[MILDEF] MilDef: When Computers Go to War

As combat goes digital, a Nordic company quietly powers Europe's military metamorphosis

A special thanks to Olof Engvall, Head of IR and Communication at MilDef, for talking exclusively to Silba and giving us valuable insights

Origins

It might seem strange to start a defence company when defence spending is at historic lows, right? Well, that's exactly what Tomas Odelid and Marianne Trolle did in 1997.

While Silicon Valley was chasing dot-com dreams, and everyone saw a shrinking market in post-Cold War Sweden, they spotted something different: militaries entering the digital age, slowly but inevitably, with nobody properly equipped to guide them through the transition. They named their venture LogIN (later MilDef), perhaps unknowingly foreshadowing their role in the military's digital transformation.

The founders' complementary skills proved crucial. Trolle's background in economics and law paired with Odelid's technical expertise created a dual understanding that still shapes MilDef's approach: balancing commercial innovation with military-grade reliability.

Unlike typical tech start-ups racing to build products, they chose to start as distributors. Call it Swedish pragmatism or strategic patience, but this decision would prove crucial. By 1998, they had secured the FMV (Sweden's Defence Materiel Administration, think Pentagon-but-Swedish) as a customer — and in defence, such relationships are different. Where else would you spend three years becoming an 'approved supplier' before selling a single cable?

Soon they were selling through partners across the Nordics, building a network that would eventually account for 58% of their business. In an industry where most players were large defence conglomerates, MilDef carved out a unique niche: they were practically alone in the Nordics doing what they did, apart from a small division of Saab.

The Nordic context shaped everything that followed. Swedish defence has always been different — collaborative development, high technical standards, export orientation. It's a unique ecosystem that allowed MilDef to spend an entire decade learning and preparing before launching their first proprietary product in 2007. What started as simply providing computers evolved into delivering complete IT backbone systems, including installation and integration. As their early customers like to say, "this stuff just works" — a reputation built through decades of consistent delivery.

This methodical approach reflected a deep understanding of defence industry timing. As they put it, they went from an era of "all the time in the world and no money" to one of "lots of money and no time."

While they expanded product lines and geographical reach, they never strayed from their specialised focus. The 2021 IPO might look like a typical tech company milestone, but it was really about timing — providing capital for expansion just as global defence spending began to surge. What started in a small Swedish office had become a major player in defence technology, positioned perfectly for the industry's renewed growth.

When defence spending exploded after 2022, MilDef was ready — not by luck, but by design. Three decades of practice when "nobody thought this was interesting" had created expertise that couldn't be quickly replicated.

While competitors rushed to enter the market, MilDef already had what mattered: relationships, expertise, and battle-tested products. The founders' contrarian bet on defence technology during its quietest period had positioned them perfectly for its loudest.

Meanwhile, a different story was unfolding in Germany. Roda Computer GmbH, founded in 1987 under Martin Bertsch's leadership, started as an Atari OEM partner. Their transition into defence technology came through an unexpected route: a tender from the Bavarian State Surveying Office in 1995. Funny how the most important strategic decisions don't look strategic at all when you make them.

Why are we talking about a German company now? Roda matters, bear with me.

Think of Roda as MilDef's German mirror image — similar destination, different path. Operating from Lichtenau, they embodied the German Mittelstand tradition of focused expertise and generational thinking.

What Roda actually builds might sound straightforward — ruggedised computers and displays — but the reality is more complex. Their specialty lies in vehicle integration, particularly the systems that keep military vehicles connected and operational in extreme conditions. Their flagship roCCs display series, designed to NATO standards, exemplifies their approach: custom-built technology that bridges the gap between commercial computing and military requirements. When a tank needs to process battlefield data at -20°C while bouncing through rough terrain, that's where Roda's expertise comes in.

This specialisation has made them indispensable to clients like the German Armed Forces, who have trusted them through multiple framework agreements since 2004. It's a position built on classic German engineering principles — precise, reliable, systematic — but adapted for an era where military advantage increasingly depends on computing power. Operating from their Lichtenau headquarters, they've carved out a unique position in the DACH region's defence ecosystem. Keep that in mind for the rest of the story.

