Clavister Holding AB (publ.)

good morning everyone welcome to our q2 25 interim report presentation my name is caitlyn wood and i am your host for today's session and with me as always is our ceo john westberg and our cfo david nordstrom So yeah, welcome today. We will start by John giving a short business insight from the last quarter, followed by David elaborating on the financial details. And after the presentation, we will have a Q&A session. So you have the opportunity to ask questions. Please also feel free to already post the questions in the question box throughout the presentation. And also, of course, at the end, yeah, you're very welcome to ask any questions. So yeah, with that, I would like to hand over to you, John.

Thank you very much, Kate. And again, we're welcome. I would like to start with just taking the opportunity to provide some of the key highlights or the key takeaways, if you like, from the second quarter, starting with a bit of the macro situation. As we all know, it's a continued uncertainty on the geopolitical arena. And as sad as that is from a macro perspective, it is nonetheless a strong driver for pushing the need for European products, European cybersecurity in particular. I think it's worth to state as well that the growth we are seeing not only this quarter, but the previous quarters as well, is still not impacted that much from the geopolitical uncertainty. Until concrete orders and concrete demand trickles down in the supply chain, it is still some time. So the growth we're experiencing right now is based on activities, I would say, over the past few years and not reflecting the current situation. If we look at the business, the growth this quarter comes from all our business lines, which I'm extremely pleased to see. That goes for our civil business as well as for our defense business. The gross margin strong in the quarter above our set out goal. And as a consequence, of course, the bottom line is showing an improvement as well. Last takeaway message from this quarter, which I think is really important looking forward, is the ability for Clouster now to attract partnerships. We've announced a few in the quarter already. And we see that as a trend, essentially, where partners and businesses across are showing more attraction to Clevister. And I will come back to that. If we look at the growth, again, it comes from all the areas. The order intake grew with 52%, so a strong order intake growth. No particular individual large orders in the quarter, which I think shows a really good robustness in the underlying business. Consequently, net sales provided good growth as well, 22%, 25% adjusted for currency effects, so amounting to 55 million SEK. And again, both from the order intake perspective and from our net sales perspective, it is driven by all our business lines. Looking at our order backlog, we are increasing that one with this quarter, ending at 375 million SEK. Worth mentioning absolutely is that our order backlog now extends into 2029. So this means from a visibility perspective, we have really good predictability over the years to come. Going back to the comment and message about partners, so what we're experiencing in this quarter and in previous quarters as well is an engagement from our existing partner network that is deepening, I would say, by the quarter. investments that are done in our collaboration with resellers, with distributors, with the integrator partners, which essentially, I mean, by all means, it drives the presence we have on the market and it lays the ground for additional growth from the extended and growing partner network. And on the same note, what we're experiencing as well is that we are able now to attract a little bit different tier of partners, partners that have until recently been out of reach for Claverster due to our limited size, limited brand and so on. But I think the combination we're seeing now, the perfect storm, if you like, with the uncertainty on the political arena, the increased visibility from Clavister, and of course, the product portfolio, which is competitive, this has started to really attract a new tier of partners. And we look really forward to see how we can capitalize on that. Looking at the civil business, again, I mean, the clear market drivers are coming from the geopolitical instability. There is a continued really, really strong push, not only from the industry as such, but from the political arena, from the agencies and so on in Europe to strive for a more sovereign Europe. uh reducing the the the dependencies of specifically american products um again this of course benefits the the few cyber security vendors in europe where clavister is definitely one of them The momentum is really high. We face an inbound request rate that is really increasing now and coming from both the existing partner network and, as I mentioned, also from new types of partners. We see additional requests coming from end customers and actually on a level that we have not experienced before. Again, our focus remains on the mission critical sectors and mission critical applications. We believe that is still a very, very good fit for Clavister, given what's happening on the market right now. And naturally, given our size, we need to be very selective in the domains we're addressing. One example of this is the energy sector. I think we've talked about that in previous quarters, that the energy sector specifically is challenged