4C Group AB

Good morning and welcome to the first quarterly earnings call for 4C Strategies for 2026. My name is Jonas Jonsson and I'm joined here by Veronica Wallin, our CFO, and we're going to guide you through this morning's presentation. We will do as we have done for the past couple of quarters with a short introduction for myself, high level overview and then going through our segments. We will then do a little bit more of a deep dive into the financial numbers where Veronica will present and then. Ending with a little bit of a future outlook and some Q&A. We are opening the digital floor for questions now, which we will then address at the back end of the presentation. So a brief introduction to the Q1 numbers. As you will have seen, obviously, the first quarter of the year didn't necessarily pan out on the level that we were aiming for. We did have a strong order intake, particularly in the defense segment, which I think exemplifies and underlines the the underlying fundaments of our business model and what we're trying to do. But all in all, obviously, the top line numbers and the net result didn't meet our expectations. I would say that the first quarter has been sort of characterized by continuous turbulence in the market. There is a lot of interest, but there is also a lot of things going on for all our customers around the world. which short term impacts our ability to close out deals and also convert on contract assets. We have also continued the transition work during Q1 in terms of refocusing the organization more towards a Defense first approach, and we have done a lot of work when it comes to actually finalizing the strategic transition, which we initiated of the third quarter last year. So we are looking to see those effects starting in full now from the second quarter of the year, and we will come back to that in more details as well. And then if we look at the actual numbers, so foresee in brief for the first quarter, as I mentioned, we did just over 60 million SEC in net sales and a negative result of 20.4 million. As I mentioned, of course, this is not on the point where we are aiming for per quarter now. I think the only upside if we really look at the quarter is that the deals that were not that didn't come in, they were phased into the future. So we haven't lost any significant pipeline deals that we were working on. And then on the other hand, as well, we have seen a significantly lower OPEX. and cost base for the quarter. So on the one hand, that's positive. Obviously, on the other hand, we've now gone through the process of making those reductions. So we now need to look to the future and really focus in on converting those deals as we move forward. But all in all, 60.1 top line and a negative result. 20.4 is obviously not at the point that we're aiming for. Going in then to a little bit more detail around these different areas. So when we look at our defense base, which makes up a majority of our business and a portion that is growing, we had a strong order intake of just over 90 million SAC. uh which came out of contracts in our prioritized markets um we did see a revenue decline compared to the previous or the comparative quarter last year that quarter was also heavily influenced by some major deals but even despite that we had a weaker quarter than expected for q1 We did sign new US contracts, so two major contracts in the US totaling over 40 million SAC in order intake, and also a strategically very important deal with our Canadian Armed Forces, where we signed a new five year extension to deliver and expand that contract even further. That has since also provided additional opportunities for growth, which is part of the business model of land and expand that we are aiming for when we break into these new markets and then continue to grow them. Obviously, the US, Canada, continuing to forward our positions in Europe, all of those very much aligned with our ambition to promote our business within the NATO countries. And that comes as we are continuing to see a continued increase in interest. We have after the end of the quarter, we've initiated or we've delivered on a number of different trade shows. where we do see a significantly higher interest in the training space than we have done before. But as I mentioned, it takes time for these processes to follow through all the way through the cycle into actually delivering and purchasing services and software within our area as well. Moving on into our resilience space, as I mentioned, we have now concluded the transition and that strategic shift, which we initiated at the end of Q3. We are working very closely with our existing customer base, and I'll go into a little bit more detail about what that means in just a second. But really with the focus to maintain a strict cost control around this area, but also to continue to deliver value to our customers and then to As we progress, we will slowly be looking towards growth here as well, aiming for a cash positive resilience in 2026 and a revenue positive going into 2027. But I thought I'd take the opportunity to give you a little bit more of a sort of a flavor of what it means when we're talking about resilience and what it is that we're actually doing. Something which is relevant from a Q1 perspective, from two different perspectives into the same customer. So first off, with one of our key core customers, the EEAS, which is the European Union External Action Services, the foreign office of the EU, if you will, a long-term 4C customer. which we have expanded our contract with during the first quarter of the year, which is obviously key important for us in this segment. We did so with a over 20% increase in terms of the annual recurring revenue from that customer as per the new contract, so really positive. But also, more importantly, in a way as well, is that what we are actually delivering to this customer. And I thought I'd mention that just to give a little bit more of an idea. So everybody noticed and know about the still ongoing situation in Iran. what i think maybe took a little bit of people or some people by surprise was the impact that this situation had on the neighboring countries places like the uae oman and other areas where people normally go for holiday and a lot of people needed to be evacuated so the the services and the software that 4c delivers into the eas is to coordinate those efforts and we worked very closely with our customer during the initial period of this of this ongoing situation to make sure that all EU citizens could be repatriated and evacuated in an as effective and efficient way as possible by pooling resources, by pulling all of that information together into one shared operational picture, and then making sure that we could get people back to Europe as safely and as quickly as possible. So just as a snapshot of what it is that we actually deliver within the resilience domain, but also from a positive perspective that we have continued to grow this customer engagement from a contractual and revenue perspective as well during Q1. Finally, then, on the segments piece, when we look at our expert services area, a growing business area for 4C and strategically important, we are looking to a significant growth level during 2026. Seasonally, the first quarter is always soft, and as was the case this year. We did have a strong order intake and we have a good order book, which we carried in from last year, where we ended the year with a lot of sales in Q4. And so for all in all, I think the areas where we are with expert services right now is proving itself during 2026. And we are looking forward to a continued strong development during the year. But at the moment, The services that we provide are very sought after and also we're seeing a significant increase when it comes to our ability to increase our average charge rates, which is obviously key critical when it comes to delivering a profitable services business. So all in all, there were phased deals across our range of businesses and we're looking forward towards continuing the hard work during 2026 to make sure that we regain ground during the coming quarters and position ourselves both for the end of this year, but also towards into next year. I will stop there on the sort of the detailed run through of the segments and hand over to Veronica for a little bit more on the financials and the KPIs.

Thank you, Jonas. So let's go through the net sales first. And as Jonas mentioned, net sales in Q1 amounted to approximately 60 million. And that was compared to 91 million last year. This was kind of in a transition quarter and the lower revenue is mainly due to timing effects. The comparison is also affected by a very strong Q1 last year, which included a larger software deal and by the fact that several contracts expected this quarter have been postponed due to external factors that extended timelines during Q1. On top of that, we have also updated our revenue recognition principles to better reflect how customers buy today. That had also had a little negative impact in the quarter. At the same time, the reorganization has been implemented as Jonas also mentioned, and that has been according to plan. We have not yet seen the full effect in the quarter, as the lower cost base only started to materialize towards the end of Q1. But this will become more visible in Q2 and we will also see the effects then. The numbers of employees has been reduced by around 35 people compared to the pre-reorganization levels last year. Overall, while the quarter was softer, the underlying fundamentals remain intact and we expect improved efficiency and profitability going forward.

Yeah, and I think maybe just to mention a little bit additionally from my perspective on the revenue recognition, obviously this is a discussion that's been had with a lot of people in the investor community and in terms of explaining our REVREC principles and how that impacts contract assets and so on. And what we've seen during the recent 18 months of global turbulence is some of the delays additionally on the conversion of those contract assets. But what we are working now, and we've been working closely with our auditors as well, in terms of being able to see how we can better align Within the rules and regulations which quite strictly regulate this how you can then look at you know what parts of software is actually how much can we take over time compared to a large chunk up front and that obviously has an impact on the. on the short term top line revenue recognition. But from a longer term perspective, it will suit us better and we'll simplify things in regards to that. So that should be positive.