Earnings call transcript: Clavister Q4 sees strong order intake despite challenges

Published 13/02/2025, 10:20
Earnings call transcript: Clavister Q4 sees strong order intake despite challenges

Clavister reported a robust order intake for Q4 despite a year-over-year decline, as the cybersecurity firm continues to expand its product offerings and strengthen its position in key markets. According to InvestingPro analysis, the company appears to be currently overvalued based on its Fair Value assessment, though it has shown impressive market performance with a 70.63% price return over the past year. The company achieved a 23% increase in net sales, reaching SEK 59 million, and reported a 14.4% growth in annual recurring revenue. Clavister’s gross margin slightly decreased to 77%, while adjusted EBITDA stood at SEK 11 million with a 17% margin. The company also highlighted its first quarter achieving the "Rule of 40" metric for SaaS businesses.

Key Takeaways

  • Clavister’s Q4 order intake was SEK 134 million, a 38.4% decrease year-over-year but a 72% increase in underlying business.
  • Net sales grew 23% to SEK 59 million, with a gross margin of 77%.
  • Clavister achieved a 14.4% growth in annual recurring revenue.
  • The company launched new cybersecurity products, including the Clavista Network 200r.

Company Performance

Clavister’s Q4 performance highlighted a mixed scenario of declining order intake year-over-year but significant growth in underlying business activities. The company’s focus on cybersecurity solutions for defense and energy sectors appears to be paying off, with notable product launches and strategic market expansions. InvestingPro data shows the company achieved an 18.85% revenue growth in the last twelve months, with a strong gross profit margin of 78.67%. The company maintains a relatively low market volatility with a beta of 0.71, suggesting more stable price movements compared to the broader market. Despite the challenges, Clavister’s net sales and annual recurring revenue showed solid growth, underscoring its resilience and adaptability in a competitive market.

Financial Highlights

  • Revenue: SEK 59 million, up 23% year-over-year
  • Gross Margin: 77%, a slight decrease of 0.5%
  • Adjusted EBITDA: SEK 11 million with a 17% margin
  • Annual Recurring Revenue Growth: 14.4%

Outlook & Guidance

Clavister is targeting EBIT positive results for the full year 2025, with potential net profitability by 2026. The company plans to maintain a focus on profitable growth, selective investments in sales and marketing, and aims to implement annual price increases of 5-7%. InvestingPro subscribers have access to additional insights through exclusive ProTips, including detailed analysis of the company’s financial health score of 2.17 (rated as ’FAIR’) and comprehensive growth metrics. Get access to over 30 additional ProTips and a detailed Pro Research Report for Clavister, along with 1,400+ other companies, to make more informed investment decisions. Clavister’s strategic initiatives include expanding its presence in the defense and energy cybersecurity markets, which are projected to grow significantly in the coming years.

Executive Commentary

  • "We are clearly on a growth journey," said David Nordstrom (NYSE:JWN), CFO, highlighting the company’s strategic direction.
  • CEO Jan Vesperi noted, "This quarter saw a very strong order intake," emphasizing the underlying business growth.
  • "We aim to be EBIT positive for the full year of 2025," added CFO David Nordstrom, reflecting confidence in Clavister’s financial trajectory.

Risks and Challenges

  • Market competition: Increasing competition in the cybersecurity sector could impact Clavister’s market share.
  • Economic conditions: Macroeconomic pressures may affect customer spending and investment in cybersecurity solutions.
  • Regulatory changes: New regulations in cybersecurity could require additional compliance efforts and costs.
  • Technological advancements: Rapid technological changes may necessitate continuous innovation and adaptation.

Q&A

During the earnings call, executives addressed several key topics, including a legal case regarding intellectual property rights infringements, sales commission structures, and strategies for mitigating churn rates. They also detailed plans for financial improvements, underscoring the company’s commitment to long-term growth and stability.

Full transcript - Capital Lease Aviation Plc (CLAV) Q4 2024:

Ora Gauter, Host/Moderator, Clavister: Good morning and welcome to our Clavister Q4 Interim Report presentation. My name is Ora Gauter and I will be your host for today’s session. And presenting the report today are Jan Vesperi, Clavister’s CEO and David Nordstrom, Clavister’s CFO. We will start today’s session with the presentation of the Q4 report and we will then have time for questions. So please use the Q and A box on the right to submit your questions throughout the presentation, and we will get back to them at the end.

So now without further ado, I would like to hand over to you, John, for the presentation.

Jan Vesperi, CEO, Clavister: Thank you very much, Aror. And again, welcome to this seminar. As usual, I would like to start with providing a bit of a summary of the quarter. So this quarter saw a very strong order intake. We reached 134,000,000 deck of order intake.

Extra positive is that the contribution of order intake came from all our business areas. In previous periods, it has been always one or sometimes two business areas that has sort of fallen behind. But this time, we have all business areas running on all cylinders, so to speak. That meant that our net sales grew with 23% and ended at 59,000,000 SEK. Important to mention as well is that our annual recurring revenue from our software subscriptions continue to grow, in this period with 14%.

