Earnings call transcript: MilDef Group Q3 2025 sees record sales, stock dips

MilDef Group AB reported a significant increase in net sales and order intake for the third quarter of 2025, with sales growing by 116% and order intake by 119%. Despite these strong financial results, the company’s stock fell by 3.85% in early trading, reflecting investor concerns about future challenges. According to InvestingPro data, analysts expect sales growth of 96% for FY2025, with the company projected to return to profitability this year. The company’s robust performance was driven by organic growth and recent acquisitions, contributing to its impressive 109% return over the past year.

Key Takeaways

• Net sales grew by 116%, with 36% from organic growth and 80% from acquisitions.
• Order intake increased by 119%, and the order backlog reached SEK 3.5 billion.
• Adjusted EBITDA rose by 172%, improving the margin to 15.7%.
• Stock price declined by 3.85% in early trading, despite strong financial results.

Company Performance

MilDef Group’s performance in Q3 2025 was marked by significant growth in both sales and order intake. The company reported an all-time high in net sales, driven by a combination of organic growth and strategic acquisitions. The order backlog increased by 142% year-over-year, highlighting strong demand for its products and services. The company is benefiting from a "defense tech supercycle," with increased defense spending across Europe and a shift towards data-driven defense capabilities.

Financial Highlights

• Revenue: Increased by 116% year-over-year.
• Order intake: Increased by 119%.
• Adjusted EBITDA: Increased by 172% with a margin of 15.7%.
• Gross margin: Combined margin of 45%, with an underlying margin of 53.5%.

Market Reaction

Despite the strong financial performance, MilDef Group’s stock price fell by 3.85% in early trading. The stock’s decline may reflect investor concerns about the company’s negative free cash flow, which was reported at SEK 53.1 million due to inventory buildup for Q4 deliveries. According to InvestingPro’s Fair Value assessment, the stock appears overvalued at current levels, trading at an EV/EBITDA multiple of 57.16x. The stock’s performance is also influenced by broader market trends, as investors navigate uncertainties in the defense sector.

Outlook & Guidance

MilDef Group is targeting over 25% annual growth and expects a strong first half of 2026. The company anticipates that the fourth quarter will remain the largest delivery quarter. MilDef plans to continue scaling its capacity, climbing the value chain, and improving margins while focusing on strategic expansion.

Executive Commentary

Daniel Ljunggren, a key executive at MilDef Group, emphasized the historical nature of the current defense ramp-up. He highlighted the importance of digitalization in building a strong defense infrastructure, stating, "Digitalization will be probably the most important thing, how we can build this threshold so we can be strong enough to build peace." Ljunggren also noted the company’s decade-long trust in the defense domain, reinforcing MilDef’s position as a trusted supplier.

Risks and Challenges

• Negative free cash flow: The company reported a negative free cash flow of SEK 53.1 million, which could impact future financial flexibility.
• Supply chain issues: As MilDef scales up production, maintaining a resilient supply chain will be critical.
• Market saturation: Increasing competition in the defense tech sector may pressure margins.
• Macroeconomic pressures: Economic uncertainties could affect defense spending and contract awards.
• Order delays: Potential delays into 2026 could impact revenue recognition and growth targets.

Q&A

During the earnings call, analysts raised questions about the company’s capacity expansion strategy and its impact on future growth. Executives clarified their plans for scaling up production facilities and processes to meet high order intake. Analysts also inquired about the expected gross margin trends, which the company addressed by emphasizing its focus on improving margins through strategic initiatives.

MilDef Group’s Q3 2025 earnings call highlighted strong financial performance and strategic growth initiatives, but investor concerns about cash flow and market conditions led to a decline in the stock price. The company’s focus on digitalization and defense tech positions it well for future opportunities, despite the challenges ahead.

Full transcript - MilDef Group AB (MILDEF) Q3 2025:

Olof, Moderator/Host, Mildef Group: Good morning. In a few moments, we will commence the meeting. This is just a brief sound check. Can I get a thumbs up from some lovely person out there saying that you can hear me?

