Hms Networks Ab · OMXSTO:HMS
Hms Networks Ab — Investor Day (November 2020)
61 slides from Hms Networks Ab's investor day presentation, Nov 18, 2020
Slide 1: HMS Networks AB – Capital Markets Day
HMS Networks AB – Capital Markets Day Staffan Dahlström, CEO, Joakim Nideborn, CFO, Hans Larsson, CCO, Jörgen Palmhager, CTO November 18th 2020
Slide 2: Agenda
Agenda Introducing HMS Networks (Staffan Dahlström, CEO) Strategy overview 2020-2025 (Staffan Dahlström, CEO, Hans Larsson, CCO, Joakim Nideborn, CFO) 5G and business opportunities for HMS (Jörgen Palmhager, CTO) HMS sustainability plan (Joakim Nideborn, CFO) Financial overview (Joakim Nideborn, CFO
Slide 3: HMS Networks – What we do
HMS Networks – What we do
Slide 4: We are Connecting Devices™
rh . . “ms \Ne are Connecting Devices™ wT Connecting Devices™ We make sure that industrial devices can communicate. Millions of robots, engines, drives, generators and other business-critical equipment rely on HMS technology to get connected.
Slide 5: We are Connecting Devices™
a “7s Ne are Connecting Devices™ En? | I i ] a eT mV Vv VY TTT
Slide 6: We are Connecting Devices™
a 7 . “7s Ne are Connecting Devices™ Anybus*’ Ewonr Intesis' Ixxat’ BY HMS US BY HMS NETWORKS ‘BY HMS NETWORKS ‘BY HMS NETWORKS WEBfactory ° PROCENTEC Member of the HMS oF jember of the HMS group.
Slide 7: Two customer groups – Users and Makers
Two customer groups – Users and Makers Makers of industrial equipment Usually targeted direct Users of automation systems Usually targeted via partners
Slide 8: HMS Networks – The company
HMS Networks – The company
Slide 9: HMS at a glance
“a HAIMIs “Mu +7,000,000 Installed devices +300,000 machines connected to cloud systems aera 700 rmnloyees fl worldwide ae HMS at a glance Market leader in industrial communication and Industrial loT At the forefront of technology 5G. Smart Grid = ALOT Partners in over 50 countries Officesini6 in 16
Slide 10: Building on the strengths
mitts Building on the strengths Bluefrog Platform Product QUALITY corners High Entry Barrier Supply Chain Organization Tech S ki | Is Staff with High Expertise Access to Machine Data Strong Financials Solid Existing Business Strong Brands Business Diversification Growth Mindset Good Technology G ood
Slide 11: The growth journey of HMS
The growth journey of HMS 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Slide 12: Agenda
Agenda Introducing HMS Networks (Staffan Dahlström, CEO) Strategy overview 2020-2025 (Staffan Dahlström, CEO, Hans Larsson, CCO, Joakim Nideborn, CFO) 5G and business opportunities for HMS (Jörgen Palmhager, CTO) HMS sustainability plan (Joakim Nideborn, CFO) Financial overview (Joakim Nideborn, CFO
Slide 13: HMS strategic focus areas 2020-2025
HMS strategic focus areas 2020-2025 Staffan Dahlström, CEO
Slide 14: Our Mission
Our Mission The effect What we do Increased We enable sustainability valuable data and productivity and insights for our from industrial customers machinery Mission statement HMS enables valuable data and insights allowing our customers to increase productivity and sustainability
Slide 15: Our Mission
Our Mission Mission statement HMS enables valuable data and insights allowing our customers to increase productivity and sustainability
Slide 16: HMS strategic focus areas 2020-2025
HMS strategic focus areas 2020-2025 ENVIRONMENT STAFF & CUSTOMERS GROWTH & PROFITABILTY Make HMS a net positive Happy & high performing employees Continue our sustainable and CO2 company by 2025 generate loyal customers profitable growth
Slide 17: HMS targets 2020-2025
HMS targets 2020-2025 TARGETS FOR 2025 TARGETS FOR 2025 TARGETS FOR 2025 • Net positive internal CO2 impact • Employee NPS > 25 • Net Sales > π (3.14) BSEK • Net positive external CO2 impact • Customer NPS > 25 • EBIT-margin of 20% • Dividend 30-50% of EPS (NPS=Net Promoter Score) ENVIRONMENT STAFF
Slide 18: HMS playing field
HMS playing field Hans Larsson, CCO
