Welcome to HMS Capital Markets Day 2023. CEO Staffan Dahlström and his, with his colleagues, will present an update to the strategy plan that was launched back in 2020, ranging until 2025. I'm Verneri Pulkkinen, and I'll be hosting this event's Q&A session in the end. Staffan will review the strategy, and others shall present a deeper dive to three main product areas, and a financial review will follow as well. Since progress has been quite stellar in the last few years, there will be a presentation about updated targets as well. In the middle of the capital markets day, we're having a short coffee break of perhaps around 10 minutes. In the end, there will be room for questions in the forum of Q&A.
We shall take questions from the physical audience as well as from the online audience. Max two questions per time, per person. Without further ado, I'd like to hand the show to CEO Staffan Dahlström.
Thank you, Verneri. Good morning! Very nice to be here, both in the room and also online here. Let me start with just showing the agenda for the day. Let's see if this works here. Yeah. And at the same time, present my fantastic team I have here, because we'll start—I'll do a quick update about the corporate strategy, what we are doing, and a little bit the history there. Then, Bartek Candell, who is our General Manager for our largest business, Anybus, will present his business and some more insights there. Bartek is located in Halmstad, but you have your development center in Sweden and in Netherlands nowadays.
And then we move over to what we call the Information Centric, where Alexander Hess, located in, Germany, in Karlsruhe, but running in development in six countries now, in Europe, in, Romania, in Sweden, in Belgium, in Germany, some other locations. Six locations, four, like, four countries. That's right. So, well, welcome. And then we have David Garcés , running our building automation business, who will, finish up all this, business presentations. David, has been, with us since 2014, something like that?
Thirteen.
13, yeah. Actually, you started in our labs initiative with new innovations that came onto our acquisition of the Spanish company, Intesis, and you've been running that for the last couple of years. So really exciting to hear more about the details of our business here. And then, of course, most of you have met Joakim Nideborn, CFO, and will present financial updates and more data from the last decade, more or less. So we have plenty of time and a lot of interesting slides for you today. So you will come back on stage in a couple of minutes. But let me start with a little bit update of our strategy, and we talk about our mission and the reason for being for HMS.
We believe that there's a lot of data and information hidden in different devices and machines out in the industry. So our ambition is to liberate this data to make sure we can enable valuable data and insights, so our customers can use that data to make better decisions in productivity, but also for sustainability. So we have an important task to fulfill here. As a company, we are a mid-sized company, not so well known in the general public, but quite well connected in our industry. We have almost 10 million devices connected through Bartek's business in Anybus. We have over 400,000 machines connected in our cloud solution for remote access and remote service. So we are quite well connected in this industrial ICT, information and communication technology.
So there we've been for over 30 years, and we are an established player. We are a technical company, a lot of engineers. We focus a lot on technology development. We work with new things in AI and IoT and 5G, and these kind of new technologies. But most of our customer and our customer's customer are traditional industrial companies who love to talk about the new stuff, but also want to make sure that this new stuff is available for the next 15 years. So of course, we have one foot in the tech industry, but one foot also in this more conservative industrial automation business. We are around 800 employees in 18 countries now. We just started in Vietnam a couple of weeks ago.
One third of employees are in R&D for product development, one third is in sales and marketing, and this been part of our success, last, well, since start, I would say. To have a combination of really good development teams, but also really skilled sales and marketing teams. That combination is really working well for us. We are headquartered in the south part of Sweden, a beautiful little town called Halmstad, between Gothenburg and Copenhagen. And, last year, good year for us, revenue-wise, SEK 2.5 billion, 25% in EBIT margin, and we've been having a CAGR of around 20%, last 10 years. Joakim will make much more deep dive into this.
If we look on the progress since we had the last Capital Markets Day in quarter four, 2020, just in the middle of this or in the beginning of the corona, so it was only digital at that time, we talked about the strategic framework about organic growth and M&A, and we had an ambition to go from where we were at that time to SEK 5 billion, and half of that should be organic growth, and half of that should be from M&A. But we also talked a lot about how we can make sure we have engaged employees, how we can build loyalty with customers, because we understand, or maybe it's quite obvious, that happy and high-performing employees generate loyal customers.
In our industry, customer loyalty is super important because there's very long sales cycles, and there's very long need for products over time. But we also had an ambitious sustainability plan, talking about Net Positive 2025, and we started a lot of initiative around, especially CO₂ emissions and how to reduce both our own impact, but even more, helping our customers, who are, in many cases, not so sustainable in these industrial plants, to minimize their footprint. So we talked sustainability, Net Positive by 2025. We talked about happy and high-performing employees generate loyal customers, measuring Net Promoter Score, and the ambition was to be over 25, and we had a revenue target of pi billion, more than 3.14, and an EBIT margin of 20%.
So this is the starting point, two and a half, three years ago, when we started this strategy. If you look on this to check the progress, sustainability, we worked a lot with this, and we've seen some progress, but we also see some developments in this field that is evolving. If we look on our own impact, what we call Scope 1 and 2, that's what we do ourselves, it's quite limited. We talk about, five hundred tons of CO₂. Of course, we can reduce this, but in combination with, Scope 3, which is much more of things around our products and how to design our products and how to be more green, that's a bigger impact. We're almost fully yet, finished with what is called the products in use.
Most of our products, they consume milliwatts, more or less, but we sell millions, so we have an installed base of millions of products. Of course, this accumulates. So we are right now trying to work with our customers, how to measure more of what is the life cycle of our products, what is the power consumption of the product. But of course, then we also need to research where are they located? What is the grid mix in these countries? So this is a little bit work in progress, but we know that for us and many other companies, it's the product in use. If you have electrical products, that is the major thing if you want to reduce your total impact. But the starting point was not only what we do ourselves.
The starting point was also how can we help our customers to avoid CO₂ emissions? And here, we do a lot of activities in, helping customers to reduce service trips to machine. Instead, you can connect them through our cloud solutions. With our building automation systems, we reduce a lot of energy consumption when you use our, HVAC systems. So you see in the picture here, we talk about over 1 million ton of CO₂. So of course, in relationship to each other, this is very, big numbers, so we need to focus on that as well. But of course, to be trustworthy, we need to make sure that we are also good in what we do ourselves. So we've been, awarded by EcoVadis, Gold Standards, for our work here, so we feel we are on the right track.
We're also doing what we can't reduce ourselves, we also do different climate projects with Gold Standards, so we have eliminated or compensate, I should say, all our Scope 1 and Scope 3 emissions. It's not really what we want to do. We want to limit them from beginning, but we are not there yet, so we also need to do some climate compensation. But when we look on this, it's quite clear that what we thought three years ago, when we set the targets regarding Scope 1, Scope 2, and also this HMS Effect, has evolved. We need to be much more scientific going forward, so this calls for continuing this work, but we will also present some new ambition when it comes to sustainability.
Not because we have done things wrong, but we need to be more systematic, and there's also different regulations and rules coming up with the CSRD and other things that we need to adopt to as well. Employee satisfaction, very important for us. We measure a Net Promoter Score. I suppose you know this already, what it means. Can you recommend HMS to work here? We ask all our employees every fourth month, and if you get a 9 or 10, you're a promoter; 7 and 8, you are neutral; and 1 to 6, you get a minus point. So when you add this together, you get a good number, and we've seen, actually quite dramatic changes, through this strategic period. So we work quite much with company culture, really making sure that people feel on board.
We spend a lot of time with our managers to making sure that we have good managers, but also managers that address the real problems. Not tomorrow, address it today. So we've been a little bit more to the point the last couple of years. We've done some acquisitions, and we are, I think, now more clear when we do acquisitions, what changes will come, what we'll do. Back in 10 years ago, maybe we said, "Yeah, no change. Everything will be normal, no changes," and then we did start doing a lot of change anyway. So I think we'll be more clear and taking away the uncertainty in the acquired companies. And I think also we are, we have been quite successful.
Our share savings program have been really successful, so it's easier to get a good NPS from your employees when things goes well. So we're on the right track here, and we just will continue to develop our staff and our leaders. We need to work in our growth a little bit more about how to find careers. We don't want to be this kind of company who promote good salespeople to sales managers or good engineers to R&D managers. We need to make sure we have different expert tracks and things like this. So with this 800 employees, we need to be a little bit more structured in this. Maybe you noticed we hired a new function, a Chief HR, being part of our leadership team here.
She will start in October, so that's one step we're taking this direction. And of course, continue working with the company culture. It's always something you need to be working with and making sure people are proud to work for us. Good curve here. If we do the same thing for customers, we see actually the opposite. We used to be really, really, successful with happy customers.... What we see here is a quite quick detraction of the score here. Not because people don't like us, don't like our products, but we've been having huge problem with long lead times, component shortage, and uncertainty in the supply chain, and of course, this is something that our customers do not like at all.
So you see here that our really good score here from over 50 is now down to 27, and we're doing a lot of activities here. Actually, 27 was a bit bad timing. We released our new ERP system in first of May. We sent out this survey mid of May, so of course, it was just in the middle of this kind of, I wouldn't say chaotic, but a little bit troublesome times. So I think some things we are doing right now is solving this. We are improving lead times, we are improving service level, but we need to work quite hard to regain this confidence, because loyal customers is super important for us. 27 may not be a bad score, but we're used to be at over 50, so we need to be back there as well.
So we keep on working on this. And then on the financial numbers, we talked about net sales being SEK 3 billion, and we are almost there. We are two point eight, and if you look on the rolling twelve- rolling four quarters here. So I think we're getting close to that, and we also feel it's time to take a new look on this, especially when it comes to the EBIT level. For you who are financial people here, SEK 3 billion and 20% EBIT, SEK 628 million, and we are already exceeding that. And we've been really successful the last couple of two years in the profit levels, so it's also time to revisit this.
So that's a little bit the purpose of this Capital Markets Day, to present new goals a bit later. So we come back on this. If we look on the development since we started this, actually, we think we've been quite successful. However, we've seen that some of the success has been extra boosted by what we call boost orders, and you have seen this in our report, that we talk about a good development, but we're also saying that some of our customers, they place extra orders just because we have long lead times, just because it's difficult to get components. So I think the buffering in the channels have been quite big, but underneath that, it's also been really successful here.
Part of the success is that we defined different sweet spots, and I'll be back on this in a minute to define this. This really helped our teams to focus that these seven sweet spot is really what we do with our business, and there we have seen a fantastic development. Also, that what we offer our customers is something that goes along the trends with the industry. We actually, not, not by doing a lot, our customers buy more from us because they are successful, and connectivity and communication is something that is more and more adopted in industrial applications. We're just getting good tailwind from existing customers. We lifted the sustainability agenda. This is not something that company look just as something nice. It's crucial for our customers.
Our large key accounts, like ABB or Schneider Electric, Rockwell Automation, they say this is something that they really invest in, and being more green is something for their survival for the future. So a lot of companies are investing and seeing a lot of business opportunities in being more sustainable going forward. And also, we lifted our corporate culture, and for us here, we talk about HMS as Hardware Meet Software. Internally, we also talk about heart, mind, and soul. That's also HMS, and we work a lot internally about our core values for this. A couple of things that is not so successful, I would say M&A plans.
As I mentioned in the beginning, the plan was to have half of the growth coming from organic and half from M&A, and, I think we have not been so successful on M&As. A couple of reasons: I think that, we did not join this rally or circus. That was maybe two years ago, about really high valuations. So, we actually said no to some companies, where we felt that we need to have at least one foot on the ground. I think also that, some of the targets we look at is not owned by financial players. They are owned by entrepreneurs, the founders, and that process is a very long process. We've done most of our... all our acquisitions in, in Europe, and, most of them have been these founder-led companies, which, which take time.
So I think also we could have worked more on the pipeline, but this is a key area for the future, so M&A will be back on the agenda for the coming years. We also had an ambition to move more into software and SaaS model for Alexander's Ewon business. You will hear more about this. We're doing good things there, but the adoption rate for these new things in the industry have been much slower than we anticipated. So maybe we could have done more here, but the solution is there. We're getting customers, but the adoption rate is lower than we expected. We talked about doing more verticals, new applications in adjacent areas.
I think the acquisition of Spanish Owasys, where we today own 80% and the four founders own the remaining 20%, is a good example that they have a communication technology that is interesting, but the application is very different from our original sweet spots. So that's a good way for doing acquisitions. So we've done some good things there. And also 5G, there's been a lot of buzz the last couple of years about 5G. I think we've been quite clear to say that this is important for the long run, but it will take some time. Other places in the industry was expecting a boom. I think we've all the time been saying, "Okay, wait a couple of years, because new technology takes time." Now, we see pretty good progress, but still, it's for special applications in a special vertical. It's not for everybody at the moment.
All right, so this is a little bit, the recap when we look back the last two, three years, what we have done. So quite much, good things and some challenges, we need to work on as well. But the key thing here, that we think there's a lot of things that remains to be done in this market. We are at a good spot, and I'll talk more about this. ... Just a little bit about our business. Many of you already know this, but just to recap, what we do in our market segment is, the majority is industrial automation, manufacturing, process automation, making cars, and making chemicals. That's where we started, and the big portion for us.
