Hexatronic Group AB (publ) (HTRO) Earnings Call Transcript & Summary

Welcome to the Hexatronic Q2 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO, Rikard Froberg. Please go ahead.

Good morning, everyone, and welcome to the second quarter earnings call for Hexatronic. I'm Rikard Froberg, Group CEO. And with me, as usual, I have Martin Aberg, Deputy CEO and Head of Data Center Business Area; as well as our CFO, Pernilla Linden; and Patrik Johannesson, Head of Investor Relations. And we have a strong quarter to present today. Net sales were SEK 2.2 billion which is 18% growth, of which 11% organic. And our adjusted EBITA was right on 10% margin, SEK 224 million, which is a 33% increase year-on-year. We will talk about adjusted EBITA in this presentation, but I just want to mention that there are no adjustments in the quarter. This is for consistency with previous quarters. So what you see is what you get. Also, the strategic business shift continues, where we see that, in particular, the data center business continues to play an ever-increasing role at Hexatronic. As of now, Data Center and Harsh Environment business representing about 40% of net sales and about half of the adjusted EBITA. But also on a geographical note, there is a shift in the business that's going on. The North American business is growing rapidly, and it now accounts for 44% of the total, and it was 34% a year ago. We saw, in particular, strong organic growth in the Data Center business, which grew at 27% organically and Fiber Solutions, which was 11% organic as it was the whole group. And for Fiber Solutions, in particular, was very pleasing to see that we turned the corner, we saw a 56% improvement in the EBITA level year-on-year as well as the third consecutive quarter of sequentially improving EBITA. Cash flow was strong at just over SEK 180 million with 84% cash conversion. And this is despite a seasonality where we're typically more busy in the summer half. So normally, there's a bit of building inventory and accounts receivable. But this has been a focus for the organization, and we're very pleased that we saw a strong cash flow also in this quarter. And because of that and some other factors, the net debt as well as the financial gearing was reduced in the quarter. Looking at the quarterly results a little bit more in the perspective of recent quarters. On the left-hand side here, we have the net sales where we can see that the blue bars, it's rather constant. So for a number of quarters, it's been relatively flat. But now in the last quarter here, we do see a step up in that. But perhaps more importantly, if we look at the gray line here is where we take out the effect of acquisitions and also currency, this is underlying organic growth. And very clearly, over time, this trend has been improving. There are some ups and downs in the quarters. This is -- at the end of the day, this is a project-based business. And we did talk about last quarter that we saw slow start to the year in January and February with an impact from the cold weather. But since then, we've seen a gradual and pretty significant ramping up of the business activity. On the right-hand side, it is the adjusted EBITDA by quarter. And here, we can see very clearly that what started as a modest improvement sequentially in last quarter, now continues with a stronger sequential improvement, but also a quite strong year-on-year improvement compared with the Q2 of last year. Some of the key events in the quarter, we completed the acquisition of JOWO in Germany. This is a defense-oriented harsh environment business that was completed on 1st of April, so we have a full quarter numbers in the results here today. Then in May, we raised some equity about SEK 600 million and roughly half or a little bit less than half of that was used to fund the second acquisition, which was Superior Fiber & Data Services in Texas. This is in the Data Center business area and was closed on June 1. So there's 1 month of numbers in this quarter. Regrettably, Martin Aberg has announced his intention to leave Hexatronic after 12 years. And we are working on that succession planning, and we actually announced this morning an interim head of the Data Center business, Oscar Warme, it's in internal solution, and that will take effect on August 1. We are -- last but certainly not least, we're very excited about announcing a strategic partnership with the Danish company, NKT. And associated with this partnership, there's also an investment in submarine cable production in our facility in Hudiksvall, Sweden, and let's take a little bit deeper look on that one. As some of you may know, we have 1 production line in Hudiksvall, making the submarine cables already. It's an old line. It's large and strong and big and it's called the hulk, therefore. And we have talked for a while now about the growth in this strategic segment. It's not huge in terms of revenue today for Hexatronic but it is strategic, and it's also a high-margin business. And gradually, we have been squeezing more and more capacity out of that 1 production line. But now we're at the point where we need to invest in more capacity. So with an additional line, it will be roughly the same size, but a faster line than the existing one. We will more than double the capacity from depending on a little bit on product mix and pricing. Today, our capacity is in the range of SEK 150 million to SEK 200 million. We will have capacity to serve over SEK 0.5 billion when this line is completed, which will be sometime during 2028. So it creates a strong growth on that platform and with the partnership that we're entering with NKT, we have a very good data loading for many years to come on this production line. And the line is also faster, as I mentioned, and therefore, we will get higher productivity in that production, which is important. But also, very importantly, we'll have 2 parallel lines. So we can now take 2 projects in parallel, which will give us more flexibility and shorter lead times and better service level to NKT and other customers. We're not disclosing the exact CapEx amount here, but it is room in the previously communicated about 3% of CapEx to total sales, plus minus 1% that we have talked about previously for Fiber Solutions. We're running