Earnings call transcript: NOTE AB Q3 2025 earnings miss forecasts

NOTE AB reported its third-quarter 2025 earnings, revealing a miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $2, falling short of the $2.12 expected by analysts, while revenue came in at $830 million, below the anticipated $877.25 million. The disappointing results led to a pre-market stock price drop of 10.07%, with shares trading at $176.90, down from $196.70. This continues a challenging year for NOTE, which according to InvestingPro data has seen a year-to-date price decline of nearly 69% and trades significantly below its 52-week high of $24.36.

Key Takeaways

• NOTE AB’s Q3 2025 EPS and revenue both missed analyst expectations, leading to a significant stock price decline.
• The company achieved 6% organic growth, despite negative currency effects.
• Strategic acquisition of Caston Electronics to strengthen the defense sector.
• Continued focus on operational efficiency through AI and modern tools.
• Positive outlook for the defense segment with expected growth of 25-30% next year.

Company Performance

NOTE AB reported a mixed performance in the third quarter. While the company achieved a 6% organic growth rate, negative currency effects dampened overall results. The industrial segment remained flat, while the security and defense sector saw an 8% growth for the year. The communication segment faced delays, contrasting with the greentech sector’s 47% growth in Q3. The company continues to focus on operational efficiency and customer retention, aiming for larger clients with higher margin potential.

Financial Highlights

• Revenue: $830 million (Q3 2025), below forecast
• Earnings per share: $2, up 26% year-over-year
• Cash flow: $121 million for the quarter
• Profitability: 9.3%, trailing twelve-month underlying OP at 9.9%
• Net debt: SEK 27 million (excluding leases)

Earnings vs. Forecast

NOTE AB’s Q3 2025 earnings fell short of expectations, with an EPS of $2 compared to the forecasted $2.12, resulting in a negative surprise of 5.66%. Revenue also missed the mark, with actual results of $830 million against a forecast of $877.25 million, a 5.39% shortfall. This marks a deviation from previous quarters where the company had met or exceeded expectations.

Market Reaction

The earnings miss triggered a 10.07% drop in NOTE AB’s stock price pre-market, with shares trading at $176.90. This decline contrasts with the broader market trend, as the company’s stock had been performing near its 52-week high of $203.20. The market sentiment appears to be negative, driven by the earnings miss and revenue shortfall.

Outlook & Guidance

Despite the Q3 miss, NOTE AB maintains a positive outlook for the future. The company anticipates sales between $1 billion and $1.5 billion, with margin guidance of 10-11%. The defense segment is expected to rebound with 25-30% growth next year. NOTE AB is also projecting organic growth of 0-5% in Q4.

Executive Commentary

CEO Johannes emphasized the company’s focus on profitability through operational performance, stating, "Our profitability comes from our operational performance, not from increasing prices." He also highlighted the company’s strategic positioning for future growth, noting, "We are positioning ourselves for growth going forward."

Risks and Challenges

• Currency fluctuations continue to impact financial results.
• Delays in the communication segment could hinder growth.
• Dependence on the defense sector may pose risks if growth expectations are not met.
• Global economic uncertainties could affect market conditions.
• Inventory reduction strategies must align with demand to avoid excess stock.

Q&A

During the earnings call, analysts questioned NOTE AB’s inventory reduction strategy and the potential trade-offs between volume growth and profitability. The company clarified its approach, emphasizing the importance of optimizing production processes and reducing aged inventory. The rationale behind the Caston Electronics acquisition was also discussed, highlighting its role in expanding NOTE AB’s defense capabilities.

For investors seeking deeper insights, InvestingPro offers exclusive access to NOTE’s comprehensive financial health assessment, with scores across growth (3.04), profitability (1.28), and relative value (3.15). The platform’s Pro Research Report transforms complex financial data into actionable intelligence, covering NOTE alongside 1,400+ top stocks with expert analysis and intuitive visuals. Explore NOTE’s position among most undervalued stocks and make more informed investment decisions.

Full transcript - NOTE AB (NOTE) Q3 2025:

Johannes, CEO/Presenter, Note: Good morning, everyone, and welcome to Note Third Quarter Presentation. How do we what is the overview of this quarter? If we move to my first slide, can see, okay, sales came in at SEK $830,000,000. That corresponds to 6% organic growth, where we had a 3% negative of currency effects. Our profitability, 9.3%.

