NCAB Group AB (publ) (NCAB) Earnings Call Transcript & Summary

[Audio Gap] The NCAB Q1 presentation for 2025. [Operator Instructions] Now, I will hand the conference over to the CEO, Peter Kruk; CFO, Timothy Benjamin; and Head of Investor Relations, Gunilla Ohman. Please go ahead.

Good morning, and welcome to our Q1 report. My name is Peter Kruk, and I'll be starting the presentation today. Again, for the new listeners, NCAB is focused -- a company focused solely on printed circuit boards, and these are unique bespoke products that are the heart and foundation in any electronic or intelligent product that we supply. And these are the green boards that you see to the left on this slide. We are a company present in 19 companies -- across 19 countries, 19 companies, serving some 50 markets with a little bit more than 600 employees and serving our customers with the help of some 33 main partner factories. We have no in-house manufacturing but instead are working with partners. And we have -- out of our 600 employees, we have some 100-plus who are working specifically with developing our factory base and working on continuous improvements with our partners. If we then move to quarter 1. So it's a quarter where I think there are some positive news. We -- positive -- on the positive side, we can see an improved order intake. We're up some -- almost around 10% versus where we were in Q4 and Q3, so clearly improving, and it's good. What we can see is a strong order development in North America and East and also better than what was actually already a strong Q1 last year. Europe is improving versus Q4, even if it's slightly behind where they were in Q1 last year. Revenue, as a consequence from our Q3 and Q4 order intake, is lagging behind, but it's recovering from Q4 as we saw some of those seasonality effects that made Q4 extra weak come back in Q1 and support us. Gross margins are down a little bit versus Q4. EBITA is recovering with the volume. We see quite a bit of FX impact in the quarter. These are predominantly revaluation effects. So nothing that is something that's going to continue going forward. And there's also some mix and also some dilution effect from the acquired companies that are part of our numbers. And EBITA has recovered now with our revenue to a better level than what we saw at the end of last year. We are in a situation right now where we're handling tariffs for our -- primarily our U.S. customers. I think they create, of course, some challenges, but there are also opportunities for NCAB to forward its positions. Regarding tariff costs, these are costs which are transferred to our U.S. customers. We have been living with tariffs since the previous Trump administration. But now we, of course, are adapting to the new levels of tariffs that are applied. But it also gives an opportunity for our U.S. customers to find alternative suppliers. NCAB has invested over the last couple of years in building a factory base outside China, which is the main manufacturing nation. And that gives opportunities right now to help customers find new sources for supply to potentially offset some of the tariffs. Also very positive is that we have been able to continue with our M&A activities. And we, 2 days ago, announced the acquisition of B&B Leiterplattenservice in Germany. B&B Leiterplattenservice is a company in Saxony, so the former eastern part of Germany, and they add a good coverage for us in this part of the German nation. They are focused very much on industrial and energy customers, working with energy metering products and so forth. Very good technical lovers. So we get a lot of good employees join the company. They used to run a factory up until 2022. So we have a lot of skills inside the company, which is a good asset for us as we take the company forward. Revenue last year was around SEK 150 million, and they had an EBITA -- a healthy EBITA level above SEK 20 million. So we will gain now some 25 employees based in Germany mainly and some in China who will be joining our business. And we expect to close this transaction here in the early part of May. If we then look at Q1 in the numbers perspective, we can see that our order intake is up around 5% versus last year. Of course, here, we are supported by the -- also partly by our acquisitions. But in order intake in U.S. dollars, we're up 2%, and we also have a continued strong book-to-bill of 1.06. Net sales is up slightly versus last year. But here, of course, organic growth is down a little bit since we have the acquisitions that are supporting the year-on-year comparisons. EBITA compared to last year decreased. We are now at SEK 100 million, but it's an improvement clearly from where we were at the latter part of last year. And we're now at a margin of 10.4%. This again is a little bit lower from the FX effects we have seen and some mix changes in the first quarter, which we expect to correct itself going forward. Operating cash flow at SEK 53 million; working capital up slightly. This is partly tied to some of our NCAB 1 or ELB implementation, where we are sort of cleaning up some accounts payable as we go live in new entities, and that temporarily has lifted the number somewhat. Even though we have a strong end of Q1 in terms of order intake and we don't really see any negative news in our numbers, we have -- given the big uncertainty that we see in the overall market with tariffs and potential impact this could have on the general economy, we have taken the decision to -- in order to sort of have financial flexibility to also continue with an offensive M&A agenda, we've decided not to pay out a dividend in light of the current market uncertainty. With that, I'm giving the word to you, Tim.

