Welcome to the Hexatronic Q3 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions- and- answers session, participants are able to ask questions by dialing pound 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Rikard Fröberg. Please go ahead.
Good morning, everyone, and welcome to today's presentation of Hexatronic's quarterly earnings for Q3 of 2026. I am Rikard Fröberg, Group CEO, and as always, I am joined by our CFO, Pernilla Lindén, and Head of Investor Relations, Patrik Johannesson. We have a strong performance to report today. Our net sales were SEK 2.5 billion, which is actually all-time high for Hexatronic and corresponds to 17% organic growth. All three business areas contributed to this growth, and it is also worth noting that North America is now, for the first time, our largest region. Adjusted EBITDA was also a highlight at SEK 281 million or 93% up over last year. Here too, all three business areas contributed to growth, with Fiber Solutions doubling the results and Data Center and Harsh Environment both at all-time high.
Cash flow was robust at SEK 228 million, and together with the earnings improvement, made a rather material impact on our net debt leverage, which is now down to 1.3x . All in all, a quarter that demonstrates that the plan that we embarked on last year is working, and I must say that I am proud to see the fruits of the hard work by everyone on the Hexatronic team. On this next slide, it shows visually quite clearly how the business has turned a corner in 2026. Revenue, which was rather flat for a number of quarters and even saw a slight weather-related drop in Q1 this year, is now back to healthy growth. Adjusted EBITDA on the back of the performance improvement program we launched last year now has three quarters in a row with sequential growth.
Next, I wanted to share with you today a really neat example of the difference that our products can make. In this case, it takes us all the way to the South Pole. You may have noted that the Nobel Prize in Physics was recently awarded to Francis Halzen for his work on neutrinos in the IceCube Neutrino Observatory in Antarctic ice. What is less known perhaps is that over the years, Hexatronic has supplied highly specialized fiber optic cables to this facility. Each cable is 3,000 meters long and weighs about 5 tons, and these are cables that can withstand extreme temperatures, of course, as well as depths, and they are used to send down optical sensors detecting those neutrinos thousands of meters into the Antarctic ice.
Of course, we're very proud of having played a small part in this world-leading research that is now recognized with a Nobel Prize. We've talked for a while about the diversification journey that is underway for Hexatronic, and by now, we enjoy a rather good balance between our different business areas. Fiber Solutions, after the recent performance uplift, accounts for a little over half of the revenue and about 45% of the profits. Data Center continues to grow and is now close to 30% of group sales and 40% of profits, whereas Harsh Environment has stabilized after a slow start to the year. This diversification is important. It gives us a more balanced portfolio and therefore resilience to market ups and downs. If we move on to look at the business areas, each one and starting with Fiber Solutions.
Q3 was a strong quarter for Fiber Solutions with 13% organic growth and Adjusted EBITDA that doubled over last year, albeit against a relatively weak comparable. We now see the full effect from the cost savings activated last year, and therefore, we're increasingly refocusing this business towards growth. Demand in North America and APAC is healthy, and in fact, we see the business growing faster than anticipated in the U.S. and have therefore decided to cancel the previously planned downsizing of one of our facilities there. We're simply filling up the lines faster than we expected. The European market, however, remains subdued, with low fiber-to-the-home activity, which we expect to continue in the near term. In the Nordics, we are now beginning to see signs of increasing activity in transport network.
This is a trend similar to the North American market, but it's not yet apparent in the rest of Europe. Next is Harsh Environment. Here we have a bit more of a mixed picture. Industry, and in particular the defense sector, is quite healthy, with demand for connectivity solutions actually starting to outstrip supply, leading to strong order books and extended lead times. Oil and gas customers, on the other hand, continue to be cautious with CapEx due to uncertainty relating to the Middle East conflict. The business overall has stabilized as expected after a soft start to the year and now shows 6% organic growth in the quarter. Adjusted EBITDA at SEK 43 million was the highest quarter we have seen. Here we continue to focus on margin improvement and expanding capacity for connectivity products and assemblies.