Two companies that started miles apart, literally and figuratively, found themselves solving the same problem for a changing world.

Today's MilDef, still headquartered in Helsingborg and with Marianne Trolle on the board, carries the DNA of those early decisions. That methodical approach to market understanding? It's why they spend years developing customer relationships before entering new markets. Their focus on military-specific solutions? It comes from those early years spent learning exactly what defence customers needed.

And as of Q1 2025, the acquisition of Roda Computer Gmbh is about to complete, making MilDef a formidable player in Europe.

How do they make money

MilDef sells computers to armies. That’s the simple version.

The money flows through three channels. Hardware, at 70% of revenue, ranges from ruggedised laptops to specialised servers that fit in submarines. Services comprise 25%, covering everything from installing these systems in combat vehicles to keeping them running in the field. Software, the newest addition at 5%, helps military units deploy and manage their IT infrastructure.

The true engine of MilDef's business isn't manufacturing - it's engineering services cleverly packaged as hardware sales. Customers fund development costs, but MilDef keeps the intellectual property. This creates a virtuous cycle: each project builds their knowledge base, which helps win the next contract, while spreading R&D costs across multiple customers.

MilDef are masters of building computing systems for military vehicles using their signature 19"/2 form factor - compact modules half the width of standard server racks that can operate in extreme battlefield conditions. Their hardware emphasises reliability through designs with no moving parts, extensive electromagnetic compatibility testing, and the ability to work across extreme temperature ranges. The core products include ruggedised servers, network equipment, and specialised display systems, recently enhanced by display technology acquired from AVT.

Their newest software platform, OneCIS, handles a critical military IT challenge by enabling secure software deployment across air-gapped networks, facilitating NATO interoperability.

Each system undergoes rigorous testing in MilDef's EMC chamber to ensure it won't interfere with other military electronics. Their focus is on building complete tactical IT infrastructure that can be trusted in battlefield conditions, serving as the digital backbone for modern military platforms.

Basically the hardware is specifically engineered to work in confined military spaces - from combat vehicles to naval vessels - while meeting strict military standards for electromagnetic emissions and environmental durability.

Their financial engine runs on framework agreements - multi-year contracts with defence agencies that provide steady baseline revenue. Many agreements allow price adjustments for inflation, protecting margins. The Swedish Defence Materiel Administration has been buying from them since 1997, but the relationship has evolved from simple procurement to collaborative development.

Project contracts form the next layer. A SEK 200 million deal to equip BAE Systems combat vehicles. A SEK 81 million software contract for the Swedish Navy. These create lumpy but profitable revenue spikes on top of the baseline. The Russia-Ukraine war has accelerated this dynamic, with European defence spending reaching record levels.

Defence customers pay slowly and specialised components take months to source. But the 33% working capital intensity isn't mainly from manufacturing - it reflects long development cycles where MilDef serves as an outsourced innovation department for military customers. Their 50% gross margins compensate not just for inventory risk, but for maintaining deep engineering expertise.

Each military project adds to their understanding of defence requirements - from electromagnetic compatibility testing to managing heat in confined spaces. But MilDef carefully avoids becoming a software company. They deliver hardware that meets specifications but never load operational software - reducing both risk and responsibility while maintaining their position as trusted advisors. This is an important detail that minimises cybersecurity risks.

Defence technology rewards patience. MilDef's strength lies in understanding how military technology needs to work in the field - from Arctic cold to desert heat, from tanks to submarines. They make money by gathering the intellectual property, then reusing that knowledge across multiple projects while charging premium prices for proven reliability. The manufacturing is relatively simple. The margins come from armies paying for certainty:

when you're building combat systems, "almost reliable" isn't good enough.

Numbers

Revenue, margins, backlog, and cash flows — these are the vital signs of any business. For MilDef, the key metrics paint a picture of a SEK 1.2B revenue company with 49% gross margins, SEK 2.1B order backlog, and improving free cash flows.

Starting with revenue. SEK 1.2B in 2024, up just 4% from 2023's SEK 1.15B. But that modest annual growth masks a dramatic acceleration: Q4 sales jumped 18% year-over-year to SEK 418M. As we saw in their origin story, MilDef doesn't chase quarterly numbers — but when defence spending cycles turn, they turn hard.

