Teqnion Stock

Good morning, everyone, and welcome to the Teqnion 2026 Q3 Q&A. Thank you all for joining. And we will, as always, for the next hour or so, try to answer as many questions as you have about your company. We will be alternating between the questions that we have received at [email protected] and the questions that we receive live here. For your information, you need to have a verified Microsoft account in order to ask questions here in the Teams. So if you don't have that, feel free to send an e-mail to [email protected], which we will be monitoring during this session. So before we start the Q&A session, do you want to say some words?

I can present us. This is my colleague, Daniel. He's the Deputy CEO of Teqnion and also holds the fantastic title CXO. I'm Johan, and I'm the CEO of Teqnion since 2009. Tomorrow, we will celebrate our 20th anniversary. The company was registered on the 20th of October 2006. We celebrate that today with a crisp autumn morning here in Solna. We have 1-plus degrees, and it's really colorful outside.

To summarize the quarter, we have continued our path to making a more stable foundation for Teqnion, a foundation that we can scale and grow from. I have a very positive feeling in my stomach that we have a fantastic team in place, and we have actually a couple of more colleagues coming in during the coming months that will help us make everything better and better going forward. So overall, a quarter with a lot of work, both on the acquisition side and on the operational side and on a good trajectory for the future.

Great. So starting with the questions then. The first one comes from Galician Investment, who is wondering, over the last few quarters, Teqnion has managed to improve profitability while deliberately walking away from some lower quality revenue. How do you distinguish internally between healthy pruning and a situation where improving margins could start masking weak organic growth? What would you want to see before saying that the existing portfolio is genuinely growing again?

Do you have something that you -- on the top of your mind? Sorry. What I just feel about that is that we've been in a period where we actually have targeted weak spots in the operational aspect of this group, and we have come a far away. We still have some improvements to do. But overall, as mentioned just now, is that we are on a positive trajectory. We have focused on the businesses that we see have a good future. And with the experience coming from doing this for a rather long time now, we have the gathered experience and knowledge on what to focus on. And I'm not scared or lying sleepless over that we have some companies still not performing on the level that we wish or that we demand, but we are getting there. And overall, it's not a scary thing, at least not for me.

No. And maybe a longer answer to that. I mean, we've been -- it's not a secret that we've been in a turnaround situation for the last few years. We've been doing a lot of things and the numbers take time before they show up. I mean, especially for some companies, most of our companies, when you do actions, you don't really see the financial results of that until maybe at best a quarter later, but sometimes even 4, 5 quarters later.

And I mean, when we learned that we needed to do more and different things in the turnaround, we started where we felt was most important. I mean, in the best of worlds, you do everything at once. At the same time, we are all only people and the companies need to hold and do enough things to make a change, but not get destroyed in the process. So for natural reasons, we started with getting the margins up, i.e., in pruning, as you said, in order to focus on the profits. That is what we will be doing continuously, i.e., focusing on profit. But we are in a situation now where we feel that on balance, I mean there's still -- there will always be companies that can do better.

All companies can do better. But we're also in a situation where we now have moved a little bit of prioritization to getting top line growth as well, which is important over time. We've also moved some prioritization over to freeing up working capital. And those things are important. But compared to ensuring enough profitability in the core they have been secondary, but we're moving closer to that.

Second question from Galician Investment: You've been very active on the acquisition front recently. As Teqnion becomes much larger, what do you think will ultimately become the scarcest resource, capital, enough great companies available at sensible prices or management bandwidth to keep the culture and decentralized model working? And what would you make deliberately slow down acquisitions even if pipeline remains strong? You want to start, or should I?

Let me start.

Yes, please go ahead.

I think the truest answer there is that it will alternate what will be the -- what will be the bottleneck of that specific question. We will definitely slow down our acquisitions if we feel that we don't have the power or resources to implement or to buy the companies that we have in the pipeline. We don't want to end up in that situation, of course. But it's very important that we implement or absorb the very nice companies that we have the opportunity to acquire and that we have the right foundation and organization to embrace them when they finally come into the Teqnion family.

As of right now, with the pace that we have, both on the operational side and in this particular question, the acquisition side, I think that we -- what I think about is that we will have the opportunity to run out of acquisition cash if we want to. So we have to balance that a little bit. But right now, we see a cash flow growth from the operational side, which, of course, will help our credit and our ability to lend more money for the acquisition side. So right now, I feel that we are in a very good position in all 3 aspects that was questioned.

Yes. It's I think it's a very interesting question as well. I mean our job is, in essence, to be the best capital allocators we can. And I think it's not really capital. It's really about resource being capital, people, what have you. And when it comes to the bottleneck on the M&A side, on one hand, you could call it resource allocation. On another hand, it's really about moving the bottleneck because the best resource allocation is to ensure that the bottleneck gets moved to something else. And I think -- I mean, I've only been here for 6 years, but during these 6 years, I believe that the bottleneck for M&A have moved quite a bit in the beginning when I just started, obviously, we didn't have the network and the reputation. So getting a pipeline was one of the key things to do.

Over time, we learned that management capacity to absorb companies became a bottleneck, and that is something that we've been working hard with. And obviously, we have Martin Lagerberg, we have Dave Barton, we have business unit leads coming in to help out with that. Capital has been a more tight resource historically. We have a new loan agreement that we spoke about in the earlier quarterly reports. We also took in capital a few years ago. So I don't think it's possible to say what will be the ultimate bottleneck. I think if we do our jobs right, we will just move the bottleneck from one thing to another and try to solve that as pragmatically as possible over time.

Absolutely.

Next question comes from Shane through e-mail. He says, "I know you've added regional heads, but I'm guessing now is also the time to start thinking about MD recruitment at Percher. How will you bring in or identify from within the right talent? Do you think you can recruit from within the organization for business unit leads? Will that be a focus going forward? How do you decide what business units are organized under a lead? I'm guessing at some point, you'll have businesses that will have more common characteristics. Would it make sense to have vertical leads?"

Perhaps, sorry. But this is a very, very good question. And the key to scale something -- anything that has involvement of human beings. I mean the recruitment process is absolutely the key thing that we do. We're very lucky now to have an HR lead or recruitment lead in-house since half a year or so. That is very, very good. It accelerated us and made us better in that aspect. We recruit internally, externally. We try to find the right individual for the right job.

Is it tricky? Yes. Anyone that's been working with recruitment knows that it's very, very difficult. We have improved our processes. We will continue doing mistakes because we deal with human beings. But any company will be possible to be destroyed or to elevate and be excellent with the right people. So this is something that we take really, really seriously and put a lot of effort into to get the right team in the right spot.

Yes. I think there was quite a few questions packed into one, but maybe just to pick on a couple of more things. When we acquire companies, we try our best to focus on succession as well. I mean most companies are actually vendors, they come to us because they see -- they see the horizon. They think about retirement. Maybe it's not imminent. That's what we prefer. But there will be -- it's not decades away because otherwise, they would not be selling to us, and we would not be buying.

But for the majority of the companies that we acquired in the last couple of years, they already have succession in place. Obviously, you never know if it works or not, but that is one of the key things that we look for because it makes it, at least on paper, much easier compared to finding someone externally. And we look forward to find more and more companies where there already is a strong management team in place and succession in place, which obviously is a little bit easier when you look for bigger companies that we are looking for now compared to historically.

I think maybe just one more point on the companies that are similar. I mean, historically, we've only looked for companies that are great companies. It doesn't really matter what color they have or what shape they have as long as it's great companies. But then, of course, when we paint our canvas, the dots will be on the canvas. And sooner or later, we'll find dots that are closer to each other, either by luck or because we actually know companies that are closer for one reason or another.

And I think you've seen a couple of those already, and I would expect that there will be more of those coming in. And when that happens, it absolutely makes sense that they would collaborate if they want to a little bit closer, we will figure that out already before acquisition, of course. And it would also, of course, make sense that they would have the same head in a sense, whether or not it's called business unit lead or something else.

Absolutely. I mean that type of a map, if we can call it a map, is already drawn, and we have a trajectory in there as well. And then, of course, we need to have the right person, but that is something that we constantly is working with.

Yes. Okay. Let's take a couple of live questions. We have Prakal who is wondering if our free cash flow deducts lease principal repayments. If not, what would free cash flow be after those repayments for the Q3? Since our recurring cash outflows, would you consider reporting free cash flow after leases to better reflect the cash availability for acquisitions?

So the answer is that in our annual report, there are a few more line items, both for the free cash flow, but also for the income statement and balance sheet that hopefully gives you a good view of how it looks. The short answer is that the lease payments have been more or less the same quarter-over-quarter. So given that you know the historical numbers, you can extrapolate a little bit on that.

I guess the follow-up question would be, why don't we have more line items? Why don't we show more KPIs? And it's an input that we have taken with us. And I mean, every year, we have a discussion regarding how the quarterly reports will look. We don't like changing them in the middle of the year, but there most likely will be some smaller changes coming up for Q1 next year.

