Studsvik AB (publ) (SVIK) Earnings Call Transcript & Summary

Welcome to Studsvik Q2 2026 Conference Call.[Operator Instructions] Now I will hand the conference over to the speakers, President and CEO, Karl Thedeen; and CFO, Peter Teske. Please go ahead.

Thank you very much, and welcome to our Q2 earnings call for 2026. I'll take this chart by just explaining the basis of the company. This is our financial figures for 2025. We are roughly $100 million in revenue. We operate in 15 countries, meaning that we have customers in 15-plus countries. We are more than 500 people worldwide, and we are, have offices in 6 countries. Our main markets are Nordics, Continental Europe, U.K., Canada and the U.S., Korea and Japan. Continue also to remind us about our key offerings and actually the key markets we operate in. If you start at the bottom right-hand corner, you see life science. This is an emerging area for us. We have been in this area for quite some time now, but we see a lot of new developments in managing and handling high radioactive isotopes for production purposes going into health care equipment, but also other industrial applications will require our competence and facilities. The main markets that we operate in are long-term operation and decommissioning. And long-term operation is all about serving the existing 440 or roughly, there are 440 plants in the world, and we are actively supporting more than 200 of these. And that is both ongoing operation, but also securing lifetime extensions. In decommissioning, we are active mainly in Germany and then also in Switzerland, Benelux and then in the Nordics. This is to safely both support outages and maintenance, but also tearing down nuclear power plants that are shut down. This is a process that typically takes 20 years or more. And a lot of our service comes into play there, including waste management, software to manage intermediate fuel, but also traditional decommissioning on-site services. The new area that we are exploring as new build is coming into play again into the nuclear sector is supporting existing reactor developers to support to do the licensing and development of reactors. But also in the quarter, we have added a new company called Kärnfull or KNXT. That is a product development company focused on developing sites with nuclear here in Sweden. And that also gives us more into the center of those developments and enabling us to become a big player also in the new build area. Highlights of our financial figure for Q2. I'm very proud to say that we have grown more than 9% in the quarter up to SEK 247 million. And that is driven by growth in all of the business areas, as you see below. We have an adjusted operating margin of 5.8%. This is a bit on the low side, and that is due to the investments that we continue to do into the long-term scaling of this company, both into sales, product and service development. I'll come to that a bit later. If we then look into the 3 different business areas, I'm very proud to say that Decommissioning and Radiation Protection Services, DRPS, has a strong growth in the quarter, almost 9% and also extremely important that we are finally turning the corner and making this business into a much more profitable business, reaching 7% in operating margin in the quarter. This is due to strategic changes in moving our business into more profitable areas and also change of leadership in this operation. Our business fuel materials and waste management technology is continuing to go very strongly with strong demand for developing new fuels, material testing and other things that is required for lifetime extensions. We see growth of almost 9% and a very healthy operating margin of more than 18% Scandpower, which is predominantly our software business for core field software is a very seasonal business. And in the quarter, we have not received any material license sales, which is obviously hampering then our profitability to low levels in the quarter. We have growth, and that is injected partly by the stronger development of BlackStarTech, products and company we acquired a little bit more than a year back in 2025. All in all, strong growth from all business areas and a strong revamp from decommissioning. Key milestones, we talked about DRPS, we