Thanks, Peter. As you heard from Peter, about 1% up on the sales side versus quarter 1 2024; in U.S. dollars, down about 2%. And we had EBITA come in around 30% lower at SEK 100 million in the quarter, but sequentially up. And we also landed the quarter at 10.4%, as you heard from Peter, with some FX effects, at 10.4%. When we look at how the top line has now stabilized a bit and you start to see order intake posting some better numbers, we also see gross profit stabilizing a bit around the 35%, 36% level in the last 12 months. And the other thing that we see on the order intake side is around a 5% growth in total, and in comparable units in U.S. dollars, down by about 5%. We do see some positive developments, some positive lights on the Nordic side, especially versus recent quarters. And East has also been quite positive within the quarter, but we still see some weak demand on the European side. Net sales up by about 1% to around SEK 958 million, and in comparable units, down by about 8%. We see a positive book-to-bill of 1.06 and continued good trends in new part numbers and new customers won. So overall, that puts the EBITA to SEK 100 million. We see that when we compare versus the prior year, caused by lower revenue and gross margins. We also have gross margins at around 34.7% compared with 38.1% prior year. Part of that is pricing, but part of it is also higher freight costs as well. That puts our earnings per share at SEK 0.28 versus SEK 0.48 prior year.

Thank you, Tim. Moving over to a little bit of a closer look at the segments. So the Nordic segment had a little bit of a weaker order intake in the quarter, also slightly down both versus Q4 and also down versus last year. We can see some mixture of activities here. I think we can see positive trends in countries like Denmark and Finland, for instance, where we see growth both sequentially and also versus last year. Norway, as a market, was quite a bit weaker. We had, in the beginning of last year, still quite strong EV business. I mean, we have talked about the EV business being an important part of the Nordic business, and that has been quite slow during '24. I mean, we're happy to see that our customers in this field are ramping up and are delivering our product during this year, but they still have had some work to get through their inventory. So we're expecting this to start recovering here later in the year for us as well. Net sales was up a little bit versus last year, so up 4%. But what we've seen on the margin side, we have quite significant FX. I think, for the group, it's around, I think, 1% year-on-year on the gross margin impact. But for the Nordic segment, it is significantly more. We see that, some other segments, maybe it's been slightly positive. And this is purely sort of related to revaluation effects of the existing AR and AP that we have, so nothing that has a long-term impact. And I think with the big swings we've had in the currencies during quarter 1, this has created extreme effects in this specific quarter. And that also then has trickled down to the EBITA level. So EBITA is down to SEK 24 million versus SEK 41 million last year, and the margin is down to around 11% versus 19% last year. Looking at Europe, we are positive to see that the order intake is continuing up. We are now up. I mean, last quarter, we were around SEK 430 million. So a big step-up on the order intake sequentially and also close to where we were last year, although if you take out the acquired companies, we are still some 30% behind what was still a strong start of last year in the European markets. But it's positive to see, let's say, that the trend sequentially is positive. And we can also see that year-on-year, we're also seeing positive development in a number of markets in Europe like Spain and Benelux. So I think the trend and the momentum is moving in the right direction, or have been in the last -- in the first quarter. Net sales down 1% versus last year, but a big jump up, of course, versus Q4 where we had net sales of SEK 365 million. And this is -- a large part of that was seasonality, which made Q4 extremely low. And now, we gained some of that back in Q1. Organically, revenue is still down and connected to the low order intake that we saw in last year. So EBITA decreasing versus last year to SEK 55 million, but with a margin of 11.2% versus 15.2%, but a big step up from the Q4 where it was just a small positive number. Going