HMS Networks AB Aktie

Thank you. Good morning, everybody. Welcome to this quarter 1 call. It's me Staffan Dahlstrom, CEO; and Joakim Nideborn, calling in from a crispy and sunny spring day in Halmstad. I think also this report is quite crispy and sunny, and we're very pleased to present 3 sections, business update, I'll do that, and then Joakim dive into the numbers, and we end up with a Q&A.

But if we look on the quarter 1 here, we are very pleased to see a fairly good momentum. We have good organic growth on sales, up 15%, a little bit of headwind on the weak Swedish currency at the moment. Joakim will talk more about that. But also order intake is organically growing double digit. And this combination of double-digit growth on both net sales and order intake, we are really pleased to see that, and we feel that the market is fairly strong, and it's a broad good market, we feel.

We're also happy to see that we are improving our profits on the EBITA level that we follow from the year -- from this year. So EBITA margin, 27.2%, better than we expected. I think we're seeing stable development on gross margin. We have kept OpEx on a flat level. And of course, this gives a good EBITA margin when we have good net sales growth. Cash flow continued to be strong, and this gives us adjusted EPS earnings per share at SEK 3.78. If we look on the last 12 months, I think it's only one thing I would like to highlight, and that is the cash flow from operations, where we almost make SEK 1 billion in a year, and we are very happy to have this, and Joakim will talk more about our debt and how we see the covenants and things like this.

But as I said, market is fairly strong. North America, after a dip end of last year, we said that was temporary. It was strong development. We also see that China -- that's a smaller market for us, but growing well. In China, we also saw some boost effect where we felt that some Chinese customers, they were concerned about lead times. But otherwise, we see a balance between order intake and invoicing to a large extent. Also Europe, that's been quite slow and Japan continue to slowly improve. So positive signs. So it's broad and positive.

SEK 1 billion in order intake make us proud. Of course, we are worried about the situation in Middle East. For us, this has not a direct impact to a large extent. It's mainly our business in building automation, where we have a fairly decent business in the Middle East and Saudi and Dubai. That's a lot of real estate projects there. There, we've seen a drop in order intake in March. But all in all, I think Middle East is less than 2% of our revenue. But of course, we are worried and we follow this, but it seems like our industrial customers and industrial markets are almost getting used to this kind of turbulence and changes, and they keep on investing, and we see a fairly stable market.

We continue to invest in product development, part of our new strategy in all our divisions, and we see this on a little bit higher R&D expenses. We also work a lot with different pilot projects and use more AI. But we are not implementing AI on full scale in our operations yet. We are more in the exploration and test phase where we test and try with our engineers. And the ambition here is to be able to do more with the current resource we're having.

We're also very happy to see that the asset acquisition we did from Molex's industrial communication from 1st of January got a very good start. We integrate this business with their 2 development centers in Canada and France very well. We also integrated the supply chain. And the customers have welcomed this, been very positive. Some customers also placed orders for the entire 2026. So this is also a little bit boost on the order intake. But I mean, this is not a big acquisition, but it's very positive to see the smooth integration and how positive this has been.

And just as a reminder, on the next slide, this was a fairly small acquisition. We got this from Molex. And from their point of view, this was too small and too strange for their large sales organization, and we did not pay a big amount of this. And we said that we hope this will add more than USD 10 million annual revenue. Quarter 1, I think the order intake was SEK 140 million. So yes, we are -- it's true. It's more than USD 10 million annually. So I think this is better than we expected.

So all in all, this is a good addition to our INT division, where we feel that their product complements our technologies and our products. And it's very positive with a positive customer feedback that we have a lot of common customers and they feel that, okay, now when HMS takes over, we are ready to invest in this technology and commit to it. So all in all, a very positive asset acquisition.

With that, Joakim, some numbers.

Yes, some numbers. And I'm going to start with the order intake as we normally do, which you saw was very pleasing. We did just about SEK 1.1 billion in order intake, a 19% growth or 10% organic growth. And you see we also have 10% organic growth for the last 12 months.

And Staffan touched upon it already. One very big contributing factor to the strong order intake was the Molex acquisition and the fact that we got many of these full year orders. So we're very pleased with the underlying business as well. And in that number of SEK 1.1 billion, we do think we have around SEK 130 million where customers have been placing orders that they normally would maybe do throughout the year, but now placing everything in Q1.

And underlying, we can see it's really all divisions and all geographic markets that are doing well. So we see a broad-based strong demand. And with everything happening in the world, we were quite happy to see that the customer is still investing and placing orders. Maybe what sticks out the most for us is the INT division. I'll come back to that with an organic growth of 25%. And we've been talking about this for maybe some 12, 18 months that we thought we would see this pickup. And now we're maybe a bit later than what we believed, and now we're seeing that business coming back on a really broad base also now in Q1.

If we move over to the sales side, we're also continuing the growth. And you see on the graph there, it's a nice continued development, SEK 971 million and a 9% growth, which is actually organically 15%. And now it's the second quarter where we have double-digit organic growth. And if you've been following us, you've been seeing that we had a more challenging situation throughout 2024 and first half of '25. And now we feel that we're back on the right track with all the inventory levels have been normalizing out in the supply chains.

Also very good to note that we do have a book-to-bill of 1.16. We've been saying that we believe we should have more than 1 this year to continue the growth journey and to place the foundation for future growth. So that's -- 1.16 is a very good number, especially when we show this 15% organic growth on sales. What's behind also here, it's quite broad-based. We see our 4 largest markets are among the ones that are performing the best. So in order of size, we have the U.S., the biggest market, Germany, Japan and China, all of them are contributing very well to this development.

And then going into the divisions, we're starting with Industrial Data Solutions, the largest one, and now 40% of the group profits. And here you see on the order intake that we report a negative 3% in development. Actually, organically, that's plus 5% due to the massive currency effects from Q1 2025 until now. As you might remember, after Q1, I think it was in April, especially the U.S. dollar took a big hit versus the Swedish crown, and that is a big impact on the bridge, of course, when you compare quarter-to-quarter.

Net sales, a good number. The Q4 number for 2025 was exceptionally strong, the SEK 481 million and now SEK 418 million as we do in the quarter for us is not bad, a 13% organic growth. And I think this also comes down to good margins of 25.4%. So we've been able to build this -- the margin in this division quite well from around 20% to 25% if you take 18-month period.

And here, the North America is the biggest market. That's also what is performing the best. It's a little bit slower for us in IDS in Europe and APAC, still okay. And to mention one big driver, we've been seeing the data center vertical performing very well, winning new business in various applications for the data center business. And just to mention also in -- we are meeting on the order side, a very tough comp in Q1 2025. So both in Q4 '24 and Q5 '21 -- sorry, Q1 '25, we had some big project orders that we did not really have now in the beginning of 2026. So we see a strong underlying development.

Then over to Industrial Networks Technology, a fantastic quarter with a 25% organic growth in orders and 23% growth on net sales. And here, you also see on the green bar in the left-hand side graph, that Molex business coming in with SEK 140 million. So the reported growth is now 73%, a very strong add-on to the business. Of course, this order intake pace is not sustainable. And I think Staffan said it, it is basically our customers placing orders for the full year. So I think what you can expect is maybe more the pace that you see on the sales around the SEK 40 million on a quarterly level.

And as Staffan also mentioned, this has been turning out a bit better than we expected. We didn't know exactly what to expect given that it was some older products and some customers that have been announced with end of life, and it seems like the business is still going very strong here. Integration is going well, and we see difficult to pick a lot of markets that are performing good or bad. We see the very key markets in Central Europe and Japan is driving. That is -- those are really big markets for INT. So that's very good to see that we are back to see good growth in those key markets.

And then finally, New Industries, also a solid quarter for New Industries. We have a 7% organic growth on orders and 8% on net sales. So pretty much in line with our financial long-term targets and also good profitability with over 27% EBITA margin. Here, we saw a good development in the Vehicle Communication business, both in Europe and North America. On the Building Automation business, we had a good start. The first 2 months were quite good. And then in March, we saw a massive slowdown in orders from the Middle East, which has been impacting the numbers a little bit.

And again, for the group, this is not a big impact. It's less than 2% in the Middle East of the total sales. But for Building Automation, it's 20% of the business. So that is -- with a big slowdown, that is, of course, visible for that part of the business.

Then going over to the results. And first, I just want to make you aware that we are now reporting a new main profitability metric, EBITA, which was SEK 264 million and a 27% margin. So this is our long-term operating target for profitability. And this is where we have a 25% target to reach 25% of EBITA. And the difference compared to before when we showed adjusted EBIT is actually a bit more difficult for us as a company to live up to. It's the same in the fact that we are taking away the excess values -- amortization of the excess values, but we are not making any other adjustments. So all the integration costs, M&A costs and this is actually burdening the EBITA result.

Also, amortization of activated R&D cost is impacting the number. I hope that was clear. Otherwise, you have to ask. And what we can see then, SEK 264 million, 27% margin, very strong start of the year for us and good to see that we are above the financial target. It's really a strong top line and cost controlling that is behind the number, so nothing strange.

Looking at the gross margin, we were slightly down compared to last year, a big negative effect from currency. And also, I would say it's a good product mix within the divisions, but the fact that INT is growing a lot and taking a bigger share of the whole is reducing the group margin a little bit. And I think we've been talking about this before that when -- if and when INT starts to come back to a good old form, that will put a bit of a pressure on the margin. On the other side, we have been rather successful with the price increases and also the volume, of course, is good in the quarter, which is mitigating. And all in all, with the mix that we have, we're quite happy to be able to present 62.4%.

On the OpEx side, we came in a little bit short of what we believed we would do. And it's -- we're a little bit behind on some of the plans. We are investing in some certain areas of the business, both in R&D, also adding a team in artificial intelligence to drive that development within the group. And it's a little bit behind the schedule, but we will be there and recoup. And then we also have salary increases coming in Q2. So looking ahead, we will have a little bit of a higher cost level.

Just 2 more things I want to mention here. One is the R&D, where we are, as Staffan also said, we're now investing in both in INT and IDS in the new generation of products. which is increasing the pace of investment in R&D and activation of cost, and this increased to SEK 27 million from SEK 15 million last Q1. And so SEK 12 million more inactivated R&D, which is, of course, you could say, a little bit helping the result. On the other hand, you see the FX effect. We had some really good currency hedges in 2025, which has been wearing off towards the end of the year and now into 2026. We are having -- we still have hedges, but it's at lower rates than what we used to have before. And so we see a pretty big impact on EBITA of the 31% -- SEK 31 million from the FX rates.

If we move on further down in the profit and loss, we come to the adjusted results -- adjusted EPS results. And here, we have SEK 3.78 as adjusted EPS, a pretty solid number. We're happy to see interest costs coming down from SEK 34 million a year ago to SEK 20 million now. It's a combination of, of course, reduced debt, but also better terms in the financing agreement, which is keeping that down a little bit. And if you want to see the reported EPS, we're at SEK 3.24. And here, we are just adjusting for the excess value amortization of the acquisitions.

We continue to show a good cash conversion and the cash flow is solid with SEK 250 million. And behind that, we're reducing inventories a little bit in Q1. We're tying up quite a bit more in our customers, good invoicing in the end of the quarter. March was a very strong month in invoicing. So we tie up some SEK 37 million more in working capital in Q1. And for the year, Staffan mentioned already SEK 940 million on good track to that SEK 1 billion mark that we would really like to reach soon.

And then if we look at the net debt situation, continue to move in the right pattern. We are reducing a bit more since Q4, and we're now down on net debt to EBITA, if I look at pre-IFRS 16 basis of 1.87. And of course, that puts us in a good spot compared to 3.36 a year ago. I think we're quite happy with that reduction. And it also means that we have -- we can put some more efforts into the M&A agenda again, and we are building that agenda now in the divisions. And it's going quite well in looking at new targets and building that pipeline.

So just to summarize before we hand over for questions, takeaways from the first quarter. What we would like you to remember is the order intake, solid over SEK 1 billion for the first time for us. Organic growth in sales, 15%, second quarter in a row with double-digit growth on the net sales side. And then we also would like to be clear with these preorders of about SEK 130 million that you can not expect to come back in the coming quarters. And then INT, we need to lift out INT, a very strong development here with both over 20% organic growth in both orders and sales and a good start to the new acquisition in INT.

The macro situation is still uncertain. I mean we are happy to see that the underlying market seems to be working well enough anyway. And Middle East, even if it's a bit of an impact on the building, not a lot, Building Automation business, not a lot for the whole group. What we also do see, I'm not sure if we talked about this before, we do see lead time for certain semiconductors coming up again, for instance, memories, also some price has been coming up a bit. We are not impacted by the worst latest geometries, but still it's a bit of a push upwards in pricing. And we are trying to now place orders for more or less the full year to make sure that we have the material we need to be able to continue to deliver.

And then finally, profitability and cash flow, quite well, both cash flow, cash conversion, good and the underlying profitability is slightly better than our long-term targets. And we are continuing to invest in the business now in R&D, in AI, and we are very happy to see the continued development of the year.

With that, I would like to hand over to operator for questions.

[Operator Instructions] The next question comes from Jesper Stugemo from Handelsbanken.

Congrats to the very strong results here. So 3 questions from me, if I may. My first one is related to the increased order placements you saw among Chinese customers here given the disruption in supply chains. It sounds like a prebuying. Do you expect a similar pattern in H1 or full 2026 as we saw in the pandemic years in terms of boosted orders? Or how should we view this?

We'll start with that. I'll say, Joakim, I think we list here SEK 130 million on order intake as a little bit of boosted. But I think we are much more into a balanced situation. We see some concerns in some Chinese customers due to geopolitical things. The memory is a bit worrying. It's not that we are using the same memories as the AI market, but it's the same factory, the microns of the world.

So I think the fact that they have full schedule also affect this kind of industrial component that we buy. But we don't really see that this is a big trend. So it's mainly related to some customers in China. And of course, this with the Molex acquisition is a onetime effect. We bought this asset without order book and some customers were really happy, so they committed to larger time orders.

So you say, Joakim, do you see this as a big trend?

No, I think we've been discussing that a lot, Jesper. I think it's been something we've been also challenging the different business owners in the company, how they see this. And I think we -- what we say in the report, we believe that about SEK 130 million was maybe placed a bit early. But otherwise, it seems to be a quite solid market, and we've also been seeing other peers reporting strong numbers for the first quarter. So it's -- we're happy to see that the investments seem to continue.

Okay. Very clear. And a follow-up then on the memory prices here. How do you work to secure your volumes to deliver to the customers? Any risk here? And also on inflationary COGS coming up and potential workarounds to not lower the gross margin here?

Yes. So very relevant question. And what we've been doing is we've been placing orders for the rest of the year. We haven't taken all the volume yet. We will probably take volume a bit earlier than what we normally would do. So I think you can maybe expect that we build a little bit of working capital for -- throughout the year.

I would maybe have expected that we could reduce before -- if you asked me half year ago, I probably think that we could reduce working capital throughout the year. Now that might be challenging. And I think that's pretty much what we can do. On the pricing side, so far, it seems like we've been covering what we need to cover in the yearly increases. If that view changes, we will, of course, act as we always do to protect the margins.

The next question comes from Viktor Högberg from Danske Bank.

Just on the EBITA margin potential. Of course, we know that costs are not fully ramped up yet, but the organic margin potential looks higher than what we picked up at the CMD was saying that maybe, I don't know, 27% as an organic potential by 2030. You're already at that level. Just what are your thoughts on the organic potential if we would exclude the M&A impact, which we know will probably be dilutive?

I mean we don't really -- we have a target 2030. That includes the M&A impact. We are talking about most of the M&As we look at will have a dilutive effect on our margins, gross margins and net margins. So we look on the combination. But of course, the more organic growth we are able to generate, the better it will be for our margins, I think, because there, we have a higher leverage.

Joakim, any comments from you? It's really difficult.

I think we try to be humble. I mean, 25% is a pretty good margin in itself. And now we've been having 3 good quarters in a row with slightly higher margins. But we also see that we need to continue to invest to be able to get organic growth. So we think that we don't want to save ourselves to a higher margin and miss out on potential growth. So I think that it's always a balance. But we think that 25%, maybe some quarters we will be a bit better, but it's -- that's pretty much what we're trying to steer against.

Okay. Fair enough. And also on the gross margin, given your expectations now on the growth in the respective segments and different profiles, balancing this with FX and price hikes, do you see a change in the gross margin profile today versus what you saw at the CMD in September?

Not necessarily. Not a lot, I'd say. It's been -- I mean, compared to then, I think we've been seeing even weaker U.S. dollar and euro versus the SEK, which is, of course, not great for our margins. But I think maybe that will do a percentage point or so.

But I think we have some good things going on. So we think that we should -- we don't want to change the long-term target for sure. I mean we set a target of 65% to 2030. We will not be there next quarter, but we think that that's still relevant with what we're doing.

The next question comes from Erik Larsson from SEB.

First, a question on OpEx. You talked about ramping costs here and perhaps lagging a bit. But at the same time, it's only up 3% here in Q1 organically, if I understood correctly. So maybe if you could just speak to how steep this increase could be in the coming quarters would be helpful.

Yes. I think I don't expect it to be super steep, but we're probably going to add a couple of million per quarter. I think you can expect that when we're ramping up. Normally, Q2 and Q4 are a bit more heavy for us in terms of marketing investments and traveling and different customer events.

So I think that you can probably expect to add on. But it's -- we will have -- it's going to be slowly but safely increasing a few percentage points from where we are today. That's pretty much what we believe. So I think we are in a good place and we will do some smart investments, but not go crazy.

All right. Great. And then on data centers, I think the last time, at least, that I remember that you mentioned the larger order was in Q4 '24 or something. So could you give some more backdrop on how this vertical has developed over the past year? Because now it seems to have been a good driver.

I think we see this in different projects that we see for INT, they are selling some gateways. We see in Building Automation, they are connecting the ACs for cooling. And we see -- we don't see so much of the switching business for network infrastructure we got for power conversion in Q4.

So it's a quite broad mix of automation projects that are related to data center. As I said before, we are not part of the compute in these centers. It's about incoming power, the cooling or heating and these kind of things, automation systems around it. But we see broad automation projects with our system integration in the U.S. that they are involved in this kind of automation projects in data centers.

Okay. And then a final question, if you could just explain more about the improvements you see in Europe. Is it broad-based? Or is it specific -- any specific driver?

I think we see 2 different things on INT. We see a pickup quite broad-based on customers who don't have inventory anymore and also customers who work towards automotive business and it's not great, but it's not too bad either. And then we see some verticals where automotive in general is not good. Maybe it's not getting worse. But other verticals are pretty good, infrastructure and automation in general, electrification. That's starting to see some momentum in Europe, we think.

The next question comes from Simon Granath from HMS.

It should be ABG, of course. Congrats again on the strong performance. And we have previously been discussing that there have been some discrepancy in recent quarters between the larger and smaller projects with larger projects being a bit on a pause. Are you seeing any change on the latter, either in terms of orders now or in terms of customer dialogues?

No. I think we're still waiting for some larger orders. I would say we see more of small and midsized broad-based orders and not too much of this larger project order that we got end of 2024.

And then only one follow-up more. And that is another topic that we spoke about at the CMD, and that was on the potential upgrade cycle for Anybus to meet upcoming security requirements. Are you seeing that play out?

Very good question. We're doing some initiatives in security, and there's a lot of new regulations, and we try to get our arms around how to monetize on this, and we have a team working on this with some products.

In general, we see a lot of customers who want to talk about cybersecurity and this, but we can't really see that there's a -- if you look at our revenue, it's not a big part of our revenue, and we're still trying to find our way in this cybersecurity landscape. So I can't really see that we have cracked the code there yet. But there's a lot of customer interest. But right now, it's more interest in education and consultant services and not really a product business yet. So we are still working trying to find our ways there.

The next question comes from Joachim Gunell from DNB Carnegie.

So just 2 questions from my side. The first one relates to end market momentum in some of your verticals. So you commented a little bit on the data center opportunity and to your point, it could be any other industrial building, right? It's not necessarily the service and res here. But you also comment a bit about semicon manufacturing. To what extent do you see that as a growth driver? And oil and gas, are you seeing customers in that or more broader energy end markets become more opportunistic I mean where -- I mean, CapEx investments going there?

Well, if I start, and this is a little speculation. We see that we have customers in semiconductor. They're highly successful. There seems to be a lot of investments, broad-based, not only AI, but most of the customers we have is more on the machine side in semiconductor doing all these vacuum things and these kind of things, that seems to be a very strong momentum.

On oil and gas, we are speculating that with the challenges we see now in Middle East, wouldn't that drive more investments in other areas of the world to be in where they have oil that this would be more investments. We haven't seen it yet, but we're speculating that there might be a good market opportunities in North America, in other parts of Europe, in other parts of Asia, where you could explore more of the oil and gas resources they have there to complement the Middle East market. But we haven't seen it yet. We're just speculating about it.

Understood. But in terms of exposure in the IDS division, the energy footprint is quite sizable, right?

Yes, it is.

And then just finally...

Just to comment that, Joachim. We have -- U.S. is -- North America is the big market. So the exposure is mainly related to North American oil and gas.

That's clear. And I mean, we saw here, of course, with the Molex order activity that yet another acquisition for which you paid fairly low price tags are playing out the way that you hoped for.

Now that we see cash flow take your net debt levels to, call it, acquisition territory, can you just comment a bit about your appetite and, call it, self-confidence when it comes to pursue more M&A towards the latter part of the year?

I think we have a pretty good confidence. And I think the reason is probably that we are a bit selective. So we want to continue to be selective, and we are looking at a couple of things at the moment. So we hope that we're going to be able to get something done this year as well. we will be as active as we can, run as fast as we can. And now we have 3 divisions that are all looking into building their pipelines and managing those pipelines. So I think we have a pretty good foundation.

[Operator Instructions] The next question comes from Jesper Stugemo from Handelsbanken.

Yes. Sorry, I just have a follow-up on this SEK 130 million in early orders. Maybe I missed that, but how much of this was translated into sales in this quarter?

Nothing has been translated into sales of that SEK 130 million. So the point is that we will be -- normally, we would have received those in Q2, Q3 and so on.

And Joakim, the major -- the larger part of this SEK 130 million is related to this Molex preorders and part -- the other part is related to the Chinese customers. So that's the 2 things we have there.

And some of the panel meters...

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you, operator, and thanks, everybody, for joining this call. We are just getting ready for our AGM here in Halmstad, and we are very happy to see a strong quarter -- solid quarter. And we feel that the market is fairly stable. It's not great, but it's -- we feel that things are falling into the right places.

We're very happy to see good progress on the acquired units from Red Lion, PEAK-System and now also this Molex business we acquired from 1st of January. So things are moving in the right direction, but it is an uncertain world out there. But as I said, we are impressed by our customers' robustness and their willingness to continue their plans despite geopolitical things and trade things. So we are fairly optimistic about the coming quarters. So stay tuned and look forward to talk to you next quarter. Have a great Thursday. Thank you, and bye.

All right. Good afternoon from a snowy Sweden on this cold February day. So welcome to this meeting. We will run an HMS investor briefing for about an hour. And we've been doing this a couple of times. We've had a -- sometimes we have a pretty high demand for one-to-one meetings, and we don't have really the time to take all of them. So instead, we do these briefings where we take a few people together and talk about the company.

This is primarily for you who are fairly new to HMS. So I will do like maybe a 20-minute introduction. I will cover the financials for 2025 briefly as well. And then we will open up for Q&A for the rest of the session. And we -- so we have 1 hour in total and feel free to ask questions after a while. So for the first part, you will be on mute and then I will open up for you to be able to ask questions.

So I will start with the presentation, and we will then run this introduction, financial summary and then Q&A.

So HMS, we have today since reorganization since a year ago, we have now 3 divisions in the business. We're in the Industrial ICT business, Industrial Information and Communication Technology. If we start with the first division, the Industrial Data Solutions, which is about 46% of our sales in 2025, we have a pretty wide offer within connecting, secure and diagnose your Industrial Data Solutions and also visualize the content. And we do this through remote access and remote data as we call it. So you can actually connect to machine remotely. You can take the data out and show in a nice dashboard wherever you want in the world for your machines.

We also have this local visualization on the machines with HMIs, human machine interfaces, where you also can design your automation project in the software that we provide. And then we also provide a wide range of different switch solutions, switches and routers for industrial applications. In this business, we go to market both directly towards different machine builders and some end users, but primarily, the majority of the sales goes through distribution and system integrators to then reach the end users or machine builders. So it's a bit of a multiple approach to go to market.

Then we have the second part of the business, second division, Industrial Network Technology, which is where HMS started from the beginning. So here we have a wide range for connectivity solutions for industrial machines, and we see a pretty wide range of different type of networks in the OT environment. And we work with about 30 different standards to connect these machines wherever you are in the world, whatever type of standard you have chosen to work with, we can connect your solution so you can communicate on the industrial network.

What you see in the picture is a bunch of industrial robots. And this is our largest specific customer group, robot controllers for various industrial robots. This is 31% of sales, kind of different go-to-market compared with the Industrial Data Solutions division. Here, we are almost directing 100% of the sales towards the device manufacturer or machine builder to design these solutions, and then we have business for a long time once this has been done.

And the final -- the third one and the final division is New Industries, which is a bit of a combined division for some smaller entities. We have one business within building automation to also connect especially heating and ventilation and air conditioning systems to the building automation systems. So it's a similar type of solution that we offer in the Industrial Network Technology, but niche for building automation.

And then we also have a niche business within -- primarily towards the vehicle industry where we connect different test systems with the vehicle between a factory and vehicle. And also, if you go to a repair shop, you typically connect and diagnose the vehicle with our equipment. This is 23% of sales and a combination of direct sales to OEMs and also going through system integrators and distributors to these customers.

If we then go -- move forward, we launched in end of 2025, a new strategy, 3 divisions, 2x revenue and 1 company, 3-2-1 grow. And you see in the middle, we have done something with O, and this shows our 6 different strategic elements that we have. And of course, as all companies these days, we also want to do our part for the planet. And we are striving to be an industry leader on sustainability, and we'll go to our targets shortly. But in principle, we want to follow the science-based targets initiatives and work towards getting to a net-zero CO2 emission towards 2050.

Then we have on the upper left, if you go to the inner circle, we have our Win-Grow-Keep strategy. And we've been quite successful in maintaining customers over a long time to keep customers. We see now in the last couple of years that we would like to win a bit more accounts. And we are also targeting now until 2030, slightly larger customers. And I'm going to come back to this and explain how we do this.

But what we're doing, we're making a big reorganization internally within the sales organization and also building completely new incentive models with a lot more focus on winning and growing targeted accounts and not so much focus, of course, a lot of focus, but not so much incentive on maintaining customers that we already have. We do that through the whole team of the company, not just through the sales entity.

And then we have -- on the upper right, you have mergers and acquisitions. So we come from the last 10 years, we've been having a strategy to grow about 50-50 through M&A and organically. And that's pretty much what we have done. And that strategy continues to be in place. So we would like to grow half of the growth through M&A. And what is a little bit new with the new strategy until 2030 is that we're also pushing this down to the divisions. So we now want the 3 different divisions to make bolt-on acquisitions into a larger extent than what we have done before.

If we move to the bottom left, we have portfolio evolution in the middle. And we've had a quite successful growth over the last decade with some 16% CAGR. And of course, that's something that we would like to continue. And we believe that we need to do -- we have a couple of really big development projects that we just kicked off for both for the IDS divisions and for the INT divisions, where in both divisions, we are trying to come out with an offer that can target a little bit larger customers. And we're doing that in the IDS division by going into a better dashboarding within remote access and remote data. So we can, in a better way, add on services for analyzing and understanding what data you're seeing in your industrial application.

And here, we're also planning to increase the Software-as-a-Service revenue with a subscription model to get these nice software features for the future. And we also say as a consequence, we should move the recurring revenue from today to about 3% to 10% in 2030. And in the I&T division, we are about to -- during the year, we launched a new solution for connecting devices in a cheaper way for really high-scale applications. We're talking tens and hundreds of thousands units per year. So that's something new to us to be able to do that in a cost-efficient way.

And then on the bottom right, I think that's something that all companies have in one way or another, working with operational efficiency. We're through a period where we've been investing a lot in our IT infrastructure, putting the same ERP system and CRM system in place for the whole organization. And going forward, we have a target to grow sales faster than what we grow our OpEx. And we also would like to improve our gross margins to 65% from today's 63% by working smarter with our contract manufacturers and how we do things in our operations.