Next question from Oceanside, who is writing organic growth usually follows a J curve. You pay for salespeople, product development, capacity and working capital before the revenue arrives. Roughly how much do you expect to invest in the existing subsidiaries before organic growth shows up and over what time horizon? It's a big question. Yes. Please go ahead.

No, I don't know if I should elaborate on that. Thank you. There's sun here. It would be easy if that would be the long-term target for us to drive top line growth. I mean, there we could spend a lot of money. I think we have the scale out all the time, where to balance, where we should put the cash, the hard earned cash. And with the experience that we have in this corridor and also out in the subsidiaries, we try to be very, very strict when it comes to capital allocation and where we see that we have the best chance of good returns.

And when will we expect top line growth? Well, I think if you look at what we've been doing in the last couple of years and where we are now and listen to the tone of my voice, I see that I would be very surprised if we couldn't see a positive turn on that KPI as well going forward. But I mean, it's not the key for us. The key is for us to build the foundation and good cash flows that would accelerate our business model, which consists of 3 engines where we have the acquisition engine, we have the big portfolio of very healthy organically growing companies, and then we have a tail of what we -- where we miscalculated, where we bought something in the future or where we just see that the market for that particular business is shrinking. That tail is going to be minimized constantly, and we have more to do there, not as much as a couple of months or a couple of years ago, but still, we're never satisfied.

I don't -- I wouldn't say that we sit down around the table and decide on a strategic level where we should organically invest. If that happens, then something very, very big has come along in one of the subsidiaries where they actually need to broaden their mandate in order to invest more than normally. Normally is that they should -- with their normal operations, they should just increase year-over- year-over-year on a healthy level with the safeguard of margins and EBITDA earnings. And yes, I think it's -- of course, it's a big question, but the big question for us is constantly to make sure that we put the capital allocation in the right spot. And for us, we see that we should make sure that all the subsidiaries are healthy enough to generate cash flow so we can drive the acquisition engine.

Yes. I feel that we're making long answers, but maybe that's okay.

No, we just...

Maybe to add on that, I mean, organic growth is important. It is one lever that we're using in the -- when it comes to capital allocation, we constantly try to see where does the money make most sense. We don't always make the right choices, but we try to. In I believe Page 24 in the quarterly report, you can see one of the other avenues of capital allocation, where on a 9-month, the companies that we acquired will make SEK 45 million EBITDA. So straight extrapolation will give you roughly SEK 60 million in EBITDA for those acquisitions. And you also see that excluding cash, we paid SEK 200-odd million for it.

So when it comes to investing in companies, there is different avenues of cash that makes more or less sense. That doesn't mean that we shouldn't have organic growth. I think that will come. It will probably come sooner than later. And then as I said, strategically, we don't really sit here and say this company should do this or that. But however, our companies are lumped into different groups internally. We have companies that we still feel need to do a lot more in order to get to a normal state. We have companies that are cash cows or normal companies. That's going to be the majority and is the majority of our companies.

And then we have a few companies where we have internally, together with the CEOs, seen that there is a lot of potential here. We might not be right. We might not be able to capture it, but we think that it is possible. And for those companies, they -- we look forward to be able to invest a little bit more in primarily salespeople in it.

Okay. Next question coming from [ Kolapan ] on e-mail is saying, "Johan and Daniel, thank you for your continued efforts in driving Teqnion forward. I have a couple of follow-up questions. What is the expected time line for Nord to return to organic growth and margin improvement? And what point would you consider taking more decisive steps such as restructuring or divesting persistently underperforming companies? In other words, at what point will your patience run out?"

How long is a string? Well, we -- the patience has run out in a couple of occasions in the last couple of years. We're constantly looking for opportunities to be the best owner of the companies and also that might, at some stage, be that we are not the best owner of companies that no longer fulfills the criteria of being one of the Teqnion companies going forward. And this is a natural state since we are constantly buying better and better. And there will be some niche industries that will have a very hard time following along. And maybe there are better harbors for those companies than Teqnion for the future, we'll see. But when we expect organic growth, I'll expect it sooner than later, as Daniel just put it. There are now a lot of the foundations in place in order to start actually driving more active sales and getting the top line there. We have the foundations for it.

Yes. I don't know if we should give a little bit more color on that. But if you look at Teqnion Väst, the company there roughly, earnings-wise, it's the same size as Sweden. However, they've grown a lot due to acquisitions in the last few years. And as you know, as shareholders, we calculate organic growth based on, let's say, been in the group for 12 months. So if you look at companies that have been in the group for over 12 months, I mean, if you've been here for 13 months, you get 1 month as part of the organic growth calculation. So in order to get a full kicker in that calculation, you need to be here for 25 months. And if you go back 25 months, the group was much, much smaller. So there's just some technicality in it.

So more and more companies in Teqnion Väst will be part of this calculation going forward, so you can get a better evaluation of how that portfolio is looking. Teqnion Väst is in local currencies, down a little bit this quarter. A quarter is a rather short time. But to explain that gap, one of the companies that we spoke about, I think, in the last 2 quarterly reports, they had a huge 2025. And now they have reversed back to normal state, which is still a very, very good healthy company. So that will establish a new baseline. And then another reason for it is that we -- as you know, the previous question was, how long is a string? There was a company that we have folded, as you all know about. Those numbers are, of course, reflected there as well.

Teqnion Nord is more of a -- yes, we've spoken a lot about that. I think the key companies when it comes to pruning, I feel that we're mostly done. Pruning is never a job done, but the big things have been done. So again, hopefully, sooner than later.

Next question. This is in Swedish. I'll try to translate it. It's Tobias who is wondering. He's a question about financial expenses. It has increased a lot during 2026. Why is basically the question.

And I think it's a very good one because if you look at the 2026 financial expenses, both year-to-date, but especially Q3, you would see that they have increased a lot. And this, I guess, is one part where maybe more line items would be helpful to understand the accounting pieces of it. A small part of the increase is that we have bigger loans because we have acquired more businesses. The interest rate as a percentage is actually lower due to refinancing earlier this year. Over 90% of the increase of the financial expense is due to IFRS revaluations. As you know, most of the loans that we have -- sorry, most of the earn-outs that we have, which is recorded as a liability and also the shares of the Teqnion U.K. companies are recorded in pounds.

So when the pound strengthens against the Swedish krona, which it has over the year, that has an effect on the balance sheet that gives us a net interest cost due to IFRS rules. It's not anything that changes the tax. It's not anything that changes the cash flow. It's just an accounting effect. So if the pound goes down, you would instead see a financial income there, which is also not a real income.

Okay. Sven from e-mail saying, "Daniel, I look forward to meeting you next month in Holland." We'll be at the investor event for your information. Congrats on the Q3 overall good result, of course, always some room for improvements. On the Q3 acquisitions, I just want to sense check based on the margins and revenues, is it possible to assume they're supposed to add roughly SEK 40 million per annum going forward starting in Q4? Almost. I think the question refers to the page we spoke about before, Page 24. So where you see the EBITDA of SEK 45 million. So the SEK 45 million there is what the companies would have contributed if they were actually acquired 1st of January 2026. So that's 9 months.

So simple extrapolation would make that SEK 60 million. Then, of course, we would have interest cost for acquiring them. So it will be a little bit lower. But that's a number.

That's also a number.

Yes. Jesus on e-mail is writing, "Congratulations on the 20th anniversary. I have 2 questions in the Q3 report. Underlying EBT was SEK 57 million in Q3 against SEK 61 million a year ago, which you can see on the whiteboard. Which cost line explains most of the decline?

The second question is Teqnion Nord's EBITA fell 5.9% in Q3 on flat sales. What drove it?

I think it's easy to answer both questions at once. Do you want to kick it off?

Well, I think the first one you just explained very thoroughly. So -- and the second one, I'll leave to you then.

Yes, absolutely. So I think -- I mean, Teqnion -- when we look at Teqnion, we look at it from the same point as you where you look at the overall numbers. But then, of course, you don't know what's happening in the subsidiaries on a monthly basis. So even if the sales are flat, you could see if you had the information that we have that it's very different companies that have contributed to those sales. Last year, there were a few companies, especially in Teqnion Nord, in the Q3 that finalized big projects and had -- and a few high-margin companies had higher sales than what they usually have, which really bumped up the sales -- sorry, yes, both sales, but also profit.

This year, I think it has been more normal. And at the same time, we had a few larger projects that were moved to October and that we'll be recording in the Q4 instead. So the answer maybe to both questions is that it's mostly a mix effect that certain companies performed better last year and certain companies performed better this year. And of course, when a high-margin company performs better, that's better.

Yes. But the EBT thing there was the first question, right? So there, you have all the things that you answered for in...

Yes. Good. Let's see what more we have. Alex, as a long-term shareholder, thank you for your hard work and righting the ship in the last few quarters. The progress is apparent. Most of the -- many of the successful serial acquirers achieved outsized success with 1 or 2 holdings that grew massively, Lifco and Brokk, Berkshire and GEICO. Does Teqnion think about enabling this sort of outsized growth? If so, how?