to the U.S., order intake, very strong, so good positive development here. We had a slightly weaker order intake during Q4 after, I'd say, overall, a good year in terms of order intake development, but Q4 was a bit weaker. And this is also reflecting into our net sales numbers, which are a bit lower. And also here, one needs to factor in, when one compares the SEK 188 million to SEK 191 million of last year, that we had, overall in the quarter, a higher U.S. dollar, which actually means that in U.S. dollar terms, the revenue was actually slightly lower than last year. And that means that also has had an impact on the margin in the business, in addition to some product mix where we have seen some more of our certain product or technologies that we're supplying, which has been higher in the share of the overall business. The tariffs are being transferred to customers. Effects in Q1 are still very, very small as the -- so the new tariffs started to come into effect from February and then March, and this is based on orders hitting the ground in the U.S. So we'll really start to see the impact on top line in Q2 from the tariffs. So EBITA is down to SEK 18.2 million from last year's SEK 24 million, and predominantly driven by lower gross margin, but also in relation to sales, higher SG&A due to the fact that, say, in U.S. dollar terms, our sales were lower. And then, moving over to East, where we can see also here strong order intake. And here, we also had good order intake in Q4, which is also helping the net sales development. So the market in China, you can see, has been slowly improving. We have still seen a good influx of new customers in high-technology applications. We can also see, let's say, lead times for high-tech materials starting to grow, and this might then spread to other markets going forward and might also be a sign then the prices might start to move up. Overall, in the business, healthy margins. EBITA increased to SEK 8.2 million versus SEK 6 million and the EBITA margin at 16% versus 15% last year. And we continue to run the business here with good gross margins connected to the high-tech services we are providing in conjunction with the sales. Tim, over to you.

Thanks, Peter. Return on equity in 2025 down a bit versus 2024 when we were at higher volumes. Net debt to EBITA still at a very healthy level of 1.6 versus prior year at 0.7. And as you remember, our targets are around 2.0. Equity to asset ratio fairly stable year-on-year at around 41.9% versus 43.7% last year. Net working capital up a little bit. Remember, we do acquire companies here. And when we acquire companies, we also acquire net working capital. So you have net working capital percentage last 12 months at around 9% versus 8%. Still quite a bit of available liquidity at SEK 1.355 billion versus SEK 1.1 billion last year. As you heard from Peter, the Board has proposed a 0 dividend. Also, together with the available liquidity that we have there, [ leaves ] for some good possibilities in the next few quarters. So we continue with our M&A process. We continue to have a very good healthy pipeline and progressing with our discussions. So we were glad to conclude the negotiations here with B&B here in the last couple of days. And this, of course, remains a strong focus for the company. And with B&B Leiterplattenservice, it's matching also part of our strategy where on the one hand, I mean, we remain fully focused on PCBs, which is a good healthy market for us to stay in where we can see good growth opportunities, we are investing in our capabilities to grow our market shares in the markets where we're present. But we're also looking to expand our geographical position and our footprint and coverage and support our customers locally. And the acquisition of B&B Leiterplattenservice gives us a very good strengthening in our position in the northeastern part of Germany and serving the customers in this region, in addition to getting a lot of good employees to join us. And then finally, also from a market consolidation perspective, we do anticipate a lot of good opportunities, especially in the current uncertain climate, to further activate our M&A activities. And having the financial flexibility is a good means to be able to support that part of our strategy. And with that, I think we conclude our presentation and open up for questions.

[Operator Instructions] The next question comes from Jonny Jin from SEB.