And then you see also circling around all this, you have people, which is, of course, super important also for HMS. And we say that we would like to have happy and high-performing employees, and we think that will generate loyal customers. So pretty simple in a sense. And we think it's an environment that is changing really fast at the moment and to reskill and upskill our employees is on top of the agenda and also to make sure that they are happy staying with HMS.

Then let's have a look at our current strategic targets. We have divided this into 3 pieces for the planet, people and growth. On the planet side, we have a net-zero target for CO2 and we have now applied for science-based targets, and we're going to follow that direction, basically following the Paris Agreement.

And then you might be familiar with EcoVadis, who is rating different companies, how well they perform in a wide range of sustainability aspects. Here, we have an ambition to be top 5 in our industry. And we used to be top 5 before, we moved up to the large corporate section. And now I think we are like top 6, top 7. So we have some work to do. We're still fairly good, but we would like to become a bit better.

On the people side, we think that, again, the people will generate loyal customers. We have a target to be on 50% on customer Net Promoter Score. And we have been there before. Right now, we're down a little bit due to not the best delivery accuracy over the second half of the year due to high demand. And we are confident we will build this back and make sure that we -- our customers are really happy with us.

We have an internal index that we call Employee Engagement Index. This is maybe more a bit of an internal KPI. We strive for having 80 in this engagement index, and we are on a good way to reach that as well. We also have a target to have a diverse team. And the first step for us is to have 30% female managers. We set a target for 20% female managers of 2025 that we set back in 2020. At that time, we were at 14%, and now we are at 27%. So it's really been working very good to have this target and having everybody driving for the same objective. We have a bit to go to 2030, and we're also convinced that we will get that done in time.

If we then take the more financial part on the growth side, we have put a financial target in place to grow to SEK 7.5 billion by 2030. And at the same time, we should deliver 25% EBITDA. And we -- over time, we're going to give between 30% and 50% in dividend to our shareholders. That's the plan. So this is some quite ambitious targets and that's something that we always would like to have, and it's going to be really exciting to work towards this for the coming 5 years.

If I then very briefly summarize a little bit what I said before, so trying to make it a bit more concrete in terms of targets. So really important on the portfolio evolution. And the way we're going to measure this is we would like to see that more than 50% of the organic growth between '26 and '30 comes from new products, which is a fairly high number in our industry where it's pretty long cycles and the price will be in place for a long time. So that's -- but that's something we think will be a key and able to achieve this growth to this SEK 7.5 billion.

We are working with AI as everyone else and trying to figure out how that will be implemented in the best possible way, both in terms of being more efficient in how we do things internally in our processes, but also how we get the best features across in our products. Exactly how this will benefit our customers in 2030, we don't really have that figured out yet, but that is one really key strategic element to get that in place until 2030.

And then I mentioned 10% ARR will be an ambition with more recurring revenue. And that's also something that we think will be a big driver to improving the gross margin going forward. We also have a strategy to come closer to our customers and have more direct business. Today, we are at 43%. We would like to come to 55% in 2030, also a driver of gross margin. Of course, a bit more risk in building up this organization. You need to take the investment before you'll get the revenue, but that's something that we think is the right thing to do given our fairly sticky offer. And then 50% of growth from M&A, we already talked about.

If we then go to a bit more the internal perspective, how do we work with this? And this is a really important perspective, if nothing else, for our people. And again, we said that people is really important. We have a very strong company culture. We still have a quite entrepreneurial spirit, maybe not the best processes everywhere, but we have a pretty good team spirit and people really want to drive and we take decisions locally, and that's something we think is super important to keep high engagement of the employees. So that's something we want to continue.

And we also have a target to have the most engaged employees in the industry because we think that, that makes all the difference. And that's why we work a lot with this engagement index and do a lot of activities to improve that. And to be able to improve it, we need to have really strong leaders, and this is also something we run a lot of internal developments and programs and exchanges to improve our leadership. And we put a target in place. Also we have an internal metric of leadership index of 85.

I mentioned this Win-Grow-Keep sales strategy to get more new customers in. And we also have a target here to -- this is maybe a bit difficult to relate to, but to have 6% of the last 12-month sales should come from customers that is won within the last 24 months. If we can do that and continue to maintain a low churn and the current customer base, we have a good chance of getting this SEK 7.5 billion growth. We've been trying to calculate backwards to see what we need to achieve. And this is pretty much where we ended. We talked also about lowering OpEx in relation to sales.

So I think this was a short introduction to HMS, our strategy. And a few words, I'll try to keep it to 5, 6 minutes on the financials, and then we will open up for questions. And the recent development in Q4 and start of the year '26, we've been seeing a good improvement in Europe that has been slow for us for maybe 2 years or so, you can say. And also Japan is going a little bit better now in Q4. In Japan, we've had a lot of inventory built up with our customers, and that is now starting to be phased out and we can get back to growing nicely in Japan.

Then a little bit surprisingly, maybe North America has been a bit weaker than what we've seen throughout the rest of the year. Throughout 2025, it has been very good for North America. It was a little bit softer in Q4, but we're not so concerned about this. We think the pipeline looks fairly well for 2026 going forward. And then, all in all, we're going to show you in the next slide that we had, again, a record net sales for the year, driven by IDS also for the quarter and especially sales were strong in the North American region, also due to really good order intake throughout the rest of the year before.

We also got the validation from science-based targets initiative. So we are now on track to become one of the companies in this nice community, showing in a very good way how we improve and reduce the emissions. We also managed to get an acquisition done in Q4. So we signed the agreement in November and to acquire Molex Industrial Solutions division and pretty much a part of that business that did not really fit into Molex, perfect fit with our I&T solution.

And we do -- today, we do the slaves on the network that will be answering questions. And Molex has also been providing the masters that are asking the questions to the network. So this will be a great fit for us to offer a more comprehensive offer to our customers. And with the deal closed now to 2nd of January, so it will be a full year effect in 2026.

Looking at the order intake, you see it's been a little bit bumpy. We had a really good Q4 '24 and Q1 '25 where we had a lot of project orders that's also been driving the good sales in the end of the year. And even if we are actually -- we report a reduction of order intake of 4% organically, it's actually up 3% due to the currency. The Swedish krona has become a lot stronger versus the U.S. dollar, especially, but also versus the euro, which is impacting this a lot.

So we think with a pretty tough comparable from Q4 '24, we're quite happy with the order intake for the quarter and especially happy that Europe is slowly but safely. It's not going as fast as we thought at the start of 2025, but it's moving in the right direction. And we see in North America, we had temporarily, we believe, a bit of a slower order intake in Q4.

And then to net sales, fantastic growth. We managed to deliver out on the backlog and 23% growth in Q4, and we managed to turn the year positive by 3%. And then you might say that, okay, that was not very good, the 3% organic growth for the full year. And the main reason for the low organic growth is that we had a really tough comparable in the first 2 quarters that we delivered out on a huge backlog in 2024. So we kind of knew that would be a really difficult year to get any growth given the tough comparables from the first half from built-up inventories at our customers that's been reduced.

So we're quite happy that we managed to get back to growth, and I think we have a much better position going into 2026 being through this built-up demand position that affected the first half of the year. And here is North America that's been delivering strong over the year. And Europe has been a bit weaker, but we see a bit of an improvement now towards the second half of the year in Europe. So that was positive to see. Also here, we see a massive impact from currency effects, both in the quarter and for the full year.

And then going into profitability, we had a very nice ending to the year, 28% adjusted EBIT margin in Q4 with SEK 268 million, took us to SEK 911 million for the year and a margin that is in line with our financial target of 25.5% for the full year. Gross margin is developing stable. We're quite happy with that. We had a dip in Q2 due to the tariffs. That has now been compensated in terms of price increases. So we do 63% gross margin for the year and for the quarter happened to be exactly the same.

And with a good cost control, we're only growing OpEx by a couple of percent. And we are starting, though, to see a bit of a more impact from the currency also on the EBIT. Before we've been having some really good hedges on high dollar rates, and now that is being faded out, and we have weaker hedges coming in, which is, of course, we're going to see a bit of a hit from this on the EBIT side. We've -- maybe I should say that as well. We have about 40% of sales in U.S. dollars and about 40%, a little bit more 45% maybe in euros. And of course, then reporting in SEK, that will have a big impact when the SEK is getting stronger versus those currencies.

Finally, I would like to show you also one of, I think, the most positive messages when everything comes together, how we have handled the debt situation for the last year. We made 2 big acquisitions in 2024 of Red Lion in the U.S. and PEAK-System in Germany, which took us to 3.4 net debt to EBITDA in the end of 2024. And now we're down to just over 2 just a year later which puts us in a good position. We are now at a stage where we can actually start looking at acquisitions again. And we also signed a new financing agreement in Q4 to have us ready to continue that journey.

So I'm actually going to stop sharing now. And I'm going to ask you if you have any questions, then just raise your hand, and I will give you the word. And we do kind of like in a queue if you just raise your hand.

All right. So I take Matthew first here. Let's see if I managed to allow your mic.

All right. Yes, can you hear me?

Yes, I can.

Yes. I was just kind of curious on the impact of the German fiscal stimulus, kind of what your exposure is to Germany specifically? And how much, I guess, that impacts the outlook for kind of the end market customers that you serve?

Yes. So I think we have a fairly big exposure to Germany. I believe it's around 17% of the group sales goes to Germany. So it's our second largest market. The U.S. is the largest. Very difficult to answer your question precisely. I think we -- what we hear from Germany, I think normally, if you compare to some other markets, they are not always the most optimistic when you talk to customers. I think they are a bit careful in how they interpret different macro things and use. But we've been hearing a little bit more positive throughout the year 2025, and we've been also seeing it in the numbers, even if we were down from fairly low volumes end of 2024.

So every quarter, we are seeing a bit of a gradual improvement, and we expect to see that as well for 2026. I don't want to go into what percentages or how much the stimulus could impact us positively. But we see a lot of -- I mean, we are through basically all types of industrial customers. So we have a generic offer. So I think everything that's been invested in the manufacturing space in Germany will be positive for us. So that is one trigger that could also continue this improvement in '26.

Perfect. And just one other quick one, if I may. I was just curious, obviously, there's a huge bow wave of kind of AI-led CapEx. Is that crowding out any industrial CapEx given, I guess, just you kind of work in data centers, maybe the same power providers? And is that constraining any growth for your industrial end market customers?

Yes. I think during 2025 and maybe also towards the end of 2024, we won a lot of more projects for data centers, both in the IDS business, but also in the New Industries in the building space to cool these big facilities. So I think it's sort of a new potential vertical for us, and we are exploring what more we can do. And it's been playing out really well for us in 2025. And obviously, that is something we'll have a lot of CapEx going forward. So that's something that we would like to figure out and tailor the offer even better towards.

All right. I will then -- I have to hand up for Aujla. Sorry if I mispronounced that.

No problem. Just one on my side. I just wanted to see if you've seen any changes in the competitive environment, especially on the lower-tier gateway side. I know sort of Chinese competition has been mentioned in the past, particularly in relation to EvOne and the EvOne line. And has there been any changes or developments on that side?

That's a very good question. It's -- in China, we don't sell a lot in China. We have a lot of problems with the firewall. So it's -- we basically -- we do -- I think we have a few cases, but it's mostly used as an on-prem tool. So we've kind of almost given up that market for the time being. And if we look outside of China, we see a lot of new entrants. And I think we had -- what did we have 8% growth organically on that offer in 2025.

So I expect that we are losing a little bit of market share actually. And we have a few competitors that have a little bit more modern offers than what we have at the moment. I'm quite transparent here. But with the developments we are about to launch throughout the year, we hope that we will kind of retake the first position as having the best offer in the industry.

And it is a quite interesting space. It's also -- the potential is quite big, but it's a big barrier with the cybersecurity that a lot of companies do not dare to kind of connect their factories fully since it becomes a bit of a higher risk of being hacked. And if that can be solved through us or through others, that would be a great step in opening up for more potential in that market.

Any other questions? We have plenty of time. So feel free to ask what you would like to know.

Just to clarify, sorry, on that point on the EvOne, was that -- were those comments directed just on sort of the gateway side or sort of on the broader business as well and the competition?

I think on the -- so the EvOne solutions are sold as a gateway, and it's -- for that specific offering, we see a bit of increased competition. And on the gateway side, I can't really say we don't see a lot of -- in the -- let's say, out of China, we don't see a lot of competition coming from China. What we see is a lot of companies being reluctant to go with, especially when you have this information transfer, be a bit reluctant to go with Chinese suppliers.

In the Chinese market, though, I think the local players in China, they're doing a good job. And we kind of -- our strategy in China right now is to be very focused on where we have the best competitive edge. So we are kind of giving up a lot of potential to focus on what's -- where we have the best edge and it's without -- within the INT solution, where we're one of quite a few players. And we also see a lot of success with international companies being present in China having their manufacturing in China. And I think they kind of feel it's safe to buy from a Swedish company. I hope that kind of gave some more light on your question.

Yes, that's perfect.

Matthew, did you have another one?

Yes, I did have one more. I was just curious, you talked about, I guess, kind of resuming the M&A strategy. Can you give us a bit more color on, I guess, what are the kind of range of multiples that you look at? I know when I think I look back at Red Lion, it was maybe a bit lower growth than you've been historically. So are you targeting cost synergies, revenue synergies? And what is it, I guess, when you roll companies into the HMS group that you're kind of targeting?

Yes, I'll try to cover all of those aspects. So first, we talk about the multiples. We prefer to be -- I mean, normally, we look at companies with a good solid profitability, good gross margin and a decent growth. And then you can end up in a fairly high multiples around 8x, 9x, 10x. I think we've been between 8x and 10x in most of the things we've done. I think Red Lion was 11x, but we also saw a lot of synergies, which I think we managed to get out both on the cost side, but also on the sales side.

And just to give that as an example, and sorry for bragging a bit here, but we -- when we took in Red Lion in the beginning of '24, we were looking at some 19%, 20% EBIT, and that is now 24%, 25% EBIT, both from investing in the manufacturing to improve the gross margin, but also taking away basically one layer of management, the top management layer is basically out. And we've also done some review on how we discount things. So we've been giving a lot less discounts to distributors that are not promoting the offer actively. And then we've been giving better discounts to the ones who are really investing in marketing campaigns and holding more on inventory on their own.

So I think this more -- how do you say like distributor portfolio management has been a big part in getting to those improvements. So even if we were looking at an 11x multiple, I think now it's -- after 1.5 years, it's down to a decent multiple. And what we are targeting is -- I mean, we don't have it needs to be this, it needs to be that. We think it needs to add value to the customers that we come with this addition to the portfolio. And obviously, we see that when we go after these smaller companies with maybe EUR 20 million, EUR 30 million revenues, then there is a lot to do on the sourcing side.

If we can consolidate with our volumes, we typically get down the prices a bit. So that we always try to do. And in some cases or in most cases, you could say, we also integrate supply chain and get some synergies on that side. But what's really driving is that we can get a better customer portfolio and then we can also later get sales synergies.

And we're always careful to kind of look for those sales synergies and being able to justify the acquisition. We need to be able to justify it on its own merits more or less, and then that will be as a bonus. That's kind of how we try to think about it. I hope that's helped a bit.

Yes, that's really helpful.

All right. Anyone else that would like to? I think I'll do like this. I just -- since we don't have too many, I'm going to allow the mic for all of you. So if you feel that you want to ask, you can just open up your line and ask a question. I should all have the possibility. Even you, Sandra, if you have something?

No more questions? I'll give it another 30 seconds to think. Otherwise, we close the call for today.

All right. Then I thank you all for listening in and taking a chance to learn a bit more about HMS and hope to see you soon again. Thanks a lot for listening.

Welcome to the HMS Networks Q4 Presentation for 2025. [Operator Instructions]

Now I will hand the conference over to CEO, Staffan Dahlstrom; and CFO, Joakim Nideborn. Please go ahead.

Thank you. Good morning, everybody. We are standing here from a beautiful winter Stockholm with snow on the street. It's a fantastic day. And we also have some good news to present quarter 4 report. Myself, Staffan Dahlstrom will start, and Joakim will take the following sessions about financial summary, and then we end up with a Q&A.

So just a quick highlight. Quarter 4, we are quite happy to see a very good development on net sales, organic growth, 23% and that's good, we think. On the order intake, we see organic growth, but it's -- we see also that the market is still a little bit soft, a bit hesitant. We're happy to get to 3% growth, but we're also waiting for the pickup that we've been talking about, and we hope that this will come 2026 instead.

Very good development on all our profits, depending on which line you look at, it's either 50% or 100% up. So it's -- we really see a good development. Good gross margin, good profits, and this lands in an adjusted EBIT margin of 28%, slightly higher than our target in combination with a good cash flow. And we are very happy to see this. And this -- Joachim will talk more about our net debt and things like that, but this really plays out with a good adjusted EPS of SEK 4.17. So we closed 2025 as a quite good year.

Net sales, we are growing after quite a lot of years of inventory reductions and things like that. We are back in good shape again. We see the order intake has been growing organically by 10%. So the market is not great, but it's not that bad either compared to 2024. And SEK 911 million as the adjusted EBIT, and we see also at the end that we are doing a good adjusted EPS, SEK 13.73. And this also means that the Board proposed the highest dividend so far, SEK 4.80 per share for the meeting in April.

If we look on the markets, we see in quarter 4, a small improvement in Europe, also in Germany, we are growing compared to last year. So even if the data isn't great for Central Europe, we're seeing that it goes in the right direction. We had a fantastic year in North America, but a little bit of softer market in quarter 4, especially for this larger project orders in infrastructure. We're also comparing ourselves with quarter 4 where we've got some really nice orders in North America. But we are quite sure that North America will pick up again. So we think this softer order intake is a temporary effect in North America.

We also made a lot of changes in the Red Lion, and we got this new factory when we acquired this, where we keep on investing. We are seeing a much better delivery performance. We're not fully yet completed there. But so far, we are seeing that quarter 4, we're delivering a lot from the order book, and we're getting back into relevant lead times, and we hope to be fully in shape here in quarter 1. So that's good.

We also keep our flag high when it comes to sustainability. So our planet target is important for us, and we got approval from Science Based Targets, a significant milestone for the company in our reduction of both reducing our own CO2, but also being active partner with our customers to help them reduce their CO2 impact for the coming years. So now we are committing to the 2030 targets, and then we also have the long-term targets for 2050.

We made a small acquisition. We signed it last quarter, and we now 2nd of January, closed the acquisition of Molex Industrial Communication, a business that we are integrating now in Industrial Network Technology, INT division. And I just would like to show 2 slides to describe this acquisition.

Molex is a gigantic private owned company by the Koch Industries family. They were saying that what we have in industrial communication, it's not bad, but we don't really have the ability to -- the size we have to really focus on it. And they were asking us, maybe HMS can take this and revitalize the business. They also felt that the main business for them is cables, connectors and these kind of things and these active components with software and hardware was difficult for the sales -- big sales teams to sell because it's very complex products. So we made a deal with them to take over this asset. So we get 2 R&D teams, 1 in Canada, 1 in France, 31 R&D engineers, very happy to get this. We are investing more in R&D. So getting more resources here is very good. But we also get complementing products and technology. We get large customers in mainly U.S. and Japan. Some of them are already HMS customers. But with this offer, we also can make a more complete solution.

We paid USD 7 million, and we expect this to be north of USD 10 million in annual revenue. And what we do here is that the Molex products compared to HMS products, HMS is really working with what is called adapters. These are all the thousands of devices inside a factory that is sitting into robots or drives or sensors and these kind of things. And all these things are connected to the controllers of the network. So the high-volume products that HMS has been focused on, that is more than 90% of all devices, that's relevant for our current offer.

But the network controllers where Molex is very good, they are less in volume, but higher in complexity, higher in price and making both these things are very important. And you see the examples here with our robot customers where we've been connecting the robot to the network, but also around Molex, we can also do sub networking around the robots, and we think this is a very good step for the division INT. And we are quite excited about how we can develop this together with the teams in Canada and France here. So a lot of things is happening. And Joakim, let's move into some numbers.

Yes, let's do that. We will start with having a look at the order intake. And as Staffan already said, we do see a small organic growth of 3% on the orders. And if you see on the graph to the upper left, you see that we had a really strong Q4 in 2024, where we had some good project orders in the IDS business. And therefore, we think that 3% is not so bad actually, even if we strive for more than that, given the comparable, that's a fair number.

You also see that there is a massive currency effect with a 10% negative effect from currency movements, where we see that especially the U.S. dollar, but also the euro versus the SEK is continuing to be weaker and weaker, and we've been seeing that also after the period ended.

If we look on the different markets, we do see Europe continuing slowly but safely in the right direction. It's been improving throughout the year. And upfront, we thought this would be a little bit of a quicker recovery, but we still see it going in the right direction. So we think that is a little bit positive after all. And Staffan also mentioned that we had a bit of a weaker market in North America in the fourth quarter. Looking at the pipeline and so on, we believe that this is a temporary decline that we're facing. So we think that there is potential to improve a little bit from those levels going forward.

If we look in Asia, we've been having a bit of a slow market in Japan for us, where China has been growing well the whole year. And now we do see a bit of a recovery in Japan. It's related a lot to INT business and some of the big customers coming back and placing some orders. This inventory buildup situation with our customers have been the largest in Japan, and that's why that's been taking a bit of more time.

And overall, if we lift the view to a higher altitude, we see that for the full year, we see organic growth now in the orders of 10%. So it is moving in the right direction, and I think 10% is a decent place for us to move forward here.

Going over to sales, a little bit of a different situation. We have very good deliveries in Q4. So we reached SEK 951 million in sales, organically plus 23%. And the reason -- the story behind this is basically what you saw in the order intake in Q4 2024 and Q1 2025, when we had a lot of good project orders where the bulk is delivered now in Q4. So we managed to deliver out on that nice backlog, and we've been fighting a lot in our delivery -- on our delivery sites, especially in North America, to get all the goods out. And I think we managed to catch up fairly well in Q4 to what we're supposed to deliver and try to keep our customers as happy as possible here with the lead times.

Looking for the whole year, we've been struggling a little bit in the first quarter, also due to pretty strong comparables in 2024. And now we actually turn the whole year positive growth, organic growth of 3% with the strong ending of the year. So of course, we would like to show more than 3% growth for the full year, but it's good that we can turn this around and show a positive development. It's been a bit of a bumpy road for the last year for us, and we've been having maybe a little bit more than the industry average, having the inventory buildup during '22 -- '21 and '22 and then the reduction in '24 and maybe partly in '25 as well. So all in all, showing growth is good to see.

The drivers of the growth is a lot the IDS division and the North Americas market, where we're doing those good deliveries in the fourth quarter. We also see on the sales side, continued recovery in Europe, same as on the order side, slowly but safely better, that's not the main driver in the quarter, but it's going in the right direction. And of course, also here, you see overall that the currency is playing a big role. So it's a pretty big difference on the reported and the organic numbers. For the full year, you also see that we have a pretty big acquisition effect with 18% growth from the Red Lion and the PEAK acquisition.

A few words about the divisions. You have first IDS, Industrial Data Solutions, where I think you see in the graph, you see the story that I was talking about with really good order intake in Q4 and Q1 -- Q4 '24 and Q1 '25. And then you see the sales graph is improving in Q3 and especially in Q4. So I think those project orders that were received in the end of '24 and beginning of '21 -- sorry, beginning of 2025, you should maybe see that more of the sales graph that it's evening out a little bit over the period.

And with that strong comparable, obviously, the order intake is down now 15% organic. We would love to see a little bit more than SEK 374 million, and we think that we have a good chance to improve going forward here.

And on sales, of course, a very nice number, SEK 481 million, and as I said, deliveries of these big projects. So I think we're very happy about the delivery in IDS. We do almost 29% margin in Q4, which is extremely high and not something that we probably will show going forward. For the full year, we are now at 24% in this business. And then with 2/3 roughly coming from the Red Lion acquisition, we're very happy with that development that we've had over this period within the HMS family. And this, of course, is a big contributor to the overall strong profitability in Q4.

Then over to INT. And here, we see pretty clear this gradual improvement that we were talking about. You see on the order side, now we have 17% growth that we present. Organic, this is 27%. So in that pretty big currency headwind, we're still managing to grow this in a good way. And the main thing we see here is that some of the bigger customers are coming back, filling up their inventories and also the European market, partly also the Japanese market are now coming back and placing orders. So this is very positive, we think.

And you see not maybe the full thing converting to sales, but also sales is moving in the right direction and showing a 13% organic growth. As you know, this is our cash cow, delivering really solid margins. We do 31% margin in the quarter and almost at that level for the full year. So this is a very solid business. And the team now will have their hands full with integrating this Molex acquisition and also delivering on the strategy for 2030. So it will be an eventful year 2026 in INT.

And then we have New Industries. Also solid development, both on the orders and on sales. Organic orders, 18% up; organic sales, 12% up, and an okay quarter. We would maybe like to see a little bit higher margin, but 22.7% is an okay level. We had, in Q3, a very good development in building automation. Now it's a little bit softer in building automation, a little bit better in vehicle communications. So it's good that those parts are complementing each other and smoothing out the curve for us.

Over to the profitability and obviously, a record profitability in the quarter, SEK 268 million in the adjusted EBIT, a 28% margin, which is, of course, strong for us. And for Q4, it sticks out maybe even more where we normally have a bit of a higher cost in Q4. And we don't see the same increase on the cost side in Q4. We are starting some of those development projects that we presented earlier this year on the Capital Markets Day. We will see those projects coming rolling into 2026 and onwards with us trying to deliver those 2030 strategic plans.

So all in all, over SEK 900 million, SEK 911 million for the year, 25.5% in adjusted EBIT margin. I think that was good to see that we managed to beat the long-term goal of 25%, and this puts us in a good position for the future as well. The good profitability comes from primarily the volume increase. The gross margin is stable at 63%, in line with our own expectations, and we think that's fairly where we should be with this constellation that we have in the group. And maybe the other thing that sticks out a little bit is the lower OpEx, where I think we've been still being a bit careful on the cost side. And as I mentioned before, we will start doing a bit more investments going forward.

Maybe to mention also on the FX side, we've been having a -- you've been seeing the FX effects a lot on the top line, not to the same extent on the bottom line due to some good hedges throughout the year. We're starting to see that effect wearing off a little bit now. The hedges are not as good as they were before, not the same high rates. And we do see an EBIT impact of minus SEK 15 million due to currency, which is a bit more than what we've seen earlier this year. And yes, with the recent development of currencies, I think this is something that we need to keep an eye out for in 2026. So there will be a bit of an impact from this going forward, obviously.

And then to our EPS. And I'm showing in the graph here an adjusted EPS of SEK 4.17, which is in itself very nice. The reported EPS is a lot lower, SEK 1.44 compared to SEK 1.49. And then obviously, we have the net financials and all that is nothing strange. But we also have a nonrecurring tax effect of SEK 104 million, which is related to the Red Lion acquisition, and we elected to do a so-called 338(h)(10) election.

And that basically means that we're treating for tax purposes in the U.S., we are treating this acquisition as an asset deal. So we have an amortization of the -- all those assets that we got in the deal, which will lower our tax in the U.S. for the coming 15 years. And that is giving us now a positive effect to make this election.

We need to pay this onetime tax, but we will have a pretty big upside for the coming years. So the net present value of the tax saving is a lot bigger than this cost that we take in Q4. This is really complicated and complicated material and very special U.S. tax laws that we're working with here. So this is the situation, and we're going to look into this forward if it's really right that it should be SEK 104 million.

Looking for the full year, we do SEK 13.73 in adjusted EBIT (sic) [ EPS ]. It's plus 42% compared to a year ago. And the Board, as Staffan mentioned, also proposes a dividend of now SEK 4.8. And the reason it was 0 last year was not that we didn't make any profits, it was that we made 2 really big acquisitions and to not having to take in more new shares, we elected to cancel the dividend for a onetime thing in 2024.

And then over to the cash flow. So here, we have continued improvements on working capital and inventory reductions. So we've been now reducing our inventory for the full year of SEK 207 million. And that is, of course, helping the cash flow a lot. We do SEK 231 million in the quarter and SEK 877 million for the full year, which we are very happy with. And the cash conversion is still quite good, 82% for the full year. And obviously, this onetime effect in tax is holding back the cash flow with SEK 104 million. So without that, you would have seen a record cash flow for the group.