I think that’s very good for the third quarter. Normally, third quarter is our weakest quarter, both in terms of sales and in terms of profitability. I think that is if we stay on that number for a while, we are running now at 9.9% for the trailing twelve month in underlying OP. Our target is 10%, and we managed to do that in a flat environment. I think that is really, really strong.

And I have to be clear with what we do internally. We it’s, what do you call it, a daily fight about costs, how do we continue to be cost efficient, how do we continue to ensure that we deliver the results that we are targeting. So I’m very pleased with that number. I would have liked to see a bit more sales, of course. 6% is in the lower end of what we stated when we had this call three months ago.

But still positive to see growth. What is also good is that if we look at the earnings per share, we’re up 26% compared to last year. So what we see is that we are constantly generating good our profitability in the operating profit goes down all the way to profit after tax and profit per share. And I think that is very important to keep in mind because that is what gives us our cash flow. When we talk about cash flow, we generated $121,000,000 for the quarter.

And just out of curiosity, I looked in what has our cash flow been for the last twenty four months, and that is $1,024,000,000 for in two years. I think that’s fantastic. That is driven by our ability to generate our profits that goes down to profit after tax, but also our ability to release the inventory levels that we had when the component crisis ended two years ago. So I think all of that is proving that we are running the business in an efficient way. There’s always lag in this process.

I mean, it would be very good if you see, okay, the inventory levels goes up in the component crisis while everyone is buffering up stock and that, that would come down very fast, but it never does. I mean, two years is a long time. We have released somewhere around $400,000,000 in inventory. That is a round number. I don’t remember the exact number.

But I still believe there’s more to come. I think we still have about SEK 100,000,000 left that are in what I call in balance in our inventories. With that said, I that means that I foresee in the coming, say, two, three, four quarters still a cash flow that will be higher than our profit after tax. So we still believe that there’s much or significantly more to come from that way. And that’s very good because, as you know, we announced our acquisition of Caston Electronics in two weeks ago.

We are still waiting for the final approval by the British authorities. We expect that to happen in the next coming days. But that is done all through our own cash flow. And I think that is very, very good in this market that we have done, I was going to say five acquisitions, but this is actually six acquisitions since I started, and we have done it. And at the same time, we have actually reduced the number of shares.

So we have bought back more shares than we have issued through incentive programs. And I think that is also something that we are very proud of, that we are generating our own cash to build our future. That does not rule out that we might end up in a situation where we acquire something rather big and that we would issue shares. But that’s another story. We think this is the way we want to run the business, that we generate our own cash, we generate our own profits, and that builds our group stronger.

And I think that is something that we work very hard on. Our equity, 50%, very strong. Net debt, I hope to say that we were debt free, but we have SEK 27,000,000 excluding the leases in the IFRS standard, but still very low debt. Also after the acquisition, I think our balance sheet will look very strong. This is prior to the Kazan acquisition that was done after the quarter.

So all in all, really pleased with what I see on the performance. We are we struggle on the top line. I think this quarter is a good step forward, but we want more. I mean, those that have followed us for many years, you can see that we still have a CAGR on the last five years that are exceeding 15%, but the last two years has been slow, and we want to get out of that position. Some highlights.

This slide becomes more and more and more worded, so we need to start to de word it because we have so many things we want to talk about. But we are investing for the future and for continued profitability. As I said many times before, our profitability comes from our operational performance. It’s not that we are increasing prices or pricing our customers in that way. We simply try to be more efficient than our peers.

And that is why we are making a few percent higher than the industry standard. All that comes from investments. It comes from using more modern tools, using AI agents to be more smarter in how we produce. We try to decrease the number of workers compared to our sales and so on. But all that comes with the price, and that is, for us, investment in both equipment and in buildings.

So we can facilitate more production in the current, how shall say, frame that we work from. And this work continues. And it’s also good that during then when we I mean, we built up Tuspe, we will move into the new premises, I think, in the November. And then we will start to move production in there in the first quarter next year. That has happened.

But in the meantime, Tuschpe is still generating very good business. And that do not interfere with our ability to be operationally efficient. So we are quite good in doing large projects. Now we are approaching two moves in the next year, while Lund is moving to new premises and also Juvekne will move to new premises. But we are confident that, that will be a smooth transition because we do this quite often.