As we learned from the head of IR, that revenue comes from single-shift production, with capacity for 3x that without major capital investment. This headroom explains management's confidence in handling the growing order book.

The order book might be the most revealing metric. SEK 2.1B in backlog (that's orders waiting to be delivered) versus SEK 1.2B in annual revenue gives us a book-to-bill ratio of 1.5x. Translation? They're winning contracts faster than they can deliver them. The Q4 earnings report shows SEK 1.1B of this backlog is scheduled for 2025 delivery — that's 92% of 2024's revenue already locked in.

Gross margins deserve attention. 49% means they keep SEK 0.49 of every krona of revenue after direct costs. For comparison, typical hardware companies run 25-35% gross margins. MilDef's premium reflects what we learned about their patient approach to market development.

The business model's capital intensity shows in working capital metrics. They tie up 28% of revenue (SEK 331M per their Q4 report) in inventory and receivables. Think of it as the cost of admission to the defence market — you need to carry specialised inventory and wait for government payments.

Operating leverage is becoming visible. While revenue grew 4% in 2024, EBITA (earnings before interest, taxes, and amortisation — a clean measure of operating profit) grew 7% to SEK 150M. The Q4 margin expansion was even more dramatic: EBITA margins hit 17% versus 14.7% a year earlier.

R&D intensity increased to 7.8% of revenue (SEK 94M in 2024). This isn't just tech spending — it's the price of keeping pace with defence modernisation. Each krona here helps maintain those premium gross margins we noted earlier.

Employee productivity metrics are striking. SEK 3.7M revenue per employee in 2024, up from SEK 3.4M in 2023. This efficiency, revealed in their Q4 employee numbers, suggests scalability in their business model. And the critical detail, right now the issue is engineering capacity, not production, limits growth. Recent hiring of more engineers suggests urgency in addressing this bottleneck.

Cash flow turned a corner in 2024. Free cash flow (operating cash minus capital expenditure) hit SEK 128M, with five consecutive positive quarters. The Q4 report shows working capital improvements driving this trend — they're getting better at managing that necessary capital intensity.

Geographic concentration remains high but shifting. The Q4 breakdown shows 58% of revenue from Nordic countries, 26% from rest of Europe, and 13% from North America. The roda acquisition (SEK 808M purchase price per their announcement) should rebalance this significantly toward Central Europe. And as we found out, Nordics, DACH and Baltics are what’s interesting to MilDef next. It’s probably the smart move.

Framework agreements aren't fixed-price handcuffs - they're dynamic, inflation-adjusted arrangements that provide baseline stability while preserving pricing power. One older Norwegian agreement dragged Q4 margins, but has since been renegotiated. SEK 107M of Q4 revenue came from these long-term contracts without impacting backlog.

The balance sheet remains solid despite the pending acquisition. Their Q4 report shows SEK 530M cash, up from SEK 82M a year ago, boosted by a SEK 500M share issue for the roda purchase. Net cash position means flexibility for future moves. And MilDef can afford to be opportunistic here. And they will probably be.

People

People in defence companies work in two parallel worlds.

In one world, engineers design computer systems that fit in tanks and survive missile strikes, while procurement officers write multi-year contracts for military equipment. In another world, investors trade shares of defence companies based on order backlogs and EBITDA margins, treating military relationships as numbers on a screen.

MilDef operates in both worlds. Their shareholder register reads like a Swedish institutions' meeting - Svolder sits at the top with 9.5%, a publicly-traded investment firm that specialises in small industrial companies. They've backed MilDef through multiple capital raises, maintaining their position while pushing for operational improvements.

Then you notice MilDef Crete's 6.4% stake. The Taiwanese company started as MilDef's manufacturing partner in 1997, becoming both supplier and shareholder. Twenty-seven years later, they still make MilDef's mobile computers being a great supplier to the business. The arrangement worked so well, they kept expanding it - last year alone they supplied SEK 103.6 million in components to MilDef.

