W5 Solutions

Significant events during quarter 1, 2023

• On 31 January, an agreement was signed to acquire 100% of the shares in ArcQor AB, a defence-oriented company specialised in battery charging. The initial purchase price amounts to MSEK 65. The purchase price has partly been paid through a directed share issue of 626,342 shares to the seller of ArcQor AB.
• On 15 March, a letter of intent was signed to acquire Kongsberg Target Systems, a company that develops, manufactures, and sells electronic target systems with an international customer base. The final agreement was signed on 31 March. The purchase price amounts to MSEK 45, of which MSEK 20 is paid in cash and the remainder through a directed share issue to the sellers of Kongsberg Target Systems.

Significant events after the end of the period

• 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.

Financial overview

JANUARY–MARCH 2023

• Operating income for the quarter amounted to MSEK 71.6 (34.3), an increase of 109%.

• Profit, EBITA, for the quarter amounted to MSEK 10.6 (4.0), an increase of 165%.

• Cash flow from operating activities amounted to MSEK 25.6 (-14.1).

• Orders received during the period amounted to MSEK 42 (17) with an order book at the end of the period of MSEK 286 (161).

Comments from Daniel Hopstadius, W5 Solutions CEO

Celebrates five years – now as a Nordic Group
Time flies, and on the first of May, the W5 Group turned five years. Five years of successful, profitable growth. It is great to see the development from two points on a map to now being established throughout the Nordic region. By acquiring Kongsberg Target Systems, ArcQor, and establishing the subsidiary W5 Finland Oy, we have truly established ourselves as a Nordic player.
We already see clear results from these efforts, and among other things, we will deliver orders worth around MSEK 40 to the Finnish market.

Record for the first quarter of the year
We continue to develop strongly and financially, both in terms of income and profit. Income amounted to MSEK 71.6, an increase of 109 percent compared to the same period the year before. Around 40 percent of our strong growth has been organic, while other growth has resulted from acquisitions. The profit was MSEK 10.6 (EBITA), an increase of 165 percent compared to the same period the year before.

Growth, both organic and through acquisitions
We have a very high level of activity, both in production and sales, as well as in terms of acquisitions. The order book remains strong, and we have made several successful deliveries during the quarter. There is still some friction due to the lack of components, which continues to cause delays, but on a smaller scale than before, which is still positive.

W5 Solutions welcomes the subsidiaries ArcQor and Kongsberg Target Systems into the Group. The acquisition of ArcQor has provided immediate synergies in existing systems, especially on the sales and production side but also on the financial side. In addition, a couple of joint projects have already been launched with Kongsberg Target Systems.

Acquisition synergies from the start
With the new companies in the Group, we are placing a larger part of the value chain under our control, while the development teams of the acquired companies contribute important expertise in areas such as power supply and Live-Fire Training. Furthermore, we have gained new business channels that benefit all companies in the Group. Overall, the acquisitions are excellent additions to the Group as we can help our customers with a better collective delivery capacity.

During the quarter, we received two larger orders from our customer KMW. One for an Archer artillery system simulator cabin and one for service and maintenance. In total, with an order value of MSEK 30.

We are proud of our long relationship with KMW, which has been built over time through mutual trust. This relationship is the basis for the solutions we create together.

Strengthened position in the Nordic market
Today, W5 is a Nordic Group. We are working to strengthen our position in the Nordic market further. There are many opportunities here, and we are great believers in digging where we stand. We also see more consolidation prospects in our product areas going forward.
However, it is important to remember that it needs to contribute to our business and work with our values for the synergies to arise.

Demand increases with growing budgets
The market is proliferating as demand grows. And we have started to see more funds flowing to customers. We assess this as only the beginning of many years of strong growth. The increasing demand is based on rebuilding and strengthening the armed forces of many countries, which have been severely neglected in light of the current security situation. This also ensures that we reach our financial target: sales of MSEK 500 with a profit of at least MSEK 75 (EBITA) by 2025.

Strong delivery capacity in a turbulent global context
What is increasingly clear is that income is becoming less quarterly-driven. The rising demand means that orders are coming in more regularly than before. Mainly, this is because customers are committed, in part, to restoring the capability that has been disarmed over many years and, in part, to developing and strengthening the military capability in the future. This will, among other things, give us more business in service and maintenance for a long time.

The new circumstances place high demands on our ability to deliver. However, the W5 Solutions team is strong and growing, and our companies are passionate about supporting our customers together. With this attitude, we will find solutions. My view is that the current uncertain environment is driving our performance. Whereas people chose to see problems in the past, now they only look for solutions.

Strengthened Board of Directors
The Annual General Meeting decided to elect Anders Silwer, Ulf Hjalmarsson, and Erik Heilborn as new Board members of the Company. I warmly welcome you and thank the resigning members for an excellent job. I am convinced that with this reinforcement, we are now even better equipped for the continued growth journey.

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