NCAB Group AB (publ)

STO:NCAB

Earnings Call Analysis

NCAB Maintains Strong Margins Amid Declining Sales

In 2023, NCAB faced a net sales decline of 8% to SEK 4.088 billion, due to weak demand and inventory normalization, yet managed a 3% increase in EBITA to SEK 647 million, reflecting an improved EBITA margin of 15.8% from 14.2%. This resilience was attributed to high gross margins, up to 38.2%, and acquisitions adding SEK 400 million in sales. Operating cash flow was robust at SEK 700 million, backed by improvements in working capital at a minimal 5.4%. Dividends remained stable at SEK 1.10 per share.

Stabilizing Prices and Manufacturing Strains

The company has observed significant price decreases commencing late 2022 and throughout spring 2023. Although they had anticipated a halt in price declines during the second half due to low factory margins, some price reductions still occurred due to currency fluctuations. However, now there appears to be stability, and any future market upturn could lead to price increases. The manufacturing sector has shown signs of strain, with factory outages and government penalties for maintenance lapses, but the company's hands-on approach with manufacturers and flexibility to move production promises quality assurance and supply chain security for its customers.

Inventory Levels and Demand Outlook

The company has managed to maintain low inventory levels after Q2, and further inventory reductions are expected to taper off. While some customers are returning to normal inventory levels, there is still excess in their customers' supply chains, suggesting a gradual improvement in demand. The company expects a slow, sequential recovery and theorizes that a turnaround in the general economy could bolster this recovery, potentially more significantly in H2 2024.

Margin Management Amidst Demand Shifts

The company has passed on price reductions to customers yet strived to maintain gross profit by finding cost-saving measures to improve profit margins. Historical trends indicate that years with downturns, such as 2009 and by implication 2023, often lead to stronger subsequent growth periods. The optimism surrounding impending market improvement is tempered with caution regarding exact timing.

Order Trends and Customer Expansion

Without discussing specific current-quarter figures, the company notes general stability in orders, with certain positive signals reinforcing this in Q4. A noted area of growth is in new part number acquisition and the addition of 200 new customers in 2022, which strategically positions the company for future market upturns.

M&A Environment and Opportunities

The company maintains stable multiple targets for acquisitions, typically between 5 to 7 times EBITA. There's an increase in former discussions restarting as valuation perspectives align more closely due to market dynamics. The pipeline for potential acquisitions continues to grow, indicating ongoing interest in strategic expansion through mergers and acquisitions.

Earnings Call Transcript 2023-Q4

[Operator]

Welcome to the NCAB Q4 presentation for 2023. [Operator Instructions]

Now I will hand the conference over to the CEO, Peter Kruk; CFO, Anders Forsen; and Head of Investor Relations, Gunilla Öhman. Please go ahead.

[Peter Kruk, executive]

Good morning, everyone. This is Peter Kruk speaking. So welcome to today's conference for our Q4 results.

So I think we're continuing on a similar note as in the previous quarters, with markets remaining weak in all of our regions. We can still see net sales and order intake being impacted by continued inventory normalization as well as continued weak demand at our customers but also our customers' customers. Order intake, however, is stabilizing. We can see the levels we were in Q2 and Q3 are remaining in Q4, and our book-to-bill is now very close to 1, and we can see some signs of more activity in both China and North America. We can also see some industry segments like automotive, EV charging markets and aerospace and defense, performing better than the market in general.

Positive in the quarter is that we've continued to maintain and develop our gross margins, and that supports a strong EBITA result in the quarter. We've been able to drive efficiency gains in both purchasing and logistic costs to improve our gross profit and also offset the lower sales.

Also positive is that, I think, we're working diligently with our M&A activity pipeline. So we're growing our pipeline and progressing pipeline activities in Europe and North America. And notably, we are expanding our pipeline in East region.

If we look a little bit more detail into the figures, we can see that our net sales compared to year-over-year declined by 14% to SEK 879 million. That is an organic decline of 23% in Swedish krona.

If we look upon the order intake, it decreased by 9% to SEK 873 million. Organically, that is down 21% versus last year, but it's also showing a slight decline of 5% versus Q2 and Q3. But if you factor out seasonal effects around year-end and some FX movements, we are basically on par with Q2 and Q3 order intake levels. And as mentioned, the book-to-bill is now at 0.99, which is also an improvement from earlier quarters.

