Welcome to this conference call on the Q2 2025/2026 report by RTX, and welcome to Henrik Mørck Mogensen and Mille Trapp Lund, CEO and CFO, and I will try to moderate the call. I'm Poul Jessen from Danske Bank.

Henrik?

Thank you very much, Poul, and welcome to all of you online. Presenting the half-year results.

A short agenda, just a brief flyover of RTX for those of you who need either a reminder or an introduction to RTX. Then, as part of these, we tend to bring what we call selected insights.

Typically, it's been on market opportunities. This time, we have chosen to dive into the supply chain side of the business, putting some words to what we see in the memory shortage and the impact and how we handle that as RTX before Mille will give a walkthrough of the financial and the business highlights in the report and then leave ample time for any questions for the audience.

Without further ado. RTX, wireless communication solutions, space we've been working in for more than 30 years, specializing in providing wireless communications solutions in applications where security and reliability is key.

Our business is structured in three segments. One is Enterprise where we, amongst others, supply headsets and wireless infrastructure that enable retail workers to perform even better both as a team, providing excellent customer service, efficient operation with efficiencies into a retail segment, also providing a positive work environment in terms of safety for retail workers.

Also deployed in healthcare where monitoring data from critical cardiac patients are transmitted to remote monitoring, enabled by our infrastructure, again relying on high security and reliability. Then also in the segment ProAudio where we deliver our technology in the form of chips that enable our customers to develop intercom solutions for anything from public safety to defense to live concerts.

That's the three segments that we deploy our technology in. We are a global company rooted in Denmark.

Yeah, 30 years of experience, 25 years as a listed company. We are around 330 employees across Denmark, US, Romania, and Hong Kong.

Two thirds of those in Denmark. Also two thirds approximately working in R&D.

Really, this is our core. A asset-light production setup where we work with global production partners, also giving us a global footprint with production both in Asia, but also in Europe.

Commercially, we work in an OEM relationship or business model with the tier 1 brands across the world, which enabled us basically to deploy our products and technology everywhere. In many different industries, anything from hospitals to live concerts where sound and reliability is key in critical environments such as defense, public safety where team communication is key, our technology is present.

How we deploy them there, as I said, our business model is an OEM business model, this is basically our sales force where we integrate our solutions and products into their solutions and they bring them to market globally. It's the likes of HP, Cisco, Philips, Alcatel, global renowned brands that integrate our products and technology and then using their sales channels to access the global market.

If you look behind that, we still believe that our business is backed by some strong market trends. One thing is the need for mobility, reliability, and operational efficiency.

When you have coordination or communication needs that are not tied to a desk, but where you need to be mobile either in an office, in a warehouse, or in the field, the need for a wireless solution is just increasing. Specifically underlying our healthcare business, the aging population and the increasing life expectancy really drives up the need for care and treatment both in the hospital, but also outside the hospital, which again relies on a secure and reliable infrastructure where we see some positive trends in that.

Then, of course, the geopolitical tension, we'll come a bit back to it. It has two sides of the coin.

One is, of course, it gives a challenging environment to do business with in, but also it holds opportunities because there are, of course, major investments in societies where there are also opportunities for wireless technology. I mentioned put a word to it earlier, really an asset-light setup.

We are really focused on our core capabilities in market insights, technology leadership. We design, develop products and solutions with our customers.

We manage the manufacturing with our EMS partners, and then we make sure the products are fit for life for our customers. Which really, and just emphasize saying that we put our capital and resources in where we can make a difference, and that's around innovation and how managing the deep-rooted competencies of wireless solutions.

We do that in close collaboration with our EMS production partners. We have a small handful of that that allows us scalability as well as agility and adaptability in a changing world.

Something that is, of course, stressed in these days, but it's really something that's a key strength in our business model. On the other side, we are deeply integrated with our customers where we design products, which have a 5- to 7-year lifespan in the market.

We see almost all of these customers are customers that we have a deep and intimate relationship with for more than 10 years. Our solutions are deeply integrated in their solutions that they provide to the market, which gives us a strong stickiness with our customers.

