Hexatronic Group AB (publ)

Welcome to the Hexatronic Q1 2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers, session participants are able to ask questions by dialing pound key 5 on their telephone keypad. If you are listening to the presentation via webcast, you can ask written questions using the form below. Now, I will hand the conference over to CEO Reichard Froberg. Please go ahead.

Good morning, everyone, and very welcome to this Hexatronics Irving's call for the first quarter of 2026. I'm Rikard Fröberg, Group CEO. I have with me today Camilla Lindén, our CFO, Martin Åberg, Deputy CEO and Head of Data Center Business Area, and Papi Grandesson, Head of Investor Relations. Before we dive into the presentations, just commenting on this beautiful picture that we have here. It's an aerial footage of our flagship site in Hudiksvall, about three hours north from Stockholm, where we are today. And you see in the background, you can see the factory. And in the foreground, there's a ship that has docked here, and it's clearly loading submarine cable from the factory. And these are big cables, and the only way that you can really transport them is via ship. So with that said, let's dive into the numbers and the presentation for the quarter, which was in line with expectations overall. We had revenue of 1.7 billion SEC, which was an organic decrease of 2%. And this decrease was entirely driven by fiber solutions in Europe, whereas most other areas saw organic growth. Adjusted EBITDA at 146 million SEC, or 8.6% margin. which is sequentially slightly higher than the last couple of quarters. And we see that the strategic shift in our mix continues, with data center and harsh environment now contributing over 60% of adjusted EBITDA. And for the first time, the data center business in this quarter was the biggest profit contributor to the group. For fiber solutions, we saw a soft quarter revenue-wise, where market conditions in Europe continue to be weak. However, the cost reductions are now coming through and adjusted EBITDA margins strengthened somewhat over the last two quarters. Data center continues strong margins and growth and harsh environment again, so good organic growth, but a margin that in the quarter was impacted by some unfavorable product mix. Operating cash flow was modestly positive, which is consistent with our typical seasonality and our net debt saw a slight increase as expected. Significant events in this quarter. We finished the first phase of our performance improvement program, the phase that was announced already in September of last year. And we made an acquisition in harsh environment, or rather the acquisition was announced in the quarter, but it was actually closed as of April 1st. So it's not included, Jovo, that is not included in the numbers of the quarter. And we made some leadership changes in fiber solutions. So we now have a clear regional commercial structure, as well as created global teams for product management and supply chain. This slide, you've probably seen it if you follow us. We use it consistently because it's an important one. It clearly shows the ongoing transformation of Hexatronic. So we take fiber solutions, which few years ago, and it still continues to be the largest business area in revenue, now accounting in this quarter for 58% of sales and 39% of adjusted EBITDA. Parts environment continues to grow and has increased a couple of percentage points to about 70% of sales, and including the Euro 1 pro forma basis would be roughly 20% of total And the biggest change is data center that's increased to 25% of sales and 46% of our adjusted EBITDA. And that, again, makes data center, for the first time now, our biggest profit contributor in absolute terms. And this shift is important. Of course, it's partially driven by the challenges that we've seen in fiber solutions, but the bigger factor is the growth. of the smaller business areas that now make up 44% of net sales pro forma. So they're starting to become very meaningful and changing the makeup of Hexatronic as a company. And this gives us increased diversification, but also, I would say, improved portfolio mix as harsh environment and data center have higher margins and higher growth. And as a reminder, we have set a target that these two business areas are to account for at least half the business by 2028. So you can see here that it's a target that we feel we are well on track to accomplish. Diving in then to the different business areas one by one and starting with fiber solutions. The sales number, as noted, was week in the quarter. And again, it really is market conditions in Europe that are challenging. And in this case, We also saw that unusually cold weather in the beginning of the year was an added headwind. Consequently, we had a January that was very slow. Some picked up in February and a rather strong March. So there was a positive ramp within the quarter, and we see that continuing with what looks to be a pretty solid April. If Europe was off, the U.S., on the other hand, was a positive. And we have now for some time, we've set an expectation, I think, that sometime during 2026 that We will see momentum gradually pick up. And we actually saw that clearly in the quarter. And already in Q1, our organic U.S. sales were growing nicely, with a positive trend also exiting the quarter. You don't see that in the North American number, which is in effect one major customer in Canada that had very low sales in the quarter. But for the U.S., we are now back to growth, which is very encouraging. It was also encouraging to see that despite a revenue drop year on year, the adjusted EBITDA margin improved sequentially. And there are two main drivers for this. So one is business mix. There was some impact where the APAC business, which is typically higher margin for us, had a strong quarter. But it also shows that the cost reduction program is effective. In fact, we're ahead of plan here, meaning that we saw most of the savings from the initial 110 million SEC on annual basis. We saw most of that already into this quarter a little earlier than expected. We also saw some rapid developments when it comes to input costs. Resin prices and fiber prices are both going up. The drivers are different, where resin is really related to oil price and what's happening in Iran and the Middle East, whereas For fiber, the main driver is really the root cause here is the booming demand for hyperscalers, which means that supply and demand thing where supply is getting increasingly high. And we're responding, of course, with price increases. And we are confident that these costs will be fully passed on. We also see competitors raising prices. However, there might be a temporary underabsorption on the way up. We have Of course, we have existing contracts and already placed orders that we need to honor. But in totality, we're pretty confident that the costs will be fully passed on on an absolute basis. Overall, in terms of market demand going forward, we expect the Europe headwinds to persist. No worse, no better at this point. while the U.S. momentum for growth continues or even strengthens. So, in summary, a lot happening in fiber solutions, some challenges and increased, I would say, volatility, but also really encouraging to see the expected improvements in the important U.S. markets is materializing, and also an adjusted EBITDA margin that after five sequential quarters of decline is now moving in the right direction. Moving over to harsh environment then. Here, the organic sales were strong, 9% growth, following the trend from prior quarters. A beta margin was hampered a bit by unfavorable product mix, and it's mostly defense orders in our U.S. business, where, as we have flagged, there's now an impact from the U.S. government shutdown that we saw late last year. This product mix was affecting dynamic cables, whereas The connectivity segment and the sensing segments were both performing strongly. And I think we've said this almost every quarter, but this is a pronounced project business. It's not unusual to have some swings between the quarters, and we need to look at, I think, the full year or the longer-term trends. Still, I think it's fair to say that for this quarter, we're pleased with the top line, but not necessarily with the margin. And on the outlook, we do see the effect from the government shutdown also spilling into Q2, but not beyond that. Longer term, we're bullish about the space. It's of course difficult to really predict what would happen geopolitically and the macro outcomes at this point. But fundamentally though, our two largest customer segments, which are defense and oil markets, If anything, we expect to be positively affected. For example, there's a lot of optimisms about Venezuela becoming a potential market. Still early days, and we're not seeing any orders, but quite a lot of optimism among some of our customers there. And then, Jovo System Technik, and we are absolutely delighted about this acquisition. employees in northern Germany. And the core business is connectors that you see on the picture here and connector assemblies. And they're sold mainly to defense applications. We see this business as a proven market leader, attractive prospects, both long-term and short-term. And in particular, it supports our strategy to grow into leading player in connectivity solutions. And we see opportunities to expand this business. Today, they're very strong in Germany and I would say central Europe, but we see that through the broader reach of Hexatronic, we can expand across Europe and potentially worldwide. And with this deal, Haas Environment Business will be approaching 1.5 billion SEC against our stated 2 billion SEC target for 2028. So it's an important step towards that ambition. Therefore, we feel good about this one. The business trend and momentum is strong, and the deal has a good value, too. And I will now hand over to Martin to give a bit more color on the specific deal and the terms.