I just will start a little bit here on North America. It looks like the order intake is rather strong there. Is this also an effect from you seeing prebuying -- some prebuying effect in North America? Could you shed some comments around that? And also, are you seeing some change in customers' behavior? If you could elaborate a little bit on that.

Thank you for your question, Jonny. To be honest, I mean, we have seen, as you said, strong order intake in Q1, and we had strong order intake during last year, bar the fourth quarter, as well. And to be honest, we don't really see a change. I mean, [indiscernible] we are early days in the second quarter, so we can't really, say, draw long-term predictions, but we have not seen any direct impact on our order intake pattern from the U.S. after the latest rises in tariffs. Where there are opportunities, of course, is -- and this was something that started already during the second half of last year -- an increasing interest from our U.S. customers to sort of explore our factory opportunities outside China. I mean, last year, of what we supply to U.S. customers, in total, I think some 47% of what we sourced came from China for the U.S. customer base. I think we can see that, that share has dropped a little bit. We see more quotes being asked from and more orders being placed to some of our non-Chinese factories in quarter 1. I think that is a change. We have not seen a change in the demand as such.

Okay. So, no real prebuying effect in [indiscernible].

No.

And then, just following up a little bit -- yes, okay. And then, on the theme of tariffs, I guess, you will increase your prices here in the U.S. particularly and push that on. But do you think this will lead to higher organic growth? Or do you think that the demand will shrink as well going forward? I'm just trying to understand the net effect for you here a little bit better.

I think for us, I mean, what we will see for sure is, of course, we will see a top line growth in the U.S. from the tariffs if they remain in the current levels where they are like at around 140%, or depending on which technology. So of course, that will have an impact. I think, where the uncertainty is, to what extent will these tariffs and other trade war activities have a negative impact on the general sentiment in the industry. And that would then not apply specifically to the U.S. only, but I guess, globally. And I think that is, I guess, where we see a potential uncertainty, even if we maybe don't see it yet in our own order intake, neither in Q1 or the first few weeks of Q2. It is an uncertain global market right now. And I think that is the uncertainty that we want to sort of give us freedom to manage in a good way.

Yes. Okay. And then, just shifting focus a bit here to the gross margin, how should we think about that going forward? It seems like it took a step down here a bit both year-over-year and sequentially in the quarter. And I think this is the third quarter in a row with a sequentially lower gross margin. So I mean, is it fair to assume that this will continue ahead, especially given the tariff situation? I know it's uncertain, but you talked about that could be dilutive. So could that potentially accelerate the decline ahead? Or what normal level can we expect here going forward?

If you look upon things, excluding the tariffs to start with, then we don't -- I mean, as we said before, I think we expect us to be somewhere in that range, 35%, 36% as a stable level to continue to keep. In this quarter, we had quite significant FX impacts that maybe sort of had an add-on negative effect. So I mean, if you compare year-on-year, as we've discussed previously, we had end of '23 and beginning of '24, we still had an impact when the market prices were declining quite substantially during '23. And there were some elements where we were negotiating with the factories, maybe getting some savings in our books before we were transferring over to customers. And that gave us an extra boost in the gross margin at the end of '23 and the first half of '24. So, that level that we have been in the, say, second half of '24, around 35%, 36%, I think is something we should expect to continue. So we -- in Q1 right now, we had a couple of negative add-ons from the FX notably that sort of push us down, but we don't expect that trend to continue.

All right. And then, just one final one from my side, shifting to the European market here. Could you maybe elaborate a little bit more what you're seeing there, if you're seeing a recovery in other important markets in Europe? I mean, book-to-bill looks to be around 1 in Europe this quarter. So is it fair to assume that performance ahead will be rather flattish and stable demand sequentially going into Q2, that is I want to say?

