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

Welcome to Studsvik Q3 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, and a warm welcome to the Studsvik Group Interim Report of Q3 of 2026. Starting with some pictures of who we are and what markets we serve, and we have shown this slide many times before. We are operating mainly in Western Europe and North America, but also a big market for us is Japan and Korea and Asia, and we obviously work in a lot of international cooperations and projects, incorporating all the states that are having nuclear power, except for Russia. We have global sales in 15 countries, we have more than 500 people, and we have local offices in 6 countries. The markets we serve is new build, long-term operation, decommissioning and life science. And traditionally, this company has been very active in decommissioning and long-term operation. Decommissioning is about in a very safe way, dismantle and take care of nuclear power plants that are not in service anymore. That typically takes 20 years per plant. And our main business there is in Germany and Switzerland, but we also work in other parts like the Nordics. Long-term operations is to support our customers to operate the plant safely and also prepare them for lifetime extensions to support them with analysis how they're going to keep the plants going for many years to come, up to 80 and sometimes 100 years after the initial construction. Life science is a reasonably new marketplace that we entered 8, 9 years back, and we see increased demand and questions around life science, where we can handle the isotopes for cancer treatment and other illnesses that are those kind of materials can solve. And the latest that we are entering as a market is new build. That was a market that this company started to support 8 years back and is now back in play, and we have announced in the quarter a project to build new reactors here in Sweden. I will do more of that later. So the markets are basically four-folded, and we have entered into a new market during this year. Next slide, please. So if I then go into Q3, we are very proud of the growth that we show in the quarter, growing more than 10% compared to the same quarter last year at SEK 227 million, very strong performance, and this is mainly contributed from the Scandpower business area, but also from the others. The operating margin is in the lower range. That is not unusual for this quarter. Q3 is seasonally a weak quarter from a profitability point of view, and we do see that this is in line with our expectations. If we go a little bit more into the detail of the different business area, I'm specifically proud of what we have achieved in Decommissioning and Radiation Protection Services. We started a journey of change in that business area some 12 months back. And in Q2 and even more so in Q3, we now see the results with significantly improved profitability, actually over the sort of the target that I have set internally of 8%, we are almost hitting 10% profitability. So very strong. That's driven both by utilization, more efficiency, but also a better market in general for the market we serve. In the Fuel, Materials & Waste Technology segment, FMWT, we had a solid quarter, and this business area is affected by the holiday seasons in Europe. And this is, I would say, a strong quarter for being Q3, but it's seasonally affected by the season. We have taken -- we come to significant new orders in this area. We have a very good outlook for this business area. Studsvik Scandpower did a record quarter in terms of growth. We grew more than 40% in the quarter. And very interesting is that is driven not only by the software sales and advisory and support services, but also by the BlackStarTech products that are almost 20% of the sales in the quarter. And we continue to report solid margins in that business area. This is what we call the cash generating core, the main part of the business that we operate with our business areas today. We also have, and this slide tried to do the cash-generating core, that's the base business that we drive today and try to improve step by step. And I would say I'm proud to say that we have 3 business areas that are now in a much better state than they were a year back and that they are now coming up to the level of growth and profitability where they should be. The asymmetric upside, which we have discussed from Q2, is to describe what investments and measures we take to really drive the company into substantially better growth and profitability, riding on the wave of new investments in the nuclear sector. Here, you can see doing more of existing fleet, the back end, which is basically what we do for Norway, how we engage in new build projects, how we come into new areas like the advanced modular reactors and fusion and continue to drive life science. If we go back a little bit to Q3 and the key milestones of Q3, as I said, growth in all the 3 business areas, very important and a solid 10% growth in the -- for the group. DRPS, strong demand and profitability. Very interesting, we had an opportunity at our site, north of Nyköping in Sweden to take over a hot cell, which is actually more modern and much bigger than the hot cell we have today that we have rented for some while, but we took it over from SVAFO and that is now in our own capacity. This means that we can continue to grow the FMWT business area. As we see more demand, we need more capacity to deliver that. So very important for us. As I said, Scandpower continues to grow strong and both on the software side and on BlackStarTech. We launched a new build project, will come to more of that later, 1.2 gigawatts to be built either at our site in Nyköping or another site on the East Coast of Sweden called Valdemarsvik. We have appointed a new Board member, Mats Ladeborn, and he also took over as acting Chairman from October 12. After the quarter, we signed 2 very interesting deals, Norway, which is a back end where we take care of the Norway's legacy fuel. I will discuss that more in detail and a much smaller but a very interesting strategic order for Japan, where we will develop our inDRUM waste management technology to take care of waste coming out of the Fukushima plant. So let's go into the asymmetric upside and some proof points of that. So here, you see a consortium that we are very, very proud of. This was launched on September 30 in Stockholm. And we are obviously aiming to form a consortium that we, as partners, can develop new nuclear in Sweden. We will contribute with things at the site and competence on, but we also look for partners that can contribute on a broad range to develop this together. In that selection, we found GE Vernova Hitachi that has a proven 300 megawatts SMR that is the only SMR in the Western world now under construction in Darlington, Canada. We also found Samsung that have actually recently built nuclear power plants in Korea and in UAE and have a strong partnership