Slide 19: Industrial Automation & Building Automation
Industrial Automation & Building Automation ICT = Information & Communication Technology
Slide 20: Control Information Infrastructure
Industrial Automation & Building Automation Control Information Infrastructure
Slide 21: Control Information Infrastructure
Industrial Automation & Building Automation Market growth 2025 Market growth 2025 Market growth 2025 • 4-6% annual growth • 10-15% annual growth • 5-7% annual growth Trends Trends Trends • Industry 4.0 • Industrial IoT • 5G & Security HMS position HMS position HMS position • Leader in network connec
Slide 22: HMS playing field – Sweetspots
HMS playing field – Sweetspots Remote access for CAN technology Multi-network industrial machines connectivity in BA Network to network integration FA Embedded Connectivity FA THE INDUSTRIAL ICT PLAYING FIELD
Slide 23: Organic growth within existing core business
Organic growth within existing core business Continued inflow of new design-wins Software & services Market penetration Selective market expansion Remote access for CAN technology Multi-network industrial machines connectivity in BA Network to network integration FA Embedded Connectivity FA THE INDU
Slide 24: New sweetspots for organic growth
New sweetspots for organic growth IIoT solutions IIoT building blocks – for Users – for Makers New technology – 5G Network diagnostics THE INDUSTRIAL ICT PLAYING FIELD
Slide 25: Mergers and acquisitions
Mergers and acquisitions Joakim Nideborn, CFO
Slide 26: M&A will represent half the growth until 2025
M&A will represent half the growth until 2025 Bolt-on to core business Strong new product companies Software solutions Technology to shorten TTM THE INDUSTRIAL ICT PLAYING FIELD
Slide 27: HMS fundamental M&A criteria
HMS fundamental M&A criteria Market and position Technology & supply • Leading position in its market segment • Own IP with high value-add • Active in a growing market • Low dependence on suppliers • Fit with HMS strategy and playing field • HMS understands the technology Development potential Finan
Slide 28: Agenda
Agenda Introducing HMS Networks (Staffan Dahlström, CEO) Strategy overview 2020-2025 (Staffan Dahlström, CEO, Hans Larsson, CCO, Joakim Nideborn, CFO) 5G and business opportunities for HMS (Jörgen Palmhager, CTO) HMS sustainability plan (Joakim Nideborn, CFO) Financial overview (Joakim Nideborn, CFO
Slide 29: 5G making Industry 4.0 happen
5G making Industry 4.0 happen
Slide 30: 5G making Industry 4.0 happen
5G making Industry 4.0 happen Smart Manufacturing • Driven by efficiency and cost optimization and customer focus • Requires adoption of new Technologies, Solutions and Architectures • Flexibility, mobility and Reliability – failure and downtime is not an option • 5G enables the “last mile” of the I
Slide 31: Smart Manufacturing
Smart Manufacturing How HMS contributes Connectivity is still Key Emerging Architectures 1. Industrial Communication 1. Wireless and Wired Horizontal & 2. Connecting and bridging 2. IT Centric and OT Centric Vertical integrated legacy systems and open Fully automated Robust production & value chains
Slide 32: Smart Wireless Factory
Smart Wireless Factory 5G enables the “last mile” of the Industry 4.0 Vision Enhanced Mobile Broadband • Data heavy applications like AI and Machine learning • Augmented reality • AGVs • Remote access • Inbound and outbound logistics Ultra-Reliable Low Latency Communications • Motion control • Mobil
Slide 33: Advantages of 5G over other technologies
Advantages of 5G over other technologies Combines benefits of Wi-Fi and Industrial Ethernet with cellular technology Flexibility & scalability High capacity Low latency Ultra Reliability One standard Operation in licensed spectrum* BUT…
Slide 34: 5G Deployment Challenges & Solutions
5G Deployment Challenges & Solutions As with all new technologies, gaps needs to be closed • Spectrum availability • Private Networks • Interoperability • Affordability • Equipment and Devices AND…
