Sectra AB (publ)

Welcome to our three months, quarter one presentation for this fiscal year. We will begin with the interim highlights by me, and then Jessica will take over and take the financial development. I will briefly mention sector way forward, and then we have a Q&A session, which is a little bit different this time as everyone can ask things online. But we'll come back to that when we come to that session. Our business operation, for those who are new to us, most of you are probably not, but just in case, our biggest business is imaging IT, which handles images in hospitals. All medical images are handled by us, if customers want it, but mainly it's radiology. Radiology is the clear dominant part of all of our imaging IT, and imaging IT is the dominant part of ZECRA. And the second largest is secure communications, which was actually Sector's origin. Sector stands for secure transmission. That is encryption and systems for transfer of highly confidential data on the national security levels. And then we have business innovation, which is our greenhouse for future successes or sometimes we have to close them down a little more. Business innovation products is to be either become a business line it can be sometimes we sell sold off or sometimes we close them down if we do not see success coming. Coming back to this we have medical education IT which is an interesting area of medical professionals live also in a rapidly changing world and they need continued education. We started that area mainly for education of medical doctors in medical school etc. It's increasingly for education of all practicing, partitioning doctors in the field. and we recently got the contract for all of Norway where we are to supply all of Norway regularly and pathology continued education from a cloud platform. It's a pure cloud environment. We have orthopedics IT which provides special tools based on images for orthopedicians planning surgery and follow-up after surgery. We have our new area genomics IT which is about the DNA and modern medicine especially in ecology is very much about DNA sequencing but it has not been reproduction we have production systems where production specialists for medical so this is not images but it's closely related to images and we do that in genomics IT and then we're research part mainly doing AI research In sector communication, we also have a growth area in critical infrastructure, IT security for critical infrastructure. And in imaging IT, we have one area that we moved from the business innovation group into imaging IT about 10 years ago for digital pathology. We add that to radiology. And a new area is outputs. All diagnostics must result in a result. and that is documented in a report and that report needs to be efficient needs to be tightly integrated with imaging components especially in radiology and that has been dominated by other companies before especially in the US but we are now creating tools where you can sit and interact with the report based also a lot of AI there create very efficient diagnostic reporting directly when interacting with him Highlights from the quarter. Our contract order bookings went down, but we had an exceptional first quarter last year, and our contracts are now very large and very long in time, and therefore we are not overly concerned about that. The book-to-bill ratio of 12 months is still very healthy. Net sales rose by 26%, and profit per share rose by 55%. We are transforming into as a service model, software as a service. And instead of paying upfront as customers did before for big license sales, they pay us now while they use the product. That means delayed time or longer time till we begin to get revenue from order, but also much longer revenue stream long-term. Long-term, this is very beneficial for both customers and vendors as well. The cloud recurring revenue is the part of recurring revenue that we deliver over the cloud. And that predominantly is in the US, Canada, UK, but also to some extent in Europe. And that rose by 75%. It's now beginning to be a significant part of our revenues. Recurring revenue in general, which includes the cloud recurring revenue as a part, rose by 32%. That includes normal service contracts and a few other things as well. And the churn, the return revenue that we lost, which is a very important factor. If you have customers who pay for usage, you don't want them to stop using your system. The churn was 0.5%, which is a very good figure. We don't lose many customers. We lose some, but not many. The financial targets for the groups, stability, equity, assets ratio. We send critical systems, both in cybersecurity and in medicine. If our systems fail, they also come to a grinding halt. Imaging is a critical part of modern healthcare. And then they look, the customers do not want to buy that from an unstable company. It's dangerous. So being a stable company, financially solid is important. And we have an equity assets ratio of 30% target. We are ways above that at 52%. Profitability, which is a second. These are prioritized in the order one, two, three here. The second highest prioritized target is profitability. operating margin. That should be about 15%. We're well above that, 21%. Both of these are hygiene measures. The most important figure, but after the first two are fulfilled, is growth of profits per share. So every share growth over a five-year period should be 50% or better. We are currently ways above that at 90% growth. In imaging IT solutions, our largest area headed by Marie-Eriksson Treger, we are leading that cloud transition. We have large contracts that we have published over the last two or three years. They are now in rollout mode. We are rolling out, we are installing a hospital a week or something like that. Some of these contracts are very many hospitals in one single contract. So the deployments go over seven years. Two health boards in Scotland. Scotland was one of those large. Two health boards are now live. And then a new one I added all the time. And in the US and Canada, we have very large contracts, both in Quebec, which is public, and some other operators in the US, which we are not allowed to disclose who they are. But they are very large. These are all now in delivery. all of the big contracts are in delivery. We added a few every month or we're adding many every month. We also have a large interest with diagnostic reporting that I mentioned before. The output of diagnostic is a report and that should be Include images and be very efficient to produce, and it contains a lot of AI in making them as well. We are revamping that and releasing a new diagnostic reporting system. Initially offered mainly in the US, but we have large interest all over the world. That is a significant part of radiology business that is up for grabs if you can do it. But there are other competitors there than we normally see. In sector communications, we are supporting national resilience and total defense preparedness. And of course, these are now with the crisis in Europe and Ukraine, the interest and growth has gone up in that area a lot. We had a production problems in Q1 that meant the factory came to a grinding halt for a while. That is now resolved. We have begun deliveries again, but that impacted Q1 a lot for communications. That is now resolved. And of course, the crisis in Europe drives demand. In general, cybersecurity is a rapidly growing area, not the least for AI that I will come back to later. Then I will leave the word to Jessica, who will go into the financials.

