Clavister Holding AB (publ.)

Welcome to our Q1 2006 interim report presentation. My name is Kate Linwood and I will be your host for today's session. And with me today, I have John Westberg, our CEO, and David Nordstrom, our CFO. So we will start today by John giving an overview of the report and sharing some insights and elaborating on detail on that. And then David will follow with the financial details. And yeah, you have the chance to ask questions after. We'll have a Q&A session. So please just post your questions in the question box throughout the presentation, and then we will pick those up after. So yeah, the session is also going to be recorded. So you'll find that on our website after. So yeah, with that, let's hand over to you, John.

Thank you very much, Kate. And again, welcome to this report presentation. I'm really happy to see that we have lot of attendees um maybe even a record number of attendees uh that's really really good to see um Speaking of record, I think we can be proud of and happy to report what we consider to be really a record quarter for Clavister from really many, if not all, perspectives. So if we would sort of phrase Q1 2026 in just a sentence, it would be really a strong start to the year. uh some of the highlights of course then includes the major defense contract that we were awarded by the norwegian defense material agency earlier in in the year um we'll come back to that um which among other uh key growth drivers has really you know driven a strong revenue growth in in the quarter with 35 net sales growth which is yeah among the the the highest growth numbers we've recorded. Not only that, we've seen that our profitability is picking up significantly, actually, despite cost drivers in the quarter related to a number of one-off effects and so forth. But despite those, we were able to show significant profitability improvement as well. All of that taken together, we are now sitting on a significant backlog, a really robust order backlog that gives us a strong visibility for the foreseeable number of years. If we start zooming out a little bit and looking at the geopolitical drivers, we've talked about this before. We will repeat a bit again because it is a clear trend. It is something that sort of dictates the market and drives the market as we speak. So if we would sort of single pick one growth driver that dominates the cyber industry right now, it is the geopolitical development in the world. So moving back a few quarters a year, we were essentially seeing the war in Ukraine as the main geopolitical tension, if you like, or geopolitical driver. But since then, as you know, we have the escalations in gaza we have the u.s intervention in venezuela we have of course than the iran war so a lot of a lot of increased tension that continues to drive the need for for security obviously That in combination with the more and more distinct requirements on moving towards a European digital serenity, those two factors are strongly contributing to high interest, high growth and high market demand for European solutions. And we've sometimes received the question, what happens if the war or wars end tomorrow? Won't that change the narrative back again? Our answer here is quite clear. Absolutely not. This is a structural and sustainable change in demand for European cybersecurity. What has happened in the past few years cannot be undone. Not at least in the many, many 10 years from now. so that trend is here to stay we see this more practically in prospect customers partners and and larger customers that we have been you know approaching for a while um seeing their narrative changing or the mindset changing from curious interest in the beginning to concrete tech evaluations and actually procurements happening with clear requirements on moving away from the dependencies that Europe has of US and other technologies. And this is on a level that we have not seen before. Then again, it's a process. It doesn't result in revenues overnight from new customers, but the trend is there. The levels are there on a level that we haven't seen before. If we move over to our civilian business, and just as a quick recap, we consider CloudVestor to be a dual-use vendor, meaning that our products are equal suitable for the civilian market as for the defense market. In the civilian business, which represents, if we look at the last 12 months, it's the majority of Clavister's business. Around 70% of our sales is coming from the civilian business. It is clearly a central part of our long-term growth strategy. So we anticipate our civilian business to be a fast-grow market for Clavister in both near-term and absolutely long-term periods. We have been working actively on a gradual shift or gradual complement, I would rather say, from a more diverse type of sales operation within the civilian business. to a more strategic selection of customer segments, especially segments where the Swedish heritage, the Swedish technology, if you like, is important and where the geopolitical tensions are really important or drivers for those type of customers. This is a process that is a bit of a transitional process. It takes time. It is an investment in time, but it's clearly something that we see is building foundation and sets the conditions for building even higher growth and profitability. One concrete example of this is, it's just one example, but a concrete one, the extended