Teqnion Aktie

Good morning, everyone, and welcome to Teqnion 2026 Q1 Report. Thank you all for joining us today. And we will, during the next hour or so, try to give you as much information as possible for you to understand your business better. We will, as always, be alternating between Q&A e-mail questions and the questions that you can ask live, which you can see in the bar in Teams. Before we jump into the Q&A, I would like to say a few words. First of all, I would like to acknowledge that the last couple of years have been challenging for everyone owning Teqnion, mainly for 2 reasons: financials and lawsuit. So let me just unpack that a little bit to provide you with a little bit more insight of how we think about this and where we are. So starting with the financial results. While we have made a profit and have had positive cash flow for every year since the financial crisis, the levels during the 2024 and 2025 period have, of course, been lower than what we want and what you would expect.

During especially 2025, we implemented different strategies. We introduced new processes, systems and more importantly, we found better operators. And I believe the financial results during the last 3 quarters have reflected those efforts. I would also like to give some insight on the 3 pieces of the business that we have been speaking a little bit about the acquisition, the part that works and the part that needs fixing. When it comes to the acquisition, during the first quarter, we have, in total, added 3 new businesses in the group. We have, during the last year or so, acquired roughly 10 companies, which is a record high. The quantity is, of course, less important. The quality is what matters. And what you have probably seen in the numbers, this group of companies have significantly lifted the average of our group. While we don't give any forecast, I would like to say that the pipeline looks very healthy and maybe better than ever.

The part that works, the companies that tracks along and are growing as we want them to, there's really not much to say about them. They're just chugging along, and that's how it should be. Hopefully, you'll hear more about that in the future. And lastly, the part that doesn't work, the part that we don't really like. I'm happy to say that this part has been shrinking rapidly. And you can probably see the numbers, especially looking at TEQ Nord, where you see the margins have been expanding significantly. A year ago, Johan, I and some colleagues, we had to multitask like madmen. Those days are gone. We never want to go back there again. The second challenge that I -- yes, thank you, the second challenge that I would just like to talk a little bit about, the lawsuit, the lawsuit in Ireland.

We will, of course, continue to follow the directions of the court, which means that we will not be spreading information or lies as certain other parties might be doing. Our truth can be found in sworn affidavits verified by data, verified by third parties and can be read by interested parties in the papers held by the Irish court. Fundamentally, the dispute is between Teqnion AB, Johan and me and the vendors of an Irish company that represents roughly 2% of our revenue today. We acquired a business in 2022 based on certain warranties and the vendors' representation of the company, which, among other things, involved that they held appropriate certifications to run the business and, of course, the financials. During the course of the last couple of years, we uncovered that certain representation of the company was materially different from what was warranted.

And this, again, has been verified by several third parties. This, together with other irregularities, which you can read about in the court papers, resulted that we were advised to ask the Court of Ireland to wind down the defunct entity. The court agreed and appointed provisional liquidators to run the business, which they are still doing today. Due to this, we have chosen to seek damage. The process will probably be long. We have the facts. We believe in the truth. We will -- we believe that the truth will prevail, and we believe in the Irish court system. There will be misinformation along the way in order to set pressure on us personally and on your company but the truth will prevail. Before handing over to my friend, Johan, I would like to just quote my second biggest hero in life, lose money for the firm, and I will be understanding, lose a shred of reputation for the firm, and I will be ruthless. Johan, please.

Thank you. This is Daniel Zhang, my friend and Deputy CEO of this company, Teqnion. My name is Johan Steene. I'm the CEO. I was a part of this since the beginning, 2006. This is my 20th year. It feels fantastic. Just a little bit about the report that was released this morning. The Teqnion that you see today is a better and more sound company than a year ago, thankfully, after all the hard work that the colleagues here have put in. And the operating profits and the cash flow is pointing in the right direction. From my heart, I feel there's so much more to do, and we're targeting that, of course. We have reorganized the way we have the group now into 2 different business areas. We have Teqnion Nord, and we have Teqnion Väst.

Both entities are performing better than before. And it's -- I see it as a fundamental base for sustainable growth and scalability going forward to have us organized in this manner. We have an acquisition engine that is performing really well. The main component of that engine stands beside me. But a new thing, which is really encouraging and fun is that our companies actually has started to do their own small acquisitions like bolt-on acquisitions. And that's also a little bit described in the report. They're sort of building small mini groups by themselves. It's fantastic. We also have a new larger credit facility with our bank, which is really, really good, and we feel that we can continue at our acquisition pace as we have informed you before, and we see no way why we should reconsider that pace.

Operationally, in the subsidiaries, we see no major setbacks this quarter. We haven't seen any exceptional good things happening either. It's just normal business going on, normal grinding. I also mentioned in the report that the organic sales is down a few percentage, but that is largely by our own design. I would like to say we have stopped -- willingly stopped doing some bad business, which has been unprofitable. And what we're chasing is, of course, revenue and cash flow, and we see that our strategy is working. Yes, once again, I feel like we are in the beginning of building something really, really fun and hopefully much, much bigger. So let's jump into the Q&A session.

The first question is [ Christoffer ] that sent this in through e-mail. He writes, does the EPS target really make sense when the FX effect has such a huge impact on the financial items? Your thoughts on that would be appreciated.

Yes. Maybe I shouldn't write so much about accounting effects. But now I felt like doing it because it looks strange in the figures. Over time, it won't matter. I think EPS is a very good KPI to measure us by, and we are aiming to double it every 5 years. Yes.

Yes. I think so too. I mean for a single quarter or maybe even a couple of quarters, the effect can be quite strange.

And especially when you compare it to the quarter a year ago, I mean. So...

Yes, exactly. I think that the tricky thing is, of course, that we have 3 financial targets on 3 different measures. And they, of course, all measure different things. Sometimes we get the question like which single metric is the most important. And I think that is a tricky thing, right, because there is not really one that rules them all. EPS is, in my view, over the long term, something that tells a story about if we're doing worse or better. But if we would exchange that to something else, there will be other problems as well. So I think it's really -- it's maybe a boring answer, but for all investors and owners of this business, yes, that one is very important, but also keep an eye on everything else, which we try to explain as transparently as we can in either your letter or somewhere else.

Yes.

Good. The next question comes from [ Aryan ] over e-mail. Do you have a strict requirement for founders to stay on for a long period or for a strong #2 to already be in place before acquiring? When external replacement is inevitable, I can't say the word, is needed, how does Teqnion ensure that the new CEO can replicate that essential founders dedication and rebuild those fragile customers and staff relationships?

Nice. Well, the normal way when we are acquiring a company is that we keep the seller, which is normally the founder or at least an operational important figure in that company. We keep them onboard for normally 3 years, and that is incentivized by earn-outs normally. During that period, hopefully, we can show that individual that it's fun to work with us and that we together can continue running the business towards the future better and better. And hopefully, that person will stay on for longer and at least in some role in the company, if it's an operative role or if it's on the board or something similar like that, we just love to keep the entrepreneurs or the founders, sellers onboard as long as possible, hopefully, for the rest of their lives. That's how we see the business we're building.

It's doing it for the long term and just keep them as ambassadors and found like a good foundation for culture and reputation in absolutely the majority of cases that, that is the best way. Then we, of course, understand if some individuals want to retire and do other things in life, at least maybe parts of their family want them for themselves for a while. And then we try to find a way to make that happen. But yes, so we incentivize them at least during the 3 years that we have the SPA running. And then hopefully, we have incentivized them by its fund to work and build companies, so they will stay on after that as well. And if they stay on as a CEO, for example, of a subsidiary after that, they fall into the normal incentivized program that other CEOs have in this group.

Yes. I think another way of answering it is maybe that we can't really find people that can replace them and make them better, at least not in the short term. So it's kind of funny when you see maybe some of the discussions that we're having with vendors because the vendors for a good reason, are sometimes concerned or scared that we might let them go during the period and part ways with their baby. And in that way, they wouldn't be able to make all of their earn-out, et cetera. And for us, that is our biggest scare as well that keeps us up at night. If we buy a company, what happens if someone leaves after 3 months because that is really, really difficult for us. So of course, when we look for a company, if the person wants to stay on and is willing to be operational and also have maybe a Crown Prince, Crown Princess or something along those ways, for us, that is worth more.

Definitely. And also, it's funny that they normally think that they want to retire. And they also have calculated it in the income statement that we have room for hiring someone to replace them and we say, yes, we cannot replace them with one individual. You're not one head. You are several heads. So we have to replace it with several people because you do so many things that you don't think about.

Yes.

No, it's a difficult thing. I mean finding and buying companies it might be tough if you not practice a lot. Daniel has practiced a lot. He's very good at it. But recruiting the right type of individuals that has all the drive, passion and skills to run a company like this, that is the big key in order to get this to scale in a good way.

Yes. Nobody asked this, but you have to explain your shirt. I feel that someone is wondering, but.

It's a very nice shirt I have a seagull here. No, I received this from our friends at HT Servo when we acquired that company, and it's so good because I haven't had a U.K. team to share for, but I have 2 sons that share for other teams. They have the individual teams that they share with us. So now we have 3 different teams to argue and fight about in our family. I also have my name.

'25 as in 2025. Good. Next question comes from [ George ], e-mail. Are you starting to feel an economic rebound in Sweden after a few years of slump? Are the weak subs starting to show clear signs of recovery on the order book and shop floor? What structural changes have you -- I think maybe we will take one at a time.

I think we have to take -- otherwise, we just forget or at least I do. I wouldn't say that we've seen an upturn in the demand for our stuff, not a clear trend shift anyway. But the big thing that we have managed to do is that we have removed a lot of bad business that reflects in the numbers. And also, we sort of found new ways to be more active in the sales process, seeking new businesses instead of just waiting for them. So simple things that is fundamentally to run a profitable company. We have tried to implement as much in as many cases as possible during the last year and continue doing so. But I haven't seen a big change in demand. But of course, you all are familiar with what's happening in the world and what has been happening in the world. And it's very volatile and it's very -- sometimes very fragile, and we have to live in that world. We can't do nothing about it. So we just have to be better than before.

Yes. And I think also every single company that we have bought have been profitable before we bought them. And I mean, to different extents, of course. And what you have seen during the last few years, of course, the macro was against us. But as we've been saying a few times already, it's not really that we're blaming because we know that it's internal reasons why we've had this downturn. We didn't have the systems, processes in place. We didn't have the right operators in place, and we have remedied a lot of that. So this is probably not the right way to say it. But when you screw something up, you can also unscrew it, and that's what you're seeing in the last few years.

And for the ones that are interested to look at subsidiary annual reports, of course, the numbers are not exactly what we see because the costs are allocated in different ways. But if you look at that and make your own analysis, you would see that certain companies that are in sectors that should have a lot of tailwind have not been doing that well. And certain companies that should be, in theory, doing worse due to the macro, they're actually doing really great. And that is fully due to how it's been run. Good. Next from [ George ] is what structural changes have you implemented on the loss-making subs, so as they don't return to the current situation in a few years' time, what other outcomes could be expected after this improvement? You want to start?

Yes, I love the question. There's no warranties that it can't happen again. You said you can't unscrew it. You can screw it again. We don't plan to do that. But there's always -- what we're doing is that we're presenting a lot of figures to you 4 times a year, the financials of the operating business that we're trying to run here. Everything is made and done by human beings and human beings take decisions and make actions or not. And that affects, of course -- it ripples down into the financial figures sooner or later. And you can never be certain. What you need to do is that you feel you need to build a strong foundation with regards to how you make up your plans, your strategies, how you process every aspect of running a business and make sure that you have the right foundations or the right, what we call, the fences that you're not allowed to jump over for each subsidiary. They have the freedom to operate within their fences and reset the fences for them.

And that is by ownership directives. We tell them what we see would be possible to harvest out of a specific subsidiary over a 3-year period, and then we help them with the strategy to achieve that. And then they are -- they have the mandate and they have the responsibility to execute on the actions necessary in order to reach those targets and goals. If we can fail, yes, definitely. If we can make it right again, yes, definitely. Is it -- is the risk of failing smaller if you have the right foundation and the right structures in place? Yes, definitely. So now we put a lot of those structures and processes in place in order for us to make it harder to fail, but it's still -- it's always possible to fail.

Yes.

Sorry for the defensive, I think it was very defensive.

But I think it's the right -- I mean we -- some of the companies will have downturn again, but very hopefully for other reasons. Someone said something the other day that I thought about said once it a coincidence, twice their choice. I mean things will happen. We'll make new mistakes, but we will do everything we can to not make the same mistake again. You wrote a little bit about that in the report as well. But now when we have scaled over the last, let's say, 5 years, we've gone from 15 companies in 1 country to 40 companies in different geographies. And now we have implemented having 2 business areas run by Dave Barton and Martin Lagerberg. And that creates a better -- yes, we do feel that we have better control, but it creates more decentralization because these people know more. Johan doesn't need to be the bottleneck for all the things that need to happen.

Another question here is that how does the measures compare to the measures implemented to the mid-, high-margin subs? It's an interesting question, and it differs a lot. The -- to make it short and simplified, I mean, if the companies are performing roughly in line with what we together believe it should, and we together think that we're doing the right things, the CEO are doing the right things. Sometimes the financials can be bad. But if the CEO are doing the right things and we don't have any better ideas, then we're just going that direction. But what Johan and I spoke about was basically what do we do, how can we help the turnaround companies. For the ones that are, let's say, mid-high margins, they usually have the drive to do things on their own and just be better. We don't come in and say, now you have to do this, now you have to do that. We spread ideas. Some of the ideas stick. Some of the ideas are good. Some of the ideas are bad.

Yes, some of the ideas you have to spread many, many times.

Yes, exactly. And we don't -- for the ones that are performing, then it's really decentralized. We don't force ideas upon people. There are absolute ideas here in Solna that we feel that why can't I do this. But in order to keep the spirit of decentralization and the ownership of the business, we don't do that. We have this sourcing office that's just as an example. A lot of our companies could do more through that. But we don't force that upon them. We want them to feel that they want to. Let's take a live Q&A question. We have [ Prakal Goyal ], who is writing a tax rate was notably high this quarter. Could you explain the main reason for the tax rate? Based on the current geographic mix, what should investors assume as a reasonable steady-state tax going forward? I think...

I mean, please correct me if I'm wrong, but the company tax is approximately 20% in Sweden, it's 25% in the U.K. So there you have it, then you can look at how much earnings we get from the different business area and do a calculation. But just to try to answer the question really rough is that if you look at where we pay the taxes, we pay the majority of the taxes in the subsidiaries and the tax authorities look at how much earnings that company has. And we have had more or less double the earnings than the comparable quarter, which means that we paid comparably double the taxes. That's how I see the answer to that question.

Yes. Good. Then we have a technical question here from [ Prakal ] as well. He's writing on the P&L. I understand that part of the FX volatility is showing up in the financial income, but the interest income expenses have also increased sharply year-on-year, 4x despite only a moderate increase in debt. Could you break down what is included for this quarter? And I think just to keep it quite short, I don't want to do an accounting lesson. I'm not qualified for that either. But when we have a positive FX effect, it lands in the financial income. And when we have a negative financial effect, it lands in the financial expense. The other financial costs are the interest on our different loans. But you also have earn-out discounting effect. So there are a few different things at play, which Johan and I spoke about this earlier. I think that if we have made up the accounting rules, it would look different.

Maybe not better, but it would look different because you have some effects here that are the discounting on earn-outs, that is not a real cost. But basically, when we have earn-outs, we have to discount that back to present value and that adds a frictional cost to it. So when we buy companies and more earn-outs, that one goes up because IFRS. Next question from [ Prakal ]. Margins have remained very strong for the last 3 quarters, even though organic growth has been weak, helped in part by mix and stronger profitability in the U.K. businesses. If margins remain at these levels next quarter as well, the comparison base will become harder unless organic growth improves meaningfully. How are you thinking about the balance between sustaining margin and reaccelerating organic growth over the next few quarters?

A relevant question. I just to lay out the foundation, we are chasing organically earnings growth. That's what we're chasing, which normally means that we also have to increase revenue growth, but not on the cost of losing the margins. So we are in the process of increasing sales and increasing margins, and that's our target.