Co-founder Marianne Trolle maintains her 5.3% stake while serving on the board, watching the company she started grow from Swedish distributor to European defence player. The ownership connects directly to how she and Tomas Odelid built the business - patient growth, reinvested profits, careful market expansion. When Odelid passed away in 2018, Trolle stepped up as interim chair, maintaining continuity through the transition.

Current management holds real money in the company. CEO Daniel Ljunggren owns 3.5%. Board Chair Björn Karlsson, the previous CEO, keeps 890,821 shares. They're betting their own wealth on MilDef's success, creating the kind of alignment institutional investors love to see.

The rest of the register reads like a who's who of Nordic asset managers - Carnegie Fonder, Deka Investments, small-cap specialists who understand the defence industry's long cycles. No single shareholder controls MilDef, but together they form a stable base of investors who think in decades rather than quarters. The share count keeps creeping up through small acquisitions - they just issued 5.4 million new shares for the roda deal - but the core ownership remains remarkably consistent.

Meanwhile, in the physical world of defence contracting, 340 employees work across nine countries building military-grade computers. The majority, 160 people, work from their Swedish base in Helsingborg. Engineers make up the core - about a third of them in pure R&D, more in technical roles, spending most of the time prototyping and innovating for their customers.

Management combines veterans and fresh perspectives. Daniel Ljunggren spent eleven years as CFO before becoming CEO in 2023. Fredrik Persson rose from R&D engineer to Deputy CEO over thirteen years, accumulating the kind of defence technology knowledge that only comes from solving real military problems. New CFO Viveca Johnsson arrived in 2023 with fresh eyes and a focus on capital efficiency. At their Capital Markets Day, she outlined her approach:

We need to continue to add resources, but we do not see adding resources in the same pace as we're adding growth.

The abstraction breaks down when you look at how defence companies actually grow. MilDef knew their recent German acquisition, roda computer, for 25 years before buying them. Those 25 years created the relationships that make military contracts possible - the kind you can't represent in a spreadsheet model. The deal will add 140 people, mostly engineers and sales staff who maintained framework agreements with German defence agencies through multiple governments.

The customer relationships span military hierarchies in ways financial models struggle to capture. Procurement officers control multi-year framework agreements, parceling out orders based on budget cycles and operational needs. Defence contractors like BAE Systems integrate MilDef's computers into weapons platforms, creating decade-long supply relationships. Soldiers trust these systems with their lives, creating a level of quality expectations that shows up in financial statements as 50% gross margins.

The most valuable assets we have within MilDef... it's always coming down to people in the end,

CEO Ljunggren noted at their Capital Markets Day.

Roda's CEO Martin Bertsch explained their choice:

The main criteria when finding a new owner of roda was to find a partner that truly wanted to continue the successful growth journey.

During our February 2025 interview with MilDef's Head of IR, we learned how this theoretical structure works in practice. Their engineering team forms the company's core - they just hired more engineers, but still can't find enough. "Our bottleneck right now is engineering power," they admit. They're still prototyping solutions for European armies, in close and meticulous collaboration, rushing to modernise Cold War-era equipment. Not an easy task. And to be fair, engineering talent is a scarce resource, especially for smaller companies without sexy titles and compensations.

The company runs leaner than you might expect. Their assembly lines employ meticulous but efficient teams - "low-cost assembly" in management's words. The real value sits in their engineering staff, who spend years learning the peculiarities of military requirements. These engineers do not simply build products; they become long-term consultants to defence agencies, with their time "very billable" as they help armies adapt commercial technology to battlefield conditions.

This structure creates interesting tensions. MilDef's Swedish management culture emphasises engineering excellence and methodical growth. But as they expand through acquisitions like roda in Germany, they're learning to adapt. "We understand that the Germans do business in Germany not Swedes," management notes. Their solution? Let acquired companies maintain their culture while sharing MilDef's obsession with reliability. After all, as MilDef puts it: "when these switches, routers, and servers go out, they must never fail." That’s the target.

Defence technology companies occupy this dual existence - one foot in the world of quarterly earnings and investor presentations, another in the world of soldiers' lives and decades-long military relationships. The numbers matter, but they reflect something more fundamental: the slow accumulation of trust between people who build technology and the armies who stake lives on it working.