We think about it, we hope for it. We have a couple of potential gems that might be really big and successful going forward. And of course, we pay some extra attention to them to make sure that the management has the right support along the way. But definitely, yes, I mean, the longer that we're in the game and the long -- the more companies we acquire into the group, we're going to see more and more opportunities in that direction. And it's very difficult not to have some kids in the group that you have closer to your heart. And I have a couple, maybe more than a couple, but a few that I definitely think that can blossom and be really, really successful companies within themselves.

Yes. I mean compared to Berkshire, we won't take any bets that are so big as Berkshire's GEICO bet or their American Express bet. It's not our business model, and we rather prefer to be conservative and just continue to acquire roughly the same size and bigger over time. We also don't have any illusion that any of us are Warren Buffett or Charlie Munger. So let's keep to what we can do. There are, of course, some companies that have contributed a lot more. You never know what we find along the way. But if we look back over the last 20 years, and let's not make this into a really long thing. But I mean, we have companies like Elrond, which was one of the first acquisitions. Without that, we would not be standing here today. They've contributed a lot. They pay a lot more per year in free cash flow compared to what we paid for the company.

Then over time, we have a few more like that, which really have changed the shape and especially the size of Teqnion. And there are a few, as you say, that we believe will be maybe one of those that, yes, will contribute, but maybe a lot. And hopefully, we can report back on that in a few years. Milan is wondering over e-mail. "Congrats on another good quarter. I understand that Teqnion explored many geographies when looking to establish its second leg, the U.K. and that you travel quite a bit to a few countries in the process. Which factors do you consider when evaluating a new geography as a potential hunting ground? And how did the U.K. score on those?

What made us pick U.K. Our spotless English language.

Exactly. No, but there's no magic in it. We've looked at a number of different factors. I mean, obviously, the jurisdiction has to work when it comes to doing business, acquiring business, all of the enforcements that are needed. There needs to be enough companies of this kind. And of course, some companies are easier -- and some countries are easier than others. There needs to be a language and a culture that we at least feel that we understand. There needs to be something about geography. It's -- I mean, everything equal, it's very difficult to acquire something in Australia just because it takes a week to visit one company, if that's enough.

And then you have to have -- be a little bit lucky to find the first company to put down the pole and start digging. There is something about what other companies have done before us. There's no need for us to invent the wheel. There is also something about that we don't love a lot of competition. So those, I would say, are the main factors when we look for a new hunting ground, which ended up being the U.K. after, I think that we looked at maybe 15 different companies. We are also now, as you've seen, we have 2 legs that are roughly the same size, which is good, at least if you're a human. But -- and we also didn't start this now. We've been thinking about our third leg for a while. And let's see where we end up on that.

Next question comes from Galileo. "How much do you expect the change in working capital to contribute to free cash flow in the next 2 years?"

I couldn't answer that question.

Me either. But maybe 2 things that are interesting still. One thing is that if you look at your cash flow statement, that would give you a very good idea of if we're tying up working capital or releasing. However, if you just compare the income statement with the balance sheet, there will be some strange things happening. Just as an example, if we acquire a company that makes SEK 1 million in EBIT per month straight and we bought it a month ago, then we will get SEK 1 million in EBIT in the quarterly report. However, their full working capital would be loaded into the balance sheet.

So the balance sheet, when we acquire companies rather quick as we do now, the balance sheet working capital just grows much quicker than the income statement, and it takes 12 months for it to catch up. Then again, during those 12 months, we buy new companies, so you would see this effect basically forever. Another thing is maybe going back to what we spoke about in the beginning. We focused a lot and are still focusing a lot on the profit of the companies. Organic growth have been a secondary thing.

Working capital have also been a secondary thing. And I mean, yes, you should be able to keep more than one thought in a head at the same time, but it's also important to know what are you optimizing for. So now when we are more in a normal state with, let's call it, 15% margin, we want to go higher. We will go higher, but working capital have been lifted up on the agenda. So you would expect to see it look better.

Next question from Galileo is, "What are the annualized savings from the supply chain office currently?"

That you know?

Yes, I do know that. I think -- to give some vague answer, I think in the last quarterly report, you wrote that the annualized report -- sorry, savings was somewhere in the region of SEK 10 million, SEK 15 million. Now it's, I would say, a little bit north of SEK 15 million, but it's not really a number that we will be reporting on a quarterly basis going forward. Hopefully, you'll see that in our gross margins over time instead.

What we see is that it's really well utilized, and it's used more and more by more subsidiaries, which is really, really fun. And they do a fantastic job over there in our office and still a lot of untapped potential, I think.

Yes. I think that the way to think about it is, yes, it's a sourcing office because we have to call it something. But over time, you would expect to have, of course, better gross margin, better working capital. And all of those pieces that you would see maybe on the cost and outflow side. What you wouldn't see or that we would see is that it's a 2-way street.

So one thing is to take instructions from Swedish and U.K. companies and say, let's make this better. But then there is the other part where with a tighter connection with the different companies in China and the Southeast Asia, we would also see more products flowing into our European markets. And hopefully, that will contribute to higher revenue over time as well.

How do you assess the current market environment due to escalation of energy prices, interest rates? Go ahead.

No, I guess -- higher energy prices for us is mainly when it comes to moving things around. We don't have that many big factories that consume a lot of energy in any way. So it's not a big thing for us. It's always important, of course, but it's not that it's something that affects us a lot.

I think it's interesting when you think about cyclicality because we -- I think a lot about that when we look for companies. I mean one thing that we always have talked about and always think about is that we don't want to have too many companies with too many correlated risks. So I mean, higher energy prices usually, that would struck into the wider macro environment about cyclicality. However, we try to always also find companies that may benefit from it.

We have, for example, Merridale in the U.K., where you see more order intake, higher growth, more profit because higher energy prices means that there are more money to be saved by using their services. We do have a number of companies within the defense sector that is not maybe due to energy prices, but the underlying reason why there are high energy prices is something that we expect will benefit them over the years to come. So it really goes in both directions. And if we do our jobs right, we will have a group of companies that will be basically unshaken by whatever happens.

Yes. No, I love the answer. And also, I mean, there's plenty of examples within the group with companies selling components or systems that actually becomes more and more important when energy prices are high. So that comes a little bit with the territory. We are working in narrow niches with high application knowledge of a very specific thing and a lot of it comes when it's -- when energy is high or where energy costs are high, our products will be worthwhile looking at and buying.

Yes. We've got another question here over e-mail saying, hello, could you please comment on whether you have plans to acquire businesses in APAC? And the context is basically that we have a coworker on LinkedIn, where there has been -- where he's been trying to get some connections when it comes to M&A in Asia.

The short answer is yes. Do we want to do that in the short term? No. But when it comes to M&A and trying to evaluate where we want to go, we can't work in the sense that we come up with the idea that let's go to a new market and then we start assessing if that market is good. At least the way we work is that we start the thought process and start to get some feelers out years before that happens. Johan started to think about other countries outside of Sweden, probably a decade before I joined Teqnion. And then for natural reasons, it took time before we got there.

I didn't have the guts.

Or maybe the time...

Or the skills.

But it takes time. So I mean, we are -- I think, in a sense, we are -- we want to become the best when it comes to this, and we want to do this for a long time. So the TAM and if you think about which countries we might go to, there are very, very few off limits. There are, of course, some that are way higher in priority. There are some that are off-limit/very, very low priority. But given that we have a lot of connections to China. We have a sourcing office in China. We have actually subsidiaries that have a subsidiary in China. And given my background in China, it does make sense for us to think about it, and it's not something we spend a lot of time on. But if that day comes, then we would be ready. It's not going to happen in the short term.

Next question, Geir, over e-mail. "Can you please elaborate on the reasons for the development on the financial expenses?"

Sorry, this one, we already answered in the previous question.

Oceanside is wondering over e-mail. "Strong quarter on the free cash flow. I have a few questions for you and the team. At first glance, Norband appears to be quite cyclical/seasonal with the timing of all events to which the company supplies its products and solutions. Could you please help us understand more about the business and your reasoning for acquiring this business? Yes, absolutely. Should I start maybe?

Please.

It's -- can it be cyclical? Yes. And I guess when people are cyclical, it's about cyclicality correlation to the macro environment because all companies are cyclical. They just have their own cycles. In this case, they are somehow tied to the event industry, which is a very broad one. They are actually more tied to the more premium high, what's this English word here? High-profile events that have been growing quite rapidly compared to the overall event industry. Right now, they're doing very, very well. From a macro environment perspective, we're -- I'm not going to guess where we are, but we're not at a high. So hopefully, if the macro environment goes up, they would benefit from that as well.

The cyclicality is at least on one aspect of the cycle is at least 100 years approximately because then we have another pandemic, so.

Yes, exactly.

Sorry for that.

And then when it comes to seasonality, we're not afraid of seasonal companies. And now I'm talking about intra-year. Norband have a seasonality where they have more of the sales and profits coming during the time when there are a lot of events. In Europe, that obviously means more during the warmer degrees. But at the same time, they have sales all over the world. And if you look at South America, it doesn't really matter. But seasonality is not something that we're concerned about. Rather, we're happy to have a company that has some higher sales during the summer period because typically, that's when it becomes really quiet for the more traditional industrial companies, both in Sweden and the U.K.