Yes. I mean we have been in a situation. If you look at the 2 different business areas that we have, we have Teqnion Väst, which is still very new, as you can see in the numbers. Previous to last year, we basically had one company that was a big, big, big chunk of the profit and the profitability. And they have -- we really think that they can continue on these high levels, but it's not a level that we expect other companies to get to. If you look at other serial acquirers, if you are performing at, let's call it, 20% EBITA, 25% or something like that, it's close to best-in-class. And the Teqnion Väst number will probably, over time, more and more converge into that direction. If you look at Teqnion Nord, it's a little bit of a different story for 2 reasons.

One, the business quality, the mix of the companies, it's a little bit of a lower quality due to legacy reasons. So I wouldn't really believe that they can reach up to the same level when it comes to profitability and return as Teqnion Väst, at least not in the short, medium term. And much of the rebound that you have seen is exactly what Johan has been saying. We have removed unprofitable revenue and through that, got a minus, minus equals plus, so we get more profit. But we are probably in a stage where we have more of a stable foundation. There's still more to be done at individual entity levels, but we are absolutely at a stage where soon or now, and that's what we're doing is to increase the organic revenue growth in order to get more profit as well.

Yes.

Good. Next up, we have another question here from [ George ] on e-mail. He's writing 3 questions. Could you please provide a short update on how you are seeing things in this quarter, I guess? Maybe we answered that in the beginning or we talk through.

Yes, maybe a little bit. But just to recap that, I see that we see the effects of all the adjustments we've done to the group and to operations and to processes. That feels good, but it's still -- I mean, it's still frustrating that I see that there's a lot of more things to adjust and make better. But no really good things have happened, no really bad things has happened during the quarter. We have just pushed everything a little bit further and continue doing so.

Yes. What has surprised you the most when it comes to improvements?

I would like to say that the time needed surprised me. But emotionally, yes, intellectually, no. I mean you know turning something like this around takes time, many, many people that needs to understand the importance and the relevance of actually changing behavior, changing how to do things. And yes, it takes time to turn -- let's call it, culture again, to turn a culture around. It takes a lot of effort and a lot of time, and there's no shortcut there.

I think also just to provide some context, even though, of course, most people know this, on -- starting maybe on the cost side, there is a significant lag of costs when it comes to Sweden, but also to a very high extent to the U.K. when we downsize companies and unfortunately, sometimes need to part ways with people, it takes sometimes 3 months, 6 months, 9 months, sometimes even longer to actually get the costs out of the income statement. So even though the action has been taken, it doesn't show until much later. There are also looking at maybe on the gross profit side of things, there are a lot of contracts where in theory, of course, you would say in excel, let's just remove these products and we'll be -- look good. But you have -- if you have entered certain contracts, it's way more complicated than that. In certain cases, you just cannot and you need to renegotiate. That might take months and you won't see the effect in maybe a year.

Or more.

Or more. And in certain cases, you're just stuck with that, which is, of course, unfortunate. But there are -- there is a natural stickiness in our group, maybe not on -- in every single subsidiary, but there is a natural stickiness and that goes in both directions. Which is also why before 2024, there were things that we felt that we were doing in the subsidiaries, which were not great, but the number is still ticking up. And yes, so we just have to ensure that we move in the right direction all the time and the financials will follow. What brings you happiness when thinking about Teqnion's future?

Definitely, the feeling that we have still a very, very long way to go and a much bigger company to build together with fantastic friends. It's a fantastic place to be in an environment where everyone tries to be their best and just pushing. Yes, it warms my heart to have this opportunity to be here.

I think for me, I would say exactly the same thing, but also for the last couple of years, it has felt that we needed to focus a lot on fixing things and getting back to some kind of normality. And while it is -- when you see the fruits of that, yes, it makes me us happy. But it's not -- at least for me personality-wise, getting back to where you are is not what drives me, winning drives me, getting back to where you are is just back to the starting point.

And hopefully, there's big adventures ahead. I mean we are in 2 geographies now. I mean, hopefully, we will be in many more in a few years.

Yes.

And...

We sit in Jasper, we have Belfast.

You're right. Yes. But I mean, there's so much possibilities and there's so much adventure ahead of us, and I'm just looking forward to that journey.

Yes. We have a question here on e-mail from [ KP ]. Regarding the discontinued operations, could you please provide some further insight? Specifically, do this represent entire subsidiaries or only specific parts of those companies? Additionally, if this is a sector-specific issue, should we be concerned about our exposure to other companies within the same sector?

Well, we have closed a couple of subsidiaries that was reported last year. But we have also, of course, stopped doing businesses in other subsidiaries that are still there and where they have a foundation that we believe in will be stronger in the future, but where they have some part of the business that needed to be exited. If we're exposed, yes, I mean, the housing industry, we downsized quite a bit there. Both companies are still around and demand for wooden houses in Sweden is maybe somewhat a little bit better than a couple of years ago, but still is a very, very demanding market. We are definitely aiming to make those companies better, and we will see in the future how that will turn out in the long run, but it's a very volatile business and hopefully, I would say. But what I believe is the housing business at least here will always be a very volatile business.

Yes. But I think that -- again, going back to what we spoke a little bit about before, yes, our housing sector with 2 companies, they are performing at the bottom when it comes to profitability, no doubt. But if you would rank all of our companies based on sector, it wouldn't really correlate perfectly with how you would like or how you think you would look. As an example, we have for defense companies, depending on how you count them, 2 of them are at the absolute top when it comes to profitability and growth. 2 are absolutely not. And I mean, yes, there might be different micro, macro reasons for that to happen, but it's mostly about how the companies have been run and how we have been supporting them. Absolutely. So I wouldn't think too much about sector. All of our companies should be able to at all circumstances make some kind of profit. Will it look like that in the reality? Probably not, but they should.

And the third part of the group, as you described in the introduction, is supposed to be really, really same and small, the underperforming companies. And we're definitely going to monitor that and take actions to make sure that, that happens in the future.

Yes. We also got a few questions over the e-mail because it seems like the chat function or a Q&A function maybe doesn't work perfectly. Sorry for that. We have [ Mahesh ], sorry for the pronunciation. He says, Daniel, you mentioned that the acquisition pipeline looks healthy. Do you refer more to the U.K. companies or also Nordic? Any plans to go further in the EU?

Do you have any plans?

I would say yes to all of those questions. U.K. is where we have most of our cases, and I would expect that most of our acquisitions will come from there. Do we look more at Sweden and the Nordics? Yes. And I would say that the biggest reason is that since Martin started, we feel that there is more capacity to absorb companies now in the Nordics. So yes, I'll say that we're back in the Nordics. Are we -- do we have plans to go further in the EU? Yes. We're not really rushing. We feel that there's so much more to do, especially in the U.K., but also in the Nordics. But we are carefully looking for a third leg, so to say.

Yes.

How is the M&A pipeline in terms of deals and valuations? Do you feel the need to go outside of the U.K.? When it comes to deals and valuations, we continue with the same way. I think it's fair. We have a valuation method where we try to get our money back in roughly 5 years. Looking at our numbers, it looks like we're hitting that target. Then, of course, as you've seen for some of the companies, it goes faster and for certain companies, it takes longer. And maybe for one company, as we know about now, the -- maybe we won't get our return, depending on how things go. But we try to keep that valuation because it makes it fair. All of the entrepreneurs coming into our group know that, yes, they get different amounts of money, but we value all of the companies in the same way and it makes life just easier. It makes it easier to speak with advisers and such. Everyone knows where we're standing. And...

Yes. That's a very important and good point.

Good. [ Ramon ] is wondering, would you consider reporting performance per cohort, either annual or longer period of businesses acquired such as we can monitor the improving quality of acquisition process, i.e., return on capital per cohort? I would say that the short answer is no. We don't plan to do that. We might do it on a discretionary basis. I think we've done it once or maybe twice where we've shown a little bit more how the different cohorts are doing. And I mean, the -- I understand the question, but a bet on Teqnion is basically a bet on that we can both buy companies that overall increases the margins, the returns and cash flows and a bet on that we can make the companies that we have acquired better and better over time. And those will be reflected in the total figures. And I understand that it would be fun to look a little bit deeper under the hood, but there are various reasons, competition, et cetera, that makes us hesitant on that.

Yes.

We have a question from [ Alvin ]. I have a few questions regarding the recent results. Regarding Teqnion Nord, what is the average EBITA margin for the segment? I think we have that on Nord...

It is 11.6%, in that vicinity, I think.

Yes. It's more or less a double compared to the last quarter in Sweden. During that period, we acquired 2 new businesses, but of course, the group consists of roughly 25 companies. So it's not that, that is tilting the numbers. What is tilting the numbers is most part that we're losing less money and that the lowest performing companies are starting to make a little bit more money and then the rest chunks along.

Yes.

Same person. How much autonomy the subsidiaries have in acquiring new companies? And to what extent is Daniel involved in the process? How do you ensure these acquisitions are aligned with the organizational targets and M&A criteria?

Short answer is they are not allowed to do any acquisitions without our knowledge or without our approval, which means that Daniel and others are involved in evaluating the project and normally also helping along the way.

Yes. It's -- we will, hopefully, one day get to a situation where certain subsidiaries or maybe business units leaders or whatever we call them, can do smaller ones and then we sign off from Solna. But at the moment, the difference is basically that if we take the compressed air group, we have a very, very good CEO, entrepreneur vendor of Avelair, Dave, who is running that. And together with him, we have identified certain companies that would be fun and great to have in the group. And then, of course, it's much easier to run the due diligence because he's been in the business for decades, he knows the market, he knows the suppliers, he knows the reputation of companies and he have more of the direct contact with the vendors, while I do more of the less fun administrative pieces. What have been your primary lessons following the headwinds from the lawsuit and the organizational changes of the past? I think it's 2 different questions.

Yes, definitely. I mean I think we covered most of it. I don't really know how to answer it in another way.

One thing it's not maybe a lesson or a surprise, but it's interesting to talk about when we have subsidiaries and if you see the subsidiary as a house, in certain loss-making companies, you just feel that there is so much negative things happening. And it's like having a house where it's just leaking from different places in the roof. And you try to do everything you can. You try to help out and put duct tape on some place, you try to exchange the roof on some other places, but it just leaks in new places and you kind of feel that life is unfair and you're so unlucky. In certain situations, because you asked about the organization challenges, you changed I was going to say the janitor, but the knight of the house, the owner of the house, the CEO of the house. And suddenly, it just stops raining. There is just no dripping anymore and everything gets fixed. It's not a new lesson, but it's one that is interesting to ponder upon and remember.

And I think we can talk about this for a very long time. I mean, okay, your housing analogy, but also it's like a relationship, right, because it's human beings coming back to it all the time. And emotions, something learned from the lawsuit, yes, you get emotional because you feel that someone is hacking away on your legacy, right? And that affects me, I can be truly honest with that. I've been doing this for a very, very long time. And would hopefully do it for much, much longer. And the reputation and legacy is something that I'm very proud of. Same thing goes with subsidiaries that don't perform in a way that should be possible. I mean, it's a culture that needs to be fixed. It's human beings, the relationship between those human beings that needs to be better in order to get things to run smoothly. Every business is made between 2 individuals, at least the businesses that we are performing, and that is built on trust and relationships. And that's a very, very important asset. And that's something that we try to constantly build on and protect.

Yes. One interesting concept, our speaker is [ Morris Tilter ], who, as you know, is shareholders at the AGM chooses to will become one of our Board members. When it comes to mistakes, I've never heard this concept before speaking with him. He said that, yes, I understand your frustration, Daniel. I understand that you want to kick yourself and that you wanted to do better. But think also about it as a DCF, not saying that it's good to make mistakes. But when you have a DCF, you have cash out today, most often. And the question is, what is the net present value of future things by investing the cash flow today. And he told me, you can think similarly about making mistakes. Do you learn from it or not? If you don't learn from it, it was just a cost. Nothing good happened from it. But given that the investment of the mistake has been made, you can't do anything about it.

But what are the future learnings? And is the net present value of your mistake positive or negative? And I guess building on what Johan said, the jury is out, but we have learned a lot, and I truly believe that it will make us stronger and better as a group. We have a few questions here from [ David Vervaco ]. It's several pieces. I'll take one at a time. Nord EBITA margin went from 5% to 11.6% year-on-year. How much of that is, a, the structural pruning of loss-making activities now complete; b, mix shift from acquisitions like MITAB, Edurus; and c, underlying operational improvement at existing base, which of these continue into Q2, Q4 and which was 1 quarter step? We spoke a little bit about this before. The majority here is that we're making less losses and that the companies that were performing close to 0% are now a little bit higher than that.

And of course, that gives a nice swing, and we believe that, that is structural and that it will continue. MITAB, Edurus, yes, it added. But if you look at the numbers for those companies, they're not huge. They're absolutely adding to the group, but it's a smaller portion. And the underlying rest of the business, they are growing, but of course, with smaller percentages, that is not explaining the full piece there. So which of this continued to Q2, Q4 and which was quarter step. I mean, we don't give guidance, but we believe that the changes we made are structural and will continue in the future. Next up, you flagged last year's Väst result was supported by a rather favorable business that should not be considered standard.

Can you quantify that roughly? And help us to think about the normalized Väst margin looks like over the next 4 quarters as comps get harder? Again, we don't really give guidance, and I know it's not really that you're looking for. But going back to what we talked about, we don't know which businesses that we will buy. We have our pipeline. We hope for some of them, and we'll find new ones that we didn't know existed. So it's difficult to say exactly where we will end up. But I think looking at the more mature companies that are out there that have several hundred companies, the ones that are best-in-class, they probably have EBIT margins of, let's call it, 20%, 25%. And I think, of course, over the long term, we want to win. We don't want to be good enough, but it's probably closer to those regions. You also mentioned...

Even if you have to stretch out the time line quite a bit, of course.

Yes.

Yes, yes. I agree with everything.

You mentioned 5 companies contributed roughly minus 7% to organic growth. Is that cleanup substantially complete? Or should we expect a similar drag from discontinued activities in Q2, Q4? At what point does reported organic revenue converge with underlying organic? Yes. You know that we don't talk about quarters. And is the pruning complete? I don't think that the complete is a word that really exists in our vocabulary. I mean there's always more to be done. Of course, you get to an intersection where there is less to prune and more to grow and then you get net positive instead. Are we at that point? Let's see. Are we getting closer to that point? Yes, absolutely.

But there will be things that we learn along the way in certain subsidiaries where certain projects, product portfolios or whatever were less favorable than we thought. And in that case, we will not hesitate together with the CEO, cut that because in the end, it's about making money and profit. Do we think that organic top line growth is important? Yes, over time, of course, that is driving the growth. But we only want to grow if that increases our profit. So we use the bottom line to drive our top line. And in certain cases, shrinking is the right way to grow bottom line, then we do that. That's what we're doing now. In certain cases, in a more stable environment, we will drive top line -- sorry, we will drive bottom line by driving top line.

Next question there from [ David ] is saying, you expanded the credit facility from SEK 575 million to SEK 1 billion. What does your pipeline look like over the next 12 months in terms of number of actionable targets and average quality size recent cohort has prospect changed? So most of those, we won't disclose. We have a very good pipeline, and I think that you will just have to see what comes up. And the reason why we don't talk about it is that we have a few things. When you look at the pipeline, the closer to the bottom you get, then, of course, we get more transparency, but we also have a lot of discussions that feels very promising, but we don't know if that's going to happen this year, in 3 years, in 5 years, in 8 years or never.

13 years.

Yes, 13 years could happen. MITAB that we bought last year, that was a discussion that came to fruition over roughly 5 years. We thought every year that this year is the year. We had to wait until 2025. But it's very much a numbers game. Next up there, we have the free cash flow question. It was only plus 7% despite EBITA increasing 106%. The question is long, but maybe we can talk about the free cash flow.

Yes, we would have loved to see more of that, but it's -- at the end of the quarter, we had some quite good sales, which is now in the working capital segment, which means that it should convert into cash going forward. So it's a positive thing. I mean we rather have it as cash in the bank, but it's actually sold, things that are sold and locked up in receivables and in stock.

Yes. I'm going to say something, but only if you promise to not extrapolate it. You can't write, so it's difficult to promise anything. But looking at the quarter, we have a lot of fluctuation month-to-month. We collect all of the data on a monthly basis. We look at it. And it's, to be honest, quite a bit of noise in that because our companies are still rather few and some of the companies are rather big. So depending on what happens on 1 or 2 companies, it can tilt a monthly report quite a bit. But January was, in our terms, okay-ish. February was rather good. March was really good, if you think about the 3 quarters in the month. And exactly as Johan said, when you sell...

Month in the quarter.

Sorry, yes. Then, of course, you get a lot of receivables that gets tied up.

