR 613 million is also how we book them for delivery. The challenge will remain a tight supply chain. The R6 is led by Electrification and Industry. That's broadening again now on the forward view.

And with that, I will hand over to Cathrin for financials. Next slide, please.

Thank you, Peter, and on to the Q3 financial highlights. Revenue in the quarter was close to EUR 267 million, which is up 59%, of which 49% was organic. EBIT at EUR 25.2 million is up 74%. The margin was 9.5%, which is up from 8.7% the third quarter last year. The margin improvement comes from cost discipline to growth. Material costs rose to 67% of revenue from 66.3% a year ago. Personnel and other operating costs fell to 21% of revenue compared to 23.1% last year. EBITDA was EUR 32.1 million, which is just above the 12%. Net income was EUR 17.4 million, which is up 91%. Following on that, earnings per share were at EUR 0.08 compared to EUR 0.05 a year ago. Net financial items were minus EUR 3.8 million, and the tax rate was around 18.6% in the quarter.

Operating cash flow was EUR 3.1 million against EUR 44.2 million last year, and I'll come back to the drivers on that on the cash flow side. Return on operating capital on a rolling 3-month basis was 35% against 26.3% last year. Net working capital at 16% -- 16.7% of sales, which is down from 21.6% and the cash conversion cycle moved to 69 days from 78 days. All of those coming very close to our strategic targets over time. And finally, net interest-bearing debt over EBITDA at 0.3x and the equity at 40.2%. So next slide, please.

Some short comments on the year-to-date 2026 financial highlights. And for the first 9 months, revenue was EUR 835 million, which is up 66% and EUR 56 million of that is organic. EBIT at EUR 79.2 million is up 89%. And the year-to-date margin as well as in the quarter is 9.5% and for the year and -- for the year and 120 basis points above the same period last year. And net income has more than doubled to EUR 58.8 million. And earnings per share are at EUR 0.27 compared to EUR 0.13. And again, operating cash flow of EUR 55.2 million against EUR 75.6 million last year. The balance sheet measures are the same as on the previous slide, so as they are measured at quarter end. Next slide, please.

Business sectors by region. Nordics and North America had revenue of EUR 121.6 million, which is up 33% and an EBIT of EUR 8.9 million. Inefficiencies due to tight supply chain brings the EBIT margin down to 7.3% in the quarter. Central and Eastern Europe more than doubled revenue to EUR 116.7 million, which is led by Defense & Aerospace products. EBIT was EUR 16.2 million and a margin of 13.9%. Asia grew 34% to EUR 31.3 million with EBIT of EUR 3.2 million and a margin of 10.2%. At quarter end, we had 3,241 full-time employees against 2,781 a year ago, which is an increase of 16.5%. Next slide, please.

Organic and inorganic growth. So Kitron Eltech has been consolidated since 1st of January, so it has no prior year comparable. The slides separate it out. Excluding Eltech, revenue grew close to 49% to almost EUR 250 million, and Eltech added just above EUR 17 million, mainly in Defense & Aerospace and in Industry. Organic growth was 126% in Defense & Aerospace and 16% in Industry. Organic backlog at EUR 778 million, which is up 30% from a year ago. Kitron here added EUR 65.2 million. So next slide, please.

Order intake. Order intake was EUR 315.8 million, up 11% from second quarter. Organic intake was over EUR 290 million. Book-to-bill was 1.18 for the group and 1.16 organic in the quarter. And for the first 9 months, book-to-bill is 1.16, of which [ 1.09 ] is organic. Orders outside Defense & Aerospace rose 63% to EUR 250 million from the second quarter. And Electrification had a book-to-bill of 1.86, Connectivity 1.48 and Industry 1.27. And as Peter commented on, Defense & Aerospace was at 0.81 after a very strong first half. And as a reminder, book-to-bill is order intake divided by revenue for the same period. Next slide, please.

So cash flow and working capital. Operating cash flow was EUR 3.1 million in the quarter against EUR 44.2 million a year ago. Two things explain the difference. First, we built inventory. Inventory and contract assets rose by EUR 40 million in the quarter. This is material for deliveries in the fourth quarter and the first quarter of 2027. In a tight supply market, securing material early protects deliveries. And the inventory buildup was partly offset by higher trade payables. Second, the comparison, the third quarter last year included large initial customer deposits and hence, the deviation. Net working capital rose to 16.7% of sales, still a strong number. Customer deposits came down by EUR 13 million to EUR 110.5 million. Deposits and prepayments are held under contract as security for receivables, inventory and non-cancelable material and are released as that exposure runs off or product is shipped. The cash conversion cycle moved to 69 days from 60 in the second quarter. Capital expenditure on property, plant and equipment was around 2% in the quarter. So next slide, please.

And on the financial ratios. So net interest-bearing debt at EUR 38.3 million at quarter end against EUR 58.6 million a year ago and which is then 0.3x last 12 months EBITDA. Net gearing was 0.10. Our equity ratio is now above 40%. And this balance sheet gives us capacity to fund continued growth with capital discipline.

With that, back to you, Peter.

Next slide, please. There we go. Thank you, Cathrin. Let's talk about our medium-term ambition of EUR 1.5 billion. It's really anchored in what we see today, a backlog of over EUR 843 million with over EUR 1.3 billion of order intake over the last 12 months. EUR 1.5 billion is a number we can trace back to programs, customers, technology development, capacity and the increased need of manufacturing expertise and the speed that Kitron can deliver. Three themes carry it. Electrification, orders of EUR 84 million in this quarter shows the theme of our order book. Grids worldwide must carry more power over longer distance at higher capacity. At the end of the line, the power must be converted into the right form for industry, homes, transport. At each step, electronics and systems are needed to control, convert, protect and monitor power. That's where Kitron comes in. We build these electronics and systems from circuit boards to complete and tested units, and we do it close to our customers in Europe, North America and Asia.

Second, industrial digitalization. The industry sector outlook has turned with a book-to-bill of close to 1.3, driven by advanced manufacturing solutions, mining and construction, maritime and subsea operations. This sector continues to be a core pillar of the company. Finally, European defense rearmament. Programs run over many years even when orders come in unevenly. 10 manufacturing sites now build Defense & Aerospace on one operating model. That's the platform we grow from. We'll say more about the road ahead on our Capital Markets Day on December 8 this year. Next slide, please.

Five things to take away. One, growth with stable margin. Revenue up 59%, 49% of it organic and an EBIT margin of 9% -- 9.5% in both the quarter and for the first 9 months. Second, order intake broadened. Orders outside Defense & Aerospace rose 63% from second quarter to a book-to-bill of close to 1.2. Three, order backlog, EUR 843 million, up 41% from a year ago, an all-time high. Four, Defense & Aerospace revenue more than doubled. Orders come in lumpy and long-term drivers remain in place. And finally, our 2026 guidance raised in the quarter, and now we project between EUR 1,050 million and EUR 1,150 million of revenue and EBIT between EUR 97 million and EUR 112 million. We will enter 2027 on a broader base than we started 2026 with. Next slide, please.

Thank you for listening. Before we take your questions, 2 dates. In the near term, our Capital Markets Day of December 8 this year, and we report the fourth quarter on the 11th of February 2027. Cathrin and I will now take your questions. Have you had a peak, Cathrin on what's going on in the Q&A side?

First, Stefan [indiscernible] asks, would a share buyback program come in consideration? And we will say currently, no, Stefan. We are in a quite strong growth path. We are -- we will prioritize that, our M&A strategy and our dividend policy.

And what's next?

Stefan as well assess Kitron security levels. We are a little bit unsure what you actually mean there. So if you can expand on that question, Stefan, later, that will be nice. And then we have [ Jasper ]. How does management see the timing of order recovery from new defense technology customers as their capabilities become industrialized? And what indicators should investors look for over the coming quarters to confirm this recovery is underway? Peter, maybe you.

I mean we have several projects that we are currently working on and traveling on also with project teams to make this happen. And if we see an order increase on this, it will probably be part of our Capital Markets presentation in December. Otherwise, the next point to look out for is the increase of the order backlog in February, unless it's an order over -- that corresponds to over 5% of our annual outlook. At that case, we'll do a press release on it. But there are several projects that have come pretty far. So I'm very happy about that.

Martine continues. Hi and congrats with the results. Book-to-bill on defense, 0.75 organic. It's a dip to most of the customer program change. Yes. I mean it's all new defense tech. As I said, on the prime side, it's just around 1. I think it's above 1 on the organic. Many of the large orders we received over the past -- over last year and into this year have been delivered now into -- or the early parts of Q3. So we're into new generations of products. Martine continues with several more questions here, quite a few. So Cathrin, do you want to take a couple?

Yes. Martine says, can you comment on net financial costs in the quarter and expectations forward? So we had a net financial of EUR 2.8 million, EUR 2.2 million of that is interest cost and EUR 1.6 million of that is argue or disarggue in this case. So I think you should focus on the interest cost because the argue is sort of hard to predict is our experience going forward. So interest level around there is not unlikely, I would say.

Cathrin, Martine continues Electrification, how much of the order intake is data centers and grid? Well, there are 2 really large customers on that front. And of course, from a volume perspective and a value perspective, it's the largest. But when you look down the list on other customers, we see probably 60% of the customers are growing on Electrification. However, it doesn't really -- it becomes such a smaller part of the top line value on the order backlog. But it is there, the growth on a broad base. Long-term orders is really where the 2 largest have placed orders for well into next year and a little bit into the following year also.

And then finally, a couple of questions on price increase this quarter. I said around 5% to 7% in Q2. I really -- I don't have a number on it now. There was a few percentage points of new pricing went up in the beginning of July as we closed the second quarter and made sure that we repriced Q3 versus the material cost. But we see the list on every single component supplier and what the price increases have been quarter-on-quarter-on-quarter for this year. It was part of our webcast presentation on supply chain and sourcing that was held, I think, about 2 weeks ago. It's still available to watch online and the presentation is there also. You can see the manufacturers' names and how they have increased prices. Every quarter, they've increased prices from a 20% increase to 40% increase to 60% increase. So if we've had parts in stock, then we haven't been affected. Otherwise, the price has gone up. Also, the lead times on new orders are very long, so 50, 60 weeks. So if you order something in Q1 this year, probably you'll see those price -- cost increases in Q1 next year. And if you're ordering now, then you'll see the price increases in the third quarter next year. But 5% to 7% over the year is probably a good number to hold on to.

And then she continues and finalizes here on what our expectation on EBIT margins in the Nordics and the U.S. into Q4 and '27? Do you have a comment, Cathrin?

Well, I'm not going to comment on 2027 currently. But we have to realize that where the efficiencies hurt more is when we have hiccups in supply chain in the Nordics and the U.S. for sure. So I would -- being realistic, I would say they will not be at the level they have been before, but slightly above where they are currently. I will not go into more details than that basically for Q4. It is very difficult to foresee what's going to happen in Q4, but I don't think it's going to be below that for sure.

No I mean, I think the situation in the U.S. has stabilized. We saw a strong finish over the quarter in the U.S. and their projection is that they have things under control and volumes will continue to increase. So it's really the fastest-growing market when we look at new business also.

And U.S. is doing fine, I would say.

Yes. Nojus has a question. Congrats on the results. Thank you very much. I like it very much that the revenue base is diversifying. How do you see fourth quarter and '27 driven mainly by Defense or should other segments play a bigger part, in addition, any guidance for '26 dividend. I think that is a bit too early and not even been discussed on the Board level yet. The diversifying continues, but I expect order intake to increase on Defense also. And when those orders will happen, will they happen in the second half of '27? I know some customers are expecting that to happen. But if you haven't placed orders or secured material yet, that's going to be a tough challenge. So Defense is going to continue dominating. And then we have new defense tech with further orders coming in. And we'll see what that -- how much of that will happen.

I mean we can give Nojus some guidance. We did comment on share buyback saying that we need to grow because of -- we need the cash because of growth and M&A programs and dividend. However, we have had a dividend about 30% of net income the last 2 years. So you need a number, you should enter that one. I think that...

Yes. And can we share, Eirik asks here if we can share how the -- how they grow compared to the rest of the base. I don't have the breakdown with me right now. I know we've looked at it. And -- but if you look at smaller customers, they can have a 60%, 70% growth in next year in the order backlog or the demand outlook. And it really doesn't show up on the top line because if you're small, then you're small.

So it's a very nice broadening of the growth in -- within the Electrification sectors this quarter. So many of the customers growing at their size.

I mean there are customers doing EUR 20 million a year. And then they -- when we look at the demand now, it's EUR 30 million. So I mean they grow 50%. But it's EUR 10 million for the top line. So it doesn't really move the needle much. But many of those together, of course, have an impact. Price hikes for Q4. Is that still the case? Prices for Q4 should have been implemented on September 1. I haven't heard a big deal about it. So I can't comment on it. Two significant programs, one in Connectivity, predominantly from existing customers. So what sort of products are driving the new wins in Connectivity, the largest one was an expansion of the win we -- the part of that win was happened in the second quarter and was announced in the second quarter. And basically, it was what probably an 80% increase on that program. So more volume for the same product. I don't want to get into the specifics of the product. It's part of an advanced 5G design.

What's your confidence level that the new defense orders will pick up towards the end of the year? Well, I mean we have almost 1 month now into Q4. So I can't comment on what orders we've already picked up. But we are working actively with those programs and additional several customers have approached us also to start up production. So you'll know when we know and when we're ready to announce. I don't like speculating. But we are prepared, I can say that. In the second quarter, you pointed to memory high-end processes, high reliability PCBAs. I'd add FPGAs to that, which is probably one of the most constrained components as the main supply constraints. Is that still the case or the situation improved or worsened since the summer? Which way market sectors are affected most by the shortages today. All market sectors are affected, right? These are -- you look -- it's a broad spectrum from semiconductors to the broad base of electronics into PCBs, into plastics into -- I think where we've seen a slight ease is the capacity on aluminum, right? But advanced steel solutions, things like that, is constraints across the board. So you have to work very proactively and all the time, have your finger on the pulse, what's happening and talk to your suppliers and talk to management. And that's what we've done and continue to do.

Okay.

That's what we have for the Q&A, and we are out of time. So we have to get going into our other meetings. Thank you, everyone, for listening to our Q3 report, and we'll see you again, hopefully, in December on our Capital Markets Day.

Good morning, everyone, and welcome to Kitron's Q2 2026 Results Presentation. I'm Peter Nilsson. And as always, I'm joined by our CFO, Cathrin Nylander. Thank you for taking the time to be with us today.

The theme for today's call is on the slide in front of you, resilience by design. Across our markets, customers are reorganizing their supply chains around resilience and origin rather than lowest cost. That shift is structural, and it plays directly to the platform we spent the past decade building, distributed, disciplined and close to the programs that matter. Q2 is what it looks like in numbers.

I'll cover the quarter highlights, our operational position, the sector and order backlog picture and the strategic outlook. Cathrin will then take you through the financials, including a cash flow story we're particularly pleased with this quarter. I'll close with the case for our medium-term ambition before we open the floor for your questions. So let's get started.

Next slide, please. Q2 extended the longest run in Kitron's history: revenue of EUR 296 million; operating profit over EUR 28 million with an EBIT margin of 9.6%; the order backlog, EUR 794 million, up 56% year-on-year; and an operating cash flow of EUR 47 million in the quarter. I'll let Cathrin tell the story, but I'll say this much now. The cash engine is turned on.

The real story isn't in any single number. The real story is breadth. All 5 of our market sectors grew year-on-year, and all 3 of our regions did, too. Defense & Aerospace more than tripled and now represents around half of group revenue. But Connectivity grew 18%; Medical, 16%; Industry, 13%; and Electrification, 7%. The diversification we've been talking about for several years keeps showing up in the numbers. One thing to flag upfront, our Nordic and North America region delivered margins slightly below target. I'll explain exactly why when we get to the regional picture. It's a supply timing story, not a demand story.

With that, let me walk you through where we stand operationally. So next slide, please. Four points on operations and growth. First, execution, and it starts with our teams delivering customer ramp-ups across every site. In Central Europe, that discipline showed up as 14.7% EBIT margin as capacity expansion converts the Defense ramp into profit. In Asia, Malaysia reached breakeven in June for the first time. And what matters more is what comes next, a significant volume ramp through the rest of the year. The outlook is stronger here than the rearview mirror. This is a volume story.

And in Norway, we're building for what's ahead. The Longum site came into service early in the quarter, and now, we've largely completed the production transfers from Kilsund. The 2 sites will specialize: Kilsund on electronics and PCBA, Longum on high-level assembly and systems integration, so we can scale Defense work without losing focus.

Second, the supply chain, because that is the defining condition of 2026. The Electronics supply chain tightened further in the first half, and we expect allocation conditions to persist into the second half. This cycle is different from the last one. AI compute is structurally reallocating memory, substrates and board capacity. And industrial manufacturers now compete directly with data center demand for the same certified high reliability capacity. Our response is discipline, long horizon purchase orders, inventory commitments backed, in many cases, funded by our customers, dual sourcing and early escalation. Late supplier de-commitments and pushouts remain part of daily life. We planned for them, and we're managing this, not absorbing it.

Third, new business, and this is a point about the quality of demand, not just the quantity. During the quarter, we booked a broad set of new programs across all 5 market sectors, split evenly between new and existing customers while extending business in competition. We welcome new customers in Autonomous Defense, 5G Connectivity and Solid-State Power Units, alongside new programs in Ruggedized Edge Computing and Quantum Security. Individually, these wins fall below our threshold for public announcement. Collectively, they're exactly the diversification we've been building for.

Fourth, our 2026 outlook. We're now trending towards the top end of the ranges previously communicated, the EUR 900 million to EUR 1,050 million in revenue and the EUR 84 million and EUR 108 million in EBIT. Our task in the second half is converting demand through a tight supply chain, and the capacity keeps expanding where the demand is. Further expansion is in early planning, in some cases together with our customers.

Let's look at the sector picture. So next slide, please. Well, the chart tells the story at a glance, Defense & Aerospace is the headline, EUR 154 million in the quarter, up 234% year-on-year, now around half of group revenue. European rearmament, unmanned systems, missile programs, combat vehicles and naval hardware, structural demand that shows no sign of cooling. But the point I want you to take away is that every single sector grew. Again, Connectivity was up 18%, driven by industrial IoT and smart sensor solutions. Medical was up 16%, led by critical care. Electrification was up 7% with data center demand intact and a large grid customer program moving into serial production. Industry grew 13%.

The industry sector deserved a more -- deserves a more nuanced read than the headline number. This sector spans a wide breadth of customers from large Tier 1 operators down to Tier 3 and 4 specialists, and they're not all living in the same cycle. Mining and Construction is very stable in outlook. Our Robotics and Automation customers are in a genuine growth cycle. And many of the smaller customers indirectly -- that are indirectly exposed to semiconductor manufacturing and data center construction, energy solutions and maintenance are benefiting strongly from new rising demand.

Sensitivity to rising component costs varies between these end-user segments. The sector average hides more than it reveals. What aggregates the truth is the order intake, 1.4x book-to-bill ratio to date, the strongest ratio in the group. We now have 2 quarters in a row with every sector growing. At some point, the pattern stops being a quarter and starts being a portfolio. And that's the point of this slide. Defense carries the headline, the other 4 compound beneath it. Breadth is one of the reasons we have so much confidence in the year ahead.

Now to the order backlog and forward visibility. Next slide, please. As I said, order backlog stands at EUR 794 million, up 56% year-over-year, and about 1.5% below the record we set in Q1. I want to spend a moment on the sequential move because it's exactly what a healthy backlog should do. The decline sits at 2 sites where our largest defense and industrial programs are shipping. That's backlog converting into record revenue you just saw. Year-to-date, book-to-bill is 1.15, and it keeps refilling the book, EUR 653 million of order intake in the first half, EUR 1.25 billion on a rolling 12-month basis.

Defense & Aerospace now represents 60% of total backlog, up 45% from a year ago. Our R6, which is a forward-looking 6-month demand communicated to our customers and our system, stands at approximately EUR 609 million. As always, 2 things are to keep in mind when you read it. First, R6 is intentionally front-loaded. We deliberately built in roughly 10% of flexibility so the supply variability can be absorbed without disrupting customer commitments. That doesn't mean that we're looking at 2 quarters around EUR 300 million.