EBITA amounted to SEK 119 million, which is a decrease by 16%. The EBITA margin reported is 13.5% versus 13.7%. However, to note is that we had a one-off positive contribution in Q4 of '22 from restated acquisition cost for one of our acquisitions. Making that adjustment, we'd like to see that the operating EBITA margin is improving from 12.8% to 13.3%. And as we mentioned, gross margin continuing at a high level at 38.2% versus 34.1% in the prior year.

Operating cash flow strong at 86% (sic) [ SEK 86 million ]. This is now a little bit more than 70% of EBITA resulting from cash flow. Working capital remains stable at a very low level of 5.4%.

And the Board is proposing a dividend of SEK 1.10 per share, which is the same level as prior year.

If we take a step and look at the whole 2023 numbers, we can also see here that we have a net sales decline by 8% to SEK 4.088 billion. The organic decline was around 15%. And if we look at the order intake, it's a decrease by 11% to SEK 3.751 billion and an organic decline of 18% in Swedish krona.

EBITA, however, amounted to SEK 647 million, which is an increase of 3% despite the decrease in sales. And this is coming from the stronger EBITA margin of 15.8% versus 14.2% in 2022. And the gross margin is a contributor to this and is average for the year of 36% versus 32.2%.

And an extremely strong cash flow of SEK 700 million versus also a very good cash flow in 2022 of SEK 568 million. And the main contributor beyond the strong EBITA is, of course, significant working capital improvements that have taken place during the year of 2023.

To note, during the year, we have done a number of acquisitions, so 4 acquisitions in the year. During the spring, we acquired 3 companies. First was Bare Board Consultants in Italy that joined in Q1. We have then 2 companies joining in Q2, with Phase 3 in California based in Silicon Valley and db electronic in Germany but also with sales in the DACH or DACH region. After the summer, we have then also done an acquisition in Spain, Electronic Advanced Circuits, and we have a start-up set up in Portugal to enter that market also. So totally, we have added close to SEK 400 million of annualized sales to the company.

We are now -- this is what the company looks like today. We are today 17 operating companies serving our markets and our customers. We are a little bit above 600 specialists in the company, and we are using some 32 main factories. NCAB, as you will well be aware, have no in-house manufacturing but are only working with outside manufacturing partners. And our aim is to be delivering printed circuits boards for demanding customers, delivering on time with zero defects and produced sustainably at the lowest total cost. Our aim is to be the #1 PCB producer wherever we are, and we are already a leading company in our segment.

Everything we do is printed circuit boards. We do the products that you can see to the left, and it's basically the foundation for any electronics that creates the intelligence module in any kind of electronic product. Our focus is very much on high mix, low volume, so typically industrial applications, where the cost of the overall building material is significant, quality demands are very high, the reliability are paramount, but the printed circuit was a very small component in their overall building material. So it's a critical component, but low value, which means that we can add a lot of value to our customers and also do this with a healthy gross margin in our business.

We have a very well-diversified customer portfolio serving a lot of different industries, all with very specific unique demands. And we are able to serve them with good technology and services to make sure that they can be competitive in those specific industries.

We have now a history, which last year was 30 years celebration, and it's been a history of strong constant growth, starting out in the Nordics, entering into Europe and then North America. And it's been a growth founded on strong organic growth as a basis and then [ still ] increasing events of acquisitions. So up until the IPO in 2018, we had something like 15% annualized growth in the last decade prior to that, of which maybe 2/3 came as organic. From the IPO, we have continued with even stronger organic growth but also adding more of acquisitions to that growth.

And we can see now in 2023, it's the first year since 2009, where we're actually seeing a decline in our overall sales. I think all other years has been growing years. And I think we can also look upon the global market for printed circuit boards. The decline that we're seeing in the global market in 2023 is very similar to 2009. So we have every ambition to believe that the market will turn around and continue growth for the longer perspective.

Anders, over to you.