Daniel Ljunggren, CEO and President, Mildef Group: Yes, we can, Mildef.

Olof, Moderator/Host, Mildef Group: Fantastic. Thank you so much. Okay. Good morning, ladies and gentlemen, and welcome to this investor call with Mildef Group this lovely morning with a special focus on Mildef Group’s reporting on the third quarter of 2025. This quarterly call will be presented by CEO and President Daniel Ljunggren, as we traditionally do. We expect approximately 30 minutes to be sufficient for the presentation and Q&A. Please help me. We are very cost-efficient at Mildef Group, so we do this over Teams. Please help me mute your mics until the Q&A. I see that many mics are open, and I try to close them as soon as I can. Please help me mute your mic until the Q&A, naturally, when we will open up for transparent questions. Also, as always, in the Mildef Group quarterly reporting, we record this meeting for your understanding. Now, please take it away, Daniel Ljunggren.

Remember, Daniel, to help the audience listening in over the telephone to state the number of each slide going forward. Take it away, Daniel.

Daniel Ljunggren, CEO and President, Mildef Group: Thank you very much, Olof. I will try to do my best to update you on the slide numbers we are on at the current presentation. A warm welcome to all of you for this conference call around Mildef Q3 report. Let’s start. Before we deep dive into the financial figures for Q3, isolated, and also look at the long-term financial trend for Mildef and also the future outlook, I will just give you some short overfly of the basic facts around Mildef and the Mildef universe. We are a provider of tactical IT solutions founded in 1997, so we have almost operated in this business for 30 years. History matters because this also means much of a trust business. We are a little bit more than four years into our journey as a publicly traded company.

We did an IPO in June 2021, and we are very happy to see that we have 46,000 shareholders, which is quite much for a mid-cap company. That is something that we are very happy about. Today, we are around 460 employees, and we operate in 10 different countries. What is it that Mildef is doing then? We are a tactical IT provider in the defense domain. We are delivering into this data-driven defense capacity that now the European defense companies and forces are building up. We are delivering the IT backbone where the stakes are the highest. We are delivering to all of the three domains within the military: the Army, the Navy, and the Air and Space domain. With that said, I think it’s time to look at the highlights for the third quarter here in 2025. First of all, the order intake is at an all-time high.

We are more than doubling the order intake. It’s plus 119%, and that is really important for Mildef to keep that fuel. That is what’s keeping the Mildef engine running. We are doubling the net sales. That is plus 116%. We also have a strong underlying gross margin, excluding the M&A. We were expecting that gross margin in total, Mildef and Roda together coming down, of course, because we know that Roda operates with a lower gross margin. The underlying one, and this is something that we have talked about now for many quarters and also years back in time, that we were aiming for reaching above 50%. Now we have a couple of quarters in a row where we are above 50%. That is something that we are super happy about. I will give some extra flavor on that coming up on the future slides here.

Also, we see a strong order backlog for 2026. We see that if we compare that to the exact same position previous year, we can see that we have an order backlog that is 142% better than it was one year ago. We are sitting in a much better position for the upcoming year here than we were one year ago. In Q2, we talked about some of these moved deliveries, and the most part of that has been delivered in Q3. There are some small parts in Q4 that will be delivered, but the lion part of those moved deliveries was delivered here in the third quarter. We have a couple of several contracts, one that is really of a strategic importance. I will go through them when we look at the different business news and highlights from the Q3 announced orders.

There is some really interesting and strategic importance in the orders and contracts that we have won. Capacity ramp-up is also something that is really top of our minds, something that we are really working hard with here, that we are accelerating this capacity ramp-up. It’s about buildings, it’s about people, it’s about processes, and it’s about, in the long term, increasing our delivery capacity. If we look into the order backlog, we can see that we will have a very intensive fourth quarter as normal at Mildef. A strong finish here in the year. We have a record strong order backlog in the fourth quarter that we need to deliver upon. Now back to some of the important contracts and the business news that we saw in Q3.

