Clavister Holding AB (publ.)

So, good morning, everyone. Welcome to our Clavister Q1 interim report presentation. My name is Kate Linwood and I am going to be your host for today's session. And with me today is John Westbrook, our CEO, and David Nordstrom, our CFO. So we will start today's presentation with the Q1 report by John and David. And after that, we will have a Q&A session. So please submit your questions at any time in the Q&A box during the presentation. And then at the end, we will answer all your questions. So and with that, I would like to hand over to you, John.

Thank you very much, Kate. And again, welcome everyone to Closer's Q1 report. Starting with a summary of the quarter and the key metrics that we bring to this quarter is starting with our net sales, 44 million. This is, in fact, our highest Q1 sales number ever and our second highest net sales ever as well. This contributed with a 21% sales growth. So I'm really happy to see that we can actually now celebrate 10 consecutive quarters of sales growth and two quarters of growth with more than 20%. So that's great. We're super happy on that. Also, our EBITDA margins continue to improve. So this quarter we arrived at 18% of adjusted EBITDA margins. So we're touching on the famous rule of 40 with a combined 21% growth and 18% EBITDA margin. If we would characterize this quarter with one single word, I would use the word stability. So in essence, it is a stable business. All of our four businesses with next-gen firewalling, identity and access management, telecom and defense, they are all stable and developing in a good direction. And the outlook in our perception is good for all the four businesses. One of the growth drivers in the quarter was the serious deliveries from the defense contracts that we have entered into. And I'll get back to that a bit later as well. If we look at the full year, we maintain a positive view. We do expect our net sales growth to be able to continue on this growth trajectory and to be able to settle in above 20%. That's our clear expectation and what we see from the trend we're into right now. With regards to expenses here again, I would use stability to characterize our OPEX. It is an OPEX under control. It's actually a slight, even a slight decrease of OPEX. If we zoom out and look at the full year, we don't see any major deviations to our OPEX trend at all. So we expect the full year OPEX to be on par with what we've seen from from last year as well. In terms of our cash flow, quite a significant improvement of the underlying cash flow. However, if we look isolated in the quarter, looking into working capital effects as well, we have some lingering effects coming from the fourth quarter. And this is the time of the season where we also build up a fairly larger stock for shipments and for deliveries during the year. And with the prepayments for those, we have somewhat a negative impact on the cash flow in the quarter. That's temporary, however. If we again zoom out in to the full year, we do expect our cash flows to increase substantially compared to last year. And last but not least, in the quarter, we finalized our rights issue that led to quite a substantial improvement of our cash position. So we raised after complete of the transaction costs, we raised one hundred and forty two million SEC. Moving to David, if you could please give us some more details on the numbers.