Thank you. Good morning and thank you for joining our call today. We are reporting a first quarter of strong growth in recurring revenue and in operating profit. Before I walk you through the financial development, I would like to highlight a few changes that we have made to the format of our interim report. So first, to improve readability, starting this quarter, we report amounts in millions without decimals, unless otherwise stated. Secondly, we have added external sales by segment, and we have expanded the table in the six to reflect this change. Thirdly, we have expanded the income statements by quarter, and we have added cash flow statements by quarter. And we hope that these changes will add value to the readers of the reports. So order intake, we reported 699 million of contracted order bookings in the first quarter. a decrease of 47% year-over-year. And despite the lower figure, demand for our solutions remains high in all operating areas. And as you heard Torbjörn say, given the long-term nature of our contracts, we expect quarterly order intake to continue to fluctuate significantly going forward. And the rolling 12 book-to-bill ratio is at 1.9. We did not sign any individually large orders this quarter, but we saw increased order intake in Australia, Norway, Germany and Portugal. Our net sales in the first quarter amounted to 963 million, corresponding to an increase of 26% year-over-year. And the continued growth of usage or use of our services is driving the recurring revenue growth up 32% year-over-year. We also saw non-recurring revenue increase year-over-year by 11%, mainly from licensed revenue, migration and professional services delivered during the fortress. and our cloud recurring revenue keeps growing. We increased by 75% to 315 million. And for the first time we saw rolling 12 that the cloud recurring revenue is exceeding 1 billion. Currency movements had a small negative impact on sales in the quarter, and the pattern for recurring revenue churn is unchanged. Please note that the chart on this slide shows the changes in external sales, whereas in previous reports and presentations, we have included internal sales as well. Imaging IT increased sales by 30% year-over-year. And the main driver is volume, increased usage of services and additional deployments of new sites. The share of recurring revenue in this area is high. It was close to 78% in the quarter. Sales in secure communications decreased by 4% to 89 million year-over-year. following continued impact from the delays in delivery. And then in business innovation, sales in business innovation primarily go through the sector one service in imaging IT. As a result of that, we will see limited external sales reported for business innovation. Looking at our geographic markets, the U.S. reported the by far largest increase in sales. All other markets contributed to growth, except the U.K., where we saw temporary decline year over year. Our operating profit increased significantly year over year by 61% to 191 million. The operating margin improved to 19.8 compared with the 15.5 driven by the development in imaging IT. Profit was held back by secure communications performance in the first quarter and also partly by currency headwind. Operating profit variations have leveled out over the past four quarters, which is according to expectations transitioning to become a service provider. With large individual contracts, and also on-prem deliveries, there may still be quarters deviating from this trend. Imaging IT increased the profit by 77% year over year, and the margin reached 23%. And again, the driver in this area is volume. more medical images through increased usage and also additional deployments and add-on sales. We also note that the rapid growth in this area requires investments, investments to further scale and refine our offerings, our organization and also our ways of working, while at the same time maintaining a strong focus on quality and security. Secure communications reported an operating profit slightly above breakeven. Serial production started end of last fiscal year, but as already commented, it was on a small scale in Q1. Our cash flow from operations amounted to 3 million in the first quarter. compared with 118 in the corresponding quarter last year. Our underlying performance has improved, but the changes in working capital had a negative impact on cash flow, mainly temporary timing effects between quarters. And we ended the reporting period with a cash balance of 1.8 billion, and based on our strong financial position, the board and CEO propose a total dividend of 443 million to the shareholders and for approval at next week's annual general meeting. That was my last slide.

All right. Thank you, Jessica. Going forward,