Okay. Good morning, everyone, and welcome to slightly gray and cold Halmstad this morning, but a warm welcome to you and to the HMS Networks Capital Markets Day. My name is Thomas Carlsson, I will be your host for this next two hours, two and a half maybe, depending on how much questions we get. I'll be behind the screen taking any questions you may have during these next two hours or so. We have a packed agenda for you, I can assure that you have a very interesting next two hours. We have most of our corporate management team here ready to present to you. During the next hours, we'll have a look at this. We'll have a short introduction by our CEO, Staffan Dahlström, followed by a strategic overview for the next five years by Staffan, Hans Larsson, our CCO, Joakim Nideborn, our CFO.
We'll have a look into some technology, 5G business opportunities for HMS by our CTO, Jörgen Palmhager, and then have a look at the HMS sustainability plan by Joakim as well. Towards the end, we'll have a look at the financial overview and a short summary before we head into the Q&A session at the end. As I said, I'll be behind the screen taking any questions you may have. You can use the Team Live Events Q&A function to shoot any questions you may have, and we'll have a short break at the end, rearrange the room, and then we'll have a short panel discussion with the questions that you have coming in. Once again, a warm welcome to Halmstad, and I'll leave the floor to our first presenter for today, Staffan Dahlström, who will introduce HMS Networks. Once again, welcome.
Thanks, Thomas. Good morning, everybody. Let me give you a short introduction to HMS and what we do. I know some of you guys are new to the company, and many of you are also quite familiar to our business. We've also been changing our business, partly the last couple of years and expanding our playing field. What we do, we are connecting devices, systems, and industrial machines. This means that we help our customers to connect their robots, their packaging machines, or their industrial systems. For example, we have customers like the Swiss company VAT, making vacuum valves for semiconductor manufacturing. They use our Anybus embedded technology to make sure that they can connect their valves into whatever semiconductor manufacturing line their customers may have.
Another example is our wireless products, where we use our wireless technology to help customers making AGVs, automatic guided vehicles, inside the manufacturing plants for automotive or maybe logistics centers to connect to both the control systems but also the logistical systems. These AGVs can move freely without cables. Thirdly, we also work with, as an example, with remote access of industrial machines, allowing machine makers or machine owners to monitor data from their machines without being physically close to their machines. Here we have over 300,000 machines inside our Talk2M cloud system. This is one of the leading IoT systems for industrial applications. This is just three snapshots of our business, and all of them are quite similar when it comes to it's B2B business, it's industrial application, and it's really critical network communication.
It's important for our customers that their systems work 24/7 for now and for many years ahead. Look at our product portfolio. We have a quite broad range of products and technology, ranging from embedded communication technology to gateways, to wireless products, to remote access products, to software and cloud technology. All this is a quite broad range of products, a combination of hardware and software, and this is really what we focus on. We have four main brand, Anybus, Ewon, Intesis, and Ixxat, all with its individual strong product offer, but all their products and solutions are offered in a common go-to-market channel through our market units around the world. We also have two new areas coming in from acquisitions in the recent years. WEBfactory, a German software company, adding more of a software content to our products.
We can combine this with some of our hardware products. The newest addition, Procentec, Dutch company working with network diagnostic, making sure that you understand your network traffic and helping our customers to increase uptime and minimize downtime of their networks. Very exciting technology. This is our product offer. What we do with this offer is to target two industrial groups of customers. First, we talk about users of industrial automation systems. This could be food and beverage companies, pulp and paper, automotive, et cetera, users of these technologies. Here we normally work with distributors, system integrators, different partners to access these end users of technology, and this is some 25% of our revenue.
We also have a big business with makers of industrial equipment, and here we work with the manufacturers of devices or machines, and we are becoming part of their bill of material or part of their solution that they deliver to users of industrial automation. This is some 75% of our revenue today. If you look at the company as just a brief overview, we have more than 7 million devices connected, running every day in industrial applications. This make us a quite big company in this specialized niche of industrial communication. As I mentioned before, we have 300,000 machines connected through our Talk2M system. We are really a leader in this remote access of machines. We focus on industrial communication and industrial Internet of Things, IoT. We are a technology company.
Jörgen will talk later about 5G and what's going on there. We also work a lot with AI, wireless technology, IoT, and smart grid for energy distribution. Technology is very close to our heart, and that's our DNA coming from a technology sector. As a company, we are almost 700 employees around the world. We have our own offices in 16 countries today. We have partners and integrators in more than 50 countries. We are headquartered here in Sweden. Normally a very beautiful area of southwest Sweden. As you see today, quite grayish here in November. We like this part of the country, and we enjoy being here on the west coast. As a company, last year we landed our revenue at SEK 1.5 billion. We have a new ambition to double this, more than double it to SEK pi billion in 2025.
Joakim will talk more about our financial goals. Our ambition is to keep our solid operating profit at around 20%. Last year, we had an earnings per share of SEK 4.43 per share. This is how we operate today. If we talk to our teams here, our managers, we made this word cloud survey a couple of weeks ago, and we asked our managers, "What do you feel is the strength of the company?" As you know, the word cloud is expanding the words that many people select. It's quite interesting to look on the strength we have here. We have a solid existing business. We have a good reputation. We have a large customer base. We have good product quality, strong supply chain, good tech skills, and there's a lot of good things here.
We feel very confident now when we release our 2025 goals and going forward towards more continued expansion, that we have strong base of business. This industrial world is a quite conservative world where a lot of things keep on moving in a slower pace than more consumer-oriented things here. We have a strong position to start from. How did we get this strong position? Let's take a quick look on the history of the company. Started in the late 1980s, quite many years ago, with my partner Nicolas and myself as a small startup working with engineering services and electronics back in the 1980s. We were fighting hard to find this new product that we should conquer the world, and it was quite hard a couple of years here.
Back in 1994, we released the first successful product, Anybus, that became an instant success. Since then, we saw quite rapid growth of the company. We took in new capital, new owners, and they helped us expand both the product offer but also the international expansion. We started it especially in U.S., in Germany, and Japan, which is still our three major markets. We had help from different shareholders, and back in 2007, we were making our IPO at Stockholm on Nasdaq OMX at SEK 8.50 per share. Since then we've been public. Slightly after the IPO, we got a little bit of a headwind from the financial crisis. You see this in the bump in the nice curve here on the screen. Quite nicely, we bounced back quickly 2010. It was a big dip, but also quite big recovery.
This is also what we see in the future when it comes to the slow business now. We expect the industry to pick up later because investments are normally not canceled. They are delayed for the future. We expect that when things go better here, also the CapEx investment at our end customers will increase. Back to the history. Back in 2013, we started the first larger acquisition. We bought German Ixxat, and this was a starting of our agenda for acquisition and in combination with organic growth. Since 2013, we have done six successful acquisitions, and one of them was Spanish Intesis. Intesis was extra important since they also helped us to take a step into the very interesting market of building automation. This is one of our key markets since 2016.
We have a long history, but now we are 2020, a challenging market with corona, but our ambition is clear. We want to keep on growing. We have ambition to become the world's greatest industrial ICT company. Hans will talk more about what this means. We feel we have a strong foundation, and we have a good ambition for the future to keep on growing. How to do this? How to become the world's greatest industrial ICT company? Well, take a look on the coming sessions here, and we explain our plan. Our focus areas going forward. We have just from a high-level view from the company, what we are doing is we are enabling valuable data and insights from industrial machinery. Okay, why do we do this? Well, this is quite important because this gives increased sustainability like energy savings and increased productivity for our customers.
They get more data, more insights from their machines, from their devices, and from their systems, and this helps them to increase their productivity and sustainability. What we do is very important. This is our mission. HMS enables valuable data and insights, allowing our customers to increase their productivity and sustainability. This is what we wake up every morning to think about, and this is what we want to do. Look at the strategic focus areas. We have three main areas that we would like to focus on. We have our environmental sector, very important for us. There are companies who want to reduce their emissions. There are even companies who want to have zero emission. We have higher ambition than that. We want to have a net positive approach to this. We want our focus to become more than just zero when it comes to emission.
Joakim will talk more about the details going forward, how our environmental plans look the coming years. Secondly, we believe that staff and customers are very important. We think that happy and high-performing employees drive happy and loyal customers. This is very important for us. Sounds simple, but we believe this is where it starts. The third area, we want to continue growing. It is important for us to combine growth and profitability. We believe that ambitious growth plans combined with good profitability drive us to be agile and flexible and really focused on the future. The targets we have here for 2025 for environmental is that we want to have a net positive external impact when it comes to CO2 emissions, but we also want to do that for internal purposes.
This is not easy, and Joakim will talk about how we measure this and what ambitions we have there. We want to make sure that our customers and our employees recommend us to their colleagues, to their other business peers. We want them to be a company that they recommend us. We want them to recommend us as a workplace or recommend us as a supplier. Therefore, we focus on Net Promoter Scores, and we want the Net Promoter Scores through our employees to be greater than 25, but also from our customers to be greater than 25. We think this is a very strong measurement of our success going forward. Happy and high-performing employees generates loyal customers. Very important for us. Finally, the financial goals. We want to reach a revenue 2025 that exceeds pi billions, more than 3.14 billion SEK.
We want to maintain a good profit level at 20% EBIT. We also want to make sure that we can make dividends to our shareholders of 30%-50% of EPS. This is really the high-level targets and our three key focus areas for our coming five years. With this, I would like to hand over to Hans, talking about our playing field and where we are active on our markets. Hans, welcome.
Thank you very much, Staffan. We are active in two significant markets. One is the industrial automation, the other one is building automation. With the new strategy we have now, we are also expanding our playing field a bit. We say we have the target to become the world's greatest industrial ICT company. What is ICT? Well, ICT is information and communication technology. We add the industrial part to this because we are an industrial company. When we look at the playing field, we will distinguish between three specific parts. It will be control, information, and infrastructure. Starting with control. Control-centric applications are typically on-premise control. It's industrial automation inside production lines, inside machines. It's real-time. We talk about milliseconds, microseconds of communication to control production.
Information is built on data, so it's acquisition of data and it's, of course, what you do with the data. Analytics, creating the insights you need to optimize your uptime or doing preventive maintenance or whatever you have. Infrastructure is basically the data transportation inside machines, inside systems, or also up to cloud, et cetera. If we look a little bit more at the details on the control side, this is really the bulk of our revenues. We have about 70% of our revenues here. It's a market where we believe that the market grows around 5% annually, and we are active in some sub-segments here. We are really the market leader in network connectivity. Main driver in this field is Industry 4.0. That's a trend which you hear a lot about, and that's actually driving the development here.
