Earnings Call: Q1 2016

May 10, 2016

Gentlemen, welcome to the Hexagon Interim Report First Quarter 2016 Conference Call. For your information, today's conference is being recorded. At this time, I would like to turn the call over to Mr. Ola Rollin. Please go ahead, sir. Thank you. Welcome, everyone, to the Q1 Interim Report of 2016. And I'd like to start on Slide number 4, overview the Q1 2016. Organic growth amounted to 2% in the quarter and recorded growth amounted to 3%. And if we break it down, the 3% recorded growth consists of, as previously stated, 2% organic, 2% negative currency impact and 3% acquired growth. The improved profitability and cash flow that we saw in the quarter is a gross margin of 61% and an EBIT margin of 22%. The operating cash flow improved by 55%, and that is indeed a strong cash flow for the Q1. We acquired 5 companies in the quarter. And if we look at Slide 5, that's just a reminder for you of the seasonality in profit and sales for the Hexagon Group, where Q1 is our weakest quarter and Q3 is the 2nd weakest, followed by 2 strong quarters, which will be Q2 and Q4. Slide 6, the profit and loss statement. Net sales amount to 724 200,000 in the quarter, and the EBITDA amounts to SEK 215,300,000, and that corresponds to an EBITA margin of roughly 30%, up 1.5 percentage points over the corresponding period last year. If we then move to operating earnings, we can see that operating earnings amount to EUR 160.5 billion, which is 7% higher than the corresponding period last year, corresponds to an EBIT margin of 22.2%. So we do see the effect of amortizations growing catching up with capitalized software in the two ratios, EBITDA versus EBIT. Earnings before taxes amount to EUR 155,300,000, which is 40 7% above last year, but then we have €36,600,000 of nonrecurring items in Q1 of 2015. Earnings per share, excluding these nonrecurring items, amount to €0.35 which is 13% better than the corresponding period last year. Cash flow on Slide 7. The operating cash flow grew by 55% to CHF 101 point 1,000,000 including the nonrecurring cash flow. As we can see, the taxes paid are roughly the same level as last year. We see changes in working capital being contained at roughly €15,000,000 which is very low for Q1. And then we also see that investments were roughly at par with the same quarter of last year. We do notice an increase in investments in tangible assets, and that has to do with the inauguration and the consequential investments that we've done at our development center in Hyderabad in India that was inaugurated in February of this year. Slide 8 talks about FX movements and the impact it's had on our margins and profit and loss. We do see a positive impact from the weakening Swiss franc against the euro. We have a negative impact on sales, but we do have a positive impact of €1,000,000 in the earnings. If we look at all the other FX movements where the U. S. Dollar and the Chinese renminbi are having the greatest impact, we can see that we have a significant operating margin impact, €4,600,000 negative impact on EBIT on €9,000,000 of net sales impact. And that shaves off 0.3 percentage points on our EBIT margin. So adjusted for FX, we would have reported SEK 700 and $33,700,000 for the Q1 and operating earnings of 164 point 1,000,000 corresponding to 22.4 percent EBIT. Looking ahead, using the April closing exchange rates, we expect the FX impact to bottom out and have its most severe impact on the Hexagon Group in the second quarter, where we estimate the FX impact on the top line to be negative 4%. Using the April closing rates, the full year FX impact Q3 and Q4 if foreign exchange rate stays where they were at the end of April. Moving on to Slide 9. Working capital to sales, we had a fairly good quarter, given the seasonally weak Q1 where we always have the working capital buildup. And we're now close to 15% working capital to sales. Moving on to market development on Slide 11. This is usually not a very exciting slide, but in this quarter, we see substantial changes to our geographic mix. North America and Western Europe are both adding 1% to total sales, While we see South America contract by 50% and South America now represent 2% of sales, And this is, of course, due to the significant downturn we see in countries such as Brazil and Venezuela. If we move to Asia and the rest of EMEA, we can see that China is gaining 1% on the back of very strong growth in the Q1. Asia Pacific is holding its position with 13% of sales, whilst EMEA is contracting. And it's the Middle East contracting significantly in the quarter. And the negative development in Middle East is actually shaving off 1% organic sales on the entire Hexagon group. And on Slide 12, we can see this in the shape of arrows where China is growing at 9% Eastern Europe, Russia and Africa, significant growth. We record 54% organic growth in Russia from very low levels, of course. North America, 2% organic growth Asia, excluding China, positive growth Western Europe, another 2% Middle East, minus 23% and South America, minus 11% organic growth. On Slide 13, you see the