Did everyone promise to not -- I think the voice was great but I didn't hear that.

Buyers beware. Next up, we have Avelair is building a compressed air-mini group via Cambs and now Powerair. Wallmek is expanding into U.K. Is this bolt-on on the subsidiary approach and deliberate strategy shift or opportunistic? Does it change how you think about M&A? My thinking is this, yes, it's deliberate. It doesn't happen by chance. If you look at the theory of things, Teqnion as a business model, we want to be sector agnostic. It means that we're in different niches. It means that if we do our jobs right, then the company would be doing well in all different economical circumstances and all different strange shocks that the world can get.

But of course, when you look at academia, when you diversify for every new company that you add, the return in risk mitigation becomes more marginal and you get diminishing returns of risk. So yes, we could add companies horizontally forever. It will add companies that are great, that are making good cash flow and good profits and it will reduce our risk a little bit. And I think that during Johan's time during my last 5, 6 years, our focus has been close to 100% building horizontal platforms to mitigate risk to have enough small legs to stand on. We are at a place where we feel that adding more companies will absolutely add more cash flow. It will add more strength and it will reduce our risk, but less compared to before.

So when we find good opportunities, and I should put it differently, we have identified certain companies and certain verticals where we want to double down. Wallmek is one the compressed air group is another, then we add companies vertically. So instead of 100% horizontal acquisitions, maybe we're at, I don't know, 80-20 or something like that. So yes, it probably will happen a little bit more in the future, but absolutely not a full switch. Good. Maybe we have time for one more question. You flagged Iran and rising energy prices, which subsidiaries are most exposed on the input cost side? And what measures have you initiated? You've been heavily weighted towards U.K. acquisitions, 7 out of 10. Should we expect the mix to continue or rebalance?

At least good questions. But regarding the war with Iran, we just took it up as a potential risk. And I mean, it's not specific to Teqnion or to Teqnion companies. It's just that it's the energy prices and the limitation of accessible crude oil in the world is less, which means that it's going to drive inflation, which means that we have to take measures. And the measures is, of course, to increase prices and not be the last in the line when people start doing that.

Yes. There are -- we try to encourage all of the companies to, of course, push out prices as much as they can to their customers when possible. Many of them have pricing power and can do that. And then, of course, in the other direction towards suppliers as well. But looking at the macro view, looking only at Teqnion and not what's happening in the world, we have certain companies that will be affected in a negative way, of course. But we also have companies that will be affected in the other direction. As mentioned, we have a few defense companies and of course, more turbulence in the world, more uncertainty, fortunately, unfortunately, will increase the demand for their products. We have companies that -- we have one company that is within Merridale, which are making cost saving solutions for diesel. When oil prices are up, demand goes up because you can save more. So again, if we do our jobs right on the portfolio side, the external shock of what's happening in Iran might not be that big. All right. It's 11:08 in Sweden, which means that it's lunch time at Solna. Do you want to end with some closing remarks?

I would like to thank you all very much for taking part in this Q&A session. And hopefully, we see each other again in July.

Or in the afternoon, if you come to our AGM.

Yes, we have an AGM tonight -- this afternoon. Yes. Correct. Correct. See you there or the next time on Teams will probably be in July when we release the Q2 report. Thank you very much for today.

Thank you. Bye-bye.

Good morning, everyone, and welcome to Teqnion 2025 Q4 Q&A. Thank you all for joining us today. We will, during the next hour or so, give you as partners and interested parties the opportunity to understand your business as well as possible. We will be alternating between the e-mails that have been sent to our Q&A e-mail before today and the ones that you raised live in this Teams section. And as a reminder you'll find the Q&A button on top of the Teams screen.

So, as always, before we join -- jump into the Q&A session, I would like to hand it over to you, Johan, to say a few words.

Thank you so much. Welcome to our call this morning, and this is my coworker, Daniel Zhang, who is the Deputy CEO of Teqnion. My name is Johan Steene. I'm the CEO and also one of the founders of this company group. We are today, as we normally are in Daniel's office here in Solna, north of Stockholm. 2025 has, of course, been a big year of transformation for us in the group. We moved away from a rather loose organization that was very well functioning when we went from no subsidiaries up to roughly around 20. Now we are in a place where we doubled from there, which means that we need more structure in our organization, and that's been a year of implementing that.

Just to reflect on why it took so long for me to understand that we need this. I don't really know, but you're used to something and you do it for a very long time and you don't see when things change around you maybe. But luckily enough, nowadays, I have really bright people around. Myself and this team is a very strong team. And finally, they managed to persuade me or me to actually changing the organization there. So, today, we have a much more stable platform to work from and scale from.

I gave ourselves a grade D- for 2025. Maybe the last quarter or so or the last half of the year was could maybe have earned a D, but since we had a very weak beginning of the year, we have to set up for a D-. That's okay. That's almost okay. It's not that fantastic, of course.

The improvements that has been implemented so far has freed up some working capital. So the cash flow is back on some sort of okay level. The organic growth, as you've seen, is down. We're not happy by that, but we're normally chasing organic earnings growth. And in this retrospect, we have -- we have made active decisions to remove some poor businesses and business deals that, of course, affects the top line, but also gives us a better bottom line when it comes to earnings. But we're still in a rather weak economic environment, which also, of course, affects these things.

Just a reminder and maybe I say that too often, but it's the organic earnings growth that we're chasing and not primarily the top line. Normally, that will follow, of course. But in these circumstances, you might see this effect.

We also had a weaker Q4 than the Q3 when it comes to earnings. Some of that might be effects from the projects that are rolling out, but also -- and it's -- to blame this is maybe a little bit too stupid, but it's a rather long Christmas holiday, which meant both customers and ourselves were off work for quite some time at the end of the Q4 quarter. But disregard that.

What is -- what I'm most positive about at this stage is that we have a new organization in place. We have two new business areas, one in the Nordics and in the U.K. with dedicated teams in each of them. We have -- we now have a platform that is so much easier to scale from, doubling again from 40 to 80. During that period, of course, we will learn new things and have to adapt to the reality around us. But we are really on a much better plateau or foundation today than we were a year ago, and that feels fantastic. Now we can start working again. We're not done with all the improvements and all the things that needs to be done in order for us to be happy with our performance, but we have a much better platform to do that at this stage.

Yes. once again, we're definitely not happy and proud of where we are, but we're in a much better place. And there's still a lot of improvements and repairs to be done for us, but we do it from a much stronger position today. Yes. And it's the profitable growth that we're aiming for and that we're chasing and nothing else. Yes, sorry for the long intro. But...

Perfect. Great. So jumping into the questions then.

We have a few questions that are variations about organic change in revenue and bottom line. So maybe we can just take all of them at once. So, basically, the questions are if we can give some explanations about the decline in organic revenue and also the differences between the different geographies, et cetera.

I think -- no, I don't think -- I know that we reported during the first half of the year that we reorganized and merged a couple of factories together. We have also scale down some of the production sites in order to just target profitable businesses there, taking away some business deals that were not profitable or not over the long run, something that we would like to keep up. So some of this decline in growth or top line has been due to active decisions from our side. Yes.

I think that it has been a tough journey during 2025. And as you may remember, we have talked a little bit about that there are no hold as our aim is to ensure that we create the highest, biggest value for the long-term shareholders possible. And in that, we have looked through all of our companies, also projects, different product lines, and ensure that we have cut down on things that are not profitable or not profitable enough.

So, of course, over the long term, we believe that we need to have organic growth and through that, get the organic earnings growth as well. But in the short term, we've had a little bit of too many companies and product lines that were unprofitable. And of course, when you cut that, top line goes down, which looks bad. But as you can see, that has also translated into higher earnings organically, which is what we've been aiming for, of course, forever, but a lot during 2025.

We also got a few questions about the differences in geographies. So, as you know, during the last year or so we talked a little bit about -- quite a bit about that the biggest challenges that we've had are in the Swedish market and mostly in certain cohorts. So that is where the decline has been biggest because that's where we have been slaughtering most of the products.

In the U.K., we actually have for Q4, an organic growth of around 9.5%, which is quite healthy in my own opinion. There is, of course, some FX effect that translates to a lower revenue as well. During 2025, I believe the British pound lost roughly 8%, 9% against the Swedish SEK. So when you translate that, something happens as well.

I think we caught most of the things there, but just to reiterate, I mean, over the long term, we do believe and we should have earnings growth organically and top line growth organically. But in the shorter term, we have implemented on what we have discussed. We have killed things that do not create value. That's the decline in top line and the increase in bottom line.

No. Yes, maybe I just feel that the situation we're in, in the world with the economic downturn has, of course, also affected some of the businesses. But since we are a rather diversified group of companies, some are affected in a positive way and some are affected very badly. And that has, of course, also caused some effect on the top line when it comes to sales.

Good. We have one question here. It could be good if we take that right off the bat as well. So, [ Emmanuel ] in the Teams chat is wondering why has it not been disclosed that Teqnion is being sued? What is the amount of the claim? And has anything been set aside to cover a negative outcome?

We are -- we talked about this in the last Q&A, and it was reported also that we have a legal case going on in Ireland. That is still going on, and it's going to be handled by the courts of Ireland, and it's not going to be handled by media or us talking about it outside the courts. So we leave it with that.

Yes. Good. Aakash from P&R Investment was wondering since earlier. Can you please reflect on this difficult last one-year period? What was the biggest lessons that you can take away from it?

A lot of learnings. I think if you have to just take one thing, it's the thing that I already mentioned that we need -- while growing, we do this for the first time. We always -- we often, I should say, got the question that how -- today, you have 10 companies, how would you manage to have 20 or around 20 companies? And the true answer that I think that we've always given also is that we don't know. We have to scale and see and learn along the way.

At this stage, I think I was the biggest break internally here at the head office when it comes to changing how we work. And when they finally penetrated my stubborn head, we started doing that last winter. And now we see the effects or the possibilities, I should say, of a much more structured -- well-structured organization where you have people in the right place at the right time with the right competence.

So the biggest takeaway for me for this year is make sure that you have a foundation that you're able to scale from the position you're in. And the feeling right now, which is positive is that we are in a place where we have a foundation, where we can scale again. That was hard for me to really see and understand. I don't know why. But yes, sorry.

Further on from Aakash. 2025 has been an exceptional year for M&A. Looking ahead qualitatively, should we view 2025 as one-off or close to the new normal with regard to deal activity?

I think that we've been also stubbornly over the years talked about that we believe that we have the capacity to do a handful of acquisitions per year. Since the group and Teqnion has evolved, we also now have the opportunity or possibility to acquire better and better companies. We look at more profitable companies today than we did two years ago and absolutely four or five years ago. So these business deals, even though that we still stick to the rather loose term of a handful of acquisitions per year, that should be much more earnings coming from those -- future earnings coming from those handful of acquisitions than compared to what we did a few years ago.

Last year, it was quite a few quite a few acquisitions because we have a very good general when it comes to searching up and making business deals with Daniel. And he had a rather long pipeline going into 2025 and a lot of relationships ongoing with potential sellers, and it turned out that they were ready to sell, and we are ready to buy when the seller is ready to sell.

Yes. Good. Next one from Aakash. Can you please tell us a little bit about the new government structure? What are the responsibilities of the U.K. and Swedish segment heads? How are they incentivized?

Do you want to start? And I...

Yes, maybe. So...

I do my own.

So, the U.K. Head, David Barton and the Swedish Head, Martin Lagerberg, they are acting as the CEO of the group. So basically, all of the CEOs in the various countries will be reporting directly to them. Johan, I and Jonathan are sitting on the Board of Directors of each of those two holding companies. So, David Barton and Martin Lagerberg will then reporting to us, which creates a much higher efficiency because it's impossible to duplicate Johan even if it will be very, very good.

Then we have, of course, set out processes and structures regarding the mandate of these two country heads. And regarding incentivization, basically, they have the same incentive as everyone else. So it's built on earnings growth in their own segments.

Yes. It's -- you get a percentage of the earnings growth compared to history.

Yes. Good. Another question from [ Gert ] from the Q&A e-mail. He's wondering, will all future acquisitions have an average EBITDA margin that is above 9%?

It's so strong words. It's very fixed goalpost when you say all future. But disregarding that, yes, we are looking at acquisitions with better margins or better financials than the average of the group. And the average of the group is higher than that. So, of course, we are looking at better and better. And over time, we believe it's -- that's the trajectory we want to follow into the future as well as long as we can.

And the expectation is that they will not only be above 9%, but they will be a lot higher than 9%.

And that's the outcome of the acquisitions from the last three or four years anyway.

Exactly. Larry in the team chat is wondering how many companies have emerged from the report, the majority of the increase has come from removal of earn-outs mark. How many companies did this involve?

So, first, maybe starting with the second question. It's not correct that the increase has -- majority is coming from removal of earn-outs. So, for Q4 in 2025, the effect was SEK 9 million. So, that is a number, but it's far from the majority.

I don't know, should we get into the technical details of earn-out revaluations work?

Yes. Well, first of all, when it comes to setting up the price for an acquisition, it's an individual process for each business and each seller, of course, or each vendor. If we have -- if we're looking at and building a relationship with a potential seller of a business that has been really stable when you look back into the financial history, it's rather easy to see that they will probably have the same type of normally single-digit growth going forward as well. It's much easier. They know what they're selling. We know what we're buying, and we can probably come to terms on how to structure a deal looking like that. And it's easier to agree on the right things in the SPA.

When it comes to earnouts, how long should the earn-out period be and what would the targets be in order for the earnout to kick in. When we have a company -- but another rather normal situation is that the seller has implemented a lot of changes that should make the company stronger for the future. And you can also see by the financial history that they are growing, growing stably from the last three to five years or something like that. And of course, we -- they wouldn't be satisfied with us paying the current earnings on a multiple on the current earnings figures. So then we have to find a way if we -- both parties are happy to proceed with the business deal, then we have to find a structure where they actually get paid what the company will be worth, let's say, in three years. Normally, we have a three-year earn-out period. And then that might be -- normally, that target is rather high because the seller wants it high because they have strong beliefs in that they're going to reach that target.

We try to down talk that a little bit because we don't want the uncertainty into business deal, and we don't want anyone to be dissatisfied when we reach that day, which means that we will find a number that might be hard to reach in order to pay out an earnout. And in those cases, when the overall global economy has been weakened, of course, it's even harder to reach that target, and we have reached those situations quite a few times now in the last year or two.

Yes. And I'm going to do 60 seconds on some boring accounting technicality, but it might be interesting to understand. So when we reserve the actual earn-out that we believe we will be paid out in the future on the balance sheet, of course, we have to do our best guess, but it also has to be a conservative number, which means that best guess plus a little bit of margin because that is how accounting works.

Then, of course, with a little bit of optimism, sometimes we're right on target. It doesn't happen too often. But as on the cohorts as a group, we used to be quite right. Some are wrong in a positive remark, some are wrong in the other direction. So what happens is that you get also an asymmetry because when we book up an earn-out to the maximum on the balance sheet, and let's say that, that company actually performs twice as well as we thought from the beginning, then nothing happens because we cannot pay out more than what is actually under the SPA.

But if another company actually, let's call it, same size, is performing half of what we are expecting, then what happens is that we get a revaluation that goes through the other income in the income statement. So even though if you take those two companies for Teqnion as a whole, nothing happened, one became better, one became less as a group, they became the same. Then on the accounting part, you only get one of the effects.

But just to add to that, we do not value all the earn-out to the maximum. We do it through what we call with conservative assumptions to ensure that the debts are not undervalued because that is very important from an accounting and audit point of view, but we do not put them at max. Maybe that was that piece.

Yes.

Great. Then going back to the e-mails here. We got an e-mail from [ Veronika ], private investor. Good morning Johan and Daniel. What is the percentage of potential companies being approached by you versus approaching you? Has the number of companies approaching you increased during the last five years?

To start out, maybe just answer the last bit of the question first, yes, due to the fact that we've been around for longer and we've done more business deals, which more people know us. And it's fantastic to get approached by a potential vendor because of word of mouth and that they talk to people that liked how we do business.

But over the years, since we started in 2006, depending on where we are and who we are, I should say, the deal flow has been from different sources. In the beginning, no one knew about us. We were very small, and we had to do more or less cold calling to approach potential sellers or companies or entrepreneurs. After a few years, some of the Swedish brokers knew about us and sent us business deals. We found some good companies there.