If we take it from your left side, you can see that FMV, the Swedish procurement agency, ordered a combination of Mildef’s total offering. It’s around the hardware as a base, but it’s also on top of that, we are adding the software, we are adding the integration services, and we are also helping them with some solutions. That’s a good story when we are talking about moving up in the value chain that we can sell the total offering, a turnkey solution to the end customer. If we move on, we also saw that Roda, our German acquisition, won a contract with a German cybersecurity company that is called Secunet. Also a long-term relationship with that customer and a really important customer relationship. We can expect to see some high volumes coming from that business in the future. Next one, also a very strategic, important contract with NATO’s NSPA.

That is also something that was our first hardware order from that, and that is something that is of strategic, important character as well. The final one that we released before we ended Q3 was Roda’s biggest order ever from Bundeswehr, the German procurement agency. That also proves the Germans’ relevance and Roda’s relevance on this German market. We have also in Q4, if we jump into that, before we were releasing this report, announced just below SEK 700 million in order intake. I think it’s also a good differentiation in the type of orders. We are talking about the U.S. market, we are talking about NATO markets, we are talking about the German markets, and high numbers on these orders as well. There is a high demand on the market, and Mildef is really relevant in this digital arms race that is going on right now.

The final and last press release here is around our new production facility that we have now opened in Stockholm. It’s four times more than we have in the current facilities. We are really taking this ramping up of the capacity in the right direction by adding on this new production. As I said yesterday, we released that Roda received an order of SEK 320 million, really also contributing and building the order backlog for 2026. Let’s move on to slide number six, and then we can see the key figures for Q3. If we start with the net sales, the positive trend for Mildef continued during the third quarter, and the net sales reached an all-time high for a single quarter. Organic growth was in the third quarter 36%, and acquisition contributed by 80%. In total, we grow 116% in net sales.

Maybe the strongest KPI in the third quarter is the order intake. The order intake grew by 119% in total. Smaller organic, but mainly driven by the acquisition part from Roda. We saw a really strong order intake from Roda in the third quarter. Totally, as I said, we are growing 119% in the order intake. This is really important for us to have this fuel for the Mildef engine, give us confidence to continue with the capacity ramp-up, give us confidence around 2026, and continue to build a bigger and stronger Mildef. If we then look at the operating profit, in this case, adjusted EBITDA that we are using for our profitability targets, we saw that that was growing 172% if we compare with the same quarter last year. That proves the scalability in the business model.

The adjusted EBITDA margin here in this Q3 ended up on 15.7% compared to 12.5% in Q3 in 2024. I was talking about the gross margin, and that is, of course, a super important contributor to the underlying margin as well. If we look at the gross margin excluding M&A, it was really high. It was 53.5%. As I said, we have talked about this transformation to north of 50% in gross margin. It depends on the product mix, depends on the customer mix, and things like that. We have said what we have done, what we said that we should do when transforming this company to a plus 50% gross margin company. In total, we ended up on 45% if we combine Mildef and Roda together.

That is expected, that the gross margin will come down due to the Roda character and that they are operating with a gross margin that is lower than Mildef. Finally, the free cash flow was negative, SEK 53.1 million on the negative side. That is despite the strong improvement of EBITDA. The free cash flow was negative in Q3. I think there is a clear reason behind the negative free cash flow in the third quarter. We are having a really estimated, really high deliveries in Q4. We have been building up the inventory for being able to meet that delivery. That is, of course, impacting the free cash flow here in the third quarter. That is something that from this delivery in the fourth quarter that we will see estimated a strong free cash flow in Q1 in 2026 instead.

With that said, I think it’s time to more zoom out and look at the more long-term financial trends of Mildef and see how we have performed at the, let’s say, a rolling 12-month basis. If we look at those numbers, just to set the scene here for the financial summary, I would say that Mildef is a fast-growing defense tech company. We have now an order intake that is close to SEK 3 billion. We have doubled the order intake the last 12 months. Our order backlog is SEK 3.5 billion. That is also more than doubling that we had 12 years back in time. Our book-to-bill is still strong. We are almost at 1.8. That is despite that we are growing the net sales the last 12 months with 48%. We have also added employees, of course, to be able to take care of this growth.

