Assured Guaranty Ltd.

Today we are here to present our first quarter result for this year. With me I have Klas Farström, our CEO, and Katarina Fischer, our CFO. So welcome to those of you who are listening in on the conference call and for those of you who are on the webcast. Please feel free to post your questions throughout the whole session if you're viewing on the webcast. We'll pick them up after the presentation in the Q&A session. Then we will also open up for those of you who are on the conference call. So with that, I hand over to you, Klas.

Thank you, Ann-Sophie, and once again, very, very welcome to this Q1 report. Before I and Katarina start to go into the details around the quarter, let me summarize it in a few sentences. A very strong quarter. Stable growth, strong operational deliveries, that paired with step-wise accelerated investments for future sustainable growth. All this combined, resulting in margin improvements and a good cash flow generation. Our strategic review of FUTech is progressing well, and our decision will be communicated at the end or by the end of H1. So with that, let's dig into the quarter. As I said, it summarizes with high demand and profitable growth. And if I take it then from the continued high demand that drives stable net sales and enhanced profitability and start with the order side then. 32% order intake of that, 29% organic. Quite strong in all business areas. Very good to see that air tech demand, especially in battery, are increasing in EMEA. Data center technology, a solid development in America's but also in Europe. And as you know, I mean, some quarters very strong order intake and some others a little bit weaker due to customer setup then. FUTech, super pleasing to see. Continued positive development, mainly in America's EMEA. And we increased the order backlog with about 10%. Moving over to net sales. All in all, 11% growth of that, 7% organic. DCT, the star in this quarter, very good deliveries. FUTech climate solution, America's continued to be strong and very strong digital solutions in US as well. Air tech decreased somewhat. Growth continued to be on the invoicing in America's and that was offset by a weaker APAC in EMEA. Adjusted EBITDA margin then, reaching for the second quarter in a 12-month period, about 14%. Solid growth, net price increases and strong operation deliveries. On the plus side, drives up the margin. Accelerated investments to create future sustainable growth. Of course, it's taking it down somewhat, but all in all resulting in a margin improvement and a good cash flow. Going into the details then. America's and EMEA being the main growth drivers then. The share in between the different ones are order intake, 42, 41 and 17 in between the three regions. Net sales being stronger in America's, about 60% and then 20, 14. But you can see the shift in EMEA starting to pick up on order intake. Air tech in America's components and services, good growth. Battery somewhat weaker, the shifted order pattern that I've talked about for a couple of quarters. DCT, a continued very strong underlying demand both from co-locators and hyperscalers. And food tech then, super pleased to see that they are continuing to deliver strong growth in all different segments then. EMEA order intake, as I mentioned earlier, pick up in battery after somewhat weaker two quarters. DCT continued to deliver good activities in the quarter. And food tech, super pleasing to see a good recovery across all segments, especially within broiler and greenhouse. And then APAC, not very much change here. I mean, it's a continued fairly weak development in APAC. As I talked about, the battery market being then a little bit cramped in China. Food tech continued to be weak, but I sense a slight recovery and we have bottomed out there. The solid order backlog, 10% larger than one year ago. All in all, large order supportive all the way into 2025. Something to highlight here, the very first order at the top there, that is completed now and we are eating ourselves into the orders then as per laid out pattern here. If I go into air tech then and start on the right side with the different arrows, as you can see, in some areas slightly less green, but still very stable in others continued to be pointing upwards. All in all, a quite solid market. Coming in then to the order intake, as I said, EMEA and Americas strong, APAC quite somewhat lower. And without going into the different details, what you can see there is we continue to have a strong service outlook, components being a little bit weakened due to the aftermarket in Asia and the others being pretty much in balance with the last couple of quarters. If I then go over to net sales, a decrease of about 1%, and here it's sort of the reversed. It's America that is growing and it's a weaker EMEA then. So you can see order pattern and invoicing is a little bit reversed. All in all then, a lowered margin that decreased to 14.9, but with that said, you have heard me say, when air tech is in between 14 to 16 or slightly over, I think they are delivering a strong and good operational outcome. I think this picture is quite interesting picture to talk about. You know, a couple of years ago, two years, we received some very large battery orders that we're eating ourselves into now, but if I exclude those, this quarter is one of the strongest quarters than in the last couple of years for air tech, and it's quite well-balanced quarter as well. You can see batteries, smaller orders, especially in Europe, are coming back and picking up, but all the other areas are also slightly growing or being stable. We continue to adjust and invest into areas that we believe will generate long-term future growth. A couple of years ago, we started with electrification, the batteries, we put in focus into deliver new product into the market when it came to data center, and now we're searching for new areas. And two areas of importance that is, of course, for long run, carbon capture and VOC, i.e. to clean out dangerous or volatile organic compounds from different areas. Here, we are investing in a company called Air Protect. It has net sales of about 300 million Swedish krona for last year, and