Hexatronic Group AB

STO:HTRO

Earnings Call Transcript 2024-Q3

[Henrik Larsson-Lyon, executive]

Thank you very much. This is Henrik Larsson-Lyon, CEO, Hexatronic Group. And you will be listening to myself; our CFO, Pernilla Linden; and Martin Aberg, our Deputy CEO.

So let's start. This is the agenda for today. So, we will have quickly Hexatronic at a glance. We will look into the Q3 highlights, a financial overview, a business overview, and then a summary and market outlook. And then after that, we have a Q&A session.

So first, Hexatronic at a glance. If we look at the markets we operate in, they are in fiber optic infrastructure. And what we see as the big market drivers, there is a low number of homes still connected with fiber optic networks and that's primarily in our big strategic growth markets. We also see that 5G deployment drives the need for fiber optic networks and to that, increasing use of data-intensive technologies creates a growing need for fiber connectivity among enterprises and data centers. And we also see a shift from copper to fiber in Harsh Environment applications. And that could be like for us in oil and gas, in sensing and defense application and very much subsea applications. And to that, we see in many countries, most western countries, I would say, there are significant government initiatives to support the fiber expansion, for instance, in the U.S., U.K. and Germany. And then it's very much in rural areas. So, there you have the big market drivers.

Then looking into sustainability. It's clear that it's very much on the agenda more and more, and it's also high on our agenda. And we have focused our sustainability work in three areas. We call them planet, ethics and people. And we have highlighted three of our priority targets in our 2030 roadmap. And that's the climate-neutral operations, own operations, 100% equal pay and also 40% at least gender equality among all employees. But of course, there are a lot of different targets and the upcoming CSRD is really a big framework that is being implemented currently.

Then if we look into specifically fiber-to-the-home, which is a quite big part of our business, this hasn't changed from the last presentation. We get an updated slide early next year. So, these figures are from September 2023. But I would say they tend not to move dramatically in only one year. But we see that our strategic growth markets, Germany, U.K. and U.S., we have highlighted them here, still have a very low penetration when it comes to fiber connected to homes. And you see in the bottom some countries that have come much further like Sweden and Korea. So, still a lot to do.

And I mentioned before, there are significant government initiatives to support rural deployment where an operator has difficulties to get the business case together, the biggest one being the BEAD program in the U.S. being $42.5 billion. And we'll talk a little bit more about that later. There is one in the U.K., Project Gigabit, which is a GBP 5 billion project and in Germany, also a subsidy program of EUR 3 billion per year, all focused on rural deployment of fiber.

If we look in total of Hexatronic, we are -- and these are on rolling 12 months, we have revenues of SEK 7.6 billion and EBITA profit of SEK 0.8 billion. Over the last four, five years, we have had the GLA (sic) [ CAGR ] growth of 33% in average of sales and 43% yearly when it comes to EBITA. And the EBITA margin on rolling 12 months is 10.4%, and we are roughly 2,000 employees.

Looking at our different focus areas. So, Fiber Solution continued to remain as the biggest one, 74% of revenues in Q3. And that's where we have all the fiber-to-the-home. We have submarine cables. We have the duct business in the U.S. and so on. Quite a wide portfolio. Then if we look at the Harsh Environment, that's 14% of total revenues and for Data Center, 12% of revenues. And this is for Q3 this year.

Then if we move into Q3 and the highlights. So, we saw a sequentially improved profitability and a solid cash flow. Net sales grew 2% to SEK 1,951 million in Q3. And compared to last year, this is driven by higher sales in Fiber Solutions in North America and also our new focus areas, Harsh Environment and Data Center. We continue to see quite a weak demand for Fiber Solutions in Europe and also then a price pressure in most markets, I should say, in Fiber Solutions. Compared to the previous quarter, sales decreased 4% sequentially then. Harsh Environment and Data Center grew 47% and 8%, respectively, and that's compared to Q3 last year and this is primarily driven by acquisitions.