And for the future, we still believe that we are in a pretty good situation here. Even if we grow in 2026, we believe that we should be able to keep working capital neutral, maybe even reduce a little bit of inventory further. So we should be able to show a good cash conversion also for the coming year. And then to -- I just love this graph to the left, the net debt graph. It's continued to be reduced. And we were in a situation a year ago where we took on a lot of debt to make these 2 acquisitions in 2024. And of course, in my role, it's really nice to see that we are following the plan and managing to close the year net debt-to-EBITDA pre-IFRS 16 of 2.13. And we said here before that we should be in line with our long-term target to be below 2.5 and that we can also deliver that is very good to see. And of course, has a lot to do with the good performance and the strong cash conversion throughout the year.

In Q4, when we have now a new strategic plan in place, we also signed a new financing agreement in December here with 2 Swedish banks for the coming years to be able to finance our expansion plans in the 2030 strategy plan.

Finally, to -- before we'd like to open up for questions, some takeaways for the full year, if we look what's been happening. From an internal perspective, we've been making a big change from the 1st of January 2025 with a completely new organization, a pretty big change actually going into 3 divisions with now full accountability of strategy, resources, finances and all that comes with that. And the reason for that was to get the full customer focus throughout the whole organization from sales, from R&D, from product development and all this. And I think with the performance in the year, we are quite happy how this has been actually playing out in real life as well, taking it from the plan to reality.

And as a step in the new divisions, we also worked with the 2030 strategy. All divisions have set their own strategy for 2030 here that we presented in September.

Performance-wise, we still managed to deliver some organic growth in what we say is a bit of a challenging or a bit uncertain market with a lot of macro challenges being -- that's been playing out throughout the year. We grow now the orders by 10% and sales 3% for the year. And we managed to also to lift the profitability and show a really good cash flow with an adjusted EBIT that is up 37% in the whole year, delivering 25.5% margin. And solid cost control is, of course, a good part of delivering that good results.

And also, as I mentioned before, the cash flow that we managed to convert those profits into cash is, of course, very key for us. So all in all, a solid year.

And with that, we are sure that there are a lot of questions from the group. So feel free.

[Operator Instructions] The next question comes from Simon Granath from ABG.

Congrats on the very impressive margins here. I'd like to start on the supply chain and see if you could help us understand the impact, if so, from rising memory prices. How much is memory prices of the bill of materials? Can you pass this through to customers similar as you have done in 2022, but also in 2025 after Liberation Day? Or should we assume any margin headwind ahead?

Actually, in our more embedded electronics, the portion of our material cost for memories is not that significant. So our products are not memory intensive. So this is not something we worry about. Maybe the only benefit with a weaker U.S. dollar for us is that many of the electronics components are based in U.S. dollar. So may we get a little bit of tailwind there. But all in all, this is not something we worry about for our products.

Very clear. And on orders, you mentioned that you think the weakness in North America is temporary. Could you shed some more light on what indicators you see that makes you anticipate that? Is it perhaps connected to customer dialogues or similar?

I think many of these larger projects we had last year in quarter 4, they are large and also difficult to predict when they land. So we are seeing still good activity, but we haven't really seen that we had closed any larger of these orders as we expected. So I think this is just delays, and we expect this to be temporary.

And since it's a few larger orders, it's also difficult to predict the effects. So we think activity is still good in U.S. And if we here in Europe are concerned about the uncertainty, we don't feel the same kind of uncertainty in the U.S. market. They keep on investing in infrastructure and automation over there. So it will come back in U.S.

Sounds very encouraging. And just a final question for me. I know that Joakim mentioned or did make one comment around the cost, given your comments at the CMD of gradually increasing investments ahead. How should we think about this? Is it fair to assume that this will be more back heavy in 2026? Or can you give us any more light on timing consideration about these growth initiatives?

Absolutely. So I think you will be seeing a gradual increase in the OpEx throughout 2026, starting ramping up pretty much now, and then it will probably increase throughout the year, with us adding some extra resources to carry out those plans. So it's -- maybe that's good enough for you. I don't know what you're after, but it's -- you'll see gradual improvement and exactly what percentage is up, I think we keep for the time being.

Congrats again on the strong results.

The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. Maybe just to build on Simon's question on costs and the OpEx there. I mean, looking at your administrative expenses, I mean, if we look at the sequential delta from Q3 to Q4 last year, these costs were up SEK 18 million. Looking at the delta this year, it's down SEK 20 million from Q3 to Q4. So can you just help us understand this effect? And is this the new base? Or is there something extraordinary here impacting this quarter?

Maybe just first comment. I think what is -- comparing 2024 to '25 is very difficult to do on a line item base. Since when we made a new organization change, we completely changed the classification of the cost. So it's very clean. Now everything that has to do with something around admin is in admin, even if it's a sales admin person. So maybe that's a clarification, first of all.

And then the reason for being a bit lighter in Q4 is that we've been doing some of the investments on the ERP side throughout Q2 and Q3. That is now done in Q4. So that has taken down the admin burden a little bit on the ERP development or the rollout in the U.S. And also the integration project is more or less done when it comes to -- fully when it comes to Red Lion and to the largest extent when it comes to also to PEAK. That's maybe the 2 main things that is taking down this cost level.

Yes. Okay. Got it. But I mean, the first part there, I mean, that would likely increase the admin expenses because you have moved the cost from selling expenses to admin, right? So that would be sort of contradictionary or...

It's -- so in admin now is a larger share than what it was before. And then, of course, there is a reduction compared to 2024 in the overall cost base. I mean we're growing, what do we say, 3% organically in Q4 on the cost side. So we've been -- only been adding 3% organically. And then you have the FX effect on that. So in reported figures, it becomes less than it was a year ago. That makes sense?

Yes. Okay. Perfect. And then yes, yes. Maybe then, is it possible to say anything how demand has continued here in the early start of January?

So just to clarify the last question as well. If you're talking about the development from 2024 to '25, the main reason for the decline is, of course, the currency. But I think your question was about why it's lower than in Q3, right, in this year. So I think the ERP is the answer for why it's lower compared to Q3 this year and otherwise, it's a currency.

Okay. Perfect, Joakim. And on the start here in early January, is it possible to say anything there?

It's, I mean, very early. We keep on tracking.

That's pretty much the same pace as you see in the quarter.

Okay. Perfect. And then just the final 1 here on the order backlog. I mean, it has been reduced as we've seen here in Q2, Q3 and Q4. So do you still see that you have excess orders to deliver on here short term, would you say? Or is it sort of stabilized at lower levels now?

It's pretty much stabilized. We do have a couple of tens of millions left, but it's been really important for us to reduce this backlog because the customer wants the goods. So that's why we've been struggling or fighting in Q4 to be able to actually reduce the backlog and get the deliveries out to our customers.

But from now on, I think you can expect that I've said it a couple of times before, and I think now is another one of those situations where we need to get in when we're going to deliver out pretty much. So book-to-bill should be around 1 or maybe increase higher than 1 in 2026.

I think in addition to this, we are during quarter 1 here, completing all the investments we've done to making sure that our new factory in York, Pennsylvania becomes state-of-the-art high-tech manufacturing. We've done a lot of things there. So the capacity will increase. We see it already in Q4. We see another expansion in Q1. So from Q2 and onwards, we will have better delivery capacity. So of course, we are open for more orders because we can't ship. So it's a big focus also to make sure we fill up the order pipeline as well.

The next question comes from Erik Larsson from SEB.

A follow-up on North America and the project orders. So is it a fair observation that in 2025, you really only had project orders in Q1, whereas Q2, Q3, Q4 was a bit slower? And had just another question on that topic. How would you look at project orders in 2025 versus previous years? Is it lower or higher than usual, et cetera? Any flavor there?

I think many of these project orders, if I start, Joakim, is related to Red Lion. So it's quite new for us with this kind of larger project orders. And we see that since it's large and not so many, it's a bit bumpy. And I think Q4 2024 and Q1 2025, we got better-than-expected orders. Since then, it's been I guess, lower than expected.

I think maybe the main difference is the size of the orders. We do get a lot of product orders, but the size that we had in Q4 and Q1, that's kind of unusual. And that size we haven't seen since then.

All right. And then second and final question, I just noted your peer, I guess, Ependion established a business unit within defense with pretty high ambition. So I'm just curious if you have any defense exposure, if you've thought about this, any opportunities or so?

We got a lot of questions from investors about this. We have quite little. I mean, could it be less than 1% of revenue will end up in defense applications. And mainly, it's not really in, I would say, more in application where you have automation of these things. Most if you look on Swedish factories, for example, as one big factory up in Örnsköldsvik making tanks for BAE. I mean this is not high-volume manufacturing. We are looking into some customers where there is more ammunition and there's more automation. It's a new field for us. We have very little business. Maybe it's potential there. But yes, for us, it's a small market today.

The next question comes from Fredrik Lithell from Handelsbanken.

I would like to have a little bit of discussion hearing your views on the very strong margin progress you have in IDS. I understand it's probably driven a little bit by Red Lion. So if you could sort of explain a little bit what you have done in Red Lion and what that brings to the table would be very interesting.

Of course, we'll try to cover that. It's a couple of things. Now of course, if you look in the quarter in itself, it's obviously a lot driven from volume. But over the year, as I said, we've pretty much taken the business from like a 20% business to now maybe 24% for the full IDS, where 2/3 of IDS is now Red Lion. There are a couple of things we've done on the gross margin side. We've been doing -- we're now through all the investments in the manufacturing that has been helping a lot.

We've been looking into the distributor and reseller structure and change the discount programs a lot. So the ones that actually promote our products will have high discounts and the ones that do not, they will have a reduced discount. So doing some cleaning on pretty simple things. I think that's maybe the main thing.

And then we've also been looking into the cost structure a little bit, taking out more or less a layer of management and now been making also the ERP investments to be more efficient and be able to use the back-office functions of the whole group around the world. So it's a couple of different things that we're doing to get to these improvements.

And Joakim, when we acquired Red Lion, one thing we identified when we start meeting them was that they didn't really have the ambition to improve their margins, and we saw some real low-hanging fruits, but there were no push for picking it. So I think also we've just been executing on some of the things we saw when we acquired them. So it's not really complicated. The discount changing -- implementing our manufacturing system where we have some things in-house, something outsourced to partners. So I think all this is falling into the right places at the moment.

And maybe 1 final thing to get also our sales team some credit. We have been seeing now some cross-selling as well that is helping this, a couple of million dollars. So that's also been good.

Would you say that you now are on the right level? Or do you still have maybe not low-hanging fruits, but do you still have structural improvements that will continue to push the margins higher over time the work on Red Lion.

I think we don't want to get inflated expectations. But of course, we also have ambition internally to drive this. So we're a little bit careful about how we answer this. But there are more things we can do, but the fruits are higher up in the tree now.

Okay. My second question is the 338 tax sort of application that you did send in and that gave you a charge of SEK 104 million in the quarter. Is it possible to somehow gauge sort of the benefits you see over time sort of a net between the 2? Is it very big compared to the SEK 104 million you had as a charge in the quarter? Or is it closer to?

So it's a super relevant question. And if I would have been 100% certain of the full impact, I would give a very clear answer. I'm not 100% certain. I can give you some direction. So what it will mean, you will not see anything in the P&L. So the tax cost will still be there. But cash flow-wise, there will be a part that is not payable. So it's -- overall, I think that the potential will be around 2% of the group tax cost for the full year. That's around the upside that we will see yearly. But you will not see [indiscernible] and this is -- everybody loves IFRS, right? And this is a rather technical thing.

Yes. All right. Understood. Final question. You talked a little bit about your ERP implementation. Could you describe a bit wider where you are in that process on a group basis and what you have in front of you in terms of the various parts of ERP project would be interesting also.

Yes. So we started this project in 2023. And since then we rolled out the same ERP and more or less the full group. And during 2025 and up until Q3, we also implemented this in Red Lion. So we have now one common ERP, one common CRM, which we think is great for enabling all the cross-selling and see all the customer activities in one system.

What is left is the sales entity in Australia and also now the new acquisition with PEAK. And the Molex acquisition, since that was an asset deal, we cannot get that implementation for free. So that is already done. It's already working in the new system. So it's not a lot left for us to be in this structure. And it is, of course, a big project that has been going on for now some years with different intensity throughout the different quarters. But it's an investment we've been taking. And I mean we've been seeing -- you see also in the admin cost this year that we do see a payoff from that investment. So soon we'll be there with the full implementation, and then I'm sure we'll have acquired something else to keep it going for the future as well.

The next question comes from Joachim Gunell from DNB Carnegie.

So we can perhaps start with where we left off. So in light of the stellar deleveraging progress here and the financing agreements in place, can you just talk a bit about your appetite when it comes to go back into more an active acquisition mode, I mean, Molex aside?

I think we are feeling that we have good financing. We have a debt level that is good for us even after this dividend we do. So I think we are positive and we see continued strong cash flow going forward. So we have an appetite. We work mainly now in each division.

And in each division, they have their own pipeline and looking for this. But of course, it's not easy to find this. It's always long processes. Most of the companies we look at have been private or privately held. That's a very long process. So we have the appetite. The challenge is to really identify and take these processes forward. So I think that's where we -- it's difficult to find and it's long processes. So -- but appetite is there.

Understood. Perfect. You talked a bit about the -- an update on the York facility investments here. But can you mention just a bit where you are in terms of capacity utilization in your U.S. operations?

Are we? Yes, if you -- maybe quarter 4, we felt there's some general things in ERP and stuff like that. If we look more on the things we love here with machines and stuff like that, I think quarter 4, we were halfway and quarter 1 will be the full way in equipment and the software and all these things we do.

And actually, what we have done is that we did not move to a new factory. We refurbished what we had. So it's been a bit of -- we're talking about a factory that had not been getting a lot love in the last 15 years, I think. So there's been a lot of -- it's from changing lightning in the facility to change new concrete floor. It's really been starting from the beginning.

But what we see now is something that looks really great, and we hope that this can also be like a way a showroom for customers to see that for -- this is how we should do manufacturing. And it's not so common in U.S. to have this kind of modern manufacturing. So we hope that this can also be a showroom to customers to show that automation is the way forward also in U.S. So we are, yes, halfway there.

I think you can say maybe in Q4, SMT was capacity constrained in the U.S. And now with the new investments in place, it will not be capacity constrained going forward.

That's clear. And then the INT EBIT margins were strong here again despite volume, call it, perhaps being slightly low and then also the FX headwinds. So what's your confidence on maintaining this high level of profitability in this division as the volumes potentially recover?

For INT, I think we have some small customers and some large customers. What we are waiting for is the bounce back at some of the large customers that we -- in Japan, we see still some inventory at some INT customers. But what's different here is that the product mix per customer generate different gross margins. So here, we see a little bit of disappointment on the revenue, but very good gross margins. But if revenue have been increasing on these large customers, we would see slightly lower gross margins as well. So that's -- it's not easy to --...

I think there are 2 -- maybe 2 things. One is what Staffan said, that we might have a bit of a gross margin pressure in INT with the large volumes coming back. And then we should also keep in mind that this Molex acquisition is fully integrated in INT and we'll have a little bit of dilution affected margins. We will still expect it to be good, but it might be a little bit down from what you see in 2025.

Lovely. And just to end, just on this -- the customers' conversations and how they are evolving, in particular the U.S., you mentioned the broadening and deepening here. Can you just talk a bit about what that means for you?

Yes. I think what we say here, we feel good activity. We have not seen so many of the larger projects. But in general, it's a solid market. We think we have good access to customers and doing the right thing. We have a very motivated and well-integrated sales teams now. We have a good relationship with our distributors, so highly motivated. So I think we are we are in a good situation.

The market is not great, but it's good in the U.S. There are investments. People are quite optimistic, and we also see many companies who want to have more manufacturing in at least North America, which drives the investments in Mexico and other places, but also in domestically in U.S. So we think it's a good market, and it will bounce back for us after quarter 4 here.

[Operator Instructions] The next question comes from Gustav Berneblad from Nordea.

It's Gustav again from Nordea. Just 1 follow-up, sorry. Because in Q3, you guided or commented on a potential negative impact here in Q4 from production upgrades. I guess that's related to IDS here. But just a clarification, is there any negative impact here on IDS that you're not discussing?

You mean in the gross margin?

No, on just on the EBIT margin that you report here on 28.9%.

I think what we probably were talking about in Q3 is since we went into this upgrade of facilities, we would maybe have a bit extra challenges to deliver. I think that's what we've been talking about that we've been really -- I think the team has been doing a great job to get all the volumes out. And there is maybe a little bit on the OpEx, but it's minor. I mean the most part is CapEx in that upgrade of facilities. So maybe SEK 1 million or SEK 2 million in OpEx, but the vast majority CapEx.

I would say rather opposite, I think, Q4 was in IDS was better than expected. We are quite impressed about the team here and we saw some risks go into Q4, and they've really been managing this well. So it's been better than expected.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you. All right, everybody. Thanks for joining this call and helping us to close a good year 2025. We're very happy to see the good development of our organic growth coming back again. And of course, also the integrations of Red Lion, PEAK, that's been instrumental for our growth going forward.

I'm also very happy to see that we have the new acquisition INT coming in, and we are quite excited about 2026. Of course, we live in a world that is quite uncertain, but we think we are at a good place in our market, and where we see continued future for investments in automation and this regionalization.

So we remain fairly optimistic about 2026, I think, and, of course, it's good to also close the year with good cash flow and solid net debt and stuff like that. So we feel that we are in a good place for the coming quarters.

And we hope you join us for the coming quarters and look forward to talk more about this after quarter 1. All right. Have a good day. Thanks, everybody.

Welcome to the HMS Networks Q3 Presentation for 2025. [Operator Instructions]

Now I will hand the conference over to CEO, Staffan Dahlstrom; and CFO, Joakim Nideborn. Please go ahead.

Thank you, operator. Good morning, everybody. Welcome to this quarter 3 report. Greetings from a sunny Stockholm, and we're also pleased me, Joakim, to have some sunshine in this report. And the agenda for today, is that I will do a quick snapshot of where we are and our strategy, a little bit of business update, and then Joakim will do a deep dive in the financial summary, and we finish up with some Q&A at the end.

So we published our quarter 3 this morning and some good signs, we think, good level on net sales. We are back on organic growth that really makes us happy. We also have some headwinds with currency. Joakim will dive into that later. Order intake, fantastic, plus 26%. But keep in mind that we had a quite weak quarter last year, quarter 3. So comparables are not that challenging. But still, 26% is still 26%. That's really good. And we continue to deliver good adjusted EBIT, both SEK 244 million in adjusted EBIT, but a margin of 27% is good for us, and we're very pleased to see this. We also can conclude that when we talk about adjustment in the EBIT, it's very little of this kind of reorganization things during acquisitions. So it's very clean adjusted EBIT at the moment.

A good cash flow, record level, and we are very happy to see that. And the combination of good cash flow and good profit also make us perform well on net debt and our covenants. Just on year-to-date, this accumulates, we don't reach organic growth for the year. Of course, this is what we follow. Good order intake, and we are happy to see the cash flow to continue to be good throughout the year. So we move into the strategy, but Joakim will be back more on data on the numbers in a moment. We presented our new strategy last month. This spans for -- from next year until 2030. We try to focus on 5-year periods because in our industry, it takes some time to develop new products. It takes even longer to make them commercially successful. So we believe that strategic period of 5 years makes sense for us because then we can set plans, execute and see good results over the time.

We talk about 3-2-1 grow; 3 divisions, double revenue to EUR 7.5 billion (sic) [ SEK 7.5 billion ] but also maintain the feeling of being one company. We have acquisitions. We are growing internally, but we want to make sure that we feel and work like one company. There are 6 elements in the strategy. And if we start with the centerpiece here, Win-Grow-Keep where we have more structured strategies for winning new customers and growing existing customers to their full potential. So we have more forward leaning in winning, and we put more effort in the sales and marketing in the coming years. We talk about continuing with mergers and acquisitions. We made a dozen acquisitions in the last 10 years, some okay and some really successful. And we would like to continue to perform on this and half of the growth will come from acquisitions, half will come from our own organic growth.

We are strong in engineering and R&D, and we believe that we should keep on investing in our product evolution, where we develop both new product, but we also see opportunities for new business models. We are improving our Software-as-a-Service portion of the business, and this is one ambition to be more than 10% of revenue in 2030 to be coming from this subscription and SaaS revenue. We also see good opportunities to improve our operational efficiency to drive gross margin, operating margin. We are maybe quite okay on gross margin, operating margin compared to others, but we still see improvements. We can improve both the cost side, but also how we do things and efficiency. And we also feel that AI tools give us fantastic opportunities to also improve our internal efficiency.

These 4 key elements are framed with 2 core things for us. We talk about the planet, where we support our science-based targets that we are just in the finishing to get our targets approved 2030 and 2050 approvals for reduction of CO2. And we also have the key element of what we call people, our employees, where we believe that happy and high-performing employees generate loyal customers. So this is really what we want to do. We set new targets for 2030, where we have planet, people and growth. For planet, we keep our high ambition on sustainability, reducing CO2 emissions to be net zero 2050. We also follow something called EcoVadis, that is an industry rating for most -- well, key companies in our world of industrial automation, and we would like to be top 5 here. This is gold rating by large customers. We would like to continue our people strategy. We have happy customers.

Net Promoter Scores more than 50. We are getting back to that. We are not fully there yet, but this is a big ambition for us. We also think that having happy employees is not about happy, it's about engagement. So we measure engagement index where we want to be industry-leading of over 80. And we keep also a focus of adding more female managers. And we've been growing this from, I think, 14% 5 years ago to 28%. So we're not at 30% yet. But we believe that a mix of, of course, female, male, but also in backgrounds in different age, and this gives much more of an innovative climate and more productive climate in the company. So that's why we focus on this female managers.

And then the numbers, growth, we would like to more than double to SEK 7.5 billion in 2030, have growth -- profit target of 25% EBITA, and we move from adjusted EBIT to EBITA instead. And we would like to continue to generate good cash flow, so we can also give dividends between 30% and 50% of our EPS. So these are the targets, and we are doing the following to really fulfill that. We talked about product evolution. We think that more than 50% of the organic growth will come from new products that we have not seen yet. There are a lot of new ideas, and we're doing a lot of developments. We are quite excited about the coming years and the new products coming out. We also see that AI will improve our products and the functionality. So we'll implement certain AI functions in our products. We also, as I briefly mentioned, move into more of recurring revenue, this kind of software subscriptions, annual recurring revenue to be more than 10% of our revenue.

This is coming mainly from subscription of the software piece that we have that is fairly small at the moment, but we see that this can improve for the coming years. And we believe that having high intimacy with customers is key for us, and we would like to improve our distribution business, of course, but we also would like to grow the direct sales even faster. And we see this win and grow strategy we're having. There's a direct connection to have more direct customer contacts and fully understand the future need of our large customers. And we continue to successfully execute on our M&A strategy and each of our divisions have their own M&A agenda, and we see good opportunities in this industry to continue finding right M&As.

We also see that our company culture, heart, mind and soul is a uniting factor for our different business, and we would like to drive this to be generating the most engaged employees in the industry. So here, we measure this with employment engagement index to be larger than 80. But having happy and engaged employees, of course, comes with good leaders where we've put a lot of efforts on our leaders and leadership trainings, and we would like to measure this with our leadership index to be greater than 85.

Win-Grow-Keep, here we talk about more winning, more growing. So we would like to have more of 6% of last 12 months' sales from customers that have won, 6% may be sounding as a low number. Today, we have 3%. This also means that we have a big bunch of happy and loyal customers that keep on buying our products. This is what we call keep. Of course, we'll keep on serving them. But we also see that we need some hunters to drive new business and be a little bit more aggressive on the market to win more. And we continue our investments in AI systems to drive our operational efficiency.

From 1st of Jan 2025, we introduced our new organization with 3 divisions: IDS, that is 47% of our revenue. Industrial Automation is the focus. And here, we work with machine builders, system integrators and end users. Second division, INT, 29% of business goes actually to the same market, industrial automation, but a different customer group with device manufacturers that requires a different go-to-market. There's a very long sales cycle with design wins, but then we build a very long revenue cycle with these customers and big loyalty. So therefore, we need a dedicated go-to-market for these customers. And then we have new industries, which is today a mix of building automation and vehicle communication today representing 24% of our business.

So this was a bit about our strategy. If we take one quick snapshot of the business in quarter 3. before Joakim talk about the numbers, we see good growth. So we see some kind of change in the market that is kind of difficult market. Of course, we still have geopolitical issues. We still have customs and tariffs and all these things, but we see organic growth, and it seems like our customers are normalizing their behaviors despite quite a troublesome world around us. Both North America and Europe generate good orders. APAC, excluding China, is more hesitant, like Japan is still quite hesitant, but China is better for us. So good net sales driven by IDS performance in North America. So North America is the engine for the growth in general, especially for our IDS division, where they have a large portion of their revenue in North America.

As I explained, we have a new strategic plan. We rolled it out internally and to our investors in the Capital Markets Day. Internally, super good engagement, and we are very excited about this. And we have a strong focus on our sustainability. We talk about people, planet and profit. So that's what we do and growth. And we keep on investing in what we said in improving our production in U.S. We are very happy to have local production in U.S., but we noted a year ago that it was not up to standards to what we think is world-class manufacturing. So we are seeing good progress there. And the end of the year, we should be finished with these investments, and we are on the right track there. And we start to seeing also improvement in quality, in performance. And of course, this will lead to good gross margins and net margins for us.

Last quarter, we talked about that our introduction of the new ERP system in U.S. made us delay some orders, and they are delivered this quarter here. So this gives a good addition. And we've been mitigating the tariff cost by increased pricing in the U.S. and customers have been accepted this in a quite good way. We are not -- we have products with limited competition and the customers understand that it's not our fault that the tariffs are hitting us. So I think we had a good conversation with customers. I don't even recall that we lost any customers there. And most of our competition in U.S. is not domestic U.S. companies. It's actually Asian or European companies. So we are on par with this other. Actually, some of this competitors like from Taiwan and others, they probably have more challenges than we have.

So with that, Joakim, let's move into the numbers.

Let's do that. And we do as we normally do and start with the order intake. Solid quarter, SEK 855 million in order intake, so 26% growth, out of which 22% organic growth. And of course, then we know that we're comparing with maybe one of our weakest quarters in Q3 2024. So the numbers in itself, the organic growth in itself is maybe not representative for what we've seen sequentially. And sequentially, still, I think we do okay. We improved a little bit from Q2. And looking at the year-to-date number, we still see an organic growth of 14% on orders, which is good to be able to conclude.

If we look on the different markets, we've said -- as Staffan said, that North America continues to be strong. And if we look at this sequentially, I think North America is the major driver for this development. Year-on-year, everything is up more than 20% in terms of geographic markets, but it's maybe more than the weak comparable than the current business. We also see a very small positive development in Europe, a few million better than previous quarters. And then that leaves APAC, where we have some issues in Japan or maybe not issues, we lack the big orders, especially in the INT division, and I'll come back to that as well. And with Japan struggling a bit and China continuing to develop well, we have now -- China has now surpassed Japan, and China is actually the third largest market for the INT division. We also see good development in the building automation part of new industries, where the Middle East continues to deliver new records and becoming the largest market for us in building automation.

So I think what we can see in the quarter is that we're now having more markets to stand on. China is becoming a bigger part for us. Middle East is becoming a market to count on. And I think that's very positive that we develop the group with more of these markets that can contribute to the overall development.

If you look on the bottom left graph, so you see here that we also have a bit of a negative FX effect of minus 6%, but that is more than made up by the acquisition, which is now the PEAK Systems part that is coming in as the last quarter where that is not part of the organic business. So that's adding an 11%.

Let's continue to the sales. And here, we delivered record volumes with a few million margin to Q1. Also here, we see a bit of a weaker currency that is impacting that. So overall, quite okay result, we must say. And as Staffan mentioned, it's the first quarter since Q3 2023, where we have organic growth. So it's good to deliver this 8% organic growth in the quarter. We had some deliveries in Q2 that we couldn't get out because of the change of ERP systems in the U.S. manufacturing. That is now being developed in -- being delivered in full in Q3. So we're making up on those SEK 50 million, which is, of course, adding to the development in Q3. That also results in a book-to-bill that is lower than 1.96. We've been seeing slightly higher book-to-bill for the earlier part of the year, and we hope that we will get back to deliver good book-to-bill ratios going forward.

