M&A Announcement

Oct 20, 2020

Hello, everyone, and welcome, and thank you all for joining us today on this call about Sandvik's recently announced acquisition of the software company, Silgutech. So during this hour, we will go through a presentation followed by a Q and A session. My name is Emily Anne, and I'm joined here today by our President and CEO, Stefan Wohling our CFO, Thomas Leyvaison and Sandvik Machining Solutions President, Naveen Chawas. With that, I would like to hand the call over to Stefan. Thank you, Emily, and hello, everyone. Hello, everyone, again, if you joined us on Friday as well. So I'll start kick this off with a few slides regarding our overall strategy, and then I'll let Nadim comment on the company itself, and Thomas will comment a little bit on the financials. But let's get started. So next slide, please. I would like to start by doing a recap from our Capital Markets Day in 2019 when, in a way, the updated strategy for SMS then were launched with this statement that it's our vision to become the world leading solutions provider to the wider component manufacturing industry. And this broadly still holds. I mean we have done now some updates to the structure, which is more related to how we intend to execute on this. And I think we are gradually, as we go through this as well, maybe being a little bit more focused on narrowing a little bit what we mean by this. But the direction still stands, and that is in the light that we should see the acquisition today. Next slide, please. This is what we talked about already back then. So we look at the the component manufacturing value chain as as being two main parts oh, sorry, four main parts. We have the component design stage, production preparation stage, the machining, and then verification. We aim to address all of these, although I've been saying also for since I joined that I believe the component design part will probably be not fully in focus. But the two the step before and the step after machining are the ones we will focus the most on in this. But there might also be aspects of component design that will come into play eventually. And we will address this through both our own solutions that we develop in house through acquisitions and through partnerships. So far, have done one, I would say, more significant acquisition here with Metrologic in the verification space a couple of years ago. We have our own solutions in both product preparation and machining, of course, and we also have a number of partnerships. And now today, then we announced the intention to close the next acquisition in this space. Take the next slide, please. This, might also have seen before when we take these different steps in the value chain and allocate them out on an illustrative machine shop floor and the workflow here. Obviously, our real core is in the machining in the middle, and then we have the various steps surrounding that. Now if we take the next slide, please. What we're focused on today is going to be around product preparation because this is where this acquisition fits in. And also product preparation, there are several steps. And it should be noted here that I would say most of these steps will actually be part of what Sandvik Manufacturing Solutions will focus on. But the steps that are close to machining, also SMS will be focusing on. And that is the case then today. If you take next slide, please. This acquisition is active in the simulation verification optimization part of product preparation. And there are also various tools or solutions here. This, in particular, is very close to the machining. It it basically takes the the the code that is being put into the machine, matching it with the selected tool and the selected machine and do a simulation verification and potential optimization on that. This is very close to the machining process, which is, first of all, where we believe we can add a lot of value. But it also means that the competence and skills in our tooling divisions become very important. And this is why, in this case, we believe that it fits even better than in the SMS part of the business. But this might be even more clear when we go through the actual acquisition. So if you take the next slide, please. We will now have a few slides on CG Tech, and I will let Nadine talk to that in more detail. So Nadine, please. Yes. Thank you, Stefan. And also, hello to everyone on the call. My name is Naveen Cowles. And as said before by Emily in introduction, I am the President of Sandsik Machining Solutions, but that is very recent, since the October 1. Before that, I have been the President for Samsik Coromant for the past three and a half years. So let's dive into then Suji Tech. What is this company about? And let's go to the next slide to see some more details. So CG Tech is a global market leader in software for this numerical control simulation verification and optimization. CGTech is a company established in 1988, has the main headquarter office in The US in California, and is founded by John Kruhn, and he as well is current owner and CEO. CG Tech is a company that has around 180 employees, with a very strong also part in r and d. So from the 01/1980, there are 36 who work in r and d, but also very much shows that this is good technology leader and also market leader in their product. On the revenue side, in 2019, it was a US49 million dollars and they have a truly also global footprint. So you see it a bit on the picture on the right. So the global footprint goes into the main areas, Americas, Europe and Asia. So they are having also there a very good complementary fit to our global footprint. When we think about the customers, it's also a very good spread. So when you think here, Americas 44%, Europe 32% and Asia 23%. So also not only the global footprint, but also the spread of the business is very well balanced. From