Sectra Aktie

Good morning, and welcome to Sectra's year-end report presentation with CEO, Torbjörn Kronander; and CFO, Jessica Holmquist.

My name is Helena Pettersson. I will be moderating the Q&A session after management presentation. The chat function is open from start, and you are most welcome to write your questions during the presentation. Management will address them afterwards.

And with that, I hand over to you, Torbjörn.

All right. Thank you very much. So we will go through interim highlights as a start. We'll do the financial development, and Jessica will do that, Jessica Holmquist. And then briefly, I will go through a little way forward at the end, and then we have the Q&A sessions. You can do questions both via chat and e-mail, and we'll reply to that, and also some previously sent in a question that we got by e-mail before the meeting.

So our business operations as a short brief. Our largest business area, led by Marie Ekstrom Tragardh is Imaging IT. That is management of images in hospital health care. Main part of that is radiology, but we have increasing other areas as well such as pathology, we have ophthalmology. We have other operations as well in that area. We're becoming an enterprise imaging company there, by far the largest area.

Then we have Secure Communications, which is high security encryption systems for communications mainly. And that is managed by Magnus Skogberg. And we have good growth in that area as well. And then we have Business Innovation, which is our greenhouse, including research. We have an extensive research, industrial doctorate student program to keep at the very forefront. And we have some business areas there that are not big enough to become a business unit itself but are still interesting areas for the future. Those are in orthopedics, medical education, which is growing well. And we have Genomics, a relatively new area with a high future potential.

Highlights from the year. We have long-term recurring revenues going up. The contract order bookings went a little down, but we still are ways above our turnover at more than double the turnover of revenue in order bookings. So we're not all panicked about that. Then we have -- and I should point out that in order bookings, the orders are very large relative to our size. And that means that individual quarters and even years are heavily influenced by individual orders when one order might be 25% of the annual revenue. It is not like selling a lot of small units. It's individual orders that come in.

Net sales rose by 9% and profit per share grew by almost 20%. And the cloud recurring revenue, which is our big growth area when we transform into as a Software-as-a-Service model, grew by 55%, which is now increasingly a very large portion of what we do. Recurring revenue as a whole, which also includes the cloud recurring revenue, but in addition to cloud recurring revenue, it includes the old service contracts and more type of that which is not related to the SaaS model, that grew by 19%. And the main part of that growth is, of course, the first one, the cloud recurring revenue. And then we have churn. If you are on a service model, you don't want to lose customers as they pay per procedure. And we have a very low recurring revenue churn at 0.5%, which is a very important figure to look upon if you compare to the first half.

The financial targets for the group are equity to assets ratio, a measure of stability. We sell into areas and customers who do not want us to cease to exist. The medical informatics solutions we sell are named to be the most important IT systems of hospitals. If radiology handling -- management of radiology stops, most of the hospital, and modern hospitals, come to a grinding halt. You don't buy that from 3 guys in a garage, you but it from someone you trust. And that trust comes both in other references and other happy customers, but it also comes from financial stability. And our target there is 30% of equity assets ratio, and we are well above that, 48%. Despite that, we also increased the dividends for last year.

Profitability, which is a second prioritized target is margin. We have a margin target of 15%, and we are well above that at about 20%. These two first are hygiene measures. Increasing margin can only do once, but growing profits, you can do forever. So stability, profitability, when these are fulfilled as hygiene measures, and they are, then the main goal of the company is growth of profit per share. We measure that by EBIT per share growth over a 5-year period. That should be above 50%, and we are well above 100%.

We, once again, we're ranked #1 in customer satisfaction. When you have such a high-trust business as we are in, what other people say is very important. And we have now had the 13th year in a row in the United States and large hospitals, we have been named is the system in our business which customers are most satisfied [indiscernible].

Seventh year in a row in Canada and in global PACS, which are other areas in Northern Europe, we are -- have the happiest customers in Southern Europe. We have the happiest customer in DACH, which is a very large portion of Middle Europe. Middle East, Africa and Oceania, which is Australia and New Zealand, we also have the highest customer satisfaction of all vendors in our business. And these are important thing when here in such type of business as we are.

We also, towards the end of the year, acquired an AI company. We have said before that we do not normally do AI in-house, but this one is a little bit different. This is not, AI just assisting a doctor. It's a system that is approved in Europe for autonomous AI. And if an AI can do at least high confidence normals, when the suspicion or the probability of disease is very, very low but you have to go through a very large amount of images, you can actually, in some cases, replace a doctor all over. And that means real savings for a hospital. Just to have another measurement for the doctor who needs to review an image anyways, that is not really saving. But if you can take the doctor away from the loop, for some exams, that's really savings.

And that was the main reason why we acquired this Lithuanian company located in Vilnius. Very competent people and we are very happy to have them in the group. There is no material impact on the group earnings '25, '26. This is a small company with small revenue. But strategically, it is important for the future.

In Business Innovation, we won a national-wide agreement in Norway for education portal. And that was not for universities. We are mainly been selling in universities earlier. But now medical doctors are becoming like us engineers. What I studied, when I was in engineering school, is by far obsolete. The only thing that's still valid is probably the math. But in -- so the half-life of knowledge of an engineer is short. You have to be a continuous learner for life. Medical has become such, also medical professionals in hospitals and working all over the world needs to keep up to speed of what's happening in the field. So they need continuous education.

And the nationwide agreement in Norway is for pathology and radiology. All over north, all Norwegian doctors will be trained, continuously trained on our solution that is nationwide. That is, we hope, a good example and reference going forward because we think this will be more and more important, to have continuous education of medical professionals because there is a new article every week for something that is important for them. And you need to have an organized training for that.

In Secure Communications, we had a very high revenue for single quarter. We are growing in a way because of a sad reason. There is a war going on in Europe, and that has driven security concern and defense concerns all over the world. And we are doing encryption, which is very important to keep secrets, secret. And with the inclusion NATO, we hope to have a larger market going forward as well. But we have a lot of growth in that area. We also do civilian defense encryption systems.

In financial development, I will leave the word to Jessica.

Thank you. Good morning, and welcome to our call. We are happy to report a solid financial performance for the full year and the fourth quarter. And as usual, during our presentations, I will guide you through the key financial metrics, starting with order intake. We see sustained demand for our offerings. Full year contracted order bookings amounted to SEK 7.6 billion, surpassed only by last year's record high order intake, which was driven by the SEK 3 billion Quebec contract.

Our rolling 12 book-to-bill ratio is 2.2, and we have seen strong order inflow across our geographic markets with North America leading and solid contributions in Sweden and in the U.K. Our fourth quarter order intake amounted to SEK 1.6 billion, notably down versus the comparable quarter when we signed several larger U.S. contracts. And this again confirms quarterly volatility in our order bookings.

Net sales for the full year amounted to SEK 3.5 billion, corresponding to a growth rate of 9.3%. The SaaS transition drives recurring revenue, which increased by 19%, whereas our nonrecurring revenue declined by 7%. And I'll point out again that the cloud recurring revenue grew by 55% to SEK 960 million. Currency movements impacted sales negatively with the U.S. dollar, the euro and the British pound all weaker against Swedish krona than in the comparable period. And adjusting for currency effects, sales increased by 16.5%. And high customer satisfaction is reflected in our figures with a low recurring revenue churn of 0.5% rolling 12.

Fourth quarter sales increased by 13%, and for the first time, quarterly sales exceeded SEK 1 billion. All operating areas increased sales year-over-year. In Imaging IT, the drivers are increased usage of our services and continued deployment at additional sites. In this area, we report close to 76% recurring revenue for the full year.

In Secure Communications, we increased sales by 11% to SEK 453 million. The fourth quarter was strong despite product delivery delays with sales reaching the highest level ever for a single quarter. And in Business Innovation, where we include Orthopaedics, Medical Education and Genomics, the performance is driven by growth in our medical operations business. All geographic markets report sales growth year-over-year in local currencies. We reported the highest growth in absolute numbers in the U.S., and Canada is the main market driving growth in Rest of World.

Please note that our year-over-year comparisons on operating profit exclude the nonrecurring patent settlement recognized in '24/'25, which had an EBIT impact of SEK 110 million. Excluding that, our operating profit rose by 16% to SEK 711 million, of which SEK 209 million was generated in the fourth quarter.

Profit growth is seen across all 3 operating areas, and the margin was improved to just above 20%, up from 18.9% the year before. And this is driven by higher volume, cost control and more capitalized work for own use. Imaging IT delivered a strong finish to the full year. Operating profit increased by 25% and the margin is just about 23%. And the drivers are the same, as I mentioned previously, increased use of -- increased usage and new -- more deployments of new customers and add-on sales. And combined with cost control, this resulted in profit growth and improved profitability.

Secure Communications operating profit increased by 24% and the margin was 17.6%. Throughout the year, we have seen the impact of delayed product deliveries. But nevertheless, the fourth quarter was strong through both growth and efficiency improvements in underlying operations. In other operations, we report a larger operating loss than in the comparable period, and this is mainly due to employee profit sharing recorded during the fourth quarter.

Cash flow from operating activities amounted to SEK 1.078 billion for the full year of which roughly SEK 500 million was generated in the fourth quarter. And the strong cash flow generation comes from profit growth and also from increased short-term liabilities related to advanced payments from customers. And given the cash flow generation and the overall financial position, our Board and CEO proposed an increased ordinary dividend of SEK 1.30 per share and an extraordinary dividend of SEK 1 per share for the -- for approval at the Annual General Meeting in September. Thank you.

All right. Thank you, Jessica. On wave forward. There is a wave of AI coming through our entire society, and we have said several times that this wave is not something that can be stopped or hindered, it's a tsunami wave coming in. You have two choices. You can either try to surf on the front of that wave and benefit from it. You would fall a couple of times, but you can at least try to surf and use that energy to your own benefit. Or you can fight like a crazy man on the back end of it, trying to paddle to keep up, and you would probably not succeed anyways.

We prefer to try to surf on the front side, and we're using AI to both help our customers, both in making health care more efficient, actually, we can see a trend that health care, as we know it, would not survive without this new trend in AI. It makes survival or increase of production in health care possible. So we are helping our customers with that. We're also helping out on the cybersecurity side to defend and also use this to increase cyber resilience. Problem there is that also the crooks have access to these tools. So it's kind of an increasing speed of change in cybersecurity.

But our job is to help our customers as good as we can in both areas. We also use AI to increase in total efficiencies. We have very large increases in efficiencies, as probably most of you also have seen in your own environments. If you use AI carefully and cleverly, you can become ways more efficient than you were without it. In medical IT, we have the growth areas that we have presented many times. Based on the demographics of the world and the number -- relative numbers of older people to younger people growing, there will be -- the main focus has to be related to the age-related diseases.

And these are neuro-degenerative, cardiovascular disease, cancer disease, musculoskeletal disease and vision and hearing. And we do image-related diagnostics. We don't do therapy but image-related diagnostics and now also genomics in these areas. And these are areas that we have to grow if we want health care as we know to survive in the future.

And that's our main focus. We need to be good in all imaging and all diagnosis, but these are the ones that will require the highest investment from society in the future. And we do that increasingly with what we call Sectra One. Sectra One, our customers are now in the cloud. They can sign one contract with us, and within that one contract, they can get all of these different services. That is radiology, which is the biggest one, but we also have pathology and cardiology, genomics, education, as we discussed before, breast imaging, orthopedic planning all in one contract. And that means the customers can -- when they use one of these functions, there is a tick and they need to pay for that, but they don't have to have multiple vendors.

