HMS Networks AB Stock

Welcome to the HMS Networks Q2 presentation for 2026. [Operator Instructions] Now I will hand the conference over to CEO, Staffan Dahlstrom; and CFO, Joakim Nideborn. Please go ahead.

Thank you, operator. Good morning, everybody. Welcome to HMS Networks Quarter 2 2026. Sunny day in Halmstad, where I'm sitting and Joakim is sitting a bit further south, north of Malmö. I hope the sun is shining there as well. Sun is also shining in our numbers. We are very happy to present this quarter 2 report. I start with a quick business update, then Joakim will do a detailed summary of the financial numbers, and then we end up with a Q&A at the end.

But a few highlights. If you look on our net sales, good growth, organic growth, 12%. We're happy with that. In total, backed by M&A and some favorable currency, plus 18%, strong currency and a good quarter. Net sales, SEK 991 million. We are not really at SEK 1,000 million yet, but the coming quarters we'll get there. Also, order intake are solid, organic 15% and totally 20%. But we are not really seeing preorders. In quarter 1, we saw some preorders, mainly relating to the acquisition we made for this Molex business. But now we feel that there's a good balance between order intake and net sales.

Fantastic development on our profits. EBITDA, SEK 266 million, growth from, what is it, 59% from last year. So EBITA margin stronger than our goal of 25%, 26.8%. We're very happy with that. But also very happy to see a fantastic cash flow from operations, SEK 334 million. So this really helps us in also how we leverage and how we deal with our debt situation. Joakim will talk about that. Strong EPS. So we're happy about the numbers. A few business highlights. We can move to the next one here.

As we said, a good record quarter, but we also see that the growth is coming from all our big markets. So it's broad-based. We're very happy to see a 35% order growth in APAC, very good. The 2 major things driving this is our data center automation business. Why we say data center automation is that, as you know, we are not really part of the computing inside the data center. However, we see more and more that our customers directly and indirectly are involved in this data center expansions. These are huge facilities, and these large buildings require power, cooling, automation and other things. And we see that this is also driving our industrial automation companies' growth to deliver automation equipment into these huge facilities.

And we also have a good position with semiconductor OEMs. These are the companies who make the semiconductor machines and responsible for the process. And of course, AI is driving the semiconductor market, and we also start to see a lot of good orders from our semiconductor OEM customers. We see the flip side of that coin is also increased lead times and prices for memory, especially memory, but also other components, semiconductor components and PCB is starting to have longer lead times, increased pricing, and we are trying to mitigate that as everybody else in this industry. But it's a hot market, and we see that also in the lead times.

During the quarter, we also made a -- we call it strategic minority investment in a small Swedish AI company called Ekkono. They are really good in making machine learning technology. This is not a large language models that are cloud connected. This is embedded machine learning. So that's another way of doing AI. And our ambition is to work with them and also use their technology to embed in some -- embed in our products to make sure that our customers can both use the communication side of this, but also do some light AI functionality within their OEM devices. And we are very happy to receive the EcoVadis gold medal here in June.

EcoVadis is a very big organization looking for environmental and sustainability aspects of the company, but also going beyond CO2, it's also about ethics and governance and responsible sourcing. So it fits very well into our strategy. And we are in the category of large companies together with Schneider Electric and Bosch to receive gold medal, which means that we are top 5% of all customers, all companies here. We are very proud of that, and that really shows that we are doing the right things in our sustainability work.

With that short introduction of the business, I would like to hand over to Joakim to talk about the numbers.

All right. Thanks a lot, Staffan. Let's get going with the order intake. And as you've seen and Staffan also talked about, we see a little bit of a change compared to Q1 that we are not really seeing these preorders anymore, these long orders, customers placing deliveries throughout the year. And we talked about in Q1 that we had about SEK 130 million for these long orders. If you adjust for that, I'd say we are just seeing the same pace more or less that we've been seeing in the first quarter as well. And good solid growth here, 15% growth in Q2 and 12% year-to-date on the organic side.

