Mycronic AB (publ)

Hello and welcome to the presentations of Micronix Q1 report. My name is Sven Kjetkovic. I'm the Director of Investor Relations at Micronix. And with me today I have Anders Lindqvist, Micronix CEO, and Pierre Broson, Micronix CFO, who will be presenting today. And with that, I hand over to Anders. Please go ahead and present Micronix Q1 report.

Thank you very much, Sven, and a warm welcome to everyone online. So today we will present our first quarter of 2024. So I will start with the short summary of the quarter. And then as usual, we'll go a little bit deeper within the different divisions. Pierre Brochon, CFO, will talk about financials a little bit more in detail, a small mention about sustainability. And then as usual, we will end this session with the question and answer session. In the material, which is also on our website, there is a market update, which we will not present, but it contains some interesting and useful information about the market we serve. So starting with the quarter in general. So we believe that we had a good start to the year. You could see that the order intake increased 2%, which is not a big number in terms of percent, but the level is very high or a very healthy level, same level as we had the same quarter last year, a little bit more than 1.6 billion. We had quite some increase in sales driven by the pattern generators division with almost 40% to close to 1.7 billion, which is a very good number. And a really good number is that we had also our second ever best EBIT at almost 600 million, which is also corresponding to a margin of 35%. Backlog increased a little bit to 4.1 billion, which is a good backlog for us. It will take us a bit into next year. We had some events also happening after the first quarter. One is that we received one more order for an SLX mask writer for the semiconductor industry. We also closed the acquisition that we announced earlier of a company called Vanguard Automation. We'll talk a little bit more about that. when we talk about global technologies, which is the acquiring division. And we closed that acquisition early in April. We also launched two new products. We'll talk about that also in a minute here. Very interesting. So, starting with... pattern generator so we could see from the market the photo mask market so the photo mask market is the market for our customers that are using our mask writers you could see that for the displays the market was stable in the first quarter and this is after a small decline in quarter four last year the photo mask market for semiconductors remain on a high level which is good for us You could see that order intake relatively favorable level. We had a decline of 21% down to 645, but that's still a good number. So it depends very much on what we compare to And in the quarter, we had orders for five systems, one Precision 8 EVO, which is display mask writer, and four SLXs for the Semicon industry. Sales, very strong net sales. And this is because of very good deliveries in the quarter. We delivered one Precision 800 EVO, one Precision 8 entry EVO, and three SLXs. So sales increased with almost 140% to $838 million. Gross margin 76 and this together gives us a very good EBIT of 543 million. Backlog is rather flat at almost 2.9 billion. I said before we also launched two new products in the quarter so one is the Precision 8000 which is the most advanced mask writer for displays on the market. So our current model, P800, the P8000 can write with a resolution which is 10% better and maintain the very high writing speed as we have in the P800. So very interesting product for the display market, which will enable our customers to take one more step when it comes to productivity and quality on their products. We also launched called MMX, which is an inspection tool or a measurement tool for the masks, photo masks for the Semicon industry. So measure the position of the masks, the lines written by mask writers, such as our SLX. So very good complement to that product. So that's very exciting. Also exciting is that this year we actually celebrate more than 50 years of innovation. It's more than 50 years ago we launched our first or we filed our first patent for innovation. So we have been in this business now for more than 50 years and continue to launch high-end products in this market. So very nice. Hyflex, next division, you could see quite slow start to 2024. We have seen demand decline a little bit in Europe and US. China, on the other hand, shows some indications of recovery. China is a much smaller portion than Europe and US. The numbers are down a little bit. We have also launched new products here. This is end of last year. And we are starting to receive very positive feedback from customers regarding stencil printers that we are now having in the portfolio, which is a very good combination to the recently launched Mipro A40, which is a new and fast pick and place machine. And so market decline results in an order intake decline of 13% and the sales decline of 11%. Gross margin at 36% and quite low EBIT at 1 million only here and the backlog of 160 million almost. So a little bit slower than usual on the high flex side. High volume, on the other hand, we see that the market is recovering. So the majority of our business here is in consumer electronics. But we also have started to gain quite a good presence in the electric vehicle industry. We have seen that these two markets are recovering and increasing both in China, which is our main market, but also outside of China. This is visible in the order intake, which we could see it rose 73%. Not yet visible in the sales, where we had a decline of 9%. And the gross margin quite stable at 41%. We have taken a lot of efficiency measures in these divisions during the last years and can still produce an EBIT of 55 million. even at the lower sales volume. So quite good performance here. And a good increase of the backlog with this order intake, of course, 741 million. Also very good quarter in global technologies. We have launched new products or a new product in the dye bonding business, an active alignment of optical components. So this will, we can address additional process steps in our customer's production process. We also acquired or signed the agreement to acquire Vanguard Automation that was then closed in April. Just recently, Vanguard Automation is a small company. The product is here on the picture, actually. So this is an equipment for automated printing, 3D micro printing of optical interconnects. And we can print fibers and we can print lenses that connects different type of optical devices. This is a very interesting technology, especially for the telecom industry and transceivers. because to use optics instead of electrics will increase communication speed and can also decrease energy consumption and size. So this is really enabling this industry to take the next step. Order intake, good increase of 46%, driven by PCB test, actually, and an increase of sales to 29. So gross margin at 42%, which is a good level, a good increase of EBIT to 30, and a backlog of 327 million. So quite good performance in global technologies. If we move to our outlook, so we remain at what we communicated the previous quarter, that we will reach a net sales of 6.25 billion at the end of this year. And with that, I will hand over to Pierre Brosian, CFO. Thank you.

