Hello, and welcome to the HMS Networks' Q3 report for 2022. Throughout the call, all participants will be on listen-only mode. There will be an opportunity to ask questions. If you have any questions, please press zero one on your telephone keypad. Today, I'm pleased to present CEO Staffan Dahlström and CFO Joakim Nideborn. Please go ahead.
Thank you, operator. Good morning. Staffan Dahlström here. We have an interesting presentation for you today. I'm myself sitting in Stockholm and Joakim sitting in south part of Sweden. Let's see if we can sync this. The agenda for today is, as normal, I make a short introduction and summary. I make a short business update, but then Joakim will give the highlights of the financial report that was presented earlier today. We end up with Q&A at the end. Let's move into some of the quick summaries for you who haven't read the report. We are delivering a solid Q3, good growth on net sales.
We see a quite good order intake, but Joakim will dive a bit deeper into this because it's quite complex with boost orders, currency, and something that makes this complex. We're super happy to keep on reporting good results, but this was all-time high, SEK 179 million. We are super happy with a strong EBIT and a strong margin. We see a fair cash flow, but we are building up some inventory, and we are consequently delivering a good and solid earnings per share. Just a reminder for you who are quite new to our business. HMS, Hardware is Software. We run with hardware products, software products for industrial communication. We have four businesses in our integrated offer, where we go to market throughout the world in a common sales area.
Our business units of Anybus, Ewon, Ixxat, and Intesis. We have our not yet integrated businesses with Webfactory and Procentec, where we are working with integration. Probably 2023, these two businesses will be integrated in our offer. We have a part-owned business in Spain, Owasys, where we own 60% of that business. Consequently, that is not integrated in our business. Talking about our business on a high- level, we talk about our playing field. We have two major customer groups. We have on one side makers of industrial equipment, and this is our big portion of the business. We also have a growing expanded business with users of automation system.
If you look on just a high- level summary of our revenue, our business models, and our go to market, we start on the left side with the makers of industrial equipment. We have two major categories. We have the device manufacturers that represent a larger portion of our business, 43%, where we have a very well-working model of design wins. Quite long design win process, but also very sticky business where we become integrated into the customer's bill of material and deep inside their hardware and software in their devices. Complex sales process because the competition here is more substitute other technologies or make things by your own engineers. We go to market through a direct sales channel with our skilled sales engineers.
Also on makers of industrial equipment, we have our machine builders growing part, 35% of our revenue. Here, of course, our dream is to be part of every machine as a standard equipment. In most cases, we are specified as an option. An option if you need, for example, remote access to that machine. If you need an integration to a production line, then we are integrated as an option to the specification. We have a combination of direct sales for large accounts and also distribution sales for many small customers. On the user side, we work with the users. The users here is what we call the Volkswagen, the BASF kind of companies. The companies, large companies that use automation systems in their facilities.
It's 22% of the revenue, and it's been smaller, but we are doing some acquisitions here and growing quite quickly here. It's either project sales, becoming part of a project where they're building or renovating a facility. Also more and more traditional product sales through our websites and through our commercial channels. Here we go to market either through traditional distributors, but to a large extent, also e-commerce that is specialized on industrial automation and communication. All right. If we take a little bit of really high- level on our vision and mission, we are sticking to our vision of becoming the world's greatest industrial IT company. For us, industrial IT is information and communication technology, but we are really focused on the industrial side of this.
We have a very important mission that is super important for our customers, where we help them enable valuable data and insights, allowing our customers to increase productivity and increase their sustainability. These are the two major drivers for our customers. It used to be primarily productivity, but we also now see that sustainability, energy saving is increasing importance for our customers. We have 2025 objectives, very important for us. Environmental goal, we want to become net positive in our CO2 emissions, both in Scope 1, Scope 2, Scope 3, but also how we help our customers to make a smaller footprint when it comes to CO2 emission, where we do a lot of great things for our customers.
We believe that happy and high-performing employees generate loyal customers, so we focus a lot on our Net Promoter Scores, both with staff and our customers, where we have high- scores. Of course, we are a growth company. We love growth, but we also like to be profitable on this journey. SEK 5 billion is our revenue target for 2025. We want to have a profitability that is beyond 20%. You will see today that we are performing well on that target. Let's move quickly into a business update before Joakim Nideborn talk about the numbers. We see continued solid demand. It is complex with order intake, and Joakim Nideborn will dive into that. We see improvement in the component availability. This used to be a really tough challenge for us.
