NCAB Group AB (publ) (NCAB) Earnings Call Transcript & Summary

Welcome to the NCAB Q2 presentation for 2026. [Operator Instructions] Now I will hand the conference over to the CEO, Peter Kruk; CFO, Timothy Benjamin; and Head of Investor Relations, Gunilla Öhman. Please go ahead.

Thank you, and welcome, everyone, to today's quarterly report. Starting out with NCAB as a background. We are a supplier of printed circuit boards, which are the products that you see on the left here, which form the foundation in any electronic products. So our customers are typically OEM customers or EMS companies mounting the electronics and creating the intelligent modules in today's modern industrial equipment. And what is unique about our business is, of course, that the PCBs are uniquely designed for the product they go into. So there are no standard components, but we provide a lot of value, both in terms of engineering support as well as in the manufacturing. NCAB, we are a company with outsourced production. We have no internal manufacturing, but work with a network of factories. And our mission is to supply PCBs for demanding customers and to do this on time with 0 defects and produce sustainably at the lowest total cost. And we believe very much in being local close to the customers, where we can provide the technical and quality engineering support and commercial support to our customers. We are operating in an increasingly complex world, especially in today's environment with AI putting pressure on supply chains. And our vision is to making PCBs easy, to absorb that complexity and make life easier for our customers. Beyond the factor that we are focusing on demanding customers, we are also targeting specifically the high-mix, low-volume segment of the market. So we are not active in high-volume consumer good products like mobile phones or PC makers as an example, but typically much more in industrial applications or medical or aerospace defense applications. And typically, what we see in these applications is that the PCB is a very small portion of the total bill of material, maybe only as low as 1%, 2%, yet the demands on quality are still very, very high. And for these customers, even though our customers, in many cases, are globally leading companies, their spend on PCBs is somewhat small, and they maybe are struggling to have enough competency to manage this commodity. But also even if they have that, they are still not having a spend significant enough to allow them to get access to the best factories and have priority there. And this is where we can add a lot of value by aggregating the spend of a large number of customers. And of course, having also that spend, we also have the competency to be able to provide support. And this gives us an opportunity to provide good service with competitive pricing and yet have a decent margin for the business we provide. If we look upon the global market, we can see the global market here being represented by the green bars and 2026 is the forecasted end number for 2026. We can see how the market has, after the pandemic years, or post-pandemic years in '23, '24, when the market was down, has resumed growth, and this is really being driven globally by AI applications. But we can also see NCAB's order intake curve accelerating as well in the recent times. And this is also something we can see is influencing now our second quarter. So if we move to the key takeaways in quarter 2, we have a very strong growth on top line as well as on EBITA. We can see our order intake accelerating in this market with quite significant supply chain challenges. The investments that are currently happening in data centers for AI predominantly is creating a lot of supply chain strains for PCB manufacturing globally, both in terms of manufacturing capacity, but now more and more in the ingoing constituent materials that you need like glass fiber yarn or laminate materials. And this is both resulting in pre-buy effects as well as price increases, which is enhancing our order intake in this quarter. But beyond those 2 effects, there is still a good solid underlying double-digit growth for us. And we see good progress specifically in the focused industries like what we do for AI as well, but predominantly also in areas like medtech or aerospace and defense. But in the quarter, we overall come up with an organic order intake growth of 58% in U.S. dollars. If we move to net sales, also here we see strong growth on the back of previous quarters of growing order intake. So our net sales growth is 25% in the quarter, and we can see all regions performing well. And beyond volume demand going up, we can also see some effects from pricing that we saw in quarter 1. And I think NCAB has a strong position in this turbulent market. We have a very resilient supply chain, a strong portfolio of factories where we are a priority customer, and it makes us a resilient source of supply in this challenging market. We should also remember that we still have some negative impact from FX compared to prior year. And in this quarter, we had SEK 35 million of negative impact on net sales. Also, EBITA, with the growing growth in net sales, we see a strong improvement in EBITA versus 2025. So we're leveraging well this volume growth and offsetting also the negative FX headwind that we still have and gross margins remained stable versus prior year. Also just at the end of the quarter, we were happy to announce another acquisition. We acquired the company Board Shark PCB in the U.S. This is a company based in Florida, started in 2006, and the focus is very much on prototyping and quick turn deliveries. And their main customer base are in areas like aerospace, but also industrial and medical sectors. In 2025, their revenue was around $17 million, and they have a very good EBITA margin, which also contributes to NCAB's performance. It's a fairly small team. It's only 5 employees in the company. But like also some other U.S. companies, they are operating with an external network of regional sales reps, and they are predominantly strong for this company in the western part of the U.S., which is a very good complement to NCAB's already strong position where our strength historically comes more from the East Coast. So this further strengthens our position on the West in the same way that our acquisition of Phase 3 did in 2023. And this transaction was signed and closed on June 24. If we then take a little bit deeper look at the figures for the quarter, we can see that the order intake overall in Swedish krona grew by 59% to SEK 1,570 million versus SEK 985 million in prior year. That is a 58% organic growth in U.S. dollars, which is the main trading currency we have. And we also have a very strong book-to-bill of 1.34. Net sales grew 25% to SEK 1,168 million versus SEK 934 million, and that represents a 24% organic growth in U.S. dollars. EBITA grew to SEK 138 million versus SEK 93 million and represents an EBITA margin of 11.9%. And as mentioned, the gross margin here stayed stable versus last year and also largely versus prior quarter. And in the EBITA, we are still offsetting a negative FX impact of SEK 10 million in this quarter. So the FX impact is reducing compared to quarter 1, but still represents a negative impact. Good cash flow of SEK 116 million versus SEK 93 million in prior year. Our working capital is up, and we see this partly as the lead times are somewhat longer on the supply chains, but it's actually slightly lower than what we were in quarter 1. Net profit is at SEK 84 million in the quarter versus SEK 40 million last year, and EPS is SEK 0.45 versus SEK 0.22. With that, I give the word to you, Tim.