EBITA amounted to SEK 230 million, down from SEK 296 million last year. And the EBITA margin improved to 11.8% sequentially, where we had 11% in Q2. Compared to Q3 last year, where we had an EBITA level of 15.4%, it's mainly higher freights and cost and depreciation that explains the difference. Cash flow from operating activities of SEK 144 million, and that corresponds to a cash conversion of 70%. The interest-bearing net debt, excluding IFRS 16, reduced by SEK 70 million compared to the previous quarter and amounted to SEK 1.9 million -- SEK 1.19 billion. And our leverage ratio that increased from 1.9x to 2x during this quarter, and that's due to the lower EBITDA level in Q3 this year compared to Q3 last year. And we have an order book corresponding to roughly 2.5 months of sales, and we expect -- we see that as a normalized level in our business. So it's a quite short order book. And I should point out that all what we have in the order book will not be delivered in the next 2.5 months, and we have orders to be delivered next year in the order book also.

Then events during and after the quarter. And the first one is about myself. So, I have announced on September 17 that I decided to step down after more than 10 years as the CEO of Hexatronic, never had that much fun in my working life as I've had during this time at Hexatronic. And the Board has initiated a recruitment process for a new CEO, and I will remain in my role until a successor is appointed.

Then on October 1, we completed the acquisition of parts of the Icelandic company, Endor, and this is in data center. This acquisition will further broaden our offering in the data center market, and will also add new expertise or competencies. And it strengthens our customer base and presence in Iceland, Sweden and Germany. And then on October 15, we started up our new duct and pipe factory in Ogden, Utah. They will manufacture HDPE pipes and that's both for telecom and power cables, so telecom companies and energy utilities. And it will serve the western part of the U.S., which we have not been able to serve before. So it opens up a new market. And it's our fourth duct factory in the U.S. And the production will start in a small scale and is planned to ramp up in line with the increased demand.

Looking five years back, and I mentioned this in the introduction, but net sales development, we have this yearly growth over the last five years of 33% and the EBITA development of 43% over the last five years, and earnings per share, a 48% yearly increase.

Then we are moving into the financial overview, and I will hand over to our CFO, Pernilla Linden.

[Pernilla Linden, executive]

Thank you so much, Henrik.

So if we look at -- we had a total net sales of almost SEK 2 billion in Q2 or SEK 1,951 million with an overall growth of 2%, or a growth of SEK 35 million compared to last year. Quarter-over-quarter, we had a decline of 4%, but in constant currency on par with Q2. We had an organic decline of 2%, but an acquisition-driven growth of 6%. Sales growth is primarily driven by higher sales in our FTTH business in the U.S., Austria and Finland, but also within our focus areas, Data Center and Harsh Environment. We continue to see weak demand for Fiber Solutions in Europe, mainly in U.K. and Germany. And that combined with prevailing price pressure had a negative effect on sales during the quarter. The acquisition-driven growth comes mainly from Fibron Cable in the Harsh Environment area and USNet and DCS in the Data Center area. We had a 3% negative effect on exchange rates this quarter, and that is mainly attributed to the weaker U.S. dollar. Our focus areas, Harsh Environment grew in total with 47%, Data Center with 8%, whilst Fiber Solutions had a decline of 5%.

Looking at our gross margin. We had a gross margin of 43.1%, 0.8 percentage points above Q3 last year. The positive effect is related to the improved margin in the Harsh Environment, mainly due to Rochester Cable temporarily had a lower production efficiency in Q3 last year and the country mix within Fiber Solutions with strong sales in the FTTH business in the U.S.

If we're looking at our operating expenses, our operating expenses in percent of sales is 27.8%. In percent of sales, it is in line with Q2 in both absolute and percent of sales, both -- but increased in absolute terms compared to last year, and that is mainly due to acquisitions we have done and increased freight costs. Looking at our depreciation. That has increased compared to last year due to the capacity investments that we have done over the last years. In percent of sales, it has increased to 3.8% of sales. It's an increase of 0.8 percentage points compared to last year. Overall EBITA of SEK 230 million or 11.8% compared to Q3 last year of 15.4%. But EBITA margin is up from 11% in Q2 '24 to 11.8% now in Q3.

We had another quarter of solid operational cash flow. Cash flow from operating activities before changes in working capital of SEK 206 million. We had a negative effect on working capital of SEK 62 million. During the quarter, we have increased our inventory, mainly due to increased raw material due to the start-up of our new manufacturing plant in Utah. We had a small reduction of accounts payable, and that was partly offset by reduced accounts receivable. Total cash flow from operating activities amounted to SEK 144 million, corresponding to a cash conversion of 70% in the quarter. Total CapEx investments in Q3 of SEK 77 million or 3.9% of sales. And in rolling 12, it was SEK 308 million, which corresponds to 4% of sales.

