Volati AB (publ) ($VOLO)

Good morning, everyone, and welcome to today's webcast presentation with Volati. With us today to present are the CEO, Andreas Stenback, and the CEO of Salix Group, Martin Hansson. [Operator Instructions] And with that said, please go ahead and start your presentation.

Thank you, and thank you, everyone, for listening in today. This is most likely also my last call with Salix as part of Volati. And I'm very happy to have Martin Hansson, the CEO of Salix Group, at my side here today to give you some more flavor about the strong development in Salix. But let's get into the presentation. So Volati creates value by developing today's 6 platforms, growing them both organically and through acquisitions. From this quarter, Salix Group is considered discontinued operations, while the remaining 5 platforms are now reported separately in our segment reporting and as separate business areas, and that will then be the remaining Volati after the potential separate listing of Salix Group. But we will get into more details about all of these 6 platforms later on in the presentation. So if I start by summarizing the quarter, net sales increased by 3%, and EBITDA came in 3% behind last year. So I do not typically talk about items affecting comparability or extraordinary items. But in this quarter, I think it's justified to do that. The reason being that we have significant costs related to the separate listing process of Salix Group. And that is also in a quarter where we have, because of the seasonality of the year, relatively low EBITDA. So these extraordinary items are affecting us more than usual. So if I adjust those, the EBITDA increased with 4% compared to last year. And what are the main reasons behind this growth? We have another strong, very strong quarter by Salix Group, growing with 37%. And that is now, I think, the fifth very strong quarter in a row from Salix. Etttiketto is also showing a nice growth of 18%. Communication and Corroventa are coming in, in line or actually slightly better than last year. While we have 2 platforms, Salix is coming in lower than last year, and Tornum Group is actually quite significant behind last year. We will get into more details behind all this later on, but I would say, summarizes the situations on the platforms. We show very strong profit, strong growth in profit after tax, and earnings per share. And I'm also very happy about the cash flow that we see in the quarter. This cash flow has enabled us to complete 2 acquisitions so far this year, adding roughly SEK 930 million of annual turnover. So we have had a good start to the year when it comes to acquisitions. Lastly, the separate listing process with regard to Solid Group is developing as planned, and we have an important meeting later on today. It's our Annual General Meeting, which will then hopefully decide upon proceeding with that process. Looking at the numbers a bit more in detail. I'm not planning to discuss them, actually, in detail. But what one can see on this slide is also that the net debt-to-EBITDA ratio is now at 2.9. It's in line with last year, and it's in the upper part of our net debt to EBITDA adjusted EBITDA range, but that's a very deliberate decision by us to be there. Looking at the figures on an LTM basis, our sales are up 4%, while our EBITDA is up 3%. However, what I think is strong on this side is the operational cash flow, which has been very strong in the last 12 months. And that's one of the key drivers behind why we have been able to also keep up our acquisition pace. Our financial targets last time with the Salix Group are most likely included. So again, behind on the EBITDA growth. We have discussed this now for actually a couple of quarters. We are currently operating under our EBITDA level, which we should achieve at a normal level. That has created our growth gap, the growth gap that I usually talk about. Once the market normalizes, I expect to close that gap. We've already actually seen it in Salix Group, while we have some of our platform still behind. But what that means is that we will grow at levels exceeding our financial growth targets for some time once we see that happening on the group level. The return on equity Rule is back where it should be. It should be in excess of 20%, and it's back now, and I actually expect that to continue to increase in the coming quarters. And net debt to EBITDA has already been touched upon. So with that, I leave the word to Martin, who will tell you a bit more about Salix Group and the development there.