a bit lower today, but this is one driver that we will approach that 3% going forward. I mentioned the diversification. And here on this page, we see that it continues. On the top, we see the group sales and data center and harsh environment business areas now account for about 40% of group sales, which is 5 percentage points higher than a year ago. And on the bottom, it's the adjusted EBITDA. And here, they account for about 50% of sales. So they are above average margins and also above average growth level. However, this is actually lower than it was a year ago, but the reason for that is the restoring of profitability in Fiber Solutions, which we will talk about in a second. So it's going the opposite way, but it's for a very good reason. So diving in then to the business areas and starting with Fiber Solutions, which I consider to be the over performer in this quarter, we saw 11% organic growth. And we saw an EBITA margin of 9.1%, which was 56% absolute terms growth in EBITA over last year. And then sequentially, it was pretty much a doubling of the EBITA, but there's some seasonality here as well. Q2 should always be a bit stronger than Q1. But clearly, things are moving in the right direction here. And we saw already a modest EBITA margin improvement in the first quarter. We talked about that, and that was largely driven by the cost reduction program that we launched 6 months ago. We see continued effect of those cost savings. But now in the second quarter on top of that, we also start to see the growth in the business. And that volume growth is really turning into operational leverage that's flowing through to the bottom line. The growth momentum, as we have talked about before and flagged is coming from the North American market, where we have invested -- we have invested for several years in plant capacity, but we also, in the last year, invested quite a bit in our commercial footprint, sales and marketing resources, new products launched, et cetera. And this is continuing to show flat. So we see strong growth in the U.S. market, and it's both in the Fiber to the Home segment, which is still the majority of the business. But increasingly, we're also seeing strong growth in the Transport Network segment that we have talked about before. And what's driving this is indirectly is actually the Data Center build-out with the almost explosive growth in Data Center builds in the U.S. market. We see that simply that data traffic is growing so quickly that the digital infrastructure needs to be upgraded on a pretty big scale. This drives sales in the middle mile and the long-haul segment, not only in the Fiber to the Home. We're not yet seeing that effect translating in Europe. Europe market is still quite challenged, and we expect that to continue in the short term. But we have a belief that over time, if Europe catches up on the data center growth that also we would see a similar effect here on the transport. Moving on. Sustainability is an important strategic pillar for Hexatronic and we have made a very clear commitment to be climate neutral in our own facilities by 2030. In the quarter, we took 1 small but important step towards this by installing solar panels in our facility in Korea. So you see a picture of that here. And we expect to generate about 430-megawatt hours of fully renewable electricity for that facility going forward. Next business area is Harsh Environment. And here, the net sales grew 9%. However, that was largely driven by the inclusion of JOWO acquisition. So organically, it was a 4% decline year-on-year. There was a sequential improvement over the first quarter. We continue to see strong performance for connectivity solutions, which is largely defense-oriented business. However, the dynamic cables, we've seen slightly muted demand in the start of this year. There was, I would say, some level of improvement in the quarter versus the first quarter. And we have seen a modest pickup also on the order book here. But a little bit ironically, perhaps that with the turbulence in the Middle East and the oil price volatility, even though long term, clearly, a higher oil price is good for the customers here. In the short term, the uncertainty leads to a little bit of hesitation for some of the CapEx projects. So that's what we have seen. We have an outlook that we think there will be a modest stabilization of this business also going forward, and we expect second half to be a little bit stronger than the first half. Innovation, another one of our core strategic pillars. Here is an example from the Harsh Environment space. where we have launched a new jacketed wireline. A wireline is, basically, it's a long cable that is inserted into a drilling hole and it's used for sensing and measuring applications, either the cable itself or it's connected with some kind of measuring device at the end of the cable. And although these wirelines are armored with steel wire, they have a certain lifetime and they tend to break. So the new product here, which is called VIRIDIS, it's -- it was launched in April, and it's a jacketed. So it's -- the secret sauce here is the proprietary polymer formulation and technology that we're quoting this cable with. It may not be rocket science, but it's a proprietary formulation, and we know that it increases lifetime by about 2x versus conventional cables. And knowing that these are cables that are typically -- they're tailor-made, always made to specification and typically from SEK 1 million and upwards in price. It's a big piece of equipment on the drilling side. And if you can double the life line, even if it's a little bit more expensive, a very, very obvious customer value and the total cost of ownership argument. So we launched in April, and we're pleased to say already several customers have placed pilot orders or test orders, so they order 1 cable, and they're fully testing those cables now. And as soon as they reach what's considered the benchmark of 500 cycles, we expect repeat orders. So for bigger Hexatronic this might not be a huge business, but certainly very promising for Rochester Cable and the Dynamic cable business. Now we are moving on to the Data Center business area. I will hand over to Martin to walk us through yet another very strong quarter of growth.