Second, Q3 is seasonally a softer for us, and that's a normal feature of our calendar, not a sign of demand weakness. What matters the most is the structural shape, a record level book, broad sector distribution, intake ahead of billings and customer relationships that are deepening. We've never entered the second half with this kind of forward visibility.

And with that, I would like to hand over to Cathrin for some financial details. So next slide, please.

Thank you, Peter. Let me walk you through the financial picture in more detail, starting with the headline numbers: revenue of close to EUR 296 million, up almost 72% year-on-year; EBIT of over EUR 28 million, up almost 89%; EBIT margin of 9.6%, 90 basis points higher than Q2 last year; EBITDA of EUR 35 million, up 79%; net income of EUR 21.4 million, more than doubled; EPS of EUR 0.10, double from EUR 0.05. Operating cash flow was EUR 47 million in the quarter against EUR 19 million in Q2 last year. That's the number I'm most pleased with, and I'll talk more on the cash flow slide in a moment.

On the balance sheet ratios, ROOC on a rolling 3-month basis at 39%, up 16 percentage points from a year ago; net working capital at 15.4% of sales, down from 26.8%; cash conversion cycle at 60 days, down from 104; net interest-bearing debt over EBITDA at 0.3x, down from 1.4x; net equity ratio, over 39%.

Let's take a look at what this means for the first half of the year. Next slide, please. The half year view puts the quarter in context, revenue of EUR 568 million, up close to 69% on the first half of last year; EBIT of almost EUR 54 million, up 96%, essentially doubled; EBIT margin of 9.5%, 130 basis points higher year-on-year; net income of EUR 41.4 million, up 135%; EPS of EUR 0.19, up 111%. And the line I would like to draw your attention to operating cash flow of over EUR 52 million for the half year, close to our strategic target of 80% of EBITDA.

At the half year mark, profit is converting fully into cash even while we fund close to 69% revenue growth. Very few companies growing at this rate can say that. Capital efficiency ratios, as you see on these slides, are the same rolling measures as the previous slide. They describe the business as it runs today: ROOC at 39%, working capital at 15.4% of sales; 60-day cash cycle; and leverage of 0.3x EBITDA.

Let's move to the regional breakdown. Next slide, please. Three regions and three tables. Starting with revenue, CEE is now our largest region at EUR 140 million in the quarter, up 147% year-on-year. This is the capacity expansion delivery supporting the major defense customer ramps. Nordic and North America came in on EUR 131 million, up 36%; Asia at EUR 28 million, up 25%.

On EBIT, CEE delivered EUR 20.6 million, a margin of 14.7%, well above the group target. Asia delivered close to 10%. Nordics and North America delivered EUR 10.6 million and 8.1% margin, slightly below target, and this is where the supply phasing showed up. Defense deliveries at specific Nordic sites moved to the right because boards and components arrived late, not because demand changed. June's exit rate points the right way recovering this region's margin, a clear second half execution priority.

In Asia, I want to highlight the milestone. Malaysia reached breakeven in June for the first time since we started the greenfield operations there. And with a significant volume ramp-up projected for the rest of the year, the outlook is stronger than the rearview mirror. The site is maturing exactly as planned into our non-China alternative for Asia manufacturing.

On headcount, we ended the quarter at 3,359 FTEs, up 36% year-on-year, but actually down slightly from Q1 as ramp proceeds to serial production. The capacity buildup supports backlog conversion is largely in place. The focus now is productivity, and sales per employee is recovering.

Now, the organic versus inorganic split. Next slide, please. Kitron Eltech, formerly DeltaNordic, was consolidated as of 1st of January with no prior year comparables. So this slide splits the quarter into organic and inorganic for a clean underlying read. Really at the headline, even excluding Eltech, revenue grew 62% year-on-year. Defense & Aerospace tripled organically, up 214%. Connectivity and Medical are essentially pure organic growth. Industry shows small organic dip against a strong comparator. The Eltech contribution takes reported growth to plus 13%.

On the order book, organic backlog is up almost 45% year-on-year to EUR 737 million, record level visibility even without the acquisition. Eltech adds EUR 57 million on top. One note on book-to-bill because the quarterly figure will attract questions. Organic book-to-bill was 1.05 in the quarter. Organic backlog is still building. Year-to-date, group book-to-bill stands at 1.15.

Now, cash flow and working capital, the slide I've been looking forward to. Next slide, please. The short version, the cash engine has turned on. The quarter delivered EUR 47 million of operating cash and year-to-date operating cash flow of EUR 52.1 million and close to our strategic target of 80% of EBITDA. So where did it come from? Receivables were collected at the record deliveries of the spring converted to cash, thus keeping receivables stable. Payables were rebuilt in step with the growing purchasing volume. This is the customer-funded working capital model doing what it's designed to do.

Even after all that, working capital still absorbed EUR 11 million in the first half, which is remarkably little for a growing to close to 69%. Net working capital ended at EUR 158 million, down almost 13% from a year ago in absolute terms, even though revenue is up 2/3. As a share of sales, that's 15.4% from 26.8% a year ago.

I want to be straightforward about one thing, Q2 was exceptionally strong. The structural story is the trend, more -- our cash conversion cycle has come down from 117 days 4 quarters ago to 60 days today. The improvement is disciplined, not timing, and it's what we intend to sustain through the second half. On the investing side, capital expenditure affects our capacity and footprint expansion, deliberate investment against contracted demand.

Let me close the financial section with the ratios. Next slide, please. The ratios on this slide are the cleanest summary of how the business is performing. Three things stand out. First, return on operating capital is 39% on a rolling basis, up from 23% a year ago. This is operating leverage on a stable cost base, and it puts us at the top of the industry.

Second, balance sheet strength. Net interest-bearing debt at just EUR 30 million, 0.3x EBITDA with net gearing of 0.08 and an equity ratio of 39%. We have ample room to fund the growth in front of us, including further M&A if the right opportunity appears.

Third, earnings per share, EUR 0.10 for the quarter, doubled year-on-year, EUR 0.19 for the half. Revenue growth is translating directly into shareholder return.

And the headline I'd leave you with, every important capital efficiency and balance sheet ratio improved year-on-year and cash conversion now matches the profit growth.

With that, back to Peter for the strategic outlook. Next slide, please.

Thank you, Cathrin. Encouraging numbers, and something to be really proud of. So what does our medium-term outlook look like? Why is EUR 1.5 billion that we're talking about of annual revenue credible in the medium term? Let's start with some arithmetic. From this year's level, EUR 1.5 billion is not a moonshot. It's just a few more years of compounding what you've already watched us deliver on demand that is largely booked or in structured evaluation rather than imagined. EUR 794 million of backlog and above EUR 1.25 billion of order intake over the last 12 months and the pipeline that has changed character. It's no longer a list of opportunities. It's a schedule of decisions, named evaluations where we're shortlisted in, requests for quotation with dates on them, programs with production slots attached.

Then the structure underneath, European defense rearmament, where EU instruments are now dispersing real money into multi-program -- multiyear program cycles and where 8 of our sites build defense and aerospace today.

Grid and data center electrification, a demand cycle with years to run as Europe rebuilds its energy and compute infrastructure.

And industrial digitalization, where industry's 1.4 book-to-bill tells you the recovery is being ordered now, not forecasted. And the honest framing, the constraint on that path is not demand. It's conversion, which is why you'll hear one word from us all second half, convert backlog into orders, pipeline into orders -- or backlog into deliveries, pipeline into orders, right, profit into cash and capacity that follows the order book, and the order book keeps growing.

Let me summarize with a few takeaways. Next slide, please. So 5 things to take away from Q2 2026: one, strength, record revenue, broad-based growth, EUR 296 million, up almost 72%, 62% organic. All 5 sectors and all 3 regions grew. Defense & Aerospace tripled and is now around half of group revenue.

Two, profitability above target and converting to cash. EBIT of EUR 28 million at 9.6% margin and EUR 47 million of operating cash in the quarter. Year-to-date cash flow close to our strategic target of 80% of EBITDA.

Three, record level order book and visibility, backlog of EUR 794 million, up 56%; year-to-date book-to-bill, 1.15; R6 demand outlook, approximately EUR 609 million, intentionally front-loaded for flexibility.

Four, Kitron Eltech delivering. Footprint is expanding, EUR 16.5 million contributed in the quarter.

Five, on the road to EUR 1.5 billion. We're currently trending towards the top end of our 2026 outlook of EUR 900 million to EUR 1,050 million in revenue and the EUR 84 million to EUR 108 million in EBIT. And the task for the second half is converting demand through a tight supply market.

So the demand is on the books, and the platform is funded and standing. And what defines the rest of 2026 is conversion, backlog into deliveries, pipeline into orders and wins and profit into cash. And that's the work we have in front of us. And that's the work this company was built for.

And with that, Cathrin and I, next slide, are ready to take your questions.

And we have quite a few questions. Let's start with Martine, supply chain, which specific component categories are most constrained? And how much revenue do you believe was delayed and deferred due to supply/demand? And how much customer-funded inventory is on the balance sheet and on what terms?

Those are some very specific confidential questions, but let's start with component categories. Right now, I think the memories, for example, and high-level processors are constrained on allocation. We're seeing a lot of constraints on the PCB market. And we're talking about high reliability PCBs, advanced PCBs for across the type of products we build. And of course, the defense part of the PCB market, where you're very much restricted to certain suppliers. So that's in general, right? I'm not going to go into detail. We have specific webcasts that we review the component market and -- about every 6 weeks or so.

Do we want to talk about the customer-funded inventory and the balance sheet, Cathrin?

What we are mentioning in the quarterly report is as well, we have deposits from customers of about EUR 125 million, which is in the same level as last quarter. In addition, of course, we have customer consigned inventory, which is not in the balance sheet, for instance, as well. And we're not -- and with that, therefore, we don't need to mention the sums.

And Martine follows up with, last quarter, you mentioned results would probably end up between 9.5% and 10% EBIT margin and not above 10%. Is that still accurate?

I'll let you take that one again.

Yes, I will say that's a reasonable accurate statement still. It requires a lot to grow this much. And also, we need to prepare for growth coming into next year, meaning that some costs will increase slightly. So I think 10% is where the high end of it.

Torbjorn has then 3 questions. The first one is regarding our guidance for the year and that we're at the top end and R6 is above that, obviously. Even adjusting for front loading, this appears to imply revenue above the current top end, and what is preventing the formal guidance today?

Well, I mean, the -- it's the tight supply chain, right? So there's risk to increase an outlook. And at this point, we're looking all the time at what is our clear to build for the rolling 6-month horizon, what's our clear to build for a 12-month horizon, what's our clear to build for what we have on order for the next month or so. So those are numbers we're following, and we see what's possible to execute. And what we thought was possible to execute and what was actually executed. So those -- all those parameters weigh in when we say -- when we talk about our guidance forward.

And when we have more clarity on that, we will be likely to reassess, but not until then.

And more clarity when we report Q3, then we're into October. So that -- then we should have a really strong picture of what it looks like.

But it's not about the demand. It's just about what we are able to source basically.

Within D&A, what extent a PCB is required to be sourced from European suppliers and European PCB capacity? And has European PCB capacity currently limited your ability to convert orders into revenue?

First question, for all of the defense primes in Europe, they are sourced from European suppliers. For some of the new defense tech, they can be sourced either from Taiwan or South Korea probably. I'm not sure exactly where we buy everything, but the scope is a bit wider there. It depends on the classification of the product and the end customer. And often the end customer here has validated and chosen the PCB supplier also. The manufacturer, not -- the supplier can be a distributor, right? We use 2 of the large European distributors for a lot of our PCBs. And on the back end there, they would have 1, 2, 3 or 4 that are qualified for each of the programs.

And is European PCB capacity currently limited to your ability to convert orders into revenue? The answer is yes, right? And that's what we said in the Q1 report that we were front-end loading, so we had some possibilities to play around. But yes, there was more demand loaded.

Do you have an estimate for the portion of 2026 revenue you expect to be related to data centers? Yes, and that's been very stable for us. It's about EUR 120 million with a couple of pure plays that are about 90% or so of that revenue. But we see a lot more going on, on that. And I spoke a little bit about this on the lower tier companies and customers we have, specifically within -- yes, really across all of the other market sectors except medical, right? So within connectivity, there's customers that are being driven to have a lot of short term -- not short term, but on a very short lead time horizon, constantly increasing demand and the same thing within the industrial sector.

Customers that I never thought was part of data center or AI demand, now specifically stating, okay, we have an order for this or we're building this or that, and what can you do to help us on pretty much immediately. So the answer was EUR 120 million.

Then, Martine comes back, a major grid program into serial production. Is that already in your R6? Yes, it is. And overall outlook, yes, it is.

Olav then comes in here with, can you give some color on the gross margin development being slightly down year-on-year and quarter-on-quarter? Is this a reflection of current supply chain situation? Or is this a mix effect? How should we think about this going into '26-'27?

Cathrin?

Well, I say, it's a percentage point down in Q2 from last year. That is true. But what we are following in general is not a material share as a percentage of sales. We follow contribution margin, and that is stable. So...

And it is a mix effect, most likely.

So we're shifting between more labor and less material or more material. I don't think you need to worry about the mix change in that sense.

We had a large degree here in the second quarter of new defense tech and specifically on PCBAs, right? And the material content can be very high there, shifting the gross margin down. But on contribution margin and profitability, those could even -- be even stronger.

Martine, again, R6 with even 10% flexibility points to above 1.1. How should we view? We take -- our outlook is we stand behind our outlook, right? It could be 10%, it could be 12%, right? Who can say today.

Eirik says, "Hi, great work and fantastic results". Thank you so much, Eirik. Finally, somebody appreciates us.

Øystein, you're trending well above guidance -- guided revenue, but not raising guidance. Do you expect material supply constraint to sustain in second half or just being overly cautious? Well, we expect that the supply constraints to continue and possibly worsen, right? So we've been saying this on our supply chain webcast over the past 6 months and guiding our customers towards that also. So a couple of the things we do here is we place long-term orders and push our customers to actually secure the next 12 months of inventory on strategic parts.

And at this point, we consider PCBs to be a strategic component, buy what you need and put it in stock now, right? And we will store it under conditions where it's good for use for the next 3 years, if needed. And in some cases, customers are responding. In other cases, customers are declining to respond or willing to take the risk. And there is risk, right? There is -- there were programs that were pushed out of Q1, and most of it delivered now in Q2, but there are some remaining that are in Q3 out of that demand.

Eirik, could you give some flavor on customer concentration risk in the reporting numbers rolling 12 months year-to-date '26? How do you balance building long-term customer relationships with strategic customers and not becoming reliant on a few customers? That would be helpful to understand the balance and how we deal with it.

Well, I think we see now in the second quarter and through the first half of the year here that the customer concentration is coming down. We had some large part of our Q1 from one large customer. That's coming down as the other customer bases and the other market sectors grow. So I'm comfortable with that.

Johnny says, good morning, how would you assess the PCB prices are up on average? I don't have a number on that, but we're looking at -- on top of the price, right, there could be an expedite fee that you have to pay to get ahead of the line, right, to get your product quicker. So that's a part of the PCB pricing. On average, I expect component pricing and component market -- as I've been saying in other meetings this year, 5% to 7% price increase probably. So if you're below 5% to 7% on growth, then you have no growth as an EMS.

But it varies on how the PCBs are designed and what substrates are part of them, what layers inside the PCBs. But we've seen now that some manufacturers of raw material components that go into the PCBs, we had 1 large supplier of a particular substrate that stopped export from the U.S., so they are restricting any export from the U.S. So that's one part of it. I'm not going to comment specifically on prices, as I'm not comfortable doing that.

Excluding the impact of supply chain constraints from Jeppe and focusing purely on underlying demand, what would your guidance have looked like? Well, that's not -- we're not going into that. We have more demand. It's not a demand question at this point, so which bodes well for whatever we don't deliver this year that's going to end up in Q1 and Q2 next year.

But you have enough information that we've given you to calculate that, Eirik.

Ben comes in here, could you talk through the order intake and what has impacted this period?

So I think it's -- when it comes to order intake, I think it's important to look at organic via the total order intake. So the book-to-bill for the organic is 1.05. In the quarter, we have a 0.96 in total. That means when we add on Eltech. And Eltech has had a minor adjustment in their order backlog in the quarter, meaning bringing the order intake down for the whole group. So I think you should focus on the organic, which is then EUR 292 million and 1.05, okay?

Torbjorn, to what extent the prices -- price increases and component pass-through contributing to growth? So far, not much, right? We did a deep dive into this in the beginning of June and looked at pricing last year on the same type of products versus -- or cost last year versus cost this year. And on the whole, there's not a lot of notable difference.

On the other hand, right, there could be variances in the products. There could have been more labor in them last year. Now, there's more material in them. So from a sales price, it hasn't -- it's not been significant, at least not year-to-date for the first 6 months. But again, we're looking at -- we -- before anybody took vacation here in Europe, the deadline was June 30 to make sure that Q3 pricing is all adjusted for whatever we see in Q3. So we'll have a better number as we exit Q3 and we can look at those numbers what has happened on the pricing. But again, my expectation is probably 5% to 7% when we look at the year. But that's more of a gut feeling right now than based on exactly what we see when we run our internal reports.

How much of your organic growth would you assess stem from pre-buying in the quarter, pre-buying components or customers pre-buying? Pre-buying components and selling them in consignment is not part of our revenue. We never book component transactions into revenue.

Customer pre-buying, I don't think ...

But if it's customer pre-buying, it could be some of the quick drop in orders we've seen where customers on very short lead time want, but it's insignificant on the total. It could be significant for some sites, where specifically, we saw a lot of drop in orders in our Asian facilities. But again, they grew, what, 25% versus last year, and it's all non-defense, right? So it is the underlying other market sectors, Medical, Connectivity and Industry basically. A little bit of Electrification also into those numbers. So they grew 25%. Maybe 5% of that growth was a quick drop in orders. But it -- so that could have been pre-buying, who's to say, I don't know.

From a total point of view, the number won't affect anything.

That is it, my friends. We don't have any more questions, and I wish everybody a really, really nice summer. I know I'm going to enjoy it for a few weeks here before we pick up the pieces and tackle the rest of Q3. Thanks.

Thank you. Happy summer.

Good morning, and welcome to Kitron's Q1 2026 Results Presentation. I'm Peter Nilsson, and I'm joined, as always, by our CFO, Cathrin Nylander. Thank you for taking the time to be with us today.

The theme for today's call is in the slide in front of you, from record to runway. Q1 was the strongest quarter in our history, and that's important. But what's more important is what it tells us about the year and the years ahead. So while we'll walk you through the numbers in detail, I want you to leave this call thinking less about Q1 itself and more what's lining up behind it.

I'll cover the quarter highlights, our operational position, sector and backlog trends and the strategic outlook. Cathrin will then take you through the financials in detail. After that, I'll close with what we believe is the most important slide in the deck, the case for our medium-term ambition. We'll then open the floor for your questions. So with that, let's get started. Next slide, please.

Q1. Q1 2026 was in every meaningful measure, the strongest quarter ever. Revenue was close to EUR 273 million, up almost 66% year-on-year. Operating profit close to EUR 26 million, more than doubled. Margin at 9.4% above our 9% core target. Order backlog grew to nearly EUR 806 million, a new record and up 54% year-on-year. Book-to-bill at 1.35, meaning we're building backlog faster than we're working it down.

But the real story isn't any single number. The real story is that all of our 5 market sectors grew year-on-year. Defense and aerospace was exceptional, more than tripled and now represents around half of group revenue, up from roughly 1/4 12 months ago. But connectivity was up almost 30% Medical close to 20%. Electrification and industry both positive. The diversification we've been talking about for several years is showing up in the numbers.

I want to flag one thing upfront before Cathrin gets into the numbers. Our 9.4% margin was above target, but it was below what we were aiming for internally. We had expected slightly more. I'll come back to this in a moment when we talk about operations, but I want to acknowledge it upfront because owning the things that didn't go as well as we'd hoped is just as important as celebrating the things that did. With that, let me walk you through where we stand operationally. So next slide, please.