Thank you so much, Anders, and welcome everyone from my side as well. Looking where we stand then after this quarter on a rolling 12-month basis, we are currently at almost 6.2 billion after two strong quarters. Our EBIT margin is now up to 27%. That means distinctly above our long-term financial target. Also after two very, very strong quarters. Our aftermarket revenue is declining as a share of sales, but increasing in absolute value. And this is really what is important for us. And further equipment sales will continue to increase. to be supportive to the long-term trend for our aftermarket business. So we're very happy with having that now for three years, increasing every quarter. Here, if we look at it quarter by quarter, you can see the really strong two last quarters that we have had. This quarter, where we had a sales increase of 39% above a relatively modest quarter in last year. And also then an exceptional high EBIT margin of 35%. So now we have two quarters with an EBIT close to 600 million. This one just below and the previous one just above with even higher volumes. If we look at it then compared to the modest quarter of last year, we can see that we have a distinct volume increase. We can also see that we have a much better gross margin. This is approximately or a little bit more than half of this is coming from a stronger margin in patent generators and half of it through the mix between the different divisions where patent generators now constitutes a higher share of the total sales. On the cost side, we are increasing gradually as we are growing the business. But you can also see that we have a positive impact on the marketing and sales versus last year. And some of you may remember that we had large business development costs in the first half of last year. This is the main explanation for this positive impact there. Ending the quarter almost at 600 million. If you look at the division by division, you can see that pattern generators, of course, we've spoken about it already, both me and Anders, has a strong improvement over last year. We can see that HyFlex has a decline. There is a bit of seasonality in HyFlex where we have typically a weaker first half of a year and a stronger ending of a year. We had an exceptionally strong ending of last year. which eliminated some of the backlog towards the end of the year. And this is one factor, but it's also true that both in Europe and North America, the business is somewhat slower than it has been. And we were just above zero for the quarter. If we look at high volume, this can look negative, that we are minus five, but we are actually quite happy with the result here. where we saw a decline in sales, but a growth in order intake and a result which is very positive in relative terms. So hopefully we see a bit of a turning the corner in China, even if it's a bit too early to say. Global Technologies, we are now performing very well in the die-bonding business line for the quarter, and this is supportive to the result. In the quarter, we also had a very strong order intake, but this was in the other leg of this division, the PCB test, which had a very good order intake, and this together makes it a very good quarter, both order intake-wise and result-wise for the Global Technologies division. In the group functions, we have the mentioned business development costs, which then did not happen this year to the same degree. On the cash flow side, we had a strong result, and this is going right through to the cash. So very strong result and cash flow from the operations. We have a positive in the working capital, mainly collecting the receivables that we had in the exceptional sales of Q4. And this is basically the base for improving our cash position even further. And we have now a very, very solid cash position with 2.8 billion in cash. And as you may know, 2 billion of facilities on top of that ready to draw on if we need to. And with that, I hand the word back to Anders again.