Thank you, Rikard. Let us look at the development of our strong business area, the Data Center. And the strong growth continued in the quarter, including the acquisition of communications that we closed end of last year, and Superior Fiber and Data Services that we closed last month, sales growth to 56% in the quarter. And we are especially pleased with the strong organic sales growth of 27%. And as in the previous quarter, it is predominantly the U.S. market that drives this growth, even if we have growth in all regions. Looking at the EBITA margin, we ended up at 15.5%. And as you can see from the graph, profitability has been in the range of 15% to 17% over the last 4 quarters, well in line with our financial targets for the Data Center business area. Last year, we had a number of larger projects with higher margins that drove the profitability, which we also highlighted in the report as of last year. Going forward, we expect margins to be at similar levels as over the last 4 quarters. And as always, there will be variation between the quarters. Moving over to the market outlook. Same message last few quarters. There is a general level high activity in the market. The market is expected to continue to be driven by the build-out of the very large data centers. And this is typically the hyperscale and the colocation segment of the market. If we look at our business, we have a healthy mix with hyperscale and colocation segment, that is our largest customer group. And this is followed by the more local Data Centers which we often refer to as the enterprise data centers. And going forward, there will be a continued strong focus on organic growth, but also our focus to continue our structure as search for specialty service businesses. We have a very interesting pipeline of potential targets and several ongoing dialogues. So Superior Fiber & Data Services was one of the targets of our list that we successfully closed last month. Superior is a service business. It's based in Dallas. It's a short drive, no more than 5 minutes from our largest Data Center office we have in the U.S. And this was a typical Hexatronic acquisition in the sense that our U.S. colleagues have cooperated with them for many years and introduce the owner and the opportunity for a deeper collaboration to the M&A team. In terms of financials, Superior's annual sales of approximately USD 40 million and at an EBITDA margin of 12% to 13%. And that's the overall Data Center business area, the company has strong cash conversion. On the right-hand side of the slide, you see a slide that we presented last year, and this highlights our ambition to broaden our service offering and also the type of customer segments that we serve in the market. And both the acquisitions that I just talked about communications in, acquired end of last year and the more recent now Superior Fiber, 1st of June. Those companies service offering include audio/visual, wireless solutions, as well as security and access control, basically ticking all the boxes on the application or services side that we presented. Looking at the customer segment side on the same slide, Superior has a very strong position towards a school and campus environment. And this is a customer segment that we previously identified as strategic. But prior to this acquisition, we did not have exposure to. Looking at the transaction and purchase price. The fixed purchase price amounted to $29 million. And then there is a potential earn out of up to USD 3 million. In terms of transaction multiple, it is 5.8x to 6.4x EBITDA, and this depends on the performance of the business over the next few years. And since we acquired a U.S. tax corporation, the transaction could be structured as if it was an asset deal from a tax purposes, and this effectively reduces the valuation with roughly 0.4x. And finally, Superior data and also the previous acquisition of Communication Zone, those both are very good examples of the company that we actively suffer our growth strategy. So with that, I hand over to Pernilla to summarize the financials of the quarter.