[Anders Forsén, executive]

Thank you, Peter. So just to repeat a little bit of the financial numbers for the quarter. As you said, we reached SEK 879 million in revenue, which is 14% below last year, and in the U.S. dollar, almost the same is 13% down. And of course, we always know that December is a weaker month. A lot of orders or deliveries are pushed into January. So normally, December is soft in invoicing, which also have impacted the revenue a little bit in this quarter.

And we are anyway happy to see that we can continue with the EBITA margin. We did SEK 119 million in EBITA and 13.5% in EBITA margin. But if we take a look into what we had this reversal of earnout payments in second quarter, which had a positive impact [ 22 ]. And also deduct small transaction costs this quarter, we actually go from 12.8% to 13.3% in EBITA margin in the quarter. So still a stable and good level.

And looking then into the full year 2023. As Peter said as well, we are down a little bit in the revenue. We're around 8% and in U.S. dollar, 13% down.

I think we should be really proud of what we have done with EBITA. It's up 3%. And I think our business, we focus a lot on keep looking at the gross profit because that's a gross profit really covers our operating costs and so on. So during this year, we have seen volume go down. We have seen prices go down, but we have been very good in mitigating the prices and keeping a higher gross margin. So even if we have reduced prices towards our customers, we have been able to cut cost even more to the factories and also for the freight side, which means that we can improve EBITA.

As we mentioned before, we have invested in our new IT platform, and we launched that in one country in November. And we have taken costs for about SEK 27 million during '23 for the new IT platform, meaning that the improvement is, in a way, even stronger.

And this picture shows clearly how we have been working with the gross margin. And of course, it is a little bit of mathematics. When prices is going down, we need to cover ourselves with higher gross margin to secure the gross profit. And then we can see the increase to 36%. So I would say we have been extremely good in mitigate the lower prices and so on to make sure that we have a gross profit which are very much in line with last year.

And looking into some more on the quarterly development of the revenue. As I said before, we are down in net sales, and we are a little bit down in order intake. You can see the line shows the order intake development. And we have seen that we have many quarters had revenue higher than order intake. And I think now we are in a situation where we have invoiced or delivered almost all extra orders we got when we had the longer lead times. And now we are back to a normal situation, and we expect that, as I said before, [ order -- 1 quarter ] will be revenue next quarter more or less. So I think that is that part.

What more to say, we can see also that we are, on order intake, rather flat versus Q2, Q3. We have seen some seasonality, and we also see that many markets are now starting to pick up a little bit in the order intake versus second and third quarter. And we can also say that almost no order book left from this high we had in 2022. So we are back to normal lead time and normal situation again.

So going into the EBITA. For the quarter, once again, we are, in [ money ], a little bit down versus last year. But if we adjust for this extra income we had last year and also transaction costs, we are on more or less the same level. I think we should also remember that normally, the fourth quarter is the weakest quarter because we see some drop in revenue in December, and we normally have the same kind of costs. Full year earnings per share was SEK 2.15, and as I said, we are proposing a dividend of SEK 1.10, which is roughly 50% of the net profit.

So Peter, Nordic segment.

[Peter Kruk, executive]

Yes. If I look on the different segments, first, one comment about Nordics from '22 to '23, we moved some of the business over to segment Europe. But if we look at the adjusted order intake, it still decreased by 19% to SEK 188 million. And you can look at the net sales decrease to SEK 200 million, with adjusted net sales decreasing by 21% in Swedish krona. What we can see is that in the quarter, we can still see quarter-over-quarter since Q2 onwards, stability in the sales numbers, and we can see that Norway and Sweden with contribution from EV charging notably and also aerospace and defense are doing quite well.

EBITA decreased to SEK 31.5 million. But EBITA margin improved year-over-year from 15.3% to 15.8% in the Nordics.

Looking at the European side, where then there has been some gain of volume from '22 to '23. Looking at the adjusted net sales. Net sales overall decreased by 11%, and adjusted net sales decreased by 24% in Swedish krona. Order intake reached SEK 445 million, and adjusted order intake for comparable units decreased by some 26% where we are also adjusting for acquisitions that have happened in the year. We can see that in the fourth quarter, the German market, as we've seen, general German economy a slowdown in the latter part of 2023 and has also impacted our sales. Other markets in the European segments are more stable, and we can see positive development in businesses related to our automotive activities.