Thanks, Peter. And here, you can see our gross margins over a longer period of time. You can see we were in the low 30s back some years ago. We invested quite a bit in having a strong supply chain and a strong engineering base. We've been able to add additional value for our customers, especially in market situations like this. And that's given us a good margin at a stable level over the past few quarters, closer to 35% in a nice stable situation. If we take a look through the order intake, you heard from Peter, around 59% up, and in comparable units, U.S. dollars, 58%. That growth is comprised of approximately 20% on the pricing side and then around 20% pre-orders for delivery in 2027. And we see that, as you heard from Peter, that with this market situation, the lead times are moving out. So around 20% of the orders that we took this quarter are scheduled to be delivered in '27. Net sales up 25% to SEK 1,168 million, and in comparable units, around 24%. That gave us a book-to-bill of 1.34. We also saw a positive pricing impact starting to be translated through from the backlog from the quarter 1 orders. And we also saw positive trends coming through in EV charging, aerospace and defense as well as industrial sectors, which we were happy to see positivity there. When we look at the EBITA result, around SEK 139 million compared with SEK 94 million last year, and that's despite an additional FX -- a negative impact from FX of around SEK 10 million. And we also had SEK 7.3 million of transactional costs for Board Shark, which you saw represented in the North America segment of around SEK 7.3 million. So despite those 2 things, we had a little bit of additional help from M&A as well. So we had B&B that we acquired last year, Multi-Teknik, and now Board Shark. But the biggest driver here has been strong operational leverage on the higher volumes that have come through. So that pushed us up to an EBITA margin of 11.9% versus 10% last year. And you heard that gross margin has been stable over the past 2 quarters. But with that, I hand it to you, Peter.

