Clavister Holding AB (publ.)

Good morning, everyone. Welcome to our Q4 Interim Reports presentation. We're a minute early, but I would say, yeah, let's wait for some people to drop in. But I think, yeah, we can start rolling. So, yeah, my name is Caitlin Wood. I am your host for today's webinar. And with me is our CEO, John Vestberg, and our CFO, David Nordstrom. So we will start with the presentation of the last quarter where John will share his key business insights, followed by David sharing the financial details. And after that, we will address any questions that you have at the end of the presentation. So please post your questions in the chat and then we will pick those up after. So with that, I would like to hand over to you, John.

Thank you very much, Kate. Again, welcome to this presentation. Q4 2025 concludes another year for Clavister. An interesting quarter, definitely with some both interesting metrics, but moreover, very interesting business events. Also, of course, events that took place shortly after the quarter ended, which we will talk more about as well. If we sort of try to set the headline on Q4, the headline would be, as this page or picture says, improved profitability in the transition quarter. What do we mean with that? Well, we see that our profitability Both in this quarter, both EBITDA and EBITDA and even net profit is continuously improving. That's all good, even in a quarter like this where we had a bit of challenges on the top line side and on the gross margin side. But despite that, we continue to drive the profit journey. Another headline I would say from the quarter would be still a very strong underlying market and demand. So the the net sales growth in this quarter does not represent any weakness in the market or any weakness in the demand for products or solutions. We'll talk more about this soon. In terms of a transitional quarter, one of the key events was, of course, the strength and financial financial position, the entire revamp of the balance sheet that were conducted during the quarter. And finally, and we highlight this already before the quarter, that there are delivery delays on the military hardware side that causes slip over from this quarter into twenty twenty six. If we look at the demand side, I think we will need to be continuously sort of better in explaining to both our customers, but to the market in general, that Clavister is a dual use cybersecurity company. Serving both the civilian side and the military side. The demand, as I mentioned, the demand remains strong. We see that in both of these segments, if you like, or sectors where the amount of qualified discussions, dialogues, inquiries and so forth we're having with larger and larger and more volume of customers and prospects keep increasing. And again, I think to some extent we can thank, if you like, thank within quotes, the geopolitical situation for this. There is the strong push for European solutions and we see that even more. In the civilian sector, there is a clear momentum. We will talk slightly more about the numbers later when David walks up through the financials. But I can say in general that in our key focus geographical markets, we have a very strong underlying momentum. Previous year's quarter was very tough from a comparison perspective. So that's why our net sales numbers have a, from a growth perspective, a bit of a hard time keeping up. But if you would plot the three, four year of trend, there is a very, very clear growth trend on our civilian business. Similar than in the defense business, defense business, a bit of a different beast in terms of business characteristics. So typically you see the large type of contracts, long lead times and so forth. So it's maybe no surprise that this is the type of business that that gets more exposed in terms of press releases and so forth. So it goes almost without saying that this is a part of our business that is developing strongly. And I think the latest contract in Norway is a good testament to that. Again, the dual use aspect of our business is a super important perspective. We actually don't want to be tied into one or the other bucket. We're neither a pure defense company nor a pure civilian company. We serve both domains. That is important from several perspectives. From the business perspective, it adds a lot of credibility to win large national defense deals when we, on the other hand, in the civilian business, have dialogues with critical infrastructure type of customers or large state agencies and so forth. So those businesses, they catalyze and they fuel each other. Then from a pure P&L or cash flow perspective, they're also good in hedging each other because of the various characteristics. So on the one hand, on the civilian side, more volume, slightly smaller deals, but compensated with large volumes, shorter time to money and so forth. And on the defense side, the opposite. Large projects, long time to order, long time to cash in most cases. But combining those two creates a good balance. In terms of order intake for the full year last year, we ended up in 320 million, so clearly the highest number ever. um that takes us to an order book of 378 million per end of q4 um and as we've communicated before our order book includes now contracts that spans all the way through 2029 and this gives us a very very good position with regards to to visibility and outlook for the coming years moving to the defense sector It is, as just discussed, it is an important growth driver for Clavister. It is not the only growth driver. I think that is very important to highlight that both the civilian and the defense sector, they keep pulling each other in terms of growth. And specifically in Q4, isolated sales in defense or revenue from the defense business grew by 66%. So it was a strong quarter from that perspective. One of the highlights was adding yet another contract of our cyber armor products to the CB90 platforms with the system taglines. This was an add on order to a previously one contract for a European nation value of 26 million SEC. Still within the defense