NCAB Group AB (publ)

Good morning and welcome to our Q1 report. My name is Peter Kruk and I'll be starting the presentation today. Again, for the new listeners, NCAB is focused, the company focused solely on printed circuit boards and these are unique bespoke products that are the heart and foundation in any electronic or intelligent product that we supply. And these are the green boards that you see to the left on this slide. We are a company present in 19 companies across 19 countries, 19 companies, serving some 50 markets with a little bit more than 600 employees and serving our customers with the help of some 33 main partner factories. We have no in-house manufacturing, but instead of working with partners and we have Out of our 600 employees, we have some 100 plus who are working specifically with developing a factory base and working on continuous improvements with our partners. If we then move to quarter one. So it's a quarter where I think they have some positive news. On the positive side, we can see an improved order intake. We're up some almost around 10% versus where we were in Q4 and Q3. So clearly improving and it's good what we can see is it's a strong order development in North America and East and also better than what was actually already a strong Q1 last year. Europe is improving versus Q4, even if it's slightly behind where they were in Q1 last year. Revenue as a consequence from our Q3 and Q4 order intake is lagging behind, but it's recovering from Q4 as we saw some of those seasonality effects that made Q4 extra weak come back in Q1 and support us. Cross margins are down a little bit versus Q4. EBITDA is recovering with the volume. We see quite a bit of FX impact in the quarter. These are predominantly revaluation effects. So nothing that is something that's going to continue going forward. And there's also some mix and also some dilution effect from the acquired companies that are part of our numbers. Alibida has recovered now with our revenue to a better level than what we saw at the end of last year. We are in a situation right now where we're handling tariffs for primarily our US customers. I think they create, of course, some challenges, but they're also opportunities for NCAB to forward its positions. Regarding tariff costs, these are costs which are transferred to our US customers. We have been living with tariffs since the previous Trump administration. But now we of course are adapting to the new levels of tariffs that are applied. But it also gives an opportunity for our US customers to find alternative suppliers. NCAB has invested over the last couple of years in building a factory base outside China, which is the main manufacturing nation. And that gives opportunities right now to help customers find new sources for supply to potentially offset some of the tariffs. Also very positive is that we have been able to continue with our M&A activities. And we two days ago announced the acquisition of B&B Leiterplatten Service in Germany. B&B Leiterplatten Service is a company in Saxony, so the former eastern part of Germany. And they had a good coverage for us in this part of the German nation. They are focused very much on industrial and energy customers working with energy metering products and so forth. A very good technical level, so we get a lot of good employees to join the company. They used to run a factory up until 2022. So a lot of skills inside the company, which is a good asset for us as we take the company forward. Revenue last year was around 150 million SEK, and they had an EBITDA, a healthy EBITDA level above 20 million. So we will gain now some 25 employees based in Germany mainly, and some in China who will be joining our business. And we expect to close this transaction here in the early part of May. If we then look at Q1 in the numbers perspective, we can see that our order intake is up around 5% versus last year. Of course, here we are supported by our acquisitions. But in order intake in US dollars, we're up 2%. And we also have a continued strong book to bill of 1.06. Net sales is up slightly versus last year, but here, of course, organic growth is down a little bit since we have the acquisitions that are supporting the year-on-year comparisons. EBITDA compared to last year decreased. We are now at 100 million SEC, but it's an improvement clearly from where we were at the latter part of last year. We're now at a margin of 10.4. This, again, is a little bit lower from the FX effects we have seen and some mix changes in the first quarter. which we expect to correct itself going forward. Operating cash flow at 53 million SEC, working capital up slightly. This is partly tied to some of our NCB1 or ERB implementation, where we are sort of cleaning up some accounts payable as we go live in new entities, and that temporarily has lifted the number somewhat. Even though we have a strong end of Q1 in terms of order intake, and we don't really see any negative news In our numbers, we have given the big uncertainty that we see in the overall market with tariffs and potential impact this could have on the general economy. We have taken the decision to, in order to sort of have financial flexibility, to also continue with an offensive M&A agenda, we've decided not to pay out a dividend in light of the current market uncertainty. With that, I'm giving the word to you, Tim.

