Good morning, and thank you for joining us today. We look forward to walking you through our fourth quarter and full year performance for 2025. This was a year marked by strong operational execution, strategic progress across key markets, and a meaningful strengthening of our financial position. I'm Peter Nilsson, CEO of Kitron, and joining me is our CFO, Cathrin Nylander. After our remarks, we will open the floor for Q&A, so please feel free to submit questions anytime during the presentation. With that, let's get started with a look at the key highlights of the fourth quarter. So next slide, please. Q4 marked a very strong finish to the year, with solid momentum across several of our core focus areas. Our order backlog continued to accelerate, increasing 50% year-over-year to EUR 709 million.
This level of order visibility provides a strong platform as we enter 2026. Defense and aerospace was again a standout performer, delivering 147% year-over-year revenue growth as geopolitical demand translates into firm and scalable orders. Financially, we delivered close to EUR 234 million of revenue and 22.5 in EBIT, resulting in a margin of 9.6%. This represents one of the strongest quarterly profits in the history of Kitron. Cash flow was also robust at EUR 18 million, reflecting efficiencies in working capital and disciplined cost management. We secured EUR 198 million in new defense and aerospace contracts and EUR 44 million in electrification, reinforcing the strength of long cycle demand drivers in these markets. Building on these strong quarterly results, let's now take a look at the operational drivers behind this performance.
So next slide, please. We continue to see a strong momentum. Our teams executed exceptionally well on customer ramp-ups while simultaneously onboarding new programs across several sites. Even in areas where volumes or cost conditions were more challenging, we maintained profitability. All regions delivered EBIT margins above 9%, proof of the scalability of our operating model and our disciplined cost culture. Our strategic programs in defense, industrial, and electrification are progressing as planned, and in several cases, ahead of plan. These programs strengthens our competitive position by embedding us deeply in customer roadmaps. On the M&A side, we signed the acquisition of DeltaNordic, which is highly complementary to our footprint and capabilities. This transaction supports our long-term growth ambitions and positions us to capture further high-value opportunities.
Based on the Q4 order intake of EUR 344 million and a strong book-to-bill ratio of 1.5, we're raising our 2026 outlook. We now expect between EUR 900 million and EUR 1,050 million euros, with an EBIT between EUR 84 million and EUR 108 million. Having highlighted our operational momentum, let's move into how these trends played out across each sector in Q4. So next slide, please. It's clear that the portfolio continues to show a healthy diversification, but also a meaningful differentiation between segments. In connectivity, we saw a 9% return to growth in Q4. While legacy products still create a drag on full year numbers, the underlying trend is improving, particularly in advanced IoT connected sensors, where volumes grew around 50%.
Electrification posted 10% growth in Q4, supported by a surge in energy requirements from global data center developments. A new U.S. customer ramped and contributed approximately EUR 55 million during the quarter. Toward the quarter end, we received orders from this customer amounting to EUR 44 million, partially covering the 2026 demand. Industry accelerated sharply with a 27% growth in Q4. Strength came from automation, subsea oil and gas activity, and transportation solutions. However, pockets of weakness remain in construction and infrastructure. Medical devices showed a modest growth of 4% in Q4, with higher value segments such as life support and surgical systems demonstrated resilience, while home care and diagnostics remained soft. Defense and aerospace continues to be a standout performer. Revenue grew 147% in Q4, with strength across surveillance, avionics, secure communications, and unmanned systems.
This segment is now a dominant growth engine in our portfolio. These sector trends set the stage for a deeper look at our order backlog and what signals that for the months ahead. So next slide, please. Our order, our order backlog at year-end reached EUR 709 million, up 50% from last year and 19% sequentially. This is one of the clearest indicators of the confidence customers place in Kitron to deliver mission-critical solutions at scale. The rolling six-month outlook now stands at EUR 531 million, up 14% quarter over quarter, providing a strong near-term visibility. In connectivity, structural growth continues, supported by the broader IoT adoption and increased sensor penetration. While order intake was softer sequentially, the long-term trajectory remains positive.