We actually see a lot of good demand pretty broad on all our markets growing well. What's a little bit surprising and very positive is that APAC is leading out the growth, 35% and also EMEA going quite well with 15%. Now of course, the comparable Q2 2025 wasn't our best quarter. So it's in one way a simple comparable there. But it's good also to see that APAC and EMEA is showing the way on the order side. On the division side, we have to note that the INT division is continuing to perform very well. We have now an organic growth of about 20% for 4 straight quarters. And I think we've been talking about this that it was expected that we're going to see a rebound in INT. I think Staffan and I have been mistaken a little bit on the timing. We thought we would see this more in 2025, a bit earlier, but now we've been seeing it for some time that we are coming back strong in the INT division.

And also, Staffan mentioned it as well that the main driver is data center investments throughout the value chain in different ways we're coming in with our products. Same products as we always sell, but to various new applications for us. So that was a solid quarter on the order side. On the net sales side, very similar numbers, SEK 991 million, so organic growth of some 12% here as well. And you see we're closing in on the SEK 1 billion mark, slowly but safely growing. Of course, the Q4 and Q1 solid order intake has been supporting now the sales in Q2.

We have, as you know, 2025, we didn't see the best growth in the first half, and now we're back to double-digit growth for the third straight quarter here. So that's also good to see that it's coming back solid. Book-to-bill happen to be straight 1. So I think that's pretty much what we can expect from the future as well, somewhere around 1.0 in book-to-bill. And here was a bit of a different mix on geographies. Americas came in strong with a very good start of the year on the order side and the 28% organic growth in sales.

Talking about the different divisions. I think starting with IDS, the largest division with 46% of the profits and the big gearing towards the American market. I think we're quite happy to see over time, you see the bottom graph, we added also the EBITDA margin history since the first quarter 2025 when we made a split into the new divisions. And we see here that we have kind of established the business on a good operating margin level that is slightly above the 25% in the quarter, 27.5%, and it's a pretty good lift from where we started out when we established this division in the beginning of 2025. So that's very good to see.

Also here, we have some product launches and both within remote access and network switches. That will be good important steps for the future growth until 2030. And the business plan we have with the strategy until 2030, this will be key aspects of building that growth. Also here, kind of a broad-based demand, good development in all regions, nothing that sticks out. And yes, a good solid performance in IDS. Then we go to INT. You see a bit of a different development here on the order side compared to Q1. This is where we had the majority of these prebuying orders related to the Molex acquisition, where some customers secured more or less the full year deliveries with orders in Q1.

And I think we're quite happy to see that we get SEK 38 million of orders for Molex in Q2. We didn't really expect that to be as good. On sales side, I think we've seen that more stable, that deliveries will pace out in time pretty much as we see here. That's what we expect at least. We must also mention that, I mean, again, we talked about the fourth consecutive quarter with over 20% growth on orders, and we're very happy with the development, obviously in INT. Also here, you see a strong development on the EBITDA margin, now above 30%, and we've been around that level now for 3 quarters.

This is maybe where we've been seeing the largest demand from semiconductors and data center investments. And that has been driving gateway business for us. And you'll see that when we talk about the margin soon, that this is also one of the reasons the gross margin has been strong for us. Then we have new industries. Here, we have also solid development with a 7% organic growth in orders, 11% on sales. Also here not meeting the best Q2, but it's a solid business. We know that we're struggling in the end markets within the Vehicle Communication that is selling a lot into the automotive market, which is obviously not the best, especially not in Europe. I think that is somewhat met up from a good quarter from Building Automation business despite the slowdown in the Middle East, which is a very important strategic market for the Building Automation business.

So I think with everything going on in the world, if we can develop like this in this division, I think we need to be fairly happy. The margins, it's a bit of a smaller division, so margins can vary a bit up and down. And this quarter was a little bit softer. You see on the graph it's been bumping up and down a little bit between the quarters. So I think that's -- don't read in too much about that slightly lower profitability. Then about the profitability then. So we do an EBITDA of SEK 266 million, a new record result for us and 26.8% EBITDA margin, 27% year-to-date. So it's also good to see that we can keep this level above our targets of the 25%.