I would actually say, I mean, if you -- I think when one looks at the book-to-bill, it's a little bit dangerous because you have that year-end effect, which is quite substantial also in Europe. So I mean, part of the revenue that you saw now in Q4 and Q1, Q4 was extremely low in Europe at only like SEK 365 million. And now, it's around SEK 450 million. Maybe you had SEK 30 million, SEK 40 million, which was kind of a carryover between the 2 years. So in reality, we have a positive book-to-bill in Europe now in Q1, if you were to look upon how things are running operationally. So at the same time, I mean, the economy is still, in some parts of Europe, strained. So -- but I mean, I think we were starting maybe to see some positive signs of recovery. What may happen now with the ongoing sort of global tariff discussions, will that have an impact, that is, I guess, where there is an uncertainty, even if maybe we don't see concrete signs in our numbers yet.

The next question comes from Jacob Edler from Danske Bank.

My first question is, just coming back to, I guess, the dividend cut here, and maybe if you can shed some more light on why the decision was taken right now. I mean, in my book, net debt to EBITA is at around 1.5x. You're talking about at least tariffs not showing that much impact right now. I'm just excited to hear a bit more on how -- for example, how is the M&A momentum and how much is actually coming down to the big uncertainties here regarding tariffs. Just add some more color on the dividend cut.

I think it's very much -- it's a combination of different things. And I think you can -- we can make a little bit of a comparison to our situation that we were in, in the spring of 2020 as a company. At that time, we were just sort of concluding 2 acquisitions in the spring of 2020, just as the pandemic broke out. And at that time, there was also this concern what will happen with the pandemic? Will that drive the market in a direction that could put strain on our financial situation? And at that time, we made an extra sort of share issue to shore up the financing. In the end, we did not need that money, and we actually made an extra dividend the following year to give that back to the shareholders. And I think we are now in a situation where we are happy that we've been able to conclude this acquisition here now. We have an active ongoing discussion with a number of potential acquisition targets. And given, again, the uncertainty, will there be a potential impact on the global economic development that could potentially have an impact on our numbers as well, we wanted to keep our powder dry to be able to sort of continue with our strategy and give us that financial flexibility.

Yes. Okay. Clear. But just to get it clear, I mean, you haven't seen any signs of customers pausing here at the start of Q2. I mean, no major delta in activity on the customer side in Q2 versus Q1 thus far?

No, we don't see anything specifically in our numbers just yet.

Okay. Perfect. Just getting back a bit on the gross margin, I mean, it's down a bit year-over-year, more than 3 percentage points, right? And obviously, you had those favorable pricing effects last year that obviously are gone now. But I'm just wondering, of that year-over-year development, how much would you say is related to product mix, which is temporary, and the FX, which also is temporary, and how much is price? Can you maybe add some more flavor there, if possible?

The majority is price. We have some FX and some product mix, but you could probably chalk up the majority on the pricing side. And the FX is really only temporary.

And how is the product mix? Is that temporary as well? Or...

No, I wouldn't say that's temporary. It can fluctuate up and down, depending upon what type of products the customers order. I think we've seen some flexibility, for instance, both North America and Europe. And Nordics had a little bit of that mix shift between customers, and that in combination with the FX on top. And that's also where you see probably the decline from, say, Q3, Q4 versus now Q1. That is largely the FX and the mix shift here. But those are not sort of long-standing either in reality.

Okay. Perfect. Then, just a last question. On price, it seemed in the report that -- if I understood you correctly, that, I mean, the price level kind of stabilized a bit at least sequentially in order intake. Is that a correct conclusion? And would you say price was relatively flattish year-over-year in order intake? Or how did it look?

Yes. I think order intake-wise, it's pretty flattish, I think, on the order intake side. I think -- I mean, of course, maybe you could say, I mean, yes, we had in Q1 on the revenue side, then you had the margin impact, but on the order intake side, not big impact on the pricing side. So I think that is sort of reasonably still -- I think what we've been seeing has been sort of the question, say, the market -- the factory loading has been improving during the latter part of '24 and beginning of [ '21 ]. And that would, of course, indicate at some point that we would see both lead times like we are seeing for some high-tech materials already now, but also that the -- we could anticipate that some of the price downs that we saw during, say, '23, '24 would start to climb back up. Now, I guess there's a little bit of uncertainty again from the global economic development and maybe that will again sort of push back a little bit, I think, right now on any potential price increases.