Thanks, Peter. As you hear from Peter, about 1% up on the sales side versus quarter one 2024 in US dollars down about 2%. And we had EBITDA come in around 30% lower at 100 million sec in the quarter, but sequentially up. And we also landed the quarter at 10.4%, as you heard from Peter, with some FX effects at 10.4%. When we look at how the top line has now stabilized a bit and you start to see order intake posting some better numbers, we also see gross profits stabilizing a bit around the 35, 36 level in the last 12 months. And the other thing that we see on the order intake side is around a 5% growth. in total and in comparable units in US dollars down by about 5%. We do see some positive developments, some positive lights on the Nordic side, especially versus recent quarters. And East has also been quite positive within the quarter, but we still see some weak demand on the European side. Net sales up by about 1% to around 958. and in comparable units down by about 8%. We see a positive book to bill of 1.06 and continued good trends in new part numbers and new customers one. So overall, that puts the EBITDA to 100 million sec. We see that when we compare versus the prior year cost by lower revenue in gross margins, We also have gross margins at around 34.7% compared with 38.1% prior year. Part of that is pricing, but part of it is also higher freight costs as well. That puts our earnings per share at 0.28 SEC versus 0.48 prior year.

Thank you, Jim. Moving over to a little bit closer look at the segments. So the Nordic segment had a little bit of a weaker order intake in the quarter, also slightly down both versus Q4 and also down versus last year. We can see some mixture of activities here. I think we can see positive trends in countries like Denmark and Finland, for instance, where we see growth both sequentially and also versus last year. Norway, the market was quite a bit weaker. We had in the beginning of last year still quite strong EV business. I mean, we have talked about the EV business being an important part of the Nordic business. that has been quite slow during 24 i mean we are we're happy to see that our customers in this field are ramping up and are delivering our product during this year but they still have had some work to get through their inventory so we're expecting this to start recovering here later in the year for us as well Net sales was up a little bit versus last year, so up 4%. But what we've seen on the margin side, we have quite significant effects. I think for the group, it's around, I think, 1% year-on-year on the gross margin impact. But for the Nordic segment, it's significantly more. We see that some other segments, maybe it's been slightly positive. And this is purely related to revaluation effects of the existing AR and AP that we have. So nothing that has a long-term impact. And I think with the big swings we've had in the currencies during quarter one, this has created extreme effects in the specific quarter. And that also then has trackled down to the EBITDA level. So EBITDA is down to 24 million SEC versus 41 last year. And the margin is down to around 11% versus 19 of last year. Looking at Europe, we are positive to see that the order intake is continuing up. We are now up from in last quarter, we were around 430 million. So a big step up on the order intake sequentially and also close to where we were last year. Although if you take out the acquired companies, we are still some 30% behind what was still a strong start of last year in the European markets. But it's positive to see that say that the trend sequentially is positive. And we can also see that year on year we also see positive development in a number of markets in Europe like Spain and Benelux. So I think the trend and the momentum is moving in the right direction or have been in the last in the first quarter. Net sales down 1% versus last year. But a big jump up, of course, versus Q4 where we had net sales of 365 million SEK. And this is a large part of that was seasonality, which made Q4 extremely low. and now we gained some of that back in Q1. Organically, revenue is still down and connected to the low-order intake that we saw in last year. So EBITDA decreasing versus last year to 55 million SEK, but with a margin of 11.2 versus 15.2, but a big step up from the Q4, where it was just a small positive number. Going to the US, order intake very strong, so good positive development here. We had a slightly weaker order intake during Q4 after, I say, overall a good year in terms of order intake development. Q4 was a bit weaker. And this is also reflecting into our net sales numbers, which are a bit lower. And also here, one needs to factor in when one compares the 188 with 191 of last year, that we had overall in the quarter a higher US dollar, which actually means that in US dollar terms, the revenue was actually slightly lower than last year and that means that also has had an impact on the margin in the business in addition to some product mix where we have seen some more of our certain product or technologies that we supply which has been higher in the share of the overall business. The tariffs are being transferred to customers, effects in Q1 are still very very small as the So the new tariffs start to come into effect from February and then March. And this is based on orders hitting the ground in the US. So we'll really start to see the impact on top line in Q2 from the tariffs. So EBITDA is down to 18.2 million SEC from last year's 24 and predominantly driven by lower gross margin but also in relation to sales higher SG&A due to the fact that say in US dollar terms our sales were lower. And then moving over to East, where we can see also here strong order intake. And here we also have good order intake in Q4, which is also helping the net sales development. So the market in China, you can see, has been slowly improving. We have still seen a good influx of new customers in high technology applications. We can also see that, say, lead times for high-tech material is starting to grow. And this might then spread to other markets going forward. and might also be a sign then that prices might start to move up. Overall in the business, healthy margins, EBITDA increased to 8.2 million SEC versus six, and the EBITDA margin at 16% versus 15 last year. And we continue to run the business here with good gross margins connected to the high tech services that we are providing in conjunction with these sales. Okay, over to you. Thanks, Peter.