sector, of course, we need to talk about our key win that happened slightly after the quarter ended. So what what we've been participating in for a few years was a large tender from the Norwegian Defense Material Agency. So that's the Norwegian version of FMV. They are. procuring a lot of digitalization projects to modernize the Norwegian defense forces. And they have a program called MIMA and our part of this, our contract, is one component out of maybe 20 in the large MIME program that encompasses many, many billion of Norwegian kronos in investments. I would refer this contract as really a breakthrough contract for Clavister, but not only for Clavister, for a breakthrough as well in tactical communication within defense. What the Norwegian government and Norwegian armed forces have done here is a many, many years of really solid design and requirements work to design the next generation communication network for armed forces. And this is something that many other nations now are looking with envy on the Norwegians, asking themselves how the beep did they arrive at such an interesting design. There was a long tender process over three years, fierce competition from really, really large vendors in the industry. But at the end of the day, we were able to win this deal due to several factors. One factor being that we are building this solution on top of our existing product portfolio. That was a very strong, strong, strong key. for the customer. The other one, us being a European, but even more a Nordic supplier that also played into our favor. And I think also our heritage coming from an engineering strong background, talking to, in this case, an engineering heavy customer also did suit us well. The project as such, or the contract as such, concerns two parts. One is the delivery and development of our solution, again based on Clever Street proprietary software. After the delivery, it is followed by a four-year maintenance and support commitment. We strongly believe that these four years will be then followed by many years of customers basically for the lifetime of the system. So in summary, we're looking at a deal worth of 280 million SEK. This is a committed order. We are looking at a project duration starting already now. It has already started and continues for almost three years or approximately three years. And we will be seeing from a financial perspective revenue and earnings support from this project throughout the project, continuously throughout the project. We are highlighting in our quarterly report, our interim report, that cash flow from the project is also supporting us during 2026, but somewhat later during the second half of the year. But apart from that, it is more of a continuous revenue and earning support from the project. Of course, we need to talk about the supply chain constraints. This is no news, I think, for anyone. We announced this already last year. I think everyone is aware of the reasons. The strong buildup of the defense sector across Europe causes a lot of strain on the supply chain in the industry. More specifically, the producers are not being able to keep up with the pace, which of course affects the entire sector, not only companies like Clavister. For us specifically, the deliveries that we planned during Q4 is postponed into 2026, fully according to what we announced last year. In terms of numbers, we're looking at an impact of approximately 10 million SEC moving into 2026. So, yeah, naturally, we will have the corresponding positive effect than during the first half of 2026. So, again, this is a timing issue. It's not a business risk per se. With that, leaving over to David to talk about our financial platform.

Yes. Thank you, Jan. So I think Q4 has been a very eventful quarter for us. I mean, for a long time. We have planning and building the foundation for being able to refinance the EIB debt that Kevshare has been having since 2017 with a combination of a directed share issue and a commercial loan. So we did a directed share issue of 167 million SEC during November, December timeframe. we were able to raise a loan facility of 100 million SEK together with Swedbank. The combination of the directed share issue and the new loan facility that enabled us to repay all outstanding debt and including a repurchasing of all issued warrants to the EIB. So when we end now, when we end the 2025, Clavister have No longer any depth with EIB and EIB no longer hold any warrants in the clavature. I think these have been two challenges for clavature that we have been wanting to resolve. And we're very glad that this is resolved. This in turn leads to a significantly lower net debt from 152 million to 67. So clearly relieving a lot of pressure from our balance sheet. You know, the balance sheet has been gradually improved over the last few years, but this is a major step in bringing our balance sheet to a much better position. And the year end cash position sits in almost at 100 million. So a reduced leverage. We remove the EIV warrant overhang, this has been, I would say, a bit challenging. The FX exposure, though, so you have followed Cavs for some time, clearly know the volatility in our financial net due to a large debt in euro that is now removed. The current debt with Swedbank is smaller, but it's also in SEC. We can also see then either than the effects that the loan with Swedbank is cheaper. So we're lowering our annual interest costs. And I think important as we are growing, this introduces a level of flexibility that we haven't had with EAB. EAB came with quite large restrictions on our flexibility. that flexibility working now only with a commercial bank means that we can be faster to act on certain, say, needs in the organization related to growth, raising, for addition, being flexible on how we finance potential working capital needs for it. As an example, not saying that this is something we're doing currently, but as an example, not having AAB there makes us more flexible, and that's important as we grow. If we then look at Financial starting, as always, with order intake. A year-over-year