And maybe the main contributor, except for volume is the pretty good gross margin of 63.8%, which came in a little bit stronger than what we expected ourselves here. The comparable of 61.8% is towards the Q2 level last year, which was tough from the tariff situation where we saw a pretty high tariff cost in the beginning where those tariff wars escalated, especially between the U.S. and China. Now the situation is much more stable. And we have not yet gotten any tariffs back. That is something we are working on at the moment and hope to be able to be successful with that. We'll come back to report on how that turns out.

Otherwise, I mentioned also the strong gateway business from INT that is supporting the margins here as well. And that's maybe where we had a little bit of a positive surprise on the margin side. We know going forward, Staffan mentioned it as well, that we see now continued longer lead times, especially on memories, but also some other components. And also price increases are starting to take off. We've been seeing some already in year-to-date. However, for us, it's kind of been offset by having inventories. And going forward, we will not be able to supply by our own inventory. We're dependent on new deliveries, and then we will see a price increase that is coming. So I think we can have a bit of a margin pressure from this level in the second half. Nothing dramatic, and we will, of course, monitor the situation and maybe do adjustments if it's needed.

But I think we can expect a slightly lower gross margin for the second half. On the OpEx side, we have been stepping up the investment pace a little bit, both in R&D and in strengthening the organization overall. We see an organic increase of 9% and a bit of a step-up as well compared to Q1. I think we have gotten in the most increase of the run rate so far this year. So I believe we'll see something similar to this level going forward for the second half of the year as well. So I think the run rate in Q2 is probably quite representable of what we will see.

As communicated before, we have also increased R&D investments, and you see that also in the capitalized R&D, which is increasing a bit. So now we're at SEK 27 million in Q2, similar level as in Q1 and similar expectations for the coming quarters as well. I do also want to mention that we have a positive EBITDA impact of SEK 6 million, which is related to a divestment of a subsidiary. We're selling off the sales entity of PEAK France that we acquired in 2024. So we're selling that to the Managing Director that will run it in a way taking in a bit more special projects that we do not normally do in the group. So we feel it's better to treat this as a distributor on very good terms, and we're happy to continue this collaboration for the future.

The earnings per share, SEK 3.65, nothing super interesting happening here. We have a slightly higher estimated tax, which is explaining the slightly lower EPS compared to the previous quarter, even if the EBITDA was on similar levels. Then I also want to make a couple of comments on the cash flow from operating activities, which was by far a record with SEK 334 million. We have a couple of things that is supporting a sort of a onetime effect here. We did have pretty high receivables going out of Q1, and that is now flowing in. So we were reducing working capital a little bit and getting a -- sorry, SEK 53 million positive effect from the working capital reduction.

Also inventories are down a little bit. I think going forward, given what we said on the component side, on the memory side, we do believe that we will have to tie up a little bit more inventories. We would be happy to tie up and put a bit more inventories when it comes to memories. Now it's not so easy to do that given the allocation that is going on. But we'll do our best to increase and secure the demand on the memory side for the coming year or so. So that's the plan for the second half.

Otherwise, for the year, also solid cash flow from operation of SEK 584 million, a pretty big improvement compared to previous year. And then let me also stop on -- looking at the net debt, where we have SEK 2.26 billion in net debt going out of the quarter, small increase actually compared to Q1, explained by the dividend has gone out in Q2 with SEK 241 million. We also made a final payment of the PEAK acquisition that impacted this a little bit. We're managing to come down to 1.74 net debt to EBITDA multiplier when it comes to the pre-IFRS 16 level, which is a small improvement compared to Q1.

And given the legacy of the last year or so, I think we're quite happy to be on that level. And we're now focusing on some continued M&A things. And with the new division structure, we're -- I think we're on a good level in the divisions, having good dialogues going. So we're quite happy to see that. We also managed to reduce the interest cost, both, of course, from the lower leverage as such, but also from better terms in the new bank agreement that we signed around New Year. So that's good to see. And then for me, it's just left to kind of summarize what we said for the second quarter. I'll try to do this quickly.