That all boils down to we had a clear ambition for growth. We had a strong core business in Enterprise and ProAudio, relatively stable, cash-positive business where we also see opportunities for growth, and one of them being retail where we really see a technology transformation going from the walkie-talkies and the legacy systems that you see in stores today where the need for mobile communication solutions that enable retail teams to work efficiently, both in providing excellent customer service, but also operational excellence, really holds a major opportunity for RTX technology, both in Europe, but very much also in US and globally.

Then healthcare where we with our key partner are supplying already today wireless patient monitoring infrastructure predominantly to the US market where we today have our technology into more than 40% of US hospitals, and still a strong opportunity for growth there. Then, because we are also, of course, exposed to many markets, then we are continuously cultivating new growth markets.

This is really a strategy about building on a strong core business and using that to really fuel specific growth segments such as retail and healthcare. When you add this all up, we have a clear ambition to target a double-digit growth year on year towards 2030, while increasing our EBITDA margins to above 15%.

That's the ambition, and that's what we strive to move towards and deliver on quarter by quarter. I think we're also seeing positive signs on that also in this results.

That was a bit about RTX, selected insights. One of the challenges out there that we deal with, I guess we all know the AI surge and the real scale of AI capabilities across the globe.

If you look at what is really driving that or what are supporting that, that is the cloud infrastructure and building AI data centers, and there's a lot of investments going on in that globally. If you move down the chain, one of the key components beside the actual GPUs is actually memory.

The memory capacity on a global scale is really being cannibalized or used by AI memory for AI data centers because they can demand a higher margin for the producer. That means that they're cannibalizing the conventional memory capacity, which leaves us in a situation where today we see increasing lead times and even allocation of the supply of conventional memory, which we use in our products.

Part of our bill of material is both SDRAM and NAND flash, which is types of memory that are being cannibalized by the AI surge. For us, this means extended lead times and constraints on production flexibility, and over time, it also leads into increased buffer stock requirements both with our customers, but also for us.

Today, we are seeing impacts of that also, and as Mille I think will return to, we are seeing some impact of this, and this is going to be part of our business for at least the end of the fiscal year, probably also into next fiscal year, is our evaluation. Going back to our asset management and how we are set up in production, we are definitely in close dialogue with our major EMS providers on managing this situation, and I think we have an ability to manage.

We're also very closely in contact with our customers both in terms of pricing, but also allocation agreements with our customers. We are asking for longer-term outlooks from our customers for us to be able to secure components.

This will lead to some uncertainty of what the impact of this situation is. When we come into our guidance and the outlook, from an overall perspective, we are seeing a positive market pull to our products.

On the risk side, it's really our ability to deliver and a price pressure in the market, and that's what we are trying to balance. Definitely our supply chain is very busy at the moment.

Far, I believe we are managing in a positive way, but we are foreseeing price impact and potentially deliverability impacts in the next 6 to 9, even 12 months horizon. That was the initial flying, and then I'll hand over to Mille to walk through the financial results.

Yeah. For the first half year, the following things I would like to highlight.

We see a good first half year performance, where we, if we just compare the numbers, it's a relatively modest growth of 2% year on year. If you eliminate for the US dollar factor as we have the big majority of our revenue in US dollar, it is an underlying growth of 11% on revenue line.

This is driven by a strong performance in Healthcare and ProAudio, where both the customer pull for this healthcare system and the amount of customers in ProAudio is giving a good momentum, good pull on both the orders, but also giving a good forecast going forward. This share of Healthcare and ProAudio in the first half year is moving closer to 38-40% of the total revenue, whereas it last year was 26%.

That is then reflected in our gross margin, where we've got a gross margin of 56% in Q2 and 55% 55.6% in the first half year. As both ProAudio and Healthcare are higher gross margin than Enterprise, this pulls up the average gross margin.

In EBITDA, we see an improvement as well, where we've got a positive EBITDA of 20 million in Q2, leading to a half-year result of 16.7, of course, driven by the improvement in gross margin, but then partly offset by the headwinds on the US dollar. Inventory, as Henrik mentioned, we have worked to reduce our inventory in order to ensure that we don't have obsolete inventory, and we don't have working capital bound in inventory.