JOWO, our recent acquisition in Germany, is performing strongly, and this is one of the areas where we're actively investing in expanding capacity. Last, but certainly not least, the Data Center business area has had another outstanding quarter. Sales more than doubled from last year, of which 44% was organic. Adjusted EBITDA margin has, as we have discussed before, now stabilized around that 15%-16% level and with low CapEx requirements, this is a business that delivers strong return on capital. Obviously, Q3 was an exceptional quarter. Looking ahead, we continue to see robust demand and a project pipeline, but we know that we're entering a slower season, and we cannot expect future quarters to deliver this level of organic growth. We did have a couple of bigger projects that were completed in the quarter, which gave an extra boost, but the outlook overall remains solid into 2027.
We sometimes get questions about AI exposure, both as an opportunity and as a potential risk factor. I want to give some more context here. If I can guide your attention to the pie chart at the lower left. Here you can see our customer mix within the business area where the cloud segment accounts for roughly one third of the revenue within the Data Center business area. In this segment, I am including AI customers, but also more traditional hyperscalers and co-locators who are focused more on data storage. Then we have the enterprise segment, which is typically customers like financial institutions or other large corporates running their own data centers. This is just under one third. Finally, smaller customers accounted for slightly over one third. This is the segment which has been expanded with the recent acquisition, to increasingly include customers like schools, airports, and hospitals.
Within our Data Center customer base, there is certainly a fair bit of the large AI-type data centers, but also many other types of customers. We like this portfolio mix, which provides a good diversity and balance of growth opportunities. In the quarter, all segments grew organically. Now it is time for Pernilla to take us through the financials in some more detail.
Thank you, Rikard. Overall, we had a total sales of SEK 2.5 billion, and that is an overall growth of 33%. Organically, we had a net sales growth of 17%, and it is pleasing to see that it is driven by all business areas. We had a 14% acquisition-driven growth from Communication Zone and Superior Fiber & Data Services within our Data Center business, and JOWO Systemtechnik AG within our Harsh Environment business, and a small positive effect from currency in this quarter. Adjusted gross margin at 39.8%, which is 2.3 percentage points higher than Q3 in 2025. That is mainly due to the mix between business areas, but also a positive country mix. Adjusted operating costs were 25% in percent of net sales in the quarter, compared to 26.2% in Q3 2025.
It is higher in absolute numbers, and the increase is mainly related to the new acquisitions we have done and increased freight costs due to higher sales, mainly within the Fiber Solutions area. Adjusted EBITDA of SEK 281 million, with an adjusted EBITDA margin of 11.3% compared to 7.7% last year. The adjusted EBITDA increase year-over-year is driven by all business areas. EBITDA includes a non-recurring effect of SEK 71 million related to the performance improvement program, of which SEK 67 million related to the reversal of a previously recognized impairment of intangible assets associated with the planned capacity adjustment in Clinton factory. The decision to reverse the earlier decisions to downsize the Clinton facility reflects, as Rikard said, both stronger than anticipated growth in the U.S. market and expectations of continued favorable market development.
Our financial items for the quarter amounted to SEK 73 million, of net interest amounted to SEK 26 million, realized and unrealized exchange rate differences of SEK -18 million, and other financial items amounted to SEK 29 million. That includes revaluation of additional purchase price and acquisition options of SEK 28 million. Earnings per share at SEK 0.81 compared to SEK -0.59 previous year. Go to the next slide. Total sales for Fiber Solutions is SEK 1.4 billion in Q3, with an overall growth of 14%. Organically, an increase of 13% in the quarter, and the rest is attributed to currency. Net sales, as Rikard said, continues to decrease. The decline is due to weaker demand in the FTTH equipment, primarily in U.K. and Germany.
In North America, net sales increased by 51%, mainly due to increased activity in U.S., both due to ongoing FTTH build-out, but also because of increased investment in transport networks as Data Center build-out continues. In the APAC region, net sales growth of 28%, driven by all primary markets as well as opportunities materializing in emerging markets. Adjusted EBITDA of SEK 133 million, or 9.4%, compared to 5.4% prior year. CapEx investment in the quarter of SEK 27 million or 1.9% of sales. That is mainly related to maintenance. If we go over to Harsh Environment, total net sales for Harsh Environment of SEK 393 million, a growth of 25%. That is driven by both acquisition of JOWO Systemtechnik AG and an organic growth of 6%.
