Teqnion AB (publ) (TEQ) Earnings Call Transcript & Summary

Welcome to the Teqnion 2024 Q4 Q&A. It is with embarrassment and anger that we presented our 2024 Q4 report this Saturday. The numbers are truly bad, and they are not close to where we want them to be and expect them to be. Due to the results, I have full understanding that the questions that we have received are mostly revolving, what are we doing about the situation and when will it look brighter again. I would have asked the same. We will, therefore, start the session by spending some more time discussing these 2 topics. Johan?

Yes. Thank you. Today is the 17th of February 2025. My name is Johan Steene. I'm the CEO of Teqnion. I'm sitting here next to my friend and coworker Daniel Zhang, to try to answer your questions after the release of our year-end report for 2024. To start things off, our business model can be simplified into 3 key areas. First, maybe our acquisition engine; and second, the larger part of our existing portfolio companies that deliver strong results and solid returns; and third, the subsidiaries that are currently struggling and require improvement. In the past, we have in these Q&A sessions primarily focused on the third category, the companies in need of improvement. Today, we will aim to provide a broader view and briefly cover all -- try to cover all 3 areas. Firstly, if we jump into the acquisition engine managed by Daniel.

Yes. So given the Teqnion is young and small naturally acquisition is going to be our biggest growth engine for the years to come. For the last few years, we have not acquired as many companies as we have -- want to do, that will change this year. And quite a lot of things have changed with the team and process that makes us very confident that 2025 is going to be an all-time high when it comes to high-quality acquisitions. We have a new process in place where the acquisition team that is us, have a larger mandate compared to earlier with free reigns to actually acquire the high-quality companies that we want to. We have also introduced some more specialization. I've been doing this now for 4, 5 years, and I've learned a lot of things. And during this process, I will now be doing more of that in the earlier processes by myself and through that free Johan to fix our current struggling portfolio. There is, of course, a lot about reputation and network in the geographies where we have been acquiring. And so the current pipeline and especially looking at both the very near-term pipeline and the longer pipeline have never looked as good. Words are cheap. So everything I can say is that put your trust into that what we're saying is true and keep a lookout for the number of acquisitions and the quality of them. You will be seeing more of those going forward.

Yes. So moving on to the next part of what we do is that we have a strong performance group of companies within the portfolio. It's good for us at least to remember this, that the majority of our portfolio is performing as we like. But as I mentioned in the Q3 report, this fall only about 2/3 of the group performed well in 2024. And that is, of course, not acceptable. We're consistently aiming for a situation where maybe 10% of the group is in need of help. And right now, there is too many struggling. The companies within the strong part of the group, delivering good results, and they have somehow successfully adapted to the changing economic landscape by managing their cost effectively, and they have intensifying their sales effort just to continuously generate new business, even though that the climate is a little bit tougher. Looking at trends a little bit, we can see that our U.K.-based companies are generally performing really well. And also, the companies that we have in the electrification and the defense sectors. We have currently 6 subsidiaries operating directly within electrification and defense. In 2024, 4 of those 6 did their best year ever. And as of today, there is no indication that this positive trend will not continue. The U.K. acquisitions that have been made in the recent years, those companies tend to have higher margins and lower economic sensitivity, they give us better returns on capital and our ambition to continuously acquire more, better companies seems to be working as planned. And that is, of course, really positive as we'll be doing more of that. And then if we come to the part that we spend or at least myself, spend most of my time these days is struggling underperforming companies. We have, as I just said, this is a too big part of our group today. And they have also faced the -- of course, the economic headwinds. And there, we have not been able to rotate quickly enough towards a sustainable path. During the last quarter, we have taken important action to correct this as I also outlined in the report. We have merged 2 contract manufacturers into one place. We have significantly reduced staffing in 3 of the companies, and we have -- during this period also appointed 4 new CEOs. In addition, we have -- of course, we have reviewed costs and work to optimize production and sales processes. But in these cases, having the right person in the right position is always important. But in tough times, as this, it's absolutely critical, and there were -- we have done a lot there. We have an example on Page 8 in the report where we tried to illustrate our new CEO that was joining us last spring has a great business mindset and actively seeks out customers and increases incoming orders, and this has been done with over 100% since this person came on board. Once again, this proves that action drives results. And yes, just to bear in mind, in this particular case, this is order intake is up really, really well, but it's -- the results are, of course, lagging. One important thing when it comes to this right now is that we have more hands on. And we're much more involved in the subsidiaries -- these subsidiaries that needs attention. Our CEO, coach Joakan,who previously owned the housebuilding factory has now stepped back in to run that site again to ensure the productivity and secure profits. Just the initial impact seems really, really promising, but the coming months, we'll provide a more clear picture, of course, regardless, this move is expected to save us millions over the course of the year. Me myself, I have also taken a more hands-on role. I'm working closely with some subsidiaries to accelerate their turnaround moving forward. My focus will be even more defined ensuring that the right resources are working on the right type of improvements. If there is one common challenge we face here is, of course, weak sales and sales must improve. The reasons why the decline in sales, we have the decline in sales, very some across the subsidiaries, but each company has a clear and individual action plan on how to return to profitability. Some subsidiaries have already built a much larger pipeline during the quarter and -- like a pipeline of quotation, I should say. And this is, of course, by pushing a much more active sales effort. It's a positive sign. However, closing these deals remains a challenge. There is still reluctant see out there to make decisions. But once again, more activity creates more opportunities, and we're going to make a lot of opportunities. We have acquired these companies throughout the years, and we have acquired them because they can be operated profitably. So every company within the group is possible to run with a profit. In this case, we haven't been able to do that. And just to be really clear. But if we fail to prove within a reasonable time frame and with reasonable resources that we cannot run it profitably, we will not hesitate to take necessary action. There are no sacred cows here. Our ambition is only and has always been to excel at capitalism and we must reshape our playing field to achieve the profits we want. We want profits.

