Cargotec Corporation

Welcome to HIEP's third quarter 2025 results call. My name is Haki Vesikallio. I'm from the investor relations. Today's results will be presented by CEO Scott Phillips and CFO Mikko Puolakko. And as a reminder, please pay attention to the disclaimer in the presentation as we will be making forward-looking statements. HIEP's Q3 profitability was affected by lower sales in the US. Our orders decreased slightly. Comparable operating profit margin decreased to 11.4% due to lower sales in the US, which was caused by elevated market uncertainty due to increased trade tensions. However, our services business continued to grow. Sale of McGregor was closed on 31st of July, and the business is now separated from the company. Let's then view today's agenda. First, Scott will present the group-level topics. Mikko will go through reporting segments, finance sales in more detail, and the outlook. After Mikko, Scott will join the stage for key takeaways before the Q&A session. With that, over to you, Scott.

Thank you, Aki. And greetings, everyone, from my side. I will start with a few highlights looking towards executing on our strategy of profitable growth for the future. First, I am pleased to share with you that we announced a partnership with Fortera to further develop automated solutions for our load handling systems business. So really exciting development there. Next, we launched a new 3.5-ton truck-mounted forklift for the EU, which will enable our Moffett branded solutions to be the clear industry leader in this size class of delivery solutions. And I would also like to highlight that we announced the launch of the smartest cable hoist solution in the U.S. market under our Golf App brand, so really proud of the work the teams have done on both sides of the Atlantic there. And finally, we are pleased to announce the revised long-range climate targets, aiming to be net zero by 2050. Now getting into the financials for the quarter, I'll start first with order intake. Our orders received in the quarter declined by 3% to €351 million versus last year comparison period of €361 million. And then as a consequence, as you see on the left-hand side of the slide, we've gone from 900 million euro order book to roughly 636 million at this time last year, and now stabilizing out around 557 million euros following this quarter. Now for the period year to date, our order intake is up one percentage point to 1.1 billion versus last year. And as you think about the last 12 months, order intake, we're somewhere around the 1.5 billion euro level, which has been the case for approximately the last two years. Now, the decrease in orders received was driven primarily by this delayed customer decision-making in the US. Of course, that was partially offset by defense logistics, and we won a nice win segment order that we announced previously in the quarter. Currencies had a two percentage point negative impact on orders received in Q3, which we had highlighted would be the case with last quarter's results call. Now looking further into the geographic distribution of the order intake, Our EMEA market was represented 56% of the orders for the quarter or 195 million euros versus last year at 155 million. So that's up 26%. Year to date, we're at 587 million euros versus 518 million last year. That's a change of 13% year over year, year to date. In the Americas, however, a bit different picture. In the quarter, we were 132 million euros versus last year at 185 million euros, so that's a 29% reduction. Therefore, year-to-date, we're down 14% versus last year at 435 million euros versus 504 million the prior year. And in APAC, we were up nicely in the quarter by 11% from 24 to 22 versus 22 million euros last year. Year to date, we're at 84 million euros versus last year's year to date figure of 72 million euros, or up 16%. In terms of the operating environment, We do continue to have positive momentum in our defense logistics and energy segment opportunities. So that's good. We have also a big, robust replacement demand that's driving the majority of our business. Of course, on the negative side, we still have the uncertainty of the trade tensions. And this, of course, has impacted the demand curve, in particular in the Americas, and in particular, drilling further in the US market, which, of course, means our US customers have remained quite cautious. Then moving into the sales development, sales in the quarter were down 11%, so 346 million euros versus last year's comparison period of 388 million euros. And year to date, we're at 1.16 billion, which is 6% below last year's level at this time, which is 1.235 billion. And then on an organic basis or in constant currencies, we're down 8%. in the quarter versus last year and 5% year to date. Of course, our services percent of sales grew in the quarter to 34% versus last year's comparison period at 29% year to date. Services represent 30% of sales versus last year's year to date figure at 28%. So sales have leveled out at approximately the level that we would expect given our prior 11, 12 quarters worth of order intake, adjusted for the seasonality effect. But of course, the big story was the negative impact that we had in the US market, which I'll cover in the next slide. So looking into the geographic distribution of the sales, EMEA represented 51% of our sales in the quarter, down slightly from last year, 5%. Year-to-date, EMEA is at 573 million euros versus last year at this time at 599 million. So that's a 4% decline. In the Americas, however, is where we had the biggest decline. Americas in the quarter was 140 million euros versus 177 million last year, 21% drop year-to-date. We're at 9% down versus last year, 508 million versus 556 million. And in APAC, much like the order intake, we were up slightly, 29 million in sales versus last year's Q3 at 24 million in sales, representing an 18% positive variance. Then year-to-date in APAC, we're down 1% or 1 million euros, 79 million versus last year at 80 million. Our Echo portfolio sales continues on a positive development. We're at 140 million euros in the quarter of Echo portfolio sales versus last year comparison period of 114 million, so that's up 23%. Year-to-date, 437 million euros versus last year, year-to-date at 354 million euros, up 23%. So as indicated earlier, our sales decline was most prominent in the Americas. EMEA sales declined slightly, of course, linked quite closely to the order intake development in the region. APAC sales increased slightly, which, of course, also linked to the order intake development in APAC. And on the positive note, our echo portfolio sales increased, in particular, in our circular solutions from our service business, as well as our climate solutions and our lifting solutions equipment business. Then looking into the profitability, For the quarter, our comparable operating profit was 40 million euros versus last year, 52 million euros. That's 24% drop on the 42 million drop in sales quarter over quarter. That puts our year-to-date comparable operating profit at 166 million euros versus last year's 176 million, representing a 6% drop, which of course all occurred within the quarter. On a percentage basis, our comparable operating profit percentage was 11.4% versus 13.4% last year. And year to date, we're at 14.3%, which is on the same level as last year due to our good performance in the first half of this year. We were primarily impacted by the 20 million negative impact from our lower sales in the US I highlighted on previous slides. Our gross profit margin also decreased slightly by 80 basis points, primarily due to the change in the revenue curve, which we weren't able to fully offset with cost out in line with the sales development or the revenue development. However, our SG&A costs were lower in the quarter by approximately 5 million euros. 1 million euros lower in sales and marketing, 4 million lower in administrative cost. So well in line with our 20 million euro cost reduction program that we announced last year. And then as a consequence, our operative return on capital employed improved, driven by the nice development of managing the working capital within the team, especially as it relates to the day sales outstanding. So really strong execution in that regard. Then as we've done each of the past few quarters, we'll want to highlight where we are relative to our long-term targets. So just to remind you, our long-term target was to was to be on a level of 7% CAGR over the cycle, 16% comparable operating profit, and above 25% return on capital employed. Our progress as of Q3 of this year, our rolling 10-year average is down now slightly to 6%. Our last 12 months comparable operating profit is at 13.1%. This compares to 12.7% where we were at this time last year. And our last 12 months return on capital employed is at 29.8%. So with that, I'll hand it over to Mikko.