Thank you, Rikard. So let us have a look at the transaction structure and the purchase price. The acquisition was structured as a charity, where we acquired 100% of the shares in the business. A closing, which occurred after the end of the quarter on April 1st. The fixed purchase price of €11.8 million was paid. And in addition to the fixed purchase price, there is an earn-out that is capped at €7.6 million, depending on the future performance of the business. And it is structured in a way that is self-funded from the cash flows from yoga. The potential earn-out is paid from the average EBITDA over the next five years and will be paid out in the second quarter in 2031. If we then zoom in on the transaction multiples, the fixed purchase price represents an EV-EBITDA multiple of 4.6 times, and this is based on the 2025 profitability. Adding the earnout to the EV-EBITDA multiple, it can increase from 4.6 to a maximum of 7.6 times the 2025 EBITDA. In order to reduce the valuation risk, we have based the earn-out on a long period of five years. It is also based on the average or the accumulated profitability of the full period, to avoid the risk of paying an earn-out if a single year has an abnormal profitability level. And finally, in order to achieve the full earn-out, the company has to achieve a strong increase in profitability from where we are today. If we then move over to the development of our data center business area for the first quarter. The first quarter was another record quarter in terms of sales and profitability. We were pleased with a strong organic sales growth of 20%. Geographically, it was especially a strong U.S. market that grew the strong sales growth. Looking at the adjusted EBITDA, it ended up at is a record. The adjusted margin is higher, or in line with the last two quarters, but it is two percentage points below the corresponding quarter last year. And there are two main reasons that we would like to highlight behind the cyclical margin. The first is that our organic initiative to expand our service offering is loss-making, but we expect that to be breakeven level within the next three to six months. And the second reason is strengthening of our organization to be able to continue to grow, and that's not only this year, but for several years to come. Looking at the second quarter, we expect a slightly higher probability than we had here in the first quarter. And then moving over to our market outreach. Same message as we had last quarter, and that is generally a very high activity in the market. The market is expected to be driven by the hardware scalers or the wider cloud segment. And if we look at our business mix, the cloud segment remains the largest segment, followed by the data center enterprise segment. Approximately 30% of our sales is towards customers with similar and high requirements. And this is also a focus of our growth journey in order to have a balanced and resilient business mix. If you look at our M&A, we are very active and have a strong pipeline with targets in different phases. And finally, to summarize the quarter, our focus is to continue to strengthen our offering and to grow the business organically and via acquisitions. And with that, I hand over to Kanila to summarize the financials for the quarter.