Return on equity in 2025 down a bit versus 2024 when we were at higher volumes. Net debt to EBITDA still at a very healthy level of 1.6 versus prior year at 0.7. And as you remember, our targets are around 2.0. Equity to asset ratio fairly stable year on year at around 41.9 versus 43.7 last year. Networking capital up a little bit. Remember, we do acquire companies here, and when we acquire companies, we also acquire networking capital. So you have networking capital percentage last 12 months at around 9% versus 8%. Still quite a bit of available liquidity at 1.355 billion versus 1.1 last year. As you heard from Peter, the board has proposed a zero dividend. Also, together with the available liquidity that we have there, leads for some good possibilities in the next few quarters.

So we continue with our M&A process. We continue to have a very good healthy pipeline and progressing with our discussions. We were glad to conclude the negotiations here with BNB here in the last couple of days. And then this, of course, is it remains a strong focus for the company. And with BNB, like the service, it's matching also part of our strategy where on the one hand, I mean, we remain fully focused on PCBs, which is a good, healthy market for us to stay in where we can see good growth opportunities. We are investing in our capabilities to grow our market shares the markets where we're present but we're also looking to expand our geographical position and our footprint and coverage and support our customers locally and the acquisition of bnb light button service gives us a very good strengthening our position in the northeastern part of germany and serving the customers in this region in addition to getting a lot of good employees to join us And then finally, also from a market consolidation perspective, we do anticipate a lot of good opportunities, especially in the current uncertain climate, to further activate our M&A activities. And having the financial flexibility is a good means to be able to support that part of our strategy. And with that, I think we conclude our presentation and open up for questions.

If you wish to ask a question, please dial star 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial star 6 on your telephone keypad. The next question comes from Johnny Jin from SEB. Please go ahead.

Yes, thank you. And good morning, Peter and Timothy, for taking my question. I just want to start a little bit here on North America. It looks like the order intake is rather strong there. Is this also an effect from you seeing pre-buying, some pre-buying effects in North America? Could you share some comments around that? And also are you seeing some changes in customers' behavior? If you could elaborate a little bit on that. Thank you.

Thank you for your question, Johnny. You know, to be honest, I mean, we have seen, as you said, strong order intake in Q1 and we had strong order intake during last year, bar the fourth quarter as well. And to be honest, we don't really see a change. I mean, what we mean, we are early days in the second quarter, so we can't really say draw long term predictions, but we have not seen any direct impact on our order intake pattern from the US after the latest rises in tariffs. Where there are opportunities, of course, is, and this was something that started already during the second half of last year, an increasing interest from our US customers to sort of explore our factories, factory opportunities outside China. I mean, last year of what we supplied to US customers, In total, I think some 47% of what we sourced came from China for the US customer base. I think we can see that that share has dropped a little bit. We see more quotes being asked from and more orders being placed to some of our non-Chinese factories in quarter one. But I think that is a change. We have not seen a change in the demand as such.

Okay, so no real pre-buying effect? No. Yeah okay and then on the theme of Paris I guess you will increase your prices here in the US particularly and push that on but do you think this will lead to higher organic growth or do you think that the demand will shrink as well going forward just trying to understand the net effect for you here a little bit better

I think for us, I mean, what we will see for sure is, of course, we will see a top line growth in the U.S. from the tariffs if they remain in the current levels where they are like 140 percent or depending on which technology. So, of course, that will have an impact. I think the way the uncertainty is, is to what extent will these tariffs and other trade war activities have a negative impact on the general sentiment in the industry? And that would not apply specifically to the US only, but I guess globally. And I think that is, I guess, where we see a potential uncertainty, even if we maybe don't see it yet in our own order intake, neither in Q1 or the first few weeks of Q2. It is an uncertain global market right now. And I think that is the uncertainty that we want to sort of give us freedom to manage in a good way.

