HMS Networks AB (publ)

Thank you, operator. Good morning, everybody. Welcome to HMS Networks Quarter 2, 2026. Sunny day in Halmstad, where I'm sitting, and Joakim is sitting a bit further south, north of Malmö. I hope the sun is shining there as well. Sun is also shining in our numbers. We are very happy to present this Q2 report. I start with a quick business update, then Joakim will do a detailed summary of the financial numbers, and then we end up with a Q&A at the end. But a few highlights. If you look on our net sales, good growth, organic growth, 12%. We're happy with that. In total, backed by M&A and some favorable currency, plus 18%. Strong currency and a good quarter. Net sales, 991. We are not really at 1,000 million yet, but the coming quarters, we'll get there. Also, order intake are solid, organic, 15% and totally 20%. But we are not really seeing pre-orders. In quarter one, we saw some pre-orders, mainly relating to the acquisition we made for this Molex business. But now we feel that there's a good balance between order intake and net sales. Fantastic development on our profits. EBITDA 266, growth from 59% from last year. So EBITDA margin stronger than our goal of 25%, 26.8%. We're very happy with that. But also very happy to see a fantastic cash flow for operations, 334 million. So this really helps us in also how we leverage and how we deal with our debt situation. Joakim will talk about that. Strong EPS, so we're happy about the numbers. A few business highlights. Let's see if we can move to the next one here. As we said, good record quarter, but we also see that the growth is coming from all our big markets. So it's broad-based. We're very happy to see a 35% order growth in APAC. Very good. The two major things driving this is our data center automation business. Why we say data center automation is that, as you know, we are not really part of the computing inside the data center. However, we see more and more that our customers directly and indirectly are involved in this data center expansions. These are huge facilities and these large buildings require power, cooling, automation and other things. And we see that this is also driving our industrial automation companies growth to deliver automation equipment into these huge facilities. and we also have a good position with semiconductor OEMs. These are the companies who make the semiconductor machines and responsible for the process and of course AI is driving the semiconductor market and we also start to see a lot of good orders from our semiconductor OEM customers. We see the flip side of that coin is also increased lead times and prices for memory, especially memory, but also other components, semiconductor components and PCB is starting to have longer lead times, increased pricing, and we are trying to mitigate that as everybody else in this industry. But it's a hot market and we see that also in the lead times. During the quarter we also made a strategic minority investment in a small Swedish AI company called Ekono. They are really good in making machine learning technology. This is not large language models that are cloud connected, this is embedded machine learning. So that's another way of doing AI and our ambition is to work with them and also use their technology to embed in our products to make sure that our customers can both use the communication side of this but also do some light AI functionality within their OEM devices. We are very happy to receive the Ecovades Gold Medal here in June. Ecovades is a very big organization looking for environmental and sustainability aspects of a company, but also going beyond CO2. It's also about ethics and governance and responsible sourcing, so it fits very well into our strategy. and we are in the category of large companies together with Schneider Electric and Bosch to receive gold medal which means that we are top five percent of all customers all companies here we are very proud of that and that really shows that we are doing the right things in our sustainability work with that short introduction of the business i would like to hand over to Joakim to talk about the numbers all right thanks a lot Staffan let's get going with the order intake and and as you've