So that provides, obviously, a solid base for our net sales generation going forward. This means as well that we have at the end of the quarter, consequently at the end of the year, an order book of SEK300 million mainly related to orders within the defense and telecom sectors. From a balance sheet perspective, we also agreed an accelerated amortization plan with the European Investment Bank during the quarter with the purpose of faster reducing our net debt and reduce the impact from our financial costs. If we look at one of our key market segments, the public sector in Europe, this is a sector that continues to represent one of our most important customer groups or customer segments, especially in these times where of course the continued, geopolitical unrest, including nowadays the uncertainties about the impact from the policies from the new US government clearly drives demand for domestic European cybersecurity solutions. In the pie chart to the right, you will actually see the the importance rated by the public sector in EU on cybersecurity being produced in Europe.

And as you can see, more than 65% or 65%, actually considers this an important or even very important aspect. And we continue to see this in the business discussions we’re having within this sector where previous years or or going even further back, this was basically not a topic at all, but it has moved to one of the top priorities looking at security vendors, which obviously is a a a very positive news for for Callister. A few examples within the public sector. So we were able to secure an important win from a law enforcement agency in Europe. It’s a software license win for 3,000,000 sec worth of licenses for firewalls with also an expectation from both sides to continue to expand with this customer also with other products from Telester’s larger solution and product portfolio.

Within our identity and authentication solution group, we also source quite several, quite many licensing agreements on that software within the Swedish public sector, especially within the municipalities, regions and selected state authorities or state agencies. If we look at an adjacent sector, the energy utility sector, this is actually a sector which quite recently has started to grow significantly from a cybersecurity investment perspective. So in recent reviews or research, we consider, energy utilities to be actually the fastest growing cybersecurity industry segment in Europe. So we’re looking at close to a 20% CAGR or 18% CAGR from this year through 02/1935, valued this year at SEK 30,000,000,000 in our target geographies only. So that would be, of course, Western Europe.

Why is this important? Well, I mean, if we look at the growth drivers, we have talked previously about the regulations, the increased regulations such as NIST two that drives not only awareness, but also strong demand on additional cybersecurity. Another growth driver is, of course, the technical convergence between the operation technology systems within the energy sector and the more common IT systems. And when you open up the typically unsecured or insecure operational technology networks towards the public Internet, for instance, you also open up for a completely new set of attack vectors. And this is one of the areas where where OT security becomes highly, highly relevant.

We’re addressing this with new solution offerings. And in this quarter, we also launched our, Clavista Network 200 r product, which is our first OT specific cybersecurity product. It builds upon many, many years of of our software development, shares the same software as all of our other firewall products. But it’s more purposely built packaging wise and hardware wise to suit the characteristics from that industry. Within the energy and utilities sector, our primary customers include the local, regional, and as well the nationwide energy providers.

So the energy sector is an important upcoming customer group for for Clavister, still within our focus being mission critical customers. If we move to another mission critical sector, the defense sector, one of the important news from the quarter was an additional contract that we managed to sign with the systems Heglunds for cybersecuring the CB90 infantry fighting vehicle. The contract was worth 53,000,000 SEK approximately and concern deliveries to one Scandinavian country and an Eastern European nation. We’re not able to disclose the the names of those nations. The contract extends over three years.

So this means that the initial deliveries are scheduled to start later this year, second half this year, and then span for approximately three years. With this latest agreement, we now have our security products integrated into CV90s that are delivered or being delivered to six different nations. So this has quite rapidly become an important revenue driver and revenue generator for Clavister. And with that said, it’s also important, I think, to emphasize that as up to this point, only deliveries to one nation has had an impact so far on our revenues and earnings. So additional nations, deliveries to additional nations will start providing revenue support for us from the second half of this year.

That’s, I think, an important thing to remember. Still within the defense sector, we see more and more interest for our cybersecurity products for the defense industry. One of the reasons for this is traditionally, if you look back a few years, when you had a lot of time and maybe not too much money and not too much budget, the industry was accustomed to to building tailor made solutions, purpose built just to fit maybe one specific use case or one specific customer. Now obviously with the, war in Ukraine and the increased spending and the need for accelerated deliveries, this has basically changed dramatically. So nowadays, customers, the defense industry and the end users, they prioritize standardization rather than customization.

This is good news for Cloudstr for a very simple reason. We are a standard product company. We’re not building bespoke or tailor made solutions for our customers. So our products for the military domain is designed are designed to be standard products. So this has gained quite a lot of interest when we when we address new prospects and new customers, sometimes with with with an impressing impressive question mark from the customer.

Wow. You have a product already. We can buy it already. This is great news. We’re not used to this.