by the rising amount of cyber threats. It becomes the natural target for an enemy that would like to disturb a country's sovereignty. As one example from this quarter, we have the ability to add a major, quite large energy provider in Germany. that adds to a set of energy customers that we have already. So we start seeing a good momentum, good repetition of customer cases on the energy side. Looking ahead then on the civil market, I think worth mentioning and coming back a bit to my first comment on the time it takes for the political situation to trickle down into concrete business. The engagements that we've started recently, that we're starting now, naturally, they are large infrastructure projects. They take some time to design, to implement, to roll out, and naturally to see the impact on our numbers. That being said, we're creating really, really sticky long-term relationships with the type of partners we're engaging with. So it adds a stability, which I think is beneficial for us as a business. Moving on to a bit of a technology piece. Some of you are aware of the AI effort that Clavister has been pushing for a couple of years now. And that's a bit of a background. We have our Clavister Passat technology, that is our innovative AI technology that is the result of many, many years, 10 plus years of Swedish academia research and further within Clavister. This is a technology that is really innovative. It is able to detect what's referred to as zero-day attacks. In other words, attacks that have never been seen live before. Typically, this is a type of attack that is really, really difficult to detect and to identify and to block using traditional methods, anti-malware or intrusion prevention technologies. So you need some kind of AI technology to do this, and Clevizer Passat can do that. What really is a strong benefit of our technology is that this is a technology that is deployed on the edge, meaning on devices that sits with the customer. We're not depending on any cloud or any large data center. We're not gathering big data, sending that to a foreign cloud somewhere to analyze, which obviously has massive consequences on both both traffic bandwidth and your sovereign data sovereignty issues. This means all in all that this technology is really well suited for mission critical and highly secure environments where you cannot essentially have external communication. During this quarter, we had the opportunity to get an approval, a patent approval by the US Patent Office for this technology. And this follows on the European patent or intention to grant as the formal statement is. That means that we have dual patents, EU and US, that is protecting our IP. And given that this is a sort of fast moving business, we have to make sure that we have innovation as a cornerstone continuously in our business. Looking at a new really compelling defense product, it's part of our Cyber Armor product family. It was a product launch we made during the quarter, the Cyber Armor RSD 200 product. This complements our larger RSD 400 and 500 products that are being used by defense customers already. This is then, again, a ruggedized security product that is used for tactical, even mobile type of deployments. It has a really, really strong performance in regards to its footprint. It's a very compact box. It comes with the full security capabilities, the full firewall feature set that Clavister provides in all of our products. The typical use cases, this product would sit in military vehicles, in mobile command posts, and even in unmanned systems, given its small form factor. This is also an ideal product for retrofitting of older vehicles where you didn't build in security by design from the design phase. Rather, you would like some bolt-on security onto your target vehicle. The reception from the market has been good. We secured a first order from a northern European nation. They are deploying this product as part of what I just referred to as a retrofitting or modernization program of their vehicle fleet. And we have solid interest from additional defense prospects on this one. We also announced shortly after the end of the quarter, a very compelling partnership with Saab. Most of us know Saab, of course, leading Nordic defense and security company. The focus of this collaboration or this strategic partnership is to combine and leverage on the experience that Saab has in the defense market and that Klausur has in the security market and take the best of those two worlds to the market. The first joint product release was actually this Monday, where we together with Saab announced the TactiGate XD product. This product is what is referred to as a cross-domain product. Essentially, it manages... classified information that needs to pass from let's say a nato secret information domain or a nato restricted information domain to another classified domain this is typically something that is that is managed by large clumsy devices today whereas we and sob come in with a slim really neat little product that that takes all of the capabilities from the clavister cyber armor product family all the capabilities from sobs components into a very very compact form factor um we claim that this is the smallest footprint on the market which means that when we're looking at the land domain vehicle domain this is an ideal product for for those type of vehicles With that, leaving the word to David to talk us through the numbers.