Transportation, infrastructure, also very important for us, and we see interesting segment here with material handling, AGVs, and this kind of combination of AGVs and robots. And it's not only transportation of material, it's also different application you do on AGVs today. It's very interesting. Power and energy, quite new area for us. We have always been in the application for wind and solar, but we all see quite much of electrification application, like BESS, battery energy management storage system, where we do different applications, so quite interesting market. And David will also introduce more of our building automation market. Separate market, separate segment. It's not home automation, it's more commercial, it's hotels, airport, shopping malls, these kind of large buildings where you have very high cost for heating and cooling, and that's what we help customers with.
The common denominator for all this segment is the communication technology, so that's what we do. There are different communication technologies, but there are also similarities, and the most common similarity is that it must always work. Cost of failure, cost of downtime is enormous in many of these applications. So we talk about our playing field in industrial automation and building automation. Let's start with control, and Bartek will be back on the details here, but control for us is the communication mainly inside factories, where you use real-time communication, milliseconds, microseconds, to control robots, machines, motion, things like this. There's quite much focus on doing this smarter. Industry 4.0 is one buzzword around this, how to use more software, more technology to improve your efficiency. But we also see a big focus on uptime.
Of course, uptime is when everything is working well. We've seen this from beginning, we've seen this as a key thing for the profits in the companies, but we all see more and more that in factories, everybody focus also on health and safety. And you know what? If your network goes down, things doesn't work. That's also a high risk. That's where you have all these injuries, where people are running around and trying to fix things. So also health and safety, we see more investments in this kind of network uptime and how to structure your your uptime in factories. And we all see sustainability is coming as a big trend.
People invest in sustainability to make it, make sure that they do less waste, better quality, longer life cycle of products, et cetera. So this market is about networking, communication. We have our embedded technology here. We also have gateway technology to connect old stuff with new stuff. Most of these applications are not greenfield. It's new investments in old factories, and we need to connect and help customers to connect this. Wireless, wired technology, network diagnostic, troubleshooting, and key thing here is reliability and robustness. Information-centric, Alex will talk about this. This is much more of getting more data.
It doesn't matter if it's in one second or in 10 seconds. You want this data from these machines to do insights and analysis and actually better decisions, better OEE, operation, overall equipment efficiency, to improve that you get more out of your current installations. Remote is very important here. You have a lot of machines in your factory. You want to make sure that you have follow your service schedule, stuff like that, but you don't want a lot of people already always on your plant. You want to make sure that these machines are online. Cloud solutions, something that we see more and more coming, but there's also a lot of concerns about cybersecurity, and we'll talk more about this later.
Collection of data, visualization of data, and we see many more systems that need much more data to use these new IT tools on AI and things like this to get data up to them. And building automation, especially in this more larger commercial installation, is driven out of energy efficiency. We see a lot of things going on there, both to save money, but also a lot of legislations that you're not allowed to build certain buildings if you don't have green technology in them. So we see a lot of drivers there, more sustainability. Here we work with network communication. We talk about HVAC, heating, ventilation, air conditioning. We started mainly on the cooling side, but they will talk a little bit more also about the heating side here.
Also in buildings, there's not only one supplier doing this. There's one supplier of the heating, one supplier of the cooling, normally not so well connected. So there's a lot of savings to do just by integrating this in a better way. When we look on this playing field, what we defined here is a couple of sweet spots. It's where we have a good market opportunity and a good business today, and Bartek will be back on this. Multi-network connectivity, this is the Anybus embedded products that we actually started back in 1994. We updated the product quite much since then, but as the concept is still the same. We grew per year since starting this strategy period 27% CAGR. So that's really good on a business that is quite, quite, how to say, quite mature.
We also have this network-to-network gateways we sell through distributors, 19% CAGR, very good. We have our Ixxat brand, doing CAN communication and communication inside machine, 13% growth. It was an acquisition we made 10 years ago, very limited growth, and last couple of years, we see a fantastic development that we also got the things right there. And then we have network diagnostics, acquisition we did in different steps, last couple of years, doing network monitoring, growing 15% CAGR. So all this is growing quite well in a market that actually is not growing so fast. So we've been quite successful here. This represents 70% of our revenue today.
Information-centric, that Alex will be on later, we have this remote data, remote access to machines, 19% CAGR the last couple of years. And we have this acquisition, Owasys, that's actually a 40% CAGR. Okay, from small numbers, but we see a good uptick there in their business. And then we have a sweet spot with David in building automation for this, especially cooling, the ACs, communication with ACs, where we have 19% CAGR. So actually, these are the sweet spots. We have favorable markets, but I think also the focus we spend on this business have really generated strong growth, better than expected, actually. We have two types of customers. We have the makers, machine builders, device makers, that makes this kind of equipment.
This could be like the ABB or, windmill company doing, wind turbines. We have users automation system. This is like, Stora Enso or, Volkswagen or something like that, that make something and use this, automation systems to produce their things. And when we go to market, we look at these as two different areas, the makers and the users. And within makers, we either have device makers making, yeah, things that is less than a cubic meter, like a robot controller or, AC drive or something like that, or instruments, or we have machine builders that do larger things, larger than a cubic meter, more or less. And then we have users. There, we normally go to market through, system integrators and different partners.
So if you look on the revenue, the business model, and the go-to-market, we see that device makers, actually where we started the business from beginning, it's 44% of the revenue, stable, and I think Bharti will talk more about design wins and how we go there with direct sale. It's a long sales process, but when you win, you're in there for 10 years, plus 10 years, I would say. So this is a very sticky business model we have there. With machine builders, 25% of revenue. Here, we would like to be part of every machine. In reality, we are more specified as an option, so we would like to be part of the bill of material, but normally, we are an option. If you need this kind of connectivity, HMS will be installed. If you need remote access, HMS will be installed.
It's a combination of direct sales and distribution. And then, actually, the fastest-growing, part we have with end users and system integrators, because we started quite late with them, we started on the left side and, moved to the right. There we go normally, to market through distributors, partners, and to a large extent, also e-commerce, that these are things that, are convenient to buy. You, you have your specification and, you need this kind of solution. So, we see this go-to-market as something that is evolving, but quite good mix of different customers and, different industry segments. All right, so, if we look on the trends, for the-- I would say, looking ahead, maybe look on coming five years, we see that there's a couple of big trends impacting our business.
In general, we see in the last years of nearshoring or moving manufacturing primarily closer to your markets. We see a big trend that international companies move mainly out of China into Mexico, to the American market, to Eastern Europe, for the European market, and this doesn't necessarily that's closed down the things in China, but they don't keep on investing. So the new investments aren't going to Mexico, to Vietnam and Southeast Asia, and also Eastern Europe. And we see that this is driving a lot of investments and CapEx investments for automation. We see also that the need for data, you all know all these AI tools that need a lot more data. We see that people are trying to collect more data from the industrial processes to learn more from it and make more conclusions.
Of course, then you need connectivity from the machines and the devices. Sustainability, I talked about this several times. It's not something that people do for fun. It's crucial for their business, and a lot of our companies invest more in how to measure, how to make sure they understand their sustainability, because, you know, what we can measure, then you can start act on it, and we see a lot of investments for measuring different data points in the factory. Networks, network security, we'll talk a little bit more about it today. It's an area. We talk about two things: network security, that's the security on your little network, and when we talk about cybersecurity, it's much more internet and cloud connected.
We come in from an industry where the network in the factory was protected by, you know, a gate and a guard inside the gate. To get into the factory premises, you had to show your ID or something like that. Now, with 5G and wireless, it's not so easy to control the boundaries, but there's a big debate within the industry how to address the need for data, but also the need for keeping your integrity and the data confidential. So a lot of discussions going on there, and our plan is to make sure we can make products that help customers improve their security. Energy efficiency both in building automation, but also in the industry.
I mean, 10 years ago, nobody would ask, "What is the power consumption of this robot?" Now, you can't sell this robot if it's not green and if it's low power. So there's a lot of changes going on, and people really care about power consumption. Factory uptime, I mentioned this several times because the, we see this as a strong trend, that if your network is not functioning well, you have big, big cost. We can talk about millions per hour in some factories. So of course, we see that, it used to be much more of a you repair when it's broken to much more of predictive maintenance, and there's a lot of investments, to make sure you can understand how your factory, need to be maintained before it actually shuts down....
We think these trends are favorable for us, and we feel we are on a good spot on the market. The framework we had here, we talked about organic growth and M&A, people, and planet. We think this is... Sorry. We think this is been working quite well except the M&A case, so I just want to show some data for M&A. We see three different things with M&A. We want to do bolt-on to our existing business, like the three gentlemen here will represent. We also see we can do acquisition that fits to expand inside our playing field, and we also look more and more to larger acquisitions. And Joakim will be back here a little bit more, how we see on financing and things like this.
But when we look on the bolt-on there, we really try to find things that we can leverage up upon selling our channel, integrating our development system, so we look for the synergies here. So both synergies and integration is something that need to be good fit here, as always, company culture. The culture fit is very important for us. In the middle, with expanding playing field, synergies could be okay, but we all see it as a new field. Like, I had this example with Owasys. They don't sell in the same channel, and we developed this a little bit parallel, so we don't need to integrate these companies in the same way. But of course, cultural fit is very important. But we also look on larger acquisitions that could be a little bit more transformative.
So we look quite broad here. Synergies, of course, but we are not sure that we need to fit them in our current organization. We look more on large acquisition that may form a new division for us, and we'll talk about this a little bit, little bit later. So M&A is an area that we are not fully happy with. What we will also do now, as in the second phase of this strategy work, is to focus on two other things. We have new strategies for operational efficiency. Maybe you noticed that we hired a Chief Operating Officer just a couple of months ago to really drive how we do things.
We've done a lot of good things, without having a perfect organization for it, but I think there's a lot of opportunities to drive, efficiency in a different way, more systematic in the company. We making over 1 million products every year, so of course, that systematic approach in production, in management is very important. So we have a couple of new strategies for that. And of course, like everybody else, we look a lot on new tools for coding more efficiently, for using, new AI tools, and it's quite amazing to see how quickly this developed just last couple of 3, 4 months. We also talk about sales excellence.
We have developed our five market units very successfully, but we also feel that it's time now to do a new step to drive much more of use synergies between the different sales areas, have more common incentives, more cross-selling, sort of things like that. We work very differently in Germany versus Japan, versus Vietnam, versus US. It's been really from ground up, but we see an efficiency opportunity if we start collaborating in different - in a different way with this. So sales excellence is also one very important things going forward. So this is a little bit about where we are today and some things what we look for the future. I would like to hand over to the business units, and first out is Bartek from Control Centric.
Thank you, Staffan. Thank you. Good morning again, everybody. So what we're gonna do now is that we're gonna take a deeper look into the left part of the industrial automation part, the control, where we talk about a lot about communication on the factory floor, in between devices, and making sure that the factories stay up and running. A high-level introduction to the majority of our offer. At the top here, we have multi-network connectivity for automation products. That's our embedded offering, represents 60% of our business, and that's our how we enable communication within the devices. If you move to the right, we have a network-to-network integration factories. Staffan, you touched it already, our gateway offering, problem solver on the factory floor, on, or inside a machine.
Bottom left, connectivity for CAN and embedded control, communication inside machines and into some specific vertical markets like battery energy management systems. On the bottom right here, we have network diagnostics in factory automation, and that's our latest acquisition that during this year has been integrated under the brand of Anybus. This business represents approximately 70% of HMS' total revenue, almost SEK 2 billion, and we act in a market that the coming 5 years, on average, will grow at a CAGR of approximately 8%. Let me deep dive a little bit more to the unique selling points we have within this offer, and, you know, at the core, we do own our own IPs to the network technology stacks that we provide within our products that creates great confidence for the customers.
We have been in the market for a very long time, and we managed to build up world-leading competence within industrial communication and network security. By having that competence, we do also have a presence in all the major industrial network communications organizations that evolve these standards ahead. We also have an impact, a possibility to impact the evolutions of the standards by this presence. If we look at our embedded offering on the top here, which enables industrial communication. The benefit for the customer is reduced total cost of ownership and time to market. The customer makes one hardware and software in design, and get access to a certified and tested industrial communication module that covers all the global major networks for global market access.
We take care of the component sourcing, the hardware construction, we manage the product life cycle, we do the necessary software and security updates, while the customer can focus on his core business. We have today, approximately more than 2,000 devices that enjoys communication from Anybus embedded offering. This amount is, of course, continuously growing. Besides the embedded offering, we also have a diverse portfolio for different communication challenges on the factory floor. This picture you see on the floor here is our latest generation gateways, where we spent a bunch of time really making this easy to use and get up and running on the factory floor. So we're really removing the need of being an OT expert when you need to get this gateway up and running besides the machine.
The complete portfolio consists of more than 200 different network combinations, so we cover almost all the types of communication problems you can run into on the factory floor when you exchange or buy new equipment, and you need to get this connected together. On the left side here, you see our wireless offering. The beauty here is that it consists of several different wireless technologies, and that means that we can apply the right technology for the right use case at the right price for the value we provide. What I mean with that is that, imagine that you have a robot with a gripper tool. This gripper tool is controlled with a cable besides the robot from that comes from a control unit. This robot moves and wears out, and cause downtime after a certain time for the factory owner.
