President and CEO, HMS Networks
Svag konjunktur broms för HMS Networks
Den organiska omsättningen minskar kraftigt med 30 procent för HMS Networks, som utvecklar system för att integrera hårdvara med mjukvara. Förutom dämpad aptit i Europa så har Nordamerika varit en oväntat svag marknad under kvartalet.
Bolagets vd Staffan Dahlström berättar om kvartalet och integrationen av jätteförvärvet Red Lion för EFN:s Gabriel Mellqvist.
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About Staffan Dahlström
Staffan Dahlström, President and CEO of HMS Networks, discussed the company's Q2 2026 results during an earnings call on July 14, 2026. He reported net sales of 991 million SEK, with an organic growth of 12% and total growth of 18% including M&A and currency effects. Dahlström noted that while net sales approached 1 billion SEK, the company expects to reach that level in coming quarters. He also mentioned an increase in R&D investments and organizational strengthening, and stated that the Q2 run rate for operating expenses is likely representative for the second half of the year. Additionally, he highlighted a positive EBITDA impact of 6 million SEK from the divestment of Peak France’s sales entity. Dahlström said that the company is seeing growth driven by data center expansion, as customers are involved in "power, cooling, automation, and all other things" related to these facilities. He also addressed supply chain challenges, stating that while some price increases and longer lead times for components like memories have been offset by inventories so far, the company expects a potential margin pressure in the second half of the year due to dependence on new deliveries and incoming price increases.
Transcript (17 segments)
I
Interviewer0:13
HMS Networks has reported an order intake that does increase, including the acquisition of Red Lion. But organically it decreases, not least net sales decrease by 30%. With us to discuss the figures and the economic situation we have Staffan Dahlström, the company's CEO. Staffan, good morning, welcome. We can start with your summary of the quarter?
S
Staffan Dahlström0:33
Certainly, as you say, we have weak organic sales, minus 30%. Weak demand, especially Germany has not gone as planned, rather slowed down. Asia, there we have roughly the same. In Japan, which we didn't flag earlier, high inventories. In China we see a turnaround upwards, but it's a small market, about 6% of our revenue. What has surprised us is that the tailwind we felt, that the US was on the way up, has stalled at the end of the third quarter. And we are a bit disappointed with the American market. So all in all, an incredibly weak demand across the board.
I
Interviewer1:14
Can you give me some more detail on the North America slowdown? Is there any particular segment that is especially affected?
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Staffan Dahlström1:23
We acquired Red Lion, largely for us in the US, which has been performing quite well. There we have seen a weak development during the third quarter. Looking at point of sales, how much our distributors sell, it looks quite okay. But there has been more of inventory at distributors and customers being flushed out. We feel, given the election, that there is a bit of a 'wait and see' mentality in North America. That it's easy to postpone things a couple of weeks to see how things develop. So we see a surprisingly weak development in North America.
I
Interviewer1:56
You also write in the CEO letter that you are putting a weak quarter behind you. Has it tapered off at the end of the quarter? Can you say something about the direction?
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Staffan Dahlström2:05
No, we have been waiting for it to start ticking up again, we have been saying for quite a while that in six months it will look better. Unfortunately, we say the same thing again: the first half of 2025 looks better. So we have pushed the six-month window ahead of us. It has been quite flat during the quarter, and we are waiting for it to tick up again. But it will take another quarter or so, we think.
I
Interviewer2:25
But that is a more tentative hope, not something you see solid signs of.
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Staffan Dahlström2:31
We believe, however, that something that has been difficult to understand has been inventory adjustments. That has largely faded out. We estimate about 100 million of things that we should have received in orders, but the customer has chosen to adjust down their inventories instead. Similar to what we do and many others do. That should fade out by the end of the year. We believe that order intake and invoicing will correlate better at the beginning of 2025.
I
Interviewer2:53
Can you talk a bit about the margin pressure that we see in the report? You have made some cost savings earlier.
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Staffan Dahlström2:58
Yes, the weakness is on demand. We have minus 30 on organic sales. Then we manage to maintain a stable gross margin: 63.5. So partly, when we bring in Red Lion, which has a slightly weaker gross margin, and that we have minus 30 on our base, it is actually good that we have been able to maintain that good gross margin. Then we have reduced our opex by 22%. I think that is also quite good and it's not easy to reduce opex. So we are not fully offsetting that minus 30. But all in all, we have an adjusted operating profit of 24.5%, largely in line with our targets. The further down we go in the income statement, the better it looks. But the weak demand has been difficult to fully mitigate.
I
Interviewer3:43
Can you tell us a bit about the integration of Red Lion? It must be a huge task.
S
Staffan Dahlström3:47
Yes, indeed. It is a fine company, well-established in North America, and there we have recently announced that we are doing a major reorganization. Now after six months with Red Lion, we have gotten to know their key people. We are reshuffling management and bringing them into our division, IDS, 'Industrial Data Solution', which becomes our largest division. That, together with some of our operations, forms the new division. And the integration consists of a joint sales organization in the US. We are also building their North American manufacturing unit. Their factory there now works together with our Swedish factory and some knowledge sharing in this area. So it is on sales and supplies that we have done the larger things so far. Then we need to work a bit more with technology and products. But that lies ahead of us, perhaps 2025, where we see some synergies in common technology and future development.
I
Interviewer4:37
And that means that the slightly lower margins in Red Lion that you mentioned, is that something you hope to get under control? Or will it remain lower in the long term?
S
Staffan Dahlström4:45
When we bought the company, we saw from the beginning a number of low-hanging fruits that we could increase the gross margin through simple measures. We are halfway through. So we have seen that they have gone from a gross margin that was maybe 52-53%, and we have been at 65. Now we are doing this, the combined is 63. And it is a big improvement of their margin we have made and also some own things here. So we are quite positive that we in the long run can maintain our good gross margins, including Red Lion.
I
Interviewer5:13
Since we have been doing some economic outlook: How cyclical is Red Lion? Is it as sensitive as the old business? Or is something different here?
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Staffan Dahlström5:23
The business we have in Europe, which is aimed at machine building, much of the Embedded part, is more linked to Automotive, which has some headwind. The North American business with Red Lion is a bit more heavy, American industry: oil, gas, energy, infrastructure. So we are a bit more sluggish, I think, in North America. The Embedded business we have, where we make wins and become integrated into various robot systems, and then there is a repurchase sequence every time a robot is sold. That is cyclical, linked to how many machines are sold. Red Lion works quite a lot with system integrators and end users, and there you have to work with sales all the time. But there is always a market to work on, so it is a bit easier, we think. So our original business is 'good in good times', but takes a lot of beating in bad times. So that is a bit what we have been looking for as well. We would like to complement our business with communication technology that has somewhat different customer groups and different cyclicality.
I
Interviewer6:26
That sounds wise. Let's hope that the soft economic times will soon pass. Many thanks, Staffan, for being with us and good luck going forward.