an industry segment perspective, they have activities in quite a spread of segments, but they also have a large presence in aerospace and defense, but also very active in machinery and tooling, automotive, modern die and also medical. So they have a broad coverage. What they are developing and introducing is robots that are extremely important for us as well to be can machine tool and cutting tool neutral. So they are able to work as a standalone or in conjunction with all the major can suppliers. So that makes a force to reach very large into the markets. Their way of doing business is a modular pricing strategy with maintenance recurring revenues and that has an account for about 51% of the sales. So that is describing a bit who CVTech is as a company. When you look down on the next slide, we go a bit more into what is it that they are really contributing with. So explaining a bit more the product and their value proposition related to this. The product at Cici Tech is very much known and very much putting an industry standard into the market is what we call the Vericat product. And that is as industry standard for the the simulation and also for the verification. So what we really aim here is to detect errors, potential collisions and a lot of areas of inefficiencies. So how can we optimize the process? So that brings us to the value proposition what is really related to increasing productivity, increasing efficiency or in other words reducing waste in the value chain of the customers. And that can be done in different ways as we put here into a few bullet points by eliminating the process of this manually proving out and see programs what is still happening quite often in our industry. Then reducing scrap loss and rework, so it is a lot of cost avoidance that can be realized with Vericast products. And also the next step is not only kind of avoiding or eliminating but it's also optimizing. So really to gain productivity. So optimizing programs what is really an ability to differentiate from a customer perspective and to create added value, save time and produce higher quality. As we said before, it is ability to simulate all types of CNC machine tools. So it has really a broad coverage, from all the leading manufacturers, that can be reached into the total market. So we have very cuts as simulation verification and optimization software, so covering the three different parts of it. And then also the different modules that is also designed versus different processes manufacturing and including for instance also additive and drilling and also materials that can be optimized. There is a part of of course maintenance and training and other services that also provides a part of the revenue stream. So this is the value from the product and the value proposition. If we would go to the next slide, then we can see how does this company have a strategic fit with, Samsung Coromant and Samsung Machining Solutions. Well, CG Tech is as also Stefan highlighted, it is the closest to the machining part that it can be and also to put the machining knowledge into kind of an extra dimension to create productivity and reduce waste. But CG Tech is at Santikoromant market leader, we are adding here a leading player as close to the core of what we are realizing in Sandvik Machining Solutions. It is a premium offering with a very strong brand. So CG Tech has a strong brand with a strong brand name on the product being very cut with also a very good name and shape on customer reliability and also service levels. Also the platform to provide machining strategies what is a differentiator for productivity in the future, not only purely the product is of course a very good strategic fit. Healthy profitability sort of reoccurring revenues is of course also a part that is in our strategy to move forward and have a combined offer and revenue streams that will be established. And then we all talk about digitalization. So in this strategic fit, we also need to say that it is a huge opportunity for a digital twin leadership in diverse applications. And then we talk about feedback loops. So by having this in the portfolio, it's the ability to have feedback loops that increases the efficiency from the machining, into back the recommendations of the tools, for a customer in their processes. So it is extremely important as strategic fit that relates the product preparation much closer to the absolute and the machining effect. So that is my part of who is CT Tech and how does it have a value proposition and a strategic fit with us. So with that, I wanna hand over to you Thomas. Thank you, Nadeem. Just a few words on the transaction as such and a little bit on the financial impact. So next slide, please. Thank you. About the transaction, we have agreed with the seller not to disclose the consideration. So no information on the enterprise value as such. The sole seller is John Pru, the founder of the company. We estimate the deal to close at the end of the fourth quarter this year this quarter, of course, subject to normal or customer regulatory approvals. When it comes to the financial impact, CG Tech will be slightly margin dilutive to Sandvik Manufacturing and Machining Solutions. But having said that, of course, this is a very healthy company. It has a customer base. It has earnings. It has a good cash flow, etcetera. The EPS impact for the group will be neutral, including PPA amortization. Of course, at least it's a software company, it comes with a software company of multiples, a little bit different compared to normal bolt on acquisitions. That means that there will be quite some bit of goodwill and materials in this, and there will be a PPA amortization. And of course, we don't know what that PPA amortization would be. We just have assumptions at this stage. We will, of course, know more when we close. But our assumption or