Slow-moving technology-wise in some parts, but always steadily moving forward. When it comes to the information side, here we have about 20% of our revenues. It's a faster-growing market. We believe it's in the range of 10%-15% of annual growth. This is typically where you talk about industrial IoT. We are leader here in remote access solutions through our Ewon brand. We have both, let's say, the access, but also the data acquisition and what we do with the data, dashboarding presentation, et cetera. Finally, we have also the infrastructure part of it. Here, this market, we believe, has a growth of 5%-7%. It's the smaller of these three portions for us. We have 10% of our revenues here, and it's primarily winning CAN technologies, where we are really a leader in products for CAN. We also have an interesting opportunity here.
It's early. We're an early adopter into the 5G arena. Let's move a little bit more into the details of this playing field. Control, information, infrastructure, where do we actually have our sweet spots? Sweet spots, for us, that's where we have a significant portion of revenue. If we start from the left side here, we talk about embedded connectivity. Embedded connectivity is really where it started. It's our Anybus embedded offering. This is what we're really well-known for in the market. Next sweet spot in the control side is network-to-network connectivity. We have a wide range of gateways connecting machines to each other and machines to, let's say, IT systems, et cetera. These are Anybus, Ixxat products. Both these sweet spots are really focusing on the factory automation part.
We have another sweet spot in the control sector as well, focusing on the building automation. Since 2016, we have Intesis in our portfolio, and Intesis has a wide range of gateways specifically for integrating air conditioning units into the building automation systems. These are all three sweet spots in the control side. If we move into information-centric solutions, we already mentioned remote access. Here we are the real market leader. We have our Ewon brand, and this is also where we have good opportunities to build upon the Ewon success with additional IoT solutions, these additional software solutions to create the insights and make something out of the data. Lastly, a smaller dot here in our CAN technology, this was 10% of the business. We have our Ixxat range of products. The CAN, it's widely used in automotive industry.
It's also used for communication in various automation inside machines. Strong position, also showing a bit of a growth and something we can build upon. Within this playing field, within our sweet spots, we have good chances for organic growth. These yellow circles here should symbolize that we are growing each sweet spot here. We have some growth drivers, so we have a good inflow of new design wins. A design win for us is when a customer would design in our technology in their products. For example, the Anybus embedded communication cores would be designed into a customer product, and we live with the customer product. It's a very sticky business model, which we like a lot. We can also work with market penetration.
We are represented in all, let's say, significant markets around the world, but we have, let's say, different penetration per sweet spot in these markets. We have a chance to work with market penetration in markets where we're already present. We have a good opportunity to add software and services. On top of our Flexy, our Netbiter Argos solutions out there in the field collecting information, we can build various software applications. We have our WEBfactory acquisition, which provides some technologies and some software we can build upon. This is also a good opportunity to leverage the strength we have. Of course, we can do some selective market expansions. The last couple of years, we established a direct representation in the Middle East region, in Southeast Asia, in Korea.
We are kind of eating up the white spots on the map, but there are some other areas where it could make sense to have a direct representation. Apart from our existing sweet spots, we can of course also establish new sweet spots, and we have a couple of them in the making, which I would like to refer to here. IoT solutions for users. You remember that Staffan mentioned we work with makers and users. Makers are makers of devices and machines. The users are where these devices and machines are being used on the factory floor, for example. We can see that a lot of companies, they have now machines with remote access from us, from Ewon.
They see the benefits, especially now with Corona as a driver, that their suppliers can remotely access the machines to do maintenance, troubleshooting, and we see more and more of these customers looking for standardizing on remote access solutions, also giving opportunities to build IoT solutions on the data. This is a nice opportunity which we will explore further. We also have a lot of technology, and we have a good relation to a lot of these device makers and machine builders. The larger ones there, when they want to create their own IoT solution, they might not buy something off the shelf. They might build a solution, and there we see a good opportunity to get designed into their IoT solutions with our technology.
As an example, Caterpillar has an IoT solution for remote monitoring of the power generators, and in that solution, we have a custom Netbiter product, which is an integrated part. We see good opportunities to explore that further. The next one here, networks diagnostics. This is something which came in with the acquisition of Procentec. Procentec works with diagnostics and troubleshooting on the factory floor, basically for the users. It's hardware and it's services and it's education. For us, this is really interesting. We have kind of never really made any business from the install base out in the field, but here we have a chance to work with the end users, with the technologies we might have delivered parts of it and actually create a good relation with the end users and build a business.
Very exciting and interesting. Finally, we have what is not the sweet spot yet, but with a good potential. We have the 5G for industrial applications. Here we have to emphasize this is for industrial applications. We are well-positioned. We have good partners in this area. We also have very good products for proof of concepts because that's what it is right now. You will hear a lot more about this a little bit later from Jörgen. With that, I would like to hand over to Joakim, who will talk a little bit more about mergers and acquisitions. Thank you.
Thank you, Hans. Hello, everyone. I'm actually going to continue using the playing field that Hans has introduced to explain to you our strategy for continued expansion with mergers and acquisitions. This will actually be the bigger focus for us going forward. In the past, we've said about one third of the growth should come from M&A, and now we say that 50% of the growth should come from M&A. This is also why you have seen the dividend target being a bit changed from being 50% to now give us an interval of 30%-50% in order to finance these acquisitions. We have four main strategies that I will present to you today to do this. Let's start with the first one, which we call bolt-on to core businesses. This is actually a new strategy for us that we haven't used in the past.
We think that with our strong positions in the playing field, the sweet spot that you see, we think that we can find good complementary businesses to those businesses that we already have. We will integrate them into the brands that we have. With adding those new product lines or new solutions that it might be, we think we can gain more better market access to a specific vertical. It could be a new geographic market or a new market segment that we're not accessing today. This is the first strategy that might not be the biggest one, but it's something that we'd like to utilize. The second one, that actually is the biggest one, the one that we have most successful in the past, and that we think we're going to continue doing.
This is where we'll see most of our acquisitions being made in the future as well, would be strong new product companies. This would be a company that is outside our sweet spot but inside our playing fields. Here we're looking for new, strong, complementary companies with strong offerings, good position in their niche of the business that we can add something to the HMS offering. In many cases, we see that we can utilize our sales organization to get this offer out on a wider geographic market. That's proven successful in the past. That's something that we're going to continue to work with. We think you will also see the bigger acquisitions for us being made here, and big for us would be from, let's say, EUR 10 million and up. In the other areas, you'll probably see a bit smaller acquisitions.
The third area is what we call software solutions, and here we made our first acquisition within this area last year with WEBfactory. We think Hans presented that we're going to work more with users. This, we think, will be a good access to the user market where we can supply a more complete offering, starting from the connectivity, going up to data aggregation, and actually present the data to the end user. This is interesting for us because we think this will add a new business model to us. Today, we had about 5% in software and recurring revenues. With these acquisitions, we expect to gain more recurring revenues, and that will be very nice for our cash flows going forward. We don't know exactly how much this will be in 2025.
We think we'll have more than 5%, but we don't want to say a specific number because we just don't really know how far this can take us. We think we will have a larger part recurring revenues going forward. The fourth area, and we call this technology to shorten time to market. You probably won't see a lot of these acquisitions, but we don't want to exclude a strategy. In many cases, we see that we have a strong offering. We maybe miss a piece of the puzzle to be able to present something completely new to the market. If we then can find companies that have this technology, that might be interesting for us to pick up. The main reason for these acquisitions will not be to increase the sales.
It will be to get an IP that we're missing to speed up the time to market and to get better business opportunities because of that. You might also see us going into acquiring distributors. It will be very selective. We've done one of those acquisitions in the past. Last year, we acquired Raster Products in Netherlands. There are not that many opportunities of given reasons is most our distributors will carry a lot of brands. We will be one of them. Acquiring that type of distributor would destroy a lot of value and just doesn't make sense. There might be one or two markets where it's interesting to do this. We won't exclude it, but you won't be seeing it a lot. We often get the question, so a bit more specific, what areas are you looking for?
The quick answer is our playing field is what we're targeting, and that's what we're going to look for. Just to mention some areas, we can say that we have the building automation space where we have Intesis today working with connectivity of air conditioning, and we think there are more things to do. We also have some offerings with WeBfactory and energy surveillance that we think is interesting. Here we can definitely expand our scope, and that's one area that we're looking to penetrate a bit more. We also have remote access where we have our Ewon offering today, and we're sure that there are other technologies, other applications that we're not reaching today that could be interesting that also we look for. There is a strong underlying growth in this area that we would like to capitalize on.
Third area would be into the infrastructure area where we see there are many wireless technologies that we think will have a nice growth going forward, and then we can certainly expand our scope in that area by searching for acquisitions. Okay. I also want to take you through our fundamental M&A criteria. What are we looking for when we evaluate these companies? We have four different areas. The first one is market and position. We would like to make sure that the companies we go after, they have leading position within their market segment. That is very crucial. Those should be growing markets. Because without that, it will be difficult to scale up these businesses. Of course, it needs to fit with our overall strategy and our playing field. We have technology and supply.
First thing, we need to have strong IP in any companies that we normally see with good gross margins. That is very important for us, and it also goes with a strong position in many cases. Since many of the companies we go after are a bit smaller, we like to also see that the supply chain is not too dependent on one or two suppliers, so that's something that we can work with to just reduce the risk of these acquisitions. Of course, we also need to understand the technology in order to be able to evaluate if this is something that we can work with.
In terms of development potential, in many cases, we go after companies that are founder-led or with a management team that knows the business very well, and it's often niche businesses, so that we have a strong management team is crucial for us. We would like them to stay on and commit to continue to drive the companies. If it's founder-led, in many cases, it's important for the founder to have a good home for the company that they have founded. Then we would like to have growth story to it, of course. We will need to see that there is a specific driver that will be able to drive the growth in these companies. Finally, in this area, that we can add some value. Could be that we open up our sales network for these companies.
Could be, as we plan to do with the Procentec acquisition, we can present some of our IP blocks that they can use and deliver and develop further. The final area, financial performance. This may be the easiest one. We need to see that there is organic growth possibilities for at least 8% organic growth. We need to have EBITDA more than 15%. We have our EBIT target of 20%. If we don't acquire companies with decent profitability, it will be difficult for us to sustain that margin. The final thing, we would like to acquire a majority stake, preferably 100%, but in some cases, it might also make sense to take a majority stake and have the opportunity to up to 100% at a later stage. All right. I think it's time for some 5G. Jörgen.
Okay. Thank you very much. I will talk a little bit about 5G and how this new technology will contribute to bringing the industrial automation and the smart factories of tomorrow forward. It is quite exciting in our business to talk about 5G. It is a new famous technology that is coming into our market. This is not something that happens every day, actually. Why is 5G so interesting for the industry? Well, we have now for a couple of years have been talking about Industry 4.0, the fourth industrial revolution, and all the great things that this will bring. There has still been an element missing, and this is the technology that actually can make it truly scalable, truly mobile, and truly flexible. This is actually where 5G comes in.