Thank you, Andreas. I would like to present some results from the Salix Group. So who are we? We are a growing B2B trading and distribution platform with an active M&A agenda. On the right-hand side, you find a graph showing the sales development since '22 as well as the EBITDA margin. We landed sales of a bit over SEK 1 billion in the first quarter, which equals some 3% organic sales growth. Organic growth remained positive across several markets, although some segments continue to face some challenging market conditions. EBITDA grew, as you heard Andreas saying, organically with 37%. We now have 8 consecutive quarters of growth, with 5 of them showing some stronger growth, but 8 consecutive quarters of growth in total. The EBITDA margin grew from 8% to 10%, leading to an LTM of 10.6%. So if we go back to the right-hand side of the graph, it's our view that our relevant market has lost some 25% to 30% in volume since '22 to '24 when the decline bottomed out. Our sales held up in this period, mainly due to sales price adjustments, combined with 8 acquisitions. And we believe that we are in a strong position to further grow in the period ahead of us with this market ahead of us. So the EBITDA margin improvement was mainly driven by favorable currency effects, product mix, and implemented price adjustments. As you can see at the bottom of this chart, our return on capital employed landed on 39%, strengthening from last year and further showcasing our capital efficiency. In the end, the acquisition of Laydex, we are very happy about that, and I will comment and say a few words about that in a moment. This slide shows the EBITDA development per quarter since 2022. And as you can see, Salix experienced a negative earnings trend from Q2 in '22 to '24 with acquisitions then partly offsetting the decline. We have had a strong earnings momentum since Q1 '25 with five consecutive quarters of substantial growth. And if you look into the details of the chart, you can see that we have eight growth quarters in total, of growth quarter-by-quarter. A few words about Laydex. That was our last acquisition, acquired on the 1st of April, and we are very, very pleased about this acquisition in Ireland. The company is called Laydex, as I said, and it is a market-leading building materials provider in Ireland. So Laydex is closely aligned with the other Salix businesses in many ways. And we have a revenue of around SEK 480 million with a reported EBITDA margin of around 13%. So this company provides a scalable platform for us for continued organic and acquisition-driven growth in Ireland, which we find very, very exciting, and I hope to build further on. So this will then give us a 10% share of turnover, roughly overall in Ireland, compared to the overall Salix turnover. So, it's in a good position to sum up. Salix is in a good position to further grow sales when the market turns. We do see strong, favorable trends and drivers in our segments going forward, pointing to positive market trends in the future to come. We are really looking forward to having Laydex on board, contributing both to growth and performance for us in the coming quarters and years. So thank you very much to the Salix team for a good quarter. I thank you, Andreas, for the couple of times when we have presented together.