Thank you. And as mentioned, I think we have seen positive development in all of our segments. So if we start by Nordics, we can see the order intake up strong by 55%, reaching SEK 403 million of order intake versus SEK 260 million. Here, we also have some contribution from Multi-Teknik that was added in. So organic growth is around 41%. And we can see, of course, the effects of pricing, pre-ordering, but also a solid development in sectors like energy, defense and also general industry that helps to drive the order intake growth. Net sales also growing nicely by 28% to SEK 277 million over SEK 215 million, representing an organic growth of 17% in Swedish krona or 21% in U.S. dollars. And we continue to see the resurgence of the EV charger business that was low for some time during '24, '25, but that is coming back and growing nicely. We also see the continued growth in defense plus general industry developing positively. EBITA amounted to SEK 42 million over SEK 23 million last year and the EBITA margin up to 15.2% versus 10.7%, which is maybe more in line of our historical performance in the Nordic segment. Contribution from Multi-Teknik, of course, helped to drive the EBITA improvement, but there's also, as mentioned by Tim in general, a strong leverage on the net sales growth that helps drive the margin development. If we start looking at Europe segment, also here, strong order intake growth by 58%, up to SEK 750 million over SEK 475 million. Organic growth of 51% in SEK and 57% in U.S. dollar. Only a small contribution from B&B makes a difference as they came in during quarter 2 in last year. So we see the order intake, again, driven by pricing, pre-ordering, but also the continued demand -- growing demand from industrial customers. All markets here are strong. We only have a few exceptions, I think Italy, where we have quite a bit of exposure to automotive passenger car, where there is a more muted performance still. Net sales grew by some 22% to SEK 536 million over SEK 440 million, organically here, 17% in SEK and 21% in U.S. dollars. And we continue to see the strong development in most of the European markets. And notably, Germany for us is doing quite well. EBITA increased to around SEK 60 million over SEK 33.6 million and EBITA margin grew from 7.6% to 11.1%. And we have some negative FX in the quarter, but it's being offset by the leverage of growth and also the contribution from B&B. Moving to North America. Also here, we continue to see strong order intake growth of 56% to SEK 294 million over SEK 189 million last year. Growth 59% in U.S. dollars, supported by some orders with extending into 2027. And we continue to see strong development in defense. Here, we have the approval of CMMC 2.0 recently for the cybersecurity, which is a mandatory requirement, specifically for defense in the U.S., and that is helping us now to win more business in the U.S. We also see continued business within Power Solutions, where we also in earlier quarter had significant projects for some data center applications. Net sales are up 24% to SEK 278 million over SEK 225 million, and it's a growth of 30% in U.S. dollars. And here, we have had deliveries of a number of larger projects, helping to drive the growth in the revenue side. And we also see strong development in the advanced prototyping business that we have in North America. EBITA came down to SEK 26.3 million over SEK 32 million, but this, of course, is mainly driven by the fact that we have the transaction cost of SEK 7.3 million for Board Shark. Without that, the EBITA margin would have been 12.2%, which is still slightly down from last year, but in par or slightly better than Q1. And then finally, over to East, where we have seen maybe the strongest development on top line with order intake increasing 102% to SEK 124 million over SEK 61 million. Order intake growth in U.S. dollars, 111%. And we are capitalizing very much on the market growth in high tech. Our team here is very much focused on niche applications where we are providing a lot of engineering support. And you can also see that a major part of customer base that have been trying to buy direct historically in China, given that, that is the main source also of supply, they are struggling to get access and they're valuing the access through manufacturing capacity from NCAB, and this is helping us to grow our business in China, notably. Net sales are up 40% to SEK 76 million over SEK 54 million, and it represents a net sales increase by 46% in U.S. dollars. EBITA grew to SEK 15.1 million over SEK 9.5 million and represents a margin of 19.8% versus 17.5%. And here, it's really the rapid growth in net sales that creates the strong EBITA leverage for the business in our East segment. Over to you, Tim.

Thanks, Peter. So I think you can see here that our return on equity is developing favorably with 18.9% during the quarter compared with 13.5% in the prior year, driven very much by a healthy EBITA development. The net debt-to-EBITDA is at 1.9 versus 1.8 last year, which is below our financial targets. And that is also considering the fact that we did pay out a dividend during the quarter as well as acquiring Board Shark. Equity-to-asset ratio at 35.8%, considering around 40.7% last year. And then working capital up to SEK 443 million or 10.3% compared with SEK 353 million or 9.2% prior year. And part of that does come from us buffering the situation for our customers a little bit and making a bit easier for them and adjusting to the market climate. Available liquidity, a little bit over SEK 1 billion versus SEK 1.2 billion last year, but very much in a good situation with additional dry powder for additional M&A. If we look at the pipeline, a bit over 300 identified companies. I think if you've been following us for a while now, you're a bit familiar with our criteria. If you look at the past few acquisitions that we've done over the past years, including B&B, Multi-Teknik, Board Shark, all without own production, all profitable companies, and that's the type of company we continue to look for. Short list of around 50 target companies and good conversations ongoing. And we're happy now to have our first of the year out with Board Shark. All 3 of these acquisitions, we think, at a very good timing in the market. And then if we look at the integration process, there's a lot of advantages for a company to come into the NCAB family. There's opportunities to improve and learn and grow in marketing, sales, people and culture, IT operations. And it's also an opportunity for us to learn from them. Each one of the companies that we acquire, we try to learn from. They tend to make us a little bit better globally. And they get to choose a little bit together with us which one of these synergies makes them more successful, and they get to choose those ones first, and that's how we move along. Over to you, Peter.