with GE. We also initially launched financing support from DS Investment Partners. So that consortium is really a dream team to drive this forward. As I said, 1.2 gigawatts, that's equivalent to 4 of these BWRX-300 reactors, 2 candidate sites, and we expect the first unit to be somewhere in the latter half of 2035. So we will now continue. The next part of this project will be to continue this state aid application to form a joint venture for a company and then continue with the financing and the permitting activities over the next couple of years. So a little bit more on the partners, and it's a true partnership here. We have -- we can maybe start on the top right-hand corner. DS Investment, a South Korean investment firm, they have already worked in similar projects in Romania. So they are really keen to not only enter as an investment part, but also maybe more important to be part of an initial early phase investment into this, which could be, in many cases, the most difficult area to finance, and we are very good for us to have them with us from day 1. GE Vernova also not only bring reactor technology, but also their financing arm is very strong and part of the consortium. We lead permitting, environmental impact assessment, site rights and so on and very important, of course, to drive this in the Swedish context. As I mentioned, Samsung is a very, very important part of this. They will not -- they will also engage with local and Swedish suppliers to drive this, but they have the know-how to really lead and drive the construction of these power plants. And then GE Vernova Hitachi had already a very strong inroad into Sweden as they worked with the other project [ Vattenfall ] for many years. And they have then already also a lot of partnerships and knowledge about the Swedish market, but also obviously bring the strong technology from the U.S. market and international market. The second big one, and this was actually signed after we ended the third quarter. This is a picture from the small village or city of Halden, just north of the Swedish border on the West Coast. And actually, in the mountain behind us there is actually where they host one of their research reactors that they've had and actually very, very important for research in nuclear that was in operations in the '60s, '70s, '80s and was closed down in 2010 -- or 2005, I think it was. What they have now been looking for, they created something called Norwegian Nuclear Decommissioning, and they wanted a way to, in a safe way, decommission this. The first thing you need to do that is to take the spent fuel out of the site, so you can start decommissioning the rest. And they have been looking and evaluating this. We have been engaged with them in a smaller project already from 2018. And now they have decided to -- that we are the best partners to actually help them to get rid of the spent fuel. Very, very important for us and actually for them to get going. It's the legacy fuel that we take care of. It's around 17 tonnes. It sounds a lot, but obviously, this is very small compared to if you run operational reactors. It's a long-term contract, but with committed volumes from day 1. So it's not a frame agreement, it's a committed volume and purchase orders coming to our desk day 1. It's not material for our revenue or profits in 2026 or 2027. But we will build volume in this contract over time as we go and get all the permits to actually import the fuel and store it intermediately at our site in Sweden. We will utilize facilities that we already have at site. So this is not that we need to invest a lot of money to take us to do this job. There will be some new intermediate storage paid as part of the contract. But other than that we use a lot of -- specifically also, as you mentioned, the hot cell that we have taken over will also be a good asset in this. This is also a very good reference for us. There are other similar research reactors spent fuel that we also have discussions with. And this will also prove that we are a site in Europe to help other countries to take care of their spent fuel. The second important but significantly smaller day 1 is the agreement we signed with ReNu Industries of Japan. And this is actually very recent. It happened on 21st of October. ReNu have applied for funding to start a development project to put our inDRUM on the site in Fukushima to take care of contaminated liquids that have been used to clean water that was a big part of the waste and that came out of the Fukushima disaster. We see this very important sign that we have something very important or good technology design to work with in that sense. So inDRUM, this is a picture from our demo facility at our site. What it basically does is take waste that can't be disposed in its current format to being disposable. It treats everything that is inside a contained environment, typically a drum, so you don't need manual handling. And most importantly, it reduces volume with up to 90%. So you actually have to store less of contaminated waste. ReNu Industries, they want to bring this to Fukushima. They will work with us to develop it. And we will advise them, sell the technology licenses and get recurring revenue from that once this site is up and running, but they will run the facility in Fukushima and other parts of Japan and Asia. A very important first step to go into entry into a new market and also work with this business cycle of inDRUM. So continue a little bit on asymmetric upside. We have momentum in many areas. Existing fleet, we talked about the Norwegian agreement, which is very much building for the future, giving a strong foundation in high revenue and margin for the company for many years to come. We also have a sign of that are inDRUM, which is a new technology, that will also build recurring revenue, not only when we build it at our site in Nyköping, but also when we go into these kind of licensing agreements in the world. New build, a big area for the asymmetric upside. We took a very important step in the quarter on that one. And advanced nuclear, here, I highlight fusion. Fusion is enjoying a lot of investments in countries like the U.S., Germany, France, also Sweden. And here, we're highlighting that we have a very strong competence in this, and we have -- we are hosting or we are chairing one of the standardizations around from one of our German colleagues. And we also attended and was a strategic partner and had spokespeople at the Nordic Fusion Forum in Copenhagen last week. So fusion will continue to be an area we'll invest in business development as many of the services they ask for are the services we have provided to the fission or nuclear power market. And in life science, we continue with a lot of interest in business development. So the momentum in the asymmetric upside is strong. And as I said, the cash generating core is in very good health. Next slide, please. With that, I hand over to Peter for the financial report.