this gives us a very, very strong base to move into certain areas when it comes to purification. It's a basement, it is a very good customer base where we can deliver service, but it's also then creating a more stable platform also for other areas within clean technologies. Moving over to data center. On and off, we have talked about what is the transactional sales to different segments, hyperscalers, collocators, and telecoms and enterprises. In general, and this is important to realize, hyperscalers are sourced through collocators or directly in direct business. In this quarter, we didn't take any direct hyperscaler sales, but we know for sure that some of our collocators are really sourcing the hyperscalers. So from that perspective, it is interesting to see more from a transactional sales where we are delivering and hyperscalers are behind a lot of the growth anyhow. Order intake, 17%. We didn't receive any larger orders, but we have to remember that last quarter we had a super strong. I'm very convinced for the coming two, three years, the foreseeable future data center market will continue to grow. Some quarters it will be up in order intake, and some other quarters it will be weaker. I see a very, very strong market here. Then when we take orders, when we put it into our system, I'm very, very pleased to see what was generated towards the bottom line, reaching a 90% EBITDA. I have to say that I'm happily surprised to some extent, but it just shows what we can do when we have an operation flow and a good order intake that can fill up the factories. What is important to say, why did we deliver this then? I mean, of course, strong volume increase, net price increases, high utilization rate in the production paired with operation efficiency improvements. What we have to remember, we will continue to invest for the future in this, and that will, of course, have somewhat of an effect on our margin moving forward. With that, then, I'm super happy to say that now we are repeating the pattern that we did in North America. We are investing and building more manufacturing capabilities. And we have, yes, we are in mid through the construction of a new expansion in Cork, 11,000 square meters of production and office spaces. It is about one third of the size of what we have in North America. But what we have also learned from North America that is that if needed, we can add shifts, etc. So I think that this will create a very, very good platform for continued growth in Europe. And when we do this, also important to say, I mean, our purpose for customer success and a healthy planet, we are also living that when we build our own factories. It is LEED, Silver Sustainability Certification, that is quite high level, and it generates a lot of energy efficiency also when we operate the building. Food tech. Perhaps this is the area that I'm most pleased of. I mean, AirTech and DCT has spoiled us to some extent the last couple of quarters. It's so great to see the combat that is happening in both that the market is improving in EMEA, but even more so that the operational measurements that we have taken is also generating a very, very good bottom line. You can see on the different arrows here that they are pointing more and more towards the green and upwards. Digital solution continues to be a very strong market moving forward and happy to see that the order backlog increased. I mean, the order backlog is one of the strongest in quite a few quarters. And this drives enhanced profitability and net sales. 11.7, I think it's a good base, and I'm super pleased that we have moved from a little bit shy of 5%, and why have we done that? I mean, the increased net sales in both climate solutions and digital solutions, efficiency measurements, and on top of that also continued net price increases. I love to talk about customers, and here we have one, I think, very good example of a customer in the more climate solution equipment-driven area. It's Zeldek. It is our wet pads that drives high energy-efficient cooling, and it's our fans that circulate it and keep a good climate for, in this case, the vegetables or the plants that are being brought in here. This was towards a EMEA contractor targeted for the Middle East area, the Middle East being a market that is investing more and more of this type of equipment for the future. Super good to see. Also very promising. I'm in yet another quarter with significant soft dresser service growth. I mean, 68%, we have now been in between 30% to up to 70% quarter on quarter, so to speak. And I continue to say like this, we are on our way to reach 400 million ARR step by step. We will take it quarter by quarter. We are not yet there, but we will continue that journey. This case, a large US-Turkey company, and not one of the largest, but still, we are upgrading their system with our modern Amino software, and that generates a good operational efficiency for them. Something to remind ourselves of, that is our software generates on and about 85% gross margin, but we will continue to invest in order to drive growth in this area. If that is what we do for our customers, let's lean back a little bit and take a look upon what we're doing when it comes to our sustainability goals then. Those numbers here, they are including also our newly bought companies as well. All in all, we continue to progress well. We have renewable electricity in the factories, about 80%. Energy efficiency, a little bit less this quarter than four quarters ago, but still on a high level. The recycling rate, close to 50%. Something that is super pleasing to see, that is our health and safety measurements and our target to reach zero accident division here, we are now down to 1.4, from a fairly good number of 2.0. I mean, this is industry leading, and I'm very pleased to see, especially a week like this, when we have a safety week across the globe. Diversity, an area to continue to improve on. We are in our industry, quite good, but we would like to continue to be a leading standard also across industries. We are about 20% plus in this region. So with that fairly quick walkthrough, I hand over to you, Katarina, and take us through the numbers a little bit more.