That simplifies the environment in the world of our customers tremendously, but it also provides a possibility to have these interacting in the future diagnosis, many different ologies, so to say, and many source information needs to be unified and participating what the customer uses. So we can say that we separate, in a way, a Microsoft Office in medical imaging. You would not today buy Excel or Word separate. You have a Microsoft Office contains that, and we have that possibility for our customers.

And as with Microsoft today, you don't normally buy Microsoft as a package in the bookstore anymore. You get the subscription and you get all the service going forward. And that is exactly what we are doing. But we charge per usage, we don't charge for seats.

And we are also adding now reporting into that. We've done reporting as kind of the output of the diagnostic process, and we have done that in Europe for many, many years. But we also add that in now in the U.S., and that is an important part because reporting can take the result of the different diagnostics and make a comprehensive report and then go to the referring physician, which is a very important part of diagnostics.

What we hear from customers all over the world, we lack medical staff and our workload is increasing. People are getting older and older, and old people in general, get sicker. And we are also seeing cancer, especially that cancer is transferring from -- transforming from being an acute deadly disease to a chronic disease. If you have cancer, you can live on, but then you need medical diagnosis all the time while you continue living because you need to monitor that.

Earnout risk is really in hospitals today. It's especially in the U.S. but also in Europe, a serious issue. People can not work all the time. You have to see your kids and have a life outside as well, even if you make a lot of money. Workflow efficiency, therefore, is paramountly and important, and that is our core, the crosshairs of what we do in products. We increase production in hospitals by improving workflows. Workflow efficiency is what they need in order to survive.

Another thing we hear from customers, we have too many IT systems, there are hospitals with 1,000 IT systems. That's a huge cost base on maintenance. They have staff in the hospitals that look on all the differences and know all these different systems. That's expensive and cumbersome. But it's also a high cybersecurity risk. All of these 1,000 systems is a possible place of attack for cybersecurity. You would like to decrease them so you can have better cybersecurity control over your hospital environment. And these two both motivate having one vendor for many systems.

And lately, we see personalized medicine, which is applying therapies that is different from 2 different patients. They have the same disease, they look the same. But they are perhaps different in genomics or something, and then you want to targetize personalized treatment for that person. And that requires integrated diagnostics.

You need input from radiology, pathology to take those decisions and not the least, genomics, our newest area. And we are -- this is what we are building, as we saw that [ big circle ] before with Sectra One. This is what is needed. It's one system doing all of these, but we can also have one report imaging to have an input from all these different areas.

And we are the only vendor in the world with all of these in one single system, radiology, cardiology, pathology, Genomics IT and ophthalmology. And that is a strength. It's fewer systems for the hospital, less concern and one integrated report going forward.

In cybersecurity, we normally say we, we're not Sectra, but we as humanity have built a very fragile society in IT. It can be compared to building a skyscraper one floor at a time. We built a very primitive, very early versions on TCP/IP with protocols underlying most of the communication in Internet, et cetera. That was very primitive in the beginning. I still remember when the first possibility to send data over the Atlantic was done in the mid-80s. But it worked fine. So we built another floor in this building and, the third floor. There was no plan. There was no foundations made to support it.

But today, that's a big skyscraper built on a foundation that was never intended for this. And there was no foundation, no plan. This is scary. But that building now runs on society. And that building needs protection and we need to patch it as good as we can. We can't rebuild it. It's already there. But we need to patch it. And that is cybersecurity in a nutshell, and we are good at that. We help out in protecting that building.

In both of these markets, Sectra is very well positioned. Health care and cybersecurity are markets that even if you have a low tide in economy, even there is -- inflation goes up, due to external pressures, we need to have health care especially for elderly but also for ourselves. And we need that huge skyscraper to be protected. These markets have to grow. So we will grow despite -- or our markets will grow despite if there is high tides or low tides in economy as a whole, which is an important and nice place to be, but that was intentionally built.

So the priorities, key takeaways going forward. We have significant go-lives in progress now. The large contracts we've taken over the years were all Sectra One, so they're spread out over many years are now in progress to be taken into real life and then they begin to pay. They don't pay now at order. They pay when they go live and they pay per procedure they do in medical. the quarterly variations in revenue and profit will decrease slowly. The quarterly variations in order intake will still be very large, and we are also exposed to currencies. So we want you to be aware that the Swedish krona affects our results quite a lot.

The upcoming financial events. We have a 3-month report in September 4. September 8, we have an Annual General Meeting, we are old-fashioned. We do it, as the kids say, in real life. So that will not be digital. It would be physical in Linköping. And in November 25, we have our 6 month report for the year that we are now working. I would like to remind you these meetings are not for the sake of us. It's for the sake of you. So we have the same thinking about you as we have about our customers. You need to tell us what you think works. Otherwise, we cannot improve them.

So send an e-mail to [email protected] if you want us to improve this, if you have suggestions how they can become more efficient. We are changing quite a lot over the last years based on that feedback. And then we open up for questions.

Thank you, Torbjörn and Jessica. We have received a lot of questions during your presentations, but I will start with one that we have seen from several investors and it's connected to the Sectra One Cloud.

Could you please update us on the implementation status and timeline on some of the larger Sectra One Cloud deployments and how they are proceeding, especially contracts nationwide enterprise imaging in Scotland, the Quebec contract in Canada and the major U.S. contract?

The major U.S. contract, we are now in the early phase. We have the first hospitals or of regions or markets depending on which chain it is going live. In Quebec, the first hospitals are live, but there is still a huge chunk to be done. And in Scotland, it's a little delayed, but that's proceeding well. But the early start is a bit delayed.

And a follow-up question on that from Kristofer Liljeberg at DNB Carnegie.

Are sequential growth for cloud recurring sales likely to accelerate in the new fiscal year?

Well, long term, it cannot grow faster than our revenue. The proportion of the revenue will increase. I mean, long term, we think we'll be, by far, majority be a recurring revenue company. But it cannot grow faster than top line growth long term because that doesn't work.

And also in relation to the Sectra One Cloud contracts, a question from Nikola Kalanoski at ABG.

Do you expect to be able to deploy with new customers faster given that you've now opened a new office in Denver, Colorado? Or do you expect this will mostly improve your customer service for local customers in the region?

Denver is open for mainly two reasons. It's a nice area to recruit in. A lot of people would like to go -- a lot of people would like skiing. So that's one of the reasons we have that office. But it's also close to the West Coast without being all the 9 time hours away from Europe. So it's only 1 hour away from our customers on the West Coast and it's a fast trip to the customer on the West Coast, but it's still not 9 hours away from Sweden, which makes Denver a very good choice. It's also a very dynamic area. And nice area to live in.

And then I think we will move on to a question from a private investor. It's regarding the installed or the -- how much is in the cloud today? How many percent of the installed base in terms of exam volume is in the cloud today?

That's not something that we...

We have actually disclosed that in the report.

Then I shouldn't say we haven't disclosed it. I don't know, but you can....

Yes, it's 25% of the SEK 180 million.

Okay. So about 25%.

Yes.

I mean, all the new deals we do in the U.S. are cloud-based. Europe is delayed as for cloud because as the political situation and it's more insecure right now or uncertain right now, what's going to happen in Europe than it was a year ago. But in U.S., more or less all U.S., Canada and the U.K., all your business is public and cloud.

Thank you. And then we will move on to questions from Jakob Lembke at SEB. Can you elaborate on the strong order rate intake in K4, which type of orders, which regions?

It's not as big as the biggest one. And some of them, we're not allowed to disclose because customers do not want us to do it, but it's dominant in the U.S.

And then we have a question from Nikola Kalanoski at ABG also regarding the order bookings. When we look at your contracted order bookings in the last 12 months, would you say that a significant share of the order bookings includes modules other than radiology and mammography?

Well, mammography is part of radiology in many aspects taken together. The absolute majority is still radiology and mammography, but increasingly shares of cardiology, pathology and the other ologies as well. But they are small compared to radiology.

Yes. And then another question from Nikola Kalanoski at ABG. Are customers using Sectra Amplifier Marketplace more this year so far compared to last year? And are you generally seeing more adoption of AI applications among customers?

Yes. The growth in Amplifier is large. And it's over 2 years, it's doubled. So it's a heavy growth, and customers are using AI more and more for every year that goes.

And we also have a question from Daniel Albin at [ Pleiades ] regarding AI.

Historically, PACS has been the central hub of the imaging workflow. However, if AI increasingly performs triage and primarily interpretation directly at the modality or edge level, one could argue that the center of gravity in Imaging IT may shift away from PACS over time. Do you believe Sectra is structurally protected from that risk? And what evidence are you seeing today that support that view?

It is correct that it might happen for a few cases, but it's mainly -- if you take the modality thing, if you put an AI into the X-ray machine, it will be different for different vendors, and a few hospitals want that. But acute settings like appendicitis or stroke can be detected in the modality theoretically. No one does it today, but it can happen. Will that change that you need a final report signed by a doctor? No, it will not. That requirement -- the legal requirements are actually signing the report is still there. And in order to do that, you need to see the images.

So for some acute settings, it might increase. But for the final handling, creating and medical report -- the diagnostic report will not change. But reporting that we do, it will be increasingly important.

Okay. And then I think a question for you, Jessica. Could you please clarify the increase in other operations? Is most of the increase related to performance-based profit sharing or central cost distribution in the group?

Well, as I said during the presentation, it's employee profit sharing that is the driver of the increased loss in other operating in that area.

And then I will move on to some more questions from the chat function. And we have one question here from Kristofer Liljeberg at DNB Carnegie.

Would it be possible to say the number of U.S. annual imaging exams you have in the backlog as an update to the figure given the latest Capital Markets Day?

We have not disclosed that. So I cannot reveal that. But we normally, we'll report back on the Capital Markets Day, and there will be more of those to come.

And the next question is regarding the U.S. market. Is the sales you're reporting now purely recurring? Or are you still incur some license revenues in the U.S.?

It is still a mix of the recurring revenue is growing. But we have revenue, for example, from migration or implementation that is not classified as recurring revenue and some license upgrades.

And another question related to that. Do you anticipate that nonrecurring revenue in Imaging IT will continue to decline this fiscal year we are in now?

We are not giving predictions on that level. And long term, it will be declining because we are also transferring the old customers over to the new model. So that license sales we did before will decline.

And then we have a question from Jakob Lembke, SEB, regarding our acquisition. When do you expect that Oxipit could contribute meaningfully to your growth?

That will take years. It's a strategic investment on the type that Sectra [indiscernible] are a long term. It will contribute strongly but not in the short-term future.

And the reflection regarding the order bookings, it seems like you are booking less nonguaranteed orders recently. Has there been any change in contract structure or type deals you are winning?

I would say it's just temporary fluctuations. As the contracts are very large, one single contract can make a change there.

And then we have question regarding U.K. and rest of Europe. What are the causes of U.K. and rest of Europe weakness when there's so much untapped market, especially in rest of Europe?

I would say that the geopolitical situation and in general also, I mean, Germany is a large country that have financial problems. But mainly the geopolitical situation, where people are waiting to see if they should go cloud or stay in what they have. And uncertainty always creates delays. That's part of human nature.

And then we have another question from Kristofer Liljeberg. In what type of deals are you getting advanced payments from customers, both Imaging IT and Secure Communication, U.S. Canada, Europe?

Yes, yes, yes. That can be both business areas, both in Imaging IT and Secure Communication. It's also across the geographies.

