Nyab AB (publ) (NYAB) Earnings Call Transcript & Summary

Hello, everyone, and welcome to NYAB's results presentation for the second quarter of 2026. NYAB has today released its interim report. And with us in this call, we have the Group CEO, Johan Larsson, and Interim CFO, Peter Franks. My name is Erik Petersen, and I'm the VP of Corporate Affairs and Investor Relations at NYAB. [Operator Instructions] And now to get started, I hand over to Johan, who will go through the results.

Thank you, Erik. Yes. Welcome, everyone. Strong report from our side. As we stated when reporting the first quarter that we had a high underlying growth that comes through now in the second quarter, where we show a strong revenue growth and with a clearly improved profitability. Our civil engineering business, mainly in Sweden, drove the performance when it comes to EBIT, and the revenue growth is strong, and our order intake remained robust. And our backlog is at the highest level ever, reaching or surpassing EUR 500 million. So quarterly year-over-year, we grow with 19%. That is even more impressive if you take into account that we still do a lot of work in projecting and planning in early work agreements and Phase 1 agreements. Rolling 12, we have a growth of 25%. And if you go further back, we have close to doubled our revenues in 2 years, looking at rolling 12. We increased our earnings and we improved our margin from 4.2% in the second quarter last year to 5.1% now, follows our plan. We have been clear that our growth mainly stems from niches with a bit higher margins such as railway, waterworks, power headlines. And rolling 12, we have an improvement of 21%. And our order intake remained robust. Of course, that is where our growth comes from. Quarterly, it's at the same level as last year. Rolling 12, we grow with 18%. And our order backlog is well balanced. We are picky and we grow in a right and good way. There's a lot of balance in our growth. This is our 12th consecutive year with growth, and we are managing that part very well. And as we have stated earlier, NYAB is a low CapEx, asset-light company that is set up for growth. The selection of new contracts. We won the trust of the Swedish Transport Administration for a North Bothnia Line contract, a railway contract. The completion is scheduled for 2030. We won a contract for A-Train, which is the project is scheduled for completion in April 2028. It's the expansion of a maintenance depot. And the important frame agreement extension with Aibel in our consulting business, Dovre Solutions, won their continued trust, and some selected early involvement projects, just to give a clearer view. We talk a lot about Phase 1, Phase 2, early agreements and such. After the period, we received a huge order for our joint venture, a SEK 6.5 billion contract for the Uppsala Tramway. We have been working with the planning and projecting for quite a long time. Very happy to receive their trust. Half of this value is NYAB's, meaning SEK 3.25 billion. We signed some early works agreement with SSAB in April and in July. And our data center contract, NYAB's first data center contract, I'm quite confident that there will be more data center contracts that will follow this. But we have received the execution orders. So we are doing fine there in Finland, important step to grow our Finnish business as well. And 1 thing we always measure of great importance to our owners, our long-term financial targets. We are aiming at an annual revenue growth exceeding 10%, and the outcome rolling 12 is 25%. And if you take into account the volumes we have in Phase 2 that aren't in the order book yet, the possibility to heavily exceed our revenue growth target are there. Profitability, an operating margin, an EBIT exceeding 7.5%. Our outcome rolling 12 is 6%. We are in a good position to improve the rolling 12 outcome in the coming quarters when we have our prosperous second half of the year. And then, of course, we have also stated quite clear to the market that 2025 and 2026, we won't reach our target, but it's a long-term target. The main reason why we won't reach that is because of our consulting business. We acquired a company that are diluting the margin and is expected to do so during 2025 and 2026, but we take a lot of good actions. We have a new leadership. We are establishing the consulting business in Sweden. And we have a lot of use in our civil engineering business of our consulting business as well, and that helps us being stronger in the early phase planning and projecting projects as well. Capital structure. We have a goal of a net debt in relation to EBITDA below 1.5x. We have a negative net debt. So a lot of room for maneuvers. An entrepreneur-led company like this should be in this position. We have to stay strong. It's somewhat related also to our equity ratio that is in the level of 67%, but we are a company that should stay on solid grounds and be stable and don't take too much financial risks. And nothing new, our direct shareholder return. We have a goal of a dividend exceeding 35% of the net profit and the outcome was 47%. And with that, I hand over to Peter Franks.