partnership that we entered into with our distributor Arrow. back in the autumn. With Arrow, we've seen us establishing distribution in more countries than the countries we've been established in, being the Nordics and Germany. So we've expanded that to the Benelux countries and the Baltic states and to Poland as well. Now, in some of those countries, we are now establishing new partnerships with new resellers, new system integrators. We are adding our own local presence in terms of our own salespeople, our own pre-sales technicians and so forth to build those relationships on those markets. So gradually expanding the civilian business. That being said, if we just look at a few number comparisons, Going back to the same quarter last year, we had a significantly high volume of hardware deliveries, extraordinary high, I would say, which temporarily boosted the revenues. Keep in mind, we're getting one of spikes in revenues from hardware deliveries and then the gradual increase of software revenues coming from the term based licensing. If we don't look at this quarter, I would refer to this quarter in terms of hardware volumes to be a bit more normalized. And of course, that means that from a comparison point of view, it results in somewhat lower revenues in hardware deliveries in comparison. But I would say more to a normal level. If we, however, then look at the underlying base of contracts, so the software licenses and specifically in the civilian side that continues to develop positively. So that is a growth business. And this is clearly visible in our increasing ARR. If we move over to the defense side and a bit of a repetition from for those who were in the Q4 call as well. We were awarded a significant contract, a strategic contract by the Norwegian Defense Material Agency in Norway in mid of January. This is a contract that is part of a large digitalization program called MIMA. It's essentially the full digitalization of the Norwegian armed forces. And I'll come back a little bit to that as well. We consider this contract to be a breakthrough contract. It's a game changer contract for Clavister, not only for defense, but it sort of sets the tone and it gives the credibility also in other civilian, larger type of business prospects. The actual contract includes development. It includes delivery of our standard products. It is mainly a software deal, which means that obviously giving very substantial margin contributions as well. After the initial delivery, we're looking at a four year maintenance and support commitment, after which, of course, we expect the relationship with this customer to continue for many more years. It's a system that should be active for very many years. The deal itself, the order sits at 280 million SEK, that's the committed order value. We have already started delivering on the project during Q1, which means that we see both revenue and margin contribution from the project already. And the project, as mentioned, is supposed to be running for a few years after after this initial start and then moving over to maintenance and support phase and or further development. That's to see. I mean, it's a system that will expand and live for a long time. if we look at the actual sort of what are we delivering this this becomes a little bit of an educational part but i think that's super important for the understanding of what we're delivering um to get an insight how that could potentially you know lead to growth business elsewhere uh going back a bit in in history again this is part of the large mime program it's a you know double digit billion Norwegian Krona program in digitalizing the Norwegian armed forces. Many years back, the special forces in Norway implemented or developed their own in-house communication system to be able to support high levels of mobility, high levels of secure communication and so forth. That system was rolled out. It's still in operation and it's really, really appreciated by the Norwegian armed forces. However, coming up to end of 2022, there was a political the political insight, if you like, or a political decision made that the Norwegian armed forces, they should be the users. They should not develop solutions. The industry should develop solutions. So when looking at the next generation of this system, they essentially turned to the industry and started a significant, large procurement process where we and many other vendors and honestly, Clavister was by far the smallest vendor. We're up against many, many large international defense contractors. So a long procurement process which ended in end of 2025 and beginning of 2026, with Claverstreet then being awarded the contract in, again, in strong competition. What is it then we're actually delivering? Well, we refer to this as the Tactical Core Network System or TCNS. So in essence, you can see this as a brain or the brain of the network connecting all units, all soldiers, all vehicles, all tactical posts, all of the units within the Norwegian defense. are connected through the Clavister system. So obviously it's a prestige project from that point. Everything is connected, everything is dependent on the quality and the performance of the Clavister solution. To give a bit of sort of more flavor to it, you could see the Clavister Tacticals core network system as the backbone, as the spine, if you like, of the entire network in Norway. So on the one hand, you have