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Interim report 2022, January – September

HMS Networks AB
HMS Networks AB

Third quarter

  • Net sales for the third quarter reached SEK 624 m (472), corresponding to an increase of 32%. Currency translations had a positive effect of SEK 41 m on net sales

  • Order intake was SEK 675 m (669), corresponding to an increase of 1%

  • Operating profit reached SEK 179 m (101), equal to a 28.7% (21.5) operating margin

  • Profit after taxes totalled SEK 135 m (84) and earnings per share was SEK 2.90 (1.81)

  • Cash flow from operating activities amounted to SEK 118 m (148)

  • Acquisition has been made of all shares in the Australian company Global M2M Pty Ltd

First nine months

  • Net sales for the first nine months reached SEK 1,742 m (1,401), corresponding to a 24% increase. Currency translations had a positive effect of SEK 92 m on net sales

  • Order intake was SEK 2,346 m (1,839), corresponding to an increase of 28%

  • Operating profit reached SEK 461 m (336), equal to a 26.5% (24.0) operating margin. Adjusted operating profit reached SEK 434 m, equal to a 24.9% adjusted operating margin

  • Profit after taxes totalled SEK 356 m (276) and earnings per share was SEK 7.64 (5.75). Adjusted profit after taxes totalled SEK 330 m and adjusted earnings per share was SEK 7.07

  • Cash flow from operating activities amounted to SEK 254 m (405)

Comment from the CEO

Continued stable demand

We continue to see a stable demand for our solutions. Order intake amounted to SEK 675 million corresponding to a 1% growth. Adjusted for currency effects, this corresponds to -11% organic growth. Compared to previous quarters, we now see fewer orders for customers’ inventory build-up, partly due to a better supply situation but also due to larger safety stocks at our customers.

In total, we estimate the pre-purchase effect for the quarter to be approximately SEK 50 million. Just as in the second quarter of 2022, we see a significant currency revaluation of our backlog, as the Swedish krona has further weakened. This resulted in a SEK 50 million positive effect on our order intake in the quarter. All in all, we see a stable underlying development, in line with recent quarters, as the previous advance order effect is now beginning to wear off as expected. The Americas stand out positively in the quarter, where we still see organic growth and advance orders in line with previous levels.

The turnover for the quarter reached a new record level – SEK 624 million, a growth of 32%. The increase is due to three factors: the continually improved availability of electronic components, stable demand, and a favourable currency situation. Organic sales growth in the quarter amounted to 23%.

Record results, price increases and fewer spot purchases of components
As expected, we are starting to see the effects of our price increases and with a reduction in additional costs for component purchases, we see an improved gross margin amounting to almost 64%. We are now back at a gross margin in line with the levels we saw at the beginning of last year.

Despite increased costs for expansion, a return to physical meetings and travel, as well as continued investments in product development, our strong turnover together with stable gross margins, results in a record result of SEK 179 million – an increase of 77% compared to the corresponding quarter last year. The operating margin of 29% is strong and considerably above our long-term target.

Acquisition of Australian distributor Global M2M
As we communicated in the interim report for the second quarter, we acquired our distributor in Australia, Global M2M, on July 1st. The company consists of four employees and already work with most of the HMS brands. Australia is now HMS’s 17th country with its own sales organization.

Pre-release of HMS’s 5G router
During the quarter, we completed a successful pre-release of a new 5G router with built-in support for industrial protocols. The product has attracted great interest at the trade shows where we have presented the solution. The 5G router is aimed at manufacturers of industrial equipment to offer a reliable and robust connection in an industrial environment. 5G is a technology with great potential for industrial applications. However, we estimate that it will take a few more years before 5G has a wider commercial impact in industrial applications.

Still positive outlook despite a challenging macro situation
In the short term, the future for HMS is assessed to be stable. We have a large order backlog and we do not yet see any slowdown, although many customers are concerned about how the industry will be affected by weaker consumer purchasing power, increasing energy costs and the uncertain geopolitical situation. At the same time, our customers continue to invest in digitalization, productivity improvements and sustainability. We estimate that our order intake will be somewhat weaker in the coming quarters as we already have a large order backlog where customers have placed orders earlier to build their own stock due to the long delivery times.

In the long term, we continue to believe that the market for Industrial ICT (Information & Communication Technology) will be an interesting area, both in terms of organic growth and acquisitions.

Halmstad October 19, 2022

Staffan Dahlström

Chief Executive Officer

Further information can be obtained from:
Staffan Dahlström, CEO, +46 (0) 35 17 2901
Joakim Nideborn, CFO, +46 (0) 35 710 6983

This information is such that HMS Networks AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 07.30 CET on October 19, 2022.

HMS Networks AB (publ) is a market-leading provider of solutions in industrial information and communication technology (Industrial ICT). HMS develops and manufactures products under the Anybus®, Ixxat®, Ewon® and Intesis® brands. Development takes place at the headquarter in Halmstad and also in Ravensburg, Nivelles, Igualada, Wetzlar, Buchen, Delft and Bilbao. Local sales and support are handled by branch offices in Germany, USA, Japan, China, Singapore, Italy, France, Spain, the Netherlands, India, UK, Sweden, South Korea, Australia and UAE, as well as through a worldwide network of distributors and partners. HMS employs over 750 people and reported sales of SEK 1,972 million in 2021. HMS is listed on the NASDAQ OMX in Stockholm, category Large Cap, Telecommunications.