It's been tough, but we think it's getting better and better. This will also ease the coming quarters. We don't really see any clear signs of market slowdown. Of course, some of our customers are concerned about the future, but still we see solid order intake and things goes quite well. So far, no clear indication of market slowdown. We also see that for the last six, seven quarters, our customers have been building up much more inventory since our lead times, and in general, in the industry, lead times have gone up. We've tried to be really transparent about what is reorders, what is boost orders, and what is currency. We'll show you some good pictures later on this.
To meet this all-time high- order book we're having, we also continue to build our component inventory, which is a bit weak on our cash flow then. As we reported on the last report, quarter two, we made an acquisition of our Australian distributor, Global M2M Pty Ltd, and they are now integrating our Asia-Pacific market unit. We believe that Australia is an important market for us going forward. Of course, this is not a big business. It's SEK 20 million at the moment. We believe that this is an important market for the future and something that will add additional growth for us. With this quick summary, I would like to hand over to Joakim Nideborn to talk more about our financial results and numbers.
All right. Thanks a lot, Staffan. I'll try to do that. Good morning to everyone. Let's kick it off with looking at the order intake as we normally start with. If you have a look at the upper left graph, you might see that it looks a bit dramatic. It's not as dramatic as it looks like. We have now SEK 675 million in order intake, which is a growth of 1% reported, but -11% organic. We have pretty big FX effects from the weakening of the Swedish Crown that continued throughout the quarter, as you know. That's why we can report the positive growth in the reported numbers. No M&A effects in the quarter for the first time in a while.
What's really happened now we need to dive into is the boost orders have been wearing off quite a bit. I'll show you this more on the next slide, exactly how this looks like. The fact that we have this weakening of the Swedish Crown has also given us some SEK 50 million in revaluation of the order book. The way we show the order intake is looking at the closing balance of the order book minus the opening balance plus the sale. With this big FX movements, we also get this effect. We want to report it separately so we understand what the underlying demand really is. For the first time in many quarters, we see a book-to-bill in constant currencies that are below one.
Normally, you would see that as a bad thing. We think that in one way, it's not bad. We need to start delivering out our order book and giving our customers the volumes that they need. In one way, this is nothing strange. We believe that we're gonna continue to see a trend of a book-to-bill that's below one throughout next year as well, given the big order book and the big boost effect that we had for now some quarters. One thing that I wanted to mention specifically is Anybus that continues to be surprisingly strong, I must say. We have good comparable quarter that we're measuring against and still showing organic growth in orders.
It just shows that we have a really strong offering, and it's still highly relevant even if it's been around for some years. Taking a look at the underlying demand on orders a bit more. We've been having this graph now for some quarters where we show the boost effect in the light blue, and then the last couple of quarters, we're also showing the FX revaluation impact on the order book, which also impacts the order intake the way we present it. Here you see that the most interesting thing is on the dark blue one, which shows the underlying demand. Here we are, maybe you could say slightly down compared to Q2, but it's still a pretty big uptick compared to 2021.
We are, as Staffan also said, quite positive that we don't really see any major signs of any slowdown in the market. It's the normalization of the boost effect that we expected that is coming, and we think that will continue into Q4. At some point, we're gonna see the reversal of this boost effect that will probably happen sometime during next year. Of course, difficult to say exactly when. I also wanted to show you our order book, which is it's actually growing now this quarter. The only reason it's growing is that we have this FX effect. Otherwise, since we had the book-to-bill in constant currencies below one, it would have been reduced slightly. But it's still growing. We're almost at SEK 1.5 billion, which is for us, an extremely high- level.
You see the history from 2020 and 2019, we had completely different levels. Of course, the company has grown, but this is just a completely different customer behavior that we're seeing. You see also the proof of that on the right-hand side in this graph showing orders for delivery longer out than 3 months. We have been having a big ramp up over 2021. Now we can say that we are quite stable, and we expect this to start coming down slowly in line with our delivery capacity. It's becoming better and better.
