HMS Networks Q2 2020 presentationJuly 15th 2020

Staffan Dahlström, CEO, Joakim Nideborn, CFO

Agenda

Summary

Business update

Financial results

Q&A

Financial summary of Q2 2020 and first six months

• Net sales 355 MSEK (416), -15%

• Order intake 302 MSEK (375), -19%

• EBIT 69 MSEK (72)

• EBIT margin 19% (17)

• Cash flow from ops. of 115 MSEK (51)

• EPS 1.24 (1.10)

Q2

• Net sales 716 MSEK (796), -10%

• Order intake 703 MSEK (762), -8%

• EBIT 136 MSEK (132)

• EBIT margin 19% (17)

• Cash flow from ops. of 170 MSEK (103)

• EPS 2.26 (1.98)

First six months

We are Connecting Devices™

HMS is working with ”Users” and ”Makers”HMS have thousands of industrial customers

Makers of Industrial Equipment These companies make:- Intelligent Industrial Machines

• Packaging machine, CT-scanner, Windmill, Elevator, genset, AGV, heavy duty vehicle etc. “Machine Categories”

- Intelligent Industrial Devices• Drives, PLC, HMI, Robot controller, actuator,

nutrunner, circuit breaker etc. “Device Categories”

- HMS typically address these customers directly with HMS sales force.

Users of Industrial Automation SystemsThese companies work in end-user industries:

- Examples of Users

- HMS typically reaches these customers indirectly via intermediaries (Systems Integrators, Distributors and Solution Partners).

Understanding of HMS sales Q2 2020

Agenda

Summary

Business update

Financial results

Q&A

• The challenging macro situation impacting all main markets

• Our three main markets in Europe – Germany, France and Italy continues to suffer from lower demand as a result of Corona slow down

• USA held up well in Q1 but is now also impacted by the market decline

• Japan and China are holding up well and showing growing order intake

• The decline impacts all our four brands – all suffering from double digit decline in order intake

• High focus on setting up digital events with customers

• HMS had 128 digital events between February to June with 5 498 registered attendees 5 425 hours of engagement

Business update second quarter 2020

Corona update

• All HMS team members are OK and healthy

• Short-time work in Germany and Sweden (about 20%)

• All supply facilities are working without any major disruption

Q2

• Expected continued soft market in all major markets

• Short-time work continues in Germany, until further notice

• Close monitoring of the situation and potential implementation of short-time work at higher level as well as in other areas

• Most fairs cancelled for the rest of 2020

Q3 expectations

• Once the Corona situation is behind us we expect good market conditions for Automation & Digitalization, and we should then have intact teams to execute our business – until then we keep a close eye on our cost and cash flow

Strategy

Agenda

Summary

Business update

Financial results

Q&A

Order intake 302 MSEK

• Order intake in Q2 302 MSEK (375), corresponding to a decrease of 19%

• Organic a decrease of 17%

• Q1 stocking orders of 30-40 MSEK

• Continued decline in Germany, Italy and France

• USA now also heavily impacted, -20%

• Japan and China growing more than 20%

15% 8% 17% 3% 34% 3%

289 288

350

387 375 372

337

302

01002003004005006007008009001 0001 1001 2001 3001 4001 5001 600

0

50

100

150

200

250

300

350

400

450

Q119Q317 Q417 Q318

401

Q118 Q218 Q418 Q219 Q319 Q419 Q120

336360

387

Q220

-19%

24% 11% 11%

Order intake R12 Order intake

ORDER INTAKE, MSEK Comments on Q2 order intake

Comments on first six months order intake

• Order intake first six months 703 MSEK (762), corresponding to a decrease of 8%

• Organic a decrease of 10%

• Germany and Italy are down more than 20%

• Japan and China growing more than 20%Growth -13% 4% -19%

Net sales 355 MSEK

Growth

• Net Sales of 355 MSEK (416), corresponding to a decrease of 15%

• Organic a decrease of 14%

• EMEA: -23%

• Americas: +4%

• Asia: -8% (record quarter in Q2 2019)

