Smartoptics Group ASA ($SMOP)

Good morning, and welcome to Hotel Continental and good morning also to you online. It's a fantastic and Sandy day in Oslo, and it is a fantastic day for Smartoptics and a great quarter that we are going to talk about today. I want to start by just a few thoughts to my staff and my team. Thank you very much to operations for always being there supporting us through the quarter and also supporting us through the relocation of production in Q2. I'm going to address all of our staff that much like me, have their life contributing to the optical networking industry. Very few people get to contribute to technical innovation that changes humanity forever once. We are starting our second time around now. That's a luxury. To the new people who have joined Smartoptics, warm welcome you have a beautiful future ahead in this industry. Stepping to the quarter, obviously, super strong momentum and really, really good progress overall and in some of our strategic areas that we've been talking about for a couple of years now. I want to start this conversation around the market that we are in. And I think today versus about a year ago or 2 years ago, there is no doubt the market projections for our market for the coming 5-year period and beyond look much, much more attractive than they did previously. It seems like consensus is somewhere high single digit to low double-digit growth over the coming 5 years of the industry. So in particular, Signal AI, which is the analyst firm that we have been using for reference is projecting $16.5 billion in 2025 to grow to $24.7 billion in 2030. It's not difficult to find higher estimates than this. And some people will say this is only a 10% growth, what's all the fast I would like to remind you that Smartoptics game has always been to take market share. We are the challenger of challengers. We are growing faster than anyone else -- and we are developing our products to have a larger and larger addressable market. The fact that we have in 2030, another $9 billion to fight for it's fantastic for us. That means we can target our technical innovation, we can target our customer activities towards that market and really grow this company for a very, very long time. So great news. You will also notice, those of you who have followed us for some time that we are no longer talking about a subset of the market. There are subsets in this market that is growing faster and faster. But with the innovation that we have done in our product portfolio over the past years, I think it's more relevant to look at the whole market. We are not a pure-play long-haul player as an example, but we are certainly there in the gray zone competing for long-haul kind of applications development that has happened in the past year or so. That gray zone is huge for us, and it's an important market for us, and it will be an even more important market as we move forward. So a great market around us a broad and high traction in everything strategic that we have been talking about for several quarters. We normally don't report order booking, as you know, for many, many reasons. But from time to time, we talk about our order booking to illustrate a phenomena or to give you a sense of the traction that we are feeling on a day-to-day basis, and I will do the same today. What I want to say is, first and foremost, a great traction through the quarter. great order booking through the quarter. Our book-to-bill is considerably higher than 1 and very stable. If we look at the United States of America, to illustrate the width of our market, we have orders from about 100 accounts. By far, the largest 1 is a U.S. Tier 2 operating across the United States. It's an unannounced customer. So it's not someone that we've talked about. They represent a little bit about 15% of our order booking in the quarter. Two runner ups sort of $1 million to $1.5 million accounts in the quarter are regional Tier 2s, also from the CSP segment. So clearly -- and we have several accounts like that. As an example, in 2025, our largest customer was a very similar Tier 2 regional operator operating in a number of states then they are not among the 3 that I'm talking about here, this particular quarter. So great success in what we have referred to as our large account strategy over the years. But that's not it. We have a California-based ISP sort of million dollar account in the quarter. We have financial verticals, so trading, algorithmic trading and such, around about $1 million -- and we have our first individual Neoscaler placing orders in the same range, million-dollar orders. So great progress also in this emerging segment of neoscalers where we have a handful or more customers today. EMEA looks similar from 1 perspective, but still a little bit behind the U.S. We have orders from about 125 accounts, 1 million-dollar plus bookers in the quarter include, for instance, government in Nordics, Tier 2 business-to-business operators, so typically data center to data center in the U.K. And we have an algorithmic trading company placing orders north of $1 million in the quarter, operating on a global scale, so great potential in those type of accounts, too. Asia, from an order booking standpoint, good news, we have opened up 1 new market in the quarter. We have a between $500,000 and $1 million PO from the Philippines, which is a market where we have not done business before. So our bisdev activities in Asia are scaling. And you will see also when I talk about revenue that there is some good news also in the revenue. So great position. I will leave the numbers. I will let the numbers speak for themselves here. And now Stefan will come back in great detail. We have a lot of new shareholders, that have joined and invested in the company over the past months and year. So I want to, as we normally do, take a step back and talk a little bit about the drivers in our market. What one should remember is that the megatrend that we are leaning on is something that we have referred to as the ever-growing demand for bandwidth. It's always been there, drivers come and go, drivers accelerate all of the forces that we have talked about over the years are still there. the need for modernization of global transport infrastructure, particularly in the metropolitan and regional area networks to support higher bandwidths. The cloud applications, the mobile, the streaming, all of that is still there. And now the ever-growing demand for bandwidth has a new best buddy called AI. So AI is the second mega trend that I talked about that will change any forever, and we are very much part of contributing to that development. If there are people who still doubt AI and the existence of AI and whether or not that's going to affect us all and how we do everything in the future. My recommendation is think again. So it's nearly impossible to talk about our customer segments without talking about AI. So I will take that stance today. So we have 3 customer segments, cloud and AI, network operators and enterprise. And I think what's happening now and what will happen in the coming decade is going to be very, very relevant for all customer segments. So cloud and AI. Those are the cloud service providers, the ICPs, Internet content providers. We package also all of the content delivery networks and such into that, and obviously, the