Volati AB (publ) (VOLO) Earnings Call Transcript & Summary

Hello, and welcome to today's webcast where Volati will present its financial results for the third quarter of 2026. Joining us today are CEO, Andreas Stenbäck; and CFO, Charlotta Nyberg. [Operator Instructions] With that said, I will hand it over to you, Andreas and Charlotta. Please go ahead.

Thank you very much, and thank you, everyone, for listening in today. Let's get into today's presentation. Volati, we delivered continued growth and improved underlying earnings for the third quarter. Sales grew by 12%, and that's driven by the 3 acquisitions that has been performed in 2026 adding a total of SEK 575 million in annual sales. Reported EBITDA came in at SEK 58 million, which is below last year. However, more importantly, underlying EBITDA grew 15% to SEK 87 million. I usually do not highlight EBITDA before items affecting comparability, but I think that is justified this quarter. The reason is that we have quite significant items affecting comparability. They are all M&A related and the larger part are related to synergy-related restructuring costs in Ettiketto, and I will get into these shortly. However, before doing that, on a platform level, we have a good performance in the growth-focused platforms, Ettiketto, Corroventa and Communication. We see in Ettiketto and Corroventa a significant growth, both in sales and EBITDA, and that is both by acquisitions that we've done to these 2 platforms, but also an organic growth profile. In Communication, we showed a stable organic growth in both sales and EBITDA. S:t Eriks and Tornum, they got declining sales. But the focus that we've had on profitability is now slowly starting to show. And we can see that by -- we have slowed down the negative profit trend from previous quarters. Cash conversion remains strong and was strong in the quarter, and it's now amounting to 93% on a rolling 12 months basis. So then I promised a few words about the synergy-related restructuring costs in Ettiketto. To start with, in Ettiketto, we have industry-leading margins and the margins of the add-on acquisitions are then lower than the overall margins, which means that we get a dilution effect. And we create value by improving the margins in the companies that we acquire. And we do that by synergies, operational improvements and what we call Ettiketto way of working. So that means Ettiketto's proven working methods. We also -- one way of creating synergies and improved operational efficiency is by co-locating existing production platforms and existing production units. We have had 2 such examples this quarter. The first one is NicEtikett. It's a Swedish company, which we acquired in the beginning of this quarter, which has now been moved into our existing production units in Sweden. Secondly, and that's the larger part of the restructuring costs are in Germany, where we got one additional production unit in the beginning of this year, and that was through the acquisition of Interket. And that is now co-located with the already existing production unit that we have in Germany through the acquisition of Clever, which was done last year. So these type of measures, of course, increases operational efficiency. They save cost, and that's one way for us of improving the margins. In this case, we will start to see effects from this measure in the beginning of 2027. In addition, we have items affecting comparability for the third quarter related to transaction costs of SEK 8 million. So all in all, we have quite significant items affecting the comparability in this quarter. But what is very important is that these are part of our -- in order for us to be able to make acquisitions and then even more importantly, the value-creating process of integrating acquired companies. So with that, I leave the word to Charlotta.