One of the contributing factors to development is the U.S. manufacturing that is ramping up. And we've been making some investments that we said we were going to do when we took this business over. We still have some developments that are being done pretty much as we speak. We were over there 2 weeks ago and looked how it's been developing. And then we can see that we -- in some of the process steps, we already improved the yield a lot, and we know that there are some results to come during Q4. Q4 will be a challenge, and the team is working really hard to be able to deliver good volumes while making the change at the same time. So that will be a very important quarter to follow.

And then Staffan also mentioned that the tariff situation is handled for the time being in terms of being compensated. And we see some positive effects here on the sales side from those price increases to mitigate the tariff impact. Just a quick deep dive on the different divisions. We're starting with IDS, where we are delivering maybe the strongest numbers in -- among the different divisions, especially on the sales side, where we do a new record quarter with SEK 439 million and showing some sales growth organically of 21%. Also then slightly weak comparable in Q3 '24, but this is quite strong for this business, we believe, with a 10% organic development. Sorry, 21% organic development. We're also managing to deliver for this division really strong margins with 27%. This has been improved a lot, primarily driven by the volume, but also some gross margin improvements that we will talk more about that in a second when we look at the gross margin for the group.

And all in all, as we said, good deliveries from the U.S. This is very U.S. heavy this business. And so that becomes really key for achieving good numbers. And we see that, and we also still keep a pretty nice order book for the remaining parts of the year. And the main difference compared to Q2, which you saw was significantly lower. Here, we have those SEK 50 million that was delivered out in Q3 instead. And then also, you see the price increase effect from the tariffs. This is, of course, the area where we have the highest tariff effect. So all in all, a solid quarter from IDS and a big contributor to the strong group results.

Then we have INT, where we are a little bit still struggling. We're almost on the same level as before in net sales, same level as last year. We're still not really up to organic growth yet. We hope that, that will come in Q4. On the order side, you see really good numbers if you look at the percentages with 34% organic development. And then again, maybe here, we had the weakest development in Q3 last year. So if you look sequentially, we're more or less on track with the same pace that we've been seeing for the earlier quarters this year.

And this market is quite German heavy, and we are still not seeing that lift in Germany. It's still quite a hesitant situation from the customers, which we are convinced that, that will turn at some point, but we see kind of similar signals when we talk around in the industry. So it's maybe not so surprising even if we had hoped to see a bit of a better development. Still for INT, this is a bit of a cash cow. We delivered good margins of over 28% adjusted EBIT. So it's -- even with some potential on the volume side, we do quite okay. And I mentioned China before, this is where you see the biggest impact of China developing strong.

Then the final division, New Industries. A bit of a mixed picture within the division. We have the vehicle communications part, which is developing more or less sideways. And given a strong weight with German automotive players on the customer list, I think that is okay in this market. And then the positive thing this quarter is the building automation business, which were a bit weaker in Q2 and now is coming back with record order intake, really nice order intake. And I mentioned Middle East before, that is going very strong in the building automation business. So all in all, we do a 21% organic order intake increase and a 14% increase in sales. And I think we have to be fairly happy with that development in this market.

So let's look at all this comes down to in terms of results, a record quarter in EBIT, SEK 244 million in adjusted EBIT and 27.3%. As Staffan said that there are basically no strange adjustments here. It's only the amortization on over values. And as you might have seen on the Capital Markets Day, we will go over to report EBITDA with only the a -- for next year as the financial metric, and then we will take away this adjusted EBIT. So it's essentially the same thing that we present today.

Looking at year-to-date, we are close to achieving the 25% target, 24.5%. So we hope that we can maybe be there somewhere in Q4 and be able to close that gap. Let's see how that plays out. On the gross margin side, 64.1%, which we think is a very good level. And 2 major things. We have a favorable product mix on the margin side, the INT embedded offer, where we normally have really good volume on the different customers, but a slightly lower margin is developing weaker and then the other parts of the group is developing stronger, which is giving us this positive mix effect. And then also the price increase effect from the tariffs is compensating. So we see a bit of an increase, both from last year and from previous quarters.

I also want to mention, I forgot to say that in the beginning here that we have -- on the EBIT side, we have now, first of all, a pretty good natural hedge in terms of higher cost base in the U.S. to mitigate the dollar weakening. And then we also have some really efficient FX hedges, some hedging contracts that are compensating the full -- more or less the full FX loss. on the EBIT line. We still see the impact, of course, on sales and orders. So when you look at comparables, I think you need to look at the organic development. But on the bottom line, this is more or less neutralized.

And then just final comments on the OpEx. We see a small increase, 7%, probably half of that inflation and half related to some sales and marketing investments. We're starting to fill some positions and to start up some smaller investments here now to get going for the future. And then as always, we have some vacation effects in Q2, maybe some SEK 50 million of lower OpEx, which is, of course, helping, especially in the third quarter.

Looking at the EPS then at SEK 3.88, a very strong level. And of course, the strong result is the main driving factor. A pretty clean net financials. We see also that interest rates are coming down and the debt itself is coming down, which is, of course, lowering the burden on the net financials and then improving the EPS. Then we have a onetime effect. In the fact that we have some lower tax related to the U.S. in the quarter, which we cannot expect to see going forward, but it's always rewarding when that happens. And that boosts, of course, the EPS a little bit as well.

And then maybe my favorite part of this report, the cash flow, which is very strong. We have a cash conversion of over 90% and good profits in the base coming over to SEK 258 million in cash flow from operations. We're continuing also to see a decline in inventories. So we've been seeing that throughout the year. And I think we have a little bit left to take in Q4 as well and then coming more into a good level on the inventory side. So that is supporting as well and very nice to have that to delever the balance sheet, which we see also now on this slide that we're continuing to do. We are closing the quarter of net debt to EBITDA of 2.66 as reported. And if I exclude IFRS 16, as we might think is more -- a better way to see it, we are doing 2.6. And then just to compare this -- after Q2, this was 2.92 and after Q4, this was 3.37. So we've been reducing some 30 basis points in the quarter, which is, of course, very good to see. We've said before that we should be below 2.5 at the year-end, and everything points to that, that will actually happen as well.

Now we've been talking a lot. We're going to open up for questions in a minute. Just a very high-level wrap-up from what we've been seeing. So all in all, recovery in several geographic markets. North America sticks out as the strongest area, still some more potential in Europe, a little bit hesitant for INT. And happy to say that Middle East and China are now growing into more important markets for the group. We're doing the investments in the production facility in the U.S. We've been already now building the capacity, and that will happen even more during Q4 going into 2026. We will have a better capacity and more flexibility if we need to change some production to the U.S. to set up a better tariff situation and get tariffs on the components instead of finished goods. And all in all, we think that this tariff situation has been fairly well mitigated for the time being at least. And we still try to keep flexible to see what happens if there will be changes coming forward.

And then finally, all in all, a good result, record profitability and cash flow, SEK 244 million EBIT, cash conversion of 91% and a strong cash flow. And we continue to delever as planned with the business.

And with that, I think we can hand over to operator and open up for some questions.

[Operator Instructions]

The next question comes from Simon Granath from ABG.

Staffan and Joakim, congrats on the robust numbers. Initially, we have recently been talking about smaller projects progressing decently despite the elevated uncertainty shown in recent quarters, while larger projects have been halted. Are you witnessing any change in customer behavior of the larger projects more recently?

Not really. No, we are lacking large orders still, but it's a broad-based increase of smaller orders from many customers, I would say. But we still lack the large orders that we would like to see.

Maybe the only area that sticks out for us is maybe Japan for the INT division, where we normally would get some large order every quarter. So I think it's more about a timing effect, and we hope that, that will materialize. Otherwise, things like Staffan said, yes.

That's very clear. And on cost, I think we've been talking about that if sales volumes do not pick up as you've been anticipating, OpEx would likely stay low. But if volumes come, you would also increase costs partly in order to reach your targets as well. So my question is essentially if you're presently seeing the progress you've been anticipating.

Yes, I think so. I mean, if you look on the market demand, it's not great, but it's okay. And I think with the cost side we're having right now, we are performing well on this market. But to be really happy, we would like to see a stronger market because it's still not great, and we hope it to be better in the coming years. But right now, we are pleased to see these signals that it's actually moving in the right direction with a little bit of organic order intake -- organic growth in net sales and things like this, but the market is still a little bit hesitant, I would say.

That's also very clear. And then a question on tariffs. Were you able to fully compensate for the tariffs in the quarter as a whole in terms of gross profit? And furthermore, given your report comment that you anticipate further changes in tariff regulations, how would you anticipate customers would react to changes in tariffs? If there are more tariffs, would you then be able to increase prices further? Or if the opposite happens, if tariffs diminish, are current prices then sustainable?

In general, I think that we've done some general price increasing, and we have not specifically only increased by tariff only. So we combine this with some strategic pricing and inflation and things like this. So we think that if the tariffs are increasing somewhat, we might not be able to do another round of price increases short term. But let's see that. I think we took some extra headroom when we did this change during the year here. So we are -- I would say that we are probably fully -- on the total, we are fully compensating ourselves at the moment, but there is some differences from some customers that are minus and some customers are plus. But in total, we are covering our extra cost and actually probably a few dollars more.

The next question comes from Joachim Gunell from DNB Carnegie.

So it's not only the weather in Stockholm that is sunny. I think that you were also a bit sunnier in the way that you communicate with regards to end markets. So can you perhaps say just a bit about -- I mean, how you think about the pacing of orders throughout the quarter and then the start of October? Adding to Simon's question, I mean, you've been very cautious on diligent and strict on OpEx in a tougher for longer market scenario. But here for the first time in 7 quarters, you're actually increasing your OpEx year-over-year organically. So how should we think about that?

Well, actually, I think when we look at the total, it's quite sunny, but I think it's been like an early spring that some days, it's been too colder than we expected. Some days, it's great weather, but you never know. So I think it has not been rock solid improvements during the quarter. It's been a little bit of up and down. And we had some weeks disappointing, some weeks, positive surprise, but it's I would say, it's not rock solid. That's my feeling at the moment.

I think we normally see a weak August with some vacations in especially in Europe, and that was the same this year. So July was quite good. September was quite good. And I think October has continued in a similar pace that we've been seeing in the quarter. So I think it's -- this is pretty much where the market is at the moment. That's pretty much our takeaway.

Perfect. And also, I mean, how is the progress of ramping up and modernizing the production facility in York going? And what further steps need to be taken to get to Swedish manufacturing standards in your view?

I think what we saw there last week was -- 2 weeks ago when we were there is that we are maybe halfway. Some process steps are fully completed, where we see very good progress. I mean, we are doubling the output in some -- and the quality is now almost on the level we expect there. And still we are phasing in this. But for some of the process steps, we are getting the new equipment in quarter 4, and we need some adjustment time. But at the end of the year, everything should be -- all the machines and all the new investments are in place and the renovation of the facilities and everything. And then we need some maybe a quarter or 2 to really work on the details to make sure that this is clockwork. But we are taking good steps in the right direction. And this also gives a very positive atmosphere with the operators. People are smiling the production there. We are doing investments, and they also feel that they are important and we see quality is rising. So we also see the pride is coming with the staff there, which is very important for building good quality.

That sounds encouraging. And margins have been, I mean, stellar here in light of still fairly low organic volumes, right? So can you just talk a bit about the FX hedges here in Q3? What would the translation effect on -- perhaps for Joakim, what would the EBIT translation effect have been without the FX hedges? And all else equal, I think is it fair to assume that FX will incrementally become a headwind on Q4 margins?

Yes. So I don't want to go into exactly the impact from the hedges. We don't normally report that. But we've had -- we've been super lucky with the timing throughout the first 3 quarters in the year and especially in Q3, we're getting a great effect on the hedges we've done. Obviously, that will not continue in the same pace going forward, given that the hedges we have taken at that point in time, the U.S. dollar was at a lower level. So I think you can expect a couple of million in negative EBIT effect from FX in Q4 in relation to what we've seen now in Q3.

And then just finally, I mean, we are now 3 quarters into the new organizational structure. So can you just comment a bit of, call it, signs where you are seeing traction of this new strategy and that you are reaping the benefits from this more, call it, effective and decentralized setup?

I think we're starting to see that the new organization launched here in the 1st of January is starting to work well. And of course, this has also reduced headcounts with almost 10% in that change. That was also, as always, a little bit of a negative feeling the first couple of quarters. that is behind us and people are positive and they realize that what we're doing now is the right organization. People are closer to customers and each division is feeling that they have the accountability to run their business. So I think we're doing good progress there. When it comes to the strategy, we are just rolling it out.

We are seeing very good excitement in the organization about this. And actually, one of the operators in the York facility 2 weeks ago, he told me, I really love our 3-2-1 grow and he's a production operator on the factory floor in U.S. So we've been rolling out this in a good and successful way. But of course, the proof is in the pudding, but now we need to deliver on this. And it will take some time before we see the effects of being more forward leading in sales, investing more in product development. That will take years before we see the real financial impact. But that's why we do the 5-year plan.

Seems you are on the right track.

The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. I thought maybe just to start off on IDS. I mean, just looking sequentially Q-over-Q, I mean, it's a massive margin expansion. Of course, I mean, I understand Q3 is seasonally strong on margins and you have a bit higher volumes and price increases. But can you just comment a bit on this expansion? And are there anything that sticks out that we shouldn't sort of know about here?

I think you summarized it pretty well. I think when you have a 64% gross margin, the volume comes down pretty well to the bottom line. And then with an improvement in the gross margin in itself, that's been very successful, of course. And just for IDS, just to make that point again, we were a bit short in Q2. So it's maybe not fully fair to just compare those 2 quarters. We had some SEK 50 million that was spilling over into Q3 due to the manufacturing stop and then start with the new ERP. So that, of course, makes a difference when you compare those 2 quarters. But we are very happy with the development and 27% EBIT margin is, of course, a very good level for IDS.

Okay. That's very clear. And then also if -- I mean, we look at Q2 here, a bit larger if we look on the year-on-year growth in R&D expenses. And now, I mean, in Q3, you are close to flat. Is it possible to say anything regarding the capitalized development cost in Q3 this year compared to last year?

Yes, we were -- I think we were up SEK 7 million, if I don't recall incorrectly. You can probably go back and check that if you want. It's in the report.

That's quite accurate.

Yes. And then if you -- maybe a more important comment on that going. So I think what we're seeing is that we are ramping up in some areas, the development pace. You saw also we made the sales and marketing was up a little bit in Q3. So we are starting to invest a little bit to fulfill the strategy for 2030. And I think I mentioned it also on the Capital Markets Day that we will see in 2026 and 2027, probably a higher investment pace in R&D to come out with the new platform for IDS and also to execute on the new, especially the INT initiatives, we will be trying to address some larger customers, both with a software offering and a new embedded offering. So that will drive some more investment pace going forward. And I think, yes, you will see maybe a little bit already in Q3, and you will see it in next year and '27 as well.

Okay. That's very clear also. And then just a final one here on margins. You commented a bit on the positive mix effect. How should we think about this going forward, short term, so to say?

Yes. So I think what we believe and what we still believe is that the embedded business in INT has some more volume in it. So we think that we will see slightly higher levels in INT. And if that becomes a larger share of the total, of course, that will put some pressure on the gross margins from today's level. Still, I think we've done some pretty good job here. So -- and we do have some potential still with the investments in the York facility. somewhere around that level, I think, 63% plus, I would expect us to be able to deliver anyway.

I think also we need to look on the gross margin a little bit on longer term. We see variations quarter-on-quarter due to, as we say, the product mix since we have some customers with fantastic margins, some with mediocre margins. But all in all, the trend should go in the right direction. And we have a target to be over 65% in the new strategic plan. So that's what we focus on for the midterm. But there will be some variations quarter-by-quarter.

The next question comes from Jesper Stugemo from Handelsbanken.

Staffan and Joakim. Many good questions already. But given that China now has surpassed Japan, I guess this is more related to market dynamics and current demand picture? Or is it this a strategic refocus that you have in China to prioritize this market given that you have a -- it seems like you have a good portfolio there with little domestic competition.

I think the strategy we have for China is to be more selective. Primarily, we see for division INT that they have a product offer that is attractive in China, limited competition. But if we look on things like IDS, we see much more domestic competition there. I think we are also reducing our efforts in IDS division there or at least not investing in it. So I think we try to really analyze where can we be successful, where can we win and put all the more eggs in that part of the business and then just accept that some of these domestic competitors we have for IDS, it's really difficult to win with an American-made product with the same functionality as a Chinese-made product in China. You can win with that in the U.S., but you can't win with that in China. So I think we realize that put our focus where we can win.

Yes. All right. And a follow-up on the Japanese orders here, larger orders. You haven't seen them here in Q3. So what are your expectations on the volumes in the coming quarters? How close are your dialogue with the customers there? And how good visibility do you have?

Very good question, and it's not easy to answer. I think we expect that our customers will come back in Japan. It's been a tough market. A lot of our Japanese customers used to be successful in China. And both -- we see this both in Europe and in Japan that the domestic competition in China is increasing and some of our Japanese customers are suffering on that. So it's not that we have lost customers in Japan, but our customers have problems with their Chinese markets. I think that's a clear indication. But we expect Japan to come up again and the Japanese market itself looks promising, but the China export is difficult for them.

The next question comes from Thomas Blikstad from Pareto Securities.

Congratulations on a very strong quarter. A lot of good questions already answered here, so I'll be very short. I was just wondering if it's possible to get a refresher on how much of your manufacturing is currently outsourced to EMS companies? And what's your view on this long term would impact on margins and so forth?

Good question, and we love to talk about this. And we have a strategy with manufacturing to do all the new and ramp-up products as well as low-volume products in our own manufacturing. And then when these products are good and stable and keep on growing, we normally work with strategic EMS suppliers in Europe, in Asia and also in North America to make sure that they can deliver the high volumes because we feel that we don't have the capacity for this high volume. And I think that strategy has proved working well for us. And Joakim, what could it be? If we look on revenue? Could we say 50-50 at the moment?

50-50, yes. So before the acquisition of Red Lion, we had a majority was outsourced, and then we took on a big manufacturing plant announce and then we'll be making some small adjustments. So I think it's about 50-50 at the moment.

And if you look on part numbers, maybe more than 90% of part numbers is made in-house, but these are low volumes and maybe 10% is done through EMS, but that's the high volume. So that's really the dynamic we are looking to fulfill.

Okay. That's very clear. And sort of you don't expect any, let's say, development here, just the same strategy going forward basically?

I think the long term, we are moving production out of China to -- from one strategic EMS or actually one location. It's the Norwegian Kitron that is we're working with there from there -- we are reducing some parts in China and ramping them up in Malaysia due to some customer needs and opinions about that they have higher taxes on made in China and things like this. So this gives us a flexibility to move between different sites as well without us doing all the CapEx investment to do that. So it works pretty well, actually.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you, and thank you all for your participation in this quarter 3 call. And we are happy to see some more sunshine, as I said. It's not great, but it's okay. And I think we deliver a fair result on the circumstances. But we keep on running out with our long-term strategy for 2030. We have a big focus on this. I'm sure that there will be some variations during the quarters, the coming quarters. And this market -- more positive market we are seeing right now, it's not for granted that it will continue, but we see that it's -- the signal we are seeing today is that it's moving in the right direction. That's quite clear for us. So please stay tuned. We are coming up with quarter 4 quite soon as well in the quarter and look forward to talk to you at that time. Thank you, and goodbye.

Good morning, everyone, and a warm welcome to HMS Networks Capital Markets Day here in Stockholm. My name is Thomas Carlsson, Director of Communications at HMS Networks in Halmstad usually. Very happy to be here in Stockholm. And I have the honor of being your host and moderator for the next 3 hours or so as we look into the HMS Networks Capital Markets Day and our current situation, plans for the future and financial prospects.

So luckily for you, you won't be listening to me -- much of me today. Instead, you will be listening to 4 eminent presenters. I can assure you they have some good slides for you. I listened to their rehearsal yesterday. So a lot of good stuff coming up for you.

Before we get going, just some housekeeping issues here. So we will take questions at the end. So we have ample time for that, about 40 minutes at the end, but we'll run through the presentations and take questions from the room here at the end. And if you're joining via the webcast, a warm welcome to you as well. Feel free to ask any questions using the chat function, and I will take that with the presenters at the end. So a warm welcome to everyone.

So the agenda for today. So we will start with Staffan, our CEO, looking into the corporate strategy for the next 5 years. And then we'll take a deeper dive into the different divisions where the magic actually happens. We'll have a short break at 10:20. We will have a chance to chat with the presenters and ask some more questions as well. And then we'll go into the financial details with our CFO, Joakim. And then ample time for questions at the end there at 11:20.

Sounds good? Good. We have no plan B, so happy to do that. Okay. So with that, I'd like to hand over to our first presenter for today, our CEO, Staffan Dahlstrom, who will also introduce the rest of the presenters.

Thank you, Thomas. Good morning, everybody. Really nice to see you here, and welcome on the webcast as well. I'm Staffan Dahlstrom, CEO of this company, but running a company is a team sport. So I would like to get my team on stage here just to quickly introduce all of them. And you see at the same time, the organization chart we're having here. What a team. So Joakim Nideborn, CFO, will present a bit later coming with the financial update. Alexander Hess running our IDS division. He will come after me in a moment.

Bartek Candell is running our INT division, also presenter. And then Mira, she's our Chief HR Officer, will not present today, but will join us on the Q&A. And Richard, running our operations and IT and sustainability will not present today, but will also join us on the Q&A. So welcome back on stage a bit later. Look forward to it.

All right. Let's just start with a short -- where are we today? As a company, we work with industrial ICT, information and communication technology, well connected in our industry. Our original products with Anybus, we have over 10 million devices installed around the world, which in our industry is a quite high number. So we've been doing this for many years. We also have over 600,000 machines connected to our cloud solution for remote access and diagnostics. So this is also well established since years. And since our acquisition of Red Lion, we have more than 0.5 million machines using our visualization of data. So we're well connected.

We're also working with new technologies as 5G and IoT. But as many of you know, we work in a quite conservative industry. So when we talk about new product, it normally takes years before they start ramping up. So things like 5G and things are still waiting for the commercial success to be more visible in our numbers. Today, we are around 1,100 employees in 21 countries where we have subsidiaries, 1/3 in R&D, 1/3 in sales and marketing, and this is a balance we try to keep. It's one thing to develop products that are great, you also need to make sure you can sell them and having that mix has been very important for us.

Headquartered in beautiful Halmstad, been nice summer there. Many of you have been there. And please, if you have time to stop by, please let us know. Revenue-wise, we are approaching SEK 3.5 billion. We make an adjusted EBIT of SEK 800 million, and we have been growing the last 5 years around 18%, a combination of organic growth and acquisitions. So this is where we are today. One thing we are not changing is our mission. We at HMS -- HMS is hardware meets software, where we enable valuable data from industrial applications, so our customers can improve their productivity and their sustainability, 2 really key aspects for our customers.

So this is working well, and we maintain that. But HMS is not only hardware and meat software, it's also heart, mind and soul. This is the internal company culture where we put our heart, our mind and soul in the things we do. And this is a good combination of hardware meet software and heart, mind and soul that really build the company. And when we see -- we've been fairly successful, and there are a couple of success factors on this hardware meet software side that we've really been seeing is something that make us successful in the past.

We've been doing this for decades, and we build long-lasting customer relationships. In our industry, it takes years to build trust with customers, and you need to maintain and really deliver good products, good quality to make sure you can keep that trust over years. And that's something we have done very successfully. So very few customers is leaving us. And of course, bringing on new customers, make them loyal, that adds over time. We've been fairly successful in doing acquisitions. What we hear from other companies that the majority of acquisitions fails. And when we buy companies, we integrate them, we want to have synergies.

And we've done a few maybe not great acquisitions, but the majority of things has been really good for us. So we stayed out of trouble. We made good acquisitions, and that's been part of our success as well. And we focus on markets where we can -- on smaller markets with limited competition, where we don't really compete with the big guys. So finding these kind of blue ocean, smaller pockets of interesting markets where we can be #1 or #2, #3. That's really what we look for. And we are a product and engineering and tech company. So we love our products. We invest heavily in product development and engineering.

So product and product excellence have always been something very important for us. So this is more on the product side. But on the software side, we also really try to preserve the fact that, okay, now we've been doing this business for over 30 years, but we started up as a start-up garage company, maybe we're not a garage company anymore, but we want to keep this attitude in the company, feeling that we take decision, we go forward, we have high ambition, that kind of entrepreneurial and business mindset is really strong in our management team and in all our managing the company.

And this is also part of our culture. We call it heart, mind and soul, where we put our heart, our mind and our soul in this. So this is important internally to build something that people really care about the growth of the company and how we take this forward. We changed our organization from 1st of January this year. One key driver was that we want to come back to have decision-making close to our customers. It used to be like that. But we built a matrix organization, and we felt, wait a minute, we need to get back to our origins where our people are closer to customers and take away a lot of middle functions.

This has been really successful, and we're seeing that this new organization works. And maybe the most important thing for us is quality. It costs a fortune if our customers cannot manufacture. So we have a business that is built on trust, and we have a history of 200 parts per million. We don't talk about percent. We talk about parts per million, we talk about quality. So our customers, they trust our products and our softwares, and this is really making sure that they come back as loyal customers.

And also sustainability is part of this long-term commitment to our customers. Many of our customers, especially in Europe, are investing heavily in sustainability, and this is the future. In U.S., we have more of a mixed picture. So these success factors have been important for us for the last 15, 20 years, but they will also remain as important for the coming 5 years. So it's important to understand what made us successful and making sure that we really nurture and keep these success factors for the future.

Products, we've done some acquisitions over the year. The Anybus, that was where we started originally, first product back in 1994, quite some time ago. Other brands have been acquisitions. And what we do with this is to integrate them, get synergies in sales, in supply and product development, but we normally keep the well-known brand because in these small pockets of markets, they are quite well known. So we want to make sure that we take -- we don't throw everything out and change. So we really want to make this to be part of the same family.

So we normally change the font and we have the brand by HMS Networks to illustrate that HMS is a company, but the brand is still intact and maintained. And the new ones here from N-Tron and Red Lion are the 2 latest additions to this strategy. Great products, both hardware and software product, and we're really proud about this strong portfolio we have.

[Presentation]

So a snapshot of what we're doing and you see the environment. This is industrial, high demand and customer -- reliability of products is key for our customers. From 1st of January this year, we organized ourselves in 3 divisions. A consequence of acquisition, organic growth, we really felt that we need to have another way of organizing ourselves to make sure that we have more transparency in the organization, more accountability and making sure that sales and R&D are collaborating with the right products in a good way. So Industrial Data Solutions, IDS, 46% of revenue.

Alex will talk a lot more about this in a few minutes, working with OEMs, system integrators, end users within Industrial Automation. INT, Industrial Network Technology, 30% of our business today, where Bartek will tell more about this, where we will also work with OEMs, but a different kind of OEMs also within Industrial Automation. And then we have New industries that is new initiatives, smaller units we have, faster-growing ambition. And there, we have building automation, vehicle communication, special products, and I will be talking about that in a few minutes.

24% of our revenue. So we think that this is an organization that is now working well. We think this also works well for the coming 5 years. So this is established, and we think that this has the potential to be the foundation when we are growing in the coming years. But before talking about the coming years, I would like to take the opportunity to look back on the last 5 years. We made a plan back in 2019. And at that time, we were slightly smaller. We still had a lot of devices connected, but only 300,000 connected machines. Now we have doubled that. 600 employees. So we also added a lot of new members.

And we had a few more -- we were in 16 countries, 1.5 billion, and operating margin goal of 20%. Actually, we didn't reach in 2019, but that was an ambition. So this was where we were some 5 years ago. And then we set a plan that for 2020, we would like to focus on environment, staff and customers, growth and profitability. We talked a lot about how to divide our market into control-centric, information-centric and infrastructure. And this was a way for us to describe the sweet spots and how we can organically be more focused in our organization to use the full -- where we saw the full potential to really penetrate these areas.

We couldn't agree on if it should be SEK 3 billion or SEK 3.5 billion, so we said SEK 5 billion, and that worked well for us. And we had originally a target of 20% EBIT margin. 2023, we raised that to 25%, so this was the focus areas. And when we look on this today, we see also that the reality came. It's good with the plan. But you remember COVID, 2021, we had semiconductor shortage that was a big hit in our industry because we normally work with -- we never work with the latest version of semiconductor. In automotive and industrial, we normally have one generation back, but this was a big issue with lead times and allocations and stuff like that.