neoscalers. So what's going on in the world is that data centers are being built at the pace that we have never seen before. A lot of those data centers are loaded up with GPU technology. and it's at massive scale. So the GPUs are instrumental machines when all of you, the public are using AI all of the compute is happening all models are running in these GPU-enabled servers. And there are hundreds and thousands of those per data center and there are many, many, many data centers and it's still growing. So in order to build 1 of these data centers, as I said in Q4, you need power. Number one, you need cooling. Number two, so water, cold climate or whatever or space for that matter or submerged or whatever, really. And you need connectivity, so connectivity is what we do. Fibers in the ground, we light them up and we see massive amounts of data over those fibers to connect those data centers to for the lack of a better term, the Internet to reach the users and also in a growing fashion to connect those data centers together to allow for the emerging machine to main communication between these GPU clusters, which is going to be huge. So owning data center and owning 1 of these GPU parts or whatever it might be, you always have the option to buy network products and software and services from Smartoptics and build your own network. That is happening. You also have an option to base your equipment in a multi-tenant data center owned by someone else who then may by the network connectivity from Smartoptics and connected data center to the world. You may also use either of the 2 models that I just referred to and call a network operator, a CSP, very much like the customers that I talked about being our lead order bookers in Q1 and ask them to supply you with bandwidth to connect your data centers. And this is happening in in the whole world for us. So as many of you know, we have no direct engagements with the hyperscalers of the world, but we have a lot of indirect hyperscaler related business, sometimes named accounts. As an example, this operator needs to build this network for whoever it might be, say, Meta as an example. And we have a lot of general demand from our operator customers who are selling a lot of capacity to hyperscalers. But hyperscalers are not alone. It's neoscalers and a lot of other organizations who are building that sort of infrastructure. So high growth for us in the network operator segment, also driven by the same development. Enterprise is an interesting 1 because I believe that's going to be a very, very important market for us in a few years. We're seeing that happening. We're seeing the enterprises realizing that the token cost for running every AI demand that you have is going to be a significant part of your overall cost in the company. Hence, you will start to invest in your own AI infrastructure and GPU technology to run your models, to run your workloads natively or in the data center somewhere. So I think that -- and this is not for all AI workloads, but it's for some. So I think the enterprise community will build this type of infrastructure for a very long time. We, Smartoptics, we have already started to build our own infrastructure to run our AI models that our customers will connect to and run our models when they buy our software products that are AI enabled in the future. So a great market also there. So a fantastic market and Smartoptics is here to service that, and we are here to stay and we're here to continue to develop our products to become more and more and more relevant. I want to dig in a little bit more into the quarter and look at the numbers. We start, as usual, by looking at the different geographies in 2025, it's been an obvious pattern that the U.S., in particular, and the Americas region overall, which is, in our case, 95% U.S. or something like that. It's way ahead, great traction. We're winning a lot of new accounts and there is just growth everywhere and opportunity everywhere we look. And the development between Q4 and Q1 is a very unusual development. The normal seasonality in our market is that Q1 is the weakest quarter, we're actually sequentially growing Americas to an all-time high in Q1. that is a proof point of the market around us and our performance in that market our attractiveness for our customers. I also talked last year a lot about EMEA and how I think EMEA will catch up. That was based on the reality that EMEA in 2025 looked a lot like the U.S. in 2023, meaning large accounts, a lot of business development towards larger customers projects that we can name, identify and design for future wins. And EMEA has gone through the first phases of that now. We have won a lot of new customers in the area. In Q1, the drivers in EMEA, the engine in EMEA is built largely on the Nordics and U.K., Ireland. The other regions are performing absolutely okay, but the growth for right now seems to be the strongest in Nordics and the U.K. But a fantastic quarter for Team EMEA. APAC is still very small. It is a bisdev market for us. what we see in Q1 is that our large and established market, Australia is fairly weak in the quarter. So the $1.2 million doesn't include a lot of Australia. Hence, for the other geographies, it's an okay quarter. There are not that many larger projects in the quarter. There is 1 sort of $300,000, $400,000 project, and that's in South Korea. So that's a second example of how we're opening up a new market. South Korea is -- has also been more or less virgin territory for us in the past. So overall, good progress with our business development activities in APAC. It is still Japan. It is still the cluster of countries from from Singapore down through Malaysia and Indonesia. It is still Australia and New Zealand and now we're adding the Philippines and South Korea to the mix. So -- and we have opportunities in all those geographies that are significant for the future. Looking at products and growth and revenue. We can clearly see that the -- well, same as always, where we invest money, we get the good growth and returns. So Smartoptics has been on a journey for the past 7, 8 years. to invest in our solutions, software and service businesses. Those are very tightly connected to each other. When we sell solutions, we sell software and services. And occasionally, we sell software and services when we don't sell solutions, but that's something we still have in the future to develop our products to become more multi-vendor, to be a pure software play in certain applications and certain areas. But today, they are largely connected with each other. And we can see the same phenomena as we saw in the U.S. that we have sequentially growth Q4 to Q1, which is great. And in my fairly long career in the industry, actually unheard of, again, demonstrating Smartoptics attractiveness in a fantastic market. We're also growing business area devices, and that's important because that has been now for more than a year. It's more like 1.5 years now when we have put a little bit more focus on that have put in a new leadership have done great changes, have invested in our software platforms to better support that business, and I'm very pleased to see growth in that segment. So it's following the market. It is time to talk about details of the numbers, and I will invite Stefan to do that. Welcome, Stefan.

