HMS : Q1 Report 2021

Interim report 2021 January - March

First quarter

• Net sales for the first quarter reached SEK 455 m (361), corresponding to an in- crease of 26%. Currency translations had a negative effect of SEK 29 m on net sales
• Order intake was SEK 565 m (401), cor- responding to an increase of 41%
• Operating profit reached SEK 114 m (67) equal to a 25.0% (18.5) operating margin
• Profit after taxes totalled SEK 94 m (48) and earnings per share was SEK 1.93
  (1.01)
• Cash flow from operating activities amounted to SEK 132 m (55)

Last twelve months

• Net sales for the last twelve months reached SEK 1,560 m (1,500), corre- sponding to a 4% increase. Currency translations had a negative effect of
  SEK 51 m on net sales
• Order intake was SEK 1,611 m (1,484), corresponding to an increase of 9%
• Operating profit was SEK 335 m (250), equal to a 21.4% (16.7) operating margin
• Profit after taxes totalled SEK 266 m (212) and earnings per share was SEK 5.70
  (4.56)
• Cash flow from operating activities amounted to SEK 447 m (257)

This is a translation of the Swedish language original. In the event of any differences between this translation and the Swedish original, the latter shall prevail.

"When we close the first quarter of the year, we can report record results in all lines.

The market has recovered faster than we previously expected, and we believe that 2021 has a good outlook.

Staffan Dahlström, CEO,

HMS Networks AB

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Comment from the CEO

Full speed ahead!

At the end of last year, we saw a more positive market climate and an increased demand for HMS products. The increased demand has continued in the first quarter of 2021, even stronger than expected. We released preliminary figures on order intake, sales and profitability as early as April 8, and can now confirm and elaborate on this positive situation.

The quarter's order intake was very strong and amounted to SEK 565 m, an increase of 41% compared to the same ­period last year. This corresponds to an organic growth in order intake of 38%. It is particularly satisfying to see that order intake from all our brands is growing by at least 35%.

The significant increase in order intake is driven by a substantially stronger end market where business has returned after 18 months of lower investment climate and pandemic effects. In addition to the general market recovery, we see temporary effects as our customers rebuild inventories after a weak 2020. There is also an effect of increasing inventories to prepare for longer delivery times for electronic components, due to the semiconductor shortage situation. In total, these effects are estimated to have had a positive effect on orders of approximately SEK 60-70 m during the quarter, which we believe is non-recurring.

Sales in the first quarter also increased considerably and amounted to SEK 455 m, an increase of 26% (organic growth is 19%) compared to the corresponding period last year.

Despite continued currency headwinds and challenges in sourcing of components, increasing our purchasing costs, we can continue to show a positive development in our gross margin, which amounts to 64.0% (62.4%) for the quarter. The biggest effect behind the strong gross margin is the program that was implemented in 2020 with increased efficiency in operations and selective price increases.

The quarter's operating profit amounts to a record level of SEK 114 m, a significant improvement of 70% compared to the first quarter last year. The positive result is driven by sales growth in combination with good gross margins and continued low operational expenses, partly due to reduced travelling for our staff and reduced external activities due to the pandemic.

Cash flow continues to be strong at SEK 132 m (55) in the quarter, which has contributed to reducing our debt. At the end of the quar- ter, we had a net debt in relation to EBITDA, of 0.21 (1.13).

Strong recovery in our main markets

The biggest contributing factor to the strong quarter has been a continued recovery in our main markets - largely driven by Continental Europe, but China and Japan have also continued to develop well, and on the order side, USA has also shown record levels. Machine builders and device manufacturers in all segments have shown a strong demand for our product offerings.

Within Anybus, the German automotive industry, which is an important target group for Anybus sales, has accounted for a large part of the growth through its investments in conversion to electric car production.

Also, in Asia growth has been driven by Anybus, largely through the robotics and wind power industry, which takes Asia to new record levels both in terms of sales and order intake.

