HMS Networks AB (publ)

Still, it's a bit down compared to the trend we've been seeing in Q4 and Q1. And the main reason we see here is that those big product orders that we have received over Q4 and Q1 that has been very strong, we don't see the same pace of that in Q2. One reason could probably be the tariffs. And then we believe that we've received a lot of those orders also in the previous quarters. So I think maybe that clarifies a little bit on the positive side we can see that Europe is improving it comes from fairly low levels but we see a continued improvement in the pace in Europe and I mean that's a significant market for us so that's very important that we see this development I'll come back to it when we look in the int numbers it's even more clear We can also note that APEC and especially China is developing extremely well, and we're more than 30% up in this region, and China for INT is becoming a really strong market. It's a bit surprising that it's going so well, but we're happy to see that. And if we then move over to sales, we don't see exactly the same situation. We see a more steady curve on the sales development. We reach 843 million, which is pretty much flat in relationship to the previous year. Organically, we're minus 5%. And here you also see that the organic development is about the same as the FX effect. And then the acquisition of peak pretty much makes up for that drop. And here we're also meeting a pretty good comp in Q2. A lot of the businesses were doing quite well. We still had some order book to deliver out from for the INT part. And also IDS had a pretty good quarter. We also see the effect of the go live from our ERP system. We went live in 1st of June, where we have been running a bit slow the first couple of weeks in the US. Which is normal. We had the same situation two years ago when we made a change in the big manufacturing site in Sweden. And this is something that we're going to get back on. We're back to a decent pace already and we will recoup on this in the second half. So that's not a big worry. But the Q2 numbers is a bit lower because of this. We also were seeing some component shortages for some of the switch products. So that's also something that we expect to solve in the second half and make up. It's not a huge volume, but that could have been a bit better on the sales side. So looking at the book to build, we're at 1.01. And with a normal sales level, I think we would actually have been lower than one in book to build. And going forward, we think that sales and orders would probably go pretty much hand in hand. as you've seen we've been building some more the book now for the last three quarters and we expect to be able to to utilize that now let's let's have a look on the different divisions if we start with the ids starting with order intake we see organically where we're down two percent to 282 million uh sorry reported down two percent organically we're plus ten percent so you see it's a pretty big difference here and and we have the majority of the sales here in the us and in the us dollars and um that's of course why this gap is becoming so big so all in all i think you the base business is doing quite okay and again remember you see here in q4 and q1 the the product orders that were received that is pushing that up a little bit So it's maybe a little bit better than what it looks like at the first glance. On the sales side, we are weak. We're down 14% reported. We're down 7% organic. And as I said, some of this we caused ourselves. And that is also the main reason why the The adjusted EBIT is not so good, 65 million and 17% margin, which is lower than what we should be. And again, we think this will be corrected over the coming quarters in the year. Then INT, the most positive development within the divisions. We have an order intake that is up 5% reported and 15% organic. and I mentioned before the continued recovery in Europe as the main explanation and we also see that some of the larger accounts that have been placing very few orders for a long time are now starting to play some orders again meaning that this inventory reduction period is coming to an end and this is extremely important for us to be able to continue to show a good development here. Also on the deliveries, we reported minus 1%, 269. But organic, we're actually plus 6%. So we're starting to see the trend in the right development. And of course, the currency situation makes it a bit difficult to compare. But all in all, this is doing fairly well. We do 75 million in adjusted EBIT, a solid margin of 27.9. And again, you see especially the development in APEC and China that is really strong with China is almost at double levels compared to Q2 2024, which in itself maybe wasn't the best quarter. But still, this is an interesting market still for this assortment. And we see that we are still highly competitive in that region. Then going over to new industries, we will be facing a bit of a more tough quarter. So in the order intake side, and I should also say that this is pro forma numbers, including now the peak system numbers all the way, also in the comparables. So you see that we are reporting 11% down on orders, 4% down on sales. And organic, this is only 4% down on orders and flat in sales. Here we've been seeing a bit more hesitation and we kind of been seeing a bit of a, especially on the building automation side, we've been seeing a trend shift from April. We're a little bit surprised that it's been being that big and we don't have any good reason other than