Good morning also from my side. Let's first have a look on the equipment segments performance in the third quarter. Equipment segment had a slightly positive book-to-bill in Q3 with €239 million order intake. Lifting equipment Q3 orders were actually flat. while the delivery equipment orders declined. This delivery equipment orders decline came from the US as mentioned already earlier by Scott and this is very much caused by the trade tensions driven slowness in our customers investment decisions. Equipment sales was 230 million euros. This is a 17% decline from prior year. Lifting equipment sales was flat year on year. So the decline came solely from the delivery equipment and in particular from the US market. Equipment comparable operating profit declined to 20 million euros, which represents a 8.8% margin. This decline in margin is solely again attributable to the delivery equipment sales decline and very much attributable to the US market. You can see clearly in the bridge on the right hand side, what kind of impact the 46 million euros decline in delivery equipment volumes had in our profitability in quarter three. The gross profit margin was negatively impacted by lower volumes. So all in all, the equipment, as well as the whole high up quarter three profitability, was impacted by the lower delivery equipment sales in the US. Services grew nicely in quarter three. We continue to increase the number of connected units and there has been also really good intake for maintenance contracts as well. The growth both in orders and sales came from recurring services like spare parts and maintenance. Services grew even in Americas as there is an installed base which needs to be up and running every day. Services profitability was on a good level, 23.5%, especially thanks to the higher sales as well as commercial and sourcing actions. When we look at the services profitability bridge, profitability improved by €5 million in Q3. The main drivers for better profitability were €4 million higher sales, as well as the previously mentioned commercial and sourcing actions, which improved the cross-profit margin in services. Also, the services fixed costs were slightly lower compared to the previous year. The foreign exchange or the translation impact had roughly three percent units negative impact in services, quarter three orders, sales, as well as profitability. Let's have a look then at the total high-up financials, and I'll focus here more on the right-hand side, the profitability bridge. The comparable operating profit declined 12 million euros from the comparison period. Here the 42 million euros decline in sales is the main factor behind the lower profitability. As described earlier in the call, this lower sales stems from the delivery equipment in the USA. Lower sales impacted also our cross-profit margin. As mentioned by Scott earlier, it was 0.8% units lower. It's good to remember that some of the costs above the cross-profit margin, like factory overheads, those are not fully scalable within a few quarters. So when we have lower revenues, like we had in quarter three, that has a slight negative impact on the cross-profit margin. We got some tailwind from the lower SGNAs, which were roughly €5 million lower than last year and then €8 million year-to-date September. The currencies, as you can see from the picture, had a minor, roughly €1 million negative impact on our profitability in Q3. On a positive note, our cash conversion, i.e. the cash flow versus comparable operating profit, was 173% for third quarter. Networking capital decline was the biggest contributor to the over 100% cash conversion, and the networking capital decline mainly in accounts receivables. The reported cash flow still includes July cash flow from MacGregor, but as can be seen on the chart, the contribution to the overall cash flow was relatively small. When we look at our balance sheet, MacGregor has now fully been removed from HIAP's balance sheet at the end of July 2025. HIAP had now €308 million net cash position, and this converts to a minus 32% gearing at the end of September. As you have noted, we have also paid an additional dividend of roughly 100 million euros in October. This is not yet visible in these September balance sheet numbers. If the dividend payment would have taken place in September, our gearing would have been minus 21% in September. Still a very, very strong balance sheet. On the right hand side you can see that we have a couple of outstanding interest-bearing debts. One 25 million euros maturing this year and another bond 150 million euros maturing in September 26. About our outlook, we reiterate our outlook for 2025. Our estimation is that the comparable operating profit margin for 2025 is above 13.5%. And please note, this is the floor for our profitability. This outlook is based on the year-to-date September comparable operating profit margin of 14.3%, as well as the order book, what we have in hand at the moment, and then also the current situation related to ongoing trade tensions. And then I would like to hand the presentation back to Scott for the quarter three summary.

