Mycronic AB (publ)

Hello and welcome to the presentation of Micronic's Q3 report. My name is Sven Kjetkovic. I'm the Director of Investor Relations at Micronic. And with me today, I have Anders Lindqvist, President and CEO, and Pierre Brouchon, CFO at Micronic. And with that, I hand over to Anders. Please go ahead and present Micronic's Q3 report.

Thank you, Sven, and very much welcome from me as well. So today we have the usual agenda, if you have seen us before. So a short summary of the quarter three result and achievements and actions. We will go a little bit deeper in the different divisions. Pierre will explain a little bit more about the financials. We'll talk shortly about sustainability. And at the end of the session, we will have a question and answer session as well. On our website in the material you can also find the market update which is third-party reports on how the market has developed previously. So talking about the third quarter, what we could see in the third quarter that we had a good order intake, a very strong order intake actually. We had an increase of 67% compared to the same quarter last year and it amounted to 2.431 billion Swedish kronor, which is also a very good number. So it was not only a good percentile increase, also the level as such is increasing. very high. We are very happy to see that all divisions contributed and especially strong in path generators and also the global technologies divisions. So very strong, but also the high volume and PCB assembly solutions also showed growth in order intake. On the sales side, we had a small decline of 4% to a little bit more than 1.7 billion, and we had a less lower sales in the pattern generators divisions than the same quarter last year, while we had growth in high volume and global technologies. EBIT declined quite a lot to 255 million, all explained by a product mix, especially in the patent generators or in the patent generators division. And EBIT margin then down to 15%. Backlog up to almost 4.8 billion, which is also a good number. And during the quarter, we also signed an agreement to acquire a Korean company, Cohen DST. If we start with the division patent generator, so we saw a very good order intake, 188%, so that's a lot of percent, but to a level of almost 790 million. And in that we saw orders for three Precision mask writers, which was one Precision 8 Evo, two Precision Lite Evo, and also two mask writers for the semiconductor industry, two SLX. We also signed an agreement to acquire the South Korean company Kowin. So Kowin is a company making repair equipment for display panels and also photo masks, both for Semicon and for display. So a very good fit with our pattern generators division. Sales down 40% to 487 million. We delivered five machines, so it was one precision eight. or a light eight Evo, three SLX and one MMX. And because of that mix, the margin declined of 59% on the gross margin and EBIT 161 million. Backlog a little bit more than 2.6 billion. And in that backlog, we have 19 systems to be delivered. And after the quarter finished, we also had an additional order for an SLX mask right there. So PCB assembly solutions, we have seen an improvement on the market in America or United States, especially during the third quarter, while still the European market is weak as before. We got full line orders, which is where we sell almost everything we have in the whole portfolio. We received that both in Europe, US and Asia, so that's pretty much everywhere. And also we are relocating the production from the previous premises in Täby to new premises in Kyrsten. And this is mainly to give more space for the pattern generators division to expand their production. So that is that, and that was successfully done. and order intake up to 400 million which is a good number and sales down to 314 a little bit down on the gross margin which is because of the lower net sales also the mix and small impact from tariffs in the us so ebit landed at 20 million and backlog 224 so which is a normal normal level i would say on the backlog Moving over to high volume. So we have seen in the beginning of the year, we had a very strong demand from the Chinese consumer electronic market. This was a little bit weakened order intake from that market during the quarter, still good, but it was more than good in the first two quarters or the first half of this year. We see good development in the markets outside of China, especially South Korea and Southeast Asia. So order intake, we had an increase of 40% to 444 million, which is a very good number. And the sales increase 49%, almost 500 million. And there is one acquisition that impacts this. It's Modus that we acquired last year, and it has a impact of 10 million gross margin 39 which is more or less normal i would say and ebit up to 79 million and the contribution from acquisition was 2 million in that ebit number strong backlog 860 million so high volume in in a very good shape i would say The global technologies is the star of the quarter. I would say we had a very strong order intake and it comes both from acquired companies, but also from already existing business, which has the majority of the contribution. So 94% up to almost 800 million. So that's almost double. That's the same quarter last year and the level as such is very high as well. Sales also up, follows a little bit, up to 416 million. And the impact from acquisitions here is 112 million. We have acquired three companies during the time that we compare against. Gross margin, strong increase to 52% and it's come from a little bit everywhere. We have improvements in the PCB test business line, in the die binding, photonics interconnect. Those are old businesses, but also the addition of the plasma business with the surface and the magnetic test business with the robot acquisition. So contribution from many places and the EBIT increase to 42 million and then Including in that number, we also had quite a lot of impact from the acquisitions with negative 21 million. So very strong EBIT on that. And also very strong order backlog, as you can see, more than a billion here. So super strong on all parameters, I would say, in the global technologies division. The outlook, not so much more time of the year to go, and we stay confident with the outlook of 7.5 billion for the full year. And with that, I will hand over to Pierre Brochon to talk about the financials.