Yes. So in short regarding the 3 areas, we have an M&A part that is firing on all cylinders. We will see a cohort this year that is of higher quality and of a higher number than what we've seen ever. We have a profitable core that is 2/3. And of course, that's going to be bigger when we get more companies fixed and we have more companies coming into that group. And for the third part, which is too big with the companies that are struggling, Johan is stepping in to help and fix the problem and it's going to be fixed. With that said, as a very long introduction, we will go over to the actual Q&A. As always, we'll alternate between the questions that have come into our Q&A at teqnion.se and the live questions.

All right. Let's start with live ones. We have Pedro Leon asking which one-off costs have you had during the quarter, relocation and restructuring expenses, et cetera?

We have, of course, had some restructuring costs during the last quarter of 2024. It's -- some of them are easy to calculate, but some are, of course, just effects of us doing big changes to subsidiaries, which makes it -- which also makes a lot of turbulence within that organization. So we have not -- since it's a hard to pinpoint a fixed number, we have decided not to show that, but of course, it's -- some of our poor performance comes from us taking a lot of costs for restructuring.

Yes. Alexander is wondering. So we will see at least 6 acquisitions this year. Yes. Martin is wondering, Teqnion stated that underperforming companies will not be divested as it would be sending the wrong signal to the Teqnion family. Under what circumstances or performance criteria would you warrant divestment? And does management assure the subsidiaries do not become complacent due to assurance that they will always remain in the group?

We have a lot of confidence when it comes to turn things around. But I mean, it's also a responsibility for us and for the people working in companies that if we don't see that they have the ability to sustain, then we, of course, have to do something with them. If it's to wind them down to very small entities and merge them into something different or if somehow, we closed them temporarily or permanently. We will make the right decision, and we will make the decision necessary in order to get things back on track. There is, of course, just to emphasize that again, we have companies that are able to be run profitably and it's our job to make that happen. Yes.

I think just to reiterate that, our intention is that we're forever owners of companies, which means that we're going to do everything we can to make the cash flows go up over time. If, for some reason, the world changes or that we cannot make that happen. Make no mistake, we're going to close them down. We're not in the business of permanent losses. AS is wondering, free cash flow conversion has been down this year, and leverage has been rising. How do you expect to fund acquisitions this coming year?