Yeah, thank you, Klas. So I'm very happy to present this quarterly results, where we again saw a strengthening order backlog, good growth and also improved profitability. All business areas increased their order intake with strong growth in A-Tech and FoodTech. Our net sales also increased, we grew organically 7% in the quarter, and including the recent acquisitions, we grew 13% excluding currency impacts. And this strong net sales growth was driven mainly then by the data center, the high pace of deliveries within data center, and also strong growth in FoodTech, both in climate solutions and digital solutions. Our adjusted EBITDA margin improved significantly, and I will come back to that a little bit later. In the fourth quarter, data center won some large orders, as you know, and as we alluded to then, we had during the first quarter received some customer advances, parts of those customer advances in the first quarter, and that has then been the main driver for the improved operating working capital and good cash generation in the quarter. Our net debt increased slightly due to the partly debt-financed acquisitions that we have made in the last 12 months. However, our leverage decreased due to the improved profitability, so our leverage ratio is now at 2.0. In the quarter, we recorded items affecting comparability relating to the strategic review of FoodTech equipment, also for M&A activities, and some relating to the repositioning of the clean tech technologies where we are exiting the marine business. This in combination with a higher tax rate and higher interest rate expenses led to net income increasing 6% compared to the organic EBITDA margin increasing 25%. We had an impressive margin in the first quarter, 14.1%, and the main factors driving that was, of course, the strong volume increase in data center and FoodTech and also the high factory utilization. We also had the strong growth in software as a service within digital solutions in FoodTech. We continued to increase prices in the quarter, mainly in data center and FoodTech, and all business areas executed really well on operational excellence initiatives. In the strong margin, it also included continued investments in the strategic initiatives for scalability and future growth. And this includes investments in digital competences, systems and new ways of working. Here we can look at the cash flow that has improved in the quarter, as you can see in the slide. We see a positive impact from the operating working capital, and this stems from many different initiatives that we are driving across the business, across the different components. But the main driver is the customer advances received in the data center, and that has really improved the working capital in the quarter. And as we have mentioned before, these large orders can create some volatility in our cash flow during the project lifetime. In terms of investments in the quarter, we have invested in one new minority company, and then we have also done two capital increases during the quarter. In terms of finance activities, we repaid some part of our loans, and we also paid the first dividend installment in the quarter. As we saw in the prior slide, we invested some 230 million in the quarter, and out of that, 175 million relates to property, plant and equipment and intangible assets. So we continue to invest in our business to support the future growth, and it's across the business where we are strengthening competence, we are upgrading our facilities, and we are digitalizing and automating. In the first quarter, we started to roll out our main system support in the company, and that implementation will now continue over the next coming years, so that will require some investments. Investments are also required for a net zero journey, where we have a target to reach net zero emissions for Scope 1 and 2 by 2030. Our investment in the Innsbruck factory in Massachusetts in the US is developing according to plan, and as you know, that is a major plant that we have, and as Klaus talked about, we are also investing in Ireland and Cork, a new plant for data center to support their expansion in Europe. Looking at operating working capital, as I have already commented, we now have a lower level, thanks to the advances in data center, that is the main driver. Looking at leverage then, we are very pleased that we have managed to decrease leverage now for three quarters in a row. Our net debt has been stable if you compare also to the fourth quarter. Important to remember here is that the finalization of the air protect acquisition will happen in Q2. And then I just want to conclude by saying I'm very proud that we have been able to grow profitably in the quarter and also to lower leverage. And with that, I would like to hand it back to you, Klaus.