Thank you, Martin. So overall, we had an axis of SEK 2.2 billion in Q2. That is an overall growth of 18%. Organically, we had a growth of 11% due to strong organic growth in our Data Center business, but also in the Fiber Solutions that fully offset the organic decline in Harsh Environment. We had an 8% acquisition-driven growth, and that is coming from Communication Zone within our Data Center business, JOWO Systemtechnik within our Harsh Environment business; and last but not least, our recent acquisition, Superior Fiber & Data Services within our Data Center business. And we continue to have a 2% negative effect on exchange rate compared to last year. Adjusted gross margin at 38.7%, which is 1.4 percentage points lower than Q2 2025, and that is due to the mix between business units, and an exceptionally strong margin in data center during Q2 2025. Adjusted operating costs were at 25.8% of net sales in the quarter compared to 27.6% in Q2 2025. But it is higher in absolute numbers. And that increase is mainly related to new acquisitions, but also, as Rickard said, small investments for future growth. Adjusted EBITA of SEK 224 million with an adjusted EBITA margin of 10% compared to 8.9% last year. The higher EBITA margin was primarily driven by Fiber Solutions through the performance improvement program launched in Q3 2025 and higher net sales in relation to the cost base, driven by higher volumes. And earnings per share at 0.61% compared to 0.38% previous year. If we're looking at Fiber Solutions, we had a total sales of SEK 1.3 billion in the quarter, an overall growth of 9% organically, increase of 11% in the quarter. And the difference between of the the 2% is headwind of FX. Net sales in Europe decreased by 10%. It is a decline due to weaker demand in the FTTH market, primarily microduct and price pressure [indiscernible] by overcapacity in the industry. But in North America, net sales increased by 44% mainly due to increased activity in U.S., both due to ongoing FTTH build-out, but also because of an increased investment in transport networks, as Data Center building continues. In the APAC region, net sales grew with 9% driven by all primary markets. An adjusted EBITA of SEK 122 million or 9.1% compared to 6.1% prior year. And the increase in absolute percentage is primarily driven by higher sales in relation to the cost base, driven by higher volume and by the performance improvement program. CapEx investments in the quarter, SEK 16 million or 1.2% of sales. That's mainly related to maintenance. If we then take a look at Harsh Environment, total net sales for Harsh Environment of SEK 361 million, a growth of 9%, as primarily driven by the acquisition of JOWO Systemtechnik. Organically, we had a 4% decline. The strong performance in Connectivity Solutions could not fully offset the lower sales within our dynamic cable business. And we also saw a negative currency effect of approximately 2%. And as previously communicated, the companies within Harsh Environment have an international customer base and a majority of revenues from large projects, which means that sales per geography can fluctuate between the quarters. Adjusted EBITA at SEK 36 million and a margin at 10% compared to 12% previous year, a decline compared to previous year due to different product mix and timing of some projects. CapEx investments in the quarter, SEK 11 million or 2.9% of sales, and that is related to both capacity and maintenance investments. A record quarter in total net sales for Data Center of SEK 538 million, an overall growth of SEK 56 million with an organic growth of SEK 27 million. Strong development, especially in the U.S., but I would also say that it's pleasing to see that overall, all operating units grew in the quarter. Acquired growth of 32% came in from Communications Zone and also from Superior. Adjusted EBITA of SEK 83 million or 15.5%, 16% growth in absolute number but lower percentage compared to prior year. The decline in adjusted EBITA margin compared to last year was driven by continued investment into organic growth initiatives and exceptionally strong margin last year. And CapEx investment in the Data Center business is quite low, SEK 3 million or 0.7% of net sales. Cash flow from operating activities before changes in working capital of SEK 214 million, a small negative effect from working capital of SEK 33 million in the quarter. That is mainly related to increased accounts receivable due to strong sales in the quarter and a small increase in inventory, which is partly offset by increased accounts payable. So cash flow from operating activities of SEK181 million, representing 84% cash conversion. Maintenance and capacity investments of SEK 30 million, equivalent to 1.3% of sales. SEK 524 million is mainly attributed to the acquisition of JOWO and Superior, as well as a payment of earn-outs related to KNET and acquisition option related to Qubix. SEK 408 million from financing activities, mainly explained by net proceeds from a new share issue of SEK 583 million. This was partly offset by amortization of lease liabilities of SEK 33 million, while borrowings of SEK 160 million and amortization of loans of SEK 302 million. If we then go to next slide and look at our net debt. Net debt, which corresponds to net debt, excluding lease liabilities, amounted to SEK 1.5 billion at the end of the quarter which is a decrease of SEK 202 million compared to last quarter. Overall leverage at 1.7x compared to 2.2x at the end of Q1 2026, a reduction of 0.5x. Leverage was negatively impacted by earn-out payments as earlier communicated and acquisitions of JOWO and Superior completed during the quarter. And that was offset by the share issue completed during the period, plus a positive effect from increased EBITDA. At the end of Q2, we had SEK 694 million of cash and SEK 1.2 billion unutilized backup facilities, which gives us a liquidity of SEK 1.9 billion. And we have a solid financial position.