And another question from Kristofer. Your peers say they take orders from competitors. Do you see any change in win rate trend between the two of you?

I wouldn't comment on that, but we have a good order intake. And now previous year, we took almost everything. Now we have not been able to take everything, but we have taken a very large chunk.

Okay. We have another question from a private investor also regarding our key competitor, which claims they are the only cloud-native vendor. How far is Sectra to become cloud-native?

We are cloud native. I will not comment on other company's statements, but we sell a lot of cloud. And we wouldn't do that if we're not cloud-native.

And then we have a question regarding the profit sharing. Can you explain the employee profit sharing? Is that a one-off, or going forward, should be a recurring expense in other operations?

Okay. So I can explain the principle we have used over the last years. That is to have a stock options program, a very long-term of investing program that we have been granted by the annual meeting. And we have run that every 2 years. We intend to propose that for this general assembly as well.

And in between years where we do not issue that stock options program, we've used profit sharing. Profit sharing is that we set a target, and everything above that target for profits is shared between the shareholders and the employees. And that is what you see this year. We had a good year. So that became a quite significant sum. But that is good. It's all the people out there that contribute this profit.

And then we have another question regarding implementation times. Have you been able to improve implementation times this year? If yes, what percentage? Should we expect the new Denver office to clear the implementation bottlenecks you have been having? So...

Two questions. Yes, we are improving but we are learning fast. And it's also important that you can use AI for implementations as well, which means we onboard new recruits faster than we used to do because we have AI to help them out. The Denver office is more being closer to the West Coast. So that's a quality issue or not, but also recruitment issue will not make any big difference in deployment time as such. Most of the deployment work today is done remote.

And I'm looking through the chat function. And if you have any final questions, please write it. And I will just check the e-mail if we have had some there.

I think that's were all the questions for today. Thank you, Torbjörn and Jessica.

All right. Then we thank you for viewing and listening. We look forward to see you in September again. Thank you very much, and best wishes for a good summer.

[Audio Gap] Presentation with the CEO, Torbjörn Kronander; and CFO, Jessica Holmquist. Today's presentation are prerecorded. Torbjörn Kronander is at the European Congress of Radiology today in Vienna, and he would join the Q&A session from there. My name is Helena Pettersson, Investor Relations Officer, and I will moderate the Q&A session after management presentations.

And with that, I hand over to you, Torbjörn.

So welcome to the 9-month report presentation, 6 March 2026. The content of this will be interim highlights by me, financial developments done by Jessica Holmquist, our CFO. A little about our way forward, and then we have a Q&A session. This is, as Helena already said, a recorded presentation. The Q&A session will be live, but I will be present from Vienna, where I'm at the radiology conference at that time.

Our business operation at Sectra is Imaging IT, our by far largest area handling and managing images and present images in hospitals. Images is a very strong part of the agnostic process, but they are not normal thing that you just put into database. They are larger data volumes and they take a special systems to treat them.

We have Secured Communications, which is our communications of secret information. We do encryption for secret information and we do a whole system, especially eavesdrop secure telephones in -- on the national security level, which is the highest possible security levels.

And then we have Business Innovation, which is our greenhouse and our future development program. These are -- should not be there forever. They should either be made on their own business area like in IT, Secure Communications. It can be incorporated into 1 of the existing business areas. It could be sold. We have sold or it's been shut down if it doesn't grow big enough to keep it.

Some examples in the Business Innovations, medical education. In medicine now, development goes very, very fast, training the existing staff of health care doctors, nurses, et cetera, become a very important part. So we have -- before, we have done a lot of basic training, university training and when you are a student. Now we see an increasing need to have continued education for medical professionals over the world, and that does a very much growing area.

Orthopedics IT. Orthopedics works with Images in a completely different way from [ radiologist ], for instance. They plan operations and they follow-up surgery, they do not only do diagnostic and they require special tools, and we do that orthopedics.

Department. We have a new department since a few years called Genomics IT. -- genomics information is similar to Images. It's not Images, but it's closely related to diagnostics and it's very much made in conjunction with digital pathology that we do. It's about in order to do precision medicine, you need to know the genomics of both, for instance, the cancer if it's oncology, but you also need to know your own DNA, the patient's DNA. That means you can treat different patients with different treatment, which increases survival a lot.

Then we have a few growth areas inside the big ones in Secure Communications where critical infrastructure with Ukraine, now that has been made clear that this is a very critical area to protect for society. We have a specialty division for that.

In Imaging IT, we have an area that was moved from Business Innovation a few years back, which is still pathology, handling microscopy images. This is quite different from radiology because these images are very, very large.

And then a new area in Imaging IT which is output, the diagnosis needs to be reported, and that report in order to be productive, needs to be very comprehensive and very good for the treating physicians to use, and we have a special product in that especially adapted for the U.S. market. But it will be generally applicable all over the world.

Highlights from the quarter. We have happy customers as we have had since Sectra started. This has resulted that the order bookings have gone up despite the difficult comparison quarter -- 9 months ago. We still increased by 4%. Net sales grew by 8% and profit per share increased by 18% to SEK 2.5 per share.

We are transforming to as-a-service model, and you see that and that we get more and more sales coming from recurring revenue and especially cloud recurring revenue, where we sell services software from the cloud, mainly in the U.S. and U.K. so far, but increasingly in Europe as well. And that grew a healthy 58%, and now where we have quite a large number to start with, percent relative growth in cloud recurring revenue makes a direct impact on the bottom line of Sectra.

Recurring revenue includes the cloud recurring revenue. That grew less because we have less and less on-premise installations, but it still grew mainly driven by the cloud or driven by the cloud recurring revenue growth.

And then we have -- if you are based on recurring revenue and selling services, you don't want to lose customers a few years into that path. So it's very, very important to keep the customers so they keep on paying for service and procedures. And thus churn is very important. And that's our large proportion you lose from these customers and only lost very little only 0.5% this rolling 12.

The financial targets for the group are fulfilled. We have 3 overall financial targets. One is stability. Equity to assets ratio should be above 30%. We are at 48%. That's a hygiene measure. We don't want this to be 100% or 75%. It should be about 30 percentage show that we are a healthy operation that will not disappear because of financial issues soon. And we sell a very sensitive product for our customers. They want us to be stable. So that's a hygiene measure.

Profitability. Operating margin is 21%. You see 2 curves there. What was a patent settlement we did last comparable quarter, but that is now gone and where the solid line is for the development without that patent. And it shows a healthy increase over the years. But again, the target is 15%. We do not have target that is higher than that. We have a huge opportunity for growth, and we will reinvest -- the profit is about 15% in growth when we see it.

And then the main target, which is not a hygiene target, but unlimited upwards is growth of profits. We count that a profit per share because that is the best for existing shareholders and that should grow more than 50%, which is an average growth of about 8%, 9%. Over 5 years, it should grow 50% and will -- ways above that. We're 126% growth over the 5 last years.

In Imaging IT Solutions, we are seeing -- beginning now that we are rolling out in these large contracts that we sold over the last 2, 3 years are now beginning to roll out. Revenue is increasing despite that we do not sell much on-prem licenses anymore. And we see that these large contracts now the first hospitals are live and we are beginning to see increased profits. It will not grossly affect this year, but we see an increase coming over the next year.

We also are the most chosen vendor in the U.S. market. So we are growing faster than anyone else in the U.S., which is, of course, is a very large market, despite the dollar now is a little lower in value than it was, it's a very important platform for us. It's our largest market by margin.

In Secure Communications, we have been selling mainly classified products. This is governmental approval -- approved encryption systems. They are difficult to administer for customers. There's a lot of regulations how you manage keys. You have to lock in the phones in the evening in safe, et cetera. Now the larger market of information or secret has to be kept secret for about 50 years. That's a very long time. We have to be very -- that's call secret level, a top secret level.

Then you have a restricted level. Restricted level is still government control. And you need to lock in the phones in the evening, but the secrecy should only be for 1, 2 weeks against state back.

Companies cannot have that administration bureaucracy around the products, but they still want secure products. We have launched a new family of product called Tiger/E. That's an eavesdrop secure phone and the E stands for essential. So we have Tiger/S for secret, Tiger/R for restricted. And now we added Tiger/E, which is mainly for a private market. You want a security but you cannot have a department that takes care of all the administration about it. So it's called Tiger Essentials, all the substantial things for high-level encryption is there. But you don't have the -- all the administration you need for restricted product.

It's the same product philosophy, but much simpler this administration. Not formally classified as I said before, but that also means you can have that simpler administration without losing that classification.

We've seen Secured Communications to postpone serial deliveries and that impacts financial outcome. The reason postponed is partly changed requirement from the customer. Cybersecurity is a fast-moving market and things happen. And then you have to change the products. And of course, serial deliveries are then delayed yet, might have to rebuild something in a very late stage, and this is what happened here. We had to redevelop things and that means a delay. This is not lost orders. We have very good order intake, but it's delayed. So -- and that affects this current fiscal year quite a lot.

But we have still won new contracts and new partnerships. We have expanded with several new customers all -- and these products, we do not sell all over the world. we sell them in EU and NATO exclusively.

After the quarter, we have been ranked again #1 in customer satisfaction worldwide. We are a 13th year in a row, the highest customer satisfaction large hospitals in the United States. 7th year in a row in Canada. And we also have the happiest customers in Northern Europe, Southern Europe, DACH, which is Germany, Austria and Switzerland, Middle East, Africa and Oceania. Of course, this is what drives us our growth.

We have also announced recently that we have entered an agreement to acquire an AI company, Oxipit in Lithuania. We have avoided doing pixel-based AI ourselves in the company so far because we think the customers must have a very clear business case. Otherwise, it's too expensive for them. We have resold -- we have had an app store, we call that amplifier for AI. So we resell a lot of products integrated into our system. But this time, we saw that this company, Oxipit, they have something very special. They have autonomous AI solutions with diagnostic imaging, especially plain chest. And that means you can set up sensitivity threshold so high that you will not -- a very small probability will miss anything that is a real critical finding. But you will perhaps take 20%, 30% out that the doctor doesn't have to look at all. Now that really saves radiologist time. It takes 20%, 30% of the images that is not needed to be looked upon by radiologist. This is significant savings for screening with lungs, which is 1 of the biggest exams you do in the radiology department, plain chest X-rays is a big thing. If we can take out 20%, 30% of those not require radiologist at all to look at them, that's a very important thing because -- and the radiologist can concentrate and only do the 70% remaining. You'll find a lot of false positives, but we have almost no or very, very few false negatives.

This will contribute significantly to the reduced cost of health care. It is an approved customer -- approved product in European Union and everyone who acknowledges MDR, which is the European regulations as a good reasonable thing to require it or to use it. So all big areas, all of European Union [ EUAS ]. We can sell it is in trials in several hospitals already. And it's an interesting year because this is a real solid business case for [ uses ]. We have FDA and other approvals in the pipeline.

It is subject to customer closing conditions. We have signed a contract. Hopefully, this will be completed in March. It requires some authorization from Lithuanian authorities and other things. It is a small company. It's a small business, but it means we're going into AI for real, and we're going into the area of AI we believe, most in ourselves, to take actually workload away from the radiologist. It will have no material financial impact on the group this year and only a little next year. But it's an interesting area, and we hope that this would be significant in the future.

Then I will leave the word to Jessica to tell a little about the financial development.

Thank you. Welcome again to our interim report presentation. I will take you through the financial development, focusing on the key financial metrics.

