W5 Solutions

Significant events during quarter 2, 2023

• On 12 April, the acquisition of Kongsberg Target Systems was completed. In connection with its completion, a directed new issue of 357 984 shares to the sellers of Kongsberg Target Systems was decided.

• The Annual General Meeting on 20 April decided, among other things, to elect three new members of the Board of Directors, as proposed by the Nomination Committee. The AGM also decided to introduce a share savings program for employees in the Group. Otherwise, the AGM resolved in accordance with the proposals submitted.

APRIL–JUNE 2023

• Operating income for the quarter amounted to MSEK 114.3 (39.5), an increase of 189%.
• Profit, EBITA, for the quarter amounted to MSEK 22.4 (6.3), an increase of 255%.
• Cash flow from operating activities amounted to MSEK -4.1 (27.9).
• Order intake during the period amounted to MSEK 86 (90) with an order backlog at the end of the period of MSEK 256 (215).

JANUARY–JUNE 2023

• Operating income for the quarter amounted to MSEK 186.0 (73.7), an increase of 152%.
• Profit, EBITA, for the quarter amounted to MSEK 33.1 (10.0), an increase of 231%.
• Cash flow from operating activities amounted to MSEK 21.5 (13.8).
• Order intake during the period amounted to MSEK 128 (107) with an order backlog at the end of the period of MSEK 256 (215).

CEO Daniel Hopstadius comments

Continued steady profitable growth
The second quarter of the year can be summarised by continued strong and steady profitable growth. Income for the quarter amounted to MSEK 114.3 (39.5), which is an increase of 189 percent compared to the same period the year before. Profit for the quarter amounted to MSEK 22.4 (6.3), an increase of 255 percent. Order intake remain strong and amounted to MSEK 86 (90) with an order backlog at the end of the period of MSEK 256 (215). Over 40% of the total sales growth can be attributed to organic growth, while the rest is acquisitions.

Overall, we had a strong second quarter and first half of the year. We generated more sales in the first half of 2023 than in the full year of 2022. An important reason is the increase in defence investments, which results in a high level of activity among our customers. We also continue to gain market share. One example of this is in the product area of power supply, which has been successful in both Sweden and Finland. In summary, this guarantees a strong continuation for the year as a whole, and everything indicates that we will achieve the annual target of a total growth of 75%, of which 25% is organic.

Focus on delivery capacity
From the customer’s perspective, the main concern is to rapidly improve defence capabilities. The surge in demand is the reason we work daily to meet the extensive requirements of our customers and the market. As a result, we continuously refine and improve our delivery capabilities. In order to maintain a high delivery focus, we have, among other things, built up our inventories. The build-up of inventory also has an impact on cash flow from operating activities amounted to MSEK -4.1 (27.9) However, we can see trends towards a more stable supply of materials and improved lead times. If this continues, we expect to be able to reduce inventory levels and increase cash flow moving forwards.

The world remains unstable
Unfortunately, we see a continued deterioration of the security situation in the world around us. My assessment is that Sweden and Europe need to strengthen their defence capabilities for several years to come, which is confirmed by the planned increases in future defence investments in both Sweden and Europe.

We have received quite a few questions from the media about how we might be affected by Nato membership. In my opinion a membership would provide improved business opportunities. What we can say at this stage is that membership would mean becoming part of Nato’s ”internal market”, lowering the thresholds and increasing the visibility of our products. Overall, membership is positive for the Company as it makes selling to other Nato countries easier.

Strengthening of the Live-Fire segment
In the beginning of the second quarter, the acquisition of the Norwegian company Kongsberg Target Systems (KTS) was completed in accordance with the acquisition agreement announced on 31 March 2023. In connection with its completion, a directed new issue of 357 984 shares to the sellers of Kongsberg Target Systems was decided.

KTS is a nice addition to our product range in the Live-Fire segment. During the quarter, we had a product release of the eScore system. eScore is a digital application that collects data from shooting exercises and competitions, enabling users and spectators to view results in a cloud-based solution. One example where the system is used is at the yearly national shooting competition “Landsskytterstevnet” in Norway.

Increased activities and shorter lead times
Activity among our customers is increasing noticeably and lead times from need to order decrease, especially for small and medium-sized orders, which reflects the customers’ need for fast deliveries. An example of this is an order for gensets from Saab. The order included development and manufacturing of advanced gensets for vehicle assembly. The order will be delivered during 2023-2024

What we do for Saab is to provide a reliable power supply in tough field conditions. We can do this because we have the ability to meet the military’s high requirements for functionality and modern technology. This allows us to customise and tailor solutions based on customer needs.

Committed and competent growing team
The organisation is continuously growing and developing. We would not be able to achieve the great results we do without a committed and competent team. During the quarter, we grew by 28 employees. We also notice that our employer brand is growing stronger as awareness of us increases, which makes me proud.

Strong future prospects
After a successful first half of the year, we enter the second half with confidence. With a fast-growing demand and an increasingly firm position, we have continued favourable conditions for growth, which also ensures that we will reach our financial target: sales of MSEK 500 with a profit of at least MSEK 75 (EBITA) by 2025. With increased growth, we can play an even greater role in building a safer tomorrow.

Daniel Hopstadius
CEO, W5 Solutions AB

The interim report is available for download at https://w5solutions.com/investor-relations/