The investments in the quarter are mainly driven by the capacity investments in the U.S. and investments in the new manufacturing facility in Utah for duct manufacturing. And after two investment heavy years in 2022 and 2023 and after completing the investment program with the duct factory in Utah, we believe that we will be able to grow for several years without extensive investments in Fiber Solutions. As earlier communicated, our estimate is that investments onwards will amount to approximately 3% to 4% of sales yearly, of which approximately 1% to 2% are expected to be maintenance investments.

Group financing activities amounted to SEK 25 million, mainly explained by amortization of lease liabilities of SEK 33 million and sales of shares linked to incentive program of SEK 12 million in the quarter. Overall, we continue to have a solid cash conversion. As Henrik said before, interest-bearing net debt, which corresponds to net debt, excluding lease liabilities, amounted to SEK 1.9 billion at the end of the quarter, which is a reduction with SEK 74 million compared to last quarter. Interest-bearing net debt in relation to pro forma EBITDA on a rolling-12 basis, a key ratio, that reflects our existing bank covenant, has increased from 1.9x to 2x during the quarter. The reduction of interest-bearing net debt could not cover for the lower profitability in the third quarter compared to Q3 in 2023. Including IFRS 16, it corresponds to an increase from 2.2x to 2.3x in the quarter. At the end of Q3, we had SEK 676 million of cash and an unutilized backup facility of almost SEK 1.2 billion, which gives a liquidity of approximately SEK 1.9 billion. We have a continued solid financial position.

[Henrik Larsson-Lyon, executive]

Thank you very much, Pernilla.

Then we move on to the business overview. And starting -- looking at the performance by focus area. So if we start by Fiber Solutions, we saw a slightly better market in the U.S., but still weak market in the U.S. -- in Europe. You see the quarter-over-quarter and year-to-date figures. So, we are, quarter-over-quarter, down 5% in Fiber Solutions and year-to-date, 21%.

Looking at the business in Fiber Solutions. The sales decline is primarily due to continued weak demand in Europe and also to that price pressure that we see in most markets. We saw a slightly increased demand in the U.S., and that's mainly in the fiber-to-the-home business. And as I mentioned before, we start up the Ogden, Utah plant, the production here in October, and that is growing our footprint in the western part of the U.S., which we have not been able to serve before.

If we look at the market in Fiber Solutions, it's still the high cost of capital inflation and to some extent, inventory buildups during the pandemic that have led to a weak market for Fiber Solutions and that we see in most markets, I would say. We also see that the market is coming back to the seasonality effects, meaning in the Nordic Hemisphere, there is Northern Hemisphere. It's a lower demand in Q4 and Q1 due to winter. But we also expect that interest rates decreasing that will improve the market conditions gradually. We also see that governmental subsidies, they will have a positive effect on the market over several years going forward.

Looking into Harsh Environment, it's really the trends within defense and energy that is driving this business. And we had a quarterly growth of 47% and year-to-date, 113%. This growth is primarily driven by the acquisitions of Rochester Cable and Fibron Cable that we did last year. And they are active in what we call dynamic hybrid cables, and that's subsea application, and it's mainly for energy and defense markets. We see a strong demand in defense and energy market, and we expect that demand to remain strong for long time to come. It's highly specialized products. This business is with long customer relations and very experienced teams. And as we said before, stable and growing market long term. And we also see that the expansion of existing sea-based infrastructures, and that's a great interest for renewable offshore energy production.

Moving to Data Center. The growth is primarily driven by hyperscalers build-out and M&A. Looking at the figures for quarter-over-quarter, it's plus 8% and year-to-date, plus 26%. And this growth is attributed to both organic, but also the acquisition of USNet last year. In the quarter, one of our most important European customers and the hyperscaler approved us also as a supplier for the U.S. market, which is very positive. And we completed the acquisition of parts of Endor in Iceland on October 1. And here, the market driver is very much related to AI, and that requires a lot of data center capacity and drives the expansion of data centers globally. I could also add that it also requests infrastructure -- fiber optic backbone infrastructure investments.

Then if we move into different geographies, and this is the total business then. Europe, excluding Sweden, that represents 45% of our total revenue. And here, sales declined partly, mitigated by expansion in new focus areas. So, we saw a slight decline of sales compared to the corresponding period last year, and that's primarily due to the softer market development in Fiber Solutions, and it was primarily in Germany and the U.K. We continue to see a solid performance in Harsh Environment, and that's Fibron Cable primarily. Data Centers was slightly behind last year, and that's also a little bit timing of different project deliveries.