Thank you, Johan. I'm Peter Franks, Interim CFO. And now I'll take you through the financial highlights of the second quarter. I'll start with group revenue, profitability, and the group financial position, and then move to the performance of our 2 business segments, Civil Engineering and Consulting. Group revenue for the second quarter came in at EUR 161.9 million, up 19% on the same quarter last year, and almost all of that growth was organic. The increase was driven by higher production during the quarter, which reflects a combination of drivers. Some production slipped from Q1 '26 into Q2 '26 because of the tougher '25, '26 Nordic winter than we experienced in '24, '25. In addition, our production levels were higher, reflecting that our order intake has grown 18% over the past year and that we had several large infrastructure projects in Sweden with short delivery time lines, which made a strong revenue contribution, alongside several larger projects being moved from the planning phase into the construction phase. On a rolling 12-month basis, revenue grew 25% to EUR 566.5 million, of which 15% was organic and 10% from acquisitions. The rolling 12-month revenue split is broadly stable. By market segment, Energy's revenue share has moved from 56% to 46%, and Infrastructure's revenue share has increased from 32% to 42%, in line with market opportunities. By operating segment, Civil Engineering represents 81% of group revenues and Consulting 19%. Geographically, Sweden remains our largest market at 65%, followed by Finland at 17% and Norway at 13%. The private sector accounts for 63% of group revenue and the public sector 37%. Moving on to group profitability. We delivered improved margins in Q2 '26 versus Q2 '25. Operating profit rose 45% to EUR 8.3 million from EUR 5.7 million in Q2 '25. And the operating margin improved to 5.1% from 4.2%. This was supported by the quarter's revenue growth and a more favorable project mix as several larger projects moved into production phase. On a rolling 12-month basis, operating profit increased 21% to EUR 33.7 million at an operating margin of 6%, underpinned by a healthy margin profile across the project portfolio. Net profit for the quarter was EUR 7.7 million, up 84% from EUR 4.2 million. Beyond the higher operating profit, this reflected lower financing from our net cash position compared to our net debt position a year ago, alongside higher earnings from associates and joint ventures as the Uppsala Tramway project progressed. Moving on to our group financial position. We closed the quarter with solid cash generation and a strengthened balance sheet. Free cash flow for the quarter was EUR 1.8 million against EUR 5.5 million a year ago. The lower figure reflects the weaker Q1 revenue, an increase in working capital, and investments in machinery. We view the working capital build as temporary relating to inventory for an upcoming project and extended payment terms with compensating revenue adjustments on a strategic project in its early phases. The rolling 12 free cash flow was EUR 35.6 million with a cash conversion rate of 88% of EBITDA. We maintained a net cash position of EUR 12 million compared with a net debt of EUR 10.3 million a year ago. The net debt-to-EBITDA ratio was minus 0.3x versus 0.56x at the end of Q1 '26. The return on capital employed was 15.6%, and the equity ratio was 67%. So now let's turn to our largest business segment, Civil Engineering. In Civil Engineering, market activity remained high. Order intake held at Q1 levels and was slightly ahead of the same quarter last year at EUR 166.6 million. The quarter's order intake includes the North Bothnia Railway project, the A-Train project, and additions to the SSAB and Mikkeli projects. On a rolling 12-month basis, order intake represents a book-to-bill ratio of 1.2x revenue. Order backlog grew during the quarter to EUR 501.6 million, up 18% year-on-year. Both intake and backlog exclude the Phase 2 Uppsala Tramway project, which Johan mentioned was signed in early July. Beyond the reported backlog, Civil Engineering has several early-stage engagements with potential for significant follow-up phases. Based on scoping discussions and pricing estimates with our customers, these future phases, if signed, could represent additional order intake of around EUR 600 million. With that, let me turn to Civil Engineering's revenue and profitability for the quarter. Civil Engineering followed its expected seasonal pattern with revenue increasing from Q1. Revenue rose 28% versus the same quarter last year to EUR 137.6 million, reflecting the catch-up of delayed Q1 revenue after the tougher Nordic winter, improved order intake and backlog, and the shift of several large projects from the planning phase into the construction phase, together with the ramp-up of production-intensive infrastructure projects. Operating profit increased 52% to EUR 8.7 million from EUR 5.7 million. The operating margin improved to 6.3% from 5.3%. On a rolling 12-month basis, operating profit grew 15% at an operating margin of 7.3%. We are pleased with this performance, both the improvement in operating margin and the profitability of the project portfolio. We now move on to our consultancy business, Dovre Solutions, which represents 20% of group revenues. The demand in the Norwegian offshore market stayed soft, and the number of consultants on assignments fell during the quarter. The appetite for new renewable energy investment projects also remained weak. Against this backdrop, our order intake fell to EUR 14 million, bringing the rolling 12-month book-to-bill ratio to 0.7x revenue. Quarterly revenue declined 13% to EUR 24.7 million, and the operating margin was 2.1%, down from 2.9% in the prior year. On a rolling 12-month basis, revenue was EUR 107.4 million at an operating margin of 2.4%. In Norway, we merged the onshore and offshore operations to capture greater synergies and efficiency across the organization. The management remains focused on building an integrated Nordic consulting offering, and we are already seeing more collaboration across the countries, and we expect this work to continue and gradually intensify through the remaining quarters of 2026. I now hand back to Johan to provide a summary of our Q2 2026.