comparison indicates a decline of 26%, but looking at that from a different perspective, there was no large orders from the defense sector. There was definitely orders from the BAE with 26 million SECs. But smaller than we see in the comparison quarter. So that still means this is the fourth largest order intake order in Clavister. So I would say still a strong order intake performance. And we still see an order intake trend line being on very high levels compared to historic levels. Then looking from a net sales perspective, well, it is a modest net sales growth in the quarter. impacted by several things. As you know, a large part of our sales are in Euro and the SEC has improved quite substantially. We also have sales in USD where the improvement of the SEC is even stronger. So this comes definitely with an impact. But still, if you adjust for FX, net sales growth is not strong in Q4. Still, it is the largest sales quarter ever in the history of Cavister, but growth levels are not on the levels where we have been used to seeing. So FX is one effect. Another, as we communicated during Q4, delays in deliveries of military hardware has an effect of approximately a little bit more than 10 million sec, impacting this quarter negatively. And then from the civilian business perspective, We saw very strong growth in Q4 last year, partially supported by one-off lifecycle effects, which we don't have in Q4 this year. So the civilian, I would say, growth challenges is a quarter-by-quarter challenge. It is not indicating challenges in our civilian business per se. And that's important to say. So I think we can pause there and then look at kind of civilian versus defense net sales. This is something that's being frequently asked. There is a good growth in defense sales, 66 percent. However, we're missing 10 million here that we expected to have, as we said, due to the delays. So it is less than what we expected. We expected it to be north of 25 million. It ended up being 16.4. That delay is then deferred to the first half of 2026. Civilian business, well, as we said, a little bit under what could have been expected. One is FX effects. The other one is, as I said, the short-term challenge in comps versus Q4 last year. But that is only a short-term challenge. I believe we will see a good growth in the civilian business going forward. And adding, I think, one more important component to the mix that might easily get overlooked, we see a lot of demand for security and cybersecurity made in Europe. We are engaging with larger partners, larger end customers than before. But that also means that our sales force is investing a lot of time in building partnership with large organizations. Time that historically might have been spent in building business with much smaller partners and smaller end customer, where the benefit is more. There's a shorter time gap from an initial discussion to a sales transaction. But a transaction is smaller. Here, I would say we're chasing a lot of things that it doesn't generate sales visible in Q4, but it's building a foundation for future growth that I think is important. And so I think one should also be aware of that effect. Hard to quantify the size of it, but I think it is important to do this transition. That's also one part of holding sales back in the quarter. ARR growing somewhat faster than net sales. Why? Well, the key reason is in the ARR number, there is a lot of contracts and the contracts are growing in value, which is driving ARR growth. The somewhat setback in net sales growth quarter by quarter is, as I said, we had lifecycle events in Q4 last year, meaning quite a lot of hardware in the sales mix. The hardware part of the sales mix is somewhat lower in the civilian business in this quarter, and hence ARR is growing faster than it says. This is, and those who have listened to these presentations for some time know that a usual statement from me is when we see low growth in a quarter, we tend to see strong gross margin. This quarter, we don't. So this is an anomaly from that perspective that we're seeing a small net sales growth and a weak gross margin. Why? Well, it's clearly very mixed driven. That in this quarter, we have seen good order intake from the gross margin strong parts of the civilian business, but that has not been able to translate into deliveries in supporting net sales in the quarters. We have a weak A contribution from the margin strong parts of the business combined with, as we said before, a 66 percent growth in defense deliveries. And they those defense deliveries in that this quarter are very hardware centric. So this combination creates a challenge for the margin in the quarter. So these are the reasons. However, I think this is an area where we are pleased to see that our focus on cost control is continued to yield results. So even though we are producing so far our strongest growth quarter, our strongest sales quarter, not that strong growth wise, but sales wise, it is the largest quarter. We are seeing a decrease in our OPEX. I think we have invested a lot of getting OPEX under control and it is under control. And I think with that, we can be able to scale, of course, operational costs when we see that there is a good traction of our states. But cost clearly under control. And this translates into an improved EBITDA. So it is the cost control part is contributing more, I would say, since we have a challenging margin situation. But all in all, we are driving growing EBITDA and growing EBIT. And of course, we see a very strong net profit. And that is, of course, driven by that we're recording a deferred tax asset of 30 million SEC. And according to IFRS, if there are clear proof points that you will produce taxable profits in future periods, you are required to record a deferred tax asset. We're doing this conservatively. And let's monitor that. And I would say then bring that asset up over time as we move forward. But let's start with a bit of conservative assessments here. But that's the clear explanation. Why are we seeing such a large positive delta between EBIT and net results?