Accelleron Industries AG (ACLN) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and a warm welcome from my side here in Bern, Switzerland. Thank you for joining Accelleron's first half year webcast conference. I'm Daniel Bischofberger, CEO of Accelleron. With me is Adrian Grossenbacher, Chief Financial Officer. Before we start, let's have a short look at the safe harbor statement. The presentation today contains forward-looking information that naturally comes with uncertainties. Further, the figures in the presentation are in U.S. dollars and prepared according to U.S. GAAP accounting standard. Let me now go through the agenda. Today's agenda looks as follows: I will start with the key highlights and market developments in the first half of 2023. Adrian will then take over for the financial review, including outlook and guidance. Finally, we'll conclude with the Q&A session. I would say let's start. What were the key developments regarding our financial performance? We can look back on a very successful first half of 2023. Thanks to our excellent strategic position, we were benefiting from a strong market demand. At the same time, separation from ABB and buildup activities are going according to plan and associated nonoperational costs developing as guided. I would like to take the opportunity to express on behalf of the whole executive committee and the Board of Directors a big, big thank you to the whole Accelleron family for their continued excellent work and passion. Our revenues grew by 17% or 20% on a constant currency basis, with a strong contribution for Merchant Marine business and demand in the U.S. gas compression market staying at the high level. Operational EBITDA increased by 12%, resulting in an operational EBITDA margin of 24.1%, which is 120 basis points decrease year-on-year. The margin decline is a consequence of stand-alone setup costs, inefficiency from supply chain challenges and product mix. Higher material, labor and energy costs, on the other hand, were largely compensated by price increases. The free cash flow conversion was at a low level of 17.5% in H1. A consequence of a strong net working capital increase. The net working capital increase was driven on the one hand by the revenues growth and on the other hand, by supply chain challenges, which were further impacting inventories and cash conversion. Adjusted for the effects caused by the one-off separation costs on cash and net profit, the free cash flow conversion would be in the order of 55% higher than at the same period last year. At the annual conference in April this year, we gave you some insights into the merchant marine market. Let's shed more light on the other actual growth driver, the gas compression market in the U.S., which continued to develop well in the first half of 2023. High Speed gas-powered internal combustion engines all equipped with turbochargers, drive compressor stations, which are mission-critical for the gas infrastructure. On the left side, you see how such a compressor station with 10 combustion engines look like. The typical application area for combustion engines in the U.S. gas pipeline network is upstream. That means pipelines transporting the gas from the Shale Oil and Gas wells to the main pipelines, the so-called midstream. In this part of the pipeline network, combustion engines are the preferred choice for the mechanical drive of gas compressors as flexibility is a key requirement and volume flows are smaller than in midstream, where gas turbines are the main mechanical driver for the much larger gas compressors. Compared to conventional oil and gas wells, the unconventional oil and gas wells, such as shale oil and gas have lower CapEx to activate the well, but higher running costs to extract the oil and gas from the well. This means that there's a higher sensitivity to oil and gas prices. When prices are high, unconventional oil and gas production in the U.S. tends to be high. When the price is low, production volume tends to be low. What does the gas compression sector means for service? Engines in compressor stations operate 24/7 therefore, reliable products and service are key elements for a stable operation. However, if the gas price goes down, there will be less investments in new rigs, meaning less drilling of new wells. And as the decline flow rates of unconventional wells is much higher, less investments in new rigs means lower utilization of those compressor stations with a time lag of only 6 to 12 months. Let us have a look on the rig counts. Rigs are used to drill new wells. Rig counts are a good indicator of the development of the U.S. Shale Oil and Gas business. The graph depicts the number of rigs in operation in the Y axis over time. What you see confirms the high volatility of Shale Oil and Gas business in U.S. In times of strong economy, number of rigs is increasing. In times of recession, rig counts are declining. Since 2021, we saw a slow, but steady recovery of gas compression markets from the COVID-19 impact -- in addition, OEM and dealers in this segment typically order to stock and not for specific demand. This comes with lower lead times and can further increase volatility, namely by increasing or decreasing stocks. So service is more stable than new business, but also here, we see higher volatility than in marine or power due to the fact just explained before. A key milestone for an independent Accelleron has been achieved. We are very proud of our very first sustainability report, which was published on June 30 this year. For us, it's clear. Decarbonization of our targeted industry will support the growth of the company. We defined our company purposes accelerating sustainability in marine and energy. Our sustainability report is inspired by the standards of the global reporting initiative, and we have the ambition to fulfill the science-based target initiative standards in the future. We have set the target to reduce CO2 emissions Scope 1 and Scope 2 by 70% compared to 2022 levels by 2030. In addition, we have the ambition to reduce CO2 emission Scope 3 in line with Paris Agreement with targets to be set in 2024, prioritizing the work safety and providing a secure environment for our employees is a key element in our sustainability efforts. Let me share some insights on the regulatory environment. The first half year also saw a landmark decision by the International Maritime Organization, short IMO. The maritime industry is in an early stage of a challenging transition, and the IMO received recently new objectives. We'll consider many of these expects is very positive, but there are also question marks that will remain. So let's focus on the highlights. The new target is to achieve Net Zero until 2050. This is much more ambitious than the previously set target of a 