But when we started out, it was necessary and fun to learn how to approach potential entrepreneurs or sellers just actively from ourselves. And that is a tradition -- maybe not a tradition, but that is a way of working that Daniel also likes. So he's been doing a lot of that from the day he started here back in January of 2021, just to reach out actively to companies that we really like looking at and that has performed really well historically.

Then with Daniel's courage and business drive, we jumped outside Sweden and started doing acquisitions 3.5, 4 years ago. And the transparency from what you can find in financial history is much more limited outside of Sweden which means that it's much harder to just be actively reaching out or cold calling companies because you know very little about them who's owning them, what are the earnings and whatever.

Here in Sweden, you can find all that. So it's much more easier. So what we've been doing in primarily the U.K. is that we found really good partners or good strong relationship with some business deal brokers that knows who we are. We -- they like us, we like them, and they find us more and more technical companies to look at and the people that they strongly believe could fit into our culture and our environment.

So the business deal from abroad is mainly driven by, by brokers, but more and more, as the second part of the question was asked also nowadays by word of mouth that someone knows someone that sold the company to us and they also -- they like what they heard about that, and they also contact us in order to see if we're interested in their company, which is fantastic, of course.

Yes. And maybe just to add clarity to that. So the brokers that find us deals, they do this because they -- for various reasons, but they are never paid by us. They are always advising the sell side.

How long is the process on average from initial contact to a deal?

I like the question. We received it a lot over the years. And I'd like to take the example of one of the companies from the first call that I reached out a very long time ago until we actually signed the SPA and transferred the shares that was a little bit over nine years. We have potential deals in the future that's going to break that record. And the shortest might be 1.5 months or something.

I think we did it four weeks.

Okay, four weeks. So it's a very broad spectrum depending on. And we try to be flexible on that side. I think I mentioned earlier today that when the seller is ready, we need to be ready. We want to be ready. We want to be easy to make business with. Yes.

But it's quite normal that it takes 6 to 12 months, I would say.

Yes.

How often do you lose out to other serial acquirers? Is the reason only price?

Also varied over time. We like when it is priced. But it's people. It's -- even though that we are competing in a financial world with return on capital, it's a people's game. And when a potential seller meets us, they either think that they want to leave us with the trust of taking care of their lives' work and work with us going forward or they feel like these guys are not for me.

So the ones that tends to like our way of doing business and like the culture that we try to nourish they can -- from what we've seen and what we are very happy about that, they can accept a lower price for the shares than they would expect from selling it to another type of culture, another type of holder. So, that is, of course, fantastic. But we meet competition. And sometimes the seller likes us better. And in some cases, they like the other party better.

Yes. I think what is important to stress here is that we meet with a lot of entrepreneurs, and we get the opportunity to buy only a very few of them for various reasons. Some doesn't really hold up to the quality that we thought when we first looked at it. Some of them goes because of price. But then, of course, it's -- as you said, it's so much personality.

And one thing that we try to do is that we really, really try to be transparent and open about who we are, and we encourage the seller to ask the hard questions before because if we do this right, it's going to be a forever relationship. We encourage everyone, even if they sometimes don't want to take references. Because it is -- yes, it's nice to acquire a company and you always have a honeymoon period. But over a lifetime, that's a long time. For us, it's much, much better to walk away from a deal no matter the reason than to just get a bump in the numbers and get problems later.

Then we have another question here from [ Sven ], who is a private investor. Thank you for your clear communication in your quarterly update. Obviously, the complete write-off has a large impact of the result. How certain are you that it stays with one write-off? Should we expect more to come?

It's impossible, of course, to talk for an eternity of future lying ahead of us. So -- but as we are today, we're not seeing any of that. But I mean, the turbulence in the world and everything that's going on, you never know for the future, and it's tough to make any promise when it comes to that. So that we can't do. But as it is of today, there's nothing that we can foresee.

Good. Then we have another question here from Francesco from Antelma Asset Management. You said that we've been in your CEO words, forced to get used a word marked by horrific and dark conflicts. You also invested in a company supplying critical components for military tanks. I'm curious about how you deal with this.

That might be a long discussion. But for me, it's always been clear. I don't know why. It's just the way I'm made, I guess. I strongly believe that we shouldn't be aggressive to one another. And I also strongly believe that to have a strong defense that make sure that no one roll the dice and attack you is a very good thing to have. That has been shown -- unfortunately, has been shown since the aggression -- the Russian aggression on Ukraine and other examples in the world, it's very good to be able to defend yourself. And unfortunately, you have to defend yourself with force.

And -- so for me, it's always been very normal to, within the boundaries of the law, make sure that we can supply defense industry and defense organizations with the right material. And I strongly believe in that, and I'm going to continue doing that in the future.

Yes. We have a live question here from Hai. What's the current environment like for M&A in both U.K. and Sweden? Given the current weak macro, how about other markets in Europe?

It would be -- I don't know exactly how to answer. I'm going to leave it to you, I think, but I'm looking forward to having a stable business area in the Nordics and having a stable, bigger business area in the U.K. And together with Daniel, starting to investigate other geographical areas, but we're not quite there at this stage, but we're getting close to it, and it will be very, very fine.

Yes. No, I agree. I don't have anything to add on the geographic part.

Regarding macro, I feel that I've been here for five years or so, and it has been maybe not the same macro, but similar-ish with some kind of gloomy outlook. And what we try to do now and always is try to find companies that are not so pure macro driven. Of course, all companies are, to an extent, part of some kind of cycle, but we want to find companies that are in different cycles and have uncorrelated risks so that we can do well no matter the macro conditions.

Douglas from Samrison Capital. Hi, Daniel and team. Thanks for the hard work. A couple of simple questions for me. There seems to be a rather big difference in profitability between Q3 and Q4. Can you please explain this a little bit more?

I think I tried to explain it. Maybe you can do it in a better way or a more clear way than I did.

No, but I think that it -- we have not been good enough is, of course, the...

The most honest answer.

The most honest answer. We should have done better. And I mean, if we -- we don't think that Q4 was great, far from it. And that's why, as Johan wrote, it's a D-, maybe D if we are nice to ourselves. Then, of course, the Christmas timing did affect it. It's nothing that should affect if we did our jobs well enough. But then there's also quite a bit of timing question. So we have a number of companies that are very projects are onetime project driven. And those orders come in when they come in. And during Q3, we had a few of those that went well. In Q4, we expected a few of those, but have been pushed to later.

For -- I mean, in a group like this, you should, of course, expect to have a rather stable profitability over time. Right now, we are still doing a lot of things to get to that point. But on an individual subsidiary level, quarter is not the right way to look at some of these companies. And right now, they still have a bit too much effect on the total group.

Next question comes from Alexander at Slow Compounding. Earnout performance hurdles. Generally speaking, a meaningful share of your acquisition consideration is paid via earn-outs over a 2-, 3-year period. As a rule of thumb, how much does earnings typically need to increase over the earn-out period versus acquisition year for the earn-out to be paid out in full?

We touched a little bit on it, but not in detail, of course. If the forecast is something that stands out from the historical numbers, it's harder to reach those hurdles. If it's a stable history, it's easier. The hurdles are lower, of course. I don't know how much into detail we should go on that. It's a big topic to try to cover, and it's very much case to case, depending on the person, depending on the financial history, depending on the business area the company is operating in. How is the market for that type of products and whatever going forward?

I think generally speaking, and over time, and the keywords here are over time because for individual cases, it can be very different. But over time, we expect organic growth for the group to be GDP plus a couple of percentage points. And then as Johan mentioned, we look to acquire better and better companies, which means that we -- for these companies, expectations are usually a little bit higher than that in order to get the full earn-out payment.

In the Teams chat, we then have [ Steven ] who writes strong recovery, Daniel and Johan. On the long term, your objective is to double EPS every five years, 15% CAGR. I understand the reason for you to double EPS every five years. But if we take a 15% CAGR, how much of the 15% would you want to be organic growth on the long term? I think the acquisition strategy slightly changed because of Daniel, do you aim for more organic growth with the new acquisitions? You want to start?

No, but I can do it.

Please.

No, we said -- I mean -- we normally don't look at much -- we don't look much at our peers because we try to do the best we can with what we have in our own resources. But of course, we have looked a little bit on how they express themselves and what they actually performed over the years when it comes to those two metrics. And normally, what they say and what we also said and what I strongly believe in is that we're going to have a few single-digit percentages of organic growth on the group as a whole, and we're going to acquire at least 10% or acquire 10% from that growth per year. And that's, of course, very rough numbers, and it can be a little bit less some years and more in other years.

So it's not figures or numbers that we look at and target. It's more of the opportunities we have on the acquisition market and our whip on our own backs to make sure that the existing portfolio performs as well as we believe it can perform where we should see the organic growth.

So, for us, we need to make sure that the existing portfolio and our beloved subsidiaries perform on their top level and gives us and themselves organic growth and preferably organic earnings growth, while we also make sure that we have a good deal flow when it comes to acquisitions and where we acquire better and better companies that will give the majority of the growth going forward.

Yes. And maybe also to add to that. So we like the financial targets because it's three targets that we want to keep forever and ever. It's worth keeping in mind is that, I mean, we come from a period with very suppressed earnings because a lot of things didn't go as we wanted them to do due to our own fault. And we are also very young as a company, which -- and if you take those two together, I mean, over the long term, as you wrote, yes, it's doubling every five years or 15% CAGR over time. But in the medium term, we do believe that we can do much more than that. And in the medium term, it will be driven both by acquisitions, as you saw last year, we did a lot of acquisitions, but also due to the suppressed earnings, especially here in the Nordic region with Martin in place, we're expecting things to change.

Next question comes from [ Prakhal Goyal ] here in the Teams chat. He's writing the recent margin expansion has primarily come from the gross margin expansion, which I think is mostly because of the U.K. acquisitions. Is that fair? Is it fair to say that the gross margin you earned in H2 2025 sets up a new base?

I think maybe if I start the second part of the question, a little bit as you said in the beginning, we're setting up a new platform. We were numbers-wise in a good place a few years back, but we didn't really have the structure, process, people to ensure that we could grow from that base. That is more and more in place now. So, yes, the H2 numbers margin-wise is what we think should be some kind of new platform, a new low point or whatever you want to call it and grow from there.

The margin expansion, yes, it comes from that we have acquired better and better companies. That absolutely has an effect, especially given that there were quite a few acquired companies. But it also comes a lot from that we basically put stop doing stupid things, i.e., removed revenue that didn't give us anything other than losses and great hire.

Yes. And also, of course, supporting our coworkers within the subsidiaries here in Sweden and give them the courage to say no to poor margins businesses and say no to things and not chase the top line while losing on the bottom line. So it's a lot of hard work also organically or what to say, operationally here during the last year or so.

Yes. Good. Next question comes from the same person. Even though your free cash flow profile has improved a lot this quarter, but a lot of it came from gross margin expansion and release of working capital. How do you think of your company in terms of free cash flow margin going forward?

Also rough numbers.

We acquire companies. I mean, right now, in the group, we have companies still that are both underperforming when it comes to margins and underperforming when it comes to free cash flow and underperforming when it comes to other things as well that are things that we are working on, have been working on and will continue to work on.

But going forward, if we allow ourselves to look into the medium-term future, we acquire -- we want to acquire companies, and we want to own companies that have a result and free cash flow that are more or less the same. Of course, due to accounting, they might not be the same every quarter. But over time, over a year or so, we would expect these companies to match free cash flow with results.

The whole business model is based on -- I think you wrote about that. I mean, cash is our raw material. So we want to acquire companies that have a very light balance sheet. It means that we don't -- they don't need to reinvest in a lot of CapEx. They don't need to hold more inventory than they need. They don't need to be overly kind when it comes to receivables, which means that whatever they split out, we use that to acquire new businesses. So that is how we think about it going forward.

But free cash flow will jump between the quarters. Some of the quarters will look bad and sometimes it's because maybe they were bad. But when it comes to the working capital, we have some companies where we're trying to be opportunistic. So, when prices are good, we will be buying them in. And then they might be sending out the stuff next month. But over a year, we expect the free cash flow to be imperative with the results.

Going back then to the e-mails. We have a question here from, [ Marcus ] a private investor. He's wondering lower earn-outs suggest acquired companies are underperforming initial expectations. Was the issue overall overestimated synergies, weaker markets or integration friction?

You talked a little bit about this before. If we look at the group as a whole, my take -- our take is that the group we acquired last year, the year before that, they as a big cohort are growing as we want them to. However, there are some companies that are underperforming a little bit compared to the expectations. There are some companies that are better than the expectations. And due to accounting, we do a revaluation of the earn-outs, but it only goes -- overall, it only goes in one direction.

Next question is also from the e-mail. It comes from [ Mergim ] how do you view the opportunity to continue acquiring companies in Sweden, the U.K., the rest of Europe, given how many competitors there are in the same space? How do you view your business model? Are you exclusively to acquire of industrial manufacturing companies? Or do you see other ways to expand into other areas such as software, investment, et cetera?

We try to stick with what we understand. It doesn't mean that we know everything about all the companies that we acquire, but we understand the business model and we understand the need of the product going into the market.

Over the years, we decided to focus on physical products, meaning that we are not acquiring up until this day, software companies or consultant firms. If we support our customers with support, it's always in addition to a physical product that everything centers from. That's our -- that's how we see our business model, but it's definitely not only industrial manufacturing companies. It's companies that has a very narrow niche where they can dictate the terms for that little piece of the market when it comes to knowledge and application know-how and where we can supply true customer value, which means that we hopefully can have a reasonable margin for what we deliver.

And we see a lot -- going forward, we see a lot of more potential. We find these type of companies, and I don't see the reason why to look into any other niche at this stage. This is a rather broad niche. We find companies in all different sectors. We constantly find new -- we constantly find companies that are experts in a product that we didn't even know existed before we learn about that company, which is also not only interesting but also very fun and keeps you alert and keeps you constantly questioning your knowledge about society because you always have to learn new things. You get humbled by doing business like this.

We're looking at companies that know a lot about their product and the application where they're used, meaning quite oftenly that they have extensive skills when it comes to standards around that application or that product, a lot of certification, like hurdles and moats for competitors come in. It doesn't matter if the total market is rather limited as long as you can dictate the terms within that market sphere.

Good. I didn't listen for the last 30 seconds. Thinking... What I should say?

I recognize that because if you would have been listening, you would have wanted to add something. So by talking about what type of companies we're looking at and that we decided to focus on companies that sell physical product to other companies. That's what we do. But we do that in all industrial niches, definitely not only manufacturing industry.

No, exactly. It seems that solves real problems and cannot be taken away by anything due to the loss of physics.

What I was thinking about is strange to think out loud in a live session like this. But Johan and I, as people, we -- it's up to you to judge. But what we always, always try to do is to be transparent and genuine about everything that we do. We always try our best to focus on earning money and creating value for the long-term shareholder. And that is on the basis that we do everything by the book and ensure that we follow legal ramifications and our ethics and morals.

As I said, that is what we're trying to do. It's up to you to judge if you believe in that or not. That is also the reason why we have an open Q&A so that anyone, no matter if you like Teqnion, if you love Teqnion, if you hate Teqnion or if you just hate us personally want to join in under maybe a synonym anonymously and write things in order to do whatever you want to do.

So, as you probably have seen, there are a few people that are focusing a lot on the Irish court case, as Johan said, we will only comment on that when it's appropriate to comment because we cannot say what other people should do, but we always will follow the rules and the processes, and we will update when it is suitable to update.

What I want to add to that is we will continue to be open. We will continue to have open Q&As and be open for discussions so that people can send in whatever they want. But I also want you to know that there are certain people out there that are doing whatever they can to pressure Johan, me, our families, our employees, our CEOs in personal capacity to scare us, pressure us, frighten us, whatever you want to call it, in order to cave in and give away Teqnion's money, your money to other people.

We won't do that. We will continue to follow the legal rules of the countries where we are in. We will honor the jurisdictions. We will honor our moral compass. So you can please continue to do what you want to do with your lives, but we will continue to do the best for Teqnion. And that's the end of the Irish piece of this. Sorry for that.

No, fantastic. I agree with everything you said.

Going back to this then, we have a question from [ Kolappan Pillai ] in Teams. He is wondering, are we done with repairing low-performing companies? Or are these low companies continue to drive organic growth for a while yet?

Unfortunately, we will never be done with it because we moved the goalpost all along. As we, as a group become better, we're also going to make sure that the tail also needs to perform better in order to fulfill the obligations towards the Teqnion Group.