talk about FMWT. KärnfullNext, very important, and we continue not only to acquire that, they also integrated the 2 founders, Christian Sjölander is now heading up the activity around new build and John Ahlberg is supporting that, but also taking on the position in the executive team as Chief Marketing Officer. We have been very active in this space with handing in just another application for a site, in this case, our own site in Studsvik just north of Nyköping and also handed in very important, the state aid application as Sweden have a very comprehensive support package from the state to enable new nuclear. If we then move over to the rest of the world and our biggest and most important market, of course, for nuclear is the U.S., and we have taken advancement there in the advanced reactor sector with new software contract for an unnamed customer. We also took a contract for Lightbridge developing new types of fuel for the next-generation reactors and that they have also selected our software. Very importantly, the U.S. regulator, NRC, have approved the use of CMS5 for new reactor types, giving a clear indication that anyone that wants to go for licensing and approvals in the U.S. for them, it's very good to use our software. We also received a follow-on order from IFE that is managing the old research reactors that are out of service in Norway. We see this kind of back-end fuel where we actually transform the spent fuel into format that can be put in final repository as an important business, not only from Norway, but also from other research reactors throughout Europe. I wanted to take the opportunity in this call to talk a little bit about the investment case in Studsvik. It's basically one platform, we have 2 return profiles with slightly different time horizons. First of all, we have a cash-generating core, which is the quality of today's business as we are reporting, for example, this quarter. That is built on the long heritage of our company. It's built on the huge customer base we have and the fact that we are an extremely well-known company in our business or in our sector. It's built on that we provide end-to-end service offering. But to that, we have added over the last couple of years, an asymmetric upside for the company with 4 structural growth drivers, being the new investments that we see into extending life of existing plants. That's a real investment that is coming, and we are not yet seeing the biggest scale of this going into securing the extension of the 440 light water reactors we have in the world. At parallel, in many countries, there is a launch of gigawatt scale new build programs in many countries in Europe, Asia and in the U.S. We also see the development of Gen 4 reactors, including Fusion, where it's a lot of money pouring in being a big opportunity for us to also continue to drive and see upside on a lot of the services that we have. And as mentioned before, life science and industry, industrial applications are also moving. So basically, a core business that is very healthy and then we add to that the upside. And if we go into the upside with this picture, it's not only talking, this is actually for real. There's clear drivers, and we have momentum in all these 4 areas. We have a strong momentum in long-term operation lifetime extension as we have proven. And I want to highlight the 2 research programs that we do on an international scale with up to 15 organizations and companies coming together, asking us to do material and fuel testing for them. We also have a lot of activities and contracts for our in-ground waste reduction technology in place. In new build, as I said, we are applying for sites and state aid applications, and we are supporting the advanced new generation reactors that also will be a very big part of the worldwide nuclear development. And health care is also a business we have been in, and we see new contracts coming our way in that sector. This means that if you look on the investment case, we have big upside as this momentum will drive into bigger and bigger opportunities as more and more reactors are built, existing fleet goes into big investment to secure the lifetime and advanced nuclear becomes a reality. With that said, I hand over to our CFO, Peter Teske, please.