20% 14% 15% 10% 20% 7%

301320 329

377

346361 355

01002003004005006007008009001 0001 1001 2001 3001 4001 5001 600

0

50

100

150

200

250

300

350

400

450

Q118 Q220

416

Q318Q317 Q119Q417

353

Q418Q218 Q219 Q319 Q419 Q120

305

363380

-15%

16% 19% 26%

Net SalesNet Sales R12

NET SALES, MSEK Comments on Q2 Net Sales

Comments on first six months Net Sales

• Net Sales of 716 MSEK (796), corresponding to a decrease of 10%

• Organic a decrease of 11%

• EMEA: -17%

• Americas: +3%

• Asia: -1%-5%-5% -15%

Sales per region Q2 2020Sales per region Q2 2020, MSEK

Americas• Net Sales 84 MSEK (81)• 24% of Group sales (19%)• USA represents 82%

Asia• Net Sales 73 MSEK (79)• 20% of Group sales (19%)• Japan represents 49%

EMEA• Net Sales 198 MSEK (256)• 56% of Group sales (62%)• Germany represents 42%

56%24%20%

EBIT 69 MSEK (19% margin)

EBIT, %

• EBIT 69 MSEK (72), EBIT margin of 19.4% (17.3)

• Q2 gross margin of 62.0% (61.2), positive effects from a favorable product mix, pricing and efficiency improvements

• OPEX decrease of 21 MSEK corresponding to an organic decrease of 25 MSEK (-14%)

• Short-time work OPEX reduction by 8 MSEK

21% 10% 20% 19% 14% 15%

65

31

63 63

74

52

60

72

56 55

67 69

0

50

100

150

200

250

300

0

10

20

30

40

50

60

70

80

Q318 Q119Q317 Q417 Q118 Q218 Q418 Q219 Q319 Q419 Q120 Q220

-5%

21% 16% 17%

EBITEBIT R12

EBIT, MSEK Comments on Q2 results

Comments on first six months results

• EBIT of 136 MSEK (132), corresponding to 18.9% (16.6) margin

• Gross margin 62.2% (60.3)

• OPEX decrease of 27 MSEK, corresponding to an organic decrease of 39 MSEK, mainly related to corona effects and restructuring program implemented in Q3 2019

• Restructuring program effects as planned, 45 MSEK OPEX reduction annually

19%16% 19%

EPS 1.24 SEK

• EPS of 1.24 SEK (1.10)

• Net financials of 0 MSEK (-2)

0.7

0.6

0.4

0.00.0

0.1

2.0

0.2

0.31.0

0.5

1.3

0.8

0.9

1.5

1.0

2.5

1.1

1.2

5.0

0.5

3.0

3.5

4.0

4.5

Q319 Q419

1.24

Q418Q317 Q417

1.10

Q318Q118 Q218 Q119 Q219 Q120 Q220

0.880.90

1.09

0.90

0.43

0.80

0.900.98

0.68

1.01

+13%

EPS R12 EPS

EPS, SEK Comments on Q2 EPS

Comments on first six months EPS

• EPS of 2.26 (1.98)

• Net financials of -5 MSEK (-7)

*Adjusted EPS

*

Cash flow from operations of 115 MSEK in Q2

• Cash flow from operating activities of 115 MSEK (51)

• Changes in NWC of 18 MSEK

• NWC in % of sales 11.0%

62

36

20

51

73

49 52 51

90

6155

115

0

50

100

150

200

250

300

350

0

10

20

30

40

50

60

70

80

90

100

110

120

Q118 Q318Q417Q317 Q418Q218 Q119 Q219 Q319 Q419 Q120 Q220

+123%

Cash flow R12 Cash flow

CASH FLOW, MSEK Comments on Q2 Cash Flow

Comments on first six months Cash Flow

• Cash flow from operating activities of 170 MSEK (103)

• Changes in NWC of -11 MSEK

Net debt 263 MSEK

• Net debt / EBITDA of 0.73 (1.61)

• Net debt / Equity: 0.24 (0.58)

• Reduced leverage as result of no dividend

Net debt and leverage, MSEK Comments on Net debt and leverage

335365

311

428365

309 299

178

98

96

98

93 91

85

0

50

100

150

200

250

300

350

400

450

500

550

0.10.0

0.7

0.4

0.20.3

0.60.5

0.8

1.8

0.91.01.11.21.31.41.51.61.7

Q120Q218 Q418 Q119 Q319

402

Q219Q318Q118

381

342

409

Q419

524

463

Q220

263

390

-50%

Net debt/EBITDA Net debt IFRS 16 Net debt

Q&A