Assured Guaranty Ltd.

Today we are here to present our first quarter result for this year. With me, I have Claes Forsström, our CEO, and Katarina Fischer, our CFO. So welcome to those of you who are listening in on the conference call and for those of you who are on the webcast. Please feel free to post your questions throughout the whole session if you're viewing on the webcast. We'll pick them up after the presentation in the Q&A session. Then we will also open up for those of you who are on the conference call. So with that, I hand over to you, Claes.

Thank you, Ann-Sofie. And once again, very, very welcome to this Q1 report. Before I and Katarina start to go into the details around the quarter, let me summarize it in a few sentences. A very strong quarter. Stable growth, strong operational deliveries. That paired with stepwise accelerated investments for future sustainable growth. All this combined resulted in margin improvements and a good cash flow generation. Our strategic review of Foodtech is progressing well and our decision will be communicated at the end or by the end of H1. So with that, let's dig into the quarter. As I said, it summarizes with high demand and profitable growth. And if I take it then from the continued high demand that drives stable net sales and enhanced profitability and start with the order side then. 32% order intake of that, 29% organic demand. Quite strong in all business areas. Very good to see that air tech demand, especially in battery, are increasing in EMEA. Data center technology, a solid development in Americas, but also in Europe. And as you know, I mean, some quarters, very strong water intake, and some others a little bit weaker due to customer setup then. Foodtech, super pleasing to see. Continued positive development, mainly in America's anemia. And we increased the order backlog with about 10%. Moving over to net sales. All in all, 11% growth. Of that, 7% organic. DCT, the star in this quarter. Very good deliveries. Food tech climate solution. America continues to be strong. And very strong digital solutions in the U.S. as well. Airtech decreased somewhat. Growth continued to be on the invoicing in Americas, and that was offset by a weaker APAC and EMEA. Adjusted EBITDA margin then, reaching for the second quarter in a 12-month period about 14%. Solid growth, net price increases and strong operation deliveries on the plus side drives up the margin. Accelerated investments to create future sustainable growth, of course, is taking it down somewhat, but all in all resulting in a margin improvement and a good cash flow then. Going into the details then, Americas and EMEA being the main growth drivers then. The share in between the different ones are order intake 42, 41, and 17 in between the three regions. Net sales being stronger in Americas, about 60%, and then 20, 14. But you can see the shift in EMEA starting to pick up on order intake. Airtech in America's components and services, good growth. Battery somewhat weaker. The shifted order pattern that I've talked about for a couple of quarters. DCT, a continued very strong underlying demand, both from co-locators and hyperscalers. And food tech then. Super pleased to see that they are continuing to deliver strong growth in all different segments then. EMEA order intake, as I mentioned earlier, a pickup in battery after a somewhat weaker two quarters. DCT continued to deliver good activities in the quarter. And food tech, super pleasing to see. A good recovery across all segments, especially within broiler and greenhouse. And then APAC, not very much change here. I mean, it's a continued fairly weak development in APAC. As I talked about, the battery market being then a little bit cramped in China. Foodtech continued to be weak, but I sense a slight recovery and we have bought them out there. The solid order backlog, 10% larger than one year ago. All in all, large order supportive all the way into 2025. Something to highlight here, the very first order at the top there, that is completed now, and we are eating ourselves into the orders then as per laid out pattern here. If I go into Airtek then and start on the right side with the different arrows, as you can see, in some areas, slightly less green, but still very stable. In others, continue to be pointing upwards. All in all, a quite solid market. Coming in then to the order intake, as I said, EMEA and Americas strong, APEC quite somewhat lower. And without going into the different details, what you can see that is we continue to have a strong service outlook, components being a little bit weakened due to the aftermarket in Asia, and the others being pretty much in balance with the last couple of quarters. If we then go over to net sales, a decrease of about 1%. And here it's sort of the reversed. It's America that is growing and it's a weaker EMEA then. So you can see order pattern and invoicing is a little bit reversed. All in all then, a lowered margin that decreased to 14.9. But with that said, you have heard me say, when Airtek is in between 13 to 16 or slightly over, I think they are delivering a strong and good operational outcome. I think this picture is a quite interesting picture to talk about. You know, a couple of a year, a year and a half ago, two years, we received some very, very large battery orders that we are eating ourselves into now. But if I exclude those, this quarter is one of the strongest quarters than in the last couple of years for air tech. And it's a quite well balanced quarter as well. You can see batteries, smaller orders, especially in Europe, are coming back and picking up, but all the other areas are also slightly growing or being stable. we continue to adjust and invest into areas that we believe will generate long-term future growth. A couple of years ago, we started with electrification, the batteries. We put in focus into deliver new product into the market when it came to data center. And now we're searching for new areas. And two areas of importance that is, of course, for the long run, carbon capture and VOC, i.e. to clean out dangerous or volatile organic compounds from different areas. Here we are investing in a company called Air Protect. It has net sales of about 300 million Swedish