Earnings call transcript: Scandinavian Astor Group Q3 2025 reports strong growth

Scandinavian Astor Group reported robust financial results for the third quarter of 2025, with net sales reaching SEK 79 million, marking a 78% increase year-over-year. The company's stock price rose by 1.54% following the announcement, reflecting positive investor sentiment. Scandinavian Astor's record order intake of SEK 144 million and a solid EBITDA margin of around 20% underscore its strong market position. The firm's strategic acquisitions and product innovations continue to drive growth, positioning it well for future expansion.

Key Takeaways

• Net sales increased by 78% year-over-year to SEK 79 million.
• Record order intake of SEK 144 million, up 432% from last year.
• EBITDA margin maintained at approximately 20%.
• Stock price increased by 1.54% post-earnings announcement.
• Strategic acquisitions and new product innovations are key growth drivers.

Company Performance

Scandinavian Astor Group's performance in Q3 2025 highlights its strong market position and effective growth strategies. The company's net sales rose by 78% compared to the same period last year, driven by increased demand for its electronic warfare and defense technologies. The record order intake of SEK 144 million, a 432% increase year-over-year, reflects the company's successful market penetration and expanding customer base. The firm's strategic focus on acquisitions and innovation continues to support its growth trajectory.

Financial Highlights

• Revenue: SEK 79 million, a 78% increase year-over-year.
• Order intake: SEK 144 million, a 432% increase year-over-year.
• EBITDA margin: Approximately 20%.
• Total order book approaching SEK 1 billion.

Outlook & Guidance

Scandinavian Astor Group expects a strong performance in the fourth quarter, supported by an order backlog of SEK 149 million. The company is poised for further expansion through potential mergers and acquisitions before year-end. The ongoing focus on strategic acquisitions is expected to contribute positively to both top-line growth and earnings.

Executive Commentary

"We expect to finish 2025 on a strong note," stated CFO Viktor Billström, reflecting confidence in the company's growth prospects. He emphasized the importance of mergers and acquisitions, noting, "M&A is a big part of what we do at Astor." Billström also highlighted the company's financial flexibility, with a net cash position of SEK 140 million, which supports its M&A agenda.

Risks and Challenges

• Potential supply chain disruptions could impact production timelines.
• Market saturation in certain defense sectors may limit growth opportunities.
• Macroeconomic pressures, such as exchange rate fluctuations, could affect profitability.
• Regulatory changes in defense markets could pose compliance challenges.
• Increased competition in the electronic warfare sector may pressure margins.

Scandinavian Astor Group's Q3 2025 results demonstrate its strong market position and effective growth strategies. With a focus on strategic acquisitions and product innovation, the company is well-positioned to capitalize on emerging opportunities in the defense technology sector.

Full transcript - Scandinavian Astor Group AB (ASTOR) Q3 2025:

Philip, Moderator/Call Facilitator, Scandinavian Astor Group: Hello, and welcome to today's earnings call of Scandinavian Astor Group. Today presenting is the company's CFO, Viktor Billström, and the presentation will be followed by a Q&A section. Here you can ask questions either via the audio line or via Q&A. I will explain how to do that in detail following the presentation. With that, I will hand over the word to you, Viktor. Go ahead.

Viktor Billström, CFO, Scandinavian Astor Group: Yeah, thanks a lot, Philip. Welcome again to another earnings call here, and hopefully I will be able to give you some more details here to the quarter report that we sent out. Hopefully there will be some exciting stuff for you coming here. For those of you who haven't seen me before or are new to Astor, my name is Viktor Billström. I am the CFO of Scandinavian Astor Group. I've been part of the Astor team. I was part of the board of directors previously, and then I joined as CFO about two and a half years ago on a part-time basis to start off and full-time from last year. Happy to be part of this Astor journey and what we have done so far.

In brief here, these numbers are relatively similar to the ones I presented about, yeah, it's about six-seven weeks ago in the Q2 report. We have used some of the M&A firepower there to increase our holding in Nordic Shield Group, so it has decreased a little bit, but not too much, I would say. We still have a very large M&A coffin to take from to support our M&A and CapEx or investment agenda. Net sales are the same as previously. We roughly proforma last year, we are close to SEK 500 million. One new thing, of course, is now that we have closed the acquisition of Immunity. I will come back to that, but now we are officially in four countries with Astor subsidiaries. Market cap is roughly the same, about SEK 2 billion. We are more than 200 employees now, or more detailed, 220.