50% reduction. To be honest, it was high time that the members of IMO finally agreed to this target in line with the Paris Agreement. Checkpoints have also been set for 2030 with at least 20% CO2 reduction and 2040 with at least 70% reduction. The initial period of this transition is very important. There is the objective to have more than 5% of energy used in marine to be based on zero emission sources by 2030. And global fuel standards and greenhouse gas pricing is to be agreed by 2025. And entry into force is foreseen by 2027. Also the well-to-wake approach will now be reflected and not only the tank-to-wake as before. Well-to-wake refers to the entire process from fuel exploration, production, delivery to using onboard ships and all emissions produced bearing. The downside of this recent decision is that a clear e-fuel target is missing. There's a risk of overreliance on nonscalable biofuels. Last but not least, the real impact will depend on stringency of regulatory implementation in key regions. In summary, this roadmap provides a unique opportunity for us to strengthen our support to OEMs and chip operators with turbochargers, fuel injection, digital solutions, upgrades and service offerings. Also turbocharging is our key business. Our future does not rely on turbocharging alone. The acquisition of OMT that we announced in May was concluded on July 20. OMT achieved revenues of approximately EUR 52 million in 2022, of which more than 70% was generated through service-related demand and has an EBIT margin of above 20%. The purchase price is in the high 2-digit million euro range. Let me briefly explain what OMT does and why we both OMT and Accelleron made the decision to join forces. Let me start by introducing OMT to you. OMT is a world leader in fuel injection systems and serves engine builders with precision equipment mainly for marine. Based in Turin, Italy, OMT was founded in 1930 and currently has 250 employees, mainly based at its Italian headquarters. OMT and Accelleron both have a similar customer base of engine builders and over 70% of revenues originating from aftermarket. The demand for fuel injection equipment is to outgrow the engine market as dual fuel engines, which are becoming the standard, require more injectors per engine. I'm happy to share with you that the new CEO of OMT will be Klaus Heim. Klaus knows the 2-stroke engine market, including fuel injection systems inside out. He joins us from Winterthur Gas & Diesel, in short WinGD, a leading 2-stroke engine OEM where he was the former CEO for the last 5 years. Before that, he was Chief Technology Officer for 8 years at OMT and had several leading management positions in R&D at Wärtsilä, a leading combustion engine manufacturer. This started September 1 and reports to me. We already have a packed agenda for the future development of OMT. Priorities include investments in a new test facilities for green fuels and expansion of production and R&D capacity to support growth and the energy transition. We are preparing the right products and services to support our customers and chip operators in the future. With our turbochargers, we are making great advancements to further grow our strong market position, too. The new Accelleron low-speed turbocharger X300-L, was launched in June 2023. We consider it as a much more than usual evolutionary improvement. It was developed with a strong focus on flexibility to help customers address uncertainty about different pathways to maritime decarbonization. And the product it excels with a number of key benefits when it comes to flexibility. Flexible design, the X300-L modular setup facilitates adaptation to new fuels and engine developments, crucial for periods of uncertainty in which fuel technologies to invest. Flexible operations, the flexible turbocharger cut-out optimizes fuel consumption across the full load range. This provides high efficiency, no matter what the future operating regime of the ship will look like. Flexible service, the cartridge concept improved services -- service durations and increases flexibility on service location. It can be done during a port stay instead of dry docking. This is ideal for turbochargers on the service agreement. And last but not least, it's digital ready, ready for data-enabled service models. I would like to conclude my part with having a glance on our future trajectory. After 3 years of strong growth since 2021, one of the key questions that we're asking ourselves and considering the future growth corridor, are we dealing with just another boom? Or are we entering a new period of high continuous growth? Historically, our long-term growth from 2000 to 2020 was in line with GDP growth levels. So meaning 3% to 4% CAGR. However, with booms, for example, in the marine sector from 2010 to 2011 and subsequent longer periods of stagnations or even declines. Product business proves more volatile with fluctuation up to plus/minus 20% year-on-year. When looking at the service business, the growth is relatively constant, but still plus/minus 5% year-on-year. The last 3 years '21 to '23 showed a period of accelerated organic revenue growth year-on-year, with 2021 at plus 5% and 2022 at plus 12% and 2023 guided at plus 13%. What we saw was, especially at the beginning, a clear recovery from the COVID-19 impact in service. And over time, shipbuilding picking up. Geopolitics had also an impact, and we noted additional investments in gas infrastructure caused by Russian war against Ukraine. Looking forward, we see different factors. Marine Products business, stringent implementation of recent IMO regulations can further push ship newbuilding. However, the value chain is facing significant capacity constraints. Main service business service will stay largely in line with lead growth. However, charter rates have come down by 75% from the record high rates in 2022, which might impact customer service spending short to midterm. The power plant segment showed a particular pattern too while smaller high-speed power plants experienced a strong demand, orders for larger medium-speed power plants remain on low levels due to political uncertainties. Gas compression investment will normalize at a certain point. So considering all these factors, some more positive, some slightly negative. As of today, we do not see any reason to change our midterm annual growth guidance. Hence, we confirm the midterm average 2% to 4% organic growth corridor. But the high product business volatility observed in the past is not history. It's not a question of whether, it's just a question of when. But as in the past, service business will be supporting profitability in product business downturns. With that, I would like to hand over to our CFO, Adrian Grossenbacher. Adrian, let's give us some insights into our financials.