Thank you, Mikko. All right, summarizing the quarter, a few key takeaways. Market uncertainty has continued to negatively impact our business. And keep in mind, we're a relatively short cycle business. So we see these impacts in a relatively short period of time. But despite the market situation, we have been able to improve on our last 12 months' comparable operating profit margin. So strong execution on delivering what we've committed to deliver. However, as a consequence and this uncertainty level that continues to be the case, we will start planning for a program which would target approximately Euro 20 million lower cost level in 2026 compared to current levels to give ourselves a bit more resilience and flexibility in dealing with the ongoing levels of uncertainty. However, we continue to execute on our strategy and focus on activating growth opportunities where they exist. And I would reiterate that we have an incredibly strong balance sheet generating strong cash flow, and that continues year to date, and that will continue to be our primary focus moving forward. So I think we're well positioned to deal with the levels of uncertainties that we face in the future and feel really positive about our ability to deal with the changes in the demand curve, whether they would be up or down. So with that, I'll hand back over to Aki.

Thank you, Scott. And thank you, Mikko. Now we are ready for the Q&A operator.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

The next question comes from Ponu Leighton Markey from Danske Bank. Please go ahead.

Hi, thanks for taking my questions.

I would have three. Firstly, starting on the margins, I was a bit surprised to see such a big change in Q3 given that sales has been declining for two years already. So basically the question is that what caused this? Is this mainly under absorption of fixed costs or is there an element that the lost US sales had like really good cross-margin compared to the rest of the business?

I can take that. Yeah. As we mentioned, basically this profitability decline is fully attributable to the US market. And this is stemming actually from the fact that we started to see already in the beginning of the year basically from February onwards a weaker order intake caused by these trade tensions and as we have a fairly short lead time from the order to the delivery we started to see that sales weakness already now in quarter three and this is stemming very much from the delivery equipment, truck mounted forklifts, tail lifts in the US market. This is the reason for the lower margins. As you can see, yes, our SG&A costs went down, but those are not enough to compensate basically the volume impact. which is then, in addition to the US market decline, then also connected with the low seasonal volumes.