Competition & the Moat(?)

Competition in defence technology operates through distinct layers. Direct product competition is surprisingly limited - while Saab Technology produces similar military computers, their position within a major defence contractor prevents them from selling to Saab's competitors. This creates an unusual dynamic where platform providers like BAE Systems, Rheinmetall, and Kongsberg become both potential competitors and crucial customers.

The real competitive barriers are structural. New entrants face extensive technical requirements, complex certification processes, and the need to build trust over decades. One product failure could permanently end a company's defence business. These barriers create an environment where competitive advantages, once established, tend to deepen rather than erode.

MilDef has built three reinforcing moats.

The first is trust accumulation - each successful deployment builds credibility for the next bid, while framework agreements institutionalise these relationships into predictable revenue streams.

Technical depth forms their second moat. Customer-funded R&D, where MilDef retains intellectual property rights, creates a growing knowledge base that becomes more valuable with each project.

Platform independence provides their third and most structural advantage. Unlike divisions of major contractors, who tend to get along like cats at a dog show, MilDef can sell to everyone. This neutrality makes them a safe choice for defence manufacturers - buying from MilDef doesn't mean funding a competitor's R&D. As military technology grows more complex and NATO pushes for standardisation, this position becomes increasingly valuable.

These moats reinforce each other in ways that deter competition. Trust enables new projects, which deepen technical knowledge, which reinforces their trusted position. Framework agreements provide stable revenue to fund continued innovation. Platform independence lets them serve the whole market, accelerating their learning curve. Modern warfare trends - increasing digitalisation, unmanned systems, AI integration - are strengthening rather than eroding these advantages.

Mr. Market

"Frankly lacklustre" might have described MilDef's stock performance in its early days as a public company.

Since its SEK 36.5 IPO price in June 2021, the Swedish defence technology firm's shares meandered, leaving investors to question whether this was simply another small-cap defence contractor.

That perception has undergone a dramatic shift. MilDef's stock now trades at SEK 166, having nearly doubled in the past six months alone. The market capitalisation—SEK 7.6 billion at current prices—reflects a company increasingly viewed as a European defence platform rather than a Nordic hardware vendor.

The journey to this valuation has been anything but linear. Russia's invasion of Ukraine provided the first catalyst, pushing the stock from SEK 45 to SEK 70 in early 2022 as markets repriced the entire defence sector. (A grim reminder that geopolitical tailwinds sometimes arrive wearing combat boots)

The market's education progressed through distinct phases. The price dipped to SEK 59 back in July. A dip that had value investors circling like sharks at a discount seafood sale.

Strong 2023 results—56% revenue growth and 10.7% EBITDA margins—supported the stock, but investors demanded evidence of sustainable expansion. Trading volumes and price movements suggested institutional investors were still calibrating their views. After ranging between SEK 70-80 through the third quarter of 2024, the stock surged to SEK 115-120 by year-end.

The last few days brought another leg higher, a significant one, with shares reaching SEK 166 amid broader defence sector strength. A combination of MilDef's record Q4 results and escalating geopolitical tensions—highlighted by renewed US pressure on European defence spending and calls for EU solidarity—drove the stock up nearly 30% from January levels. The move echoed similar strength seen in peers like Rheinmetall, suggesting institutional investors are repricing the entire European defence technology sector amid expectations of accelerated military spending.

Today's valuation metrics—4.48 times 2024 sales and 35.1 times forward earnings (2025E)—suggest the market sees MilDef differently than it did two years ago. Analyst questions during earnings calls confirm this evolution: early 2023 discussions centered on hardware sales; by late 2024, the focus had shifted to geographic expansion, integration and delivery capabilities.

The ownership structure reinforces this shift in perception. Swedish institutions, which dominate the shareholder register, have maintained their positions through multiple capital raises. The limited free float and patient capital base have allowed for gradual price discovery rather than sharp swings on quarterly results.

Mr. Market, it seems, has graduated from viewing MilDef as a niche Nordic player to seeing a European defence technology platform.