right now, today, is that it will be neutral. It's a plain cash deal, nothing strange about that. And then if we look at the impact on the group balance sheet, Sandvik today has a very strong balance sheet. The gearing is very low, 5% or 0.05%. Net debt over EBITDA is barely measurable. Of course, this deal will have an impact on the debt KPIs, but they will be very limited, and they will not, in any way, jeopardize our credit rating KPIs. So with that, we can move on, Emily. Let's do a summary then. So let's go to the next slide. Just to summarize then, we believe that this is a very strategic acquisition for us. It adds a market leading software player. It's very close to the core machining part of the business. It will also, as part of that, I believe, add, in a way, a bridge from the core machining to manufacturing solutions. So it's a very important piece of the puzzle to add to the business, notwithstanding that it's a really nice company on its own as well. There's a strong strategic fit. It has grown nicely historically, and we expect it to continue to have a healthy long term growth prospect for sure. And of course, it takes then us one step further on the journey to expand into adjacent areas, especially around software and services. So we are really happy to be able to announce this acquisition today. So thank you. With that, I think we'll go to Q and A to open up for questions. Thank if you wish to ask an audio question, you may do so by pressing 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Once again, it's 01 on your telephone keypad if you wish to ask an audio question. Our first question comes from Magnus Cooper from UBS. Go ahead with your question. Hi, Stefan. Thomas Nadim. The man is here from UBS. First, of course, you haven't said anything about the price, but is it reasonable to assume it's not too far away from what you paid in in 02/2018? Well, I'll pass on that since I wasn't here. Thomas, do you have any comments? Well, we we have agreed to not to disclose the the price, but I was alluding a little bit to that. This is a software company. It comes with software multiples. So, of course, it's without comparing to Metrologic, which I'm I guess, you're thinking of. But, you know, it's it's up in those neighborhoods. But we can't talk about it. Can't talk about I would say, I mean, there there are no no all the multiples are what you would expect versus what is the trading and so on. So there's nothing, I would say, newsworthy about it in that sense. No, nothing is great. Nothing that sticks out really. Thanks a lot. And secondly, could you comment a little bit how fast the company has grown in the past and sort of where you expect the revenues and margins to be in this business in, say, three years or so? Historically, they have grown in the high single digits, and that's approximately where the market is as well in terms of growth rates. We expect them to continue with that. On top of that, we expect some synergies on the go to market. The case is also built on that some of these synergies or quite a lot of them actually will also be in other parts of the business. So we expect that it can also drive hardware sales and so on. So when we look at this company three years from now, we will not see all the benefits in this company P and L only, so to say. But even, let's say, stand alone, we expect the synergies we can bring to them to increase their market rate going forward as well. And of course, the good thing is I can say that with PPA is that it's a fixed cost, which means when you grow, you gradually sort of get leverage on it. So of course, then you start to improve the margins as well. Absolutely. And just finally, what kind of market share would you say to take that? You mentioned they have a strong brand in a good position, but is it possible to be a bit more specific? I don't think we can I don't think we want to comment specifically, but it's very high? Let's phrase it like that. It's multiples on the number two in the industry. There are really no strong competitors then. Okay. That's all from me. Thank you so much. Thank you. Our next question comes from Andreas Kosti from Nordea. Please go ahead with your question. Yes. Thank you. I hope you can hear me. You mentioned that some 50% of sales are recovering revenues. But could you please give us a sense of how it has performed in Q2 and Q3 now during 2020 to better understand the cyclicality of this business? Nadine, you want to take that a little bit how they have managed the COVID? Yes. Partly they have had as they have been very active in aerospace, they have had the same impact as other companies in the software, but there has been a good holding on to the reoccurring revenues on the maintenance. So they have a good pipeline on that. They have been diversifying into different other segments. So to kind of also compensate on the change that is happening in aerospace so to say. Okay. Yeah, because I saw that you mentioned aerospace and defense is a key end market and automotive was also on there. So how much of sales is aerospace and how much is automotive? It's not going to be in the percentages. I mean, aerospace is important, but we also need to divide aerospace into different blocks. There are the space part and the defense part is still going well. So it's a mix of good and parts that have been suffering. And then of course in the automotive also they have elements that are still holding up and also having the recovery as we see in other areas at this point in time. And then they have been working also on the segments as we talked about as in the medical and the biomode to diversify in their approach. I was I was probably a bit unsure. How much was saved in 2039 was to the aerospace industry and how much was to the automotive industry? I don't have those Okay. Exact numbers. Okay. They're both Okay. Quick