Absolutely.

How many of these subsidiaries are below your 15% bottom line hurdle today?

I would say that we don't really disclose that, but our current margin is more or less 15%. So mathematically, half of the revenue is below and half of the revenue is above. That doesn't mean that half of the companies are above or below, but we would, of course, always have due to how averages work companies that are underperforming compared to the average.

Then we have a question about earn-out liabilities and revaluation. Wondering where those latest revaluations came from, which companies. And that's unfortunately something that we do not disclose. It looks like the Q3 deals are priced below 4x net EBITDA with 9% contingent consideration versus 25% in H1. What drove that change?

I mean, every deal is different. In theory, we can pay more total EV if the sellers are happy to take more on earn-out as a risk sharing. Some people like to have more certainty. And in that case, to a certain extent, we can be fine with it if we're sure about other aspects. But in that case, the total EV becomes smaller. So I wouldn't say that it's a trend regarding in which way we're going. You would see this kind of fluctuations because there will only be maybe a couple or 3 acquisitions in a certain quarter.

Absolutely.

Noah over e-mail is wondering about backlog and revenue. Backlog continues to grow considerably faster than revenues. I'm curious on what's driving the divergence and how we should think about the timing of the revenues.

It's a very diverse story or the order -- the backlog consists, of course, of a variety of different type of projects and products and deals. And since we acquire companies, we -- some of the companies that we acquire have a backlog that will from -- as you mentioned, regarding the balance things coming in with just 1/12 of the revenue when we acquire a company, this is the same thing. I mean we acquire a backlog from a company, and it pops up on our backlog.

So some of it comes from new companies, but we also have quite a good order intake from parts of the existing portfolio. And there's nothing that has changed when it comes to the execution of the backlog from the historically owned companies, it's the same thing. So it will -- I don't see any trend in that, that it will be -- that will stay longer in the backlog or shorter. It's just the normal execution of the backlog. Just talking from experience and what we have today.

Exactly. Very different from company to company. But again, we do believe that we will start seeing more and more of the revenue coming through. Maybe one thing to add to that. The backlog piece is quite interesting. We follow that as one of a few different KPIs. We follow it on a company-to-company level, not really on a group level because on a group level, it unfortunately makes less sense. Just to take a few examples, Abercromby that we just acquired, they're not a far quite away from SEK 100 million in revenue, which is quite big for being our group.

They don't have an order backlog because they get cash paid when people transact or actually that goes to the card processor and we get it within 2 weeks. But there's no order intake and no order backlog. Norband also very recently acquired. They don't really have backlog in that sense. They do, but a lot of the revenue and the exact volume will come rather close to execution. So we have a few companies or we have a few more companies compared to if we go back 10, 15 years or even 5 years, where the order backlog tells a little bit less of the individual subsidiary story about what will happen next. Again, that is not a trend. It just happened.

Next question from Noah is acquisition disclosures. Is there a particular reason why we provide a 3-year average for revenues rather than the most recent fiscal year?

Most other acquirers report the latest annual revenues, which I find helpful in assessing the underlying growth and contribution of acquisitions. Yes, there is a reason or maybe a couple of reasons. One is that we don't really like to change communication when we have chosen a certain way of reporting. So this has been the way that we've been doing for 6 years, maybe something like that. And we want to keep it just to keep it stringent. And I mean, the companies we acquire, we expect them to grow. So if you take the average of the last 3 years, if you believe that your companies are growing and have been growing and the average of the last 3 years would, of course, mean that, that is a little bit lower compared to the last year on balance.

However, there are companies that are jumping down quite a bit. When we look at companies, we try to look at the history. We look for longer than 3 years. We try to focus more on a 5-year, what has happened because you get companies that are up and down because of different reasons. So we feel that, one, it's a little bit more conservative to use a 3-year average. And secondly, when it comes to expectations, it takes out some of the volatility in both directions. That's the reason why we've chosen that. That's also the reason why we don't do pro forma because we don't want to create unnecessary expectations for the companies.

Yes. I mean, very few of the companies that we have in the portfolio would be on a stock exchange themselves. I mean so they are just by the nature of it, rather small companies, and they can fluctuate a bit. What we look at when we look at the history of a potential company that we are looking at to buy, we want to know that it's been around for at least a decade, and then it should have been constantly slowly growing and being stable over that time.

And if you draw out the line for a decade, then you see that it fluctuates a little bit about an average point, then it's good enough for us. It tells so much to us if the company has been around over a decade, then you know that the people in there are people that are able to build strong relationship with both their staff, with their customers and clients and with their suppliers. So you have a very good part of the DD, just look at the history and the stability of the financial data.

Yes. We have actually run out of time. We're 3 minutes past 9 over here. I guess we could, in theory, do this for a lot longer. But with respect to everyone's time and for us to focus a little bit on making the business better and getting that organic growth, maybe we end it there.

Absolutely. Thank you so much for popping in and hope to see you again in February.

Take care, everyone.

Bye-bye.

Bye-bye.

All right. Good morning, everyone. Welcome to Teqnion 2026 Q2 Q&A. Thank you all for joining us today, especially given that I guess it was a late night for many of you due to the World Cup final. We will, during the next hour or so, give you as partners and interested parties, the opportunity to understand your business as well as possible. We will be alternating between the questions that we are receiving through the Q&A here in Teams. [Operator Instructions] We will also be jumping into the e-mail questions that we have been receiving.

But before we start doing that, some words from you.

Hello. Good morning. How are you?

Good. A little bit tired. How are you?

Are you tired?

Yes, a little bit.

Welcome very much. Me and Daniel, we're here at our office in Solna in Daniel's office space. Teqnion is doing a little bit better every quarter now, which feels great, at least in my stomach. For the quarter, the Q2 here in 2026, the underlying pretax profit from our subsidiaries is more than double than last spring. Nice. The earnings on the EBITA level was SEK 7.9 million (sic) [ SEK 72.9 million ] that is up 36% compared to the last Q2. The organic part of that EBITA is up 52%, which is good. We try to sell more, but we are very much interested in earning more on everything we sell. And just as a comparison, the increase of the organic EBITA for the Q1 this year was 13%. So we're doing a little bit better on everything we're selling. The group as a whole is performing better. It's not good yet, but we're getting there. The work that we put in throughout the years now, the team has managed to put us in a better position for -- and just moving everything forward.

We have a lot of new processes implemented, and we worked hard on some turnarounds. And finally, the performance shows we are on a better foundation to build something from. I'm really happy about that. We have operated in our 2 business areas for quite some time now, and we have 2 driven teams with fantastic coworkers that are doing their best and want to perform. Also very positive. And with that said, there's still plenty of things for us to do and for the teams to perform, but we're doing that, and we will just continue and we will never get satisfied.

Let's jump to the questions maybe.

Yes, let's do that. The first one comes from Cristoforo through the e-mail. He says, hello, Daniel. Nice to see the improved results. Thank you to the team from our long-time shareholder. About organic growth, good news. The number is positive, excluding exiting unprofitable businesses. One question. Even if it is an apples-to-orange comparison, I see some Swedish conglomerates will have still higher organic growth rate this quarter. example, Lifco plus 5%, Lagercrantz plus 6%, RACO plus 3%, et cetera. What is your thought on that? Thank you. Keep up the great work.

You want to listen to my thought first?

Go ahead.

My thought is that we want both. We both want organic growth on sales, and we want organic growth on earnings. If we have to choose one, we have to start with the earnings bit because we don't want to do a lot of business that we don't earn enough money from. So we want -- my thought is that we're going to have both on a good level. Right now, we are focusing on making sure that the businesses we're doing, we're doing in a great way with good margins and therefore, good earnings.

Yes. And maybe just to add to that, we as owners ourselves in Teqnion, and I think for most owners, given the business model that we have, our business model is that we're going to make more and more earnings and cash flow per share. It's not really to get a higher valuation for what we're building. Hopefully, that will come with it. But that means that we want to have more earnings. In the short, medium term, it's really about using both levers. And of course, in the longer term, higher earnings will need to have higher organic growth as well. But it's not really what we're chasing. We're chasing the earnings and then using sales as one of the levers rather than the other way around. But maybe another perspective on that is that, of course, when we see other companies that are better in one or other perspectives, we want to be better than that. These companies have been around for a while. They have quite a lot of experience. Of course, RACO is rather new, but it's gathered with a team of people that have done this for a long, long time and with extremely, of course, smart people, good team and a lot of capital as well.

There's an underlying factor of it as well. Of course, if you pay a lot more for the same earning, you would also expect to have companies that just organically grow more. And there is a balance to that as well.

There are many levers.

Yes. The next question is coming from Thomas through the e-mail. Says, thank you, whole Teqnion team for amazing work. Does Teqnion as a group have pricing power?

As a group?

As a group, tricky one on a group level. You want to start?