Component availability is, of course, the main challenge in order to improve the delivery capacity. Continuing on that note, going over to the sales, we are happy to see that we are having another record quarter of SEK 624 million, so 32% growth, 23% organic growth. Then year-to-date, organic growth is 15%. It's a solid development. Then, of course, we could have been better if we had better component availability. Also here, really good to see that Anybus is delivering well. We've had a very good order intake for some quarters on Anybus, and now we're managing also to convert that to sales. So that's very strong. 42% organic growth on Anybus compared to last year is, of course, a very good number.
On the other brands, I think on basically all brands, we could have been performing a little bit better if we had better component availability. Looking forward, we think that we will have slow improvements. Maybe a couple of quarters ago, we thought it would be more of a clear cut, that we would be seeing a completely different market. It's getting better, but it's going slowly, and there's still some problems and end-of-life issues that we need to handle and work with. We expect slow improvement over the coming quarters, and that's how we hope it will develop. Also looking here, you have no acquisition effects on the sales side, so 23% organic growth and then another 9% from the currency.
First per region, pretty similar to what we normally see, 60/20/20 is what we normally say between EMEA, Americas, and APAC, it's a similar situation now, and pretty similar to what we had last year as well, so nothing strange. Go over to the profitability, and here we have a record quarter of SEK 179 million in EBIT, of course, a result that we're very pleased with. 28.7% margin compared to 21.5% a year ago, we're pretty far beyond that target, so that's very good. Now we need to remember also that we have Q3 is the quarter that would normally perform the best, and here we have solid volumes as you saw on the sales side, with record volumes on the sales.
We have managed, which is very positive, and this is maybe one of the strongest numbers in the report, the gross margin of 63.6%. We went out for the first time, actually managed to compensate ourselves for the COGS increases that we've seen over pretty much a year's time now from the inflation on the component side. Then you see this marked uptick on the gross margin side, which is of course helping us a lot on the bottom line as well. We also need to mention the fact that we have a very favorable FX situation with the weak Swedish crown.
This is giving a positive EBIT impact of SEK 10 million in comparison to the same quarter last year. That of course boosting a little bit as well. The way the currencies are at the moment is very solid for us. On the OpEx side, I want also to mention that we have been doing, you've seen this before this year, we've been doing some investments in the sales and marketing organization. Also compared to 2021, which was a difficult year, we see COVID is around and now we're managing to travel more, meet more customers, which we believe is positive for the future. You know also that Q3 is low on OpEx. I need to mention that we have about SEK 20 million in lower OpEx due to vacation effects.
This is of course something that will come back in Q4. With the investments we're doing, we expect to be maybe some 15%-20% up in OpEx in Q4. I think this Q3 is a very strong result with a 28.7% margin, but it's not necessarily representative for the future performance. Earnings per share, I want to touch upon that as well. 2.9 SEK, of course, a record there as well. Maybe worth to mention, given the large FX effects, we're getting higher- net financials than normally. We have SEK 11 million in the quarter.
The main things that are striking in there is the revaluation of our option-related debt and also additional purchase price reservations related to the Owasys acquisition that we did last year. Having a look at the cash flow then, it's SEK 180 million, slightly better than recent quarters. Still quite hit by the inventory buildup that we're continuing. We're building inventory with another SEK 50 million, and this is majority to the majority related to components. We've been seeing the same trend throughout the year. We've been trying to improve or increase our component inventory to be better in the delivery performance towards our customers. This is also why we're managing to grow the business slightly in the quarter compared to previous quarter, that we have many components available.
When we have these shortage components, in many cases it's the processors that are being the shortage components at the moment. When we get those components out, then we can deliver. We want to make sure that we have that situation going forward as well when we expect the volumes to ramp up slightly, then we need to have this extra inventory. It's hitting our working capital short-term, but we believe it's the right decision for the business in the near future. Also, with the higher- sales levels, we have some receivables build up that is also impacting the cash flow a little bit. Good to see that we're improving, and this is maybe not our first priority at the moment.