And this is part of our DNA to be efficient and strong in this kind of activities. And for those that follow us knows that this is one of my most important topics that our production is our engine, it’s our heart, and we are proud to say that we’re good at it. And that’s what we see on the market that the customers really appreciate that. On top of that, we invest for future growth. The acquisition of Caston, we have talked very little about it, but this is one of the how should I say, one very strong company in especially in the defense sector.

They are very good in production in the earlier phases. They are good in NPI. They are good in pre series. They are good in small series. They are very strong in production with big variations of products.

And I think their ability to generate new customers and new leads will be a strength in our U. K. Operations. But also, we expect that with a new ownership structure, we can continue to grow this facility quite nicely in the coming years. The outlook for growth in this factory is really strong.

It’s stronger than what we see in the rest of the group. They also how shall I say, they’re also deepening our position in the defense sector, which we are very proud of as well. So we welcome Caston and the Caston team to our group, and we think that will be a good asset for us going forward. We talked a little bit about our ability to deliver our operational excellence. But the last couple of years with the component crisis and so on, we lost some on time delivery.

I can now say that we are back about 96% in on time delivery performance. And 96% is, I often refer to it internally, that’s when my phone stops to ring from annoyed customers. If we’re below 90%, we have a lot of annoyed customers. So I think that is one key KPI that those of you that follow us and other peers should be really keen on looking at because the satisfied customers are have a tendency to not leave us. And we have very strong retention.

We don’t lose customers. That is also something that we are very proud of. Yes. We come back to some guidance and so on, these are my operational highlights from this quarter. And I can say that it’s we talk about basically the same topics every time, but they are that’s because they are so important.

What I didn’t mention is that my other big interest in this is customers and how customers are doing. I think I have two, three customer meetings every week at least and are involved in how we deal with customers on a much more deeper level than that when it comes to internal decisions on how we quote, how we price, how we work with efficiencies and so on. I think that is also one of our assets that this goes all the way through our management team that customer orientation is so important for us, and that should be something that we are reflected throughout how we work. So that’s very, very important for me. Going into some numbers.

This we have presented, I think what I would like to highlight of this is, of course, the strong profitability, 9.6% underlying, and we have our best quarter that is yet to come. Q4 is by trend always the strongest quarter. We are guiding for 10% to 11%. We are we need to reach 10.9% to reach 10% over for the year, And we still have an internal objective to reach 10% underlying OP for the year. I think Kaston will positively affect our profitability, both in terms of real numbers, but also in terms of percentage.

So that will be a good asset for us. As I said before, profit after tax, really important for us. That generates our cash flow, that generates our ability to act on the market. And what is also very interesting is that even after the acquisition of Castan, we still have room for more acquisitions. I’ve been questioned that we had a big dividend.

Would we did we give out our ability to grow and acquire? I think the answer to that is no. We have proven that we can do it, and we are determined to continue with this journey. And then we have not even tried the route to issue shares for this. But so that’s how we deal with this.

Cash flow, very important. I talked about it before. I think we have 100,000,000 to $150,000,000 that is left to take out on top of our operational cash flow coming from reduced inventories. And also the effect of when we start to buy according to our sales, we will increase our APs and that will also have a positive effect on our cash flow. So we see very positive upon this going forward.

Our reporting segments, I talked about it before, rest of the world, that means Bulgaria, China and Estonia, 8.3% is, I think, our record. We have been at 8% before, but 8.3% is a record. And we have very good operations there. We did a cutback in China about a year ago. We have been very cautious with adding people in Estonia.

Bulgaria is gearing up. I think Bulgaria has, what is it, 30% plus growth, even more, even from a low level, but that has a good impact of the results. So this is three very well run sites, and I’m very pleased with the management of those sites. Then we shouldn’t forget the Western Europe 9.9 is not our record. It’s still a good number.

We know we can do better. We have some sites, especially in UK that is not performing according to expectation. That is something that we are working on and that we believe we will sort out in the coming quarters. So we have good expectations. On top of that, we talk about what is a realistic realistic profitability going forward.

I would say that if we continue to quote and price products the same way we do, I would expect profitability to increase in percentage. We are now targeting a bit slightly bigger customers that might mean that we will remain on the around the 10%. We will see which customer contract that we win and that will have an effect. But if we continue with the current operations, we will end up in higher profitability when the growth is coming back. But we will come back to you in more details either in the Q4 report or in the Capital Markets Day if we choose to have that in December.