Okay. Thank you very much, Pierre. So some final words on sustainability, where we think we have a little bit of mixed performance. So you could see that when we had compiled the environmental data that the emissions that we generate declined in 2023, mainly from lower electricity consumption from use of our products, less purchased materials and a decrease of the use of natural gas. So this is good. On the other hand, we could also see that in our own facilities and properties, we had an increase of electrical consumption. We had an increase of transportation and air travel during the year, which has a negative impact on the environment. So obviously, this is an effect of our growth and higher activity. But regardless, we want to see a decrease of this, which is also in our long-term target. that we have committed to do. So we will reinforce that in our annual strategy process, really with the aim to reverse this increase to reach our target level on this. So with these words, I think we can move into the question and answer session.

Sven, will you take it? Great. Thank you, Anders. And thank you, Pierre. for the presentation. So now we are moving over to our Q&A session and we will start with Fredrik Littell from Handelsbanken. Please go ahead and ask your questions, Fredrik.

Thank you. And thank you for letting me on. I have a first question, which is actually, can you hear me? Yes, I see you as well. I have a first question, which is really the launch of the P8000. If we could get some description on it, the work behind it, and how you expect it will be received in the market, and how you see the coming two years in terms of demand for this machine, it would be interesting to hear. Thank you.

Yes, so the reason for launch is of course both technical availability. So I would say that we had this opportunity in our hands for quite some time actually to do something after the P800. But the whole industry needs to be prepared for taking on such technology as well as there are other process equipments involved in the making of the photo mask and the developing of the photo mask, such as aligners and so on. And we could see that that point is now really. So this is a good time to launch that product. Difficult to say how the market will react. Of course, it's done in dialogue with the key customers, which we hope and believe will take on this product. But it's a quite expensive thing. So there is, of course, a commercial dialogue always. doing that we could see that when we launched the p800 it took actually quite some time after launch until we got the first order and i can only speculate it might look the same this time as well but definitely we have launched the product with the ambition to sell it so that is that's obvious

Can I can I follow up there and say, I mean, is this something that has been driven by the customers that they have been on you saying that you need to sort of make these moves? Or are you sort of ahead of what customers actually are working with in their innovation, sort of situations?

I would say that we walk in a very parallel speed on this, actually, that we have an ongoing dialogue with our customers all the time, really. And, of course, we wouldn't develop something that we don't think we can sell or that we know that the customer actually would need, because development costs are quite high on these kind of things. Also, producers of aligners and so on need to be need to be involved as well here, or the customer need to involve them, of course. So it's not really us knocking on the door to the customer, but it's really a kind of a parallel discussion that has been during a few years.

All right, perfect. I go back in line. Thank you. Thank you.

Thank you, Fredrik. And next, we will move over to Carnegie and Mikael Lassen. Please go ahead, Mikael.

Yes, thank you. Good morning. My camera is not working, so this is OK. So can we start with the outlook? You reiterated the sales guidance for this year, but I think you're shifting shipments to mask writers from Q4 this year to Q1 next year. Can you explain how this works and the reason for doing this? shipment in 25 instead?