same picture, but expressed as segments per geographic region. And we do see that in the Middle East, it's actually not power and energy contracting, but it's all other activities that are now subject to budget cuts in the large economies of the Middle East, such as infrastructure and construction, for example. The 2 good businesses in the Middle East in the quarter have been Safety and Security and power and energy. Slide 14 shows the geographic regions over a longer period of time, where we can see that Asia is outgrowing all other regions and Americas is recovering and are above the previous peak before the financial crisis. EMEA is now very close to reaching its previous level before the financial crisis. EMEA, Slide 15, 2% organic growth. Core segments such surveying, automotive report solid growth. We did see significant negative growth in the Industrial Tools business, partly caused by a restructuring where we divested a product line within the Tools business, and that is having an impact on growth numbers for Western Europe. Russia, as previously stated, continues to recover and record strong growth from fairly low levels. And as previously stated, the Middle East recorded significant decline due to spillover effects from the overall weak sentiment in the region. Americas, Slide 16. North America, 2% organic growth South America, minus 11% organic growth. In North America, we're successful in public safety right now. Construction and surveying is growing, whilst Mi recorded negative growth in the U. S. From the manufacturing sector. PP and M recorded growth despite the weak sentiment in the oil and gas sector. And in South America, we do see Brazil as the principal problem area. Brazil suffers from, as you well know, both political and economic setbacks, and we recorded minus 23% in the quarter. Asia, Slide 17. China has turned a corner and is recording 9% organic infrastructure and construction as well as order wins for our digital city project. We also saw strong development from the traditional engineering industries, automotive, aerospace and so forth. We did record negative growth or negative development in power and energy in China. It was a weak quarter for electronics where we're facing tough comparison numbers where Q1, Q2 were really strong quarters in 2015. Geographically, Japan, Korea, Southeast Asia all record strong single digit organic growth, whilst Australia continues to dampen the growth for the region. Segments. Slide 19, Industrial Enterprise Solutions. The organic growth for this segment was 1%, and it was 1% for both Manufacturing Intelligence and PP and M. Manufacturing Intelligence were faced with tough comparison numbers, but we saw solid development in aerospace, but a somewhat sluggish development for electronics. Order development signals demand improvement. We have a positive book to bill ratio in Manufacturing Intelligence. PP and M, good performance for PP and M given its market. 1% organic growth, and it will. It's just as a reminder, our 2 strongest quarters were Q1, Q2 and a fairly strong Q3 of 2015. So it's going to be tougher and tougher for PP and M to beat previous year as we proceed throughout 2016. Sales amounted to EUR 354,800,000 and the EBIT amounted to EUR 89,600,000, which corresponds to an EBIT margin of 25.3%. Most of the currency impact EBIT wise hit Industrial Enterprise Solutions, where Geospatial has a positive impact from the Swiss franc. If we now move to Geospatial, Slide 20, organic growth was 4% for the segment, consisting of 5% organic growth for Geosystems, 6% organic growth for Safety and Infrastructure, but negative 3% for Positioning. Geosystems saw a strong recovery in the infrastructure and construction related business in Asia. It also saw a good take up for the new business Digital City in China, and North America performed well for Geosystems. In Safety and Infrastructure, we see good growth and positive momentum both in North America and Europe, and we see a weak South American market. In positioning, we have good growth in our GPS or GNSS solutions whilst our positioning services are suffering from moss balling of oil rigs and drill ships in the Mexican Gulf and North Sea. EBIT came in at €75,700,000 on €369,400,000 of sales, corresponding to an EBIT margin of 20.5%. And this is really where we can see the EBIT margin improvement over last year. And currency wise, we benefited from a somewhat weaker Swiss franc in the quarter. Slide 21, gross margin. The gross margin recorded gross margin in the quarter was 61.1 percent. And for the 12 month rolling period, it's 60%. EBIT margin, 12 month rolling, 23%, 22.2 percent in the quarter, 1% better than the corresponding period last year. Let's talk a bit about M and A orders and product releases. Slide 24. In the quarter, we acquired a company named SigmaSpace. We've done LiDAR Technologies for the past 10 years. What signalspace offer us is the single photon lidar technology, which enables data collection at very high speeds and resolution. So we can get much more resolution from a higher altitude, collecting more data covering larger