Now it is to make sure that we can deliver, and then we have to live with the fact that we're hanging a bit behind on the cash flow. That will come back next year. Also to see year to date, we've been building this inventory of SEK 129 million. Overall, I think we're still in a good position with an average working capital of less than 10% on sales. The final slide I want to touch upon is the net debt situation. Here you see that we're moving sideways compared to Q2 roughly. Two things worth mentioning there. One is that we're having some new rental contracts that is being hit by IFRS 16. So this is increasing from SEK 80 million to SEK 163 million.
No dramatics in that it's not the impact of covenants or anything, but it's something that needs to be there. On the other hand, to compensate for that with the profits we're managing to lower our what we call here all other net debt, the dark blue one, it goes from SEK 235-SEK 155. That's maybe what's interesting here. That's where we have our interest-bearing debt. That's where we have our covenant-based debt. That's what we're following. You see that we're doing very well there. We have a net debt to EBITDA of 0.72. I think we have plenty of room for future acquisitions and investments that we want to go after. All in all, quite solid balance sheet from our perspective.
I would like to hand over to Staffan to summarize before we go over to questions.
Thank you, Joakim. As you hear, we think we are delivering a quite stable quarter. Two things we would like to highlight. I think first, we see a stable demand, but of course, there are uncertainties ahead. We see order intake looks softer, but I think you feel also that we are transparent about the changes and if you look on the real demand, it is pretty solid when we take away for the boost orders and this effect. As Joakim mentioned, we're expecting that these boost orders will be coming back on the negative side. We need to get back on short lead times and eat up the order book we're having, so we are quite positive about this. We see that the component availability is slowly improving. In general, our customers remain positive.
I think there's, of course, worries about the future. Everybody talks about that everybody else see weak markets, but our customers are still quite solid, and we think we are in an industry that is holding up quite well for the time being. Secondly, I must say I'm very happy with the continued solid execution. Very important that we can improve our gross margins. We are back on the high- levels we had in beginning of last year. A lot of work with the price adjustments and working with our cost sides. This also indicates that we have a position where we can raise prices to some of our customers, and we are getting away with it, and that's very important. That shows that we are important. We talked about our expanded inventory.
I think it's important that we allow ourselves to also expand our inventory to make sure we can eat up our order book. Of course, we are super happy with all-time records in sales and what is plus 77% on earnings. Strong quarter, and we are happy with this, but we need to be a little bit careful for being agile for the coming quarters. So far, we are not too concerned about the coming quarters. With that, I would like to open for Q&A.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two. Our first question come from Joachim Gunell at DNB Markets. Please go ahead. Your line is now open.
Thank you. Good morning, Staffan and Joakim. Starting off with the very strong Anybus growth that's quite surprised a bit here. Can you talk a bit more about what drove this stellar organic growth?
Joakim, would you like to take that or?
Yes, I can take that one. I think in terms of the sales growth, it's not surprising at all for us, Joakim, because we've had this really good order intake, and we have a lot of those boost orders that we've received has been to the Anybus business. Since you have a lot of embedded business, you're making the customer super dependent on this component for them to be able to deliver. That, I think that was expected that we should have a good sales growth in that sense. Some of those deliveries might very well go to some increased safety stocks and so on for the customers. What maybe surprised us a bit more was that we're still doing so well in the orders.
We thought maybe that this SEK 50 million boost effect that we saw is to a large extent related to Anybus, and that we still have customers building that inventory. We thought maybe that was passed in Q2, since we saw a pretty strong decline towards the end of Q2 in this boost effect. I think those are maybe the main things beyond the fact that we have a very strong business. The business is still very strong. I think that's also what we see here. There are not really any signs of this underlying slowdown there.
Okay. I mean, it's a very dynamic environment out there, since as everybody's looking for the canary in the coal mine. Based on, yeah, with regards to macro, basically, what are you guys seeing at HMS, call it, month-over-month through the quarter? How order development trajectory, and if you are seeing, I mean, are you worried to a certain degree of any sort of cancellation within the order books and so forth?
I thought, I think we still see, if you look on October so far, we still see a good and stable order intake. I think we have some customers that are talking about maybe delaying some shipments, but we don't see any cancellations. In general, we don't allow any cancellations. Most customers, they need the material, but of course, they are changing their planning. So far, we could deliver more if we had more components. Still we are in a situation where component situation is still limiting our ability to deliver. That's a bigger problem than a few customers who are talking about maybe they have a little bit of high- inventory in their warehouses. I think we haven't seen that change yet.