Bear Thesis

The bear case for MilDef might seem counterintuitive at first. After all, how can you bet against a company riding the wave of increased European defence spending? You cannot doubt a raincoat manufacturer during monsoon season. And yet beneath the surface of record orders and ambitious expansion plans lurks a more complex reality.

Sales swing dramatically—from SEK 250m in Q3 2024 to SEK 418m in Q4—suggesting a business model still struggling with predictability. More concerning is what lies ahead: the order book shows a cliff-like drop from SEK 1,149m in 2025 to just SEK 269m in 2026. That's not just a decline; it's a 77% plunge. Increased spending might change that. It’s speculation though, not actual orders.

But perhaps the most intriguing risk lies in MilDef's R&D model. "The customer pays for all the R&D," is the mantra at MilDef, seemingly a financial strength. Yet in Ukraine, where electronic warfare capabilities evolve every "eight to twelve weeks," this reactive approach to innovation might prove dangerously slow. With technology, innovation can win the war. Ask the Bletchley Park veterans.

The roda acquisition adds another layer of complexity. When MilDef admits there’s a cultural difference, they're not just being candid about language barriers. They're revealing the scale of the integration challenge ahead. Cultural misalignments have derailed smaller acquisitions than this.

Engineering constraints compound these concerns. While order books swell and ambitions soar, the company faces what their IR head calls an "engineering bottleneck." It's like trying to drink from a firehose with a coffee straw—the opportunity might be there, but the capacity to capture it remains limited.

Financial metrics flash their own warning signals. EBITA margins bounce between 17.0% and 11.3% within a single year, suggesting limited pricing power. Working capital fluctuates between 27.6-35.1% of sales, hinting at operational inefficiencies that could become more problematic as the company scales.

Yet perhaps the most compelling bear argument stems from MilDef's technological position in the evolving defence technology landscape. News from Ukraine highlights an accelerating shift toward electronic warfare, AI-driven capabilities, and autonomous systems. With 70% of revenue tied to hardware and limited software development capabilities, MilDef risks fighting tomorrow's wars with yesterday's tools. While MilDef excels at ruggedised hardware; modern warfare is increasingly fought in the digital realm. "We do not put software on the hardware," they proudly declare, a statement that might have inspired confidence a decade ago but raises eyebrows in an era where artificial intelligence and autonomous systems dominate military innovation. The NVIDIA vs AMD battle showcases why software can win the hardware war. MilDef might fall in the same trap. Rely too much on the hardware, without the software moat to complement it.

The market, meanwhile, prices in perfection. At 16.8-21.0x EV/EBITA, current valuations assume flawless execution through all these challenges. That's a high bar for any company, let alone one being pressured from all sides.

Customer concentration adds another wrinkle to this story. With 80% of revenue from the defence sector and growth heavily dependent on framework agreements, even minor shifts in political winds or budget priorities could upend growth expectations. The "long administrative processes and sales cycles" mentioned in company reports might prove particularly problematic if defence priorities shift—as they inevitably do.

Bull Thesis

In 2009, describing MilDef's technology as "mission-critical" would have drawn skeptical looks. Today, the company sits at the intersection of two unstoppable forces: Europe's military modernisation and the digitalisation of warfare.

The evolution has been decisive. From a Nordic specialist in ruggedised computing, MilDef has evolved into a systems integrator whose products are becoming as essential to modern military operations as ammunition. Their testing facilities in Sweden—complete with EMC chambers and environmental machine-torture chambers—shows you how advanced they are. When military operations depend increasingly on secure communications and reliable computing, MilDef's obsession with reliability becomes a strategic advantage.

The numbers support this evolution. A record order backlog of SEK 2 billion might seem impressive, but more telling is how they've maintained 49% gross margins while transforming from hardware supplier to systems integrator. Working capital efficiency has improved, suggesting that growth hasn't come at the cost of operational discipline.

Yet focusing solely on current operations misses the larger strategic picture. MilDef's acquisition strategy reveals a company methodically assembling the pieces for European dominance. The roda deal, priced at multiples well below MilDef's own valuation, doesn't just double their revenue base—it provides direct access to Europe's largest defence market just as Germany commits to unprecedented military spending. At the heart of the biggest defence spending shift in a generation.