First of all, the most -- our key efforts now are towards making us much more profitable. And with the profit, we also have within what we do, a better free cash flow. There's also -- built into the incentive programs for the subsidiary CEOs that they need to reach a good level of free cash flow compared to the results in order to get a bonus. It's also incentivized. But of course, we track this very, very closely, and we work on that as well. But the main focus right now is to make the companies profitable.

Yes. We will not over leverage. We will acquire companies in a sustainable manner so that we can make more and more money over time. And as Johan said, the biggest funding source we will have is that we're going to make that money operationally internally. Matthias Reichardt is wondering, can you please speak more about your operating model? What are the KPIs? When do you interfere with managers? How do you change your hands of decentralized model going forward?

You turned quiet. Does that mean that I can answer this?

You can start.

I can try. Our model consists of around 30 subsidiaries run individually by CEOs. We have CEO coaches in the head office that are there to support them and also track their performance. If we see trends that are turning the wrong way, it is the responsibility for the CEO, coaches, to step in and start asking why. And if they can't get a good answer, then we need to monitor it more closely and see what actions are taken. So it's more of an action-based coaching when we see things are not going in the right direction. And if the subsidiary CEO is not able to produce a great action plan, then we will help them to develop one of those and then make sure that they follow them. If that's not possible, of course, maybe that's the wrong person for the job. So it's -- that's a little bit on a very rough level on how we operate. In this case, we have not been good enough in that and that has been addressed over the last year in our reports and in my letters. This is what we now have improved and that we are working much closer with this KPI. We're monitoring these KPIs that are necessary for the individual subsidiaries to excel, and we are making sure that every action is taking within each subsidiary in order to get them back on track. Just to remind you that the majority of the companies are doing this exceptionally well and are performing exceptionally well. We have a few -- too many, but still a few that needs more attention from us. And us coming out of this will have built a much better base for us going forward as well. I mean this is a tough and sad lesson, but it's something that we will come out stronger from.

Yes. The base model is that we want to be decentralized. That doesn't mean that we should be sloppy and not step in when it's needed. So exactly as Johan said, I mean it's basically maybe a 4-step process. Companies that are performing as they should, the CEOs that are performing as they should, they have rather free reins to continue to do good things and just become a little bit better each year. So that's category one. If that doesn't happen, we will ask the companies for a business plan or an action plan of how to make things better and see if they deliver on it if we like the action plan. If we don't think the action plan is good, we make the action plan for the CEOs and I'm sure that they will run with it. And if they don't, we find someone that will do it for us. It sounds harsh. I think that we've been a little bit too patient to use a nice word during 2024. As Johan wrote in a letter, I think we exchanged 4 CEOs in Q4 2024. I would be surprised if that journey is ended. Moving on to the next question. Martin, through e-mail, have wondered, could you provide an update on the current acquisition pipeline which sectors or regions are prioritized for the next 3 years. I can take that. So...

That must be yours.

So region, we're focusing on basically 2 regions. Focus #1 right now is the U.K. It has been a good hunting ground for us. We've learned a lot, and we want to continue that momentum. With activities that we are starting today, but also following up on activities that we have kept for years where we expect results to happen in the near term. The second priority is Sweden or Scandinavia. We have things that we're working on and where we believe we will be closing something also this year. Sector-wise, we are rather sector agnostic. We're looking for companies that are not as dependent on macro. And we're looking for companies that are -- that have uncorrelated risk with the rest of the companies so that we can build a more robust group, because we never want to be in this current situation again. But we're not looking at one specific sector, but rather companies that are great in diverse industrial sectors. Galileo, investor through e-mail, is wondering how can you escalate M&A. You said that you can increase the number of transactions with the current team. How many acquisitions can you do without hiring someone else? It's difficult to put a number, but I promised all-time high. So we're going to deliver on that. And that's not because we're going to go out and buy companies starting from today, but it's a momentum that will build up. I feel that we and I have learned a lot of the process, during the process, some things that are easy to put on paper, some things that are more of soft character, but the result is going to show themselves this year. And I guess as with everything, we have been not good enough in a lot of areas, but I really don't believe that we'll find someone that can outwork us and that is also a promise.