EBITA performed very well in the segment for the quarter. We see EBITA increasing to SEK 56.4 million from SEK 53.2 million despite the lower sales, and it corresponds to a margin in the European segment now of 13.1% versus 11% in 2022.

Looking at North America. Order intake amounted to SEK 190 million. Adjusted order intake for comparable units decreased by some 19%. If we look up on the net sales, we can see we are level in par with the prior year. But however, if we take out the Phase 3 acquisition, net sales are down significantly by 31%. However, we can now start to see some improved market and sales since Q2. Phase 3 came in, in Q2, and we can now see Q3 and Q4 a slight positive trend throughout the year.

EBITA decreased to SEK 25.3 million. And EBITA margin decreased to still a healthy 13.3% but down from 17.7% in 2022 Q4.

And finally, our East segment. Still, the market conditions in China remain muted, but there are some signs of increasing activity. And I think our company, we have a strong focus on niche applications where we can provide a lot of technical services. Order intake still declined to SEK 49 million from SEK 51 million year-over-year, but it is increasing now from Q2 and Q3 levels.

Our net sales increased with 6% to SEK 59 million versus SEK 55 million in Q4 prior year, and our EBITA increased slightly to SEK 11.7 million but a strong maintained EBITA margin of 20% versus 21% in the prior year.

Anders?

[Anders Forsén, executive]

Yes. Thank you. Looking into our pipeline of acquisitions, I think we have a very healthy pipeline. We are in more discussions with more company now than in a long time. So the market seems to be very favorable to do some transactions. We are also starting to look more and more into Southeast Asia and the Eastern part of the world. We have increased our identified companies. We have found a number of companies in that area.

Still, we are looking for very much similar companies like NCAB, focus on the high mix, low volume; make sure that they have the right customer portfolio; and, of course, no own production. And as before, we are always looking into profitable companies where we see that we can add the business in a good way for NCAB.

And as we see, we have done 6 acquisitions in the last 4 years. And we are in good discussions with a number of companies. So it looks rather promising.

And also, we have still a very strong balance sheet and financials. We have been able to work a lot with our working capital during '23. We built up a lot of extra inventory during the pandemic, but that was -- now we are back to normal. So we have a net working capital of net sales of 5.4%. We still have a very strong return on equity and a good solvency. And right now, including our loan agreements and frame agreements for acquisition loans, we are close to SEK 1 billion in available cash for further growth investments. So we think we are in a very flexible and strong position.

[Peter Kruk, executive]

Very good. And then also one thing which we're also proud of is that during the year, we have continued our work on sustainability. We have initiated the work together with EcoVadis to assess our sustainability work in all ESG areas, and we're very happy and proud to be awarded the gold rating from EcoVadis, which means that we are among the top 5% globally of all the companies they are rating.

Also very positive this week, we were awarded the Brilliant Awards, leading employer of the year company within the area of construction, manufacturing and industrials. So again, this is something we're very proud of. We are also the winner in 2022. And this is a work we will continue to work on.

Looking at our strategy, we remain focused with the foundation focusing on PCBs. The global PCB market in '22 was around $80 billion. The high-mix, low-volume business is around $25 billion. So we see a great opportunity to continue to grow within this market and keeping focus on printed circuit boards with an asset-light model, outsourced production. We are continuing to invest in more technology and services to allow us to grow organically as well as in the -- through sustainability. We are looking to expand continuously geographically to add new markets and better coverage in the regions where we are already active. And M&A is an important part to accelerate this process. And then in this market, there is still a very much a fragmented competitive landscape, and we see great opportunities for market consolidation through acquisitions.

We remain and reiterate our financial targets that were released in -- after 2021, whereby we are aiming for an annual turnover of SEK 8 billion in 2026 and an EBITA of at least SEK 1 billion in '26 and still remaining with a net debt over EBITDA less than 2x. And we are a cash-generative company. Whatever cash we feel that we do not need to sustain our further growth, we will be making as terms of dividend to our shareholders, and as historically, we have -- or also forward-looking, we approximate that or estimate that to be in the range of around 50%.

And with that, we open up for questions.

[Operator]

[Operator Instructions] The next question comes from Gustav Berneblad from Nordea.