quick. I'll come back with something that They can. Yeah. Okay. Thank you. Yep. Thank you. Our next question comes from Casplain Barronin from Citi. Please go ahead with your question. Thank you. Yes. Thanks. Hi, Stefan. From Citi. A couple of questions, please. First, on the relationship in the past, did you say that you bought this technology from them in before? So there's a supplier. So it says that the software is sold as a license. We are trying to understand more how it will become a standard proprietary solution or if the software will be sold outside of them. You can take that, Nadim. And you can also comment on the historic relationship that you have with them. Yeah. There is a collaboration with CT Tech and the Vericut product. As we say, Vericut is a market leading product. So we have been using it in our own premises and that is also in for instance in the YIMO production unit that has been highlighted as lighthouse by the West in recent times. So that is also part of optimizing the flow and optimizing how we are moving with production units into the future of four point zero lighthouse so to say. So that has been a very good collaboration and that also goes into other parts of the production units as we serve our own industry. So that is extremely important. And we are of course moving ahead with CG Crack has an own strong brand. So we will of course keep it also as supporting two strong brands, Santi Coromant on its own and CG Tech on its own. And then of course we see synergies of leveraging of the go to market and the leads. But as CG Tech is as we said before, can and tooling supply neutral. Of course, they will also have and continue on that path. Okay. My thank you for that. My my second one is on on for you for you, Stefan, on product preparation and verification with the machine in the middle. And you say that, obviously, now we're closing the gap in in machine. It's the bridge over and that's really interesting, but you indicated there is more M and A to do in preparation of verification. And obviously, we have Metrologic on the verification side. But could you I know that you didn't talk about this during the C and D, but what is the opportunity here? Because obviously, we take in machine is not adding that much sales to the group. Yeah. It's good elaborate a little bit. Yes. We will come to some of the markets and all the figures, as you said, on the Capital Markets Day. But overall, when we look at these two areas, if if we we start with the product preparation piece, we we we can go no. We we have some of our own solutions in in in in cam as well, but we are right now testing on the market. And and I think there is more we can do there. So so there is a wider scope in the product preparation part as well. And then on the metrology side, there is also more we can do in the in in the, let's say, the manufacturing part of metrology. What you will see on the Capital Markets Day as well, I mean, we shouldn't expect this short term to add tremendous amount of additional revenue because even this, which we believe is a very good addition from a Sandvik perspective, of course, it's the revenue is still relatively small. But what I think we should expect it to do is to gradually increase the portion of higher growth areas in this part of the business and through that also increase our, let's say, strategic relevance that we believe will also protect and help the core hardware business. So without going into specific figures, which you will get more of on the Capital Markets Day, we should have the right type of expectation. Think that it's this is not a volume revenue volume game in the same sense. I think there is more to gain on more bolt ons and so on if we just want to add the revenue. But what it will add is structural growth, which the more we increase its share of the pie, it will actually add start to add to the CAGR of of the machining business as well Mhmm. Over time. Yeah. No. I I thank you. No. I never expected to add that much to top line because it was only, you know, companies that try to come come say because of you. Yeah. It it becomes a little bit different. But at the same time, this is my final point from this is that the more the interview, there is there is a bottom line impact over time as well because you create synergies rather than rather than in the first deal. Right? So it is a roll up opportunity as well, I guess. Yeah. Yeah. You're you're right. I mean, of course, the first one you buy in a new area, so say, there is less synergies. Now in this case, we have not so much bottom line synergies or none. We're probably going to invest rather, but there is go to market synergies both in CityCheck and in in Machining Solutions. If we buy other similar companies, then, of course, over time, we can also realize bottom line synergies because we can start to have a shared technology components and and know how. So that but that will that will come over time. And then when when we do more, and that's why I'm also saying we the aim is to do more. Excellent. Thank you. Thank you. Just as a final reminder, if you wish to ask an audio question, you may do so by pressing 01 on your telephone keypad. Once again, it's 01 on your telephone keypad if you wish to ask an audio question. Next question comes from Anders Rosland, Pareto Securities. Please go ahead with your question. Yes. Hello. I had a question regarding the press release from yesterday. You said that we would be the acquisition would be EPS neutral initially. Are there some heavier PPA amortizations in the beginning? Or is it just that as it grows, it gets less important? Or or how should we see from that wording initially? Well, it is, as I mentioned in the beginning here, that since the PPA, we first of all, we haven't we don't know exactly the PPA nor the amortization strategy for it, so to say. That will come