Thank you. Magnus. So the revenue was a very strong quarter. We have an increase of 59.6% to 22.9%. And that, as Magnus said, was mainly driven by high growth in Americas and EMEA, mainly within Business Area Solutions. The gross margin in Q1 was 48.2% compared to 47.3% last year. and in line with the full year gross margin for '25 or 47.8%. The underlying margins are still or consistent quarter-over-quarter, and we believe that the full year 2025 gross margin still serves as a good guide going forward. The EBITDA is -- was 2.7 million compared to 1.2 million last year. with an increase of 1.5 million. And that is split up in the revenue made an increase of 4.2 million and the employee benefit expenses increased with USD 2.2 million from USD 67 million from [ 45 ] with 48%. And -- and that is -- can be broken down into some components where we see 11% is related to nonrecurring costs related to the consolidation of production. -- and that's around SEK 0.5 million. We have 10%. That is an FX component. We have 70% of our costs in NOK and SEK, and we have 20% in U.S. dollars. 1% of the growth is related to organizational growth, where full-time equivalents grew from 129 to 147 persons. And that includes new hires of sales in the U.S. that with the mix with more people in U.S., the average cost per employee goes up. Remaining 13% is related to inflation, annual salary increase and variable compensation related to the positive development in sales. Other operating expenses increased from USD 1.1 billion to USD 1.7 billion and was -- and that component is Half of it is based on employees and half of it is related to the development in sales. The EBITDA margin increased to 11.7% compared to 8.4% last year. And excluding the nonrecurring cost, the EBITDA for Q1 was 13.7%. The EBIT margin was 7.9% compared to SEK 4.1 million last year. and excluding the same nonrecurring costs, the EBIT margin would have been 9.9%. Cash flow from operations in the quarter was good, SEK 2.2 million compared to SEK 2.6 billion last year, and we have a stable working capital. Looking on our balance sheet, we have an equity ratio of 56% compared to 58% last year, and the decline is a result from a growing balance sheet. Nonrecurring assets amounts to EUR 9.1 billion, up from 8.6% last year. Current assets is NOK 39.3 million, up from EUR 34.4 million and is related to mainly inventory and trade receivables. Cash SEK 8.4 million compared to SEK 9.9 million last year. We have available credit facilities of $7.7 million equivalent to NOK 75 million. We have a high focus on cash. We continue to manage trade receivables, but we expect inventory to increase and that will then result in an increased working capital. Nonrecurring liabilities, a small item, USD 0.2 million and current liabilities excluding deferred revenue, amounts to $11.4 million, up -- down from $11.6 million last year. Deferred revenue is still growing and is now USD 13.6 million, up from USD 10.2 million last year. The working capital amounts to USD 14.6 million compared to USD 136 million last year and is up 100,000 from last quarter, and there is no major changes. Inventory is amounting to USD 18.4 million compared to 49 million last year. And the increase is related to longer lead times in components -- we see also that, as I said, higher levels of inventory are essential to secure the future growth in sales. And we see a very low risk in our inventory. Trade receivables amounted to $19.1 million compared to USD 84 million last year. We have had normal collections in Q1 and -- we have a higher share of sales later in the quarter compared to last quarter. We see no risk in our trade receivables. Trade payables has decreased to 5.7 compared to 6.9 last year and are on par with last quarter. Our payment terms is mainly 60 days, but we have some suppliers that force us into 30 days. Net other short-term liabilities increased to USD 17.2 million. and that is mainly related to deferred revenue, as I mentioned, and also we have net tax liabilities of a little bit more than USD 1 billion. The Board has proposed a dividend of NOK 0.6 per share. And the company is facing -- emphasizing an increasing or stable dividend. We see a stable and positive financial development with a solid financial position and the strong cash flow. The dividend is still pending AGM approval later today. Thank you all, and back to you, Magnus.