Thank you, Katarina. And let's move into a summary and then open up for Q&A. So all in all, you have heard me say many times, I mean, it's a -by-step journey that we're on to. And very pleased to see improved EBITDA margin, slightly below our organic growth target for net sales, and then also improved operating working capital as such. This we will continue to work with -by-step and I think it is a promising start of this year. So, more than a promising start, a very strong start of the year. High demands continue to drive our continued momentum. A little bit shift in between the regions. Super pleasing to see what is happening in food tech coming back from very low levels in some regions. All this drives a good profitability and an improved leverage. And we continue to invest ahead of the curve where we see sustainable growth moving into the future. So with that, let's open up for Q&A and welcome Ann-Sophie.

Thank you, Claes. So we open up for questions on the conference call as a start.

Thank you. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Adela Dashian from Jeffreys. Please go ahead.

Yes. Good morning. My first question relates to data sectors. And I guess the timeline as we're moving into 2024, we didn't see any larger orders, as you mentioned, during the quarter, but you still have a pretty good order intake. And I guess with the visibility that you have and the communications that you're having with existing customers and potential new customers, what is their timeline for the remainder of the year and then how should we position the growth or the order intake that you're expecting into the different quarters going forward? That's my first question.

Thank you very much. As I think we're all aware of now that I constantly come back to, I mean, we have a volatile order pattern depending on what type of customers we have. Some are bundling together many orders and put one larger order in and others, they are coming with smaller orders. You know, we are trying to not go into clear forecasting moving forward. I can only say like this. I know that we have very good talks with already existing customers and other customers, and I'm confident for the year that we will continue to deliver a very good order intake. And I can say like this, when it comes to data center, I foresee a strong market in the coming years. But predicting one quarter to another, if that would be unfair for me to say, but I'm very confident for the year. It could be smaller orders or bundled orders coming forward.

Okay, that makes sense. And then maybe also if you could provide some update on the battery subsegment in AirTech, especially in APAC. Are we reaching a bottoming out there or is it going to be a couple of more quarters of a week development?

Very often, the pattern is in China, because we talk predominantly about China here. That is that you have an expansion and then for a couple of quarters, sometimes up to a year and a half, I mean, you have a little bit more contraction then or a similar pattern. I have said earlier that perhaps at the end of this year, we can start to see an up-pick, but what is good to see, we are not seeing it trending down anymore in Asia and especially in China. With that, if I turn it around then, and let's point out Europe and EMEA, I mean, there we had quite a week quarters, the last two quarters and now that has started to pick up. So I think this will move in across the different regions then. On a direct question, yes, I think it has bottomed out in China and by the end of the year, it can start to pick up.

Interesting. And then just lastly on food tech, should we still expect an announcement to be made on the strategic review in the first half of this year? And then secondly, on the margins, you mentioned that the margins that you achieved during the quarter is a good base. How sustainable is that going forward and then what kind of room for improvement is there if the food tech division is continuing to improve its momentum top line wise?

First of all, I'm super pleased to see that all our efforts and the great work by our people in food tech is starting to pay off in all the different segments. The market is improving in EMEA when it comes to the more equipment driven segment and it's still continued strong in North America then. Then coming back to the first question, yes, before the end of this quarter, this half year or at latest in conjunction with the quarter report, I mean, we will come with a very clear conclusion on this.

And you see room for margin improvement if you have better volumes coming through. So this is... The 12% is sustainable.

What we can see, that is, of course, if we have more volumes into very lean and good factory output, I mean, that gives a positive effect on the bottom line. But I'm not predicting anything for the future. This quarter was a very good work by everyone involved.

Thank you.

Okay, we take another question from the conference call.

The next question comes from Carl Bockvist from ABG Sundal Kalia. Please go ahead.

Thank you and good morning. My first question is on the profitability in data centers. Many plus signs working in your favor this quarter. I was just a bit curious thinking further ahead both into the next quarter, but also perhaps, let's say, a year from now, how much this quarter was supported by end of deliveries or finalization of particular projects that could have benefited as well.