Such use case can easily be replaced by a wireless Bluetooth technology, point-to-point cable replacement. While on the other hand, we can have complex AGV applications that need to tunnel safe communication, and for such use case, we will apply our upcoming 5G technology. And lastly, this nice box here is called Atlas. Our diagnostics offering enable uptime for factory owners, help the factory owners to build structure and reliable networks without the need of being operational technology experts on the floor. I will move on and show you the distribution of the business within the control-centric playing field. 60% of the revenue comes from device manufacturers. This is our embedded offering. The business model here is something we call design wins. And can also the design win process is pretty long.
You know, it always starts with an opportunity, and when a device maker starts to integrate our embedded module into the device, we register a design win. This design win process can go on in between 6-18 months, in some cases, even longer. When the customer release the product to the market, that's first when we register it as a production win. But then it can take one or two more years before we actually see the money and the device ramps up in the market, and that's when we have the larger orders coming in. Very sticky business, long time to market. We approach these customers through direct sales. I move on to the right. Here, we have 11% of our revenue, equally distributed by the rest of our offer, except embedded. Slightly different business model.
Here, we are specified as a standard in the specification or just an option in the bill of material, and we reach these customers through direct sales and distribution. And then further to the right, we have 30% of our revenue, also equally distributed from the main offer, except embedded. Pretty fast business. There is a problem that occurs on the factory floor, and the deliveries should go fast, project sales, product sales, and here we have distributors and our e-commerce partners that bring these products to the market. From the distribution of the business to some specific trends that will create interesting opportunities for us within the Control Centric playing field. Number one, wireless acceptance. Staffan, you touched this.
This buzz around the 5G has benefit with something good, actually, because all these discussions that 5G will enter and change the factory floor, it has created an acceptance, a mental acceptance, for other wireless technologies. So people are mentally getting ready to cut the cables on the factory floor, and this will open up interesting opportunities for us. Secondly, Staffan, you touched this as well. Digitalization drives the need of data. It drives the need for products that supports data information models. If you want to make your factory smart, you need to get access to the data from the device. We don't only talk about the new devices that gets deployed in the factory automation. There is a huge brownfield market here that needs to enable data from the devices. Very interesting opportunities.
We move on with network security, and security threats are for real now. It seems like factory owners, especially the smaller one and midsize, don't take it serious enough. But there are several security regulations falling into force now that will change this. We have NIS2, we have the European Union Cyber Resilience Act, we have a standard called IEC 62443 that is evolving. We have something that is called SBOM, a Software Bill of Materials, driven by the U.S. and German government. This will put an attention on cybersecurity within factories, will spill over on device makers, and open up pretty interesting opportunities for us within HMS. We move on to our core, industrial Ethernet evolution. This is where we come from, and the Ethernet evolves towards more safe communication, increased bandwidth.
You know, the need of data drive an increased bandwidth. We talk about Gigabit now, we're not 100 Mbps. And thirdly, determinism, time-sensitive networking. And I would say it comes in the order I just said it: safety, increased bandwidth first, and determinism will come few years ahead. And we talk about determinism, it's not about increasing the speed, it's about getting all data timestamped. And lastly, factory uptime still remains the key. Downtime costs are rapidly increasing. This is today already on everybody's agenda. If you look on the automotive factories, on average, two years ago, they had 30 unplanned downtime incidents.
Today, they are down 16, but still are the downtime costs rapidly increasing, and this is because the factory is getting more and more interconnected, and when you have a downtime, you shut down a big part of the site. Opens up very interesting opportunities for us. This is the trends, and we move on what we have achieved since 2020 and what the focus areas will be until 2025. Since 2020, Anybus is growing over 100%, 87% organic, and this is to a large extent, driven by the digitalization that is ongoing. If you want to improve efficiency of your factory, you need to, need to get your devices connected.
The beauty in this growth is that our latest embedded technology platform grows with more than 200%, and this is by majority since Q1 2018. So here you also see how long time-to-money we have from the design-ins we do before they ramp up in volume. We have also released a beautiful next-generation gateway offering, as I already said, really differentiating with ease of use in the market, prepared for increased data throughput for the future demands, built-in security features. Great offering, and we have learned a lot when it comes to 5G since 2020. Lot of proof of concepts executed that we take with us for the rest of strategic period. Key focus areas ahead until 2025.
Embedded is our core, and we want to expand our embedded offering to fit better for slightly larger customers that we are used with today. We want to have the capability to grow with existing customers, but also grasp new business with slightly larger device makers. There is in-design process to get your industrial communication up and running. We're narrowing down in details here now to really try to make this in-design process as effortless as possible. If we can remove any, you know, challenges for the customer, we will be able to generate more in-designs, and this will also, at the end, offload our own engineers to support more customers to win more business. We want to, until 2025, bring our 5G offering to the market.
And lastly, you know, we have, we enable factory uptime today with our diagnostics offering, and that's very close to security. Besides diagnostics, we would like to add up a security offering, so we can enable both factory uptime and factory security. So with that said, I mean, we are in a business that adopts new technology at a very slow pace. Therefore, we will stay close to our core business and continue to nurture and expand our current value propositions. So to wrap up this, main takeaways I would like you to take away with you. Market drivers, we have smart industries, sustainability and security. I mean, this drives the further need of industrial communication solutions. We have pretty solid market conditions. The end users, they need to invest in sustainability, security, and digitalization. Strong focus on expanding our core business.
We want to stay very relevant for new in-designs. We know that data and security will be the key. Continue to expand our diagnostics offering for diagnostics, help customers minimizing downtime, and there is a huge diversified network technology landscape out there, out there. Fits very well to HMS offering, and this means that our core business is solid. From innovation perspective, until 2025, three things. I've already touched 5G. Secondly, communication as a software... We want to explore and network technology or an embedded solution which is hardware independent, delivered as a software. Slightly different target customers than we are used to today, but still relevant and interesting for us. And third bullet, AI-based offering for network diagnostics.
We're building an offering that can guide the customers upfront on what the error in the network is or and even if so it can, so it can guide the customer upfront of possible errors. Based on historical incidents and snapshots of what's going on the traffic, we can teach the AI engine to predict possible downtimes in the factory. That's all from control centric, and with that said, I will hand over to Alexander Hess. Look a little bit more into information centric.
Thank you, Bartek. Thank you. All right. With this said, after the deep dive on the factory floor, we would like to move in a level up, so talking about information-centric business, which means going from the factory floor towards the cloud or to a remote solution. Within this area, we have two main sweet spots, which I will address today. So first of all, remote access and remote data for PLC-based machines, which means on the factory floor we have in the cabinet our devices installed, and this is the focus which I will take for today. On second, we have remote connectivity for mobile machines, which is our overseas business, where we own 80% of the business and where we have a little bit of different business model.
Overall, we are talking about 23% of the HMS revenue within the information-centric area. It's around about SEK 664 million, twelve months rolling, and we are in a really favorable market situation. So if we talk about information centric, IIoT, Industry 4.0, this is a really, really growing market where we expect a double-digit growth over the next couple of years. Talking about our offering, our USPs, I divided it in three parts, which I would like to go a little bit deeper in. First of all, starting with remote access and remote data. There we have a real, real added value that we have a so-called southbound connectivity to all major PLCs. This means we support all the big PLC brands, which can be added or addressed with our gateways.
We are in this market over 20 years as a leader and having over 8 million VPN connections each year, where we connect a machine to a PC and where you can access the machine. We do this in over 178 countries worldwide, so that's a really, really big portion and having over 450,000 devices connected to our cloud solution and to our gateways, with over 25,000 active customers working on that.
As mentioned before, network security, cybersecurity is really a key, so for us, security standards, it's really one of the major efforts we put in, and we are ISO 27001 certified, and we are doing also beyond that certification, a lot of security testing and additional tests with third parties, because if you access a machine, you need to ensure that this is a secure connection. With the devices, we have our cloud solution. It's called Talk2m, where we have an easy setup to, let's say, control the device and the machine at the factory floor through our cloud, and we have a worldwide coverage here with over 30 data centers and an SLA of 99.5%. So we have a real huge global coverage here.
As I mentioned before, in over 178 countries, our devices are connected towards the cloud, and there we have a big infrastructure to support this and to be able to have up to more than 1 million devices connected towards our cloud. Then moving from the factory floor, more to also decentralized applications, we have remote management. You see it a little bit from the housing; it looks different. So if you look to the top, these are usually devices which are in a cabinet in the factory floor.
And, on the bottom, we have our device, the Netbiter, which is usually used decentralized, for example, at gensets, where you have a remote management solution to the whole system, and where we support a lot of third-party vendors, which you can plug in in towards the device, to get all the data out of your machine and your local device towards your application. And this is what we are doing with the remote management solution, especially on vertical markets, where our remote access and remote data solution, it's broad across all industries. Our remote management is really focused on power generation, energy monitoring, tank monitoring, for example, and also solar and battery systems....
If we look into the revenue stream where we generate our business, we learned from Bartek that we do design wins for device manufacturers. This is not the business model we are doing within the information-centric area. We are really focused on the machine builders, which is two-thirds of our revenue, and a machine builder is usually it's a bigger machine, it's not a small device. You have a whole machine, and you have usually a cabinet with a PLC running in the cabinet, and there, our gateways are installed in the machines. And so the machine builder has the possibility to remotely access the machine, if they are installed, let's say, built in Germany, installed in China, and they have a service issue, they can remotely access the machine from the headquarters or from wherever they wanna be.
This is two-thirds of our business. We are usually specified into the bill of material of the machine builder. Some machine builders, every machine is equipped with a device from us, which is appreciated, but for sure, we have also machine builders where it's an option that you have a remote access or remote data solution on it, and this is where we're working on to get it even more standardized. We do this indirect via distribution for small machine builders, and we do direct business with the bigger machine builders, there we have a direct sales force. The other third of the revenue for us is end users and system integrators, and as Staffan mentioned, this is the fast-growing path.
So for us, very important because the end users, they are quite often specify what's allowed to be used in a machine and what's not allowed. So for us, it's really important to be close to the end users, get into the specifications that they say, "Yes, in our factory, we wanna have an Ewon device," and then the machine builder needs to install an Ewon device. So it's one third of the revenue, and here we do usually project business, so it's a project with the end user where we're getting in or getting specified in, and then the machine builder is buying it. And the sales, if you do it directly to the end users, it's going usually through distribution and e-commerce.
If you look into the trends in the information-centric area, we have, yeah, still one big trend, which is a little bit boring, cost-saving, but it's still there, and it's a real, real important point, because why should I add additional cost towards my machine? Because I wanna save something on the other side, and that's a big driver because, in the past, you had to travel if you have an issue towards the machine to fix the issue, and now you can remotely access to the machine. So that saves a lot of cost, time, and it's also good for the environment. So sustainability plays also even a bigger role, as a lot of companies have sustainability objectives, and they wanna reduce traveling. And with our products, we can help to reduce this and to have, yeah, the advantage of cost saving and sustainability.
So this is still a big driver for remote access and remote data solutions. Beyond this, predictive maintenance. So if I have control of my machine, if I know what's ongoing there, I can see, and also upfront inform the customer that maybe I need to change something before the machine is broken, and that's something what the machine builders do really active now. So they use the remote data for doing predictive maintenance and also to, let's say, supervise the end user.
So sometimes they use the machine, which is limited, I don't know, to 100 liters you can fill in, and they enter to 150 liters, and then they say, "The machine is broken," and then they can just say, "Yeah, but it's 100, and it's not 150." And all this is a big added value for the machine builders and giving a lot of possibilities in regards of predictive maintenance and then also of data insights. So data insights, it's important for machine builders on the one side, so they know more about the machine, and they can find out some patterns if they have machines at different locations or at different end users to see what's working, what's not working. So working with data is becoming every year more and more important.
Now, with AI, it's taking a lot more grip on it. You can do a lot of analysis on data, and that's a big trend for us for the future. And also for the end users, they are really interested in the data. They wanna understand what's ongoing in their machines and what they can do out of the data, and there we support with this. And last but not least, Bartek mentioned network security. Network security is on the factory floor. It's really, really important, and a lot of standards coming up, but also from the networks toward the cloud, cybersecurity, it's really a key, and it's... For a lot of companies, it's a threat, so they just wanna ensure that it's secure.
For us, it's a big opportunity because we have secure offerings, and we can help to make the connection secure and to have a real secure offering there. That's a big trend for the future, where I think cybersecurity and network security becomes year by year for the industrial world, even more important. If you look into the achievements since the strategy was kicked off, the Ewon brand was growing 75%+ at the last years, and it's mainly driven by remote data. So we do remote access and remote data, and we see a real trend towards remote data. So data becomes more and more important, and also driven by our software as a service revenue. So the cloud solution is growing over proportional in that.
As I've mentioned, we have over 450,000 devices connected to our cloud solution. That's really a big milestone, and that's something where we differentiate ourselves towards also competition, where we be able to support this worldwide. So you need a lot of certifications to make this happen and a lot of, let's say, infrastructure to be able to do globally coverage on devices. And we are very happy since 2015, we are voted to be number one as remote access provider. But this is a vote not by journalists, it's a vote by end users. So it's a annual survey for end users, where they have to decide which company is providing the best remote access solution.