We are today roughly 50% more people than we were 12 months ago. Even if we look back in time and look at the order intake, for example, and go back to 2021, we can see that we are increasing order intake with a CAGR of more than 50% on a yearly basis. This is the dynamic we are operating right now. The order backlog as well, if you look at that, also really strong development and having been increasing that with just less than 400% if we look at the order backlog. This is the context and the market dynamics and the relevance of Mildef, I would say.

Geographically, if we split down our total revenue and take it into different geographic areas, we can see that the Nordic countries are still the strongest one, even if we expect that Europe now, when we are adding Roda over 12 months, will become bigger than the Nordic countries. That is also what we see here in these numbers, that Europe is showing that they are really starting to pick up. They are growing 15% at this point if we compare to 12 months back in time. When we close 2025, I think that we will have been transformed Mildef to a strong Nordic company that we are seeing a bigger footprint than Europe, and that Europe will be Central Europe will be the main market for Mildef. Back to the order intake, I showed this picture before, but it’s really important for us.

It’s, as I said, the fuel for the Mildef engine. That is our future revenue, future net sales, future cash flow, and also gives us confidence to continue with this capacity ramp-up and adding more resources on top of everything. Book-to-bill rate to almost 1.8. Continue with a strong order intake. Backlog duration, we have, as I said, a really strong backlog of SEK 3.5 billion. If we look at how this was compared to when we closed Q3 in 2024, we can see that all of the bars are much, much higher than it was 12 months ago. That also builds some confidence. I think that the 2026 order backlog now is starting to look really, really healthy. That also gives us, as I said, confidence to continue to invest in this.

For those of you who are doing your math correctly, you can see that there have been some orders that have been moved into 2026. The order pie chart for the duration for the rest of this year is not in total line with what we have announced in Q2 when it was around the second half of 2025. This is also due to that we have been moved some of the orders into 2026. That is also around this historical ramp-up where we’re now trying to calibrate our resources to be able to deliver on a new higher level. That is also something that will, so to say, not be a spike just up in the sky. It’s something that will have some lumpiness in it, so to say. That is what we’re trying to solve and work really hard with at the moment.

Gross margin development expected to come down, of course. As I said, Roda is starting here to impact in the numbers. It’s very important for us that the underlying gross margin is strong at least so we can keep that. We will try to work with Roda gross margin over time and come back again. This is quite expected to see a drop from the high numbers that we are delivering at Mildef. EBITDA development, we have seen that back in a 12-month basis, we are growing the EBITDA with 50%. After now a couple of quarters, we have standing still in the EBITDA development. We’re now taking a big jump up again and showing the trend that is going in the right direction. As I said, we have an intensive fourth quarter with an expected high delivery.

That will also hopefully continue to add on this EBITDA development before we close 2025. We can see that the scalability is there. When the top volume, the top line volume is coming, we can see that it’s rippling down nicely on the EBITDA row. Working capital and net debt EBITDA. If we look at the networking capital, we can see in percentage of net sales, we see that the networking capital is quite similar to what we had in Q2. We are just below 40% in the networking capital. Now, as I said, we are in this phase with an inventory ramp-up to meet the high delivery demands in Q4. We also have not really taken the full 12 months net sales of Roda into these numbers.

That is also something that will positively impact these net sales of the networking capital and aiming to come down around 30% and maybe a little bit lower than that. Net debt EBITDA, we see expected coming down 2.9% in Q2 and now 2.6%. This is something when we’re now growing the EBITDA, when we also get the full picture of Roda’s EBITDA into the total consolidated EBITDA, we will see that this net debt will come down. We expect this before we close 2025 to be below our long-term target of 2.5%. It’s now showing that it’s going in the right direction. Short update around the Roda situation here in Q3. I think that they’re showing solid Q3 figures, especially strong order intake in the third quarter here. As I said before, they were announcing the biggest contract ever from Bundeswehr.