Great. Thanks, Peter. Yes, first of all, to sum it up, we can clearly state that we are addressing growing markets. Society needs to invest in these areas to be able to be competitive, grow, and it's of importance for the future. The investments, energy, heavy investments, both in energy sources and in energy infrastructure, the defense, which is a client to us in both Sweden and Norway. Infrastructure investments, a lot of investment needed in railway, roads, bridges around harbors, ports, markets we address, and the industry, especially up in the North, where you have a lot of huge heavy base industry investments as well as in Finland. So we had a strong revenue growth. We have a higher operating margin in the quarter. And we have, as stated, a lot of potential from our early phase assignments. Worth mentioning is that in NYAB's history, we have never won a Phase 1 nor an early work agreement without receiving the order for the execution phase. That doesn't mean, of course, that that's a truth in the future, but it's at least a good indication. Our Civil Engineering business drove the improvement, good improvement in profitability in Sweden and increased activity in Finland. I would say that the Swedish improvement comes from niche markets, railway, waterworks, and power headlines mainly, and to some extent, also the defense, a robust order intake, and the highest order backlog to date in Civil Engineering, which, of course, gives us the base for a continued growth. We have 12 straight years of growth, mainly organic. We continue to focus on further strengthening profitability and our order backlog where our expected growth is in the right niche segments supports that. And we have touched it already, but a solid financial position and a well-balanced project portfolio as we enter H2. H2 has always been the strongest period for both revenue and earnings, and it's just like a football game. We go to halftime with a good result, but it's in the second half, it's decided if you win the game or not. So I'm happy with our first half.

Thank you, Johan, and thank you, Peter. We will now open the teleconference for questions. [Operator Instructions] The next question comes from Simon Jönsson from ABG Sundal Collier.

First, I have a few questions on the Uppsala project, the Tram project. And first of all, I wonder when you are starting the work? Is it already now or when they start? And also how the sales and earnings will be reported for you guys given the joint venture?

Yes. To some extent, the work has already started. When it comes to the different alternatives of the accounting of the project, I leave it to Peter.

Good. Thank you. So as the Uppsala Tramway project is a joint venture, we will recognize our share of the profit or loss of the Uppsala joint venture company as our share of equity in associates and joint ventures in our P&L. So it will fit below operating profit, but it's very much managed as part of our overall business and will be part of the civil engineering results going forward. And depending on the services provided by NYAB and other companies to the joint venture, there may be kickers in the operating profit as well, but that's sort of still in the sort of negotiation and agreement phase. There's no commitments as to what that will look like.