Perfect. Just finally, if you can comment anything a bit on how much of the, I mean, the density of the organic growth, so basically split that up between what is volume and what is pricing. That would be helpful. Whether customers, if you've seen any like sequential change to customers' willingness to accept price increases.
If I start with that, Joakim, you can fill in. I think in general, we are of course the customers are not super happy with the increased prices. I think since this has been industry-wide, I think most customers understand this, and we have good dialogues with the customers. I also feel that we are increasing pricing and some of these effects are still to come, so we are just in the middle of this. We expect that some of these effects from increased prices have not been materialized. I think there will be more to come there. Joakim, can you give some more details on that?
I think you're right, Staffan. I think we might be halfway there in terms of the effects that we see from price increases. We still have some effects to be seen in Q4 and Q1 next year from the things we've been taking. In terms of putting a number to it, I think I'm gonna pass on that one. Joakim, it's a single-digit number when it comes to the price increase growth in the quarter. Maybe we come back to that in Q4 and then see when we have the more or less complete picture.
Very clear. That's all from me for now. Thank you very much.
Thank you, Joakim. Thank you.
Thank you. The next question comes from Klas Danielsson at Nordea. Please go ahead. The line is now open.
Yes. Thank you very much, and good morning, and thank you for taking my questions here. I'll kind of try to build a bit upon Joakim's questions. He asked on the October delivery rates and the month-over-month demand and so forth. You know, I was just wondering, seeing as you're kind of mentioning the components are moving a bit more freely heading into Q4 and so forth. I was just wondering, could you maybe help us quantify your sales capacity for the next quarter a bit, maybe based on how it's looking in September and how it's started in Q4 as well? I'll start there.
Yeah, good question. We still see some hiccup on the delivery side. In general, we get more stability in what we get, promises from our component suppliers, but we still see some hiccups. So it's still a bit unpredictable. We are not at max capacity in our delivery performance, so we are still having more production capacity to use. But the component availability, even if it's improving, is still limiting our capacity, I would say. So it depends a little. Our quarter four performance will be a bit dependent on component availability still.
Yeah. As you mentioned on the max capacity, how is your max capacity and how much headroom do you have still up until that level?
Yeah. We have a supply strategy that is a mix of outsource and in-house production. You can say that in general, the majority of the high- volume standardized products are made at our EMS suppliers in Europe and in Asia. The high- flex low- volume products are mainly done in-house. We have a good mix there. This means that we are probably faster to ramp up in the high- volume. We do that through EMS suppliers. That doesn't really require a lot of investments. That's maybe a 3-6 months horizon because we know that our partners have more capacity.
When we do the high-mix, low- volume ramp up, then it's more about hiring our own people and expanding our factories in Sweden and Spain, which is a longer process. I would say that maybe it's a six-month horizon in general to increase production capacity more than beyond 10, 15%-20%, something like that. That requires six months window, I guess.
Okay. All right. That's interesting. I mean, you touched upon this already in this call, I think a bit, but just on the kind of boost side and obviously you have some increasing lead times and inventory buildups in there that's driven orders and that's reversing a bit. I mean, could you give us any indication of how much of an impact you should be able to see there over the coming quarters? I mean, should we expect you to go from having kind of SEK 200 million in order boosts that you had last year on a quarterly basis to now having minus SEK 200 million? Or could you or should it be flat? Or I mean, what sort of levels should we expect?
Maybe I can take that one because we've been reasoning, of course, around that a lot how that we hit. Now taking into consideration that over the last seven quarters, we have now built up SEK 950 million in these boosted orders. Of course, but I can when Staffan and I discussed this the other day, we said that is really the net effect. Of course, some of that has been delivered out, but then we have yet some more. Nine hundred and fifty, basically the SEK 1.5 billion order book is maybe the SEK 950 million more than what it should be. That's basically how we look at it, and that's been building up over seven quarters.