Slide 35: Co-existence of 5G and other technologies
Co-existence of 5G and other technologies …this does not mean that 5G will replace all existing technologies • 5G will first occur in new automation architectures addressing shortcomings of Ethernet (and WiFi) • 5G will co-exist with wired technologies as wires will stay where it makes sense (perfor
Slide 36: Smart Manufacturing – 5G @ Industry 4.0 Use Cases
Smart Manufacturing 5G @ Industry 4.0 Use Cases Why 5G • Current systems rely on static wired technologies to connect industrial devices such as sensors, actuators, drives and controllers. • To enable higher flexibility such as reconfigurable systems, mobile machines, AGVs and battery-operated tools
Slide 37: Smart Manufacturing – 5G @ Industry 4.0 Use Cases
Smart Manufacturing 5G @ Industry 4.0 Use Cases Brownfield Greenfield Digitalization Driven by internal strategic Does not understand Realizes the potential 5G directions to evaluate and automation but knows that brings to Industry 4.0 use 5G 5G will do the job Automation Engineer Automation Archite
Slide 38: HMS and Industrial 5G
HMS and Industrial 5G What is HMS doing within 5G • Have been working with Industrial 5G applications since 2018 • Active member in organizations and forums driving Industrial 5G • Formed a 5G unit focused on industrial 5G products and Services • Entered strategic partnerships with several 5G techno
Slide 39: 5G in the Factory: How 5G IoT at the Edge Can Elevate Your Manufacturing
5G in the Factory: How 5G IoT at the Edge Can Elevate Your Manufacturing Business Strategy Wednesday, 18 November 2020, 11:00 a.m. ET Marco Contento Dr. Jens Jakobsen VP of Technologies Development Manager Telit HMS Networks
Slide 40: Agenda
Agenda Introducing HMS Networks (Staffan Dahlström, CEO) Strategy overview 2020-2025 (Staffan Dahlström, CEO, Hans Larsson, CCO, Joakim Nideborn, CFO) 5G and business opportunities for HMS (Jörgen Palmhager, CTO) HMS sustainability plan (Joakim Nideborn, CFO) Financial overview (Joakim Nideborn, CFO
Slide 41: Focus on environment and staff/customers
Focus on environment and staff/customers TARGETS FOR 2025 TARGETS FOR 2025 • Net positive internal CO2 impact • Employee NPS > 25 • Net positive external CO2 impact • Customer NPS > 25 ENVIRONMENT STAFF & CUSTOMERS Make HMS a net positive CO2 company by 2025 Happy & high performing employees generat
Slide 42: HMS main environment focus on CO2 emissions
HMS main environment focus on CO2 emissions HMS internal impact. Goal: CO2 Net Positive @ 2025 SCOPE 2: INDIRECT – ENERGY SCOPE 1: DIRECT SCOPE 3: ALL OTHER INDIRECT Vehicles Facilities Transports End of life Purchased energy SCOPE 3: ALL OTHER INDIRECT HMS External impact. Goal: CO2 Net Positive @
Slide 43: HMS focus for employees and customers
HMS focus for employees and customers Health & Development Company Culture Leadership Diversity & equality Responsible taxpayer Ethics & Anti-corruption
Slide 44: Follow our progress in our sustainability report
Follow our progress in our sustainability report
Slide 45: Agenda
Agenda Introducing HMS Networks (Staffan Dahlström, CEO) Strategy overview 2020-2025 (Staffan Dahlström, CEO, Hans Larsson, CCO, Joakim Nideborn, CFO) 5G and business opportunities for HMS (Jörgen Palmhager, CTO) HMS sustainability plan (Joakim Nideborn, CFO) Financial overview (Joakim Nideborn, CFO
Slide 46: Financial overview – the last decade
Financial overview – the last decade Joakim Nideborn, CFO
Slide 47: HMS Group has delivered 18% CAGR last decade
HMS Group has delivered 18% CAGR last decade NET SALES, MSEK COMMENTS • CAGR of 18% last 10 years • 2010 fast recovery from financial crisis (41% growth vs 2009) 1 600 1 519 • Seven successful acquisitions during the 1 500 period 1 400 1 366 1 300 • Four main brands in Q3 2020 1 183 1 200 1 100 +18%
Slide 48: Acquisitions adds 1/3 of the growth 2010-2019