Yes, thank you, Jan. And for those of you who have been with us for some time, you will see that this is a big change of format. So I hope you will enjoy this and please share any feedback you have with us. So if we look at order intake, this is the lumpiest of our metrics. You will see that in quarter by quarter figures. And if we look at Q1 compared to Q1 last year, we see a 10% growth. That is delivered primarily by, as John said, by stability in our business, predominantly within the identity and access management business and next generation firewalls. Important here when you look at order intake is to look at the last 12 month trend where you see that we have clearly increased that to a high degree due to a very large defense contract one in Q4 that supports this. But with the performance in Q1, we are increasing the trend line with the improvements compared to Q1 a year ago. But also important to carry with you is our order backlog, which has increased compared with Q1 last year from 73 million to 227, which is a very good foundation to generate future net sales growth. So if we look at net sales, Here we can see when we compare to order intake that the lumpiness decreases. It's much more underlying stability in our net sales as that comes from a large volume of many recurring contracts, meaning that net sales for us is more stabilized. We see a 21% growth compared to Q1 last year, not generated by any single deal, single contract within the quarter, but rather underlying growth and underlying improved levels of the contract base. Here again, I think it's important to look in the upper part of the picture on the on the trend line on the last 12 months trend line. We see a continued increase. And as you said, this is our 10th consecutive quarter with net sales growth. And we see that the trend line is increasing as we progress in time, meaning that our our our growth performance are increasing, which is, of course, something we're very glad to see. And then moving on to ARR, you see that the trend of stabilization also increases. Here we zoom in on the annual recurring revenue in the software portfolio. We have been able to progress in line with the strategy we set out in 2021 to move Clavister from perpetual licenses to a SaaS-like business model that sits with recurring revenues. And we've been able to grow that continuously. And just to share some light on this, I think this growth comes from three areas. In the bottom, you have an increased number of recurring revenue contracts. So we are expanding our contract base. That's, of course, very important to generate more ARR. The second part is when we did this change strategy three years ago, one important part of that was to shorten our contract base. So we have a shift that is meaning that we are moving from predominantly focusing winning three to five year contracts to zooming in to be better to generate 12 month and monthly contracts. And that means that over time we have a better profitability in our contract mix because shorter contracts have better price points than longer contracts. And from a discounting perspective, we will also shift more power away from the customer to Clavister. If there's a shorter contract, it is harder to negotiate for discounts, meaning that our price levels are are better in shorter contracts. And the third part here is we have raised prices when we went into this year. So we have a better price mix with us supporting more ARR growth. And as the contract base is shorter, it more quickly can absorb price increases. So these three factors, I would say, explains the ARR growth. So we move forward. And we can look then at our gross margin. We grew net sales with 21 percent and we're growing our gross profit with 17. So we are not capturing the full net sales growth in our gross profit. And the reason for that is what was said earlier by John, that one important growth driver for us in the quarter is that we're scaling up. the deliveries within defense to BAE Systems. There we have a little bit of a less favorable gross margin profile than we have in our other parts of the business. So that has a somewhat, it is good for driving net sales, but it has a certain impact on gross profit as it is a bit lower within this part of the business. But I think if we also compare Q1 to Q1, we go from 83% Q1 last year to 80% in gross margin this year. But I think it's also important to compare with Q4 when we had similar growth levels of a little bit about 20%. There we had 77% of gross profit. if you've been with us for some time, you know that we try to communicate that in periods with higher growth, we have an impact on our gross profit. And then why? Well, the answer to that is When we sell and start more contracts, we have a more negative gross profit profile day one since we ship more hardware. Day two and onwards, there is no hardware element, only the software element, which has been very good gross margin. So when we grow, there is an impact on our gross profit. So compared to Q4, we have improved the gross margin quite significantly, even though we have more defense sales in the sales mix. And this is explained by two factors. We have been able to build a higher ARR level. meaning that there is more software in the sales mix with better margin support. And the second part is ongoing work with ensuring that we improve our gross margin within our next generation firewall sales, which we've also been successful in doing. So these factors combined explain that we can have improved gross margins, even though we have better growth. I think that is important for us to communicate. Then on OPEX side, we are, even though that we are delivering 21% net sales growth in the quarter, we are able to decrease our OPEX with 2%. So we are utilizing our resources more efficiently and being able to scale growth with the cost base we're already having. So that's something we're proud of. If we look at this from the sustainability perspective, we see that we are taking Clavister step by step to a position where we're able to fund our business with the profits that we are generating. So if you compare gross profit to the... Part of the picture on 36 million and then OPEX. And bear in mind here that OPEX includes capitalized R&D. So our full operational costs for driving the clavister business, that sits at 39. So we're not fully there yet where we see that we are on a stabilized level, having gross profits that's able to carry the clavister business. But we're clearly step by step getting there. So that's very important. And in looking at the upper part of the picture on the trend line, we see that thanks to the cost optimization program we ran in end of 2021 and during 2022 and onwards, we have pushed our OPEX level from around 180 million down to 150. We're stabilizing around that level. We don't expect OPEX to drop further. So the scalability here from pushing OPEX down as a percentage of net sales will not in the future come from driving OPEX downwards, rather maintaining OPEX while we continue to grow net sales. But that means that we will scale the business continuously better and make Clavisier more robust and sustainable here. So we're heading in the right direction. And finally, as we said, with improvements in net sales, we're protecting our gross margin and we're pushing OPEX down, meaning that we have a good leverage in our EBITDA levels up. a little bit more than 300% compared to Q1 last year. Our seventh now consecutive quarter with EBITDA growth or a positive EBITDA and where EBITDA trend-wise is growing quite clearly. If we compare a year ago, adjusted EBITDA on the last 12 months perspective was 1 million. Now it sits with 27%. it's not, as we've said before, it's not the end goal, but rather seen as steps on a journey where we continue to grow and push our EBITDA levels upward. But glad to see that our increased sales are translating into clearly improved EBITDA. So I stop there and hand over to you, John. Thank you very much, David.