Connectivity solutions continue to perform well on the back of increased defense spending, while dynamic cables saw muted growth in the back of lower demand for the oil and gas sector. Adjusted EBITDA at SEK 43 million, which is a record for Harsh Environment business area, and adjusted EBITDA margin at 11%, which is in line with Q3 2025. CapEx investments for the quarter, SEK 7 million, 1.7% of sales, and that is also related to mainly maintenance. Another record quarter with total sales for Data Center of SEK 692 million with an overall growth of 107%, of which organic growth 44%, with especially strong development in the U.S. and acquisition-driven growth from our earlier communicated acquisitions, Communication Zone and Superior Fiber & Data Services. Adjusted EBITDA of SEK 117 million, or 16.9. 108% growth in absolute number, but in percentage, in line with Q3 2025.
CapEx investments in the quarter, SEK 4 million or 0.6% of net sales. Cash flow from operating activities before changes in working capital of SEK 316 million. A small negative effect of working capital of SEK 88 million in the quarter, and that is mainly related to increased accounts receivable due to the strong sales in the quarter. Cash flow from operating activities SEK 228 million, representing a cash conversion of 72%. As earlier said, maintenance and capacity investments of SEK 38 million, equivalent in total of 1.5% of sales. If we then last but not least, look at net debt, which corresponds to net debt excluding lease liabilities amounted to SEK 1.3 billion at the end of the quarter, which is a decrease of SEK 165 million compared to last quarter. Overall leverage at 1.3x compared to 1.7x end of Q2 2026, a reduction of 0.4x.
The lower leverage is mainly driven by the positive cash generation driven by our higher EBITDA. At the end of Q3, we had SEK 678 of cash and SEK 1.4 billion of unutilized backup facilities, which gives a total liquidity of SEK 2 billion. This gives us a solid financial position.
In summary, the strong results in the quarter is a validation that we are on the right track. We saw record net sales and continued improvement in margins. North America has now materialized as an engine of growth and is by now the largest region for Hexatronic. The performance improvement program is delivering the committed cost savings, and together with organic growth, is now rapidly restoring the profitability in Fiber Solutions. Data Center saw another record quarter, of course, boosted by a market that continues to be strong as well as two acquisitions. Harsh Environment also moving in the right direction with organic growth and some margin improvement. As you have seen, our balance sheet has strengthened materially compared with only a couple of quarters away. If we then say a few words about the near-term outlook.
First, for Fiber Solutions, we expect continued growth in the U.S. offsetting lower activity in Europe. We have a couple more quarters of relatively lower comparable numbers, but also coming into the winter season with generally slower activity, so that needs to be taken into account. Submarine cable, which is a factor, it has healthy margins and typically larger shipments. We saw a good Q3, and is expected to be at the similar levels in Q4. Next is Data Center. As noted, Q3 was exceptional, so we cannot expect a full repeat of that quarter. Also here, Q4 tends to be somewhat lower seasonally. However, the order book and 2027 outlook remains robust. Harsh Environment. Here, our current expectation is, I would say, more of the same.
We do expect continued strength in connectivity products with an offset in the dynamic cables business, which tends to be oil and gas heavy. Q4 that is expected to show the same trend as Q3 with the margin modestly improved over what we saw in the first half. Now, we do see some of our product segments experiencing tightness in supply. This refers primarily to glass fiber and connectors and leads to some lengthened lead times and price increases. As of today, we view this more as a limitation on growth than a major risk. On a positive note, resin costs, which we have talked about before, they have stabilized and to an extent actually come down. This one seems to be by now mostly behind us.
Finally, as we have said several times, we remain focused on M&A, but obviously we look to maintain discipline and acquire only the right targets at the right price. With that, I think it is time to move to Q&A.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Please limit your questions to a maximum of two. If you have additional questions, feel free to rejoin the queue. The next question comes from Max Bacco from SEB. Please go ahead.