Thank you, Andreas. And as we talk about the EBITDA development in the quarter, as we mentioned in Q2, we are, of course, not happy with this negative trend that we're seeing. But when we unpack the EBITDA in this quarter, the reported EBITDA was SEK 58 million and EBITDA before items affecting comparability, SEK 87 million. And as Andreas said, that is a strengthened underlying EBITDA margin. And to dive into the platforms, we see that in Ettiketto, the EBITDA increased to SEK 64 million. And as expected and as very clear with Interket, we see that the margin decreased because that is a reflection of the lower margins in Interket Group. Communication, the EBITDA increased with 6% and the margins are in line with last year's. In Corroventa, we see an increase with 68% in the EBITDA and the margins are up about 3 percentage points. That is mainly supported by Tramex's higher profitability that we see in this quarter. For S:t Eriks Group, we see that despite lower net sales, it maintains its EBITDA margin for the quarter at the same level as in the quarter of previous year. And EBITDA in Tornum decreased, but we see that the impact of the lower sales were counteracted by the cost efficiency and operational improvement that has been done. We also continue to see a strong cash flow in the quarter. The cash conversion remains strong, amounting to 93% on a rolling 12-month basis. And with a seasonally strong cash flow towards the end of the year, we expect leverage to decrease over the coming quarters. We're satisfied with the pace of acquisition, but we will, of course, continue to balance acquisition activity against our leverage. And following this year's acquisition, the net debt to adjusted EBITDA is now at a 3.1 ratio, and that is slightly above our target range. But it's important to remember that the consistent cash generation across all the platform is what has allowed us to maintain our acquisition pace. If we should sum up, how are we then delivering on our financial targets? Well, the growth in EBITDA per ordinary share is minus 31%. And as I said, we now see that the underlying growth in EBITDA is improving in the quarter. We have a ROAE of 13% that is very closely tied to the EBITDA growth, and we see that when that changes, we will also see the improvement in the ROAA. And as we said, the net debt to adjusted EBITDA is 3.1%. And this we see as okay and a deliberate result of our M&A strategy. It's important to note that our approach to capital allocation remains unchanged, focused on discipline in acquisition and securing strong cash flows. Andreas, over to you.