Hello from my side as well. And going directly into the result for the quarter, we had after a number of very strong quarters with EBIT on or above 25%, we had a somewhat lower quarter as expected. We had 1.7 billion in sales and an EBIT margin on 15%. And the aftermarket revenue continued to be strong at 469 million in the quarter. If we look at it on a rolling 12-month basis, we are still on a good rolling 12-month margin at 27% and just shy of 8 billion in sales. Here you can also see that we continue to grow our aftermarket. So it's now up in absolute values just below 2 billion and representing 25% of net sales. If we look at the comparison against the very strong third quarter of last year, you can see that we have declined on all parameters. And on the volume side, I think this is mainly related to lower pattern generator sales. And this also affects the relative margin that we have in the Micronic Group. So about half of that is related to lower lower margin within pattern generators, and about half is related to the mix between the pattern generators and other divisions. So despite the strong development in global technologies, we had a decline of the gross margin. On the OPEX side, the main explanation to all this, which is about 140 million in total, is related to the acquisitions that we have made. More than half of it is related to that. But we also have increases in the R&D spend in patent generators, in particular to some degree in our high volume division. And in the high volume division, we are also building the global footprint, meaning that we are increasing also the spend in particular on the marketing and sales, but also on the G&A. This resulted in 255 million for the quarter. If we compare division by division, we had last year a fantastic third quarter in pattern generators, could not match that, did not expect to match that. This is in line with our expectation for the quarter. On the PCB assembly solutions, it's been a tough market. I think we have seen pretty good order intake the last couple of months, but the revenues were lower than last year and also the result. On the high volume division side, the comparative numbers is not so strong. It's a solid quarter in high volume this year. And I think it's a good result, but not out of the extraordinary. On the global technology side, this is a good increase on last year. But as Anders explained earlier, there is really a super performance underlying in global technologies. Very strong order intake, very strong gross margin. And there is quite a lot of acquisition related costs in this number and still improving 28 million. I think it's really good. Ending on the 15%, 255 million for the quarter. Cash flow wise, we have continued good cash flow from the result. If we compare with last year, we have a negative impact on the working capital side. We have a little bit lower order stock in patent generators. and thereby also less advanced payments. And we have, by growing the business, also increased the inventory somewhat during this period. On the investing activity side, we have mainly the acquisitions that account for the majority of this. And no drama on the financing side either, majority being the dividends that was paid out in the second quarter. Still on a healthy cash level at 2 billion. And with that quick walkthrough, I hand the word back to Anders again.

So thank you, Pierre. So a few words around sustainability. So this time we will focus on our supply chain, where we have, during the past years, made a lot of efforts to strengthen processes and tools for due diligence in our supply chain. And recent analysis of where we are is that we see that 95% of our high-risk suppliers and 60% of all direct material suppliers have signed the Micronic Code of Conduct, which is a clear improvement compared to 2024, where the numbers were 90% and 49% respectively. And of course, we continue to work with this to improve further, but the direction is very good and nice on that one. So with that Sven I think we can move into the Q&A part right?

Yes thank you Anders and thank you Pierre. So now we are moving over to our Q&A session and compared to the Q2 report we now have two new banks that have started coverage of Micronic. two new investment banks, ABG Sundahl Collier and Bank of America. So we have Henrik Hintze and Oliver Wong joining us today, which we're very happy about. But we will start with Nordea and Anders Åkerblom. So Anders, please go ahead and ask your questions.