That’s a DLBO contract, digitalized land-based operation, a big digitalization project going in within the German Army that Roda plays an important role in. That was our largest order. Strong order intake also, as I said, proves Roda’s strong position on the German market and that Roda has a good end-user reputation. That is something that we can continue to build on in the future. Germany has also announced this defense ramp-up of €500 billion over the next 12 years. I think there will be a lot of business opportunities and a lot of great need for building their IT solutions going forward. With all of this combined, I think that the acquisition of Roda will be a very important part of Mildef’s growth journey going forward. The German market and Roda together will be a strong contributor to Mildef’s continued growth.

Future outlook, and now I am on slide number 17, growth priorities. This is something that we will focus strongly on within Mildef in the upcoming two to three years. Number one that is really on top of our mind is the scaling up thing that we really need to ramp up our capacity. We are seeing a couple of quarters in a row where we are reaching high new record levels in order intake. That is something that will impact the business and will impact how we build up our capacity. We need to do that in a cost-efficient way, but we need to increase our capacity in total. It’s around the facilities, it’s around the people, and it’s around the processes.

The next one is also climbing the value chain where we can take a position on the market as a prime contractor within the tactical IT solution area where we have today an offering and a competence and a capacity to deliver a turnkey solution to the customer. They are more and more asking for this kind of turnkey solution because they have no time, but they have a lot of money. They want the industry to really help them out to make sure that they get the capacity they want out there. I also think that this climbing in the value chain will increase the barriers to entry. It will create a position and take a position on the market that will be really strong and will be hard for the competitors to come in and attack this position that we can take on the market.

Improved margins, of course, is one of the big players as well. Focused expansion, I think, is really important in this dynamic, in this high-demand landscape that we are in, that we are laser-sharp in our focus around the defense domain. We really prioritize our key customers, the big customers. We really prioritize the selected MODs and the government customers, making sure that we are super focused on finding the right solutions for them and delivering with the best quality that we can. The final piece in this one is the resilience. Resilience is really important for our future growth because if you want to be a relevant supplier and trusted partner within the defense industry, you also need to make sure that you are a resilient company. You need to have your supply chain really in good order and have a resilient supply chain.

You need to have cybersecurity really on top of that. You need to have an organization ready to take on higher volumes. All of these kinds of things will build a more resilient Mildef in the future. If you see in the bottom row, you can see that something that we always will be working with is our sustainable business and responsible business due to the industry we are. We will keep that as a really strong area to focus on. Also the M&A. We have been on an M&A journey, and we still want to find good M&A that fits really good into what Mildef is doing into our core business that can help us continue with this growth journey like we did with the Roda acquisition. That is something that will continue to be on our priorities for growth going forward.

Now we will come to slide number 18, and then we can see the strong outlook for the future. I will go through what we see from our view about the future. First of all, something that really creates a dynamic on the market that there is a high-demand landscape. We are seeing more and more defense spending. We also see that they are transforming into more of a data-driven defense capacity, which also creates this digital arm race where digitalization will be probably the most important thing, how we can build this threshold so we can be strong enough to build peace. That is our second strong outlook for the future, the digitalization and connectivity. Some people are talking about this defense tech supercycle, and it’s here to stay. What we are doing at Mildef, building the IT backbone, is really a relevant thing into this European defense ramp-up.

Finally, also that is really important in this defense domain. Mildef Group has a decade of trust in this one. We have been operating in this domain for almost 30 years. We have a field program portfolio, and we are already today a well-trusted supplier and a partner in this domain. That is something really important where we now see all of these new opportunities coming up here in the future. With that said, I think it’s time for the Q&A session.

Olof, Moderator/Host, Mildef Group: Absolutely. Thank you, Daniel Ljunggren, CEO and President of Mildef Group. I have raised hands from Tom and Daniel at Danske Bank. We’ll start with Tom and make sure that you unmute your mic, Tom, so we can hear your lovely voice. Tom with Pareto, are you ready to fire away?