Thank you, Karl. And I will start with the group financial performance. And as you see, the sales in the quarter amounted to SEK 247 million, representing a growth of 9.2% in local currencies. And as you've seen in the previous slide that we have all the 3 business areas that they are increasing the sales during the quarter. And I will come back to the main reasons behind that later on in this presentation. We reported an operating profit of SEK 9.2 million. However, this includes the acquisition-related costs and costs for the implementation of the group's long-term incentive program, the LTIP program. Adjusted for these one-off items, the operating profit is SEK 14.3 million, corresponding to an adjustment operating margin of 5.8%. During the quarter, we have continued to build for the future. We have completed the acquisition of KärnfullNext, continued the integration and development of our recent acquisitions, including Extreme [Bornholm Salt Technik] and BlackStarTech and continued our investments in strategic growth initiatives. This action has a short-term negative impact on the earnings and cash flow, but are intend to strengthen the group's long-term position. And the free cash flow for the quarter was impacted by the acquisition of KNXT and changes in working capital, but I will come back to that later on. But then if we go into our 3 business segments, we start with decommissioning and radiation protection services. And this business area delivered a strong quarter. The sales increased to SEK 96.8 million, corresponding to a growth of 8.9% in local currencies. The increase was supported by good progress in our planned outages projects in Belgium, Switzerland and Netherlands, together with a higher capacity utilization across the whole business area. And more importantly, the sales growth also translated into improved profitability. So the operating profit increased from SEK 4.4 million to SEK 6.8 million, and the operating margin improved from 4.9% to 7%. So we are now beginning to see the effect of the strategic changes we made during the past year, and the improvement is a result of high utilization, strong focus on higher-margin services, cost control and more efficient organization. And we also see during the quarter that we have seen more improved market conditions. And then we move to Fuel Materials and Waste Technology. and also delivered a high and stable level of profitability. We increased sales to SEK 116.3 million and an increased operating profit to SEK 21 million and with an operating margin of 18.1%. And the development was supported by good progress in our customer projects, improved productivity, higher capacity utilization and a favorable product mix. And what's particularly positive is that increased sales were converted into earnings while the margins remain above 18%. And this demonstrates our strength in the underlying business model and our capability to maintain disciplined project execution. And if we move to Studsvik Scandpower, we see an increase of sales to SEK 37.1 million compared to SEK 35.5 million last year. And BlackStarTech that we did acquire last year in Q1 had a positive effect on the revenues during Q2. And at the same time, we see that operating profit amounted to a negative of SEK 5.4 million. And there's 2 important factors behind the results. First, the business is seasonal with a largest share of sales normally generated during the second half of the year and a single quarter that does not necessarily reflect the expected full year performance. Second, we are currently investing in long-term intiatives to drive future sales growth and product development, for example, within the SMR and AMR market. And also, we are building our pipeline and opportunities, particularly within BlackStarTech. And we should also notice that during last year, we had a positive exchange rate effect. And then if we then look on our cash flow, finally. And we had during the quarter a negative free cash flow of SEK 59.6 million compared to a negative of SEK 1.3 million last year. And we see in the quarter, SEK 34.1 million of the cash outflow was related to the completion of acquisition of KNXT and the remaining is partly driven by mainly driven by the changes in working capital, where including a reduction in customer advances as ongoing projects progress during the quarter. So this should mainly be seen as timing and acquisition-related effects. And as you see and as is illustrated in the graph, Studsvik's cash flow can vary significantly between the quarters, and this reflects the different business models across the 3 business areas as well how important is with timing of project execution, timing of invoicing and timing of customer payments. And as a consequence of the acquisition and the changes in working capital, we have an increase of the net debt during the quarter, but we see that the group has a solid capital structure with an equity asset ratio of 39.1%. And looking ahead, cash flow and working capital will remain a key priority, and we will continue to focus on our disciplined project execution, timing of the invoicing, customer collection and overall financial control across the group. And to summarize, this was a quarter of continued growth and continued investments of the future of Studsvik. We delivered sales growth across all 3 business areas. We completed the acquisition of KNXT and continue to build capabilities in important growth areas. So with that said, I will hand over to Karl again.