So that was a big thing. High inflation during these years and recently also the tariff discussion. So it's good to make a plan, but reality is not always as you thought it was in 2020. However, we executed on our plans. We went to some new markets with new subsidiaries in Dubai, Vietnam and Australia. We did acquisitions of Procentec in Diagnostics. We became the majority owner of the Spanish Owasys business, where we today hold 80% of the shares together with founders. A lot of new products. This picture show Ewon Edge, but also a lot of new products have been released over the years here. And we made the big acquisition of Red Lion last year.

That's really been a change for us. And at the same time or slightly after, we got a fantastic opportunity to also acquire German PEAK-System, a really good match with us, and we're happy we did that as well. That's been a busy year. And that's why we started this new organization. So I think we've been executing on the plan. And even it's been a bit bumpy in the world around us, it's -- the power of the plan is quite clear for us. Let's make a plan, execute, adopt on the way, but really keep our eyes on the long-term goals here. So we look back, and we can see that we more or less managed to fulfill many of these goals.

For sustainability, we are now top 6% of EcoVadis. We want to be even better. We are silver. We want to be gold. We have this -- we'll talk more about this. We have committed to science-based targets, working with that. We had a plan to increase the number of female managers because we know that if we have more female managers, we can also attract more female employees. And we believe that this mix of female, male in R&D teams and sales teams generate so much good performance. So we really want to focus on female managers. From 15% to 27%, we've done good acquisitions in what we call control centric that is now rolled up under Alex IDS team.

We also made good development of our sweet spot. Organic growth have been good. And financially, we over-performed on our targets, and Joakim will talk more about this in his session with the details there. We're quite happy with that. And I think that's also important to look back and see what we have done have been working well. That gives us good self-confidence when we also move on to the next 5 years. All right. Let's look at the market and some trends.

The market we're operating in is industrial and the dark blue areas here on the map, this is where we have subsidiaries and own HMS staff. We believe that it's important to have our own staff on markets to really stay close to customers and understand each market. What we see for the future, we don't really expect that there will be a lot of geographical new expansion for us. We are talking about dig where we are, improve our business in U.S., in Europe, in Asia, but it's not that we have new geographical markets that we need to penetrate. So we're quite happy with the setup we're having, and we will develop this further.

There can always be countries like maybe Poland, maybe Turkey. Let's see how it develops. But right now, we dig where we are, and we are in the right places. So if you look on our business, we are -- where we have it today, we used to be factory automation, process automation. That is still 50% of our business, very important. But within industrial automation, that is now 77% of our revenue. We also work with infrastructure like data centers, material handling, warehouse management. We work with power and energy, oil and gas, renewable energy, energy distribution. So we also widened our scope with this industrial automation business.

Then we have our small but very successful piece of building automation, a subset of building automation, HVAC: heating, ventilation and air conditioning. And then we have our vehicle communication with a strong center in Europe, 16% of our revenue. So we feel that we have -- all these are industrial markets, some differences, but all of them require super high quality, reliability and stable markets. Customers are quite -- they like to talk about new things, but they love to buy the existing things because that's what they trust. So we think this is good for us, and we're happy that we've been expanding the last couple of years in this.

If you look at the customer types, we have 3 types of customers. We started with what we call OEMs. For OEMs, it's either machine builders where we want to be part of the bill of materials. So when they build the machines, they add our things for certain functions. Or device manufacturers, where we have the design win that we are deeply integrated into their microprocessor boards and computer boards. That is a very nice business, but it's also a long time to success, but very, very sticky. So the OEM business we do take time to win, but it's a lot of good revenue for years when you win something there.

52%, these are the drives, the robot, the machine builders of the world. But we've also been saying that when we work with this, we are quite far away from the real applications. We want to come closer to the end users. If we know the end users, we know what is their pain points. So we work more and more with end users, larger end users to understand what is their demands, what do they need for the future. And in many cases, some end users rely on system integrators that are higher to do this kind of integration. So almost half of our business today is with end users and system integrators. And we're very happy to have this mix of customer types.

OEMs drives volumes and long-term stability, projects and this kind of newer things becomes onetime projects, quite high values in some of them. So it's nice orders, but then we need to find new customers and -- after each installation, so it's a good combination for us. And we have strategies that is different for these customer groups because they are quite different. If we look on the markets for Industrial Automation, that is our large part today. We estimate that the market growth is 7% to 9% CAGR in the coming 5 years. We see on the IDS market share, where Alex will show more about this. We think that we have a market share of about 13%.

It's always difficult when we talk about market share because it's competition, head-on competition, is it substitute and there's a gray zone. But we believe that the addressable market right now is EUR 1.2 billion. INT and Bartek's team, they have an 8% market share. The other 92% is occupied by competitors, but it's also substitutes, where people have taking microprocessors, adding their own software and things like this. So we believe that that's a EUR 1 billion addressable market for the future. Building automation also growing a little bit faster, but maybe up to double-digit percent here.

And here, we see -- since we are in HVAC, we see a lot of activities in especially cooling, unfortunately, and we see this all over the world that heating has become more of a problem. And it's not only for convenience, it's really if you have a shopping mall, you need to have 20 degrees. Otherwise, customers will not come to you. So of course, these kind of things is more and more common also in cold countries such as Sweden here. And then vehicle communication, slower moving market at the moment. We know about the German vehicle business is not great, but we also see that there's a lot of things going on in technology and things like that.

And I'll be talking more about this. And we think we have a 16% market share here where we have a few really strong competitors in -- mainly in Germany here. So all in all, we see that we have an addressable market of some EUR 3 billion. We believe that this is growing some 7%, 8%, 9% in general. So we have a quite good stable market. It's not fantastic growth, but it's stable growth. And we think that this is a relevant picture, and we keep investing in this growth potential. If you look on the trends, we focus on 5 trends: deglobalization, need of automation, digitalization, cybersecurity and artificial intelligence, and how they affect us with the globalization.

We see that we can be a winner. A lot of our customers are segmenting or changing their manufacturing processes from being one global supply chain to have much more regional supply chain, and this also drives investments. We are still waiting to see the big boom like in U.S. for more regional investments, more people talk about it. But I think we've seen more of these investments in Mexico in the past years, but we expect that this will also come in U.S. This comes also together with increased need of automation. We have a factory in U.S., and we are not super impressed about the level of automation and the level of competence and workforce competence.

Rich and his team is doing a lot of investments and changes there. So we are on the right way. But in U.S., they are behind in automation, in manufacturing technology. So we also believe the next couple of 5 years, U.S. will be a good market for us, and they need to invest more. And honestly, I don't really know who they will hire. This Apple's $600 billion US factories, something like that. Numbers I can't even understand, but there are not people in U.S. who can take these jobs. They don't have the competence or the will to take these jobs.

So we see a lot of automation is the future. We see more and more of digitalization. This is an industry that is a little bit second mover compared to IT because this is a huge investment. If you own a steel plant or a paper mill, you may not be at the front of technology. You are a little bit conservative by nature. And we see more of digitalization on the factory floor. We see with our IDS products that we collect data. We take this data in the cloud and then the customer apply their AI and other algorithms in the data in the cloud, but we are enabling the valuable data for them.

Cybersecurity, we have a lot of attacks coming in our industry. We have a lot of concerns there and a lot of new regulation coming up and have a separate slide to show what we are doing there. But it's still a quite early market. We expect a lot of opportunities in this, but we also need to nail it. We need to find what HMS as a company can do in products, in services, and I have a few slides on this further on. And then AI, as we said, AI need data and the data is coming from the machines and sensors and most AI is not applied on the factory floor. It's applied in the cloud.

What we do is to gather the data, we filter the data and we bring it up to customers' application in the cloud. So we feel that there's a lot more need for data, and we also see that AI is coming into the products going forward. I'll talk more about this. So these are trends we are seeing. And we think that these 5 trends are good for us. We are in a good place in this market. I'm sure there comes some faster and slower moving trends here, but I think we are well positioned for these trends here.

So based on this, we've been working for 6 months to figure out what we can do, and here is the result.

[Presentation]

Three divisions. We think we have the right organization, double revenue, that's #2, and one company in culture and how we drive the business. So this is our growth ambition. And the wheel in the middle here is very important that this really shows the 6 strategic areas that we focus on for the coming 5 years. We start with Win, Grow, Keep. We and many other companies were hit by COVID. The hunters became farmers, and we really need to change this that we love to keep our existing customers, but we also have customers where we reach the full potential. So it's -- whatever we do, they will keep on buying our products. That's good.

But we need to have much more emphasis on winning new customers and focus on the accounts where we have not yet reached the full potential. And we need sales force and our marketing team to rethink about how can we become -- back to becoming hunters again. So Win, Grow, Keep is a very important strategy internally to make sure that we are more forward leaning in the business, more aggressive to win new customers and build new loyalties with them. Of course, we also focus on keeping our existing customers. But if we have a design win or machine win, of course, we are quite -- it's quite sticky already. We need to be more forward-leaning in sales to this.

So Win, Grow, Keep, very important. Product evolution, we are very proud of our product, but we also see that there are a lot of new ideas in the company. We would like to do more investments and making sure that we continue the path of innovation and, at the same time, we also see that things are changing, slowly changing in the industry. More things are going to software. People are more and more accepting subscription. We talk about annual recurring revenue in IDS, and we're doing more of these things here. So this is an area where we focus quite much on.

Mergers and acquisitions, we stayed out of trouble, have been quite successful with this. And we look on a plan. There are -- we have some good candidates. We also try to balance this to make sure we can use our own balance sheet to do these acquisitions, even if we have some other tools as well. But this plan with acquisition is also based that we can finance the acquisitions based on our current and future balance sheet and what we can do there. And I think also the divisional setup with the team you meet here is also enabling more M&A discussions further out in the organization, closer to customers, closer to product competition and things like this. So I think we have a good path there.

And then we have our operational efficiency. We feel we are pretty good, but we would like to be great. There are so many more things we can do in this area, and we see we can improve our efficiency, we can improve our gross margin, we think, and this will -- we have more things to do. And of course, AI and other tools is also elements that will help us here. Around these 4 key areas, we also have our Planet strategy. We believe that sustainability is really important. Science Based Target is our way to address CO2 emission, but we're also taking broader scope with this to include also social governance and quite much also -- very much also our sustainable procurement.

One of our biggest footprint we have today is not how we do things, it's our suppliers and our supplier suppliers. So we are very actively in working with our supplier base and trying to help and push them to become more green, and that's a big part of this as well. And then as we said for years now, happy and high-performing employees generate loyal customers. So we also have a strong focus on our people program and making sure that we build a company with really engaged employees here. So the new targets for 2030, it's Planet, People and Growth.

On the Planet side, we talk about our Paris Agreement, net CO2 emissions. We want to be top 5 on EcoVadis. EcoVadis is an international body that we believe is taking a bigger than just environmental. It's more about compliance and governance and procurement and things like that. That fits very good to us. And many companies in our industry is following EcoVadis as the guideline. Happy customers. We want to keep Net Promoter Score with customers to be more than 50, ambitious target. We've been there. We have been a bit dipping in the last couple of years with long lead times and inflation and price increases and stuff like that.

We want to come back there. We are moving away from employee NPS because NPS, it's 1 to 10. If you're 9 and 10, you're a promoter. If you are 7 or 8, you are neutral, Otherwise, you're detractor. But we see that month by month, we measure this, it's a roller coaster. We want to have some that is more predictable and we selected employee engagement index. We want to be what we believe is world-class, more than 80. And we want to make sure that we beat our target with female manager beyond 30%. And then for this group, quite interesting, I think, we want to be more than SEK 7.5 billion in revenue 2030.

We want to have a 25% EBITDA, and Joakim will explain a little bit more. We are there in the corner, EBITDA there. And we keep also our dividend policy of 30% to 50% of adjusted EPS. So some news here, especially on the revenue side, where we feel that the market is okay, and we see that we have a good position and both organically and by M&A, we believe that we can grow significantly here. If we move into these key elements for us, Win, Grow, Keep. This is -- we focus on winning new direct customers. We would like to have more than 6% of the revenue for really new customers. And that's a number that is difficult for you to relate on.

We are 3% at the moment now, so we want to double the number of new customers on a yearly basis. We want to have, and this is maybe obvious for everybody, everybody in the company that work with the sales have individual targets for Win, for Growth and for Keep to really make sure that it's not only a team effort, every individual will really focus on this to make sure that we do the best out of this. And we will also move into -- today, we have a mix of distribution and direct business. We will grow both, but the direct business will be even faster growing.

And we believe that with the product we have, we would like to address more of larger companies with longer sales cycle, more international presence, which is difficult to do with -- when you work with distributors. So distributors are good, they will grow, but we move to a larger share of direct business more than -- moving from 53% to more than 55% in 2030. That's also an important strategy for us.

Mergers and acquisitions, we believe that we can continue this. We need to have a balance of finding the right opportunities. We also calculate this on the cash flow. We do dividends and we use cash flow for M&As. And this plan is also to self-finance the M&As without any issue of new shares or anything like that. If we need to do it, we can do it, but the plan right now is to not do it for the coming 5 years. And as I said, the divisions will be responsible for this, and we see more opportunities to bolt on certain acquisitions inside our divisions. And we maintain our target of, over time, not have a debt level that is more than 2.5x net debt versus EBITDA. We are slightly over that at the moment, and I'm sure Joakim will talk about that a bit later.

Product evolution. We have a lot of new ideas, and we believe that most of the -- more than half of the organic growth in the next couple of years will come from new products. So we have some exciting things that we are working on and we would like to release quite soon, so we're quite bold here. We would like to focus more also on annual recurring revenue. This is on subscriptions. We do that on IDS today. Can it be 3% of our revenue today, and we want to move that to 10%. And this may not be a big change. But for us, it's a sign that the customers are moving in this direction. 5 years ago, it was impossible to have the discussion. They had a CapEx budget and they could not talk about AR.

We see a trend change there, and we see more opportunities. So more than 10% of revenues will come from our AR. And we also believe that we'll have more AI functionality inside our product. I will be back on that in a moment. For operational efficiency, there's a lot of more things we can do. But keep in mind, compared to 5 years ago, we know so much more when it comes to resilience, flexibility. 5 years ago, we and many others had just a global view of this. Make where it's cheap, more or less. Now we have completely different strategies. You need to be resilient and high flexibility. So I think both we and our customers focus a lot on this.

And we think that we have more things to do there. So we think that we can grow sales faster than OpEx, which is, of course, always good for margins. But also from an efficiency point of view, we just released in U.S. now our new ERP system, and we have a common system now for many businesses, and we see quite good synergies that it's becoming more efficient and we can do more synergy out of this. So we also believe that sales growth will be faster than OpEx growth due to these efficiency gains. And we have an ambition to grow our gross margins to beyond 65%. We see that, of course, the software content, AR is one element, but we also see that we can do more of smarter pricing and smarter ways how we do things in manufacturing.

So we have high ambitions for the gross margins. On people side, Mira and her team is focusing a lot of this, happy and high-performing employees generate loyal customers. You may not get Nobel prize for that, but it's really important we talk about this. Our team, we need to be happy that we need to be high performing as well. That's the combination we look for. Happy nonperformers, go somewhere else and high-performing idiots, go somewhere else. We need to be happy and high performing. That's the mix of great people we really want to find.

Female managers, we think that's an important element. We're doing good steps in that direction. We need great leaders. We have some great leaders. We have some good leaders, but we really need to lift this for the coming 5 years. We spend a lot of time to help our leaders to become even better than our. So we measure our leadership index to be greater than 85%, which we believe is world-class. And we want to make sure we have the industry's most engaged employees in our company. So these are people targets. And then on the sustainability and the planet, we look on the environmental. Here, we are quite good. We've done a lot of stuff.

So our own footprint is quite low. So we don't see a lot of other things we can do here. But we see that this sustainable procurement, how we work with our suppliers and how they do their things and further down in that value chain, there are more things to do. We work also with labor and human rights, strictly connected to this, but also the governance and ethics. We are European, Scandinavian companies. We have ethics that we want to deploy around the world, not always easy in India or in U.S. and things where we have a different culture, but we are quite strict on this. On our ethics and how we do business, that's more the Scandinavian way of how we do this.

So we keep our targets with Science Based Target. EcoVadis to become a gold rating during this period, and we have a quite busy schedule here. But this is not something we do as a nice sticker. This is important for us, and it's important for our customers. We need to keep focus on this even if in some markets, it's questioned at the moment. Manufacturing, I just want to take a few seconds to describe our strategy. We have -- if this is complexity of products and this is volume, over the last, I think, 15 years, we've been saying we want to invest and have the competence in manufacturing, but we don't have the capacity and maybe the cost level to really work with high volume.

So lower volume, high complex partner, we work with our own factories and some local partners. For higher volume, more stable product, we outsource them with our strong EMS partners that we have both in Lithuania, in U.S., in Romania, in China, Germany, around the world. So we're quite well covered here, Canada as well. And the idea is that we do in-house manufacturing for prototyping new products, high flexibility, high complexity, things that is actually quite difficult to outsource because the volume of complexity is actually too high. We keep on doing that. But for higher volume standardized product, we work with suppliers that have capacity and have the scale to drive the cost down.

But we have the capacity and the competence to be a good buyer. And I think the mix here has really proven to be a solid way of driving margins to be this combination. And we also want to be close to our customers. We have our own logistics hubs in U.S., in China, in Germany and in Sweden to be closer to customers. Most of the value-add is done here, but we will see a future where we can do more value-add configurations and software downloads and things like that on our local logistics hubs, which is also one tool we can use to manage tariffs and things like that.

All right. Last slide for me is about AI. And I just want to show -- we are just in the starting of this, but we divide our AI initiatives in 2 different buckets. Here, we talk about how to use AI inside our product. We are not there yet, but we see a lot of ideas and things how to use AI on the edge in our product to do data analysis and really operate as a machine learning algorithm inside this, also to improve user experience and configuration. And as I said before, we see already today quite much a business where we collect the data, we package the data and then bring it to the cloud and then customer deploy their AI tools. So we just enable the data for them.

So this is on product evolution. And then on operational efficiency, we see a lot of activities to do efficient coding, efficient accounting, efficient forecasting, we're deploying this. And primarily, we work mainly with the Microsoft tools here, but we can do a lot more things here. But also customer-facing things, the front end, the web page support tools, we start to use more AI in this. But this is a different thing. That's for operational efficiency. And I think for us, it's been important to segment AI activities in these 2 different buckets. So we think this is also ways for us to have better products, but also improve our operational efficiency going forward.

All right. That was a very quick review of our targets. And Thomas, Time for next person.

Thank you. Thank you very much, Staffan. Lots of interesting stuff indeed. Okay. So before the break here with some coffee, we're going to have a look at -- a closer look at our divisions and where the magic actually happens. So as Staffan mentioned, we have 3 divisions. We have the Industrial Data Solutions, which take the data from the industrial floor, lift this and make this available to different systems.

So Alex will talk about that. We have Industrial Network Technology, which is more the real-time communication on factory floors between robots, making them able to move a robot arm, for example. And then we have New Industries, which Staffan will talk about industrial communication for niche applications in vehicles or in buildings. So that's what we're going to have a closer look at now until 10:20 around that.

So with that, I'd like to hand over to our next presenter, Alexander Hess, Senior Vice President of IDS, Industrial Data Solutions. Alex, over to you.

Thank you, Thomas. So a warm welcome also from my side. Really happy to give you some insights of the IDS business. So in IDS, we do solutions to Connect, Secure, Diagnose, Visualize data in industrial applications, and I will explain a little bit more what's behind that. If we look to our customer base, Staffan already presented the few of HMS, where we have a big portion of OEMs. If we look a little bit deeper into the IDS organization, we have around about 30% of our business directly with OEMs, which is mainly machine builders. So the product is used in the cabinet and then shipped to an end user.

We do around about 10% of our business with system integrators where they put our products together. They provide a solution which goes to the end user. and we do around about 60% directly with end users. So it's a little bit different picture in IDS than for the whole group. And if we look to the market, we already mentioned a growth between 7% to 9% for IDS, what we expect in the market growth. And also there's a difference. So we have different markets, which we serve in IDS. We have the IIoT market, for example, where we see a higher growth, where we have also markets which are more conservative, for example, on the panel meter side, where we expect a lower growth rate. But if we combine all this together, we see a market growth of 7% to 9% for the next 5 years.

The distribution in the company. So 46% of the sales of whole HMS is going through the IDS division. And on the contribution, it will be 40% of the adjusted EBIT year-to-date. And then a little bit different picture when we come to our customers. So you see we do 2/3 of our business in U.S. That's very specific for the division. It's mainly driven by our big acquisition we took -- we did with Red Lion in U.S., where we have our strong brands, Red Lion and N-Tron. And then we have 27% of our revenue in EMEA, where we also have a strong brand and a strong recognition with Ewon, and we do 7% in APAC. So it's a real, real big part U.S. and EMEA and also a lot of potential for APAC in the future.

If we look into the value proposition, so what is IDS about? And what are the products and the value proposition inside that. So we decided to go into 5 pillars to segment our portfolio. And from the left to the right, we have products to access the machine. You have seen it in the video. So if you have a machine remotely, you want to access, you want to do some maintenance, for example. We have products there with the Cosy with our Talk2M Cloud and also now with the new Ewon Edge, Ewon Cloud to access these machines. Then in addition to the access, we have the insights. So data is really important.

So 23% of our revenue comes from products, which are called in the Insights category, where we can use, for example, the remote access already and having an addition -- yes, data, which we get out of the machine. And therefore, we have products like the Flexy. We have also products which are not using a cloud like the FlexEdge. And then we have the Netbiter as a product and also Ewon Edge, Ewon Cloud, where we can, let's say, get all the data out of the machines, and that's 23% of the revenue. And then if we get the data out of the machine, we need to visualize it as well. And there we have our visualize pillar. We have the HMIs where we can do a visualization.

We have panel meters to visualize, and that's our biggest portion of the IDS revenue with 30%. And then we have our fourth pillar, which is Connect, so these are switches. So we have unmanaged switches in the portfolio, managed switches, power over Ethernet and also media converters in this category. And last but not least, diagnose. So if you have a network, there are also errors occurs, and we have the right products to do some, yes, permanent monitoring that the errors will not occur or if you don't have a permanent monitoring, we have the diagnose tools to find out where the error is.

So that's how we move on for the next 5 years in our segmentation. So we don't -- we really focus on these 5 pillars in our offering, and we also will develop our products under these 5 categories. Where we are now? So if we look back, Staffan already mentioned, it was a bumpy road. So 2020, COVID hit us. And we had a lot of supply chain disruptions and a double effect in our business, especially in Access and Insights, where we saw that our -- where we sell most of our products through distribution and where we saw the demand is going up and up and up.

And this was caused by the end users on the one side. They had a need of, let's say, 5 devices. They put an order of 7 or 8 because just to get the devices. And then the distributor collect all the numbers together and said, I have a demand of 500, let's order 700, so it was a double effect. So we got a lot of stocking orders, especially as I said, in Access and Insights business. And then '23 onwards, this destocking started, so we had this huge backlog to work off. And yes, we have a recovery. We are now back on a normalization, I would say. So book and turn looks more normal.

And we also saw that '23 onwards, there's started to getting higher demands on cybersecurity regulations, and I will talk more about that when it comes to NIS2 CRA, for example. If you look today and onwards, '25, we see generally a positive market outlook, still with some uncertainties with the U.S. tariffs. But overall, if you look into the market, it looks positive for IDS. On the product side, yes, as we had to ensure supply chain at the beginning of the strategic period, we had to focus on redesigns and this cost us some time to develop new products at the beginning.

But besides that, after we were able to start our new developments for, yes, a next-generation product offering where we launched our Ewon Edge, Ewon Cloud, for example, beginning of this year, where we're really proud of. And for the future, we have a big, big opportunity and potential to leverage our portfolio and technology synergies to create a new, let's say, technology platform and offering for the market. And I will talk more about that in a second.

Last but not least, organization. Since January 1, we are in a divisional setup. So we have a global division with IDS. So my management team is in 5 different countries. So we are over -- operating in over 17 countries with the division. And this is in place. This is running now and really happy to see also the first positive effects there. If you talk about Win, Grow, Keep, that's really important for us. So this we established for sure in sales, and I will talk more about that. But also for us, it's important to focus our R&D efforts to spend the time on new products to win new customers and to grow customers and not to only maintain our existing portfolio.

And we also do a focus on 5 key vertical markets, which I will explain to you here. So we say in the new strategic period, we want to -- for sure, we want to have our offer brought to all markets, but we want to focus on 5 markets where we want to dig in on the sales marketing side more in detail and also then having the right products behind that. So it starts from the left with food and beverage. And here, we have our target customer base, which are OEMs. So we mainly sell our products directly to the OEMs. And there we have the Access and the Insights product portfolio fitting very well. We also, in the past, we were quite successful in food and beverage, and we really want to expand this and become even more important in that market.

Second, logistics, warehouses are growing. It's a nice growing market. Here, we want to establish a close collaboration with system integrators. So having our products in there, yes, with for Connect and for Diagnose. Then third, Energy. In the energy market, we want to go directly to the end customers, end users with our Insight and Visualize portfolio. And then there's a big portion of water and wastewater for us where we can bring in our full IDS portfolio, where we can also do really good cross-selling across all our product offering. And the same counts for oil and gas, where we have already a really strong footprint where we want to continue to focus on the system integrators also with the full portfolio.

Trends, Staffan already mentioned the trends for the group. If we look into a little bit more in depth for IDS, what does this mean for us? So the deglobalization, we have the big advantage that we have our production, for example, in New York and in Halmstad, so we can use this, and we will use this, having also the strategic partners, which is important for us. And we also have a big advantage that we have a global footprint when it comes to our sales and technical support capabilities.

And this is very important to speak the local language to be there, be in the local markets, and that's an opportunity for us, which we want to use. Increased need of automation. So I think there's a lot of talks about dark factories, so having no humans in the factory anymore. So this is a growing -- that's a big trend. And for sure, we have a perfect offering there. And with our approach of Win, Grow, we want to go directly to the customers, establish the relationship and also do cross-selling for that -- for the automation companies.

Digitalization. So we see a big potential here with our new platform, which I will explain in a second, and also the transfer and the transformation in the market towards more acceptance when it comes to annual recurring revenue. So there are new business models we can attract with. Cybersecurity in OT, so CRA compliance, we are already a forerunner with our products when it comes to have secure products. For sure, we want to use that. And we also want to leverage our ISO 27001 knowledge on that and become the first choice of Secure products within this market.

AI, when we do data, we have the data. We want to have the application interfaces towards the cloud systems to enable the use of AI and investigate in new business models around AI as well. With this said, we have 3 strategic initiatives for the next 5 years where we want to focus on. And the first initiative is our platform. So we really see a huge advantage combining the knowledge we have with our, let's say, Ewon knowledge together with the Red Lion knowledge to bring this together and develop one hardware platform, one embedded software platform with a lot of common features like device management, user management, which is always the same with one cloud infrastructure.

And to do this, we will be able to sell products for all our 3, let's say, for 3 out of the 5 pillars. So Access products, Insights products and new Visualize products will be all based on this new platform. And that's really exciting. So we see that we don't need to do double developments. We can combine a core development and we can become much faster when it comes to innovation and new product sales in the future. Second, improved service offer and capitalize on ARR. So we see already a trend in the market. So we have customers like, yes, genset companies, they sell or they rent out gensets. And they ask already why I need to invest in your devices upfront as a CapEx investment.

Can I get this as a, let's say, as a rental? And for sure, that's very interesting for us. We want to help our customers on that. And for them, they already run an ARR model with their customers, and we also can use this and can, yes, have an ARR model with them. And in addition to that, with the new platform where we have one cloud solution, device management, user management, we will be able to enable a lot of interesting features for the future, which allows us to have additional services, which are interesting for our customers, which we can then use in a way of recurrent revenue and sell in a way of recurrent revenue.

And this is also then giving the customer the choice of a CapEx or OpEx model. And also if you want to have additional services, you can opt in towards the services. Last but not least, we want to grow our key account sales and also use and enable cross-selling. So we see a huge potential already above USD 2 million in cross-selling opportunities when we have the direct access. And as Staffan said, we want to grow our distribution for sure, but we want to focus in the strategic period to even get closer to our customers, to our large customers, having a direct connection there, direct approach and be able to cross-sell towards the customers. So the share will increase in the IDS offering where we do a lot of distribution today, and we see a huge opportunity to grow that.

With this said, thank you very much. Handing over to Bartek.

Thank you, Alex. Good presentation. And now it's time to move on with INT. Industrial Network Technology. I will just grab my water.