Yeah, just to add a bit more color there, I think just to reiterate for Ipano, it was a combination, as you pointed out, of sales decline, which primarily happened in the U.S., but also it was more impactful than we would have anticipated from a mixed perspective. So both of the two businesses that were primarily impacted there normally have margins that are quite accretive to the overall high of margins.

Okay, thank you. Then secondly, on Q4, so what are you seeing during the rest of this year in terms of orders? Are the trends similar or should we expect sequential worsening? And also maybe if you can comment on the margins. So should we expect that due to seasonality Q3 was maybe the lowest point of the year? And how should we think about Q4 as in the comparison period you had this restructuring course last year?

Yeah. Yeah, as I point out, we certainly tend to have a seasonality impact in Q3, which we've called out previously anywhere in the 10% to 15% range, which we did see that materialize overall, primarily due to the lower working days, both in Europe as well as in the U.S. So similarly, we would expect to see Q4 top line to be, from a sales perspective, more in line with our trailing last month order intake. And similarly, follow the pattern of seasonality, whether it's negative or positive. So we expect Q4 to be quite in line with what you typically see in Q4.

Okay, thanks. And then thirdly, could we talk about Europe? So we saw pretty good orders in there. What is driving this? You mentioned defense and the wind order, but Is this like an overall market recovery or some single orders, and do you have any kind of improvement in the construction segment yet?

Sure. I'd say four points that I'd highlight here. One, as we alluded to in the presentation material, primarily the demand is replacement cycle driven, which should follow along the lines of pattern that we would expect to see given the lifecycle of our products. Two, we certainly are seeing an uptick in activity on the quote side, on the lead generation side. We have seen a mixed picture in terms of lead conversion throughout the period, which has been interesting. Then the third point I'd highlight, as I alluded to earlier in the discussion, then defense logistics was a positive within the quarter. But then if you add the defense logistics from Q2, Q3, we were roughly flattish with an increasing pipeline of opportunity. And then the last point, we have seen a number of lumpy large key account deals. And in this case, in our wind energy segment, that converted. So that was primarily the drivers for the increased level of order intake in Europe.

Okay. Thank you.

The next question comes from Andreas Koski from BNP Paribas Exane.

Please go ahead.

Thank you very much and good morning.

So firstly, I want to try to get your thoughts about 2026. When I listen to truck manufacturers, it sounds like the truck market is not going to improve at least substantially in 2026 or 2025. And now you are planning for a restructuring program aiming to lower your cost base by 20 million euros so should i read that as a signal that you share the track manufacturer's view that 2026 is most likely not going to be much stronger than than 2025

Yeah, I can start this one. Yeah, thanks for the question, Andreas. The way we think about 2026 is twofold. One is that we'll adjust our cost base on the basis of what our trailing order intake levels are. And on that basis, as well as the change in the mix that we've seen now reflected in the sales result. It's obvious that we need to adjust the cost base just to make sure that we're covered relative to the changes we've seen both in terms of the trailing order intake as well as then how that's affected from a mixed perspective. And then in terms of the top-line development for next year, we haven't typically provided forward-looking comments on the top-line development. But, of course, we want to plan for a scenario that would allow us flexibility to deliver if the demand curve were to pick up. And similarly, we want to manage our cost base so that we're well covered in the event that the demand curve goes in the negative direction.

Understood. Thank you. And then I understand that the tariffs might have impacted the demand for your products, but did it in any meaningful way also impact your cost levels? And in combination with that, what kind of price increases did you see in this quarter and what should we expect? for the coming quarters?

Thank you. Yeah, sure. I can start with this one. And Miko, you can pick up if I miss a point here. Yeah, thanks for the question, Andrea. So what our policy has been or our practice year to date relative to the tariff response is that we're trying to implement surcharges that we transparently share with our customers. so that we could stay neutral from a cost perspective, and that still remains our view today. I couldn't say that we got either a positive or a negative impact relative to the tariffs. And if we did, it'd be just a matter of timing. I think Mikko alluded to in his presentation, though, the impact relative to order intake and to the sales level. And perhaps maybe can reiterate the impacts there.