Electrification maintains strong momentum, driven by global electrification trends and the unprecedented build-out of data and data center infrastructure. Industry shows a mixed picture. Several large programs are progressing well through quotation stages, while smaller customers face market-related pressure. Medical devices remains a stable sector for us, showing above-market medium potential growth. Defense and aerospace is by far the largest growth driver, with 117% growth in order backlog. Demand is fueled by the high-priority projects in missile technology, surveillance, encryption, avionics, and advanced UAV platforms. Visibility here is exceptionally high. Given the strong demand visibility, let's transition over to the financial results that reflect our execution in the quarter. So next slide, and over to you, Cathrin.
Thank you, Peter. The financial highlights. Q4 was a very strong financial quarter. Revenue increased close to 46% year-over-year to almost EUR 234 million. Robust execution, favorable mix, and strong demand in high-margin segments contributed to the growth. EBIT nearly doubled to EUR 22.5 million, delivering a 9.6% margin. Both volume leverage and continued cost discipline drives margin improvement. Return on operating capital strengthened to 39.3%, a significant improvement driven by both earnings growth and efficient asset utilization. Our cash cycle improved dramatically, with days down to 55 compared to 106 last year. We ended the quarter with a net cash position of EUR 31.6 million. This is a highly attractive position that gives us strategic flexibility for future investments and M&A activities.
Net income grew to EUR 17.2 million, and earnings per share increased accordingly. After reviewing Q4 in detail, it makes sense to broaden the perspective and evaluate the full year performance. Next slide, please. Full year 2025 highlights. For the full year, revenue reached EUR 738.4 million, a 14% increase, driven by strong demand across our prioritized markets. EBIT increased 35% to EUR 64.5 million, with margins expanding to 8.7%, reflecting an improvement in operational efficiency and strategic mix over the year. Operating cash flow more than doubled to EUR 93.6 million, demonstrating significant progress in working capital management. Net income reached EUR 43.8 million, representing growth of more than 56%. Overall, 2025 was a year of strong strategic execution, improved profitability, and enhanced financial strength.
Building on the full-year trends, let's examine the contributions from each region and business sector. Next slide, please. Business sectors. Regionally, CEE delivered the strongest expansion with 50% revenue growth, driven by major customer ramp-ups and expanded capacity utilization. Nordics and North America followed with 23% growth, anchored by strong contributions in defense, aerospace, and industrial segments. Asia grew 6%, reflecting stable but more moderate demand compared to Western regions. Importantly, through the scalability of our global model, all regions delivered EBIT margins above 9%. Our workforce expanded to 3,090 employees, an increase of 678 from last year, ensuring that we have the resource and operational bandwidth to support current and future growth. These results brings us naturally to the cash flow and working capital development, supporting our growth. Next slide, please.
Operating cash flow was EUR 18 million in the quarter and EUR 93.6 million for the full year, representing a substantial improvement in our cash generation capability. Net working capital decreased to EUR 135 million, down 28% year-over-year and down 10% sequentially. The primary driver is higher customer prepayments and deposits, which reduce balance sheet risk and support liquidity as volume scale. These improvements provide us with more financial flexibility as we enter a year of higher production volumes and new customer ramp-ups. Next slide, please. Our balance sheet is stronger, it is in a stronger position than at any point in recent years. Net gearing is negative, and net interest-bearing debt over EBITDA is also negative. Adjusted for the DeltaNordic transaction, net gearing and net interest-bearing debt is still very strong.
These metrics highlight that we are operating from a very strong financial position. Financing costs remain low and also improved cash cycle further supports profitability. Our equity ratio strengthened to 42.4%, giving us resilience and the capacity to invest strategically while maintaining financial discipline. With this financial position in mind, let's wrap up the presentation with the key takeaways from Q4. Next slide, please, and over to Peter.