Thank you. And then we'll go into the continuous operation, as it is called. What we mean by that is the 5 business areas, which will remain with Volati. As said, these are now presented as separate business areas, which also means that I will be able to give you some more details about their overall development. However, before we go into the separate business areas, I would just like to say a few words about the overall development in continuous operations. Looking at this slide, firstly, what can be seen is that we had a very strong development up until 2023. However, this graph also shows the very clear that the growth gap that I earlier referred to. And that has been created then because of the poor development after 2023, mainly market-related. So, just stopping for a short time at 2023, I think that is a good year, and it's a good indication of where our 4 platforms that were earlier included in the business area Industry as a combined entity operated at a normalized level. While Ettiketto has grown with acquisitions since 2023. So, they are currently operating at levels above 2023. What does that mean? That means that the continuous operations should, in a normal market, operate at least at 2023 levels, I would say, beyond those levels. And that is the growth gap that I'm referring to. In order to get back to those levels, we need to show an organic, accelerated growth. And that growth needs to be in excess of our financial target for quite some time in the future. So, talking about the development in the individual business areas or platforms during the quarter, we start with Ettiketto Group. So Ettiketto Group showed very strong sales, and that was both acquisition-driven. We have done two acquisitions that are still rolling in, but it's also an organic growth, and that is much thanks to the demand in the important Swedish market, which is now back on track. EBITDA growth of 18%. So, that's been driven both by acquisitions and organic growth. The EBITDA margin is as expected, decreasing, and that's because of the dilution that the acquisitions that we've done create. However, in our business model, we increase the margins of the companies that we acquired, which means that we will, over time, also increase the overall market in the Ettiketto Group. So that was that with regards to Ettiketto Group. If we then get to the next business area, Communication. Sales were down in the quarter. That's because of generally lower market activity in our core markets. However, we mapped that with better margins, two percentage points better to be more specific. And that's mainly because of two reasons. One is the deliberate move towards more profitable segments. The other reason is that we have generally lower operating expenses. So given that, I would conclude the development and the EBITDA development in Communications to be quite satisfying at the time being. Looking at Corroventa, we actually met somewhat tougher comparables when it comes to sales and profit for that sake as well in the first part of the quarter. And that was because we had flooding in the late part of 2024 with rentals lasting into 2025, so the first months of 2025, which we then met in this quarter. We have, however, I would say, successfully compensated for that with poor sales. So, we still had another quarter, and I would say that 12 months of extraordinarily dry weather. But as all of us know, after the sun shines, we typically see rain. So that means that we are now meeting easier comparables. But if the patterns are similar in the future as it's been in the past, we will hopefully see some better market circumstances for Corroventa going ahead. I would like to conclude with Corroventa that this is a very nice company to own during dry times, and that can be seen in the financials that we are presenting, but it's also an extraordinarily strong company to own when we get the help out of our clients. Next platform then, that is S:t Eriks Group. So S:t Eriks showed a net sales up of roughly 7%, and that was despite an unusually cold weather during January and February in Sweden. EBITDA margin, however, declined, and that was mainly because of the lower production rate, which means that we had a lower cost absorption. The lower production rate was a deliberate shift or deliberate decision. It was mainly because of 2 reasons. One reason is that we're shifting away from the volume segment. And the second reason is that we are releasing capital, and capital or capital employed. We have taken cost measures in S:t Eriks to meet this lower production pace as we foresee that it's going to stay that way for the foreseeable future. We also have some cost adjustments related to the segment shift that I talked about. When it comes to Tornum Group, we've seen significantly lower volumes in the quarter. That is mainly due to industrial projects. The most important and significant one is Lantmännen, which we have not been fully able to offset in the quarter by new volumes. That is also, despite the lower cost base, led to a significantly lower EBITDA. I think it's SEK 27 million below last year. We see some positive signs on the market. We do gradually fill the order book and offset the decline in the contribution from Lantmännen. So, looking at the quarters to come, I'm a bit more optimistic than what we've seen in this last quarter. Nevertheless, we have taken cost measures to meet lower volumes and to ensure that we can show profitability also at these very low volumes that we are operating at right now. Again, I would like to really put emphasis on the fact that this is market-related. We have one of the toughest markets in end markets during our ownership period within Tornum Group, which is at least in the last 20 years. So that was the business area update. The next section is to tell you a bit about the acquisitions. We've done 2 acquisitions in the last 12 months, and that also concludes 2 acquisitions this year. So it's Laydex and Intercat, Group. I did tell you a bit more about Intercat Group in the last quarter call, and Martin told you a bit more about Laydex this call. Looking at the acquisition pace, we're now at SEK 930 million of annual turnover. So I would say that's at a good pace. And we have a very good acquisition activity across our platform. So that remains high. So the trick now for us at Volati is really to balance the pace of acquisitions against the net debt against the debt leverage. And as we've said before, we are still comfortable operating at the upper end of our target rate when it comes to net debt to EBITDA. So given that, we still believe that we have room for making acquisitions. Cash flow. So Q1 is a negative cash flow quarter for us. Nevertheless, we have had a stronger quarter compared to last year. Our cash generation is now at 90% during the last 12 months. So that's at a good level. And we have, as I said, a net debt to EBITDA at 2.9x. Now we have a more or less neutral cash flow quarter in front of us. And then, as always, our second half of the year is the cash flow strong quarters, quarter 3 and 4, so that means that we will increase or expand our acquisition room during the rest of the year. Then to summarize, so another strong quarter for Salix Group with EBITDA up 37%. We have the acquisition of Lidex, supporting further growth in that business area on that platform. We also saw profit growth in Ettiketto and Communication, both actually showing 18% up compared to last year. And we've had a negative development in S:t Eriks and Tornum compared to last year. However, we have additional cost measures initiated in both of those platforms to meet the lower volumes. Good cash flow generation has enabled us to complete 2 acquisitions in 2026. So the acquisition pace is there, and we are also well-positioned overall for accelerated organic growth once the markets improve. Then, as already concluded, the preparations for a potential separate listing of Salix Group are progressing according to plan. So with that, Martin and myself leaves for any potential questions from the audience.

Thank you so much for the presentation. As you've mentioned, we will carry on with the Q&A. [Operator Instructions]

Just a couple of questions from my side. If we start with Salix, is it possible to disclose the organic growth rate here in the quarter? And also, if you have any comments on how demand is developing throughout the quarter, and also maybe, yes, if you have any early indications for the start of Q2?

So sales growth in the organic growth of sales in the quarter. Was that the question?

Yes, exactly.