the tariffs that is causing some hesitation in the markets. And we have to wait and see if this comes back. This is, again, a little bit strange. And also the vehicle side, we are seeing a bit of a tough market at the moment with the German car industry as a main driver. And I mean, all in all, we do flat in sales. So we hope that this will improve when clarity comes on the tariff side. And also should mention on the order side that we did have some pre-tariff orders in Q1 on the vehicle business. That is causing Q1 to be a bit higher and Q2 to be a bit weaker. So if you maybe took some 10, 50 million and change from Q1 to Q2, maybe you've got a better pace. And then you would be flattish on the order intake as well. So let's look at the profitability out of all this. And we do an adjusted EBITDA of 181 million, 21.4%. And I think overall, if you consider that we are down 5% in organic sales to still be able to improve the margin over Q2 last year, we need to be fairly happy with that, with what we have. It is not our best quarter, especially not on the delivery side. And that is maybe the main reason why we are a couple of percentage points from our EBIT target. We also have a tough situation on the gross margin, 61.8 versus 61.9, and then you say, okay, that's not a big change. But we have been, as you might have seen, we have been a bit higher in between those periods. Q2 last year was also, for various reasons, a tough quarter on the gross margin side. So we see a bit lower margins than what we normally would expect. Two main reasons for this. One is the tariffs, where we've been seeing tariff costs coming in the quarter. And the stuff I mentioned, we did not increase prices on the order books. So we just increased prices for new orders, which caused a bit of a delay in getting that gross margin effect to balance out. So we're not too concerned about this because we're going to get that back from probably from Q3 onwards already on the tariff impact. But then we also have the currency situation where we do have some impact on the cost of goods sold as well. And this is, of course, also something that probably will continue a little bit, even if the euro has come up towards the last couple of weeks, that might help a little bit. If you look on the OPEX, we see, again, an organic reduction of a little bit, 1%, compared to last Q2. And you might also have seen that we are slightly down compared to the first quarter this year. So we are keeping OPEX pretty tight. And we really want to see that Europe really comes back in a stronger pace before we have a couple of initiatives lined up that we would like to do. But we're holding those for a little bit. And then on the, I also want to just point out that for what it's worth, the net R&D is also impacting the quarter by 10 million compared to second quarter 2024. So the comparison is fairly okay, and comparing to the same quarter last year. APS small improvement to 252. Net financials a bit softer than the last time. And here we have the currency to thank for that. also the interest are of course a bit lower than it was one year ago. Let's look at the cash flow that we really like 201 million second time we're above 200 and we have the decent results to thank for that but also the reduction that we have on the inventory side that we've been we've been talking about this before that we should continue to reduce inventory and now we made a good reduction here in the second quarter and we think there is a little bit more to take over the last two quarters for the year as well we also see that receivables are coming down so we're doing a good work in collecting which is extra important when we run with a high high leverage so a bit more focus on this than than we normally have, and it's good to see the results. And then go over to the debt situation and the leverage. We're having just over 2.8 billion in net debt at the moment, out of which about 2.4 is interest bearing. And we see a reduction pretty given the strong that we're coming down in interest bearing debt. And it also means that we're reducing leverage, which we kind of like on these levels. We said that we're going to move to around 2.5 at the end of the year, which we still think is a good admission. And you see net depth divided by adjusted EBITDA is reported 2.97 and adjusted for pro forma from the acquisitions and pre-IFR 16, 2.92. And here we have the 2.92 is actually down from 3.05. 2.97 is down from 3.10 in Q1 2025. So we see the continued reduction. Good to see and this makes us quite comfortable with that we're going to be able to reduce this as we want. Then to sum up before we let you ask your questions. Three things that we would like to highlight. All in all decent organic order intake in a Pretty challenging environment, we still have to say. 8% organic order intake growth. The base business is developing quite solid after all. We maintain a book to bill of over one in constant currency, so we're happy with that. And then maybe the most important thing for us to see that the INT division continues to recover. Europe seems to be coming back slowly. Also, the big customers are placing orders. We see good development in APEC and China. And finally, I think the cash flow, it's important to see that in these circumstances.

and continue with doing what we should on the inventory side and converting good to the cash so with that operator would you open up for some questions 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

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