Thank you and good morning, Rikard and Pernilla. Rikard, well done in the quarter here. Only one question from my side this time. Looking at the quarter, you highlighted before or in connection with the Q2 report that you might see some kind of pressure on the gross margin due to lag in price increases to offset the cost increases. Did that to any extent materialize here in Q3? I mean, the gross margin was indeed quite satisfying. Did you see an impact of that in the quarter or did you manage to offset it completely?
I think largely we managed to offset, would be my answer. I do not know if you want to expand on that, Pernilla.
No, I think that is the answer. We have managed well to push our price increases overall to mitigate the increases.
Okay, perfect, then.
The next question comes from Jacob Edler from Danske Bank. Please go ahead.
Hi, Rikard and Pernilla, and congrats on a strong quarter. I have two questions. Starting off a bit on Fiber Solutions, and the U.S. is clearly strong here, also decided to reverse the decision of downsizing the Clinton plant, as you talked about. Just a general question, what is the capacity utilization in the U.S. currently for the Fiber Solutions business? If you can give us a ballpark figure.
I am going to make you disappointed, Jacob. We do not disclose that. Of course, it is improving, and it is improving a bit more than we had anticipated, and therefore we reevaluated this decision. But it is not a number that we disclose for competitive reasons, mostly. I think you said you had two questions, so hopefully we will answer your second question.
Yeah. Good, thanks. The second question is really on Data Center in the U.S. It was really strong this quarter, up from SEK 284 million in Q2 and now SEK 450 million. Obviously, some favorability of Superior being included for a longer period as well. But you state that it was kind of benefited by project timing and also seasonality. And I presume Superior's school exposure in general also kind of helped-
Yes.
The seasonality element. But just looking ahead here and talking about forward, is it more feasible to look at H1 and Q2 as a reference? And then the second on that, when it comes to project timing, what type of customers did you over-deliver on here in Q3? Was it the cloud segment or any favorite out there? Thank you.
Yeah. So quite a lot there in that question.
Yeah.
You are right about the seasonality. Superior obviously serving school districts. They are extremely busy June, July, August when the schools are closed. So that is a seasonality for them. Then for the entire business, as you get into Q4, you have Thanksgiving and then you have Christmas. So there are quite a few days less in a way. Then the question about the projects. Yes. So I think you are right. There were a couple of larger projects, and it is always a timing of these projects, but that was mostly on the large customers, so the hyperscaler sides in the quarter. I think you are right in your assumption to look more at prior quarters as a guidance to what to expect going forward than necessarily extrapolating the organic growth of Q3.
Very good. Thank you so much.
Thank you.
The next question comes from Fredrik Nilsson from Redeye. Please go ahead.
Hi, Rikard and Pernilla. One question first here about the facility in Clinton. What kind of production lines are you now keeping that previously were set to shut down?
We're keeping Conduit and Microduct. I don't think I want to get into the details of what we were planning to shut down, but it's a facility does both, and we will continue to make both.
Okay, I see. Regarding the supply constraints in glass fiber and certain type of connectors, you seem quite confident today that it's not a big thing, but should we expect that it's a risk of becoming something bigger in the next few quarters? Or what's your view on the more midterm outlook for that?
It's hard to say, Fredrik. Obviously, the root cause here is strong demand, so in a way it's a good story. Especially the fiber market is kind of sold out. If we had had more glass fiber in this quarter, we could've sold more. So we, as well as our colleagues and competitors, are a bit hand to mouth in this business. Where it's going from here, I don't know. Prices have gone up quite a bit. At some point, supply will catch up. We know that starting the first quarter 2027, there is new supply coming to the market to the tune of, I think, 10%-15% globally, and then another 20%-25% capacity increase in the second quarter globally. Initially, the new capacity is coming mostly from China, which would've been a problem a couple of years ago.
Today, we increasingly customers accepting Chinese fiber also in the U.S. market because there are not many alternatives. Very hard to predict when this new capacity catches up, and of course, that also depends on the future pace of the Data Center and AI build-out.
I see. That's all for me. Thank you very much.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more written questions at this time, so I hand the conference back to the speakers for any closing comments.
All right. Well, thank you everyone for listening in. I also want to take this opportunity to thank everyone at Hexatronic for working very hard. It is nice when a plan comes together, and I think this quarter we did see the fruits of all that hard labor. Thank you, everyone, and have a great day.