With smart manufacturing, the targets are to drive efficiency in the industry, to drive cost optimization, but also increase the customer focus throughout the value chain in production. This, of course, requires adaptation of new technologies, solutions, and architectures, which includes 5G. Key requirements is still flexibility, mobility, and of course, reliability. Failure and downtime is definitely not an option within industrial manufacturing. Here, 5G shows excellent performance actually to overcome this compared to other wireless technologies. Since 5G has been designed with these requirements in mind from the beginning, this means that today the notion in the industry is that 5G will enable the last mile of the Industrial 4.0 vision. This is also one of the reasons, I believe at least, that it's predicted that the industrial applications will be one of our fastest-growing applications within 5G altogether.
It's easy to use terms like smart and so on, and I would like to begin a little bit to explain what HMS sees in smart and how we contribute to this moving forward. Taking a look in our playing field, we start with control. Well, to be smart, of course, you need a fully automated production and intra-logistic within your manufacturing site. This includes, of course, material handling and warehousing as well. To do this, you also need information. What this means is that you need both horizontal and vertical integrated value chains. Horizontal meaning machine to machine, system to system, device to device. This is an area where HMS has been very successful in the future. Now to make this smart, you also need the integration to the IT systems. This is normally called and/or referred to as IT/OT convergence.
Of course, finally, infrastructure. You need a robust communication infrastructure that provides both wired and wireless services. Of course, what we see here is that when doing this, connectivity will still be a very key part of this. Industrial communication, connecting and bridging legacy system and open technology standards, industrial IoT, remote connectivity and security, all the things that HMS are doing today will still play a very crucial and vital part of the new systems of the future. We also see new emerging architectures and solutions coming in. We talk about wireless and wired. We talk about this IT-centric and OT-centric, dynamic solutions in parallel with the traditional static solutions that we have seen in the industry.
We talk about intelligent new technologies like machine learning, AI, and so on, in combination with the more logic control sequences we have been using in the past, one for even more security. Here we see that 5G will actually be a technology and a solution that will contribute to all of these three parts here. Just talking about this last mile, what we actually mean a little bit more in technology. There are three main capabilities of 5G that is actually extra important for the industry. If you take a look on the value chain from that material arrives to factory until finished goods are leaving the factory, we talk about enhanced mobile broadband. 5G has the potential to provide industrial networking capabilities with speeds that are as good or even better as wired technologies today.
This, of course, means that all these data-heavy applications like artificial intelligence and machine learning and so on, will be able to run on top of 5G. The other one that is extremely important for the industry is what's called the ultra-reliable low latency communication. Meaning reliability, of course, but also high-speed communication or low latency communication, being able to talk to devices at millisecond accuracy, which is extremely important for control like motion control, mobile robots, and so on. Last but not least, the ability to connect a massive amount of devices. To do smart things, we need more information, we need more data. Wireless sensor technologies are becoming extremely important, but also doing things like intra-logistics. You also would like to keep track of location and also keep track of where your assets are.
All these technologies combined together provides a very good scene to take the industry forward. You could say that 5G actually takes in the benefits that we see with both hardwired Ethernet and traditional Wi-Fi. It has the flexibility and scalability, it has the high capacity that is needed, it has the low latency, it has the ultra-reliability, and it's one standard. In the industry today, and we see that we have a lot of different standards available, and this is actually one standard that can address and solve many of the use cases we are looking for in the future. It has the possibility to operate in a licensed spectrum, which means that we know that in this spectrum, meaning frequency, we will only see 5G traffic. We will not see anything else.
There will be no other Wi-Fi devices or anything like this interfering with the very critical traffic from the control systems. As with all new technologies, when they enter the market, there are a lot of technology gaps that needs to be closed. One thing is, for instance, spectrum availability. If you are going to run your own network, you need to have your own frequencies. To this, frequencies in the air and spectrum availability is very hard regulated today. Activities are ongoing to open up so industries can get access to their own spectrum to be able to run their own private networks. With private networks also comes the challenge of these users to operate their own mobile network. Of course, this is where we have the operators and so on, so the telecom companies.
There are new discussions and new partnerships being aligned and new services being created around this. Interoperability is another thing. We need to make sure that the traffic that is required for the industry actually can run on top of the 5G technologies in a good way and reliable way. Interoperability is extremely important because we will see a lot of old existing technologies that now needs to communicate over 5G. How can we assure that this still continues to operate in a safe format? Of course, not the least, affordability. It will be more expensive than traditional wiring we see today, but of course, we all expect that the benefits will be as big that you actually can afford this kind of investments that you need to do. As always, over time, cost for new technologies will drop.
All of this also means that there is a lot of industrial devices on the market today. Robots, machine drives, controllers, sensors, and so on, it's not capable of communicating over 5G. We need to provide solutions to make these devices come on to the 5G network. This is actually one of the key parts that HMS is focusing on today. Even though we will address all these challenges, this does not mean that 5G will replace all existing technologies we see today. 5G, we will start to seeing them in new automation architectures and addressing the shortcomings of Ethernet and of course, the Wi-Fi systems we have today.
5G will come in and solve specific solutions and so on before moving over to becoming more of a new technology that will replace what we already have today. Even though our industry is conservative, it takes time for new things to get established and developed. We believe that 5G will coexist with wired technologies for quite a long time, and wires will still be used where it makes sense from a performance, cost, and architecture alternative, like inside of a machine, for instance. When can we expect that 5G can come in and start generating revenue and business opportunities for the industry? You could say that it could be seen that it will become a mainstream technology for industrial communication by 2025. Based on this is that it takes normally five to eight years for new technology to become established.
It must be shown that these new technologies actually bring value and solve real-world use cases in order to become this. 5G definitely have all of these capabilities. From a part where HMS is looking on today, we have three, I would say, categories of users that we are addressing when we are now starting to work with 5G on the factory floor. Why do I want to use this? Well, they would like to overcome this static wired technologies, and they are looking into bringing higher flexibility into reconfigurable systems, mobile machine, Automated Guided Vehicles, and so on. Not the least, battery-operated handheld tools. For this, you need robust and flexible wire technologies like 5G. It's not only in new deployment, so-called greenfield, there is also big need to renewal of existing applications or systems in the factory, called brownfield deployments.
They do this all to address this new Industry 4.0 requirements that are coming in. Use case number one, the automation engineer, the guy on the factory floor. He's looking to use 5G to do cable replacement, to migrate systems that he has over to wireless to capture new system data, like introducing new parallel systems on the factory floor. He might also have bought a new extension to his factory, so he need to integrate new systems. We have the automation architect, the one who is thinking about the new architectures of the future, really addressing the 4.0 requirements. He's focusing on designing reconfigurable systems, looking into mobile machine, this battery operation, and solving this intra-logistics and the positioning kind of applications. The third guy that we're working with is actually more of a digitalization consultant.
He is looking to do IT integration over the factory floor. That's a lot of data needed with it to doing this kind of smart analytics and so on. Measure, measure, trying to get out as much information from the system as possible. Of course, connecting machine and people and to do image processing and other high-ends like augmented reality solutions and so on. Use case number one, definitely a brownfield, an existing installation where you would like to do add-ons using 5G. This is driven by internal strategy directions to evaluate and use 5G. The guy in the middle, he is focusing on greenfield installations. He realizes the full potential of 5G and the value it brings to Industry 4.0.
The last guy working on digitalization, normally he's not that focused on automation, but he definitely knows what 5G means and that it will do the job for him in his type of applications. These are the real-world challenges and the application use cases we are focusing on today and are active providing solutions to. From HMS point of view, when we talk about 5G internally, what do we talk about? We have been working with industrial 5G applications since 2018. We have and are still a very active member in organization and forums driving the industrial 5G agenda forward. We have formed our own 5G unit within HMS, focusing solidly on industrial 5G products and services for smart manufacturing. We have entered strategic partnerships with several of the 5G technology founders like Ericsson and others, and are today doing activities on the market together.
As a result of this, we are a key supplier in several of the industrial 5G proof-of-concept installations that are taking place today throughout the market. Especially, of course, these are the guys that are going in the forefront of 5G are the, as usually, the automotive companies. That is really normally the first ones to adopt new technologies and to adopt new automation architectures. The real value we bring with this is actually that we do combination. We combine this new 5G technology with our existing industrial communication solutions. By doing this, we really bring something that is unique to the market in terms of solution and innovation, I would say. This is my short introduction to 5G, what we see for the future with this, and also showing that there is a great potential for 5G moving forward.
If you are interested in learning more about this, we are very active in these areas. I think already today, this afternoon, we will do a presentation at the IoT Solutions World Congress, which is a digital format this year, where Jens Jakobsson from HMS will be representing our 5G solutions for the industry. All right. That was my part. Thank you very much. Moving over to Joakim again with sustainability.
Yes. Let's do that. I think, as you remember, Staffan presented three focus areas for us, one being the environment, one being our staff and customers, and the third one was growth and profitability. What we've been talking about so far mostly relates to the profit and growth part, and I'm going to now also talk about the environmental part and the staff and customers. Of course, we see a lot of demand from you guys, from the investment community too, around ESG reporting and to make sure that we do good things there. That is important for sure, but the main reason that we are now focusing more on these areas, actually, that we first of all believe is very important in the management team, but we also see it from our staff, from our customers. There is high demand to improve in this area.
That's not said that we're doing a lot of bad things today, we think we can become even better, that's what we would like to do until 2025. Yes, to reiterate the targets, we would like to be net positive on CO2 emissions in the internal perspective and the external perspective. I'm going to go through what we're doing to accomplish that, at least some areas of it. On the staff and customer side, we would like to reach the NPS about 25. I'm also going to go through what areas we think would be important to achieve that. Let's start with environment. First, just to put this in context, I think you're all familiar with Scope one, two, and three. Scope one being the direct impact that we will have from our facilities, from our assets.
Scope two being the indirect impact from the energy that we purchase. Scope three being more or less everything else. I think what we're going to do now is define what areas within scope three that we think would be most important and also tell you a bit about scope one and two. We also will look in the upstream activities in our operations and in the downstream just to make it a bit more easy to follow. Let's start with the first area. We call this the internal impact because we think this is something that would actually within our power indirectly to do something about. If we start with scope one, starting with our vehicles, today we have a fleet mostly consisting of diesel cars, which is not great.
We are now rolling out new policies to go over to only electric cars or at least cars with an electronic component. We have could be hybrids in the short run, sure could be electric cars in the longer run. Within our facilities, so you know we have mostly offices. We don't have a lot of factories. We have some production here in Halmstad. Otherwise, it's mostly office buildings. It's difficult to say one or two things. There will be many small initiatives that we're working with to improve the carbon dioxide emissions in the offices. Looking at scope two, we have the energy part where we, in our biggest sites today, are using green energy. In 2025, that will be in all our sites.