Thank you, Sven. What an honor to start. So just asking first on global tech, obviously very strong performance. However, my question would be a bit, we've recently seen some adjacent, at least, product announcements from pretty large players in the space, such as BSC and Applied Materials for hybrid bonding. Could you explain sort of how and if this in any way competes with your offering? And just in general, kind of what your current view of the competitive dynamics in your sort of relevant end markets is. That would be my first question.

Yeah, I can start to answer on that one. So on the bonding side, you can actually split this kind of bonding market in a lot of different categories, depending on the application and also the accuracy and precision of bonding. So the bonding that you refer to is not directly competing with our technology that we have in the die bonding business line of ours. So it's a little bit side by side. However, that technology and the bonding technology is a key driver for another business line in our global technologies, which is the plasma surface treatment, which is really benefiting from different bonding technologies as it is to deoxidize and clean surfaces, in many cases prior to bonding applications. It's good that the bonding technology develops and expands also. So that's good for us. Was there another question? That was a question maybe.

So our plasma solution is a complement to the die bonders that are supplied or as part of the solution to die bonders supplied by various players in the industry.

Okay. So just to get it very explicitly, You're not seeing, at the moment, signs of increasing competition in your relevant end markets and product offerings?

Not more than normal. I mean, we always have competitions. In most of our markets for Micronut, we have competition. And in our die-bonding business line, we have had competition from Japanese and Chinese companies. And this remains quite unchanged.

Okay. Thank you. And sort of on the margin level in global tech as well. I mean, again, obviously, a very strong sort of year of year uplift. I mean, you're adjusted for the acquisition related costs closer to 30%. Do you think this is a sustainable level to be performing at going forward?

I would say it's a rather high level. I think there is a lot of explanations to, in particular, the gross margin in the quarter. On the dive bonding side, we have done a lot of efficiency improvements that is paying off. On the PCB test side, we have a very high volume and that will remain at least for for a while now i think we have the order intake is is really really strong so we will continue to see good margins there for for some time and then the acquisitions that we have added have intrinsically high gross margins so so it's a healthy business when it scales and and we believe that that will be sustainable going forward

Okay, that's very clear. Thank you. And just a final question, since that's kind of been in the ropes recently. I mean, SLX, obviously, in recent years, the capacity build out in China has been an important incremental driver for you. But could you kind of just remind us and elaborate a bit on how you see demand for SLX progressing in the future, particularly with regards to kind of the majority of the installed base that's not located domestically in China and what your kind of current view on replacement demand and your ability to win orders in that market is?

I think starting with China, China has been a big, as you said, an additional driver for SLX sales. So it's not the only driver. I mean, we have drivers from many different sources and China has invested quite a lot and now a little bit less, but that's a part. Of that, we still believe that China will be a very strong market for SLX going forward. The demand is still there. And as you mentioned, the installed base is huge. Also in China and elsewhere, we have more than 200 machines that we believe that we can replace. Maybe not one-to-one because our machine is more productive, but maybe like 70% of those could be replaced. replaced and so on, and we will most likely take the majority of that sales. But that will be under a long time period, obviously, and that's a little bit everywhere. We can also see that we have started to sell in new territories that we have not had orders from before, like Europe, other parts of Asia. and so on. So it's kind of a mixed kind of portion of different drivers. But China will remain to be a strong driver or a good market for the SLX. That is clear.

Okay, thank you. Just a really quick follow up on what you said there about kind of the order win rate. I think you mentioned 70%. I mean, that's kind of the rate that you've been taking for all new sort of greenfield orders in the market. Do you think that you can sustain such a rate also when you go in to replace existing capacity?

It's difficult to say, and my meaning was also that existing capacity, one SLX is much more productive than one other machine. So if there are 200 machines to be replaced, it's not needed 200 SLX for the same capacity. So that will give a little bit fewer than a pure one-to-one, if you just take a total accumulated capacity. But our ambition is really to win more than 50%. So 70 is a good number to aim at. How it will be, we will see, of course. But we know that we have a really good offering and our target is really to take the majority of that market.

Makes sense. Thank you so much. I'll get back in line.