The next question comes from Marcus Develius from DNB.

Just my first question is a bit broader, but the tariffs. It's not the first time you experienced it. What lessons do you take with you this round to handle the situation as smooth as possible compared to, let's say, 2019?

I have to say I think we have a pretty good process in place for this. I mean, we've handled it, as you said, for a number of years now. And I think in the first time it happened, then you had a little bit of this wait and see, where when the tariffs came into play that orders paused for a while, people were uncertain, are the tariffs really going to come into effect? I think we've seen less of that this time. So I think we're quite well prepared to manage tariffs, and our customers are accustomed to paying tariffs on our products historically. I think what creates an extra workload for our team right now is, of course, to handle all these different tariff levels and the changes to understand what is being shipped from inventory that has a certain tariff level and what is right now landing in the docks and is going to pay another tariff level and to manage that process. So it increases a little bit of our manual workload to ensure that we are handling this work correctly for our customers. But otherwise, I think we're quite well set up to handle this process, and our customers, as I said, are well aware of the situation and are able to handle it.

Okay. And let's say, your U.S. customers want to increase their sourcing from outside of China. Are you seeing any ramp-up investments for factories outside of China like after the tariff was announced? What are the discussions there?

I think this has been going on actually for quite some time. So I don't think it has changed specifically in the last few weeks or months. But it's something that has already been sort of going on during the second half or during 2024. So there is a number of new factories being established in Southeast Asia predominantly. We've been working actively with this for a couple of years. So we have had historically factories outside China, and we have grown that portfolio of factories supporting our customers. So we're quite actually in a very good position to help customers make that transition. And I think it's also a very good opportunity for us to win more business because, I mean, part of our customers or potential customers have also had an organization where they maybe were sourcing directly. They had long-standing relationships with a few factories, which have served them over a period of time. Now, quite a few of them are looking at a situation where they want to move out from those Chinese factories. And to then identify new factories in a different region is quite a big task if you don't have the setup for it. So I think this is an opportunity for us to build up relationships with customers who previously were buying themselves directly.

The next question comes from Gustav Berneblad from Nordea.

It's Gustav here from Nordea. Just to start off on the margin side as well here, I mean you have a quite good table here in the annual report of the sort of FX impact on earnings, but a quite strong tailwind here in recent years. But just based on the levels where we are today in terms of FX, how should one think about the EBITA margin development sort of once demand takes off? I mean, you comment on gross margin likely to continue to hover around 35%, 36% longer term. But on EBITA level, is it possible that you still would reach north of 14%? Or should we assume sort of the implicit margin of your financial target here of sort of 12.5%? Is that more closer?

I think we don't give forward guidance, first of all. But what I can say is, when you look at the FX impacts, what we saw at least in this quarter primarily was the sort of APAR revaluation of things that have largely already happened, so invoices that already went out and now we revalue them at a weaker U.S. dollar. A lot of our purchasing and sales is done in U.S. dollars. So you don't tend to see these fluctuations over the medium, long term, but you will see fluctuations both up and down, which you see in our numbers on the short term, so sort of quarter-to-quarter. So we don't expect to see any type of medium, long-term impacts from FX just because of that sort of natural hedging that we have in the business.

Okay. Got it. And then, on the margin in North America here, I mean, you commented on the product mix. But would you say that the complete sort of 330 basis point year-over-year margin delta is related to this? Or -- and also, what specifically is driving the mix here?