Demand for Sectra's products and services remains high with the contracted order bookings exceeding SEK 6 billion in the 9-month period, of which SEK 4.5 billion was guaranteed order intake.

In the 9-month period, we have seen strong inflow of large- and medium-sized orders in the U.S., Sweden and the U.K. And during the third quarter, several of our U.K. customers already using our imaging systems have signed Sectra One Cloud contracts, taking a step towards cloud services.

Our book -- our rolling 12 book-to-bill ratio is 2.6. And we highlight the fact that the size of individual orders can cause large quarterly fluctuations in our reported order intake numbers.

We see solid recurring revenue growth. Our net sales increased by 8% to SEK 2.5 billion in the 9-month period and high customer satisfaction, new deployments and increased production volumes all drive growth, whereas customer -- sorry, currency exchange rate movements and the delayed deliveries in Secured Communications have a negative impact on our sales trend.

And just to repeat what Torbjörn said, our recurring revenue from our cloud services grows fast, up 58% year-on-year and we continue to report low recurring revenue churn, 0.5% rolling 12.

We had substantial currency impact in the period. Adjusting for currency, sales would have grown by 16% instead of the reported 8%. And the third quarter sales increased by 5% to SEK 892 million, and adjusting the quarterly numbers for currency, sales would have grown by 16% also in the quarter.

Our operating areas, Imaging IT Solutions and Business Innovation increased sales year-on-year and our Medical Imaging business grows with deployment of new customers, add-on sales and health care providers choosing to move from on-prem to cloud services. Imaging IT increased sales by 10% to almost SEK 2.2 billion in the 9-month period.

In Secure Communications, we remain impacted by a delay in a major customer project, and we reported a sales decline of 3% year-on-year.

Business Innovation increased sales by 25%, and this is driven by the development in our medical operations.

In geographic terms, our U.S. operations reported by far largest sales growth year-on-year, but all geographic markets show growth in local currencies. We note that more than 70% of Sectra's sales are generated in foreign currencies, primarily euro, British pounds and U.S. dollars causing high sensitivity to currency fluctuations.

First, I would like to highlight that all year-on-year profit comparisons in the -- during the presentation are made excluding the patent settlement that occurred in the third quarter last fiscal year, as this is a nonrecurring business transaction. The EBIT impact of the patent settlement was SEK 110 million. And having said that, our operating profit increased by 21% to SEK 502 million, and the margin was improved to 20%. And the growth in our operations and also more capitalized work for old news are drivers of the profit development.

The third quarter operating profit of SEK 194 million is lower than in the comparable quarter where we had a larger impact of traditional license revenue recognized Imaging IT shows profit growth of 27% and an operating profit margin close to 22% in the 9-month period. And I repeat, increased sales and more production volume as our customers take our services into operation and more capitalized development costs and as well as lower consultant costs have impacted the profit generation in the period.

Secure Communications operating profit declined by 25% to SEK 45 million, and the operating profit margin is at 15%, 9 months into the year. And here, we see the clear impact of delayed product deliveries this year.

Year-to-date, the cash flow from operations amounted to SEK 578 million. Cash flow generation in the third quarter was strong, SEK 418 million, and underlying profit growth is the main driver of strong cash flow. Comparing to the 9-month period last year, we have increased our capital tied up in current receivables as -- mainly as a result of higher accounts receivable outstanding on the balance sheet.

And that was all from me.

All right. I'll way forward. I've shown this picture very many times before. I show it again, a very important thing in a fast moving world is I try to be [ ahead and ] be good, better than competition predicting where the world will be. When Wayne Gretzky, the best hockey player in the world was interviewed why he was so good in hockey, he was not really good in any part of it. He didn't skate very well, he didn't shoot very hard. He said, "I do not state with the puck is, I skate where the puck is going to be." And we have been good at that over the years. So we are well positioned now when time comes. And now we have the genomics, we think will be -- that would be very important as well going forward.

Our general philosophy about shareholders is that you need to start with a rational strategy in a growing market. It's being in shrinking markets is tough, because it normally ends up in a price war. In a growing market, you can grow with market or ideally you grow faster. Then if you have happy customers, and in order to have customers who must have happy employees, it's not possible otherwise. Dare to be expensive when you're worth it and have reasonable cost control, shareholders will be happy. But it comes in that order. And it's very important to realize that this is prioritization we make and that means we might take a small hit for profitability business if it's required by happy customers. Right now, we have the most happy customers in the planet, and thus, we think we have very happy employees. We do a lot of investigation in internal surveys that check this up. And without those employees, we would not be able to have the customers we have and shareholders will thus be happy will continue this way.

In medical IT, the growth area is the diseases of the elderly. The demographics in the world is a little concerning and the cost in health care is mainly driven by the diseases of the elderly. And that's neurodegenerative disease, cardiovascular disease, cancer diseases, muscoskeletal disease and vision. And we are working in diagnostics for these areas in particular. We can do a lot of other diagnostics as well, but we should be very good and highly efficient in this area because these are the areas where society have to address in order to have a health care networks all the time, 2030 as soon.

We are selling this now in a Sectra One contract. You signed 1 contract of Sectra, you can use anything we use. Very often, you start with one, like radiology. But if you were to add breast imaging, which is mammography, digital pathology, genomics, whatever, you can add this after a while, you don't -- you have a new contract with that. That has been a very good model. It's easy for the customers to take up the next area. So even if radiology is the major part of this income, you can use others as well. And genomics was, as I said before, it had a few years back.

What we hear from customers will go around the world is that -- and especially in the U.S., but also in Europe and other places, there is a lack of medical staff. The workload is increasing, burnout risk is real. The burnout risk in specially in physicians is scary and of course if the substantial amount of the workforce gets burned out, the remaining people would be even more loaded because patients coming in the same rate as before. And our job is to help out with that. Workload efficiency is very, very important. And to make these doctors actually do medicine is either doing paperwork or doing administration, et cetera.

Another concern we very often here is we have too many IT systems. We have thousands of IT systems in large corporation. Every 1 of these is cost too because the hospitals have to have expertise, knowing how to deal with all these systems. It's a general trend that they want less systems. It's also a lot of cybersecurity concerns. Every 1 of all these thousands of systems is security risk by getting the numbers down, they have less risk.

And later, we see integrated agnostics. Personalized medicine is coming very strongly. That means different patients get different treatment. But then also do that, you need diagnostics information from all over the place, including genomics. We are the only vendor today who have all of these in 1 single system, and we will also use data from other areas in order to feed into especially medical tumor boards, which is a very expensive meeting, but it's very essential for treatment. We have a regularly radiology, cardiology, pathology, genomics, IT, ophthalmology and others in all in 1 single system, reducing the number of systems, increasing efficiency and improving the diagnostic quality.

In cybersecurity, we see a new digital reality. 10, 15 years ago, people very seldom spoke about security and eavesdropping. Today, this is an everyday reality. It's growing and has to continue to grow. And there is no other way to go up. We see also that increased international tensions, there is concerning tensions in Europe, in Ukraine, but also other parts of the world that is driving the need to be able to communicate without someone else listening in. We are very well positioned, and we have a very strong brand name in area where trust is absolutely required. And our brand, both in medicine and in communications is our biggest asset, is not on the balance sheet, but it's definitely our biggest asset.

In both of these market sectors, well positioned health care and cybersecurity of markets that due to external pressures have to grow, even if it's a recession in the economy and society, these 2 have to grow, and it's a nice place to be because our markets, we grow. If we grow with the market, we will grow, if we grow faster and we go even faster.

Priorities and key takeaways going forward. Quarterly variations will slowly decrease. We're getting more and more recurring revenue. And that, of course, will drive down the variations. We still have a lot of variations between quarters, but it will decrease. We are now doing significant go-lives. Not many, the first ones on these large contracts are now operational. But over the next year, so we'll see more and more coming in. But cost is still high for the next quarters. So you will not see a huge profit gain, but you will see a high cost, but also increasing numbers of these hospitals that we've signed on getting live.

Also, subject to closing, autonomous AI is an exciting new area, significantly reducing workforce stress in health care. Where this is an increasing area that we're just opening in up and we think there will be exciting news coming out of this over the next few years. We also want to point out that we have a large currency exposure, Sectra, you have to be a little careful about evaluating and predicting Sectra on that one. We have especially large income in foreign -- or currency that is not the Swedish krona.

The upcoming financial events are in June 5, we have the year-end report. September 4, we have a 3 months first quarter report of next fiscal year. On September 8, we have Annual General Meeting that will be in real life as the [indiscernible] in here in Linköping. We don't believe [indiscernible] meetings. We think that meeting should be physical.

Again, your feedback for this mints important they are done in order to serve you and the marketing shareholders. So if you think we should improve them anyway, please send an e-mail and tell us what you think we should improve upon.

And then we open up for questions.

Thank you, Torbjörn and Jessica for the presentations. I want to start with apologizing to all of you try to connect to today's report presentation. We had have had some technical issues. And -- but these presentations and Q&A will be published as soon as the recording is done.

And with that, I will start with a few questions from private investors to Torbjörn. And the first questions regard the Imaging IT Solutions operations. Have you made progress in shortening the implementation times for new customers?

Yes, we have. It's getting better and better, especially on the cloud deliveries, but there is still a lot to be done. We can always get better.

And the next question is, the capital region contract in Denmark now generating full revenues. Was it a successful implementation and can other regions in Denmark follow?

Well, 3 questions. Yes, it's full revenue since quite a long time back. It has been, according to the customer, a huge success. We think also it went well and everything is live and the customer is happy. As for the additional orders in Denmark, that is, of course, an ongoing fight and we would like to participate in more business in Denmark. We like Denmark. It's similar to our home market, and we would very much like to progress and sell more there.

And the next question, I think you have touched upon in today's presentation, but I will take it again. What is the status of transferring current U.S. customers to -- from on-prem to cloud?

There's been a few move. That is a complex installation. It's almost like installing something from a new. So it's an ongoing process and will take several years to get most of them or all of them even over to the new environment.

And the next question is about business innovation. How have the sales of the genomics IT module progressed?

We have 1 customer still, the 1 we got first. There is a lot of interest of more, but this is nothing particularly strange. This is typically what happens. We have completed a new product to a new customer, that it takes a while before other customers realize this actually works. It does work. It is University of Pennsylvania genomics lab, it's the most happy customers we have in the entire company. So we hope to get more business within a not too far distant future.

And then we have another question around AI risks. It's a longer-term strategic question. There is increasing market concerns that advances in AI could make parts of the SaaS industry obsolete. In my view, this has been 1 of the drivers behind the recent decline in the Sectra share price with the discussion accelerating after the recent plug-in release for Claude. How do you view this risk long term? And how resilient do you believe your software is to potential AI disruption?

Well, first, we are dealing in markets where trust is paramount. We are a trusted company in a market where trust is very important with the customers. If our medical equipment stops working, the hospital comes to a grinding halt. You don't buy that from 3 guys in the garage. You buy from people and a company you trust, that is not affected by the AI. And then as for AI, there is a wave of efficiency improvements coming that will make coding and specialty programming much, much faster. We are using it. Everyone else is using it. The benefit is as much on our side as on anyone else's side. The important thing is this is a wave that is coming. And a good company serves on the front of the wave. A poor company is paddling like crazy in the back of the wave. We are good at surfing the wave, and it will be as beneficial for us as for everyone else.

Thank you. Then I will move on to some questions from Nikola Kalanoski at ABG. And the first question is, during last year's Capital Markets Day, you showed a graph of the total processing on amplifier marketplace going up significantly. Do you see continually increased usage of amplifier marketplace among your customers?