I mean, we've been raising that it's and the way it's been building up is almost like a normal distribution, right, over time. It was slow in the beginning, then it was high in the middle, and then was low in the end. Our best guess is that we will have something similar in terms of that distribution on the way out. How many quarters that could be over? We don't really know, but maybe a good guess could be that it should be the same period that it's been building up over. It's not gonna go overnight, that we're pretty sure of. If you just reverse that normal distribution over another, yeah, six, seven, eight quarters, I think that's probably our best guess that it will even out something like that. You're probably gonna see that we.
As I said in the beginning, maybe we'll have a book-to-bill slightly lower than one for now, for a couple of quarters, and we'll have a little bit of this reverse boost effect with us for the next year and then probably into 2024 as well.
Yeah. That's great. Very great. Good. Then I think just to end off, I have two questions, actually. I know this is a really difficult ask, but could you maybe try to kind of help us understand how your customers' inventory typically look like? I mean, how many months do they typically have in inventory of your products, and how much do they have now? If you could maybe help us a bit on that.
Yeah, if I start in general, we see different behaviors in different markets. If you look on some of our large Japanese customers, some of them carry inventory for 12 months going forward, which is very high and very long, but you know, that's the Japanese style. Maybe their cost of capital is not so high either. If you see on the European side, it's a little bit mixed, but I would say that quite many of our customers are having a, I would say, maybe 4-6 months of inventory in general. But the challenge is that in some of our products we are an option which make it difficult for our customers to say they don't know how many of their product is using our component.
Some of them have higher- inventory because they want to have buffers. Some of them are a little bit lower because they don't know the utilization rate of our component. I would say it's probably at least double from what it used to be. At least double. There's a buffer there that over time need to be reduced, of course, to get into normal. If that takes four quarters or eight quarters, we don't know yet.
All right. That's fantastic. Last one from me. Gross margins super strong this quarter. I think it surprised me a bit on the upside for sure. You do mention still that you have some price increases to come, just now early on this call. Should we expect increases in gross margins further over the coming quarters, or is this a reasonable kind of level to expect?
Maybe I start, Staffan. A couple of things that I maybe should have clarified before. We have one part that is driving the gross margins with about one percentage point. It's also that we have stock revaluations of the inventory that we keep in other currencies than Swedish crowns. That is helping the margins with a little bit more than one percentage point. That will of course not be the case if the Swedish crowns were not to be weakened further. That will be reversed. On the other hand
All right.
You're right that we still have some price increases to come that will strike through, that will help us. I mean, just a rough guess would be that we should be able to be on this level that we are maybe slightly better in Q4. Something like that. I think that's also what we said there when we started. We did this work in 2020, a long time ago now, and we saw margins getting up to close to 64% in the first half of 2021. That's where we should be able to be. That's our expectation. Then we have maybe a couple of times or a percentage point left to getting there.
All right. That's very helpful. Super. That's all for me. Thanks.
Yeah. Thanks a lot.
Thank you. The next question comes from Viktor Hellberg at Danske Bank. Please go ahead. Your line is now open.
Yes, good morning. First, just a clarification question 'cause I lost the line. What did you say on the OpEx guidance for Q4?
I said that in Q3 the run rate is SEK 20 million higher than what we're showing utilization effect. I also said that we expect to be somewhere between 15%-20% up in Q4 versus Q3. That does not mean, maybe you have to clarify that as well. That does not necessarily mean that the run rate will be that much higher because, you know, as always, we have these big trade shows that we do in Q4 that cost some extra. Q4 is also always our highest quarter in terms of cost, and Q3 is always the lowest one.
Yeah. Perfect. Thank you, and sorry for that. Next question. On your comment on this, that you expect a somewhat weaker order intake in the coming quarters, is that purely on the comparables being so strong in the recent periods, or do you bake any macro uncertainty into that comment as well?
Well, I think in general, the main thing here is the boost effect on the order intake, I think. The coming reversal of that boost effect. That's the majority of effect we're seeing.
Okay. Perfect. I would have guessed that. Okay. Thank you very much. That's it for me. Thank you. All right.
Thank you. Just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. There are no more question. We just received one more question. It's from Simon Granath at ABG. Please go ahead. Your line is now open.