geographic areas with uncompromised quality as a result. We will consolidate this as of March, and the approximate turnover in 2015 was $25,000,000 Slide 25, Icon 3d Systems offers a white light technology, which is complementary to the white light technology that we already have. And it's for high precision monitoring in the industrial space. It's going to touch industries such as automotive, aerospace, shipbuilding, Renewable Energies and Mechanical Engineering. And it was consolidated on the 30th March. So we're going to consolidate sales as of Q2. Slide 26. We acquired a division within the Italian based company IDS, and this is a radar technology in the geospatial area. It's got fairly sophisticated technologies where we have a ground penetrating radar, which can detect things such as pipes, cables, fiber optical cables and so forth. And basically, geo referenced those pipes. And you see on the piece of software within this picture, you can see the piping and where it's marked in the street. So it lowers the cost of fixing utilities and other things. Furthermore, it's a way of monitoring mine walls in open pit mines. Slide 27, SCCS is a survey equipment company based in the UK. This is in our approach to convert sales from selling hardware into subscriptions. So we're building up a network of companies that are being able to rent out and basically offer subscription services for construction companies and surveying companies around the world. Slide 28. FTI is a software company making CAE. CAE stands for Computer Aided Engineering Technologies, And it's basically the link between CAD, Computer Aided Design and CAM, which stands for Computer Aided Manufacturing. You take the CAD design and you expose it to the real world, if you so wish, in the CAE. You look at the properties, if you can make a product that you've designed and so forth, and then you alter designs. Our project is to create a new overarching software where we connect CAE with CAM and with metrology software. So we create a self teaching feedback loop where we can improve quality and productivity in manufacturing companies. Digital City, we talked about our wins in Digital City in the quarter. We've got an order from Pengtai, a company in Beijing, specialized in smart city planning applications. And they decided to integrate Hexagon's digital city model, where we use sensors and software solutions, and we provide an innovative and efficient way to capture large cities in 3 d. And you see a picture here of the city of Shanghai. Slide 30. We got an order from Links Transit Solutions Canada, where they're going to build light rail connections in the City of Toronto in Canada. Slide 31. Ecuador has decided to start building subways in the city of Quito, and they're going to standardize this modeling using Leica sensors and software. Slide 32. MK service are using our mobile mapping equipment, Pegasus 2. It's a software suite and sensors where you collect data. And this is really a prerequisite for autonomous driving. Slide 33. We got an order from the state of New Mexico, United States, where they choose to standardize for their public safety agencies on Intergraph's computer aided dispatch system. Slide 34. This is actually a quite exciting application. It's Zipline, a unmanned robotic and remotely piloted platform company, where they will use this platform to ship medical supplies to remote regions. And what we've done here is we will provide high precision GNS receivers in connection accuracy anywhere this platform is deployed in the world. Slide 35, we talked about it when we talked about investments, but this is the positive side from this investment. We inaugurated our Hexagon Capability Center in India, which you see on this picture. And we basically move in our 1200 staff in the city of Hyderabad to state of the art facilities. And that's it. So in summary, if we summarize the quarter in one slide, on Slide 37. 3% recorded, 2% organic growth was driven by Geospatial Enterprise Solutions in the quarter. We expect somewhat stronger growth rates organic growth rates that should be later in the year as a result from stronger order development, new product launches and initiatives. We see an improvement in the operating margin of 1% despite the negative currency impact. We have a strong balance sheet, and we have a strong cash flow that underlines the potential for further M and A. And with that, I am ready for the Q and A session. So Elaine, we are ready to take any questions from the audience. Thank you, Mr. We will take our first question today from Stacy Pollard of JPMorgan. Please go ahead. Hi, thank you. Can you please kind of go through your pipeline and stronger order development, new product launches, etcetera, and talk about that kind of breaking it down by metrology and safety and infrastructure and kind of by division a little bit? And secondly, can you talk about some of the new products specifically that are driving growth today and will do in the second half? Thank you, Stacy. If we break it down, if we look at the Q3, you had 1% growth from the industrial applications. And