Thank you, Stefan. I want to talk a little bit about the long-term targets. This slide is the same 1 and these targets are the same ones that we've been using since mid-last year. So the company at the moment, me and my team are in the middle of our yearly strategic review process. We are also in a market that has changed dramatically. The outlook for the coming several years is absolutely phenomenal. And we are, of course adjusting to that. In Q2, we will release new targets. And I would like to say that there are a number of things that you should expect, and there are a number of things that you should not expect. There is nothing wrong with the targets that you see in front of you now. They are strong, solid for us in the company and for people deeply involved in our industry, they are understandable. But I don't think they are good enough for a broader audience. We have to clarify what do we mean and what are we really striving for in the coming 5 years. You should also expect more KPIs from Smartoptics where you can track our progress. in greater detail and that we can really lean on when taking our investment decisions going forward, so an overall improvement of -- in that area, but not significantly different. What you should also expect is continued investments. We have a fantastic opportunity ahead of us. And as I've said for several quarters, not investing in the company's future at this point would be full out foolish. So that's the path we're going, and that's the future we have ahead of us. With that, we are done with the presentation part of today. And I would like to hand over to Per, our moderator. If there are any questions.

Do we have any questions in the room? Okay. Then we go to teams. We have our analysts on the call. I see Christopher on 1 wants to start is from DNB. Could you please unmute yourself and ask your question.

Yes. Can you hear me?

Yes.

Yes.

Amazing -- so for taking a on the strong momentum in the quarter. It's all exciting. Just wanted to kind of -- if you could give us some kind of nonquantified preview on the need to kind of change a bit the targets in conjunction with Q2. Is it reflecting like something like negative? Or is it more that you're seeing that you're kind of currently tracking well ahead of the trajectory that you set out and you need to kind of talk about higher growth now and then return to below trend in some year for route just like -- it creates a lot of uncertainty when you say that there will be a change in outlook when we get to next quarter. So just any any directional hints would be much appreciated, I guess.

So directional hints on the strategy. Is that what you're asking for and the new targets that we intend to release.

Yes, directionally, like is it -- do you think it will be a positive thing or yes, because it's a bit spooky when you say that we are maintaining our guidance for the long term, but we will kind of change it next quarter?

If I may stop you right there. We didn't say that we will change it. We said -- I said -- I hope I said that we will improve it. We will improve it in a couple of ways. We will improve yes, make it more simple to understand. Obviously, we are setting tougher targets on ourselves. We are continuing to invest probably at a higher pace than we have the market ahead of us is fantastic. We need to capture that opportunity. So I would say for you, for me, Christopher, it's going to be a very positive development. It's going to trigger us enormously within the company, and I hope it's going to create some excitement in other stakeholders.