Acquisitions adds 1/3 of the growth 2010-2019 NET SALES, MSEK COMMENTS CAGR • Organic CAGR 12% 1 519 • Acquisitions represent ~1/3 of growth 2010- 175 18% 2019 (R12 sales @ time for acquisition) • Favorable FX development boosting sales by +2% 175 MSEK 412 16% • 2020 first year since 2013 when FX de
Slide 49: Financial overview – the last five years
Financial overview – the last five years Joakim Nideborn, CFO
Slide 50: Ewon and Intesis driving growth 2016-2019
Ewon and Intesis driving growth 2016-2019 NET SALES PER QUARTER – LAST 5 YEARS, MSEK COMMENTS • No seasonality in sales, easier to evaluate 416 420 HMS on sequential numbers 400 19 380 377 361 380 353 363 8 28 • Anybus and Ixxat impacted by slower 346 10 355 360 11 25 22 329 18 11 9 345 infrastructu
Slide 51: Solid gross margin developments, reaching ~62%
Solid gross margin developments, reaching ~62% GROSS MARGIN PER QUARTER – LAST 5 YEARS % COMMENTS • Internal efficiency in supply and selective 63% 62.8% 62.8% price increases behind improvements in 2020 62.4% • Volume and FX working against 62.2% 62.0% 62% 61.8% 61.8% 61.9% • Weak SEK positive for
Slide 52: Operating expenditures to follow the historical path
Operating expenditures to follow the historical path OPEX BY FUNCTION, MSEK COMMENTS -67 • OPEX growth in line with sales growth during 704 2016-2019 +18% 42 638 • Sales decline starting Q3 2019 – restructuring 589 22 program, lowering run-rate 45 MSEK 5 512 • OPEX per function 0 432 349 • Sales and
Slide 53: Operating margin closing in on 20% target
Operating margin closing in on 20% target OPERATING MARGIN PER QUARTER – LAST 5 YEARS % COMMENTS • Restructuring program and pandemic impact – 23 22.3% main factors for the EBIT expansion in 2020 22 21.5% 21.2% 20.9% • Seasonality – Q3 always strong (vacation 21 20.6% effects), Q4 always weak (marke
Slide 54: Growing EPS despite the challenging macro situation
Growing EPS despite the challenging macro situation EARNINGS PER SHARE PER QUARTER – LAST 5 YEARS, SEK COMMENTS • Growing EPS despite declining top line 1.4 1.33 • In good position for continued EPS growth 1.3 1.24 • EPS 2019: 4.43 (adjusted 4.06) 1.2 1.09 1.10 • EPS R12 Q3 2020: 4.26 (including the
Slide 55: Solid cash conversion during the period
Solid cash conversion during the period CASH FLOW FROM OPERATIONS PER QUARTER – LAST 5 YEARS, MSEK COMMENTS Cash Flow Cash conversion • Strong cash conversion trough the period 120 115 116 200% • Fast expansion in 2017 (18% organic growth) 110 • Inventory build-up during 2018 due to component 100 sh
Slide 56: Cash conversion allows rapid amortization of debt
Cash conversion allows rapid amortization of debt NET DEBT/EBITDA COMMENTS RCF covenant • Acquisitions are debt financed, currently RCF of 45 3.0 MEUR (currently utilized to 46%) 2.69 • Covenant: Net debt/EBITDA of 3.0 2.5 • Net debt / EBITDA expected ~0.5 end of 2020 2.35 2.31 • Expected interval o
Slide 57: Our analysts
Our analysts Fredrik Stenkil, Nordea [email protected] Victor Högberg, Danske Bank [email protected] Joachim Gunell, DNB [email protected]
Slide 58: Agenda
Agenda Introducing HMS Networks (Staffan Dahlström, CEO) Strategy overview 2020-2025 (Staffan Dahlström, CEO, Hans Larsson, CCO, Joakim Nideborn, CFO) 5G and business opportunities for HMS (Jörgen Palmhager, CTO) HMS sustainability plan (Joakim Nideborn, CFO) Financial overview (Joakim Nideborn, CFO
Slide 59: Summary: HMS 2020-2025
Summary: HMS 2020-2025 ENVIRONMENT STAFF & CUSTOMERS GROWTH & PROFITABILTY Make HMS a net positive Happy & high performing employees Continue our sustainable and CO2 company by 2025 generate loyal customers profitable growth
Slide 60: Summary: HMS 2020-2025
aifis Summary: HMS 2020-2025 Focus areas for 2025 5a « Environment At the forefront of - Staff & Customers Smart Grid trends & technology ¢ Growth & Profitablility Al | O HMS plays on the Sweetspots Industrial ICT for business focus until 2025 Playing Field ZL Gontrol Information _\nfrasteuchore\, O
Slide 61: Q&A
Q&A