Okay. Thank you, Pernilla. So time to wrap things up here before we move on to Q&A. And if we summarize the quarter first, it was a strong quarter. Net sales of SEK 2.2 billion, double-digit organic growth as well as an EBITA improvement, both sequentially and year-over-year. Fiber Solutions came back to organic growth driven primarily by the U.S. and also a strong EBITA margin improvement, both year-on-year and also for the second consecutive quarter sequentially. Harsh Environment was slightly down in the quarter, but it was also a little bit better than the first quarter. So sequentially it was an improvement, and we do expect that slow gradual improvement continue. And then Data Center continued its string of strong growth, again, strong organic growth in the quarter and for the very first time, broke through the SEK 0.5 billion in the quarter in terms of net revenue. And we do, as Pernilla just pointed out, we have a strong financial position to invest for growth, and that's acquisitive growth, but it's also increasingly organic growth that we are investing in. So if we take a little bit of a step back and not only about the quarter, but I've been here 16 months now. And we have been very busy in the last year or so on working on, I would say, mainly 2 things. One, is a turnaround of Fiber Solutions, and we're now clearly seeing things moving in the right direction for Fiber Solutions. And the other big strategic initiative has been to grow and boost the Harsh Environment and Data Center business so that we have a better diversification and balance in our portfolio. And I think we're seeing also the effect of that now with those businesses at 40% of net sales and 50% of the profitability. So there's a lot of things that are moving in the right direction. We are proud of that. We're proud of the results this week -- this quarter. But we also know that there's a lot more work to be done. So -- we're not resting on any laurels. And we hope that there is more to come in terms of performance. And on that note, just a few words of guidance on how we see the outlook going forward. Starting with Fiber Solutions, we do expect continued organic growth in the U.S. We've been clearly seeing this for a while now, and we expect that to continue in the short- to mid-term However, equally, we expect a lower activity level in the European market to remain in the short term. We have, I think, a speculation or an expectation maybe that at some point, the transport network growth that we see in the U.S. should also translate over in Europe at something similar, but we're not seeing any signs of that as of today. The submarine cable order book is strong for 2026. And the majority of the revenue will be in the second half. We previously said third quarter. What we see now is that some -- timing of some orders have been moved a little bit. So we think it will be more spread between Q3 and Q4. And all-in-all, if we look at all the puts and takes for Fiber Solutions, as of today, we expect that the third quarter will be rather similar to the second quarter. For Data Center, strong market, strong order book, and strong outlook. So organic growth to expect to continue there. And in terms of the margin, we have seen that margin, sort of, converging towards the 15% longer-term financial targets that we have issued. And for the last 4 quarters, it's been relatively stable in that range or slightly above. And we also don't see that would change materially going forward. Harsh Environment, there's overall robust activity. The defense sector is seeing strong demand, the temporary effect of some government shutdowns that we saw Q1 and Q2 is now behind us. However, as mentioned, a little bit softer demand from the oil and gas industry. So all-in-all, we expect a modest margin improvement in the second half compared to the first half of 2026. And overall, we continue to prioritize Data Center and Harsh Environment for M&A activity where we have room to continue to do acquisitions. And we're also taking an opportunistic view on Fiber Solutions. I think we're now earn the right to grow in Fiber Solutions. And if something comes up, we will take a look at that, but it's not where the focus is today. It would be more of an opportunistic approach. So with that, that summarizes the presentation for today, and I think we can move over to the Q&A.