Four points on operations and growth. First, operational momentum. Customer ramp-ups are progressing well across all sites. The new Swedish facility is complete. The Norway site is on track for handover and startup and our Polish capacity expansion of about 40% is paying off. CEE was the biggest single contributor in Q1. Both CEE and Asia delivered margins above 10% in the quarter.

Second, and this is what I flagged on the previous slide, Q1 efficiency. We expected slightly more on margin than we delivered. Three factors held us back. We introduced many new employees during the quarter, all requiring training and start-up time. Demand intensity in some areas outran the responsiveness of our suppliers, which created some late supply deliveries and lost capacity. And as we entered the quarter with less front-end loading in our order book than would have been ideal, meaning when the supplier didn't ship, we had less flexibility. And battery ran out, had less flexibility and weren't able to switch the line to something else. Neither of these are a structural problem. We know how to fix them, and now they're built into our planning for the rest of the year. I'd rather flag it early than dress it up.

Third, M&A. The DeltaNordic acquisition closed and was consolidated effective January 1. Approximately EUR 74 million of predicted '26 revenue, around half of it from defense customers with 2 Swedish production sites and 1 in Nanjing. Integration is proceeding above expectations. Capability and customers are added from day 1. And to meet '26 to 2030 demand, we've extended the Kungsängen facility, accredited the Kitron Jön shipping facility to serve select customers and are planning a new facility in Örnsköldsvik for early 2028, doubling capacity, footprint and employees.

Fourth, our 2026 outlook. We're now trending towards the upper half of the ranges previously communicated 2026 outlook of EUR 900 million to EUR 1.05 billion in revenue and EUR 80 million to EUR 100 million in EBIT. Our hesitation on further growth is hampered by supply chain efficiency. If we see relief over the next quarter, we're likely to reassess. Our confidence in this range rests on 3 mutually reinforcing foundations: a record backlog, a book-to-bill ratio above 1 and the deepest pipeline of new opportunities we've ever carried into a quarter. Now let's look at the sector picture. So next slide, please.

The chart on the right tells the story at a glance. Defense and aerospace is the headline. Sector revenue. The chart on the right tells the story at a glance. defense and aerospace is the headline with EUR 137 million in the quarter, up 213% year-on-year. That's more than 3x where we were a year ago. And now it's around half of group revenue, up from 27% last year. But -- and this is the point I want you to take away from this slide. Every single sector grew. Connectivity was up 28%, driven by industrial IoT and smart metering, both structurally growing categories benefiting from data center expansion and regulations. Medical devices was up 19% with critical care and patient care leading the way. Industry grew 8%, but more importantly, industry showed a clear inflection point in order intake in the quarter, including brand-new mining and construction program building backlog very quickly. We see this as an early indicator of broader recovery cycle in the nondefense sector. And electrification was up 4% with grid demand intact and power conversion ramping nicely on data center demand.

A year ago, the conversation we'd be having on this slide would have been, well, defense is doing well, but the rest is mixed. This quarter, it's defense is exceptional and the rest is growing. That's a meaningful shift and one of the reasons we have so much confidence in the year ahead. Now let me turn to the backlog and forward visibility because that's where the picture for the rest of the year really comes into focus. So next slide, please.

This slide is, in many ways, the most important one we'll show you today on the operational side. Order backlog is almost EUR 806 million, a new record, up 54% and 14% sequentially. Book-to-bill ratio is 1.35, well above the level needed to keep backlog growing. Defense and aerospace now represents 59% of the total backlog, up from 45% a year ago. Our R6, the rolling 6-month forward demand look stands at approximately EUR 590 million. That's a very strong number. But I want to be careful about how you read it because I don't want anyone leaving this call with the wrong expectations about quarterly cadence.

Two things to keep in mind. First, R6 is intentionally front-loaded. We deliberately built approximately 10% of flexibility into it. So when the supply chain variability hits, exactly the sort of variability we saw in Q1, we have some work to absorb it without disrupting customer commitments and revenue. So the EUR 590 million does not mean 2 consecutive quarters of around EUR 300 million.

Second, Q3 is particularly seasonally softer for us than other quarters. That's a normal feature of our calendar and not a sign of demand softness. What means most on this slide is not a precise R6 number. It's the structural shape of the backlog, record book, broad sector distribution and book-to-bill comfortably above 1 and customer relationships that are deepening rather than broadening. We have never entered the quarter with this much forward visibility.

And with that, I'll hand over to Cathrin for some financial details. Cathrin, go ahead.

Thank you. Next slide, please. Thank you, Peter. Let me walk you through the financial picture in more detail. Starting with the headline numbers. Revenue of EUR 272.7 million, up 65.7% year-on-year. EBITDA at EUR 25.6 million, up 105%. EBIT margin of 9.4%, which is 180 basis points higher than Q1 last year. EBITDA of EUR 31.8 million, up 86%. Net income of EUR 20 million, up 163%. EPS of EUR 0.09 more than doubled from EUR 0.04. Operating cash flow at EUR 5 million is below the EUR 12.1 million we generated in Q1 last year. That requires a comment, and I'll walk you through it on the cash flow side in a moment.

The short version is that high growth on a record order book absorbs working capital before it converts. On the balance sheet ratios, and there are some of the metrics I'm most pleased with. ROOC R3 at 38.7% is more than double than the 18.7% we reported a year ago. Net working capital R3 as a percentage of sales has improved 15.7% -- improved to 15.7% from 28.6%. Cash conversion cycle R3 is down to 53 days from 111 days, below our 60-day target. Net interest-bearing debt over EBITDA is at 0.5x, down from 1.6x, and our equity ratio is 40%.

To Peter's earlier point on Q1 efficiency, yes, we expected slightly more on the margin. The capacity build and supply timing affecting the production mix in the quarter, particularly in our Nordics and North America region. We have addressed it in our planning. Underlying capital efficiency is in very good shape. So let me now show you the regional breakdown. Next slide, please.

Three regions, 3 tables. Starting with revenue. CEE is now our largest region by revenue at EUR 131.5 million in Q1, which is up 155% year-on-year. This is largely the Polish capacity expansion delivering, supporting key customer ramp-ups in defense. Nordics and North America came in at EUR 117.7 million, up 26% year-on-year. Solid growth but slightly below where we wanted to be on the bottom line. Asia at EUR 26.3 million, up 25%. Group eliminations as usual. On EBIT, CEE delivered EUR 17.9 million, a margin of 13.6%. Asia delivered EUR 2.7 million at a margin above 10%. Both regions are running well above our 9% target. Nordics and North America delivered EUR 9.4 million, which is an 8% margin, slightly below target. This is where the Q1 supply timing issues that Peter mentioned showed up in the numbers.

The CEE and Asia regions absorbed the growth without difficulty. The Nordics had less buffer. We are not concerned about this structurally. It reflects a mix of demand intensity and front-loading at specific Nordic sites. But it's where our attention is focused for the remainder of the year. On headcount, we ended the quarter with 3,373 FTEs, up 982 from a year ago, an increase of 41%. This is the capacity buildup that supports the backlog conversion. Most of the growth have been in CEE, where we have added almost 600 people in 12 months. Let me now walk you through the organic versus inorganic split. Next slide, please.

Kitron Eltech, formerly DeltaNordic, was consolidated from 1st of January with no prior year comparables. So the tables on this side split Q1 into organic and inorganic to give you a clean underlying read. First, the Eltech number themselves. The site contributed to EUR 14.6 million in revenue. Our profit before purchase price allocation and depreciation was EUR 1.6 million, an 11% margin, which sits above the group's 9.4%. After EUR 0.6 million PPA depreciation on excess values, reported EBIT from Eltech site was EUR 0.9 million.

Now the organic view. Excluding Eltech, revenue grew almost 57% year-on-year. Defense and aerospace tripled organically, up 196%. Connectivity, Electrification and Medical are essentially pure organic growth. The one sector where the split matters is industry. Organic revenue was down 8% against a strong Q1 2025 comparator and the EUR 6.7 million Eltech contribution is what takes reported growth into positive territory.

On the order book, organic backlog is up 38% to EUR 724 million. So record visibility even without the acquisition. Eltech adds EUR 82 million on top, mostly in defense and aerospace and industry. One note on book-to-bill. Group book-to-bill is 1.35x. Organic book-to-bill is 1.06x. So organic backlog is still building. The difference is Eltech's intake of EUR 96.5 million, most of which affects multiyear framework agreements that came on to the books on consolidation rather than Q1 order activity.

In short, a record quarter on an organic basis with Eltech integrating cleanly and contributing from day 1. Now cash flow and working capital. Next slide, please.

The cash flow story in Q1 is straightforward, but worth explaining clearly. Operating cash flow was EUR 5 million and lower than the EUR 12.1 million we generated in Q1 last year. The reason is on the third line of the cash flow table, change in inventory, accounts receivable, contract assets and accounts payables was negative EUR 26.7 million in the quarter versus a negative EUR 2 million last year. In other words, working capital absorbed cash. This is what high growth does on a record order book. You build inventory and contract assets ahead of shipping, you carry receivables before they collect and the timing creates a temporary drag.

The important thing to look at is the underlying quality. Net working capital ended at EUR 173.2 million, which is down 9% from EUR 189.8 million (sic) EUR 189.9 million a year ago, even though revenue is up 66%. This is a meaningful improvement in capital intensity. Net working capital R3 as a percentage of sales is 15.7%, almost half from 28.6% a year ago. The structural cash quality is intact and improving. Investing cash flow of negative EUR 67.5 million reflects the DeltaNordic settlement of approximately EUR 59 million in January. Excluding the acquisition, underlying CapEx is disciplined and in line with our normal pattern.

So to summarize, cash flow timing was affected by working capital absorbing high growth, but the underlying ratios continue to improve. We expect cash flow to normalize as the quarter's working capital build converts. Let me now walk you through the financial ratios. Next slide, please.

The ratios on this slide are, in many ways, the cleanest summary of how the business is performing. Three things stand out. First, ROOC R3 at 38.7%, more than double the 18.7% we delivered a year ago. This is operating leverage on a stable cost base. The business is converting growth into return on operating capital at a rate that puts us in the top quartile of our industry.

Second, balance sheet strength. Net interest-bearing debt over EBITDA at 0.5x, down from 1.8x -- 1.6x. Net gearing at 0.13, down from 0.52. Equity ratio at 40%. Even after the DeltaNordic settlement in January, leverage remains conservative. We have plenty of room on the balance sheet to support continued growth, including additional M&A if we find the right opportunities.

Third, EPS at $0.09, more than double from $0.04 a year ago. Revenue growth is translating directly into shareholder return. Cash conversion cycle R3 improved to 53 days from 111 days. We are below our 60-day target, and we expect to stay there over the course of 2026.

The headline I'd leave you with on this slide, every important capital efficiency and balance sheet ratio is improving year-on-year, and most of them have improved very significantly.

With that, let me hand back to Peter for the strategic outlook. Next slide, please. You're muted.

Thanks, Cathrin. Thanks, well done. Well, a pipeline like never before. This slide is the one I want you to remember from today. Everything we talked about so far, the record quarter, the record backlog, the operational platform, it all serves a bigger story. From record acknowledging -- acknowledges Q1 what it was. Record revenue, record backlog, record pipeline. If you've seen the numbers, you know the record is real. From record to runway tells us that Q1 isn't the destination. It's a clear acceleration surface. The record results are not the peak. They are the conditions what makes -- what comes next possible.

Kitron has the runway, the visibility, the fuel and the room to accelerate. The question we've been asked fairly is what makes you think we can get there? The answer is on this slide. We already have a record order book of EUR 806 million. This is the most important point. Our pipeline is qualified as qualified opportunities for '26 and '27 that are the deepest in Kitron's history. Customers are engaging with us earlier in the product life cycle on larger programs and on longer time horizons.

Third, our multiregional manufacturing platform is now engineered for speed and scale, exactly the capabilities our customers are asking for. And behind that pipeline, 3 structural themes are doing the heavy lifting. European defense rearmament, NATO commitments rising towards 3.5% of GDP or beyond, multiyear program cycles and 8 Kitron sites in Europe and the U.S. positioned for defense primes and new defense tech.

Grid and data center electrification, power conversion, grid modernization, data center infrastructure, a multiyear demand cycle that is already showing up in our electrification recovery, but also having a strong impact on industrial IoT, HVAC and other industrial products in this quarter. Industrial digitalization, Industry 4.0 retrofit, advanced sensors, mining, agriculture and infrastructure automation. That's where the Q1 inflection in our industry sector is, and we believe that's a leading indicator of much more to come.

These 3 themes are not cyclical bets. There are structural shifts in how the world is investing in defense, energy and industry. And Kitron is positioned at the intersection of all 3. We're not going to reach EUR 1.5 billion in a single year, but the path is visible to us in a way that it's never been before, and I have full confidence in our team to convert that pipeline into sales.

Now let me summarize the key takeaways from today. So next slide, please.

One, record revenue broad-based growth, close to EUR 273 million in revenue, up almost 66% year-on-year. All 5 sectors grew. Defense aerospace tripled and now represents half of group revenue. Two, profitability above target with room to do better. EBIT close to EUR 26 million at 9.4%, above our core 9% target. Q1 efficiency was held back by supply chain timing, front-end loading and significant training as we ramp personnel. I mean almost 1,000 employees more compared to Q1 last year and a lot of employees added in the Nordic sites during Q1.

Three, record order book, deepest pipeline ever. Backlog at close trade under EUR 6 million, 54% up, book-to-bill at 1.35, R6 at EUR 590 million, intentionally front-loaded for flexibility. Four, DeltaNordic onboard from day 1, acquisition completed, consolidated effective January 1. And the team and the integration with the teams has been the best we've ever seen. Approximately EUR 74 million of projected revenue in '26 and half of it from defense customers. A new facility in Örnsköldsvik is planned.

Number five, on the road to EUR 1.5 billion. We're now trending towards the upper half of the ranges previously communicated of EUR 900 million to EUR 1.05 billion in revenue and EUR 84 million to EUR 108 million in EBIT. And the pipeline of opportunities we're working on across '26 and '27 supports our medium-term ambition of EUR 1.5 billion in annual revenue. We have the platform, we have the pipeline, we have the people.

Now Kitron, we deliver. And with that, Cathrin and I are ready to take some of your questions.

And I believe we have quite a lot of questions today.

We do. And we don't have much time. So you need to leave not far from 9:00 Peter.

That's basically about now. So I'll grab a couple and then I'll head down to my transportation.

The first question is about the Norwegian government with the new agreement with Ukraine with drone manufacturing in Norway. So question is, is Kitron involved in this? And so as far as I know, the project is still under secrecy Act, and we don't have a comment on it.

Eirik has many questions here about Q1 revenue and customer -- you can -- okay, Q1 revenue is high, R6 demand implies only EUR 188 million need for Q4 revenue to reach top end guidance for '26. Why not lift guidance early? I think we've reflected on that. And we've said we'll reassess in Q2 as we see how the supply chain develops in regards to global challenges on supply chain and whatever is going on in the Middle East and those things that's happening.

You also say that the R6 is front loaded. So that will come into Q4, Eirik.

Unless we'd be able to deliver all of it, which would be fantastic, but not likely.

Customers engaging earlier on longer programs, how that effect impact orders ahead. Well, hopefully, yes, the orders will come in. It's not going to -- when we talk about that, we're not talking specifically about this year. There could be something in Q4, who knows. But it's building the future for '27 and beyond.

EBIT above our core 9%. What's a reasonable margin to assume given the current momentum? Cathrin help me out here.

I say between 9.5% and I think -- I wouldn't go much higher than that because we are growing and we're planning to grow more. So we need to bring in facilities. We need to bring in people. But we noticed in this quarter.

That was it from Eirik. And then we have Øystein saying you see the deepest pipeline you've ever seen. Is it mostly defense related or broadly across more sectors. I think it's both. I think it's both, right? There's a lot of new defense tech that we're discussing with engaging very early in those programs much, much earlier than we have before. We are the go-to partner on these things now. So many of these customers, new customers are coming to us. And we -- I know we've said that before, but the opportunities now are much, much stronger.

What drove the strong order intake in industry? I mean, number one, we added one of the big minor customers that we had before in Kitron, but we added that through DeltaNordic acquisition. And the order intake there has been really strong in the quarter. We're continuing to grow both in our Kungsängen facility and in our Nanjing facility, which directly supplies into the Chinese market, that kind of mining equipment. So that's a strong intake there.

What else do we see in the industry sector? I think I spoke a bit about how data center expansion affects many different parts of our -- both industrial and connectivity sector. The big growth in connectivity, usually, we talk about tracking equipment being the high growth and the largest. It is still the largest subsector within connectivity. But we see that our industrial IoT customers are expanding. And really, when we look at the order backlog Q1 this year compared to Q1 last year on industrial IoT, it is up a lot, 40%, 50% order backlog growth on industrial IoT.

And when we ask our customers, what's driving this? Well, they're saying data center demand, right? And why in data centers? Well, the cost per trip to a data center is pretty high. It's much cheaper to install industrial IoT, have better surveillance of what's going on and able to automate things that need to be adjusted much cheaper and quicker.

Capacity expansion plans previously from Martine. Can you say something more about your capacity expansion plans? And also, there's previously communicated capacity potential of [ EUR 500 million ] in Europe and U.S., [ EUR 200 million ] in the U.S. Where are we on these numbers now, right? The U.S., we're ramping to over $100 million this year if we can get there, and over $100 million this year if we can get there. The product mix has changed. So it's much bigger products. We're delivering bigger units into data centers. So footprint in the U.S. is -- by mid this year is going to be filling up very, very quickly. So that will only give us about half of what we need in the U.S. So we're looking at what the options are there.

EUR 500 million in Europe, right? Again, that was based on us building only the electronics, right? So SMT lines and high automation, what we're seeing is we're delivering complete systems. So there's a lot more -- if you look at the factory in Poland, there's probably 7 to 8 big semi-trucks with trailers leaving the factory every single day, right? If that was electronics, it would be 10 boxes maybe. But here, it's a lot of big equipment. We're building complete. I don't want to get into the detail of what we're doing.

There are also -- we are doing what we call short-term expansions as well. So...

So that's why the footprint in Poland is not just that site that we spoke about earlier, but we have an additional 2 sites that are in that vicinity supporting that expansion. It would have never been able if had we not been -- had the ability, the agility and the speed to react in the way we've done.

Okay. Martine has a question here on expanding stronger demand in industry, which I think we have actually already answered -- the electrification and particularly data centers is doing well, I think.

Yes, ramping up. Not at full output yet, but getting there. March was a good month. January, February struggled. The capacity was there, the people were there. So that's why the cost was there, but the material wasn't there. Now in March, they delivered a solid revenue and solid profitability. So we understand that to keep going in April and onwards.

Okay. So just short, Nojus asks whether the defense aero revenue will go up further in the coming quarters and the percentage share. We expect it to be about the same, I think, actually during the year.

At least now in the second and third quarter, we'll see what happens in the fourth.

Correct. And then what areas within D&A are you seeing the largest growth opportunities now? And after that, we have to close.

We have probably half a dozen defense primes that are still not in production, but in either negotiation or in contractual discussions with. So those are some of the longer terms over the next 2 to 5 years growth opportunities. In the short term, it's going to be new defense tech, where there's also a lot of interest and discussions, but we'll get to that when we announce it.

Yes. And then with that...

With that we'll have to sign off because I have to rush off. Thank you, everyone.

Okay. Thank you.

Good morning, and thank you for joining us today. We look forward to walking you through our fourth quarter and full year performance for 2025. This was a year marked by strong operational execution, strategic progress across key markets and a meaningful strengthening of our financial position. I'm Peter Nilsson, CEO of Kitron Group, and joining me is our CFO, Cathrin Nylander. After our remarks, we will open the floor for Q&A. So please feel free to submit questions any time during the presentation.

With that, let's get started with a look at the key highlights of the fourth quarter. So next slide, please. Q4 marked a very strong finish to the year with solid momentum across several of our core focus areas. Our order backlog continued to accelerate, increasing 50% year-over-year to EUR 709 million. This level of order visibility provides a strong platform as we enter 2026.