Yeah. In our quarter three order intake, we had less than 10 million euros kind of impact. let's say price increase effect coming from the tariff surcharges in sales due to the lead times, one could say that the impact was almost plus minus zero. The main impact, I would say, from tariffs is on the demand side. Like Scott said, we are basically moving the tariff cost to the customer prices.

I might be mistaken, but if I remember correctly, when we discussed on the pre-close call, we talked about price increases of 10 to 20 percent but maybe I am mistaking there but was that not the case?

Depending on the product category the surcharges have been around 10 to 20 percent depending on the product category. This changes all the time because there are also changes in the tariff regulations and what kind of components are included in the tariffs. We are also doing actively measures how to mitigate the tariffs, changing our supply chain so that we could make this as, let's say, bearable to our customers as possible.

Understood. Thank you very much.

Thank you. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Antti Kansanen from SEB. Please go ahead.

Hi, guys. It's Antti from SEB.

Thank you for checking my questions. I'll start with the same topic on the US orders and sales going forward. Kind of reflecting back to the price increases and the tariff surcharges, I mean, i get your number that that on volume basis your orders contracted quite a lot on the third quarter compared to what they were on on first half of the year so i just wanted to better understand that if will the volume impact on profitability still be much more severe going into q4 and perhaps q1 next year as it seems that the that the volumes that you are getting into your factories are are still on a decline

If I take this one, you can compliment. So overall... You may remember that in quarter two, we received a key account order in the home improvement area. And basically, if one calculates the kind of lead times from the order to the delivery, we would start basically the delivery of that order, let's say, in the beginning of quarter four. So that would then support the top line development in the U.S. in the quarter four That would allow then better loading for our factories, both in Europe as well as in US, which are supplying that kind of products during quarter four. And that should also then improve the US profitability in quarter four.

Okay. And then the second one was on clarification on the previous questions on the difference between the communicated surcharges, 10% to 20%, and the achieved kind of a price impact, which I calculate to be around 8% of the U.S. orders. I'm not exactly sure if I calculated correctly, but is the delta kind of something that you have given up on pricing in order to secure volumes, or is there some other dynamic in play here?

Now these are basically these 10 to 20 percent, these are the surcharges and then of course our let's say order intake, it cannot be kind of just simply calculated, be calculated from our kind of year-on-year order intake development. Basically like Scott mentioned, if there is a tariff of 100, that 100 is reflected in the tariff surcharge to our customer invoicing or in the order intake.

okay and and then on on the development outside of america's i guess mainly mainly in europe where you are flagging defense logistics and and energy wind orders uh is there something regarding delivery times that we should be taking into account other kind of a bigger deals or let's say frame contracts in in the q3 orders that would have a longer delivery times or should we just assume that it's it's a normal normal kind of a backlog to sales rotation

Yeah, I can start this here. And Miko, please jump in if this isn't reflecting an accurate picture. But what we reflected in Q3, Antti, relative to the wind order, is a consequence of a frame agreement that will be reflected as order intake over a number of quarters. so it's not a case where the entirety of the order was reflected in one quarter and then it will be delivered sequentially from there over a period of time but rather the order intake will also be reflected a bit more in line with the revenue recognition all right makes sense and then the last one for me is the 20 million

cost savings program to be implemented next year will there be a one-off cost booked on on q4 and will that be included in the adjusted EBIT that you are guiding for or will that be a one-off

In case, based on the initiated planning, in case there would be one of costs, we would report those in items affecting comparability, so separately below the comparable operating profit. Depends on the planning and then we would be also opening how much that kind of costs we would have in quarter four or in 2026.

Makes sense. Thank you very much.

Yeah.

Thanks, Santi.

The next question comes from Tom Skogman from DNB Carnegie. Please go ahead.

Yes, hello. This is Tom from DNB Carnegie. Did I understand correctly just that, you know, if you book an EU item, it is kind of above EBIT adjusted, like last year?

So if we book for this 20 million euros cost savings program, one of costs, those would be reported as items affecting comparability below the comparable operating profit. So not included in the comparable operating profit.

Why would it be different from last year?

This is very much related to the, of course, weakness in the US market, but the 20 million euros program would be company wide. Previous programs have been more related to the kind of general optimization of the business, also in line with the order book. But this 20 million is of course, in the first place, very much driven by the trade tensions.