With the situation we have now on memory, we are, of course, in parallel with maintaining a reasonable level of inventory looking into which part of memory should we potentially purchase as buffer stock, RTX ourselves, our EMS partners, which is, of course, our preferred model so it doesn't come into our inventory. This is a point where we look into that inventory could possibly increase as we want to ensure that we are able to deliver to our customers' demand.

Not reaching the levels that it was a year ago, but we could see an increase in inventory the next 6 months. We have maintained a strong balance sheet with a net liquidity position of nearly 130 million, and we maintain our full-year guidance on EBITDA and revenue and EBIT.

When we look to the three segments, we can see the headline for Enterprise is that we've seen a significant improvement in Q1. You might remember a relatively weak Q1, and we see the market demand both in order book is supporting that we will have a strong second half year and thereby living up to our expectations for Enterprise for the year.

In ProAudio, we see a strong quarter, and it is really reflecting a positive market pull from our key customers, both in Asia and the rest of the world, and a good momentum on this strategy of focusing on module business. In Healthcare, we see a good, solid quarter in line with our expectations, and this is one of our growth segments, the cooperation with our key customer in securing, you can say, sticky revenue there is progressing as expected.

On revenue, as you can see here compared to last year, both on quarter and on accumulated year to date, we are in line with last year on revenue, driven by strong revenue in ProAudio and Healthcare and weaker revenue in Enterprise, which we assume will be caught up by the end of the year. Our gross margin, as I mentioned before, is reflected both by the efforts we have to increase profitability, but very much so that ProAudio and Healthcare is driving a bigger part of the revenue.

This is reflected on EBITDA where we now see a positive EBITDA both for the quarter and for the half year. Other key figures, inventory, as I touched upon before, free cash flow is negative for this half year, and that is very much impacted by, as you can see, our trade receivables where we in Q2 had a very high delivery in March.

That's always with the closing of the period where there can be fluctuations. Oops.

Just going back to outlook, we maintain the outlook of revenue of 575 to 625, EBITDA of 35 to 65, and EBIT of 0 to 30. As Henrik also mentioned, we actually see a good market pull, and that is then counterbalanced by the risks on delivery capability due to mainly the memory situation, but also the production capacity related to that.

I guess, well, maybe you also noticed this morning, we announced the extension of our existing share buyback, which originally was 20 million DKK, and we added another 20 million to that as a result of a strong cash position.

Right.

Yeah.

All right.

That was the presentation. If anybody out there has questions, then raise the hand, and you will get the mic open for you.

Feel free. I will start about the memory part of it.

Can you give any indication about, if you take a bill of material of a product, how much is RAM? Is it significant, insignificant?

What's the impact on your cost by the rising RAM? I think

depending on the products, it has a different impact. Memory is a significant part of the costs.

It is one of the single key components that have a relatively large impact, yeah.

That was also before rising prices.

Yes.

Yes. What's the risk for you here, then?

Can you pull it or push it to your customers, or do you have the risk, or does the contract say that you can pass it forward to them?

To a large extent, the pricing risk we can offset to our customers. Of course, there's then a consequence of that that might hinder or challenge their business, thereby lowering the volume.

Of course, even though we can push the majority to most of our customers, there might still be an impact. That's one side of it, and then there's the other side, which is the allocation, which can potentially push out revenue or potentially even lose revenue if we're not able to deliver.

It's both a price, but it's also a deliverability risk.

Do they expect you to secure that you can deliver at all times so that you have, as you said, to increase the inventory?

The

inventory, you say,

not

as high as a year ago.

I think many of our customers work in the same space, they also know that securing the components is not just something we can go out and do. They understand the dynamics of that some of this, as Henrik says, is on allocation, you can kind of put a chip in for I would like to purchase this revenue, and then in 6 months' time, you'll be notified whether you actually get it or whether you only get part of what you have asked for.

Mhm.

That's why we also with our customers are talking, and they are very engaging in that we extend their forecast for us to put in longer-term commitments also to the suppliers because that's the way we can actually secure components also on a longer lead time.

They are willing to commit for more than 3-6 months, and are they doing that?

They are actually doing that, and that's also I think that was also what Mille said that we are seeing a strong commitment. Our order horizon is actually longer than it has been to balance that.