That is a very healthy trend upward.

And we continue with AI. Are there any additional AI capabilities that you would like to develop with the help of the incoming Oxipit team or will focus be on Oxipit's existing product offering?

We see that as an AI center of Sectra or clinical AI Pixel-based AI center. There will be many more coming out with time, but we wanted to -- we want to rather be doing a few and doing it very well. And now autonomous AI is very important. We will not do all AI, we'll not compete with everyone and everything. We'll do what we're good at. And right now, there's autonomous AI for test.

And the next question is about Sectra One cloud. Approximately, how large a share of the order bookings are from Sector One cloud contracts?

Very large portion.

Is there any particular part of the world where you would like to hire more people? Or would you say it's similar as in previous years?

Right now, we're staffing up mainly in the U.S. and Canada and the U.K. That is where we have the large orders. We're also staffing up in Portugal and Sweden, where we have significant orders, and I would say these are the main with U.S., especially leading because we need to step up there.

And then a final question from Nikola and has NHS Scotland gone live at any site yet?

It's a development process of deliveries. Migrations of archives, et cetera, has started, but it's not live.

Thank you. Then I will move on to questions from Kristofer Liljeberg at DNB Carnegie. And the first 1 is any timing effects explaining strong sequential growth for the cloud recurring revenue. Does it include any one-off payments?

The answer to that is no. No. No significant one-offs or material impacts from -- or from one-off payments. It's related to volume growth.

And the next question, is the lower gross margin in the quarter explained by an increase of cloud storage costs?

Goods for resale include hosting and storage costs. Also includes hardware and components. And as the volume goes up, hosting and storage increase, but we can also have other components that impact goods for resale and the gross margin.

Thank you. And I think the next question from Kristofer Liljeberg is for you, Torbjörn. Can you please explain rationale for the acquisition? As you have previously said, you did not want to bet on a single AI solution but wanted to be gender neutral?

We are gender neutral still. We will have a lot of different solutions for AI working with all our partners all over the world. But this is different. This is autonomous AI and they are proof of that. The only approved solution to actually replace radiologist work. That's a huge difference of aiding or helping a radiologist with different things and actually taking a part of the workload out because that is what really is needed. There is a shortage of radiologists all over the world. If we can take part of the high-confidence normals in screening applications for you -- when you scan and screen a lot of people. Most of the images are normal. And if you set up sensitivity, you can take off a significant amount of those, perhaps 20%, say these are normal with very high probability, then no radiologist have to view this. And that's a big difference from other AI.

Okay. And a final question from Kristofer. Can you provide details of how much you will pay for this acquisition? .

We have not disclosed that.

And then I move on to questions from Jakob Lembke at SEB. And the first question is, could you elaborate on what drove the strong increase in cloud recurring revenue sequentially compared to Q3?

All right. I think we touched that in the previous question. So it's volume growth as we go live with new sites and as the usage increases our cloud revenue -- cloud recurring revenue grows.

And I also think you touched upon the next question previously, but you could repeat as well. Was there any impact from retroactive revenue recognition of cloud revenues in the quarter?

The answer is no.

And the next question is about the implementation process. Can you give an update on where you are in the implementation process on Quebec, U.S. multistate health care system and Greater Manchester?

We can begin with the last. Great Manchester is all live since many years. So there's no change over the last year. It has been live a long time. In Quebec, we are archiving everything, and 2 hospitals are live of the 100 plus that will go live, but 2 of them are live. In the large U.S. projects in the -- in all of those, there is 1 or 2 or 3 or regions going live. And they are split up in regions, but the majority is still to come.

And the next question from Jakob is could you elaborate on what drove the strong order intake in the quarter?

Of orders, we are doing -- selling well in many countries. So there was not 1 of those massively large, but still a lot of order impact.

And the next question is, it looks like you have won many deals in this fiscal year beyond what you have press release. Is the ambition to get this live in 1 to 2 years? Or do you see longer implementation time line since the backlog is increasing?

We're getting better and better in doing it faster, but there are significant delivery time to lease. Not the least because we have to migrate archives and archives have to move over when archive is included, and that takes time.

And the next question is, what drove the large increase in goods for resale in the third quarter?

Okay. Well, like I said, it includes hosting and storage, hardware and other components, and the increase is a mix quarter-on-quarter.

And the final question here from Jakob Lembke, and this is for Torbjörn and it's around AI again. Can you elaborate on what has driven the shift in your AI strategy from only integrating third-party tools to now developing your own? And a follow-up on that, so should we expect you to build more AI tools internally?

As I said before, partly mostly repack that question already. Autonomous AI is different. This is significant cost reductions for the health care and hospitals. We have never said that we would not ever do AI ourselves. We say we will not complete in all areas. But if it's good enough for hospitals and a big business, especially autonomous AI, we can do a few ourselves. We will not do everything.

Okay. Thank you. And I will just check my mailbox once again, and there is no further questions. So thank you, Torbjörn and Jessica. Do you want to say anything more, Torbjörn?

Thank you. Right now, I'm in Vienna and a very successful radiology show, ECR. And next week, we will be in California at HIMSS, which is a large informatics conference. So there's a lot of sales activities going on right now. So best regards and thank you for listening in.

Good morning, and welcome to Sectra's financial report presentation with CEO, Torbjörn Kronander; and CFO, Jessica Holmquist. My name is Helena Pettersson, and I will help moderate the Q&A question after management presentation. The chat function is open from start, and you are most welcome to write your questions during the presentation.

And with that, I hand over to you, Torbjörn.

All right, and good morning. We apologize we have some IT issues here this morning. So this is not done in a normal professional way, but we are -- fixes. So we do it in this improvised way instead. So 6 months report, I will begin with the interim highlights, and then Jessica will talk about financial development. I'll talk a little about the way forward, and then we have a Q&A session in the end.

Highlights of the quarter. We have business in Imaging IT, our largest business unit, Business Innovation and Secure Communications. And Business Innovation is our greenhouse. And the big -- 2 big, I think people know, then we have education IT, which is used for education of medical and veterinary staff and students. We have orthopedics IT. We have our fairly new genomics IT. We have research department. We have IT security for critical infrastructure increasingly important these days. We have digital pathology and integrated diagnostics and the 2 latest here are done in Secure Communications and Imaging IT. And then we have added a new and that is diagnostic reporting adapted for the U.S. market, and I'll come back to that later.

Second highest contracted order booking for a single quarter ever. The last year Q2 was even larger, but it's a very high order intake. We are in the transition to as-a-service model, and we have also launched several new innovative products. Happy customers drive growth. We have contracted order bookings decreased a little bit, but we're still second largest, as we said before. Net sales increased by 9%. That is affected by the transition to as-a-service model. The initial license sales are not many and none such in the U.S. and Canada now. And then we have profit per share, which has increased by 49% to SEK 1.30. We are in a transformation to as-a-service model, especially in medical. Our cloud recurring revenue increased by 61%, and now this is beginning to yield significant contribution because we are starting from an already fairly high number.

Recurring revenue, of which cloud recurring revenue is a part increased by 18%. This includes also old service contracts on the old service model. But the growth is explained by the growth in cloud recurring. And then churn, recurring revenue, so important if you have as a service model continue to be very, very low. It's 0.5% over the last 12 months. The financial targets for our group are in order, stability and measured in equity assets, that should be above 30%. It's currently around 51% despite a quite large dividend given in Q2. We have profitability, which we consider a hygiene measure. It should be about 15%. We are at 21%. Note that the profitability of this quarter is due also to some temporary effects that is not recurring.

And then we have the third goal that is our main financial goal that is a growth of EBIT per share over 5 years that should be above 50%. It's ways above that at currently 109%. And if you include the patent settlement, it's even more than that. Patent settlement was done in Q4 last year. We have won several large contracts in Q2. In Sweden, we have won a large region of Stockholm and Gotland. And this was -- these were in most of the cases, our customers already, but they have now got on over to a Software-as-a-Service model, and we've added a few hospitals that were not in the product before.

In U.K., we've got another 4 NHS Healthcare regions, Blackpool, Lancashire -- East Lancashire and Morecambe Bay. In U.S., we have a large health care provider to implement Sectra One Cloud at 11 hospitals. These contracts in the U.S. are large because the customers are many -- or the hospitals are many in each of these contracts. We have also a new planning tool for advanced orthopedic trauma surgery, this planning tool we had a long time, but we have added more libraries from the large prosthesis manufacturer. These are used to plan operations so each patient gets the correct size of its prosthesis. And this was historically done in 2D, but we today do it in 3D. It's very important for us to be good with the customer's customer and orthopedics is the largest customer of radiology all over the world.

The planning tool now covers almost 80% of all template orthopedic trauma surgery in the world. And the patients, of course, benefit from getting the rightsized and correct prosthesis or metal operated into the surgery operation. In Sectra Communications, we launched a version of our secure phones that is not formally approved. It is very similar to our formally approved phones, but they do not require such extreme carefulness with key distribution, et cetera. It's intended for industry and users that are not as forced to use the restricted secret level. It's called Sectra Tiger/E for Essential. It's a managed service and a new customer offering that we have seen a lot of interest for people who are not required to have the absolute highest approval levels, but still are very careful about not being [ e-stocked. ]

Security service support smartphones and tablets, which is important. It's hosted and it's sold as a subscription model and in Europe. After the quarter, we have last week or 2 weeks ago, gone to a -- the world's largest radiology exhibition, Radiological Society of North America in Chicago. We had a record number of demonstrations, and that was despite that we had low international attendance in this normally a lot of Canadians and Europeans competition. This year, that was substantially down, and we have a few people coming from Europe and also a few people from Canada. So it was mainly U.S. customers, but we still have more demonstrations than any year before.

We had also a record number of visitors. We are now considered leading the way as the most innovative tax company with the highest market growth. And the highest market growth is proved by class numbers as we have shown in previous presentations. The new products we show was the new reporting tool adapted for the U.S. Photon counting CT viewing, which is a new modality. Computer tomography has existed a long time, but photon counting is new. And we are the only PACS company who now can display those very important images. And users do not want to go to another workplace when they display that. They want to sit at the normal workplace and see these images, and we're the only company who can do that currently. We have enterprise imaging genomics leading -- having a lot of interest and education portal as well and our new cardiology viewer adapted, especially for cardiac ultrasound. We also showed many other new features.

The new U.S.A reporting tool is a version of the reporting tool we have had many years, adapted for the U.S. needs, which is quite different from European needs. Reporting is a very important part of the diagnostic workflow and to have that integrated in the PACS is a very important step for us. And we hope that we bring some business going forward.

Then I will leave the word to Jessica.

Thank you. Good morning, and welcome to this part of the presentation. Our 6-month report shows a strong order intake, solid growth and increased profitability. And we also -- our cash flow development also continues to be positive. The demand for our offerings, both in Medical Imaging and cybersecurity remains high with contracted order bookings of SEK 4.7 billion in the period, a decline of 2% year-on-year despite the strong inflow as the comparable numbers include the 12-year contract with Quebec amounting to SEK 3.1 billion. Our book-to-bill ratio is at 2.6. And the second quarter order intake included several orders in North America, the Region Stockholm contract and the another Sectra One Cloud contract in the U.K., as you heard from Torbjörn's presentation. And Secure Communications received orders for additional Tiger/S and extensions for managed service contracts during the second quarter.