Thank you, Martin. So overall, we had net sales of 1.7 billion in the quarter. with an overall decline of 10%. Organically, we had a decline of 2%. The strong performance, the strong organic growth in data center and harsh environment was not able to fully offset the organic decline in the fiber solutions, mainly coming from the EMEA region. We had 2% acquisition-driven growth from our recent acquisition, Communication Zone, within our data center business. And our most recent acquisition, Yoho, will be, as Martin said, consolidated in harsh environments from the 1st of April in 2036. We continue to have a negative effect on exchange rate in this quarter. It's actually minus 9%. And this is more or less all currencies that are weakened compared to the peak. Adjusted gross margin at 41.3%, which is a similar level compared to prior year. As Rick had said, our initial performance improvement program is finalized within Q1 as early communicated, and we have implemented these savings a little bit earlier than expected, meaning that we saw most of the savings within the quarter. Adjusted operating costs were 29.5% of net sales in the quarter compared to 28.5%, but lower in absolute numbers. Adjusted EBITDA of 146 million with an adjusted EBITDA margin of 8.6 compared to 9.8 last year. And the EBITDA margin compared to last year was negatively impacted by the lower sales in private solutions compared to the same period as last year, as well as some price pressure and unfavorable product mix in harsh environment. But but noted that the EBITDA percent is up from Q4 2025 from 7.2 to 8.6. Net financial items of minus 14.6 million is mainly related to net interest expenses of 28 million. A positive effect of 14 million in other financial items, which is related to revaluation of additional purchase price and acquisition options attributed to both currency effects, and change assumptions. The effective tax rate decreased by roughly 15% points due to the recognition of a deferred tax asset related to non-deductible interest expenses from prior years, supported by available deferred tax liabilities in the same jurisdiction. If we then take a look at private solution, total net sales for private solutions of 1 billion with an overall decline of 20% organically, a decline with 11%. A decline due to weaker demand in the FTPH equipment, primarily micro and price pressure overall in the industry. And that is mainly related to the European organization, meaning Europe declined with 30% due to the weak performance across the primary markets, And also that the lack of material submarine cable revenue within the quarter. North America declined by 18%. But we are pleased to see that we had organic growth in our U.S. market. But that was not able to offset the decline in Canada and also the negative ethics effects. And the growth in U.S. is mainly related to the FDTH business. APEC. grew with 28% driven by all primary markets and were related to some larger projects. The Fiber Solutions business also then, of course, were affected, positively affected by the performance improvement program that was finalized during Q1. Resulting in adjusted EBITDA of 61 million or 6.2%. Profitability was hurt by the lower sales volumes, mainly within my product and continued price pressure, partly offset by the implementation of the performance improvement program. Sequentially, we are on the same level, and margin increased by roughly 1% per spot. We have no key investment in the quarter, 9 million or 0.9% of sales, which is mainly related to maintenance. Harsh environment. So, total net pay for harsh environment of 283 million C, a decline of 1%, but an organic growth with 9%. Growth driven by dynamic cables and connectivity solutions overall. And as previously communicated, the companies within harsh environment have an international customer base, and the majority of revenue comes from larger projects, which means that sales and margin can fluctuate between the quarters. Adjusted EBITDA at 24 million SEK and margin of 8.5 due to a non-favorable product mix driven by timing of projects and the U.S. government shutdown in 2025. Compact investments in the quarter of 10 million or 3.6% of sales, mainly related to production and efficiency improvements in our U.S. manufacturing sector. As Martin said, a record quarter in data center with total sales of 434 million SEK, with an overall growth of 20%, organic growth of 20%, and the prior growth of 8% from communication zones that was acquired in November. That was offset by the 9% negative ethics effect. Adjusted EBITDA margin of 16.8%. Two percentage points lower than prior year, mainly due to organic investment to grow and broaden our service offer. Capital investment in the quarter of 3 million or 0.7% of net sales. Cash flow from operating activities before changes in working capital of 112 million SEK. Negatives. Effect from working capital of 83 million in the quarter. That is mainly related to increased accounts receivable due to strong end of the quarter. Part of set by the increased accounts payable. Cash flow from operating activities of 29 million SIG representing 26% cash conversion. And overall then when it comes to investments, we have of 22 million CIC equivalent to 1.3 percent of state. Net debt, which corresponds to net debt excluding lease liabilities amounted to 1.7 billion CIC at the end of the quarter, which is an increase of 90 million compared to last quarter. And that is due to the strengthening of the U.S. dollar. just a revaluation, and investment in our operations, plus a decreased rolling 12 adjusted EBITDA, leading to a next step in relation to perform adjusted EBITDA on a rolling 12-month basis of 2.2 during the quarter. Looking forward, we have a burnout connected to a prior acquisition that will be paid out in Q2 2026, which will increase the by roughly 0.2% or else equal. After that, we expect the leverage to come down operationally. At the end of Q1, we had 603 million of cash and 1.1 billion of unutilized backup facilities, which gives us a liquidity of 1.7 billion. So we have a continued solid financial position.