Thank you, Peter. I just want to continue a little bit and look outside and look into the nuclear market worldwide. If we look at the world, obviously, we have seen over the last couple of years that nuclear is becoming a key critical energy and industry infrastructure as the world goes for more electrification and fossil-free power productions. The other trend is technology and that SMRs is moving from plans and discussions and designs to execution. We have seen that in China to some extent. We see it in the selections of various SMR projects, both in Czech Republic, in the U.K. and now in Sweden. And that is obviously with the promise that SMR project will be more plannable, smaller and also for that reason, safer to invest in. If we look into where this is happening, Asia is leading the way. China has never stopped to build nuclear and are building on large scale. But we also see that U.S. is accelerating. They're both planning and building large-scale reactors, but also a lot of the developments on SMR and AMR reactor types. The demand is coming to a large extent from AI. The big data center deployments of AI is driving a lot of power demand, and we will see that coming very much coupled with a large buildup of nuclear power. If we then look into Europe, Europe is also moving into nuclear big time. EU policy support is turning into projects. We see that in 4 main distinct markets: France, which is obviously the biggest nuclear market in Europe, and they are building and planning to build large-scale reactors continuously. In the U.K. and Sweden, there have been during this year, announcement of large-scale SMR projects, and that will continue. Nuclear is, for Europe, very important for energy security. It's a way to remove the geopolitical uncertainty and being more self-sustained in your electricity production. If we specifically look into Sweden and the reason I point that out is for us, as many other companies, it's important to have a strong home market. And here, nuclear enters into execution phase, specifically with the announcement that the [indiscernible] Vattenfall company, VidebergKraft announced the selection of Rolls-Royce as a technology for their build-out at the Ringhals site. The financing framework is now in law and it's a framework that is very -- will enable a lot of new nuclear in this country. The industrial demand is coming both from the electrification of transport sector, but also, for example, from things like fossil-free steel production. If we continue to look on the map and I continue to take Sweden as an example, we see different sources of research pointing out a surge in demand for electricity starting in the coming years. On the high side, there are people saying or research institute saying this could be up to threefold over the next 20 years. And -- but the minimum is up to 2x from the existing where we are today, which means that we have a need in the world and in Sweden to continue to run existing nuclear power plants and then add capacity to meet the demand from different sectors of the countries. And how would you then do that? Well, in Sweden, we have the -- and this is happening in other countries as well, but we have a very focused system for regulatory requirements and enabling it to be easier to get permits to build new nuclear. -- but also a financing mechanism to do so. There is now a plan to build up to 10 gigawatts of new capacity and the initial plan up to 2035 includes 2.5 gigawatts. I specifically mentioned here our home turf. Once again, we operate in a market where this is happening, which means that we are first-hand sight on what is required, and we will be very much into these developments with our acquisition of KNXT. So you need to do both. You need to continue to run your existing plants in the world, the 440 plants that are today operating and you need to add more to improve or increase capacity. And so to speak, we are a company that are supporting these 2 streams of investments that is coming. Long-term operation with a lot of our traditional services around fuel inspection, material analysis, our unique hot-cell capacity that we have at our site and our support for different licensing activities. But we also do that both on technology, but also with project development for new build, which means that we are in a very good position to take advantage of the 2 investment cycles that have started, both the new investments going into existing plants and the even larger investments going into new build. Also back again to why can I say that? Yes, we have proof points that we are in these markets. Here, I highlight 3 examples of long-term operation. South Korea is the market that never stopped investing in building and investing in technology with capabilities around nuclear. They are the power country of new nuclear and nuclear operations in the world. And we have a strong customer commitment and contract in that market. Recently, in the early part of this year, we announced a big contract with Korea Nuclear Fuel for Fuel testing when they develop new types of Fuel. And we also have waste management contracts here. So Korea is a very important market for us to be in to enjoy the new investments coming into the sector. We also, in the quarter, announced follow-on orders for back-end fuel treatment where we take spent fuel and transform it to a format that can be put into the f repository. And we also, in that process, provide intermediate storage. This is large-scale products that will require our unique infrastructure, and we are one of the few that can do this on the European soil. We see these opportunities emerging not only from Norway, but from many other countries. And then as mentioned before, the SCIP and SMILE project, which gives us a unique insight into the testing and material fuel development that are required to do long-term operation. Some examples, excluding the project development for new build AMR and SMR market is also here highlighted by the first I already talked about Lightbridge doing next-generation fuel development and the first AMR contract for an advanced reactor developer in the U.S. I also want to highlight here Rolls-Royce that we have highlighted in previous calls as well. They were selected by VidebergKraf. They have already been selected by a customer in Czech Republic, and they are also building and selected for customer deployments in the U.K. They will now be very close to us, and we will continue to invest in that relationship to provide more and more services as they go into licensing and construction activities throughout Europe. With that said, final remarks on the quarter. I'm proud to say that we have a strong quarter in terms of sales. We grew more than 9% and the growth come from all business areas. We have a strong foundation in our home turf, and we see Nordic expansion, both on our traditional business, as highlighted by some key contracts in the quarter, but also in the new focus area of building new nuclear in Sweden. Our software is very important for us, and we see, as I said before, this is an entry ticket to provide more software into modernization and new types of reactors. And we are winning ground and contracts in the U.S. in the quarter. In parallel with that, we are investing in the business to take on what we have mentioned here, the asymmetric opportunity. We have a stronger sales team, better coverage and invest more into next-gen products and services, and we have taken those investments partly in this quarter. once again, remind us all that this is an investment case, one platform with 2 return profiles, the ongoing strong operation business we have today and the upside opportunities with a lot of new investment into new areas that will support long-term growth opportunities for the company. My last picture, typically is this is now a more realistic showing the beautiful site that we have in our south of Stockholm. And here, you will see the SMRs that we are applying to build at the site. You will see our hot-cells. You will see in drum waste management facility and the possibility of building a fusion test facility. Not all of this will potentially happen in 10 years, but some of it will definitely -- all these, we have strong dialogues to build. So the company, the sector is definitely under a lot of change in the positive way. With that, I would like to thank you all for listening, and then we can go to questions. Thank you.