[Operator Instructions] The next question comes from Max Bacco from SEB.

Only two this time. So I will have to prioritize perhaps on the Harsh Environment segment. I mean, you have a target of 15% EBITA margin in 2028. How should we think about the trajectory here in perhaps say it's 2027 and going into 2028 as well given the current development? Any comments on that?

Do you want to take that, Pernilla? I will start and then Pernilla can correct me. I mean, as we've been pretty clear before, most of the companies in this business area, also the new ones are in that range. We have 1 company, which is a larger one in the group that's lower. They didn't have a good start to the year. Things are improving a bit right now. We still feel quite strongly that this is a type of business that should make 15% longer term. We haven't really proven it to date, but we have a a modestly improving trend right now. And I -- we also have -- we have activities and plans in place to get us towards that target. And I don't want to be more specific than that.

Okay. Understood. And then turning to the Fiber Solutions segment, which, of course, the growth in North America, very impressive. Perhaps a few questions in one. But first, you mentioned that Fiber Solution was the over-performer here in the quarter. The question then, should we interpret that the asset was perhaps a bit too strong here in the quarter? And then also, if you could have some comments on the capacity utilization in North America, given the very strong growth. And also how you serve the U.S. market in terms of middle mile and long-haul solutions given that you previously have been very focused on the Fiber to the Home segment?

All right. A couple of questions. Starting with utilization. I mean, we have seen volume growth in the U.S. market for a while. Also last year, last year, it was offset with price declines year-on-year. That's now behind us, so the volume growth translates into revenue growth as well. And in fact, for most of the DUC, because of the resin price increases going forward, there might be some help on the pricing side. We've talked about that. How we serve the market is, we sell directly and we sell through distribution. We are working to expand our distribution. We think there's room and we have expanded the distribution. There's definitely room for us to do -- continue to sell direct to some customers, but also get a broader reach through an expanded distribution network. And what particularly when it comes to the middle mile, we have launched some -- a product line, you may recall Max called Viper core. This is a type of product that is directly aimed at that middle mile with a high fiber count and it's looking pretty promising.