When we look at the market development, this higher cost of capital and inflation that has led to an effective market still, soft market for Fiber Solutions and again, primarily in Germany and U.K. for us. But I would say, overall, we see this in most markets. We see both new focus areas, that's fiber -- that's Harsh Environment and Data Center. They continue to show strong demand, and that's very much related to defense and energy markets and then implementing AI that drives that.

Looking at North America, North America represents 38% of our total revenue. We saw a slight increase in demand in Q3 in Fiber Solutions, and we are positioned for long-term growth in North America. So, sales grew 13%, and that's driven by higher organic sales in FTTH system in the U.S. and also to some extent, the acquisition of USNet for the Data Center activity in the U.S. Our duct sales in BDI was slightly lower than last year, and that's primarily due to pricing. The new Ogden, Utah factory, we opened that in October, as we mentioned, and that will expand our footprint in the western part of the U.S. We see the final CapEx investments there in Q4, and we will start up production small scale. We will have some start-up costs in Q4 and Q1.

The market development; markets in duct and FTTH system are still cautious, although we have seen signs of improved market conditions for especially fiber-to-the-home buildout in the U.S. And the BEAD program is progressing, and it's expected to reach the market now mid-2025, mid next year. And as of today, 55 of 56 states or regions are fully approved. And when we released our Q2 report in July, it was 17 states, regions that have been improved. So, a big progress there, but a little bit delayed compared to what we expected when this will reach the market compared to what we said in Q2.

Then Sweden, representing 9% of our total business. We saw a quite stable FTTH market. Sales decreased by 11% compared to Q3 last year. But last year, we had a rather big submarine cable project that we delivered. So if we exclude that, it's a quite stable business there. And we also see the market developments that are relatively stable markets.

Then Asia Pacific, representing also 9% of total revenues. Quite stable performance. We saw a little bit softer market in Australia and New Zealand. In total, sales declined by 7%. We saw a little bit lower sales in Australia and New Zealand. But also here, we had a submarine cable project that was delivered last year in Q3, and that was to Japan. Excluding that, no material changes. The market development; it's the same as we have said before. It's the cost of capital and inflation that has led to soft markets, especially in fiber-to-the home.

Then we move on to the summary and market outlook. So in summary, what we have said during this presentation, net sales grew 2% to SEK 1.9 billion in Q3. That was primarily driven by higher sales in Fiber Solutions in North America and in our new focus areas. We continue to see a weak demand in Fiber Solutions in Europe and also a price pressure in most markets. Profitability improved in Q3 compared with Q2, up to 11.8% versus 11% in Q2.

Cash flow from operating activities of SEK 144 million, and that corresponds to a cash conversion of 70%. We continue to maintain a strong financial position with a leverage ratio of 2x at the end of September. And the order book at approximately 2.5 months of sales, which we see as a normalized order book in our business. The duct factory in Ogden, Utah to start production small scale in October. And we also see that we have an interesting pipeline of potential acquisition candidates, and that relates then to Harsh Environment and Data Center where we focus our M&A activities. And the last point then that I've decided to leave Hexatronic after more than 10 years.

Looking at the market outlook. I'll start by saying that we see this return to seasonality variations in Fiber Solutions and meaning, we expect a lower activity in the market in the fourth and first quarter. We are cautiously positive for next year, and we see signs of improved markets in several countries. The BEAD program in the U.S., as we mentioned before, we expect to see that start to reach us and the market in mid-2025, and it will primarily be good for Blue Diamond Industries. In the long term, we continue to see solid structural trends that support the continued expansion of fiber optic systems globally. There is still a lot to do, and we talk about AI and everything that drives fiber optic systems. And we see strong markets for our new focus areas for a long time to come, mainly driven by investments in defense, energy and AI.

So, that was the last part of the presentation, and now we will have the Q&A.

[Operator]

[Operator Instructions] The next question comes from Jacob Edler from Danske Bank.