That's also why we believe we still have a positive outlook also for the Enterprise business for the year that's in line with our expectations. With basically a strong commitment from our customers.

That's, of course, then being balanced by the supply situation.

At the same time, we don't see the same kind of high increases in order forecasts as we saw with a component and corona crisis previously. I think that's very clear in their mind that we don't want to kind of give over-optimistic outlooks either.

It is a good market development without being something that we couldn't have foreseen half a year ago.

I think it is predominantly reflected by an actual market pull, this is not our customers building finished good inventories.

Okay. Can you close down the presentation so we can see

if

somebody raises the hand? When you give the full-year guidance and you take a upper or lower end of the guidance, if you have better visibility because they put in longer-term contracts, what's the risk then for you to move to the lower end?

Is that access for deliveries from EMS partners, so that's the main risk here?

That, I would say, is the main risk.

Okay. You talk about partners normalizing their demand.

Is that more or less across all your partners

or so

it's normal business more or less back?

I would say so. You probably find one or two customers, but on a broad scale, yes.

Okay. If we then go down to the three business segments, have you seen any changes in the market dynamics during the last two months with war in the Middle East, or is it reflected in that you get longer-term commitment and thereby having no significant impact?

I think the main impact we see are energy prices, transportation time. We don't, as such, see a huge impact on our business on

that. There are talk about plastic, but we haven't seen it yet.

Okay. That means that the main issue here now is memory.

Yes. Yes.

That is. Availability and deliverability touching on Yeah.

In the second quarter, you mentioned in Enterprise that there were some deliveries that were missed due to your subcontractors delivering. How significant is that?

Is it also in ProAudio where you say that the timing also impacted revenue in ProAudio? Was that positive or negative?

In Enterprise, you clearly missed, but the impact in ProAudio, was that also on the positive or is that also on the negative side?

The impact in ProAudio is on the positive side, and I think it's always like that with quarters. I would not say that the ProAudio has as positive trajectory for the year, and we see positive movement also in this quarter.

Coming from Q4 into Q3?

Yeah. Then

the size in Enterprise, indications is 5, 10, 15, 20 million that were missed?

I don't think I want to give indication. I would say that we still believe in the full year for Enterprise.

Believe in the full year?

We believe that we will reach our outlook for the full year, and our internal expectations for Enterprise, the first half year have not met our internal expectations, but the full year does meet, and that is backed up by order and order book and delivery plan for these orders.

Yeah. I have to read here.

In healthcare, you just said that 40% of US hospitals has your technology in-house now. I just think when going back in years when the former CEO indicated high potential in the US, and if you are 40 now, does that mean you are in the hospitals, 40% of the hospitals, and some of them with a very small footprint?

Can you put a little more wording on how should we look at that? Or are you getting close to where you are going to a mature market, or is it because you are just one section of the hospitals?

I would say so where are the growth paths? It's clearly a strong position, but where can you then grow from?

One is we are with a dominant player, and they are taking market share, the applications that we have, we foresee that there'll be a growth in volume of that. That's one.

Then we have briefly discussed or saying that we have developed this extension to our portfolio, the USB dongle, the access point, where we actually enable to cost effectively increase the coverage of these monitoring infrastructures, which then also opens up for a growth opportunity within the existing install base. Which very specifically, these systems are typically installed in cardiac wards where you're monitored for some cardiac condition.

What we see, one of the use cases is really to equip larger portions of the hospital, for example, typically these patients, they don't stay in the ward, they need to go to imaging and so on. Today, a nurse need to follow them because then they leave the covered area and they cannot be remotely monitored.

If you can equip that hallway all the way down to imaging, then you can have those benefits. That's definitely some of the market opportunities that we aim.

Then we're also actually seeing an opportunity within that this technology and this system has actually been installed in these hospitals for a long portion of time, and as part of us taking over, we're also refreshing the infrastructure. There's also an opportunity for a renewal or refurbishment of the existing install base.

These are the three major growth opportunities based on the position that we have.

If you measure by the next-gen products which you are growing by now, what's the penetration rates of those in the hospitals? The 40%, is it only a small part of the hospitals who are upgraded to the new, or?

Today, it's a small part.