So that’s an important benefit. Another defense related news from the quarter was our initial entrance into the naval or marine domain. So up until this point, we’ve been mainly located within the so called land based applications, be that vehicles or other types of land use cases. However, during the fourth quarter, we had the benefit of getting approved as a supplier to a very large Nordic defense company. Can’t disclose the name, unfortunately.

And entered a first contract with them for cybersecurity for enable or marine application. First contract worth 8,000,000 SEK, deliveries starting already now this first half. And we see this as an important step where we can basically start also replicating our cybersecurity technology to the to the naval domain as well. If we look at the telecom business, historically, as you all know, it has been a bit of a troublesome some market with a lot of consolidations, a lot of restructuring happening with the consequences that there hasn’t been too much growth in the telecom domain, and that has, of course, spilled over to our sales as well. I think we’ve highlighted in previous quarters that we’ve started to see early signs of recovery, and I think this fourth quarter continued on that trend.

So we did see even more signs of recovery and consequently for for the business we have as well. More practically, we saw a new contract for a North American mobile operator for our firewalling software as well hardware shipments and consulting. We have also been active. We’re still active in converting our legacy telecom installations that were mainly based on perpetual licensing contracts over to the more modern term based or subscription based contracts. That’s a, you know, quite lengthy type of of work, but but it obviously fuels recurring revenues for us going forward as we continue to success with with that transition.

So in the period, we had the opportunity to convert two of our Asian mobile operator customers to the new licensing model with also a, you know, subsequent order value of SEK 4,000,000 coming in in the in the quarter. In in June, we announced a business opportunity in UK. We had to announce that opportunity. It was an early opportunity. We had to announce that for regulatory reasons.

The customer at hand was three UK, the large mobile operator in UK. And since the announcement of that opportunity, there has been a merger process going on in The UK between three UK and Vodafone (NASDAQ:VOD). Since a number of months back, the competition agency in The UK has been reviewing the merger, and late in December or in December, they approved the merger. That’s that, of course, changes the dynamics with this operator quite a lot in terms of new organization, updated technology platforms, and so forth. So we can just conclude that the way that opportunity was structured last year is not longer the case.

So we will lower the expectations on that deal, at least in its original form, and take one step back and look at sort of how this merge evolves and what type of new business opportunities this translates to. With that, leaving the word to David to walk us through the numbers.

David Nordstrom, CFO, Clavister: Yeah. Thank you, Jan. So let’s start with order intake. Only looking at the numbers, we see a decrease of 38.4%, but let’s deep dive into that a little bit to give some more explanations to the underlying performance. As you know, we had quite large or very large BAE contracts in Q4 twenty twenty three, roughly SEK170 million.

We managed importantly to one yet one more, as Jan talked about, a BAE contract of SEK53 million in this quarter. If we adjust for them to see how is the underlying business performance, you will then see a 72% increase of order intake in the underlying business, meaning that this quarter, if we look under the large PAE order, we’re doing 80,700,000.0 in order intake, which is if we compare to previous quarters, well, that is our best performance in the underlying business by a large margin so far. So I would say then a good order intake from the business. We see order intake increases in all parts of the business. We haven’t really seen that all parts are delivering so clearly in the previous quarters this year, but in this quarter, all parts are doing that.

So glad to see that. We can move forward. Looking at net sales, there we see that the order intake growth that we were having is translating into a clear net sales growth of roughly 23%. Again, that growth is coming from all parts of the business, leading to clearly our strongest net sales quarter so far, almost reaching SEK 60,000,000 of net sales growth. So clearly, the trend is there and the trend is slowly but steadily bending upwards in terms of the growth trajectory.

So pleased to see that, continue with that. Then looking at the gross profit sorry, the ARR. ARR wise, increasing the growth trend, landing at 14.4% increase in ARR. We talked about this a bit in Q3 where ARR growth was a little bit slower. We then said that we saw quite clear growth in Q3 and especially in the later half of Q3.

And just as a reminder, we record ARR when a customer has started a license. So from the time when we sell a license until the customer have installed the license and then started it, it is a time lag of roughly thirty days. So we said that we expected ARR to increase in Q4 on the back of the development sales by thing Q3. And we’re then moving into 2025 with a solid foundation of ARR contract, but also with sold but not yet started contract. So glad to see that then we’re moving into this year with our largest ARR base so far combined with our largest order book so far, which creates a good foundation for delivering growth in 2025.

And then we talk about gross profit. So gross margin wise, we land around 77% in this quarter, a decrease of roughly 0.5%. Gross profit wise, we see clearly growth with more than 25%. So we are translating our order intake growth to net sales growth, turning that to both improved ARR and improved gross profit. Then from a gross margin perspective, let’s look a little bit into where our growth predominantly coming from.

Well, it is our more margin weak parts of the business that stands for most growth in q four. We see a lot of growth from the defense part of the business, but also from our civilian firewalls. And these are the business areas with a little bit weaker margin profile. So if from a Clarity perspective, our I’m business is with the, on average, the strongest gross margins, followed by telecom, where we typically have more software in the sales mix than hardware. Then comes civilian firewalls.