Maybe just to underline a little bit once more that, I mean, the philosophy regarding what we're looking for when it comes to acquisition and how rigorously we investigate both the company that we're about to acquire and the people working there, it's the same. It's just that we have changed the way we work a little bit and maybe not a little bit, but we changed it in a way so it -- and it's been a process. And as Daniel said, it's -- we have a very good pipeline that has been worked on for quite some time.

Yes. Another question from the same person. You have warned that is -- you have to warn the CEOs to start push selling more. Why weren't they already doing that given that they have bonuses? Isn't it better if they have Teqnion shares? Have you changed many of them for those reasons? Do the current ones look better? And there's a few questions in one.

Yes. Unfortunately, the world is not always that simple that you just pay more and get a better result. It's also come down to personality and having the right person in the right place. We changed during the year when it comes to how -- what type of people we hire. We focus much more of the business mindset of those individuals, and they should have a clear view on how to make money maybe we have not been as good as we wanted previously. But since last year, we have a much higher focus on this. Maybe I didn't answer the question, but let's move on.

We got a live question from Prakal, who was wondering what was the total cash acquired from acquisitions this year? And what was the total consideration paid relating to acquisitions from previous year? And what was the total cash paid, the total consideration for acquisitions in this year? So we actually don't disclose more numbers when it comes to that than disclosures that we have, we'll have an annual report coming up where there will be some more information about that.

I think it's scheduled for the 22nd of March.

Yes. However, I guess, what is interesting to know is that as a cohort or cohorts looking at the last 4 or 5 years when looking at what we've actually paid what we think we're going to pay in total and what we've actually guided in cash flow from the companies. You know that we've been nagging about that we have a valuation model where we want to get our money back in roughly 5 years. And so far for the total group, we've gotten our money back faster than the 5 years, not by a lot, but some. So the validation model on a total seems to be working. We're paying what we should for the group. Some of them we've been a little bit lucky. So the payback time have been much faster than the 5 years, and for a couple, a bit slower. But as a group, it has been adhering to our investment philosophy of getting the money back in roughly 5 years. Martin is wondering what is the expected timeline for the decline in companies return to profitability?

It varies a lot. And we -- unfortunately, it's impossible and wouldn't be honest of us to give a specific date or a timeline there. We're working as hard as we can. We see improvements since we've been doing it for a while. And I'm confident that we will get back on track. But when that is, we will come back to that.

I just want to emphasize that even though it's difficult to know exactly the timing, we're doing everything that we can on an individual company basis in order to make that as fast as possible. In the event if we get into the situation where we feel it's not going fast enough or in the direction that we want to, I mean 2025 is going to be a year where that company like that will not make it to '26.

You're very harsh today.

I'm very harsh today. Okay. Lamar is wondering and I appreciate the transparency and high standards at Teqnion. While Teqnion's recent acquisitions appear to be aligning well with the company's vision and standard, some of the early acquisitions have struggled and weighing on overall performance. As you've mentioned, addressing this lagging subsidiaries a key focus point as the management team ever considered divesting from companies that fail to meet expectations. If so, what would the actual factors be to take those actions?

I think we covered that topic already, so maybe we just move on.