for PPNM, it's fairly straightforward. It was 1% for the smart plant software. If we then jump to Manufacturing Intelligence, we saw positive growth from our portable metrology business, which mostly is working with aerospace. And yes, I would say Aerospace. We saw a slowdown in the automotive, but we do think it's temporary moving forward. We think automotive will actually recover somewhat in the quarters to come. We also saw a slowdown from very high levels or I should say a decline in electronics, which has to do with we're basically between product generations with our largest customers in the electronics segment. They are running with their current platforms, but we believe that they will launch new products in the quarters to come later in the year. We also So I was going to say and that's the you think Q1 also represents the outlook for Q2, Q3, Q4 as well? How do you mean? How do you mean? I think it will be similar. Do you think the growth will be similar in future quarters as in Q1 on those individual divisions? No. We believe that Mi will see somewhat better growth for the remainder of the year. I think this was the bottom. Okay. And sorry, I interrupted. I think you were heading towards geospatial. Yes. Geospatial is reporting good growth. We see no reason why it couldn't continue throughout the year. We see good momentum in the SI. So the Geospatial segment, if you so wish, should be able to continue its growth. And we should see a somewhat stronger industrial growth in latter quarters in the year. Talking about new products, you have to buy a ticket and you have to join us in Anaheim in June. And then we will happily answer any questions you have on new products. Okay. Thank you. Thanks. Thank you. We will take our next question from James Goodman of Barclays. Please go ahead. Good afternoon. Thank you. I wanted to ask on the gross margin, the significant improvement that you saw there. Could you give us a little bit more behind the factors driving that? And would you expect a comparable improvement as you move through the year? Because it looks like it wasn't mix driven. Was it product specific? Or what drove that? And then if I could follow-up just on the PP and M outlook. Given we've seen oil price come back a little bit and maybe a few more decisions being made, how are you thinking about the more medium term outlook for that business and the positioning of your business ahead of that? Thanks. Thanks. On the gross margin, you need to do one thing, and that is it's a bit unfair to previous year. We do have some nonrecurring posts in Q1 gross margin of the previous year. It's not significant, but the improvement on a steady state is not as great as one first might see looking into the interim report. I think it's roughly 0.5% impact on 2015. But you're absolutely right. What has had a positive impact on the gross margin is product mix within the businesses the divisions, I should say. Between the divisions, you could say, Geosystems was outgrowing Mi, which has a positive impact. But on the same time, at the same time, PP and M was not growing, which would have a negative impact. So it's really individual product lines within the divisions that are improving the overall gross margin. If we then move to PPNM and outlook, we believe that this is the bottom for PPNM, and we have a somewhat brighter forecast for the remainder of the year. Having said that, one needs to remember that we had 2 large orders, 1 in Q2 and 1 in Q3 from PINKANTIERE, which distorts the short term picture. But coming out of Q3 and if you look mid term Q4 going into 'seventeen, We believe the worst is over for us. Thanks, Oliver. That's very helpful. If I remember correctly, the order in Q2 last year was €7,000,000 Could you help us with the Q3 order because I don't have that? And was it Similar size, maybe slightly bigger. We can check it up for you. Without much recurring this year from those deals, there's not a recurring a large maintenance coming through from those deals? Well, they are going to be recurring, but they're not going to be to that magnitude, the recurring revenue. So maybe 20% of the total order value recurring revenue. Excellent. Thank you. Thanks. Thank you. We will now move to Guillermo Peigneau of UBS. Please go ahead. Hi, good afternoon. Guillermo Peigneau from UBS. I actually wanted to ask a couple of questions regarding Digital City China. Can you give us a granularity as to how big it is this at the moment and how big of an opportunity this can become? Thank you. The order in Q1 was for €10,000,000 and that's an order for 1 city. And then we have recurring revenue from that order for the well, foreseeable future, maybe 20% of the total order value. It's important to remember, and we've learned our lesson from our H2O project, that this is a city by city decision. China has decided to digitize the 6 100 largest cities, but we do know this is going to be lumpy. We think we have good success with our product. We have more orders coming in later quarters of this year, And we do believe that it's a good momentum. But we want to be a bit