Yes, in this specific instance it's the customers who have asked to have the deliveries early next year. And this is of course one component when we collect the information in order to prepare for the outlook that we have. So this is one information and of course, we collect information from all divisions and all businesses and combining this, we reiterate the 6.25 billion for the year.

So just to be clear, it means that you have basically upgraded the tail projection for the other three segments.

This is a combination of the other three segments of exchange rates and other things that happens. So yes, you may say that, but I mean, the outlook we guide for is 6.25 and this constitutes everything.

Yes, okay. And do you know if this is related to a more hesitant photomask market or is it production plans, just technicalities or do you have any more flavor on that?

This is not specifically related to declining photomask market. I mean, the investments are committed. So if they get it one month more later or earlier, it's not related to the market really. It's more how it fits into the scheme of preparing the facilities at the respective sites.

Okay, just wanted to double check about that. And I'm also curious about the gross margin here for the high flex segment. Maybe you mentioned that, but 36% is unusually low. I guess you feel that as well. Usually it is 40% plus and sometimes 46% as it was in Q4. Can you explain this?

Yes. Compared to the other divisions, there is a relatively higher fixed cost base, which means that it is a little bit lower when you have lower volumes. And on top of that, of course, the product mix is one factor in this. And this also influenced the Q1 to some degree.

But there's no recurring things?

No recurring things other than product mix and a lower volume. And it is correct that our expectations is that it should start with a four.

Yeah, okay. And if I may, I also have a couple of other questions. First of all, can you explain how the AKG company within global technologies, how their business, the PCB test systems, are affected by AI applications? How much of their business is exposed to high-end servers and GPUs, for example?

Maybe if I start, I can say that the demand increase specifically is related in the end to AI-driven demand. So if I should, I don't dare to say a percentage on how much because it's several process steps in between. But we know for sure that the majority of this growth is powered by investments that will go into the AI segment.

Okay. And how is the other customer applications developing? I mean, we can see that PCB volumes are very low in Asia. I don't know if that has affected this segment. It should, I mean, hold back the demand in other applications.

It is exactly what we see as well, and we see that we have been able to sustain our level better than most of our competitors when we look at the statistics, which means that we are more exposed to the more advanced PCBs and substrates, and thereby we have also been able to keep up much, much better than the market as a whole.

Okay. That's it. Thank you.

Thank you, Mikael. And now we will move over to a new face, namely Nordea and Anders Åkerblom. Please go ahead, Anders. You're muted. Oh, apologies.

Hi, good morning. Thank you. So I wanted to follow up a bit on the previous questions with the new product launches. I think you kind of covered most of it, but particularly with the MMX, just so I kind of understand here. Do you expect any cross-selling opportunities with kind of the other products in the division?

Yes, absolutely. It's a perfect complement to the SLX mask writer. So it's not unlikely that they will be sold in pairs. You need maybe only one MMX to several SLXs, but still a combination order is definitely possible. And the MMX can also, of course, measure photo masks produced by other producers, mask writers as well. But it's more likely, I think, that we sell it in combination with our own product.

Okay, so it can also be sold into the kind of existing capacity in the market, the installed capacity?

That's right.

Right. Okay, interesting. So kind of staying on the PG division, I mean, there have been several quarters now with historically quite high and impressive profitability. And I mean, at the same time, you've been able to deliver out on a quite substantial number of systems. So could you maybe give some flavor on what kind of steps you've taken in the delivery and production stage to make this more efficient?

Yes, and this is something that has been ongoing for quite some time where we are really because of if you see the amount of products that we sell now compared to maybe three years ago, I would say, yes, it's more than double that. And we have at the same time reduced lead time quite a lot. What we have done, we have standardized. So all the products today have the same what we call control platform, which is kind of the machine inside that controls the machine, which is helping us to produce faster and also pre-produce a little bit. We have also reorganized the flow in the workshop and everything to... to minimize waste of time and so on. So on all products, I would say that we have reduced lead time. And that is the reason why we can produce more on the same floor space. That being said, it starts to be get very busy in our workshop. So that's, we are also looking on how to expand physically the space that we have.