All right. Got it. And as you said, Johan, it's already started in some ways, and it's going to go on for a few years. Should we expect work is done on a relatively even pace throughout those years? Or could there be any swings in, or differences in the different years, you think, in terms of how much will be completed?

It's relatively even. But if you look at our growth as a whole, it's not a big chunk every year. It's less than 10%, clearly less than 10% of our annual revenue going forward, this project's volume alone.

Yes, I see. All right. Very good. And then another follow-up on the project in Uppsala. I understand that this is also a partnering contract. But what does it mean for margins, do you think? Is it relatively similar to the rest of your civil business in Sweden? Or is there something we should think about in terms of profitability here for this project?

No, it follows the rules of the business. So the margins are quite similar to our average margin in Civil Engineering.

All right. And then, Peter, you talked a bit about the Phase 1 pipeline that you have right now. I think it was EUR 600 million in potential order value for those Phase 2s later. I guess Uppsala is included in those EUR 600 million, correct me if I'm wrong.

Wrong.

Okay. So EUR 600 million is excluding Uppsala.

No. No, Uppsala is included. It was after the end of the quarter.

EUR 600 million is including Uppsala.

Yes, yes.

Yes. And the rest of it, how long would it typically take you to convert that? Are we talking 6 months, 12 months? Or what's the average time line of those projects turning into Phase 2?

Well, first of all, they are not signed as execution contracts yet. So that has to happen, of course. But the production time or the life length of those contracts, which is, they have been announced, it's the Mikkeli data center. It is 2 contracts with SSAB related to their new steel mill, and it's Svenska Kraftnät. So the production time varies on those projects, but the shortest 1 is 2 years, and the longest 1 is close to 4 years.

2 to 4 years, is that how long the Phase 1s are taking?

No, no. That is how long the execution phase and the Phase 2 is taking. The Phase 1 is that most likely all of these will materialize in Phase 2 during this year.

All right. Okay. Yes. That was my question. Very clear. Just 1 last question for me on the consulting business. You have guided before that its growth to be muted. So that's all good. But you also said that you are working to improve the margins. So where do you think you are right now in terms of potential margin improvement for the consulting business? Should we expect to...

Yes. When it comes to the consulting business, we made an acquisition January 2025. We have been quite clear that we will have a dilution of the group's margin due to that business. We have divested and sold our North American consulting business. We are, first and foremost, a Nordic company. We have made leadership changes. We have established the consulting business in Sweden during this summer. And we have made some restructurings in the setup of the organization and the entities within consulting. So it's we are doing the right things. And I, at this moment, see no reason not to believe in a quite heavy margin improvement during 2027, and that's what we aim for.

The next question comes from Christoffer Jennel from Inderes.

I take them 1 by 1. So starting with revenue. You saw a very strong growth now in Q2 despite a very strong last year and the civil engineering backlog reached a record level. So my question is, do you see that the H2 now being more backloaded than in previous year? Or how do you see the second half developing from here?

Well, I would say that the signs that we can see now is, of course, that our great margins in Civil Engineering during Q2 is from projects that are ongoing in H2, meaning that we are quite optimistic about the second half of the year. Our seasonality is always the same. We have 75% or more of our earnings in H2. And I see no reason why it shouldn't be like that this year.

Okay. And then on margins. So the group EBIT margin improved to 5.1% from 4.2% a year ago and Civil Engineering in Sweden reached 7.7% from 5.8%. And I'm wondering how much of that is operating leverage from higher volumes versus a structurally more favorable project and segment mix?

It's a combination, of course. But since I have founded this company, and I have seen the yearly patterns for 13 years, I must say that this is by far the strongest Q2, which is a semi-low quarter for us. Q1 is very slow. Q2 is semi-slow. And it's, the margin improvements are both structurally. It comes from our outspoken goal to address niche market, niche markets that has higher margins. But of course, you get an effect as well with higher volumes to carry the overhead costs.