Yeah, the other ones are about the same. We're still three business areas and roughly the same numbers of shareholders. Obviously, this is including Immunity, but not Nordic Shield Group. Nordic Shield Group is not included in any numbers here because it's an associated company. Coming back more to that, you can see that all the companies we own, except Nordic Shield Group, we own 100% of, except Nordic Shield Group, that we own 36.5%. For those of you who don't know that, we have three business areas. We have Astor Tech, we have Protect, and we have Industry. I can show you the next slide. It's easier to explain. On the Astor Tech side, we deliver directly to the end customer.

We are a prime deliverer in the Scandiflash flash X-ray systems and in Ossilium, where we make electronic warfare systems. In Astor Industry, we are a sub-supplier to ourselves in Astor Group on an increasing level, and we are also delivering to the big defense giants in Northern Europe, especially. We have Astor Protect, the newest business area, where it's the same formation as before, but now with Immunity from 1 November here. That would be very exciting, of course. We are also getting a contribution there for our associate investment in Nordic Shield Group. Some recent events, incoming events. We have the Immunity acquisition that we just made. Very happy about that. Coming back to talk more about Immunity, of course. We still have communicated a little bit more about the batteries. We've seen the first orders coming through.

Hopefully, we will see more of that in the coming months. Nordic Shield Group has had a strong development. Coming back to that as well, but they recently signed this about SEK 250 million order. We have now officially applied for NGM main market, a regulated market according to EU rules. We are expecting to be listed there in the early parts of December this year. Some key takeaways here from the Q3 report, if you have not already taken them yourselves or seen the Pareto analysis or Newways. Again, it is a very good quarter. I will go through the numbers later here, but it is a very good quarter, we think, on sales and results. The net sales, their turnover is a 78% increase from year over year.

It's actually a small incremental increase from relatively to in the Q3 or in the Q2, we had 77% year over year. 78% now in Q3. That's a good number, we think. We also had a record order intake here of SEK 144 million in Q3 alone, and that corresponds to an increase year over year there of 432%. It's a very strong improvement, as I said, here on year-over-year numbers, both on EBITDA and net earnings. As you can see in the report, we have an order backlog for Q4 deliveries standing at roughly SEK 149 million. That in itself suggests that there will be obviously a new record quarter for Astor.

On the negative sides, of course, everything will not always be a sunshine story, but on the negative side, there was only a small contribution for Nordic Shield Group in quarter three, but expect that to be the other way around here in Q4. The cash flow was negative on operating level, but that is thanks to the buildup I had of the Q4 deliveries. As I said, the expected order backlog for Q4 is SEK 149 million. There is a lot of buildup going into Q4, which is our historically, as you know, from last year, our strongest quarter. Very happy to be just in the midst of our strongest quarter here and still delivering a good summer quarter here with Q3. The numbers then in more detail, as you can see, roughly SEK 79 million on net sales. Last year was SEK 44 million.

Year to date, we are now for three quarters, we are now above the numbers we had on the full year last year. It is increasing, but things have to be built and invoiced, and it will not be a rocket ship by itself. Things have to be worked on and invoiced. The numbers are coming through, and especially here in quarter four, as mentioned. EBITDA margin is, of course, on a very good level here, higher than expected, of course, and about 20%. The adjusted number there is SEK 70 million with some adjustments for rental and this relisting to the main market there at NGM. That in itself takes some costs. Let's move on there. I can mention the order book as well, SEK 368 million order book. That is also, of course, a record number for us. That is very good. Coming back to that.

All the segments are positive on EBIT level there. We have both the Industry, Tech, and Protect, as mentioned before. Protect is maybe not the highest number for year to date, but obviously we will get a nice effect there from both Immunity that will go into that business area from 1 November. And then we also have Nordic Shield Group that will contribute to the earnings there in that business area from hopefully with bigger numbers than came in Q3 there. You can see roughly SEK 500,000. So here are some quarterly look back here on the numbers, and it's a nice, of course, increase both on, as already mentioned there, for sales and adjusted EBITDA. I showed you this picture last time around, so I might as well do it again here.

If we take the order book end of the quarter, we are at SEK 368 million. If you include what deliveries or order backlog that Immunity has, that is SEK 250 million. We are at, going into quarter four, roughly SEK 600 million. As mentioned also before, this possible extension of the Immunity contract, that in itself is SEK 400 million. Of course, we now, as new owners of Immunity, want to have a good dialogue there with the main customer and other customers, of course, as well, and see if we can push things higher than that. This is the way it looks now. A total order book then would be, if the contract is extended and nothing else, a total order book of close to SEK 1 billion.