Okay. And kind of just on that, I mean, do you take the opportunity now to kind of produce as much as possible when you're, I mean, producing a set system, even if it's several quarters out that you might, you know, do the groundwork for the system and then kind of just let it be and do the final touches when you're about to deliver it out? Or do you kind of wait with the bulk of the production until it kind of approaches its delivery phase?

It's normally produced to order, so there's no speculation, really. But as the products are modular and start to be quite standardized, you can, of course, pre-produce modules and sub-suppliers. You can also keep stocks. This is one part of the efficiency. Sometimes we also produce in-house machines for our own use, for demos and for R&D purposes, which could be sometimes converted into customers' machines and so on. There are some ways to cut lead times.

Okay. Just moving over to the semiconductor for mass market quickly. I mean, obviously, this is at a quite high level still. But if I'm not mistaken, I mean, since the launch in 2019, your orders have mainly been driven by new factory CapEx. And at the same time, there's a seemingly large replacement need in the market and Just yesterday, SML commented that the investments in immature nodes are occurring at a slower rate than what is likely required to cover global demand going forward. So kind of based on this, could you give any flavor on what you're seeing in terms of a potential replacement cycle to materialize?

Yeah, so this is still ahead of us, I would say. There are quite a large installed base, which is getting older and older, and on the mature nodes. And the mature nodes, the photomask for mature nodes is growing still, and especially in China, I would say, because that's a technology which China is allowed to import. I think we can most likely look forward to that this replacement cycle is starting to happen and that the nodes that we address with our mask writers are still an attractive area to be at.

Kind of ahead of us, I mean, is that... If you can come in closer, I mean, is that kind of this year or next year or two years out?

No, no, you need a very long horizon. In this industry, we say ahead is the next 10 years, I would say that there is a, I would assume there are maybe 200 to 150 systems in use globally. Average age is most likely eight to 10 years. So within the next 10 years, the majority of those would have been needed to be replaced.

Okay. I'll just quickly ask on the PCB assembly part and then I'm finished and won't take up any more time. But in Hyflex, even clearing for the lower than usual gross margin, it still came in quite clearly above its historical profitability. Maybe this was asked, but if so, I missed it. Could you expand a bit on what this was due to?

yes so the the profitability is volume driven and the high flex has a bigger impact of volume than maybe most other divisions so we could see that when we have high sales we have high margin and we have low sales low margin i think that was very visible in in the last quarter last year in quarter four we had unnormal high margin, maybe an unnormal low margin. So we came into this year with quite a small backlog. So this is one reason for the lower sales. But we also see that the markets are a little bit slower. Europe and America, these are our main markets, and they have declined a little bit. So I think this is also one reason. So yeah, that altogether is giving this

Right. But still, I mean, you seemed quite optimistic last quarter about the new pick and place machine. And I was kind of wondering here on the demand outlook going forward. I mean, do you expect us to kind of cannibalize on the existing pick and place machine offering and sales? Or will you aim to target different parts of the market with the new solutions?

Yeah, both, actually. So we will be able to address new markets with this machine, which we couldn't reach with the previous. Because traditionally, high flex, we have been in this high mix, low volume segment. and super strong in that segment. This new machine is actually so fast that we start to move a little bit into not really the super high volume segment, but higher volume segment. And by that, we could capture more customers that has this need. So definitely it will give us the opportunity to expand our addressable market with that. Most likely customers that maybe could have bought the previous generation will buy the new one instead. Also to be able to grow into higher speeds for their own future and so on. So most likely there will be a little bit of cannibalization as well. But still it's a positive thing.

Okay, perfect. Thank you. I'll get back in line.

Great. Thank you, Anders. And now we will move over to DNB and Anders Rudolfsson. Please go ahead, Anders.