Defense and Aerospace was again a standout performer, delivering 147% year-over-year revenue growth as geopolitical demand translates into firm and scalable orders. Financially, we delivered close to EUR 234 million of revenue and EUR 22.5 million in EBIT, resulting in a margin of 9.6%. This represents one of the strongest quarterly profits in the history of Kitron. Cash flow was also robust at EUR 18 million, reflecting efficiencies in working capital and disciplined cost management.

We secured EUR 198 million in new defense and aerospace contracts and EUR 44 million in electrification, reinforcing the strength of long-cycle demand drivers in these markets. Building on these strong quarterly results, let's now take a look at the operational drivers behind this performance. So next slide, please.

We continue to see strong momentum. Our teams executed exceptionally well on customer ramp-ups while simultaneously onboarding new programs across several sites. Even in areas where volumes or cost conditions were more challenging, we maintained profitability. All regions delivered EBIT margins above 9%, proof of the scalability of our operating model and our disciplined cost culture.

Our strategic programs in defense, industrial and electrification are progressing as planned and in several cases, ahead of plan. These programs strengthens our competitive position by embedding us deeply in customer road maps. On the M&A side, we signed the acquisition of Delta Nordic, which is highly complementary to our footprint and capabilities. This transaction supports our long-term growth ambitions and positions us to capture further high-value opportunities.

Based on the Q4 order intake of EUR 344 million and a strong book-to-bill ratio of 1.5, we're raising our 2026 outlook. We now expect between EUR 900 million and EUR 1,050 million with an EBIT between EUR 84 million and EUR 108 million. Having highlighted our operational momentum, let's move into how these trends played out across each sector in Q4.

So next slide, please. It's clear that the portfolio continues to show a healthy diversification, but also a meaningful differentiation between segments. In connectivity, we saw a 9% return to growth in Q4. While legacy products still create a drag on full year numbers, the underlying trend is improving, particularly in advanced IoT connected sensors where volumes grew around 50%.

Electrification posted 10% growth in Q4, supported by a surge in energy requirements from global data center developments. A new U.S. customer ramped and contributed approximately EUR 5 million during the quarter. Toward the quarter end, we received orders from this customer amounting to EUR 44 million, partially cover the 2026 demand. Industry accelerated sharply with a 27% growth in Q4. Strength came from automation, subsea oil and gas activity and transportation solutions. However, pockets of weakness remain in construction and infrastructure.

Medical Devices showed a modest growth of 4% in Q4 with higher-value segments such as Life Support and Surgical Systems demonstrated resilience, while home care and diagnostics remained soft. Defense and Aerospace continues to be a standout performer. Revenue grew 147% in Q4 with strength across surveillance, avionics, secure communications and unmanned systems. This segment is now a dominant growth engine in our portfolio.

These sector trends set the stage for a deeper look at our order backlog and what signals for the months ahead. So next slide, please. Our order backlog at year-end reached EUR 709 million, up 50% from last year and 19% sequentially. This is one of the clearest indicators of the confidence customers place in Kitron to deliver mission-critical solutions at scale. The rolling 6-month outlook now stands at EUR 31 million, up 14% quarter-over-quarter, providing a strong near-term visibility.

In connectivity, structural growth continues, supported by the broader IoT adoption and increased sensor penetration. While order intake was softer sequentially, the long-term trajectory remains positive. Electrification maintained strong momentum driven by global electrification trends and the unprecedented build-out of data center infrastructure.

Industry shows a mixed picture. Several large programs are progressing well through quotation stages, while smaller customers face market-related pressure. Medical devices remains a stable sector for us, showing above-market medium potential growth.

Defense and Aerospace is by far the largest growth driver with 117% growth in order backlog. Demand is fueled by the high priority projects in missile technology, surveillance, encryption, avionics and advanced UAV platforms. Visibility here is exceptionally high. Given the strong demand visibility, let's transition over to the financial results that reflect our execution in the quarter. So next slide, and over to you, Cathrin.

Thank you, Peter. Financial highlights. Q4 was a very strong financial quarter. Revenue increased close to 46% year-over-year to almost EUR 234 million. Robust execution, favorable mix and strong demand in high-margin segments contributed to the growth. EBIT nearly doubled to EUR 22.5 million, delivering a 9.6% margin. Both volume leverage and continued cost discipline drives margin improvement.

Return on operating capital strengthened to 39.3%, a significant improvement driven by both earnings growth and efficient asset utilization. Our cash cycle improved dramatically with days down to 55 compared to 106 last year. We ended the quarter with a net cash position of EUR 31.6 million. This is a highly attractive position that gives us strategic flexibility for future investments and M&A activities. Net income grew to EUR 17.2 million and earnings per share increased accordingly.

After reviewing Q4 in detail, it makes sense to broaden the perspective and evaluate the full year performance. Next slide, please. Full year 2025 highlights. For the full year, revenue reached EUR 738.4 million, a 14% increase, driven by strong demand across our prioritized markets. EBIT increased 35% to EUR 4.5 million, with margins expanding to 8.7%, reflecting an improvement in operational efficiency and strategic mix over the year.

Operating cash flow more than doubled to EUR 93.6 million, demonstrating significant progress in working capital management. Net income reached EUR 43.8 million, representing growth of more than 56%. Overall, 2025 was a year of strong strategic execution, improved profitability and enhanced financial strength.

Building on the full year trends, let's examine the contributions from each region and business sector. Next slide, please. Business sectors. Regionally, CEE delivered the strongest expansion with 50% revenue growth, driven by major customer ramp-ups and expanded capacity utilization. Nordics and North America followed with 23% growth, anchored by strong contributions in Defense/Aerospace and industrial segments. Asia grew 6%, reflecting stable, but more moderate demand compared to Western regions.

Importantly, through the scalability of our global model, all regions delivered EBIT margins above 9%. Our workforce expanded to 3,090 employees, an increase of 678 from last year, ensuring that we have the resource and operational bandwidth to support current and future growth. These results brings us naturally to the cash flow and working capital development supporting our growth. Next slide, please.

Operating cash flow was EUR 18 million in the quarter and EUR 93.6 million for the full year, representing a substantial improvement in our cash generation capability. Net working capital decreased to EUR 135 million, down 28% year-over-year and down 10% sequentially. The primary driver is higher customer prepayments and deposits, which reduce balance sheet risk and support liquidity as volumes scale. These improvements provide us with more financial flexibility as we enter a year of higher production volumes and new customer ramp-ups.

Next slide, please. Our balance sheet is stronger -- is in a stronger position than at any point in recent years. Net gearing is negative and net interest-bearing debt over EBITDA is also negative. Adjusted for the DeltaNordic transaction, net gearing and net interest-bearing debt is still very strong. These metrics highlight that we are operating from a very strong financial position.

Financing costs remain low and also improved cash cycle further supports profitability. Our equity ratio strengthened to 42.4%, giving us resilience and the capacity to invest strategically while maintaining financial discipline. With this financial position in mind, let's wrap up the presentation with the key takeaways from Q4. Next slide, please. And over to Peter.

Thank you, Cathrin. To summarize, Q4 delivered very strong results, up 45.6% from revenue, order backlog up 50%, a book-to-bill ratio of 1.5, highlighting high confidence from customers across our portfolio. Defense and Aerospace continues to be the largest contributor to growth with 147% increase in revenue and 117% increase in order backlog, fantastic numbers.

Nondefense sectors also delivered a healthy top line growth of 14%, supported by diversified demand drivers. New defense tech-related technologies are expanding at the scale of opportunities in production and supply chain management and 7 of our sites are fully prepared to support continued rapid scaling. With strong operational momentum and a solid near-term demand outlook, we're raising our guidance for 2026. This positions Kitron for another year of meaningful profitable growth. And with that summary, we're ready to move over to Q&A. Next slide, please.

[Operator Instructions] We're in a bit of delay on the question side. So Cathrin, well, Q4 really developed across the board, strong revenue nearing EUR 234 million, margins close to 10% and a solid cash flow. A quarter like that certainly makes presenting the numbers a pleasant task.

Yes, Peter, it does. And I have to say, seeing the cash cycle improved from 106 to 55 days was a personal highlight. Finance things don't often get moments of joy, but that's one certainly came close.

When the EUR 709 million backlog at year-end doesn't hurt either. 50% year-over-year increase gives us reassurance and I imagine that lets your team sleep a little better.

Certainly helps. And it's a big reason we're comfortable raising the 2026 outlook to EUR 900 million to EUR 1,050 million in revenue and EUR 84 million to EUR 108 million in EBIT. Optimistic, yes, but grounded in what we're actually seeing.

Agreed. Demand is visible. Now it's all about execution and continued rapid scaling. I see the Q&A stream is catching up now. So let's move over to some questions.

So let me see here what the order is. Okay. The top is the first question. Gabriel says, can you quantify your expected 2026 growth for data center segment, given that the key driver -- given that this is a key driver behind the increased higher guidance. Thank you and congratulations for an amazing report.

Well, thank you, Gabriel. Well, can we quantify, I would say the initial order we received from just one customer was worth EUR 44 million. And that, as I said, partially covers 2026. So we expect an expansion of that order if things move along the way they're doing now. So of course, it is a big driver. It's going to be somewhere in that -- in the vicinity of EUR 0 million to EUR 100 million, depending on how the year develops. But right now, we have orders for EUR 44 million, and those should be delivered sometime towards between midyear and end of Q3, depending on timing.

[indiscernible] asks rapid growth incurs the risk of hidden flaws building up in the organization, a, or the Penrose effect. Can you give some flavor on what action is taken to strengthen the organization? Do you publish a number of accidents in plants and development of quality complaints. Cathrin, what do we do when it comes to action...

I think let me if it's clear here. First of all, all sites are their own legal units. And so we follow any profitability on a site level. In addition, we capture about 130 different KPIs on operations every week for every site. It's very hard to hide flaws, I would say, locally due to that. So we have very strong control. And we've had not -- we don't have any accidents to report on. And the quality complaints, I think, are at a very low level, also followed every...

Given the follow-up -- the weekly follow-up, each of the legal entities and that they report to us every single Friday, these are 115 KPIs that you talk about or performance indicators really. So there's a follow-up question here also. What is the state -- current state of thinking about M&A? And what is the opinion about current valuations?

Well, let's start with the valuation part. I think the valuations tend to be pretty high, especially if you can demonstrate strong exposure to growing market sectors, right? You can get low valuations if you're not exposed to that, but then revenues and profitability tend to be lower also. So right now, we are in the midst of taking on board the DeltaNordic acquisition. It's going really well. The team there is fantastic. The January reporting was completed and done in the model of the Kitron operating model.

So we're happy about that. And we're also then making sure there's enough capacity for DeltaNordic to be able to manage and grow their continued order backlog. So that's the focus now. We continue to run our M&A project with our advisers. So we're putting together a refreshed list and taking a look at what market sectors would we like to grow in. We're pretty strong in defense aerospace. So that may not be as a strong priority for us on the M&A front.

So there's 2 parts to it, swallow what we already have make sure that works really well and integrates and becomes part of Kitron as well as keeping an eye on the market and positioning ourselves for any opportunity we may like.

Torbjorn, are you seeing any evidence of demand pull forward in any segments related to supply chain tightness, particularly with memory components? If so, in which verticals and to what extent?

Our message to all of our customers are make sure that you have enough memory components, particularly across the board for whatever market sector and market segment or product you're building for the next 18 months. And having orders out there for parts is by no means a security. So the only security is having it in stock. And that's how we're approaching this towards all of our customers working very closely with them to make sure that we are able to -- make sure that we have parts on hand covering the next 18 months. And we'll see how that goes. But so far, things are moving along as they should, and we don't have any tightness in our sites right now.

Which parts -- [ Marcus Ganelli ] says, which parts of connectivity remain the softest? What's holding back order intake growth?

I'd say it's some legacy products with older technology where you see newer tech taking over, right? And then there's a market in general, which I'd say the companies that are succeeding are launching new technology that really creates a market for them because it delivers competitive solutions that changes spend in industry that invests in these or provides new capabilities.

So that's where the growth is. We can't look at legacy companies and say because they're not growing most of them. And that sort of connected to the general industrial macro trends we see also. If you're not -- if you don't have new technology, if you're not offering new solutions, then you're having difficulties. And the market and the strong industrial motor in Europe, Germany and even in China are not that strong for the general industry sector. And that's what we see on the market sectors also.

Torbjorn asks also delivery schedule on the 44 million electrification contract. I've already commented on that.

What's the current backlog of DeltaNordic? And how did DeltaNordic's order intake develop in Q4? DeltaNordic was not part of Kitron until we had the closing here in January. So DeltaNordic's order intake is not part of the EUR 709 million we have. I'm not sure exactly how it ended in Q4, Cathrin, and their numbers.

No, I don't have it, but I think they have a good coverage for the first 3 quarters of next year and in line with the expectations and also in line with what you can see generally.

We have the January results. So I think that's what you're basing it on when you say we have about 3 quarters coverage for this year, which is pretty strong anyway. It's never 4 quarter full coverage. There are clearly scale effects here from the defense ramp-up. Could you elaborate on the gross margin development? Any recent changes in product mix -- any recent change in the product mix, which has lifted it?

It's a lot about scale, right? So not growing overheads as you grow revenue. And that's a big part of the gross margin. We had -- if you look back at late '22 and early '23, we have 5 quarters -- straight quarters with above 9% margin. So we had a similar situation back then when we, in 2023, delivered EUR 775 million top line. So very strong numbers. But of course, now in Q4 and as we look into this year, the numbers should be even stronger. Gross margin material content versus our total top line remains about stable. It's around 65% of direct material cost. And then there's a direct labor cost, which is also pretty stable across the board. I don't recall the exact number.

Magnus says congratulations on strong results and execution. Thank you, Magnus. Can you please comment on the reason for relatively wide guidance for 2026? Well, there's a low-risk scenario and then there's a slightly higher risk scenario, and then there's an even higher above that. And we positioned ourselves now where we think our midpoint is strong at EUR 975 million, and then we have plus/minus EUR 75 million on that guidance. There is a total possibility for that upside, but we'll have to move forward further into the year and see how that actually firms up that scenario. Any other comment on that, Cathrin?

No, I think you're right. We have a 7% now from EUR 900 to EUR 1,050 from the midpoint of that. And we're starting at our previous midpoint as a lower end guidance. And I think we see a lot of opportunities as well. So that's why we are expanding a little bit to show what we see.

Juan asks, congratulations on an excellent quarter. With the scale increasing and EBIT margins approaching 10%, what are the key drivers that could further improve or constrain margins in 2026, '27. So that's one question. How sustainable is the current mix-driven profitability at higher revenue levels? Two, given the significant increase in Defense and Aerospace backlog, how should investors think about revenue phasing and margin development through '26 to '27, particularly regarding backlog conversion time and operational rates?

I think our guidance gives where we think we're heading, right? So we're heading up towards 10%. When we get to revenues above EUR 1 billion, you'll always -- we'll see a couple of points maybe above 10%. I can't really comment in any further detail on it.

Well, looking at -- [ Jeppe Baardseth ] says when looking at market balance, a lot of focus is on the demand side. Have you any indication on the supply side, is development given growth and capital returns, I would assume more are investing in increased capacity. So when you say supply side, I assume maybe you're talking about competitors and how supply on that part is -- or maybe you're talking about the material supply situation. And I've commented on the material supply situation a little bit, so -- which is the most critical part.

I don't see competitors growing capacity a lot. I don't see them investing in a lot of capacity. I don't see any competitor having the strength we have in defense and aerospace driving that capacity increase. I mean there's another aspect of defense and aerospace demand. And that is localization, sovereign supply, regional manufacturing, close to the market, which is a really strong driver for Kitron, right, with a presence in all of Scandinavia -- a strong presence in all of Scandinavia. And Norway, Denmark, a lot of localized manufacturing, a lot of offset demand driving growth in those countries when it comes to defense manufacturing.

Many, many of the large manufacturers and the new defense tech customers, they want to be in Central Europe, right? So with Lithuania, Poland, Czech Republic, extremely strong growth in all of those areas. Poland is turning into be a defense manufacturing hub for Europe. So we have a strong presence there. We invested in land. We invested in additional buildings.

So right now, we have 3 locations in the area, region where we're located. A year ago, we had one location. So we've expanded here on more footprint, and we're looking at being able to support customers that may have large programs that have to be built in Poland with even further expansions.

Torbjorn says how much of the EUR 100 million UAV contract was delivered in Q4? Or was it about EUR 30 million, Cathrin, something like that?

No, it's more between EUR 30 million and EUR 50 million.

Okay. Yes, I think EUR 30 million was the minimum we were targeting.

I know...

No, they did a good job. They did a good job.

Yes.

It's -- I mean there are several thousand units being delivered every week. So I might read about some competitors where they hope to be delivering 1,000 a month. Well, we do 500 a day or 600 a day. I'm sort of ran out of steam here on the question side.

Yes. I think we can comment lastly. We didn't say so much comments about it in the presentation, but we're proposing a dividend of NOK 70 per share. compared to NOK 35 last year. This consists of around 30% of the net income. We have a policy saying that we should distribute 20% to 60% of net income. So we are at 30% for the current time. And it comes -- it's about EUR 13.5 million in cash.

So another question usually comes up then why don't we have a higher dividend? And the reason is we're a growth company, right? So we're going to grow a lot this year. We grew a lot last year. And our financial position supports that growth. We want to make sure that it stays that way.

Yes. And we have an M&A strategy there.

Okay, Cathrin. Hey, that was 32 minutes today, so longer than usual, but it was a year-end.

Could I spoke about stock dividend? No. We don't have that currently.

Okay, guys. So we'll see you out there. We're on several roadshows over the quarter. We're a couple of times here in Oslo, we're in London, we're in Paris, we're in Helsinki, we're in Stockholm. So take a peek at our schedule, and you may want to meet us at one of those locations. Thank you.

Okay. Great.

Good morning, everyone, and welcome to Kitron's Capital Markets Presentation. I'm Peter Nilsson, CEO of the Kitron Group. It's a pleasure to see so many of you here today. And also welcome to customers and suppliers. Your companies shape the backbone of the capability we all depend on.

The theme of today is scaling resilience. Scaling resilience means that as Kitron grows, we get stronger and more predictable. Each step we take, every new capacity, every new program or new tool reinforces the entire system, allowing us to scale without compromising reliability, quality or financial performance. Today, we will show you how harmonized systems, more capacity and competitiveness demonstrates scaling resilience.

Now let's take a look at our agenda. And really, before I start that, I'd like to commend the press release we just got out this morning just before the meeting started here today, which was a new order for follow-on production of a product we launched back in, I believe, it was September, the press release for EUR 100 million. This one is a follow-on order for that. It's for next year, it's for EUR 55 million. And we're really happy that we've received this. It demonstrates again our ability to scale very quickly and help our customers be successful.

Today's program is structured to give you a clear picture of where we stand, how we're growing and what lies ahead. I'll start with a brief introduction to Kitron and how we positioned ourselves for scalable, profitable production and growth in high reliability markets. Hasse will then walk you through our commercial and sector outlook, where we see opportunities across connectivity, electrification, industry and medical devices, and how our market access continues to expand. Hans Petter will take over with an update on Defense/Aerospace, our largest and fastest-growing segment, highlighting key programs, customers and our European and transatlantic footprint.

Rickard will follow, taking us deep into our latest acquisition, DeltaNordic, and the amazing opportunities we see. After that, Stian will present how operational excellence and AI are transforming how we run our factories, driving cost savings, speed and smarter decision-making across the group. Cathrin will then guide us through our financial performance and outlook for 2025 and 2026, focusing on margin development, cash generation and investment priorities. And finally, I'll return to summarize the key messages of the day before we open up for questions and discussion. So with that, let's get started. And once again, thank you for joining us.

Let's start with our business. Kitron was founded more than 60 years ago in Silsand, Norway, close to the current Norwegian operations. Kitron's name comes from combining Silsand or Kilsund and Electronics to form Kitron. Today, Kitron is a Scandinavian EMS company with a global presence, but that doesn't quite capture everything we do. We support the entire product life cycle from R&D support to design optimization, industrialization, sourcing and to high reliability manufacturing following with test, logistics, services. And we operate in 5 sectors. Currently, Defense and Aerospace is the fastest-growing sector and strategically most critical. The balance between the different market sectors help us stay current on developing technologies and drive scale. Our mindset is predictable execution, engineering depth and the ability to scale complex systems fast.