But all in all, I think it’s really good numbers that we show in both areas. And I’m pleased to see that the rest of the world is doing better than last year. If we do 5% in that part, that part represents I’m trying to add up in my head, but say 25%, 30% of our top line. And if that doesn’t perform according to the group, is a burden to the group. But now we are seeing that this is a good level.

And I also think that we should be when we look at the rest of the world, if we can keep them at eight plus percent, I think that is a level that will, together with the Western European profitability, that will add up to the 10% or higher. I don’t have the same profitability expectations of these factories. They are naturally lower margin customers that are in these factories, and that is something that we are dealing with, and that is something that we are planning for. So I’m happy with the performance there. I’m happy with the performance in the Swedish sites, the Finnish sites.

We struggle in U. And that is reducing our OP in Western Europe. We come back to that a little bit. You can see that we have 34% negative growth in U. K.

And that is our biggest challenge at the moment for the group. Segments. Our big industrial segment, that’s our engine, as I always call it, we’re seeing 10% negative for the year, but it showed 1% plus in the third quarter. I still believe that we are not in the good growth in this segment. So a lot of customers, it’s a lot of it’s a big mix of customers here.

Some of them are coming back to good double digit growth. Some are still struggling to get back on track. Security and Defense, we show growth of 8% for the year. This is what I call a bit it’s a bit disappointing. Decreasing in this segment for the quarter.

I’ve talked about it in the previous calls that defense is an area that year over year, we will see a constant growth. I think that we will see at least 30% CAGR in this segment if we look at the three- to five year period. We had 90% last year. We will have a slower growth this year. Next year, we believe that we will be back on numbers that are in that range.

And this comes basically from that ramping up electronic manufacturing is significantly easier than to ramp up like I often refer to if you build like an archer, I mean, the guy that is doing the launching equipment and that for them to ramp up is much more tricky than to ramp up electronics. So we are a bit in the hands of our customers’ ability to ramp up and scale up their own production. So that means that we might be a bit ahead of some of the deliveries into some of the systems that our customers is delivering. And that’s something that we know and that has been the case for many years. So we are not concerned of the negative growth in the quarter.

We see that that is some of the programs we delivered more than our partners in the supply chain could do in that field. So this is something that will come back throughout this year and next year. Also with Kastan, I think that if we are running this with I think we’re 13% of sales is now in the Security and Defense area with if we would add Kastan to this, it would have 2% to 3% unit in this segment. So that will take us slightly higher than 15%, 16% in this segment. And we expect organic growth coming from this segment to increase that share significantly over the coming years.

Communication, I think it’s still in the segment that we are not very pleased with. There’s a lot of delays in this segment. It has we in Q3 last year, we were a bit complaining about the order intake and the push outs from the customers there. We see a few of our largest customers there are not back to numbers that we are expecting and that they are expecting. And that will affect our ability to grow.

One positive thing is that we are now we have signed this agreement with Wastream that we communicated in the second quarter that we will be their only supplier, and they are sourcing back the manufacturing from China to our Lund facility. And that is something that will start to come in into our books in the fourth quarter and the first quarter next year. They still are consuming inventory that were produced in their Chinese supplier side. Medtech. Medtech is an area where we have a few customers.

And if one or two of them are late with deliveries, that will have an effect in our quarter. I think if you look at this, the MedTech sales is adding up from maybe six larger accounts. And in this quarter, had no deliveries to one of them due to overstock or that they didn’t they choose to produce other products. And that is affecting the quarter. Greentech, often laugh when I look at this.

This was 28% of our sales three years ago. And now it’s coming back. We had the best quarter in many, many in maybe two years in the segment. We were up 47%. And the pleasing here is to see that it’s not I mean, Playda has been in this segment and they have been growing.

But this quarter, the growth is coming more from what I call a return on the EV market. See short jump is moving up. We have some other customers that are really ramping up in this segment. So we are pleased to see that this quarter is widening and growing. So that is very, very good.

I think I said that after Q1 or so that this segment is getting so small, so we cannot shrink it anymore. But now we see that it’s coming back in a good way. And the outlook for this segment is a continued growth. If we are coming in at 47% in Q4, I don’t expect that, but I expect it to be in good double digit growth also in the fourth quarter. So for the year, it will be a good recovery in this segment.