when we get closer. Assuming it's a flat or a linear amortization, As we grow the company, that stays flat, which means we we get leverage on that. And and then, you know, then when you grow, you you start to get contribution to EPS. If it starts basically at zero, and then we grow or we get leverage from it. So that's why we say initially. Should, of course, contribute EPS eventually. Otherwise, it would not have been a good acquisition. No. But sometimes you could have some amortizations that are heavier during the first year taking away some more of the profit. Okay. Then the second question was about Metrologic. Would you have some synergies between those two entities? That I would say. With with Bitswan and Metrologic, it's, I think, it's pretty far fetched. They will be in the same data loop eventually, you know, comparing the outcome in the metrology part to the design and the cutting process, so to say. But I don't think that these two, in that sense, will be directly connected. There will be other things in between, so to say. But in the sense that they will both contribute to the closed loop, there are synergies. But, yeah, I would still call them fairly professional at this point. So there is no sort of idea that's another question before here that you would separate those software parts of the business into an own division or something like that? Yes. That that that is, sounds like manufacturing solutions then, which where most of these solutions will end up. The reason we have decided that this one in particular will stay within SMS and Coromant is because it's so close to the machining process. It it's all about understanding and knowing the tools and the and the process. So so well, also, when we look at the synergies, we believe that the two of them working together will maximize the the value creation here. So so this one will be in in in SMS. But, of course, both machining and manufacturing solution segments will also work together tightly. So but it's not really about creating just the pure software division because I also think that machining solutions and Coromant, they also need to digitize. So it's more a matter of whether you are very close or a little bit more adjacent towards the machining process that defines where they are located in the business. Okay. Thank you very much. Thank you. Our next question comes from Andy Wilson from JPMorgan. Please go ahead. Hi. Good afternoon, everyone. Thanks for taking my questions. Just a couple really. I'm just interested on the process by which the acquisition was done. Was it I guess, was it motion process? Were there other parties involved? And kind of if there was a trigger for, I guess, this event given you've obviously known the business for some time, just interested as to anything that impacted the timing? And I guess second question linked to this is, whether you saw interested parties in this acquisition at the time that you were doing it or not. Just what you're seeing from your competitors in terms of looking at assets like this and just the general shape of how your competitors are, I guess, approaching this sort of digitization of machine tuning? Yes. We the the it was not a straight I mean, they they didn't run a straight auction process. It it was but but at the same time, at least to our understanding, were also competitive I mean, there were competitors. Compact it was a competitive process. Then whether it was our classical competitors that were involved or not, that, of course, we don't really know. I would be very surprised. However, I would suspect that in that case, it's either either a PE firm. It's probably the most likely one in this case. We know that some of our other, let's say, industry peers that are into software and closed loop manufacturing and metrology might have been interested in the past. But the seller has been quite picky as well to pick what he believed was the right home for his company in terms of culture and staying close to manufacturing and machining. Thank you. And maybe just as an extension, the second question. Just to sort of get a sense of that, you are seeing, I guess, the kind of nontraditional competitors in this space as opposed to the sort of men's wing just traditionally associated with SMS? That's that would be my take. Yes. Nadine, do you have a different view? No. No. I think at this point in time, it is more likely that it is outside of our traditional contactors that we see in the field than the ones that we would see in the same tooling or business. Great. Thank you. Thank you. Our next question comes from Max Yulitz from Credit Suisse. Just a couple of questions. So just in terms of the customer base, of that USD 49,000,000 of revenue, how much does the largest customer or the top three customers represent of that? Just trying to understand sort of the diversification of the customer base. Yes. On the the top 10 customers are only kind of 10%. Okay. And and just So it has a it has a high diversion diversification in that sense. Sure. And just to understand a little bit about the sort of market growth prospects, is the driver of the market growth here the technology and the software going into new end markets? Or is it primarily a sort of penetration story where these are the most relevant markets, aerospace and defense, automotive, and you're pushing further into more customers that are using the software previously didn't. Just to understand a little bit about what's actually driving the underlying market growth. It is a combination. It is clear that when we talk about productivity, productivity goes into different steps and now productivity in the next phase is around connecting the different elements or steps in the value chain. And that of course increases the possibility of the penetration of these products and also the more complexity of components is driving this very