Net sales in the 6-month period amounted to SEK 1.616 billion, an increase of 9% year-on-year. There is negative impact from currency on our sales. Adjusting for that, sales would have grown by 16% in the period. And the recurring revenue keeps growing, up 18% in the period, and the cloud recurring revenue part is up 61%. This shows that we are now starting to see customers from the large orders secured in recent years gradually go live, still on a small scale this fiscal year. The nonrecurring revenues are declining year-on-year, all according to expectation and as a consequence of the transition to cloud-based Software as a Service.

The second quarter sales increased by -- sorry, increased by 13% to SEK 851 million, driven by the growth in our medical operations. Imaging IT reports sales growth of 12% despite the currency headwind. And the use of imaging services grow by -- through deployment of new customers, add-on sales and also existing customers converting to cloud services. There is strong growth in cloud recurring revenue, up 63%. This shows we are moving in the right direction, though we have many customers remaining to be deployed over the coming years. Secure Communications sales declined 7% year-on-year to SEK 184 million. This is a result of a delay in an ongoing development assignment, a delay caused by revised customer requirements. The fastest-growing volumes were noted in the U.S., which reported by far largest sales growth in the period.

The U.K. report growth in local currency, but not in Swedish krona and the same applies to rest of Europe. In Rest of World markets, we also see growth, and that is driven primarily by the sales development in Canada. Our operating profit increased by 47% to SEK 307 million, and the margin was strengthened to 19%. Top line growth and higher investments in capitalized development are the main drivers behind the profit improvement in the period. In the second quarter, profit was also impacted by customer compensation for delays, delays which were not caused by Sectra. And we also have the impact of lower costs for our share-based incentive programs due to the share price trend in the quarter.

Imaging IT increased operating profit by 54% and report margin -- a rounded margin at 21%. As I mentioned on the previous slide, increased sales and more capitalized work for own use are drivers behind the profit improvement, also lower consultant costs year-on-year. We continue preparing for large deliveries, and we will carry initial implementation costs that are expected to dampen profit development near term. In Secure Communications, the operating profit declined by 44%, and the margin is just below 11%. And again, I repeat, it's mainly explained by delays in an ongoing development assignment and the associated product deliveries with that development. And this delay is expected to impact the outcome for the rest of our fiscal year.

Cash flow from operations amounted to SEK 160 million in the period, and there was strong profit growth driving the cash flow, partly offset by settlement of current liabilities. We have been utilizing the advanced payments received in earlier -- in previous periods. And in the second quarter, the cash flow was also impacted by increased capital tied up in current receivables as there was increased invoicing activity towards the end of the quarter.

And with that, I'm handing over to you, Torbjörn. I don't know what's not working now, but...

We sort that out. So sorry about that. As I said, we had a little IT issue this morning, which caused a change of rooms and some fast -- late [indiscernible] So when asked why it was so good in hockey, many of you have seen this before, Wayne Gretzky, who is the best in hockey over many, many years said, I do not skate to where the puck is. I skate to where the puck is going to be. Sectra has been good in that, and it's very, very important. We also continue on that, trying to see ahead of where cybersecurity and medical diagnosis will be a few years down the line. We are right now in a huge change due to mainly AI, and it's very important we continue to be prepared for what's coming.

Philosophy shareholders is that if you start with a rational strategy in a growing market, then if you have happy customers and in order to have happy employees, you must have happy employees -- for happy customers, you must have happy employees. If you're dare to expensive when you're worth it and have reasonable fit for shareholders will be happy. And I think we have showed that over the last years. But it comes in that order. We will compromise a quarter if needed to keep happy customers that is best for shareholders long term.

In medical IT, the growth areas because of demographics are age-related diseases. Almost all countries in the world have a very difficult to handle demographics. And the main diseases then is neurodegenerative disease, cardiovascular disease, cancer disease, musculoskeletal disease and vision. And we should be good in all diagnostics and image-related diagnostics, but we should be very good in these areas. We sell this in the form of new contracts we sell -- we call that Sectra One. You sign one contract and you get all. We can compare that to Microsoft Office when you don't anymore buy Excel or the Sectra One by one. You have one contract and you can use the different types of images or different services different. We've added 2 new things to this over the last year and that is genomics and now we have integrated reporting added as an additional service as well. Integrated reporting is a very interesting area, as I said, that is the output of images of diagnostics, and we have good hopes for that going forward.

We have all -- as I said, we have all imaging-related diagnostic data in one single cloud-based systems. We are the only vendor who have this operational in clinical use based on the cloud that enables better care for patients, more efficient workflows. And workflows are now critically important as staff in the medical world is overloaded and they must have efficient work or risk burnout. And if part of the staff is burn out, then, of course, the remaining get even higher workload. So it's very important for customers to have that. That result also in low cost and reduce complexity for the hospitals and improve cybersecurity as you don't have to have many different systems. You have fewer systems, which means you can be safer than with many different systems.

In cybersecurity, we stand for a new digital reality. Cybersecurity is growing and has to continue to grow because of our complexity in society and sensitivity in society, which we have seen not the least in the Ukraine crisis now. We have an increase in international tension and cyber crime, which drives this area a lot. And we are well positioned. We have a very strong brand name in cybersecurity, and we have new products and service coming out in a rapid pace. So we are well positioned. Health care -- sorry for that. Health care and cybersecurity are markets that due to external pressures have to grow. Even if there is a recession in society, both of these health care because of demographics and cybersecurity because we are building a more and more complex society, they have to grow, and that is a good place to be in.

Our priority going forward is that quarterly variations are still very large. We want to point that out. Q2 was a very good quarter, but the long-term trend should be seen over 12 months, not in individual quarters. Don't expect significant positive effect from the large contracts in '25-'26, which is our fiscal year ending in late April. We will see some effects, but not significant. They will begin to come next fiscal year and then gradually grow over the next 1 to 3 years. Also note that when going live with large customers in the cloud, the cost increases well before revenue. We need to spin up all the different machines or virtual machines in the cloud before we get revenue. So that means when you start up these very large contracts, cost goes up well before revenue, which will come when people begin using it. We have very significant go-lives ahead of us.

And also, please note that we are very exposed to currency, especially in U.S. dollar to Swedish krona right now. Our upcoming financial events is March 6, we have a 9-month report. June 5, we have our year-end report. And in September 8, we will have our Annual General Meeting in Linköping Sweden that will be on-prem. Also note that we -- your feedback is important. We do these presentations for you. Again, we apologize for a little IT issues this time, but things happen. We did the best of it. But send an e-mail to [email protected] if you have any input or suggestions to improve it. We have shortened the presentation a little bit based on previous feedback we got.

And then we open for questions.

Thank you, Torbjörn and Jessica. And I will start with a question from a private investor that we have received by e-mail and it regards our financial targets. And I think this is for you, mainly Torbjörn. You talked about your operational margin target as a hygiene factor. At the same time, another of your motto is there to be expensive. And according to the latest Capital Markets Day, margins are significantly higher in the cloud businesses. In addition, revenues are roughly 2x in the cloud model.

Once your large contracts become operational and you are paid per exam, I expect cost increases should be marginal. At the same time, development costs should be possible to optimize with AI tools such as Cursor. Based on all this, I find it hard to see how your margin would not increase over the coming years. How should we think about future margins? And will they be affected by any plans for entering new markets and developing more new products?

We have, as a goal, 15%. If we go up to much higher levels, it's because we run out of ideas, and we have a lot of ideas for improvement. Health care and cybersecurity will need new products. And as the largest shareholder, I am very interested on growing EBIT per share if you can because you can increase margins once, but you can continue with an increase of EBIT per share forever. So for us, 15% is a good measure, subject to the Board, of course, but we have no plans to change that right now. We will invest in future growth where we have the chance because these markets are so large. I would also like to comment on the AI for development. Yes, of course, we use Cursor or today the buzz right now is around a product called Claude Code, but that goes for all companies in the market. So that doesn't change the competitive landscape.

Okay. Thank you. And the next question comes from Nikola Kalanoski at ABG. Could you please let us know how you're doing on the implementations of some of your largest cloud contracts in the U.S., Canada and Scotland?

They are now -- we always start in this by working a lot with the customer on how the workflow should be, how the organization should be set up. That phase is over for all of these 3 are the 3 big ones. And I would say that with the server side is now implemented. Now we have to take hospitals alive, and we have prototypes or pilots -- not prototypes. Pilots gone live in the largest products, not yet in Scotland, but that will come. But you start with one and then you gradually take more on after a while. And that will take 1 or 2 years to go full live.

And then we go back to the first quarter. In that quarter, you mentioned that an international health care provider in the U.K. went live with Sectra One Cloud. Do we see full run rate revenues from that client this quarter?

No. That will take a little longer before that.

And we move over to a question regarding the Region Stockholm contract. You announced a contract with Region Stockholm that was quite large. There was a large difference between the client's estimated value of SEK 1.6 billion and the guaranteed order value of SEK 557 million. A few questions on this. First, could you please explain the difference between these 2 order figures?

Mainly what we are a little careful in what we promise. The lowest value if the customer doesn't use it very much. Now it would be very surprising if they don't use a system like that, but this is the guaranteed. Now the higher estimate is if they use it a lot, and then you have all in between. The estimate -- I mean, a probability-based estimate is probably between these 2 figures, but we only publish what we know we can -- we will get.

And the second question related to this is -- and Nikola, as he appreciate if you don't want to answer it in detail, but approximately, how much did you book as a contracted order bookings for the quarter for this contract?

Well, we haven't disclosed that, but I think Torbjörn already responded on that question.

And thirdly, I understand that this is an existing customer. What is the primary difference between implementing a fully managed cloud service for an existing client that already has an on-premise solution compared to an entirely new client?

Quite large difference except in the U.K. U.K. is a little different, but I will describe the Swedish situation. The Swedish situation, the customer bought the hardware and had IT services, local IT service on themself. We deliver software and support for the software if something happened. In a managed service or Software as a Service contract, we are responsible for that it actually works. The customer has very little staff working with the system, but we have to provide them services as well.

Okay. And one last question from Nikola for this time. There was a quite large discrepancy between the value of the order bookings that you announced prior to the quarterly report compared to the actual reported figure. Is the difference mostly attributable to unannounced Sectra One cloud contracts?

Yes. Yes, that is correct. As I mentioned, we had -- we received several orders in North America, primarily in the U.S. during the quarter. And then we have the Region Stockholm order value, which was significant.

And I will move over to a few questions from the chat function. And the first one is from Jakob Lembke at SEB. Is it possible to put into context how much the compute cost is in relation to revenue on the SaaS contract once exams reach mature level?

We do not disclose that, but we have a margin also with cloud cost, of course, not as much as for our own software partner.

And the next question is also from Jakob Lembke. Do you still see strong potential to win large contracts in the U.S.

There are many vendors or many systems in the U.S. who still not decided what they will have for the future. We, of course, hope we can get more, but we don't know that yet.

And it seems like recruiting is slowing down. Do you feel that you have reached critical scale and will not have to recruit as much going forward?

We will have to recruit because, as I said before, the Stockholm contract, the new type of contracts require us to have people to do what the hospital did before. I mean hospital saves a lot of money in reducing staff that we take over responsibility for, not with as much staff, but we do need staff. So we will continue to grow, but perhaps not as fast as before.

And a final question for Jakob Lembke. Could you talk about the potential to convert your old license customers to SaaS?

Our intent is to try to get everyone over to SaaS long term, but that varies a lot between regions and customers. We have had a few -- very few transitions so far. We hope -- we expect there will be more coming forward.