And lastly, up until today at least, our defense sales, where we see a more hardware centric delivery profile, even though we have pure software deployments as well to our customers. So given that sales mix, I would say that a 77% gross margin is clearly quite strong. And as you know, when Clebsdrew is growing, we have a short term impact on gross margins as we are leading with hardware, to enable new customers to run our software. And here, the hardware centric businesses are leading our growth. So hence, we see this.

Operating leverage. In this quarter, we see some more cost increases, increasing with 16.3%. Clearly, growing slower than our net sales that’s growing with 23%. But I think let’s talk a little bit about the OpEx increases. Because when we have this big order intake increase in the underlying business of 72%, that has an impact on sales commissions.

So the clearest cost driver in this quarter are related to one off effects due to sales commissions based on high sales growth in the quarter. The second impact, which is also a one off, is the fact that we had our court proceedings related to the lawsuit of what we believe are our IPR infringements in our identity and access management business. We had court hearings in October. That led to, of course, costs related to that, roughly SEK 2,000,000. They are also not structural costs that we carry with us.

They are one time effects in this quarter. So there are some underlying cost increases, of course, as Clavity is growing, but the majority of the costs are one time effects. Then talking a little bit of what are we seeing ahead of us, we are, we have been talking about ourselves for quite some time as a turnaround case. That turnaround from our perspective is going well. We’re clearly taking steps, and making Clavister more profitable.

And we see more and more stability in our growth. So we are clearly on a growth journey. We are not yet relabeling ourselves to a growth case, even though we’re nearing that point. So you that have been with us for some time know that Clavicero has been in a cost reduction phase that then moved into a cost control or cost stability, maintain cost phase. And now we are moving over into a phase that was more, say call it, focusing on profitable growth.

And in order to reach that, of course, cost will be a high focus to make sure that we have control over cost. But in order to grow and grow with profitability, we will do selected investments in sales, predominantly sales and marketing going forward. So you should expect to see growth growing a little bit, but slower than our net sales growth. It’s clearly slower, but still growing. And EBITDA, growing with almost 56% in this quarter.

As you know, there is a seasonality in our business where Q3, I would say, always shows the best EBITDA profile depending on the cost structure of the business. But comparing quarter to quarter, we see that the EBITDA growth journey in Clavicry continues. We’re landing on roughly 11,000,000 in adjusted EBITDA, raising our adjusted EBITDA margin to 17%, comparing to 14% from last quarter. So I would say the trend line of improving EBITDA, it is clearly there, even though this quarter is weighed to a certain degree with one off costs as we talked about. And maybe a little bit unscientific, but still looking at the rule of 40 mark as a quality stamp of a SAAS business.

This is, I find, worth mentioning that this is actually the first time that the combined net sales growth and the adjusted EBITDA margin in Clavister is at that 40 mark. So glad to see that because, of course, if we say that we’re chasing profitable growth, seeing that we’re growing the business and also growing the gross margins sorry, the EBITDA, well, very important. So glad to see that. And then looking at, okay, our performance versus our ambition, we have had a target of saying that we would reach 20% or above 20% net sales growth. In this quarter, we’re landing on 23%.

So reaching and overperforming versus the target. Gross margins, not entirely on the 80% mark, a little bit under. But as said, we are delivering a solid growth in the quarter. And the growth predominantly comes from our hardware centric businesses of civilian and military firewalls, which dampens the gross margins a little bit. We had a target of 20 or above 20 adjusted EBITDA margin reaching 17.

So not fully reaching that target. But the trend line is there, so we’re step by step, growing our EBITDA margin. And operational cash flow, we said it would be positive, and it is positive, so reaching that target. Saying just very shortly, though, that the growth has impact on our operational cash flow where we’re binding quite a lot of accounts receivables. But that is a temporary growth effect.

So should see more support in coming quarters from that. So I stop there.

Jan Vesperi, CEO, Clavister: Thank you, David. So let’s leave back to you, Arora, to see if there are any questions from the audience.

Ora Gauter, Host/Moderator, Clavister: Yes. I have a few questions from the audience. So let’s start with the numbers while we’re talking about them. Yeah. Impressive order intake and growth, but do you see profitability coming soon?

David Nordstrom, CFO, Clavister: Well, that well, yes. I mean, first of all, I would say, as we just talked about EBITDA, we see that we are in a growing EBITDA trend. So I would say profitability is constantly growing. If you’re looking at profitability from an EBIT perspective, Q3 was our first EBIT positive quarter. If we, maybe we could go back to the EBITDA picture.

Just look at that very briefly because I think that could help in the explanation. You see that the first quarter that we shown positive EBITDA was in Q3 twenty twenty one. Then it took three quarters until Q3 twenty twenty two. Then we came in and became EBITDA positive and we have been EBITDA positive ever since. Not saying that we should see exactly the same kind of cycle with EBIT, but it’s still likely that you can draw some conclusions from how, EBITDA went from negative to be then steadily positive.