Okay, I summarized the key takeaways from the quarter. Net sales were down 2% organically, and this decline was entirely caused by the headwinds in fiber solutions in Europe. But we turned the corner to reclaim organic growth in the important U.S. market, and now with a sequentially improving margin. Data Center was now the largest profit contributor, and again saw strong organic growth and margins. Harsh environment delivered solid organic growth, and we saw a temporary margin decline here. So all in all, the ongoing transformation of Hexatronic continues, with harsh environment and data center continuously increasing in importance, and they now account for about 44% of sales after the Yova acquisition. And we have a solid financial position with discipline in both cost controls and M&A. Finally, A few words on the outlook and starting with fiber solutions. We do expect the headwinds in Europe to persist at, I would say, roughly the same level as today. No better, no worse is what we're seeing in the market, but offset by growth in North America. Macroenvironment is impacting raw material costs, and we are countering with price increases. Timing is still to be seen and therefore there could be some temporary risk or pressure to margins. If so, we expect that this would be primarily in Q3. So we would come back with an update after the second quarter where we have more clarity. Also noting here that the submarine business is looking very strong with an order book that is Largely full for 2026 and starting to get pretty full for 2027 as well. We're almost at the point where its capacity is the bottleneck more than anything. Timing of shipments is important. They were low in the first quarter. We see a little bit more shipments but not major in Q2. And the big peak this year will be in the third quarter where we have some large shipments scheduled for submarine tables. And as noted, we saw most of the cost savings already in the first quarter, so we expect these to remain, of course, but not a major step up in coming quarters. For data center, I think it's a pretty simple story, really. Continuous strength in this business. Demand is good. Order book is good. And we do expect a modest margin increase in Q2. For harsh environment, the longer-term outlook is positive. The market is robust. particularly in defense. However, for the same reasons as in Q1, we could see margins to be somewhat muted in Q2 with the normalization in the second half. And then some overall factor. As Pamela mentioned, we have seen FX as a major headwind to our top line in recent quarters. That should now start to abate going forward with the exchange rates that we're seeing today. We do expect a slight increase in leverage in Q2 driven by an upcoming earn-out payment. And we do continue to have an attractive M&A pipeline with focus on data center and harsh environments. So with that, we'll move over to Q&A section.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. Please limit your questions to a maximum of two. If you have additional questions, feel free to rejoin the queue. The next question comes from Max Bako from SEB. Please go ahead.

Thank you. Hi, Richard, Martin, and Camilla. Thank you for taking my questions. I'm starting with... With the cost increases and also the price increases going forward, you said that you expect to be able to fully compensate. Can you give any indication of the magnitude that you expect? How much will prices be increased within the fiber solution segment as it looks right now, if you have anything to add to that?