Okay. Thank you. And I will move over to questions from Kristofer Liljeberg at DNB Carnegie. And maybe we have touched upon the first one. How large part of orders in Q2 was related to the U.S.

Well, we haven't announced that exact number, but a substantial part, a substantial part was generated in the U.S.

And I also think we have touched upon the first one regarding -- no, we talked about margins, but could you explain a bit what will impact operating costs coming quarters? They have slowed a bit during the last 12 months. But at the same time, the message is that the rather strong margins seen in recent quarters might not be sustainable.

Well, as I said before, the cloud cost when we do live, we have to allocate all the compute resources in the cloud that the customer will need clearly before they actually begin using the system on the revenue. And there will be a gap in between where the cost goes up significantly, but revenue has not yet come.

And then one further question regarding costs. How much of the higher external costs in Q2 versus Q1 is cloud related, reasonable to assume external costs will continue to increase in second half of the year?

External costs will continue to increase in the second year -- second half of the year, especially because of the large go-lives we have ahead of us.

Yes. And then I move over to another question from a private shareholder. And I think we have touched upon this earlier as well. I wonder if you can elaborate on some more on the cost percentage that is captured by Azure in Sectra One deals and how that will change with increasing volumes?

Azure, to explain, is the Microsoft cloud service that we mainly use. And of course, that cost will increase, but we have a margin also on that part. And we do not disclose portions or levels on that.

And then we have another question from Nikola Kalanoski. How large was the one-off customer compensation payment? And was that booked as nonrecurring revenue or as other operating income?

That was around SEK 8 million reported as nonrecurring revenue.

And I will go back to the chat function -- see what we have there. And the first one I see is related to what you just said, Jessica. In the report, you mentioned the compensation from a customer. How big was this effect on the operating result? And then we have one further question from Jakob Lembke. Historically, you have always had a seasonally stronger Q4 for nonrecurring revenues. Should we still expect this to be the case as the nonrecurring revenues become increasingly smaller component?

We will have a strong effect because we don't have so much license sales anymore. So you should not expect that trend to continue.

And then we have a further question from Nikola Kalanoski. If possible, could you please let us know how large the one-off -- yes, that was the one we took. And then I wonder if you have answered those. Could you talk about the potential to convert your own license customer to SaaS?

Potential to move all over, of course, in the long term, but that is not so much our decision, of course, lies with the customer to decide if and when they want to go over. The situation between the U.S. and Europe right now is complicating things because American clouds are not accepted in European Union at least not in all countries. We will see with time what happens with this.

Thank you. I think that was all the questions we have received today.

Okay. Then we thank for our side, and we would like to stop with our traditional Christmas song done by our employees and we have to start this up again, there is some issues with -- it seems not to work. We apologize for this situation. Many of you will have it -- we will have it on our web page towards Christmas. The IT situation today is depending on a computer in the room stopped working, and we had to move very late in the process.

Okay. And that's from us. Thank you very much and Merry Christmas to all of you.

Good morning, everyone, and welcome to Sectra's 3-month interim report presentation with CEO Torbjörn Kronander; and CFO, Jessica Holmquist. Management will start with their presentations, and you can ask questions in the chat function during the presentation and management will address them after at the Q&A session.

And with that, I will hand over to you, Torbjörn.

All right. Thank you very much. Welcome to our quarter 1 presentation for this fiscal year. We'll start with the interim highlights by myself, and then Jessica will take over and present the financial developments and figures. I will have a brief Sectra's way forward, and then we'll have a Q&A session at the very end. You can use the chat function or you can send in your questions by e-mail.

Our business operations sector, to repeat, that is Imaging IT. We manage images. We started with only radiology, which is still dominant, but we manage all images of the hospitals in one single systems today. We do pathology, radiology, cardiology, dermatology, ophthalmology and other ologies as well.

And then we have Secure Communications to the right that we handle the top-level approved encryption devices, mainly for Europe, almost exclusively for Europe and NATO. We are NATO approved since before. We are also selling mainly into Sweden and Netherlands, but also to other countries.

And then we have business innovation, where we have a greenhouse of future business or smaller business areas that actually do not easily fit into Imaging IT and Secure Communications, and we have 4 operations there.

Highlights from the quarter. Order bookings doubled compared to the previous equivalent quarter last year, mainly due to successes in the U.S. and Canada. We are growing very well in the U.S. and in Canada, and it's almost exclusively Software-as-a-Service sales in this region. We sell very few licenses there today.

All operating areas grow, which is important. And as I said before, we have a huge progress in transition to as-a-service model. And know that software-as-a-service can be a little confusing. One model is selling a license upfront, which we did historically and then getting perhaps an upgrade of service revenue from it going forward.

The other one is when you have recurring revenue and you charge per user per month. That's a conventional way of doing it, and many companies have that model today. Most companies today is going to pay for usage, which we went to right away. We went from license model to pay for usage. Other companies went to pay per user per month, which we skipped. We think that was good. The whole world is going towards pay for usage, we went to right away. So we are past a transition that many companies will have to do now.

Happy customers drive growth. We have happy customers, which is the main reason we have grew. We are rated as the happiest customer in the U.S. and Canada in several other areas as well. The contract order bookings grew by 130% compared to Q1 last time. Net sales grew a little less by 6%. Now we also have currency effects in that, but it's still a good growth. And profit per share grew by 26% compared to the previous quarter.

The transformation to as-a-service model, as I said, cloud recurring revenue is the recurring revenue we get through cloud sales. This is for usage and what I described before. We also have recurring revenue, which is service contracts for the old systems that was once sold by a license model. And therefore, we also inform you of the recurring revenue, including that part. But the cloud recurring revenue is the new business model, and that has a very good growth of 4% to 6%. And before we had large growth figures or the relative growth figures, but now there is a substantial amount to grow from. So now this is beginning to make a real impact on what we do.

The all over recurring revenue includes the cloud recurring revenue, but also the old service contracts, and they are not growing as much. And the churn, which is very important if you charge for usage, you don't want to lose customers because you never got that upfront. You want customers to stay. And we have a very low 0.7% churn of our recurring revenue.

Financial targets for the groups are from the left, stability. Our systems are considered one of the most critical systems of both hospitals and nations. We sell the highest level security systems for nations, and we also sell, what some people say, it's the most critical IT system in the hospital management and images. It definitely is one of the most critical. And you won't buy that from 3 guys in a garage. You want stability and long term on your vendor. And therefore, we also want to be financially stable, and we have an equity assets ratio target of about 30%. We shouldn't compromise on that front, but we are well above it at 54%.

Profitability, we need to make money, of course, on what we do. The target is 15%, but both of these first -- and we are at 19%. Both of these first are hygiene targets as we see it. If we were asking or really trying to increase margin, we could, but that will compromise our future growth. And you can only increase margin once, but you can continue to grow forever. So whatever we have above 15% should ideally be invested in future growth. And if these 2 are hygiene goals, we have the third one, which is the main goal, but it's kind of third in priority. It's growth of profits per share, and that should be over a 5-year period above 50%. So at 115% is what we have currently, right?

We also had a patent agreement last quarter that drove that up a little bit, but that's a onetime thing that will go away after 12 months. So we are showing you 2 figures based on that.

In communications, we were actually chosen to secure communications during the NATO summit this summer. That is a huge honor if the top leaders from NATO using our systems for communicating between themselves. And they do trust us and it was a huge, also, marketing event for us.

Dutch Authority was in charge of that. And of course, we consider Netherlands as one of our home territories for high-level encryption. And we have NATO approved encryption solutions since before, but of course, it's easier when we're part of NATO ourselves. We are selling -- these phones are the highest possible security levels for mobile devices.

We also have an international health care provider that went live with 20 sites in the U.K. We see increasingly that some of the hospital providers operate in many countries. And this is an international one who was our customer before, but they also went live with 20 sites in the U.K. It went record fast. All sites, all 20 went live within 2 weeks after deployment at the first week. And this will show we are increasing efficiency and deployment in this one.

It's interesting that we see increasing and see this very, very large international chains buying from us because, of course, that's larger volumes and larger contracts if we get international business. It's radiology plus mammography in this case. They do about 0.5 million exams per year.

And then I will leave the word to Jessica, who will tell you a little about the financial development.

Thank you. Good morning, and thank you for joining our first quarter call. We're off to a good start this fiscal year with strong order intake and cash flow and continued growth in our recurring revenues. During my presentation, I will focus on the development in base and our other key financial metrics.

We doubled the contracted order intake year-on-year to SEK 1.3 billion, which is a confirmation of high demand in medical IT and cybersecurity. We were particularly successful with contracting in North America in the first quarter, both in the U.S. and Canada. And our book-to-bill ratio is currently at 2.9, heavily influenced by the large Q2 order from last fiscal year. Net sales increased by 6% to SEK 766 million year-on-year. Adjusting for currency impact, the sales growth rate equaled 12%. And usage is driving the recurring revenue, which increased by 14%. We had a decline in our nonrecurring revenue as our customers are increasingly purchasing services instead of the traditional software licenses. The share of recurring revenue out of total revenue is currently at 72%, 65% rolling 12, and we continue to report low recurring revenue churn. Progress in the transition to cloud-based service sales is reflected in the growth in cloud recurring revenue, which was 46% year-on-year.

All operating areas report sales growth year-on-year. Imaging IT report overall sales growth of 4%, solid growth in recurring revenue and cloud recurring revenue as both existing customers and new customers increase usage, but at the same time, less nonrecurring revenue.

In Secure Communications, we have delivered year-on-year higher volume of products, services and development assignments to our customers, resulting in a growth rate of 20% year-on-year. From a geographic perspective, sales are growing in the U.S. and Sweden this quarter. Growth is dampened by the development in exchange rates. We note that in local currencies, all markets showed growth in the quarter.

Our operating profit rose by 19% to SEK 119 million, and the margin improved to 15.5%. And we see higher personnel costs, partly due to the increased costs we have for our share-based incentive programs. And at the same time, this particular quarter, we had lower costs for consultants and travel. We also highlight that the activation of new large sites is expected to only have a minor impact on our profitability in this fiscal year.

Operating profit, all our operating areas increased profit year-on-year as well. Imaging IT is up 20% to SEK 114 million and shows a margin just above 17%. And this is despite the costs for cloud transition and the ongoing preparations for deployments of large customer sites. Secure Communications report operating profit of SEK 11 million at a margin of 11.6%. And here, profitability is currently hampered by an extension of an ongoing development project. And the increased scope of the project as such is positive, but it causes delays in serial deliveries and associated revenues. And we had very strong cash flow from operations in the quarter. And in essence, this is explained by profit growth and less capital tied up in current receivables. We received some large upfront payments in the quarter. We also had quarterly invoicing that was settled within the fiscal year quarter. And we also note that in the comparable period, we had some large cash outflows connected to hardware and other project-related items, and they were not repeated this quarter.

We closed the first quarter with a cash balance of SEK 1.4 billion, and we have a proposed dividend of SEK 405 million for the Annual General Meeting next week, split in an ordinary and an extraordinary dividend.

That was all from me.

All right. Thank you, Jessica. Then we'll go into our way forward. We have modified this a little bit. I will be a little more brief than normal. We make these presentations a little shorter. In medical IT, what we hear from customers is we lack medical staff and our workload is increasing. Last week, I was in a very interesting conference where this was pronounced even more. And a lot of medical doctors all over the world, not the least in the U.S., is just on the brink of burnout. And they are working very hard. They make a lot of money, but they're working very hard hours. This will not be sustainable long term. You can make a lot of money, but you need to see your family sometime as well.