No, it would be too philosophical, I guess.

I think it's really difficult to answer as a group. I think -- the way I think about it is that as a group, we have more pricing power now than ever, to be honest. I mean, for every company that we acquire, we try to find companies that do have better pricing power than the group as a whole. So slowly, slowly, I think we have more pricing power now compared to 1 year ago, 5 years ago, 20 years ago. But it's really, really different on an individual level basis. I mean, unfortunately, because we like to tell you exactly how it is, we do have a few companies that have been struggling, as you know, and some of those have close to none pricing power.

A couple of those are contract manufacturers, and they are price takers when it comes to the projects they're doing because it's rather generic. We don't want to acquire companies like that, and that's also one of the reasons why they've been struggling. But we also have companies that are doing really, really niche applications. And for them, when they find the right customer and can explain to the customer why their application is the right solution for them, the price is not really a factor. And for them, the pricing power is really very high. And I think we have a rather big scale when it comes to the pricing power.

Absolutely. But it's still -- I totally agree with you. And the most important thing there that Daniel is saying is probably take out that over time, we make sure that the pricing power on -- let's say, on a concrete level is getting better and better. But it's also the mental part of it, just to educate ourselves and build a group -- a team feeling that we actually can supply our customers with something that is valuable to them. And that is also something within each individual that works even if you're in a contract manufacturing business, if you're able to make sure that you're the best friends with your customers, you will be able to charge more because you will have the best relationship and you're confident and you're proud of what you can perform and what you can deliver.

So it's so many levels of this. And we are, of course, in charge of making sure that our coworkers have the right feeling about it and the confidence and the proudness of actually supplying the best there is in their niche.

Yes. No, it's very interesting that you're saying that because I think for -- it's easy to sometimes think that the product is X and therefore, pricing power is X. But then, of course, it depends on how you package things and how you actually build the whole solution and the relationship. And I mean, we have, for example, a couple of companies that are doing on paper the same thing. I think for most people on the outside, you would say that they are doing exactly the same thing. One of those companies have at the moment, an earnings that is, let's call it, low single-digit EBIT margin. The other one is closer to 40% EBIT margin. The products are more or less the same, but they are packaged in a different way. They have different solutions. They have different relationships. Yes, they are in different geographical markets as well. And then, of course, as smart investors, the question is why don't we do the same thing for both of them? And yes, we're trying.

Next up, we have another question from the e-mail. It says, firstly, I apologize for my ignorance, but I found Teqnion as a very interesting investment case. The transparency and reporting is truly exceptional and create a lot of trust. So thank you for that. Thank you.

How should an investor view Teqnion's main risks?

I just got sighed. Only risk is -- everything we do is balancing the risk because that's business. I mean the main risk as an investor is that we would start making stupid decisions and acquire things that we don't understand or that we pay too much for or we get too much leverage or I don't know, but that's -- I see that risk as rather limited because we've trained on this for quite a while, and we cherish this company as it was our own. And yes...

Yes. I think so too, I mean, Teqnion is a vehicle for redeploying cash into return of capital projects, which usually means acquisitions. And of course, if that goes wrong, we have these 2 engines, acquisitions and the current portfolio. And if one of those things doesn't work, the whole thing will fall apart. Over the last couple of years, we've had challenges, as you know, with our current portfolio. We are at a stage right now where Teqnion Nord, which is the part that has been struggling, are close to all-time high earnings and margins, which is a good new baseline, but far from where we want it to be over time. We have Teqnion Vast, which has performed. It's also newer. So you could say that the jury is still out.

So I mean, if things like that happen and we can't fix it, that's of course, a big risk. We think that we're better positioned now. We have -- we got ourselves into that challenge, and we have fixed it. So hopefully, that shows that, that risk exists, but that we're a little bit better now compared to 2 years ago. And then as you said, the acquisition thing, if we start buying bad things at high prices, then that will be very detrimental. We don't want to do that.

From the same person, he's asking what is your biggest subsegment exposure?

I think -- I mean, there's different ways to cut this. Geographically, Sweden is still our biggest end market. And then you could, of course, argue is it really Sweden that is the end market because a lot of our customers are international conglomerates. So they in turn don't actually sell to Sweden, but rather to other international companies. But I mean, Sweden is, yes, high exposure. U.K. would be our second biggest exposure. And when it comes to industry, traditional heavy industrial is still our biggest group, I would say. But compared to maybe 10 years ago, it's in percentage, much smaller. Defense has become bigger, MedTech has become bigger. And I would say that the group miscellaneous, which is very different things have become much bigger.

Yes.

Next one from the same person. Your returns on capital has been falling steadily for a while. Is your business cyclical?

A part of it is cyclical. Companies acquired over 5 years ago. When it comes to return on capital, I -- we're, of course, affected there, but because of previous mistakes and it's going to turn better.

Yes. And maybe just to reiterate, I mean, yes, the industrial climate 2025, '26 is more difficult compared to a few years ago, but most of the decline, I wouldn't really attribute that to the cyclicality. It's actually mostly due to self-inflicted pain that we also have to a large extent fixed by now.

Yes. That was a better answer.

I have 3 questions on the live Q&A from Prakal. He is saying, excluding the discontinued unprofitable business, organic growth appears to be roughly flat. How much more business remains to be exited when you do and when do you expect reported organic growth to normalize?

It's definitely a continuous project. And when it comes to discontinued business and what we report, we made it a rather clear -- we made it rather clear cut. So there is more things to come, and it should also be able to -- for us on the internal side, we see that we stop doing things that just makes us busy fools. So we stop doing things that we don't earn money from and only produce sales, and that is over the entire group. And over time, we hope that we can -- and over time, the target is, of course, to make everything much more profitable, and we're still in the journey of making that happening. But the intention is that you're going to see better and better margins and better and better earnings and better and better sales.

Yes. Prakal is also wondering, how has the organic revenue and profit performance been in the companies acquired during 2025?

I mean, it's still very early. Some of the companies we acquired in 2025 are only maybe 8 months old or something like that. But as a group, we're happy to say that they are growing. Yes, that's -- growing as a group. And I mean, the quality of the companies that were acquired in '25, '26 are different, better compared to earlier. And the expectations on them are, of course, higher. And we hope to be able to buy more of those companies that are more autonomous and just stronger in most regards compared to earlier.

Yes.

With EBITA margins now at 14%, 15% for 4 consecutive quarters, how should we think about margin and EBITA growth as comparisons become tougher from Q3 onwards?

Maybe just to repeat what we just talked about, we're really targeting to become better overall, and that includes making more sales with higher margins. Our target is internally to continue moving along this path. We don't give any forecast and -- but you know how we express ourselves, hopefully, what we -- how we communicate over the years, and we are not satisfied where we are today. We want to become better at what we do.

Yes. I think also, I mean, exactly say we always want to be better. We've had a period of rather quick decline when you looked at the financials. And during the last 4 quarters has been maybe not a straight line, but a rather quick recovery for 4 quarters. And if you were a shareholder that didn't really look at the reports for the last 2 years, you would say that it looked almost a little bit like a straight line over the last 2 years. So of course, going forward, we won't have earnings growth -- organic earnings growth of 50% or whatnot, that won't happen. We're getting closer to some kind of normality, whatever that means. And then we just nudge that normality into a new normality that is a little bit better than yesterday. But -- and I think we're getting closer to that point, which is, I guess, how a serial acquirer should work. You have, over time, a rather stable return on capital or rather stable profitability and then you just grow from there.

Yes.

We got an e-mail from Rosserial. It's in Swedish. But basically, the question is if every subsidiary is acting independently, who is held accountable when things go wrong? Is there a risk. It's 2 questions. Let's start with that one.

Yes, every subsidiary is operated autonomously, and they are working under the holding company in their separate region, Nord and Vast. They have a Board. Every subsidiary has a dedicated Board of Directors that make sure that they have a strategy going forward, going into the future to maintain competitive and profitable. And the Board together with the CEO works this out and make sure that we follow that strategy. And of course, the top management is held accountable for making sure that we perform along that line that we together decided on.

Yes. The second part of the question is, is there a risk that the continuous improvement mentality becomes a reason to not really hit the target with clear and measurable results?

I think the risk is there. I mean we absolutely hear every now and then, especially a little bit earlier, that things will be better because it's human nature that you believe in what you're doing, you believe in your team, you believe in your business and you're doing things that you -- that are, of course, qualitative.

You feel that you work really, really hard and that should pay off mentally.

Exactly. And that soon the financials will come. And I think, I mean, to be self-critical, in the beginning, Johan, I, the rest of the team, we should have -- maybe not push that, but we should have question and verify that clearer and maybe have closer deadlines to ensure that it's really, really paid off. But we're humans as well. We learned from that. And we were maybe a little bit too lenient. I mean, looking backwards, yes, we were. But then we saw in some of the companies, yes, the talking became action that became output and results, great. In some of the companies, the talking and the actions didn't really translate into results. I mean, capitalism or business, yes, action is good, but action in the wrong direction is not helpful. Sometimes it's even worse. And in those cases, we do something about that. We try to be a sounding board. We try to be closer, we try to coach. We see if we agree about the direction. We try to see if we can support in any way. But if nothing of that works, then we will have to find another solution.