a number of so-called battle management systems, a few examples on top. Could range from Norway's own battle management system. It could be Saab's battle management system. Could be any of those. We are agnostic to any system. uh at the bottom of the picture you see a number of tactical radios and other connectivity links could be commercial 5g networks could be private 5g could be starlink or other satellite links but also common military radios or digital radios from kongsberg or elbit or bitium or or trellisware or or others we are again agnostic to to the system so What we essentially become here is a system of systems that are interconnecting all other systems into one cohesive system that sort of interconnects all the units, all the operations in the Norwegian army. If we look at some of the benefits of this, first of all, it brings an always connected type of philosophy to the network. So regardless of if you're behind a forest, behind a big mountain in the Norwegian fjord, wherever you are, you should have connectivity. That's obviously super important in this highly digitalized environment. But even more so, it's a nationwide communication. So whether you're in the south of Norway or in the top north of Norway, you're connected to the same system, you have the same capabilities and the same communication abilities as everywhere in the country. Furthermore, one key aspect of this is so-called interoperability, which means that whenever Norway is running federated missions, NATO operations, NATO missions, the system as such is fully compliant with other NATO systems. So essentially, you can have a group of vehicles belonging to different NATO nations, and they are immediately able to connect and communicate. And finally, as one final example, also a global access. Obviously, NATO countries, Norway not excluded, is participating in a lot of global operations or global missions. If you have soldiers or units elsewhere on the planet, they are still able to communicate. They are still forming a part of this national network in Norway. So many operational benefits and a lot of, of course, security and connectivity demands on the system. If we then move slightly from the actual contract in Norway and look at the defense sector in more general, If you recall from Q4, we had a number of supply chain challenges with hardware deliveries that were postponed into the new year and thus negatively impacting our fourth quarter. Now, we have been working very thoroughly with our suppliers on this matter in the past months and quarter, and are happy to see that we have been able to mitigate many of those supply chain challenges in this quarter. We are, of course, monitoring this situation going forward. We are ramping up our deliveries. Again, from our order backlog, we have large volumes of deliveries coming up. So it's highly, highly, highly important for us to monitor this and make sure that we have long-term stability now in our deliveries. But so far, looking good. With that, moving over to the numbers and David.

Yeah, thank you, Jan. So we're looking at a record high order intake and quite obviously so given that we won the contract in Norway of 280 million SEK. So that is clearly boosting our order intake in this quarter uh comparing to to q1 last year which was in itself quite strong with with a quite large bae order there is there is not no such bae order in q1 this year so so but with this uh this is clearly our our largest order intake quarter so far and then leading to an order book of 640 million second to put that into perspective that's almost three times last year revenues so so that's a significant um support for for revenue growth going forward in the coming years and i think it's important to reiterate that this is a committed order book with a delivery timeline tied to it so so we have a you know a strong certainty on how this order book will translate into revenues over the coming years Then seeing then that the order book that we're sitting with are able to fuel net sales growth in this quarter. And I think important to say, Jan said it, and I think it's important to say it again. The Norwegian order is starting to support net sales already in Q1. We don't see net sales support from this in January. This project is being ramped up in February. continuously ramping up in March and still growing somewhat here in Q2 as well. So the full net sales support that you would see from a contract like this is not yet visible in our P&L. And we will come to looking at kind of the civilian and the defense business, how it's performing in Q1. But we can say that, okay, the defense business has been very important in driving net sales growth in this quarter. Ramping up the Norwegian contract is one reason. The growing deliveries to the BAE system is another. There are others as well, but these are the two main drivers and then able to recuperate a lot of the We did profit warning Q4 because of the supply chain issues that John talked about. We have been able to deliver a lot of that delay in Q1, which also generates support and growth here. Then comparing the civilian and the defense business, the defense business are showcasing a very large growth in Q1. I mean, more than 300% net sales growth in the defense area. But important to state, the civilian business still is 70 of our revenues and with somewhat i think this is something we can elaborate a little bit on