That is something that we're rolling out, probably going to be done before 2025, but that is something that we believe is easy enough for us to do, and that will have a good impact. That's definitely something that we're going to do. Going over to scope three, which is a bit more complicated because it's so wide. We have decided to focus on some areas, at least in the first run. Might be that we have an updated plan during this five-year time since it's a pretty long time. One of the areas that will have a big impact is our EMSs, our contract manufacturers. Here we are working together with them to see what we can do to reduce their footprint. We think that we have many of the EMS that we have.
We are pretty big customers, so we think that we will have a good chance of influencing these guys as well. The second area is the transportations that we have in the upstream activities. Here we know that there are green alternatives that we have in some places. We're going to make sure that we have that for all our transports going forward. The third area will be our own traveling. Right now we're not doing a lot of it, at least not by plane. We think there are some different things we can do here. First of all, what the pandemic has learned us is that we don't have to travel as much as we've done in the past. We think that we can actually reduce the traveling and use more digital tools instead. That is something that we're going to continue with also post-pandemic.
Also there are other options. We can use green options instead of flying. In many cases, train would be feasible. That we're going to try to use in more cases. If we have to fly, which we still will have to do, we just make sure that we climate compensate for those flights. Looking at the downstream activities, we have the same situation with the transports, the same initiative goes for that. We also have the designs for products and the end-of-life use our products. Here we see when we work with the product designs, we use parts that can be recycled. We're happy enough to have parts that stay in place for many years, but still we'll use parts that can be recycled, materials that can be recycled.
Also we work with the packaging material of the products to make sure that we use as little material as possible when we do the packaging. Last but not least, which might actually be the most important thing, is the savings that our products will actually give when they are in use. Here we know that we have a lot of carbon dioxide savings from reduced trips when we use, for instance, our remote access offering, so you don't have to send the engineer out to the plant. If we should do one single thing, it should be better design our products that will enable a faster growth, that will enable more customers to connect remotely. That will be the main thing now that we actually can do. That's of course, a main priority for us.
Going over to the employees and customers, we have some areas that we think are of high importance here. We're going to start talking about health and development, which of course is a priority for us. We would like to encourage a healthy lifestyle of our employees and make sure that we develop the staff so they have the latest skills and tools that they need to do a good job. What we do here is we offer a lot of training opportunities. We have CrossFit trainings during lunch. We have running groups and so on to make sure that people get moving, to just get down the sick leave. It's a good thing for everyone. On the education side, we set aside a certain time per year for each employee to develop their skill sets in the way they want. Of course, in together with their management.
Company culture. We are a small company that are becoming a bigger company. What's important for us is to keep this entrepreneurial feeling within the group that people dare to take their own initiatives, and that is something we really encourage to also try to spread this in the global organization that we have. The third area is leadership, where PILOT might not say too much to you. This is our leadership tool that we use. We have P for passion, I for initiative, L for leadership, O for organization, and T for top priority growth. This is something we work with all our managers to develop in these different dimensions. We have local sessions going on all the time.
We have also global initiatives where we collect our managers every year to make sure they get the latest updates on what's required and what we'd like them to develop within. That's something that's super important for HMS. We have diversity and equality. Some of these things are probably given to you. It's given for us that you get the same pay for the same job, that everybody has the same opportunities to develop in the company, regardless of gender or where you come from or whatever it might be. This is completely given for us and something that we work extremely much with. In terms of diversity, I think we have now about 30 different nationalities within the group, which is not that bad for the size of company that we have. What we see is our different sites are still quite homogeneous.
Here we think we can actually do more and more work to get more influence in the different sites. We also have today, it's a male-dominated industry. We have about 12% female managers, which we're not happy with. We've set a target for 2025 to reach 20% female managers, which you might not think is super aggressive, but we feel we need to start somewhere, and we don't want to fire a lot of people just because the demand that would feel a bit bad. We think this is a good start to get to the 20%, and from that become a certain target. Being a responsible taxpayer, I think you see a lot of companies being super intelligent in how they set up the structure to pay the taxes in Ireland. We're not that interested in that.
We would like to pay the taxes where we have our business and be a fair citizen. That is a key of our DNA and something that we're going to continue to do. Last area, ethics and anti-corruption. First of all, I think we would like to be a fair business partner to our employees, to our customers, to our suppliers. That's also within our DNA. To make sure that we keep on track, we have our code of conduct, where we have updates regularly, and we make sure that the staff gets training, and they need to do tests to make sure that they've understood the different parts that's in there.
We have a supplier code of conduct that we will ask all our suppliers to comply with, and we will, of course, audit them on this as well to make sure that they stay in compliance. Okay, finally, around the sustainability, I think what we presented to you now is our ambitions within this area. We think that we, especially in the environmental part, we have pretty strong ambitions, as you see. We don't have all the answers yet, how to do it. We still have five years to go to this level. We're pretty sure that we will come up with everything that needs to be in place until then. We would like to encourage you to follow us in our sustainability report on our way to our objective.
What we're going to try to do is to be a bit more crisp and show some more KPIs on where we're going and how we're developing going forward so you can follow us also on this journey. Take it as the ambitions and that we are working with some areas. We're going to add more and we want to make sure that we reach those targets by 2025. All right. That was sustainability. I'm going to continue now with a financial overview, and I will start with a few slides on the last decade. I think many of you have seen this slide before. During the last decade, we have achieved 18% CAGR. Starting from 2010, which was a good year after the financial crisis with 41% growth versus 2009, so it's a good base year to start from.
During the time, we have made seven successful acquisitions. We made Ixxat in 2013. We made Intesis and Ewon in 2016, Beck in 2018, and WEBfactory and Raster in 2019. Then, obviously it is not visible in the graph, but we made Procentec now just two months ago. At the end of Q3, we had four main brands. That would be Anybus, Ixxat, Ewon, and Intesis. As you see, Anybus being the base business of HMS, where it all started, this is still by far the largest part of the business with 56% of the total sales. We have Ixxat being 12%, Ewon 21%, and Intesis being 8% of the sales. I think this is where we still have our main businesses. Procentec, we will get in there as well, being around 10%, a bit less maybe.
You might wonder, okay, so how did we achieve this growth? What was organic? What was M&A and so on? I'm going to try to explain it to you as well. Starting off, we have here 2010, the SEK 345, going to 2019, the SEK 1,519 million. As you see, SEK 587 million is organic growth in this period, being 12% CAGR. We have also the acquisitions, which adds SEK 412 million, if I count rolling 12 months sales from the time of the acquisition. In total, that will take us to a 16% CAGR. We've also had a very favorable currency development in the period, adding another two percentage points in terms of CAGR, SEK 175 million. That takes us to a total of the 18% CAGR.
What's also worth mentioning, I think 2020 was actually the first year from 2013 where we will have negative currency impacts on the business. As you see, we've had a good tailwind from the currencies, but now it will not be that way this year. Yes, to put it in perspective, we have 60% of our sales in EUR and 25% in USD. That was the last decade. Now we're going to zoom in a little bit on the last five years to see what's happened during that time. Sorry for the busy slide here. We are showing the net sales per quarter divided per brand. I think there are some interesting things to comment on related to this. First of all, we'll always get the question, what about the seasonality in sales?
We don't really have a lot of seasonality in our sales. As you can see also between 2016 to mid-2019, we had a pretty solid growth every quarter. We think it's easier to evaluate our business on a sequential basis than on a year-by-year basis. What happened there in mid-2019 was that we saw declining investments in the underlying business in factory automation, which impacted primarily Anybus and Ixxat, which started to see a decline in order intake and sales during that period. I'll talk about this later, but that also caused us to put a restructuring program in place. The growth drivers during this period has been the remote access offering with Ewon and the building automation offering with Intesis. Even if they continued to grow after mid-2019, that couldn't make up for the decline in business in Anybus and Ixxat.
Of course, in 2020, everybody knows what's happened. What will be interesting to look at is also we have during this period, we had group CAGR of 17%, where currency actually helped us 4% of that. Looking at the different brands we have in this period, this is also adjusted for any M&A, so this is without any M&A impact. Anybus grew 10%, Ixxat 9% CAGR, Ewon 21%, and Intesis 29%. What I would like to say here is that, first of all, you see that all the acquisitions that we made, we actually managed to scale up the growth on all of them after the time of the acquisitions.
I think that is very positive, and it proves that we actually have a good strategy for how to integrate them, how to use the sales force to get these offerings out in the wider markets. Let's go down to P&L, talking about gross margins for a while. As you can see on the trend line, the yellow course here, we have improved our gross margins over the period. We are now around 62%, and this is in a year when a lot of things actually work against us. We have lower volumes, we have currency effects working against us in the gross margin side. With some internal efficiency in supply, we're doing a good job there to take out some costs, and with some selected price increases, we can still expand the margins to the 62%.
I also would like to point out that a weak Swedish crown is working in our favor, so it's positive for our gross margins, and one reason to that is that we have pretty big part of the manufacturing overhead in Swedish crown because we have all the overhead team in Sweden. We have, looking at the different brands, what we can say is that most brands are on very similar levels in terms of gross margin. The exception would be the embedded business, the embedded custom business that we have within Anybus, which is normally bigger volumes and a bit lower margins. That is also helping us with a few parts of a percentage point this year, a few tenths of a percentage points. And this might work against us in the future when we scale up the business again.
When investments comes back, this will then limit the gross margin expansion. We think that 62% is a fair level for us to be in the future as well. What you see in 2019, sorry, in 2018, the drop in gross margins there for a few quarter is mostly dependent on the Beck IPC acquisition. Took us time to get it integrated and to fix those things. Then in Q2 2019, we had also the acquisition of WEBfactory that helped the gross margin a little bit. All right. Let's continue down to operating expenses. We have, as you can see for the period 2016 to 2019, we had OpEx growth pretty much in line with sales growth. Then we had, as you saw before, the drop in sales down to 2020.
What we did here in Q3 2019, when we saw this, we act immediately, put in place a restructuring program to take out SEK 45 million on the run rates, which is now done. Everything has gone according to plan, and we're ready with all those things. What I also would like to say, if you look at the OpEx per function, we have the sales and marketing being about 22%-23% of sales. It's pretty much the same over the whole period. Admin is between 8%-9% of sales, and R&D is between 12%-13% of sales. You can see that this is pretty stable over the whole period, and this is where we expect to be going forward as well.
We think that we will need those R&D investments in order to have a successful offering that we can continue to grow with in the future. What you will see us do a bit differently maybe is, will be a bit more selective on the OpEx expansion post-pandemic. We'll not invest in all the areas that we've done before, but we'll be a bit more careful there. All of this comes down to the operating margin. You know we have our target of the 20%, and that was the same target as we had before. We're still keeping that target, and we've been on around 18% for the last few years. We think that we should be able to go up to the 20% now. We have the restructuring program in place.