[Operator Instructions] the next question comes from Kaleb Solomon from SEB.

You mentioned that the profit improvement in FMWT was driven by higher utilization. Can you maybe start by giving us some color on where utilization rates are currently and how far you are from reaching some sort of optimal rate?

Well, thanks for the question, Kaleb. It's a very tricky question because utilization in new formats. It's both people and staff utilization and maybe more importantly,hot-cell utilization. We are definitely not on a peak. We can -- we have, to some extent, during the quarter, used extended working hours to make sure that we can fulfill customer requirements. We have also had some weekend extra work to perform, but we can put that even -- do even more. Obviously, doing this kind of advanced testing requires a lot of extra when you do over time. Of course, it also comes with putting all the security and safety organization in service when you do that. So we have taken, as I said, those kind of measures, but we can definitely take more to deliver. But there is not everything we can do by the extend some of these things can not happen outside working hours, if you like.

So should I interpret that as you being relatively close, but not at some sort of peak or being quite far away still from some sort of optimal rate?

So this site can take -- definitely have higher output, but it's also very much subject to what kind of work we should perform. Some work is easy to perform on outside normal working hours and you can fill and increase your vessels. Some is not. Sometimes we are working for -- waiting for input from our clients. So it's not a given answer, but we are definitely not on the peak of our site can deliver.

Okay. That's very clear. And for Scandpower, can you maybe give us an exact figure of how much the positive one-offs impacted year-over-year comps as well as the sort of negative impact from this year's incentive program or the impact from the incentive program to kind of give us an idea of how the underlying performance was year-over-year? And sort of as a follow-up to that, last quarter, you said you expected BlackStarTech to contribute this year and maybe even reach the sort of 10% run rate of Scandpower sales. How far away from that are we right now? And what was the actual contribution this quarter?

Yes. I can take the first question there about the adjusted numbers, and you asked about the incentive program. And we have it on the group level. So that's -- in total, we have one-off this quarter of about SEK 5.1 million, and that's the incentive as well as the acquisition costs.

Yes. Just to clarify because in the Scandpower section specifically, you said that earnings in the period was held back by long-term initiatives undertaken to drive future sales growth. I interpreted that as being the incentive program?

No, no, no. So the incentive program is on a group level. So what we're doing in Scandpower is that we have the strategic initiatives that we do for strengthened for example, integration of the BlackStarTech and strengthen the sales pipeline and product development.

Okay. That's clear. And how big was that effect roughly?

We have not monitored the effect in the results. So I think it's more like, as you said before, when you compare Scandpower to the year-on-year, we should take into account that we had this pretty large impact of the FX exchange rate effect last year.

Okay. That's clear. And just could you comment on the BlackStarTech contribution as well, both in terms of what it contributed this quarter and how far away we are from the sort of 10% of Scandpower sales run rate?

Yes. I think that the contribution of BlackStarTech was around SEK 10 million during the first half year.

Okay. That's clear. And just another question on the sort of adjustments to operating profit related to the acquisition cost and long-term incentive program because the adjustment this quarter was roughly SEK 5 million, right, which correct me if I'm wrong, but it's quite a bit less than the full impact should be. So could you maybe first help me just split how much of that SEK 5 million was related to the acquisitions versus the sort of long-term incentives? And second, could you maybe quantify how much, if anything, remains for the next 2 quarters this year?

Yes. And just to clarify, those SEK 5.1 million is the one-off cost we had during the quarter. Its cost for -- for acquisition and the incentive program. And of course, there will be ongoing costs during the next quarter and next year, of course. But we have not quantified them yet in this perspective.