Thank you, Daniel. Let me now guide you through our financials, starting with the group performance. As already informed in July, our revenue growth clearly exceeded our guidance with a 20% compared to the first half year 2022 on a constant currency basis, respectively, 17% in nominal figures. Overall, the positive market momentum continued, leading to an increased demand for both the marine and energy industry with merchant marine and gas compression showing high growth rates. Price increases contributed about the force to the overall growth with 24.1%, we delivered an attractive margin at the upper side of our expectations. While the increased volume contributed positively to the margin we faced higher stand-alone costs of above 250 basis points versus the 200 basis points we communicated back in March. We managed to largely compensate for cost inflation, mainly in material, energy and labor through price increases. Now let us go to the high-speed segment with the gas compression business in the U.S. continued supporting the topline, while the power generation business remained largely stable. Overall revenues grew in line with the group. Compared to 2022, we could significantly improve our operational EBITDA margin to a strong 25.8%. And this was based on a strong operating leverage and pricing measures. As a result, we managed to overcompensate for the impact from cost increases and the stand-alone cost. Moving to the next slide, where we see the performance of the medium low-speed segment depicted. While the demand certain strengthened in this segment, we face more difficulties to translate this into a higher operational margin and could not fully compensate for the cost increases and the stand-alone cost. The cost increases not only resulted from the inflation, but as well due to challenging supply chain situation, which caused multiple inefficiencies, not only limited to sourcing. To a lesser extent, the unfavorable product mix contributed to our [ path ]. Before moving to the cash performance, let us go through the bridge from operational EBITDA to net income and use this opportunity to provide you with an update on the status of our separation journey from ABB and our buildup activities. Operational EBITDA amounted to USD 108 million. As announced during our update in March, the first half of 2023 was a heavy lift in terms of separation and buildup cost. We spent USD 49 million during this period and made, again, very good progress. We managed to terminate more than 95% of our transitional service agreements with ABB. At the heart of this heavy lift resides the ERP transition where we managed to move more to 90% of all countries to the new ERP landscape by end of July this year. We would like to take this opportunity to thank all the people involved in the undertaking for their hard work and dedication. Furthermore, we confirm our guidance of USD 70 million to USD 80 million separation buildup costs for the full year 2023 by when we expect to be largely done with these activities. Finance and interest expenses were in substance offset by a noncash effective pension income. Income tax expenses were largely in line with expectations, with a small upside, thanks to a more favorable jurisdictional profit mix. This leads us to a net income of USD 47 million. Moving to the cash flow, where the conversion was again on lower levels, amounting to 17.5%. Main reasons for the low conversion rate are the increased levels of net working capital, resulting from the volume growth as well as supply chain inefficiencies that can also be partially linked back to higher demand levels. To ease the comparison to last year's figure, we would like to highlight the effect of the USD 49 million one-off cost when adjusting both the net profit and free cash flow by the net impact of these costs we would end up at a conversion rate of around 55%, which is still far from our target corridor, up definitely higher than the figure presented here. While we expect the cash conversion to be on higher levels for the rest of the year, we believe that inventories will remain on high levels. As announced in July, we significantly increased the full year organic guidance to 13%, plus another 2% contribution from OMT. We keep our guidance for profitability stating that we plan to close the year on the lower side of the midterm guidance corridor of 23% to 26%. As stated on the slide before, based on higher levels of inventory, we expect our cash conversion for the full year 2023 to be around 60% to 70%. We confirm our guidance for a constant to slightly growing dividend for 2023. Furthermore, we confirm our general dividend guidance where we plan to return 50% to 70% of our net income to our shareholders. Payout, maybe up to 100%. If leverage is under 1x operational EBITDA, also depending on inorganic opportunities. Finally, please note that we continue to evaluate different ways to return cash to our shareholders. With this one, we closed the presentation section. Thank you for your attention.