Since 2015, we are voted now 9 years in a row to be number one here, which is a real strong vote and which makes us really happy. Since 2020, we have last year released our newest gateway, Cosy Plus, which is a remote access gateway, which have additional security standards to address also the cybersecurity threats, to really have already be prepared for the future and the next steps also on certifications which are coming out, and here we are on a forerunner. If you look towards the next years, so we wanna expand furthermore our business towards remote data. So we see remote access, it's a nice growing business, but data becomes even more important, and that's the focus we put in, and also software as a service.
So for us, the cloud solution and having recurrent revenue is a focus area where we put in our efforts. Then, we are really good in the machine builder market. So, machine builders are using our solutions, and we wanna expand our offering and target more also the medium and the large machine builders. We have medium and large machine builders using our devices, and we see trends here and requirements for the future, which we wanna address to be even more attractive in this field for medium and large machine builders. And then, yeah, we would like to strengthen our footprint in the worldwide offering.
So we are there worldwide, and we are continuing doing this with all the certifications for all the countries and, doing all the, let's say, worldwide differentiations and certifications, especially if it comes to wireless connection or 4G connections. They are different. There are a lot of differences between the countries, and this is where we put in a focus, where we say we wanna have our devices running globally, and if you have an Ewon device, you can access towards your machine, independent in which country you run the machine. And then, last but not least, we wanna continue also beyond the, let's say, horizontal offering, our focus on vertical markets, where we are successful in, like with the Netbiter and the transport market.
We wanna continue this and even explore more vertical markets where we can make a special offering in the vertical market. All in all, we see, as I said, the trend from remote access also towards remote data, and we wanna continue this journey and also the customer journey to help our customers, which are starting quite often with remote access, to make the step towards remote data, to understand the added value of data, and to use our solution for getting additional information out of their machines. If we take all together, the main takeaways, so we have a nice growing market, as said, a double-digit growth market, driven by sustainability, cost savings still, and also improved productivity and time savings, still driving the market, for remote access and remote data.
Also, there was a booster due to COVID. No travel was allowed, so everyone had issues if the machine was going down. This was changing the mindset of a lot of companies, that they got the awareness that, "Oh, there's an added value if I can access my machine remotely instead of traveling." This growth is still there and still in the mindset of the people and seeing the added value. If you look into the applications, it's remote maintenance and support. Proactive and predictive maintenance becomes really now standard. A couple of years ago, it was a little bit all we are talking about it. Now, it's really what the companies are doing, and also machine monitoring and data acquisitions and analysis are applications which are growing, which are fast-growing.
Also here, edge computing becomes more and more important. So in the past, companies started to get some data out of the machines. Now they say, "Yeah, it's great to have data, but I would like to have also running my own code on the device to do some precalculation, to filter, to have some faster response rates." And this is meant by edge computing, and this is a application and a trend which is also supporting our growth for the future. Last but not least, I mentioned this, but, that's really the key: data. So remote data. Data is, I would say, the new oil. It's really, really something where companies now working with, and for us, very important, it was already mentioned years ago about data. Data is important.
Now it becomes reality, so the companies, they build business models on the data because it's nice to have data, but you need to have a business model behind of this. You need to make some, some out of it, some money, some cost saving, whatever, but there need to be a value behind this. And now we see that, our customers, they've developed business models where they can use data, giving an added value, where they can earn revenue, new revenue streams out of the data, and that's a big growth driver for the future as well. With this said, I will hand over to David, talking about building automation. Thank you.
Thank you very much, Alex. Good morning, ladies and gentlemen. It's a pleasure to be here, and I will guide you now a little bit on the building automation business at HMS. We have two main applications that I will talk about. We have our multi-network connectivity for HVAC equipment. This is basically climate control, everything that is related to heating and to cooling of buildings. We are experts in this area. This application represents 75% of our business. We developed the very first interface to integrate an air conditioning system back in 2005. At that time, it was a Mitsubishi Electric unit being integrated into KNX, and over the years, we have expanded our portfolio, adding many more brands, all the major players, and different control technologies that are common in the building automation market.
I will also talk about our general purpose communication gateways for different applications: lighting control, metering, EV charging, and many other applications in buildings. They make up 25% of our business today, but they are very fast-growing, and I think it's worth knowing about them. Today, we represent 7% of the total HMS business, as Staffan mentioned at the beginning. Our rolling twelve figure number is SEK 208 million, and the CAGR we expect for the market for the next years is around 10% in the coming years. Talking about climate control, as mentioned before, this is our main business, our main market, and the unique selling point that we have with this family is that we are collaborating with all the major AC manufacturers.
Every company, Daikin, Mitsubishi, Fujitsu, Panasonic, you name them, they have their own private proprietary communication interface with their units. So we, over time, over the years, developed a relationship with these customers. They have opened their communication technology to us, so we were able to design and develop our products. They have tested and validated our products as well to ensure that they are compatible, fully compatible with their AC systems. We have signed, IPR licensing agreements, so we are entitled to use their proprietary technology in our products. And also important, they add our products in their catalogs, and they sell our products through their sales channels as well. So having this very strong, intimate relationship with, the AC manufacturers is a key differentiator for us in our business.
On top of that, it is also very important that the products are reliable, robust, easy to use, and quick to install by installers. Typically, they are not experts on one of the sides of our product, so they might be experts on the cooling equipment, but they might not be expert on the control technology or the other way around. They might be KNX integrators, for example, but they are not familiar with the cooling systems. So making that process easy, that's a key aspect in our gateways. And this also applies for our general purpose communication gateways, where the configuration of the product is very simple, very user-friendly. We have a multi-language configuration tool, features to detect the systems and get, like, an automatic configuration and making the process very, very intuitive, very simple, and very fast to perform.
Looking into the different segments that you have seen from my colleagues before. Device manufacturers represent 19% of our current business today. We have the same business model, with design wins, into the makers that integrate our technology, and we go with direct sales into that customer segment. Machine builders, they make 32% of our total business, and here again, we go direct or through distribution, depending on case by case. And what we have a lot is business with end users, system integrators. This represents 49% of our business.
This is very, in our case, very project-driven, so we might have a project in a certain country, in a certain sector, with a certain use case or application, and next year, it will be in another country, in another sector, with another application, but it's always a lot of project business in the construction market. And here we sell as, in the other brands, through distribution and e-commerce. We see the following trends driving the growth in the building automation marketplace. First of all, Staffan mentioned this before, energy efficiency is very important. Energy costs are rising everywhere worldwide, and this has a direct impact on the cost of operating buildings, if you have a hotel, if you have an office building, if you have a shopping mall, and so on.
So, energy efficiency is a very, very important driver for our business from the cost side, but also from the sustainability point of view. Buildings are responsible for 40% of the CO2 emissions worldwide. This is more than any other industry sector, this is more than industrial factories, this is more than transportation, so buildings are the main generators of CO2 emissions. And there is a lot of pressure from the legislation side to become more efficient and reduce the emissions of CO2 and reduce the usage of fuel in buildings, fossil fuels. In addition, we also see network security, as Bartek mentioned before as well, plays a role in our market.
It is important that communication inside the building is secure, and it's not possible to access from outside and do some harm. There has been cases where hackers have hacked hotels or other buildings just to show, to prove that they are vulnerable. And if we think about critical infrastructure, airports, hospitals, and so on, it is important, very important that those buildings are secure. So customers are requesting more and more secure products. And last but not least, also looking into comfort. This might be, or you could have the impression is something that is nice to have, but not so important. But it's not. It is really important. If you think about shopping malls, for example, the well-being of customers affect their purchasing behavior. In offices, the right lighting levels affect the employee performance.
Or, in other buildings also, the comfort of the users of the buildings is very important, like in hotels, for example, right? So those are the market trends that we see for our business going forward. So what we have achieved since 2020, in the last year, is to have the market leadership in the application of climate control, integration of AC equipment in buildings. We have more than 1.3 million air con units installed in the field that are controlled through some of our products interfaces, and we have been growing at 20% CAGR in this application since 2020. Our other product line, protocol translators, is growing even faster, even better, with 37% CAGR in the last years. So really, really nice growth that we see with that product family as well.
We started our penetration of the American market back in 2017, and we have seen that this is speeding up in the last years. So since 2020, we are growing in Americas at 30% CAGR. And also, we have had, and this will be our major application this year, our customer number one business with heat pumps, in this case, with a hybrid heat pump application. In this case, hybrid means an existing gas boiler is complemented with a heat pump and there is a controller trying to use the heat pump as the primary heat source, and having the gas boiler just as a backup option for special cold days when some additional thermal energy is required.
In order to communicate with that controller, the heat pumps need an interface that we provide in this case for this application. So looking into the future, we see heat pumps as a very attractive application for the coming years, especially air-to-water systems. We do have products for that type of applications, for some vendors: Panasonic Aquarea, Toshiba Estia, and others that we support. But we would like to expand our portfolio to cover all major manufacturers of heat pumps and have compatibility with those systems. Also, we see a lot of energy-saving projects in the retail sector that we have been doing in the last years, and we see a lot of opportunities that we have in our CRM for the coming years with multi-site retail applications.
This could be supermarket, supermarkets, this could be fast food chains, this could be stores, and so on. So there are a lot of applications of that kind that require our products, our solutions, to reduce their energy consumption. We will continue our growth in Americas. It's growing very nice, but we see also Europe becoming very attractive, especially with the heat pump applications for the future. And we wanna stay focused on the commercial, light commercial building sector because I think that's where we provide the most value for. So this being said, our strategy is to continue our market penetration, both in Americas and in Europe, and also explore additional applications with heat pumps. So main takeaways from my side.
Growth drivers for our business in building automation, energy, energy costs, rising energy costs are accelerating the adoption of building automation in smaller buildings. In the past, it was typically the case that only large buildings were installing building automation systems, and now, the business case is turning positive for small and mid-size buildings. Also, the legal requirements are increasing to adopt building automation technologies. For example, if you have a climate system with a power of 290 kW, you need to undergo in commercial, like commercial buildings, energy audits every year or have a building automation system in place. So this will also speed up the adoption of our technologies.
Since energy is the main cost factor, the first thing building owners want to address are the systems that consume the most energy, and those are heating, ventilation, air conditioning, and refrigeration systems, climate control, and this is, as I mentioned before, our core business. Space cooling has been growing very fast in the last 20 years. It has actually been growing twice as fast as heating applications. Last year, 2022, it was the fourth warmest year in history. Experts expect that 2023 will be on the top three, and the top three are all in the last decade. So global warming is a reality that is affecting or, or is increasing the need for space cooling.
In emerging countries like Indonesia, Mexico, there is a large amount of population that are entering, or are having now the possibility to have air conditioning as well. Air conditioning has been, and still is, growing a lot, worldwide. Now we see also space heating with heat pumps is becoming more and more attractive. The European Heat Pump Association estimates that there will be 21% growth per year until 2030. That's something that we want to take advantage as well. Regarding the markets, as mentioned at the beginning, we expect 10% CAGR for the building automation market as a whole, moving forward.
We are outperforming the market, growing at 20%, since 2020, and in certain geographies, like Americas and Europe, we are growing even faster, with 30% in Americas or 27% in Europe since 2020. So this is a bit the overview, the picture I wanted to give you about building automation market. I think now we have time for a coffee break, and we will be back, start again at 10:40 A.M.?
Yeah. 15 minutes coffee break.
Perfect. Thank you very much.
... All right, welcome back from the break. I hope you had a good break. And first of all, I just got to say, when we did this in 2020, we were online, looking into a camera through the whole presentation. So nice to be with some crowd and be able to talk afterwards and so on. So that, that's really nice. I will talk about, obviously, the financial update. I will start by giving a short trading update as we issued a press release yesterday, including that as well. But I'll spend most of the time looking back to the last decade, what's happening, and maybe especially the last couple of years in this strategic period. But I think it makes sense to put it into some context.
So starting with a trading update, and what I wanted to say first here is that I know this triggers maybe some questions, and we would love to have them on the Q3 call. I hope you take the opportunity to ask questions to the special guests we have from the management team here today, understanding the business, understanding the strategy, and maybe we can leave the current trading to the next update, where we will focus only on the numbers. With that said, starting off with the supply chain situation, that's been a big topic for the last, yeah, two and a half years. And we're happy to say that the situation is improving.
We've been seeing this development throughout the last year or so with our delivery capacities coming back, and I think that is continuing in the third quarter. Component availability is getting better. We still have a few areas, especially within Bartek's area, in Anybus, we have some challenges, but it's getting much better, and we're happy to see this development. Then maybe the most interesting update on the order intake side. We have been reporting also in Q2, that we saw a certain normalization of order intake, and you've been following us know that we've been having a pretty big boost or earlier placed orders for two years, basically. And now we see this, this is being normalized. We saw a bit of that in Q2, and in Q3, we see that pace is increasing in this normalization.