So, yes, no, we're not done. Yes, we will always continue doing this to improve the individual subsidiaries within the group. I mean it's fun to improve businesses. That's what we do.

Right? Yes, exactly. Greg, a private investor is asking, thanks for the great job and the transparency. One question from me. What is your dream acquisition?

I think we missed it. I never look back because I'm -- that's the personality, I think, so I don't cry over things that could have happened. But we -- Daniel has a fantastic nose for finding very niche, very good companies driven by fantastic entrepreneurs. And sometimes we are not the right taker for them. So we missed a few of those. And some of them I sometimes think about when I get confronted with their products.

But our -- the future is so long and so fantastically bright because we will always adjust our ways of operating due to our size and our abilities, and we will find the most fantastic company going forward. I'm so confident in that. And that's, of course, one of the big drivers of just pushing energy into us to just continue doing this because we know that we can do more and better, and that also goes with acquisitions going forward, of course.

Yes. There are so many nice companies, and it's difficult to say what the dream is. I mean, just yesterday, I think I told you about I had Olympics on when I was thinking about other things and then they were doing curling. And then I thought who makes the stones. And apparently, it's a Scottish company that makes those stones.

It's Scottish granite, right?

Yes, exactly from an island outside of that where they have a lease until 2050.

Yes, okay. Okay. 2050, we have an opening.

Exactly, exactly. That will be fun. I think they call [ fireclay ], whatever. And just for information, finding interesting companies that could suit our group is it's fun, but that is not our USP. There are so many companies out there. There's Google out there. So giving away some thoughts about what could be an interesting company, that is not what is building Teqnion. But otherwise, I think we have a lot of really good, great companies in the group. I think it will be fun to build a little bit more within those niches find more similar companies that can become friends with each other.

Yes. I thought of one of those aspects the other day is we have several companies within the group where I would love to work operationally. It's so fun products, so nice teams, fantastic management. So the dream company to acquire, it's constantly going to change because we change and the world around us changes, but the opportunities are extensive.

Yes. We have another question here from Prakhal in Teams. The backlog jumped 50% in fiscal year '25 year-on-year. How material is it to look at this?

I think that it's important to view it not in a vacuum, but together with everything else. I mean, everything equal, that going up is good. We, of course, have a lot more granularity regarding which companies have increased it. And as you know, the profitability of some of our companies are really, really great. Some are at a 50% margin EBIT and some are far from it. So obviously, the former group's backlog growing is much lighter compared to the second. But that is not something that we disclose. But of course, that going up is a good thing.

Next question comes from [ Arthur de Munck ] Sorry if I mispronounced that. Congrats on the comeback. That is worth D- for me.

Thank you. I don't really agree, but thank you.

In the beginning of '25, you gave some insight about the amount of acquisitions you expected, which became a record for the year. How do you expect it to be 2026 without going into specifics?

A handful.

Yes. No, I think, going -- without going to the specifics, we will put more focus on doing acquisitions. We have...

Yes, sorry for interrupting. One great effect, and maybe we didn't touch up on that today in the call. But of course, as we structure the organization in a much better way, it frees time for Daniel and for me and for Jonathan and for other people at the headquarters, which means that we can actually do more of what we're supposed to be doing and in Daniel's case to search up great acquisitions. So that is a huge advantage that we gain from the new organization.

Yes. But also just keep in mind, we got a question earlier from [ Veronika ] regarding the usual time line. So let's call it that a normal acquisition takes 6 to 12 months, which basically takes us into Q3, Q4 2027 for a normal acquisition. We did one in nine years. Last year, I thought we will buy one after 13 years of discussion. This year, I think we're going to do it after 14 years of discussion. So...

Maybe next year, it will be 15 years.

Exactly. Jokes aside, we, of course, internally have some thoughts about what could be realistic to get this year, but it moves a lot, usually not because of us, but mostly because when sellers feel that they are ready or not. And it has to be feel really, really good for them because otherwise, we don't think it's going to be a good match. But what we're doing now will lay a foundation for a more optimistic and more attractive sales -- sorry, acquisition pipeline. going forward that some of that will happen '26 and some of that -- most of that will happen later.

We got through most of the questions. I see that it's 2 minutes past 8:00, past 08:00 -- sorry, 09:00. So, with that, do you want to say something before we...

I just want to thank you all for listening in. It's fantastic that you're interested in what we're doing. And we see that we have a much better platform. Maybe that's the big takeaway from today. We have a much better platform to scale from, and that feels great for us and the team.

Thank you, everyone, for joining, and look forward to see you again in a few months.

Thank you so much. Bye, bye.

Bye, bye.

Good morning, and welcome, everyone, to Teqnion 2025 Q3 Q&A. Thank you all for joining us today. We want to give you as partners and interested parties the opportunity to understand your business as well as possible. We will, during the next hour or so, as always, alternate between the questions that we have received on our Q&A e-mail and the ones that you can send in here live in the Microsoft Teams function. [Operator Instructions]

Before we jump into the Q&A session, I would like to hand it over to Johan for a short summary for the quarter.

Hello, everyone. Thanks for listening in. We're here again with myself and Daniel in Daniel's room in our Teqnion office here in Solna. Q3 was a period of continuous improvement tasks for the entire team. We've been implementing the previously reported changes in the organization and the procedures that we now use and work according to. We come quite a bit, which is shown in the figures. It's a better EBITDA and free cash flow. This is positive, but we have a lot more to do, and we will never be content. Very little business comes easy these days. The economy still shows plenty of hesitation. Our coworkers has to work really hard to get the sales that we show. And I mean, in a headwind like this, it's just to work harder, and we are we're ready to do so.

During the quarter, we're very happy to welcome 2 new subsidiaries into the group. Both of them are located in the U.K. First, Birketts Bogmats, who's a business specializing exclusively in the supply of hardwood timber bogmats, fantastic product primarily for infrastructure work and HT Servo, which supplies high-precision servo components and systems to the U.K.'s leading aerospace and defense industries.

As we informed you in press releases last week, we decided to seek appointment of provisional liquidators for reward catering. Partly as a result of this, we have made a goodwill impairment of SEK 73 million. And yes, so it's been a lot of things happening through the quarter, and we're happy to try to answer the questions that you have sent in and what you maybe will supply during this call.

Yes. So we have received quite a few questions about different topics. Two popular topics have been goodwill, how that works. That questions have come in, in different shapes, of course. And then we have also received a couple of questions regarding how we can be better at due diligence, why we didn't see things going wrong earlier, et cetera. So instead of reading those questions up maybe 5, 6, 7 times, I thought we could maybe elaborate a little bit on that just that.

Yes. Maybe to start off with -- when it comes to goodwill and how that works, according to IFRS, goodwill is not tied to a legal entity. It's tied to a cash-generating unit. And when it comes to this, as long as the operation continues in other units, the goodwill can and should be transferred accordingly based on the documents and rational method that reflects where the value will be created going forward.

So I mean, goodwill is a specific thing. I wrote something about it in the Q1 report in 2024. But it's -- goodwill consists of those things that is very hard to actually differentiate out. It's the experience, human drive and knowledge with and between employees in one of these -- or some of these cash-generating units, which means that it's a very important asset, and it's an asset that it's hard to define in a balance sheet. It's hard to put humans on a balance sheet more or less.

Yes. And just to make it a little bit more concrete. Of course, you know this as professional investors, but just for the benefit of everyone, a cash-generating unit can be a group of different entities. So in our company, at Teqnion, we usually say that we have roughly 40 different companies right now that is not fully recruited because certain of these companies, we call them companies, but they are actually small groups of several entities because they have a subsidiary in another country or for different legal reasons.

And when a group like that -- when a group of, for example, 3 companies that work very closely together or actually is a conglomerate in itself, if one is removed, the actual know-how can be transferred to the other ones. That's a short crash course in IFRS CGU, goodwill accounting.

I don't know. When it comes to the DD processes that we perform, we take that extremely seriously and put a lot of effort into that, and we've been doing it for almost 20 years now. Most of the time, maybe it's worth noting that it works out just fine. And we tend to find things that might be bad in the future, and we can walk away or we can mitigate that risk in other ways. But in this case, we have made a mistake, obviously. And just to talk a little bit about maybe what we learned from this particular case is that we use a third party for making reports for us when it comes to the different part of the DD work. Maybe we listened in a little bit too much on that and left our own guard a little bit too low. We will never do that again.

I know that we -- I speak for both of us when I talk about these things. We also put into our procedure that we do a personal background check on the specific vendors. We have always been very thorough when it comes to checking the background of the legal entities and the companies in question. But nowadays, we also take that into the actual individuals who are part of this transaction.

We also make sure that nowadays, we take control over the different systems much, much earlier on in the process. So we have full insight and full control over IT system, bank control, things like that. Everything is much tighter when it comes to those things. And if we see something going forward after a transaction, we are much faster to step in and take action on those topics. Those are a few things. I don't know...

Yes. I think we could unfortunately write a book about things that we can get better at. And for ourselves, we've done that, not a book maybe, but the learnings have been a lot. It has been the biggest mistake that we have done. And I think that, of course, part of it comes down to the due diligence and acquiring the company and -- but a nonsignificant part of it has been the operation of it or the nonoperation of it afterwards. So that is equally important to bring up as a lesson learned.

And as I said, this mistake is ours. That's us owning it. However, we do want to point out that we will, in the future, make mistakes as well. Not this mistake, not mistakes that looks like this, but other ones. But what is important, of course, is that if you believe in Teqnion as an entity, you hopefully will invest in a portfolio that we have said looks like it's -- we're getting back our money in 5 years and much more after that time period.

Shall we move on to -- sorry, one more thing.

Maybe touch upon -- I mean, we are in legal procedures in Ireland. And we mentioned this before, and I would like to emphasize that again that we do not comment on ongoing legal proceedings, and we fully respect the court's request that all discussions remain within the legal process. Yes. And I hope you respect that.

When we have information to give and when we're allowed to give that, we will do that through our official channels. Yes, we'll stop on that.

Related to that, we got our first question in the Teams chat. It's coming from [ Nai ] who is wondering what didn't you see at Reward Catering at Hemet? And what did you learn from this experience?

I think touching upon the first point, we -- there's a lot of things we could have done better, should have done better and will be doing better. I think the biggest point is that on the first part of the question, we have strengthened our due diligence on the people behind the company a lot. And -- during the 3 years since then, we have actually walked away from various companies, I would say, roughly 3, where we have felt indications or seen indications that company looks all solid, but where there have been shaky personal backgrounds. And in those cases, it's just not worth it.

I don't know if we're going to say a few words about Hemet. Hemet is building wooden houses for customers that want a really customized home here in Sweden. It's been really good when the economy was strong, and it's been extremely poor when the economy had been poor. We're still struggling a lot there. We have a plan on how to make that better, but we couldn't defend the entire goodwill post there.

So the plan is started to be executed, and we have an idea going forward. Maybe worth mentioning is that we -- we are not looking to buy any more companies in that sector. It's -- I think I touched upon this before, but I love the product. That shouldn't inflict we buy the company or not. In this case, it's a very volatile business. Some years will be extremely strong, some years will be extremely difficult. And it's not for Teqnion going forward to be involved in businesses like that.

So we got an e-mail from [ Keith ] through the e-mail saying it's a 3-piece question. So first part is your target with your M&A is to get your money back within 5 years. For the companies acquired more than 5 years ago, has the target been met collectively? Why or why not?

This is a question that you love, right?

I like the question. You wrote a little bit about that in the CEO letter. We focus -- when it comes to acquiring a company, we try to get our money back in roughly 5 years. But what is really great with what I believe is really great with this yardstick is that we buy companies that don't need to tie up money in -- on the balance sheet, very little CapEx, very little inventory, et cetera.

So after the 5-year period, the cash flow that comes out becomes just cash going to us compared to buying a machine where you get your money back in 5 years and then maybe you make money in 3 to 5 years more and then you need to buy a new machine. Here, we don't need to do that. It becomes this perpetual magical cash flow machine that we get cash from as long as we are doing the right thing.

So for the companies that have been around for 6 years, 10 years, 15 years collectively, yes, we have gotten our money back in 5 years. But more importantly, for a lot of those companies, the return on investment number looks really, really, really good. I think you wrote in the letter that we have a few companies now that are actually making a lot more per year than what we actually paid for it in the beginning, including all earn-outs.

It's maybe to just point out what we're trying to do is that we continuously try to just improve the companies that we have within the group. And if we do it correctly with small changes throughout the years, we going to sooner or later have really, really good cash-generating entities that we have -- that we now have from companies that we own for a very long time. And those companies, of course, generate more than -- more in 1 year than we paid than we bought them. So that's the way to do it, of course.

Yes. The second piece of the question for [ Keith ] is any data you can share with respect to the returns on M&A since 2021, roughly the time period since I joined Teqnion, I assume Daniel. Yes. So I think we wrote a little bit about that as well. Collectively -- hitting me. Finally -- collectively, yes, they look good at getting to the 5-year yardstick as well. The companies -- most of the companies were acquired recently, of course. So while I'm happy to say that the companies that we bought this year are tracking on target or actually a little bit above target actually, but the statistics are just so little. I mean, some of the companies we bought a month ago and some 8 months ago, so it doesn't really count.

But if we look at the companies that we acquired 3, 4, 5 years ago, and that would include, in this case, our Irish company, it still looks like we're hitting our 5-year target. And of course, that's because we have a portfolio of them, where some have done better than what we believe in the beginning. Do you want to add something?

No, I just feel that like it's a question that I totally understand that is coming in because we have -- whenever we talk, whenever we report, we focus on the things that we are not happy with or we tend to anyway. And maybe that's who we are as individuals. We're trying to fight to make everything good. Not everything in a group like this is going to be good all the time, but now we've been -- the portion of companies performing poorly has been too big, and that's why we focus on that so much, talked about it and reported on it.

And hopefully, we can show you a little bit of improvement there now. We're far from happy with where we are, and we know that we can do so much better. So we're working towards that. And I think that you also see through the figures that there's something in our group that is performing extremely well, some things -- the most part of it, of course, but we tend to focus on the fraction that is not...

Sorry about that. The third question here from [ Keith ] saying that Teqnion has acquired 9 companies in 2025, roughly double the number in any prior year. How will you know if you have acquired too many too fast, i.e., will you know beforehand if you have the management and processes in place to successfully integrate them all?

It's a very good question again. I think we have managed -- we have communicated internally and externally that we target to acquire roughly a handful of companies per year. And if we look back 4, 5 years. That's what we achieved now with the bulk this year. So -- and we have also changed the way we work. We changed the organization here at the head office, and we are working in an updated version of the old Teqnion. We're keeping the culture, but we're making it more efficient and more structured, and we see that we have so much more potential in scaling this today than we just had a year ago.

So I feel very confident with the pace that we performed and also what we are aiming to do going forward. So -- but knowing 100%, you can never know, but I feel very confident at this stage.

I think one interesting thing to add there is that, of course, -- as an investor or an outsider, it's easy to focus on the number of acquisitions. It's more difficult, of course, to see the quality of it, especially on the soft side. You know, of course, that all companies come in different shapes and various different soft sides as well. I think that the companies -- I believe that the companies that we have bought this year have a higher quality. We also have more high-quality capable people internally, as you mentioned, that can take care of them. So -- and have been prepared for that we would acquire more companies this year.

So this should not be any problem when it comes to integrating the companies. I think that obviously, if we bought low-quality companies with a lot of management troubles and problematic people, then even one company would be too much. But 9 great ones is no problem compared to problematic ones.

And going back a little bit to what we discussed before, I do believe that we have gotten better when it comes to due diligence. And of course, now we also buy companies that on average are a little bit bigger and have better processes, governance in place, which should be helpful in scaling up when it comes to the numbers of companies.

And that way of walking just towards something better and better is, of course, something that we tried to do all along our history and it's going to continue to do going forward as well. I mean it's a natural step to step up when it comes to acquisition as well. So we continue to say that we're going to acquire roughly a handful of companies per year going forward. But the natural way would, of course, be to buy better and better and bigger and bigger entities, that handful.

Yes. We've got a question here from [ Volney ] on the chat. He's wondering how do you find so many companies in the U.K. now? Is it word of mouth? Or do you use brokers there? No, we don't use brokers. We don't have any buy-side advisers on our side because we want to represent ourselves. We want to do it ourselves. There are, of course, various upsides of using buy-side advisers, but we have found that our way works the best by doing it ourselves.