Okay, George. So we are open to take questions.

Our first question comes from the line of John Kim from Deutsche Bank.

Two questions, please. On your H1 reported results on the divisional operational EBIT, do those reflect the full effect of the stand-alone operating costs? Or are there additional operating costs that need to show up in the accounts as we think about H2? Secondly and kind of dovetail to that, can you just speak about the underlying seasonality to your divisions before the impact of separating from the company and OMT. And then one very pointed question on restructuring costs. I know you've guided for $70 million to $80 million for this year. But given kind of your rollout and your plan, what do you see for '24 at this point in time?

Okay, Adrian, do you want to take?

Yes. Let me start with, do we see the full effect of the stand-alone cost? Yes, we can confirm this, the sense of a prorated basis. That's to the first question. Second question relates back to seasonality. I think it's fair to state that it's not in each year similar. So we could not talk about general seasonalities. Yes, there are certain effects, for instance, around the Chinese New Year, where we see a bit China slowing down, but then usually recovering. We see minor effects around Christmas. But honestly speaking, it would be fair to state that there are little to no seasonalities actually post-pandemic. And last but not least, in terms of the [ $70 million to $80 million ] and the visibility towards next year, as stated, we expect to be largely done with the separation and build-up activities by end of this year, December. Nevertheless, we would expect most likely up to USD 10 million next year to invest, to optimize our system in orders, well, then to reduce the stand-alone costs, which are running operationally through our P&L. Furthermore, there is still the possibility that the small part of the $70 million to $80 million guide this year could shift into next year. I think these were the two questions I took, and I hope I was able to answer.

Our next question comes from the line of Margarida Rosas Almeida from Goldman Sachs.

Margarida, Goldman Sachs. So why are you guiding for less positive factors in merchant marine? Is it due to overexposure to container?

I mean, I'm not aware that we were guiding negative on marine. I mean the only thing what we see is a good order backlog on the for the shipyards still growing, not to the same extent anymore as 2022, but still growing. The only thing what we are saying is that what we see on the service side, quite a strong demand this year. And there's probably two factors. One was that last year, the charter rate was so high that a lot of companies were trying to delay services just to take advantage of these high rates. In addition, it seems like that thanks to their high -- good money they make, they are now quite positively investing in services. So these are the two effects. So that's why we see might a bit normalized when the charter rates now are done and they follow up the service accordingly. So that's the only thing. But it's not that we are negative, but we just see a quite good positive factor this year in the first half year, especially.

Our next question comes from Martin Husler from ZKB.

I have two. First of all, the price increases versus the cost development in H2. Can you say something about this? Because I think in the first half, you mentioned something like plus 4% on pricing. And then the second question is a very general one. Why is the operating level at medium and low speed so much lower than for high-speed performance.

Let me take first the price increase. I mean, first of all, I would like to repeat, again, what we already said, we had in the two sections, slightly different dynamic. On the high speed, we were able to pass on the cost increase, including the margin to our customers. We're willing to accept these price increases. While on the medium and low-speed, we saw more competitive pressure that we were not able to always with all the customers and all the same products to fully pass on the margin. But overall, for Accelleron, you would say we were able to pass on, but this is a different mix. Looking forward, I mean, it's still valid that prices increase are lasting. And normally, what we do on the service side, we increase once a year the prices. So this will last also in the second half. While on projects, sometimes it's project-specific pricing. So there, we can't really say what's H2.

