Year-end report 2021, January - December

Fourth quarter

• Net sales for the fourth quarter reached SEK 571 m (405), corresponding to an increase of 41%. Currency translations had a negative effect of SEK 7 m on net sales
• Order intake was SEK 699 m (408), corresponding to an increase of 71%
• Operating profit reached SEK 109 m (75), equal to a 19.2% (18.5) operating margin
• Profit after taxes totalled SEK 86 m (57) and earnings per share was SEK 1.85 (1.21)
• Cash flow from operating activities amounted to SEK 104 m (83)
• HMS acquired minority shares in Connectitude AB.

Yearly

• Net sales for the year reached SEK 1,972 m (1,467), corresponding to a 34% increase. Currency translations had a negative effect of SEK 75 m on net sales
• Order intake was SEK 2,538 m (1,447), corresponding to an increase of 75%
• Operating profit was SEK 446 m (288), equal to a 22.6% (19.6) operating margin
• Profit after taxes totalled SEK 362 m (220) and earnings per share was SEK 7.61 (4.79)
• Cash flow from operating activities amounted to SEK 508 m (370)
• HMS acquired 60% of the shares in Owasys Advanced Wireless Devices S.L.
• The Board of Directors propose a dividend to the amount of SEK 3.00 (2.00) per share
  
  
  

Comment from the CEO
A strong finish to the record year 2021
The strong market demand from previous quarters continued in the fourth quarter. Furthermore, we had a temporary improvement during the quarter in the availability of semiconductor components that increased our delivery capacity. In total, this resulted in a new quarterly record with an order intake of SEK 699 million, and sales of SEK 571 million, which corresponds to an increase of 71% in order intake and 41% in sales compared to the same quarter last year. Operating profit ends up at SEK 109 million, which is an increase of 46%.

We can thus close a fantastic 2021 with impressive annual figures. An order intake of SEK 2,538 million, corresponding to a growth of 75% and a record turnover of SEK 1,972 million, an increase of 34% of which 26% is organic growth. Our operating profit reaches a new record level of SEK 446 million, which corresponds to a growth of 55% compared to the previous year. Notable is also our strong cash flow during the year, which amounts to SEK 508 million, an increase of 38% compared to the previous year.

A strong cash flow and a strong balance sheet create good conditions for future investments, both organically and through acquisitions.

Good growth in all of our geographic markets
All of our geographic markets continue to show good growth in both order intake and sales, primarily driven by increasing investments in automation, digitization, energy efficiency and remote monitoring of industrial machines. Apart from increased productivity in industrial applications, we also see an increased focus on sustainability as an underlying reason for the high investment rate.

We see the largest increase in Continental Europe, which has more than doubled its organic order intake in the quarter. Just like previous quarters, it is a combination of high investments pace and compensation for longer lead times and component uncertainty that is behind the development. We can see that the markets in Continental Europe that had the toughest 2020 have shown the strongest recovery in 2021.

Continued great uncertainty regarding semiconductors
There is still a great deal of uncertainty and problems regarding the supply of various semiconductor components, especially processors. During the quarter, we succeeded in solving several of our challenges in the short term and therefore managed to deliver better volumes than expected. For the coming quarters, we see a continued shortage of components and we believe that our delivery capacity will remain volatile.

As in the third quarter, we see an impact on our gross margin as an effect of cost increases on components and a continued need for component supply in the spot market. The gross margin ended at 60.8% (61.6).

During the second half of 2021, we made price increases that mostly will have effect at the turn of the year 2021/2022. We have chosen not to change already confirmed orders, which means that we believe in a gradual improvement in the gross margin as our price increases take effect in 2022.

Order book strengthened by pre-order
The strong market situation in combination with longer lead times and the previous-mentioned challenges in component supply leads to customers continuing to place orders further into the future. We continue to build an order book which now amounts to SEK 864 million, strengthened by an estimated SEK 200 million from pre-orders in the quarter. We see this as a direct consequence of the current supply chain situation, which does not reflect underlying demand. Of this year’s order intake, we estimate that approximately SEK 500 million are orders placed in advance due to the supply chain contraints in the market.

Stable inflow of new Design Wins
Despite the fact that many of our customers have been forced to work on modifying their existing products in order to be able to deliver and thus in the short term reduced their focus on new development, interest in HMS solutions has remained high. For those of our products sold according to our Design-Win business model, approximately 43% of HMS sales, we can see a continued stable flow of new customers in 2021. In total, we received 174 (165) new Design-Wins during the year, and that the total number of active Design Wins now amounts to 1,790 (1,820). Of these, 1,447 (1,418) are in production, while 343 (402) are expected to go into production in the coming years.

Acquisitions and strategic collaborations
Spanish Owasys, which HMS acquired 60% of on July 1, has developed well and several technology and marketing projects have already been started together with HMS.

During the quarter, we acquired a minority of Swedish Connectitude AB, and we have started collaborative projects using Connectitude’s software together with our Ewon offering. This type of minority investment is a way for us to create new long-term collaborations, commercially and technically, in areas we deem interesting.

Continued positive market situation with short-term variations in delivery capacity
Overall, we continue to see a positive attitude among our customers. Despite the ongoing pandemic and geopolitical uncertainty, our customers’ interest and need for industrial communication continues to be great and many of our core industries are developing strongly.

We consider the outlook for 2022 to be good, we are entering the year with a strong order book and good speed in our key markets. In the short term, our sales will continue to be strongly dependent on the availability of components. We estimate that our delivery capacity will be volatile, especially during the first half of the year.

The situation on the component market is still uncertain and temporary setbacks cannot be ruled out. We have a good dialogue with our customers, who understand the situation that has affected the entire industry and we see the risk of lost business as small. We continue to work with a focus on long-term growth based on a balanced view of our costs.

In the long term, we continue to believe that the market for Industrial ICT (Information & Communication Technology) will be an interesting area, both in terms of organic growth and acquisitions.

Halmstad January 26, 2022


Staffan Dahlström         
Chief Executive Officer


Further information can be obtained from:
Staffan Dahlström, CEO, +46 (0) 35 17 2901
Joakim Nideborn, CFO, +46 (0) 35 710 6983


This information is such that HMS Networks AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the contact persons set out above, at 08.00 CET on January 26, 2022.


HMS Networks AB (publ) is a market-leading provider of solutions in industrial information and communication technology (Industrial ICT). HMS develops and manufactures products under the Anybus®, Ixxat®, Ewon® and Intesis® brands. Development takes place at the headquarter in Halmstad and also in Ravensburg, Nivelles, Igualada, Wetzlar, Buchen, Delft and Bilbao. Local sales and support are handled by branch offices in Germany, USA, Japan, China, Singapore, Italy, France, Spain, the Netherlands, India, UK, Sweden, South Korea and UAE, as well as through a worldwide network of distributors and partners. HMS employs over 700 people and reported sales of SEK 1,972 million in 2021. HMS is listed on the NASDAQ OMX in Stockholm, category Large Cap, Information Technology.

Attachment

• HMS Networks Q4 Report 2021

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