Procentec, which was acquired in the previous quarter, has continued to develop very well, with organic growth of 75% and sales of SEK 52 m, driven by a number of new key customers in Logistics.

Roll-out of the HMS 2025 strategy

During the quarter, we continued the work of implementing the HMS 2025 strategy, presented during the latter part of 2020. Among other things, we strengthened our resources within the important functions M&A and sustainability, two of the main areas in our new strategy.

After setting the wheels in motion last year, we have now begun further expansion in China and investments in other interesting markets in Southeast Asia.

In the near future, we will also make further investments in building our team for long-termorganic growth in Industrial ICT (Informa- tion & Communication Tech­nology), towards our goals in 2025: Revenue of more than SEK "π" (3.14) billion, to be CO2 net positive, and to reach our high ambitions for customer and employee satisfac- tion.

Positive outlook for 2021

The recovery has been somewhat faster than we previously expec­ ted, and although the first quarter has some positive non-recurring effects, we expect to see continued strong demand in 2021. Of course, there are still uncertainties about what happens with the pan- demic, but we assess the risks as lower for each month that passes with more and more people vaccinated. Despite strong demand, we are able to deliver as usual, but we see that the strong order intake in combination with increasing lead times for sourcing semiconductor components means that we can expect certain delivery time increases for customers. The price situation for semiconductors is also expected to increase in the future. As previously communicated, we see increased interest in our offering within Remote Access, which we believe will continue to have a strong market even after the pan-

demic. We also estimate that our operational expenses will increase

during the year with new investments and gradually better conditions for travelling and customer meetings.

We continue to work with a focus on long-term growth with a balanced cost level. In the long term, we continue to believe that the market for Industrial ICT (Information & Communication Technol- ogy) will be an interesting area, both in terms of organic growth and acquisitions.

+41%	+26%	25%
Order intake	Net sales	Operating margin
Q1	Q1	Q1

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Order intake, net sales and earnings

First quarter

Order intake increased during the first quarter by 41% to SEK 565 m (401), of which currency translations affected by SEK -51 m (19). Procentec B.V., acquired in the fourth quarter of 2020, has contributed to order intake with SEK 61 m. The organic increase in order intake was 38%.

Net sales increased by 26% to SEK 455 m (361), of which currency translation effects were SEK -29 m (3). Procentec B.V. has contributed to net sales by SEK 52 m. The organic increase in net sales were 19%.

Gross profit reached SEK 291 m (225), corresponding to a gross margin of 64.0% (62.4). Operating expenses amounted to SEK 177 m (159), where of SEK 15 m corresponds to Procentec B.V. The organic change in operating expenses was 7%, corresponding to SEK 11 m.

Operating profit before depreciation/amortization and write-downs amounted to SEK 141 m (90), corresponding to a margin of 31.0%

(25.0). Depreciations/amortizations and write-downs amounted to SEK 27 m (23). Operating profit amounted to SEK 114 m (67), corresponding to a margin of 25.0% (18.5). Currency translations effected the Group's operating profit by SEK -12 m (4). The acquired company Procentec B.V. has contributed to the operating profit for the quarter by SEK 16 m, including amortization of overvalue.

Net financials was SEK 1 m (-4), which gave a profit before tax of SEK 115 m (63).

Profit after tax amounted to SEK 94 m (48) and earnings per share before and after dilution was SEK 1.93 (1.01) and SEK 1.92 (1.01) respectively.

MSEK	Net sales	MSEK
500		1 800
450		1 700
400		1 600
		1 500
350		1 400
300		1 300
250		1 200
2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1

Net sales per quarter		Net sales rolling 12 m

The graph shows turnover per quarter on the bars referring to the scale on the left axis. The line shows turnover for the latest 12 month period referring to the scale on the axis to the right.