Thank you. And first of all, congratulations then to another great quarter. Great job. Perhaps this question regarding China. We are listening to ABB this morning saying that it starts to recover. even if it's rather slow, it's still recovering though. And that's a new sign for them. And then you mentioned after Q4 that you didn't see any improvement at all in China. And now you're talking about this. How do you see that? Is it from something just, of course, from the low level, but are we supposed to get the longer term change of the market now? Or how do you see that?

Yeah.

I wish we all had the crystal ball on that one. It's obviously a very important market for us. And what we can say that there are certain pockets that have started to move and started to invest. And this has now in the quarter benefited our high volume division. where there has been a good pickup in order intake. I would say that we need to wait the time a little bit more to see that this is really come around the corner and more long-term pickup but it's definitely a much more positive sentiment than we had a quarter ago.

And is that from the old customers or is it just specific things here or are we talking about a broader view so to speak on the market?

Our high volume division is addressing a rather broad customer base consumer electronics and also to some degree the automotive sector and we have already had the positive demand in the Semicon industry in China for the pattern generators division since before So that is unchanged. We do see certain component manufacturers related to our global technologies division also investing, then supplying further on in several steps into the data centers to meet the AI-driven demand. So that has been strong.

And the follow-up on that one is, if you see better demand going forward here, Could that actually improve your margin as well? I mean, the utilizations of fabrics obviously has been very low for a long time now for the Chinese customers.

Yes, I think there are certain pockets. Of course, we have traditionally or historically often been on a 20% EBIT margin for the high volume division. And I don't see why we could not reach that if we have a better demand. So I think that is there. We can also see that the aftermarket, which is an important part for PCB tests, for instance, is driven a lot by how much utilization you have in the different factories. So there are certain pockets that will relatively quickly benefit from increased capacity utilization if that is happening.

All right. I have another one. You have been through and seen 18 months of very strong demand from patent generators. And now, of course, you start to deliver on that. And you mentioned after Q4 that we might not see the same pace for this year. Have that changed anything, do you think? I mean, looking into the outlook as you send out this morning, the semiconductor industry, for example, and the whole industry, actually, electronic industry seems to be going into a very strong 2024. Any comment on that?

I think we have seen a very, very strong demand both on the display side and the Semicon side for some time in pattern generators. And I think what we wanted to say is that it's hard to be certain that this will continue on exactly the same level going forward. I think we have a good backlog for this year. We start to add good backlog for next year as well. And it's not completely, it's certainly not a dead market out there now, but this super order intake that we had end of last year, sorry, end of two years ago and last year is maybe a bit much to expect.

Thank you so much for that. And I'm back into line here. Thank you.

Okay, thank you, Anders. Now, I believe Fredrik said that he might have some more questions. So Fredrik Littell, Handelsbanken, please go ahead.

Thank you very much. Maybe a little bit of follow up on your comments around AI chip making and the drive we see there. You talk about the die bonding and you talk about the PCB testing. Could you, on the dye bonding side first, could you say how much of that unit that is exposed, how many of the machines that you actually feel that they have that are feeling this effect? And secondly, on dye bonding, how is that competition looking for you there? And then also on the PCB test, what does the competitive landscape look like in that specific segment? Thank you.

I can make a test. It's very difficult to make the correlation on AI and our share because The customers we sell in to produce mainly transceivers and data communication equipment. So their demand is very much driven by AI. So I think it's a better proxy maybe to look on companies like Broadcom and so on and say, how much of transceivers do they actually sell to AI driven? And if they do good, then we will do good. Or that industry is doing good, we will do good. So maybe one or two steps. away really as our dive bondage can be used for several applications and the products that our customers can do can also be used for for the demand for that could be driven by different reasons, I think. But in total, we believe that where we see that the AI demand is driving our business. And this is in global technologies, both in dibonding and in PCB tests, as well as most likely on the on the Semicon and sometimes also high volume. So it affects a big part of our business in a positive way. On the competition side, so we have competition on dibonding. There are three, four companies. I would say the largest competitor we have would be ASM Amicra. On that one, there's also a few Japanese players.