We have the pandemic impact this year that is helping us to actually reach the 20%. That's where we are here to date. What you'll also see here is that we have a bit of a seasonality effect. We have Q3 always being very strong. We have vacation effects in there, giving us lower OpEx. In Q4 is quite often quite bad for us, which is because we have the marketing investments in terms of many fairs and trade shows that we go to in the fourth quarter. In terms of what will help us to get to this target is, of course, the sales growth coming back. We're going to continue the good cost control. We're going to have a more selective OpEx expansion and the solid growth margins. All of this should take us from this 18% to the 20%.
I also would like to show to you the EBIT-- sorry, the EPS graph, which I think is quite positive. We've seen a growing EPS despite the decline in top line this year. We think we are in a pretty good position to continue the EPS expansion. We have cash flows and cash conversion, which is one of the things that I think we've been doing pretty well this period, which is one of the key things for HMS continued growth strategy. As you saw, we extended the M&A growth to be now 50% of the total growth. This will be one key to achieve that. In 2017 here, you saw we actually achieved 18% organic growth and still could have almost 100% cash conversion, being defined here as cash flow from operations divided by EBIT.
During 2018, we had an inventory buildup, which put some pressure on this for us. We had some component shortages that led us to take on some more components in inventory. We had in 2020 very good cash flows, and the main reason for that is that we have lower demand, which actually makes that we can take out some working capital and then get up the cash conversion. Okay. I also would like to add that besides what you don't see on the graph, we are a pretty capital light business. We have R&D investments that would normally be somewhere between 2%, 2.5% of sales. We have fixed assets that will be less than 1% of sales normally. We have some investments in our facilities in Halmstad that we will need to do in the operations.
Otherwise, it's a little bit of IT, but not much more than that. All of this, you can see also the net debt EBITDA, how that has developed through the acquisition journey the last couple of years. I want to start by saying that we have our CF of EUR 45 million, that we currently utilized a bit less than 50%, and we have a covenant that is on 3x net debt to EBITDA too, towards the banks. To see what's happened during the period, we acquired Ewon and Intesis in 2016. We went up a bit in leverage, pretty quickly coming down, as you see here. In Q3 2018, we acquired Beck, going up a little bit again, then down and up with the WEBfactory and Raster in Q2 2019. From that, you've been seeing that we've been able to amortize a lot.
One thing that's behind that is, of course, that we didn't give a dividend in 2020. Now with Procentec, you can't see it in the graph, but I think we expect to close the year somewhere around 0.5, which also, of course, leaves us in a very good position to continue making acquisitions. Over time, I think we expect to be somewhere between one and 2.5 net debt EBITDA. If you would like to discuss more details, you're always welcome to contact us. You can also reach out to one of these two guys. They know us very well. Fredrik with Nordea, Brit with DNB Bank, and Joakim with DNB that can help you understand the business better.
All right. Thank you, Joakim. Great presentation. Okay, let's make a summary before Q&A. Not easy to summarize all this comprehensive information we've been sharing today. As a quick summary, we have three main areas. We talk about our environmental focus, making HMS a net positive CO2 company by 2025. That's an important ambition we have. Secondly, keep on working with our employees, making sure that our employees are happy and high-performing so they can generate good business and create loyal customers. As Joakim described very clearly, we have growth ambitions. We come from a solid foundation. We have a good situation today, but we have good ambition going forward. As Hans explained, our playing field still leaves us a lot of room for growth going forward, and we have good organic ambition and good M&A ambition.
These are our three focus areas when we set our targets going forward. Let's look on this boilerplate we had from the beginning. As I said, we have our three areas, environmental, staff and customers, growth, and profitability. We are a tech company. We will continue working with the technology development related to 5G, related to IoT, related to wireless technology, AI, smart grid. That's important for us. That's our future. You also see what Hans explained in the playing field. Even if we have a, I would say, business to business in this industrial field that's quite conservative market, but it's also a playing field with a lot of room for expansion. We have our control, we have our information, we have our infrastructure section.
You saw in our sweet spot, we have good ambition to grow our sweet spot, but there's a lot of empty areas between our sweet spots where we can actually expand through organic growth, but also through acquisitions. We're quite confident that this playing field is enough for us for the coming years to come to keep our growth targets. Our growth target is to make sure we exceed our SEK pi billion revenue to 2025, so that's beyond SEK 3.14 billion . We would like to maintain our operating goal of 20%, as you saw on the curve from Joakim, we are almost there. NPS larger than 25, that's important for us, but also being a net positive when it comes to CO2.
This picture we have here, this is what we in our management take forward, and this is what we wake up with every morning, and this is what we run for. We are quite excited about the future. We have a good plan. We have a good market. Even if right now it's a bit depressing, but we look ahead, we have a long-term perspective, and we are quite confident for 2025. All right. We will open the Q&A session in four or five minutes. Maybe it's time for a leg stretcher, grab a coffee, hang on here, and we just rearrange the tables, and keep on posting your questions to Thomas, and we bring up as many as possible in the following section. Have a good coffee and see you soon. Thank you. Okay, everyone. Welcome back to the Q&A section.
We will take some very good questions that we received during the next two hours. You still have time to ask questions as we go through this Q&A up until 11:00. One question that's been coming in a lot is if this presentation will be recorded and distributed afterwards. Yes, will be distributed as a PDF on the website and also a recording will be available. Let's dive into the questions here. First one, I think this is for Hans. It's from Joakim Gunell from DNB Markets. In terms of the potential sweet spots that you mentioned, can you discuss the growth drivers in more detail in terms of which are the most important segments to drive the bulk of your 2025 target growth? Where will your attention be as a management team?
Yeah, that's a good question. When we look at the control center part of it, that's the bulk of our business. It's 70% of our revenues today. Even if the growth percentage-wise is lower, that will be the bulk of the revenues. The drivers here is, of course, increased automation in factory automation, increased technology content also in individual process lines machines. Pretty solid drivers which we've been confident with. The growth rate is the highest in the information side of things. There we have a very solid base position with our Ewon footprint, 300,000 devices connected in the cloud. Here we see a good potential. We see that the market is moving really from connection only to data. We bring data from these devices, we bring it to the cloud.
We have in the last two years established a solution partner program with partners who put applications and using the data to create insights. We have also added WEBfactory software, which is a component here for our sales tool, so at more of the application side here. Here we see a really good growth rate. It's an area where we as the management team spend a fair amount of time, of course. I would say we need to be all over the place and focus on all our sweet spots. I mean, we have business which is not in the sweet spots today. We have kind of defined these sweet spots to know where we need to spend our attention. I think that explains the question.
Yeah.
Yeah. Thank you.
The next one is, I think, for Joakim. Where are your current priorities from an R&D standpoint to execute the technology shift you see?
Well, from a technology shift, if we go back and talk about 5G and so on as a true normal technology that is coming in. First of all, let me start with this. Our market has always been changing. There's things going on every time. There's technology shifts going on. We have a quite good established setup for handling this with both initiatives within our local business units where they're focused on their application areas and technology areas and so on. We also have a centralized approach which we call HMS Labs, where we look at truly emerging technologies that will take a couple of years to be established, where we do a little bit of incubation and trying to bring this technology out in a more packaged format to the business units.
When it comes to 5G, for instance, in our industry, we must remember that when new technology enters that has the potential to change the way we do it today, it's really important that it's done in a collaborative of companies and partners. That's not only one company that can drive this. Our focus today is actually to be very active within these venues and organizations, bringing this out, be an active contributor to this, because no company by itself can establish new technology. We must make sure that we have this interoperability, that we have this set up, and that the end users and the factory owners and so on actually can trust the technology, that it's truly a multi-vendor technology that is coming out.
Thank you. Right. Next question here, I think it's for Hans again. It seems as if COVID has put a greater premium on software transformation and being able to do more remotely and not be on every single point of contact in a factory or a plant, or have send out a team to diagnose a customer. This still seems as a very fragmented market. How do you think about HMS Networks' position to capture that market opportunity from a remote monitoring and e-monitoring function?
Yeah, that's a totally correct observation. The main driver for remote access in the past has been the machine builders. They build a machine, they ship it somewhere in the world, and then they need remote access to maybe commission the machine, fine-tune it, or troubleshoot whether when there are problems. The driver there is the warranty time, of course, because machine builder would have to pay this during the warranty time. Then post-warranty, they can charge for a trip, so at least fly in an engineer. Now with Corona, I think there's been quite a lot of focus for the asset owners here, let's say the factory owners, that when a production line goes down, even if you pay for it, you might not get the service engineer to come and fix it.
We see increasingly that factory owners are interested in remote access, but also concerned about the security aspects of having companies connecting into the factories. For us, we have a very secure solution. We have, for example, a company like Nutreco in the Netherlands, they produce animal feed. They have plants all over the world. They standardize now on Ewon devices for remote access, and they will be in charge of which supplier can access which machines at which time. This is clearly a potential for us. We talk about this week's "Spot in the Making," where we talk about user IoT, and this is clearly a move for us to start talking to these end users instead of talking to only the machine builders like we did in the past.
Long answer to a short question, but it's a correct observation and we are moving on that.
Thanks. I think the next one is for Jörgen, since you talked about greenfield and brownfield. How large share of sales today is driven by greenfield and new build, and how much is more brownfield?
Well, this is quite hard to say because when we are focusing on the users that actually are the brownfield or the greenfield application space, we have a very small part of our sales today focusing on the user, so to say. I think you mentioned it, the percentage was like.
75% or makers.
75% are makers. When we supply to makers, this is our recurrent revenue for us. These makers in their turn, they sell either to brownfield or to greenfield. It's really hard for us to determine this, but to be quite honest, it's really seldom that you see that a brand-new factory is being built ground up. Today, you do a lot of modifications, you do rebuilds, you do extensions, and this could actually be seen as brownfield, I would say.
Okay. We had a question about the sweet spot. We talked about that. I think this is for you, Joakim. How large share of sales is software and how much is service? Can you say anything about that?
Today, if we don't take Procentec into account, it is total 5% that is recurring, and most of that is software sales. We have a very little bit of service offering today. With Procentec, they have a bit of bigger share service offering. If we do that, it may be 50/50.
Okay. Right. Okay, question about the Procentec acquisition. I think this may be for you, Staffan. Regarding the progress in software and aftermarket transition, in what way would you say that the Procentec acquisition will strengthen your aftermarket business to tap into the installed base of the seven million Anybus devices that you have in the field? What's the strategic reasoning behind making this acquisition now?