Let's take a look at our operations. After the DeltaNordic's acquisition, we operate 13 plants across 11 countries with more than 3,200 employees. Our model is global capacity with local execution, which means we can meet offset and security of supply and localization requirements. For OEMs looking for multisite redundancy, transatlantic presence and a secure European base, Kitron is a strong fit.

Let's review what sets Kitron apart. Our standout strength is our One Kitron approach. We operate on common IT platforms, common processes and common production equipment platforms. This gives us speed. We can shift work packages across borders in days, not months. We are heavily certified Cyber, Defense, Medical and Aerospace, and we invest continuously in secure operations and digital traceability. When the customers scale, we scale with them predictably.

Now Kitron has more than 10 years of proven execution. In the last decade, we've transformed the company. Revenue from EUR 230 million to EUR 720 million, almost 3x. EBIT margin from 3.5% to close to 9%, and that's world-class in our industry. We grew by adding capacity, greenfields in Poland and Malaysia, multiple site expansions across Europe, the U.S. and Asia, and targeted acquisitions. But in the end, one signal beats all others. Customers stay. They scale with us and they keep giving us more. And that's the clearest proof that the model works.

After this brief introduction to Kitron and how we positioned ourselves for scalable and resilient growth, I'd like to hand over to Hasse. He'll walk you through our commercial strategy, how each of our market sectors is developing and how we're winning new business and where. We'll see how demand evolves into 2026 and beyond. So Hasse, welcome up.

Thank you, Peter. So good morning, everyone, and thank you again for joining us and showing interest in our business. From a macro perspective, across all market sectors, demand in our key markets, so the Nordics and U.S., have shown strength and resilience. And we see that Europe is set to recover during '26. The recovery has already started and is underway, especially in the connectivity sector and clear strengthening of the sentiment is visible in the industrial sector.

Our strategic focus is new partnerships with global OEMs and upcoming stars, supporting sovereignty capability building, expanding our platforms through selective platform acquisitions, and our current growth path is closely tied to the defense investment cycle, which is now accelerating across Europe. And we are, to be honest, very excited about and have high expectations for that development. Based on the current market outlook and our current momentum, we have set ourselves ambitious but yet realistic growth targets for the coming years.

Our position, we sit in the mid space with high complexity, high reliability requirements and medium volumes, exactly where complex products scales. Supply chains and manufacturing are often regionalized. Sales are strongly characterized by repetitive business, which is continuously renewed by onboarding new generations of products. Kitron's customers are often market leaders in their business or upcoming stars within their field. The relationship with our customers is based on a solid and a long-term foundation, which is based on trust and high performance.

Let me walk you through each of our market sectors and how they contribute to the Kitron midterm growth. Starting with connectivity. We expect a 10% to 20% annual growth driven by sensors, optical networks, cyber -- sorry, encrypted communication and data acquisition applications. This is a scale-driven business, and we win because we highly automate, have high utilization, and our ability to take in new products to production quickly. Our application knowledge and track record give us a strong competitive position in this sector.

In electrification, we target 5% to 10% annual growth. Power storage, grid updates and energy transformation continues to expand as we see the global need for modernizing energy systems. As this market normalizes after the greentech correction, we are supporting our customers with complex electronics and large system builds. Our ability to scale and deliver reliably is a key differentiator. Industry also offers a 5% to 10% annual growth in the coming years, driven mainly by industrial automation, robotics and infrastructure investments. Here, cost competitiveness is essential, and we deliver through strong purchasing power, automation, rapid flexibility in our demand management. Capabilities from the Defense sector flow into the industrial sector, especially in complex electronics and system integration.

Medical devices grows at 3% to 7% per year. This is a stable sector with long lifetime products and high regulatory requirements. We focus on laboratory equipment, diagnostics and digital morphology. Our strategy remains to strengthen our capabilities and customer relationships, but we also expect targeted M&A or carve-outs from customers to accelerate our position in this sector. Finally, Defense and Aerospace. It remains our strongest engine, as Peter was mentioning, with over 20% annual growth, but Hans Petter will elaborate further on that in the next part of the presentation.

Across all segments, the theme is consistent. We scale where scale matters. We specialize where complexity matters and leverage our global footprint, automation, deep industrial expertise to stay ahead. When we look a couple of years ahead, our ambition is clear. Kitron aims to reach EUR 1.5 billion of annual revenue, while maintaining above 9% EBIT and a return on operating capital above 25%. This is not just a financial target. It reflects how our business model is scaling. The foundation is already in place, a record order backlog, a strong Defense and Aerospace pipeline, expanded capacity in Norway, Sweden and Poland and Malaysia, and a solid momentum in the nondefense sectors as the market is normalizing.

We deliver profitable growth today with above EUR 700 million in 2025 revenue, and we see a clear path towards the EUR 1.5 billion mark through a combination of organic growth and strategic M&As. Time line will, of course, depend on continuous buildup of capacity in the Defense sector with our customers, overall market recovery and the pace of consolidation opportunities that we at Kitron choose to pursue. Scaling, efficiency and return discipline remains the core of our strategy. In short, the next phase for Kitron is about turning our resilience and sector strength into profitable, sustainable growth.

So returning to what is really driving the growth in Kitron right now? There's no question that Defense and Aerospace is our main engine. Over the past years, we have seen record order intake, confirmed again this morning, new long-term contracts on existing and new programs, unprecedented ramp-up across multiple sites. This segment is growing very fast, but it also demands precision, compliance and scalability. No one knows more about this area than our own, Hans Petter Thomassen, who is leading our Nordic and North American operations and who is also driving forward our programs for the Defense. Hans Petter, over to you to give us an update on where we are and what is coming in the defense sector.

Thank you, Hasse, and good morning, everyone. I will share some views on how we see the defense market evolving and what that translates into for Kitron in the near and medium term. Fundamentally, the backdrop and the drivers of the defense market are the same as they have been for the prior 3 years. However, there is a distinct change in terms of how the geopolitical landscape is now shaping the political agenda and the corresponding defense budgets and acquisition plans.

European NATO countries have defined a path and a time line to build a credible European deterrence posture. 2025 through '27, we're seeing accelerated spending priorities of strategic assets. By 2030, there is an ambition to build the industrial base and incorporate joint procurement, and by 2035, achieve a 5% GDP spend target and a fully credible deterrence posture. So as we see it, we are now at the beginning of an investment super cycle. NATO countries are on track for gearing up defense budgets close to 3.5% and above. Civilian defense infrastructure resilience and cyber readiness will add to this scope. Close to 80% of European equipment needs were purchased outside of EU in 2023. In 2025, we saw a rapid change in regional spend. And in '25, European defense companies outpaced European -- no, sorry, U.S. companies on growth.

For the last 3 years, the defense spend has been very much conflict-driven support for the Ukrainian war effort. What we're starting to see now is the effect of the Europe both supporting Ukraine and transforming the rise in GDP spend to a tangible long-term armament acquisition plan. So in the near term, we now see large platform orders related to naval capacities, air surveillance systems, air defense. NATO rearmament also incorporates new technology introduced into the market. Kitron is well positioned to serve customers across multiple platforms, sites and regions. We see a 30% in 2025 and a more than 20% annualized potential through 2030.

Over the last year, Kitron has focused on qualifying and engaging our entire European and U.S. footprint in the defense manufacturing. Norway, Sweden, Denmark, Poland, Czech, Lithuania and U.S., all have established presence in this market. Comparing Q3 numbers, Defense revenue is up year-on-year 82%, and order backlog is up more than 100%. So in short, what I said a couple of years ago, the ambition from the 2023 NATO industry for more faster everywhere has now transformed into budgets that are up sharply, time lines that have been pulled forward, priorities that have shifted towards high-intensity industrial scale war fighting and rebuilding the European defense industrial base.

So taking a look at Kitron's strategic position in the defense market. This has evolved over time. We have decades of experience operating in this Defense sector, interacting with prime OEMs and subprime OEMs combined with a strategic vision aligned with what is required of a defense contractor that has yielded very strong sustainable partnerships with leading OEMs. We have established management protocols, security framework fully compliant with all the defense contracting requirements, both in Europe and in the U.S.

Strategic geographic expansions of factory locations enables Kitron to efficiently serve leading OEMs across the transatlantic sphere and support rapid multisite scaling of programs. So Kitron projects now a significant growth. The revenue outlook we present here is based on existing customer base, their forecasts, their order backlog, where Kitron is currently a qualified supplier in the program. Added to that, we have also incorporated new customers and program in the qualification phase where we have a clear line of sight on products and volumes. The revenue projection obviously does not predict the total available market, nor does it incorporate leads. In summary, defense is difficult. Entry barriers are high. Kitron have established a European and U.S. footprint fully qualified for defense manufacturing. For the OEMs, this translates to lower program risk, faster time to field, and that is precisely why Kitron is valuable.

So digging a bit deeper into the details. Kitron has, over time, built application knowledge in a broad range of systems and platforms. These technologies are key elements of defense capabilities and building blocks of Europe's next-generation defense capability. Over the past year, we have successfully entered into the new tech space of unmanned systems and countermeasure systems. This outlook is based on customers we're already doing business with. And the demand for unmanned systems, specifically in countermeasure systems are currently very much conflict driven. However, shortly, these assets will be an integrated part of every military capacity in every NATO country.

Short term through 2026, the growth is very oriented towards support of Ukraine and high priority assets for national capacities. Though from '26 and onwards, we see a surge effect of scaling European defense capability is materializing by scaling primarily of land and naval forces. Our current outlook for the defense sector projects a 21% CAGR over the next 5-year period. Combat vehicles alone and guidance control systems project well over 30%. We will continue to invest in capacity and capability, balancing defense and other market sectors for scale.

So before we move on, I want to take a moment to highlight an important addition to the Kitron family. As you know, earlier this year, we announced the acquisition of DeltaNordic, a company with strong capabilities in high reliability electronics power system and industrial applications. DeltaNordic has a long track record of serving Nordic and international OEMs with high-quality products and their expertise in system assemblies and customized solution complements Kitron's offering exceptionally well.

They strengthen our footprint in Sweden, broaden our customer base and bring a team with deep engineering and manufacturing know-how. Leading that team is Rickard, who together with his team has been instrumental in building a DeltaNordic culture, customer relationships and operational strength. We are very pleased to have him and his colleagues on board, and we see strong opportunities for growth together.

So with that, I'll hand it over to Rickard, who will take us through DeltaNordic, their capabilities and how we are planning to integrate their business into the Kitron Group. Thank you.

Thank you, Hans Petter. Yes, I'm happy to be here today to give you a short introduction to DeltaNordic. I would start by saying it has been very, very well received within DeltaNordic that we will be acquired by Kitron, and we look forward to be part of the Kitron Group. We share the Nordic roots. We both focus on high cost-of-failure segments, and we are committed to profitable growth. And together, combining the strength of both companies, we can leverage and we can unlock new opportunities, and we can secure the growth that we have in front of us.

So DeltaNordic was founded in Sweden in 1949, and we established in China in 2012. We are a provider of robust electronics and electric systems for harsh environments like marine, military, mining, construction, and we service our customers through the whole product life cycle like Kitron is doing. The turnover for 2025 will be around EUR 45 million. We have a high revenue visibility driven by a large share of repeat business from long-term customers, mainly in the Defense segment. The Defense segment is the largest segment for us, and we are awarded several programs where we will deliver high volumes over several years. The 3-year revenue outlook is exceeding EUR 300 million at this point.

Let's look at the segments where we operate. We have chosen to focus on 4 segments. In the Defense segment, we are well established with BAE Systems Hägglunds since over 30 years, and we deliver a big scope of electronics and electric systems. We have also recently been awarded business with another big OEM in this segment, and we expect to increase our outlook continuously in the Defense segment as we understand more on how the new NATO target will materialize. We have not yet factored in any effect of that in our projection.

In the Mining and Construction segment, we have experienced a very high demand in the mining part due to the mineral prices development recently. But on the construction side, we have seen a little bit softer demand, and that is due to the low activity in Infrastructure and Building. But we see a recovery in the 2026 forecasting for construction. So we see it's coming back for next year. The Industry segment is a segment where we have most customers and it's also the segment where we invest a lot in new sales resources to grow organically. And our ambition is to outperform competitors and grow significantly faster than the underlying segment growth. Infrastructure is the smallest segment for us today, but we believe this will also benefit from the new NATO target, and we are already now in discussions at an advanced stage with many new customers in the Infrastructure segment.

So what is it that we deliver to our customers? So we divide our business into 3 parts. We call it power, automation and systems. Power is typically bigger electric cabinets for power substations, electric distribution control and motor starters. The automation part is robust box builds like operator panels in vehicles and machines and remote controls and signal distribution boxes. And in the third part, which is the systems business, we build complete finished products, and that is normally quite large units, could typically be for energy storage, process control systems and also data measurement and collection devices.

So why is DeltaNordic an attractive addition to Kitron? Well, first of all, we bring 75 years of industrial experience in this field. We have mission-critical components serving high cost-of-failure applications, especially for harsh environments. That's our really specialization that we bring that competence into Kitron. We are a trusted long-term partner with a low customer churn. So we are appreciated over time for what we deliver. We have a high revenue visibility. So we bring a very extensive good order book into Kitron, especially in the defense side, land vehicles. And we have a scalable operating model, so we are ready for growth.

And that concludes my short introduction to DeltaNordic. And as you have heard from me and also Hans Petter, Defense and Aerospace is expected to grow significantly over time. But growth is alone not enough. To deliver reliably at scale, we need world-class execution. So this is where Kitron's operational excellence AI initiative comes in, and these programs are transforming how Kitron plan, produce and scale across all sites, ensuring that Kitron stays efficient and competitive as volume rise.

So to tell you more about this, I will hand over to Chief Technology Officer, Stian Haugen.

So thank you, Rickard. Since stepping on to the Capital Markets Day stage for the first time, it is a privilege to present what truly matters to us. Let me start with the backbone of our next growth cycle, our unified operating model. Every Kitron site runs the same equipment strategy. The same ERP, the same digital toolbox and the same performance system. Every employee has access to the same level of training and experience with advanced manufacturing challenges. This creates opportunities for workforce mobility, a principle we constantly leverage and production volumes scale across multiple sites. That's what allows us to move programs across borders, scale volumes quickly and keep quality stable.

Investors ask, does scale dilute margin? At Kitron, it's the opposite. Automation and AI creates operating leverage as volumes rise. Over the last years, we have completed more than 1,500 operational excellence projects. Throughput is up 10%. Inventory days are down 20%, and these gains appear in EBIT every single quarter. AI will be embedded in scheduling, procurement and predictive maintenance. AI will support rapid product development, prototyping, design for manufacturing and production line simulation and setup, all necessary to support hyperscaling. We expect to see 15% faster changeovers, 30% less scrap and 10% more output with the same OpEx base.

Operational excellence is deeply rooted in the company's core values. We are building Industry 4.0 into every new facility, robotized handling, predictive quality, automated testing and real-time analytics. We will see lights out capable pilot lines by 2027. These capabilities translate directly into EBIT. OE improvement, 10% per year and failure rates approaching Six Sigma. By compressing cycle times and reducing WIP, our cash generation strengthens even as we grow.

Capacity, resilience and speed. These are our priorities as defense demand accelerates and other market sector starts to grow. New capacity in Sweden and Poland is online and a major site opens in Norway in 2026. We have expansion potential in Poland with multiple up to 15,000 square meter sites, ensuring that we can follow our customers' long-term plans. DeltaNordic adds regional presence in the Stockholm region and Northern Sweden. Because our operating model is standardized, each new site strengthens margin rather than diluting it. We can move people, processes and programs seamlessly, enabling through more with the same. The result, Kitron has the capacity, capability and operational discipline to support a journey towards EUR 1 billion and beyond without compromising profitability. With new capacity in the Nordics and Poland, we see no capacity constraints. We can grow without growing costs in the same proportion.

Operational excellence and AI are all about making us faster, more consistent and more scalable. And that's already showing in our financial performance. As we continue to grow, maintaining strong margins, solid cash flow and disciplined investment is what turns efficiency into shareholder value.

To take us through the financial outlook and our targets for 2025 and 2026, I'll hand over to our CFO, Cathrin Nylander.

Thank you, Stian. Our financial framework is built around 5 key goals that ensure both growth and resilience. First, revenue. We target around 10% organic growth over a business cycle with M&A providing additional upside. We're seeing that balance today as Defense and Aerospace drive strong top line momentum while other sectors gradually recover.

Second, profitability. Our goal is to have an EBIT percentage of about 9%. That margin expansion is underpinned by operational efficiency, standardization and our AI and OpEx programs. Even in a period of capacity investment, we continue to deliver solid underlying profitability.

Third, return on operating capital, consistently above 25%, that reflects the quality of our earnings and disciplined capital use. It's one of the strongest ROOC levels in our peer group.

Fourth, cash flow. We aim to convert 80% of EBITDA into cash. Our working capital efficiency programs are progressing well. And as inventories normalize, we expect continued strong cash generation.

Finally, our balance sheet strength, maintaining net interest-bearing debt below 2.5x EBITDA ensures flexibility to fund both organic and acquisitive growth. Together, these metrics create a sustainable platform, predictable growth, solid margins, strong cash flow and balance sheet capacity to capture new opportunities. For 2025, we expect to be on or exceed our set targets.

Moving on to finances. Our financial strength means that we are a low risk predictable partner. Our low debt leverage supports a strong balance sheet, ready for expansion. We fund organic growth ourselves and deploy capital towards new capabilities in M&A. Our dividend policy is annual dividend of 20% to 60% of the company's consolidated net income.

Free cash flow. Here, we show both the quarterly free cash flow development and the outlook for the next 2 years. Starting on the left, you see the quarterly pattern through '24 and '25. Free cash flow improved steadily after the softer third quarter in '24, driven by normalizing inventories and more predictable customer deliveries. By Q3 2025, we see a significant step up to around EUR 42 million, reflecting both improved profitability and tighter working capital discipline.

On the right, we show the full year comparison. Free cash flow increased from EUR 17 million in '23 to EUR 43 million, and we expect a further strong improvement in 2025, supported by higher margins, continued optimization of working capital and relatively low CapEx levels. For 2026, the outlook remains solid. The figure shown includes DeltaNordic's operational contribution, but excludes the acquisition payment, giving a clean view of the ongoing cash generation.

Overall, the trajectory demonstrates that Kitron's growth translates directly into stronger cash flow, supporting our ability to invest in capacity, absorb acquisitions and maintain a disciplined balance sheet. For 2025, our outlook remains strong. We expect revenue between EUR 700 million and EUR 740 million with EBIT in the range of EUR 59 million to EUR 66 million. Operationally, we anticipate EUR 80 million to EUR 90 million in operating cash flow, supported by improved profitability and disciplined working capital. Leverage is expected to be below 1, ROOC above 35%, and a cash conversion cycle at approximately 60 days.

Looking ahead to '26, we see continued top line expansion, as capacity ramps up and new defense programs scale. Our target is EUR 845 million to EUR 943 million in revenue, with EBIT between EUR 77 million and EUR 93 million, a meaningful step-up in operating performance.

Cash generation remains robust. Again, in the EUR 80 million to EUR 90 million range, leverage stays below 1x, and ROOC continues to be at 35% or higher, reflecting the quality of our earnings and capital discipline. The cash conversion cycle remains stable also that at around 60 days. Altogether, this outlook underlines that Kitron is entering a period of profitable growth, supported by strong demand, operational efficiency and disciplined financial model.

Now back to you, Peter, for some key takeaways.

Thank you, Cathrin, and thanks to the rest of the team also. Let me close with a few clear messages. First, Kitron relies on its 5 market sectors for technology development, business cycle diversity and stability. Second, Europe is entering a long intense investment cycle in defense. The countries that scale the fastest and the most predictably will set the pace for the entire alliance. Third, manufacturing and electronics have become a strategic bottleneck. Without secure, high reliability manufacturing and supply chain, no country can deliver modern platforms at the scale and speed required. Fourth, this is exactly where Kitron is the strongest. We have the secure sites, the certifications, the track record and the operational discipline, and we know how to scale across borders when customers need it.