fast forward. And then of course we have certain specific segments, but it's both kind of enlarging in different dimensions, would say. Okay. And just in terms of as you integrate this business, so your how you think about your sort of sales force that you have and the way that you go to market with this business in the context of machine solutions. I mean, is it that you sort of keep the metrologic sorry, the CG Tech sales force on? Do you try and sort train Sandvik employees that are involved in sales and SMS to be pushing this? How do you think about kind of the first couple of years of integration into the sales force and the go to market with this business? Of course, I mean, when we talk about this, the business from C2Tech, it has a synergy that goes about leads leads from C2Tech into or or other in the centric machine solutions and and the other way around. Then it's it is very strong to to drive the enhancement of the of the products of the optimization. We of course, we will use marketing synergies to kind of use the ways how we go to the market through our centers. We will use of course also our own production units show the advantages to our customers. And then we will use also the different channels as we said that the CT Tech is a product that is neutral versus the Camden machine tool makers and so on. So we will also broaden the view of going to market opportunities. So it's not a purely two company only kind of sales force that we will use all the channels that available. Okay. And just finally, is this something when customers kind of do invest in this software, is this something that they've tended to kind of retrofit into existing manufacturing setups? Does it normally come when they kind of build a new factory? And what is kind of normally the trigger? Or at what point do they sort of buy the software? Does it tend to be with the actual kind of machine tool itself? Does it tend to be when you're setting up factory or when you're replacing a machine tool? I'm just trying to understand when that sort of exact decision is normally made to invest in the software. It's not particularly with new factories or new machines. It's more a component driven decision, whether in certain segments components are expensive. It needs to be reliable. It needs to be good. You need to kind of improve your efficiency in existing production sites. So the trigger is more on optimizing on efficiency gain in existing or in new facilities. So it is not related to new investments so to say it is optimizing existing and then potentially also kind of optimizing new factories. But it is a lot driven from efficiency gain on also existing. Okay. Understood. And just very final short one. So in terms of the management, John Prune, will he stay on within the business after the acquisition closes? Yes. Is there a sort of lock up period that he'll stay with the company? He will stay on and because of course we are CG Tech is a strong brand, has a strong a strong plan, a strong strategy moving ahead, which we of course want to to secure and he will stay on after the closing. Okay. Fantastic. Thank you very much. Thank you. Our next question comes from Sebastian Gruyter from Redburn. Please go ahead with your question. Hi. Good afternoon to all. One thing maybe two questions I have and a follow-up on Max's question on penetration. I mean, just do you know the proportion of your 100,000 customers at SMS that are using CGTech or a similar software. Or maybe if you have an idea of of how many customers of CGTech serve today. That would be a good. And my second question is about just trying to understand the competitive advantage of CGTech versus a bigger campaigners such as Siemens that offer controllers, and simulation as well. Thank you. Do wanna take the first one, Marlene? Exact amount of customers, I I need to come back on on on the number so that I cannot give here and now. Okay. Know Do if it's quite usual to see your customers at SMS using Veritech? Veritech? Yes. I mean, we we are ourselves within Tantive Machining Solutions in our own brands and units. We we we are using it ourselves so it is a very very common usage in in our customer bases. Okay. Thank you. On your second question, there are there is a trend among cams or also the cam cam suppliers to also start to include simulation and and so on in into their software. They are not, according at least to to our understanding and and and to to CGTech, close to us advanced at this stage. There is a strong selling argument from CG Tech, which is the independence. And it's it's like a student correcting their own exam, really, if you it to some extent. So fact that it's done by an independent software with independent, let's say, code creates an additional level of assurance that the code that is being tested is is really good, so to say, both from a that it actually works and also from an optimization perspective. And we know that that is important from from many of VirTrak's customers. That said, I think we will have both in the market. There's no doubt about it. So but we believe there is a specific market for the independent type of tools that this represents. Okay. Thank you. Our next question comes from Maurice Singh from Bank of America. Please go ahead with your question. Thanks for the call. Just a couple of questions. The first one, if I were to think about your overall software technology ambitions as you have also mentioned previously on some calls. So this acquisition, would you say that with this acquisition you are still at the initial phases of your overall tech ambition or you have you have gone midway or, you know, so if you could tell me overall tech ambition where you stand right now with this evolution. And secondly, in terms of, you know, one of the slides I saw that you mentioned CVTech itself is also offering solutions around additive