Yes. So summing up, again, we are a specialist company, and we remain 100% focused on printed circuit boards. And overall, the global market this year is predicted to be around $100 billion. And what we are focusing on in high-mix, low-volume represents maybe around 30% of that. So a worldwide market of around $30 billion. So even though we are a clear leader, we still have a lot of market to target. So we do not have plans to extend into other product areas, but remain 100% focused on the PCBs. And we also want to continue with this asset-light model of not having in-house production, but instead leveraging a strong portfolio of partner factories to always have the -- be flexible and adaptable to have the right offering for our customers. We are still, however, investing a lot in the whole manufacturing process. We have a strong factory management team. We're also investing in technology and system support to help us provide even better service for our customers and build stronger relationships to further increase market shares in the market where we operate. We are continuously also looking to expand geographically to cover new markets or areas of new markets. And we believe that M&A is a very good method of doing this. We are very much -- you can say we are supplying products, but we're very much a service organization and building those customer relationships takes time and even more so if you're entering a completely new market. So M&A is a very good vehicle of establishing a foothold and then from there, growing our shares in that market. And we also see still, in Europe and North America, especially, there are a lot of smaller, medium-sized regional players, trading companies where we see an opportunity to consolidate this market. Many of these companies lack the kind of the muscle that NCAB has in terms of its factory management supply base organization and its work on sustainability, et cetera. We can help these companies take the next step for the future. And as many of the companies were formed and started some 20, 30 years ago, there are many of these companies that are also coming up with a success and change. And here, it's a good opportunity for those companies to transition their ownership into NCAB and give both the company, their customers and the employees a nice future development for the future. And with that, I think we wrap up our presentation, and we'll open up for questions.

[Operator Instructions] The next question comes from Jacob Edler from Danske Bank.

Congrats on another strong quarter. I have a couple of questions. Starting a bit on the order intake side and starting with pricing. Pricing was 20% up year-over-year in the orders here in Q2. However, if I look at external data, it seems that spot prices are running even higher heading into Q3 here. Do you agree with that statement? And how do you view the price development here ahead?

I mean, that's a fair assumption, Jacob, because, I mean, what we've seen is, of course, this has been, say, a gradual process starting maybe some of the discussions already end of last year and during quarter 1. So in quarter 1, we had price increases in, say, north of 10%, and now maybe we are north of 20%. And I think that has been, say, a gradual implementation. So it's a fair assumption to say that the prices are higher now at the end of quarter 2 than what they were at the beginning of quarter 2. And looking ahead, I mean, I think what we -- it's always hard to predict where this -- how the market is going to develop. But I mean, we do not see any relief in the supply chains in the near term. If anything, they may become more challenging going forward before they turn to the better.

Very clear. And kind of touching a bit on that. I mean, as you explained now, but also in the report, the capacity constraints are tougher than ever. And I believe the last component crisis we had back in '21, that cycle kind of lasted for 1.5 years in terms of sustained order intake growth. Based on what you can see right now, do you think that this cycle will be more prolonged, so to speak?

It is, of course, challenging to predict. But I mean, right now, what has been the main driver of this cycle has been the investments in AI. And then that, of course, has created shortages, which in turn has created more of pre-buy, which actually amplifies the strained supply chains. But if we look at the current rate and the projected near or, say, midterm investments in AI, there is no real relief from the AI side in the investments. And there, investments as predicted, at least, look to outpace the pace by which the industry can ramp up its capacity. So right now, it's hard to predict, and we don't right now see when things would kind of turn around.