Thank you, Max. fully understand the question. I don't think we will give a number on that one. There's, you know, for competitive reasons, but also quite frankly, we don't know what's happening to oil prices. What I will say and the way I would think about it is that the, you know, the plan and the ambition is to keep gross profit in absolute terms, so in sec or dollars, the same. We're not intending to increase prices more so that we make more money, but we're certainly planning to pass on 100% of the price increases. As I said, possibly with some timing, right? What we've seen historically is that sometimes on the way up, you're lagging a little bit on the price increases, but you typically make that back on the way down. because you can hold on to higher prices for a little bit longer when raw materials come down. So over the cycle, I see it as a net zero sum game, but there could be some phasing potentially.

Okay. Sounds very reassuring. And then the next question then on that. On the harsh environment segment, which as you guided for ahead of the quarter, impacted by both the weather and then also the government shutdown in the U.S., margins down some 1.7 percentage points year over year. Do you expect to see a similar magnitude in Q2 or perhaps less so? Yes. On the margin pressure?

Mm-hmm. Yes, we see that effect also within Q2.

Okay, understood. I think that was my two questions for the moment of unpacking the queue.

Thank you, Max.

The next question comes from Adrian Galani from ABG Sindal Collier. Please go ahead.

Yes, hello. I'd like to use my two questions on the raw material costs as well. I guess, first of all, a bit of a follow-up on Max's question. Can you at least split out how much of the raw material cost line item in the P&L is resins and fiber? And also, just since there are many different price indices for these kinds of things, can you give a rough approximation of how much prices are up on the stuff that you buy?

I mean, fiber, I don't have a number because it depends so much on which specification of fiber, and it also depends on contracts that are confidential. I think for resin, the rough guidance is that at least so far what I've seen is that it's followed quite correlated with oil price. The oil price is up 100%, resin is up 10%. I'm not sure if that will hold in the future, but so far it seems to be a rule of thumb.

Okay, and how much, before sort of the price increases started, how much of your raw material cost base were these?

That's not something that we're disclosing.

Okay, understood. and just the second one on timing impacts. Can you go a bit deeper into the timing impacts and how the purchasing agreements compared to your pricing structure to clients, where is the discrepancy and is there a particular quarter where you expect there to be a squeeze on the timing effects?

At this point, I'm not sure that there is a discrepancy. We're working through that at the moment. I think rest in prices is It's more or less a spot market. It's a commodity, but there are lead times, right? So it's more about measuring what we have in inventory and what we have on the water, so to speak, versus how quickly we can increase our prices. The fiber market, both on the sourcing and on the customer side, tends to be a little bit longer contracts.

Okay, I understand. Thank you.

That's all from me. Thank you. Adrian, I understand that this is something that's important. Again, I think reality is that there will be some impact to the top line here, which is very difficult to predict because the world changes every day. But, again, I do think that it's a reasonable assumption that over time the gross dollars, gross margin dollars or SEC, will be largely unimpacted.

Okay, understood.

Thank you.

The next question comes from Frederick Nielsen from Red Eye. Please go ahead.

Thank you. Hi. I was thinking about the improvement in the U.S. fiber solution market. Is that both within duct and your fiber systems? And is it current customer increasing their rollouts again, or is it more new customers coming in to you?

It's yes, yes, and yes. It's both new customers and also some historical customers that had slow build-out levels last year are coming back with much more aggressive plans now. And it's also, it's both fiber cable and duct and conduit, and I would say recently particularly in conduit we've seen very good volume momentum. You know, we have talked about that has been the case for a while, but it's so far been offset by year-on-year price declines. I think that year-on-year price decline is mostly behind us now.

Okay, I see. That's clear. And regarding investments in data center, as far as I understand, you are looking for more niche markets, perhaps, rather than investing more into hyperscalers. I mean, why is that, given the very strong growth we see within hyperscalers?

Yes. So, I mean, hyperscaler, we observed the hyperscaler market for a very long time, very long relations. We're very well positioned to continue to capture that growth, so we'll continue to focus on that market. What we're saying is that we would like to have a balanced and very resilient business mix, so still we expect hyperscalers to be dominant in our exposure, but we also would like to broaden the customer base. And if the customer has very high requirements, and a similar offering. So it's very much in line with what we have been doing and what we're doing.

Okay, great. That's all for me. Thank you.

The next question comes from Max Baco from SEB. Please go ahead.