And as you've seen, solid organic growth, pretty much driven from all markets, record net sales of SEK 991 million. The 2 larger divisions are both on double-digit organic growth, both when it comes to orders and sales. And again, data center investments are the main driving factor for the growth. When it comes to profitability, we have also record profitability, record cash flow, very happy with the cash conversion here and looking good for the future even if we know. The third point here that we will have -- it is still a bit uncertain macro, and we know that we will see these longer lead times and slightly higher cost for memories. We just want to flag. We're doing all that we can to mitigate the situation, but there might be some disturbance during the second half of the year. And with that, I'd like to hand over to the operator for any questions we have.

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

Could you just help me understand how we should think about the strong margin improvement. You mentioned it here on the call, but the margin is quite strong despite the higher investments. Is this mainly driven from volumes and pricing and tailwinds from the gross margin and the mix? Or is it that the cost initiatives are still lagging here and you expect more to come in H2.

Maybe I can start with that. I guess you're referring to the EBITDA margin with the question.

Yes.

Yes, if we take the different parts, I mean, obviously, the gross margin improvement is helping that a bit. I think with that said, we've been on this operating margin level now for a couple of quarters. So it's not only that. I think what we see is the simple answer is like this, the top line is growing faster than the cost. And now you saw we had a 9% organic increase on the cost side. So I think we are investing in the organization as we would like to do. So I wouldn't say that there's a lot of things lagging on that side. And then it's not given that the growth would be forever double digit organically. So I think that is -- right now, we have a good pacing on top line versus cost. And as I mentioned, I think we have -- at least for 2026, we have set the organization we believe we need for the rest of the year and taking the main investments that we need for the rest of the year. So I don't think you will see a higher pace for 2026. We need to be able to absorb the things that we add as well.

Okay. Great. And how sustainable is the current strength in data centers and semiconductors, you think? And how much of the demand is project-driven versus temporary.

Maybe I can take that. If we try to zoom out a bit, it's clear that we're not involved in the compute, the servers and the IT environment. That's not our business. But we see more and more that we have 3 different things that, first of all, our industrial automation customers like the Rockwell Automation and Schneider Electric, they are selling quite much automation equipment to these facilities for cooling and power and all those things. And there, especially our division INT is coming in where we are embedded inside their things that they sell to the data centers. That's one pillar.

The second pillar is that we have our own system integrators that are involved in this integration of systems inside these big facilities. There, we mainly sell the division IDS through the American, mainly system integrators, where we sell gateway, switches. And these are more of the things that they realize when they do this kind of, oh, wait a minute, we have the wrong protocols between these 2 machines, let's buy 50 HMS gateways to solve this problem. So that's the second pillar.

The third pillar is what Joakim mentioned about the semiconductor, where we have good business with the OEMs in semiconductor, the machine builders. And of course, AI, the compute side drives all these investments in semiconductor fabs. And there, our customers is supplying the machines. So all these 3 different pillars are indirect to the data centers, but we see quite clearly that they are driven outside the data center momentum. Okay. Now we see how long will this momentum continue? Well, right now, we see enormous investments, especially in U.S. about these facilities.

It will not continue forever, I'm quite sure. But right now, we don't see that it's slowing down. There seems to be a lot of investments, and we see that this Magnificent 5 with Meta and Google, and they all invest heavily in this. So I think we are floating behind because all these automation investments related to data centers. And we see this as a continued trend for quite some time, we think.

And how large is semi and AI data centers verticals for you, you think?

Yes. I know you asked that. And we don't -- as I say, we are supplying our standard products to our normal customers. And for them, part of their business is data center. So we don't have full transparency, and we don't have data that -- trustworthy data that can say how much is our market share and how much of that is our business because it comes as a portion of our regular business. So we don't really have good data on that.

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

So you said that the gross margin was elevated now in Q2, partly on mix. What do you expect ahead? Could you quantify the step change in the second half in gross margin so that we don't extrapolate the Q2 level too much. That's the first question.

Maybe I'll start with that one. And I think what we see is, as you said, it's a little bit elevated from the mix. And then we also expect now to have maybe a bit of headwind from the semiconductor increase. So I think, let's say, maybe it's a percentage point elevated due to extraordinary mix in the quarter. And then maybe we could have another percentage point impact, something like that from the semis. So I would expect us to be still north of 62%, but not necessarily north of 63%. That's the best guess we can do at the moment.