[Gustav Berneblad, analyst]

It's Gustav here from Nordea. Maybe just to start off here in terms of the Chinese manufacturing industry for PCBs and the oversupply situation there. I mean are you noticing any difference in terms of demand or supply consolidation, bankruptcies or anything? And then also if you can comment on any indication of pricing ahead?

[Peter Kruk, executive]

Maybe I'll start with the second question on the pricing side. I think what we've said before, and I actually -- it remains panned out what we were estimating that we saw quite significant price decreases starting in late '22 and during the spring of '23. Then we were not really expecting to see further price increases in the second half because we could see that the factories was running at very low margins in their business. However, there was some movement on the Chinese RMB versus the U.S. dollar in Q3, which enables some further price downs. However, in Q4, we've seen more stability. So we're not really seeing further price movement down. If anything, once the market will turn up, we can expect some price increases to come back into the market.

And regarding the financial health of the manufacturing industry, there are clearly strains. We have seen some manufacturers go out of business, not factories that we were using, but nevertheless, we have also seen some other factories be sort of penalized by the governments for not maybe maintaining equipment, et cetera. And I think this is, again, an area where we, NCAB, can make a big difference for our customers because we have boots on the ground. We are working with the factories. We can identify where there are issues and make sure that the equipment used for our production is fully maintained, et cetera, and if need be, move production to other locations.

So just like in 2021, then there was more a question of could you get supply. We could add a lot of value for customers to make sure we have priority in production and secure the supply chains by being there even throughout the pandemic. And now maybe there's more of a risk of quality issues where factories filled -- filling necessity maybe try to cut corners, and we can, again, safeguard our customers and the quality in the product we deliver to them.

[Gustav Berneblad, analyst]

Okay. Perfect. And then maybe it sounds like a relatively soft outlook for demand in H1 2024 in your wording. I know the visibility, of course, is relatively low. But are you expecting a gradual sequential improvement in orders from here, would you say?

[Peter Kruk, executive]

I mean, I think what we've said before also after Q3, we don't expect as a dramatic turnaround. I think we're going to see gradual improvements potentially as inventory reductions come to an end. I think we can see that, I mean, we basically came down to our low inventory level after Q2. Both Q3 and Q4 have been quite stable and around a little bit more than 5%, which is a quite a low number for us, historically speaking. I think we've seen some of our customers also starting to come down to more normal levels in inventory. But then, of course, you have their customers' customers.

So I think we are expecting that say, also in the next couple of quarters, we will still see impact of inventory reductions. But these will gradually go away. That alone should help to boost -- or lift our order intake somewhat. And then, of course, we can see that once -- if and once the general economy starts turning around with maybe interest rates coming down, that should then create further boost, but maybe that is, as you indicate, maybe more in the second half, though.

[Gustav Berneblad, analyst]

Perfect. And then just the last one here. I mean let's say that demand is bottoming out here for the overall group. Can you sort of reason a bit around the gross margin development here if we are to see demand gradually increase? I mean how much do you think you can give -- or how much do you think you have to give back and so on?

[Peter Kruk, executive]

But I think it's a little bit like Anders has said. I mean a lot of -- it depends to say what happens to the overall pricing. I think -- I mean, I think right now, I think we've not -- really, I mean we've been giving price downs to our customers, clearly. But of course, in order to maintain the same kind of gross profit or not give away more than you're actually saving, your gross profit percentage needs to go up. And I think we've done that, and maybe we found also some additional savings. So I think we believe we can keep a fair bit of the margin improvement we have generated in the last couple of years. But of course, if there's great significant pricing volatility, that can have some impact, of course.

But I think one thing which is maybe also positive to remember when we look at the overall long-term graph of growth, we mentioned that, say, 2009 was down, and 2023 is down on a global scale. I think important to note, both in those 2 years or at least in 2009 and also other years when there was more kind of a flat development that subsequent years actually showed a greater growth historically. And I think that might be something we can anticipate or hope for in the coming years as well. The question point is more, when does the turnaround happen.

[Operator]

The next question comes from Johan Skoglund from DNB Markets.