Okay. And then I wonder about, I mean, this is perhaps more kind of a general big picture discussion. So last year, America's was 45% of sales. You have painted a picture where the Americas is quite an immature market. You have a lot of kind of white spots in distribution in the U.S. But still, I mean, it's been almost half of your business. And I just remember, you know, 10, 15 years ago, you know, Spain was the world's largest market. And that market basically... never got back to all levels. It was so overheated. So could there be like just a risk that it will take many, many years before the U.S. market is back to where it has been the last couple of years? Or do you really feel confident that, you know, it's just this normal fast breaking, fast accelerating in the U.S. market? Or are there some kind of risk elements there that suggest that it could be that it takes many years to go back to all record levels?

Yeah, I'll start with this one then. And yeah, thanks, Tom. I take this in pieces. So you mentioned our characterization of the US market and the way that we characterized it is threefold, if you will. So on the one hand, we were quite mature in our penetration of delivery solutions as it relates to serving primarily the building construction supply market. Two, we've had it continue to have and did have quite a strong position also in delivery solutions relative to retail last mile. So those were fairly mature markets, a long ways to go, especially on the retail last mile, given the market share position relative to the number one competitor that we face today. on a daily basis. Then the way we characterize it is we're under-penetrated both in our knuckle boom loader cranes as well as our hook, lift, and mountable solutions, primarily in waste and recycling, perhaps somewhat in terms of defense logistics. and that the market was definitely under-penetrated relative to knuckle boom loader cranes in the construction segment as well. The way in which we wanted to attend to this is that we have a lot of geographic white spots because we weren't structurally set up similar to how we are structured in a European country, let alone Europe as a continent. And that was a weakness on our part. So the way that we've been attending to it and we continue to execute on the strategy is that we're turning on at-scale distribution channel partners to cover the geographic white spots with a focus on shoring up those areas that we both were under-penetrated because of just lack of scale of sales and service excellence to support those products, but then also the geographic lack of coverage that we had as well. So that continues to be ongoing. Now, in terms of the comparison relative to Spain, I'd say there's two things to keep in mind. Of course, let me start with the really obvious one. Is that just mere scale? It's an order of 10x magnitude difference in terms of the GDP ratio. of comparing the U.S. versus Spain. But then more importantly probably is the fact that the growth in Spain was primarily driven by one segment, and that was construction. So at one time, it was one of the world's, if not the world's, largest construction-applied knuckle-boom crane markets. And of course, that's the segment that had most been impacted following the global financial crisis. And to your point, hasn't quite recovered or hasn't recovered at all relative to the pre-global financial crisis levels. But definitely two different comparison cases in thinking through Spain versus the US, because the basket of segments that we serve relative to our full portfolio completely different opportunity set, if you will, in the U.S. versus, well, any country in Europe, but especially if you think about a country like Spain. Having said that, we've got a lot of opportunity to grow in Spain as we are underpenetrated there.

So what do you think that will be kind of, what are you looking for in the U.S.? It's a trigger, you know, for customers to... start ordering more again what will be the trigger is i mean it's the interest rate you know it's quite high on on on the housing and the abi index is not that strong for instance or is it just that you have this parent situation with this There are loads of parts imported from Mexico that is just kind of cool in the entire market. And when we get the solution to that, you know, then this is going to be normal again. What are you looking for?

Yeah, yeah. I'll sound like a broken record here, Tom, but I think it's still a factor of I can bifurcate it into two parts, right? On the one hand, you're right. We need to see the microeconomic cost come down a bit for U.S. customers that we've talked about a lot, especially last year and a little bit in the first half of this year. in terms of overall inflation, as well as the general level of interest expense. I think then moving to the second piece now, of course, is a matter of getting some stability in terms of being able to plan the business in the future on what your general cost level is going to be. I think that's a key factor as well. And then I would then add one more point to this scenario is that Once you see the level of stability achieved, that no doubt will happen. It's just a matter of when. Then you'll start to see a pickup, I believe, from the stimulus bill that was enacted earlier in the year that I think is characterized as the one big, beautiful bill. And at the same time, we know that with the aging of our equipment and the installed base, there will be a robust replacement cycle coming as well.