A great pleasure to be here and tell you a little bit about what we have been doing in the last years, but as well where we are heading ahead, of course. And within INT, we are focusing on real-time communication, control and security, forming the backbone of industrial automation systems. We operate in similar market as IDS, the industrial automation market, but we have different target customers and different go-to-market. We work primarily with original equipment manufacturers, more specifically the device makers, where our solutions get tightly integrated into their devices. And from a go-to-market perspective, we have pretty long time to money.

It's pure direct sales and the business we win today start to generate revenue in 2 years when the customer release their product to the market. So looking at our customers, 85% is device makers, pure direct sales. We have pockets of products that goes towards system integrators and end users. Here, we do collaborate with IDS in the go-to-market since they have these channels established while we're working primarily on direct sales activities. If we look on the expected market growth, it's similar to IDS, around 8%. There are some geographical variances where we see that APAC and North America will have higher growth of approximately 10% within Industrial Communication, and we're going to see a slightly lower growth in the EMEA region.

From a net sales perspective, we contribute 30% to HMS Group. If we look at the adjusted EBITDA, it's slightly higher, 37%. And from a market breakdown is EMEA, our largest market, 56%; followed by APAC, more specifically, Japan and China, 27%; and the smallest market is Americas. If we look into INT's 4 main offerings, it consists of embedded gateway, safety and wireless. Embedded represents majority of our business. And here, we enable real-time communication solutions that shorten customers' time to market and R&D efforts. As Staffan said, this is what we are born out of.

We do believe that we understand this business really well, and we are seen as market leaders when it comes to embedded connectivity in the market. This follows with our gateway offerings, approximately 20% of our total portfolio, a problem solver on the factory floor, enabling industrial communication, field bus connectivity and IT connectivity, primarily targeting device makers, machine builders and system integrators. Followed by a smaller offer, safety, only 5%, pre-certified hardware and software that enables a safe communication of our bus system. This has been a really hot technology for 5, 6 years as people have been speaking about. Finally, we see this business taking off, actually driven by some regulations, safe regulations falling into force.

And lastly, wireless, still a small area within our business, 5% solving complex cable installations, which replace with wireless or enabled mobility needs. And if we are -- we think we understand this business really well, I must say, wireless is probably where we are struggling. HMS was announced as market leader within 5G and factory automation 2 years ago. It's a really hot topic. Everybody loves to speak about wireless. But when it comes to finally actually defining the solution that you will implement in your factory floor, you go for cable because that has been working for 20 years.

And that probably shows how conservative our market is to adapt to new technologies. But of course, we have some more work to do here as well. If we move ahead and check on where we are now from a market perspective, pretty similar as IDS. We stepped into COVID and supply bottlenecks. We increased our lead times to 1 year on some products. That was, of course, creating a really high order intake. Then we moved into post-COVID recovery where the demand surged and are since '24 in something, which we call a normalization. I think still during quarter 1, '24, we shipped out the huge orders that customers placed back in '22. That was the last quarter we did that.

I think it's more important now to look on the order intake for INT for 3 consecutive quarters, we have a small uptick in the order intake. The market is normalizing. Customer stocks has emptied out. And what we see now is the actual consumption driven by North America, APAC, where we still see that EMEA is a little bit slow on this recovery, but of course, with a positive outlook. From a product perspective, well as well, innovation lost. The challenge we had was that our products are really tightly integrated into customer devices. So when redesigning the products due to supply issues of components or components being placed end of life was pretty challenging to actually avoid the fact that our customers would need to recertify our products.

Fantastic work done by R&D here, but the effect no time for working on new products. Despite this, we managed to release a new generation of gateways to the market, received very successfully during COVID. And even more important, right now, are we working on a new embedded offering. This is a new platform we're going to use in our future products, which is hardware and software decouple. This will give us the opportunity to offer our communication solutions on several hardwares, fulfilling customer needs of resilience, which is on every customer's agenda post-COVID, but it will also give us opportunity to deliver industrial communication solution as a software for the future.

And from an organizational perspective, it's really nice to have this divisional structure in place and have an organization that focus on device makers, which is slightly different than hunting for a quarterly quota. We have this design win process with pretty long time to money. We have a new management team in place, understand this business where we create a focus. Of course, as Alex said, we can grow, keep in sales, but equally important in R&D. We have really heavy product road maps ahead of us, and we need to make sure that we allocate the right time for the products for the future.

And lastly, we are restarting in this division structure our operations in Americas, and I will come back to that shortly. Staffan presented a couple of trends. They have an impact or opportunities for IDS and some different opportunities for INT as well. Let me walk you through on those. When it comes to the globalization, we have historically in China been very successful in targeting customers in China that target the Western world with their products. Now it's time to expand this strategy with an in China for China strategy for some selected vertical pockets.

Resilience is on everybody's agenda as well, of course, our new hardware software decoupled platform will open up several opportunities here. If we look at increased need of automation, of course, more and more devices are getting connected on the factory floor. We're going to expand our embedded offering here towards large and excel customers, which I will come back to shortly as well. But even more important, the networks are now getting quite complex.

Today, you don't only have the control data on the network, you have IT security features that need to run on the network in parallel. On top of that, there is a third layer coming in with security regulations, security certification on the network. This is getting complex, and we start to see a behavior on the customer side that they prefer to buy an industrial communication solution instead of building it on their own.

Moving on to digitalization. This drives the hardware/software decoupling trend, opening up opportunities for software offers, but as well for us, the capabilities to upgrade customers' products with features upgrades by upselling software upgrades to them. Cybersecurity and OT, that will -- we have touched that quite much. That will become a hygiene factor. I mean we need to be compliant to all regulations. And of course, AI will be very important ahead. We need to make sure that we have capabilities in our products where customers can execute their AI engines or machine learning softwares.

But we will also try to take advantage of the great AI tools on the market and reduce the complexity we have in our in-design journey when the customer integrates their product into their devices by creating a no-code environment, meeting the needs of modern engineers on the factory floor. But wrapping this up, I think there are 3 elements here. Customers are facing resource constraints, networks are getting really complex, and there is a regulatory uncertainty in the market. These 3 elements together open up great opportunities for INT for the future 5 years ahead.

With that said, let's look into our top 3 strategic initiatives ahead. First of all, new embedded offering to expand the addressable market. And what you see in the screen here is some matrix how we, on a high level, segment the industrial communication device maker market. We have small, medium, large and XL customers. This is not in terms of how big the companies are. It's in terms of how many devices with industrial communication solutions they bring to the market annually. And on the Y-axis, you see how expensive these devices are that the customers bring to the market.

So the small and medium customers, they tend to be pretty niche players in the factory automation market, which is a little bit more expensive devices, while large and XL customers, they tend to be the mainstream factory automation players. They have devices that cost probably less than EUR 100, which are networked to more expensive medium voltage drives that cost above EUR 20,000. There is, of course, a price sensitivity for industrial communication solution across this matrix as well. And the green area you see in front of you now, this is where we are playing and winning really well with our existing offering. Already next year, during quarter 1, we aim to release an offering targeting the large customer segment.

This customer has a little bit specific needs with a mandatory onboard communications interface on board, which we have in our road map. And what I didn't mention for you as well is that this pocket here with large, XL customers covers approximately 40% of annual amount of nodes that is deployed to the market annually. This is typically a little bit cheaper devices, but these devices has today capabilities to run communication as a software without any hardware. And here, we do also plan to release a new embedded software offering, tapping into new customer segment we are not doing business with today. Very interesting initiative in the coming 5 years or several strategic initiatives in this slide, the coming 5 years.

Second one is to restart and expand Americas. Unfortunately, due to historical lost focus in the previous HMS context, we are restarting from scratch in Americas in this new divisional structure with a focus on device makers. So 2026 will be a lot about reestablishing sales management, building up a sales structure, ensure that we have great Win, Grow, Keep strategy in place, identify the different pockets of opportunities that are available in this huge market and execute our go-to-market agenda properly. Of course, are we as well on the side looking for M&A candidates to expand our geographical presence faster in that region.

And lastly, slightly different initiative, retrofitting of installed automation systems. And imagine there are millions of devices today running in existing automation systems that holds tons of valuable data that the factory owners cannot get access to, to optimize their equipment. We aim to bring a product to the market that we target these customers, device owners, factory owners to enable connectivity of these legacy devices that are installed on the factory floor, allow the customers to give them access to the IT information to extract it to their IT environment and improve the efficiency of the factory or simply make that old device secure to comply with security regulations or just enable an OT network connectivity of that old device.

We're going to launch this concept under something we call connected, plug and play upon arrival, sold through e-commerce only, and we plan -- which will open up a new pocket of revenue streams for us with pretty fast time to money versus the long time to money business we're doing today with our design wins.

With that said, that's all what I had for you. And I will hand it over to Staffan, who will talk about New Industries.

Thank you, Bartek. Very exciting. All right. Hello again. So I'm back on stage talking about our smallest division, New Industries. And the reason I'm up here is that this is a collection of smaller businesses we have with the ambition to find this niche application with higher growth, higher potential, and we today have a couple of different activities. The customer base is primarily OEMs, but also system integrators and end users, and it's different for different activities here. We see a quite different type of growth here. On average, it's 8%. The vehicle communication is slower. The building automation is faster.

And today, it's 24% of revenue on the 3 different activities, also 23% of our group EBIT and the majority of the business here is in Europe. So these are businesses we have acquired, and we now try to form different synergies in this, and we have this under the umbrella in new industries. And each of these segments are run by 3 entrepreneurs. So being head of this is just a small hobby project for me. We have a German guy, Thomas running this; Spanish guy, David running this; and a Swedish business development running the OT cybersecurity. So vehicle communication consists of our Ixxat business and our PEAK business and our Owasys business, focusing on vehicle communication. That's the largest part, but still not big enough to become its own division within HMS.

Then we have our smallest business with building automation, where we see this HVAC, nice market and a little bit different. And now under the wings under New Industries, we really can focus on helping them in acquisitions and organic growth. And finally, we talk about OT cybersecurity. This is more a special project in business development, and let me talk about all these 3 activities. So 3 strategic ambitions, and let's start with vehicle communication. And this is a bit crowded. But here in vehicle communication, we aim to be the best friend of the engineers developing systems for the vehicles.

The majority of products we have is not onboard the vehicle itself. It's the tools when you develop the vehicle, when you have the aftermarket coming in for airbag crash testing and things like this. That's the communication tools around the vehicle. And there, we need to make sure that we are the best friends of the development engineer. We should be the first choice in their mind. We also have products that is onboard the vehicle, but then it's more special applications like excavator and lower volume kind of things.

And honestly, we don't want to be onboard in a personal car. It's a completely different market with a lot of different demands, and there are other companies who can serve that market. But since the market for in-vehicle networks is developing both with CAN XL and Automotive Ethernet, it's not only -- it used to be much of the control in the car with the braking and engine system and stuff like that. Now it's also the infotainment system and the networking and there's a mix of different Ethernet and CAN system in the cars.

So we put a lot of effort here on the development, on the product and making sure we have innovation and comply to this new trends we are seeing this with the ambition to create the #1 portfolio for vehicle communication engineers, quite exciting, and we see a lot of opportunity in this, even if that market is kind of especially in Germany, a little bit on the negative side at the moment, but the engineers are still there. The engineers still think about the next-generation vehicles and how to make sure they are competitive in the future.

Second initiative is about building automation. With building automation, we are coming from mainly the AC side. And AC, as you probably know, is that a lot of Asian and Japanese and now also Chinese suppliers have been really strong on this. And cooling is one of the most expensive thing for a building owner. And therefore, we see a lot of opportunities to make smarter networks that control the cooling. So we've been really successful there, a good market presence in Europe, but we're now expanding in Middle East. It's very hot, and they invest a lot in cooling. We also in U.S., we have been under-penetrated in U.S., so geographical expansion will be around Saudi and the Gulf states, and also in U.S.

And we're also seeing more of hybrid applications that there's also -- in Germany, it used to be a gas market for heating. Now this cooling and heating, heat pumps is coming in, and we're also working with some of the companies to go into more of this heat pump. And it's not more -- it's not for private homes, it's much more for commercial systems where you have buildings like this. That's where you want a system to make sure that you manage different rooms if there are people in the room and things like that. So we think that we have a good market here, and we also see opportunities for acquisitions here. We are quite small, and there's others quite small local players, and we think there's an opportunity to do more things here in the coming years.

And finally, cybersecurity. In OT, operational technology, we see that 86% is the increase of cyberattacks in manufacturing. And this used to be just having different system, and it was so obscure the systems that were used in manufacturing, so it was difficult to hack. Now it's much more Ethernet and WiFi and the kind of system are used since the last 10, 15 years. So it's also more vulnerable. And we see that a lot of our customers are really focusing on this, but also regulation is coming in, CRA, Cyber Resilience Act European, NIS2 is coming and some other specific regulations that machine builders and factory owners need to comply to.

And we've done some test projects. We have a special team here working on talking to customers what they need. We have like firewalls for segmenting your OT networks on the factory floor and things like this that we haven't fully got it yet. So we have a small team working with this. We have some good products. But when we meet customers, say, okay, we can buy your product, but we have a bigger problem. Can't you just hold our hand because we need to do something big about analyzing, we need consultants and these kind of things. And we are -- we sell a product, and we need to have a better strategy. So we're working hard now to see what is the future here.

The market is there. Our customers have a need, but we need to find the right match because the product we have today, nothing wrong with them, but we need to take something bigger to really make sure that we are successful here. So this is -- we see this more as a business development project for the next 1, 2 years before we can scale it up, but we think this is a market for the future.

So this is shortly about New Industries. It's quite small for us, but also a greenhouse for some new innovation, and we also see some potential acquisitions to bring in some small activities here. So this is done in a little bit different way when the structured way of this great 2 large divisions we have with INT and IDS.

All right, Thomas. This is my last slide for this moment. So over to you.

Thank you. Thanks to all the presenters for the divisions. So we're going to have a short break, some coffee for you here and take the chance to talk to the presenters during the break. We will meet back here at 10:40. So see you back soon.

[Break]

Okay, everyone. Welcome back, and welcome back to you guys joining on the webcast as well. So we've listened to the business side, our divisions and what they do. So now it's time to look into the financials. And we have our CFO, Joakim Nideborn with us here to talk us through that. So welcome, Joakim.

All right. Thanks a lot, Thomas. Great to be back here. I think, we were 2 years ago, last time we here presented 2023 target update and now we're evaluating the strategic period, 2020 to 2025. I will talk about 3 things. I will have a short trading update. I think everybody is curious to hear that. And then I will look into the last 5 years, what happened between 2020 and 2025. And then finally, I will also wrap up this whole thing with going through the financial targets once more and also summarize what my colleagues just said before.

But let's look at the trading update first from September, and we're now 2 months into the third quarter, so 1 month remaining. And I can start by saying that what we said in the Q2 report in the outlook for the rest of the year, seems to be developing pretty much in that way.

Starting to talk a little bit about the order intake, how the market has been performing. Our 2 main markets, U.S. and Germany, slightly improving. And it's maybe not a big surprise to the U.S. market. It's been a good momentum throughout the year. For Germany, we're quite happy to see an improvement, not a lot, but moving in the right direction, and we're getting some more comfort underway with some macro numbers that this seems to be on the right track.

A little bit surprising where the rest of the European Union is slightly down in terms of orders. It could also be that we're now in the middle of the vacation period in August, so that's normally a little bit weaker for us. So in comparison with what we saw in Q1, Q2 slightly down.

Japan, also an important market, especially within INT. Here, we are also seeing a small decline, and we have a couple of big customers in Japan that tend to place pretty big orders. When that happens, you tend to have a good month and also could be a good quarter even with those bigger orders. We haven't received any of those yet in the third quarter. So that could be part of the explanation why we're seeing a little bit weaker development in Japan. China has been developing very well for us over the last 12, 18 months, and we continue to see a solid development and pretty much in line with what we've seen over the last period.

Let me then mention a couple of things more on the operations side, what we are seeing. We reported in Q2 that we have a backlog -- or we had a backlog of SEK 15 million from the ERP go-live in the U.S. So we're now finally in the same ERP system with the big Red Lion acquisition and the rest of the company. That backlog, we have now more or less managed to push out the whole thing in Q3. There might be a little bit remaining that we're going to probably handle in September. So that's positive. We also reported on price increases that we needed to get through the price increases to cover the tariff impact. We were suffering a bit on the gross margin in Q2 from tariff impact.

And now we can see that those price increases that we pushed out in the second quarter are actually getting effect. So this is positive for the gross margin. And we should -- if our calculations are right, for the remaining of the year, we should be covering the tariff impact fully with these price increases. That's positive to see. But all in all, the market is -- even if it's slightly improving in the main markets, it's still not a supermarket that we're seeing at the moment. So we're continuing to be careful on the OpEx side as we have been for the last 1.5 years or so. So we continue to keep OpEx under control.

I also wanted to mention our debt situation, our leverage. And I'm here showing the net debt to EBITDA adjusted for IFRS 16, so on pre-IFRS 16 basis. That's normally how we internally follow this, and I think that makes the most sense. We were high in Q4 after both the Red Lion and the PEAK acquisition within a couple of months. We've been working down from the 3.37 at year-end to 2.92 when we closed the second quarter. And for the rest of the year, we believe that we will be able to exit around 2.5 or maybe below 2.5 towards the end of the year. So I think it is very important and positive for us to see that we have a good cash flow and we managed to amortize our debt to pretty rapidly come down in leverage. So that was it for the trading update.

And even if I understand that there are probably a lot of questions around this, we would prefer to discuss the strategy going forward and the financial targets and so on. We will be back within a month with a full Q3 report, and then we can, of course, discuss all the details. So then let's have a look on 2020 to 2025. My colleagues explained what we've been up to, and let's see what that materialized in terms of results and so on. Before we look at the numbers, I have 3 assumptions that I would like to share so you understand what we are evaluating.

For sales and profitability over this period, '20 to 2025, since '25 is not yet closed, we're looking at 2025, Q2, the last 12 months, but pro forma for the PEAK-System acquisition that we made in November last year. I think this makes the most sense to have somewhat comparable what we could maybe exit the year in 2025 with. In terms of profitability on the EBIT side, when we started making these big acquisitions, we've been showing adjusted EBIT instead of reported EBIT as the main metric that we're following. And then we have also adjusted backwards through the period -- the whole period, so we're looking at adjusted EBIT every year. So it's not a reported figure that you're seeing in these numbers.

In terms of outlook, and now I'm probably tying a rope around my neck and could be hang up here. But what we see in the market is that the second half of 2025 will probably be better than the second half of 2024. We see a better momentum. So the numbers that you're seeing, it's likely that we will come in a little bit better than that. And please don't ask me more details on that statement.

So let's start with the net sales. You can see the CAGR of 18% through the period. And maybe let me first also explain what it is exactly you see in the graph. You see the dark blue, that's the organic business. The light blue is the acquisition impact of that specific year. So you have the reported figures on the top in this graph. And it also means that if we did, let's say, take 2020 when we made the acquisition of Procentec, we made at 1st of October, so we have 1 quarter in 2020 and the rest of the full year effect, you see the light blue in 2021, the remaining 3 quarters.

That's how we've been segmenting this. And again, in 2025, we also added a pro forma 2025 Q2 last 12 months, also had the pro forma. So 18% CAGR. We've been through a round of 6 -- sorry, too much, 6 acquisitions. Procentec in 2020 that is now integrated in the IDS division; we had Owasys in 2021, now part of the New Industries division; 2 small acquisitions in 2022, Global M2M, which is now our sales organization in Australia; and CSL, which is a bolt-on to the Procentec business also in the IDS division. And last year, PEAK-System into the New Industries and Red Lion being part of the IDS division.

My colleagues talked before about what's been happening throughout this period. And just to summarize what they said, in 2021 and '22, we had this pretty big boost in order intake from the component shortage, people were stocking up. That then led to sort of a boost in net sales during '22 and '23, with '23 being a fantastic year for us at over SEK 3 billion in sales. But then you saw pretty quickly in 2024, a big reduction, as you see in the dark blue here down to SEK 2.2 billion, where we saw this destocking coming into effect pretty rapidly. And I mean, the whole industry has been through this.

I think we saw it in a larger amplitude than some of our competitors and peers in the industry. We've been through this many times before, but I wanted you to have the full story. Sometimes when you look in the -- just look at the quarter-by-quarter, you don't really see the full picture, and I think it makes sense to reflect back what's actually happened. So destocking in 2024, Bartek and Alex talked about, we see now the market coming back more to normal in 2025, and we can grow from where we were. We said that we will grow half of the top line with M&A. We've done it for sure even more, SEK 1.6 billion in total acquired net sales looking at the time of the acquisition.

I would like to come back to the organic growth at the end of the year when we've seen how everything has fully played out. It's a bit difficult at the moment to make the right analysis on this. FX has been -- it was a big part of the growth during a period, and now it's come down. So it's still something, but it's not super material. But we'll come back to organic growth when we present the Q4 report, and we can see exactly how this has played out.

Then over to my own favorite KPI, gross margin, which I think is super important. And I'm going to take you through the story of what's happened also throughout the period. And before we start looking at what happened, I just want to say that before this strategic period, we were around 60%, 61% for a pretty long time, and we struggled to improve it. In 2020, we did some really good things during COVID. We managed to consolidate some suppliers, consolidate some EMSs make some selective price increases here and there to become a better business. And we saw in 2020, we're up to 62%. In 2021, we saw a great first year.

We're doing more than 64% in gross margin. But then like midyear, something happened. It was a major increase in costs from our semi suppliers. So we saw a 10% price increase more or less overnight. We were sitting with a huge backlog, much larger than normal, given the boosted orders, and it took quite a long time to get the price increases through to the market, which we saw during the second half of 2022. We're starting to see the effect of the price increases. We're coming back to the 64%. And then in 2023, we had sort of a perfect year. FX was with us, volume was with us. The mix was good, price increases were through, and we managed to get to 65% gross margin. Maybe a little bit boosted with all those conditions, but we saw that it was moving in the right direction.

And then it looks dramatic again for 2024 with a big drop. And it's pretty easy to explain. We made the acquisition of Red Lion coming in beginning of Q2 with margins of 57% at the time when we acquired it. So of course, this diluted, with such a big acquisition, 1/3 of the total business, of course, this had an impact. And then we made the PEAK acquisition in November and also with slightly lower margins, just below 60%, also further diluted this a little bit. So the 62.6% in 2024 is not that we have made something very much differently. It's the mix that is of the companies that have come to this.

And now we are, of course, determined to improve the margins in Red Lion and in PEAK, and we're seeing that journey starting now in 2025 or in this 12-month period. There's only 2 quarters that are new, but we're seeing the development in the right pace. And I will also talk a bit more what we've been doing in those acquisitions shortly. But all in all, you can say when you look at this, yes, well, it's been a bit of a bumpy road where the macro situation has been changing. And I think we've been doing a pretty good job to improve this. Staffan mentioned before that we are going towards a target to reach 65% over time in gross margin, the ARR transfer of the business model will be one important thing to get there.

All right. Let's look at the profitability. So here, I show an adjusted EBIT throughout this whole period. We can first see that we had a CAGR of 21%, so growing a little bit faster than the revenues. We had -- 2 years ago when we were here, we set first a target of 20% EBIT back in 2020. And that was also a higher level than what we had been on before.

And in 2023 with 2 really good years with 27% and 26% margin, we figured we probably should increase this, and we set a new target to '25. And of course, then the next year miss it.

I don't think it's very strange that we missed it in 2024. You saw before when we looked at the sales was a pretty massive drop in sales. So all in all, to be able to stay at 22% with that drop, we think was a pretty good job at with those conditions. You can also see that we have grown about SEK 500 million in terms of money in this period, out of which, 70% comes from M&A. So it's been a good journey not only when we made acquisitions. It's been a good journey afterwards that I will show you on also in the next slide.

And I think a big part to why we have managed also to improve is that we managed to improve the acquisitions. So I've been getting a lot of questions before this session. Will we get an update on Red Lion, what's happening with Red Lion. How you've been developing that. And as you know, Red Lion is an integrated part of IDS. So first of all, it's not super easy for me to get the numbers out, what is Red Lion actually stand-alone. And also, we don't necessarily follow it that way.

So I'm going to give you a onetime analysis what happened with Red Lion for the first 15 months, what have we done? If we start with net sales, it looks pretty bad. What we look at here is the last 12 months from Q2 2025 compared to the last 12 months in the period before. So we're down 17% reported. If I take away FX, we're down to 11%. So why is that? Some of you might remember that when we announced the acquisition, we said that the numbers that you see for Red Lion is boosted by probably SEK 100 million. It was SEK 1.2 billion, if I talk in SEK in revenue at the time of the acquisition, out of which SEK 100 million was boosted.

I think for short; it was SEK 100 million, maybe a little bit more in retrospect. And then we also have the currency effects on top, which you also have been impacting this. So was it then a bad business that we bought to do by that at the wrong time? I think what kind of proves what I said is if you look at order intake, which has been moving in completely a different direction, where we're up 12% reported or 15%, if I take away the FX effect.

So the situation here was really the second half of 2023, Red Lion was delivering out a lot from the backlog orders they received just as HMS before received during '21, '22. And obviously, then the order intake was pretty bad since the orders were already in the book. So I think these 2 figures together, cash show that this is how it's really been and not a lot of things that we can do about, but these dynamics.

If we then have a look on the gross margin, we've actually managed to do a couple of things. We have been through the whole distributor setup, reviewing different discounts. The distributor who has been investing in us, have maintained a good margin or a good discount, the ones who have not have been put in a different category with a lower margin or lower discount. And then if they want to get back to a good discount, they need to show that they are investing. We've been doing the first phase of investments in manufacturing facility, looking over some sourcing contracts, and we managed to improve this gross margin from 57% when we acquired it. And then I've adjusted this 57%. So it's per HMS accounting principles and have taken away all spot purchases that we had.

So it was actually lower but adjusted 57% and now it's more 60%. So that, we're very happy with that work, and we think that there is a little bit more to do here as well.

On the OpEx side, we have managed to reduce this by 6%. And then it's, of course, a salary revision in this. So without that, it would have been a higher number. What we've done here is to consolidate some back-office functions, HR, finance, IT, integrated, sales, we've been doing a pretty big job to get the sales organizations together. I'll come back to that shortly. We've also taken away more or less a whole layer of management and really trying to find the individuals that contribute most in right positions.

The adjusted EBIT margin has improved by 4 percentage points. So when we started the period, we were around 19%, 20%. We're now around 23%, in line with more or less the rest of the business, not yet at a 25% target. I think we also said that over time, we want to get this company also to 25% is for the rest of the group. And I think we're on a good track, a little bit more work to be done, and we look forward to discuss that next time and see if we get it the whole way.

Alex mentioned that we have SEK 2 million now of cross-selling opportunities. So we set the new ERP and CRM system live in June this year. So now you can say that the sales organization is fully integrated, working in the sales tools, working with the same customer base, and now we can actually measure what's happening. So difficult for us to mention exactly what has happened in the past, but now we have full control of this, and we can see is that we have this SEK 2 million since June, we have consolidated this SEK 2 million in opportunities.

A little bit, we already managed to convert, no super big money, but this will also be something that will be interesting to evaluate a year or 2 from now. So what have we done? I think I mentioned most of it. Integration is more or less finalized. Sales organization has been maybe the biggest part. Alex presented also the common product platform that we're going to have for the future to develop our products that will gain us some time to market for sure. So that's very positive that we take the knowledge from the different parts of the business. This is, of course, quite difficult, and it will take some time to get this fully fixed, but it's a good initiative.

We've done the first phase of investments in the manufacturing. The second phase will be in place during the second half of 2025. And if we just look on the integration cost follow-up, I want to be transparent with this as well. We said when we announced the acquisition that we would spend SEK 100 million on the integration. We said SEK 30 million in OpEx, SEK 70 million on CapEx. So far, we've spent SEK 50 million on OpEx and only SEK 10 million on CapEx. So why is that?

The main thing why we have our overspending in OpEx is that we -- when we made a plan, we were planning to take the CRM project as a CapEx investment. Now we didn't do that. We've been taking that over the P&L, which pretty much makes up the difference. So if I take that away and put it back into CapEx, we would be pretty much spot on here. And remaining, we say we have 40% in CapEx. So we actually expect to end up at 100% as we said.

And what we're doing, I think we're getting a bit more for the money here than what we had expected to. In the remaining investments, we are also giving the tariff situation, building out capacity in the manufacturing facility in the U.S. to be able to move some of the products over that is now manufactured in Europe to have a better tariff situation simply.