I think EBIT will follow a certain kind of trend. So I expect us to and we say that also in the report that we aim to be EBIT positive for the full year of 2025. This is something that we firmly believe in. And then okay, and then talking about profitability as in net in showing net profitability also after the financial net, I think a likely scenario is that we will see that in 2026. And given the large amortizations we have done on our debts, especially the EIB debts, during Q4 and we aim to do that and back of the T09 warrants, we’ll do further repayments.

Of course, the financial net will be burdening us less. So I think based on that, ’25 clearly landing on positive EBIT, ’26 very likely landing of positive net results. So I hope that quite a bit lengthy, but I think that question also we need to kind of talk that through. So if that wasn’t a good enough answer, then come with a follow-up question.

Ora Gauter, Host/Moderator, Clavister: Right. We have several questions about OpEx that is a bit higher than expected. Mhmm. So someone wanted to know the exact sales commission during Q4, the extra sales.

David Nordstrom, CFO, Clavister: Yeah. Well, we can start to say that this, that we have, typically, as a salesperson in Clavister have a fixed part and then you have a smaller flexible part. That part is associated with, typically it depends a little bit between the sales teams depending on, okay, what is the profile of the sales in that sales team. But if we take the civilian firewall team as an example, you have that divided into, the flexible part into ARR growth and order intake growth. And you have a target to say, okay, in order to reach your full compensation through the full year, ARR needs to grow with this amount and order intake with that amount.

And of course, if the team is overperforming and reaching better and far better growth than what the target is, the commissions are also then growing correspondingly. My personal view on that is as long as the targets are set on a relatively appropriate level and you have over performance versus that targets, which we had in clearly in Q4, then sales commissions will be higher. Then also we sit with very motivated sales staff who clearly is chasing more growth. And of course, when we then go into 2025, the targets are adjusted and higher, meaning to only maintain the sales level we had during 2024 will not generate the same commissions, then you need to grow more. So I hope, John, do you want to add something there?

No.

Jan Vesperi, CEO, Clavister: I think that’s a good explanation. I mean, clearly, we we tend to benchmark our sales commissions with the industry in general, and I think we’re at a a reasonable level.

David Nordstrom, CFO, Clavister: Yep.

Jan Vesperi, CEO, Clavister: And, of course, I mean, we we’d like to pre premier salespeople that are carrying a lot of weight into growing the business. So, yeah, completely natural effect in Q4, I would say.

David Nordstrom, CFO, Clavister: Yeah. And just adding one thing, because, of course, we have been adjusting sales commissions. I mean, throughout the years. I think today that we are landing on flexible compensations that are driving the right behaviors, that are creating value for the company, but also stimulating salespeople to go the extra mile to trying to close as much business as possible.

Ora Gauter, Host/Moderator, Clavister: Another question about OpEx. How do you see the legal and court costs going into 2025?

Jan Vesperi, CEO, Clavister: Well, I mean, I could start and you could compliment David. So, clearly as, as David mentioned, we had, the court hearings, court proceedings on the legal case we have been, running mainly in in 2024. The court ruled against us, to our surprise and to our advisors’ surprise and to actually many legal advisors’ surprise. So it should come to no surprise that we are intending to, of course, appeal the the verdict. Because of all the preparation and all the work that went into ’24.

But we feel that this is a way too important issue to just leave the court order or court verdict hanging as as it was. It’s important not only for Clavister, but basically for the entire Swedish software industry. Because if the verdict stands, then basically anyone could could could behave very, very bad, to say the least, in the software industry and get away with it. And we don’t want that to to continue. So we’re we’re most likely appealing the case and it will drive some cost.

Ora Gauter, Host/Moderator, Clavister: Thank you, John. A question about ARR that took a big step during q four. Do you see the same momentum in in ’25 or was it a seasonal or is it usually a a stronger quarter for adding new contracts? Well,

David Nordstrom, CFO, Clavister: I think typically, we have strongest sales in q four. So meaning if but everything we sell in q four is typically not started in Q4. That means that you will go into the next year with sold but not yet started contract. That would give us support in the coming periods. To talk about seasonality, I think what we can say is there is one quarter that is weak from an ARR perspective, and that is Q3 due to a that is a vacation period.

So we tend to sell less, especially when we sell less in June, maybe not so much, but July and August. And of course, people are away, so they’re not starting that many contracts and since a typical lag of thirty days, the sales we have in September has not tied to be not yet kicked in. So Q3 is a weak ARR quarter. The others there, you don’t see the same seasonality, I would say.

Jan Vesperi, CEO, Clavister: I can just compliment as well that if you look at the ARR development historically and you compare that with our net sales growth trend, you see some similarities in those curves. And I think it’s reasonable to claim that if we maintain a fairly similar product mix going forward, the ARR growth will follow the same trend as the net sales growth is doing. However, some quarter, maybe two quarters behind, given when contracts are sorted and so forth.