Yes. So we have a 3% organic sales growth in quarter 1 compared to last year. So I believe that the underlying market still sees some growth in the market, and I think we should be pleased with our sales growth of 3% compared to the market development. So, 3% organic sales growth in the market. And when it comes to the next quarter, that's not for me to comment on today, but organic growth in the quarter.

Do you have any comments on how demand shifted or varied, maybe across the quarter? I have been hearing from maybe some peers of yours that January and February might have been a little bit slower, partly, I guess, to the colder weather, and then that we saw more of an uptick in March. Is that also the situation you are seeing?

Yes. So we had  , from our perspective, as you say, in February, we had a couple of cold weeks that actually slowed the sales down a little bit. And as you say, it started to pick up in March. So I think you answered the question by asking it. So we have seen this pattern as well, of course. We are following the weather, and wind is also impacting us to some degree. But overall, I think that was leveling out throughout the quarter. So even though we had a couple of weeks with cold weather, we captured those sales a little bit later.

And yes, if we move away from Salix and just look at the group overall, you mentioned nonrecurring items related to the IPO. Is it possible to quantify those, maybe? And also if you expect to see any further IPO-related costs in the, I guess, Q2 or the upcoming quarters overall?

Yes. So what can be seen is, we do specify in the quarterly report, we do specify the nonrecurring cost or the items affecting comparability. Under Note 5, you will be able to see how many of those items affecting comparability were attributable to Salix Group. And the vast majority of that number is attributable to the separate listing process. To answer the next question, I would foresee that there will be additional costs also in the coming quarter, connected to the separate listing. If we get the go-ahead from the Annual General Meeting later on today.

And yes, if we talk a little bit about your expectations for St Ex going ahead. You obviously mentioned that you've been making some efforts there. Do you foresee that taking effect and resulting in margins improving a little bit already next quarter? Or is this more of a, call it, long-term project to increase those margins?

We typically don't give these kinds of forward-looking statements. But what I can say is that we've taken measures during this quarter, and we will see the effects gradually coming in during the coming, I would say, 6 to 9 months or 2 to 3 quarters. So we will see effects already in the next quarter from that. But then, with regards to overall margins, that's, of course, also dependent on the demand and the top line and the turnover, which I did not comment on.

Yes. And we talked a little bit about this during the last quarter, but are you still observing some delays related to deliveries in Salix? We obviously had, the weather being quite cold here might have impacted you negatively. I guess that's something you're still seeing? And do you feel you still have sort of a delivery backlog that's yet to be seen in the P&L for that business?

Yes. I would say that, yes, we had some delays in Q4. And then we had a very cold start to Q1. And similar to what we talked to Martin about in January, February was very cold, and that affected Salix as well. I think we picked up some of that in March. And overall, we showed a turnover growth, which was good. Some of those delays, I believe, we kind of caught up in Q1. We have some of them with us in Q2. But I wouldn't say that they would have any major effect on the future development.

Maybe if we turn to Tornum for a second and just, yes, it would be interesting to hear your comments there on what you're seeing in terms of market dynamics, but also how we should view the, I guess, the comparison going ahead here, given the, I guess, the absence of similar volumes from the Lantimen project. Is it going to be, I guess, a little bit challenging for the upcoming quarter before hopefully getting better? Or yes, if you have any general, yes, thoughts on that would be helpful.

So I guess the general comment on that is that we weren't able to compensate in Q1. That is very clear when you look at the turnover delivered. We also had meeting volumes from Landmäen and industrial projects, mainly in Q2 and Q3. I would say that we have had more time to compensate for those volumes. And I think I said that also during the call that I'm more optimistic about meeting those volumes in Q2 and Q3. So I do not expect the same deviation as we saw in Q1. Then, also more importantly, we have taken additional cost measures, which are similar to what I said with regard to Salix; that's something that we will see effects from in the next 6 to 9 months. So we are also meeting potentially lower volumes with cost reductions. And this is also driven by the fact that we do not see any significant shift in the market in the short term. We see some positive signs. We also see that it's not getting worse, but we do not see any significant signs of any significant shifts. So that's why we have decided to take these additional measures. Again, Tornum, we are very well positioned. Once the markets really come back, once we get back to close to what we've had in the historical levels, then we're very well positioned to show good profitability in that platform.