Thank you, Jan. I'd say that I'm suffering a bit from a cold, so my voice might be a bit rough, so you have to bear with me. But as Jan said, we're seeing a solid order intake growth in this quarter, and we're seeing this growth coming from all parts of our business, which is, of course, very good for us. And I think when looking at the bars in the graph, it's quite interesting to see here that we're managing to deliver 76.2 million sec of order intake in this quarter, which looking at you know other bars where you see very high order intake numbers that has been supported by single large orders typically from ba systems we have no such orders in this quarter and and that is as john alluded to earlier i think showcasing an increasing robustness of the business where we see orders coming from uh well all parts of our business and that together regenerates a larger overall order intake so that's that's very positive Again, this then looks looking at our net sales. We're seeing that I would say continue to deliver on what we have stated, a bit above 20% net sales growth. And I think worth to remember, this is all organic growth. Cleveter has no M&A that are supporting these numbers. So this is organic growth as before. Showing also supporting the growing net sales trend line. And I think we're seeing more and more quarters now coming in. with some good margins above 50 million SEC in that sense. So that's positive. ARR-wise, and I think this is important to state also for those who participated in the Q1 presentation, we then said that, as you see here in Q1, we had a dip in ARR. We said then also that this was associated to lifecycle events when we did really the change of the business model back in 2021. That created effects in 2025 on ARR numbers. And as we said then, that was a one-time effect. I think we proved that by now saying that, okay, in Q2, ARR is back on its typical growth trend. So I think that's positive to see that, and it underpins what we said before. Gross profit wise, I would say a strong improvement of gross profit in this quarter. So I think this is very important. We're producing 22% net sales growth, but also producing an 81% gross margin. And I face quite many people asking the question and having the view that growth means that we will not reach a gross margin target of 80% or above. And I think we have been saying that, no, that's not the case. We can have growth and we can have strong gross margins. And I think this proves this. Of course, as we said before, growth puts the margin under pressure because typically that leads to more hardware shipments. But it still means that, okay, there is a growing There's a growing recurring revenue base, which gives margin support. And of course, there will be different sales mix in different quarters. And here we see a quarter with strong growth, but with also a lot of software in the sales mix, hence landing in a strong gross margin. So I think that's good. And it proves that Clouster can grow with maintained strong gross margin. So this is something that we're very pleased with. Well, looking at operating leverage and looking at OPEX, as you know, we stated some time ago that we have no longer focusing on cutting costs, but rather investing in our ability to capture a good market that is becoming increasingly favorable for Clavister. So this is what we see here. The main growth drivers for OPEX is investments, well, controlled, selected investments, but still investments in mainly sales and marketing and to a certain degree also in our tech organization, enabling us to grow better. But I think it's also important to state that we have 2.4 million in non-recurring OPEX in Q2, and that is mainly related to cost optimizations. And I think this is also important. I mean, we are investing in a growing clavister, but we keep a frugal view on spending and looking harshly at Do we need an organization looking exactly as it does, or can we extract cost saves by doing changes in the organization? And that we have done in Q2, which means some reserves then for cost optimizations. That will lead to a structurally lower OPEX in 2026. And I think just as a final comment, if you adjust for those one-offs for cost optimizations, the underlying OPEX increasements is not 19%, but rather 13, 14%, which is then well under the growth rate of net sales. EBITDA, a 60% growth in adjusted EBITDA. I think we continue to see a growing EBITDA trend, which is, again, very positive. Main drivers for improved EBITDA is, of course, the sales growth combined then with improved margins, and somewhat dampened then by the reserves for the costs for structural changes. of a last comment here is okay how are we performing versus our our financial ambition so ambition number one is of course a sales category of at least or above 20 percent and we we are delivering that landing on on 22. uh glad then to see i'm repeating myself fair but with the gross margin coming in above our target of 80 percent where we land on 81 uh adjusted EBITDA margin, not fully reaching the 20%, landing on 16, would we adjust for... But I think we are seeing that the margins are gaining more support from growth, from protected gross margin. So I think we will see EBITDA growth as we're moving forward as well. Cashflow wise, here is an area where we actually not meeting the ambition of positive operational cashflow. We have a slight negative cashflow from operations in the quarter. That is mainly related to the fact that, well, there are two main drivers here. One is, well, a little bit of higher inventory levels because inventories as you might remember we had very very high hardware shipments in in in q1 hardware deliveries increased with more than 100 in q1 putting inventory levels of course being quite low when leaving q1 uh i would say we're leaving q2 with more normal inventory levels so i would say there's not a dramatic build up in inventory but rather being on on more sustainable inventory levels Second impact is, well, the good growth we saw in the quarter have then translated into more accounts receivables that will then turn into cash in Q3. So, there's a kind of temporary effect of finding more operating capital, really, and