because this is important to to look at and understand that clavister are seeing a robustness in the civilian business. Comparing to Q1 last year, then we saw a more than 100% growth of hardware deliveries in Q1 2025. And as Jan said, we have more normal levels of hardware deliveries in this quarter. So that might give the impression that the civilian business is shrinking. It is not, but it does not have the very large revenue support of one of hardware sales that we saw in Q1 last year. but saying that it's important to say that there is more growth capabilities in the civilian business that we're showcasing here and now and then why while Clavisor is doing a transition in building larger markets as Jan were talking about building larger partnerships working with larger end customers and this takes time so if we're moving also sales resources in creating a better foundation for larger growth going forward and to us It is important to make this investment and give this investment some time so we're able to capture growth in larger customer segments. And that, of course, have a somewhat dampening effect on the growth capabilities here and now. But we believe in making these investments to create a larger growth vehicle in the civilian business going forward. And we see good proof points of this. And I think just mentioning this very quickly. Some time back, people were talking about European alternatives, then going to investigating uh european alternatives now and we are in a phase where we more do more technical proof of concepts signing new partners building a distributed landscape and and seeing active procurement happening in a civilian era not making promises on where the growth will be in a quarter or two quarters from now but but we have a situation where the european market is moving from curiosity to action and this over time will benefit clavister and our growth capabilities ar wise We're still seeing and continuing the growth trend in ARR. And that means that even though we don't have the hardware support compared to Q1 last year, the installed base of the software contracts is growing. Then, of course, the ambition is to grow this faster. And I think we will. But this will take some time and just reflect on what John and I said before about how the civilian business is evolving. Profit-wise, I mean, we're seeing a 45% increase in our gross profit, maintaining or showcasing a strong gross profit margin in this quarter. And then why? Well, there are three reasons to why the gross profit or the gross margin is this strong, despite the high growth level. One is, of course, that the contract in Norway is a software contract, meaning that there is really there are no third party components. There are no hardware. So the sales here have more or less a close to a 100% gross margin. So that in itself gives support. On the other hand, we were able to recuperate a lot of the delays to BAE in Q4, delivering a lot of that now in Q1. That has a dampening effect, but the strong gross margin in the Norwegian contract boosts this. Then the civilian business, which was a bit lower on hardware volumes, then of course generates a strong gross margin on its own. So there you see a good margin support in the civilian business as well. So when you take these three effects together, we're landing on a gross margin that is above our target of 80%. So this is something that we're happy with. On the operational leverage, we're seeing a continuing trend of maintaining reasonable deltas between our net sales growth and our OPEX growth. But there are a lot of things to talk about here. OPEX growth is 22% in the quarter. However, We are burdening Q1 with one of costs related to winning the contract in Norway. These are 3.6 million. So if you take that into account and also adjust for non-recurring items, we are actually sitting with an OPEX growth of 11% compared to a net sales growth of 35%. So I think we're able to grow and grow with cost control. And this, of course, have been a key focus for us for quite some time. So glad to see that. And on a profitability level, the growth that we are demonstrating, the gross margin and the gross profit expansion, is then leading to profitability increases as well. So on an adjusted EBITDA level, we're sitting at 15.1. And then worth mentioning here, those 3.6 million that being one-offs related to Norway, they are not in this number. Would you adjust for them? We are at 18.6, but we're not adjusting EBITDA with the one-off effects for Norway. So that's important to state. Staying with an adjusted EBITDA margin of 20%, we are seeing that we're able to grow our EBIT levels of sitting at 3.6 million and leading to a net result of 1.4 million compared to a positive result last year of 3.2. So let's just a few words on that. Last year, we still had the debt to EIB and that debt was in euros. So Clavistry was subject to large effects in our financial net. And we had a substantial revaluation last year q1 where the sec were improving versus the euro so that gave a very positive accounting effect impacting our financial net but if you adjust for that this is actually the first quarter where the clever is your business is generating positive net results without support of one of accounting effects so this is actually the performance of the business that's generating a positive net results and that's i think is is a clear highlight for us as a company