Yes, hi again. Two more, if I may. Thanks, so perhaps certainly back to the harsh environment segment, you said beyond Q2 you expect to be back to normal levels in line with quarters seen previously, but shouldn't we be able to expect some continued margin improvements beyond Q2 year-over-year driven by underlying improvements in Roche at the cable and then potentially also some operating leverage on volume growth?

Yes, I think that's a fair expectation and I would have the same expectation. I think given the first quarter I don't really have that visibility to commit to that here and now, but that would be the expectation.

Okay, perfect. And then on fiber solutions, I mean, we have talked some time about the very strong demand within submarine cables, and you highlighted here that, you know, for the boat for 2026 and almost for 2027 as well, do you have any concrete plans to expand the capacity up into the club for submarine cables?

It's, I mean, we're looking at, different options, obviously, and I think if we have any concrete plans, we will come back and inform the market about that in due time.

Okay. Yes, understood. That's possible. Thank you.

The next question comes from Adrian Galani from ABG Sundal Collier. Please go ahead.

Yeah, hi again. Another round from me as well. One question on the data center margin. What is it that is changing sort of between Q1 and into Q2 that makes you confident to guide up the margin again into Q2?

First of all, I mean, we mentioned two things that impacted the costs for the quarter. And if we look at our organic initiatives, we expect a smaller loss. We expect it to be even in the next quarter or the following quarter. And also a mix of projects is what we're expecting.

Okay. Thank you. And then also one on submarine cables and fuel. since you explicitly mentioned them in the outlook, which you typically don't, have mentioned the larger orders coming in Q3. Should I read this as, you know, something exceptional? And can you give a rough indication of how big these Q3 orders will be, since that can be quite lumpy on the submarine side?

Yeah, we had... We had a similar peak in Q4 of last year. And we expect that Q3 this year will be at that level or probably a little bit higher than that even. So there's at least 50, if not a little bit more, additional sales in that segment compared with Q1 and Q2. And that's pretty good profitability. Okay, that's very helpful.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Thank you. So we have a few questions also coming in online. So we will read those so that management can answer them. So the first one is, could the input cost inflation in fiber solution lead to demand disruption, especially if you raise prices one to one? What does your dialogue around this with customer look like?

I think in the U.S., the market is strong enough that it's not an issue. And keep in mind, these are big construction projects and the material part tends to be 20% or less. So even if there's significant increase to some of the materials, the total project cost doesn't go up that much. I would be more concerned about that as a possibility perhaps in the European market, which is a little bit tough already. We're not seeing it today, but I'm not ruling that out.

Thank you, Richard. So the next question is, what do you think about upcoming orders from the BEAD program?

So this is an interesting one and it's been discussed very heavily and back and forth. By now, it's clear that the BEAD program is moving forward. I think we're already starting to see some effect of it in the market, but I think it's pretty minor today. However, as of the second It's become a more meaningful driver of volumes in the U.S. But also keeping in mind that the BEAD program is one of many factors. I said for some time now, I think we should look at it as a cherry on the cake and not BEAD alone will drive the market. I think that there are many other factors that are also important. Interest rate is one of them. A lot of the funding is not BEAD. And the majority of the funding is still private. And a lot of that is private equity and interest rates are very important.

Thank you for those comments, Rika. So the next question is, could you put your submarine cable comments into perspective? So we say in the quarter, largely fully booked for 2026 and filling up for 2027. What is the magnitude of such an order book relative to the SEC 50 delta mentioned in Q4 2025?

Yeah, we're deliberately trying not to disclose it for competitive reasons, exactly how much we're selling and what margins or pricing we have there. So I think I will repeat what I said, that it's looking good. We have an almost full order book for 26, and it's quite rapidly filling up for 27 as well.

Thank you for that, Rikard. Next question is, what is the typical lag in terms of margin recovery when you put prices through, based on your experience?

I would say a couple of months.

Okay, thank you. And then we have a last question also. Can you give a guidance on Capdex, which has been very low now for the last five quarters? What's a reasonable expectation for the full year?

So the guidance that we have given when it comes to CAPEX is that it would be very low for data center, around 1%, and that's probably what we've been seeing. Horse environments, 3% to 5%, which is also where we've been. Where we've been lower is within the fiber solutions area, and then we guided over time that it should be around 3%. And what we've said there is one that we have, capacity in many areas, But if we see that we need some more capacity, then we will add that over time.

Thank you for that, Pernilla. There are no more written questions online, so I hand it back to Rika for some final comments.

Okay. Thank you, everyone, for calling in today, and we will see you again in three months' time.