You can argue if this is a strategy that is good to be in this segment because the, what we call it, the electrification is a bit slow at the moment. And if you look at Germany, if you look at other markets, they’re pushing back on the demands on what to do here. But if you look at Sweden, mean, the chargeable cars are still selling between 6070% month after month. So there will be more and more EV cars out on the streets. This is primarily driven by company cars, of course.

But what the good thing is that three years after the company cars is what that will be sold to a private person because that’s when the lease period ends. So there will be secondary sales of cars is adding a lot of volume to the EV market. And those customers that are buying used EV cars, they will buy their charging station. So we still believe that there’s a lot of room for growth in this area. And that is also our customers’ view on this.

And if you look further out in Europe, mean, the percentage of EV cars is shrinking the further down you get. If you get to South Europe, you rarely see EV cars, which is a bit frustrating if you produce EV chargers, but that’s how it is. So we will see where this takes us. But my expectation is that we have stabilized on a low level. We’re starting to grow, and we expect this segment to continue to grow over the coming quarters.

So that is basically how we see the segments. If you look at our graphs, we have really turned the trend on profitability. I’ve been clear on that, that we are that this is the area where we are seeing our ability to deliver is stronger than on the top line. Profitability is more in our hands. The sales is you can how should I say it a bit more you can say that it’s the customers that has to come in, then you can argue, okay, we need to win more customers.

And that is true. And that is something that we do constantly. But I said it before that the time it takes from you win the customer until that product is ramped up is increasing. And that is a trend we have seen ever since the component crisis that our customers are still they have we have pre produced, we have made the industrialization projects, but they still are selling their own versions for longer time. The exchange of going from the old to the new versions is a bit slower.

And that is pushing out some of our growth in the coming year. And that is something that we are working with the customers, one, both to understand and also to see how we can help them to be more efficient in the ramp up. But there has been this time has been longer if I look at the last two years compared to the period before. And that prevents us a bit from our growth. So what we say is that we anticipate that our sales will come into $1,000,000 to $1,000,000 or $1,000,000,000 to $1.5 and that we will have a margin 10% to 11%.

So that is where we expect to end the quarter. And of course, with strong underlying cash flows to continue to generate into that pocket. So with that said, I think I will stop my presentation. My view is that the third quarter is a very good quarter. I would have liked to see more top line.

I think that all other indicators are in where we want it to be. Profitability is continued to increase and to increase with one percentage unit with only 6% growth. I think that’s very good. I often say that if you are below 5%, then it’s a cost cutting activity. It’s not a volume game.

So to be able to improve that number with this much is really pleasing. I think that if we look at the year as such, think, what is it, 0.7% up on an organic growth of zero. I think that’s also good. So we need to get our growth back in shape. The rest of the business is looking as we want it.

So that is my conclusion of this. So I will open the floor for questions. What do do? Yes, we do questions in the room before, so.

Anders Schochblom, Analyst, Nordea: You. It doesn’t work. It’s on? Yes. Okay.

Thank you, Johannes. Anders Schochblom from Nordea. Just a few questions from my end. So firstly, I mean you alluded to it a bit with larger customer contracts, but it would be interesting to hear how you kind of view the potential trade off between volume growth and profitability.

Johannes, CEO/Presenter, Note: Yes. I think that if you look at our business and if you read this will be a long answer. Will start with saying that, Anders, because I think it’s a very important and good question. If you look at our business and say that we with the normal customer contract, if you win, say, 100,000,000 contract, we will normally expect to see 15% or higher fall through on that contract. That is what we you utilize your fixed cost assets in a more wider way and that then the fall through is quite strong.

If you look at larger accounts, maybe we expect the fall through to be in the range between, say, 9% to 12%. And that would mean that even if it’s a quite lower margin compared to some other customers, that will still add profitability in the same range even if we are pricing it quite aggressive. So that’s how we see it. But this is something that we look very carefully in, Anders. And I think it’s a very valid point.

And we will have factories where we will focus on this, where we’ll have a lower margin expectation. And we’ll have factories where we are not going into that chase for these customers, where we will have another kind of margin expectation. But the overall picture is that we are expecting to remain at this level, 9.5% to 10.5% is what I would expect for the future. I personally expect us to be over 10%, but this is where we are heading, and this is what we are planning for. But growth is very important for us at the moment.