Nothing strange for us. We've been talking about that this is going to happen, but now we really see that happening. In Q2, we saw this especially in Americas, and now we see this also in Europe, which is the largest market. Americas is 20% of sales, Europe is 60% of sales. So obviously, the impact is a bit larger now in the third quarter. If we talk about the net sales and delivery capabilities, Staffan mentioned in May, we had some problems with our goal of new ERP system that caused us to miss out some SEK 40 million in terms of deliveries in the second quarter. We're happy to say that we managed to recoup on almost all of that in the third quarter.
We said we would need the rest of the year maybe, but most of that is being addressed in the third quarter. So delivery capacity is back where it should be, and all those issues are resolved. Let me just stay on this, order intake a little bit and take some help from this graph. So you see in the graph on the dark blue is the net sales, the light blue is order intake, and this is in constant currencies. So don't try to add the numbers but just to show the pace of the orders and the net sales. So as I said, during 2021, 2022, we saw this special order pattern. You see it pretty clearly in that area between the two graphs.
So almost SEK 1.4 billion in order intake in excess of net sales throughout this period. We've also been reporting about book orders of about SEK 1 billion, so a little bit less, but we expect to be a bit ahead of the curve in the order intake, given that we're a growing company. And then we see year to date, 2023, we have been about SEK 100 million higher in net sales in comparison to order intake, so reducing this a little bit. But that's what we also stated on previous slide, that we will see this gap being a bit larger going forward. We expect to see a book-to-bill lower than one, maybe through into 2024, maybe halfway into 2024.
Exactly, it's of course very difficult to say, but that's pretty much what we expect, because obviously we need to get back into net sales and reduce these over orders. Looking at another order backlog, just to put it into context, you see to the left-hand side the backlog and the rolling twelve-month sales. Here we peaked out about SEK 1.5 billion in Q3 2022. From normal levels, you see around maybe 250-300 million in backlogs. A pretty big difference, and now we have reduced this to 1.3 billion, roughly. So a little bit down from the top, but still a rather high backlog. To the right-hand side, you see order backlog in relation to sales.
A ratio of 0.2 from the beginning, going up to 0.65, and currently 0.46. So here we also expect this to continue down throughout the coming quarters. Maybe to balance out on some 0.3, something like that. We don't think we'll be back on 0.2 in this ratio. We still have these long lead times, and some customers maybe learned a lesson or two from the just-in-time thinking. We'll see. All right, so that was the short trading update. If we then go into the longer perspective, and let's start with looking at the P&L and on the top line, you see net sales almost 5 times higher than it was in 2014. Pretty nice development. We have 19% CAGR throughout this period, and a pretty solid line. Not too many outliers.
2020, we had some issues on the COVID, the first quarters or so, but then I think it's been balancing out quite nicely. Looking at the brands, you see, all the brands on double-digit organic growth. So I'm showing on the bottom right, organic growth of the different brands. You remember that Bartek was talking about the CAGR of 8% for that business, and here we show Anybus and Ixxat on 12 and 10. Ixxat as we acquired in 2013, then a company with not so much growth, really been able to get that up into a nice, growing business. Outperforming the industry a little bit here. Ewon, we showed 12% growth. Alex reported on a 15% growth for that market at the moment or for the coming 5 years.
It's been a bit lower in the past. We think maybe we've been developing roughly on par with the industry. And then finally, Intesis, where David and the team is doing a great job. Market growing at 10%, Intesis showing 18% since the acquisition in 2016. Ewon numbers is also, also from 2016. And then try to break this down for you. So we said 19% is what we report. Out of that, 13% is completely organic. We have another 3%, well, 16 in total, if you add also the M&A part. And then if you also add the FX part, you get another 3% up to 19% growth. And that might be...
What surprises me a little bit is this FX part is really big, and then we just taken this, of course, point to point from 2014 to 2023. We just been taking the currency rates from 2023, recalculating based on the 2014 rates, and see what it would have been without currency changes. And this effect, of course, comes from the fact that we report in Swedish crowns, we have 60% of our sales in euros and 25.5% of sales in US dollars. So the fact that those currencies have gained a lot in relation to the Swedish crowns plays a big role for us. Let's continue down in the profit and loss to the gross margin, where we've seen a pretty good development over the years as well.
We've been in the period from 2015 to 2019, very stable, around 61%, and now we see a rolling twelve-month, 64.2%, percent. And what really happened here is we did some focus work in 2020 during the COVID times. We needed to focus on something more difficult to travel, difficult to meet customers, but we did some work on this, and what we did was really trying to consolidate suppliers, consolidate EMSs, working on pricing, especially on tail products, older products, where we could make a pretty big difference, and customers were so happy that we continued to selling these products. So we managed to get a good effect from that work, and we showed almost 64% gross margin first half of 2021.
Then we had some issues for about 4 quarters, where COGS increased quite rapidly. A lot of our component suppliers came to us and said: "Yeah, now, tomorrow is going to be 10% more expensive to buy these components," and it was not so much we could do. It was the seller's market at the point. We had to push, of course, price increases to our customers to, to mitigate this effect, and I think we did that quite successfully throughout the last 1.5-2 years, but it took a little bit of time to, to get that through. So I think, yeah, basically a year ago, I think we compensated ourselves fully from that COGS increase.
And now you see in rolling 12 months, 64.2, we actually ended the year, or we have year to date, we have a bit higher up against, 65%. So very happy with that development. And while we've done some good things, for sure, there's also we need to be humble for the fact that the FX has helped us a lot. We have some COGS in SEK that is now impacting this, of course, and also some economy of scale that is, of course, here to stay. The FX, we don't know about, that can go either way. But we feel rather solid on these levels, so 64, 65%. We think that that's where we should be, and we, we should have. We made the effort to lift this from that 61% level.
Then looking at the profitability, that, of course, follows the nice development of sales and, and gross margin. You see on the graph, the EBIT in the bars, and, the line shows the margin. If we are start looking at the CAGR, we have a 25% EBIT CAGR throughout this, this decade, and a 37% CAGR since the start of this strategic period. So a very strong performance. We see, of course, the gross margin increase of that 3-4 percentage points, the single biggest contributor. We also have some impact from, from the positive ex-FX side for us as well. But we also have some operational leverage. I think we managed to do something, things a bit more efficiently.
The biggest area is on the development side, where we don't see we need to add as many resources as we grow in, in terms of sales, and that, of course, gives a margin effect. With that said, I don't think we underinvest in R&D. It's just that we, we still manage to push a relevant offering and do what we have in our plans. So you see, in total, we've been going from this maybe 17%-18% up to 25%-26%. And this is also the reason why we will come back to this on the target side stuff, and we'll talk about. And then, yes, continue down a little bit, looking at earnings per share, twenty-nine percent CAGR over the period. Of course, we're very proud of that, that development.
We changed the dividend policy in line with the new strategy. We used to have a 50% policy, and now we have an interval between 30%-50% that we launched in 2020. The reason was to gain flexibility for M&A on that side, and since we haven't done as much M&A as we thought, you'll see on the balance sheet that we have a pretty strong situation right now. And the reason we didn't give any dividend in 2019 was due to the beginning of COVID, uncertainty, and so on. I think most companies took the same decision. All right, let's involve the balance sheet a little bit as well, looking at cash flow and cash conversion. So we have over time, maybe we start with that.
Over time, we believe that we should be around 75% in cash conversion and cash flow from operating activities after working capital in relation to EBITDA. The reason we say 75%, then we have a couple of assumptions that we're going to continue with a double-digit organic growth, which will tie up some capital. Normal operational leverage for us may be between 1-1.5, and a normal working capital of around 10% of sales. That's normally where we will be. You see some deviations, especially in 2020 and 2021, and then also in recent years, 2022 and year to date, or sorry, the rolling twelve months from Q2 in 2023. Let me comment on that.
First, in 2020, we had an unusual situation for us that we were actually declining sales with 3%, and obviously, then we could release some working capital, so not a normal situation. In 2021, the situation was a little bit different. We had big delivery problems, and we didn't really hold too much inventories. Everything we got in, we shipped out as soon as possible, and the customers were not happy, as you saw on Staffan's presentation, on the customer satisfaction, because lead times were longer, delivery position were bad, and so on. So that's not a situation we want to be in. Of course, nice in the short term for cash conversion.
And then now 2022, 2023, or the first six months in 2023, we have a little bit opposite situation, that we've really been trying to build inventory to improve the delivery capacity, delivery capability, and making our customers more happy, which is costing us a little bit on the working capital. We expect this to be something like this, that this will probably turn up to be rather good in coming quarters and so on. But it is a little bit like that, so 25% of... sorry, 75% of the time is basically where we think we will be. Looking at some CapEx, I think, in general, I like to say that we are rather CapEx light business. We don't need too many investments in the business.
Maybe I should start by explaining the graph. We have on the bottom the dark blue capitalized development costs, and then we have the middle blue is other intangible assets, primarily the last two years' ERP system change, and then we have in the light blue tangible assets, and then you have in relation to sales the line. So we've been around 3%. You see it, it's a little bit higher. Normally, the biggest investment part for us would be capitalized development cost as we build new products, new platforms. We had a new platform being built in 2019 to 2020. You see a little bit higher capitalized development cost there.
Right now, I also want to mention that we have, looking at the rolling twelve months, of course, there is some double counting from what you see in 2022, especially on the tangible asset side and also on the other intangible asset side, where we have been investing in a new supply line with almost double capacity compared to 2020. We needed to make that investment, and we've also been expanding some capacity in our offices, doing some refurbishment. We really want to get people back after COVID. As everyone else, we do some hybrid work, but we want to get we like to have people in the office, but we don't want to force everyone to be there five days a week. We want them to be able to come by themselves.
So we've been doing some work to refurbish our three largest offices, actually. And then in 2022, and that will continue, we have the ERP system change. We made the most complex part went live in May with our whole operations. We will be rolling out during 2023 and 2024 also to some of our subsidiaries and some of our more recent acquisitions. It will not be as intense as it's been, but there will be investments going on in that throughout 2024 as well. But over time, I think around 3% of sales is a reasonable number to expect in terms of CapEx.
I also included a slide on return on capital employed, to be honest, not because we follow it a lot in the management, but I know some, some of you think this is interesting when you compare companies. I think for us, it's really important to drive growth, make sure that we protect our, our gross margins, and try to be a bit careful on the CapEx and OpEx side, and then this takes care of itself, basically, if we do good M&A as well. But as you see, if you take the period from 2014 to 2020, we've been around 20%, if we round off a little bit, and now you see numbers almost around 40%, which is a pretty big difference.
And then obviously, we have the improvement on the, the EBIT side, the profitability that's gone up from that 17% to 25%-26%, which is, of course, a big contributor, represent about half, maybe a little bit more of the improvement. The rest is maybe a bit more difficult intuitively. We do get some M&A timing effects here when you get, of course, the capital in, the capital employed effect instantly, but then the, the sales will come over 12 months period. And we did, 2 M&As in, in 2016 that was quite large, given the size we had at that time, which pushed down the, return on capital employed for, for 2017, in 2016 and partly 2017. And then we made some smaller acquisitions to 2018.
19 was a poor year in performance on the profitability side. That was bothering. And why we now see this development is because we made the Owasys acquisition in twenty... Sorry, Procentec in twenty, Owasys in 2021, and now we're starting to see the full year effects of that. The acquisitions in themselves also developed very nicely. So that's why you see this progression towards twenty twenty-one, sorry, 2022, 2023. That is really good. And now we are in a situation where we don't really have any acquisition effects that is rolling for us. So I think now we are on these good levels.
So what I'm trying to say is if we had a steady stream of similar size of M&As, it would not be looking like this, then it would be a flatter curve. I also, before the summary, I want to show you also how we look upon the balance sheet, and, if I start to explain the graph we have in dark blue, we call it all other debt, what used to be all debt back in the day. And then we made some distinctions in the last couple of years to make this more clear. In 2019, IFRS came in, IFRS 16 came into play, so we decided to strip out the leasing part of our debt in the light blue.
Then the mid-blue is that you see from 2021 going forward is debt related to options, where we had a 70% holdings in Procentec, which went up to a 100% in 2022. And then we have now 80% holding in Owasys that we still have, and that's why you have that mid-blue. And the reason that we did this is because the dark blue part is interest-bearing, the rest is not. So even if it consumes some potential acquisition space, it's not interest-bearing. I think it makes sense to look upon it like this.
Then looking at the leverage rate, net debt to EBITDA, we peaked out when we did those acquisitions, at least in this period, with Intesis and Ewon in 2016, which were 2x, and now you see around 0.5x, so a pretty big reduction. When I say 0.5x, that's including all the debt in this graph, so not everything is then interest-bearing. I think we are in a pretty solid position at the moment. We have a strong balance sheet. We state in the header that we have about SEK 3 billion in terms of investment room. SEK 2 billion we could probably arrange with debt financing, and then we have a mandate from the AGM for roughly SEK 1 billion equity, given that we are around 20%.
That's SEK 20 billion market cap at the moment. All right, so let's just summarize what I said before I hand over to Stefan. Starting with net sales, you saw 19% CAGR over this period, out of which 13% is organic. This is possible because we believe that we are well-positioned in this pretty attractive part of the industrial B2B market. We are humble to the fact that we had some, maybe had some boosted demand last year or so from I call it post-COVID trade disturbance, so the whole component situation really visible on the order intake, but maybe also a little bit on the sales.
