HMS Networks (HMS) Q3 2024 earnings summary

Executive summary

• Organic net sales declined 30% year-over-year, with Q3 2024 net sales at SEK 792 million, flat year-over-year due to 31% acquired growth offsetting organic decline; order intake rose 37% to SEK 677 million, but organic intake fell 8% amid weak demand and inventory adjustments.

• Adjusted EBIT for Q3 was SEK 194 million (24.5% margin), down from SEK 226 million (28.7%) in Q3 2023, supported by strong cost control and improved gross margins.

• Cash flow from operations reached SEK 205 million in Q3, aided by significant inventory reductions.

• A new organizational structure with three divisions will be implemented in 2025, targeting improved customer focus, efficiency, and annual cost savings of SEK 40 million.

• Acquisition of PEAK-System Technik GmbH and divestment of MB Connect Line were completed or announced to strengthen the portfolio and focus.

Financial highlights

• Q3 2024 net sales: SEK 792 million (Q3 2023: SEK 789 million), +0% reported, -30% organic; adjusted EBIT: SEK 194 million (24.5% margin); adjusted EPS: SEK 2.51 (Q3 2023: SEK 3.77).

• Gross margin at 63.5%, slightly diluted by Red Lion acquisition; product mix impacted margin by about 1.5 percentage points.

• OpEx reduced by 22% organically; SEK 80 million in annualized cost savings from restructuring.

• Net debt at SEK 2,571 million; net debt/EBITDA at 2.79; book-to-bill ratio at 0.87 for the quarter.

• Cash flow from operations SEK 205 million; inventory reduced by SEK 79 million in the quarter.

Outlook and guidance

• Destocking expected to continue for another quarter, with gradual improvement anticipated in 2025, especially in the second half.

• Large customers unlikely to place significant orders for 1–2 more quarters; recovery timing remains uncertain.

• Focus in 2025 on integrating acquisitions, reducing leverage, and realizing cost savings from new organization.

• Cash conversion expected to normalize around 75% after further inventory reductions.

• Price increases to be moderate or stable in 2025.