Thank you, Cathrin. To summarize, Q4 delivered very strong results, up 45.6% from revenue, order backlog up 50%. The book-to-bill ratio of 1.5, highlighting high confidence from customers across our portfolio. Defense and aerospace continues to be the largest contributor to growth, with a 147% increase in revenue and a 117% increase in order backlog. Fantastic numbers! Non-defense sectors also delivered a healthy top-line growth of 14%, supported by diversified demand drivers. New defense tech-related technologies are expanding at a scale of opportunities in production and supply chain management, and seven of our sites are fully prepared to support continued rapid scaling. With strong operational momentum and a solid near-term demand outlook, we're raising our guidance for 2026. This positions Kitron for another year of meaningful, profitable growth.
And with that summary, we're ready to move over to Q&A. Next slide, please. Please submit your questions through the webcast interface, and we'll address as many as possible. And let's see, we have some questions coming in. We're in a bit of delay on the question side. So, Cathrin, well, Q4 really developed across the board. Strong revenue nearing EUR 234 million, margins close to 10%, and a solid cash flow. A quarter like that certainly makes presenting the numbers a pleasant task.
Yeah, Peter, it does. And I have to say, seeing the cash cycle improve from 160 to 55 days was a personal highlight. Finance teams don't often get moments of joy, but that one certainly came close.
Well, the EUR 709 million backlog at year-end doesn't hurt either. 50% year-over-year increase gives us reassurance, and I imagine it lets your teams sleep a little better.
Certainly helps, and it's a big reason we're comfortable raising the 2026 outlook to EUR 900 million-EUR 1,050 million in revenue and EUR 84 million-EUR 108 million in EBIT. Optimistic, yes, but grounded in what we're actually seeing.
Agreed. Demand is visible. Now, it's all about execution and continued rapid scaling. I see the Q&A stream is catching up now, so let's move over to some questions.
Mm-hmm.
So let me see here what the order is. Okay, the top is the first question. Gabriel says: "Can you quantify your expected 2026 growth for data center segment, given that the key driver... Given that this is a key driver behind the increased, higher guidance? Thank you, and congratulations for an amazing report." Well, thank you, Gabriel. Well, can we quantify? The—I would say the, the initial order we received from, from, just one customer was for EUR 44 million.
Mm-hmm.
-and that, as I said, partially covers 2026. So-
Mm-hmm.
We expect an expansion of that order if things move along the way they're doing now. So of course, it is a big driver. It's gonna be somewhere in the vicinity of EUR 50 million-EUR 100 million, depending on how the year develops. But right now, we have orders for EUR 44 million, and those should be delivered sometime towards between mid-year and end of Q3, depending on timing. Waring asks: "Rapid growth incurs the risk of hidden flaws building up in the organization, a.o. the Penrose effect. Can you give some flavor on what action is taken to strengthen the organization? Do you publish number of accidents in plants and development of quality complaints?" Cathrin, what do we do when it comes to accidents?
I think we may be a bit clear here. First of all, all sites are their own legal units, and so we follow any profitability on a site level. In addition, we capture about 130 different KPIs on pro, on operations every week for every site. It's very hard to hide flaws, I would say, locally, due to that. So we have very strong control, and we've had not—we don't have any accidents to report on, and the quality complaints, I think, are at a very low level, also followed every week.
Given the follow-up, the weekly follow-up, each of the local legal entities, and that they report to us every single Friday, these 115 KPIs that you talk about, they're performance indicators, really.
Mm.
So there's a follow-up question here also: What is the state, current state of thinking about M&A, and what is the opinion about current valuations? Well, let's start with the valuation part. I think the valuations tend to be pretty high, especially if you can demonstrate strong exposure, strong exposure to growing market sectors, right? You can get low valuations if you're not exposed to that, but then revenues and profitability tend to be lower also. So right now, we are in the midst of taking on board Delta Nordic acquisition. It's going really well. The team there is fantastic. The January reporting was completed and done in a model of the Kitron operating model, so we're happy about that.