Thank you, Karl. And I will start with the group numbers, and the sales in the quarter amounted to SEK 227.4 million. That's up 10.7% in local currency. And as Karl mentioned, we are so proud that all our 3 business areas grew within the quarter, with Scandpower showing the strongest increase. And for the first 9 months, the sales amounted to SEK 700.8 million, up 7.9% in local currency, that's above our financial target of 6%. Operating profit was SEK 7.2 million in the quarter compared to SEK 13.2 million last year, giving an operating margin of 3.2%. When we talk about the results, we need to take into account that Q3 last year, we had a one-off effect of SEK 6 million. So exclude that effect, the profits in the quarter are in line with the Q3 results last year. During the quarter, we have continued to invest in our ReFirm program within BlackStarTech, SMR and AMR development as well as in inDRUM waste technology. These initiatives carry costs today and are intend to support the future growth of the company. And when we talk about operating profit, even on the group level, we want to highlight the increased profitability we had within DRPS. The margin increased to 9.9%. If you look on the free cash flow, and as we expected, it was negative in the quarter. It was negative with SEK 35.3 million. The main reason behind this is the changes in working capital, where the customer advances reduced as the prepaid project progressed within our company. And year-to-date, our free cash flow, when you look at those numbers, you should take into account that they are including the SEK 34.1 million cost of the acquisition of KNXT. If we go into and look a little bit more into the detail of our business areas, we start with the Decommissioning and Radiation Protection Services. And the sales in the quarter amounted to SEK 92.8 million, and that's up 2.6% in local currency. And for the first 9 months, the growth was 4.5%. But the main point we want to highlight here is the improvement of the profitability. The operating profit more than doubled to SEK 9.2 million from SEK 4.4 million last year and also the increased operating margin. And we have seen now that the changes we did during the past year now translates into results. We have a clear focus on higher-margin services. We have better capacity utilization, and we continued our work with the cost discipline. So this combined of a stronger market contributes to the strong results. And then we go to Fuel, Materials and Waste Technology, FMWT. The sales increased to SEK 83.1 million from SEK 79.5 million, and that's up 4.4% in local currency. And the operating profit was SEK 4.4 million. And we see that there is a slightly lower profit compared to last year, and there's mainly 2 main reasons behind the lower profit. One is the seasonality that we have within the business. And also during the quarter, we had a little bit less favorable product mix. But we are still focusing on improving our productivity and the high utilization. And that will, of course, continue even into Q4 and ongoing next years. With that said, we have a strong order backlog within the business area now when we enter Q4. During the quarter, we also took over the operation of the hot cell facility from SVAFO at the Studsvik site. This expands the capacity and improves the logistics for the future project. From a financial point of view, this also increased our financial assets and our provisions, and that reflects the decommissioning fund of the future obligation of the decommissioning of this facility. And also, we have signed the NND agreement with Norway, and this is a long-term agreement and runs until 2055. And the agreement includes a fixed annual fee, and that's covering the project management, regulatory work, security and also reservation of storage capacity of Studsvik. The pre-study begins immediately and will define in detail how the fuel is collected, transported, handed into Sweden and also returned to Norway. And in the -- on that basis, the parties will -- we and Norway will then finalize the project plan and the budget. And the NND will place orders for each stage. And all these are subject for required regulatory approvals and permits for both countries. And this will not affect our financial material during 2026 or 2027. And then we move to Studsvik Scandpower and the sales reached SEK 54.8 million compared to SEK 38.7 million last year. That's a growth of 42.3% in local currency, and that's supported by the software deliveries we've done during the quarter and also signing new customer agreements. But it's also encouraging to see that our BlackStarTech business contributes by nearly 20% of the business sales in the quarter. The operating profit increased to SEK 9.2 million from SEK 7.8 million Q3 2025. But also, we need to take into account that last year, we had a one-off in the quarter. So therefore, it's a little bit tricky to do the comparison when you compare it between this quarter and also for the full year. For the first 9 months, sales grew with 21.5% in local currency, while operating profit was SEK 12.4 million compared to SEK 21.4 million last year. And as I said, last year, we had a one-off of SEK 6 million as well as we had some FX gains. And then my final slide will talk a little bit about our cash flow. The cash flow was, as I said in the beginning, negative with SEK 35.3 million, and that's compared with the last quarter -- same quarter last year where we have a positive cash flow. But if you look on the bridge then to the -- and start to go from left to right, you see that the operating cash flow before working capital was positive with SEK 16.4 million. Then as expected, our working capital was negative with SEK 41.5 million, and that's due to that we continue to deliver on our prepaid projects, and that means that our customer advances has reduced. But I also want to highlight that our trade receivables now are almost SEK 19 million higher compared to end of Q3 last year. And this will, of course, have a positive effect in our cash collection in the coming months. We have also done some investments on site in Nyköping, and they amounted to SEK 10.1 million. And in this cost, there's also some minor acquisition investments. For the first 9 months, free cash flow -- for the first 9 months, free cash flow was negative with SEK 107.3 million and also that includes SEK 34.1 million from the KNXT acquisition. And we still are focusing a lot on how -- and monitoring the cash flow, and we work with the change -- we monitor the cash flow and the change in working capital very closely. And to sum up the financial, I will say that it's positive that we have growth in sales on all 3 business areas and especially clear improvement in DRPS, and we have an underlying group profitability that was in line with the Q3 last year. So we continue to build for future growth while keeping focus on the earnings and cash flow. With that, I will hand over to you, Karl.