But word of mouth is absolutely, I think, the biggest piece. When we started out acquiring companies in the U.K. 4 years ago, it was actually very, very difficult. Nobody knew about us. We speak English like this. And we didn't know, to be honest, how to actually run a full process in the U.K. So I mean, the first calls were very difficult, cold calls when we try to explain that let us buy your business. We don't really know how to do it, but let's figure it out together. That's a really hard sell.

Now more and more have gotten to know us, more and more sell-side advisers have learned that it's actually fun to work with us that we keep our word, et cetera. And I think that's really the biggest thing when it comes to scaling up the cases in the U.K.

The second question here from Walden is, did you consider buying just a portion of a business, for example, 80% and leave 20% for the founders who want to stay in the business? I know Roko do something similar to that.

Yes. Look at the track record of Fredrik Karlsson at Roko, he knows what he's doing. I think I heard or read somewhere that the best performing companies within [ LIFCO ] was owned that way. But I think it's -- for us, we have always acquired 100% to make a clear cut. It's very -- it's obvious to everyone involved who is responsible for running the company going forward. We have been an incentive for the sellers in earn-outs that is very, very strong normally. And we've seen throughout the years that this is a very good way of doing the transactions. I strongly believe in it.

I think there are other ways that are good as well, but we stick to this way. And I think others can perform really well in other ways. Maybe not a really clear answer, but I think it's very important to stick what you know and stick to what you believe, and this is something that we know and that we believe in. And we've seen different outcomes of this procedure, and we love most of them.

E-mail question from Davis. Congratulations on all of the seemingly great acquisitions completed this year. I was particularly encouraged by the MITAB acquisition. I think it was that came about due to your building the relationship over many years. Yes, that is true. I really appreciate all of your team's hard work over the tough stretch. It will pay off.

I have a question that you can address in the next call if you think it's worth talking about. Sorry, that was the Roko question again. Sorry for that.

Next one on e-mail is James. There's been very many successful programmatic acquirers in Sweden and indeed elsewhere. They look to buy only from missionaries. Have you ever considered acquisitions in these terms? And just for the benefit of everyone, the letter is longer, and there's an explanation about the difference between missionaries and mercenaries. Simplified mercenaries are people that jump from company to company and missionaries are the ones that stay on for one company for a long, long time, maybe forever.

You look at me as I'm supposed to answer this.

The missionary...

Maybe the original one. No. But I think normally for our way of work is that we mainly buy from missionaries. It just comes that way. But we come across the mercenaries as well. Most of them fall short when it comes to the process when we get to know them because we know that they are not looking at the world the same way as we do, long-term small improvements, owning forever.

But of course, it doesn't rule them out as vendors to us by that fact. You can actually come across fantastic people that are really good at what they're doing and have a lot of experience under the belt. And why say no to them. It's more to make sure that you do -- you have a rigid DD process where you catch everything that might be a problem going forward.

I think, of course, it's also a scale between mercenaries and missionaries where you can be kind of both.

Yes, you're not -- I mean, it's always a great scale.

Yes, exactly. And my point just going to that, we don't buy from pure mercenaries. We don't buy from anyone that have started a company 3 years ago and then we buy it. We want longer track record than that. We've done a mistake when it comes to that. But if someone did something else 20 years ago and started a new company 15 years ago and done it well, that if everything else is fine, fine for us.

Absolutely. And maybe I didn't touch up on that when I talked about the DD process. I mean we have acquisition criteria that we strongly believe in, and they should be fulfilled in order for us to proceed towards a business deal. And in the case when it comes to Reward Catering, we just didn't follow our own criteria in -- at least in one aspect, and that was to acquire companies that has a long solid history. That is, of course, really important, and it comes into play in this question as well.

Yes. We've got another question here from [ Karl ], who is wondering how much of the margin uptick year-to-year, would you say is strictly a function of the recent M&A? And how much is due to organic improvement on the cost side, mix, et cetera? Possible to break out the organic EBITA growth year-on-year question mark? Should this pace of EBITDA growth also continue in the next couple of quarters? Or is there any material seasonality in the recently acquired entities we should keep in mind? There's a lot of factor.

Yes. I can -- I caught a little thing that regarding looking forward to what we're going to earn, we don't give forecast. I can just put that out there again.

Yes. No. We haven't reported on the organic EBITDA piece. What I can say is that, of course, you have seen probably on the whiteboard that margins of the companies that we acquired this year is very good and of course, a lot better than our average in the group, and that is part of our business. However, we're not satisfied with our organic bulk, but there is a little bit of happiness that even them have improved organically, and that is a trend shift if we look at the numbers. We knew, of course, based on organic operational changes that we've done that this would come. But now it has started to show in the numbers as well, which is nice.

There is a part of the question when it comes to material seasonality of the acquired entities, one should keep in mind. It is interesting. When we look at companies, we try to look at companies that we don't have too many correlated risks and seasonality is, of course, one of them. There are certain companies there that absolutely do not have any kind of seasonality. It's just project driven. I could mention HT Servo as one of them. We have, for example, Norlin Polymers, which is a process industry where you would expect to tick along like a clock on a -- maybe not on a daily basis, but almost apart from where they close for vacation.

And then you would have companies like Birketts Bogmats, where every time it rains in the U.K., you would expect their revenue and profit to go up a little bit. And then you would have companies like Edurus here in Sweden that is probably the most seasonal one where they sell tombstones and also install them. And due to the weather conditions here in Sweden, they do most of their work during the warmer seasons because it's too cold and then too wet in order to do it. But as some kind of summary to your question, I would not expect any significant seasonality.

All right. Next question is coming from e-mail. George, who has read the book, the compounders, a book from REQ Capital. And there's a couple of quotes here from Annvik, who is the CEO of Indutrade. It says here, Annvik has also managed to improve processes and professionalize governance, developing people in-house to take on internal Board positions, a vital necessity as new companies are added to the group. How have you, with your experience and personality made Teqnion a better company? Do you want to start?

Yes, I can try. I've been here since 2006. This Teqnion is most of my experience, personality maybe. If it's been better, yes, well, at least it's bigger, and it's a more mature company now than 20 years ago, of course. But of course, the key to building something is the team and the people and constantly trying to be better yourself and facilitate a culture where people want to be their best and constantly try to do better and encourage each other to do so and keep the target clear for everyone, which is to just create more profitability and create more wealth with the means that we have. It's a very fun sport.

And if you can keep the happiness and keep the drive intact, I think there is no limit to what you can achieve. I mean, someday, probably there will be someone saying that you're too old. Maybe I would hate that day, but maybe someone else has a better drive right now, I feel like maybe -- I don't know, it's strange for me to talk about these things, but I feel I may taking on better because otherwise, I wouldn't be in this position. I would step aside in one second.

Yes. I don't know if I should add something to that, but...

Add a lot, please. I don't know what I talked about.

I think that we want to win a lot. And it is very helpful to be 2 people or more that really want to win compared to being alone and wanting to win. It's different.

Can I add just one? And if it comes to the question, if we have made Teqnion better, it's easier for someone to look at Daniel and answer that because you can just check what the company was worth when he started in 2001 and look what it's worth today and see what -- how the company has evolved during these years. And the answer should be really clear for everyone.

I think that one thing that we do well as a couple is that we let the best ideas win. There is -- we really, really try to keep the ego when it comes to that to an absolute minimum. And one thing that I do believe that we are good at is to find good people. We try to figure out what is important, what makes Teqnion tick, what makes the shareholder value go up over time, and then we find the very best people to do that. And I think simplicity, there are maybe 2 type of people, either you hire people to try to be kind of your assistance because you want to keep your role and feel more important or you try to employ people that are actually better, way better at what you're doing at certain tasks, of course.

And I do feel that over the years, we have had that. We have David Barton now in the U.K. who has my partner, Linea asked me the other day, why don't you travel to the U.K. as much? Well, I'm not neither there to the same extent because we have David now. We have Stephen here as a head office who is doing wonders. And we have various many people here that weren't here many years ago. And the effects of that are being shown in this quarter and even more so going forward. And I think I hope that should be some kind of contribution.

Next same person, acquisition structure. When will you start to do small bolt-on acquisitions on top of the current niche isolated companies? At what size and years down the road do you think acquisitions will have to be delegated at lower levels? I think it's a very interesting question. We are looking at bolt-ons every now and then. The thing is that in order to do a good due diligence, the process is very similar. It's still the same things that we need to go through whether or not the company is making SEK 3 million or SEK 20 million or SEK 30 million.

So of course, from a time efficiency standpoint, also when it comes to integration, it's the same steps and processes. buying a bigger thing is usually more cost effective and more value creating. Of course, a bolt-on can be big. A bolt-on can, of course, also be bigger. And we -- yes, we're looking at that, and I would not be surprised if it did happen in the time going forward.

And it has happened in the history of this build. But we don't rule anything when it comes to acquisition out. I mean we constantly and organically moving forward. And down the line, I think we're going to see new ways of building this group bigger and stronger and more profitable.

Yes. When it comes to M&A delegation, full delegation will probably not happen in a while. And there's a couple of reasons to that. One is that it's -- right now, it's not needed to come up with cases and run the processes is not the bottleneck. And we have CEOs that are very, very focused on what they are doing, and most of them are really focused on getting the ship better and better and should continue to do that. A few of them actually have the interest or experience when it comes to M&A. So when it comes to resource allocation, we would like, of course, everyone to do what they are best at. Yes.

Yes. And one day, we're going to have people that are present then you maybe not.

No, we should have that. We should absolutely have that.

And then they're going to be added to the team or do it from wherever they're located in the group.

Exactly. A live question here from Valentin. As far as I know, this is one of the first times that 1 of the 3 financial targets, specifically doubling EPS every 5 years, including the impairment have not been met.

Yes, that is true.

Are there any incentives tied to the goals in general? Or is it more of a guiding benchmark to aim for? Do you want me to answer that?

Do you want me to answer that? Yes, it's incentivized that if we don't fulfill our financial targets, there are no bonuses paid out. So that's a clear incentive. It's also -- for us, it's a bar that we're going to jump over. It's one of the most important bars for us standing in front of you today to make sure that all the shareholders get the highest return on their investment. And we believe that this target is one of the most important ones. So we're not happy with this, and we're going to fight effortlessly to just achieve better.

Yes. This is maybe a strange thing to say, but taking off my Teqnion management hat and putting on my Teqnion investor shareholder hat. Of course, if the management doesn't fulfill the financial targets over time, please buy them. That's also some kind of incentive.

Next e-mail question from Bibranium, e-mail. That's a really cool name. I'm an individual investor from Greece, been following Teq for the last couple of years, and I'm a shareholder. I would like to ask if you have any insights on the impact of AI in our companies in general and particularly that on humanoid robots. Do you want to start on that?

I don't know if I want to start on that. We're doing a little bit of help from the chat bots, and we -- and we see the potential in quite a few of our subsidiaries using more and more AI generated tasks. We are in the process of looking at that, where to start and where to start learning in which or which subsidiaries. Most of the industries that we are working in are very far behind when it comes to this technology, which means -- or at least I, we feel that we have some time. And even with that said, I think we might be ahead of the bulk going forward.

And when it comes to humanoid robots, I think we wait a little bit with that. We need -- we have plenty to do with not so humanoid robots for quite some time.

Good. Next question from e-mail comes from [ Yang ], who is a French investor. He has a simple question. You're investing in industrial companies in less promising continent for industry, Europe. We will probably run out of energy and raw material. This will become a growing concern in a few years probably. It's starting to be difficult to be an industrial in Europe with economical war in place and geopolitical trends and opponents. I know you're investing in niche only and you don't think that much about macro. I know AI is not the main focus for small industrial companies, and that's good, but it can improve the efficiency in many ways. How do you deal with all of this?

I think as this person -- also Europe is standing in front of a lot of things to address some problems going forward, of course. But we also have to consider the drive and the ability of humans to just work around problems as we've seen many times and maybe we saw it really clear during the COVID period. We tend to acquire small companies that Daniel mentioned that are not doing much of their production themselves, mainly design and acquisition knowledge and selling very niche industrial components into other industries, preferably very important applications that are necessary to run the society forward.

I see -- if Europe is struggling, of course, we are also going to have some headwind, but I think that we will be positioned a little bit better than the more industrial manufacturing side. We have -- we are always looking ahead to see where we have to adjust in order to be relevant in order to make sure that we always make money. One little way maybe you could squeeze into this discussion is that we're setting up a sourcing office in China now to make sure that we always have access to high-quality, good priced goods.

And maybe in the future, we will see that we can do something similar in other parts of the world. And also it shouldn't be so strange if we, in 10 years from now, also have subsidiaries in other parts of the world as well. So just making sure that we have a differentiated group and that we spread our risks in different countries in different segments and will probably mitigate some of those risks.

Yes. Good. Next question comes from [ Lucky ] through e-mail. Happy to hear that we are over the bump, keep up to good work, nice turnaround, more acquisitions, more U.K. companies, larger and better. Three questions. What is the current environment for competition when it comes to acquiring industrial niche companies in U.K. and Sweden? Secondly, who is the -- what is the purpose of the sourcing office in China? Maybe start with those 2.

When it comes to the acquisition climate, obviously, I know most about Sweden, the Nordics, U.K. and then every now and then, I do speak with someone outside of these geographies just to start learning about the processes. I don't think that there has been a lot of change in the last couple of years. There seems to be still quite a lot of money that are interested in being put into use when it comes to acquiring small industrial companies. And I think that's mostly Sweden and the Nordics.

I think the U.K. is still quite similar as it has been for the last few years. But of course, overall, the climate has been more -- people have been more interested in buying these kind of companies compared to maybe 5 years ago or 10 years ago. I do not think that has a big impact on us because we buy so few.

Yes.

The purpose of the sourcing office in China is a little bit like Johan discussed previously and maybe it goes back to what are we doing with our experiences to make the company better. Obviously, there's a lot of things that we are not good at, but we try to lean in into those things where we do have certain natural advantages or maybe almost unfair advantages.

I come from China. I speak Mandarin, I have worked quite a bit with sourcing in my previous life. And through that, we have found out that there are huge opportunities when it comes to bettering our price, better in our products, better in our processes, liquidity, et cetera, if we do it right. And it's impossible to do all of these things right with a country far away speaks a different language and more importantly, have a different culture and think that all of our small companies should have an employee that understands this.

So we have tried a little bit with certain companies over the last year or so and felt that the results have been very, very promising. So we hired one guy sitting 5 meters from me, who is the best I've seen when it comes to these kind of things. He's absolutely smartest guy in this corridor. And we're also setting up an office in China. So we have boots on the ground, as people like to say, because you need to be close.

Yes, we don't know exactly how big that office will be. From a cost perspective, it's not going to be a cost. They're going to save much more than let's say what we invest in people there. And then we'll just scale it up in small steps depending on how much value-adding work we find. Good.

The third question there, just to have that completed. who are the 2 people in the picture on Page 27? So that picture in the quarterly report is 1 [ Carl ], 1 Johan, 1 Daniel.

Next question comes from Fabio through e-mail. Great results. I have seen that you have made some changes when it comes to CEOs. Who is your best CEO?

We have many, many best CEOs.

Yes, difficult to judge. Difficult to judge. I want to say certain things, but I'm not going to do that. I saw a study online about the correlation about strength training CEOs and performance. So my question is, how much do you bench press?

Less than my youngest son.

I'm not sure what I do on one rep. I do, I think, 120, maybe 125.

On an angry day.

Maybe more on angry day, but then I break my hand. Mark on e-mail is wondering, Johan and Daniel sharing my question for the Q&A. What specific type of companies and competitive modes are you seeking to ensure sustainable returns over the next 20, 30 years? Secondly, under what conditions would you consider using stock as a currency for acquisitions? And thirdly, how do you mitigate the future risk of company becoming too dependent on the skills and knowledge of Daniel and Johan?

Maybe try to answer it a little bit quick. I think we've covered these topics before somewhere. We're looking for companies that have this solid history mentioned that are focused on providing physical product that is necessary to run society somewhat. We prefer a component rather than a full system that, that component is just a small part of the total cost of the total system that our customer is putting together or selling or operating. And we also like if it's regulated with a lot of standards or laws to make sure that there's a good moat for competitors to come in. Those are a few things. I think we can continue finding that type of acquisitions going forward as well.

Using stock as currency, we rather use cash because we strongly believe that the stock price is supposed to go up, and it will be a very expensive acquisition after a few years if we do everything correctly. So we'd rather stick to what we have done before and just use cash.