krona for last year. And this gives us a very, very strong base to move into certain areas when it comes to purification. It's abatement. It is a very good base, customer base, where we can deliver service. But it's also then creating a more stable platform also for other areas within clean technologies. Moving over to data center. On and off we have talked about what is the transactional sales to different segments. Hyperscalers, co-locators and telecoms and enterprises. In general, and this is important to realize, hyperscalers are sourced through co-locators or directly in direct business. In this quarter, we didn't take any direct hyperscaler sales, but we know for sure that some of our co-locators are really sourcing the hyperscalers. So from that perspective, it is interesting to see more from a transactional sales where we are delivering. And Hyperscalers are behind a lot of the growth anyhow. Order intake, 17%. We didn't receive any larger orders, but we have to remember that last quarter we had a super strong. I'm very convinced for the coming two, three years, the foreseeable future data center market will continue to grow. Some quarters it will be up in order intake and some other quarters it will be weaker. I see a very, very strong market here. Then when we take orders, when we put it into our system, I'm very, very pleased to see what was generated towards the bottom line, reaching a 90% EBITDA. I have to say that I'm happily surprised to some extent, but it just shows what we can do when we have an operational flow and a good order intake that can fill up the factories. What is important to say, why did we deliver this then? I mean, of course, strong volume increase, net price increases, high utilization rate in the production paired with operation efficiency improvements. What we have to remember, we will continue to invest for the future in this, and that will, of course, have somewhat of an effect on our margin moving forward. With that then... I'm super happy to say that now we are repeating the pattern that we did in North America. We are investing and building more manufacturing capabilities. We are in mid through the construction of a new expansion in Cork, 11,000 square meters of production and office spaces. It is about one third of the size of what we have in North America. But what we have also learned from North America, that is that if needed, we can add shifts, etc. So I think that this will create a very, very good platform for continued growth in Europe. And when we do this, also important to say, I mean, our purpose for customer success and a healthy planet, we are also living that when we build our own factories. It is LEED Silver Sustainability Certification. That is a quite high level and it generates a lot of energy efficiency also when we operate the building. Food tech. Perhaps this is the area that I'm most pleased of. I mean, air tech and DCT has spoiled us to some extent the last couple of quarters. It's so great to see the comeback that is happening in both that the market is improving in EMEA, but even more so that the operational measurements that we have taken is also generating a very, very good bottom line. You can see on the different arrows here that they are pointing more and more towards the green and upwards. Digital solution continues to be a very strong market moving forward and happy to see that the order backlog increased. I mean, the order backlog is one of the strongest in quite a few quarters then. And this drives enhanced profitability and net sales. 11.7, I think it's a good base. And I'm super pleased that we have moved from a little bit shy of 5%. And why have we done that? I mean, the increased net sales in both climate solutions and digital solutions, efficiency measurements, and on top of that, also continued net price increases. I love to talk about customers, and here we have one, I think, very good example of a customer in the more climate solution, equipment-driven area. It's CELDEC. It is our wet pads that drives high energy efficient cooling. And it's our fans that circulate it and keep a good climate for, in this case, the vegetables or the plants that are being brought in here. This was towards an EMEA contractor targeted for the Middle East area. Middle East being a market that is investing more and more of this type of equipment for the future. Super good to see. Also very promising. I mean, yet another quarter with significant software as a service growth. I mean, 68 percent. We have now been in between 30 to up to 70 percent quarter on quarter, so to speak. And I continue to say like this, we are on our way to reach 400 million users. ARR, step by step, we will take it quarter by quarter. We are not yet there, but we will continue that journey. This case, a large US-Turkey company, and not one of the largest, but still, we are upgrading their system with our modern Amino software, and that generates a good operational efficiency for them. Something to remind ourselves of, that is our software generates on and about 85% gross margin, but we will continue to invest in order to drive growth in this area. If that is what we do for our customers, let's lean back a little bit and take a look upon what we're doing when it comes to our sustainability goals then. Those numbers here, they are including also our newly bought companies as well. All in all, we continue to progress well. We have renewable electricity in the factories about 80%. Energy efficiency a little bit less this quarter than four quarters ago, but still on a high level. The recycling rate close to 50%. Something that is super pleasing to see, that is our health and safety measurements and our target to reach zero accident, the vision here. We are now down to 1.4 from a fairly good number of 2.0. I mean, this is industry leading and I'm very pleased to see, especially a week like this when we have a safety week across the globe. Diversity, an area to continue to improve on. We are in our industry quite good, but we would like to continue to be a leading standard also across industries. We are about 20% plus in this region. So with that fairly quick walkthrough, I hand over to you, Katarina, and take us through the numbers a little bit more.