We have seen that we want to come closer to users of industrial automation systems. We have a huge base of the installed units, we have not delivered them to the end users. We have delivered them to machine builders or device manufacturers, then they end up in this end user application. We see a lot of value in these systems because they need to work 24/7, if that doesn't work, that's a lot of lost value for the customers. They are willing to be proactive here then look for how can we maintain or uptime the network. That's exactly what Procentec is doing. They started with the troubleshooting tools when things do not work, how to fix it. Now they're moving into more predictive tools to make sure we can plan, okay, when will this not work?
How can we be proactive in solving these things? I think this helps us to grow with the user of industrial automation. It's a high value add business, but we also can use our IPs, because it's the same IP that is used for monitoring the network that actually could create the communication from the ending. We see a lot of synergies in the technology, that they open up a new door towards the users. It's quite interesting.
Right. Thank you. The next question here is kind of two-sided, so maybe if you start with the first. Who are your main competitors today? Maybe that's for Hans or Staffan, and then more to Jörgen, what do you see potential emerging competition given the IoT and 5G trends? Let's maybe start with the main competitors today.
I think as you said, we have several different sweet spots. I would say that we have different competitors in different sweet spots. This is a fragmented marketplace. We don't really have a head-to-head competitor in our playing field. In the embedded communication sweet spot, we have competitive substitutes such as microprocessors that is easy to deploy. You do it in-house instead of using HMS. We have a few, mainly German, smaller competitors like there's a great company called Insys that is a competitor to us in that industry. Within network-to-network gateways, there are another set of smaller competitors, et cetera. I think this is a very fragmented marketplace, and we don't have a clear, "This is our main competitor.
Yeah, I agree completely. We have a lot of competition, it's fragmented and it's different in the different sweet spots. We can see in an area like remote access where we're clearly the market leader, this is a market where it's becoming increasingly competitive in the base functionality, remote access. Obviously we try to be a step ahead with our data collection and dashboarding and whatever we deliver. Hopefully we'll stay ahead there. Yeah, competition is sound. It shows that there is models.
Going more into the technology side and talking, I think.
Of course with new technology, there's also new players coming around. Of course there are small innovative startups with new ideas and so on. They might not be the real challenge here. What we see is, of course, that with all the IT companies, a lot of companies from the IT side is moving in and stepping in and taking a look on the industry. You have companies like Microsoft, you have companies like Cisco and so on. Of course, they will actually, of course, generate competition in these areas. Maybe not from going in and doing industrial automation. Being able to be a technology provider, a backbone provider or an architectural provider and so on, that enables other to become competitors to HMS. We have seen the, of course, activities from these kind of companies.
Of course, when you take a look on the infrastructure, 5G is coming in, of course, the guys that are delivering 5G infrastructure to the commercial side, of course, they are also looking into the industry side like Ericsson and so on. This is not really competition to us. We are not in the space today. We see this more as a potential of having partnerships and actually being to go together to the market to provide a better offering. Of course, with new technology, with the move that we are now leaving our safe OT domain and also moving into the IT domain, which might be much more fast-moving and so on, these companies that are active there will of course, competition will occur.
Right.
For example, in a factory floor, it's almost been impossible for one company to solve all applications in that factory. Great companies like Siemens and ABB, fantastic company with huge product portfolio, even these companies like Siemens cannot solve all applications. In the industry, it's quite natural with this kind of cooperation, and you need a multi-vendor application because you select the best robot and then the best this and the best that for your process. I think this is what we see also in 5G.
Yes.
It's a mix of commercial companies coming in that we use to take a dominant state, but there's so much multi-connectivity underneath.
Yeah.
This is two different industries that need to merge.
Yeah
to make this happen.
Absolutely.
I think that's what we see, and a very good collaboration between us and companies like Siemens and ABB and Ericsson and Rockwell and Cisco. I think we are seeing the start of it in these collaborations.
As I said, industry has always been about that. It should be multi-vendor, it should be interoperable. Competition is of course something, we use the term frenemies as well. You need both to be a little bit of friends in order to develop a standard moving forward. On your own, you can't do this. You need to work together.
Okay. Moving a little bit more on the financial side, I think this is for you, Jörgen. From Joakim Gunell at DNB Markets. On the topic of the EBIT margin improvement, you're already at 19% versus your 20% medium term target. I'm just wondering from your point of view, how much room for increase is there? Should your new adjacent services and the growing software mix be additive on the margin side? Can you talk a bit about some of the key levers that you can pull?
Let's start by commenting the level of EBIT at the moment. Year to date, we're actually at 20% and I think we are seeing a lot of one-time effects there. We are running extremely lean at the moment with no traveling, no trade shows, no customer events. Also some short-term work impact, especially from Germany. I think the current OpEx level is not at all sustainable. Just want to be very clear with that. If we're going to be able to sustain a pretty high single-digit organic growth, which we would like to do with our new target, we will need to add on some resources from the level that we are today. I think you will see the OpEx expand when we see the money coming back. Right now, we are careful what we take on.
We would not be able to have this 20% margin with this top-line development in normal circumstances this year because we have the very special effects this year. We still have some work to do to get to the 20%, then complementing acquisitions. Yeah, we hope that will add to that. If we make software acquisitions, that will also help us a little bit to increase the margins. That is one part of the recipe also to get to the 20%. I often say that under normal circumstances we wouldn't be at this 20%. We still have some work to do to get there. We'll need to make some things better in the future to actually reach the 20%. What levers we can pull, I think we are of course adding some parts to the economy of scale.
We don't necessarily see that we will add the number of resources supply that is in relation to the new sales that we get. There we think we'll have some operational leverage that also will be part of driving us to the 20% growth. Maybe also on the admin side we can see some leverage on the essential resources as we go forward. I think that's about it. In terms of the R&D, we still think there will be somewhere 12%-13% of our sales going forward. That also goes for the new acquisitions that we do. We don't necessarily see that there will be a lot of leverage to gain from that.
Was there anything I missed on that?
I think you've broken levers and yeah.
Some more questions about the mergers and acquisitions coming up. The first one here, maybe this is for Staffan. Could you elaborate a bit on the go-to-market strategy with the acquisitions and how you have been able to accelerate the growth in the acquired units historically for HMS?
I think we've done a couple of mistakes and we learned some lessons. I think when we buy these kind of companies, they're all already successful. I think sometimes we need to make sure that we do the right things. In general, we've been trying to integrate them in our sales organization. That's been successful. We also saw when we acquired Intesis 2016, that they were also very successful in a different area where we did not have the sales. We were very careful in how we expanded that, and it took us three years before we started to integrate the sales organization. I think also we learned to be a little bit careful. We don't count a lot of synergies short term.
We want to make sure that these successful companies can be even more successful by some help of HMS. We are not really forcing something on them. We would like to collaborate with them. This is what we see now with Procentec. There we own only 70%, but we also work with their management team, and we tell them, "Let us know if you want to start an office in U.S. Join us. We already have this infrastructure." We try to coach them instead of telling them what to do. I think this is what we learned, to make sure that the local management team are really in the driver's seat. I think we're also seeing good synergies within our sales organization. We're also seeing good synergies from a technology point of view.
We'll have a common technology platform going forward, but this takes years to do this, and we are quite careful in how we do these things because the companies we buy are good companies from the beginning. We don't need to transform them. We need to help them become even better.
Good. Thank you. Some more questions on mergers and acquisitions. Maybe this is for you, Joakim. The M&A ambition implies a higher pace than historically. What are the key challenges to achieve this? Would be interesting to hear about your acquisition sourcing. How do you work with finding targets and some numbers on the number of potential targets? I think maybe we'll break the question there.
Yeah. Okay.
I think that's about what I can handle, sorry group.
I think the first part of it, one of the main challenges I think to find good targets and to actually be able to close those targets, that's the main thing. Even if we see a lot of companies, not all of them will be for sale. That happens sometimes when we have discussions quite often. They will say, "Yeah, we'll find a few prospects, but we're not for sale right now." The structure we have of the different sources, I think we try to use every different sources that we can. We talk to the bankers that approach us. We explain to them what we're looking for. Sometimes we get leads that makes sense that way. We also get a lot of proposal from different brokers around the world of companies that they believe fit with HMS.
I think the main strategy that proves successful for us is actually through our own channel, through the companies that we know that we meet in the trade shows that we see in the space, so to say. In most cases, I think it's been our Staffan's contacts in many cases. With this open initiative that I discussed before, we also see that our business units that also know the specific companies in the different sweet spots. We expect them to bring a lot of new leads into the pipe as well, that they can continue to work with locally. That will be a new source to help us, I think.
Right. Last part of Fredrik's questions there as well. How is the competition looking in terms of other buyers? What do you think the valuation multiples will be on average?
Okay. Good question. The competition, I think it's different. Our primary channel, as I said, would be to find those targets ourselves, approach them when they're not on the market, so to say. We find that in that case, we don't really have competition. We'll be alone about the deal, and that is very good if we can have that situation going forward. I think on getting the broker, sole companies, normally competition is quite tough. Many companies are bidding, and then also depends a little bit where we are in the cycle. I think now it's been calm for a couple of months. It's coming back now after the summer, and we see more companies coming out and more people are willing to buy at this point.
About the valuation multiples, I think for most of the acquisitions that we make, we expect to pay around 10 times in EBITDA, and could vary plus, minus maybe two times, depending on exactly where they are and the underlying growth in that field. Something that will be different, though, that we've learned is the software companies, the pure software companies that are more expensive. We try that. In some ways we did for a few of those companies this year, and we were low. I think we just need to accept that if we're going to grow for that type of business to return revenues, we need to pay higher multiples. I think we'll be prepared to do that when we find the perfect fit as well. Yes and no, they will be different on those.
Thanks. Some more about M&A maybe this for you, Staffan. Could you expand on the verticals you find attractive for M&As? You mentioned building automation. Could that be a competitor to Intesis or rather an adjacent segment? What could be a good vertical within energy that you have in mind?
Joakim already mentioned some of these verticals. Building automation, there we think there's a lot of nice opportunities to build around what we have done with Intesis. There's a lot of drive for energy savings and asset management and these kind of things in this more industrial or larger buildings. You mentioned also energy. We are doing an initiative within Orgalim within smart grid, that will have some really nice products, how to communicate between energy distribution centers and things like this. There we believe that there's room for acquisitions to really build that area because we see some nice areas, industrial applications there. Geographically, I think we would like to do something both in Asia and in U.S., Our focus so far has been on the continent of Europe or Nordic area.
Of course, we think that in Asia it would be nice to grow faster than only organic. On the U.S. market, we feel that there's much more things that could be done. I think we are looking quite broad at the moment, so it's not so specialized. We are out scouting in all these areas.
Logistics automation or service robots, another segment that you have dealt. Does that fall outside the industrial focus?