Yes, sir. Just a question on the delays here. It looks like you moved some SEK 180 million, SEK 200 million in terms of organic backlog into 2026. How much of that is on you versus on the customer acceptance rate here? What sort of investments or initiatives are you taking to enable a higher delivery pace here into 2026?

Daniel Ljunggren, CEO and President, Mildef Group: Thank you very much, Tom. I just want to start with maybe giving some flavor on the bigger picture here. I mean, we are in a historical defense ramp-up, and we have been talking about this beginning of beginning for many times. Now we really see a strong demand, strong order intake that is building up a need and a situation in the delivery that we need to be able to take care of. I think we can expect maybe some turbulence in the upcoming quarter or two quarters going forward. We have the time to find a new delivery capacity. That is something that has been impacted, as you say, some of the moved orders into 2026. It’s really important that we are doing this on a daily basis. We are adding on capacity.

We’re adding on what we need, as I say, the building, the people, and the process to be able to deliver even more. It’s not always that these kinds of movements are that it’s Mildef that needs to address. We also need to increase the supply chain that we are working with. We also have the end user and the end customer sometimes is telling us to move the orders into 2026. Maybe our products are going into a bigger platform program, and maybe there is a delayment of the platforms and things like that. They don’t want our things. They want to have a coordinated delivery of all things together. I also see that some peers in the industry are also talking about this growing pain that we are seeing right now.

I think it’s a little bit naive to think that this was just going to go on a straight road to heaven. I think we will see some bump in the roads going forward, but it takes some time to calibrate the new situation and find a new higher delivery capacity.

Olof, Moderator/Host, Mildef Group: Perfect. Thanks.

Daniel Ljunggren, CEO and President, Mildef Group: Thank you, Bob. Do you have another question, Tom?

Yeah, just a quick one on the sort of seasonality going into 2026. Any specific high delivery quarters to expect here for the coming year? Or similar patterns as 2025 and 2024?

Yeah, thank you, Tim. I think we can expect a little bit the same pattern that we have seen in the past year, so to say. Of course, now we’re also moving a couple of things that will be expected to deliver in the first quarter. We had a little bit of, what I say, a weak first half of 2025. I expect us to be much stronger in the first half of 2026. I also think that the biggest delivery quarter will be leaning towards the fourth quarter.

Perfect. Thanks.

Olof, Moderator/Host, Mildef Group: Thank you, Tom. We have a lineup of Daniel, Hugo, Finn, and some questions in the chat. I’ll go to Daniel Ljunggren with Danske Bank. Please open your mic. If Daniel is not opening his mic, we go to Hugo Liesjö with DNB Carnegie.

Hi. Thank you for taking my questions. I’ve heard that the distribution agreement you have with Mildef Group ends at the beginning of 2026. Is this correct?

Daniel Ljunggren, CEO and President, Mildef Group: That is not correct. Our current distribution agreement with Mildef Crete will actually now end in April 2031. I know that some have seen this 2026, but there is a dynamic in the agreement that will prolong that agreement with automatically five new years. That really kicked in two years ago, actually. We have a good situation on the distributor agreement with Mildef Crete. Just to add extra flavor on that, I mean, we have been a strong partner with Mildef Crete since back in the ’90s. Agreement or not agreement, I think we have a really strong position together with Mildef Crete. I’m not worried about that relationship or that partnership or that supplier.

Olof, Moderator/Host, Mildef Group: Thank you, Hugo. More questions?

This also holds true for Roda.

Daniel Ljunggren, CEO and President, Mildef Group: Roda has been even having a stronger and longer relationship with Mildef Group. Underpinning of their existence, they have, of course, an existing distributor agreement with Mildef Group. I’m not going to go exactly into when that expires, but I have no worries. With the new orders, what we are seeing coming in from Roda is building the relationship even stronger with Mildef Group. They have been partners and friends for more than 30 years. I’m not worried that something will change.

Okay. Regarding those production capacity restraints you had in 2025, how should we think about this looking into 2026? How much production capacity do you add?