You can say that the last, say, one point five year, it has been a lot focused also on getting their inventories down. That has been also pushed out and that can have had some effect on our ability to grow because we think it’s very important to have the inventory in shape. So it’s a lot of, how shall I say, deviating targets that has to be managed into one group of results. So that’s how I see it.

Anders Schochblom, Analyst, Nordea: That makes sense. If I may follow-up

Johannes, CEO/Presenter, Note: on another It’s for the audience. Sorry,

Anders Schochblom, Analyst, Nordea: I thought my voice was sufficient. So looking at industrial, I mean, as you said, flattish basically year over year growth, up 1%. So we’ve started to see a bit of an early cyclical recovery, I mean, in partly for other contract manufacturers, but in the market in general. You mentioned that it was weakness among one customer in Sweden and weakness in The UK, if I heard correctly, driving that. But looking at the portfolio in general, would you say how would you characterize the trend among your customers?

Is it sluggish also apart from those customers?

Johannes, CEO/Presenter, Note: I would say that there’s quite a big, how should I say, delta between I would say the larger more well known industrial companies are we see quite decent growth, 5% to 10%, maybe 15% on those. Where we are struggle is more and more customers with that are more new starter companies. I wouldn’t call them start ups because they are in the they are positive scale up, but not with a wide range of products compared to like ABB or Atlas Copco. I think those companies, just to mention too, they are there we see better growth. So I think the recovery for the larger companies is a bit earlier than for the smaller ones to very, very general.

U. We have talked about and that the decrease we have seen for this year is particularly our largest customer that has clearly informed us that they have threefour of overstock and they will not buy. And we started that one up again now in September, not at full speed, but still very important for us.

Anders Schochblom, Analyst, Nordea: Okay, makes sense. Just a final one from my end. Tushpi, so you discussed sort of delays in the defense, what should I say, ecosystem or value chain in the quarter. Does that in any way incrementally change your view of Tuspey perhaps the ramp up and when you expect to reach sort of satisfactory capacity utilization in that factory?

Johannes, CEO/Presenter, Note: I would say that Tuspey in Tuspey, we are turning in somewhere around $950,000,000. We doubled the floor space. So we have another 1,000,000,000 until we are satisfied with growth there and that will take us some years to come there for sure.

Anders Schochblom, Analyst, Nordea: Is the ramp up in any way differently, I guess is my question?

Johannes, CEO/Presenter, Note: Would very good question. But if I would say like this, we will make the move as planned, move the processes so they are at the right positions. We will not invest in new lines if we don’t need it. That will come upon needs, so to say. But we will have what I call gaps in our layout where we want to place the new machines when we need them.

So we have a plan that we work on, but we don’t push the button on the machine equipments until we or machine investments until we need it. I mean the building is, what should I say, 90% down. So we will not delay that. That would be that’s not part of our view, but

Anders Schochblom, Analyst, Nordea: But the ramp up of the machine?

Johannes, CEO/Presenter, Note: Yes. That will, of course, follow the needs, so to say. And in Tuspeed, it’s quite good. I mean a big part of that is defense. Defense is very good at having good visibility on what they want to do.

Then I think that we and all our peers are seeing the same, that electronics is quite easy to ramp up. It’s the bigger hardware that takes some more time. So there is we and others are going to see some push outs on projects that are not coming on time. But over time, the capacity increase among our customers will come. So it’s yes, I can talk a lot about this.

You.

Analyst: You for the presentation, Johannes. Just on the defense and in terms of backlog, could you give some color on sort of how much of the defense, I don’t want to call it downturn, but negative growth in Q3 is sort of delayed deliveries and how much is actual projects deferrals into 2026 and in terms of the flattish backlog development this quarter?

Johannes, CEO/Presenter, Note: Yes, think that we don’t report a backlog on segments. We still see that defense is growing. I think the other part of the backlog is more and more the better availability on components, the shorter term you see orders on. So I think that is still an effect of this. But very hard to say.

We had in Q3 and Q4 last year, I think we had over 120% growth year over year in defense. So we had two really strong quarters. So I think we’re meeting some really challenging peers in that way. But our trend line is very, very, very strong. And I think we if you look at next year, I think we will be back to the 25%, 30% growth in defense in Tuske.