All right. That's helpful. And then as my follow-up, -- can you give an update on the lead times you see from competitors and how they've evolved since last quarter? And and that's on the demand sedan then also how your kind of transition into new facilities has fared and how you're supplying capacity looks in the quarters ahead, if you're able to deliver on the massive opportunity that is currently out there.

Right. So I mean, obviously, to get detailed information, you should probably talk to our competitors because I'm hearing information kind of indirectly from our customers mainly. And the several new customers that Smart Optics has onboarded for the past 2, 3 quarters as a result of larger competitors not delivering products to them. I mean the overall trend seems to be the largest players in our market are doing everything they can to satisfy the demands of the largest customers in our market, meaning hyperscalers a very demanding group of customers with huge growth and huge needs that is kind of opening up the good old gap that we have been talking about for so many years, the lack of midsized vendors to address the midsized market I mean that GAAP argument is more relevant than ever. We are, as I said, onboarding many, many new accounts as a result of this. The good thing is that they are not they are not changing their overall procedures when they do that. They do it at an accelerated pace, but it is still important when you bring in a new critical vendor of this type of technology and software into your backbone that's a procedure that has to be thought through. You have to change your operational procedures to fit the new player, Smartoptics in this case. You have to educate people, you have to do a lot of things. So it's not like this is happening overnight, but I would say what took us 1 to 3 years to achieve a few years ago may take 2 to 3 to 4 quarters now. So the processes are way faster. When it comes to Smartoptics delivery times, we're still good our inbounds on components is still working nicely. But you also have to be aware that we are currently in the process of planning component deliveries for Q1 and Q2 next year. So we have to take risk, and we have to do the right things. Now this is not a trivial exercise by any means. So far, we have it pretty much right. And I'm hoping that we will continue to have it much like that for the rest of the foreseeable future, but there is a little bit of risk in those exercises. When it comes to our own capability, well, I kind of hinted to that in the beginning here that our book-to-bill is considerably higher than 1. So where we limited to our capabilities in Q1. I mean the answer is given by the previous statement. We could have delivered more if we had, as an example, a double-sized production facility or triple size production facility, which we will have going forward. Q1 is also a quarter, as you know, with a lot of holidays, closing all the book, doing all of the stock taking keeping the order. So it's a shorter than an average quarter from an operational standpoint. In Q2, we have a massive project for Smartoptics in the first 3 weeks of the quarter, where we are consolidating all of our production into a new facility. So Q2 for us will be very much a catch-up game now. The teams are working over time and have been working over time for a very long time, including Saturdays and Sundays and so on and -- we're doing all the tricks that we are aware of to increase capacity, including bringing on temporary staff taking external help and so on and so forth. So knock on wood, the catch-up will go great. And yes, so -- thank you. I'll jump on the bus on the queue. Thank you.

Perfect. Up next is Øystein Lodgaard from ABG. Please unmute yourself and ask your question.

So first of all, just on the quarter, is this -- are there any kind of one-off large projects or anything? Or is this more kind of many smaller deals? I'm thinking here about how we should kind of extrapolate the strong Q1 growth? Is this kind of should we now assume kind of normal seasonality here for the next of the year? Or were there any kind of 1 of large contracts that boosted Q1 growth?

Nothing significant to talk about. I mean, obviously, we are in a different situation now is then compared to a year ago. We have a lot of larger accounts that we did not have on and in particular, 2 years ago. So the -- obviously, the overall project size when our customers expand their networks in certain regions or areas of the network, et cetera, they are, in general, bigger. There is no doubt. But that's not going to change in Q2, Q3 and Q4. If it does change, it's going to change upwards. So yes, so normal seasonality, taking into account what I said about 2 minutes ago, it's probably good, as always, a pretty decent way to think about this. Yes.

And regarding what you said 2 minutes ago about the big move in Q2. Do you think that will have a major impact? Or is that something that you -- that will kind of lower revenues all else equal? Or do you think you should be able to catch up during the quarter?