We are, of course, trying to do this in the same pace that we are seeing order intake, etc., coming in. I’m sure that we will, in the upcoming one to two, three quarters here, add a lot of new delivery capacity on top of what we already have today. It’s hard to give an exact number how much we will increase our delivery capacity. It depends a little bit on the future order intake and things like that. We will absolutely add on so we can meet our long-term financial target growing 25%. At least more than 25% of what we are doing today. Of course, there is a limitation on everything. If we see continued really strong order intake, maybe we will have even in 2026 capacity issues of growing that quick.

Okay. My last question, that’s regarding the gross margin. Organically, it was strong in this quarter. Roda’s gross margin was a bit lower than previous quarters. Would you say that this quarter’s level is more of a normal level for both entities and for the group?

If we look at the Roda margin, for example, in Q3, it’s very similar to what they have done in the past. They have been operating around 30%, something like that, and they are doing that in Q3 as well. That is probably something that we can expect going forward. Of course, we will try to see if we can find some opportunities to increase the Roda gross margin. What they’re doing in Q3 is very similar to what they have done in the past. If we look at the Mildef margin, we have now seen a couple of quarters in a row that we are improving. We are above 50%, and we have done this a little bit transformation to our product mix. We have more software. We have more of the solutions and integrations and also improving the gross margin.

I can expect that the classic Mildef gross margin, if we speak it like that, will continue to be above 50%.

Okay. Perfect. Thank you.

Olof, Moderator/Host, Mildef Group: Thank you, Hugo Liesjö with DNB Carnegie. I think we go to Finn Kempe now with Cantor Fitzgerald. I hope that you are able to open your mic on your side, Finn. Thank you. I see you did that. Welcome with your question.

Thanks for taking my question and congratulations to the great quarterly results. Really well done. My question...

We’ve lost Finn there. Do you hear us still out there?

We hear you.

Yes. Sorry.

Please ask the question.

I’ll ask the question again. Sorry. You’ve significantly expanded the capacity in Rosasburg and stepped up also the recruitment. Maybe you could elaborate a bit on the capacity runway and when you expect that to really reach saturation. Maybe off that, on the flip side, how do you balance the current investment pace with the risk of potential overcapacity if order conversions slow in the following years?

Daniel Ljunggren, CEO and President, Mildef Group: Thank you very much, Finn. If we take the first question, they are out in Stockholm, our new facility here. We are four times increasing our capacity here, and that is a 10-year lease contract. Of course, this will not be up and running on four times higher capacity already here in a couple of one, two, three years, maybe. It will take some time to really come into that new delivery capacity and come into that new facility. Of course, we’re trying to do whatever we can to fill that with a lot of new business and things like that, and that gives us the room to grow. Your second question there, of course, we are really listening to the market. We are looking at the order intake. We are doing our evaluation and see so we don’t overinvest in things.

Here and now, we need to take this delivery capacity to the next level because we are seeing that the high demand is here and it’s here to stay. As I said before, this is probably a 10-year out in time. That is why we are confident in continuing to add on capacities. We, of course, need to follow this carefully walking into 2026 and 2027 and beyond.

Okay. Thank you. Maybe a follow-up question. You mentioned that already during your presentation, but moving towards positive free cash flow, maybe in early 2026, what are the key levers you’re really pulling on the working capital? Maybe improved delivery planning, supplier terms, or also customer prepayments. How sustainable is that improvement? What is a comfortable working capital ratio moving forward that you feel comfortable with?

Thank you. First of all, I will say here in Q3, of course, that is a situation where we see a really intensive delivery quarter in the fourth quarter. For me, it’s not anything unrare that we are really ramping up the inventory for making deliveries in the fourth quarter. We are working really hard with improving, optimizing the cash flow. I think that we have seen some improvements in that area when we are talking about prepayment. We are talking about milestone payments. We are talking about an end user that realizes that they need to, in some kind of way, support the defense industry in this ramp-up as well. We need to be able to share some risks, and we need to be able also to get some funding before deliveries. I see some kind of change in the dynamic.