We have a question from George who was wondering what is the target ROE and ROIC expected in around 5 years? That's just a few questions. Maybe we can start with that one. So we absolutely have our internal targets when it comes to ROE and ROIC. It is also kind of possible to back that number out by looking at our 3 financial targets. So when we acquire a company, for example, we try to get our money back in roughly 5 years. And overall, we borrow half of the money and use half of our own cash. So that gives you more or less that answer. When we look at capital allocation internally, the benchmark and the gold standard is, of course, that we know what we can do with the cash through acquisitions. So if a company wants to buy a new laser cutter or whatever, that is the benchmark that we are trying to adhere to as strongly as possible, which puts a floor on where we think that ROIC and ROE should be over time, but because we don't have that as a financial target, I don't think it's a good idea to talk about that number. What percentage of subsidiaries have little pricing power without fear of losing customers? How much of the business might have the structure to lose to remain part of the business with pricing power? I think it's a difficult question to answer. Not because I don't want to because -- but it's because the concept of pricing power, of course, is not binary. It's somehow a long scale. We have a few companies that have very little pricing power and especially if we talk about the house building companies in a macro environment like this, where there is too much supply still and not enough demand. The pricing power is not existent. We just have to take whatever price there is in the market. And then you have the other extreme where we know and we have seen where companies can basically do almost what they want with price and nothing happens with demand because they are absolutely unique in their solution. So I mean, not to make this answer very long, but we -- when we look at companies that we acquired, I mean, pricing power is a key factor. It's difficult -- I mean we can't aim that every company is in a situation where they can put whatever price. But we absolutely want to acquire companies where we believe that there is untapped pricing power and where we believe that they are able to sell more even through raising prices. And I think the ones that are struggling right now are -- I mean, the pricing power is a rather good indicator if the companies have a good competitive advantage or not. So maybe that gives some kind of clue of how to think about it. Another live question is, as permanent owners, you must think on the sustainability of the business models for the long term. How many of the subsidiaries might not be around in 20 years due to disruption, out of fashion, other reasons?

I wouldn't dare to answer it, but I can answer it in this way. When we look at potential acquisitions, we think, decades ahead. And we look for businesses that sell crucial components for society that we believe will be around for a long period of time. Yes, I think I'll stop there.

Martin is wondering or writing, I appreciate the responses. My main concern is not just the numbers, but the lack of transparency. The last Q&A gave no sign of the severity and no profit warning was issued. That makes it hard to trust forward-looking statement now. Do you understand this concern? And how do you plan to rebuild trust?

I think the only way to rebuild trust is to show results, and I'm confident we're going to do that. So I just think words are not necessary in this stage. It's just action and then showing proof of what we've been addressing today.

Yes. We have financial targets that are on a 5-year basis. We absolutely believe that we're going to meet those targets and exceed those targets. And in 5 years, is in situations like this on days like this, it feels like 5 years is forever, and we're not hiding behind the fact that we're long term, but that is the financial targets that we have. And if we get into a situation where we don't believe in them anymore, which we are not, in that case, we would issue a profit warning. Carl is wondering. Thank you for the update. When do you think the extra focus on struggling 1/3 will start to show in improved numbers for these companies?

I think we covered that answer.

Yes. Louis Evans, with the weakening performance in '24, are you experiencing increased tension between the parent organization and subsidiaries? Has Teqnion become a less fun place to work over '24?

What a question, Yes, of course, there's more friction since we have been more actively out with the subsidiaries and putting demands of the people that are giving the responsibility to run them well. And if they are not run well, of course, there will be friction. And that is not fun, but it's necessary and it's part of our job. We still are very proud of our group and our team and our culture and that is fun. And it's fun because we're in this for the long run, and we're going to succeed.

Yes. This is probably something I'm going to regret saying later, but I mean, for us, working at Teqnion. Of course, it's more fun when the results are better and better because we like winning. In a situation where it's down we lose sleep. We -- it's not as fun. It doesn't matter that we know is going to be better. It is less fun. And we also want people that feel the same in our subsidiaries. We want CEOs that feel the pain because their company is doing less good. And we want CEOs that lose some sleep if they are performing bad. That's the only way of making companies better, not having that ownership is not okay in while sitting in a position like that.

I don't think you're going to regret saying that continue.

Georgia is writing. I used ChatGPT, NotebookLM and DeepSeek on a daily basis. I use output from each to feed the others to analyze documents with quality in very little time per philosophy. What's Teqnion's is thinking on AI's productivity against tools to increase sales, investment just not to lose market. It's a very broad question, and maybe we can start by answering that. We personally used that quite a lot more and more. We try to figure out -- I try to figure out new ways of using different types of AI to save time to get productivity gains in our daily lives. And that absolutely have yielded a lot of results. I do not believe that we would -- I would be able to do the amount of work I'm doing now without some of these tools to be frank, not only productivity, but obviously, regarding the quality and the insights that I can get through the different AI tools. On subsidiary level, it is very dependent on which company it is. I'm not saying that it's more difficult to implement in some, but it's more driven by who is the CEO and who's running in the company. Some people have the aptitude of learn these things and like these things. And for those, I do feel that we have some productivity gains. And just to give an example, when it comes to marketing and creating different types of ads and writings. Of course, you can say loads of money and time through doing that. We have other CEOs that are actually very, very good at what they're doing, B2B sales, keeping costs low, et cetera, but have very little interest and aptitude for, let's call it AI, but maybe the broader IT in those cases, we don't push that. If it's working, if they're running the company well, we keep the decentralized model. You want to add something?