Just lastly, from my side, moving on to the acquisition pipeline. And I'm curious to hear more about Etiketo specifically. You've obviously done a couple of larger acquisitions here recently. But if you have any comments on the acquisition pipeline within Ettiketto and how we should think about that, I guess, throughout 2026. Can we still, despite these larger acquisitions taking place quite recently, can we still expect more to be done there during this year? Or are you going to be more into now, I guess, an integration phase and value creation phase, and increasing margins in those already acquired businesses before we see a resumed M&A activity there?

Yes. Good question. So two comments on that. Firstly, when it comes to Ettiketto, yes, we are able to do more acquisitions. So what the two acquisitions that we've done lately have created new platforms for us to grow from, meaning that we now have platforms in our geographical markets, I would say, Germany and the U.K. being the most significant ones. And we are prepared already this year to add acquisitions to those geographical markets. And that's also the reason we have now created a platform with a capacity, a big enough platform with the capacity to both do acquisition, build pipelines, integrate them, and do that at a more constant pace than we've been able to in the past. So if we find the right target, if we find the right acquisition of capital, we will be able to do that during the course of this year. The second comment on the acquisition pipeline is that it's broader than that for us. So we want to do add-on acquisitions to all of our platforms. We are also looking into add-on acquisitions in the other platforms. So I would expect in the next 12 months or so that we will also see acquisitions in some of the platforms that we haven't done acquisitions during the last one or two years.

And maybe just a quick follow-up on that. When we look across the platforms constituting the former Industry, which platforms do you see the greatest M&A potential? Also, if you look at your current pipeline, where are the most opportunities currently existing?

I think that's a short-term and long-term answer to that question. Long-term, I see good potential in all of them. Short-term, as one could understand, we have S:t Eriks and Tornum being a bit more internally focused right now, while Communication and Corroventa are more in a position to also short-term handle an acquisition or a more sizable acquisition. So short-term, I would say that it's most likely in those two, Communication and Corroventa. But long-term, we've done several acquisitions in both S:t Eriks and Tornum, and I foresee that we will continue growing these platforms with acquisitions also going forward.

We will now go ahead with a couple of questions that have been sent to us. What were the key growth drivers for Volati in Q1 2026? And how does the company plan to expand its business going forward?

So there, I think we touched upon that very short answer to that is that Salix was the main growth driver in the quarter, but also S:t Eriks contributed to the growth in Q1. With regards to the other question, what segments we envisage growing within, our clear strategy is to grow in our platforms, meaning not expanding into new segments or new platforms, but rather focusing on growing the existing ones, both organically, which we've done very successfully, for example, in Salix at the Capital, and this quarter, but also with add-on acquisitions.

With Salix not being a part of Volati going forward, do you see any risk of not being able to fund the dividend to the Volati preference shares if you want to continue the M&A pace?

No, not at all.

Are you fully prepared if we're still heading into slower times? It seems like that recovery is expected in the near term, but what if it's not?

Yes. I would say that we are prepared. So when it comes to Tornum, for example, which we have talked a bit about on this quarterly call, we are not expecting a short-term significant shift. We are rather preparing for the market to remain for some time. However, we are also confident that the markets will come back. And when they come back, that is where we will show the accelerated organic growth.

Moving on to the last question here. How should we think about growth and margins for the remaining businesses post Salix spin-off?

I think we've tried to be a bit more helpful about that. So we do now have a target margin for each and every business area or platform. These are the long-term goals that we believe that those platforms, the EBITDA margins that those platforms should operate under. So that's a good indication of where we believe the margins to be in the long-term.

Thank you. That was all the questions we had. So thank you all for calling in and answering questions. And I will now hand over the word to Andreas for some concluding remarks.

Yes. So I think, firstly, thank you, Salix, for your great contribution, not only this quarter, but the last couple of quarters. And let's see what the Annual General Meeting decides later on today. But if the process continues as planned, we will be two separate companies for the next quarterly report. And that, please give me the remaining Volati then, which I'm extremely excited about. We have had some headwinds in the remaining Volati and in some of the platforms, but I'm also extremely proud of how our leaders out there are handling that every day. I'm also very confident in the position that we are. And I expect to continue working also with the new management team of Volati and the extended management team now to continue developing Volati. So thank you, everyone.