And keep in mind, roda is as big as MilDef, if not bigger. That means that MilDef will suddenly double in size, both in capacity and expertise, but also connection-wise across DACH and Nordics.

Their business model appears particularly well-suited to this moment. Customer-funded R&D combined with retained IP ownership allows them to innovate aggressively while maintaining capital efficiency. "The customer pays for all the R&D, but we keep all the intellectual properties," as we learned, describing a model that turns each client engagement into a funded research opportunity. Win-win… for MilDef.

The much-discussed "engineering bottleneck" actually reinforces their competitive position. When a company with three decades of experience struggles to add technical capacity, it suggests the barriers to entry are less about capital and more about accumulated expertise. Their recent success in adding ten engineers indicates this constraint is manageable rather than structural. And we know they are laser focused on this.

More intriguing is their evolution beyond traditional military hardware. Their dismounted soldier systems initiative aligns perfectly with modern warfare's shift from platform-centric to network-centric operations. Their work on UAV control systems similarly positions them at the forefront of drone warfare, where reliable control systems can mean the difference between mission success and catastrophic failure.

The valuation speaks volumes. At 16.8-21.0x EV/EBITA(25e), MilDef trades still below peers. Although, we have to acknowledge valuations are pretty speculative at the moment. This discount appears increasingly difficult to justify as their systems become more central to military capabilities. Framework agreements provide recurring revenue stability, while their technical leadership allows them to capture additional value through specialised solutions.

Perhaps most compelling is their strategic clarity. "We are not throttling up on the US expansion right now," MilDef states plainly. "With the roda acquisition, we're throttling up on the European expansion." This focus on dominating their home market during a historic defence modernisation cycle, combined with technical leadership in increasingly critical domains, suggests a focused company whose best years lie ahead.

The transition from hardware vendor to strategic partner hasn't been seamless. But in an era where military advantage increasingly depends on digital capabilities, MilDef's position looks less like a company riding a spending wave and more like an essential partner in military modernisation. That's a transformation worth noting.

So what do we make of all this?

MilDef represents an intriguing case study in how patient specialisation can position a company for explosive growth when market conditions align. After three decades of steady development in a niche few cared about, they now find themselves at the intersection of two powerful forces: Europe's defence modernisation and the digitalisation of warfare.

The core strength lies in their deep technical moat, built through decades of co-development with military customers. When your product absolutely cannot fail in combat conditions, brand trust becomes nearly unassailable. The business model is clever too - customers fund R&D but MilDef keeps the IP, creating a virtuous cycle of innovation at minimal risk.

However, their greatest opportunity also presents their biggest challenge. The roda acquisition could transform them into a pan-European leader, but integration always carries risks. Meanwhile, they're racing to add engineering talent in a tight market while maintaining their culture of reliability and innovation.

The bull case here would appeal to GARP investors who see MilDef as a way to play defence modernisation with software-like margins and recurring revenues. The steadily expanding service network and high switching costs provide quality investors the predictability they seek. However, value investors might balk at current multiples that price in near-perfect execution.

Looking ahead, three scenarios seem possible:

The base case where roda integration proceeds smoothly and European expansion continues steadily,

An acceleration case where geopolitical tensions and faster digitalisation create a perfect storm of demand, or

A challenging scenario where integration issues combine with slower defence spending to compress margins.

What makes MilDef particularly interesting is how they showcase a deeper truth about market transitions. In moments of urgent transformation - like Europe's current military modernisation - the limiting factor isn't usually technology or capital. It's trust. MilDef spent three decades earning the right to be trusted with the nervous system of modern warfare just as combat itself becomes fundamentally digital. That's not something you can quickly replicate, regardless of resources.

This frames the opportunity and risk very differently. The key question isn't whether they'll execute perfectly - though that matters - but whether anyone else could even attempt what they're doing. The moat isn't in their products, but in thirty years of proving they won't fail when failure isn't an option. Armies adding more orders translates into proof. In that light, the roda acquisition looks less like traditional M&A and more like connecting two trusted networks at a moment when trust itself has become scarce and essential. That's the kind of insight that makes you sit back and think.

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