Fifth, we're financially strong and unified, 1 IT platform, 1 operational model, 1 global footprint. That means we can move people, competence in production between countries quickly and safely. And finally, we see a huge opportunity for deeper collaboration with our customers. Together, we can build the manufacturing backbone that Europe needs and deserves, resilient, scalable, and sovereign.

Our 2026 targets reflect some of the opportunities we see in the market. There are further upsides. Currently, our 2026 outlook is revenues between EUR 855 million and EUR 943 million, EBIT between EUR 77 million and EUR 93 million.

Thank you for your attention. Give us a minute to reorganize and we'll start our Q&A session. Thanks.

All right. I'll be the moderator here. We have some online questions coming in, but we'll start off with questions here in the room. So please wait for the microphone.

Martine from Nordea Markets. I have several questions, if it's okay. So I think I'll just go one by one. The first one is considering your order that just came in, how much of that approximately is included in your 2026 guidance?

40%.

About 40%?

About 40% of that specific order.

Great. And also like considering your overall forecast, where do you see the most like risk on the upside and the downside considering both I saw, for example, the unmanned vehicles that is considerably lifted from the last time. And you also have the NATO orders coming in that I understand is not included in the DeltaNordic outlook. But you also are lowering, for example, your electrification forecast a little bit. And I also want to like get a little bit more color on how much of your DeltaNordic customers do you see like potential to gain a larger share of orders coming from their customers since you have a larger scale to offer? A long question, but...

Let's start with the last one. And really, the business development, and Hasse and his whole business development team are visiting DeltaNordic on Monday next week, I believe, both sites in Stockholm and up in Kolsvik also, for that purpose of looking at and really showing the business development people, these are the capabilities, so they can go back and go into the field and start looking for opportunities with confidence, being able to sell new capabilities. And that's what they'll see when they see those sites and they see the products that are being built there. It's difficult to set an estimate on what that will be. But I think it's going to provide opportunities for DeltaNordic and for Kitron.

There has been several cases throughout the last couple of years where we have basically declined to quote for business, which falls directly into the heart of what DeltaNordic is doing. So I personally think there's quite a lot of opportunities there.

And if I then continue on the unmanned systems, I think you're on to something, because you can say the decision-making and the technology development within that sector is much faster than what we see in our Defense business. So the opportunities there is, I would say, quite big, but also, to a certain degree, unpredictable, because something could happen that we did not know about yesterday, could happen not that many months, weeks into the future. So that's also, as Peter is saying, we are only building in a relatively small part of what we believe could be out there before it actually transforms into real orders. So we are quite conservative.

If I can just stop you there. For example, the Norway is considering to have like a fast tracking of the drone line in next year. Is that like included in your forecast? Because I think that you will be a preferred supplier into that.

Let's put it that way. We're looking into the opportunity. It has not come to a point where we can say that this is going to be a reality. But adding to Hasse's about the unmanned systems, we are sort of in 2 layers of that value chain on the front end, building the complete systems, but more than anything, I'm guessing about half of our revenue in that is more system components that can be integrated in a multitude of these applications. So when you talk about drones, there is a an extremely broad range of them. However, many of them use the same communication and other sensor technology where we have a strong presence.

And the same brain.

Yes, same brain.

It doesn't matter who exactly as the, what should you say, drone provider wins, we will still have a chunk of that business.

Well, it could be an unmanned land system also.

Or sea based, right, in the marine.

But if you just took and combine what is out there public of what Ukraine is targeting for their defense capabilities, the U.S. and what Europeans are indicating, you're talking drones in tens of millions. So yes, even though there are hundreds of providers, if you divide the tens of millions with hundreds of providers, there are still big chunks out there. But it is a volatile market.

And our position is quite strong because it is super important in Norway, yes. But as you can imagine, the Polish guys are also extremely focused. We have a site in Poland. The people in Lithuania, of course, extremely focused also due to interruptions they have had. Denmark, the same. So we are, you can say, in those, what we call our home markets, we are very relevant for that business also going forward.

Great. Very good answer. If I can just do one more and then I can pass it on. It's on the medical side that you say that you are considering a carve-out, like in which subsectors would you see that interesting?

Something within instrumentation, medical instrumentation or a complete medical product. You're looking for the high-level assembly, where a device manufacturer is doing this themselves, and for cost reason or efficiency reason or strategic focus, decides to have a partner do the manufacturing for them. So if we see an opportunity like that, we'll pursue that opportunity, but we don't have anything in the pipeline on that yet.

Yes. And to my understanding, you often also end up with that as a customer.

Yes, yes. Obviously, right.

I'll go quickly then. Olav from Pareto. I just want to drill into your 2026 guidance a little bit. And you're saying EUR 43 million from combat vehicles. I'm assuming this is 100% from DeltaNordic?

As on date maybe.

Okay. But still, if you subtract that and we assume that a large chunk of it is from DeltaNordic, your Kitron stand-alone guidance for 2026 looks quite low compared to where your backlog sits currently. And then if we add in this EUR 55 million order today, there seems to be a big discrepancy there. So I just want to understand, is there some ramp-up that's taking some time? Or is there something else that can explain this?

I think Kitron stand-alone number is what, EUR 835 million, I believe?

Yes.

All right. So from EUR 720 million, that's a 16% growth with not high growth in nondefense market sectors. That means defense is pulling that growth with very strong growth, I think over 20% defense growth for the full year. But there is some sort of -- there's a little bit of hesitancy or a little bit of conservatism for us, where we see things coming in quickly. Like we had this morning, we sort of were working on, hoping on that, that would be a continuation. But until you have that order in hand, you're not going to go out and talk about it.

And just to specify, what we announced this morning does not fall into combat vehicles, but unmanned systems.

Yes, go ahead. Hans Petter also.

Yes. And just to add a little bit related to defense. If you're talking about the more traditional defense platforms, very few of them are scalable or possible to ramp up in anything less than 6 months. So it goes with -- we need the order backlog in order to bring it into our guidance.

Øystein Lodgaard, ABG. Just to follow up on the previously asked questions. On the unmanned vehicles, you only have a growth of -- I think it was EUR 34 million from '25 to '26, but you have these 2 announced orders, can you say. Is that because there are some other major projects that are kind of in '25, but not in '26? Or is this just caution?

It's the other way around really. It's the other way around. So we've got 2 major customers right now, 2 major customers right now. Next year, we'll have 5 major customers. So there are products that are starting. But again, you don't know -- with new defense tech, you don't know who's going to be the winner in the next-generation product. So it could be somebody else, or it could be our customer who's developing new systems and launching those and we'll get orders for them.

And the technology landscape for that kind of application is significantly different than what we do in or see in traditional defense industry. It is moving more like a consumer from a technology point of view.

But again, right, there's a vast difference, because these products are sort of hyperscale. You're going from 0 to delivering 10 trucks a day of product in a matter of 3 months with continuous product development every single week, sometimes every day with battlefield information coming in and the product transforming and changing out. That's why some parts are being 3D printed for some of these products to be able to scale that. And to be able to scale that level when product will take approximately 5 labor hours to build a product, talking of hundreds and hundreds of people to deliver thousands and thousands per week at a massive scale, you start up, you get it up and running. And once you have that capability, that's a sellable capability across the board in the market. Not many can do that. Many are talking about it. I've yet to see anybody out there doing it.

And a question on your kind of production flexibility. How dependent are you on these new capacity increases versus how quickly could you ramp up production at your existing facilities if you get new large orders like the one you announced this morning?

You want to say hours?

I mean, as we have also touched on during our presentation, what we have gone through this year is, as Peter is also saying, building up or strengthening our capabilities to take exactly that flexibility. And because we are who we are, we take very, very fast decision based on real business needs. So I would say what we have gone through and what we will continue into '26 is to take all those needed decisions on the site where it's needed, and we can do that extremely fast. I'm not going to say hours or days or weeks, but it is extremely fast. And as Peter is saying, we have shown that we can do this, and that is also why a lot of companies within that industry is coming and asking us for our support.

This is also one of the reasons why I talked about this One Kitron program and the harmonized systems across all the factories. It makes us very scalable. We can transfer programs from factory to factory. We can also scale several factories at once if we need a muscle for that, or we can move people and they don't need training.

We've put together a project team of the best of the best across the different factories to help a new program launching in Poland, for example.

Doing subassemblies on one side and finished products on another or helping each other across and so on. And we are doing that today, and we will continue doing that in the future also.

Some, what, 4 months from signing to moving into a new building in Sweden, completely modern 6,000 square meter factory. From signing to moving in, in Poland, which were 3,000 -- 2 weeks for 3,500 more square meters to support extra business, we didn't even know that we had won. We thought we'd won one little piece, it turns out that there was massively more.

And we did not know that in Q2 this year. So it's something that has evolved like this.

Then you have to -- I mean, you have to put a strong team together. Otherwise, you will not succeed in this. And they have to speak the same language in the form of engineering and how we do business. They can be Norwegians, they can be Swedes, they can be from Malaysia, they can be from Lithuania, but they all work together and all understand how we do business.

I also have to add that the footprint needed doesn't have very special requirements for the unmanned vehicles. We can move into basically logistical barn and use it from day 1. We don't need to do much.

But when it comes to larger new platforms from the primes, that's where we're looking at, can we reach an agreement with them? And then we're talking in 2027, 2028. So that's where we're seeing, do we need another facility in Poland, for example. And in Poland, we have the option to -- we own the land, so we can build another four 15,000 square meter facilities if need be, right? And it can get done in about 10 months.

And it's in a special economic zone already.

So we have flexibility.

Yes, okay. Just Sindre Sørbye from Arctic Asset Management. Three questions. First on the D&A outlook. First, is this EUR 55 million order this morning that's reflected in the outlook, right?

No. As we said earlier, roughly 40% is factored into the outlook.

Yes. But in the long-term or medium-term revenue forecast, you knew you got that order when you made this material, right? So it's reflected there?

40%...

We received it this morning.

We received it this morning. It's very on and off. We don't really know.

Okay. So if we were having your CMD next week, you would have increased that?

A little bit. Yes.

And then firming up the numbers, you can see.

We will see in our Q1 report in February where we are and if we will adjust our '26 outlook or not, in the Q4 report.

And we will, of course, keep informing. When things are firming up in our order backlog and so on, we'll keep informing openly about that.

But this was actually an order that was delivered during the night, a purchase order. This is not a signed agreement, this is a purchase order.

I think it's important to distinguish between the volatile new tech business and the more traditional defense. The traditional defense operates with completely different time lines.

And also in this outlook, I think you said that it's existing customers, existing products, but also new products with existing customers. And then you have this -- say that it's also a business where we have a clear...

Clear line of sight on volumes.

Exactly.

But some of them don't have clear line of sight, some of our customers don't have very clear, because they win or they lose. That's the nature of that new tech business is that either you win big or you lose big, for those customers. So they are extremely hard to predict. That's why we're a bit conservative when we predict them going forward.

We are 0 on that kind of...

But we don't speculate on 2026. We try to refrain from speculation on '26.

Yes. But I'm also thinking about the more medium term '27, '28, '29. So for instance, I know we've been working a lot with potential naval programs? Probably nothing firm in 2026, but a great likelihood probably for more long-term revenues?

I would say probably '28 and onwards. If you took the Norwegian frigate acquisition, the industrial participation plan is due to be ready next year when there is an actual contract signing. There has only been a down select up until now. So I wouldn't expect to see any serious volumes from that until '27 or '28.

Okay. So we have included nothing of that in...

There we have -- again, we have included everything where we see -- the frigate itself is basically a done deal. They have established a value chain. Where we see opportunity in that space is on several subsystems and our key interest is in those nearshore standard vessels, which will be equipped with modular containers with different capabilities on board. That's where we see our sweet spot going forward. And that's not even out on the RFI yet. We can only speculate what the opportunity is.

Yes. clarifying. Finally, on your thinking about -- or we will assess expansion in Poland in '27. And obviously, it makes sense, especially in this kind of defense environment that expanding in Poland. And then you have the factory in Czech Republic. At the same time, looking longer term, a lot of your, let's say, peers in this industry and also in other industries say that labor costs in Poland really have skyrocketed. So they're relocating to Romania, Bulgaria, other countries. So how do you think about that? Because I mean, you're a very cost-conscious company. So even that high concession could be acceptable for a defense customer, it might not be so acceptable if you were to tender into, let's say, other industries.

From a risk perspective, if we talk about 2 of our larger customers, right, they prefer Poland, or Scandinavia, from a risk perspective.

In defense.

In defense.

But it could even also be in infrastructure that these kind of more geopolitical factors into the decision-making. And then I will also say, I mean, one of the important parts of what Stian was saying is that we are constantly running a lot of operational excellence projects exactly to balance the increase of labor. But we have also to remember that a lot of our products is also quite intensive on components and not so much on the labor part. But automation, new processes, operational excellence is how we live every day, and that is how we basically balance those.

Direct labor costs in our Polish, Lithuania and Czech facilities is fairly similar. We're talking about 4%, 5% of product cost being direct labor. Of course, then there's indirect labor and those costs are higher, but the blue-collar labor cost has not moved significantly.

And I think you also have to consider that the 2 words, security of supply and sovereign capabilities is coming into play to a much greater extent, not that cost doesn't matter, because cost is a worry in all long-term acquisition plans in the European countries. However, security of supply, sovereign capabilities is also...

Access to energy.

Access to energy. So there are new aspects that are considered now that were previously not that strong in the decision process.

Finally, finally, several of your customers have actually announced plans or also in the step of implementing production in Ukraine itself. If you were asked to, would you consider setting up a supporting plant for that kind of production?

We would consider it.

I will, though, also say that what we see is actually the opposite of what you're stating is that after the change in legislation, a lot of younger, especially men are leaving Ukraine, which is weakening the manufacturing capabilities in Ukraine, at least short term. So we actually see a lot of Ukrainian companies looking opposite, so wanting to move their production outside of Ukraine. So it's a balance that we follow all the time. And of course, we are very open. But again, it's also something about security, as Hans Petter was saying, and that's a several step -- or several factors in that play a role.

Just look at what's happening now with our Norwegian Defense Minister just announced that we're considering to produce Ukrainian drones in Norway. And the backdrop there is that it's hard to do, let's say, what we do producing electronics that needs a relatively controlled environment to have a decent outcome. It's very, very hard for them to do. So we see the opposite. The components we deliver are more relevant for production outside of Ukraine to be delivered into Ukraine.

Let's go to some questions online. And staying with the focus on defense and aerospace. There's a question here. How do you view capacity constraints in the defense and aerospace value chain? Is there a risk that competitors will build material capacity negatively impacting supply/demand on capacity within the sector, although demand is accelerating materially?

Shall I take a stab at it?

Yes, go ahead.

Okay. If we look at the broad picture, if you take electronics and components as a whole, going back 2, 3 years when we had a component allocation crisis, we have to acknowledge that defense is about less than 5% of the total global market. So as I told some of the defense OEMs, like it and not guys, you don't have leverage in this market. So it very much depends on where the commercial markets are going. That said, though, yes, there we see more and more nations enforcing or putting in place other export control measures in order to fight a trade war and to have restrictions on value chains. So that is coming into play. That is, in many, many cases, offset by very, very long-term orders and very long-term material security. And the whole industry is focusing much, much more on finding regional value chains that are available also in a war time situation. Even the newcomers now are starting to focus on that. Although they are currently probably a lot China influenced, they are focusing in that direction.

So I come back to our One Kitron approach, right? So it's easy for Kitron to build a new factory, because we know how to build a factory, know how to put processes in place. And basically, it will be a clone of whatever we're doing everywhere else, right? Most EMSs in Europe are either very small, EUR 40 million, EUR 50 million, EUR 60 million, EUR 75 million top line, and many are under EUR 10 million even. We don't consider those a real threat because they're not playing in the same league at all. They don't have that capability to scale.

Even larger EMSs that have done a lot of acquisitions over the past years have not integrated their acquisitions in the way Kitron does. So it's difficult for them to scale. They may have a factory somewhere in a country that's excellent on building these types of products, but that plant does not have the capability to scale, and they can't hire people where they are at. And there's sort of no corporate umbrella overhead that can help them do that. So that's, I think, the main point with us when it comes to scaling and Kitron's one operating model policy.

And if I can just comment on the component part of that question. Of course, that is a consideration. But back to as Hans Petter is saying that the defense is not the biggest consumer on anything. But that is the kind of learning that we have also taken throughout our hyperscaling in this year, and that is also a key reason that our customers or new customers is coming to us, because we are sitting on that knowledge, and that is not knowledge that you obtain overnight. It has taken a lot of blood, sweat and tears to get to that point, and it is now starting to pay off with dividend.

That said, there's enough business to go around.

Yes.

But what Hasse just mentioned is an extremely important part of our value proposition to the OEMs that not only can we put the product together, but we can highlight risk in the value chain and support offsetting that risk.

Good. We'll do a couple of more questions relating to defense. How do end customers prioritize price versus other KPIs in their decisions in this sector? Is it fair to say that these customers are, on average, less price sensitive?

I think -- I mean, as you also saw, we split it into different sectors within defense or different subcategories. It very much differs between those different categories, because it also depends on how often is your technology shifting, what is the life cycle of your product and so on. So I think it's not something that we can give a straight answer to as a whole group. It very differs between the different type of applications that we call defense.

In general, though, in general, I would say that price matters less to customers in defense than it does, for example, in connectivity, right? So yes, it matters, but it matters less. What matters more is ability to scale.

And quality and reliability and compliance and all those things.

And to add to it, though, on the larger systems, we work with complete open cost transparency. We are audited left, right and center, and we sit for months with government auditors explaining our cost structure. So yes, it is competed in a market.

One sort of longer-term question relating to this. But since you grow so much within defense, is there a risk that you have to move into lower-margin business to fill capacity as the defense and aerospace growth turns more moderate from 2030 onwards, so longer term?

It's difficult to predict the long-term market, 2030 and beyond, and how other market sectors will evolve during that time frame. But we're going to continue pursuing business in all the other market sectors also. And we rarely go into any high-volume business. We rarely go into any low-margin business, and that's our policy to continue. Always when we accept any sort of risk, we make sure that we have an appropriate customer prepayment and things like that sitting there on our balance sheet as a watchdog over any risk.

But over time, there's always an evaluation of what footprint you need. And if we need less, so you'll probably look into that investment or the investment in the future. We always try to think about how can we reduce cost in the future as well as how can we increase volume in the future. So I think it's part of...

Even in this scenario, right -- even in this scenario, when all of the different companies presented their budgets for 2026, and we've reviewed them and revised them, obviously, they also presented a downside recession type budget. So what happens if the market drops out 40% next year? How do we maintain profitability? What does that mean for you and your company and your factory? So we always do that also. So we prepare for the worst, plan for the best, hope for the best.

And when building infrastructure, let's say, the factory in Norway, a big consideration is, okay, what's the alternative use of this building if there was a downturn 10, 15 years from now. So we try to create facilities that are not so adapted to our special needs, that they can actually have an alternative use.

I think important also is to acknowledge that it will be a big aftermarket business beyond 2028 and forward that needs to be considered as well when you evaluate the potential of the defense.

I think on that keynote, I think considering we're in the business of electronics, if you take a frigate or an F-35 platform, they are out there and lasting for 30, 40 years. But the sensor systems, the electronics on board is probably going to be built at least 4x by the end of that life cycle.

So if they buy 1,000 F-35s, we'll supply 4,000 units over the lifetime of that aircraft.

And I would also like to mention that even though we are speaking a lot about defense and aerospace, and we do that for a reason because we are in the middle of that super cycle, from a business development point of view, our focus is actually much broader and maybe even stronger on non-defense, because one of the key foundations of why we continue to keep financial strength is that we are playing in not just 1 segment, but in 5 segments. So developing those other 4 segments while segment is growing is super important.

And you can say 4, 5 years back, we were talking a lot about electrification. When we were talking about electrification, back then, we were in business development already looking at what is the next thing. We need to try to work not just on one thing specifically, but much broader to make sure that we also keep our strength when, I would say, the defense market normalizes, because it will normalize in a much higher level than it was 5 years ago. But yes, there will be a normalization period. Whenever that will be, we don't know if that's in 2028 or '30 or '35, but we need to, of course, plan into the future from a business development point of view in nondefense business.