Okay, and then finally on the defense side, I mean, it's just easy to say that it's a promising market generally. But I would like to understand a bit more. I mean, we have seen orders from, for instance, the U.S. Army and orders, you know, from Rheinmetall or, you know, bundle to Rheinmetall. But is it so that we should kind of – Perhaps also expect that just kind of national defense forces in different countries will be kind of major customers, or will it be more like, you know, kind of defense companies that will order from you, or how will it be?

Yeah, I can start here as well. So, yeah, thanks for the question again, Tom. In defense, we have a 40-plus year history of serving not only the U.S. Department of Defense, but then also the majority, if not all, of NATO countries as well as NATO partner countries, which we'll continue to do moving forward. And you're right. Each of the defense organizations have made commitments to increasing of spend, unfortunately, due to the geopolitical changes that we've seen materialize over the last three, four, five years. And we expect that to continue moving forward. The challenge that we have is being able to forecast and model that business because the majority, if not all, of these opportunities are typically larger tender opportunities that have quite a lot of variability in terms of time of opportunity to decision in terms of who that deal is going to be awarded to. And it's worked on both sides of the equation for us, if you think through the last year. On the one hand, we've seen more faster moving emergent opportunities. And then on the other hand, we've also seen delays of opportunities that we knew were there prior to this period of increased geopolitical uncertainty that have pushed to the right. So difficult to model on our side in terms of the timing both of booking the order as well as then how that will materialize and the change in revenue recognition.

Okay, thank you.

There are no more questions at this time, so I hand the conference back to the speakers.

Yeah, we will have a couple of questions from the iPad, from the webcast audience. So first the question is about the service order trends. Is there any lagging impact from that? So what is the profitability trend in the services going forward?

Yeah. So on the services side, the only real lag would be the non-recurring revenue that we have. And if you think about the mix within the quarter, we were approximately 74%, 75% recurring revenue. So that's been on a nice trend relative to the overall service, both order intake as well as revenue. Within the non-recurring, of course, you have installations that are a factor of the equipment lead times. And so that tends to be the piece that lags behind. But otherwise, the rest of the services order intake will follow and link quite nicely to the revenue recognition.

Yeah, thanks. And then we have a couple of questions. I'll try to combine them. Both are related to the tariffs. So we went through quite a lot of the parts of the question already, but there was also the question, do we see permanent impacts that could be caused by the tariffs? For example, could we lose some of the US customers because of these tariffs permanently? And do we have any estimates how long this situation would last?

yeah so um i'll start with the easy part first the last part of that question um hard to tell right how long this will last um you know one thing that's certain is is that i i myself have lived in nine countries and i've had a long career of this type of work and serving 100 to 200 different countries and most countries have some form of tariff so we can count on that they'll continue to be some form of tariff. I think really the core of the issue and the question is then how long will this level of uncertainty last? And that's hard to call at this point. So our job is to be as resilient in our overall cost as well as our ability to deliver and execute as we possibly can. So we need to be prepared that this level of uncertainty may continue indefinitely. Yeah.

And could you please then still repeat what were the mitigating measures that we do? And do we individually negotiate with the US to get lower tariffs?

Yes, so far, no, we haven't directly negotiated with the US government on the tariffs. That one we haven't had the opportunity to, and I'm not aware that any individual company has. But what we do do, however, is that the way we sell our equipment is a function of market list price, and we sell on value. So therefore, from the tariff perspective relative to our price positioning, this is more mechanical, if you will. So the contribution of the equipment that is under subject to a tariff Then we transparently share that information with our customers. We link that then to a surcharge that is simply a mathematical calculation. And we try to work on other mitigating factors on the market list price to see if we can make this more attractive for our customers or not. But to reiterate, the biggest impact at this point from the change in the trade policies has been on the demand cycle because all businesses have a need to be able to forecast the forward-looking cost in order to then be able to take risk on deploying capital in order to catalyze or to run their business or to grow their business.

Okay.

Of course, we are looking also to increase local US supply or US MCA supply base also to reduce the, let's say, tariff base as an example. And then it's good to remember that a significant part of our US sales are assembled in the US, but of course, the ultimate tariff depends on where the components are coming from. Yeah.

Thank you, Mikko. Thank you, Scott. And that concludes our third quarter earnings call. So we published our finance calendar for next year yesterday. So we will be back in February 2026. Thank you for watching. Thank you.