HMS Networks AB (publ)

Welcome to this queue-free call from HMS. I'm Staffan Dahlström, and I'll start this, and Joakim will join with some more details a bit later. We run this morning with four items. I'll start with a short summary, especially for newcomers who are not so familiar with HMS networks, a short business update, and then Joakim will dive into our results of the quarter, and then we finish up with a Q&A. All right. So just in brief, we are having a bit of a mixed picture. We have good sales. We have a new record level on revenue, plus 26%. On the other hand, we are seeing order intake that goes in the other direction. This is quite complicated and Joakim will spend some time to explain what is destocking, what is underlying demand and things like that. So give us some time because we spend most of the time today to explain this because this is a very important indicator for us. Since we have a high revenue, we are seeing a good result. New record level, 223 million. So this gives us a strong margin. Q3 is normally a strong quarter for us with a little bit of Lower cost for vacation effects and other things there. So it's always quite good margins. Cash flow is improving, but we are not really fully happy with our inventory build up. Keep on going here, but fairly good cash flow. So let's move into more about HMS just as a faceplate for newcomers. HMS, networks, hardware meets software, that's our business. We are well connected in our industry. It's a specialized company in the field of industrial ICT, information and communication technology. Almost 10 million devices connected through our Anybus brand around the world and soon half a million machines connected to our cloud-based remote access system.

for diagnostics and remote access of machines. We're a tech company focusing a lot on new technology. Right now, we talk a lot about smart grid, 5G, IoT, and these kind of things. But keep in mind, we're also working with large industrial end users in paper, steel, transportation. These are industries that love to talk about new technology, but they also would like to have these technologies available for a long time. So we are always having this mix of new tech, but also long lifecycle of products. We are 800 employees in 18 countries. We have one third of the employees in R&D, one third in sales and marketing, and this has been important for us through the years to really focus on developing fantastic products, but also making sure that we really can sell and make sure that we identify our customers pain points and help them solve their problems. Headquartered in beautiful Halmstad, southwest coast of Sweden, It's actually outside of Sweden nowadays. Last year, revenue 2.5 billion, even more than 25%. And we've been growing on average 20% the last 10 years, per year. And the majority of that, I think, some... 14-16% has been organic, and then we made a couple of M&As that top up this growth. All right, so we talked about enabling valuable data and insights. The reason we talk about that is that with this data and insights, our customers can improve their productivity and their sustainability. So the hardware and software products and services we make for them is very important and helps them to become better.

We have the main market, industrial automation, free sub-segment in manufacturing like factory automation, gross automation, transportation infrastructure and power and energy. And then we have a subsection for building automation. Building automation is commercial buildings, industrial buildings, airports, these kind of things. And the common denominator here is the communication technology and also the requirements that we see in these applications about quality, about uptime. And if it doesn't work, it costs a lot of money for our customers. So reliability is a key thing why people use our product. We have two types of customers. We have the makers of industrial equipment, the machine builders, the device manufacturers, and then we have users of automation systems. And when we look on the markets, we go to market through device makers and machine builders, either direct, where we have 44% of revenue, where we have a direct sales force working with very good collaboration with these customers. With machine builders, that is 25% of revenue. We have a combination of direct sales to large customers, but also a lot of successful distributors around the world. And in the machine building industry, of course, we would like to be part of every machine. Right now, we are more specified as an option if you need remote access or if you need connectivity in your production line, etc. And then we have our end users and system integrators, where we spend quite much energy the last couple of years, both organically and some acquisitions.