Clear. Good. And then I just have 2 questions on North America. I mean, in Q1, you were talking about these bigger orders that you quantified of $20 million, which was partially towards these research centers, which may become once a year, but then you also have these ancillary energy systems towards data centers. You mentioned energy here in North America segment, but the magnitude of the data center order is a bit smaller here in Q2, and can we expect larger orders in H2? Or how should we view that commentary here in Q2?

Yes. I think it's fair to say that, I mean, as you said, in quarter 1, we had a little bit of an extraordinary assembly of those orders coming in kind of all at once. So yes, we have had continued orders for these kind of power auxiliary supplies also here in quarter 2. And I think we expect to have more opportunities going forward. If we will have that they will kind of converge in a single quarter like they did in quarter 1, that's a little bit hard to judge. I think actually if you look upon our order intake numbers for quarter 2, then actually in the year-over-year comparison, then we actually were lacking one part of those kind of science orders that we then last year had in quarter 2, but this year came out in quarter 1. So yes.

Good. And then also quite exciting to see that you started to receive defense orders on the back of the CMMC 2.0 certification that you got approved for. And I guess can we expect these orders to kind of continue for the remainder of the year? And are you able to kind of quantify the magnitude within the North America segment, which is connected to defense, or give any color there?

I don't think we're breaking out exactly defense for North America. I think defense for the group in '25 was around 6%, but that was predominantly then North America and Nordics. And I think this is also a general development that on the one hand, we are cementing our position in North America and hopefully extending through our commitment with the CMMC 2.0 investment. But also, we can see that the work that we initiated a few years ago to extend our sales to aerospace and defense in Europe is starting to bear fruit, but we're also winning more new orders and projects in Continental Europe, which is also positive for the future.

Very clear. Last question from my side before I hop to the line. But I think the gross margin guidance you've had for a couple of quarters has been 35% to 36%, and you delivered right above the low end in this quarter, which I thought was quite strong given how fast prices are moving in the market. So do you think you'll be able to kind of sustain this low end of the guidance here ahead given the market dynamics? Or how should we view it?

I mean, it is our aim that we will be able to sort of manage the cost increases to our customers in the way that we are also preserving our gross margin. So that, I guess, is our ambition to still stay with that kind of guidance we've given before to be in that range, 35%, 36%.

The next question comes from Gustav Berneblad from Nordea.

I thought maybe just to start off with something you write here in the report regarding you say that deliveries for current orders are now materially into 2027. So just a clarifying question that if I were to place an order today, will I get delivery first mid-2027? Or is it still possible to sort of place orders today and get delivery within 2026?

I think you can still get orders into 2026. But it is increasingly -- it depends a little bit on which technology, et cetera, but you can still get orders in '26. So it's not that it's completely closed, but we also see that, especially on the pre-ordering side, we have seen orders extending where they have visibility that stretches beyond customers are placing those orders as well. So a lot of the pre-ordering is materially pushing into next year.

And shorter delivery times also require slightly higher prices in some places, because capacity utilization is so high in many of the factories that can do that.

That's very clear. And just given -- I mean, given the order book you have today, you have quite good visibility here into H2. I mean, how confident are you in seeing sales volumes increase year-over-year here in H2, given the supply chain constraints?

I mean, right now, you can say that you have to, of course, take out, say, the pre-buy side of things from our order intake. But I think generally, we are keeping up quite well with our customers' demand increases. So we don't see, at least for the near term, major risks to our supply opportunity. So I think we are pretty confident about how we can develop. But I think what we can see is, of course -- and this is something for, maybe for those who were with us in '21, '22, to see that, yes, when we have this significant order intake and with levels of pre-buy, the revenue will climb slower than what the order intake. You will not see the kind of 1,500 plus order intake materialize in near-term revenue. It kind of gets more prolonged in its growth.

And maybe to add on to that, I mean, if you look at where the orders were originating for these different quarters, the orders for quarter 3 were originating largely in quarter 1 when the supply chain issues were not as severe as they are now. So the bigger risk in the 2 quarters is really more in quarter 4, where we typically have a seasonality pattern in December as well, which bleeds into quarter 1. So I would say it's more of a thing in quarter 4 than it is in quarter 2.

That's very clear. And just on the price increases filtering through, just to help us with our estimates as well. I mean, should we expect a gradual increase in the price increases reaching roughly 20% by mid-'27, or is that a good reference point to sort of see the 20% coming through?