HMS Networks (HMS) Q4 2024 earnings summary

Executive summary

• Q4 order intake surged 110% to SEK 893 million, mainly from acquisitions, with organic growth at 2% and net sales up 6% to SEK 807 million, though organic sales declined 33% year-over-year.

• Two major acquisitions (Red Lion and PEAK-System) were completed, strengthening North America and niche technology segments, while a divestment (MB Connect Line) was finalized.

• Internal restructuring and a new divisional organization were implemented, reducing about 100 positions and generating over SEK 100 million in annual savings.

• The company maintained robust profitability and cash flow despite lower volumes, aided by cost control, inventory reduction, and a CapEx-lean business model.

• No dividend proposed for 2024 to prioritize deleveraging and integration after major acquisitions.

Financial highlights

• Q4 adjusted EBIT was SEK 163 million (20.2% margin), with full-year adjusted EBIT at SEK 665 million (21.8% margin); Q4 adjusted EPS was SEK 2.60, and full-year adjusted EPS was SEK 9.65.

• Cash flow from operations in Q4 was SEK 177 million, up 49% year-over-year; full-year cash flow was SEK 592 million.

• Net debt at year-end was SEK 3,293 million, with net debt/adjusted EBITDA at 3.41 and net debt/equity at 0.94.

• Q4 gross margin was 62.6% (65.3% prior year); full-year gross margin 62.6% (65.0%).

• Book-to-bill ratio (excl. FX) at 1.07 in Q4, first time above 1 since 2022.

Outlook and guidance

• Destocking is largely over, with gradual market recovery and improved order intake expected mainly in H2 2025.

• Europe, especially Germany, remains challenging, while North America and China show positive trends; APAC lags due to acquisition mix.

• Gross margin expected to remain flat in 2025, with potential improvements from Red Lion integration and higher volumes.

• Cost discipline will continue until clear growth trends emerge, with potential for increased OpEx if performance improves.

• Focus on integrating acquisitions and reducing leverage in 2025.