Yeah. Thank you, Claes. So I'm very happy to present this quarterly results where we again saw a strengthening order backlog, good growth and also improved profitability. All business areas increased their order intake with strong growth in air tech and food tech. Our net sales also increased. We grew organically 7% in the quarter and including the recent acquisitions, we grew 13% excluding currency impacts. And this strong net sales growth was driven mainly then by the data center, the high pace of deliveries within data center, and also strong growth in food tech, both in climate solutions and digital solutions. Our adjusted EBITDA margin improved significantly, and I will come back to that a little bit later. In the fourth quarter, data center won some large orders, as you know. And as we alluded to then, we had during the first quarter received some customer advances, parts of those customer advances. advances in the first quarter. And that has then been the main driver for the improved operating working capital and good cash generation in the quarter. Our net debt increased slightly due to the partly debt financed acquisitions that we have made in the last 12 months. However, our leverage decreased due to the improved profitability. So our leverage ratio is now at 2.0. In the quarter we recorded items affecting comparability relating to the strategic review of food tech equipment, also for M&A activities and some relating to the repositioning of the cleantech technologies where we are exiting the marine business. This, in combination with a higher tax rate and higher interest rate expenses, led to net income increasing 6% compared to the organic EBITDA margin increasing 25%. We had an impressive margin in the first quarter, 14.1%. And the main factors driving that was, of course, the strong volume increase in data center and food tech and also the high factory utilization. We also had the strong growth in software as a service within digital solutions in food tech. We continued to increase prices in the quarter, mainly in data center and food tech. And all business area executed really well on operational excellence initiatives. In this strong margin, it's also included continued investments in the strategic initiatives for scalability and future growth. And this includes investments in digital competences, systems and new ways of working. Here we can look at the cash flow that has improved in the quarter as you can see in the slide. We see a positive impact from the operating working capital and this stems from many different initiatives that we are driving across the business, across the different components. But the main driver is the customer advances received in the data center. And that has really improved the working capital in the quarter. And as we have mentioned before, these large orders can create some volatility in our cash flow during the project lifetime. In terms of investments in the quarter, we have invested in one new minority company, and then we have also done two capital increases during the quarter. In terms of finance activities, we repaid some part of our loans, and we also paid the first dividend installment in the quarter. As we saw in the prior slide, we invested some 230 million in the quarter and out of that 175 million relates to property, plant and equipment and intangible assets. So we continue to invest in our business to support the future growth. And it's across the business where we are strengthening competence, we are upgrading our facilities and we are digitalizing and automating. In the first quarter, we started to roll out our main system support in the company. And that implementation will now continue over the next coming years. So that will require some investments. Investments are also required for our net zero journey, where we have a target to reach net zero emissions for scope one and two by 2030. Our investment in the Ainsbury factory in Massachusetts in the US is developing according to plan. And as you know, that is a major plant that we have. And as Claes talked about, we are also investing in Ireland and Cork, a new plant for data center to support their expansion in Europe. Looking at operating working capital, as I have already commented, we now have a lower level thanks to the advances in data center. That is the main driver. Looking at leverage then, we are very pleased that we have managed to decrease leverage now for three quarters in a row. Our net debt has been stable if you compare also to the fourth quarter. And important to remember here is that the finalization of the AirProtect acquisition will happen in Q2. And then I just want to conclude by saying I'm very proud that we have been able to grow profitably in the quarter and also to lower leverage. And with that, I would like to hand it back to you, Klas.