I can start, Katarina. I mean, you follow this in details as well. Please pitch in. But I mean, first of all, I mean, it is a quarter where we've had very, very good efficiency and good leverage in our factories. I think that sends one signal that our lean work and the way we operate our factories is really on the right move then. Then when it comes to, I mean, a 19% record margin in data center, I think it is a record margin in the industry across. I mean, super pleased about that. I'm confident that they will keep a good underlying margin, but I don't foresee that they will deliver a 19% each and every quarter. Anything to add on? I can

just add that they also had a strong product mix, but no big one-time completion effects, I would say. And then we should also remember that going forward, we will continue to invest in data centers so that they will continue to build their support structure going forward.

Understood. And about this mix aspect, this is something that you have flagged historically in both low-margin and high-margin quarters. So when you talk about mix in data centers, what should we usually think about them?

I think you can have a few triangulation points. First of all, we have become much better in what I call the modularization of the products, especially when it comes to cycle. That is one example. Cycle is driving up margin. With that said, I mean, we are working with lean across all the different products. So I see that the margin, call it difference in between the product lines has slightly decreased. So I expect all product lines to deliver a good margin, but cycle has the highest margin.

Understood. And then on the progress you are making in Europe, you now investing in the factory and you talked a bit about it during your latest webinar, but when should we start to think about commercial orders from Europe?

I mean, first of all, we have to say that on the invoicing, Europe is progressing very well. I mean, I think you've heard me say something like this. First, we double Europe and then we will double it again. And we are on invoicing close to double it already now then. So that's the reason why we're building the factories. What we need to do now and bear in mind then how it started in North America. We built the factories, we started to take medium sized orders and then we moved into the very large orders. I mean, step by step, it will come into larger and larger orders here as well. But I mean, I'm super confident we have double it and we will double it again. And that I think we should remember, we are just in the beginning in Europe when it comes to how we can impact the market.

Understood. That's all from me. Thank you.

Okay, we take another question from the conference call.

The next question comes from Julia Uttbalt from SEB. Please go ahead.

Hello, thank you very much. Julia is with SEB. I have three quick questions and the first one is from service. We see that service is picking up again in Ayrton. Can you give us some background to that?

Julia, it was a very... But absolutely, as you know, I mean, service as such is a core area for where we focus efforts. We would like to have recurring revenue as such. I mean, part of the service pick up is, of course, we have a large installed base then. And then some of our product lines needs to be replaced. It's super nice to see that we have progressed very well in Europe and continue to progress very well in North America. And then to some extent, a little bit weaker service region in... in APAC, it is. But all in all, it's about how we work and how we attract customers, if I summarize it.

So would you say that there was anything specific that was different between Q4 2023 and this quarter?

I mean, sometimes we do receive more bundled service projects and that can have a certain effect this quarter as such. But I mean, generally speaking, that we receive year after year, so to speak. So to some extent, a little bit positive on larger bundle orders, but in general, it's the good underlying work.

Okay, great. Thank you very much. And then the question on the SaaS development in food tech, we see good growth there. Is it mainly driven by new customers or is it add-on revenue from existing customers? Can you give us some call of that, please?

It is a combination. I mean, a large part is coming from the earlier announced customer, larger customer contracts that we announced a couple of quarters ago, up to a year plus. That is then advancements in those projects. I think you all remember that I said when it comes to one contract, it will generate a recurring revenue of about 50 million Swedish kronor on a yearly basis. But then we are adding, and I gave a small example of that in this quarter report, we're adding more customers as well. So you can say like this, I think it is without giving an exact number, but you can put it in two buckets, and they are at current and more coming from already taken orders, but it's increasingly coming from new customers that we roll in.

Okay, thank you. And my final question is on clean tech. You mentioned that you are exiting marine. Can you explain more about the background around that and if you see any more potential for exiting other segments or how you're working with this area?

A couple of years ago, we called clean technology a mis-delimination. At that time, the marine segment was a fairly large sector. And as we all know, that has been affected, that it is different regulations and the sulfur, the more dirty oil is not used there anymore. So we took a decision a couple of quarters ago to reposition ourselves, then we started two quarters ago, and then we reallocate the focus and the resources using similar technology into other areas. And then we talk about VOC and we talk about carbon capture as an example. So I think it is just to be described as the never-ending story. We need to be focusing our efforts on the markets that we see are generating results for the future, so to speak.