Thank you, Anders. And now we move over to SEB and Ina Gypsund. Please go ahead and ask your questions, Ina.

Yes, so hi, thanks for taking my questions as well. So you had a couple of orders within PEG with faster delivery here in Q3. And yeah, I was wondering if was there anything special about these orders and did you already kind of account for them in this year's outlook?

This is one of very few cases where we do have a very quick delivery. We have certain certifications etc. that we are doing together with specific customers. We did account for this one. It had an impact but not a substantial impact to the outlook for the year. But we believe that we would get through with it, yes.

But it's not a normal happening, I can say. It's kind of a little bit unique. From case time to time, it can happen.

And then, I guess, kind of like a follow-up, how should we think about delivery times going forward now that you're also expanding capacity and getting more efficiency in pattern generators? Do you see that you could have better workflow and maybe work more efficiently within production going forward, or Will there be similar delivery times?

Yeah, I think the capacity increase will take some time, and it's also to make room for future products that we don't yet have in the portfolio. I think the lead time today for SLX is between 6 and 12 months, and for a precision machine it's likely to be 12 to 18 months. And I think that will remain. It's not only the manufacturing time and lead time and hour, it's also the customer's lead time, because there's other Normally, in relation with the purchase of an SLX or a precision, there's also other related process equipment needed in the factories and on the lines, which has even longer lead time than ours, and also some design and construction work of buildings and so on. So six months is not our limitation, really. It's kind of more or less the customer expectation, or the customer demand, you can say. So I think... even though we could produce faster, cannot. But of course, a shorter lead time in our production means that we can produce more machines on the same floor space. So that's efficiency. But from order to deliver, it will look the same most likely.

I see. Then a question on order intake. How comfortable are you with the current order backlog at the moment? What kind of visibility do you have for order intake? in PEG for the rest of the year? And do you feel kind of confident that you can fill up the capacity for 2026 that you have still free?

That's absolutely the ambition, of course. And we have capacity to do it, depending on the mix and the product and so on. But we do have capacity at the end of 2026 to deliver more. So we will do everything we can, of course, to take orders for that.

You said previously that you haven't seen any macro hesitation among your customers. Has this changed anything during the quarter?

I think we have seen a little bit more thinking time from customers and also delays almost a little bit in every kind of activity. But I think this has normalized more. I think this is not a change anymore. This is kind of the situation as it is. Our customers need to really, really have a long horizon on their thinking and their strategies. They need to think now how they will look like in five, seven years in order to decide what kind of technology should they produce and where should they produce it and how and with type of equipment and so on. So that is quite beyond the current up and down activity that happens. And it looks like this is stable on a long-term perspective.

Okay. But I get back in line. That was all for me.

Thank you, Ina. And now over to a new face, Henrik Hintze from ABG Sundahl Collier. Please go ahead and ask your questions.

Thank you, Sven. So first on the PCB assembly solutions segment, The margin still looks a bit weak to me. First of all, was there any negative impact on the segment from the relocation of production in this quarter? And if not, how should we view this going forward? Is it mainly a matter of waiting for volumes to recover or are you doing anything to manage cost in the segment?

If we start with the relocation, first of all, we agree with you that the profit level is low. It's not where we like to have it. On the relocation, I think the team has done a fantastic job. So we will not blame the relocation for anything in this quarter. Of course, there is some smaller costs and inefficiencies exactly when you move, but the team has done a super planning and execution on this. So this is not an explanation we will use in this. As to the market, do you want to comment?

Yeah, absolutely. So market has been weak, but we see now an improvement. We have seen improvement in the US. Still small, small signs of improvement in Europe. Not yet visible in the numbers, I think, but you can see it from other companies. I think a little bit our peer companies that are active in the same Same segments and so on. I can see that. And the volumes are a little bit too low for us. The volume has quite some impact on the gross margin in this division. And the normal gross margin for us would be 40%. And then we will make about 10% in EBIT. This is kind of where we should be. And we had a little bit less. than that very much driven by volume. But we also have seen that the order intake was quite good in the quarter in the last three months, and the sales were lower. So that should translate into sales one day, of course. But it's less than it should be, absolutely. We are not very happy with the level.