[Johan Skoglund, analyst]

Johan from DNB here. I have a few short questions. So just to clarify on the order trend, what can you say about the monthly trend during Q4? And could you give any color on the first weeks of Q1?

[Peter Kruk, executive]

We do not comment on Q1. And I think -- but I think you always have a bit of seasonality effect. So it's a little bit hard to talk about a trend throughout the quarter in Q4. I think it's more a kind of a, I'd say, stable. The positive trends that we may have seen in some areas in Q2 and Q3 were continuing to be visible in Q4. Then I think on the only negative side maybe was Germany was weaker in Q4 than in Q3. But otherwise, I think we've seen the signs where we saw stability. I think that stability was kind of reinforced, and maybe there are some further positive signs.

I think one thing which, I think, is also important for our future development is also that throughout the year, we've had a very positive development in terms of new part numbers. So we've won a lot of new part numbers with customers. So we're growing that number over 2022, and we've also added some 200 new customers to our portfolio. So I think we are positioning ourselves to -- for a good development once the market also stabilizes.

[Johan Skoglund, analyst]

Okay. And on the destocking effects where you're expecting a gradual recovery, but any color on how long that could proceed? I mean shelf life for PCBs is quite short, if I recall.

[Peter Kruk, executive]

Yes. And I think it is what you say. I mean our customers typically do not have a lot of inventory of printed circuit boards. Maybe before they had some -- maybe more -- a little bit more in their stock levels than what they used to have. But I think they also have built sort of semi-finished modules where they had mounted components on the boards, et cetera. But that was stopping.

I think now the situation we're facing with now is not really our customers maybe having huge inventory. That is more of their customers. So we have EMS companies, which are producing modules for -- and OEM customers. Someone may be producing for, I don't know, [ Atasco ] or Volvo or someone, and they have some inventory in their supply chain.

So I think it's -- that is what we're seeing right now. That is why it's a gradual development. I think it's -- this is like where you're cleaning the stairs, but cleaning it from the bottom. So I think the factories are running very lean. We have already come back since a couple of quarters to low levels of inventory. Our closest customers are now may be coming closer to normal levels, but they still have some cases, customers which still have some inventory. So I think that is why, I think, we have seen the worst of inventory reductions, clearly, but probably, it is a gradual process how we get out of it.

[Johan Skoglund, analyst]

Okay. And then lastly, on the M&A pipeline, could you perhaps share how multiples have moved and the -- I mean the development and growth of the pipeline? I mean in Q3, I think you mentioned that 8 to 9 targets and discussions at the time of that, and now it's growing. So any more color on like the number of targets and multiples would be appreciated.

[Anders Forsén, executive]

Firstly, I can go to the multiples. I think they are rather stable. I think we try to make offers of discussions. We have something between 5 and 7x EBITA, a little bit depending on type of company and which stage they are in. So I think that's rather stable. What has changed a little bit, I would say, is that we see more and more companies we have been talking to, where we couldn't agree on the valuation, which are coming back to us and would like to take up the discussion again. So we have a number of cases where we didn't really agree on the valuation 1 year ago and where we see now that we are -- they would like to take up the discussion again. So I think that is a positive sign.

I think the main reason is that they maybe had after this growth, '21, '22, everyone expected it to continue, and now they see this flattening out or even going down a little bit. So that means that we are much more easy to have a common view on the future and, I think, therefore, also make an agreement.

And we normally don't mention exactly numbers, but we are in that range or a little bit higher than we said 1 quarter ago. So from that point of view, we are in a number of good discussions.

[Johan Skoglund, analyst]

Okay. And just to clarify, then if price expectations from sellers have come down, what are the main sticking points or pushbacks in M&A discussions now? Are there any big things?

[Anders Forsén, executive]

No, not really. It's always that -- I mean these are smaller companies, and they normally don't have a clear organization to complete the data room and all that kind of stuff. So sometimes, these kind of transactions take longer time than you would like them to take. So I would say it's a lot of time constraints mainly from some of the sellers.

[Operator]

The next question comes from Anders Rudolfsson from DNB.