Thank you, operator. Hi, Staffan, and Joakim Nideborn for the presentation. Regarding the gross margin, one driver has been the reduction of additional costs for component purchases. Could you guide us on how much this versus price increases drove gross margins? Also, would you say that components are starting to reach more normal levels in terms of pricing for them?
I will take that one. Yes. Good question, and maybe let me take the opportunity to clarify. We have two things basically that have been impacting our gross margin in terms of the component cost. One is that let's call it the inflation driven, the fact that everything is getting more expensive. That is, of course, still there. It's not been accelerating into Q3. It's pretty much on the levels that we saw in Q2, so that's good. It's just slightly up.
The other part is the stock purchases that we have been having to do on components when you pay maybe 10 or 100 times more for a single component to get, you know, to get that last component out of a couple hundred components to finalize the product. We've been seeing much lower volume in Q3 compared to Q2, and basically half the volume what we've been buying on the spot market. The main reason for that is that the component availability is better. So it not only does it impact the lead time, it also impact the margins that the component availability is better. We still think that we'll have to do some of those spot purchases.
Some of the suppliers are now also looking over their product portfolio and maybe choosing to put some of their older product end-of-life, which is also causing more difficulties in the sourcing situation. We still think that we'll see some spot purchases going forward, but it's at a much lower level than we saw in Q1 and especially in Q2, when we think it probably peaked in Q2.
Thank you so much, and that's very clear. 2023, obviously there is lots of uncertainty among how customers will spend, etc. How would you say that you are currently positioning yourself in terms of investments and spending into resources, R&D, marketing, etc.? Have you made any delta now versus the Q2 report, for example?
Well, I think we are going to our 2023 planning as we speak here. Of course, we are like everybody, I guess, in the market, anticipating higher- costs based on inflation. That's clear. We need to be agile, but we need to be. We're a combination of careful and opportunistic here. We try to make sure that we navigate this in a way that we maximize our opportunities, but try to be a little bit cautious on the risk side as well. I think it's. We're trying to be a little bit careful, but still there are good opportunities out there in the market, and we don't see that we are in the position where we should do a lot of savings or reductions.
We still wanna expand, but we wanna expand in a good and smart way, being close to the customers and really hear what they are saying. So far, we are optimistic about 2023. Of course, we have a fantastic order book, so we are not so afraid of the revenue and the profit next year. We are keeping investing in sales, marketing, and innovation. I think we are just being careful, but still making sure that we are not passive. We need to stay active here.
Thank you so much. As a final question, you mentioned in the reports something about 5G, and it feels like we have not spoken too much about 5G since your Capital Markets Day in 2020. Would it be possible for you to give a brief update on how the market has developed since, and also the mid- to near-term outlook regarding that?
Yeah, I think this is very interesting technology as we rely upon. As we know in our industry, new technologies take years to establish themselves, and that's what we're seeing here. We also see that there's a lot of interest in special applications in manufacturing, in mining and this kind of application of 5G, where the technology itself is really promising. We do a lot of proof of concepts and have good customers on board here. We also see that some of the technical specification, and this becomes a bit technical, but there's a feature called ultra-low latency, which is super cool and very interesting for synchronization of robots and stuff like that. That part of the specification in 5G is not completed yet. There are some lags in the specifications that is still for the future.
We are seeing a little bit as expected. This is a technology adoption that will take time, but the interest is there and the market will come, but the commercial breakthrough will still take a couple of years. The reason we are investing here is mainly to making sure that we are ahead of the curve here and engage early with these new customers. Commercially, it will take maybe we talked about 2025 as the breakthrough years at Capital Markets Day. I think that feels quite valid. 2025, this will be part of our revenue, but until then, it's much more of exploring and innovating with customers at the moment.
Interesting stuff will be to follow, in the future as well. Thank you so much.
Thanks, Simon.
Thank you. There are no more questions at this time, so I hand the word back to the speakers for any closing remarks.
Thank you very much. Thank you all for participating in this, quarter three call. We really appreciate your support and interest in our company here. As you hear, we are super motivated to continue to make sure we take opportunities we see in front of us, but also we are a little bit careful and staying close to our customers for the future. With that, I would like to thank you all and wish you a fantastic day today. Goodbye.