From a seasonality point of view, we typically have a very strong ending of the year as well. In this division, if you look at the past three years, you will see that as well. So we do expect an improvement on this.

Yeah, great. Thank you. And maybe also on high volume, the margin there was a bit weaker Q&Q despite higher sales. You also mentioned that demand in China is growing softer while other countries improved. But orders and sales grew here. So how should we view the net impact of the different demand trends in different regions? And does the mix between regions affect the margin?

Yes. So yeah, the domestic business in China was super strong in the beginning of this year, the first half, really. And now it's still strong, but maybe not with super before, but only strong. So I think that's how it looks like. So the level is still quite high and the numbers is really good. And in addition, a large part of the strategy and also how the world looks like is to expand outside of China, especially Southeast Asia, but also Europe and the North America, South America, and so on. And that contributes. So I would say typically we have a little bit stronger margin outside of China than in China, but also the cost of sales and so on is also a little bit higher. But the contribution should be a little bit better from the non-China part. when it grows.

All right. Thank you. That's all for me.

Thank you, Henrik. And now over to another new face, Oliver Wong from Bank of America. Please go ahead and ask your questions, Oliver.

Hey, guys. Good to see you guys. Thanks for taking my questions. I guess first, just off of the last question, did you say margins in high volume for China customers is lower than for non-China customers? Or is it the other way around?

It was, as you said, first. So we have a little bit lower margin in China than outside of China. The competitive pressure in China is higher than in the rest of the world. So there's more price pressure with China customers. Also, the volumes, the projects are larger in China. It could be hundreds of machines in one order and so on. the volumes outside of China are typically smaller, which is also impacting the price and also the kind of aggressiveness from competitors.

Got it. And then I guess pivoting back to pattern generators. I guess I was curious about for the display mask riders. Last year, as in 2024, the order intake was pretty strong, up about 40%. By my estimates, this year we'll see, but so far seems to be at least flat year over year. Is there any way that we can... kind of you know better projects you know how next year could be shaping up or uh display mask writers i know it's lumpy but um you know what what kind of leading indicators could we potentially uh look into

That's quite difficult. Sales is very easy to predict because that's more or less our backlog and you have the deliveries and you can figure out the value also by looking on historical announcement on what different machines cost and so on. So that part is super easy. And then equally difficult is the order intake. Also for us, of course, we know what kind of discussions and how the quotation pipeline looks like, but there's a very uneven pattern of ordering in that. And I think normally you have to extend the timeline maybe to 36 months to see some kind of trend because we have had quite long times in and between where no orders have happened. I think even before prior 24, I think we had almost a year with no display order. And then all of a sudden we had a lot. And this was not connected really because there are different customers, different parts of the world. and so on. So the key drivers, and it's not easy to triangulate that into the quantity of orders, but on the long term, it's really the one is the expansion of mask area, which have a steady growth and the mask area is driven by display area. quite a lot. But then also a lot of the growth is coming from new applications. And new applications are typically that you see displays and much more kind of features or things like automotive is a big driver and also white goods and new type of consumer electronics and so on. And then there is a large technology shift in the industry where you go from what we call now old LCD-based display technology, which is still the majority of displays, but the transition into OLED hasn't been maybe that strong as projected, but now it seems to take up some speed because previously it was only maybe in smartwatches and smartphones and so on, in very expensive TVs and computers, and now it's coming into kind of the normal computers and the normal television sets, more or less. I think that still happen. And then also we have shapes and new display technology like this mini led, micro led, etc. That's also a driver for using photo mask in the industry. So There's a little bit of small pieces here and there. Let's contribute. And also another driver for us, which is maybe more predictable, is the installed base. So we have 100% of the installed base of masquerade searches in the industry. We know that they don't last forever and there is an end of life typically after 15-20 years of those and that goes in generations. So we retire generations and we discuss with the customer prior such a retirement when is it time to change and what should they change to. and so on so that is also quite a large part of our our order intake but still that's not really predictable quarter to quarter and sometimes not even year to year but but long term we know that sooner or later of course this installed base has to be replaced so maybe a fuzzy answer but it's kind of the difficulty really yeah and if i may follow up um over the long term do you think um you know display

display masquerade revenues will broadly follow, because I know in your presentation, Dex, you kind of have a long-term third-party estimate of display panel revenues. Do you think your masquerade revenues over the long term would broadly follow that growth rate?