Ora Gauter, Host/Moderator, Clavister: Can you give some more information on the 4% churn? What is the main reasons that customers churn and what churn level are you aiming at?

David Nordstrom, CFO, Clavister: I’ll start from the end. We have not clearly expressed a churn target, so hard to answer exactly that part of the question. Reasons for customers churning is there are a couple. You might be aware that we are doing a bigger focus on selected geographies in Europe. So historically, if you go back a couple of years, Klavser had sales representatives in other markets outside of EU.

We don’t have that, meaning if we look at our sales team, the biggest churn is in markets outside of EU, because we are not focusing on that. We don’t have presence. We maintain that business at lowest possible cost from Sweden. So that is churning more. I think that’s quite logical.

I think those churn levels are also coming down because the transition has been going quite well to Europe. Not saying that we’re not helping customers in other parts of the world. We do. But our focus and where we have staff is in Europe. Then, other reason for sharing typically, I would say, is we have an indirect sales model.

We’ll sell through partners. So say for the sake of argument, we have a local municipality. They are procuring firewalls through a local partner. They do a tendering process, change the partner. That partner have no clients or competence, but have their competence on a competitive the brand of a competitor, then that represents the most likely churn risk for us.

So then, of course, it depends on how strong is the relationship with the end customer and do they have a champion there. We’re clearly requiring them, the partner, to keep the installed firewall base. And that differs from case by case. I think this, you know, the geopolitical tension in the world, and we clearly articulates our values of being Swedish, European, not Israeli, not Chinese, not Russian, and not American, well, that helps. I think that is that that will, to a higher degree going forward, protect against churn.

So.

Ora Gauter, Host/Moderator, Clavister: Thank you, David. A follow-up question about the lawsuit. In case you finally lose the legal case, do you see an impact on Clavister sales going forward?

Jan Vesperi, CEO, Clavister: Right. I mean, obviously we hope that we don’t lose, but, but we have to be prepared for that, that potential. I think it’s important to be clear that the legal case is not about whether or not Clavister holds the rights or the, immaterial rights to the software. It is about someone else has been infringing on our software. So even in the case we would lose, it is still our product.

It’s still our software. We have still all the flexibility and all the motivation, of course, to sell it. The drawback will, of course, that there will be a competitor on the market that has been able to build a similar product or a competing product, with less investments. I mean, that’s that’s the clear consequence. In that case, we have and I think it’s important as well to to remember that we have a good brand, especially in the Swedish market for identity solutions, and that brand remains, of course.

So I think the clear answer is that it will not limit our possibilities to sell, but we have to be as good as we were before and even better to improve our growth rates in that area.

Ora Gauter, Host/Moderator, Clavister: Another question about OpEx. How should we view OpEx costs and by how much will financial costs decrease after the repayment?

David Nordstrom, CFO, Clavister: Yeah. So OpEx, as we, I think, tried to to say, a lot of them are are are one offs. The the underlying cost in in Clavister will likely grow, during during 2025 a little bit faster than they did 2024. We’re not talking about dramatic increases in cost. But in order to drive more sales, we will be looking at selected sales investments in having some more salespeople investing more in marketing so we can drive the Kavitha brand more, build more brand awareness to generate more sales, doing also kind of, you know, SDR telemarketing, SDR services, and so more to drive more sales pipeline.

So and of course, that have some OpEx impact. The larger impact we saw in Q4, that was related to, I would say, an over performance sales wise with 72% order intake growth in the underlying business. Well, if we are delivering consistently on that level, well, that will have a higher impact of cost, but an even higher impact on that sale. So then on the financial part, on the financial costs, a, we repaid we did prepayments to EAB of accelerating repayments of €6,000,000 and then doing also the contracted repayment of €800,000 that we had previously agreed with EIB that would be in Q4. So total then €6,800,000 The impact on the financial net from that on a full year basis is roughly SEK 8,000,000.

Then we will see some additional decrease as interest rates are dropping. So that will have an additional positive effect, maybe in the range of 1,000,000 on a full year basis. And then depending on the outcome of TO9, that will further decrease the EAB debt with, I would say, €4,000,000 to €5,000,000 But that’s totally dependent on, of course, what is the valuation of the share at that time and the uptake from investors. So and that then will have an additional impact on positively on financial costs.

Ora Gauter, Host/Moderator, Clavister: Thank you. Let’s take a break from the numbers question and talk about nice growth in the energy and utility market. Can you describe how you work to position yourself to be a major supplier? And what targets do you have

Jan Vesperi, CEO, Clavister: in the sector? I mean, one of the reasons why energy and utilities is a selected focus markets for, for clouds. It’s not a new one. I have to say, if we move back a couple of years, we started our focus journey, looking at the various type of industries that are within the critical infrastructure, if you like, or the mission critical applications market. Public sector clearly stood out as one important target for Clevester given, the customer base and, the geopolitical situation.