[Jacob Edler, analyst]

I have a question on the cost side to start with. The gross margin is quite strong and up year-over-year. However, a lot of that leverage is offset by higher OpEx in this quarter. And I'm just trying to understand a bit what's happening. You're talking about D&A, which is part of the equation, but also freight cost. But I'm just trying to understand if there's something else driving this increased cost because, for instance, headcount is down both sequentially and year-over-year. And otherwise, I would just like to hear if you can quantify the increased freight cost here.

[Pernilla Linden, executive]

Yes. So overall, as we said, if we're looking at the amount increase from Q3 last year to Q3 this year, it's mainly related to the increase of cost when it comes to sea freight overall. And also then when it comes to that, we also have had a change then when it comes to the LTIP accrual. Those two are the main things. And then, of course, also the Ogden start-up costs that we -- small start-up costs that we had during this quarter. Those are the main reasons, I would say. Yes.

[Jacob Edler, analyst]

Perfect. And then I'll take my second question then. On the BEAD, I mean, I don't think it comes as a major surprise to the market given what we've heard from the industry and peers here recently. But what is your view? Why are the procurement processes kind of prolonging? Is it the permits and paperwork taking a bit longer than expected? And then also just on timing, when you say mid-'25, do you think we could see some volume already in Q2? Or is it more of a Q3 play, so to speak?

[Henrik Larsson-Lyon, executive]

Yes. On the first question, so you actually managed to get two questions in there for one. But the first question, I would say, we have seen that NTIA, they have been speeding up the approvals of the different states and regions. I mentioned this from -- going from 17 when we reached Q2 to 55 now today. But at the same time, our understanding, talking to a lot of people in this business in the U.S. is that the government rules regarding the project has been sharpened, making it more time consuming to really come to the projects being kicked off. So, there's quite a lot of red tape around getting these subsidies working in the market. And that's the reason for the delay. On your second question, our best view is that we will start to see the effects on our business in the second half, meaning early Q3. That's our best estimate now.

[Operator]

The next question comes from Adrian Gilani from ABG Sundal Collier.

[Adrian Gilani Göransson, analyst]

My first question is regarding the outlook for Q4. If you are able to give some sort of indication of how big of a sequential sales decline that you expect and whether that downgrade is isolated to Q4, or also sort of affects your view for 2025 as well?

[Henrik Larsson-Lyon, executive]

I mean, we are not guiding on how large that effect is. We just conclude that we expect sales in Q4 to be below what we had in Q3. And we also mentioned the seasonality effects, meaning that Q1 should also be a little bit softer than Q2 and Q3. And we believe that this pattern will continue now and going forward. We had it before. And meaning, also in 2025, Q1, Q4, a little bit weaker than Q2 and Q3.

[Adrian Gilani Göransson, analyst]

Okay. Understood. And then my second one is more on the financials from the Ogden plant now for Q4. I guess both, if you could provide us with -- if that's going to come with a significant working capital buildup to ramp up the Ogden plant and if it's going to sort of cover its costs immediately or if it's going to be loss-making for a while?

[Pernilla Linden, executive]

So we are starting -- as we said, we are starting small. And already now in Q3, we have started to build some raw material stock for the start here in October. So, we are expecting small but some start-up costs in Q4.

[Operator]

The next question comes from Max Bacco from SEB.

[Max Bacco, analyst]

I'm trying to prioritize my questions here. If we perhaps could start with the duct business, Blue Diamond Industries. I noted yesterday that Dura-Line reported as well, saying that volumes were up year-over-year, but sales down due to lower prices. And I understand it on you that you basically have seen the same thing more or less. So it would be interesting to hear your view on why prices are down year-over-year, while volumes are up? Any thoughts on that would be interesting if we start with that.

[Henrik Larsson-Lyon, executive]

Yes. I mean, I think the main reason being that if you look at us, we have increased our capacity in the U.S. We know Dura-Line has done the same and some other duct producers, meaning there is more capacity. So today, we probably have a situation where there is an overcapacity. I think everyone has, as we invested for BEAD, so there you have -- it's demand and supply that affects that business because it's a commodity product.

[Max Bacco, analyst]

Okay. Understood. And then the final question. You mentioned here in the report that one of your important customers within data center in Europe has approved you as a supplier in the U.S. Could you perhaps comment on who that customer is? And would it be fair to guess that it's Microsoft?

[Henrik Larsson-Lyon, executive]

Yes. I mean, you are free to guess. It's a hyperscaler. And so it's one of the big ones and it's very positive. And this is very much installation service and so on of data center expansion. But we don't comment on who it is.