No, I think we will more or less see the same as history. I think the drivers that have created the last 10 years of growth will still be there for the next 10 years. It has been looking at this for a long time and the display industry goes up and down and that's very much demand and supply question and also a little bit on China has a quite big impact here with really huge production facilities of displays and that could that also impacts prices. So in order the display market is expressed in value and not in quantity. So that's also a little bit difficult. here to see. So the volume is not one of the key drivers for photomask. It's more the change of technology and also new locations to produce at. And it's more and more clear that everyone wants to have their mask production close to the production facility. It was already in the same country. Now it's maybe even closer than that and so on. So that means that the kind of overall industrial utilization can go down, but the amount of mask writers will be higher.

So presumably prices may be, you know, coming down a bit, but then volumes are sort of more. And I guess, yeah, I guess like, you know, in terms of your mask writers, it should kind of outperform just... given you're not as impacted by the pricing pressures for displays.

Yeah, exactly. The displays is like one step further away from the mask production. There is no price pressure on the mask writers because we are more or less the only one who can sell them. So it's really demand which is driving that.

Thank you very much.

Thank you, Oliver. And now we move over to a more familiar face, Fredrik Littell at Handelsbanken.

Thank you. Good morning. Thank you for taking my questions as well. I thought maybe if we could get some hints on the PG division and the fact that you are spending more on R&D, it would be interesting to hear your views without revealing any of whatever new products you're working with, but something that could help us understand the drive in R&D costs. And then also, if you could describe a little bit the Covin acquisition pending regulatory approval, I know that, but what does it bring to you and how can you sort of excel on what they have already done? It would be interesting to hear. Thank you.

about new products without really talking about your product so that's uh no but maybe maybe you can see the pieces of a puzzle that we expand the production capacity in in tab we spend more on r d at the same time and so on so we i mean our our strategic direction is to expand the product portfolio with adjacent technologies we have talked before about metrology and inspection equipment and that is the most likely direction of of our development because it's uh very much connected to the writing of mask, also to control and measure the quality of the output is almost equally important. And also very valuable or kind of sector which has a high value and increasing importance, I think. So that is kind of a good step. But as you know, everything takes time, especially in this world of complex technology. So we also recently launched, I mean, we do upgrades and additions on all of our products. The SLX range, maybe it's not visible, but we have already three different variants in the SLX. And you have seen that the average sales price most likely goes up if you look at that. And that is because of the addition of features and capability. and performance. And that will continue to happen as well. This is our ambition. Also driving R&D cost, but also, of course, value in that direction. And the same also goes for the precision mask writers. We recently launched the P8000. but we don't go to sleep because of that. That product can also be enhanced and also we need to see what is coming next and so on. So that's all there. So I think we have a good roadmap for the PD division for a very long time. On the CoWin, that is really super interesting. So I think what CoWin does is really very, very complementary to what we do, as they have the mask repair equipment, both for Semicon and for display. So this is, you can say, exactly the same customer base as we have. And also the panel repair equipment, which is also in our kind of reach, you can say. COVID has not a lot of customers, really. They have had a quite limited customer base. We have a much, much broader customer base, so we can take this technology to more places outside of Korea. Back in Korea, we also acquire a lot of capabilities. So the current business of COVID is not very big, but really the capabilities of COVID is very big. And that is where we want to capitalize on really to utilize that and be successful with additional services and products outside what where they have been backwards it's also very good for us to get a good footprint in korea we have had a sales and service organization before now also we get manufacturing capability and r d capability and today especially i think it's quite good to be more in more more than one place in the world and korea is a good second place or another place to be at so that's that's maybe a soft benefit but but still good

So just to follow up on that, then, is it fair to say that Coven brings repair capabilities, meanwhile your R&D goes in more towards sort of metrology inspection? Is that sort of how we should divide it when I think about it?

Yeah, in a simple way, you can say.

All right. Thank you very much.

Thank you, Fredrik. And now we move over to Mikael Lassén at D&B Carnegie.