So we're taking that -- building that buffer as well when we do this change. And the investments we've been taking, setting up the same ERP using the same equipment is making that possible.

So I think all in all, we are not going to give another update like this. But I think now you've seen that what we've done so far seems to have been working out somewhat. And going forward, we expect to see the top line become even better, and we hope that there is a little bit to do on the margin side as well.

Let's also take our other big acquisition PEAK-System that we made 8 months ago. Of course, a little bit less time to work with this, completely different journey in terms of how the market has been. Here, we had a pretty good development with a 7% reported growth actually 10%, if you were to adjust with constant currencies and order intake in a similar manner. So the business is performing quite well, even if I think we were, and I know some of you were a bit worried that this was pretty heavy towards the automotive industry, which hasn't been the best also with a big Europe focus. But it's been tracking on quite well. We have managed also to improve gross margin by 2 percentage points.

Same reasoning here that we have restated for our own accounting principles at the -- at the time of the acquisition. What we have been doing is that we've been outsourcing some of the high runners for global EMS contracts to gain a little bit cost advantage. And also, we've been looking into the pricing.

We believe that PEAK was maybe a bit defensive on pricing to previous years when there was a market where it could actually increase the prices. So we're pushing some price increases. And even in a short period of time, we see a little bit of effect of this.

In terms of OpEx, it's been growing roughly with sales. We have salary increases in. We have a few selective investments in management positions to continue to invest in the business. This was a pretty small organization to start with. So not a lot of things that we could take away, we've been investing slightly. And then the EBIT margin has improved. This was on a very high level before almost at the 30% level. So always difficult to continue to increase the margins on those levels. But we're super happy with the development so far within PEAK.

We have now cross-selling opportunities of EUR 0.5 million. Some of that has already materialized, and we're quite positive that we'll manage to materialize the rest of this during next year. So whatever -- we are we in the process? Well, integration is progressing pretty much as planned. We're not through everything. We're through a big part of it. We've been having common partner days, and collaborate in sales, trying to cross-list products with our different partners.

And the big thing here is also the portfolio harmonization between the previous Ixxat brand and the PEAK brand, the vehicle division, main pieces to have one common road map going forward. And we're in the middle of that work as we speak.

Yes. So pretty much as planned, and we have to be happy with it. Then we have -- if we continue the profitability earnings per share. Here, you have a growth of 16%. The reason it's a little bit lower than on the EBIT side is that we had this dilution from the Red Lion acquisition, 7% dilution on this. And here, we also have adjusted the figures backwards. So it's all adjusted in this graph. The reason why we're looking at adjusted, maybe it's given, but I'm going to say it anyway, so with the big acquisitions, we have a lot of amortization of excess values, and we think it gives the wrong impression to not adjust for those excess values on the amortization of excess value. So that's why we've been doing this to give a fair dividend to our owners.

I've also wanted to speak a little bit about cash conversion. The same story as we've been discussing before, it goes through the cash conversion as well. So here you see the cash flow from operations in the bars and then the line shows the cash conversion versus EBITDA. So in the beginning of this period, you saw that we were around 92%, 93%, and this was -- when we had this really high demand, rapid order intake increase, a lot of deliveries that our customers wanted to get out. So we're really decreasing safety stocks. And everybody was paying us very well on time. So very good for the cash conversion.

During '22, '23 kind of the opposite situation. We had a huge buildup of inventory. We also needed to stock up as everyone else to be able to deliver. And this, of course, impacted cash conversion to 57% to 59% in this period. And then we're starting to approach something that is a little bit more normal. We had 74% in 2024, when we started this inventory normalization. And this year, we had a really good cash conversion as well with 85% so far since we have managed -- the main thing is that we managed to decrease our inventory.

So over time, when I do the math, I think that we will be around some 75% on cash conversion. I think that if you would look at the average for this period, that's pretty much what you would get. It will always be a little bit bumpy like this when things happen in the market, but 75% is pretty much what you can expect.

And then we have, again, the story with the acquisitions, looking at the leverage. I talked a bit about it in the trading update. And now I actually show reported figures to be fair. And we saw then the big increase in 2024. The smaller acquisitions we made hasn't really put us in a tough spot at any point. And now we're at the SEK 3.4 billion in 2024. And as I said before, it was important for us that we show that we can continue to come down, and we're positive that we can get to this SEK 2.5 billion at the end of this year.

So then we've been through the whole financial period. And my last slide on this is just how did it play out against the target then? So we started at just short of SEK 1.5 billion in 2020, and now the last 12 months from Q2, just about SEK 3.4 billion, so above the SEK 5 billion target, 114% growth so far and expect it to be a little bit better when we close the year.

On the profitability side, we had a 20% target. So we're being nice to ourselves and evaluating towards the original target. And even if I would take the adjusted target, I think we will be doing quite well given the top line is performing so good. We're going to beat that as well with SEK 800-plus million versus SEK 628 million and more than 160% increase.

So I think that -- that's good to when we now enter into new strategic period to see that, okay, we actually managed to do what we were set out to do in this period. And it's good to show you, it's also good to be able to show our organization that we managed to set targets and deliver on it.

Before I hand over to Thomas to start the Q&A session, I just want to conclude what we have said. And starting with the targets. Staffan has already presented this. I'm going to stay on one specific topic here, and that's the profitability target, where we say 25% EBITDA before it was 25% of an adjusted EBIT. So what are we doing here? Are we trying to move up the P&L? I would say, no, that's not what we're trying to do. Actually, a little bit the opposite.

What we would like to do is when we continue to make bigger acquisitions, we will have those amortization of the excess values, and we don't believe it's fair to evaluate the ongoing business on that metric. So that's why move to EBITDA, we take away the burden of the amortization, but we keep in the amortization of other intangibles. For us, is especially capitalized R&D, which is -- could be a big portion. So that we still need to own, and then just get rid of this other thing.

What we're also doing is in the adjusted figure before, we've had integration costs, transaction costs, restructuring costs, I know that's not always easy to follow exactly what is what. So that is now gone from the EBITDA. This is clean. If we have integration costs, it will be included in the EBITDA. Then we might report to you what it is separately, so you know but we're excluding it from the target level.

So all in all, I think we're making it easier, cleaner to follow. That's the ambition, and we're not trying to make it easier for ourselves. I think I commented already on why we have adjusted EPS is the same reason as a dividend interval between 30% to 50%.

All right. Let's conclude the strategy then. So if you're going to remember something, I think these are the things to remember. First, we talk about the product offering and go-to-market business models, so portfolio evolution will be super important for the coming period. We heard Alex talking about it a bit of a lost time to do some retrofitting and adapting to new components for us and for our peers. It's been the same. So now we really want to improve the portfolio that we had, and you saw some of the plans, how we're going to do that.

So our plan here is to more than 50% of the organic growth that we deliver in the strategic period should come from new products. Staffan talked about AI, how it's important to both integrate in our offering, but also to use to make our business more efficient and difficult to find a good metric to this, but the plan is that when we close this period in 2030, we believe that we will have several AI tools implemented in the strategy. And of course, we will keep you updated on the way how this is playing out.

To move something as very concrete on the business model. Annual recurring revenue should be 10% of the sales, and we'll fill the offer with more value for more service offerings for our customers. And that should then enable this change from 2%, 3% that we have today. We've been talking about proximity to customers that we want to be as close to our customers as possible. And then, especially if we're going to now do business with some of the larger customers, we saw both in IDS and INT, we're working towards some of the larger customers as well. We need to have a direct relationship. So the business model shift and the relation to larger customers will also lead us to get to direct sales of 55% instead of 43% as we have today.

And then finally, on this side, the M&A part, we believe that somewhere around 50-50 organic and M&A will be the recipe to reach the SEK 7.5 billion in 2020 -- 2030.

Then let's look a bit more internally, how do we work in order to achieve this. Staffan talked a lot about company culture, how we would like our employees to be happy and high-performing employees, generate loyal customers, how we measure this is with employee engagement index. It's a new metric for us. And we're today somewhere around 70, 74 and the target is to get even better to 80. This is a really high priority for us and a key ingredient in recipe to achieve the growth targets.

To enable our employees to be better, we need to invest -- continue to invest in our leaders that will show the way how this is going to be done. We run different programs and sessions with our leaders to make sure that this happens. And we've set in leadership index target of above 85 which is slightly higher than where we are today.

You've heard win, grow, keep many times today, and it's because it's -- we think that is going to be such an important thing to really get the sales management super crisp to have focus on winning new customers to develop the customers that we can develop and cross-sell. And how we're going to measure this is with the amount of new customers in the last 24 months, how much did they generate in sales for the last 12 months. Target here is 6% of sales in the last 12 months. We're currently today at half of that. So it's going to be a big change and a key thing to get us there.

And finally, we would, of course, like to be more efficient in the business as we have. We always strive to become better. And we're implementing various tools. Now we just invested a lot of money in the common ERP system, and we're looking for different AI tools as well to become better in all the things we do and how we'll measure this is, hopefully, we'll see an OpEx growing in a slower pace than what the top line is growing.

Thomas, that was all for me and...

Good timing.

Yes. Sometimes you make it...

Something in essence. Thank you very much. Okay. So we are going to open up for some questions and answers both from the room here, of course, and also from the online chat call. So if we could have all the presenters up on stage here, and we can -- we have Sandra here in the room taking any questions you may have. [Operator Instructions] So yes, we have a question straight ahead here.

Joachim Gunell from DNB Carnegie. So we've talked a bit about how behavioral and technological shifts that tend to take some time in your industry. And obviously, there's a lot to be excited about over the coming 5 years. But given the new, call it, the divisional focus and your venture into slightly new areas, do you envision any sort of transformational shifts when it comes to technology in either parts of your divisions?

Alex, Bartek, would you say?

Yes, maybe I can start for IDS. So when we look into these 5 pillars, which I presented, I think they will be relevant in 5 years as they are relevant today. Within the pillars, there is a shift, let's say, more the ability to use ARR, for example, AI plays a bigger role. There will be some elements which are changing but the, let's say, pillars of access insights, visualized connect and diagnosed, they will be relevant for the next 5 years.

And secondly, just to follow up, your ambition seems to be on an organic basis to essentially grow in line with the market across your different segments? And -- so perhaps if you can comment a bit about, okay, at the market share numbers you provided, which perhaps does not optically look that high. Do you still consider yourself the clear dominant market leader in a very fragmented market? Or who do you really see as the main competitors? And are there any shifts here in regards to where HMS was 5 years ago?

Yes. So also answering for IDS. There's not one competitor for whole IDS. So it's really in the segments. You have competitors for access. You have competitors for visualized, for panel meters, for example, the same for diagnosed, and they are totally different. So there's not one big competitor, which has the same offer than we have. That's a real advantage for us, which enables us to do cross-selling while the competitors are focused on that segment. So one competitor is doing remote access, for example, another is doing switches, and they are not doing both.

And for sure, there in the niches. We want to keep our marketplace where we are. We want to do what I've presented this technology shift, which will enable us, especially during the strategic period in the long run to be much faster when it comes to new product releases, which will give us a really nice boost also 2030 onwards.

Right. Bartek, do you want to also elaborate on that?

My perspective I think the competitive landscape looks similar, but I think will change over the coming years as Staffan touched a bit, the INT landscape consists of few players competing with HMS or INT, then we have a bunch of fragmented technology providers, chip providers, where a customer build their industrial communication solutions on their own. So I would see a trend shift ahead, I believe, where we're going to grasp a bigger portion of this business with our other peers that offer buy solutions instead of allowing customers to build them on their own.

And talk for these new industries. I think in this vehicle communication, there's one clear leader called a German company called Vector, and they are super strong, and they are almost a default when it comes to the Volkswagen Group and everything. So fighting that competitor is really, really difficult because they are so in deep with their customers, and we try to find segments where we can complement them. But there's a market where there's a clear leader, and we are among the challengers in that which is unusual for us. But -- so here, it's different markets and different positions.

I'll come back later.

I can add one more thing, Joachim. I think if I take INT, you had a question around the market share. How that seems a bit low in some areas. I think it's important to say also that now we've been -- if you take maybe INT, where we said 8% market share, we have a larger market share on the embedded business. And then we have a smaller market share on the gateways. So when you combine that addressable market to EUR 1 billion, I believe it was, right? Then -- of course, it's difficult to get into the small details actually, where are we in the different segments of that. But largely on embedded, smaller on the gateway, but all in all, it comes down to the 8%.

I think we had a question in the back of the room there.

Yes. Jesper Stugemo from Handelsbanken here. I'm just curious, you're talking about some of deglobalization et cetera, we have seen, I know that you are kind of neutral to the protocols. But if we are looking at Ethernet and fieldbuses, et cetera, we've seen a rise from Ethernet, a decline in fieldbus. Do you see a volume play and the price play here as the nodes are more expensive when you're selling into the Ethernet protocols?

For you Bartek, maybe?

Yes. I mean it depends on the target customer. It depends on who that actually will integrate an industrial communication solution. The price range between fieldbuses and industrial Ethernet, that is not different. Ethernet is taking more and more market share in the market. I would rather say the price sensitivity depends on which volume segments of device makers that we are targeting and what the price acceptance for industrial communications solution are for that specific device.

Good. And another question from the room here.

Yes. Erik Larsson, SEB. On M&A, I have a couple of questions, and I think the answer might be different between the divisions here, but what's your ideal call it, target in terms of either geography or product that you're looking for?

Should I go first? We have basically 3 directions. Number one is expanding our portfolio within technologies where we are standing today, focusing on factory automation, but as well into process industry. The second is to expand geographically or that's basically those 2 that we are focusing on. And there are probably less players within the INT segment than in the IDS segment, I would say.

And IDS from geographical perspective, we focus on EMEA and Americas. That's our focus area. And when it comes to, let's say, targets, they are bolt-ons to our 5 pillars, and there are companies in which fits maybe to 1 or 2 of the pillars. Okay. And then more broadly for HMS. How would you describe the competition in terms of M&A? What's your, I guess, general value proposition to sellers, why they should go with HMS and not a competitor, except for price, of course.

I think in the acquisitions we have done, maybe Red Lion was an exception, but normally, we have no competition. We meet these companies early on. PEAK was a good example, I think, they want to sell to us, and we like each other, and we shake hands and we do the deal. With Red Lion, it was larger. That was more of a bidding scenario, but in most cases, we don't have a lot of competition. And to complement us, I think there are 3 things that we see as knows. We really want to invest in companies who are profitable, so the people who haven't made it themselves we will not buy them. They need to make money themselves.

Secondly, I think it's important that they have an organization. If there's only one founder, an entrepreneur, these entrepreneurs, they are difficult to deal with. We need to have somebody that need to be more managers in that company as well. Otherwise, they are too small. And third, they need to have a culture that is relevant for us. So these are the 3 things we really look for. And if we don't feel that these 3 are okay, we walk away. That's very important for us because otherwise, we tried sometimes to buy companies cheap who don't make money. It's not for us. We have not been successful there. So I think this goes for the M&A strategy going forward as well.

Great. If I can squeeze in a question here from the live chat. I think I'll direct it to you, Staffan. We talked about the new industry section and that we reported 45% on OEMs, 30% on system integrators and 25% for end users. If you could elaborate a little bit on the difference between vehicle communication and building automation there what the differences are when these 2 target groups.

With building automation, there's a larger portion of system integrators because we want to target the system integrators because they know the real estate owners and their systems there with vehicle communication, it's primarily OEMs that we target there. And on cybersecurity, we have a mix of -- we think that the end user is most interesting, but we also see that the machine builders and the OEMs, they also face challenges because they are asked to guarantee up times with their machines. And in this world of cyber threats, it's not easy for them to give these guarantees. So we also believe that this OEM business could be potential in cyber. So it's a mix.

I'll take one more question then I'll hand it back to the room. I think this is for Bartek and Alex, which product categories do you see the greatest potential to expand into? And how do you approach finding synergies and technology development between your different business areas, both within the division and maybe also across the divisions.

I can start off on this one. Within INT, it's definitely our home turf. We are expanding towards additional customer segments. This is probably where we will enjoy highest growth ahead. In terms of finding technology synergies, I think if we look at INT, we focus strictly on core realtime communication technology stacks, if we move over to ideas, I think, Alex, you focus more on I/O connectors, edge connectors. This is a slightly different technology. If we look at the building, they have slightly different networks in the building industry, Beck, [ N-Tron ], DALI, high portion of proprietary protocols.

I think this divisional structure also shows that there are not many synergies on technology between different divisions. But of course, within the division, we have tried to have a common technology base. Do you want to add something, Alex?

Yes, for IDS. I think biggest potential for sure data is really important. So the IoT field. So our insights fields and also connectivity. We expect a bigger growth from the technology. I showed you the platform, which will support later on access, insights and visualize. So there we see a real -- a lot of synergies when it comes to, let's say, yes, same functionalities, same core functionalities, which we can support.

Anything to add from new industries there when it comes to platform technology?

I think in general, we, as a management, I mean, we did this organization to drive accountability, responsibility for sales and R&D in the divisions. And it's easy for top management here to think about synergies between the division. Let's not do that. Let's focus on each division and make them accountable for that. Same for new industries. So we try to avoid that discussion. The synergies is mainly in supply and the global supply chain and sustainability and these kind of things there. We have common platforms, but between the divisions. You guys have a cooperation on some go to market, but that's -- we try to put that on your shareholders to figure out.

Good question here from Alexander von Wachenfeldt. And he also had one more question, which we touched upon the acquisition situation and how we deal with that. But an interesting part of that, do you prefer to make fewer larger acquisitions or many more smaller ones. Can we say anything about that?

I think we -- our sweet spot right now is maybe a company with a SEK 300 million revenue, why do I say that? Normally, you don't have this problem with one guy who is one founder is running a company. You typically have an organization; you have a management team with a certain competence. It's feasible to integrate that size is not too much of a target, but still, it will build something to us. So it's worth spending the time. So that would be, if I could wish the perfect target, SEK 300 million. With that said, of course, we will look at larger and smaller.

Okay. A question from the room here.

Viktor Högberg from Danske Bank. Some -- just thinking about the margin targets. What is the -- and this is a question for you, Joakim, maybe the organic margin potential until 2030, just thinking the split here of margin dilutive M&A which keeps the margin down. And what is explained by the increased R&D investments? And also what's the timing for those R&D investments? Are they going to be linear or gradual?

So yes, good question. And I don't have a perfect business plan to show you, but we will invest a lot for the coming 2 years to get a kick start of these things that Bartek and Alex showed. The organic potential is maybe slightly higher than the 25%. I believe that with the things that we talked about improving gross margin or so and with the move to ARR will also help that move then what we have seen in the past is if we look at the target pipeline, the majority of targets are not at a 25% margin. Some are even a bit below 20%. And then it is a bit of work. It takes a bit of time to improve these companies. And sometimes you can't do a whole lot to improve it.

So I think you need to see that as a combined target with half of the growth still should be coming from M&A over this period of time. And that's why we're not increasing the target. But you're right, organically, yes, if we should say pure organic, we should probably have a slightly higher target than the 25%.

We have one more question here in front.

Simon Granath with ABG. And a question on China. I believe that I've asked about it before, but a lot have happened in the global automation market over the past 10 years. China has moved from a relatively low share of property installations to accounting for 50% of them right now, and you have the benefits of being a comparably agnostic company, not having to care too much about domestic competitors in China. What do you see about China going forward? Is it a priority to improve efforts there? Or what do you see?

If I start here, I think we mapped our business in China in first different industries. There are certain industries that is more government infused like power and energy, water, wastewater, and some other more machine building aviation for some reason, it's not so much -- it's more American planes and things like that European planes. So there are certain -- on this scale, it's how much the government is trying to control that through Chinese suppliers, and we try to find the pockets where it's further out from this government control.

And then we have our attractiveness from a Chinese perspective where we have a few, especially in IDS. We have a few products where we see very high competition in China. We have some other products, mainly in INT, where we have very little competition like the safety and some of the embedded stuff, we are quite unique. So we try to map this on this to find this less government control and more attractive. That's where we have the new China strategy to find the pockets. So we try to be a little bit selective on where we play. And to be successful there, we also work with more of local supply chain and this -- maybe Bartek, you are the best to answer that in general.

Yes. And I think I touched it in my presentation, we are looking on some pockets of opportunities in China where we're going to enable an in-China for-China strategy. And that basically means that you remove all CE mark regulations you have in Europe, and you can really optimize the product in China for China, probably also sourced in China, targeting that specific vertical. While we will continue to focus on this segments in China where they -- these customers focus on the Western world where they want to have this high-quality certified according to all regulation approved products as well. So it's 2 different strategies ahead.

And a follow-up is on M&A. Of course, an interesting topic. And I had a question both on timing and in terms of multiples because you have now introduced a new KPI, focusing more on ARR and also talking a lot about software revenues. Does this mean that multiples could come up in future acquisitions? And also regarding timing, as Joakim mentioned, the gearing is elevated versus your targets and also versus historical terms, and you are also working with lots of integration. Where are we -- when could we see an accelerated M&A pace or not even accelerated, but...

Yes. So I'll try to cover that. If we start with the timing and pace, yes, obviously, this year, we will be working towards reducing the leverage to below the top 2.5. So maybe into next year, we could be looking at something. I mean the work is continuing to build the pipelines. And now, as we talked about also before, we're now letting the divisions run their own agenda, building their own pipelines. So that work is continuing as we speak.

In terms of multiples, we -- if we -- let's say we buy a company that is partly selling recurring revenues, well, yes, the multiple will be higher. Some reason for us, it kind of -- it hurts to be up too much in double digits, we like to be 9, 10x. I think that's okay for us. It depends on the company and the growth, of course, it could also be a lower multiple, depending on what type of business we're targeting. But it can happen in cases that we will be probably mostly in IDS that will be on -- maybe into the teens in margins as well.

I think we got a question from back of the room.

Fredrik Lithell from Handelsbanken. And I have a few questions on the strategy you're working, you summarized it towards the end of your presentation, the ARR that's going to be more than 10% in 2030. Is that new -- totally new rev streams? Or is it going to be replacing traditional perpetual license revenue stream? So that is one question.

The other one is more towards direct sales. Is that part of your ambition to increase your gross margin? Is that the driver there? Or what is that?

Yes. So I will take your first question on the ARR side. So it's both. So on the one side is like this example that I mentioned, where you have a customer buying right now the products, looking forward to buy it in a different way. So we want to convert it and want to enable that. And for sure, in addition, with the new platform, we will have much more services around it, which will be additional revenue. So it will be a combination of both.

And to your second question, that was -- the question was around, sorry, i missed it.

Direct sales.

Direct sales. So there, the main focus in IDS is to enable cross-selling. So there, we see a huge advantage if we have our full portfolio. If we are direct, we can sell the full portfolio. If you have distributors, not all our distributors selling our full IDS portfolio, we have some distributors selling a part of and selling even competitive products towards the customer. So for us, it's important for the large customers to stay directly to enable this cross-selling opportunities.

Maybe I can just add on the margin side, since that was part of the question as well. Obviously, the direct channel will come with a slightly better gross margin, but also with a higher OpEx. So you can see a bit of a shift between the lines.

Just a follow-up there. I mean, if you go more towards direct, what do the system integrators say then do they feel threatened by you? So is it a conflict in between those channels?

No, I would not say the system integrator. So we have a model today where we sell through distributors. If we go to a system integrator, we would call this as a direct sale as well. So having the system integrator as a direct customer. And we want to expand also our system integrator business. So you have seen in the vertical markets 3x the main customer type or the system integrator. And there, we want to do much more.

I think we have Joachim Gunell.

Yes. Just some follow-up questions here from Joachim Gunell at DNB Carnegie. So the step-up in product releases, can -- Viktor touched upon this, but -- just can you talk about the investment needs to realize this? Do we need to see like a modernization of your IT platforms? Or will there be a lot of, call it, CapEx investments quite earlier in this period to realize this? Or are you -- will you just reap the benefits from investments already made? If you can talk a bit about that?

I can maybe talk about the timing part. And then what we expect to see is, if you look in percentage, CapEx in percentage, yes, they will be a bit higher in '26 and '27, not necessarily in money since we'll be a bigger company towards the end. So my estimate at the moment is that we'll probably see a rather flat CapEx side on the R&D. And then I think the other question is maybe for someone else.

Just whether it's -- if you think they will require like a very comprehensive modernization of your IT platforms as such? Or do you have the, call it, setup to just...

I think we'd rather talk about an evolution or what we, of course, aiming for is to reuse the hundred, thousands of hours we already have spent in R&D and evolve these IPs into new generation platform. So it's not a restart we're talking about is rather evolution of offerings into new generation platforms from where we are today.

That's helpful. And just one final question. You've done a great job in showcasing the breadth of the organization and highlighting a lot of people from the organization as such. And perhaps if you, Staffan, would comment a bit about how hungry you are to realize this 5-year plan?

Yes, I'm sure if you note, but this is quite fun. I mean I've been here for quite many years now and another 5 years. I mean, this is not so with Union planning another 5 years. This is HMS. And I must say we have a lot of fun when we have done this process, but we also feel when we talk to customers that we have good access to customers. We are, on one hand, viewed as a small innovative company but also a trustworthy company. So we are at this size, where we're small enough to be faster and more agile, but large enough to be trustworthy and have power in our investments and do this. It's fun. So I'm ready for another 5-year here.

That's encouraging.

Great. Other question from Gustav.

Gustav here from Nordea. I thought maybe just build on the ARR question we got here. Is there a risk if you go from less or customers go less direct and you go more with, I don't know, rental, could that have a negative effect on your top line here in short term, is too small?

So if we would do a shift from today to tomorrow, just say everything we do on CapEx, we changed to ARR. For sure, we would see a drop, but this will not be a step approach. It's a continuous approach over the time. So in our growth. And there, we will see a conversion. And as I said, also additional services which will enable additional revenues on the ARR side.

Okay. Perfect. And then also on the retrofit market that you touched upon a little bit. Now sort of with the importance of data and AI, et cetera, are you seeing a shift in the retrofit market that customers are willing to upgrade old sort of production facilities to higher extent today? And also, if you can just elaborate a bit on the retrofit market in your different divisions?

Yes. I can start from an INT perspective or from a regulation perspective, security is becoming really important. CRA is coming in during 2027. This would put completely different demands on factory owners, suppliers to the factory automation industry where a certain level of security need to be reached and the industry will not really afford to redesign all the products that are out there in the industry or that still are supplied into the industry.

So there -- I believe that there will be a need for retrofitting devices to upgrade existing installations to actually be compliant with the required industry standards.

Yes, I think it's the same for IDS. So we see if you take especially, let's say, the U.S. market where the factories are yes, a lot of investments are now ongoing, not only into new factories, also to upgrade the factories, and that's a huge potential for us.

Do you see that, sorry, to build on the market growth or -- do you see that sort of adding to that 8% as you see across the group? Or is that included as well?

No, it's included.

Great. I think we'll jump in with one question here from the chat. I think this is for you, Joakim. Given that your aim for long-term gross margin above 65%, do you see any potential in the EBITDA margin to surpass 25%, or is this more of an ambitious goal considering that the SEK 7.5 billion is a much larger revenue base.

I think it's a little bit -- a similar question that Viktor asked. We believe that if you were to just take away the M&A part there is maybe more potential than 25% in organic business. If we're going to continue to maintain this nice organic growth. But we believe, as we said, that it will even out with the acquisitions, will probably be in a slightly lower level, yes.

Yes. Another question here from Thomas Blikstad from Pareto Securities. The target implies an annual organic growth of around 8%, which is in line with the expected market growth. Are there any particular periods, where you see potential for stronger growth, for example, a rebound in 2026 or similar? Or is this target more an even growth target? Maybe you could touch upon that.

Yes. I wish I knew. I think it's -- the best we know for now is that it should be somewhat evenly distributed and 2026, yes. I think, yes, is any other year. It seems reasonable around that level, yes.

Okay. Correct. And we can just a comment there. The majority of our revenue is from keep customers. And of course, these are dependent on the industry cycles and stuff like that, but that's also why I want to emphasize a focus on win and grow. And we hear from Bartek, it takes 2 years from the win to make money on it. So of course, we are we need to look beyond the industry cycle sometimes to see where we're winning and growing. And then financial results will come as a consequence that maybe 1 or 2 years later. So it's important for us in the management team to work internally to see through the revenue only because we have other things to also measure that are early indicators.