Yeah. Okay. And then just shifting focus a bit here to the gross margin. How should we think about that going forward? It seems like it took a step down here a bit, both year over year and sequential in the quarter. And I think this is the third quarter in a row with a sequentially lower gross margin. So, I mean, is it fair to assume that this will continue ahead, especially given the tariff situation? Now, I know it's uncertain, but you talked about that could be diluted. So could that potentially accelerate the decline ahead? Or what normal level can we expect going forward?

If we look upon things excluding the tariffs to start with, then we don't, I mean, as we've said before, I think we expect us to be somewhere in that range 35-36% as a stable level to continue to keep. In this quarter, we had quite a significant FX impact that maybe sort of had an add-on negative effect. So, I mean, if you compare year on year, as we've discussed previously, we had end of 23 and beginning of 24, we still had an impact when the market price were declining quite substantially during 23. And there were some elements where we were negotiating with the factories and maybe getting some savings in our books before we were transferring over to customers. And that gave us an extra boost in the gross margin at the end of 23 and the first half of 24. that level that we have been in the say second half of 24 around 35 36 i think is something we should expect to continue so we in q1 right now we had a couple of negative on add-ons from the fx notably that sort of push us down but we don't expect that trend to continue

All right. And then just one final one from my side, shifting to the European markets here. Could you maybe elaborate a little bit more what you're seeing there, if you're seeing a recovery in other important markets in Europe? I mean, book-to-bill looks to be around one in Europe this quarter, so is it fair to assume that performance ahead will be rather slapdash and stable demand sequentially going into Q2?

I would actually say I mean if you I think when one looks at the book to bill it's a little bit dangerous because you have that year-end effect it was quite substantial also in Europe so I mean part of the revenue that you saw now in Q4 and Q1 Q4 was extremely low in Europe at only like 365 million and now it's around 450 maybe you had 30 40 million which was kind of a carryover between the two years So in reality, we have a positive book to build in Europe now in Q1, if you were to look upon how things are running operationally. So at the same time, I mean, the economy is still in some parts of Europe strained. But I mean, I think we were starting maybe to see some positive signs of recovery. What may happen now with the ongoing sort of global tariff discussions, will that have an impact? That is, I guess, where there is an uncertainty, even if we don't see concrete signs in our numbers yet.

All right. I understand. Thank you for taking my questions. That was all for me. Thank you.

The next question comes from Jacob Edler from Danske Bank. Please go ahead.

Hi, and thanks for taking my questions. My first question is just coming back to, I guess, the dividend cut here, and maybe if you can shed some more light on why the decision was taken right now. I mean, in my book, you know, net EBITDA is at around, you know, 1.5 times. You're talking about, you know, at least tariffs not showing that much impact, you know, right now. I'm just excited to hear a bit more on, you know, For example, how is the M&A momentum and how much is actually coming down to the big uncertainties here regarding tariffs? This adds more color on the dividend cup.

I think it's a combination of different things. I think we can make a little bit of a comparison to our situation that we were in in the spring of 2020 as a company. At that time, we were just sort of concluding two acquisitions in the spring of 2020, just as the pandemic broke out. And at that time there was also this concern What will happen with the pandemic? Will that drive the market in a direction that could strain on our financial situation? And then at that time, we made an extra share issue to shore up the financing. In the end, we did not need that money and we actually made an extra dividend the following year to give that back to the shareholders. And I think we are now in a situation where we are happy that we've been able to conclude this acquisition here now. We we have an active ongoing discussion with a number of potential acquisition targets and given again the uncertainty will there be a Potential impact on the global economic development that could potentially have an impact on our numbers as well We wanted to keep our powder dry to be able to sort of continue with our strategy and give us that financial flexibility Yeah, okay clear but just to get just to get it clear I mean you haven't seen any

know signs of customers you know pausing here at the start of q2 i mean no major delta in activity on the customer side uh in q2 versus q1 uh thus far no we we don't see anything specifically in our numbers just yet so okay perfect just getting back a bit on the on the gross margin i mean it's down a bit um year over year more than three percentage points right and Obviously, you had those favorable pricing effects last year that obviously are gone now. But I'm just wondering, of that year-over-year development, how much would you say is related to product mix, which is temporary, and FX, which also is temporary, and how much is price? Can you maybe add some more flavor there, if possible?