So There are things that I know and things that I hope and things that I think here. And I know that the first 3 weeks in the quarter were dramatically lower in revenue than they would have been without the move. That's a no-brainer. That's obvious. I think we will have a great catch-up game, and I hope that we will have a great catch-up game -- but the market is not slowing down. We haven't seen any signs of that. So I would assume that when we talk about Q2 in the summertime, we will reiterate that if we had, had a production facility twice the size that we have now, we could have done more. I think that's a fair assumption for now.

Interesting. And you stated earlier that the market outlook for the coming years is I think you said absolutely phenomenal, and we have to adjust to this. Could you just give some flavor on what does that mean? What -- if you have to adjust does that mean investing more now upfront to capture that opportunity? Does it mean going more broader? Does it mean going even more focused towards larger customers? Can you say what you mean by that?

So I mean, the details of this, we are in the middle of it. I'm the CEO of the company. Of course, my influence on this is huge. So my feeling is I pretty much know where this is going to land, but I want to save some thunder. This is a process. We need to get people on board. We need to get the Board on board with our strategy. We need to do a lot of things when we do this. But I think all of the things that you said there are relevant are relevant, broadening the scope in terms of what softwares are we going to deliver to the market? What hardware capabilities are our products going to have? Which verticals are we going to address? Are we going to go after larger and larger accounts. I would say, yes, that's a given. Are we going to invest more. Yes, that's also again, but to what degree is the interesting question here and how to manage that in a responsible way an aggressive enough, I would say. So a lot of forces in play here.

last question from me. Devices, once again, very strong results from devices. How much of that is the market just being very, very strong? And how much do you think is driven by the strategic measures that you have implemented in the Devices business. Just trying to figure out how sustainable that is and if that is kind of a new trajectory going forward?

So I wish I knew Øystein, that's a very, very difficult question to answer. It's again here things that I know and things that I think -- so what I do know is that we have done tremendous progress in terms of our tools to deliver products to customers quicker and at higher quality -- those are our software tools. That's where the innovation in this product area is happening in Smartoptics. We've done great progress. Are we done with that? No, we're not done. We're going to continue down that journey. I think -- sorry, I know that, that has had a positive effect on that business. And what I think is that the overall market is, of course, contributing to this growth to some extent, it's impossible to give you any more qualified numbers on that.

Good. Up next is Markus Heiberg from SEB. Please ask your question, Marcus.

So a couple from me as well. The first 1 is on the addressable market that you're talking about the SEK 16.5 billion in 2025. I would assume that less than half of this is addressable to you or I might be wrong, but you talk about the whole market growth being addressable. So how should we think about that market number?

So the way I think about this, and this is the big change. And we sort of started to talk about that change about a year ago, maybe 2 years ago even. If you take Smartoptics full product portfolio and you say that all of the world is going to be built with Smart optics. Can it be done? Yes or no. The answer is yes. Will it be the most effective and efficient solution for all of those applications? The answer is probably no. We are continuing to invest in performance, capabilities, speeds, feeds and so on and so forth. It's a very multidimensional game. We're playing there into our products. They are becoming more and more capable. They are becoming more and more comparable to the more advanced products in the market -- and we are also riding some other waves like -- I mean, the advancements in pluggable optical technology that we are using in the lion's share of our product is also helping us tremendously here. So I think if we were talking about $5 billion, $6 billion being exclusively the metropolitan area networks 2 years ago, we are definitely an attractive player in the very large gray zone between metro and the most advanced applications. We have customers running terabits of traffic over 1,500, 2,000 kilometers today. That is absolutely very, very long distance communication and that is very, very high capacity transport. That's the gray zone I'm talking about. And that, I believe, is a huge market. We're also adapting our products for 2027 and to do even more on that. So this is going to be a continuous opening up of that long-haul market, but not to the extreme.

That's very interesting.

And very interesting. I agree.

And then to my second 1 here is on the cost and investments going forward. The costs were a bit higher. Of course, you have some FX headwinds and some relocation issue, but it also looks like underlying costs are up quite a lot. So -- how should we think about that over the coming quarters? Is the Q1 cost base a reasonable level to look at and you will invest from that? Or are there any things that we should adjust for.

Do you want to come up and answer.

I think that's Yes. I can see if we look on the employee benefit expenses that increased 48%, 21% was nonrecurring and FX driven. So -- the remaining increase of 25 percentage points approximately. I think it's reasonable that that's going to be a stable position for our expenses. -- stable increase and good guidance going forward. So -- but of course, in general, we will see that our expenses is going at a slower pace than our revenue. I mean that's the underlying plan to enable to facilitate the increase in EBITDA.