Naideck and Hiyoki.

Yeah, that's on PCB test. And on PCB test, especially Naideck and Hiyoki, which are Japanese players. So there are a few out there. So on the PCB test, we are extremely good really on this flexible, the probe, flying probe PCB test, which is very similar to our high flex, which is serving really the flex market. And that's also why we have been able to keep up our sales despite this decline in PCD demand, because we are addressing the high end of that market with multi-layer and also with substrates and so on, which has not seen the same decline as the high volume or the general PCB board.

All right. Thank you.

Okay. Thank you, Fredrik. And now over to Carnegie again and Mikael Lassén. Please go ahead, Mikael.

Yes, thank you. Just a couple of follow-ups or additional questions. I was thinking about the services and off-the-market sales for the PD segment. It was 749 million in 2023 and just wondering if this is a base that you can grow from into 2024 or did you have anything of non-recurring nature in that revenue stream?

There is a little bit of upgrades and software and so on, which is sold on at the later stage, which is not necessarily recurring, but the vast majority of that is service business, which we should be able to grow on with a larger installed base.

Okay, so it's fair to basically assume that that level. I mean, to make it simple.

To make it simple, yes.

Yeah, okay. And then another thing here that maybe is important for the growth outlook for the PD segment is the order book for the PD segment contains a lot of replacement systems right now. And can you just remind us how an LRS system to precision swap for a customer, how that change in their capacity and capability is affecting their mask production. If you know what I'm thinking about here, I mean, if it's a substantial change in capacity and capability for them, when they do this.

Yeah, it depends a little bit. But normally, I would say that an LRS, if you take the 15,000, it's most likely sold more than eight or ten years ago. And of course, the current products are more productive and also more capable. It's very much likely that the customer that has this old mask doesn't really have the need of that kind of product. Their customers will not really have the need of that kind of photo masks. So definitely the replacement is really, I'm not saying the majority is replacing, or how do you say, replacing capability, but also capacity. But if you look over the years, the amount of display mask characters has more or less been constant over the years. There is very much one-to-one in the replacement cycle.

Okay, yeah. Yeah, difficult dynamics actually. But another big question, the final one. I'm looking here at your balance sheet and you have a net cash position of about 2.8 billion. Can you talk to us about the capital allocation considerations that you have right now and say something about the M&A pipeline?

No, I mean, we continue to explore this space. This is also our mission. We are quite clear about that, but also clear about that we are cautiously approaching this market and adding things to the existing divisions, but also looking at complementing technologies in our space. It's very hard to say when something will happen, but we have the mandate to continue with a good, strong cash position from our board and look into the space what we can make out of this. But our existing business, that is highly cash generative, as you know. So we do not expect very large investments in the existing business, really.

Okay. And the final one, if I may. Can you say something about Axon or listing of Axon in China, how that process is developing and what are your plans right now?

I can just say that we are continuing with the project. Relatively, we are not throwing all resources at it. It is a tricky process to manage and with certain uncertainties as well. So we take it step by step, but we are moving slowly forward.

Okay, thank you.

Thank you, Mikael.

I believe Anders Åkerblom at Nordea might have some more questions.

Yeah, just the final question. I wanted to follow up on kind of the very high net cash position. I mean, you've been looking for acquisition targets for quite some time, if I'm not mistaken. And I mean, obviously, you found now in global tech and such, but it's not a huge target. So are you considering alternative capital allocation methods or uses of this capital rather than just looking for M&A opportunities?

Not for now. So this is the only track that we explore for now.

Okay, thank you.

Great. Thank you. And finally, Anders Rudolfsson, DNB. I believe you might have some final question as well.

I think everything has been discussed already and I got the answers needed. So thank you so much.

Thank you. So with that, we have reached the end of the presentation of my Q1 report. Thank you very much for attending.