Thank you very much. Okay, we'll take another question from the conference call.

The next question comes from Mats Liss from Kepler. Please go ahead. Hi,

thank you. A couple of questions. First, we were talking about the European potential in data center and so on. Could you just sort of give some flavor about... I mean, you mentioned you doubled the size in Europe already. What do you see in profitability in Europe compared to in America, I guess is the question.

I can start and then I also hand over to Katarina to give a couple of examples. But if I go back then, when we decided that we should put focus into Europe again, I mean, we evaluated the market, we came to the conclusion that the profit pool, the possibilities to generate profit in Europe is as good as in North America. So that is sort of the base, so to speak. And then what we learned from, I mean, before my arrival to the company, that is the famous strategy, think big, think ahead, start small and take it step by step, and that is what we're doing right now then. And the market share in Europe, we say that it's below 5%. And then we also count in the market that we had generated several years ago until we sort of departed from Europe. So from that perspective, we have a similar profit pool and then we have a larger market or untapped potential in the market. So I expect that step by step, I mean, the growth in Europe will accelerate and have a growth pattern that is similar to North America. But that will not come in one or two quarters. That is a journey for a couple of years. Anything, Katarina, I mean, you have looked into, I mean, you don't have the background on data center, but any reflections on the investments that we're doing in Ireland and so on?

Yeah, no, they are, of course, progressing very well. And I think in terms of margin going forward, I mean, we say the 13 to 16 also for data centers. So I think that is what you can have in mind.

OK, great. And secondly, you talked about financial targets there and you're a bit below the sales organic targets and a bit above on the EBITDA margin target. Should we sort of see this as, well, you're focusing more on profitability than on sales? A bit provocative, I guess, given the outlook for opportunities, but could you say something there?

If I start with the growth, then, I reiterate myself, then. If I go back three years, we have on a CAGR deliver well above the 10%. If I would take away one year of that and add another year, I'm very confident that we will deliver a CAGR that is about that. And that I can repeat. And if I look three years ahead, I think that we will be on or very, very close to the organic growth also for the coming three years. And the reason for that is we are into transformative segments where we see strong underlying growth. Being batteries, being carbon capture more and more, being data center. And with that, then, I mean, then, one or another quarter could be lower and one or another quarter will, of course, be higher. So I'm confident in that. And then what is very encouraging to see that is that when we are aligning the stars, then we can reach the 14%. The main focus is not reaching that. The main focus is doing it in a sustainable way. So one quarter is not a target reach. This we need to continue to develop.

Great. Then I guess you have this new business segment that you are addressing carbon capture and VOC. Could you use the existing technology to grow in these areas or should we expect a lot of cost to... Well, development cost to be implemented in the years to come?

If I divide it into two different sectors here, you can say the carbon capture we have in our hand. And I mean, now we are not talking about that we will deliver large, super large systems for carbon capture. We are delivering critical components and subsystems. We have in our hands then two of the main type of solutions that is. I mean, either it's a different version of the wheel type of technology or it's abatement. So those technologies we have at hand then and they are already being used in existing installations. So there we will invest based on our new technology. Then we will cherry pick certain smaller companies where we see that they can add to our portfolio. If I move into VOC then we have the majority of the technology in hand here. And then what we need to complement it with, that could be footprint, it could be Salesforce, it could be very much what we did recently with the requirement in Italy then to add on to this. So it is not overly substantial investments, but it's cherry picking in some areas and we have quite a lot of the technology at hand.

Okay, great. Thank you. And finally, just about bookkeeping question that I mean, you had done one of the items affecting compatibility in food tech. Should we expect similar level in the coming quarters?

Yeah, we will continue to have expenses for the strategic review of food tech equipment. And we are also continuing on our M&A agenda. And the clean tech technologies exit of the marine business will continue through the year.

And the good part then, we can talk about different one-offs and now I say this with a smile, but when you conclude a strategic review, I mean then the one-offs from that perspective will of course not be repeated.

Great. Thank you very much.

Okay, we continue with the questions from the conference call.