That’s what all indications are telling us. But it was a bit we knew that Q3 would be a bit weaker. We have delivered one of the bigger projects that we ended deliveries in May and then that is having a stop for some month until our customer has consumed up the board, so to say.

Analyst: I understand. So there weren’t any sort of planned deliveries in Q3 that are now pushed out to?

Johannes, CEO/Presenter, Note: Yes, some. But the majorities that we one of the bigger programs we did not deliver in Q3.

Analyst: Thank you. And a slightly more technical question here. You talked about these new potential customer wins and sort of the activity in this area. I was also just wondering if you win a new product line or this is in general as well, do you manufacture 100% of that product line? Or do you or does the customer also manufacture some of this same product line, if that makes sense?

Johannes, CEO/Presenter, Note: Yes, think I have got that question from many times. And I think I can say that we have maybe two customers that are of importance that could potentially produce the products that we make. And one of them is, of course, Plaid that is using own production. And I think you could argue that maybe like ABB and Schneider could potentially they have SMD equipment in place. The business units that we talk or work with in the among these customers do not have SMD capacity.

So I would say that the only customer where we see that I think is a bit more, if we could call it, threat is, of course, played. We have a very good relation with them, and this year has been a fantastic year for us. And I think that is the otherwise, I don’t see this as a problem. I don’t think Plaid is a problem either. It’s just that we need to work together to do the best out of it from both ends.

Analyst: Very clear. Thank you.

Johannes, CEO/Presenter, Note: Other customers in the room, otherwise I move over to the web. I’ll start from the first one, and that is Thomas. Thank you for the effort you and the great team of note is doing. I think Thomas is the guy I like. Yes, just kidding.

The inventory is slightly up compared to Q1. How do you view current inventory levels? And when do you expect growth here? I would say that I don’t want to say too much, but I think you are wrong because this question came in five minutes before I started. So I checked this with our CFO.

We’re actually down $60,000,000 from Q1, ending Q1 until end of Q3. But there is still more to do on the inventory levels. Even if we start to grow, I still expect inventory to continue to decline over the current the coming quarters because we look at inventory aging and we can see that we have inventory of maybe SEK 200,000,000 that is older than we want it to be. And that means that, that will bleed out through this period and we will not replace it until this has came out. So even if we start to buy on new programs, we will offset that with reducing the inventory that is aging.

So that is how I see this. Then I go to Jonny. Regarding your Q4 guidance, how much contribution do you expect from Castan acquisition in Q4? If we adjust for M and A contribution FX, how much have you adjusted your organic growth expectations? CASM did GBP 12,000,000 last year in top line, and we have taken onefour of that into our guidance.

Of course, they are a very profitable company, so we are expecting that to help our ability to come in with strong numbers on the OP level. I cannot be more specific. It’s still acquisition is still yet to be approved. So it’s yes. So that’s how we see it.

Okay. Then we have one more from Jone. Can you talk a bit about the Kastner acquisition? Margins looks very high. What makes you confident that this level are sustainable for the future?

I think that is a very good question, Jorn. And what I see here is that over the last four years, which is when the company structure changed in Cast and Electronics, they have been looking at margins that are similar to where they are. We know that they are growing, and we know that they are in a I would not call it segment, but in production of specific products. I was touching upon it at the start. It’s very complicated products, very small volumes.

Have for a few customers, maybe one to five pieces per batch. And if you have that, you have a lot of services included in what you produce. So there’s very little material and a lot of manual work, a lot of technical support. So we believe that this is a sustainable level. Otherwise, we will not have acquired them.

We will come back to you more on that when we have them in our books. Okay. Then we have one more from Jone. Green tech sales look strong. What is driving that?

I think that I have answered that. So I will not go into that, Jone. You can give me a call later if you’re not happy with that answer. Then we have one from Per. The Swedish krona has became even stronger in the last quarter.

Looking into 2026, how will this affect the business and how would an even weaker dollar affect note? We have quite transparent pricing to our customers, which means that we will have similar margins independently of the currency fluctuations. And that is what I think is a strength for us. I said it before that when the Swedish krona is gaining strength, we will have an exchange rate gains that will be reported and we report that as what you call it, take it away for the underlying measurements. So even when it gets weaker, we have that and when it gets stronger.