I would call service robots. My understanding of this is that this is more for healthcare and these applications. I think we are feeling right now that this is too far away from our industrial automation kind of focus area. It's outdoor operating.
Question around software. What kind of software offering do you lack today that you think you could have a good go-to-market approach together with? Maybe that's more related to M&As and software.
We have a software offering right now. This is interesting with WEBfactory. We are working with our business units who develop different product for Ewon, for Anybus, for Intesis, et cetera, where they take WEBfactory and bundle a solution with that software together with our existing hardware. We've done some successful pilots now in Netherlands, for example, in the wind parks. We actually take our connectivity, our data collection and things, we add this software on top for diagnostics, asset management, and things like this. I think the challenge we have here is more of a go-to-market because these are normally verticals you need to be really good in, for example, wastewater handling. You need a go-to-market strategy to reach these municipalities and wastewater plants. I think there is more commercial challenge than so much a technology challenge.
Would you agree also with that?
I would agree. Whatever we can package as a solution on top of our hardware would be very interesting for us. I think we have a lot of these bits and pieces already, but we need to package together and then find a way to market. We have these solution partners. They are basically software companies who standardize on getting data out of the Talk2M, our cloud system, so very easy for an end user to deploy. Of course, partnering doing it ourself. We think partnering is also an important factor in the software business, which drives our sales, it drives our strength in the infrastructure and the data side of it. I think there are many ways we can do it. Going pure software, I think that is a challenge for us.
It has to be connected somehow to what we do in the industrial context.
Right. More interest in M&As. I think this includes Staffan as well. With the increased focus on M&A, what will change in terms of your criteria to execute on interesting targets? Will you source more companies, and if so, will you be changing the way of sourcing or will it pay more?
Yeah. We said, Joakim, we are working now to expand our shortlist. I think it's too short today, so we need more names on that list, and this is one reason we engage now more of our business unit managers on what they know. In the past, we were more or less this group who came in with inputs to the shortlist. I think we try to get more people involved within the organization. We're just recruiting a new M&A manager who can work more with us. Next standard there, but I think we need a larger shortlist because we know that many of these companies are founder-led or privately held, family-owned. It's not easy to buy them. You need build trust. It takes years. If you look on this acquisition, we're done. The seven acquisitions we have done, these are companies we have been working with.
We know most of them before. Take Procentec. We know them. We've been drinking beer with them in their trade shows for the last five years, so we have a friendly relationship with them. Now the stars was on the right position that we execute this because the founders had retired and they would like to do something else. That was lucky. We did not have a competition. We were the only person they would like to sell to, and we paid a fair amount of money, and we did the deal. I think this is a very typical kind of M&A process we have. It's a long process, and we need to make sure we have more of these processes ongoing, but it's so difficult to say when can they close. It's out of our control in many ways.
Thank you. Okay, another one on competition. I think we answered that. Let me see. One for Jörgen. On 5G, what do you say about the revenues from the 5G products and solutions? What do you mean by mainstream in 2025? Maybe we can start with that and then the second part.
Well, with mainstream, I mean it will become an accepted technology that you will see actually in many installations. My view is that this will first happen within the large organizations that is driving automation, being in the foreground. Example of this has always been, as I said earlier, the automotive company that is really pushing the boundaries of what's possible to do with automation technologies of today. When it comes to revenue, it's very hard to say, of course. I'm not really on the sales area, but of course, we see that if you take a look on the estimates that could be done is that if every machine should have a 5G connection instead of a normal internet connection, well, then it could be a quite substantial, of course, part, but it takes time to get there. We need both to prove that the technology is working.
This is what's going on today. We need to approach the makers, the machine builders, the device manufacturers, making sure that they also adopt this 5G technology. This is, I think, our main sweet spot, that it's both to provide infrastructure components bridging 5G with industrial communication, but also helping our traditional customers getting onto 5G.
Right.
I'm not sure.
Could we make an example?
Yeah.
We've been working with wireless technology with Bluetooth and Wi-Fi for 10 plus years.
Yeah.
10 years ago, that was a completely new technology in the industry. We talked about the value of not having a cable, go wireless then. The first application we saw was this what we call hard-to-reach application. It was this kind of cranes and it was very expensive to take this cable here for moving robot arms because it was so expensive to run the cable there. They were the first adopters of wireless technology. Now, 10 years later, a lot of cables that were there are replaced by wireless. That's become more mainstream accepted. I think you see the same thing with 5G. It can be these specific applications that are difficult to solve today without 5G. That's where we have the highest value.
Absolutely. Yeah.
That will spread to also other applications. In 2025, we think that 5G will not replace everything, but it will be a technology that is okay to choose without a big debate with the end user.
Exactly. Yeah. Also the product offering, the infrastructure, the affordability, as we talked about earlier, has been coming down to reasonable level. The knowledge has also been going up, the competence, and it's a trusted technology more or less.
Right. I think maybe we should clarify there. Now we're talking about industrial applications which are 5G.
Yeah.
The fact that we will have-
Functionally core applications.
We will have 5G nodes.
Absolutely.
Our cellular products.
Yeah.
We have cellular product today with 3G, with 4G, and then with 5G.
Absolutely.
That's just a natural development. Now we're talking about specific applications.
We are talking about factory automation, smart manufacturing, how 5G comes in and solves on-prem private network installations. Of course, in the commercial 5G networks, using this as data transportation, that will be done much earlier, I think. This is just like we do 4G, LTE today.
Yeah. Right. Thanks. The second part is a question from. It is more financial but directed to you, Jörgen. On the 20% EBIT margin target, where do you see gross margins in this context? Gross margins remain at 62%, with double revenue, the 20% EBIT margin in 2025 seems rather conservative.
Yeah, I think that's how we look at it. For now, with the current mix that we have, we think that 62% gross margin is where we'll be in the future. If something would happen, let's say we make a big software acquisition, of course we'll come back to revise the target. From what we can see today and what we expect, that we will make more smaller software acquisitions that will have a big impact on the gross margins. We think that 62% is the gross margin level we will be at. Bolle, if you think that the EBIT margins of 20% seems too not ambitious enough, I think when we do the math, we think that's where we're going to be. Again, the current situation, where we actually reached the 20%, is not a sustainable level.
The way we see it, we've had a run rate of about 18% now for three years, and we still need to close the gap of those two percentage points on the margin. That's something I would believe we can do in this period of time.
Right. Thank you.
Could we also comment, you mentioned it briefly before as well. We look on M&As. We look at these kind of leading product companies that we have been buying or really considering to buy. We look on their EBIT margins. They are normally
10, 12, 15, some cases up to 20. I think in that sweet spot, it's slightly under our target as well. We'll bring that in. We work with them a little bit to get to our targets.
Yeah.
I think that's partly affecting the next when we look on this.
I think also back to the question we had before around what's the problem with finding targets. If we're going to only look at companies that have a 20% margin and a 10% growth, then there wouldn't be a lot of targets either. We realized that we need to expand the scope a little bit. We need to accept lower EBIT margins and still be good companies with 15% EBIT margin. That will also be something that we need to take care of and ensure that we can work with to reach that percentage margin.
Thank you.
Right. We're closing up to 11:00. We have about 10-ish questions still coming in. Should we keep going for a little bit more?
Let's go a few minute more.
Yeah.
It's fun, isn't it?
Yeah. That's today, yeah, we have put in some thoughts so. Right. The next one is a bit on the pandemic. How far have you come in terms of up and cross-selling of Intesis and Ewon products, and have customers' perception of their products changed with the pandemic? Hans or Staffan maybe.
Yes. Cross-selling in that context, I'm not sure I understand that question.
I think maybe.
I'll try the question to, I think, can we say if we say pandemic impact, of course we multiple for the other fact that, let's say factory owners, industry out there, they have of course increased awareness that remote access, remote services is important and also of course the security aspect to this when we work remote. That's of course contributing. When it comes to the Intesis side of things, I don't think the pandemic in itself is a driver. There is a very good driver for that business in the fact that the hot areas of our globe like Asia, in Latin America the installation of air conditioning is increasing a lot, and that's a fundamental driver. Pandemic might have slowed things down a little bit because you cannot really go out and install this kind of equipment. That's a very temporary gap that will come back.
Yeah, in cross-selling there, I'm not sure what is that.
What if cross-selling means also doing a remote access within building automation? That could be one.
That could be. If you look at that, we have launched, let's say more of IoT solutions into the building now. We're able to have more connected gateways and cloud services going into the building where we utilize our HMS Hub technology for getting the data. We are of course looking into also let's say IoT applications where we use the factory software also in the building automation side of this. Maybe that's answering the question.
Yeah.
We elaborate a little bit on the pandemic effect that this is a little industrial automation market. I think we see right now lower CapEx investments, there's a hesitation for investments. bounce back quite well. I think these investments, they are postponed. They're not canceled, they're postponed. We see the pulp and paper, food and beverage, automotive, still these are industries that keep on moving. People are still drinking beer and you still need the toilet paper and all these things. These industries tend to delay their investments, but if you look at building automation, I think there is some uncertainty. We have end customers in hotels, shopping malls, airports.
Some of these things are more, actually, how will this market look going forward? We still see good, okay growth at Intesis, but I think the end customers there are more concerned, how does this market look in five years? On the other side, energy saving and cooling by AC is two very strong drivers. I think that market is more of a discussion topic among end customers today.
Warehousing.
Warehousing.
That's increasing.
That's all increasing, yeah.
Yeah.
Question for Joakim on OpEx. On the OpEx side, what does being selective with OpEx investments mean in the various cost buckets? R&D to sales unchanged. More specifically on the other cost items, what will you be more and less selective with?
Okay, if you look at the different offerings, as you saw when we presented the growth of the different areas, we see different growth. I think we need to think a bit more about what of those areas can actually have a high growth, and there we will need to make the underlying investments in a higher pace to support that growth possibility. There's some other areas that we will see a lot of growth going forward, and I think we need to be thinking a bit more cash cow around those areas. We're not going to be investing as much as we've been doing in the past. Of course, it doesn't really matter how much we invest, we will still not be able to outgrow the market. I think that's what we mean by that.
In terms of sales and R&D, I think it also varies. There are some areas where we're growing very well, like in China and Japan at the moment, where we're going to continue to do a lot of investments. Especially in China, we're going to look at what's next year to get a higher presence on that market. Some other areas, for instance, Germany at the moment, where we do have a pretty strong and big organization, but we don't really see that the underlying growth is really there, so we're not going to put as much sales resources into that area.
I think it goes both for the sales and for the R&D, but it's depending on where we see the growth in the different businesses.
Thank you. Okay, more about M&A. I think we answered that question. One more from Viktor Högberg and Staffan. Maybe he wants on the existing products. Could you elaborate on how the competition has handled the pandemic? Do you feel you have strengthened your competitive position or performed as the market?