Definitely.

And maybe just to tie that together. I mean, yes, we talk a lot about improvement and slow progress and those things because they are important, but they are only important in the framing that we want to have measurable results. That is, of course, the target.

We got a question then from Akash. He says, hi Dan and Johan, congratulations on the continued success regarding the turnaround. I have 2 questions. One, what will be the impact of a more stringent M&A criteria on deal volume and ability to deploy all your free cash flow?

Let's start with that one. Maybe this is marking a little bit on words, but I'm not sure if we have a more stringent M&A criteria. I think that we are sharper when it comes to M&A. If this is referring to the comment that we made on the whiteboard where we got a clearer mandate in the beginning of 2025, it's not really that we got a more tight criteria. I would say that we got a more clear mandate. Before it was -- we didn't really have a super clear frame for the management. And for every single case, we have to take it to the Board and have discussions with the Board and in certain cases with the bank as well regarding what to buy and what not to buy, just to give an example.

And during 2025, due to the new Board that came in, in '24, they came to the conclusion that management is running the business, management is running M&A, and the management should be accountable for what we acquire or not. So the Board is doing their evaluation on us if we are acquiring the right businesses or not. They're doing the evaluation on us if we're running the businesses in a good way or not. But the Board isn't operational as they were to a higher extent before, just to maybe clear out that question mark. You want to add something to that?

No, I just felt more stringent, I was also hooked up on that a little bit. But I mean, the deal flow is high. What we're looking at on paper is better acquisitions than before as it should be. And the confidence in that we're doing the right when it comes to M&A is very high.

Yes. I mean we have a higher cash flow now, of course, because we are a bigger group. And we will deploy all of our cash flow into M&A. And that -- I mean, not saying that it will happen exactly now, but that is how it will look, and we have enough cases more than enough to get that done.

The next question from Akash is in the Q2 report, EBITA was plus 36%, but organic EBITA was up 52%. Can you explain the discrepancy, i.e., how is organic EBITA significantly higher than the EBITA growth?

Do you want me to?

Yes. Go ahead. You're the IFRS expert.

What we're saying is that the organic part of the EBITA has grown by 50-plus percent. So just to say that if we had SEK 5 million -- I don't say that we have that, it's just an example. If we had SEK 5 million, now it's SEK 7.5 million. So it's just the part of the growth -- the organic part of the growth was growing by over 50%.

Yes. And then maybe just to add some fun IFRS facts. The organic growth in EBITA, as you say, is how we view real earnings. The auditors in the call might not really agree with how you think about real earnings, but that is the closer you get to cash in the income statement. In the EBITA, that one includes, among other things, earn-out revaluations. You also have the IFRS lease and then, of course, you would have overhead. Overhead is absolutely real. The other 2 things are question mark. But that's how the rules are. So -- we show both because then you can choose which one you want to follow or maybe both.

And maybe we complicated that too much. So we have to do a [ new whiteboard ] for the next quarter. That's fine.

We got a question from Benjamin Billiard, who is quoting, Johan saying, effective data analysis and support from non-human intelligence are becoming increasingly important for getting there efficiently. This was an interesting comment regarding M&A. Can you expand on it a little bit more, please?

I think I'll leave that to you. But of course, those tools are implemented more and more over the entire group, and we're constantly in a learning process on how to use these tools effectively. And on the M&A scene, over to you.

It's super interesting. I mean we've received a question a lot of times regarding how will we scale M&A. I mean, for a couple of years ago, we were acquiring 3 companies a year -- 3 to 5 companies a year. And we got a question of how would we ramp that up. And our answer, I think, has always been we'll figure it out. And hopefully, we get smarter, we get better. Maybe what we didn't anticipate was that we got this gift from God that AI came. I think historically, if you look at peers, you would see that there's roughly 1 to 2 acquisitions per M&A FTE in the other serial acquirers.

At Teqnion, I mean, depending on how you count FTE, I'm working close to full-time, Johan is supporting. Jonathan is supporting a little bit as well. But we're closer to last year 9 for 1 FTE. And it's not because I have stopped sleeping. It's absolutely helpful that we have AI tools that can help us to do things, that can run 10 things simultaneously while I'm sleeping, to help out with things that would just take a lot of manual work and that would pick up things that we would never have picked up before. And then of course, we take very much Centaur approach where we try to use AI as a tool to support us.

Basically, when I work with M&A, I think about them as a team of junior or associates. It's not the answer. You can make mistakes and we can't trust it at face value. But it makes a lot of the analysis that we -- that would have taken us a lot of time or maybe we wouldn't even have done them because it's too time consuming and not good capital allocation. But now when we have it, I mean, yes, we're spending tokens, not tokens that you really can see on the income statement as some of the real AI companies do. But yes, we're trying to really lean into that. And I think part of the result you can see as well.

Good. Then we have a question from Augusto on the e-mail. He says, amazing progress, keep it up. I'm aware you increased your M&A hurdles to 15% margins and up to SEK 40 million in profits. However, I don't think you ever acquired a company that large. How different is it acquiring a company in that range? Is sourcing different? Is growth profile different?

We have acquired a couple of companies that are -- they're not SEK 40 million, but they were just north of the earlier hurdle of SEK 30 million.

How different is it to acquire a company in that range?

I mean, it's interesting. I mean, we learn things all the time. Theoretically, you would think that if you acquire a very small company, it would go in the other direction, it would be easier. So if you buy a company that is half the average size, you would want it to take less than half of the time in order to make capital allocation good, right?

But the -- what we've seen is that buying companies of smaller sizes usually just takes more time because they're usually, on average, not as good when it comes to administration, structure, process all of the pieces that matters when it comes to M&A and business quality. And if you go in the other direction, going from, let's call it, SEK 10 million to SEK 20 million to SEK 30 million, SEK 40 million, they are on average better. So the processes are a little bit more professional. They usually have sell-side advisers that are, of course, more expensive, but also better. And it makes the processes, I would say, a little bit easier and more professional.

And more predictable.

And more predictable, Exactly, exactly. Is the sourcing different? Well, right now, we're in a very fortunate situation where we have, it's strange to say too many, but we have more incoming leads than what we can take care of, which is really, really nice because then we just pick the best ones. And the sourcing from this one is just -- there's so many things that just comes in. I pick up my phone and we get things, mostly on the e-mail, but sometimes on the phone.

And the growth profile, is that different or not? I think our biggest companies that we have acquired overall have a little bit better growth prospects, but it's not something that is significant. But I think that the robustness is different. There's less downside risk in them because they are less reliant on one person doing everything. They have more people usually to begin with spreading the risk out a little bit. They have more structure, they have better processes. They have, let's call it, just systems, hard and soft of different things.

Normally longer history, deeper relationships.

Yes. Exactly. [ Lou ] is another person that has written to us on the e-mail. He says, "Hope you are well. I'm taking the most recent report. A few questions are coming into my mind, and I was wondering if you could answer either here or within your call next Monday."

One, what does the management perceive as a new mandate for acquisition starting January '25?

I think we spoke a little bit about that.

Yes.

Question number two, you have changed your maximum earnings level to SEK 40 million. Are you searching for slightly bigger target? Are you finding bigger targets coming your way?

Yes, to all of those questions. I've been trying to communicate clearer and clearer to all sell-side advisers, brokers, investment banks, corporate finance advisers, whatever you want to call the helpers that we want to look for bigger things. I mean, with the help of -- that we are getting a little bit better, with the help of AI, I mean, we've shown that we can acquire 9 companies last year. We've done a handful this year.

But then, of course, there will be some kind of bottleneck in how many companies can we acquire per person. So the natural next step instead of buying 100 companies makes SEK 1 million, a ridiculous example, it's, of course, easier from a capital allocation perspective to buy the same amount or maybe even fewer and go up a little bit. So it's both that we are receiving more companies of all sizes, but also that, of course, that we believe that it's better capital allocation and better for Teqnion shareholders to go up a little bit in size.

And maybe just to align expectations, we don't think that the majority of the companies will be of that size. We just want to let all of the sellers know that we are open to that now and mostly that we're lifting up the lowest level.

Next question here is, as your floor for profitability has increased from 10% to 15%, is this a consequence of the management mandate? Are you seeing more difficult to improve margins, so you tend to acquire better margins at first?

It's not a mandate thing. This is something that we have decided that we want to acquire, let's call it, better companies.

Is it because we -- it's difficult to improve margins? Part of the answer is maybe yes. It's a strange -- maybe it's not strange, but I feel that it's easier to improve on something that is above average in quality, because they usually are used to improvement work. They usually have a mindset that they want to change and they are open to try things to make things better. I mean, the reason why you usually don't want to do turnarounds is because on paper or in Excel, it's super easy. But in the real world...

You have to turn around the people and their mindsets, and that's the part that takes time. And if you're already on the winning streak, you know that you have the confidence, you know that you're able, you know all those things. So it's much easier to tweak that into something even better than trying to change a mindset that doesn't believe in themselves.