And maybe to the second question related to the operating leverage or by the medium, low-speed margin is actually decreasing. I think one element, Daniel, you highlight related to the pricing. The second one is definitely that we continue to encounter supply chain challenges and this then leads to inefficiencies along the value chain, meaning from the supply, but then as well to the operation. And last but not least, we have as well seen, let's say, the product mix developing in that sense, unfavorably that certain lower-margin products are more demanded as opposed to last year. And so consequently, you feel that when there is a competitive angle as well on the margin.

Maybe an add-on. When do you expect the supply chain challenges to kind of ease out? Is it in the second half or maybe next year? Or you already see now a certain relief?

First of all, probably -- when I was asked, I think, at the annual conference about our supply chain. At that time, I said worst is over, but we are not back yet to normal. So unfortunately, proved to be right. But all in all, in general, the supply chain has improved. This is just -- this additional growth of 20% was for some of our suppliers quite a challenge. And now they are managing with them and they are ramping up the capacity. So I expect in the second half, it will improve, but it's not 100% over, and that next year, we should be okay then with the supply chain.

Let me just take one question from the chat tool, and it fits to the last question in a way. It's from Alexander Burgansky from Research Partners. Can you please provide more details on price increases, i.e., when were they introduced? How much? And what is your ability to continue increasing prices in the next 12 months? First of all, as I said, normally, we have adjustment of prices on a yearly basis, but they are not all at the same time. As I said, on service -- on spare parts, we have the global spare parts price list, which we adjust every year, more or less towards the end of the year. On the frame contracts we have with the engine builders, that's different. That's depending on the timing, I would say we have distributed them along the year, where we have renegotiating of those prices, some -- on the service agreements, a lot of them are multiyear and there has -- we have indexes where we adjust prices based on external factors like PPI or material or labor costs.

Our next question comes from Sebastian Vogel from UBS.

I have two questions. I would ask one by one. The first one is a follow-up to an earlier question on the marine service demand and the pent-up demand in there. So my question is pretty much is do you see the sort of pent-up demand to support your also in the second half of 2023 or potentially even going into 2024?

As I already mentioned, our trading update, we saw some quite positive impact on the first half, and we did not expect them to be on the same level in the second half, and that's why our guidance, when you do the math, you will see that the revenues in the second half is slightly lower than the first half. So -- and in '24, I don't know yet, to be honest.

The next question would be also on the guidance if we stay there with the 23%. I mean, with the range as said you will be ending up -- or you aim for the low end of the range in that regard. If I calculate correctly, it's implying quite a deterioration compared to the first half. However, the topline is maybe a bit lower or maybe a bit up, but it's not materially different there. So where is the sort of additional margin drag coming from or in that regard, maybe clarification when you mean in the sort of the low end of the range, does it really mean for you 23% or 23% to 24%, 23% to 25% or just have a bit of a better thinking there. What is your understanding of when you're saying the lower end of the range.

Okay. Fair questions about. I mean, as you correctly said, we see slow lower volume and some mix in the second half. But we still have the stand-alone setup costs. And so that's why -- we definitely see it slightly lower, and we are not 100% sure that we can fix everything on the supply chain. That's why we -- you forecast a smaller one, but it's clear. If everything we can manage in a positive way, there's an upside. When we take a look, when we talk on the lower range than normally what we mean is between 23% and 24%.

Got it. And then my last question would be on the mix side of things. Is there a chance to give us sort of a bit of a rough indication or ballpark, what is the mix between equipment and service on a segment level?

Normally, we don't guide that one, but definitely on the high speed now, we are enjoying a higher product portion because as I mentioned, the gas compression has seen a quite strong demand. But all in all, it's around 25% product and 75% service. But again, in the first half year, probably a tick higher on the product business.

Tick higher mean something more like 27% or even going to 30% or beyond?

Max 27%. It's not largely different than group, in fact, but maybe in 1 segment a bit more in the over a bit less, but that can then change again.

Our next question comes from Benjamin Tribble from [ ANZ ].

I got two questions, if I may. The first one regarding the shipbuilding industry and the new climate goals that you mentioned net 0 until 2050. You criticized the known clear e-fuel target, and you mentioned the risk of overreliance on scalable biofuels. I know there's quite some chat about, well, methanol and ammonia as future drivers for ships and shipbuilding. Could you please elaborate a bit on this risk of overreliance? And what would it mean for your business?