cautious not overselling your expectation for Digital City. But it's one of the very good developments in the quarter. How many competitors do you have in this segment? Is there anyone doing the same? Not really. We have a fairly unique product offering where we combine LiDAR and photogrammetric capabilities in the sensor with the workflow where we can download an entire city in hours after the aircraft has landed. Thank you. Can you also comment on when you said that the order trends will suggest a better second quarter, I was wondering whether you could give us basically a book to bill indication just to see how the order trends compare to the sales trends. Yes. I mean, if you take Mi, it was 107 if you divide order to sales. Thank you. And my last question regarding the electronics market and obviously, the its relationship with the mobile industry assemblers. I was thinking whether you could give us any indication of whether you see the Chinese local manufacturers starting to do the same kind of investments? They are. And there are 3 local successful Chinese handset manufacturers that are investing in similar technologies as we've seen the leaders have done previously. So there is definitely hope for the electronics industry. Yes. And did you capture any order from those yet? Or would be something for the future? That goes without saying, of course. Okay. Thank you. Thanks. Thank you. Erik Golrang of Nordea. Your next question, please go ahead. Thank you. I have two questions and then returning to the margin discussion. Within IES, you talked about the sort of divisional mission and so on. But how has the margin for PP and M specifically developed over the last couple of years here when growth has slowed down? That's the first question. And then secondly, if we look over the next couple of quarters here, you're moving into the quarters now where you started to see the benefits from the cost reduction program you launched early last year. Will there be enough growth and positive mix effect to sort of offset less year on year support from savings if you compare it to the 1% expansion you had on EBIT margins in Q1? Well, if I start with your second question, the simple answer is yes. We do believe that we're on track to reach our margin targets. We're going to do it with mix rather than volume in 20 16. Moving back to PP and M. We've improved the PP and M EBIT margin by 5% over the period you referred to when you've seen the sort of sluggish market. So it's not volume driven there either. It's more getting the customers to convert from the legacy product to smart plant, and that is having a margin boost on the business. Okay. Thank you. Then just one follow-up, a technical question. If I add together the stated FX effects on sales there from Slide 8, it gives you SEK 9,500,000 which is less than the reported 2% impact on sales. What's the difference there? Yes, it's 1.6%. It's rounding off, I guess. Okay. Thank you. Thank you. We will now move to Mikael Lasen of Carnegie. Please go ahead. Yes. Hi. You stated on the first page in the report that you had some regional initiatives that will support growth ahead. What are they really about? Can you explain that, please? One regional initiative would be Digital City, which is a Chinese effort, where I can't really say that the Chinese economy is growing at the same rate as our business is growing. Okay. So it's basically China that you're referring to that? China, we're actually launching another initiative in Brazil Brazil in connection to the Olympics. So we will be able to talk about that in latter quarters. So we have several initiatives regionally to boost growth. Okay. Thanks. And second question is about acquired growth in the quarter was a bit better than expected actually. Can you talk about Ecosys, how they are performing in the quarter and the outlook for them? Ecosys is okay. It's not as good as it could be, and that's one of the things we expect will happen in the quarters to come. We're now introducing Ecosys to our customer base in PPNM, and the uptake and the reception so far has been very good. Ecosys was primarily a North American business. We're now introducing it in EMEA and Asia. And our customers actually like Ecosysm, want to integrate it into their smart plant offering. Okay. Thanks. Thanks. Sid Mehra of Morgan Stanley has our next question. Please go ahead. Hi. Thanks a lot for taking the questions. Just two quick ones on the growth outlook. Firstly, on China, you reported some very strong growth there of arguably easier base comps. But could you talk a little bit about how the sustainability is around that growth? Do you think this is sort of one off stimulus related? Or do you see that sustaining into the rest of the year? And then secondly, on the growth outlook in general, the 4% to 8%, could you give us some color around what the macro assumption is to get you to the 4% organic versus what the assumptions need to be to get you to the higher end of that? Thanks. We talk about China. We can't promise you that we can do 9% throughout the year, which is a very strong number given the