You're underestimating though the effect of the additional 1.5% of GDP spend for civilian resilience. It's not only going to be roads and buildings. It's going to be a broad spectrum of infrastructure where energy and our other sectors come into play.

Encrypted communication and so on. Yes.

Following up about the other sectors, we have a question here. Can you give some color on the changes to midterm growth outlook and why it's been raised in connectivity and medical devices, but lowered in electrification? I'm assuming that's compared to the presentation last year.

I can speak to the lowering of electrification. That sector for us is divided into 2 distinct differences. One is infrastructure part, the large grid systems, those are still on a growth trajectory. What is the more consumer and, let's say, EV charging and similar, that is still down. So let's say, more than 50% of our market is on a strong growth trajectory. We do see signs of recovery on the consumer end. And it has also somewhat shifted in terms of drivers. We're going back 3 years, it was all greentech and transformation to non-fossil fuel that was driving it. Now we see AI coming into play, really driving power consumption and not greentech.

But then, I mean, these are large infrastructure projects. So sometimes there's a delay in the rollout of a project, and that will affect whatever we deliver in a certain quarter or a certain 6-month period. So there can be some fluctuation. But as you say, right, the underlying demand continues to be strong. Do you want to comment on connectivity and medical?

Yes. If we start with medical, as we also said or I said during the presentation, then, of course, the life cycle of the products in medical is very, very long. So you can say, right now, we have seen some of the products that we have been producing going end of life. And while we are building up new ones, it takes time. So that's more an outlook for the future. But we are spending quite a lot of resources in building even more and broader capabilities. And then, of course, hoping that we will find the right M&A that fits into that capability building is also on the agenda.

And then on the connectivity part, those are maybe the fastest technology-driven products that we have outside of unmanned vehicles. So therefore, we can see that the underlying demand in that market is constantly high and still increasing, because the need of new technologies in that segment is needed as the market and expectations and demand in the market is changing.

And coming back to medical, we're actually growing, and that's actually because we have taken over production from a customer that we didn't have before, which is actually producing quite some growth going forward. And it's basically the difference between the more...

Super interesting product, bioprinting of -- 3D printing of biomatter. And we're building those complete units in our plant in Sweden.

So without that, that would be flat, but that is increasing and making it grow.

Yes, we won more in medical, definitely, no doubt.

We have one specifically for DeltaNordic. How certain is DeltaNordic's revenue forecast? Is good revenue visibility to be interpreted as certain or merely as an estimate?

Should I comment on that one? As I mentioned on the presentation, we are awarded these programs. So what we have factored into the projection is the volumes expected on those programs coming years. So it's correlating to a vehicle plan with our customer, and we are awarded a single source for those projects. Then in the projects, the orders will come continuously over the years from the customer. And also adding on to that, we have also secured material for those deliveries several years ahead. So that could also be a sign of that it's pretty firm.

I would say that it works in a similar manner to our legacy defense customers. We recognize the patterns on how we work and coordinate and the message is given and what you can see and what you can expect. And that will go for the defense, and you can tell a little bit more on your industrial part, maybe?

Yes. No, but the order book for industrial and the mining and construction, that's forecasting from those customers. That is very similar to how Kitron is operating as well with 6 and 12 months forecasts. And then we measure the forecast accuracy over time and so on. So we feel confident that the projection is solid.

Then we have one about capacity, both at Kitron and competitors. You referenced growth without constraints. You seem very comfortable that you can deliver the anticipated growth without any meaningful constraints. Do you have a feel for how this applies for other players in the industry?

I'm not going to comment on our competitors. You can speculate by looking at some of the top line developments. Let me just put it out there, right? And there's a difference between doing bolt-on acquisition and doing platform acquisitions that you integrate.

And of course, we are focused on competitors when we are bidding for business and so on. But in our daily life, we are focused on our customers and how we develop with our customers. That is what is core to us. So of course, they are on the map out there. But for us, we do the right thing together with our customers, and that's how we...

You listen to your customer. If your customer says, it's too expensive to be in Germany. There's no solid recurring supply that you can depend on when it comes to electricity. If your customer tells you that, and this is the largest defense manufacturer in Europe, and they say, one division says I want to be in Poland, the other division says I want to be in Scandinavia. I want to be in Scandinavia for security purposes. I want to be in Poland because it's close enough, and they have a strong defense development and the cost structure is more favorable and they have the energy, right? So those are the messages we're getting from the large, large customers.

All right. We have one here. Could you help us understand how much of the new business over the next years come from, one, existing customers versus new customers; and two, expanding on existing customer product lines versus growth on new product lines from existing customers?

That's your table there, Hans Petter.

I can't really give more information than we already have. I mean we have...

But the basis for that table and the growth we have is not new programs that we know nothing about.

That's all sunshine built into that basically. So...

It says there's a clear visibility to customers and programs. That's what it's based on.

Yes. But in defense, of course, we prefer and totally aligned with our customers that we cannot share specifics on how their programs are developing, who they are and so on. So that's also maybe an answer to that.

All right. Are there any more questions here?

One final one.

One final, just regarding on the capacity, because I remember you said like I think it was this spring or something you mentioned additional EUR 500 million in capacity in Europe and EUR 200 million in the U.S. And then I was just wondering how much of that is reflected in your slide about the additional capacity and how we should view that in your forecast now?

One learning, since I said that, is it depends on what type of product you're building. Are you doing final assembly of a complete product? And is that complete product then shipped with a multitude of other products that you buy in to deliver a complete system to your customer. The difference there can be 10x on footprint. And that's what we've seen with one of these latest projects that we ramped up. Also, the projection of we have EUR 500 million in immediate capacity in Europe, that we said last year and then reiterated in April, was based on us running 24/7 on that existing footprint, which is not something you want to be doing more than 6 months or 9 months or something like that. Beyond that, you really need to extend and expand if it's going to be consistent and continuing, so that you can go down to a 2 or 3-shift operation, which is more cost effective, but it also allows room, if something goes wrong, to catch up, right?

If you're running 24/7 and something -- I mean, you don't get the component delivery where a test station goes down and you have to either replace it or repair it or you have to get an alternate supply source in and you lose a day, 3 days, a week, 10 days, you never catch up, which is out of the question, right? So you need to be able to catch up. And that's why you don't want to be running 24/7 consistently. But that's what that was based on that EUR 25 million. High-value products that are smaller, that sort of the normal Kitron type of product based on the footprint we had available and running 24/7. Now we see larger products and...

And you might say that the cost per footprint is a lot less now than what we anticipated before, because we can actually just move into existing facilities and do the final assembly of these products where we're actually growing quickly, which is with the unmanned vehicles basically. So there's a different look at it. And then you don't really see the rent cost coming in. It's too small.

I think that's it. Thank you to the audience for staying with us here today and for everybody online. Again, I'd like to thank our customers, our investors, our suppliers for the great job and your support. Thank you.

Good morning, and welcome. Today, we're proud to announce the acquisition of DeltaNordic, a Swedish provider of advanced electronics and electrical systems with a strong footprint in the defense market. This acquisition marks the next step in Kitron's strategic journey, strengthening our position in high reliability and mission-critical electronics.

I'm Peter Nilsson, CEO of Kitron Group. And with me today is Ms. Cathrin Nylander, CFO of Kitron Group.

Next slide, Slide 2, please.

Disclaimer. Before we begin, a reminder that this presentation contains forward-looking statements. It's prepared for information purposes only and should not be regarded as an offer to sell or solicit any securities.

Slide 3, please. Forward-looking statements. Some of today's remarks will address forward-looking expectations, particularly regarding revenue, margins and integration effects. These projections are based on current assumptions and may be adjusted as the transaction closes and the integration proceeds.

Slide 4, please.

Well, here's today's agenda. We'll start with key transaction highlights, then introduce DeltaNordic and its operations and move into strategic rationale and financial impact and, finally, close with summary remarks and the Q&A.

Slide 5. Next slide, please. So transaction highlights. This acquisition is a natural next step in Kitron's growth journey. DeltaNordic adds strong confidence in defense/aerospace electronics, expands our presence in Sweden and brings complementary expertise in rugged electrical systems. There is minimal customer overlap, creating clear cross-selling potential. The deal is earnings accretive and supports long-term shareholder value creation.

Next slide, Slide 6, please.

Transaction overview and timeline. We've agreed on an enterprise value of SEK 1.255 billion or EUR 114 million, corresponding to 9.65x 2026 EBITDA of SEK 130 million. The settlement combines SEK 760 million in cash, SEK 150 million in Kitron shares and an earn-out of SEK 345 million linked to revenue performance up to and including first quarter 2027.

Financing of the acquisition is contemplated by way of available funds and facilities. Kitron may consider existing facilities in combination with other financing alternatives including new bank facilities, debt equity or other third-party financing to settle the cash part of the purchase price at closing. There are no financing conditions for the acquisition.

Regulatory approval is expected within 25 working days and closing is targeted for late December or early January 2026.

Slide 7.

Introduction to DeltaNordic. DeltaNordic is a full-service provider from design and prototyping to certification, production and aftermarket support. Their core strengths lie in mission-critical electronics and electrical systems serving defense, industrial and infrastructure customers.

Next slide, Slide 8, please. DeltaNordic at a glance. They deliver robust electronics, electric cabinets and complete system assemblies ranging from PCBAs to box build assemblies. Based in Sweden, a NATO member with a strong defense cluster, DeltaNordic serves blue-chip customers such as BAE Hägglunds, supplier of the CV90, the CATV and the Beowulf combat vehicles, together representing roughly 47% of revenues. Revenue is projected to grow from SEK 498 million in 2025 to around SEK 1.4 billion by 2028, with the full 3-year outlook exceeding SEK 3.4 billion.

Slide 9, please. Market exposure. Well, today, defense accounts for about 50% of sales, covering combat vehicles and naval systems. Mining and construction contributes 30%; industrial automation, 17%; and infrastructure, around 3%. Over the medium term, the defense share is expected to reach around 70% as new NATO-related programs ramp up.

Slide 10, please.

Product and service offering. DeltaNordic's product range spans electronics, electronic systems and value-added services. Their strengths include high durability through thermal coating and potting and electric cabinets built to withstand dust, heat and vibration. Their DISP process, integrating design, sourcing and production ensures traceability, quality and efficiency through product life cycle.

Slide 11, please.

Geographic footprint. The company operates from Örnsköldsvik in the north of Sweden and Kungsängen, just outside Stockholm, Sweden and a site also in Nanjing in China. This provides both proximity to Nordic defense customers and global cost flexibility. Combined with Kitron's 11 production sites across Europe, U.S. and Asia, we will gain broader capacity and sourcing reach.

Next slide, please, Slide 12.

Why DeltaNordic is an attractive addition. DeltaNordic is highly agile and deeply embedded in its customers' development processes. Their prototyping and NPI capabilities generate sticky long-term business. They bring mission-critical expertise in harsh environments and have a management team with strong combined experience. With clear growth, visibility and ample capacity, they're ready to scale.

Slide 13, please.

Strategic rationale. Strategically, this acquisition strengthens Kitron's defense and aerospace offering, our fastest growing market sector. It adds complementary competence, deepens our presence in Sweden and provides an access to a broader customer base with minimal overlap. DeltaNordic will gain scale and support through Kitron's global network and industrial platform.

Next slide, Slide 14, please.

Integration and growth platform. Our integration philosophy remains decentralized, and DeltaNordic fits very well into that. DeltaNordic retains its entrepreneurial spirit while benefiting from Kitron's legal, IT and financial infrastructure. That gives them freedom to focus on production, innovation and customer support while leveraging our purchasing scale and global capacity to accelerate growth.

Slide 15.

Strategic positioning. Both companies operate in the high-mix, low-volume sweet spot, where complexity and recurring business creates value. This is precisely where Kitron has a competitive advantage and DeltaNordic fit seamlessly into that positioning.

Next slide, please.

Outlook. Kitron reiterates its outlook for 2025 with a revenue of EUR 700 million to EUR 740 million and an EBIT of EUR 59 million to EUR 66 million. In 2026, excluding DeltaNordic, we forecast EUR 785 million to EUR 865 million in revenue and EUR 70 million to EUR 84 million in EBIT. DeltaNordic adds a further EUR 70 million to EUR 78 million in revenue and EUR 11 million to EUR 13 million in EBITDA, making the acquisition earnings accretive from year 1.

Slide 17.

Some summary and final remarks. To summarize, this transaction strengthens our defense and aerospace portfolio. It expands our Swedish footprint and it adds new engineering capabilities to the group. Minimal customer overlap means immediate new growth opportunities. The transaction is financially disciplined and strategically transformative for Kitron.

And we expect the deal to close by year-end with full integration support from the global platform starting in '26.

Slide 18.

Q&A. Thank you for your attention. I will now open the floor for some questions on the transaction, financial impact or strategic integration plan.

So Cathrin, this has been a really fast process, right? We've worked hard long, long hours, making it happen.

Yes.

We signed the LOA just, what, 23, 24 days ago.

Yes. It was important to have a speedy process for all parties.

Let's go to the first question. The first one is from Petter at the SB1 Markets. And he has not one question, but he has six questions. So how many employees are there in DeltaNordic?

You take the second one, and I will help with the numbers.

Okay. Can we elaborate on the comment, high visibility? Is it better than Kitron? And if so, why? The comment is they're more deeply integrated in the deliveries and manufacturing to primarily BAE, working very closely with the different customizations for the different vehicles that are delivered on different programs. So there's a strong visibility. There's a build plan from BAE, so that's completely correlated into DeltaNordic's build plan also. The order horizon is about the same as in Kitron, if you look at order backlog. But there's an understanding of what's going to happen in the next 1, 2, 3 and 4 years out.

Can we talk about the history in DeltaNordic over the last 5 years, what has been the -- both on growth and margin? I think the historical values have been related to the development of BAE and other customers. There's been a big transformation of the company in the past 2 years with a completely new management team brought on board, more professional, looking to transform the company to something that very, very much looks like Kitron when you start talking to them and looking at processes and business decisions. So the growth journey really kicked off this year. I think it's extremely strong growth for '26. And just like Kitron, right, we see the tsunami coming in '27 with defense orders.

Number four, was it a structured process? Yes, it was a structured process. The new company has a leverage, net interest-bearing debt to EBITDA of around 1.3. Why is equity any alternative? Cathrin, that's for you.

Part of our very good net interest-bearing debt to EBITDA is, as we said in the quarterly reporting, due to very high customer deposits for ramping up of strong projects going on. So we always need to look at that in the vision. So we are looking into several sources of financing for this acquisition.

Want to jump back to the employee question?

Yes. So there are around 200 people. And they're growing, so it's sort of what number to say. Mainly all the people are in Sweden. So their Nanjing facility is quite small in that sense.

Yes, serving a more limited portion of customers for the Chinese market. So it's around 20 employees building product there. But a very nice site. Our people visited it, and it seems like it will be a good fit for us also.

Yes, very -- only 2.5 hours from our other sites. They're sort of 2.5 hours from each other, which is a nice distance in China.

What capabilities that DeltaNordic have that Kitron does not have? Well, it's the very complicated, complex cabinet assembly. The system integration involved in building those very, very large products on the civilian side, on the mining side, in the industrial side in Europe, together with all of the types of different cabinets that are used in combat vehicles for both the naval part and the land-based part, so those are traditionally not products that Kitron has built.

We've based our portfolio much more on electronics, whilst DeltaNordic has the capability and competence to build and understand and quote these difficult products that also contain, in many cases, high voltage and high amperage type of challenges, where Kitron, really, we can't even quote the product. We don't have that experience and understanding how to do that. But this opens up a market for other types of combat vehicles where we have a lot of connections and already are discussing with those potential new customers, not about DeltaNordic yet, but capability or opportunities for Kitron.

I think that -- and finally, can you bridge the gap from '25 and '26 in Kitron in the updated guidance, both in terms of growth and margins?

I think we are continuing on our growth journey within defense and we also see pretty strong growth actually within connectivity coming into '26 and where the other sectors are more stable, I would say. And that's basically the comment on that at this point of time. We will be more specific, I think, in the Capital Markets Day in December on the buildup on the whole revenue part for Kitron. But as you look at the numbers, we are planning to stay above 9% in '26.

Why don't you just jump right over to the next question from [ Espen ], how many employees are there in DeltaNordic and some discussions about management fees.

So we talked about 200 people. I think no, as we said, we run a decentralized company. So management fee structure, no. We want DeltaNordic to be run exactly as it is with the company management that they have today. I think what the point here is not removing things. It's adding things, right? It's basically bringing added capabilities that a company the size of DeltaNordic will need once they grow when they don't have today, as with IT, as with other structures and specifically a strong finance backbone which we have in Kitron to help them grow and capabilities to support them in their growth path.

The next question is, what's the estimated CapEx in DeltaNordic to complete new capacity in [indiscernible]? It's included in the outlook in the budget for next year. And in terms of Kitron investment, I think it's fairly modest, actually.

Yes, it's -- I wouldn't say modest.

I don't have the exact numbers.

So the added capacity when it comes to footprint, these new leases, they are within the cost levels that are in the agreement.

Martine asks, is it possible to get more info on the segment split for the outlook excluding the...

I just told you, Martine.

Yes. Mentioning some of the contracts that are not in the backlog for DeltaNordic. How will those affect net sales guidance and what the timing is there? No, but their backlog is like Kitron. When we look at '26 and we talk about the outlook for '26, doesn't mean we don't have an order backlog for all of that. And the same, it's very similar case for DeltaNordic, what's actually on order because what's on order is what you're building now and probably for the next 3 to 4 to 5 months.

You're starting that actual specialization into exactly which vehicle is it and how will it be equipped. And then beyond that, there's a forecast and build plan on how many chassis of a certain version of the product you're going to build. But you have to have flexibility because you don't know exactly which order you're building vehicles in 6 to 9 months' time. So that's why the actual purchase orders come in closer as we get closer to date of delivery.

And for the other sectors, it's more in line with what we have in forecast and what will be converted into orders. So it's in a similar manner to how Kitron operates, basically. And then I think that's one of the things we recognized when we started to look at DeltaNordic, is that they have basically the same type of relationship with their biggest customer, as we do with Kongsberg. It's very strong. And you share and you have material buy early so that you have a good visibility on what's going to go on.

We've done a deep dive into exactly how projections and orders are created and when they come in and what the overarching outlook is for the next 3 years and how that is created. We had a really good update also with BAE yesterday also, and we feel comfortable on the relationship. Or actually, they feel very comfortable with the relationship, which is important for us.

Margin guiding, number three here. Of course, right, there's always upside.

Margin guidance on the upper end, quite high.

Excluding DeltaNordic, yes. And that's because basically, if things come in quickly, we see that there are certain projects and things going on there, that there are other upsides. And if they materialize, they will bring very quick revenue. And that means that the cost will be less changed from indirect cost. That's where the upper end is coming from.

For the total for Kitron, you mean?

Yes, for Kitron. It's extremely...

There are opportunities that are not even including in that upper end, right? So there's upside, but we hesitate to bring everything into the upside also into the outlook until we have some more order confirmations and see what happens.

Petter Kongslie again. How many employees -- well, we took that one. I think that's -- okay, so here's the follow-on question, right, to what capabilities that DeltaNordic have that we don't. So it's similar to the new facility we're setting up in Arendal? Well, not really, right? Our sort of high-level assembly is more based on electronics, on pure PCBA builds, right? This adds capabilities.

Imagine all of the electrical systems and cabinets and control systems that you may have in a submarine, right? It's low-volume build. You're not building a lot of submarines a year. But everything there needs to be connected, not necessarily just by PCBAs or like pure electronics, but connecting different systems together. That capability exists within DeltaNordic to understand and how to quote that and how to actually create better solutions for the customers. We design the product to make it more cost-effective or easier to produce and higher quality.

Was Kitron the only potential buyer in the acquisition? I know that there were others also involved in the background. But we went in very fast with, I think, a strong offer and got exclusivity. So we were able to proceed at really fast pace, and there was no bid war at the end.

No.

How big is the largest customer as a percentage of the turnover? Well, it's around 45%, 47%, right? The other defense customers aren't really that big yet. They're coming in, in the next year or so.