The majority is price. We have some FX and some product mix, but you could probably chalk up the majority on the price and such. the fx is really only yeah i know i know and how is the product mix is that temporary as well or no i wouldn't i wouldn't say that's temporary it can fluctuate up and down depending upon what type of products the the customers order i think we've seen some flexibility differences both north america and europe and nordics had a little bit of that mix shift between customers and

And that in combination with the FX on top. And that's also where you see probably the decline from say Q3, Q4 versus now Q1. That is largely the FX and the mix shifts here. But those are not sort of long standing either.

Okay. Perfect. Then just the last question. On price, it seemed in the report that if I understood it correctly, that I mean, the price level kind of stabilized a bit, at least sequentially in order intake. Is that a correct conclusion? And would you say price was relatively flat this year over year in order intake? Or how did it look?

Yeah, I think order intake wise is pretty flat, I think, on the order intake side. I think, I mean, of course, maybe you could say, I mean, yes, we had in Q1 on the revenue side. Then you had the margin impact. But on the order intake side, not big impact on the pricing side. So I think that is sort of reasonably stated. I think what we've been seeing has been sort of the question, say, the market, the factory loading has been improving during the latter part of 24 and beginning of 21. And that would, of course, indicate at some point that we would see both lead times like we're seeing for some high-tech materials already now, but also that we could anticipate that some of the price styles that we saw during, say, 23 would start to climb back up. Now, I guess there's a little bit of uncertainty again from the global economic development, and maybe that will again sort of push back a little bit, I think, right now on any potential price increases.

Yeah, perfect. Thank you. Those were my questions. Thank you.

The next question comes from Marcus Develius from DNB. Please go ahead.

Yes, thank you. Hello, Peter, Timothy, and Gunilla. My first question is a bit broader, but the tariffs, it's not the first time you experience it. What lessons do you take with you this round to handle the situation as smooth as possible compared to, let's say, 2019?

I have to say, I think we have a pretty good process in place for this. I mean, we've handled it, as you said, for a number of years now. I think in the first time it happened, Then you had a little bit of this wait and see when the tariffs came into play that orders paused for a while, people were uncertain are the tariffs really going to come into effect or not. I think we've seen less of that this time. So I think we're quite well prepared to manage tariffs and our customers are accustomed to paying tariffs on our products historically. I think what creates an extra workload for our team right now is, of course, to handle all these different tariff levels. and the changes to understand what is being shipped from inventory that has a certain tariff level, what is right now landing in the docks and is going to pay another tariff level, and to manage that process. So it increases a little bit of our manual workload to ensure that we are handling this work correctly for our customers. But otherwise, I think we're quite well set up to handle this process and our customers, as I said, are well aware of the situation and are able to handle it.

Okay. And let's say your US customers want to increase their sourcing from outside of China. Are you seeing any ramp up investments of factories outside of China, like after the tariffs was announced? What are the discussions there?

I think this has been going on actually for quite some time. So I don't think it has changed specifically in the last few weeks or months. But it's something that was already being sort of going on during the second half or during 2024. So there is a number of new factories being established in Southeast Asia predominantly. We've been working actively with this for a couple of years. So we've had historically factories outside China and we have grown that portfolio of factories supporting our customers. so we are quite actually in a very good position to help customers make that transition and i think it's also a very good opportunity for us to win more business because i mean part of our customers or potential customers have also had an organization where they maybe were sourcing directly they had long-standing relationships with a few factories which has served them over over a period of time now quite a few of them are looking at a situation where they want to move out from those chinese factories And to then identify new factors in a different region is quite a big task if you don't have the setup for it. So I think this is an opportunity for us to build up relationships with customers who previously were buying themselves directly.

Okay, thank you. Those were my questions. Thank you.

The next question comes from Gustav Bernablad from Nordia. Please go ahead.

Yes good morning it's Gustav here from Nordea. Just to start off on the margin side as well here I mean you have a quite good table here in the annual report of the sort of FX impact on earnings but and you're quite strong tailwind here in recent years but just based on the levels where we are today in terms of FX how should one think about the EBITDA margin development sort of once demand takes off I mean You comment on a gross margin likely to continue to hover around 35-36% longer term, but on EBITDA level, is it possible that you still would reach north of 14% or should we assume sort of the implicit margin of your financial target here of sort of 12.5%, is that more closer?