No, I think there's a couple of effects here. Part of it, yes, is the fact that there are some high-growth, low-margin products that we do sell in the U.S., still good profitability, but lower gross margin than the rest. And then, part of it is the fact that we believe in the sort of longer-term growth story in the U.S. So we also do ramp up the organization to take advantage of that, which you heard a little bit from Peter in terms of the sourcing possibilities that we offer new customers.

And on the mix side, I mean, we have our acquisition in Phase 3 a few years back. They have part of their product portfolio. They have slightly lower margins overall. And when they have had a good sort of delivery or a higher share of the deliveries during the quarter, that can have a slightly adverse impact as well. So I think this is what we've seen in this specific quarter, and then on generally lower sales than what we've seen in the previous quarters. So I think that's behind the drop.

Yes. Okay. Perfect. And then, just on the IT rollout here, I mean, can we talk a little bit about Q2 and Q3? I think you've commented previously that it will increase in terms of expenses, but also you will target North America. Can you just specify a little bit more of the IT rollout going forward here, which regions will be affected?

Yes, sure. So you heard from us back in quarter 4 that we had one of our larger go-lives with Germany. That one has went live. We also did our group function headquarters in quarter 1. And at the tail end of quarter 1 and into the first weeks of quarter 2, we did one of our other larger units, Benelux. In quarter 2, towards the end of it, potentially early quarter 3, that's when you'll see one of our largest entities, our U.S. entity go live. We have been saying that the cost for this rollout has been around SEK 10 million per quarter. And again, without giving forward guidance, we don't expect to see that change much. Again, the U.S. entity is one of our largest, most complex ones. So if there is one that requires a lot of extra effort and travel, it's that one. But after -- you could say basically after the U.S., we still have entities left to go live, but they're all smaller.

And typically, you get -- even if it's like SEK 10 million a quarter on average, we have a little bit of a shift and, say, typically, Q2 and Q4, just like last year, will be more intense. Like we'll have the tail end of the Benelux go-live here in quarter 2, and we'll have U.S. And then, during quarter 3, you have more preparations for the latter part of the year go-lives, which will predominantly be in the end of Q3, maybe starting of Q4. So you will have, again, most likely a slightly lower cost level in Q3 and higher again in Q4.

Perfect. That's very clear. And then, just on defense here, I mean, we saw in the annual report 6% of group sales. Would you say that it's significantly higher here in Q1? And then, also just regarding the order intake here, a bit stronger, but should we think about that translating into sales in Q2 or...

I think overall, the order intake in Q1 should indicate, I mean, that we have a healthy order book going into Q2. I mean, traditionally, we have been on average roughly a quarter behind in revenue side. That can vary a little bit. So it's not a perfect size. But I mean, the order intake development from Q4 and Q1 is a positive sign for the future revenue development. On the defense side, I would say we did not actually have so much more defense orders in Q1. So that was actually a little bit lower, which maybe also partly impacted the order intake in Nordics, which was a little bit behind. We have a number of projects going on. So we expect that to continue on a high level and to be a growing business in 2025, even if maybe Q1 was not really heavily influenced by defense orders.

Yes. Okay. Perfect. Sorry, just one last quick one here. I mean, in terms of the high freight rates you also commented about, is it possible to say anything about the impact here on top line and gross margin?

You could say minimal impact on top line and a slight impact on the gross margin without going to exact details. It's a slight impact year-over-year. We saw freight rates really start to go up in quarter 4. We tend to see them on a little bit of a delay versus the actual market itself, and then we started to see them come down a little bit towards the end of quarter 1.

And I think that is where maybe you have seen a little bit of at least a short-term impact on the gross margin side when they have been sort of climbing upwards during the second half of last year and into this quarter also that whilst pricing is being adapted for new freight costs, the trued up freight costs actually come in slightly higher since they've been climbing up during this period of time. And I think that has also maybe had, as you said, a small impact on the gross margin as well in the first quarter.

No more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Thank you. And we have a couple of written questions. And the first one comes from Karr. How active is the current M&A pipeline? Do you expect to sign more add-ons during the year?