But adjacent to that came energy. Reason, quite a number of reasons. One being purely structural, where many energy providers, especially in The Nordics, as well to some extent in Germany, are owned or partially owned by, by government or by by local municipalities. So that makes an excellent case for upselling or cross selling into that industry. So we have already quite a strong presence within the municipality, sector, for instance.

And by then complementing that sales with products and solutions that are more geared for their energy companies. That’s that’s one of the reason and one of the possibilities we have to position ourselves there. Secondly, I think one of the strong positions for energy and utilities that goes across all the target customers is, again, the geopolitical situation and the fact that Calvester is one of the few European vendors. So talking to an energy company in Europe, it is it is a strong argument having a, you know, completely European product and software development and product development being carried out in in Sweden. So that’s that’s not only not only a, you know, a a lip service argument.

It is a real consideration for those those customers. Another thing we’re doing is that, of course, we’re selling to a great degree, through partners. And several of our existing partners, they have quite a strong inroad into the energy sector already, but we’re also complementing that with partners that are more niched towards the energy market. And we see more and more uptake in interest on that. So, I think that’s in essence what we do.

We’re not we’re not disclosing or exposing a, you know, a a monetary target for that sector, but it is it is an important one, and a growing one.

Ora Gauter, Host/Moderator, Clavister: Thank you, John. Onto the defense sector. I see you delivered to six nations for the CV90. Can you please elaborate a bit about competitors and market share?

Jan Vesperi, CEO, Clavister: Absolutely. If we look at the defense sector in general, if we sort of zoom out a bit outside, CV90, there is some addressable market in total for the cybersecurity industry of some 60,000,000,000 in defense by, I think, by 02/1934. That’s not what Clavister can aim for clearly because it includes, a lot of different other types of cybersecurity technology. We have selected to chase the tactical security market, which is in essence where cybersecurity is positioned closer to the battlefield, if you like. So not not the traditional racks installed in server rooms where you could as well put, you know, a typical civilian firewall from one of the large American vendors even.

But the further out on the tactical side you get even closer to the individual soldiers, There is less competition from the traditional firewall vendors, for many reasons. One being that it’s quite a niche market, so the big US Vendors doesn’t really care too much about that market compared to the huge enterprise market, but also from a technical and product perspective where our products are more suited for those type of environments, where you need to have small footprint, you need to have super fast startup times, and those things that are typically not attributed to large data center type of products that you typically find. There are some other competitors, of course. Otherwise, there wouldn’t be a market. But there are a few European competitors that that sell products into this market.

We have yet to see a vendor that combines firewalling military grade products and AI into the same package that we do. So that’s not only an important icebreaker in our customer discussions, but it is actually a key differentiator. In terms of market share, or if we zoom in a little bit then on the infantry fighting vehicle market, the land based market, I would claim that with the rate of digitalization happening in the industry where the systems has a pole position in that trend, and I would basically stick my neck out on saying that the CV90 is the most digitalized vehicle on the market. In that context, Clevester is in this in design. We’re designed in into that architecture.

As long as we continue to be a good supplier to be systems, we are all but not exclusive from a contractual perspective, but we are designed in. And it would take not only a lot of effort, but, you know, a lot of purpose to basically change our product to something else. It would cause a major redesign to quite, you know, quite, quite low value in the end for the end customer. So I think we have a very strong position in that sense. And, you know, as you’ve seen in previous press releases, we’re slowly but surely expanding that footprint into other vehicles and in Q4 also into the naval domain.

So I think we have a fairly strong market share. It is a quite fresh market still. That’s that’s important to say. Did you say digitalization in defense has barely started if you zoom out and compare to the the civilian market. So it is a fresh market, young market.

We have a good really good starting point with what we’ve done so far.

Ora Gauter, Host/Moderator, Clavister: Thank you. Well, will the 8,000,000 sec order for the navy be delivered in q one twenty five given its connection to the NATO exercises?

Jan Vesperi, CEO, Clavister: It is actually not connected to the NATO exercises. This is something else. And it starts delivered being delivered during the first half year in 2025, and then the project continues for for a while. So it’s, well, we we could potentially see something of it in q one, but it it’s distributed over a bit longer period.

Ora Gauter, Host/Moderator, Clavister: What portion of this quarter sales came from CV90 deliveries?

Jan Vesperi, CEO, Clavister: That’s David David question. Yeah.

David Nordstrom, CFO, Clavister: I would say roughly 10%.

Ora Gauter, Host/Moderator, Clavister: All right. I

David Nordstrom, CFO, Clavister: mean, bear in mind there as, you know, repeating what Jonas said previously throughout this presentation, we are only seeing deliveries from one nation so far. The accelerating revenues from BAE engagements will come gradually throughout this year starting mainly from h ’2.