I think we don't give forward guidance, first of all, but what I can say is when you look at the FX impacts, what we saw at least in this quarter primarily was the sort of APAR revaluation of things that have largely already happened. So invoices that already went out and now we revalue them. at a weaker US dollar. A lot of our purchasing and sales is done in US dollars. So you don't tend to see these fluctuations over the medium long term, but you will see fluctuations both up and down, which you see in our numbers on the short term, so sort of quarter to quarter. So we don't expect to see any type of medium long-term impacts from FX just because of that sort of natural hedging that we have in the business.

Okay, got it. And then on the margin in North America here, I mean, you comment on the product mix, but would you say that the complete sort of 330 basis point year-over-year margin delta is related to this? And also, what specifically is driving the mix here?

No, I think there's a couple of effects here. Part of it, yes, is the fact that there are some high-growth, low-margin products that we do sell in the U.S., still good profitability, but lower-growth margin than the rest. And then part of it is the fact that we believe in the sort of longer term growth story in the US. So we also do ramp up the organization to take advantage of that. Which you heard a little bit from Peter in terms of the sourcing possibilities that we offer new customers.

And on the mix side, I mean, we have our acquisition in phase three a few years back. They have part of their product portfolio. They have slightly lower margins overall. And when they have had a good sort of delivery or a high share of the deliveries during the quarter, that can have a slightly adverse impact as well. So I think this is what we've seen in this specific quarter. And then on generally lower sales than what we've seen in the previous quarters. So I think that's behind the drop.

Okay perfect and then just on the IT rollout here I mean can we talk a little bit about Q2 and Q3 I think you've commented previously that it will increase in terms of expenses but also you will target North America can you specify a little bit more of the IT rollout going forward here which regions will be affected?

Yeah, sure. So you heard from us back in quarter four that we had one of our larger go-lives with Germany. That one just went live. We also did our group function headquarters in quarter one. And at the tail end of quarter one and into the first weeks of quarter two, we did one of our other larger units, Benelux. In quarter two, towards the end of it, potentially early quarter three, that's when you'll see one of our largest entities, our US entity go live. We have been saying that the cost for this rollout has been around 10 million sec per quarter. And again, without giving forward guidance, we don't expect to see that change much. Again, the U.S. entity is one of our largest, most complex ones. So if there is one that requires a lot of extra effort and travel, it's that one. But you could say basically after the U.S., we still have entities left to go live, but they're all smaller.

and typically you you get it even if it's like 10 10 million sec a quarter on average we have a little bit of a shift we say typically q2 and q4 just like last year will be more intense like we'll have the tail end of the benelux go live here in quarter two and we'll have us and then during quarter three you have more preparations for the latter part of the uh the year go lives which will predominantly be in the end of q3 maybe starting with q4 so so you will have again most likely is like a lower cost level in Q3 and the higher again in Q4.

Perfect that's very clear and then just on defense here I mean we saw in the annual report six percent of group sales would you say that it's significantly higher here in Q1 and then also I would just regarding the order intake here a bit stronger, but should we think about that translating into sales in Q2?

I think overall the order intake in Q1 should indicate, I mean, that we have a healthy order book going into Q2. I mean, traditionally we have been on average roughly a quarter behind in revenue side. That can vary a little bit, so it's not a perfect size, but I mean, the order intake development from Q4 and Q1 is a positive sign for the future revenue development. On the defense side, I would say we did not actually have so much more defense orders in Q1. So that was actually a little bit lower, which maybe also partly impacted the order intake in Nordics, which was a little bit behind. We have a number of projects going on. So we expect that to continue on a high level and to be a growing business in 2025, even if maybe Q1 was not really heavily influenced by defense orders.

Okay perfect sorry just one last quick one here I mean in terms of the high freight rates you also comment about is it possible to say anything about the impact here on top planning gross margin?