No, no. A lot of words about that. But generally speaking, what we do within the subsidiary group is, of course, that we try to share good examples and learn from each other and this is also one of those topics that we see good results from someone using these tools, then others get interested and inspired and start using them as well. So it's -- that's how we improve a lot of things within the group.

Yes. Akash is saying, not sure -- sorry, I'm sure you will get through this difficult period and come out stronger. Yes. Regarding the new credit facility, how is it better than what we had before?

How is this better?

Yes.

It's more flexible. It's a little bit larger and the interest rates are lower.

Yes, it's a good combination, yes. Maestro is wondering how come everyone in management are not in since that I got a PDMR inside a person.

It's because that our interpretation of that regulatory writing is that only people that are -- can influence the long-term strategic decisions of the company should be a PDMR. And in Teqnion, we have 3 people there today. It's me and Daniel, I'm the CEO. So I have the executive power to make all these decisions. In some cases, it can be Daniel, when it comes to talking to you today, for example, or if I shouldn't be here, he would be sitting here talking by himself. So he's in our information policy, he is responsible for taking that role when I'm not available. And then we added Jonathan Alexandersson since -- around Christmas since he's also a part in the acquisition team. So all 3 of us need to agree on an acquisition. And so he has a veto in those topics, which makes him a potential -- not the potential -- so he's also a PDMR in that sense that he can actually make a decision that would prevent an acquisition. So those are the rules regarding these issues. And maybe we can clear that up going forward on the web page and in the reports and just show that in a more clear way. But I mean, we're in office with 9 people. Not all of those 9 people are -- have the power to make strategic decisions within the group. That's why not all of them are on the PDMR list.

And also I just want to stress, this is not something that we have made up. It is consistent with FE, [indiscernible] or the Swedish SEC. So it is the rules that we are following. Who from the acquisition team is based in the U.K., Jorda is wondering? I think if you ask my partner, Linnea, she would say me, but none of us are actually based in the U.K. I think Johan, I and even Patrick was not part of the acquisition team, we are in U.K. every second week for a few days, give or take. I think that number is going to change in the U.K. direction. Yes, I think that was the answer.

Do we have some more on the old question list?

Mufasa is wondering, regarding the underperforming subsidiary CEOs, were they always below standard? Or did you only find out there lack of quality during this downturn?

Well, when you have a strong headwind in the economy, of course, you will see what type of personalities function in those climates are not. And it's -- I think there can be a really long answer to that question, and it's debatable, of course, but you will see it's easy to see poor performance or the lack of the right personality when the times are rough.

Yes. A follow-up question on that is were they CEOs in the position before we acquired the companies or were there hires from the outside?

The new CEOs have replaced CEOs that were not in the companies when we acquired them. Sorry for my English.

All right. Janne, e-mail, why return on investment capital is not part of the financial target for Teqnion. Net debt divide by EBITDA, EBITDA a percentage EPS growth are all good metrics, but I compound -- a key component like ROIC is crucial as well as assessing if value is created or not?

You covered that already, right?

Yes. Could you please consider how to clearly communicate how Teqnion's ability to acquire new businesses have developed over the years. It was briefly mentioned in the Q4 report, but more focus would be appreciated if as it's one of the key questions in the investment case for Teqnion?