In terms of gross margin, from 61 to 64%+, I went through all that consolidation of suppliers, a little bit of help of FX, also some good job on navigating this inflation environment. EBIT margins from roughly 17% to 25, right now just even a bit more, and 3-4% of that comes from this gross margin increase and the rest from primarily operational leverage. And then return capital employed from about 20 to 40. Maybe the 40 is a bit on the high side, given a normal M&A pace. Half of that from profitability, half from this M&A timing, and maybe a little bit more efficient capital use.
So I mean, as you see, I hope you've seen based on, on these numbers, we've, we've had a good period behind us, which is also why we, we felt that it's maybe time to, to look at those targets that we set in 2020, and that's what Staffan is going to talk about a little bit more now.
Thank you, Joakim. Beautiful slide. Thank you. Maybe you should take this... even take this back. I, I think, I just want to say, Joakim, thanks a lot, and I think what—looking at what Joakim said in the last decade, I just have a feeling that what we have in this company is stability. It's a very solid business, and showing a decade like this, it's make me really proud. But I'm also very proud about the team here. Competence and commitment, that's what I feel when I hear these four guys presenting. Time for a little bit updated goals as we've been pegging for in this presentation, it's time to review it. But we also said that we don't want to change the timing period. We have a very well, well, connected strategy within the company.
2025 is a very important year for us, and there's a lot, lot of activities that lines up to be finished at 2025. So we want to keep this, but this also put us in a bit tricky situation when we look on the financial targets going forward, because it's just 2025 may feel far away, but two blinks, and we are there. So I think this been a key thing when we look on this, and we talk about SEK 1 billion. Now, we update 1+. What does this mean? Well, as we said in the morning here, SEK 1 billion original was a combination of organic growth and M&A. What we feel right now is SEK 1, for us, we will do that organically. The plus is the acquisitions we will do until 2025.
So Pi, Pi plus for us is a new ambition, but we see that Pi is the floor and the ceiling is a lot higher. We don't know exactly what this mean in terms of exact numbers. Depends a bit on the acquisition we do, and it's too short to make a defined goal here. That's why we select the Pi plus. What we also do is to update our financial targets from 20% EBIT to 25. Three years ago, 20 was a very ambitious goal, but we are very happy about the changes we have done, so we are willing to—we think it's relevant to upgrade this. We've been on 25 for a couple of quarters, and we see that with the things we are doing, we think we can maintain this.
If we look on the potential M&As we are doing, we don't believe that we would do a lot of this kind of dilutive M&As. Maybe we'll do some M&As that is less than 25% EBIT, but of course, as you saw on my slide, we want to get some synergies out of this as well. So we think over time, that the ambition is to also buy companies that, together with us, will be able to reach 25% EBIT in a couple of years. So we feel quite comfortable with updating these two targets. They are targets, not promises, but we like ambitious targets. We also keep this dividend policy. We have 30%-50%. It's good. No reason to change that.
As Joakim said, the interest-bearing debt is almost zero, and we see that we have some dry powder if we need to do this for acquisitions. That's so we feel the money is not a problem for acquisition, is to identify and negotiating with these targets we have. That's the challenge, to get the timing right here. So these are the financial targets, but what's even more important is the bigger picture, and this slide is what we talk with our teams, with our customers, with our suppliers, because this is more than just financial results. It's the company and what we, what we are working with. First of all, our sustainability goals around the planet. As I said, we had ambitious target, but we need to be more systematic, more scientific. So we're now applying for science-based targets.
This means that, it's the Paris Agreement 2020, 2050, of course, and that's midterm target is 2030. But we can't really give you any exact number right now because we're in the process with science-based target to define this and, see what we can do. So we'll be back on this, but it's a commitment from us to work in a more systematic and scientific way. I also mentioned this, the HMS effect, what we avoid, and this is key for us. We want to triple that effect from today, 1 million ton per year to 3 million ton per year. And that's of course, this is very a big, big effect we are doing, and that's very important that we keep this in track.
But when we look on this CSRD and new regulations, you can't count avoided things. You, you need to count real reductions. So there's two different things: the real reductions and the avoided reductions. We follow both. The people side, we still believe that happy and high-performing employees generate loyal customers. We are today at employee NPS, around 50. We believe that this is a very good level. Let's stay on that level. For customers, as I mentioned, we have now 2 years with declining results. We need to move up. We'll probably take another year to do that, but we've been at 50, and of course, we would like to be back at 50 by the next couple of years.
We also see in our organizations that diversity brings more innovation, better business results, more fun at work, and we are quite diversified with 18 different subsidiaries in 18 different countries. So of course, we have a lot of different nationalities, but to be honest, there's a lot of men in our organization. We need to attract more women, especially in the R&D side and the technical side, and we believe that the best way to attract more female workers is to have more female managers. So we have a program to recruit more female managers. Three years ago, I think we had 14%, embarrassing. Now, we are at 22%. We would like to be at 30%—over 30% in 2030. There's a lot of competent ladies out there.
We just need to find them and make sure we can convince them to work for us. So this is also an important target for us going forward, and I said, the growth targets, it's still a combination of good profits and good growth. That's the balance we have here, 5+ and 25% EBIT. So this is the new strategic targets, and ambitious, but as you hear on the team here, we are quite committed to do this job, and the market itself looks quite good. Let me take my last slide, a little bit summary. I think the last decade show that we have a solid business. What we do is important for our customers. I think Bartek said this: it's a long sales cycle, but when we're in, we're in for a long time.
So of course, keep moving this big wheel forward is important for us. Partly, we've been bit boosted last 2 years on the order intake. That's important to remember, but I think we had a favorable market in general as well. We think the favorable market will continue, but in the short run, we talk about this destocking. A lot of people talk about potential soft landing or some kind of landing. We are not sure yet. When we talk to customers today, my feeling is that most of our customers have very good business today, but they're quite nervous about the next couple of quarters, the next year, and so. So maybe there's some kind of slowdown in the cards for the short perspective. But with long sales cycle as we have, we don't care so much about the short cycle.
We care about the longer cycle because that's how we operate our business, and in the long cycle, we see very good business opportunities. We feel that our products we have today are very relevant. There's a lot more market we can tap. I think you heard this from our business unit. They want to win more customers. They want to develop more products. So we have a lot of innovations going on in the company, and Joakim just showed the SEK 3 billion we have available to do M&As. We will never stress an M&A. We will only buy great companies, so it can take the time it takes, but I think this priority with M&A is something we focus a lot on at the moment, and I think it's also a good market for M&As coming up here.
So we talk about the industries connected. When we start talking about this over 25 years ago, it was kind of strange to have connectivity to machines and stuff like that, machines that can talk to each other. Today, it's something that everybody need to have. So I think this evolution will just continue, and there's a lot of market potential for us. With that, I think we are at the Q&A session. Verneri?
Thank you. You're correct.
Let's bring up the team, then. It's
Yes, thanks for great presentations, everyone. So now we turn on the Q&A. In the beginning, I'd just like to remind you that we also take online questions. We've only had one thus far, but we shall begin here with the physical audience. So please.
Thank you very much for interesting presentation. My name is Björn Linderstena. I would like to ask two questions, one related to your capital allocation strategy. You're talking about the potential acquisitions in the future, and that you said it takes time with entrepreneurs, the price tags have been too high. What about now? How do you see the price tags? Entrepreneurs are entrepreneurs, I understand that, but could you elaborate a little bit about the strategy for how and where you target America, Asia, EMEA? And my second question is related to competition. Would you like to elaborate it a bit, the big picture, and also maybe on different business areas? Thank you.
Thank you. So let me and Joakim take the first M&A question. Maybe I can start saying that all the acquisitions we have done so far is in Europe. Europe represents 60% of our business, Americas, 20, and Asia, 20. We feel the market itself is as big in US as in Europe and as in Asia, so we are a little bit under-penetrated in Asia and US. I think we are not looking into acquisitions in China at the moment. We have been looking a little bit in Japan, but we have a quite big focus on North America. We are under-penetrated there, so I think there we can see some opportunities. When it comes to pricing, I mean, especially America, we've been shying away a couple of years ago for very high valuations.
I think most of the companies we look at is not owned by financial companies. It's like a family business or a founder, and if they used to have a price tag up here, they tend to stick on that price tag, even if the market price goes down. So there's a long cycle, I think, until it adjusts, but I think the climate is improving for us compared to maybe two years ago. So I think we can be a little bit more, I wouldn't say aggressive, but active, on this because we, we will always keep at least one foot on the ground when we do acquisitions. We don't believe in this kind of really high price for something that may be a miracle in a couple of years.
We would like to see something that is good today, and we are willing to pay for it. Joakim, anything else to add to that?
Maybe just to add, yeah, I think what you said, I fully agree with. The pricing, I think are becoming a bit more reasonable, especially when the talks we had in the U.S., that was almost impossible in 2021, I think, maybe beginning 2022 as well. Now it starts to look a bit more reasonable. So, that's an opportunity, and as you said, I think that's a big focus for us right now, to see if we can take a bigger position in the American market space. And otherwise, especially when you talk to a financial owner, it's much easier now to find a reasonable level. We've been on around 10 times EBITDA before, in the historic M&A that we've done, and I think most of those are fast-growing companies.
We're quite happy to be able to pick them up at 10%, 10 times. Maybe we need to stretch that a little bit for some of these fast-growing companies, which I think we're fine with. But when we start going up to these but above 15, I think then we start to be a bit cautious.
Regarding the second question about competition, it's a great opportunity because we have the business owners here. Maybe you can take a couple of seconds, each one, to, because it's different competition in different segments.
Of course. We can talk a little bit about our embedded offering. I mean, the biggest competition we have still is to make your communication solution on your own, your own R&D. But when you want to target the global market, that becomes rather complex to manage because each of these networks that are available out there becoming more and more complex, and that eats up your R&D resources that you want to probably spend on developing a core device. So I would say if you target the global market, make it, doing on your own becomes rather complex. We do have similar companies like we in Germany that develop industrial communication solutions, but I would say when you narrow down in details, they're targeting probably slightly different customer groups than we do. But of course, they're out there.
From a gateway perspective, there is a lot of competition out on the market. If you look at Asia, we have a low-cost competition. Here, I guess that the regulations, especially within security, that fall into force, will help us a bit as a company because that will clean up the low-cost solutions in the market. But of course, we are not alone in the market. There is competition, and we need to stay on toes to battle that.
If you talk about information-centric area, we have different competitors than we have with, within the control-centric area. And as the market for remote access and remote data is growing very fast, there are also new companies coming up doing similar offers than we do. So we are market leader there, but we see in a market which is growing, which is fast-growing, that competition is picking up. So we have, in certain areas, one-on-one, competitors for such our, gateways, but not overall, one competitor which covers all what we are covering. So it's even on the product side, and, there we have still a very strong position as a market leader.
Yeah, and for building automation, is pretty much the same as Bartek and Alex have mentioned. I would say our main competitor is the in-house R&D centers from the manufacturers. So the make, buy decision is the first thing we need to win. And we always say that, as Bartek was saying, they get a partner that is delivering the product over the whole life cycle, taking care of updates and all those things, and time to market is important. When they take our product, they are faster in the market, typically, if they do it that in-house by themselves. But that's the main, the first hurdle that we need to take. And then on the competition with other companies, competitors, we have several competitors, but covering different applications that we are doing.
We have certain competitors in the air conditioning integration, other competitors in lighting control, and other competitors in metering, but there is not like a direct one-to-one peer that we could compare to.
Yes. Any other? Yes, please.
A follow-up on the same, follow up on the same question. Has your position improved or deteriorated during this problem with the lead times? The make, buy decision, has some of your customers been quicker to get the supplies or some of your competitors, or has it been as tough as for you, for everyone?
Maybe I can take... If I first start, I think that in your business, Bartek, it's very sticky. It's a long process, a long design win, so it's very complicated for them to replace us. So there, we have kept the customer, but with you, Alex, you've seen some customers had to move away, and there, especially for remote access, we lost some customers temporarily, maybe for good, but because the switching cost was... It's not easy, but it's not super difficult either. But for any of us, there's a big moat around your, the, your business.
The embedded business is extremely sticky, but, you know, when we jumped into this component crisis, we have also seen some customers that took that make decision earlier. That they realized that sourcing components for industrial communication, redesign the hardware, is not that easy, if you, if that isn't your core. So some customers has actually also came back during the component crisis because they prefer to source it out to us instead, that, that are better on this. But from a gateway perspective, that's completely different. Fast business, if you have a long lead time, and somebody else can, ship the products, of course, you, you lose that order.
I would say the last two years, there were some times you were the one be able to deliver because you get the components in, then you win additional business. And sometimes it was vice versa, that we had some issues to get our components in, and the competitor was there to have their components in. So it was really depending on the product mix as well. So it's, yeah, in general, I would say, we did a great job over that time, but sometimes we won.
... with additional, having, let's say, some not critical components used, and sometimes we lost when we had a very difficult component, which we had to replace or do some redesigns, and we are not able to ship for half a year, for example, and the competition was able to ship. So I think that's was a little bit the situation. So where we see on the product sales, in depending on the delivery, some we won and some we lost. Yeah.