Okay. And also, could you maybe describe the pacing during the quarter over the individual months, over the markets and the segments. That would be helpful as well.

Well, that was a lot of details. I don't think we're going to go into all that. I guess what we can say is that we've had a slightly lower, slightly weaker May and well, then a better start and a better finish to the quarter.

Okay. And last one, you talked a bit about it on 2026, but just an update on the product development efforts, which you talked more in detail at the CMD. Is it going where you wanted to in terms of the deliverables and also CapEx and costs involved? 2026 seems to be on track. What about the rest of the planning period.

Do you want to take that one, Staffan, or should I?

Maybe you can talk about the cost side. Well, I can start just -- so we are happy to see that we are releasing new product generations. We just released a fantastic product line from N-Tron NT7000, which we believe is a fantastic product line for Ethernet switches. We released a new generation of Ewon products. And later this year, we have a big Anybus release. So I think we're seeing good progress on the product releases. But I think the question was also how we see about the cost related to that, Joakim.

Yes. I think we've been keeping the plans that we've said pretty well. If anything, I don't want to promise too much, but we see actually we're coming out slightly better than planned on this INT project, where we've been able to have massive gains using AI tools for the coding. So we're actually doing more than what we have planned to do in the same time frame, which I guess is also maybe part of the explanation that we're managing to grow top line quicker than the cost side that would be a little bit more efficient here than we thought. So I think that's positive. And otherwise, I think we're keeping the plans. And as I said before, the run rate that you see right now both in terms of activation of R&D costs and then on the cost, I think that's pretty much what we expect to be at for the rest of the year.

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

All right. Thank you very much. And I must say that we are very happy to -- if we look back 2 years ago, we did 2 big acquisitions, Red Lion in North America mainly and the PEAK system in Germany 2 years -- well, 1.5, 2 years ago. And we formed a new organization 1.5 years ago to make sure we take advantage of this new capabilities we have. We released our new strategy at the Capital Markets Day last fall. And we're seeing good progress here. We have a fairly good market as well, but I must say I'm very happy to see that things are falling into the right places and the organic development is going really well.

So we're happy with the quarter 2. And at least for me, I will celebrate with an extra ice cream today, and I hope you have a good opportunity to do the same. So I would like to say a big thank you from myself and from Joakim and wish you all a nice summer and look forward to hearing from you during the coming quarter. Thank you, and goodbye.

The host has ended this call. Goodbye.

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

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

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

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

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

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

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

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

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

With that, Joakim, some numbers.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The next question comes from Viktor Högberg from Danske Bank.

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

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

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

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

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

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

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

The next question comes from Erik Larsson from SEB.

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

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

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

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

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

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

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

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

The next question comes from Simon Granath from HMS.

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

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

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

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

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

The next question comes from Joachim Gunell from DNB Carnegie.

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

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

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

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

Yes, it is.

And then just finally...

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

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

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

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

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

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

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

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

And some of the panel meters...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

All right. Yes, can you hear me?

Yes, I can.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes, that's perfect.

Matthew, did you have another one?

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

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

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

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

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

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

Yes, that's really helpful.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Congrats again on the strong results.

The next question comes from Gustav Berneblad from Nordea.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The next question comes from Erik Larsson from SEB.

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

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

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

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

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

The next question comes from Fredrik Lithell from Handelsbanken.

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

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

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

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

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

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

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

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

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

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

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

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

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

The next question comes from Joachim Gunell from DNB Carnegie.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

You mean in the gross margin?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Operator Instructions]

The next question comes from Simon Granath from ABG.

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

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

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

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

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

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

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

The next question comes from Joachim Gunell from DNB Carnegie.

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

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

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

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

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

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

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

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

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

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

Seems you are on the right track.

The next question comes from Gustav Berneblad from Nordea.

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

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

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

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

That's quite accurate.

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

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

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

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

The next question comes from Jesper Stugemo from Handelsbanken.

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

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

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

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

The next question comes from Thomas Blikstad from Pareto Securities.

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

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

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

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

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

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

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

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