[Anders Rudolfsson, analyst]

Congratulations to another good report. So 2 more questions from DNB. And the first one is regarding AI. Listening to a number of calls from American companies, there's huge demand from example, AI chips. And there could be -- we also see trends that we see increasing momentum in PC sales and, well, all over the place, so to speak, regarding tech products. If it starts to be a major, like, market for this, this is already is, of course, but if you look into when and where would you come in here in this trend? And when do you think it could actually happen in your figures as well?

[Peter Kruk, executive]

I would say -- sometimes, I say in industrial applications, it tends to go a little bit slower than before these technologies would be adopted. However, where we will see it is in that, say, driving some of those AI applications, require specific micro processes and certain semiconductor products that you use, which then also puts different demands on the printed circuit board. Generally, these are high-powered products with then demands on technical special -- technical requirements on the printed circuit board.

So it will require us -- we will be well positioned to support our customers to provide them with the access to this kind of technology. So I think it's a trend which when it happens in our industries or our target markets is an area where we will be able to support and benefit from this trend.

[Anders Rudolfsson, analyst]

So we haven't really seen it in your figures yet that you expect it to come more.

[Peter Kruk, executive]

I think we will see it. And you can all see it's happening in terms of how we do business and how our customers do business. But in terms of our product deliveries, I think we're not seeing it to any significant effect at this time.

[Anders Rudolfsson, analyst]

And regarding AI specific for NCAB, how do you work with that today? Can you actually improve margins or product development, whatever that most -- was higher margins or faster products?

[Peter Kruk, executive]

I think there are various tools where we strive to become more efficient, whether one calls it AI or something else, maybe a question of definition. But I think we do a lot of things, and that is part of our IT investments that we're doing, which is creating us platforms and tools to enable us to both use our data, our customers' data and do it in a more efficient way to even improve our service to our customers and become more efficient internally as well.

[Anders Rudolfsson, analyst]

I mean so many clients you have really would be very supportive for our products, yes. Well, the other one actually is, Anders, been so long -- such a long time in NCAB and really has done a fantastic job on growing the company. If you compare today's market with, let's say, 5 to 7 years ago, is there any big difference? And in what way in that way, would it be different? And looking forward, what do you think you actually can use going forward?

[Anders Forsén, executive]

5, 6 years ago, maybe not so much difference in the market. I think still, we do have a lot of opportunities. And somewhere you can compare -- I mean, as I said, I've been in the company for a long time. So I was even here with 2009 with the financial crisis. And I think what we could see after that was that when the market really took off again, it was very easy for us to support our customers. We have a huge capacity in the factories. And I think that our business [ model ] was very easy to grow. We didn't need to invest much more in people or invest in machinery, production equipment and so on. So our business model makes it easy to follow and have a flexible way to follow the revenue stream and the demand from customers.

So I think that is something we can take with us. And then I think that the market is still very -- I mean a lot of electronics is needed. Then of course, we had a very strong boom during the pandemic when the lead times increased, and that created this kind of strange things. And maybe we had a little bit higher growth than what we should normally have, but I think that is adjusted now, and we should be back to a normal situation.

[Operator]

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers.

[Gunilla Öhman, executive]

So there is one more question written on the site. And it's about compared to previous quarters this year, even though gross margin is at record highs, what is the reason for this? Also, other expenses as a percentage of sales has increased significantly this quarter. Could you elaborate on which items are including in this accounting term?

[Anders Forsén, executive]

I think the main reason is that the revenue is down in the quarter. So if we compare the revenue, we had some SEK 950 million something in third quarter, now down to SEK 879 million. We have more or less the same cost structure. Of course, our purchase of PCBs goes down, which indicates that we have a stronger gross margin. But on the operating cost, they are very much the same. And I think we can normally see a weaker result from an EBITA margin point of view in fourth quarter due to that, it's normally weaker revenue in December, which has an impact on the quarter.

So otherwise, I think that the costs are very much the same as we had in the other quarters. And so no extra cost [ to note ], especially higher cost. It's more a relationship with the lower revenue.

[Gunilla Öhman, executive]

Thank you, Anders. There are no more written questions. So I'd just like to remind you about our financial calendar for this year. And our next report is our Q1 report, which is Thursday, the 25th of April. So very welcome back then, and thank you for today.

[Peter Kruk, executive]

Thank you.

[Anders Forsén, executive]

Thank you.