The next question comes from Carl Dejenberg from Carnegie. Please go ahead.

Thank you very much. Good morning. So I just have a follow up on the margin development in the data center division. I'm just a little bit curious about sort of the mentioning of price effects in the data center. I'm just curious about the sort of variable pricing components and what are the effects having a positive effect here in Q1? Because I remember just go through your Q4 presentation deck and there were no mentioning of pricing previously, at least from what I've seen. So I'm just curious, what are the sort of variable pricing components here in the data center backlog and what have been the effect here in Q1 that makes you do that sort of mentioning? Thank you.

But a very good question. As you know, we have in some or I should say most of the larger contracts worked in a one-directional price clause that if the basket of certain components are above a certain level, we are entitled to increase the price and we are not forced to lower the price if it's reversed. In this case, I would say it is not very much connected to this. It is more the smaller projects that we have been taking on and off, so to speak, and there we have been able to drive price increases into the market. So we have not effectuated a large part of the call it the price clauses. It's more the general work in price and profitability management that has paid off.

Okay, very well. Thank you. And just to follow up on that also on sort of effects development here, I guess, is it fair to assume also that the strong US dollar appreciation has a quite tangible positive margin effect in the data center division given that it's a lot of North American exposure as it fits today? Does that also have an effect here in Q1?

Yeah, it was not a major effect in Q1.

It was a couple of percentage and I think you can see it. It's well described on the order intake, on the invoicing and in general terms, not a large effect.

No. Okay, very well. Thank you very much.

Thank you. So we take another question from the conference call.

The next question comes from Carl Oskar from Burenberg. Please go ahead.

Good morning. Hi, everyone. Just one quick one follow up from my end also on data center margins. Thanks for clearing up that pricing impact and so forth. But I'm just wondering, you're mentioning sort of, we shouldn't extrapolate this 90% as you quite clearly stated and say what we expected. I think you said something like that. A good stable underlying margin. I'm just thinking what does that really mean? I mean, do you see it as more kind of the margin level we've seen over the last three quarters? Is that kind of what we should expect or are you now established at sort of a higher level than that? How should we think about sort of the margin here going forward?

I can start and elaborate and then expect that most probably Katarina will pitch in the correct perhaps. It is a little bit like this. If I take three triangulation points, I mean, one point that I'm super pleased in, that is that we've proven over and over again that we are driving efficiency into the system. And I mean that we will continue to drive. In order to drive efficiency, I mean, we need to load the factories. Then you have the bottom line effect that we did very much in this quarter. Then the second part is, of course, that are we selling the right products? And here you can hear me say that I mean, the cycles are the highest margin, but we are also driving up the margins in the other areas. And then the third combination is, okay, some quarters, I mean, those are lined up and we have not been able to push out the increasing cost, etc. When it comes to certain advancements in Salesforce, advancements in different call it support functions. But what I think you should take with you, that is that when the system is working very well, I mean, then we have a fantastic margin opportunity in data center. But don't expect that the system will all stars will be aligned each and every quarter. I cannot give a better description than that, but Katarina, maybe. I

think you described it very well. I would only add that remember that we will still continue to invest in this support structures.

Yeah, no, fair enough. All right. No, thanks. That's all for me. Thank you.

Okay. Thank you. I think we have a follow up question from a listener on the conference call. We will take that as well.

The next question comes from Carl Bockvist from ABG Sundial Collier. Please go ahead.

Thank you. Yes, just a quick follow up. And that was on the what you communicate as Q4 regarding planned maintenance shutdowns and so on. Have these all now been completed and we should not expect anything in future quarters?

I think that refers to that we were pushing the factories extremely hard and we prolonged in some factories the call it Christmas break if I use that expression. So I mean, Christmas is when Christmas is and then of course, if we come into the normal summer routines in some factories, I mean, then we will do it like that. But we are not foreseeing any larger maintenance work taking place in the coming quarters more than the seasonal ones.

Understood. Thank you. OK, so with that, we have covered all the questions and I would like to thank everyone that has been viewing us and listening in to us. We will be back on the 21st of May when we have our capital market day here in Stockholm. You can attend physically or through a webcast. So don't forget to tune in then. And with that, I would like to thank you for today. Have a good day.

Thank you very much. Thank you.