Thank you, Peter. So let me summarize the business once again. The net sales, strong growth of more than 10%, significantly higher than our financial target of 6%. DRPS, as we said, both growth, significantly improved efficiency and hence, also strong profitability, which is an effect of the changes and new leadership that we put in place in the beginning of this year. FMWT, hot cell capacity expanded, which is important because we need to take more and more growth out of the facilities that we have in Nyköping. And obviously, we are extremely proud and the foundation that the NND landmark agreement puts to us can't be underestimated. It's very, very important for the long-term play of our business. Scandpower, strong growth, both in the traditional software and advisory and support business, but also very nice to see that BlackStarTech is contributing with almost 20% of the sales. The new area, which is sort of a new market that we try to -- we are starting to serve much more aggressively is new build and specifically new build here in Sweden, which is one of the most favorable markets in the world to start new build projects. And there, the partnership with GE Vernova Hitachi and Samsung is clearly the strongest partnership that we can have found both on technology, financing and experience. InDRUM, which is our waste technology, which is something that we are planning to build at site, but we also have a business plan to sign technology licenses for recurring revenue in the world, and we are very proud to sign with ReNu, the Japanese partner, to develop that for Fukushima waste to start with them for other waste in Japan and Asia. Global business, 80% of our sales is outside Sweden. So this is truly a global investment case. One platform, 2 return profiles, the existing cash generating core and the big upsides that we are trying to bag for the future, and we have clear proof points of that in the quarter. This is a slide that I have shown for quite a few investments calls now. And you will recognize that we added, I think, last quarter, the SMR developments that we see. We have hot cells. Actually, the new hot cell is by the sea and that we have not put in here, but that's one we added. We are obviously looking to become bigger in the fusion. And here, we are in discussion to put the test facility here. InDRUM, we talked about inDRUM partnerships internationally, but important here is that we also build inDRUM facilities at site for Nordic and European customers. The life science business with Nordic isotope. And then we added one, which is the intermediate storage for the Norwegian spent fuel, which we will build on a contract from the NND customer in Norway to store the spent fuel before and after treatment before returning in latest 2055 to Norway for a final disposal. So you can see that this site is more and more becoming a very important asset for the company, and we will continue to drive business opportunities out of that asset. Thank you very much for listening. And we -- by that, we hand over to questions.