Exactly. And I think -- just to add to that as well, we have seen, at least for us because there's so many cases, and you could say that the market for really, really small companies is inefficient when it comes to acquisition. I would say that maybe that's true, but also because we and the sellers are choosing each other not only because of money, but because of other things, relationship, culture, beliefs, et cetera. So what we have seen is that we're not paying higher multiples for companies that are of 15% compared to 10%. Of course, for the same size of revenue, 15% is more, so therefore, more money, but not in relation to the earnings. And given that conclusion, we really don't see a reason why we should not buy "better companies" for the same price.

Next up, same person. What is the process and steps regarding acquisition on your end? I understand that Daniel is the go-to try to find them. Do you manage to do the valuation, due diligence all internally? Or are you taking external counsel?

Yes. No, just to simplify it very much is that Daniel finds them, does the DD and negotiates with them. He has been doing this for over 5 years. And he's a fast learner to begin with, and he has a very bright mind that handles -- fits perfectly well with the support that he gets from the other team members here in this corridor. We strongly believe in that way of doing the business, because we own the responsibility ourselves on a very personal level.

We are very, very thorough when it comes to doing these things because we don't want to make mistakes, and we don't want to pay for that responsibility on a third party. We are so, so confident that the best way of doing an acquisition process is to own every step of the way from the first contact to finalizing the deal and then start building a strong relationship by doing business together with the seller that we normally do for several years after an acquisition.

Yes. I think that I don't know why I didn't say that, but maybe because I'm still thinking about the World Cup. I mean, for Teqnion, what we do is that we acquire companies and we improve the companies over time. That's it. That's our two core activities that should make us great and make shareholder value great over time.

And we so much believe that we should be really, really good at that and not outsource our core competence, because if we outsource our core competence, then what are we? And I mean, taking a football analogy, I mean, we're on the pitch. We should assist, we should score, we should catch balls that don't fall into our net. We can outsource things as diet, massage, I don't know what things football players do, but scoring goes, you don't take.

Lemonade mixers.

Exactly. You don't outsource those key things. That's our view of it. And then, of course, other companies do other things. And for some of them, it works very well.

The next question from the same person is, what's your plan when deal ramps up over time? As the free cash flow improves, this is more capital to deploy since we will need capacity in many forms to address that.

One thing is, of course, that we, over the last year, have increased the number of people that works here and the new team is, in your words, is the best team we ever had. It's -- we have a fantastic driven team, both in the U.K. and in Sweden. And several of those people will probably, as the time goes by, be more and more involved in the acquisition part of our business as well, but time will tell.

We -- as we normally answered this type of future-looking questions before is that we will, as we go along, learn along the way and find ways to do this and scale this in an effective way. We long for that day that -- the day that we have too much capital to deploy. So the bottleneck is that we have -- we have not enough people that want to run M&A.

M&A is often looked at as something magical and very, very, I don't know, it's very intriguing for a lot of people to work with M&A, and we -- it doesn't take too many days between the inbox is filled with people that would like to work with us on the M&A part.

I strongly believe that the best way to be a very good person working with M&A is that you've been operational. You have seen how you have to manage people in order to make a profitable business and you deeply understand the different levers, as you say, on how to pull an organization in the right direction and not only be extremely smart when it comes to read an Excel sheet or the financials.

Yes. And I also think it's -- we as human, we try to improve all the time. And I think that we are better compared to a year ago and 5 years ago. But the thing with humans is that we learn rather slowly. And I mean, secondhand information is super important. We try to read things and get better.

But for some reason, evolutionary-wise, we learn better through first-hand experience, which is a slower, more anecdotal process. AI doesn't work in the same way. And unfortunately, people -- everyone says that you can make just one mistake, but don't make the same mistake twice. We try to live by that as well. But still, we're all humans, and that will happen because we are humans.

AI is a little bit different. So I actually don't want to talk too much about AI because it sounds like we're becoming an AI company, but it's interesting. When it comes to acquisition, the first acquisition that I did with support of AI, it took longer compared to if I just did it myself.

Then for the second, I think it took maybe roughly the same amount of time. And then over time, it just became quicker and quicker, and I built different artifacts that help me to analyze various things that catches things and do different checklists that I would sometimes miss and it reads 300 pages of lease agreements that -- and cross reference to other things that a human mind would not.

So how would that ramp up? That's, I think, at least part of it, and that's what we're seeing at the moment.

We've got another question here in the Q&A from Benjamin. He's saying that our financial target #2 is that the EBITA margin should be at least 9%. That target seems a low bar now, especially as you're acquiring far more profitable companies now. Is it time to review that goal?

I think it's hard to answer that question because I don't -- let's put it this way. Every year, we look through our strategies on a group level, and we look at the financial targets and we talk about them and see if they're necessary to move them in a direction, and we're going to do that this year as well, and we will see what comes out of those discussions with the Board.

Yes. I think maybe just to add to that, and this becomes a little bit philosophical. We've made financial targets in a 3-tier way because #1 and #2 should always be in place. They're put as a hygiene factor when we're off on 1 or 2, that's a red flag. So the focus should for us always be to at least double our EPS every 5 years.

The first one is on stability. We want to ensure that we always can survive because with our survivors, there's no 5 years. So that is, of course, there. And then you could argue, is that the right KPI, should it be something else or not? But it's one way that we're looking at it.

The second one is to ensure that we have enough buffer to being busy fools, they are not creating value. Should it be 9%, should it be 12%, should it be 15% or 7%? I mean, we could argue that. But the key, which we strongly believe in is number three, that we create long-term shareholder value by increasing the EPS or actually free cash flow per share over time.

If the margin is 9% or 15% or 20%, of course, it's helpful, but it can come, of course, from having higher margin. It can come from having higher revenue that translates into profit. And my view is that as long as we're above a certain threshold that we call 9% at the moment, but it could be a different number. It's not really that, that we're chasing. It's just more profit and cash flow per share as long as we are safe, which is 1 and 2.

Very good explanation. That's how we look at it, and I totally understand that you look at from a different way from the outside. But for us, it's the EPS, that's the main driver.

Yes. The next question comes from Pete on the e-mail and says, Daniel, congratulations on a great quarter. I just have a couple of questions for your earnings call, assuming you're doing one.

One, working capital has been an outflow year-to-date. Do you expect this trajectory to continue as acquisitions increase or will it stabilize in H2? Are recent acquisitions more sensitive to cash collection compared to the longer-standing companies in the group?

I mean, the short answer is that we don't really do forecasts on that. And maybe the same amount of words is that we grow -- when we get into a position where we're growing organically and assuming that disregarding acquired companies, then, of course, the growth will take some working capital, but that will also stabilize. I mean, if that will happen in H2 or not, we can't really comment on that. But I think you should expect that it will, one, normalize. And secondly that, that number will sometimes be positive and sometimes negative in a quarterly basis, which is I get it. It's not much of an answer, but that's how it is.

Yes. Margins have declined in Teqnion Väst due to exceptional comparable quarter. Can you comment on what you expect the normalized margin run rate for Väst to be in the future?

I think that -- I mean, we're acquiring companies that are, let's call it, ballpark 20%, 25%, maybe just a little bit north of that in EBIT margin. So if you draw out the line long enough, it should go into that direction.

If we don't put too much cost on it.

Yes, exactly.

And we also see over time, I mean, just going back to what you just said about the financial targets, it's the EPS that we're chasing in the long run and maybe the margin -- EBITA margin will change accordingly to something else. But as it looks right now and what you also has shown on the whiteboard page, you see what has happened with the most recent acquisitions when it comes to EBITA margin and where we're targeting right now.

And then on an individual company level, we have one company Teqnion Väst, for example, where they are in rather advanced discussions with their key client where if everything goes through, it might take a year or maybe 2 years. It's a really big international conglomerate on the other side. If that happens, they will probably bump up the revenue in the subsidiary, let's call it, GBP 20 million, GBP 30 million. The margin on that will be not high. But it's -- based on the discussions, it's basically a case where we get, let's call it, a fixed amount of margin that is more or less free for taking up a little bit of responsibility.

Great for earnings, great for earnings per share. Good for our return on capital. But on the KPI margin for that company, not great. But however, that's not really what's important. You pay salaries with profit or what a profit is, not margin.

I have a question here from Leo Williams in the chat. He says, "Hi, guys, I've read that there is an emphasis on keeping the owners of acquired companies on at least 3 years to help with the transition. I'd love to hear how those conversations look at the juncture where they are considering retiring, et cetera, and what the process is of finding the right replacement.

Yes, that's a really relevant question. That's one of the key pieces of the puzzle that you need to manage in order to make a successful serial acquirer, I guess, finding companies and acquire them to a reasonable price is doable, finding the right type of people to operate these companies that we acquire is a tougher nut to crack. We love spending a lot of time with the seller after we finalize the deal, make sure that they continue to have a place within that subsidiary.