Exactly what will happen here in the future is hard to say. At least they are more open to have these kinds of dialogues, how we can help each other from the government side and together with the industry.

In terms of the ratio, is it closer to 25%, or are you comfortable with below 30% already?

I think that we can, if we look at the history, we could be operating with 25%, but maybe we will aim for 30% in that area would be quite doable for us going forward. It’s also always a balance act between the lead times. The lead times are really important for the end customer here and now. We also need to have a basic inventory level to be able to meet these kinds of shorter lead times as well. It’s a balance act between a great cash flow, but also be able to win the business because you have the right lead times.

Okay. All right. Thank you again. Congrats.

Olof, Moderator/Host, Mildef Group: Thank you, Finn, from Cantor Fitzgerald for tracking us. Before we go to Tom for final questions, before we have a hard close at 40 minutes past the hour, a question in the chat. You can have a look at it also, Daniel. How are the projected gross margins for the long-term order intake 2026, 2027? Do we see expansion of margins as the backlog really is starting to become filled? Are you taking winning orders on any margin just to fill the book? What can we expect in the future? Many questions in one.

Daniel Ljunggren, CEO and President, Mildef Group: I think we have touched base a little bit around the gross margin here, and we have seen where we have talked about where we are today and where we have been in the past and the journey we have done. It’s always hard to predict in the future there, but I expect that we can continue to improve our now total gross margin. I expect that we can continue to improve the Roda gross margin, absolutely, because they are on a little bit less level than that. Are we taking orders just to win? No, we are not. We are always keeping our gross margin because we know the importance of the gross margin for the profitability going forward. I would say we have a good pricing power in these market conditions here and now as well. There is a high demand, and we are in a relevant position.

We are a trusted supplier. That is also why we can keep the price level at the same level that we have done before. It’s not about lowering our gross margin and winning order intake. It’s keeping our gross margin and continuing this high-demand landscape.

Olof, Moderator/Host, Mildef Group: Thank you for that question out there in the cyberspace. Finally, very quickly, Tom with Pareto, you have the final floor.

Thank you. Yeah, on the Roda EBITDA margin, I know we spoke about gross margins, but what’s happened to the OpEx development here in 2025? Because EBITDA margins are down quite significantly for the first three quarters. What are you expecting moving forward into 2026?

Daniel Ljunggren, CEO and President, Mildef Group: Yeah, that’s a good question, Tom. I think it’s a little bit on the side that the figures in the reports are not really reflecting how Roda looked before, because you can see some integration costs into Roda. You can see some of the depreciations around acquisitions-related depreciations and amortizations. I don’t think it’s super fair to compare it because it’s a little bit other dynamic into the Roda EBITDA margin. For me, operational-wise, I expect them to be at the same level that we have seen in 2024.

All right. You should see a comeback already in 2026 then?

We should do that. We should also see one.

Exactly. On the JACO program with Rheinmetall and KNDS, what are your hopes there?

We have always good hopes to win some future business. We know that there are some big programs going on around in Europe and big vehicle platform programs. We are trying to put us in a good position. We are having a strong relationship with many of the big platform providers. Rheinmetall is one of those, and we have an existing framework agreement through our Roda company there. Hopefully, we can be a big part of that.

Perfect. Thank you.

Olof, Moderator/Host, Mildef Group: Sorry for the little bit hard close here, but thank you so much, everyone. 45 souls, ladies and gentlemen, or 47 altogether tracking this Q3 call. Thank you for taking part in the Mildef journey, and thank you for contributing to the Mildef journey. We’re very excited to be back on February 5 when we disclose the year-end numbers for the full year of 2025. Daniel, final words from you?

Daniel Ljunggren, CEO and President, Mildef Group: Thank you very much for following the Mildef journey. I hope to see all of you in February when we will talk about our Q4 report. Take care out there.

Olof, Moderator/Host, Mildef Group: Thank you very much. Don’t be a stranger. Stay in touch.

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