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

Maybe I'll start off with a question on Scandpower. I mean operating profit was up quite a bit compared to last year despite sort of absence of positive one-offs, which were quite substantial last year. And at the same time, you're sort of saying earnings were held back by investments into product development this quarter. So can you maybe just start by telling us how big those investments were this quarter to get a better sense of how the underlying performance was?

Well, if I start, I think, first, when we view this business, we have very strong profits. And obviously, we don't scale cost that fast even for investments. So we -- it's very much leveraged by the strong growth in the quarter. And that growth comes both from very profitable license sales into advisory and support services, but also then BlackStarTech, which typically is a slightly lower margins than the software business. So all in all, I think the volume drives a lot of the positive signs in this quarter. Investments here is -- continues to be in BlackStarTech, where we invest for product development, also go-to-market models and partnerships that we need to sign to really drive volumes in that business. So that's one big investment area. And then we are investing into new software modules based on the team we have, but also with new hires, and that's first to serve the light water market that we're in, but also to build more advanced product for the advanced modular reactor business that we do. So I think it's a continuation of investments. But obviously, for example, the BlackStarTech business has been an investment case for the last 18 months that we have invested in that put us in a position where we can start getting significant or reasonable good sales in the quarter. That would be -- I don't know, Peter, if you have any other additions.

No.

But can you -- I mean, I'll get to BlackStarTech, but can you give us a sense of how big those investments were this quarter, and if we should sort of expect the same run rate heading into Q4?

I think that I would just continue to say what Karl said that we will continue to invest in the business, both within Scandpower and especially within BlackStarTech. So they will continue.

Okay. So I interpret that as you don't want to put a figure on how big the investments was this quarter?

Yes, that's correct.

Okay. And sort of as a follow-up to that, I mean, earlier, Karl, you expected BlackStarTech to constitute roughly 10% of our earnings this year, and you're already up to 20%, as you sort of mentioned earlier in Q3. Should we extrapolate that sort of run rate heading into Q4 and '27 as well? Or was there any particular reason that the contribution was so big this quarter?

Well, as you see, the business in Scandpower is very seasonal from the base business, the software business. And typically and also this year, we expect Q4 to be a strong quarter for that business. In terms of BlackStarTech, that's much more of a hardware business. It's much more lumpy. So I think to forecast that and just take extrapolate what we did this quarter is not the right way to do it. It's going to bounce up and down during the quarters because of the nature of that business. But I think it's a sign that we have started to get a sales machine going and that we have products that is sort of attractive for the market. But I think it's also fair to say that we are still in early days for the full potential of BlackStarTech, and we need to continue to invest and drive that business. Now it's only a North American business over time, and we also need to drive it into the European business.

Okay. That's helpful. And I mean, just lastly on BlackStarTech and then I'll move on. But I mean, the sort of long-term potential there, as you've described it, is to be sort of 10% of group earnings. Just if it keeps developing in this pace, do you think we can reach that level maybe end of next year or '28? Or how should we think about the time line for that?