You could say minimal impact on top line and slight impact on the gross margin without going to exact details. It's a slight impact year over year. We saw freight rates really start to go up in quarter four. We tend to see them in a little bit of a delay versus the actual market itself. And then we started to see them come down a little bit towards the end of quarter one.

i think that is where maybe you have seen a little bit of a short-term impact on the on the gross margin side when they have been sort of climbing upwards during the second half of last year and into this quarter also that whilst pricing is being adapted for new freight costs the true up freight costs actually come in slightly higher since they've been climbing up during this period of time and i think that has also maybe had as you said a small impact on the gross margin as well in the first quarter

Perfect. Thank you very much. That was all for me. Thank you.

More phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Thank you. And we have a couple of written questions. And the first one comes from Carl. How active is the current M&A pipeline? Do you expect to sign more add-ons during the year?

I mean, M&A is a very core part of our strategy. I mean, we're basically looking to grow over time equal amounts per acquisition as from organic growth. So, yes, we have a very active pipeline. I think there is a good opportunity to make deals in the current climate also. We've historically had the ambition to sign somewhere between two and five company acquisitions per year. It's always a little bit hard to predict because you're at least two parties that need to come to an agreement. And since we are talking in most cases to family-owned companies, it's very much a personal matter for the sellers. And these discussions can take different length in time, which makes it somewhat hard to predict. But we expect to make two to five acquisitions also in the current climate.

So the next question comes from Mr. Case and he asks for USA customers. I understand that only 50% of these PCBs are coming from China. Yet how can a customer accept to take such a steep impact of tariffs?

I mean, I think on the one hand, there's not much one can do. The tariffs are there and we can of course not absorb them. But I think one also needs to remember that in our applications, the the cost of the PCB roughly represents 1 or 2% of the total bill of material. So we are overall a low cost item in the general bill of material. And of course, as these grow, there will be an increased incentive to look for other markets. Right now, the Chinese tariffs are on extreme levels. I mean, historically, we have lived now for a long period of time with tariffs in the order of 25%. And then China has still been very competitive to most other markets. So with With tariffs where they currently are, the incentive is clear to move to other factories like Vietnam, Thailand that you mentioned. And we are happy to help our customers do that. Then we'll have to see, of course, if the Chinese tariffs remain at that level.

Okay, great. Next question came from Thomas Blikstad at Perieto. And he asks about the Nordics that we saw growth. due to orders received in the latter part of 24, a significant portion were defence orders, he says. Can we expect similar growth development in the Nordics going forward from stable deliveries of these orders? Or is it more likely with fluctuations quarterly?

I think, I mean, in our business, there is still a level of fluctuations, but I think, as you mentioned, we have a number of defense orders that we booked with longer lead times during last year, which will be sort of delivered during a large part of 25 and also into 26. They will, of course, provide a foundation to revenue, but we can expect to see some fluctuation on top as well. But we will have, of course, those orders that we booked during the last part of last year will continue to prop up the revenue streamline in Nordics.

And he also had a bigger picture question. With the current tariff potential, many manufacturers will struggle with supply chains sourcing PCBs. Do you believe PCB manufacturing will grow in Europe or US as a result?

I think right now the biggest challenge is the uncertainty. It's very hard. I mean, making a PCB manufacturing, investing in a manufacturing plant for PCBs is a very high cost investment. And that is very hard to make, given the uncertainty what the tariffs are. Today, we don't see any signs of investments being done to build manufacturing, neither in Europe nor in North America.

Okay, the last question here is from Philbert, and he's asking regarding US, what proportion of order could you ship from outside China for the US market?

I mean, this is a little bit sort of, I mean, theoretically, we could ship 100% from outside China, I mean, given our factory base to our US customers, then, of course, still chinese suppliers are very good at what they do they've been highly specialized and invested in this for a long period of time so there are some technologies and some partners that even with a higher tariff cost they would not want to change because it is a critical component but i think we we have the factory portfolio there to support customers to have a significantly higher degree of sourcing outside china than what they even currently have i mean our group sourcing from china At the time of our IPO in 2018, we were at 95% sourcing in China. I think end of 24, for the year 24, we were at 72 or 73%. So it has shrunk as a whole. And you, as we said, is just below 50% last year. But we can expect with the current climate that that share of sourcing in mainland China will continue to decline.

okay thank you so so that was the last question written questions so i'll just remind you that our annual general meeting will be the 8th of may and you're very welcome to attend so thank you everyone for today thank you very much thank you