Chinese economy right now. But with the regional initiatives that we touched upon, it's shipping, construction of ships, digital city, the slight recovery we see from construction and infrastructure and the continuous demand for our products in automotive, aerospace and later in the year electronics. We believe, all in all, that should create a firm foundation for continuous growth from China. If we then move to the general outlook, it's fair to say it's increasingly difficult to grow organically by 8% in 2016, but 4% is still achievable. And then we're coming back to the product launches in Q2, recovery, the order intake we see in MI and continuous stability and growth in the other businesses. Great. Thank you very much. Thanks. Thank you. Alex Tout of Deutsche Bank has our next question. Please go ahead. Yeah. Hi. Thanks for taking the question. A quick one on restructuring. What was the impact on the operating income in the quarter? And when do you expect to annualize the impact there? And what would make up for the loss of that effect later in the year to see you hitting that 100 basis points margin expansion target? And then secondly, a more general one on the automotive industry. Just the trends that you're seeing there, perhaps if you differentiate across North America and Europe, how strong growth was overall and how sustainable that is? Thanks. Sorry, we I had to look at your restructuring question. We had full impact in Q1, and therefore, we don't report. It's running at roughly SEK 9,000,000 per quarter in savings. So the program is concluded and closed. From here on, what you need to remember is that was to mitigate the strengthening of the Swiss franc that was a negative impact last year. But any additional growth on top of last year, of course, has an incremental margin of roughly 35%, 40%. And that's how we achieve our 1% improvement. And could you repeat your second question because I didn't hear that? Yes, sure. It was on the automotive industry, what sort of trends you're seeing, maybe if you differentiate between the major geographic regions, just the overall growth rate that you're seeing and how sustainable growth would be in that industry? I guess some of the trends in North America suggest the sector might be quite late cycle. What's your view on that? What we saw in the quarter, which do not necessarily translate into a forecast for the year, is that we saw a bit hesitation from Germany. We saw good growth from all other regions but Italy. So Germany, Italy, we saw a bit weaker demand from automotive in the quarter. France, U. K, other countries in Europe were fairly strong when it comes to equipment to the automotive industry. China, Japan, Korea, good growth in the doesn't come as a surprise, I guess, because it's mostly Brazil. North America, I don't think that investments did reflect the growth from the consumers in the quarter. So that could actually shift into somewhat positive growth in latter quarters of the year. Many thanks. Thanks. We now move to Gautam Pillai of Goldman Sachs. Please go ahead. Hi, thank you. First question on the geographic growth progression especially in Europe, despite the negative growth you mentioned in Industrial Tools, you have reported positive organic growth across verticals. Anything specific you would like to call out here? And also, can you comment on the pipeline looking forward for the remainder of the year? And just going back to your automotive comment, is there any concerns that any automotive CapEx could be a near term headwind for you at all? Regarding Europe, we saw good growth. If we take the various countries in Europe, Nordics, France, Spain grew. We saw negative growth from United Kingdom, Germany and Italy. And Germany, Italy I think Germany was somewhat of a surprise, and we think Germany and Italy will recover in later quarters. We don't see a reason why we would have negative growth in those two countries. UK, one has to remember, has recovered and performed remarkably well over the past 4 years. And it's at the peak of its market. And there is a bit of a hesitation in connection to the Brexit discussion right now in U. K. So we'll see what happens after June. Regarding automotive, what was your question again regarding the automotive segment? I mean, you mentioned that you think it should be your growth rebound in the coming quarters. But any concerns you have at all that the order CapEx could be a near term headwind? For us, it's not CapEx. So that's important. It's actually OpEx, our equipment. And the second thing is we are connected to product launches that have been decided years ago. And we see no reason why the OEMs would back off launching new products in the quarters to come. Okay. And a quick follow-up on PPNM. Was the Q1 growth progression better than your internal expectations? And is there any specific project ramp ups in Q1, which we should be aware? Also, can you comment if you're seeing any change in the competitive environment in PPNM? We've seen no change in the competitive environment, and there wasn't anything specific. It was actually a very, very ordinary quarter for PP and M. No large orders, no one off orders, nothing out of the normal. Understood. Thank you so much. Thanks. Thank you. We will now move to Per Lindbergh of ABG. Please go ahead. Thank you. Good morning, good afternoon, everyone. I have 2 accounting questions, if I may. These relate unmistakably to whether they have had any influence on the income statement. 