We're also then making sure that there's enough capacity for DeltaNordic to be able to manage and grow their continued order backlog. So that's the focus now. We continue to run our M&A project with our advisors. So we're putting together a refreshed list and taking a look at what market sectors we would like to grow in. We're pretty strong in defense aerospace, so that may not be as strong a priority for us on the M&A front. So there's two parts to it: swallow what we already have, make sure that works really well and integrates and becomes part of Kitron, as well as keeping an eye on the market and positioning ourselves for any opportunity we may like.
Torbjørn, are you seeing any evidence of demand pulled forward in any segments related to supply chain tightness, particularly with memory components? If so, in which verticals and to what extent? Our message to all of our customers are: Make sure that you have enough memory components, particularly, across the board, for whatever market sector, market segment, or product you're building for the next 18 months. And having orders out there for parts is by no means a security. So the only security is having it in stock, and that's how we're approaching this towards all of our customers, working very closely with them to make sure that we are able to make sure that we have parts on hand, covering the next 18 months.
We'll see how that goes, but so far, things are moving along as they should, and we don't have any tightness in our sights right now. Marcus Gavell says, "Which parts of connectivity remain the softest? What's holding back order intake growth?" I'd say it's some legacy products with older technology, where you see newer tech taking over, right? And then there's the market in general, which I'd say the companies that are succeeding are launching new technology that really creates a market for them because it delivers competitive solutions that changes spend in industry that invests in these or provides new capabilities. So that's where the growth is.
We can't look at legacy companies and say, and say they're because they're not growing, most of them. And that sort of connected to the general industrial macro trends we see also. You know, if you don't have new technology, if you're not offering new solutions, then you're having difficulties. And the market and the strong industrial motor in Europe, Germany, and even in China are not that strong for the general industry sector. And that's what we see on the market sectors also. Torbjørn asks also, "Delivery schedule on the EUR 44 million electrification contract." I've already commented on that.
What's the current backlog of DeltaNordic, and how did DeltaNordic's order intake develop in Q4?" DeltaNordic was not part of Kitron until we had the closing here in January, so DeltaNordic's order intake is not part of the EUR 709 we have. I'm not sure exactly how it ended in Q4, Cathrin, and their numbers.
No, I don't have it, but I think they have a good coverage for the first three quarters of next year, in line with the expectations, and also-
Yeah.
... in line with what you can see, generally.
But we have the January results, so-
Mm-hmm.
... and I think that's what you're basing it on when you say we have about three quarters coverage for this year.
Yeah.
Which is, you know, pretty strong anyway. It's never four-quarter full coverage.
Mm-hmm.
There are clearly scale effects here from the defense ramp-up. Could you elaborate on the gross margin development? Any recent changes in product mix? Any recent change in the product mix which has lifted it? It's, it's a lot about scale, right? So, not growing overheads as you grow revenue. And that's a big part of the, of, of the gross margin. We had, you know, if you look back at, at late 2022 and early, and, and early 2023, we have five quarters, straight quarters with above 9% margin. So we had a similar situation back then, when we in 2023 delivered EUR 775 million top line. Some very strong numbers. But of course, now in Q4, and as we look into this year, the numbers should be even stronger.
Gross margin, material content, versus, versus, versus our total top line remains about stable. It's around 65% of direct material cost. And then there's a direct labor cost, which is also pretty stable across the board. Don't recall the exact number now. Magnus says, "Congratulations on strong results and execution." Thank you, Magnus. "Can you please comment on the reason for a relatively wide guidance for 2026?" Well, there's a low-risk scenario, and then there's a slightly higher risk scenario, and then there's an even higher above that. And we positioned ourselves now where we think our midpoint is strong at EUR 975 million, and then we have ±75 million on that guidance.
Mm.
There is a total possibility for that upside, but we'll have to move forward further into the year and see how that actually firms up that scenario. Any other comment on that, Cathrin?