Ora Gauter, Host/Moderator, Clavister: And a bit related about the strong order intake and adjusted for the large CV90 order. Do you see this level as sustainable?

Jan Vesperi, CEO, Clavister: From my point of view, I believe so. If you look at the order intake data historically, you, of course, see the seasonality, where q four always is the strongest quarter. I think that’s quite a general thing in the IT industry. The, the momentum we’ve built up in across all our business areas points towards that we can have a sustainable level of sales this way. One important reason, it’s absolutely not the only reason, but the change we made to a recurring business model and the subscription based business model means that more or less our entire sales crew can basically work on building growth and and, you know, gaining new customers rather than chasing our own tail as we did a few years back where, you know, every growth came with a lot of effort just to sort of regain the the the the previous level.

That has completely changed. So, yeah, from my point of view, it’s it is a sustainable level.

Ora Gauter, Host/Moderator, Clavister: And about, these this BAE contract, was it a one time thing, or do you foresee more BAE contracts coming up?

Jan Vesperi, CEO, Clavister: I think, you know, one one way we’re looking at that, if if you see the, the the the increased budget spending on the increased, really, really strong increased demand for defense deliveries across the board. I mean, in general, not only the CV90, but across the board. I think, you know, and the only logical conclusion you can draw, especially in the light of the CB90 also is really successful in the market, the only logical conclusion you can draw is that BAE will naturally, logically sign more contracts with armed forces across Europe and potentially outside Europe as well. And as I said before, following that we continue to be a good supplier and demonstrate our value, delivering good products with good quality, I see no reason why we shouldn’t be in in those future orders. You know, with humble statement, again, you know, we’re not exclusive.

There is no exclusivity anywhere. But from a relation point of view and, you know, the the position we have, I feel that that’s quite likely.

Ora Gauter, Host/Moderator, Clavister: Thank you. We have some follow-up question about churn. If price is a major factor in churn, could you raise prices more aggressively?

David Nordstrom, CFO, Clavister: Yeah. I agree with I think it’s a very good question. So it’s I would say it’s true. Price is not a major churn factor. Clavister tends to be typically price competitive.

Depending a little bit on which market we’re in, it could we could have more price aggressive competitors in some markets. But generally, Clavister is competitive from a price point of view. And yes, I believe that quite aggressive price increases is part of our growth and profitability strategy. Then, of course, it needs to be done at such a pace that we do not alienate the customer base we have. It needs to be on a level which is justifiable.

But that said, yes, I think it is more likely that we are raising prices 5%, six %, seven % on an annual basis rather than 2%, three %, if that answers the question.

Ora Gauter, Host/Moderator, Clavister: And finally, could you walk us through the plan for profitability on an EBIT level for ’25?

David Nordstrom, CFO, Clavister: It is to a high degree maintaining and gradually continue what we’re doing, bending the growth trajectory upwards. That is key. I truly I mean, we truly believe in that we will succeed in that. We have now the thirteenth consecutive quarter of sales growth behind us. We will continue in growing.

We do that with profitability and we do some selected investments in more sales and marketing capabilities. That is the key strategy. So growing with control over cost. And I think we have demonstrated that we can do that for quite some time. And I think, I mean, going back to kind of the analogy to EBITDA, looking at that seasonality, I think we see a similar trend.

And I truly believe that we will succeed in landing on positive EBIT for the full year of 2025 as we say in the interim report as well.

Ora Gauter, Host/Moderator, Clavister: Thank you, David. That was all for the questions from the audience. So now it’s my turn to ask. John, what are you the proudest of this quarter?

Jan Vesperi, CEO, Clavister: Yeah. I think, you know, what really made me proud was to see that all our businesses contributed so strongly with with with, you know, order intake growth and deliveries in in this quarter. I think I started mentioning in the beginning of the call, previous periods, there is, you know, there’s always one, sometimes two areas that fall a bit behind. But but when we have a quarter where, basically, the engine is is running on all cylinders, it’s really interesting to see the leverage it really brings on on on top line. So I think that’s that’s what I’m most proud of.

Ora Gauter, Host/Moderator, Clavister: Thank you. And, David, anything you would like to highlight?

David Nordstrom, CFO, Clavister: Yeah, it might be I have to choose one. I think okay, we didn’t fully reach the target of gross margin of 80%. But still, looking at the level of growth and looking where the growth come from in defense and civilian firewalls, I think still we have a resilience in our gross margins. And even though we sell a lot of hardware and military hardware, we can maintain gross margins on those levels. So I think that is a positive takeaway that I wouldn’t say surprised me, but I’m glad to see that we can achieve that.

So that resilience, I would say, yes.

Ora Gauter, Host/Moderator, Clavister: Thank you. Well, thank you both for the presentation and answering all the questions. Thank you everyone for attending and asking so many questions. This interaction is really, really valuable to us. Recording of the session will be available on our website shortly and on LinkedIn.

And with that, I wish you a wonderful rest of your day, and thank you for joining.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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