[Max Bacco, analyst]

Okay. Understood. Yes. And perhaps a follow-up on that, if I may, just a clarification. When you say that you have been approved as a supplier in the U.S., does that mean that you actually have done some projects to do as well? Or is it just that, that might happen?

[Henrik Larsson-Lyon, executive]

Yes. We have started to get some small projects. So it's in the start-up phase.

[Operator]

The next question comes from Stefan Ward from Pareto Securities.

[Stefan Wård, analyst]

I'd like some color on the FTTH sales in the U.S., if you can describe if there's been any new contracts or in what states that you are growing in and perhaps also how big the share of the total U.S. revenues comes from this area at this stage?

[Henrik Larsson-Lyon, executive]

Yes. There are several things, and please remind me if I miss to comment on it. But if I start by saying, I mean, we are constantly gaining new customers. You know from before, it takes some time to gain a new customer because we come with -- for the U.S. new technology, but this is progressing well. I mean, everyone is not on the level that we press release it, but that is heading in a good direction. I think your next question was where we are active. And I would say the majority is probably on the East Coast and also Central U.S. like Texas and so on. But I mean, we follow our customers where they have projects. So, that could be all over the U.S.

And the third question in one question, Stefan, that was -- please remind me?

[Stefan Wård, analyst]

The share of revenue of total, if you want to give us some color on it, [ how big and what's the share ]?

[Henrik Larsson-Lyon, executive]

BDI is still -- Blue Diamond Industries is still the largest company. We have activity in the U.S. And then, I mean, Hex U.S. selling our solution is clearly growing. They are approximately on the same level in terms of revenues as Rochester Cable's in Harsh Environment. And then a little bit smaller, we have the Data Center activity. But I mean, if you take Hex U.S., it starts to be one of the most important activities we have in the U.S. And I would say that's also where we see the biggest growth opportunities. We have a very small market share, and we have a very attractive solution.

[Stefan Wård, analyst]

So, I'll try to sneak in more questions there. But if you could also give me -- if you compare -- when you speak about the market, if you compare the outlook without seasonality or anything like that, just pure demand, how is the status today compared to at the end of Q2? Would you say that market conditions have improved or be flat for the period?

[Henrik Larsson-Lyon, executive]

I would say it's rather flat. And when we released our Q2 report, you might recall that we said that we expected the coming quarters that demand would still be quite weak, but we saw a possibility of an increased market demand in the end of this year. Here, I would say we are probably talking more that we see -- we are cautiously optimistic about 2025. But I would call the market quite flat compared Q2 to Q3 and what we see in Q4. So it's more the seasonality effect that kicks in, in Q4.

[Operator]

[Operator Instructions]

[Henrik Larsson-Lyon, executive]

Let's see if we have any.

[Operator]

There are no more questions at this time. So, I hand the conference back to the speakers for any written questions.

[Pernilla Linden, executive]

Okay. We have one question here. It's regarding the development of Europe. How delayed are the rollout in your opinion? The target was already by -- already being pushed out from 2028 to 2030 in many countries based on EU. What is your take where we are?

[Henrik Larsson-Lyon, executive]

Yes. Thanks for the question. I think that, overall, these projects are rolling out, if we talk about fiber-to-the-home. It takes a long time. I think we have seen due to the conditions with higher financing cost and inflation that it will take even longer time. It has been delayed. And I think it varies a little bit from market-to-market. If we look at a few comments on Germany and U.K., I mean, U.K. is -- they have had a real boom, built a lot quite fast. But we also see that everyone is building in more densely populated areas. Then there is a slowdown as soon as you get out to more semi rural. So, that will take longer time now. And if we look at Germany, which is today way behind U.K., I expect that will take several years after 2030 before they are on, say, mature level like Sweden. This takes time. But in short, I think we see a delay due to the macroeconomics we have had the last two years.

[Pernilla Linden, executive]

We have another question here.

The gross margin has increased by 2.3 percentage points sequentially. The gross profit actually has increased with 1.1% sequentially. And the reasoning for -- the reason for that is that, as I said before, the FTTH business in U.S. is one of the drivers, but also the strong performance we have on the Harsh Environment side. So, those are the main reasons for that.

[Henrik Larsson-Lyon, executive]

Good. There were no more written questions. And then, I thank you very much for the showed interest to this presentation. And thank you very much, and have a nice Friday.