Okay. Understood. And just circling back to the question on capacity utilization. As you stated, you have seen volume growth, both in 2025, but also now as well, of course. So the question being, do you have much more room to grow within existing factory? Okay. Okay. Understood.

We don't -- as you know, we don't disclose utilization numbers, but we have ample opportunity to grow. And I think also now I remember, you asked this an exceptional quarter -- as you know, I mean, this is a project business. So we always say don't look too much on a single quarter, look more at the trends. I think we talked about the first quarter being a little bit soft, and there was some weather impact on that. And now that's catching up. You probably should look at the half in total. I don't think there's anything exceptional in the quarter, but you always have a little bit of these swings. But like we also said, as of today, it looks like the third quarter will be similar to the second quarter.

The next question comes from Adrian Gilani from ABG Sundal Collier.

Yes. I'll use my two questions to just clarify some things about your outlook comments. First of all, on Fiber Solutions, as you said, you're guiding for similar results in Q3 as in Q2. And as we know from before, you're expected to have significantly higher subsea cable deliveries in Q3. So I guess, I'm interpreting this as you are sort of guiding down Fiber to the Home sequentially a bit. Is this a fair interpretation? And if so, what is sort of driving that sequential decline?

Yes, I understand the question. I think fair or not, I think you're perhaps reading a little bit too much into it. I mean, we're 10 days into the quarter. So there's a number of factors here, right? You've got product mix, you've got geographical mix, you've got pricing, you've got volume. And it's very complicated if we start dissecting all these different levers. Clearly, if there's a big book of submarine cable in 1 quarter that can have an impact. But as I also mentioned, we now see that more spread out over the half, not only in third quarter. And as of today, when we look everything taken together, we think that the third quarter will be roughly similar to the second quarter. I don't think you should interpret that as there's an underlying softness there. There will always be some pluses and some minuses. And overall, we don't see that the pluses or the minuses will be in a strong majority, so to speak.

Okay. That's very helpful. And then the second one is on Data Center margins. When you say that margins are going to be similar to the past 4 quarters going forward. Is this for the coming couple of quarters? Because as we know, H2 or second half margins tend to be lower than first half. So is this sort of an annualized margin guidance, so to say? Or is it for the coming couple of quarters, specifically?

I think generally, as Rickard said, I mean, I think we were trending towards the long-term financial targets. There will be variation between quarters. And it's a bit early to say exactly where it will be the quarter, again [indiscernible] of 10 days into the quarter.

The next question comes from Jacob Edler from Danske Bank.

The first question is on Fiber Solutions. And in Q1, you were talking a bit more about the potential negative timing effect on the gross margin related to the price increases we've seen on resin and fiber. Given that you're not as explicit in your commentary regarding this now, should we kind of interpret it as that your view on the timing effect has improved? Or is it more kind of related to the mix from the submarine cable orders? How should we view that?

Yes. So again, going back to my earlier there's pluses and minuses. This is one of the minuses potentially. I we're not overly concerned about it. It might be a small minus. But again, that's something that we would then expect to be offset elsewhere. I think in general, we're seeing that the price increases that need to happen are happening. And always here and there, there are some customer contracts that there is some time delay. But again, overall, all things taken together, we see that the third quarter would be expected to be roughly in line with Q2.

Okay. And is that in terms of top line and EBITA? Or what do you mean when you say yes, in line with Q2?

Yes. Yes. Sorry.

Yes. Okay. Great. So my second question, I guess, is on Data Centers then. I mean here in Q2 and in H1, we've seen that North America has been the primary driver of the data center growth, should we expect North America to continue to lead the way here in H2? And can we expect positive growth for Europe as well? Are there positive growth to be seen in Europe as well or mainly North America driven?

It will be quite similar in the sense that, I mean, we expect U.S. to continue to drive, but it has been positive in Europe as well, and we expect that.

Yes. So you expect positive there as well.