manufacturing. So how big is that for three d tech? And is that also part of the reason why you you you have acquired this company in terms of, you know, protecting yourselves around any threat from three d printing or editing manufacturing? Thank you. Yes. Thanks. So on your first question, we are not even close to midpoint. Let's phrase it like that. And of course, it's how far have we come, it's a matter of a time perspective as well. It's difficult to answer that in a backward way. But we are not even close to midway towards what I believe we need to do, maybe 10%, 20%. Then on Additive, I I would regard it as Nadine, you can say something else if you have a different opinion, but I I I would regard it as a fairly niche offering as part of their suite. They also do things in in composites and and a few other things, but the the their core is is in the in the machining aspect. That said, this is one of the it's not the reason why we acquired them, but they also do three d printing. But it is a it's a good attribute, that several of these, software companies have is if they all do more than just machining because then, obviously, they also get more resilient towards, you know, whatever manufacturing technology will not be used among the customers. I think it's a good attribute, but it's not one of their core parts of their offering, so to say. What what would you say, Nadim? Yeah. It is it's as you say, it's a minority. It is the the the core of their product suite is more related to the verification, the simulation, and then the the optimization. So those three as a main and then focusing on the multi access, what of course is also very interesting area moving ahead. But the additive is on the minority side, but interesting but not the main at this point in the offer. Thanks. Just one quick follow-up on the technology ambitions. Could you share how big is software or technology part of business as overall SMS or Exposure right now? We'll come back to that on the Capital Markets Day because we haven't really shared that in detail before. So we want to do Okay. Fine. Thank you. Thank you. Our next question comes from Andreas Kusoski from Nordea. Please go ahead with your question. Thanks. A couple of more questions if we have time for that. The first one is on pricing power. You mentioned that CG Tech was multiple times larger than its closest competitor. So pricing power should be quite good, I guess. Do you have a sense how much of the high single digit growth that CG Tech has seen historically that comes from price increases? Not in. Yeah. Honestly, that has been a part that can be strengthening honestly because they have been market leading and they are really kind of with multiples in the forefront absolutely, but there is absolutely an opportunity to look into how working with the price component moving forward. So has not has been used in a positive way but not to the for this expansion. So the growth comes mainly from volumes historically. Yes. And then hopefully you will add a price component to that in the future? Yes, that's correct. Okay, great. And then a broader question on the growth outlook for Sandvik Machining Solutions because we know that SMS is meeting some structural headwinds in the coming years. And for the group, you have a growth target of more than 5% over an economic cycle. Do you expect SMS to be able to reach that too? And how much of the growth in SMS do you think needs to come from acquisitions to reach 5% or more? We'll I guess he will join our Capital Markets Day. So if you could wait until then and see what we will present there and see if you have further I'll keep it for the CMD. Thank you. Our next question comes from Ross Wilson from Barclays. Two quick ones for me. Just on I was a little late on the call, apologies for that. But on the returns profile for the deal, Thomas, when do you expect to generate a positive return on this investment? Well, this is a software acquisition, and it comes with software multiples. And let's say, if you would have a normal bolt on acquisition, you would be normally accretive after like five years or something like that, but it will take longer time as it always does. So we don't have any more specific guidance than that right now, but it's more than five years. And secondly, if I can just ask to the I think I've heard you say growing historically high single digit in line with market. As backward looking, what's the thought here going forward? Do you think or rather when do you think we might return to those sorts of growth levels for this business? Well, from you mean, when they will start growing again, is that what you said or what is it? Well, I think you had some questions around aerospace where Yeah. Okay. Okay. You got a very good answer answer to it. So I just wonder what the current growth profile is of the business and and what you see going forward as opposed to seeing going backwards. We think they will grow in a bad number next year. They have some headwinds now, but I will but we believe they will be back to growing next year. That's helpful. And maybe just finally to that, I guess, going back and looking at MetroLogic, which at the time of acquisition was growing at that high single digit level pre COVID over the last couple of years post integration, have you been able to maintain that sort of growth for Metrologic just to get a sense of how the acquired businesses performed in the context of Sandvik? I think we have to come back on that, the where we were pre COVID. We'll come back on that. That's great. Thank you. Thank you. There appears to be no further questions. So I'll hand back to the speakers for any other remarks. Super. Thank you very much, Stefan, Thomas, Nabil. We will now close the call for this time. Thank you all for joining us today, and we look forward to speaking to you soon. Again? Thank you. Thank you.