Okay. When you say 40%, it's because you are in the hospitals, but based on your legacy solutions.

Okay.

Yeah.

What about the cooperation here? Have you begun talking about Europe or going beyond the US?

It's still, we hang

to the US.

It is mainly US, and it's very, very much driven by, for this system, there are actual reimbursement codes in the US. There is a clear, clear business case for these solutions in the US.

That business case in Europe is still there, but it scales slower in Europe because of the very clear economic incentives in the US hospital system. That's where we see the fastest scale of these solutions.

The solution is existing, it is in Europe. I think today, the sellout rate of our products going to US is about 80% to 90% US.

Was then also reflected in the previous generation?

Yes.

You have earlier spoken about potential for expanding into competitors to Philips. Is that still early days, or?

I would say still early days. We have dialogues, and it's part of both the ambition behind the deal that we made with our partner, it's definitely something that we are exploring.

We are having dialogues, but I would still call it early days, I think, yeah. Then

a technical question for you, Mille, about the EBITDA levels for the three business units are very, very volatile. Can you give some elaborate how we from the outside should look on what's the allocation key?

Is it put in once a year on how you will share the cost, or is it more or less on the quarter shared by revenue, or what's the key drivers here for the allocation?

On the capacity costs, the key driver, there is a small portion, 10% or something, of the costs that are allocated by direct allocation, where the resources are allocated directly to one business unit. The rest are allocated by expected revenue share for the year.

It's a fixed rate for three business unit based on what we expect that they will pull off of revenue for the year.

That rate is then fixed for the four quarters?

Then it's fixed for the four quarters, yeah.

If we then should look forward on investments in the future, as investments in R&D moves up, that's one part of it. You increased the hirings.

I know some comes from insourcing in Romania, but you are still adding core people to the business. Can you share on the thoughts about your investments, what is increasing, where are you investing, and should we expect that, for instance, FTEs to continue growing as you grow?

I think earlier you stated that you could grow a more fixed or fixed timing. In the numbers, you grow.

What are the overall considerations for the reinvestments into the business?

Clearly, a large part of our investments, both the financial investments and the FTE investments, is building our healthcare business. As I think we also communicated earlier this year, start of this year, we actually separated the healthcare business more clearly, and we onboarded Julia Abrams, a seasoned MedTech profile, really to build that business.

That's where the majority of our investments actually go, really to build that business because we have a strong belief in that business, and glad to see it's growing also this quarter. That's really about building a clear, strong pillar in the future RTX business that, of course, is founded on what we do with our partner today, but also potentially expanding from there over time.

That's where our major investments are going. Then we are also on the balance sheet investing in our next-generation of Enterprise platform, realizing the platform and product vision that we've had for years that we will be launching end of this year, early next year, which also ties up investments, but which should be transformed into a cleaner platform business also underlying our existing Enterprise business.

That's I think the two areas of investments that we are doing and how we are prioritizing them.

When you talk about next-gen Enterprise, then it's the business unit Enterprise and not your

Yes. Yes, there are elements of it that also actually goes to ProAudio and the healthcare, but it is really to make sure that taking our 20, almost 30 years of learning in delivering solutions for the Enterprise segment and building a strong platform for that and moving our customers over the next years onto that platform to, yeah.

I have one question left, if anybody out there would come, then it's now. The last one for me is inventory.

You said you have to increase inventory due to securing components and delivery. You also said it wouldn't reach the levels we saw last year.

Could it also be that it would be other things than memory, or is it just a question of securing the memory right now for maybe the next 4 months or?

It is mainly memory. I think this is where the overlap from the AI pull and there are some minor things, some PCBs, components for PCBs, flash base, but that's not the key part.

It is, yes.

The surge we saw in receivables in the quarter is simply timing because you had deliveries late in the quarter?

Yes. Yeah.

That should reverse in the next quarter?

Yeah. Depending on the timing of the Chinese New Year, we sometimes see that this is, and this year Chinese New Year was late in February, and therefore there's also more in March than what we had foreseen.

Perfect. I think we are done then.

Everybody, thank you for participating, and then we will end the call here.

Yeah. Thank you very much for listening in.

Thank you.

Thanks.

Bye. Bye.