And a short follow-up on costs to take the gross margin question here also. It recovered very nicely from Q4. Anything in particular that we should be aware of going forward on the gross margin side?

No, I think the answer is no, there is nothing in particular that you should be aware of at this point. And what we said in Q4 is that the Q4 was a little bit abnormal in some senses and that the full year 2025 was better guidance. And I think it's that's where we are. And I think it's going to be relevant also. Thank you.

Good. Then I see that Christopher has an additional question he wants to ask.

Yes. I just want to ask on fiber channel. It seems like there is some talk in the market about Broadcom taking of new generation. Can you maybe talk about how you're positioned for that? And from your experience, how kind of kind of the refresh of customers' setups have impacted you in the past and how to think about this going forward?

Sure. Absolutely. Yes. So -- so fiber channel is a subset of our enterprise market. So if you look into our Q4 reports over the years, you see that we have been reporting the different market segments. Fiber Channel is -- we've never really done the estimate. But if I were to sort of give a qualified yes, I would say that half our enterprise market or so is related to those type of applications. So we do not dictate the pace in the fiber channel market, that's dictated by companies investing in their storage environments. That, in turn, is dictated by when new generations of fiber channel technology are released and new generation of, of course, risk systems and so on and so forth. So -- so it's typically every second year or so, we get a new generation of fiber channel coming out, and we see a boost that lasts for for 18 months or so, and then it cools off a little bit before the next generation comes out, and we see a new boost and it goes on and on like that. I would say, overall, there are very few people who talk about fiber channel being a growing market. I mean, that can change. It is a rock-solid technology for storage area networks. And of course, storage will always be a very, very relevant piece of the overall IT infrastructure cluster. So 1 should never say never. At the moment, so Brocade or Broadcom, who are the largest supplier of the switches. -- that we also have a unique collaboration with in the sense that our optics is the only optics that's approved to sit in the fiber channel switches and directors -- they are now in -- on releasing Gen 8. I believe they are releasing it this summer. Is that correct, yes? And that means the big storage OEMs, I mean, the IBM, Fujitsu, Dell Corporation and so on of the world. They will start qualifying Brocade Gen technology this summer. They will be done by that sometime late fall and customers are going to start buying Gen8 enabled storage area network and storage clusters. -- from sometime next year. We are releasing our response to GEN 8 this summer. It's a 64 gigabit DWDM DWDM technology we're talking about that goes together with basically all our other products, line systems and so on and so forth and become part of this solution. It's going to go through the same qualification processes, as I just talked about. And we can expect that to have a pickup in 2027.

That was all from the call. We have a few questions on the portal as well. Oscar, first here, he has 2 questions. One, risk for a shortage of components, et cetera. The second 1 is given the growth target is 13% to 16% EBIT margin conservative given underlying scalability.

So I think 2 things there. On the first one, is there a risk of component shortage? I wouldn't characterize this as a risk. It's a fact. I mean the component industry is absolutely running at full pace. There is no doubt. And I mean these are components sitting inside the components of our components. -- that's where you see the shortages. So things like laser ships, for pump lasers that we use in EDFAs, urban do fiber amplifiers that we use to extend reach in our product is 1 good example. So it's a fact we are managing it. We're working now on securing our future, and we have been doing that for 2 years. So yes, so it's here. The second 1 was related to profitability and scalability of the business model. And I think this is precisely what I talked about in the conversation around what is our new strategy going to look like. And I would like to push that question into the future and come back in Q2 with a better guidance on what we are really aiming for with this fantastic company.

Nice. Then we have TrigBrunlang. In addition to a potential revenue loss, what is the level of extra cost that the moving process in Q2 will incur USD 1 million is the question more or less or more.

The cost of consolidation of production. So that's already in Stefan's number, the USD 47 million includes all of the extraordinary things that we have done, and it includes everything up to and including July, August and then we're done.

So good. That was the last question on the portal.

And I think if I may clarify, it's not lost revenue. It's going to be if at all, it's going to be slightly delayed revenue. because we are still better than most other people in the market, then thank you very much. Have a great day, and see you in about a quarter. Thanks. Bye.