1 is R and D, capitalization minus amortization. You kindly disclosed that on an annualized basis now in the annual report, but not to the best of my understanding on a quarterly basis. Could you please quantify the effect in the last 3 months? That's the first item. The other is a little bit more intractable. It relates to movements of provisions, something that we did see in the annual report for 2015 and also beforehand, what was the net effect of the movements of provisions, specifically reversals of provisions in the last three months? Thank you. The capitalization and amortization has not had any great impact in the quarter. And provisions were actually negative in the quarter where we built provisions. Thank you. Thanks. Thank you. We'll now move to Wasi Rizvi of RBC. Please go ahead. Yes. Hi. Good afternoon. Just a couple from me. If I could start on new product launches. Have there been any delays? Or is this running to your schedule at the start of the year? I mean, the reason I asked is I don't recall in previous conversations whether you were flagging that product launches would be more towards the later half of the year and maybe Q1 would be a bit weaker? We have a hard stop in mid June where we have our annual user conference, and we simply need to time our product launch with this user conference. Right. Okay. And then I guess what I would like to, I guess, hear a bit more about is this network of businesses for a rental model on the surveying equipment. If you could just talk me through what you're doing, what portion of your business that is at the moment and where you'd like to take that? It's a fairly small portion of the total surveying business, but we believe this is the model for the future, where we will basically have pools of equipment around the world, where we will offer subscriptions on various, well, time lines. You could rent it short term or you could rent it long term. And we're going to bundle that so that you also subscribe to a cloud based solution whereby you can store your data and everything, archive information. So we believe this is the model for the future for Sobeying. Right. And then I guess just as a follow-up, how do you think about the returns on that business versus how you're doing it now? And by that, I mean return on sales as well as return on capital employed? How does that compare to We believe it's going to be significantly better returns on both capital employed and sales. And it's sort of a long term model where we collect more and more data. It's a crowdsourcing model, and we are going to offer that data to 3rd parties via the Hexagon Imagery program long term. Okay. Thanks so much. Thanks. Thank you. We will now move to Daniel Schmidt SAB. Please go ahead. Yes, hello. Good afternoon. I have two questions. First one, Ulla, you mentioned in the PowerPoint and also verbally that you had a negative impact in Europe from the divestment of a product line with Industrial Tools. Could you say anything about the magnitude that, that impacted top line on? And if we should expect that for the coming quarters as well? It's minus SEK 2,700,000 in the quarter. And yes, you should expect a similar number for the coming 3 quarters of 2016. All right. Thank you. And then secondly, coming back to Automotive and the Sims 360 product that you have been out in the market now for, I think it's 2 years. And you've had a number of OEMs, I think it's 4, that have signed up. Could you tell us anything about the more about the progress and what you're seeing in terms of interests and pickup and what we should expect in terms of growth for this year for this particular product? Yes. No, we've had good uptake, and we expect it to gradually ramp up. We believe this is not probably a the strongest automotive year 1 will encounter during one's career. But we do think that the SIM 360 is going to do well this year. I can't give you the order book, but it looks promising. And can you say anything about OEMs that have sort of signed up with you? Has that changed in the past couple of quarters? Or it's still these 4 that you've mentioned in connection with the CMD? Let's put it like this. We have OEMs in Asia, Europe and Americas, and it's going to be similar geographic regions that are going to buy in 2016. All right. Okay. Thank you. Thank you. Thank you. We appear to have no further questions. I would like to turn the call back over to you, sir, for any additional or closing remarks. There are no additional remarks. So thank you, everyone, for listening in, and we'll do the same procedure again next quarter. Thank you. Thank you. Ladies and gentlemen, that will conclude today's conference call. Thank you for your participation. You may now disconnect.