This year, I think we have gained $10,000,000 or so on this line. If I take it from back of my head, I don’t have the number. But otherwise, that will not affect. Of course, it will affect top line. I mean, we report in Swedish, if the sales in dollar is reducing, that will have a limiting effect of our top line.

So that is basically how I see it. Okay. Then the one around from David. Will the Kastner acquisition be fully consolidated as of Q4? And is the unit consequently included in the revised Q4 guidance?

Yes. We are expecting that we will close this acquisition in the October. And as long as that happens, they will be consolidated from October 1. I’m looking at Frieda and she’s nodding, so that is what we will do. Then we have from Andreas.

I noted Hansa’s acquisition of BMK in Germany yesterday. What are your thoughts on this? Really good question because, I mean, the Hansa is becoming big. So that is good for them. When you look at Germany, and Germany has been one of our target markets for many years to acquire in.

I took part of a report of the German industry outlooks, and I was not very, very pleased with that. We were in quite close discussions with one target, and we decided to withdraw from that target at that time. And the reason is that Germany is so heavily driven by automotive. I think 40% of EMS production in Germany historically has been towards automotive. When that segment is shrinking and the outlooks are really poor, the EMS companies, in my opinion, will start to chase other customers.

And that means that I think there will be a lot of pressure on the companies within Germany to deliver this. Germany has a quite high cost level. So I see the spreading effects outside of Germany is not that big. So we are quite cautious about Germany, even though it’s the biggest market in Europe, and we would love to be there. But at this moment, we have put that on hold.

So good question. And I think the market is moving and that is we have to move with it. So we are a bit hesitant to Germany at the moment. Then Johan, you’re lowering your full year guidance compared to Q2. Is this because of currencies or slower customer demand than expected?

Yes. I mean, currency, we will have 100,000,000 to $120,000,000 is our expectation of lower turnover for the year due to stronger Swedish currency. And then we see some I mean, we see some customer pushouts in the fourth quarter that is adding to that. But the majority is that we come in slightly lower on the currency and that we see some pushouts on the customer side. But yes, currency is a big effect of us missing the guidance.

Janne, thank you. Just a follow-up for Q4 guidance. What is your underlying change in organic growth expectation would you estimate? I need to think about what he means. Okay.

What our organic growth expectation compared to last quarter, that is how I read it. Yes, I expect us to have positive organic growth but in very low numbers. That is my expectation. I said at this call when we were talking that a quarter ago that we expected 5% to 10% for the second half. I think we will not reach that level in the fourth quarter.

We will be 0% to five is our estimation. Yes, Johan Hiltner, is there a possibility that you at Note can learn from Caston and push margin levels higher in the core Note operations? Yes, Jan, we try we will always try to use best practice where we can. So that this is something that we see very positively upon. I think that also Castan will learn from our bigger sites to run more streamlined operations when it comes to larger batches.

So I think there will be good learning from both ends. So we see very positively upon this. Then we have one from Christian. Does your guidance for Q4 mean that you expect organic flat or even negative growth or top line adjusted forecast? Yeah, I think I answered that just now.

And that is the last question I have from here. Is there any other questions from the audience? If not, would like to summarize this in first of all, I think the questions are really good. I mean, we try to give reports where and tell you what we think and then you have a lot of questions. So that means that we can be even better on that.

But it also shows what you as analysts or investors are thinking about. So I really appreciate those. When we look at the future, I think we still see we see good recovery plans from our customers. What we also see is that they forecast it and then they continue to push them out a little bit. But I think the level of, how should I say, positive views of the future is increasing every quarter.

So I think that part is still valid. Q3, yes, better or we came in on organic growth. I think we will have organic growth in Q4 slightly lower. I think the acquisition of Caston will be an injection of how we operate. I think it’s very important for The U.

K. Operations as such to get Caston in. We’re optimistic company. We get a good customer portfolio that we can build on the next step. We know that Kastan is not doing much box build and that is a part that we can probably built on for some of the Kasten customers.

We know that they are not doing larger series for some customers. We can add that capability to that. So we have good expectations that this will add new possibilities for us as a group. On top of that, we continue with our investments for the future. I think we are positioning ourselves for growth going forward, and that is what we are expecting.

So we still believe that this is a very, very interesting coming year and an interesting quarter to come. And we are pleased to have you as shareholders, the ones that are. So thank you for me, and have a good day.

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