I mean, M&A is a very core part of our strategy. I mean, we're basically looking to grow over time equal amounts through acquisition as from organic growth. So yes, we have a very active pipeline. I think there is a good opportunity to make deals in the current climate also. We've historically had the ambition to sign somewhere between 2 and 5 company acquisitions per year. It's always a little bit hard to predict because you're always -- you are at least 2 parties that need to come to an agreement. And since we are talking, in most cases, to family-owned companies, it's very much a personal matter for the sellers, and these discussions can take different length in time, which makes it somewhat hard to predict. But we expect to make 2 to 5 acquisitions also in the current climate.

So the next question comes from Mr. Case, and he asks, for U.S.A. customers, I understand that only 50% of these PCBs are coming from China. Yet how can a customer accept to take such a steep impact of tariffs?

I mean, I think on the one hand, there's not much one can do. The tariffs are there, and we can, of course, not absorb them. But I think one also needs to remember that in our applications, the cost of the PCB roughly represents 1% or 2% of the total bill of material. So we are overall a low-cost item in the general bill of material. And of course, as these grow, there will be an increased incentive to look for other markets. Right now, the Chinese tariffs are on extreme levels. I mean, historically, we have lived now for a long period of time with tariffs in the order of 25%. And then, China has still been very competitive to most other markets. So with tariffs where they currently are, the incentive is clear to move to other factories like Vietnam, Thailand that you mentioned, and we are happy to help our customers do that. Then we'll have to see, of course, if the Chinese tariffs remain at that level.

Okay. Great. Next question came from Thomas Blikstad at Pareto, and he asks about the Nordics that we saw growth due to orders received in '24, in the latter part of '24. A significant portion were defense orders, he says. Can we expect similar growth development in the Nordics going forward from stable deliveries of these orders? Or is it more likely with fluctuations quarterly?

I think -- I mean, in our business, there is still a level of fluctuations. But I think -- as you mentioned, we have a number of defense orders that we booked with longer lead times during last year, which will be sort of delivered during a large part of '25 and also into '26. They will, of course, provide a foundation to revenue, but we can expect to see some fluctuation on top as well. But we will have -- of course, those orders that we booked during last part of last year will continue to prop up the revenue streamline in Nordics.

And he also had a bigger picture question. With the current tariff potential, many manufacturers will struggle with supply chains sourcing PCBs. Do you believe PCB manufacturing will grow in Europe or U.S. as a result?

I think right now, the biggest challenge is the uncertainty. It's very hard -- I mean, making a PCB manufacturing -- investing in a manufacturing plant for PCBs is a very high-cost investment. And that is very hard to make, given the uncertainty of what the tariffs are. Today, we don't see any signs of investments being done to build manufacturing, neither in Europe nor in North America.

Okay. The last question here is from [ Filbert ], and he is asking regarding U.S., what proportion of order could you ship from outside China for the U.S. market?

I mean, this is a little bit sort of -- I mean, theoretically, we could ship 100% from outside China, I mean, given our factory base, to our U.S. customers. Then, of course, still Chinese suppliers are very good at what they do. They've been highly specialized and invested in this for a long period of time. So there are some technologies and some partners that even with a higher tariff cost, they would not want to change because it is a critical component. But I think we have the factory portfolio there to support customers to have a significantly higher degree of sourcing outside China than what they even currently have. I mean, our group sourcing from China at the time of our IPO in 2018, we were at 95% sourcing in China. I think end of '24, we -- for the year '24, we were at 72% or 73%. So it has shrunk as a whole. And U.S., as we said, is just below 50% last year. But we can expect, with the current climate, that, that share of sourcing in Mainland China will continue to decline.

Okay. Thank you. So that was the last question -- written questions. So I'll just remind you that our Annual General Meeting will be the 8th of May, and you're very welcome to attend. So thank you, everyone, for today.

Thank you very much.

Thank you.