Too dependent -- looking forward, becoming too dependent on the skills and knowledge of Daniel and myself. I think we covered that a little bit today as well. We're trying to build a team with highly skilled fantastic people, and we're not supposed to be the only ones, and we are not the only ones that provide -- I don't know, profitability into this build or knowledge into this build. And it's not going to be like that in the future either. It's -- we are a part of this. We are a part of the team. We are not a team.

I mean the trick is really, of course, when we optimize for the long-term performance when it comes to the shareholders, we -- there are a certain number of levers that are important. And for those, of course, Johan and I think about those things on a daily basis. And then we try to find people that are better at certain aspects when it comes to those maybe 10 or 20 different levers. And that takes away maybe 1 of them or maybe 2. And then we try to be better at the ones that we are left with. And then over time, we try to find people that are better when it comes to those things.

And either we become so good at the ones that we still are focusing on that we still have something to do here or the rest of the team will just take it over because they collectively are better at it. But both of those will make the company less dependent on people in here.

Well put.

I know that it's 9:00 over here, but we have a few more questions. Let's go through them quickly. So we have one live here from Pedro Leon. How good is Eloflex performing since the new CEO took over the job?

We can comment on that? One sentence, very good.

Yes. I not going to answer that question, but maybe to the question, what is a really great CEO? A really great CEO can take a company from minus 5% run rate EBITDA to 30% in 10 months, not answering that question.

[indiscernible] live is wondering why do you use EPS as a KPI metrics rather than free cash flow per share. As a serial acquirer, FCF is a more useful metric, right? Yes, I agree. We write a short, hopefully, humorous sentence about that as an asterisk on the page where you see our EPS and share price. The reason why we don't use FCS, FCF, I don't know why I can't say that per share is because on a quarterly basis, it jumps a lot. When we become bigger, it will jump less, but it's a little bit trickier to follow the company, we believe, following that measure on a quarterly basis, while EPS is more steady due to accounting regulations. But yes, that is a very relevant -- it is the most relevant metric, I would say.

Questions live is wondering, is the new sourcing office in China meaning that we're going to start looking for possible acquisitions there? Not really. The sourcing office is sourcing for products rather than companies. Would China be a potential interesting country to buy countries in the future years? I would say, more probable compared to other sale acquirers given the background and experience that we have in this room. Is it priority 1, 2 or 3 in the coming years? No.

Good. Anton on e-mail is wondering which sectors have you been -- have you seen most positive development in during the year so far?

Maybe we'll try to speed things up a little bit. But I think that we see -- we see headwinds in most sectors. The ones that we don't see headwind is the ones that you already know of, so electrification and defense maybe.

Yes. The companies that have done better this year is not because that the headwind have become a tailwind. It's because they've done more of the right things or less of the bad things. You have previously said that roughly 1/3 of the companies have been loss-making. How does that number look now?

It depends on what time period you look at, of course. We give out this information every once in a while. We're not going to do it going forward that we have planned anyway, and it's less than 1/3.

Yes. I noticed that the price you paid for companies have increased during the previous years. This is based on the numbers in the annual report for 2024, where you paid 9.5x EBITDA for the total earnings 2024. You talk about getting your money back in 5 years. Can you give some color towards that?

Is this -- maybe it's hard to do short, but we try to answer it right. When it comes to the acquisitions over a year, you can see what we have estimated to pay for the company when it comes to initial payment and also the earnouts, the earnouts mostly over 3 years going forward, meaning that if you take all that into consideration during -- how they performed the first year, it's going to look like we paid more. We have not changed the way how we evaluate the company. We are still -- we still have constructed a payment method that should give us the money back in 5 years if they perform as we together with the vendor has forecasted. If not, we're not going to pay as much.

So it's a mitigated risk we take. We pay a little bit upfront, and we pay with earnouts, which is both good for when it comes to the cash flow criteria, but also when it comes to the financial performance of that entity going forward. You will never get the correct estimate valuation if you just carve out 1 year and look at what happened in that year. We have a much longer horizon than that. And if you look at the history and as we already discussed today, we see that we for most of the time, fulfill that criteria.

Yes. Lastly, from Anton as well. I understand that the net debt divided by EBITDA of 2.0 is not on pro forma, that is correct. If you did pro forma, what would it be in that case?

I'm sorry, but once again, we're not giving out forecast.

Yes. But what we can say is that it is not on pro forma, which means that the earnings that we use in that measure is only the earnings since we acquired the companies.

All right. That's the end of the list for now. Thank you, everyone, for attending. Do you have any concluding remarks, Mr. Steene?

No, I think we tried to cover a lot, and we have plenty to do. So I think we better get back to work. Thank you so much for listening in, and see you soon again.

Bye-bye.

Hello, everyone. welcome to Teqnion 2025 Q2 Q&A, it's the start of our [Foreign Language]. Thank you, everyone, for taking your time from your busy schedules and vacation to read our quarterly report that was released this Saturday and for joining us in this call today. We will, as always, alternate between the questions that were sent into [email protected] and the ones that we get live here in the Q&A function.

Before we start the actual Q&A session, I would like to hand it over to you, Johan, for a quick overview of the quarter.

Yes. Thank you. Hello, everyone, and welcome to our office here in Solna out of Stockholm and Q2 Q&A for 2025. This is my friend, Daniel, who has worked with acquisitions and he's the Deputy CEO of Teqnion. My name is Johan Steene. I'm the CEO of the company group since 2009. Talking a little bit about the first half of the year, we see that the market is rather slow. It's been difficult to generate orders and we need to work harder to get sales. This is in the process of doing a lot of changes on the organizational level and how we measure ourselves within the group.

We are on the road to doing something that will be the new Teqnion. We have -- the group has grown quite a bit. We have -- as we talked to you about going out to 2024, we had a lot of acquisitions on the way in, we have finalized those. We have seven new companies in the group now, which is fantastic. We're strengthening in our position in the U.K. with five new acquisitions there, and we have two more in Sweden, which is really fun. It was several years since we acquired something in Sweden when we have new two great companies here.

The operational earnings as presented in the quarterly report is weak. We are very dissatisfied with that. Compared to 2024, we see that it's more or less flat. I pointed out that you should disregard the positive effects of the earn-outs and if you compare that to the positive effect of the earn-outs in 2024, you see that the operational underlying earnings is more or less flat, which is not fun, but still maybe not as bad as you can read.

We have, as mentioned in the report as well, reached the level or plateau in Teqnion now where we need to reorganize how we operate. And we have done that during the spring by adjusting how we measure the subsidiaries and how active we are when it comes to supporting them. I mean the key for us as a group is, of course, to keep the subsidiaries autonomous, they should have all the decisions made out there up to the point where they show a trend which is not good enough or it's trending downwards, then we know early on now that they are -- need for support, and we will demand from them to turn that trend around much more quickly than we have done previously.

And one way of doing this is that we introduced a new type of role, so to speak. We have called the -- our coworkers that work closely with the subsidiaries before CEO coaches. We still have a few of those, but it's -- now we will introduce regional managers. And now we have a U.K. manager responsible for making sure that the U.K. companies or the international subsidiaries perform on the right level and are trending in the right direction. And he's now based -- he's been with us for a little bit over a month. Everything looks really, really well.

It's to -- just to put some words on what that is. It's more of a super CEO coach maybe that follow up more closely on the metrics and make sure that we implement actions as soon as we see the trends turning in the wrong direction or is flattening out. So a new way of working, not introducing a new level of organization, but more of one point of responsibility and a more heavy skill set in that type of individuals.

We will probably -- not probably, we will introduce the similar role in Sweden, hopefully during the fall or in the winter, we have a plan for that, and we see that the U.K. will stand as an example on how we should organize ourselves now that we reach this level of volume. We have -- that's maybe I'm repeating myself, but that is what it is.

I have -- has also explained a frustration over that things takes time. We have implemented quite a lot of changes and a few new colleagues over the last 6 months. And we see that the things that we have done and that we are continuously doing is changing to the better our performance. Of course, it's frustrating when you see that the underlying performance of the operations is generating better orders, less costs and all of that, but it hasn't filtered through into the real numbers yet.

I will -- I'm trying to -- I'm trying not to be a negative person, but maybe that's my personality. But right now, I'm actually feeling a great deal of hope going into the fall. All the things that's been implemented and are being implemented is actually showing that if you work harder and more effectively, it actually gives effect, it's always a surprise in a rather strange way to many people. But if you actually do a lot of things, that will give you some effect. And I see that now. Unfortunately, it's frustrating that it hasn't filtered through into the numbers. But that's maybe how I would reflect on the last quarter and the last 6 months.

All right. Let's jump into the questions then.

The first email we got from -- regarding the Q&A is from David, who is wondering which business has had exposure to the U.S., what level exposure and what is the impact of tariffs.

We have -- I think we touched on this subject before. It's -- we have three, four companies that have some sales directed to the U.S. it's very low numbers. The potential is great or huge, but since all these tariffs came into the discussion we have paused or just idled those processes, projects. So the potential for the future is huge for a few of our companies, but we will wait until the rulings and the tariffs are more stable, so we know what's going to -- how they're going to affect and how they're going to hit different markets.

And to give some more color on that. So the three companies account for maybe 2%, 3% of the revenue, if you look at the U.S. piece. For one of them, I don't think that impact -- the tariff will be impacting at all volume-wise. For one of the companies, the sales absolutely have been impacted severely, but it's still a small percentage for that company and for the group. And for the third company, it's something in between, but it's insignificant for the group, even though it's not fun, of course.

Next question comes from [ Akash ]. He says, hi, Dan, Johan, what sort of net debt to EBITDA level do you think is sustainable to operate at on a consistent basis. I know that your upper limit is 2.5x. But on a sustainable basis, I imagine it's lower.

I think we touched on this before as well. But I think if we can be around 2 or just below 2, it would feel great. But then, of course, going through different development processes and stuff, of course, that can alter it a little bit, but we will hopefully be around 2.

Yes, on a long-term level. If we find a good acquisition that potentially would be a little bit larger, that will stretch that for short term, and that is -- if that's a good bet, we will not keep to the 2.0.

Can you talk a little bit more about the addition of the three new subsidiary CEOs plus one interim CEO in the context of improving operating performance?

We have a few new CEOs that look really promising. We have a couple of more coming in, in a month or so, seems to be really good people. Of course, when you do changes in companies on that level, it's going to have an impact. And in this case, we see very positive impacts. Some of them have a lot of work with and a lot of struggle ahead of them, but the trend is looking good.

A question from [ Christopher ] on e-mail. Dear Daniel and team, Christopher from Italy here. Two questions. How do you assess the quality of the increased inventories and trade receivables, just to be sure that counterparties will be good and cash collection is ensured?

Let's start with the first question. So basically, we explained -- I mean, the cash flow -- free cash flow ex acquisitions this quarter was very low, as you saw, and we're not happy about that. A part of that is explained by the inventory levels went up and that the sales actually went up for quite a bit of companies by the end of the quarter, which, of course, didn't really translate into actual cash yet, but trade receivables. So when it comes to the inventory part, looking at the companies that went up in inventory, we are very confident that it's companies that will actually be selling those inventory and translating that to profit and cash flow later this year.

And when it comes to the momentarily higher trade receivables for the companies that actually went up in sales, roughly half of that trade receivables have actually already hit our bank account as of today. And for the rest, we're very confident that they will hit later in this quarter or sooner.

Yes. And I mean in a situation where we have felt that we haven't performed well when it comes to gathering orders or receiving orders, and we push that really hard. And of course, that's going to lock up some of the working capital. So not fun, but also a natural course when we do what we do.

Yes. Second part of the Christopher question is, how the organizational changes will affect the subsidiaries and the decentralization approach that you have always followed. What are the risks of losing the benefit of autonomy? Do you want to start.

Yes. No, please start.

I think it's a really, really good question. And I mean decentralization still is the heart and the center of our business model where I think that we have not done good enough, and to be honest, far from good enough is that decentralization works when you have individuals that are doing the right things, that have autonomy to do the right things, but it's also people that have the capabilities and ownership, feeling the ownership of doing the right things.

If there is a person like that, that is running the company in the right direction, autonomy is the right to go and decentralization is the model. However, when we see and we are following this up more closely nowadays, when we see that operations are deteriorating, and we're not talking about the financial numbers, but rather more forward-looking indicators. In those cases, we need to be quicker to identify that as number one. And secondly, to ensure that the people that are running the companies are running in the right direction.

So it's really about trust, but verify. And as long as the person are doing the right things, it is an autonomy. But the more we feel that it's going to the wrong direction, in the first step, they need to explain to us why it's going in a direction that we feel is wrong, and they also need to tell us the plan of righting the ship. If we believe in that, then we support that CEO fully in going in that direction and full steam ahead.

If we try that or if we don't feel that they are having the right plan of righting the ship, then we get to a point where we basically have to draw up the map and say, this is now your journey going forward, please implement. And if that is going in the right direction, then everyone is happy. And hopefully, we'll all learn something. But without putting too many words on that, Christopher, I mean, decentralization and autonomy is really the way to go, but only if we feel that trust for the individual.

Yes. And I think it's characteristic also that you talk about feel, when we feel that it goes in the right direction, it feels. And maybe we emphasized that word a little bit too much historically because we have had the ability to handle the group when it was in the cycle volume.

Now that we are a little bit more companies, and we are in several jurisdictions, we cannot feel that much. We actually have to see it, and that's what we're measuring now. We have metrics that we actually look at, and we follow up on the metrics and not so much on how we feel. I know that you meant that. But it's just how we phrase ourselves and what type of words we use.

These subsidiaries should be autonomously run. But if they trend in the wrong direction, and the metric shows that, then we had to demand from the subsidiary, what are your actions that will be implemented to turn this ship around again. And if they are not -- if the person put in place to be in charge of that doesn't have the equipment or the skill set to do that, then we have to support and follow up on that very, very closely and much more faster than we have done previously.

Yes, we fill in data. All right. We've got a question here from [ Prakal Goel ] who is wondering how economical conditions in Sweden deteriorated since we last spoke around the Q1 earnings. What is the outlook from here? And please frame the comments from investors who is not familiar with the Swedish market.

It actually has deteriorated a bit in some segments, especially some heavy industry segments. On the positive side, we actually see -- at least if you want and if you look hard for it, you can actually see that we have some new orders coming in when it comes to building houses and from the construction industry, but it definitely has been a more difficult situation when it comes to heavy industry, big global customers are hesitating and they have struggling -- they struggle with their order intake, which just seeped down to us as well.

I think there's maybe two things to add to this. So one part is that for some industries, absolutely, if you look at a 1-year basis, 2-year basis, the economy is down. But our companies are so, so small compared to the total, so that it should not impact one to one how we are doing. I mean obviously, if you have a CEO that is just running the mill, yes, that will impact close to one to one.

But our point is and has always been that when you're running something that is so small and where you're 1% of the market or even less, you just work a little bit harder, a little bit smarter, and then you take a little bit of market share and nothing has happened. We have CEOs in our group who work exactly like that. And if you ask them, they cannot see that the industry and the market have deteriorated, even though all macro data say that, they just don't feel it because they're pulling double the weight at the moment. And that is something that we need to instill more in the group.

Very good. We got the e-mail from [ Alexi ] on email. Could you please share a bit about the synergy between your subsidiaries? Has there been any case as when one business significantly improved its margins or scales by adopting some ideas from another one?

It's a lot of commenting nowadays since we have more companies and the CEOs from the different companies get together a couple of times a year to tell their stories for each other and to get to know each other. So of course, there is a lot of, what we call, soft synergies there. I don't know if we go into hard examples, but I have a few that I really, really like and where you get influenced and get the toolbox from a fellow CEO that you can implement into your own business and actually see the effects quite quick, so yes.

It's difficult to put numbers on it, but just to give two rather concrete things that we're working with. I mean not a long time ago, we had 10, 15 companies. So it was more difficult to find real interfaces where they had natural touch points could make each other better rather than the -- other than the soft one that you mentioned.

But I mean, nowadays, when we have roughly 35 different companies, they do have natural touch points where some of them sell to similar customers, where they can open doors to each other, some of them actually buy things that others are selling. And I mean, we're seeing more and more of that right now, it's on a very insignificant level. But on some micro level, we do expect that to give some kind of synergy effect and margin uplift.