This is roughly the same picture as you have seen before. Nordic Shield Group is an associate company to Astor. As of 7th of October, we own 36.5%. They have a lot of exciting businesses and with reasonable margins there. Obviously now from Q4, they will contribute more on the operating profit there with 36.5% ownership than the previously 30% that we had. They are definitely an exciting company here for the future for themselves and as an associate company to Astor. Obviously, you know this, or for those of you who do not know, Sweden has had a lot of underinvestment the last 30 years in also not just the military, but also on the civilian defense. They are exposed to both the civilian buildup and the military buildup that needs to happen, especially in Sweden, but also in our neighboring countries.

Moving over to Immunity, very happy to have Immunity on board. They have a brand new management team that came in last year, and they have made some really good add-ons to that. There are a really good team here that can probably, we hope that it will be a very good business to be in in the coming years here. Of course, bullets is something you need, both for warfare, but also for training. You need a lot of bullets for military bullets for training as well. We see that this will be an exciting business for Astor and for you as shareholders in Astor here in the coming years. Okay, some outlook, and then we move over to Q&A part. We have the listing on NGM main market here coming up in the earlier parts of December this year. Most costs are incurred.

They are about SEK 1.3 million there year to date. There will be some small add-ons here in Q4 as well on that number, but it's not very large, and it could have been a lot more, but there's been a tremendous work internally on this, and we managed to keep the fee down, so it hasn't cost us too much. It will be exciting for Astor here to be on a regulated market, and we hopefully will have something similar to this picture here with Astor management in the early parts here of December, as I said. We are very happy about Nordic Growth Market, of course, and this is being on a regulated market. If we look in a longer-term perspective, we have always the possibilities after we list on this NGM main market to, of course, list at other regulated markets at some future.

We are very, very happy to move here to NGM where we have a very good dialogue and partnership with them. What's more to come in 2025? As I said, 36.5% of Nordic Shield Group as of Q4, up from 30% in Q3. We will continue to see a little sale on electronic warfare sales here, or not sales, but deliveries. Hopefully, sales as well on a big level. We are, of course, very excited to see more on that. What we will see is the order book that they already have, they will continue to deliver on, and that will affect the numbers because they were very small in the comparison here. We will also see Immunity here contributing from 1 November 2025, and we know that they have a really good start here to the last quarter of this year.

It's important to also mention this because it affected our Q3 as well. Capitalized development costs, that's something that's necessary for us to invest in the customer dialogue we have with, especially the electronic warfare business. But that number, as part of or on a relative basis to the revenue, it will come down in Q4 here. It was maybe on the higher end in Q3. That's important to mention. On the M&A side, I put it in italic there. It's only roughly six weeks left of this year. We'll see if we can push some M&A also here coming out by the end of the year or early next year. M&A is a big part of what we do at Astor. It's something we're always pushing, but the dialogues need to be wrapped up, and we need to have consensus on valuations.

With that said, and I think you got this message by now, we expect to finish 2025 on a strong note. With that, I move over to the Q&A session. Thank you. Thank you very much, Victor. As said in the beginning, we will now allow questions. There are two options, as said. The first option is to go via audio line. If you want to ask a question via audio line, I would ask you to click the raise hand button. Afterwards, I will allow you to speak. The other option is to go for the Q&A function. Here you can type your question in written form, and it will be read out by myself and answered by Victor afterwards. We will prioritize audio questions, and I see the first hand is raised by Henry Bendish. Henry, you can unmute yourself now. Yes.

Thanks, Philip and Viktor. Just a few questions from me this time. The first one you already answered. The capitalized development expense, I think, was a bit of a margin pusher here. Other than that, on the segmental level, I've seen at the Astor Protect Q3 figures that the margin actually also saw a steep jump, which, of course, there was some effect from the Nordic Shield Group at equity contribution. If even I exclude that, the margin would have still been at around 14% versus minus 7% and 2% in the minus 3% and minus 7% in Q1 and Q2. What's driving this margin increase? My understanding is that AirSafe is a bit of scaling in a scaling phase, for example, or what's the driver behind this development here? In Astor Protect segment, you mean, or? Yeah. Yeah.

Let's see if I can show you that picture here. Yeah, obviously, AirSafe is scaling. They had a very strong quarter in Q4 last year, maybe not as strong if you look at the comparables from last year. Yeah, it's developing well, and we will get a nice push there from Immunity being included here in Q4 in the Protect segment. Also, as I said, not to say too much, obviously, we will get some contribution there, more than that number, $500,000 at least from Nordic Shield Group here in Q4. Yeah. Cool. Looking forward to Q4 already. Yeah. Me too. We still need to wait a few more months. Great. My next question is Ossilium. Electronic warfare, I think it's over the news everywhere.