Great. I'll squeeze in one more question here. I think this is for both Bartek and Alex on wireless. Could you please elaborate a bit on wireless solutions versus cable between your different business areas? Where do you see the highest demand for wireless solutions? And how do you think this will change in the coming 5 years? Maybe you could start Bartek.

Yes, that's a really good question. And as I said, this is probably also an area we are struggling. How -- what was the...

Yes. How do you see the wireless situation in the next 5 years?

In general, wireless is a great technology, and it reduce really complexity versus expensive and complex cable installations. And as far as in the cable breaks, you probably have a stop in a production cell that probably stops a large portion of the factory. So there are significant benefits of actually applying wireless replacing cables, cutting the cables, but as well, of course, in logistics where you need mobility needs.

The question is then how fast will the market adapt? When will you be ready to actually remove the cable and trust the wireless technology that it will work? This is the question we don't really have figured out yet because then you probably see much higher revenue from the wireless offering. And I don't have a good question on that.

What we, of course, see is that there are discussions that 5G will change the factory automation industry that every -- all communication will run a completely over 5G without any cables. But I cannot see that, that will happen during the next 5-year period in the conservative industry we are in.

But you're also often say that wireless is a door opener that starts with the conversation with wireless but then goes over to other products. Maybe you can elaborate on that as well.

Well, I think it's exactly what it is. It's everybody loves to speak about it. It takes a lot of time as well to speak about it. And at the end, you turn how to actually offer a wide solution.

Alex, anything you want to add there to the wireless?

I think Bartek already summarized it very well.

Perfect.

But one comment -- sorry, in IDS, we see some wireless application more on mobile application that there's a remote pump state and something like, of course, there, we have mainly 4G wireless and these kind of things. That's quite mature for that we kind of access. But inside the factory floor is quite slow. But for these remote assets, wireless been successfully deployed for 15 years, yes.

That's a good remark, isolated equipment outside of the factory, that's a different discussion inside factory that's where we have this slow movement.

Yes. And there is standard. So if you're outside like you said, Staffan, that's used since years.

Other question from Gustav.

Gustav from Nordea again. And sorry for bringing up. But the Red Lion margin, as you stated, Joakim, 23% today and you say that you aim up to 25%. Do you see that coming just from volumes rebounding? Or are you still looking to do any operational activities within?

I think we -- I also mentioned that we have done 1/3 of the investments in operations in the supply chain. And we were just a couple of weeks ago, we ordered a new SMT line, we replaced 3 very old ones that we have today. So I think the gross margin will help us apart on the way. And then with, yes, some operating leverage continue to grow the business, I think, will those things together should get us to the 25%. That's my thinking.

And then -- sorry, go ahead.

Yes. Then just one follow-up here. On the sort of data center order that you talked about in Q4, I think, Q1 and Q4, can you just elaborate a bit on your offering there and also the potential? You mentioned data centers on one slide, but it was included sort of in a group of accounting for 10%. I don't know how much does it account for today? And what's the potential?

Yes. The application we do in data centers is not the servers and the racks itself, it's the power into the data center. So for us, it's like any other industrial building more or less. And we do the network switching of the monitoring and stuff like for the power part of this. So it's related to data centers, but it's not on the floor inside, it's on the wall into the building more or less. And this is one of the applications we're seeing in IDS. Do you have any -- is that a big portion or we get some big orders, but it could be any type of building of power at small...

If you see these verticals, it's more the energy part. And then it can be a data center. It can be something else. So it's not like we said, not the data center itself. So it's the energy. And for sure, they consume a lot of energy. So that's the beauty of it.

Are you seeing this becoming sort of a standard here, a sort of a new market for you or?

Yes, we want to focus on this energy part. And there, for sure, energy for data centers is included in that.

Joachim had another question.

Yes. One just a follow-up from me. You showed in INT this matrix where you currently play in the more, call it, high-value niche applications and you want to -- with the new launches going to call it, all else equal, cheaper devices but larger volumes. So just help us understand if -- I mean, all else equal, I would assume that these customers have a very sophisticated procurement departments. And that being said, just -- I understand that you want to go after new customers, but could this in itself be a more competitive field with a different margin profile?

I don't think we are willing to trade the volume for margin. We are expanding into new growth areas, exactly what you say that the average sales price will probably be lower, but we don't expect to reduce our gross margins in this business. This is simply new pockets of opportunities and that we are playing with in today.

But the competitive dynamics, are they [indiscernible] different from where you currently are?

The competitive dynamic is probably -- these customers are probably doing quite much on their own today, but the complexity actually start to drive by behavior. I've already talked about a little bit earlier, where they see a benefit of actually buying an industrial communication solution instead.

And that's something that we've talked about ever since your IPO that the OEMs outsourcing a bit of due to increasing complexity. Can you say anything with regards to just a rough estimate how many of your OEM customers still in-source their solutions today?

It's really a fragmented market, and I don't think I will go into that discussion, okay? I will not give you a good answer on that.

But there's room to grow.

There is room to grow, yes.

Right. One question regarding ARR, that's hard to say. If you just speak in Swedish, it's even harder if Southern Sweden. ARR and if you could give an example that, I think we discussed that yesterday, Alex, with Netbiter and an example of an HMS products that can work with ARR.

Yes. I think I mentioned this with the gensets. So that's the Netbiter, for example, where you can have this as a, let's say, each genset is equipped with a Netbiter, and then they rent it out to their end users, and they charge on a monthly basis, and we will charge on a -- yes ARR base as well. That's one example. The other example where we do recurrent revenue is with our infrastructure right now. This we do already with Talk2m, where we charge for, let's say, getting the data out of the system, and doing some alarming for the system, and there are a lot of additional potentials with additional services, which we want to bring towards the market in the future where we can have a nice service offering to enable more ARR revenue.

Okay. That was all the questions from the chat. Any more questions from the room here? Yes.

Daniel Thorsson from ABG as well. On an AI-related topic, over the last 5 years, I think organic growth rate has been slightly lower than your target now for the next 5 years, you see an acceleration. But the products are hardware and also software developed in the hardware. And with AI, we will reduce cost of developing software. Is there a risk that they will emerge new competition that is causing a price headwind rather than the price tailwind we have seen in the last 5 years, which make it hard to accelerate organic growth versus the last 5 years?

Good question. I think we haven't really seen any new competitors in this field for the last 5 years, I would say -- so it seems to be quite -- but that's also dangerous when we say that. So I think we are on our lot to really monitor this. I assume that with this efficiency gains you can get with AI, maybe there are other industries that you want to break in first. So I think we are maybe not the first target, but we think that we need to stay on our focus to be more efficient ourselves to potentially meet that competition.

But we also see that -- we saw this in a couple of years ago when there's a hype around IoT and these things 5 years ago. There were some newcomers, but it was really difficult for newcomers because the traditional customers, they want somebody they can trust. And so it's not easy to be a newcomer in this industry. And with AI, we should be careful because maybe that's something that is changing the game. But so far, we haven't seen it.

Great. Any more questions from the room? Perfect. Yes, we're in good time. So with that, thank you, everyone, for attending, and especially who on the call as well. And we'll stay around for a few more minutes, if you want to talk to the presenters. Have a coffee. We have to talk. Otherwise, thanks very much for joining. Bye-bye.

Thank you.

Welcome to the HMS Networks Q2 presentation for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Staffan Dahlstrom; and CFO, Joakim Nideborn. Please go ahead.

Thank you, operator. Good morning, everybody. Welcome to this HMS Networks Q2 report. We follow the standard format we normally do. So I will start with a short business update from this eventful quarter, and then Joakim will give a financial summary and a deep dive into the numbers, and then we'll finish up with a Q&A at the end.

But let me start with a very quick overview of the mix picture we are seeing in the quarter 2 and remember that we made a big acquisition in April '24. So this also now means that the Red Lion acquisition is part of our organic growth after 12 months. So, we see a mixed picture both on net sales, where we are more or less flat. But behind this is also some currency changes and things. We also made an acquisition in last fall in Germany. So we are more or less flat, but we need to look a little bit under the hood here to see the details, and Joakim will be back on that.

Order intake, a little bit the same. We have some organic growth, but it's a bit strange to report plus 8% organic growth, but 6% in total. And this is related to currency effects. And here, we also have some impact from M&As, but we also need to show a little bit more details on this and we'll come back to it later.

We see a good development on the EBIT. So we are proving a little bit. Adjusted EBIT margin is 21.4%, slightly under our long-term target of '25, but an improvement since last year. The highlights of the quarter, at least in my book, is our very good cash flow. Cash flow of SEK 201 million for the quarter, very good improvement and this also is a good result of that we manage the company. We manage our inventory and all the cash flow items. And we have also a fairly high debt in the company. So it was very nice to see that we are maintaining a strong cash flow. And this results in a growing EPS of SEK 2.52.

I think for the year-to-date numbers, the first 6 months, this -- they look a little bit different because there, we have some acquisition effect in quarter 1 from Red Lion. So I think I will not move into these details. They are mostly old data. Too many clicks here. From 1st of January, we operate in 3 divisions. We have our largest division, IDS, Industrial Data Solutions, representing 46% of our business, focusing on industrial automation, but going towards customers for machine building, system integrators, end users, and we have a mix of direct sales, distribution sales and e-commerce. Then we have our -- well, actually original business with Anybus, Industrial Network Technology, INT, representing some 30%. And here, we also go for industrial automation, but primarily focus on device manufacturers and direct sales in our design model.

And finally, we have 24% of revenue from New Industries, which is a combination of companies or business we have, where we see good potential, but they need to grow for the future before they can be their own divisions and we have building automation and vehicle communication here.

So let me just see if I can click right this time. So for the business update, a few highlights. We will be back on the order intake. We see good growth, but there's also a currency effect and we need to look on the bridge to really understand this. And net sales is behind last year. There are some -- we see quite not perfect market, quite weak market and uncertain market conditions. We also have some smaller things that is affecting our shipments in June here, We are changing ERP system in the acquired Red Lion to be fully integrated into our systems. A lot of work and this delayed some invoicing, but it also is an important tool to make sure that we can improve our business, improve our margins and operations for the Red Lion business.

We also continue to invest in our production facility in York. The ambition here is that our manufacturing facility in Sweden and in U.S., they will be sister factories, and we can quite easily change products depending on volume and customers between these 2 as a complement to our network of EMS partners in Southeast Asia, Eastern Europe and North America.

Look on the divisions, the IDS division, stable development on order intake. And we have some delivery issues there, we are also seeing that some of the larger project orders are not coming in quarter 2. We reported this in quarter 1. That's good, but we also believe that this is one trend in the market that there's a big uncertainty. So small projects are executed, but large projects are delayed and more wait and see for these investments.

INT division. Here, we have talked a lot about inventory correction in the last couple of years. This is now more in balance. And of course, the German automotive business is not great, but still we see some positive signals from that market. It will take time before it's improving, but we see some good signs there.

New industries, our smallest division experienced some hesitant market in building automation and some headwinds in this. It's a smaller business, but there we see some, both on order and invoicing that is not great, a mixed picture, I would say. Let me just -- this is a crowded picture, but let's try to just dive into understanding the flows.

Tariff is a big topic. And our expectation was that we should have more data on this and is still quite uncertain. But if we look on the 4 elements related to U.S., first, we have manufacturing in EU, in Europe. And this represents some 15% of group revenues, and this is finished goods. We expect this to be tariffs of 10% going forward, who knows, but that is at least our assumptions.

And number two, we're manufacturing in the U.S. -- sorry, we manufacture also in Europe, sell to -- ship to U.S., but it's end destination is Canada and Mexico. And here, we can do some activities to make sure we don't get tariffs on this because it's not destinated for U.S. This is less than 5% of our group sales. We estimate this to be 10% of tariffs as well, but we have different activities there to try to mitigate that potential cost.

Number three, China and Asia, we buy some components from China and Asia to our U.S. manufacturing. And here, we expect higher tariffs and this -- who knows, but 20% is our guess, but we're also seeing some indirect cost here for U.S. suppliers that they are American companies. We buy from them, but they have part of their raw material from China. So we also see some side effects of this.

And finally, number four, we are doing some products in the U.S., and we ship to China. This is a very small piece of our business, it's less than 0.5%. So this will not really impact us. So our tariff strategy in this uncertain world is, first, short-term increase, making sure that we can increase prices to our customers to more or less cover this.

We decided to not make price increases on the order book, but we have made price increases on all new orders coming in, in the last couple of months. Midterm, of course, we have manufacturing capacity around the world. And the idea is also to make sure we invest more in the U.S. and build more capacity in U.S. to mitigate this. We expect this tariff problem to remain for the foreseeable future, but it's only our speculation.

All right. With that, I would like to move over to Joakim for our financial update.

All right. Thank you for that, Staffan. And let's dive into the order intake, which I think might need some explanation. It's a bit of a tricky quarter with a lot of currency effects, and we also have an acquisition that is with PEAK-System that we need to account for.

Maybe we start on the bottom left on that graph, and let's try to understand the percentages. So what we report is a plus 6%, SEK 816 million. And organically, this is actually 8%. And what might not be super intuitive is that the FX effect is actually larger than the acquisition effect, and that's why we have this bigger organic growth. The SEK 87 million in FX is, of course, the normal order intake affected orders received in the quarter. But it's also from a recalculation of the order book, which impacts with minus SEK 41 million.

So if you then go to the upper left graph and you look on the trend series, you see that SEK 816 million is a bit of a drop compared to previous quarters. And it's maybe not as drastic as it looks, given the currency effects here. So if you add back that SEK 41 million first, and then you also account for the high currency effects on the orders in the quarter, that will look a bit more solid, that development.

Still, it's a bit down compared to the trend we've been seeing in Q4 and Q1. And the main reason we see here is that those big project orders that we have received over Q4 and Q1 that has been very strong, we don't see the same pace of that in Q2. One reason could probably be the tariffs. And then we believe that we received a lot of those orders also in the previous quarters. So I think maybe that clarifies a little bit.

On the positive side, we can see that Europe is improving. It comes from fairly low levels, but we see continued improvement in the pace in Europe. I mean that's a significant market for us, so that's very important that we see this development. I'll come back to it when we look at the INT numbers. It's even more clear. We can also note that APAC and especially China is developing extremely well, and we're more than 30% up in this region, and China for INT is becoming a really strong market. It's surprising it is going so well, but we're happy to see that.

And if we then move over to sales, we don't see exactly the same situation. We see a more steady curve on the sales development. We reached SEK 843 million, which is pretty much flat in relationship to previous year. Organically, we're minus 5%, and we also see that the organic development is about the same as the FX effect and then the acquisition of PEAK pretty much makes up for that drop.

And here, we're also meeting a pretty good comp in Q2. A lot of the businesses, we're doing quite well. We still had some order book to deliver out for the INT part and also IDS had a pretty good quarter. We also see the effect of the go live from our ERP system. We went live on 1st of June, where we have been running a bit slow in the first couple of weeks in the U.S., which is normal. We had the same situation 2 years ago when we made a change in the big manufacturing site in Sweden. And this is something that we're going to get back on. We're back to a decent pace already, and we will recoup on this in the second half. So that's not a big worry. But the Q2 numbers is a bit lower because of this.

We also were seeing some component shortages for some of the switch products. So that's also something that we expect to solve in the second half and make up. It's not a huge volume, but that could have been a bit better on the sales side. So looking at the book-to-bill, we're at 1.01. And with a normal sales level, I think we would actually have been lower than 1 in book-to-bill. Going forward, we think that sales and orders will probably go pretty much hand-in-hand. As you've seen, we've been building some order book now for the last 3 quarters and we expect to be able to utilize that.

Now let's have a look on the different divisions. If we start with IDS, starting with order intake, we see organically, we're down 2% to SEK 382 million -- sorry, reported down 2%. Organically, we're plus 10%. So you see it's a pretty big difference here. And we have the majority of the sales here in the U.S. and in U.S. dollars. And that's, of course, why this gap is becoming so big. So all in all, I think the base business is doing quite okay. And again, remember, you see here, in Q4 and Q1, the product orders that we received, that is pushing that up a little bit. So it's maybe a little bit better than what it looks like at the first glance.

On the sales side, we are weak. We're down 14% reported. We're down 7% organic. And as I said, some of this we caused ourselves. And that is also the main reason why the adjusted EBIT is not so good, SEK 65 million and 17% margin, which is lower than where we should be. And again, we think this will be corrected over the coming quarters in the year.

Then INT, the most positive development within the divisions. We have an order intake that is up 5% reported and 15% organic. And I mentioned before, the continued recovery in Europe as the main explanation. And we also see that some of the larger accounts, that have been placing very few orders for a long time, are now starting to place some orders again, meaning that this inventory reduction period is coming to an end. And this is extremely important for us to be able to continue to show a good development here. Also on the deliveries, we reported minus 1%, SEK 269 million, but organic were actually plus 6%. So we're starting to see the trend in the right development.

And of course, there the currency situation makes it a bit difficult to compare. But all in all, this is doing fairly well. We do SEK 75 million in adjusted EBIT, a solid margin of 27.9%. And again, you see especially the development in APAC and China that is really strong, where China is almost at double levels compared to Q2 2024, which in itself maybe wasn't the best quarter. But still, this is an interesting market still for this assortment, and we see that we are still highly competitive in that region.

Then going over to New Industries. We will be facing a bit of a more tough quarter. So on the order intake side, I should also say that this is pro forma numbers, including now the PEAK-System numbers all the way also in the comparables. So you see that we are reporting 11% down on orders, 4% down on sales. On organic, this is only 4% down on orders and flat in sales. There we've been seeing a bit more hesitation and we kind of have been seeing a bit of -- especially on the building automation side, we've been seeing a trend shift from April. We're a little bit surprised that it's being that big, and we don't have any good reason other than the tariffs that has caused some hesitation in the market. And we have to wait and see if this comes back. This is, again, a little bit strange.

And also on the vehicle side, we are seeing a bit of a tougher market at the moment with the German car industry as a main driver. And I mean, all in all, we do flat in sales, so we hope that this will improve when clarity comes just on the tariff side. And also I should mention on the order side that we did have some pre-tariff orders in Q1 on the vehicle business that is causing Q1 to be a bit higher and Q2 to be a bit weaker. So if you maybe took some SEK 10 million, SEK 15 million and change from Q1 to Q2, maybe you've got a better pace, and then you would be flattish on the order intake as well.

So let's look at the profitability out of all this. And we do an adjusted EBIT of SEK 181 million, 21.4%, and I think overall, if you consider that we are down 5% in organic sales to still be able to improve the margin over Q2 last year, we need to be fairly happy with that, with what we have. It is not our best quarter, especially not on the delivery side, and that may be the main reason why we are a couple of percentage points from our EBIT target. We also have a tough situation on the gross margin, 61.8% versus 61.9%. And then you say, okay, that's not a big change. But as you might have seen, we have been a bit higher in between those periods. Q2 last year was also, for various reasons, a tough quarter on the gross margin side. So we see a bit lower margins than what we normally would expect.

Two main reasons for this. One is the tariffs where we've been seeing tariff costs coming in the quarter. And as Staffan mentioned, we did not increase prices on the order book. So we have decreased prices for new orders which caused a bit of a delay in getting that gross margin effect to balance out. So we're not too concerned about this because we're going to get it back probably from Q3 onwards already on the tariff impact. But then we also have the currency situation where we do have some impact on the cost of goods sold as well. And this is, of course, also something that probably will continue a little bit even if the euro has come up towards the last couple of weeks that might help a little bit.

If we look on the OpEx, we see, again, an organic reduction of a little bit 1% compared to last Q2. And you might also have seen that we are slightly down compared to the first quarter this year. So we are keeping OpEx pretty tight, and we really want to see that Europe really comes back in a stronger pace before we have a couple of initiatives like that, that we would like to do, but we're holding those for a little bit. And then I also want to point out that for what is worth, the net R&D is also impacting the quarter by SEK 10 million compared to second quarter 2024. So the comparison is fairly okay when we compare it to the same quarter last year.

EPS small improvement to SEK 2.52. Net financials, a bit softer than the last time. And here, we have a currency to thank for that. Also the interest base, the interests are, of course, a bit lower than it was 1 year ago.

Let's look at the cash flow that we really like, SEK 201 million. Second time, we're above SEK 200 million. And we have the decent results to thank for that. But also the reduction that we have on the inventory side that we've been talking about this before that we should continue to reduce inventory and now we made a good reduction here in the second quarter, and we think there is a little bit more to take over the last 2 quarters for the year as well. We also see that receivables are coming down. So we're doing a good work in collecting, which is extreme important when we run with a high leverage. So a bit more focus on this than we normally have, and it's good to see the results.

And then go over to the debt situation and the leverage. We're having just over SEK 2.8 billion in net debt at the moment, out of which about SEK 2.4 billion is interest bearing. And we see a reduction pretty, given the strong cash flow that we're coming down in interest-bearing debt. And it also means that we're reducing leverage, which we kind of like on these levels. We said that we're going to move to around 2.5 at the end of the year, which we still think is a good admission. And you see net debt divided by adjusted EBITDA is reported 2.97 and adjusted for pro forma from the acquisitions and pre-IFRS 16, 2.92. And here, we have the 2.92 is actually down from 3.05, 2.97 is down from 3.10 in Q1 2025. So we see a continued reduction, good to see and this makes us quite comfortable that we're going to be able to reduce this as we want.

Then to sum up before we let you ask your questions. Three things that we would like to highlight. All in all, decent organic order intake in a pretty challenging environment. We still have to say 8% organic order intake growth. The base business is developing quite solid after all. We maintained a book-to-bill of over 1% in constant currency, so we're happy with that. And then maybe the most important thing for us to see that the INT division continues to recover. Europe seems to be coming back slowly. Also, the bigger customers are placing orders. We see good development in APAC and China. And finally, I think the cash flow, it's very important to see these circumstances. And we continue doing what we should on the inventory side and converting good to the cash.

So with that, operator, would you open up for some questions?

[Operator Instructions] The next question comes from Viktor Högberg from Danske Bank.

So just thinking about your customers being a bit hesitant, tariffs and geopolitics side, you mentioned some regulations. Could you go into that, just what you're referring to? And also seem to be, and you continue to be cautiously optimistic on the full year, is that more tilted to Q4 with Q3 just slightly better? Or what do you see in terms of facing? Third question, gross margin and mix. So FX aside, what kind of mix impact do you see from recovering Anybus deliveries in negative gross margin effects, this is for the rest of the year?

I didn't get this with regulations. Viktor, what do you mean with the regulations?

If I didn't misread, I think you mentioned regulations as one thing that helps your customers back. Sorry, my bad, I missed that you talked about tariff regulations. Just regulation. So let's skip that question. Sorry about that, my bad. And let's go to the gross margin instead maybe and the phasing of the recovery that you've seen for the rest of the year.

All right, that seems to be my territory. I'll take that one. So what you might have seen, Viktor, was that the order intake was quite good on the INT side in the quarter, the sales was not that strong. So the mix effect is not that big in the quarter. And when we come down to these levels, the gap towards the PEAK and the rely on margins are not so big, so we don't have a huge effect actually on the mix as such. Looking forward, when we see those order intake is converting to sales, there might be a bit of a push down on the gross margin.

On the other side, as we mentioned, we think that the fact that we don't have an upside on the tariff price increases, but we had a full downside, that will probably more than compensate for that. And now we don't know how the future will play out. But since the euro has come up a little bit compared to where we were in the quarter, we think that could also maybe help a little bit. So I think we're quite positive towards seeing better gross margins than what we deliver in the second quarter looking forward, if I put it like that. And then you had the last question that I -- sorry, I forgot that one. Can you just repeat that?

The basis of you remaining cautiously optimistic and the phasing of it tilted towards Q4, maybe end of Q4, I would assume.

A lot comes down to at least what we believe that we need to get some clarity on how these tariffs will play out. And hopefully, we'll get that fairly soon. And I think that will probably ease up some decisions when we get that clarity. So I think the fact -- the clarity is probably more important than if it's going to be 8 or 10 or 12 for Europe to the U.S., but we need to know what -- so I think that goes for a lot of companies. So I think once we have that clarity, we probably believe that there will be a small uptick throughout the year.

All right. So we move on with more questions.

The next question comes from Erik Larsson from SEB.

I have a couple of questions. So we could continue on the gross margin side here. Is it possible to quantify the impact from the tariffs on the gross margin? Like are we talking up to a percentage point or is it less?

It's about a percentage point, yes.

Okay. And then I'm just curious if there were any material differences in order intake comparing like April to June, for instance.

It's been a pretty stable trend throughout the quarter. So no big differences.

All right. And then the final one on OpEx. I saw you had a small organic decline in OpEx. So I'm just curious about the balance here because I assume your plan is to increase costs as demand returns. But just would there be a more pessimistic scenario, can you sort of hold on to this level or even take it down further, if you must?

You want to take that one, Staffan, or should I?

I think what we've done here, we started this new organization in three divisions here from 1st January. Part of this was also to become more efficient and more customer focused. So I think what we see in the reductions we're doing, that's an effect of this new organization. If things continue as it goes, we will be a little bit hesitant to add new costs. But at the same time, we just started this new organization. We are also reluctant to cut more at the moment.

So we think we have a good organization. We need to get more traction on this. So I would expect this to be more on this level going forward. However, of course, if we see a significant drop, there's always cost to take out, but it's always a balance about short term versus long term. So right now, we have no plans for other costing changes, rather that we are waiting for an uptick and then ease a bit of the holdbacks we have.

[Operator Instructions] The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. I thought I'd just build a bit more on sort of what Erik was asking here regarding April to June. I mean, would you say that you saw a drastic change in the communication with the customer from Liberation Day then? Or how would you describe sort of the overall communication with your customers?

Yes, I think that is the beginning of this period. It's been a lot of uncertainty, and it just seemed to continue, this uncertainty. Some customers maybe get used to it, but we think the tariffs is creating a situation where smaller projects are continuing as normal, but larger projects are on hold due to this uncertainty. So we think that Liberation Day was a starting point for an increased uncertainty. But from that level, it's just been pretty much the same, I think.

Okay. Perfect. And then regarding sort of the price increases that you have implemented? Should we expect them to fully come through in Q3? Or should we expect sort of a mismatch also slightly early into Q3 as well?

I think almost everything should balance out in Q3. It might be a little bit of a gap left but no materiality in Q3.

Okay, that's clear. And then just the last one here. I mean, regarding sort of your comment on pre-ordering related to the vehicle business, as you say, some SEK 10 million to SEK 15 million here in Q1 that maybe we should have pushed into Q2 instead. But is that all the pre-ordering you have noted in Q1? Or have you gotten sort of more perspective now in Q2 that there might have been more pre-ordering elsewhere as well in Q1?

Not that we know of. And then, of course, we're not interviewing every customer exactly what they have done, but I think it's pretty -- the big difference, if you look in pace, if you take INT, it's improving. If you take IDS, then we have a couple of pretty big project orders. And if I take them out, I think the business is developing about in the same way. So I think there is no big reason for suspecting it from our perspective.

I think it's also important to add that many of these customers, they have come from the last couple of quarters with quite high inventory themselves. So even if it would make sense from a cost point of view to make some preordering, I think a lot of these customers have all said, okay, we are not wanting to build up more inventory at the moment. So we had a few customers and distributors in this vehicle communication, but beyond that, we haven't seen so much of that effect. I think it's a reluctance of customers to build inventory. That's the background there.

Perfect, that's very clear. Sorry, just one last one here. You also comment on the investments you're making in the production facilities in New York and Pennsylvania sort of scheduled to roll out here in H2. Did you say anything regarding the impact on the margin? You say it will be positive here going forward, but did it impact Q2 margins specifically?

Maybe I can take that one. So we've been -- some of the investments are in place. And as you might remember, Gustav, we've been seeing a bit of an improvement in the rely on gross margin, partly from this, but also partly from pricing and other things. And going forward, we think that we will probably not see the effects in this year. We're probably going to need the rest of the year to get everything in place.

And then from Q1 onwards, we will see. We did not say -- I kind of saw that question coming. We did not say how big the margin would improve, and I think we're going to hold that for a bit to promise too much. But of course, we see a bit of an improvement, but we'll come back when we know a bit more how everything has worked out for us.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you, operator, and thanks, everyone, for attending this quarter 2. We will work hard in the coming quarters to make sure that we get back on growth, but let's also hope that the market uncertainty becomes a little bit more clear going forward. And both me and Joakim would like to wish you a very nice summer and look forward to be back here for the next quarter. Thank you. Goodbye.