Eirik. Can you share some more information about '22 to '25 performance? The historical numbers are available to look at, right? But we're not looking back at something that was very small. Because now it's growing, that's why also it's interesting as an acquisition.

I think that's also what's interesting for us because we can add more into -- very interesting now because of defense, but our work is to strengthen the other part as well and to build that going forward. But they've been around over the SEK 400 million mark last 2, 3, 4 years, basically.

New question is, what about the depreciation profile, same as we have or higher?

A little bit lower, I would say.

What does the earn-out structure look like in terms of timing? I mean, if we get the closing done and the approval process from authorities done this year, right, we'll be closing either late this year or early next year. And from that point, we'll take over.

And the earn-out is first 12 months of '26 and first 3 months of '27. So over a rolling 12-month period, we have to achieve a certain financial revenue top line. So either it will be achieved in 2026 or it will be achieved second, third, fourth quarter and first quarter in '27 or it won't be achieved. That's basically what it looks like. There has to be some -- that's why it's called an earn-out.

What kind of utilization are they operating in, in '26? Is there room to continue growing on the footprint they have today? No, we're adding -- there's a business plan for '26 and we're executing on that business plan. And it means a few expansions that are building out, a couple of thousand square meters in the factory in Örnsköldsvik. And the factory outside of Stockholm, in Kungsängen, they are moving into an unused segment of the facility that they're in. So they're also expanding some 1,500, 2,000 square meters, maybe.

That gives them more -- I mean, these are pretty large products that they build. So the part that more -- the service mount or PCBA part, building electronics is only done in Örnsköldsvik. So it's only final assembly or high-level build in Kungsängen.

And China.

And China, yes. Revenue plan until '28, how concentrated is the revenue uplift across key customer's firm orders? How much is non -- I mean, the firm order situation is you have a build plan exactly what you're going to be building probably for the next 6 months or so. So that's firm orders. Other than that, there is a forecasting to create possibility for material acquisition and those kind of things. And I think there's more upside than there is downside in the numbers we've seen after a brief meeting with the customer yesterday.

Then between China and defense, what it looks like, how much of the defense business is done in China? There's no defense business done in China, not in Kitron, not in DeltaNordic. No, the China side is for the civilian side, industrial and mining and such.

We stated the '26 guidance for the first time. Well, we have to do that when we also go out with something like this. We have to give you an idea of what we think is going on. There will be a clearer update on the Capital Markets Day on December 10.

I'll just repeat that we are growing the defense around 30% and we'll have a pretty strong growth in connectivity. And the other sectors are fairly stable.

Yes. Olav Rødevand says, can you elaborate on potential synergies and breakdown between revenue and cost synergies?

So in this case, when you're acquiring a smaller company where you have a management and you want to keep the management and, in addition, they're having competencies that we don't have in Kitron, so there is obviously no cost synergies. What we see is maybe cost avoidance synergies going forward because we will help them to grow and use our systems going forward. So we haven't -- for the deal, for us to calculate it, we have not increased any the top line based on our acquisition or we have not calculated into any cost synergies or cost reductions.

How do we view additional production exposure to China? I think what was included here, it's a limited operation. It's a strong customer base with a strong relationship with those customers. So I am not concerned about that.

[ Bjorn ] asked also about the percent of the customer. Who's the biggest customer, BAE Systems? Yes, correct. It represents 40% of delta revenue, yes, for this year, yes.

A little bit higher.

A bit higher, 47% is what we've said. Capabilities, Petter Kongslie again, let's see if they're coming out...

Just switching over there, you're coming back to the ones...

I know. But here, there's a new question on the bottom there. What's the revenue capacity in DeltaNordic with the new capacity? They have indeed more to reach in 2028. That will depend on how much more business and what type of business, right? We are flexible, if nothing else, at Kitron. We're fast and agile. If we need footprint, we can get footprint. And we will get footprint because we're going to get the business, all those new opportunities. So it's not an issue. It's not a huge cost thing. So not concerned about that.

No. And we have to bear in mind now that for Delta, the capacity is mainly when you grow within the competencies that we don't have so much in Kitron. It's not machinery based. It's people and footprint, basically. So it's a lower investment level and easier to find facilities or expand.

There's not a lot of expensive automation equipment.

No. Of course, there will be some, but not nearly as much as...

Petter also asks us why the earn-out is only based on revenues. Well, it's a point of negotiation in the contract. So no further comment.

We sort of mentioned it. It's not much. It's a couple of million euros for 2026.

[ William Hartner ]. Excellent work. May I ask whether your corporate teams is also following other companies that are being considered for acquisition? As I've stated earlier, we're working with a long-time adviser now for the past almost 18 months, right? So yes, we have a substantial list of companies we've looked at. And we're continuing to look at a few of those companies. We want to close this transaction before we start moving on aggressively on something else. This has been a lot of work in these past couple of months.

Let's see, I think we have -- and the final question here is also from [ Magnus ]. Again, are we looking at further acquisitions in the next 12 months? Yes, as we are. Where do you expect the financial leverage to stand post the acquisition?

As we're saying, we're tapping into different expectations here. So it's not defined, the target. But we have ample room in whatever we do.

Yes. And I think that concludes the question part of this presentation. So any other questions or follow-ups, you're welcome to contact either Cathrin or myself, and we'll be happy to take your questions. If we don't see you before December, we'll see you probably in December 10 for our Capital Markets presentation.

So thank you so much for attending, and see you later. Thanks.

Thank you.

Welcome, everyone, and thank you for joining the Q3 2025 presentation for the Kitron Group. I'm Peter Nilsson, CEO of Kitron. And presenting along with me today is Cathrin Nylander, CFO. This quarter marks a continuation of the momentum we built through the first half of the year. We'll review the highlights of our performance, key growth drivers and what's ahead for the rest of 2025. Next slide, please.

Quarter highlights. Well, Q3 was another strong quarter. Operationally, we've maintained solid execution across customer ramp-ups and new contracts. Profitability remained resilient. All regions delivered EBIT margins above 9%, even in the face of some local headwinds. Performance has been solid in the quarter, driven to a large extent by Defense-Aerospace revenue, which grows 82% year-over-year. This is also visible in the order backlog, which rose 100% for Defense-Aerospace and 31% in total, closing in on EUR 600 million.

Our success with new defense tech continues with a EUR 100 million order from a new customer signed. Next slide, please.

Operations and growth. Our order intake in Q3 reached EUR 257 million with a very healthy book-to-bill ratio of 1.53. Given this momentum and our strong execution, we're raising our outlook for 2025. We now expect revenues between EUR 700 million and EUR 750 million (sic) [ EUR 700 million to EUR 740 million ] and an EBIT between EUR 59 million and EUR 66 million. While we do see some uncertainty globally, the fundamentals for growth remain strong. Next slide, please.

Let's take a look at some of the revenue trends by sector. While Connectivity remains mixed, legacy product declines are offset by growth in next-generation communication and control equipment. Electrification is stabilizing with the new U.S. customers driving energy storage and transmission growth. Industry showed strong momentum, automation and subsea oil and gas were standout performers, whilst infrastructure and construction suffered from lower market demand. Medical Devices were weaker overall, but life support and surgical equipment grew solidly. And finally, Defense-Aerospace, our clear growth engine, up 82% year-over-year. Next slide, please.

So let's review the order backlog. The order backlog now stands at $598 million, up 31% year-over-year and 18% sequentially quarter-over-quarter. Defense and Aerospace doubled its backlog driven by strong demand in surveillance, UAV and encryption systems. Connectivity grew 24%. Industry is stable, whilst Electrification saw a temporary pause as some customers expand capacity. This strong order backlog and order visibility give us a solid footing for the next 2 quarters.

Now Cathrin will take us through some financials. So next slide, please.

Thank you, Peter. Q3 highlights. Financially, Q3 was excellent. Revenue came in at close to EUR 168 million, up to over 15%. EBIT reached EUR 14.6 million, up 36%. Operating cash flow was particularly strong at EUR 44 million compared to just EUR 2 million last year. Return on operating capital improved to 26% and our order backlog grew to nearly EUR 600 million, again, up 31%. Next slide, please.

Third quarter year-to-date highlights. For the first 9 months of 2025, revenue reached EUR 505 million, up 3.7% year-over-year. EBIT increased to EUR 42 million with a margin of 8.3% Operating cash flow tripled compared to the same period last year. EPS also improved to EUR 0.13. We're seeing profitable cash-generating growth, a solid foundation as we enter the final stretch of the year. Next slide, please.

Business sectors. All regions contributed positively. The Nordics and North America grew 15%, driven by strong industrial and defense programs. CEE was up 30%, showing strong capacity utilization. Asia remains slightly lower due to few customer transitions. Our workforce grew to 2,781 employees, up 307 from last year and in line with our ongoing scaling [ efforts. ] And again, all sites and market sectors here delivered over 9%.

Cash flow and net working capital. One of the real highlights this quarter was our cash flow performance. Our operating cash flow reached EUR 44 million, supported by more efficient use of working capital and higher customer deposits. Net working capital is down to 18% year-on-year -- down 18% year-on-year and 20% quarter-on-quarter, a major improvement. We're managing inventory and receivables tightly while ensuring that we can still support ramp-ups. Next slide, please.

Ratios. Our financial ratios reflect a much stronger balance sheet. Net gearing is now 0.27, down from 0.60 last year. Net interest-bearing debt has improved to 0.8 from 1.6. Our cash conversion cycle dropped significantly to 78 days from 123. This performance reflects the great teamwork across Kitron. We are stronger, faster and more focused, positioned with the agility and capacity needed to scale for future growth now.

And now back to you, Peter, for some key takeaways and wrap up. Next slide.

Thank you, Cathrin. Well, to sum up Q3, revenue and profitability are up solidly. Defense-Aerospace continues to surge with the 82% increase year-over-year in revenue and a doubling of the backlog. Non-defense sectors remain stable, but with several strong performers in each sector to drive future growth. We're scaling now across seven sites to handle new defense programs. And with strong customer demand and visibility, we've raised our full year guidance, targeting EUR 740 million in revenue and EUR 66 million in EBIT. Next slide, please.

I'll pause here and open the floor for some questions. We're proud of the progress the team has made. We're happy to discuss any area in more detail, whether it's sector dynamics, cash performance or the updated outlook.

Well, Cathrin, that really wraps up Q3, really strong quarter across the board. Looking at these numbers, again, it's clear that the whole organization has been firing on all cylinders.

Absolutely, Peter. But I think there's more to go on for sure. What stands out to me is how well the teams managed cash and working capital this quarter. We haven't just grown revenue, we've grown smarter.

That's a great way to put it, smarter growth. It's not just about volume. It's about balancing and agility. And this quarter, we've really been put to the test on that. And it shows that discipline is paying off.

I agree. But you should also remember that Q3 is a vacation quarter in Europe with many customers taking time off with the reduced demand that follows. And I think this lifts our achievements even more.

Exactly, right. But for the European customers, probably July is half of a normal quarter. So from that point of view, I'm extra happy of what we've done. With the new contracts now that we've landed in defense and other sectors, we've got plenty of exciting work ahead. It's a great feeling heading into Q4 with this kind of momentum.

It really is. The energy across all [ of us ] is fantastic. People are proud, focused and ready for the next step.

Perfect note to end on. I think the line is caught up now, and let's move on and take some questions.

So there's a question from [ Arild ]. What are our plans for acquisitions? And what sectors are we then looking at?

So over the quarter, really over the full year, but with a lot of focus in the third quarter, we looked at a lot of different companies and completed work that we started earlier in the year also. For Kitron, it's important that the more we look, the more we also understand that it's really important that there's a strategic fit. How does this acquisition plug into Kitron and how do we help it grow? Right? We're not just about bolt-on businesses and turning into some sort of private equity owner. It has to be part of Kitron.

So when there's challenges and difficulties in those potential companies you buy, you can grow it as a group, right? And that's what we've proven that we're really good at across the board here. And this latest contract is one of those things where it's the whole of Kitron working together, not a single site.

The sectors we're looking at, obviously, is the growth sectors. So you look at the market in Germany, for example, there's a lot of struggling companies there. Demand in the industry and factory automation, tooling is way down in Germany. There's a lot of companies suffering from very low demand or low growth outlook. On the other hand, the prices tend to be super high. And that's off putting to us. Really, the ideal mix we would see is a strong defense sector, but also a risk spread into other market sectors also. So I hope that answers your question.

Okay. Martine is next. If not answered during the call, some more color on the working capital, both short term and long term. Why don't you dive into that, Cathrin. Also answer the question, how much M&A-related cost was in the quarter?

Yes. I can start with the part that's the working capital. If you look at the growth now, we will see a more slim working capital, if you say, on the growth level. That's the extra growth coming into the quarter. So I assume that our net working capital will be much closer in the growth part to 20% of revenue. I think that's something that you can look at.

How much M&A-related costs in the quarter. Yes, there are some M&A-related costs in the quarter. I would say it's around EUR 1 million.

And what subsegment in defense does the new customer relates to?

Well, I mean, I think it's part of what's also published in the CEO letter in the quarterly report, right, where this is the fourth customer in the UAV sector that we signed on. It's also the largest. So it's within that subsector, UAVs.

So a couple of more questions. Some competitors have reported on difficulties in supply chain when it comes to delivery of defense projects affecting them. Do you see the same? And which customer segments within defense is this most relevant?

In general, I would say no. But in specifics, there's always issues that pop up, right, especially when -- if you're building a defense program that has in the past, operated at lower volumes and now you're scaling it to higher volumes. It will tend not to be so much electronics as it will be mechanical parts, things like that, that go into the product where maybe smaller suppliers have been used to manufacture because of the volume being low. And now when scaling, they don't really have the process control to deliver the expectation on quality.

So there are some small delays that happen there. When products come in, usually -- in some cases, there are delays. So when they actually come in, it's just in time, we're loaded and ready to go, and it turns out that the product has defects. So that's happened a couple of times here over the quarter, but nothing too serious.

Is the EUR 100 million order included in the order backlog, how much is delivered this year and approximately next?

There's about 2/3 of it is in the order backlog of the EUR 100 million. And of that, about 15% to 20% delivered this year. Cathrin?

Yes, we did raise the guiding a little bit, and I think you can connect it to this order.

So the rest would be delivered in the near term as quickly as possible.

Yes.

And how should we look at defense sales next year versus this year given the R6 outlook, which is more tilted into '26. Well, the R6 is very strong, right, EUR 468 million in the R6. I'm not sure what the question is. How should you look at defense sales next year?

I think we are planning to talk more about defense next year...

Because this is a big order intake period up through November for next year. So we'll have a clearer picture exactly of what the second half of next year look like. So our Capital Markets Day is December 10, I believe.

Yes, I think so.

So who's next here? Olav. Can you provide more color on development electrification? What gives you the confidence that the dip is temporary? And what signals are you getting from customers for 2026?

Well, we signed a new customer in the U.S., and that's ramping up. Really, we went from a few -- basically 0 last year to a few hundred thousand euros in the first half of the year to EUR 5 million this last month -- no, this last quarter. So it's a big ramp-up.

The market there is driven to a very large extent by data centers. So this customer provides energy storage backup and transmission solutions. The other large customer we have is as they've been talking about really scaling their own production and hiring thousands of employees to their main factory. And from what I see and hear, the ramp-up hasn't gone as quickly as expected.

For them, Kitron, of course, has performed. So they need to sort of take their foot off the gas for a few months here and also to be able to catch up and not overfill every warehouse with product from Kitron. But this is long-term growth. It's energy transmission. So they have long-term contracts for the next 5 years.

Also in that area, we've won the next generation from those -- that customer also to be started to be ramped up sometime in next year in Poland. I think the expectation from the customer is first quarter, so that shows that they're optimistic, but we know that these tend to drag out in time. So sometime in the second half of the year, I would expect.

Could you give more color on your defense production capacity for '26 in relation to where backlog now stands?

Yes. No, we're looking to expand in -- the Swedish facility just took into operation this week, the new factory that they have which extends capacity 50%. And all of the systems integration and final assembly will be moved to that site, then opening up the existing site for more investment in automation and electronics production. So from Sweden point of view, we're fairly safe.

From Norway, yes, it's a continued struggle with capacity and footprint. We do have some extra space outside the factory we're also using. And the new site is slated to be inaugurated mid-Q2 next year is, I think, the time plan right now. So there's a bit of a struggle there.

In Lithuania and Poland, we're looking to add new facilities actually. So we've added a new facility in Poland. We signed about another 5,000 square meters or so in a facility not far from our existing site. And that is being used right now. It took -- we took it into operation here in October. And we're also looking then to -- we're starting our planning process to be able to put new site in place in Poland. If you recall, we bought some 80,000 square meters of land adjacent to our facility there. So we're looking for new construction and a decision on that sometime probably Q2, mid-Q2, midyear next year.

Yes, earliest, I think...

To decide to build. Then there will be -- we'll have that in mid-'27 up and running, that site.

I think there is ample footprint now to cater for what we see.

Yes. Okay. Let's move on. Nojus, what is going to drive the growth mostly in Q4, fourth quarter? Under the latest guidance, it seems revenues will reach a minimum of EUR 185 million, would be the highest figure this year.

Yes. Well, Q4 is a pretty good quarter, usually is the highest quarter we have also every year, competing with Q1 nowadays. But there is running 6 days a week, 24/7 -- not 24/7, but 24/6 basically in Sweden. So there's a lot to be delivered in Q4.

Yes. But to drive the growth, it's going to be defense in Q4 compared to...

Yes. The outlook for Q4. Well, we gave the outlook for the full year, which is what we guide on is EUR 700 million to EUR 740 million.

Yes. And we had EUR 504 million year-to-date. So you can do the math, [ Kristina. ]

Yes. So there's a question of who's the customer for the EUR 100 million order and which site will be produced. We cannot comment on either one of those.

Congrats, good results, from [ Sindre. ] Can you elaborate on the discontinued M&A process and what you're now looking at? Cathrin, why don't I throw this one over to you?

No. I mean we are looking at several sites. And when you are in an auction process, in some situations, you win and some situations you don't. Some people are willing to pay higher multiples maybe than you are. And then also, it might be the fact that you are looking into certain site -- what you look -- you have a target, you look at it and then at the end, you figure out you don't want it anyhow. So that has been some certain discussions here now during the first 3 quarters...

You have to be brave enough to walk away.

Yes. Basically, that's what's going on. Now we're looking at mostly defense, I would say.

So [ Karim ] has a question here. You mentioned local headwinds in some regions. Could you elaborate on the regions and the nature of these headwinds?

Well, nothing really specifically, nothing serious, right? There's always some supply chain delays, you lose a shift or a day here or there, things like -- things of that nature. I think if you look more regionally, right, we'll probably get back to that on the Capital Markets Day, is what the development is in China and what's going to happen there. Our sites are performing tremendously well, but there is -- we have no growth, right? Yes, we're winning new business, but then the other business tapers off also. So...

When do you expect it to start production in the Arendal facility? From [ Vladimir. ] So at some point in Q2 next year.

[ Christian, ] do you have high focus on know your customer, KYC, to ensure that your technology does not end up in countries that represent risk. Do you have high focus? Yes, we do have high focus.

Very high focus. The whole defense business is very...

A lot of due diligence going on when we sign a new customer, who's behind it and so forth. So -- and this is not just us doing that, but we have professionals that work with us.

Sorry for asking for clarification, but did you say that the new defense customer relates to UAVs, and this is the fourth customer within this product category? Yes. Yes to both.

And that is what we have on the question front. Very good. I think we'll wrap up there.

So Cathrin, I'll be heading off for one-on-one investor meetings now for the rest of the day. So perhaps we'll see some of you there -- last question came in here or a couple of more came in. Last one.

Any specific areas of competencies, capabilities that are challenged? Wire harnesses.

I don't know if -- we have wire harness production. We have it in our Lithuanian facility. We are ramping tremendously on that, again, for a defense product. And yes, it's not really a capability, but it's a capacity issue. So we have some partners we work with that can take some overflow out of us.

[ We source them ] from several and I think that's a sensible thing to do.

Very good. Thanks, guys. We'll see you at the Capital Markets Day in December.