NATO has realized that this is the biggest sort of missing technology that they neglected over the few years. We see you with Astor Eclipse being a very, very interesting product. I think we sort of have not spoken a lot about Astor 4 in the last few months. You said it in the report that the testing in France went really well, and it is now back to evaluation. Maybe you can share a little bit of a time horizon, what we can think of, what do you sort of expect from this product going forward? The tests, as it says in the report, were quite successful. I am sort of thinking, what is the next step here in Astor 4? Yeah, sure. Sure. Yeah.

On the electronic warfare business, of course, I could include a lot of headlines coming out from all over Europe here of disturbances at the airports related to drones without any messenger. Obviously, our Eclipse product would be a possible solution for that on a soft kill basis. We will see where the dialogue goes. It is a little bit sad for the people of Europe, of course, but it is something necessary to build knowledge and to get these new techniques that we can offer into the system here so we can defend against this. Obviously, the biggest product as we see it in the coming time here in the future is this Astor Eclipse with the drone threat. On the Astor 4, it is still a good product.

As we said in the reporter, we mentioned that it was a successful test. Now there's some technical review ahead of the next part. Hopefully, we will see some exciting news coming out there as well. It's important to mention that in the beginning, when I started here with Astor, Astor 4 was a very big part of our business, but we have a lot of other things at the moment. It's an exciting product, and we hopefully will see good news coming through. As of now, the test was successful, and we plan ahead for the next stage there. Okay. There's not a time horizon you can give us? I mean, how long do these evaluation phases usually last sort of to give us an understanding here? Sure. Good question.

Now, as you have seen before, maybe on the news about Astor 4, it's heavily dependent on a lot of things, especially on government giving airspace and giving clearance to fly and being able to jam because it affects a lot of things going around this area. It is, in that sense, a little invasive product to test. That is why it's taken longer time than expected. Right. Yeah. Okay. I guess I need to live with that answer. I mean, you cannot tell me more, I guess. No. Fine. Last question is regarding M&A. You already gave us in the last slide a little bit of an outlook, but in italic writing that might be not ideal in 2024. Is there any details you can share about location, industry, size, or any of that stuff so we can have a rough idea of what's coming?

Or will it harm your negotiating power? On the M&A side, you mean? Yes. Yeah. Yeah. I think we showed pictures of that before. I did not include it in this presentation today, but we have a lot of all of the acquisition targets we have are in Northern Europe. It is Northern Europe, meaning the Nordic countries and the Nordic part of continental Europe. Yeah, I cannot say anything more than that, but we have a lot of exciting dialogues. One thing to mention is, of course, that the dialogues we have are becoming increasingly more on bigger acquisition targets that can contribute more to the Astor, both top line and earnings. We are getting more and more Astor is getting where ourselves becoming a bigger company.

Then it's also something we look at adding, not going for too small acquisitions, but something that can contribute more on both top line and earnings to give us a nice push towards the goal here in 2028. Right. Okay. Thanks. That's it from my side. Yeah. Thanks. Thank you very much, Henry, for your questions. Right now, I don't see further hands raised. Once again, a reminder, if you want to ask a question via audio line, please use the raise your hand button. With that, let's dive into the written questions. The first one is about the working capital buildup. Victor, can you maybe elaborate for which segments the deliveries you expect are mainly coming from? Yeah. Yeah. We usually have a lot of buildup related to the industry side.

That is something we have seen before, and that's without giving too much detail or elaborating too much. I can say that especially the industry side is driving that buildup ahead of Q4. Okay. Thank you. The next question says, "You have a credit facility of around SEK 127 million until 2026 to finance further growth. Beyond that, do you anticipate to issue new shares, taking on debt, or using internal cash flows to finance further M&A?" Yeah. Good question. Positive cash flow and a free cash flow is always very good to finance your acquisitions. If we go for bigger targets, as mentioned here, of course, we can look into more. We have a net cash position of about SEK 140 million today. And on top of that, we have, as mentioned, this acquisition loan that we can draw on.

We have used SEK 27.5 million on that for Carbonia, but we still have SEK 100 million to draw upon there. We have a very good position here to be able to execute on our M&A agenda, I would say. Going forward, I think I mentioned that before as well, we have a lot of interest from the financial market on giving out a corporate bond. That is, of course, something that can finance a bigger acquisition here in the future. That is something we're definitely looking at. It was not possible to do that a couple of years ago or maybe only a year ago, but as the sentiment has shifted, there is not only interest in the equity market for getting exposure to defense, but also in the debt market. That is something we're definitely looking to. All right. Thank you very much.