Seeing as Staffan also talked about, we see a little bit of a change compared to Q1 that we are not really seeing these pre-orders anymore, these long orders, customers placing deliveries throughout the year. And we talked about in Q1 that we had about 130 million sec for these long orders. If you adjust for that, I say we are just seeing the same pace more or less that we've been seeing in the first quarter as well. and good solid growth here 15% growth in Q2 and 12% year-to-date on the organic side. We actually see a lot of good demand pretty broad on all our markets growing well. What's a little bit surprising and very positive is that APEC is leading out the growth 35% and also me I go in quite well with 15%. Now, of course, the comparable Q2 2025 wasn't our best quarter, so it's in one way a simple comparable there. But it's good also to see that APEC and EMEA is showing the way on the order side. On the division side, we have to note that the INT division is continuing to perform very well. We have now an organic growth of about 20% for four straight quarters. And I think we've been talking about this, that it was expected that we're going to see a rebalance in INT. I think Staffan and I have been mistaken a little bit on the timing. We thought we would see this more in 2025, a bit earlier, but now we've been seeing it for some time that we are coming back strong in the INT division. And also, Staffan mentioned it as well, that the main driver is data center investments throughout the value chain in different ways. We're coming in with our products, same price as we always sell, but to various new applications for us. So that was a solid quarter on the order side. On the net sales side, very similar numbers, 991 million. So organic growth of some 12% here as well. And you see we're closing in on the 1 billion mark, slowly but safely growing. Of course, the Q4 and Q1 solid order intake has been supporting now the sales in Q2. We have, as you know, for 2025, we didn't see the best growth in the first half and now we're back to WD growth for the third straight quarter here. So that's also good to see that it's coming back solid. Book-to-bill happened to be a straight one. So I think that's pretty much what we can expect from the future as well. Somewhere around the 1.0 in book-to-bill. And here was a bit of a different mix on geographies. Americas came in strong with a very good start of the year on the order side and the 28% organic growth in sales. Talking about the different divisions, I think starting with IDS, the largest division with 46% of the profits and a big gearing towards the American market. I think we're quite happy to see over time, you see the bottom graph, we added also the EBITDA margin Thank you very much. and the business plan we have with the strategy until 2030. This will be key aspects of building that growth. Also here, kind of broad-based demand, good development in all regions, nothing that sticks out. And yeah, good solid performance in IDS. Then we go to INT. You see a bit of a different development here on the order side compared to Q1. This is where we had a majority of these pre-buying orders. Thank you very much. We must also mention that, again, we talked about the fourth consecutive quarter with over 20% growth on orders, and we're very happy with the development, obviously, in 2019. Also here you see a strong development on the EBITDA margin, now above 30%, and we've been around that level now for three quarters. This is maybe where we've been seeing the largest demand from semiconductors and data center investments. and that has been driving gateway business for us and you'll see that when we talk about the margin soon that this is also one of the reasons the gross margin has been strong for us. Then we have new industries. Here we have also solid development with a 7% organic growth in orders, 11% on sales. Also here not meeting the best Q2, but it's solid business. We know that we're struggling in the end markets within the vehicle communication that is selling a lot into the automotive market, which is obviously not the best, especially not in Europe. I think that is someone met up from a good quarter from building automation business, despite the slowdown in the Middle East, which is a very important strategic market for the building automation business. So I think with everything going on in the world, if we can develop like this in this division, I think we need to be fairly happy. The margins, it's a bit of a smaller division, so margins can vary a bit up and down. And this quarter was a little bit softer. You see on the graph, it's been bumping up and down a little bit between the quarters. So I think that's, don't read in too much about that slightly lower profitability. And then about the profitability then. So we do an EBITDA of 266 million, a new record result for us and 26.8% EBITDA margin, 27% year to date. So it's also good to see that we can keep this level above our targets of the 25. And maybe the main contributor, except for volume, is the pretty good gross margin of 63.8%, which came in a little bit stronger than what we expected ourselves here. The comparable of 61.8 is towards the Q2 level last year, which was tough from the tariff situation where we saw pretty high tariff costs in the beginning where those tariff wars kind of escalated, especially between the US and China. Now the situation is much more stable and we have not yet gotten any tariffs back. That is something we are working on at the moment and hope to be able to be successful with that. We'll come back to report on how that turns out. Otherwise, I mentioned also the strong gateway business from INT that is supporting the margins here as well. And that's maybe where we had a little bit of a positive surprise on the margin side. We know going forward, Staffan mentioned it as well, that we see now continued longer lead times, especially on memories, but also some other components. And also price increases are starting to take off. We've been seeing some already in year to date. However, for us, it's kind of been offset by having inventories. Going forward, we will not be able to supply by our own inventory. We're dependent on new deliveries and then we will see a price increase that is coming. So I think we can have a bit of a margin pressure from this level in the second half. Nothing dramatic. And we will, of course, monitor the situation and maybe do Do adjustments if it's needed. But I think we can expect a slightly lower gross margin for the second half. On the OPEC side, we have been stepping up the investment pace a little bit, both in R&D and in strengthening the organization overall. We see an organic increase of 9% and a bit of a step up as well compared to Q1. We've gotten in the most decrease of the run rate so far this year. So I believe we will see something similar to this level going forward for the second half of the year as well. So I think the run rate in Q2 is probably quite representable of what we will see. As communicated before, we have also increased R&D investments, and you see that also in the capitalized R&D, which is increasing a bit, and now we're at 27 million in Q2, similar level as in Q1, and similar expectations for the coming quarters as well. I do also want to mention that we have a positive EBITDA impact of 6 million, which is related to a divestment of a subsidiary. We're selling off the sales entity of Peak France, that we acquired in 2024. So we're selling that to the managing director that will run it in a way taking in a bit more special projects that we do not normally do in the group. So we feel it's better to treat this as a distributor on very good terms and we're happy to continue this collaboration for the future. The earnings per share, 3.65. Nothing super interesting happening here. We have a slightly higher estimated tax, which is explaining the slightly lower EPS compared to the previous quarter, even if the EBITDA was on similar levels. Then I also want to make a couple of comments on the cash flow from operating activities which was by far a record with 334 million. We have a couple of things that is supporting us sort of a one-time effect here. We did have pretty high receivables going out of Q1 and that is now flowing in so we were Thank you very much. The demand on the memory side for the coming year or so. So that's the plan for the second half. Otherwise for the year also solid cash flow from operational 584 million, a pretty big improvement compared to previous year. And then let me also stop on the looking at the net debts where we have 2.26 billion SEC in net debt going out of the quarter. Small increase actually compared to Q1. Explained by the dividend that's gone out in Q2 with 241 million. We also made a final payment of the peak acquisition that impacted this a little bit. We're managing to come down to 1.74 net depth through EBITDA multiplier when it comes to the pre-FR16 level, which is a small improvement compared to Q1. And given the legacy of the last A year or so, I think we're quite happy to be on that level. And we're now focusing on some continued M&A things. And with the new division structure, I think we're on a good level in the divisions, having good dialogues going. So I'm quite happy to see that. We also managed to reduce the interest costs, both, of course, from the lower leverage as such, but also from better terms in the new bank agreement that we signed around new year. So that's good to see. And then for me, it's just left to kind of summarize what we said for the second quarter. I'll try to do this quickly. And as you've seen, solid organic growth, pretty much driven from all markets. New record net sales of 991 million. The two larger divisions are both on double digit organic growth, both when it comes to orders and sales. And again, data center investments are the main driving factor for the growth. When it comes to profitability, we have also record profitability, record cash flow. Very happy with the cash conversion here and looking good for the future, even if we know. The third point here that we will have, it is still a bit uncertain macro, and we know that we will see these longer lead times and slightly higher cost for memories. We just want to flag, we're doing all that we can to mitigate this situation, but there might be some disturbance during the second half of the year. And with that, I'd like to hand over to the operator for any questions we have.

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