Maybe from the building side, as I showed on the slide, it's very project-driven, so you need to have the product at the right time when the customer need it. The project will not wait. If they find an alternative solution, they will take that for that project. But I have to say, we were quite lucky that we could cope the sort of situation quite well, and we were able to deliver most of the product most of the time over those two-year period. Yeah.
Comment that, David, is also, of course, we were a bit concerned when COVID started because the application we talk about, hotels, not so good in COVID, shopping malls, not so good-
Offices.
Airports, offices. But I think what balanced this was the energy saving. So a lot of the investments have been going on in that industry because they had to invest to reduce their cost. So I think all in all, it didn't at all play out as we expected.
No.
It's been actually much better.
Yeah.
I think this energy saving cost have been driving it.
Absolutely. Yes.
Thank you. Please.
Simon Granath here with ABG. Thanks so much for being here, and thank you for the presentation. I have two questions, but I'll take them separately, if you don't mind. Initially, on the cybersecurity theme, which I believe has been very present here today, I think historically you've been talking about adding more capacity here from M&A, but I also interpret as you want to add more organically. Is that the right interpretation? And also, where do you stand today in terms of your cybersecurity offering? Is that a USP today? Are you winning deals against competitors due to this, or how should we view it today in concrete terms? Thank you.
Bartek, is that for you?
Yeah. Let's start with answering the second question, where we are in terms of offering. And as we—if I speak for Control-Centric part, there are two things here: enabling secure products and have a security offering. In terms of being secure and trustworthy partner, we have reached quite far here. We're just being recertified according to a standard called IEC 62443-4-1, Maturity Level 3, which shows that we can apply cybersecurity, software development, and we can repeat that process in R&D. And by that certification at hand, we pass all the major security requests from the key players on the market from our own offer perspective.
When it comes to enabling security offer, I think we look both on both options here, but priority right now is to look for interesting acquisitions, I would say.
Perfect. Thank you. And a follow-up question. I believe that you talk about user part of your business is growing faster than the makers of industrial applications and machines. Do you see that impacting your mid to long-term margins, i.e., could we see a mix effect here going forward? And could you also bake that into the fact that the makers of machines perhaps have longer sales cycles, so we could also see a different HMS in the long run than it stands today due to this?
Joakim, margins?
Yeah.
Um...
Starting with the margin part, I think, it doesn't play a big role for us in the margin. Obviously, the ASP is higher on that type of product, but it also is another part in between. So normally, we'll go through a distributor, they will earn their margin as well. So on our behalf, it's about the same as the direct business that we do. So that will not be a big, big part of it.
Of course, these acquisitions we have done, since some of you remember back in 2008, 2009, it was terrible, and the only business we had then was Bartek's embedded business. It's great when everything goes fine, but if there's no sale of robot, you can't sell any embedded technology. So the strategy we decided after 2010 was that we need to expand the company to be less dependent on this kind of long cycle business that is quite cyclical. So all this acquisition we have done give us more flexibility, and we not only talk about device makers, now we talk about machine builders and users. So I think changing the company, we are already on that journey, not because we want to reduce the business.
Your business have never been as successful as it is today, but of course, we need to add more things to become a little bit broader and less, less volatile, I would say. So this is the strategy.
All right. Thank you. Claus Danielsen, Nordea here. So just trying to sort of understand your pricing environment a bit more. So could you go over that during the... basically from the outset of the pandemic till now? How much it's been and, and basically relative to your competitors as well. And then also perhaps considering that your customers are a bit sour with this, what do you see going forward, on that front?
Pricing? Would you like to start or should I take it?
I can start if you want.
Yeah.
You can follow. Throughout the pandemic, I think the whole issue or situation started in 2021.
... when quite rapidly we were hit with these COGS increases overnight, more or less. And I think we kind of saw it coming a little bit, so we started, I think, first of January 2021, we made our first price revision. Then we were hoping that that would be that year's revision, but it wasn't enough, so we made another revision first of July in 2021, and then we made a third one, first of January for 2022. And I think we haven't communicated exactly how much. I think in comparison with competition, I think we are somewhere in the middle, maybe towards the a little bit above the middle since some of our products can take it.
What was important for us was, of course, to balance that, that market price level with also compensating ourselves. So trying to take both perspectives in. So all of these three revisions were somewhere between 5%-10%, to give you a ballpark of where we are. Right now, I think this is slowing down. We see a mixed picture in terms of COGS. We have a few components actually being cheaper, but we still see a price increase on some. So we are actually discussing in next week how we're going to handle this situation until 2024. And it's not impossible that we will do something there as well.
I think also, in addition to this, if we look on the Asian market, both in Japan and China, we more or less have deflation. So of course, we, we pushed a lot of price increase in Japan, which is always very difficult, but in this circumstance, it's been really difficult. So I think there, we are taking a bit easier, but more focus on Europe and US, where we need to be smarter for future price, changes. There are some areas we need to be more aggressive on price, but we also have a quite long tail of good old products where we could increase a little bit more. So I think we are taking more granularity on the price strategy at the moment. So I, I think this developed over these last two years.
I think also our team, I mean, most of us have been growing up in very low inflation, and price increase have been almost zero. So for our sales force, it's been a big training to learn about inflation, to be proactive and talk to customer about this, and the customer, they also understand it. They do the same thing. But it's, it's, you know, if you sell to a German big automotive company, they are really skilled in purchasing, and it's you need to really step up to have that negotiation. So I think we spent a lot of time, and we learned quite many things during COVID. So I think we are stronger now when it comes to our pricing strategy, but there are more things we can do there.
Just as a housekeeping follow-up question, is there any pricing included in the financial targets? From my understanding, maybe not much.
Sorry, I didn't hear it.
How much pricing is included in the financial targets?
I think we, as Staffan said, for 2025, we're quite convinced that we should be able to reach this SEK 5 billion organically, and obviously, price increases will be a part of that, in that, and then, yeah.
Thank you.
If you look on the market growth, you talked about 8%, you talked about 15%, and you talked about 10%. That's in money. Part of that is, of course, not units, that's also part of inflation. But we look on this for five-year, and we think the high inflation will maybe remain for a year, but we expect that we'll land on a low inflation in this five-year period when we look on this market growth. So that's how we get these numbers. So I guess inflation is the smaller part of the market growth here.
Thank you.
Thank you.
Yes. Hi, Daniel Djurberg , Handelsbanken. And again, thank you very much for this very interesting presentation. Two questions. First would be to control on very long sales cycles. Very good, obviously, but do you see any, you know, trends in any, you know, geographies that we have a hefty uptake of procurements that is canceled or prolonged, or other impact from the business cycle downturn that we might see around the corner? That's the first question. And then also a little bit on standardization. You are working hard there to be ahead of the curve and to do your very including the cybersecurity issue. But that you're relative small to a lot of your, you know, customers and machine vendors, et cetera. I guess they are also in the standardization bodies.
How do you cope to, you know, secure that your view and is taking... Yeah, so you take part of this outcome? Thank you.
Yeah. Second question first, maybe you can take that?
Second, yeah.
Standardization bodies.
And about we have a presence in the major network organizations, and we are part of the dialogue, and the standards evolve with the teams that are part of this group. So there is no single person that takes that decision, and we are in the major ones in different levels. Some engineers in one organization, do we have a CTO over from HMS? So it's a group work. There are group organizations, and there is no single source that takes the decision, and they agree upon the evolution of the standards together.
May I say that there are three different classes of members. There are some members, mainly the large automation companies.
Mm.
that they have a legacy to defend.
Yeah.
There are some IT companies that would have much more standardization, and there are a couple of neutral guys like us.
Mm.
We don't care. We do both. So I think this is a little bit of the scenarios we see in this standardization organization. But all this kind of IEEE, it's years and years and years. The newest technology, TSN, Time-Sensitive Network, we present the latest products... we were first on the market, I think, maybe a year ago. We talked about this since 2016, I think, and maybe in 5 years it will be something important.
I think everybody talked about it 3, 4 years ago-
Yeah.
But now everybody talks about safe communication instead, and TSN is postponed for the future, because safety becomes much more important.
On the security part, we also work together with third-party companies, which are really expert on security, where we do also testings and getting some information in on that. When we work with our customers, bigger customers, they are also doing a lot on security. We do additional pen testing of all our devices and all the things, which really gives us leveling up on all the time to be ahead of the curve.
Back to the first question, that was about cancellation or delays in the order book, right?
Yeah.
Yeah.
Eventually, they receive that.
Yeah. What do you say? Cancellations or delays?
Yeah, I can, I can start. I think we see right now we have a, an interesting situation because we still have some customers that think we should be faster in delivering, so they are really asking us to be quick. But we also see some customers that really want to manage inventory, which I think is a change the last six months or so. I guess the CFOs have a higher voice on working capital and so on. Want to maybe go back to a little bit how it was before, also when, when, the delivery performance is better. So we see some customers that are pushing out some orders in time, no cancellations, but instead of getting it into September, they want it in November, and so on. So that is going on.
Right now, for us, I think it's quite good because we can then serve the customers a real stream for products at the same time.
Hi, Viktor Högberg from Danske Bank. Staffan, I think you created a cliffhanger yesterday. You should have been upfront about the pi plus target being organic in the low end. I think, but breaking it down, it implies a CAGR of 4% until 2025, organically. Market growth, 10%. You're in a bit of a tricky spot here with the component and backlog and so forth. Can you say anything to flesh out the 2024 and 2025 implications from those 4%? Is it implying double-digit growth again in 2025 and negative in 2024? Give me what you know now. Just help us along.
Yeah.
Yeah. I think I can take that. If you look two years back, I think we've been growing more than 20% the last two years. So, let's say we were to have a 4% organic CAGR for the coming two years. Over a 5-year period, we'll probably still be beating that average growth of... If you weigh it together, for us, we'd be in 10% organic growth. With the graph I showed before on the current trading, you see this all this order intake that has been building up a lot. Obviously, that needs to come down, so we will be having a tough situation during 2024.
We don't know exactly how much, but of course, it's quite likely that growth in 2024 will be significantly lower than what we've seen in the last couple of years. That's pure math in our minds. So exactly the timing between 2024, 2025, and what the K will be and so on, I think we need to come down and communicate about that when we see a couple more quarters in the bank.
Okay, fair enough. So on the market growth rate, the 10%, in the different areas and units you are, could you help us break down what's penetration and what's volume growth underlying? It could be interesting, maybe have some implications on, the growth opportunity beyond 2025 as well.
When we talk about the market growth, we talk about from a 5-year K perspective, so it's beyond 25, 2025 already. But do we have any data on, anybody who wanna take that question about what is volume, what is penetration, what is new there?
I think maybe I can give some light on it. If you also look upon the performance over the last decade, let's say that the market growth had been 10% throughout the whole period. Probably it's been a bit lower because we revised it upwards the last three, four years. But let's say it's, it's 10, 10%, and we've been growing by 13% organic. So in some way, we've managed to, to capture some market. Could be that we just taken market share, but what we believe is maybe the, the main reason that we're growing a bit faster is the penetration of, of the connectivity.
So when we—maybe that's important to mention, how we come up with that 10%, since our niche is so small, so we can't look at that in that report for our specific niche. So we look more on the larger automation business trends, and then we try to break it down in as relevant pieces as possible. So maybe it's true that the communication parts will be growing a little bit faster due to this penetration or more people would like to connect to machines, basically. So I think that's definitely a driver, but exactly how the ratios would be in volume, penetration, I don't think we should guess when it comes to that.
Can you say anything about the relationships between the different units? I would assume that Anybus has come the furthest when it comes to penetration. What about the others? Can you help us along with the digitalization penetration journey that your customers are on?
I think it's not so much the industries we have here, it's much more the applications in automotive. They are normally much quicker to adopt the latest digitalization and things like this, compared to like a process industry that is much slower. So I think we see much more of this on the industry segment where we operate, rather than the different brands or the business here. So I think that, the process industry, you never switch off, more or less. This means also that you are quite concerned about any changes. There we see a very slow adoption of new technology. Automotive, and it's batch-oriented, it's much more faster in changes and innovation and these kind of things. I think that's a general...
Then we have, like, food and beverage is somewhere in between, and so I think it's more industry related.
... Okay, fair enough. Last question. Software and services trajectory. I think in the low single-digit percentage points out of your revenues, where can it go in the future? What's your internal targets? Can you communicate anything on that? 'Cause I would assume that you're a bit disappointed that it's not come further. I don't know if it's the market or your products or the pandemic. What are you looking at? What could boost the growth in more recurring parts of your revenue model?
That's the, on the cloud side, I guess-
Yeah
... we look on this, but,
So, if you look in the information-centric business, this is what I've mentioned: you have remote access and remote data. If it becomes data, this becomes more, software as a service model. We see this trend from remote access towards remote data, and we see over proportional growth there already, but not on the level we would have expected. We see that it's ramping up, and that's where we wanna focus on, where we see software as a service for remote data as a potential for recurrent revenue generation. Because at, from a business model point of view, today, we sell quite expensive hardware at a fantastic margin, and on top of that, we also sell a software. Of course, we have a bundle hardware and software solution.