Hi. I'm not sure I'm visible on the screen, but my logo is maybe there. All right. I have a couple of questions. The first one is just a detailed one. on the results impact from H-probe, Robot and Surfax in the quarter of 21 million. Why did they have this cost? You have mentioned that before that they have incentive costs in Surfax, for example, but what are the other things?

Property is related to that and other acquisition related costs plus in some cases the volume is not really where we think it will be in the future. But super healthy gross margins across and good businesses to come. And I think for Surfex you have in the note that we would take 5 million US dollars over the profit and loss statement this year and about half of that is taken in the third quarter.

Okay, so how should we think about this short-term, just mathematically? Is this a fair assumption also for Q4, roughly? Maybe a bit lower?

Slightly lower than Q3.

Okay, and I also have a question on M&A. You have been quite active this year and made several interesting acquisitions. Should we expect, I mean, a bit lower pace now when you have done this, I mean, focusing on integration first, maybe quite big tickets also in some cases.

It's always difficult to tell when an M&A will happen. I can only say that we remain active and the financing of the company is still solid to do more. And we remain active in that space.

Okay. And what about the pipeline? Can you say something about that?

I think what you see in the M&A market right now is that there is a good level of transactions. So there are potentials in the market. So normal activity level, I would say.

All right. Thanks a lot.

Thank you, Mikael. And now we will do a quick second round for any additional questions. So back to Anders Åkerblom at Nordea.

Yeah, thank you, Sven. Just a quick follow up on the most recent question. I might be mistaken, but I do sort of remember you communicating in Q2 that perhaps a bit more focus would be put on integration of the recently announced acquisition. So incrementally, a bit of a change in your wording at least. Should we interpret that as some interesting M&A target having popped up in the market or am I sort of mistaken here?

No, I think it's of course we need to take care of what we bought, but it's not for the majority of the parties, not the same resources that do the deals that also integrate. But of course, we need to take care of what we have acquired. That's super important to us. And we have, if you look through the history, we have some success cases and some cases where we haven't really done everything we should. So we put a lot of emphasis on integration, but that will not limit the possibilities. With that said, there is nothing to communicate specifically on the M&A side.

Okay, interesting. Thank you. And just a quick question on the display side of PG. We've recently seen a fairly important company in the sort of general ecosystem announcing new phosphorus blue emitters to be integrated into displays. Do you see this potentially driving some sort, being some sort of trigger for, you know, incremental upgrades of displays and thus perhaps driving orders in that sense?

I think it's a very interesting thing actually, but it's a little bit early to make a conclusion. We haven't seen any performance yet of this kind of technology and so on. But of course, if it helps panel or display makers to reduce cost or to increase technology, it should be good. I mean, there should be more of them and also they should also, of course, buy more masks and so on for both development work, but also for production. Of course, but the success is still, or kind of the technology is very far away from proven, I would say. So maybe in a year from now, we have a better picture.

Yeah. Okay. Sounds good. Thank you. Thank you very much.

Thank you, Anders. And now over to Ina. Any more questions from you?

Yes. A follow up on the M&A. Are you looking to do more M&A within, especially within pattern generators or accelerate kind of new products or do you think kind of new products will be mostly organic going forward?

I would say if we start with acquisitions we are looking in all divisions for logical bolt-on acquisitions this goes of course in particular for PG as we have such a strong position to work from but it goes equally for the other divisions. In parallel, not competing with the same resources, we are organically putting focus on certain areas where we think we can do the development ourselves. That is where we can do it, typically a lower risk and more attractive option.

Yes, and then in terms of R&D, you talked about having multiple versions of the SLX, for instance. Can you talk a little bit what else you could do on R&D on the SLX side? Could you, for instance, move towards a little bit smaller nodes or what kind of opportunity do you see there?