MSEK			Operating profit EBIT			MSEK340
120
110								320
100								300
90								280
80
70								260
60								240
50								220
40								200
2019 Q1	2019 Q2	2019 Q3	2019 Q4	2020 Q1	2020 Q2	2020 Q3	2020 Q4	2021 Q1

EBIT per quarter		EBIT rolling 12 m

The graph shows operating result EBIT per quarter. The bars refer to the scale on the left axis. The line shows operating result for the last 12 month period referring to the scale on the axis to the right.

	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2
Quarterly data	2021	2020	2020	2020	2020	2019	2019	2019
Order intake (SEK m)	565	408	336	302	401	337	372	375
Net sales (SEK m)	455	405	345	355	361	346	377	416
Gross margin (%)	64.0	61.6	61.9	62.0	62.4	61.2	62.8	61.2
EBITDA (SEK m)	141	99	102	111	90	78	82	94
EBITDA (%)	31.0	24.3	29.4	31.2	25.0	22.6	21.7	22.6
EBIT (SEK m)	114	75	77	69	67	55	56	72
EBIT (%)	25.0	18.5	22.3	19.4	18.5	15.9	14.9	17.3
Cash flow from operating activities per share (SEK)	2.83	1.79	2.49	2.47	1.18	1.30	1.93	1.10
Earnings per share before dilution (SEK)¹	1.93	1.21	1.33	1.24	1.01	1.46	0.98	1.10
Earnings per share after dilution (SEK)¹	1.92	1.20	1.32	1.24	1.01	1.46	0.98	1.09
Equity per share (SEK)	27.08	25.75	24.62	23.60	22.49	21.06	19.88	19.42

¹ Attributed to parent company shareholders.

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Cash flow, investments and financial position

Cash flow from operating activities before changes in working capital amounted to SEK 151 m (84) for the first quarter of the year. Changes in working capital were SEK -19m (-29),mainly explained by a combination of increased accounts receivable and decreased current assets. Cash flow from operating activities was thereby SEK 132 m (55).

Cash flow from investing activities was SEK -9 m (-14) which corresponds to investments in intangible and tangible assets of SEK -6m (-14) and investments in financial assets of SEK -3 m (0).

Cash flow from financing activities was SEK -126 m (-29), which is mainly explained by a decrease in external loans of SEK -102 m (-15) and re-purchase of own shares by SEK -15 m (-6). Moreover, amortizations of lease liabilities claimed SEK -9 m (-9). This means that cash flow for the quarter was SEK -3 m (12).

Cash and cash equivalents and net debt

Cash and cash equivalents amounted to SEK 80 m (67) and unused credit facilities to SEK 419 m (203). Net debt amounted to SEK 96 m (390), whereof SEK 96 m (111) corresponds to lease liabilities. Net debt to EBITDA ratio for the last twelve months was 0.21 (1.13). Net debt/Equity ratio was 7% (36) and Equity/Assets ratio was 71% (59).

The HMS Networks AB share

HMS Networks AB (publ) is listed on the Nasdaq OMX Stockholm Mid Cap list, in the Information Technology sector. By the end of the period the total number of shares amounted to 46,818,868 of which 157,571 shares are held by the Company.

A list of the company's ownership structure can be found on the company's website (www.hms-networks.com).

Annual General Meeting and dividend

The shareholders of HMS Networks AB (publ), have been invited to the Annual General Meeting, which will be held on Friday,

23 April 2021. The Board of Directors has decided that the Annual

General Meeting should be conducted by way of postal vote pursuant to temporary legislation being in effect in 2021. This means that the Annual General Meeting will be held without the physical presence of shareholders, representatives or third parties.

The Board proposes to the Annual General Meeting 2021 that an ordinary dividend of SEK 2.00 (-) per share will be paid for the 2020 fiscal year. Excluding shares held by the Company, this corresponds to a total of SEK 93 m (-). The dividend is proposed to be paid on one occasion with record date April 27, 2021.

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