Yeah. Okay, this will be a bit of a gut feeling. I think during the pandemic, it's very hard to acquire new customers. It's fairly easy to go, say, digital and virtual selling to existing customers. It's a lot harder to really secure new customers. I think most companies do not really grab market shares in circumstances like this. We have been, like many others, extremely active with the lead generation, through webinars, we do a lot more tech talks. We do a lot more activities where we create interest. If we just count lead generation, we generate more leads now than when we were at exhibitions and so on. Of course, the quality of the leads can be discussed if they are good or not.
Yeah, long answer, but I think the short one is that probably no one's really taking market shares in this climate. We're kind of maintaining business and growing with our customers or suffering with our customers.
Right. Thank you. Question from Urban Jonnson, an old acquaintance of HMS. Given the goal of gearing level, how much room for acquisitions will it be, in SEK billions? For Staffan or you.
I think maybe I advance like this. I think we don't see a problem at the moment with not many funds available for the acquisitions we would like to target. Of course, that can change in periods of time. We also have a standing mandate from the AGM to offer 5% to issue new shares to represent in acquisitions. With the pipeline that we have today and the visions that we have right now, I think we have plenty of room for what we need to do.
Right. Another question from Urban about acquisition. Do you have a long list of acquisition targets, or are you prepared to see your own shares in deals? Use your own shares in deals?
I think we start with the first one. We have a long list, and I think one of the activities that we need to be working on now is to expand that long list, and we need to especially take it down to some qualified focus on the short list as well. That is one area that we're working actively with now, and also Staffan said we add a new resource that can perform more focus on this.
What was the second part?
With the shares part. Yeah, I think the primary target, we will make the medium-sized acquisitions. Small or medium-sized, we will pay with 100% cash. If we want to go after something larger, we're totally okay with using our shares. I think we've done it once in the past, partly with the Ewon acquisition. Otherwise, everything has been financed with either bank or our own cash. We could probably see mostly it will be bank financed.
Okay. Maybe I can take the opportunity to send greetings to Urban Jonnson. He's the former chairman of the board for HMS for many, many years. It's great to hear that you're on this call, Urban.
All right. I think there are five more questions coming in, so I think we'll take them. That will be just about the number of questions. I think it's for you, Staffan, about NPS. What activities will you undertake to keep customers on NPS of 25% net positive? What are the drivers going forward to keep customers satisfied and buy more?
Good question. I think the key thing we are thinking about, is how can we make sure that our employees are both happy, motivated, and high-performing? We believe that is the key thing towards creating loyalty with customers. We are now starting with the NPS measurement that works with customers. We're changing it. We don't have a lot of data on that yet, but we know from customers that they appreciate good service, good personal services. They really appreciate that we tell them the things that are good, and we also tell them the things that are bad. This is very good for us. I think we don't give them what they want to hear. We try to be honest and talk about the good things, the bad things. I think we talk a lot about the service levels, how we can have short lead times, understand customers.
I think the challenge going forward is maybe how can we expand also the digital relationship with our customers? How can we make more of this kind of self-service and things like this? I think we need to maintain this small company personal feeling we have with customers today. How can we keep that but growing into more digital tools at the same time? I think it's important that we really keep our close contact with customers. We are growing the company. We hear that many of our developers is feeling that they have too long distance to our customers. We need to shorten that distance again. We need to act as a small company, even if we are getting bigger.
I think that's what we work with here in management, to make sure we maintain this kind of entrepreneurial company culture we have, that will maintain and drive the NPS with customers.
Thanks. Question for Hans: How does your go-to-market or channels split look today? How do you foresee it developing?
Okay. That varies quite a lot around the globe depending on the market situation. We have quite a lot of products which are typically sold through channels, gateway products which are problem solvers out in the industry.
System integrators buy them through channels. A lot of the Ewon remote access products are also sold through channels because we reach all these small machine builders more efficiently like that. The markets where these products are dominating, of course, we have a very high dependency on our channels. If you go to typical, let's say, device maker market, Germany, Japan, we have got more direct sales. All in all, best guess, and Jorgen, maybe you have better figures, I don't know. I would say around 30%, but growing, is channel sales. That's growing. The highest growth we have are in sweet spots where we're more depending on channels than direct sales.
Yeah. I can confirm the number. It's been around the 30% channels and 70% direct sales for the last few years. I also think it might change a little bit in the future, too. Yeah. That puts the channel.
Like in Germany, we have a lot of direct accounts. We're also moving to make sure we spend more time with the larger customers, and we're actually motivating some of the small customers to go through our channel system. We actively trying to make sure we get a better mix there.
That's correct. We are a customer company, so of course, a few years back, we were a small company. We dealt with everyone directly, and now we're really trying to focus our energy on a more important or, let's say, larger customers. All customers are important, of course, but the larger ones we first focus on direct resources, and we try to have our smaller customers serviced by our distribution facility service. We have also hooked up a lot of our products to well-known web shops, so we have a fair amount of our products in, let's say, in Europe, it's Conrad, in the U.S., it's Digi. It's global. Digi are truly global. We try to make it easy for also these companies who need one or two and they need it tomorrow to actually buy. We are great with that.
We are really great in long relations with high volumes to our embedded customer. That has been quite successful. We can see that in many tech companies, if you're a developer or if you're working in the production environment, you are allowed to buy from this. You have an account, buy from there, and we see a very nice growth of online sales, but through channel partners, I'm saying. That's an interesting development as well.
Thank you. Right. A few more questions coming in. Can you say anything about the total market that we do, Jorgen? How large is the addressable market that we define our sweet spots today, and what is the HMS market share?
Yeah. I think we get that question a lot, and it's a very difficult question.
Yeah.
We're active in pretty narrow niches. There are no really good market data available. I think what we can do is just make your best guess. I think what we normally estimate is that, let's say we have somewhere between 20% and 30% of the market within any of our offering, and maybe the same in the Ewon offering in remote access. As for the other areas, we don't really know, but also this is our best guess. We know that we are a leader, the leading player in those fields, but exactly how big they'll be for more others is difficult to say.
Okay. Maybe this is for you, Staffan, on market and trade fairs. For us to get a sense of how important it is for you to be out on trade fairs and demo new products, how much of the annual sales growth usually is obtained from leads generated from these trade fairs? What are your plans to digitalize these processes?
If I got this question a year ago, I would say that trade fairs are very important for our growth and our lead generations. Today, or maybe it is for you, but we see that we have more leads coming in now through our digital activities. Of course, we haven't met them face-to-face, so we don't have the same feeling for these individuals, but we have a digital tool now to nurture the leads and make sure marketing is doing one part and sales will get to do one part. I think right now, trade shows will, to some extent, come back, but I don't see that they will play the same role for us post-pandemic, like before. I think we will do more of seminars and these kinds of flex things, our own events in the U.S., fantastic events.
We miss them, these big industrial fairs, yeah, we for sure don't miss the OpEx cost in doing these kind of big booths in Germany. Of course, it generates some 500 leads, 600 leads in a week, but it's a very high cost a week. I think we are looking into alternatives.
Absolutely. The majority of leads in the past has been created by some kind of face-to-face interaction. Trade shows, events we organize, or customer meetings. I would say 60%-70% of the leads in the past were probably created that way. Right now, probably, I don't have statistics because it's so new with the pandemic, but I would assume that we create 90%, 95% of the leads either from existing customers, but with detailed interaction or through online events. Also deploying this marketing automation tool we have deployed now will give us a really good way to nurture these leads which we are creating digitally and make sure that they're qualified and put them on the journey square where we will hopefully create high-quality stuff for that.
It proves that this is not our choice. I think our customers, the buyers, they prefer digital tools. For them, it's much more efficient. I just read the survey we discussed the other day, 76% of business-to-business buyers, they prefer digital tools. For them, I think that's meaning they adapt to that new world.
Being a supplier, you have advantages in face-to-face contact, but being the buyer.
Yeah.
It looks like buyers are more ready to go digital than sellers actually.
Yes.
Right. We talked about warehousing, automation and robots, and we talked about the addressable market suite spots, there? One last question just came in. I think we'll keep this the last one, but one that we received. How do you create differentiation when it comes to technology services or other in the Anybus business? Is that one for you, Jörgen, maybe? That's a very difficult question.
Yeah.
It's a tough one to pass.
I think what we have, our products and technology, the products we do, they fulfill it all. So does a lot of other stuff on the market. I think it's more or less from HMS perspective, I would say it's the complete package. It's good technology, a transparent roadmap, good quality, good supply chain. Basically, it's doing business with HMS. That might be one of these differences. We have always put a lot of effort into making sure that the customer gets successful using our product and so on, and our services have been extremely well appreciated. Every time we do a survey, this pops up at a high level that we are a good company to work with. We have good service level, that we have good quality of the products and so on, and we take care of the customers.
Of course, we also would like to believe that we are in the forefront of innovation, that we are seeing new technology. Basically what's also been important about that is the commercial value of technology. Do not only do things for technology's sake. It must bring value to both the customer and, of course, to us. That, what I would say is it's our overall profile of the company than actually down to bits and pieces and technology.
If I may add a little bit to that, I think in the traditional, let's say, embedded technologies business within Anybus, it's a lot about make or buy decision. These are open standards, and we design our communication core. For a large customer needing large volume, they could develop the communication themselves, but then they also have to maintain it and make sure that when a standard is upgraded, they upgrade their product. What we deliver is a solution which we guarantee will be upgraded all the time. The make or buy decision is the most important, I think.
Absolutely.
What you buy from us is not just a product, it's a lifetime commitment.
Exactly.
That this works.
The future is included. Future included.
Yeah.
I think what you see here as a point of differentiation, we've been working for the last three years with large customers. All large customers, Rockwell and Schneider. They realized that when it comes to security in plants, you cannot only be on IT level. You need to boil down to also devices. We are now, HMS, now certified according to a standard called-
62443.
62443, which is a security standard. This is also how we develop products in a secure way. We are now certified here in Halmstad, our development center do that. We believe that this will spread to other customers, that here we hold the hands to our large customers. We implement new capabilities in our development, we also think that this will be a differentiation going forward. Security, it's so challenging for many small and medium sized device manufacturers in machine building, because it's a completely new area of competence. We are developing these new competencies and capabilities together with our large customers. We do that because we think it will boil down and give us benefits to our small and medium in the future. This could be one differentiation we all work with. Okay. That was all the questions that we had coming in.
Anything you want to add at this moment, Jörgen and Hans?
Lots of great questions, so thank you for the interest.
Yeah.
Excellent. With that, we'll just say that this presentation and the recording will be available on the HMS website, hms-networks.com. You also have a PDF of the slides there. Thanks very much.
Thanks to us for hosting this.
Very good.
Thanks for joining.
Bye.
Thank you.