Yeah, I think there are a lot of different directions for SLX. There are limitations, physical limitations, because we have a laser-based technology. And if you go into much smaller nodes, the next technology is electronic beam. But there is an area of overlap as well in this industry. And most likely we can... We are competing to electronic beam in that kind of area and can reinforce that. But it's more than the nodes and the smallness of that. It's also the speed of writing, the accuracy of writing, writing different what is called features, which is kind of complicated patterns. and so on. And you should also know that for the most advanced nodes, most of those layers of masks or the layers on such masks used for the advanced nodes are also written with laser-based mask writers. And to improve capabilities of that can also increase that kind of numbers so so it's very mixed i would say they kind of it but there's a lot of potential technical improve or performance improvements we can we're looking at for the slx to uh to cover larger parts of the applications and smaller notes is a part of it but we will never really go to the super small we can physically it cannot be uh competing to the high end the super advanced electronic beam mask writers i understand

And then a bit of a longer time question. So you're targeting sales of 10 billion. What do you think will be kind of the main growth? Will it be more M&A to get to this 10 billion? And which divisions, if we think organically, do you think will contribute the most?

When we have spoken about this before, we have said that we want to have about one third inorganic through acquisitions and two thirds from the existing business. Of course, you can say after a certain period of time, the acquired business becomes also organic, but we will see a mix. I think what you see now is that we have a very solid growth in the global technologies, and I think that division should outperform some of the other divisions, maybe in terms of growth.

Okay, thank you. I'll get back in line.

Thank you, Ina. And now over to Henrik at ABG Sundal Collier.

Yeah, sure. Just a quick detail follow up on the acquisition costs in global technologies. Should we expect that starting maybe in Q1, the costs that are not intangible amortization should be gone? Or how long will this persist?

Yes, you could say that what will remain then is the intangible amortizations in principle.

Okay, thank you. That's all.

Thank you. And over to Oliver. Any more questions from you?

Going back to pattern generators, semi-mask riders specifically, I was curious about the end-of-life replacement orders. I know you guys have been getting orders for that kind of throughout, you know, last few years. And you said that, you know, hopefully you're aiming for a 70% market share there, but curious if you could, you know, share a bit more color on what it's been so far to the extent that you'd know, like, you know, is it, is it 50% or is it below or above that?

Yeah, and this looks different in the semi-con as in the display. So on the display, we have 100% of the replacement. But also there that the price, of course, or the capability of the machine, the new machine is much, much higher than the previous one and so on. And the price is also extremely much higher. So that is one part, actually, of our growth is that the average sales price for our equipment has continuously increased. and in relation to the performance and the features and benefits that that machine can do and the lifetime is typically 15 to 20 years of the installed base so you can And the install base today is 70 machines around. So then you can figure out how many per year that should be. Four or five maybe, something like that. If it's 15 years. Then on the Semicon side, we haven't really seen that happening. That was actually one of the key drivers when we developed SLX to take the replacement market. But what happened instead was that the expansion of the market was so much stronger. So that has been the focus. both from our customers and ourselves really to take. And there we have really taken the majority. So we haven't really a track record yet of replacement. Many, some of our orders has been replacement orders, and we are taking more than half of those. So it is in this range, 50 to 100% of that part.

As you were saying, I guess when the customers are replacing their old mask riders, you're kind of winning over 50% of that so far?

Correct, yeah.

Got it. Okay. Thank you.

Okay. Thank you, Oliver, Bank of America. Now we move over to Handelsbanken and Fredrik Littell again.

Thank you. I have one last question. If I could have you guys elaborate a little bit on the PCB assembly again. You say that it is sort of The performance on margin is what it is right now. It's a bit below what you want it to be. Do you feel that there is any possibilities for consolidation on a global basis in the space you are in? Not for you to go up on the high volume side or anything like that, but where you stand, do you have a consolidation to do? Thank you.

Yeah, it's maybe a theoretical kind of discussion. So the majority of our offering is in this low volume and high mix segment, and there are not so many other players in that. So I don't think it's very likely that... I think it's more likely that some of the other disappear rather than they go together or something like that. It's a niche which is good for price and also competitive dynamics, but it's also quite a small niche in the whole pick and place or surface mount treatment segment. So it has its limitations as well. So I don't think that will change so much. Okay.

Really. All right. Fair enough. Thank you.

Thank you Fredrik and now finally over to Mikael at DNB Carnegie.

I'm good thanks.

So thank you very much and with that we have then reached the end of the presentation of Micronics Q3 report. Thank you for attending.

Thank you.