So for us, we don't really feel so stressed of moving into SaaS only, since our customers accept to buy our hardware. So we are saying that we will not force anybody to go into SaaS. We say, "We have the classical model, and we have the SaaS," and it's up to them to decide. But most of them are used to buy this kind of hardware device. They pay for it, they own it, and then they just subscribe on the software piece. So we don't see, it's not like a software company that only have the license. We have both, and maybe that's changing the pace as well for us.
All right. Thank you. Fredrik Nilsson from Handelsbanken. Thanks for all, all the presentations. Joakim, you said that you are driving for top-line growth and sustained gross margin. So the question is for the three business unit managers: if you look at your sales split, where you are right now, are there reasons for you to try to change that sales split, going more for the device, or more for the machine, or more for e-commerce? In each and every of your divisions, could you elaborate a little bit if you would gain something from that? Would you drive growth quicker, or would you drive your gross margins quicker upwards, or... Each and every one of you would be very interesting to hear that elaboration.
Maybe I can start. Sorry, go ahead.
So maybe as we, we are talking about SaaS before, so in the information-centric business, we are interested in to get more revenue out of service, software as a service revenue, which is recurrent revenue, which have an impact then on the mix in general. But as Staffan said, right now, we have the bundle. We don't force them to move to the SaaS model, so they can make the choice, but we build a lot of additional services around the data, which will be software as a service, so in the product portfolio for the future, which will have an impact then on the mix in the information-centric area.
In the case of building automation, we have 49% of our business today on the user side, which is quite opportunistic and project-driven. We are aiming to have more relationship with the manufacturers to turn our business to become a bit more sticky, and it has longer sales cycles, but then you have a longer relationship with that customer, so that's our intention.
But will that change your gross margins up or down, or is it similar gross margin, both these business?
It's similar because, as Joakim said before, the sale price on the user side is higher, but then we have distribution in between. So for us, at the end, the gross margin is similar.
Mm-hmm.
Yeah, I cannot really see the difference here either. The user business is growing fastest now, but the gross margin will not differentiate, and we don't intend to focus more on any of these legs we stand on. It's independent teams. We're focusing, very focused on evolving each of these main offerings.
Thank you. And maybe a final question to Staffan. If cybersecurity is a key selling item for the future, for the next decade-
Mm-hmm
... do you have the right resources in place, or is this some, a field where you feel you will need to recruit or acquire?
Yeah. Very good question. We have some really good engineers in our company who know this, but we realized that this is different market. So last year, last Christmas, you hired a senior business development person who comes from the cybersecurity industry, and I must say, I'm quite impressed about him. He knows this industry. It's a different game there. You sell in a different way, and his task right now is to figure out: What can we do in services and products to be attractive for this? And he's a little bit shocked that most of these machine builders, there's the NIS2 is coming, there's EU Cybersecurity Act is coming. Most of them are not really aware of it.
So we see, it's a lot of education we need to do, and we think we can do, related to what Bartek said about this diagnostics, where we offer diagnostic products and training and things like this, we think about adding also a security layer on that, also in trainings and products and things like that. So we think that could be a way into this because most of these kind of big process plants and chemical plants already use our products for diagnostics. They are standing now and trying to figure out, "Okay, how can we secure the network? How can we..." Just, we talk about this software bomb. Maybe you heard about SolarWinds. This was the Coop, and all this retail could not use their cash machines anymore. The big problem with this is, of course-...
There's a problem, but how do you know what of your assets are affected? Because you don't have a list of your assets with this kind of software in it. So there comes a new regulation how to do this, and this is exactly what we do in diagnostics, how to diagnose and keep an inventory of your machines. So we see that that could be a great way in, but we, we are adding some new people with different background into this, and hopefully we can find some M&A targets in this industry. A bit expensive, it's looked like, but let's see what we find there.
A follow-up on the same topic here, but how much of the cybersecurity is dependent on the software of the controlling system of a machine and the software that's on your hardware, just connecting the machine with that, the device?
If I start or?
Yeah.
I think the software on our device or machine have always been developed to withstand external attacks, like DDoS attacks and stuff like that. There we are great. You can't kill our product with this kind of simple attacks. But I think the entire industry have always been thinking about how to protect from these kind of things. Cybersecurity today is much more of how you share information within your company, and in the past, as I mentioned earlier, the factory used to be a isolated cell. You couldn't get in there, and there was a cable to everything. Now, it's changing. So I think the protection we have good in our products, but we need to figure out a way to productify a security product to offer our customers.
Exactly, and I think then the intrusion will happen in high-level systems, maybe on PLC level, that controls the other devices. But on our level, we are pretty safe at this stage, I would say.
So what I was wondering about is this really your business? If you... You're good at your business, connecting-
Yeah
- software and machine, but why should you be good at the software part where others have been working for decades?
Yeah. I think our logic is that we have customers who need to solve this problem. We may not have the competence today, but since we have the customer, we could be a relevant provider of that.
But that, there's always already a customer that is controlling that machine. They also have the same customer.
Well, if you look, there are two different levels. Maybe the big technical layers. We talk about this OT level on the factory floor, where we have the automation players, like the Rockwell and the Siemens. They have their own software departments. Then there's the IT guys with all the Palo Altos and these other guys up here. It's two different worlds. What we're trying to figure out is how to play in this. We don't try to be another Palo Alto or something like that on the IT side. On this OT domain, there seem to be an immature market because these machine builders, they don't know how to do it.
If you look on how we connect with remote machines, if we talk to large food and beverage companies, they are saying that, "We actually don't like remote access, but we must have it because otherwise we can't have support from our vendors. But we don't want the vendor to dictate what they put in our factory. We want to work with, like HMS here, to dictate this is the only solution, because then we can approve one solution." So we feel that on this OT domain, there is another market that is... We feel it's untapped, partly at least. So it's different from the traditional cybersecurity companies on the IT side. I'm not sure I answered the question, but yeah.
Yes, you did. Thanks.
I could take few questions online, and, remind that there's an opportunity to put questions just below me if you're watching the webcast. The first one: Could you comment on the development in product performance and customer adoption of OPC UA over the last 12-18 months, and how you see the implications for your business?
Yeah, we see and this is what I talked about a little bit earlier, but today the need of data. OPC UA is a data information model that enables the data that the customer is looking for. I would say that if we look at last year this has been supporting our growth and we have support for this kind of protocols in our product. And this comes in as a request, not from every customer, but those customers that are bridging and extracting the data from the factory floor request it and of course that has supported our growth in a positive way, I would say.
Thank you. And then, other one: How much of the margin upgrade from 20%-25% is driven by effects as Swedish krona has weakened by north of 15% versus euro and over 25% versus U.S. dollar since the 2020 target was set?
I think 1-1.5%, roughly.
Thanks. Do we have any more questions here in the audience? Please.
Thank you. Follow-up, Daniel Bjurberg, Handelsbanken. Yeah, when I went to Hannover Messe, two years back, I think, there was a lot of interest for remote machines, et cetera, but, but at least the German high-flex manufacturer seemed to be a little bit worried on the remote data thing because it was the holy grail, more or less, that they hold on to. Do you see any change there, and, and, or is it a hurdle, or is it good that they are a bit more conservative? Because you also could see the AWS, the Googles and the Microsofts of the world there, but, but perhaps they don't dig into the level that you work on. Thanks.
So, I see the change.
... So, in general, remote data or data becomes more and more important. But, that's what I've said, we are need to talk also to the end users because they are concerned what's going on with the data, and this really depends on. So we have customers where they are quite open. The machine builders, they wanna get all the data, but then the end user says: "No, no, no. If you're in my factory, I don't wanna have you streaming out data out of my products." And this is why we need a double approach with both sides, with the end users and the manufacturers.
But in general, I see that the trend is going in the direction that the machine builders and the end users see the additional value of the data, where they build also business models on it, where they say, "Okay, now I see more," let's say, "positive implications on having the data available than the negative side." But for sure, very often it's a question of who is owning the data? Where is the data going? I don't wanna have it somewhere in another country, and so on. But this is where we have also different solutions with cloud solutions and on-premise solutions, to support the customers there. But the trend is really going in that direction.
And my last question, I promise, on connectivity. Obviously, we have cables, the Wi-Fi 5, 6, 7, and we have the LoRaWAN, and we have the 5G that you touched upon. Can you just give us a flavor of what's happening right now in this field? And is 5G also pushing in, you know, operators into the private network space? And yeah, what do you see, and do you, can this trigger new, you know, collaborations with Verizon, for example, or that also works on the enterprise space? That's my last question. Thanks.
You wanna take it,Bartek?
Take it or... Yeah. There are a lot of different wireless technologies available, of course, and I think, each technology fits into certain application as well, because LoRa, I mean, that, that doesn't fit everywhere. I talked today about Bluetooth. That makes complete sense when you have, a use case that fits for that purpose, as 5G do. So, factory floor, well, I think, I think we're gonna see Bluetooth, Wi-Fi, 5G, and that's what I think you're gonna see inside the factory. Talking about the ecosystem, I think you asked for, within the 5G arena, who, who will be in, in, in the market? It, it's a difficult question. I think if you look at the key players, automation players, I think they will, they will own their networks.
I don't think they will let in any operators to manage their networks inside the factories. But, I'm not sure how that will evolve either. Want to add in something here?
Just on the same topic, I think we need to convince our sales team-
Yeah
... don't talk about technology. What is the problem we solve for the customer? And we shift that the last two years, we start to see much more adoption for wireless technology. People don't care what, what is the name of the technology, what does it make for the application.
Yeah.
So I think we went from a technical sale to more a value-based selling in the wireless. That seemed to pay off.
But of course, 5G is a door opener because majority of the wireless discussion still starts with, "Yeah, we are interested in 5G," but maybe ends up on Wi-Fi or Bluetooth because that's what you actually need for that specific use case.
So-
Hi, Mikael Lassén , Carnegie. I'm curious about the end customer demand, what you see. You talk about potential inventory reduction in your supply chains. I guess that's mainly triggered by lower friction, that the customers see that they can get products quicker. So how much is that effect and how much is actually somewhat sort of softer end markets?
I think it's a really good question. We talk about destocking, but the question is: Is it 100% destocking, or is there a weakened market, demand, in combination here? Or say, Joakim, do we know that or-
No, we don't know.
Yeah.
I think we'll make a deeper analysis when we have the Q3 done and come back on that on the-
Yeah
... on the conference call. But we, we don't know the, the split, to be honest. We, we normally make a, a bigger analysis after each quarter, dig down to all the large customers, what have they done, what did they order, what did they not order, and so on. So I think we need to come back on the Q3 call.
Okay. Also, I have a question on your R&D activity. You invest around 10-11% of your sales in R&D. Can you say something about what areas you're focusing on and prioritizing in your activities? And, roughly how much of your spend that you're putting in each area, what you're sort of focusing on?
So question was R&D spent in each area and focus areas?
Yes.
You can... for a different business.
I mean, I'm not sure I understand the question now. Are you asking for focus areas ahead? What we're-
If you spend 10% of your sales in R&D, what are activities are you focusing on? What, what is the R&D sort of pipeline ahead? What, what are you trying to achieve?
Yeah, I think I said it on my last slide today. I mean, we're focusing on expanding our embedded offering from control perspective, and that's core of our business. We need to stay relevant in the market here. We're gonna explore 5G. We want to launch 5G to the market, and we are enhancing our diagnostics offering. That's the three key elements from a control-centric perspective, and we're gonna keep a focus until 2025.
... If you take information-centric, it's really about remote data, so from access to data. So this means software solutions around data is where we're focusing on, and then also all the offering which is needed for medium and large machine builders, where there are other requirements from the market.
In the case of Intesis with building automation, I mentioned development of heat pump-compatible products to integrate heat pumps. That's something we have on the roadmap. Also, adding network security to our products, so KNX Secure, PROFINET Secure in our case. And also we have been very successful in the last years supplying products to the market because we have done a lot of redesigns, so we still have some legacy products that we would like to redesign to be sure we can make them available to our customers.
And just as a general comment, I think, Alex, you have a larger portion of sales in R&D at the moment because we have some really big projects in information-centric, compared to you run a lot of different things, but you have such a big revenue as well. So I think in proportion, you have larger R&D than the other two-
Yeah
... in percentage.
Thanks for all the questions. We are now approaching 12:00, so we are going to conclude this Q&A session, and Staffan will say the closing words.
Thank you. Well, first of all, thank you to everybody in the room. It's so nice to have real people in a real room compared to last time we had this in 2020. And thanks also online for joining these three hours. Thanks for the team. I think this is what we hope for, to give you a bit more flavor of this great business we have and understand that this is far, far, far away from a one-man show. These guys are doing the business, and as you hear and feel, they know what they're doing, and there's a lot of things to do.
So, I think we all, all happy that we have been able to do this Capital Markets Day, new targets, but 2025 is still the ambition we're having, even if we have a little bit higher ambition right now. So look forward to keep meeting you and keeping have this dialogue open for the coming quarters and coming years. Thank you very much. Thank you very much.
Thank you.
Thank you.