Hopefully, just do business as usual. Even after that, we own the shares. Nothing should be happen. And over the time that comes, we work with them normally in the Board of that subsidiary and make sure that we have a strategic plan going forward with or without them depending on if they want to retire or not. And the retirement plan is normally discussed very early on in the process of us getting to know them always before we actually finalize the deal.

So we -- both parties are very -- we are very certain of what's going to happen when it comes to that transition. And then how we find a new person, hopefully, we find someone that is able to run the business that is already in the business. And then we have a time to transfer the mandate over to that individual over the years where we still have the owner in operations or we together with the previous owner can go out on the market and find a capable person.

And we both have the -- from a Teqnion perspective, we have the experience on how to search and find the right type of individual. And from the owner's perspective, they have all the knowledge of what's necessary in order to operate just this particular subsidiary. So we work with that together to find the right type of individual that is giving the fantastic mandates to run this good business going forward in the Teqnion Group.

It's -- I have the deepest respect for this type of search, and we have found really good people, and we also made mistakes in this because you are -- in these type of businesses, you definitely need to be entrepreneurially driven to some extent. You need to be a true leader. You need to have many, many hats in order to make sure that you grow the business going forward. And hopefully, we find someone that is very eager to be a part of the big journey of the Teqnion Group. So they also, over time, can help us and support other subsidiaries.

And that is something that we implemented maybe in -- for the first time in a really true way last year, and it so far looks really, really well, that a subsidiary CEO also starts to help and support the Boards of other subsidiaries to make sure that they perform well.

Yes. I think, we're also in a fortunate situation. I mean, perfection when it comes to acquisition or when it comes to recruitment, it doesn't really exist, but you could try to find something within us, a proximity to perfection. And we're in a fortunate situation where we receive hundreds of IMs every year. I speak to maybe 100, 200 vendors per year. And as you know, we only buy, let's call it, 1, 2 handful per year.

So I mean, as soon as we feel that it's not the right fit, we try to just -- we just stay away because there's so many other things that we could chase after. It's not a problem for us. We can, of course, make mistakes just as -- I mean, it's a dating process. You could find a partner, you could marry the person and then you find out, well, this wasn't really right, that happens as well. But we just try to be very, very picky with that.

So to your question of how does it work when the vendor maybe wants to retire, if we feel that there is -- if the person is going to retire the same day and it's super important, and it's difficult to recruit, we just don't go there. That's the luxury of being in our position. We don't need to solve something. We only want to solve the easy problems.

Are we ready to wrap this hour up?

Let's do a couple of quick ones.

Yes. Okay.

[ Kit ] has a question. It's a little bit long, but basically, it's wondering, if you look at the note when it comes to the business combinations and how much EBITA we buy and then compare that to actual numbers over time, how does that compare?

I think a quick one is that, of course, in the disclosures, we put in the numbers that you should put in according to the accounting rules. The companies that we acquired before they sometimes look a little bit different compared to when we own them. Just as an example, because they are privately owned, some of them have properties in the company, so they don't pay any lease. We usually don't want to own the properties. They go out to do a leaseback, so that adds cost.

A lot of the owners, let's call it, that it's 3 owners, they don't take any salary or very close to due to tax reasons, it's better to take dividend or something similar. But then, of course, in the real world, you need salaries and exceptionally -- and especially if we recruit someone else to replace or 3, 4 other people to replace the 3 people, then you would have that up as well. So there are -- it's not really apple-to-apple.

Another question is, I know you've been consciously discontinuing unprofitable business for the last few quarters. How far along in the process are you? Are they more of an ongoing process?

Well, it's going to be there forever. We never want to enter any unprofitable business, then sometimes people make mistakes. Sometimes they will change that things become unprofitable while they were not in the beginning. So it will always be there as a process to tidy up and clean up for things that should not be there. But then, of course, I think the biggest jobs have been done. We -- as you know, we closed down business, and that's not part of what we should do going forward as long as we maintain them.

No. There's so many things going into this question also because we will definitely try to make sure that all our coworkers are confident and want to deliver customer value and be proud of that and make sure that they can do sales with high margins and make more money. Some of it will, over time, not be good business, and then we have to do less of that and more of others. That will -- as Daniel mentioned, we will always be -- it will always be here, and we will always have to address that.

What we are -- I want to fall back on what you said about EPS. I mean, that should be our KPI that we should be measured on, and that's the one that we're chasing. We want to deliver shareholder value over time, and we're going to do everything we can in order to reach that.

Yes. Two quick ones from Doug. Historically, Q3 has always been a quarter with strong margins. Why?

The short answer is really that it's a mix of which companies that have delivered during the Q3. It's also a little bit by chance. I would not expect if you draw out the time line 20 years with the same type of companies, you will not see the same accentuated seasonality as you've seen.

Doug is also wondering why is working capital consuming cash if organic sales are negative. The key component there is that the organic growth measures companies that we have in our group for at least 12 months or actually 13 months and above. And -- so during the last 12 months, we have acquired a number of companies that have performed quite well as we talked about before. These companies are growing.

Okay. Let's do the last one as well. Jorge, positive organic growth versus flat figure in Q2 '26. I think the question is, when will we get that organic top line growth?

As soon as it will drive EBIT. As soon as we will make sure that we earn good money on all the business that we do.

Yes. We're getting closer and closer to that number. And as you've seen, the negative organic decline have been shrinking, but I wouldn't really draw a flat or sorry -- a straight line into that as well, either. Okay?

Stable or higher margins as demand is increasing versus current sales, and the pressure will be on having companies working at the same or high capacity and with more higher margin product split.

I'm not entirely sure if I understand the question. But I mean, we are, as you see in the backlog, we have increased the backlog this quarter quite a bit. And maybe just to give some color on that, across the board, the backlog looks good.

It looks a little bit better.

Exactly. It looks a little bit better across the board. And then there's 3 companies that have really bumped up that increase. So it's not evenly distributed. Three of the companies have done exceptionally well when it comes to order intake. And for those companies, I would absolutely expect revenue to be up and profits to be up. For one of the companies, the delivery is not expected to be until 2027.

So -- and for 2 of them, I think it's going to be later this year or something like that. So it's not -- it's across the board better, but 3 companies really did really well in that regard.

Yes.

Last one, just listened to the interview you did. I think that's referring to a podcast. And I just want to say thank you for transparency, especially on the topic of your partner. You're welcome.

I also really like the details you provide on the subs. Teqnion is becoming a better company with each new acquisition, and it's clear that your role in the process. Teqnion is the second biggest position in my portfolio. So to see that it's in capable hands is really important to me. Thank you.

So it's a long question. I'm going to be short. What did you learn in McKinsey? What did you learn afterwards pre-Teqnion? And what have you learned at Teqnion?

I think, just to make it really, really simple and real life, of course, isn't this simple in my mind. I think at McKinsey, I really sharpened the tool of analyzing things. I think, I became really compared to earlier, much better when it comes to analysis and getting a good business sense. My time between consulting and Teqnion, I think I got a chance to try to apply that into the real world into change management, taking it from Excel to the real world, translating that to P&L. And I think at Teqnion, I have the opportunity and have been challenged to do more of both. Then of course, the real world isn't really that simple, but that's what I could come up with in 10 seconds.

Very good. And with that, we wrap things up.

Yes, do you want to say something as a closing remark?

I just want to say to all of you that took the time to listen to us, thank you very much. I hope to see you again in October when we will be back. And until then, have a great time.

Thank you very much. Take care. Bye-bye.

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes.

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

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

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

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

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

Yes.

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

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

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

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

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

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

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

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

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

Yes.

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

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

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

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

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

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

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

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

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

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

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

Yes.

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

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

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

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

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

Or more.

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

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

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

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

Yes.

And...

We sit in Jasper, we have Belfast.

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

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

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

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

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

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

Do you have any plans?

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

Yes.

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

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

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

Yes.

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

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

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

Yes.

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

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

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

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

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

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

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

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

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

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

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

Yes.

Yes, yes. I agree with everything.

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

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

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

13 years.

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

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

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

Month in the quarter.

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

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

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

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

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

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

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

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

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

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

Thank you. Bye-bye.

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

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

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

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

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

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

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

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

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

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

Perfect. Great. So jumping into the questions then.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Do you want to start? And I...

Yes, maybe. So...

I do my own.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes.

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

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

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

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

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

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

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

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

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

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

I think we did it four weeks.

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

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

Yes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The most honest answer.

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

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

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

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

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

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

No, but I can do it.

Please.

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

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

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

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

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

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

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

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

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

Also rough numbers.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

No, fantastic. I agree with everything you said.

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

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

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

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

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

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

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

It's Scottish granite, right?

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

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

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

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

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

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

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

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

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

A handful.

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

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

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

Maybe next year, it will be 15 years.

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

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

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

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

Thank you so much. Bye, bye.

Bye, bye.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This is a question that you love, right?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The missionary...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes, that is true.

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes.

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

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

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

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

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

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

We have many, many best CEOs.

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

Less than my youngest son.

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

On an angry day.

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

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

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

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

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

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

Well put.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bye-bye.