I think the bigger effect going forward is that without adding a heavy overhead cost to it, we have many companies that have very similar functions. For example, every company, of course, buy something from someone. We have a lot of companies that are sourcing things from China, but obviously have not had the capacity to be best in class when it comes to that.

We have many companies that work with marketing but have done it with some just a couple of hours a week and not really had the capability. So we are looking at finding experts that can help us out and do this on an overarching basis and one, in the short term, save a little bit of money through not having as many external consultants, but secondly, more importantly, we do believe that the impact of that will be rather big, but of course, that will take time.

Next question comes from [ Arnold ] through the e-mail. He's wondering regarding the country managers for the U.K. and Sweden. Given the shift from technology centralized model, how do you plan for these managers to effectively oversee especially the smaller subsidiaries? And we've touched a little bit on that but please.

Yes. But I think it's -- I don't really know how to phrase it, but it's the normal way to operate, but we're going to do it on a more professional and more close level. So when following up on different type of KPIs, we have always done that, but maybe we've been too slow, too soft when it comes to actually supporting and demanding from the individual subsidiary on how to change things around or making things better. And our slack has been too long, maybe in some cases.

And at this stage, we're putting in an organization where we will focus more on how right now here and now following up and demanding more or less a response from the person in charge, the responsible individual, the CEO of the subsidiary, to actually get from them an action plan taking us to a better place.

And if that individual is not capable of producing such an action plan fast enough, then we will support them with that and make sure that they actually do the things necessary in order to take us to a good place. And this is the role of these regional manager or country managers and it's their responsibility to make sure that we find a way that is -- that's going to take us into the future much more healthier than we have been standing previously.

Yes. We've got a question here in the Q&A from Prakal who is writing that our free cash flow profile has deteriorated significantly. Why was that? Do you expect the pressures to ease? And what is your outlook for free cash flow going forward?

I think you explained that quite well just a few minutes ago. And just to emphasize that, we are driving the activities really hard at this stage, and we've been doing that for a while. Of course, one big thing is to be really close to our customers and potential customers in order to make sure that we have the sales and that increase in sales, of course, is going to lock up some of the working capital and the free cash flow for a bit.

But in the long term, we have the incentives for all subsidiary CEOs and also for ourselves that the free cash flow should be high. Otherwise, we won't get our bonuses. And so we have the toolbox on different levels in order to make sure that the free cash flow is what we are aiming for and what we're chasing. And it's a fundamental piece of running a company like this. So it's on the top of our minds.

Yes. An email question from Akash. Johan and Dan, I have a few questions. Can you please speak in detail about the performance metrics you are implementing across your subsidiaries? What type of KPIs are you focused on? Who is responsible for ensuring these are implemented and tracked at subsidiary level?

On a subsidiary level, it's always the subsidiary CEO that's responsible for making sure that they have good earnings and good free cash flow from that business. We -- on the top of the KPIs that we always look for is, of course, the earnings for that subsidiary. And then we have the margins, the different margins, making sure that they trend in the right direction. And then we have a metric which is a return on capital, which needs to be high enough. Otherwise, we make sure that we implement actions in order to restore everything to a level where we want to be.

Yes. And that goes back a little bit to the decentralization and autonomy question. So basically, we have implemented five different KPIs on two profit levels and two margin levels and one return on capital level for different time perspectives. And if everything looks good, feelings but defined in Excel formulas, the CEO can run their company as if it was their own with basically full autonomy, of course, following the CEO instructions and the Board instructions. But when one or more of these things becomes red, then things get escalated from the country head in U.K., CEO coaches in Sweden up to here, and there are different routines for handling that. And that is something that we implemented more clearly this year, which we, of course, believe will have effect going forward.

Another question from Akash is your net debt-to-EBITDA calculation includes lease liabilities in the net debt. Is that the calculation used for debt covenant by lenders? Intuitively a better measure of leverage would be net debt, excluding lease liabilities, divided by [ EBITA ].

Yes. I think one can have different opinions about this. Opinions, unfortunately, usually doesn't really matter so much when you speak to the rather rigid banks even though we love our bank, SEB, very much. But covenant calculations is actually based on what were the leases included and the potential earn-outs for the future is also included. However, we use pro forma as the bank wants to see how things would be running at full speed with acquisitions for 12 months. So that is watching the covenants.

A third question from Akash is what are the learnings from the reward catering transaction. Please share what you can of the current status of reward and the lawsuit.

Okay. A little bit of background. We have an acquisition in Ireland, and we are in a dispute with the sellers of an earn-out that turned into a court case, which is now put back into to be settled between the parties according to the SPA. In the aftermath of -- or during that process, a couple of other legal cases have emerged and the court has asked the parties to sell those cases in court and not in public. And we will respect that and of course, let the court take its time in those cases.

So unfortunately, we cannot talk very much about it. It's a very, very, of course, strenuous situation to be in this. This is not a normal way of operating for us, but it is where it is, and I'm confident that the courts of Ireland will decide what is right and what is wrong.

Maybe important to add as well is that from our side, we, of course, have our solicitors involved. We also have certified adviser involved and also our auditors so that whatever should and need to be put into the different reports are put in there and whatever should not be put in there is not in there.

So I have, of course, seen that some people that, for some reason, are very interested in the case have been writing about why there are more disclosures and why we don't answer more publicly. It's because we're really just following the rules of the High Court in Ireland and local rules here in Sweden. When we have more to share, we will share that. But until then, we will just continue to follow the legal procedures.

[ Douglas ] through e-mail is wondering, you mentioned on the four -- page that four companies have lost SEK 14 million during first half of '25. And you expect by the end of the year, the group will instead contribute SEK 2 million to SEK 5 million. Can you please -- I'm paraphrasing, but can you please give some more color on that?

So the four companies that Douglas is referring to are the ones that you can see in the middle of the whiteboard page, where you can see their order stock backlog per month. The companies have been losing money because there is, of course, a level of operational leverage in it where with little revenue, of course, it's going to be a loss. But if you get to a certain stage, they start making money.

The good thing with these companies that they are rather high gross margin businesses, which means that it doesn't need a lot of sales in order to break even, and after that, it start making quite a bit of money. The thing which is really frustrating is that from actually closing the deal to being able to produce and recording the sales and getting to cash flow, it's a long lead time.

In this group, you have four different companies, two of them are building-related, Hem1 and Grimstorps, where there are a lot of planning permits involved, which takes time. So in Q4, we do believe that these companies will be positive, not by a lot, but by the SEK 2 million to SEK 5 million as we wrote that on the whiteboard together.

That is not the level we expect these companies to operate on, but that is also due to the lead time and what we see in the backlog today, what we do believe is realistic because we actually need to start building things before you can record the revenue for them. Then of course, going forward, we expect that number to be much higher. We've seen the numbers for those companies that are on much higher levels, and we, of course, are doing everything we can to get them to those numbers again and beyond.

Yes. Another question from [indiscernible] through mail. Johan, Daniel, thank you for the transparency in the report. My question is, while quarterly updates are useful, as a long-term shareholder, I'm more focused on the operational trend and the underlying culture. Are you satisfied with the current trajectory of key metrics this year? And how confident are you that this momentum is sustainable? Additionally, how are you fostering a culture of transparency and trust with the subsidiary CEOs where they feel safe and share bad news early yet empowered enough to operate without micro management?

Great question. Of course, when it comes to fostering a culture, it comes down to how we act all through the company group, of course, how we interacts, what type of relationship we built. And it's extremely important that Daniel has touched upon several times during this call is that we have the autonomy, we have the independence but we also monitor it very closely and that we follow up on the metrics that actually means something.

Some individuals that run the subsidiaries are, of course, sometimes in need of support and help and maybe they reach a level in their business where they've never been before, and they need to get some influence from outside from us, from the team here on how to take it further.

And the way we have been organized hasn't been, just to be self-critic of myself is that we haven't followed up close enough on a structured way and maybe a little bit in a, let's say, standardized way. And that is the new role of the country managers that we will have metrics that we will all -- that we will demand that we will follow all of it.

And of course, one of those things is the transparency. And it's very, very important that we have a full set of trust between us. And the first thing that we want to hear from our colleagues and from our CEO coaches and from our subsidiary CEOs is the problems. Those are the ones that's going to be top of the agenda in every conversation.

And I have this small anecdote from and Daniel followed me out to the subsidiaries the first time when he was fresh here in the beginning of 2021, we visited the Swedish subsidiaries and one of the CEOs came running out to the parking lots when we arrived in our rental car and said, do you want to -- I've been here -- we miscalculated the earnings for last month, and this is why we have been sitting all weekend.

So -- and I remember, Daniel was a little bit in shock in a positive way that the transparency was so high and that no one was trying to hide anything. On the contrary, they were actually shouting it out. And that's, of course, the type of relationship and the culture that we want to nourish. And how to achieve that? Yes, talk about it, always be open about it and always lead by example, of course.

Yes, the last piece. I think also just going back to your question, if we're happy about the operational improvement. I mean, maybe the starting point is that we truly believe that when looking at the actual operations, the lowest point is behind us and that we're moving now in a trajectory that is upwards, which we're happy about that it's upwards.

Are we happy about the actual delta and about the speed, the momentum? No, we are not. We do believe that there is a lot more to be done. So it's not that we feel that, okay, we are bottom out. Now let's go on vacation. We feel that we're going to use that energy. And of course, a little bit of happiness that we do feel that, that is behind us and build on that momentum.

There's also a lot to be said about, and if we go back to the beginning of this year, we tried to explain in our heads how our business is looking. And we have, roughly speaking, three different legs. We have one leg which is acquisitions, we have one leg which is companies that is actually performing, and we have one leg which is companies that are not performing.

Usually, you want to have three legs. Still, in this case, we want two. We don't want to have third piece even though realistically, it will always be there, but as a small, small leg. The acquisition piece, in the beginning of the year, we said that we're going to have a big acquisitive year and that we were going to buy more than six companies. We're at seven so far. I do not feel that we're done yet without making any promises.

When it comes to the companies that are performing or not, we don't have this normal distribution of most companies performing to the average. It's quite a bit in the opposite actually, where we have a bunch of companies that are performing very well. The majority of them are in the U.K. But we also have a lot of companies here, maybe not a lot, but we have some companies here in Sweden that are performing on that level as well, growing and with 20% margins.

But we have this third group, which is not something that we like, companies that are losing money, which is really hurtful. As a group, they are moving in the right direction. But on individual levels, I mean, we do have some quick turnarounds, which we have shown also on the whiteboard where the financial results are actually already seen and will improve even more going forward. We also have some companies where they have plateaued out in the other direction, which is something not great, but as a group, they are moving in the right direction but we feel too slowly. That was a lot of words, unnecessary.

Very true words.

All right. Next question comes from [ Gunther ] on e-mail. Can you please give some more details about the processes that are or will be installed avoid acquiring a kakapo or to avoid that an acquired company becomes a kakapo?

kakapo, someone that has been so acclimatized to a certain level of environment, so they forget how to work in another type of environment. I mean, the risk is always there. To acquire something in the short term is not that high of a risk because we are looking for companies that are growing a little bit and that have a very niche market where they are very good at what they're doing, they're the leader in their little narrow niche, and they have a very good history of doing that.

So -- but of course, every company that is growing will reach a level or leveling out or a plateau, as I mentioned before, where you're not used to -- you don't -- maybe don't have the skill set or you don't have the experience on how to get away from that plateau, starting to climb again, climbing to higher altitudes. And that will probably happen to the subsidiaries. And it has, as I mentioned earlier today, also happened to Teqnion, and it happened to Teqnion at several stages throughout our history.

And now we've been in such a situation again. And now we're a bigger entity, which means that the impact will be bigger. And I'm very happy and confident that we have found a lot of new tools that is necessary in order to proceed. I think the high risk of ending up in a kakapo situation is if you hire someone from outside and you don't -- into a subsidiary where maybe the founder or an entrepreneur has been running the show for many, many years or decades, the risk there is not that high.

But if you bring someone from the outside, taking them in maybe don't have the full skill set or the -- what is necessary in order to make sure that you also do the things that is not obvious for this moment because becoming a kakapo means that you do things that or making sure that you don't become a kakapo means that you do things that is not -- maybe not necessary here now, but will be probably extremely necessary for the future or tomorrow and continue to practice those things and emphasize those things that will make sure that you have the full toolbox of taking the company into the future and having it grow forever.

And I also think that we are expensive letter but -- an expensive lesson, but we are getting better and have sharpened our tools during this downturn. So two things that I also feel is important in addition to what Johan said is, one, to actually set the targets in the right way. So we are more involved in the strategy phase of figuring out where the company should go, in which pace and building that in a very, very realistic but achievable and with concrete steps. So we have some kind of baseline against where we're heading.

And then secondly, just as we've mentioned a couple of times regarding the lead times from actually closing the sales and getting a sale on the whiteboard, the good and the bad is that for quite a bit of our companies, there is a lot of momentum in both directions. So when you started to build up to a sales pipeline, there will be a lot of incoming things for a while, even if you stop which we will not do again. But the momentum is true in both directions.

So we have implemented KPIs and a structure where we actually follow up much closer because, unfortunately, we saw some of the companies operational deteriorating for a little bit too long until it hits the numbers and we were too slow to react on those things for various reasons. So I think being just much better at setting the targets, both on a financial level and also operational what needs to be done and then following up more tight when it comes to the forward-looking KPIs are things that we do believe will affect not becoming just stupid work going forward.

All right. Next question from Gunther as well. Are Grimstorps a big component? Are Hem1 and Markis City a part of the group of turnarounds mentioned on Page 9?

The two building companies are, Markis City is not. Markis City is a business that, strangely enough, doesn't really have a backlog in the traditional meaning. So their numbers are always reported as 0 when it comes to the backlog. What we can say is that it's also a company where we're putting a lot of effort at the moment and we do feel that even though there's a lot of things left to be done, it is moving in the right direction. I think, year-to-date, that company has made close to 0, which is like doing exactly nothing, which is not where we want to be, of course. But that is roughly SEK 4 million better than last year or SEK 4 million less poor than last year, but a lot more to be done.

Yes, a positive trend.

Yes, yes, exactly, from a low baseline.

Yes.

Is the order backlog of SEK 69 million sufficient for these companies to become profitable in Q4 or is further growth needed for this?

I think you mentioned that already. So it looks like they're going to make a small profit and -- as of today, and that is still something that we're not happy with, of course. They need to be much more profitable for the future, and that's also the aim for CEOs and for us to make sure that, that happens.

Yes. Besides these four turnaround companies, are there any other companies that are losing money? If yes, can you indicate how many?

Yes. We have a few more companies that are losing money. And I don't know if we mentioned something about that in Q1 or year-end report. So it's approximately 1/3 of the group. I think we are about there.

Yes.

Also worth mentioning there is, of course, that the trend is showing that we're doing the right things and we're moving in the right direction and the idea that we will be able to report a much healthier group for the coming times.

Yes. We have one more e-mail coming in from [ Kip ], who basically is wondering two things. How do you define organic growth? And when do you include an acquisition's contribution in the income statement?

So when it comes to organic growth, I think that we write something short about that on the last page but for simplicity, organic growth is when a company has been in our group more than 12 months. So the 13th month they start when they have a month to compare to and that is when they are included for organic growth. And when we include an acquisition's contribution to the income statement, so basically, this is when we have control and control means when we actually have the deal done, signed, completed and monies and the shares in our hands.

So because accounting is tricky to do in the middle of the month or actually can do, but it's a lot of work. So for simplicity, the companies get included the first. And basically, it is the first that is closest to usually the press release which is very close to actually the completion date, usually the same day.

Good. It has been very quiet in the live Q&A today, and it looks like we actually got through all of the mail questions with 2 minutes to spare. Would you like to end with some concluding remarks?

Yes. Thank you so much for listening in. And please take with you that we have done a lot during this year, and we feel confident that our path forward looks much brighter. We have still a lot of things that we need to address and that we do take action to. I feel very confident when it comes to the new organization and how we're going to work together for the future. We have been on this plateau, nagging about that, but that's maybe something that we need to push through in order to be able to scale and double the group from today.

And it's with some positive feelings within that I say that the fall will show more improvements for us going forward. And we are still very, very much focused on doubling the EPS for Teqnion for every 5 years to come and at least -- that is very important, but at least that we still feel that the things that have been implemented and the things that we're actually achieving right now is very, very good. I hope that we will talk again in October.

Yes.

And up until then, have a very good time and take care of the rest of the summer.

Thank you very much. Have a good day. Bye-bye.