No, I think you're right. We have 7% now from EUR 900-EUR 1,050, from the midpoint to that, and we're starting at our previous midpoint, as a lower end guidance, and I think we see a lot of opportunities as well. So that's why we are expanding a little bit, to show what we see.
John asks: "Congratulations on an excellent quarter. With the scale increasing and EBIT margins approaching 10%, what are the key drivers that could further improve or constrain margins in 2026-2027?" So that's one question. "How sustainable is the current mix-driven profitability at higher revenue levels? Two, given the significant increase in defense and aerospace backlog, how should investors think about revenue phasing and margin development through 2026-2027, particularly regarding backlog conversion time and operational rates?" I think our guidance gives where we think we're heading, right? So we're heading up towards 10% when we get to revenues above EUR 1 billion, you know, we'll see a couple of points, maybe above 10%. I can't really comment in any further detail on it.
Jeppe Baardseth said, "When looking at market balance, a lot of focus is on the demand side. Have you any indication on the supply side's development? Given growth and capital returns, I would assume more are investing in increased capacity." So when you say supply side, I assume maybe you're talking about competitors and how supply on that part is growing or maybe you're talking about the material supply situation, and I've commented on the material supply situation a little bit, so which is the most critical part. I don't see competitors growing capacity a lot. I don't see them investing in a lot of capacity. I don't see any competitor having the strength we have in defense and aerospace, driving that capacity increase.
I mean, there's another aspect of defense and aerospace demand, and that is localization, sovereign supply, regional manufacturing close to the market, which is a really strong driver for Kitron, right? With a presence in all of Scandinavia, a strong presence in all of Scandinavia and Norway, Denmark, a lot of localized manufacturing, a lot of offset demand driving growth in those countries when it comes to defense manufacturing. Many of the large manufacturers and the new defense tech customers, they want to be in Central Europe, right? So with Lithuania, Poland, Czech Republic, extremely strong growth in all of those areas. Poland is turning into a defense manufacturing hub for Europe, so we have a strong presence there.
We invested in land, we invested in additional buildings. So right now we have three locations in the region where we're located. A year ago, we had one location. So we've expanded here on more footprint, and we're looking at being able to support customers that may have large programs that have to be built in Poland with even further expansions. Torbjørn says, "How much of the EUR 100 million UAV contract was delivered in Q4?" What was it, about EUR 30 million, Cathrin, something like that?
No, it's more, between EUR 30 million and EUR 50 million.
Yeah, okay. Yeah, I say, I think 30 was the minimum we were targeting.
I'm not gonna-
No, they did a good job. They did a good job.
Yeah.
I mean, there are several thousand units being delivered every week.
Mm-hmm.
So I read about some competitors where they hope to be delivering, you know, 1,000 a month. Well, we do 500 a day or 600 a day.
Mm-hmm.
Hey, I sort of ran out of steam here on the question side, but-
Yeah, I think we can comment, lastly, we didn't say so much comments about it in the presentation, but we're proposing a dividend of EUR 70 per share, compared to EUR 35 last year. This consists of around 30% of the net income. We have a policy saying that we should distribute 20%-60% of net income, so we are at 30% for the current time, and it's about EUR 113.5 million in cash.
Another question usually comes up then, you know, why don't we, why don't we have a higher dividend? And the reason is we're a growth company, right?
Mm-hmm.
So we're gonna grow a lot this year. We grew a lot last year, and our financial position supports that growth now.
Yeah.
We wanna make sure that it stays that way.
Yeah, and we have an M&A strategy still, so. Mm-hmm. Good.
Okay, Cathrin. Hey, that was 32 minutes today, so longer than usual-
Yeah.
But it was a year end.
Could I offer stock dividend? No. We don't have that currently. Mm-hmm.
Okay, great, so we'll see you out there. We're on several road shows over the quarter.
Mm-hmm.
We're a couple of times here in Oslo. We're in London, we're in Paris, we're in Helsinki, we're in Stockholm. So take a peek at our schedule, and you may wanna meet us at one of those locations.
Mm-hmm.
Thank you!
Okay, great.