Okay. So then we're going to talk a bit about the individual platforms, and we will start with Ettiketto. So as we mentioned already, Ettiketto Group reported a strong third quarter, increasing net sales by more than 50%. Growth was primarily driven by the completed acquisitions, but we also see a strong underlying organic growth. That was mainly driven in Sweden, where we see a strong demand. EBITDA increased to SEK 64 million, and that's a growth of 22%. So it's a solid growth. However, as expected, margins are still seeing a dilution effect from the completed acquisitions. As already commented on, we see a significant potential to gradually improve the margins by systematically realizing synergies and strengthening the operational efficiency through the Ettiketto way of doing business. So -- and we expect to get that effect going forward. Then turning to Communication. Communication continued to perform steadily and has done now for many quarters, delivering a good third quarter. Despite the continued growth that we see, we see a cautious and somewhat hesitant telecom market. We've had that for quite some time. But we are compensating that with sales to other areas within what we call critical infrastructure, and that are areas such as surveillance, defense, electrification. The EBITDA margin was in line with last year, so very much in line with what we expected. We do see Communication now being a platform well positioned for also acquisition-driven growth. Then I believe we have, yes, Corroventa. Corroventa increased its sales by 44% and much of that, of course, is driven by the acquisition of Tramex that we completed in the beginning of this -- in the third quarter. However, we do also see organic growth in Corroventa, and that is mainly driven actually by Tramex, which has developed quite well since the acquisition. The EBITDA margin also improved compared to the same quarter last year with almost 3 percentage points, and that is mainly because of that Tramex is showing -- is strengthening the overall margin profile. I think one important aspect of the Tramex acquisition is that it reduces the weather dependency in this platform. So Corroventa, we still experienced a very dry weather. We haven't had any flooding effects in Corroventa. That mainly explains the growth profile that we've seen in Q3 in Corroventa. But with adding Tramex, which is much less weather dependent, we still see an organic growth, which is very positive for us. We also have -- which we also have a new CEO now in place since the beginning of actually this week, Christian Engvall, which has joined that platform. Then we'll get over to S:t Eriks. S:t Eriks net sales amounted to SEK 290 million, and that's a decrease of 9% compared to the same period last year. The decline reflects the deliberate shift away from less profitable product segments, but it's also an effect of that we have a weak -- we are acting in a weak part of the construction market. And as I've said before, S:t Eriks is late cyclical when it comes to the construction market. So we're still seeing a weak market there. As also in previous quarter, we still see -- we're seeing a stable development in the infrastructure segment, and that benefits from a stronger civil engineering market. While actually the Water and Wastewater segment in this quarter has been a bit weaker, and that's mainly because of the lack of major projects. Despite lower net sales, S:t Eriks Group maintained the EBITDA margin for the quarter at the same level as last year. And that shows that the cost adjustments that we've done are now showing effect. We took some restructuring costs in Q2, and we now see the effects of this -- starting to see the effects of this. Also, it shows the effects of that we've now increased the production rates again in S:t Eriks, and they are now more in line with existing demand. The last quarters, we have released significant cash flows from S:t Eriks through lower production rates, which have dampened the earnings but created good cash flows. Now we are back on track with regards to balancing cash flow and earnings. Key priorities for 2026 are still on focusing on profitability, focusing on improving earnings, and that is done by continuing to do the structural changes within what we call the infrastructure, but the Construction segment, improve the production mix and very much focusing on capturing the volumes that are out there on the market. Tornum, net sales decreased 17% compared to the same quarter previous year. That decline is mainly attributable to the Lantmännen project, which we have not been able to fully offset with new volumes. So we are now completely done with regards to invoicing or revenue recognition in Lantmännen, and we meet in quarters where we had quite much of that last year. The business continues to face challenging market conditions, characterized by lower grain and pulp prices. We have high fertilizer and diesel prices. So that are dampening the willingness to invest. And I would rather say that the investment need remains, but we see a delay, and we see that delay also in terms in both short term -- in short term. The key priorities that we have right now is really to deliver on the order book that we have, but also to capture new volume. So it's very much of a sales focus. And then it's to continue working with the execution and operational efficiency measures that we already initiated. So that was that about the platforms. Now going to spend a few words on acquisitions. So as already mentioned, we've done 3 add-on acquisitions in 2026, and they are adding an annual sales of SEK 575 million. And we've done 2 in Ettiketto and 1 in Corroventa. That is an acquisition pace that I'm satisfied with. So that will help us drive growth in line with our financial target. We are focusing on add-on acquisitions. And as you can see on this slide, we've done add-on acquisitions now to all of our platforms, Corroventa being the last one, which actually have done now an add-on acquisition this quarter. We're currently focusing on Ettiketto, Communication and Corroventa with regards to add-on, while S:t Eriks and Tornum are more focused on profitability measures. We have a good pipeline. I'm happy with that. And what we're now doing is that we're balancing that pipeline with the leverage and the net debt-EBITDA ratio that we've seen. We used to do that. We've done that now in the last couple of years. And we -- I think we can -- we have been able to show that we are successful in keeping the acquisition rate going. To summarize, net sales driven by Ettiketto, Corroventa and Communication by -- where we see -- where we see a good organic growth. And we also see that we have effects from the acquisitions that we've done to Ettiketto and Corroventa. EBITDA reported, we see a decline, but we have the items affecting comparability. And if you adjust for that, we have a 15% growth in the underlying earnings. We still see lower earnings in S:t Eriks and Tornum where we are focusing on improvement initiatives. And I would say that we are starting to see effects from these already in this quarter. And as Charlotta mentioned, it's extremely important for us to have the operational cash flow. That is what enables us to continue making acquisitions and invest in that. And these are still on a good level, so 93% cash conversion in the last 12 months. So I think with that, we leave for any potential questions from the audience.

Thank you for that presentation. We will now open up for a Q&A session. [Operator Instructions] The first question, reported EBITDA declined by 23% despite revenue growth of 12%. What were the main drivers behind the decline?

Yes. So I think that's a valid question. And as we highlighted, the main reason for that is the items affecting comparability, which are all M&A related and value creation related and which will also enable cost savings going forward. So if you adjust for those, we're actually strengthening the margins, the underlying margins in this quarter. So I think adjusting for those, the profile is that we're growing net sales with 12% and EBITDA with 15%, which means that we see a margin improvement.

Moving on, both Tornum and S:t Eriks Group continue to face weak demand. Are you seeing any early signs of a market recovery heading into 2027?