I think -- well, before 2021, it was more or less me. After 2021, it's been me and Daniel together. And the approach has been that he has been very, very proactive in contacting potential acquisitions, and then it dragged me along to sit down and meet the potential sellers. I've been very much involved just next to him. It's been good for him. And it's been good for me, and it's a good acquisitions. But of course, now since we are all more confident with each other and with our abilities, it would be stupid to continue to allocate resources in that way. So now Daniel is doing more of that initial work when it comes to acquisitions by himself and just involves me later on in the process when we get to more like a face-to-face or a real-life meeting with the potential vendor. So it freed up time for me doing other things, and it freed up and it's accelerated Daniel's acquisition work because he doesn't have to wait for my schedule to do all these things that he's doing.

Yes. And I think, once again, going back to your question, like how can you trust that. I think that this is our description, explanation of what has happened and where we are now. But result is going to speak stronger than words. Smith, e-mail. If I invest a significant part of my savings in Teqnion today and lock it up for the next 20 years, I'm trying to get an idea of what I should expect when I turn to 60 and opened a locked drawer. Any color is appreciated.

It will -- my intention is that it will be better than our financial target.

Yes. I think financially, that's easy answer. I think to put some kind of color on that. I mean you know how other serial acquirers that have succeeded over time and are more mature and how that looks, that is some kind of part that we, of course, get inspiration from while not trying to do any copycatting. I do think when it comes to geography right now, we're basically in 2 geographies. In a few years, we might be in more, very strategically sought out to build a better, stronger, more robust group, and then it will be more of the same but better. That's the intention. All right. We have more questions here on the live. Akash is wondering how our subsidiary manages incentivized?

They have a bonus system, which is a percentage of the profit increase each year.

Yes. I should maybe also add that we have changed the bonus structure a little bit in order to tighten the incentives a little bit. So it is exactly as what Johan said, but there's also a change so that if the theoretical bonus was negative, i.e., the results are lower. That's a negative bonus that we will be carrying forward and netted against future plus bonuses. So it's upside and downside.

And need to generate a type of -- a good enough free cash flow in order to get to full bones as well also incentivized as mentioned before.

Maybe one more change that we can add for flavor is that if you get a high bonus, you will be forced to use part of that to actually buy shares on the open market that you will need to keep to create even more incentive alignment. Speaking of that, Martin is wondering, Johan and Daniel, do you plan to buy more Teqnion shares to increase your skin in the game?

I don't know what to say about that. Actually, I feel it's rough to say. I would loved to. That's I think I stopped there.

Yes. Maybe the last question. From Frederik Liersalvesen. You stated the relative outperformance of the new companies due to better acquisitions in the last 4 years, how can we be sure that is the reason and not a weakness in Teqnion model becomes apparent after some years of ownership? I think one way of looking at it is that, if we look at the companies that we have in our company and if we would divide that up into maybe 4 different cohorts. We've been around for, let's say, 18 years. But if we make cohorts of 4, 5 years, the strongest performances are yes, it's the one that we've acquired lately, the newest cohort, but that doesn't prove anything, as you're saying. But equally strong is actually also our first cohort. So the companies that have been with us the longest, just absolute weakest cohorts are, I would say, in #3 and part of #2. But -- so if the thesis that we destroy all companies over time, then the Cohort 1 and 2 would be much weaker, and that is not the case. A lot of those companies are actually at all-time highs. I think that gives a little bit of feeling that we believe that we actually don't destroy companies over time, but we need to improve the ones that way that are struggling.

Maybe it's time for us to wrap things up, right? We're at 9:00. Just to summarize a little bit how we started out today. We were presenting our 3 key areas. Our acquisition engine is performing very well. Our acquisition team has been reorganized and made more efficient, which will lead to more and continuously better acquisitions. We expect an all-time high when it comes to acquisition this year. Then we come to our profitable core of the group. It's diversified group of subsidiaries and they continue to deliver solid results. And we are confident in this part of the business and remain aware to ensure that it's continued strength. New acquisitions will fall into this category as we acquired them. And then we have the third section, the struggling subsidiaries where we have already taken significant corrective actions and are committed to restoring profitability. If further measures are needed, we will take them. We thank you very much for your participation here today and your engagement. Thank you for all the questions. And we will, of course, continue to fight to get back on where we want to be, and we are confident that we are going to succeed with that.

Thank you very much.