What I mean with that one, definitely, there's an intermediate or transition period where definitely biofuel plays an important role. But it's -- it would be bad if we just believe we can fix it with biofuel. So that's what I mean with that one. We need now to invest a lot in renewable energy in wind farms and photovoltaic, but also in H2 electrolysis and so on. So if the industry will not invest in that one, then someone -- we will see that there's a limit with biofuel. So we have the whole industry. We can't just wait and hope someone else will do it. So the ship owners have now to start investing together with [indiscernible] in this infrastructure. So that was my concern. If that does not happen, I mean, the ships will still run, but they would not be able to follow the CO2 reduction trajectory. So that will be the bad thing.

Okay. And the second point, if I may, regarding your financing and the current developments in the Swiss banking sector, I mean the integration of Credit Suisse into UBS. Does this in any way impact you? Do you expect that it may impact you in the future? Are you approaching other banks than UBS now? Or did you have no relationship with them at all? Could you please add some color here?

It's okay, I would like to hand over to Adrian.

I think first and foremost, we need to understand that the financing is based on basically a solid expiry date in '27, meaning that's not tomorrow. Second, I think we do have no indications of changing, let's say, the business relationship. We just got informed. We will be taking over in that sense. So no, not at all, but surely, it is as well our task to continuously evaluate what are attractive, let's say, financing pillars for us. As said before, potentially a bond in the midterm could be something which is of interest for us in the Swiss market. But again, I think that's the situation where we stand currently.

I would take again one question from the Q&A tool from John Sonnerhed from AKO Capital. Can you please confirm the impact of your nonrecourse factoring agreement on H1 cash flow and what the same amount was in H1 '22? So I think nonrecourse factoring agreement, let me try to answer in the sense that what we have in terms of factoring, we did not change. Meaning that on an ongoing basis recurring, if that question more direct towards maybe the other investing activities we have outlined within the investing activity cash flow, that dates back to basically '22 where we have been still a part of ABB. And so there is a change in the treatment as opposed to the times in ABB, but I think it's important that you take '23 on a stand-alone basis, and that's then basically, let's say, the jump-off point.

As it's a feedback tool, I think we don't -- from the Q&A to online, I think we don't get live feedback. But if you want to follow up on this question, please feel free to formulate an answer in the tool. Now back to the phone line, please.

We have a follow-up question from John Kim from Deutsche Bank.

I'd like to spend a little bit of time talking about what you're seeing in the service parts of the business in terms of competitive intensity, ability to put price increases through and a level of indexation. Follow-up question to that. Can you give us a sense within your service base, how much is what you might call ad hoc or normal repairs versus framework and pay as you go?

To be honest, I don't have that pockets in mind, but I would say the maturity is all scheduled maintenance. There's little breakdowns and so on. So it's all mainly based on hours running and dry docking and power plants under ours. So there's very little breakdowns in between. So our products are pretty reliable.

Okay. And can you give us a sense of within your repair base, how much is ad hoc repair versus framework agreement?

Okay. So all in all, we would say we have about 60% transactional business. So where we [indiscernible] quotes. We provide the quality places in order. And the other 40% is what we call agreements. And out of those 40%, 50% what we call more binding agreement. So fixed price paid by the [ hour ] agreements.

Okay. And have you noticed any change in behavior from competitors perhaps somebody like a Wärtsilä?

No, I mean, first of all, when you talk about competitors, they are not competing against us. So I mean -- but also, for example, Wärtsilä is also going in this direction to get more service agreement and we as well because, first of all, this is for us more interesting also service agreement. And in addition, we see more and more appetite from the customer to play service agreement. It's peace of mind, ease of doing business and we are willing to take over some risks, but which, for us, are not risk because we know our product and we can optimize services and service interval.

We have another follow-up question from Margarida Rosas Almeida from Goldman Sachs.

Could you please provide some color on the strong organic growth? So was it mainly driven by volume or pricing?

I think I referred to this already partially at least in the sense that we said we grew 20% organically in constant currency and there of roughly a 4% from pricing, meaning 5% plus minus being then the quarter of that 20%, therefore, 3 quarter being volume driven.

There seems to be no further questions. So I would like to thank everybody for their interest and for joining. We highly appreciate the interaction we have with investors, analysts and people from the press, and we will keep our strong relationship with all of you and looking forward to meeting you soon again. Thanks again for the day, and thanks [ George ] for organizing.