I think that answers the question. Another question says that over the past month, it appeared that you slowed communication a bit. Do you intend to give the capital markets more updates on the status of your processes and also customer interest going forward? Yes. Sure. Sure. Yeah. We understand that it was maybe not the same level of communication here, but you need to understand that this relisting at the NGM main market has taken a lot of our time. We have had a lot of dialogues on the M&A side. As of now, I cannot expand too much about that. Of course, M&A is, as I said before, a big part of what we do at Astor. We expect M&A news flow coming out in the future here. All right. Perfect.

Next question is regarding an interview Matthias did where he mentioned that he believes that the market most likely is underestimating Astor within these segments, EW and composite. Is it possible to elaborate further on that without saying too much? Yeah. Sure. Sure. Yeah. On the electronic warfare side, I think the shareholders listening in or that has been with us a little bit longer here, maybe the full journey here, three years, that they know that we've been in the electronic warfare business for 30 years. So obviously, I don't know if that's fully understood by the market. But I think that was the meaning of the CEO's, what he said there, that we have a lot of knowledge that we will hopefully transform into bigger orders here in the future.

On the composite side, I think they are already delivering, but of course, they could do more, especially to the defense giants. We could do more of their production at our production sites so they could outsource more to us. It is always a customer dialogue, and I will not get ahead of that. Yeah. That was the meaning, I think, of the CEO's words there. All right. Perfect. Thank you. Thank you very much. Next question is on mergers and structural changes. Example given is Scandinavian Astor Technologies AB, which has been merged now. What cost savings or efficiencies do you expect, and when do you expect to see them? Yes. Yeah.

I wouldn't expect it's not too much cost savings, but it's always good to do that kind of make the group more efficient and close down or merge companies that don't have any, it's not any necessary existing of this Astor Tech. We might as well merge it to Astor Group. If you look two years back, we closed down or liquidated one subsidiary that didn't have any sales or was expecting to have any sales. It's important to always make the group more efficient. That's also something we look when we buy companies, if we can buy them as that we only buy the asset purchase. We don't buy any more limited companies that we need to submit everything every month on taxes and so on. It makes the administration easier.

Of course, there will be cost savings, but it's not really measurable at this stage. All right. I understand. Thank you, Viktor. Next question is, if you could make your dream acquisition tomorrow, can you explain what would it look like and which type of company or technology would you target? And maybe also explain why. Yeah. Oh, it's a good question. Given where we are on the acquisition pipeline that we're working on, I think it's not good for me to elaborate too much about that because I don't want any negative effects on the US shareholders. Don't want that either. I think I shouldn't elaborate too much about that.

Obviously, if I just mention a few things, it's very important for us that they contribute on a top-line basis and they contribute on the earnings so we can build, so we can, together with the current Astor subsidiaries, get ourselves closer as quickly as possible to the financial target there in 2028. All right. Thank you. Next up, can you elaborate on the collaboration with Altruist and how is it going right now? Yeah. Sure. Sure. It's an exciting product or the collaboration that we have together with them. It's especially really good niche batteries for the defense market. Hopefully, as I mentioned, we will see more news about that collaboration coming out.

One thing is definitely for sure, and that is that the old battery or the battery industry, as we know it, with these rare earth minerals is something that's going to affect us in the future here and that we do not have a lot of these rare earths in Europe. This technology could really be something for a Europe battery base here in the future. Definitely interesting, especially in the defense space. All right. The next question is regarding the collaboration with Scandiflash. How do you see that going in the future? Oh, yeah, on the newest collaboration there. Yeah. Yes. It's too early to say now. It's quite a new collaboration, but it's definitely a very exciting one. We have to, it's too fresh to speak about it at this meeting today, but hopefully coming back to that on the Q4 earnings call.

All right. I'm looking forward to this then, definitely. Currently, last question we have here, Viktor, the question is, when are you going to increase your holding in Astor further, or do you intend to increase it further? Yeah. That's a good question. If you do not know it, there's obviously, if I buy in the open market, I will not tell you beforehand. What I can say is there's some warrant purchases coming up here for the old warrants that were issued before Astor was listed. I have 50,000 warrants there. Of course, I will intend to buy those. Very good. Thank you very much. So far, we do not have any further questions in the queue, and I do not see any further hands raised.

Once again, a reminder, if you want to ask a question via audio line, please use the raise your hand button or ask a question in the Q&A section. I do not see any further raised hands or questions right now. With that, I would thank you, all participants, for being part of this call today. For some final remarks, I would hand over the word to you, Viktor. Oh, thank you. Yeah. Thanks for listening in, and hope to speak again soon. Looking forward here to a strong last quarter of the year. Very good. Bye-bye. Bye-bye.

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