So tools for that is what we are in the business we're in. We are making health care professionals more effective. Workflow efficiency is paramount for them. They need to do more in the available hours because the workload is not getting less, it's increasing and the number of people becoming medical doctors are not increasing at the same speed.

Another one is we have too many IT systems. One of our customers explained to me a couple of years back that they had 1,100, not a very large hospital. That is very dangerous, both from cost is high, maintenance to keep knowledge internal hospital all these systems and interfacing everything else and training is very expensive. But it's also a huge cybersecurity risk. Every one of those 1,100 systems is a potential attack point for cyber attacks. So they want to get the number of IT systems down.

And lately, we see integrated diagnostics. People want to use many sources for their diagnostic process. Before, radiologist said something, then the pathologist and so on. Now they want to take joint decisions. And they do that in the form of tumor boards, sorry. And we are making tumor boards and clinical conferences more effective. But we also try to get all the data they need into one place. We have connections in the EMR, lab, et cetera, and we do all the imaging internally, which speeds things up, which is important. So efficient workflows is becoming paramount in health care, I would say, almost more important than anything else. We are one of the fastest systems on the planet. And you can see they get there very, very fast. It's us and a few others about the same.

And today, we are the only vendor with all of these, what we call, ologies in one single system; radiology, cardiology, pathology, genomics, IT and ophthalmology. And of course, that's very attractive for hospitals who want to get the total number of systems down. They can get all of these in one system. And now we have also added genomics that we still have only one customer there, but we have a large interest from the market. And that genomic connected to pathology, especially for cancer research or cancer genesis.

In cybersecurity, we live in a new digital reality. There is increasing international tension and cybercrime drives strong growth. We are very well positioned there and have very strong brand name as we have in Medical. We are a strong brand in the areas where we are dealing and people trust us, and that trust is probably one of the most valuable assets we have. We also have a lot of extensive research and patents. And last quarter, we got a patent settlement that showed that those patents can be very valuable at times.

Prioritizing key takeaways. The highest priority for the fiscal year and the next year is to get the new SaaS customers to start usage. We get revenue when they use it. So for us, it's very important they use it and they increase using it and add more modalities to the systems they have bought from us.

Note still, even though it's a little less quarterly variations this year, but they are still very large. And if you want to judge Sectra, look at the rolling 12 average, you will understand very little of what's happening relative to if you look just as the quarter.

Be aware of the large currency exposure, we are exposed to currency. We have a very large portion of our revenues in foreign currency, and we have a lot of cost in Swedish kronas. And also do not expect significant effects from the large orders. People think that those orders will come materially fast. They will not. It will take time, but it's gradually getting up to usage during this year. And still, I'll say that start with our main philosophy shareholders, I will repeat it here again, start with the rational strategy in a growing market. We are in markets that have to grow if it's a low tide or high tide in the society, people do get older and health care usage is increasing all over the world, and they will need systems to maintaining that. And people do not get less sick in a low tide economy.

In cybersecurity, the digitization of society is increasing. People will have -- or have to spend in cybersecurity. So this market will grow by their own force. Then if you have happy customers, happy employees, which are needed to have happy customers. It's impossible to have happy customers if you don't have happy employees. They're too expensive when you're worth it and have some stubbornness and reasonable cost control, then shareholders will be happy. But it comes in that order, and we've said that all the time, and we maintain this basic philosophy of how we operate.

And then leads us to the upcoming financial events. Next week, we will have our Annual General Meeting here in Linköping, Sweden. It will not be broadcast. It's close. You have to be here to participate. December 12, we have a 6-month report; March 6, 9 months and June 5 is the year-end report of this fiscal year.

And with that, I also remind you that we've modified this presentation based on your feedback. And we got a little feedback. It was a little too much repetition. We have taken down a little bit of that now. But if you think we should concentrate on something or change the way the format of this, these presentations are for you, not for us. So send us an e-mail and tell us how you want us to do this to be even better.

And that leaves us to this question session. And Helena?

Yes. Thank you, Torbjörn and Jessica. And we will start the Q&A session. We have received questions both via e-mail as well as online. And I will start with the questions I got via e-mail already yesterday. And those are from analyst Nikola Kalanoski at ABG. And the first question is, how should we think about the ramp-up and full go-live of the following contracts and then he specifies the USD 227 million contract from 2023, also the NHS Scotland contract and the Quebec contract.

All of this will begin generating revenue this year -- this fiscal year, but it will not be significant yet. This ramp-up is over several years. They typically take a few hospitals into operation. But if you have 100, you will not start all of those 100 at once. But they will begin generating revenue in this fiscal year.

Okay. And the next question is regarding digital pathology. Could you please discuss the competitive advantage you have within digital pathology compared to other players in the space?

Well, one is, of course, that we know what we're doing there. And there are now vendors who will say, competition in radiology, who say they will have pathology within a year. But pathology is not radiology. It's images, yes, but the images are different and they're managed differently. You need completely different functions. So we are in a good position. We know what we do.

Second, of course, you get all of these type of images in one single system. And we do have one single system that operates very well for all of these systems. We win when there's a pathology-only RFP, and we win when there's radiology-only system, but it also works for the other side. So we are competitive both in pathology and in radiology because we win these individual deals. And that is not being able to show a report in the occasional images. Actually, we are there. And this combination -- and also that you can get images from all these sources when you take the final decision diagnosis without having multiple systems and user interfaces. That is a strong advantage.

And a follow-up question, how long have you been offering the digital pathology? And how does it differ compared to radiology when it comes to installation, implementation, et cetera?

We've been offering it for about almost 10 years now. We started -- we know this. We have special people working only with this. it is different and similar to radiology. The workflow is very similar. So the workflow components and how you operate and how you list things, how you interface to EMRs, for instance, are similar. The viewing is quite different. Pathology images are very, very large. The most important thing in the pathology image is color. And the regulatory requirements are a little bit different also. So the viewer component, it's quite different, but in the same system. But the radiology part is what we know from the beginning, and pathology, we have learned over the last 10 years. But they are not the same thing. Pathology is very, very large images. You can't handle them in the same way.

And then I have a fourth question from Nikola Kalanoski and it regards certification, especially in the U.S. Have you ever received an authority to operate with any part of the U.S. government?

No, not yet. We could achieve that when we need it. But so far, we have not done business with the U.S. government.

And the follow-up question is, do you have a FedRAMP certification in the U.S.?

FedRAMP is a cybersecurity certification, and there are many of those. We normally -- we are a cybersecurity company at the basis. So this is things we can do. As we have not sold to the federal government in U.S., we don't have a FedRAMP, but we have TX-RAMP. Texas RAMP is what's required in the state of Texas, and we've got that because when you've a customer there who required it. And that we publicized last quarter that we have. If we want to do FedRAMP, it's similar, but a little different, but it's not an impossible task to get FedRAMP if and when we need it.

Okay. Then I will move on to questions from the online audience. And the first one is from analyst Jakob Lembke at SEB. I will start with the first one. Could you explain what causes the volatility in Imaging IT recurring revenue, why they increased significantly quarter-on-quarter in Q4 and now decrease in Q1?

Yes. There are 2 things to that. Currency, of course, impacts the reported number. And the other is retroactive revenues in the fourth quarter.

And the next question from Jakob Lembke is on Imaging IT nonrecurring revenues. Is it possible to say if you view the quarter as weak for being a Kl or more normal?

That's a level of qualitative analysis. We don't -- we can't do that publicly.

And another question from Jakob Lembke. Is it now -- it's now 3 years since you won the large contract in the U.S. How much of that have you implemented now? And I think maybe this is the contract you referred to, Jakob, you may write another question could be the $227 million that we received 2 years ago in 2023. How much of that have you implemented now? Has the process to implement this contract gone according to your expectations?

Nothing goes to expectations. That doesn't mean you can't have success. But yes, it's going on very well. And as I said before, we will begin invoicing now. We have invoiced services, and we have done a lot of migrations. So I mean, if you get the contract that you need to move the old archive to the new, and that takes time. And before you have it on the new archive, you can't begin invoicing for exams. But during this year, this fiscal year, we will begin taking that into operation in the first part of that system. And over the next 1 to 2 years, that will go fully into operation.

And then yet another question from Jakob Lembke. Secured Communications, previously, you have talked about delayed deliveries. When do you expect them to come through?

Currently, we expect to have some impact towards the end of this fiscal year, but will also continue into next fiscal year as of right now. That's our expectation.

And then I will move on to questions from Kristofer Liljeberg at DNB Carnegie. And I think the first question may be similar to one we already have answered. But can you please explain why recurring revenues did not increase versus Q4, also when adjusting for negative currency effects.

All right. So I repeat retroactive recurring revenue in the fourth quarter is the main explanation.

And the next question from Kristofer Liljeberg is, in the report, you write that financial impact from new customers will be small this fiscal year. Does this mean that the sequential growth for recurring revenue will remain rather slow coming quarters?

We will not go into that projection forward, but it will not -- the important thing is to realize that these very, very large customers, they have hundreds of hospitals equivalent to country. They will not go live in all 100 hospitals at once. They will gradually take it on. When they see it works, they will take the next one. So it's not like a binary thing as you put on a switch. You take them gradually on live when you see the previous one works.

And the next question I also think you have touched upon, but you could repeat the answers maybe. How many years do you think it will take for orders signed last 2 years to be fully up and running?

Another 2 to 3 years.

And a final question from Kristofer Liljeberg here. Can you explain what are the larger cost items in external costs and why it has stopped growing after the large increase in recent years? Will it pick up again? Or is this trend an indication EBIT margin has bottomed out?

Well, as I mentioned during the presentation, in this quarter, we had lower consultant and travel costs to mention 2 categories of costs. We see this as it fluctuates from quarter-to-quarter. There is less activity in the first quarter than we have in the other quarters.

Okay. Then I will move on to questions from the online audience again. And the first one is from Jakob Lembke at SEB. Can you further explain the share-based incentive programs mentioned in the report? Is it possible to share how much these burden the result in each quarter last year? Are these something you have always had for a long time? And which segment is share-based compensation mainly burdening?

There were quite a few questions in there.

Should we take -- maybe you can talk about what those are. And then I go.

Okay. Yes, we have -- right now, we have 3 programs running. We started one after the comparable quarter. So that is explaining the increased cost year-on-year partly. Then we also have the share price development, which is impacting the cost that we have to recognize for these programs. It is particularly impacting the social security contribution that needs to be cost accounted for. And -- what were the other questions?

One was if it was possible to share how much this burden the results in each quarter last year.

That is not something we have disclosed previously.

I can give a comment there that we have begun recognizing or showing it now because we have a large variation in cost due to the stock price, and we are not controlling the stock price. So when the stock price goes up, we get a cost associated with that. And we need to explain that because the effect has been material over the last years.

And the last part of the question was which segment is share-based compensation mainly burdening?

The cost is carried by all operating areas.

About proportion to the number of people or revenue we have, but a little more than Imaging IT because these programs are larger in the U.S. and Canada than it is on the European side.

And then we have a question from a user about Visage. They claim they have the only cloud-native solution and all other vendors need some on-premise components. Is this true? Or are you also 100% cloud native?

No one is 100% cloud native. You need clients locally. Everyone has that. And you need some form of gateway to send images and modalities in. And so in saying everyone is completely cloud is not true. There is a component. And we are about the same as they are and many others.

Okay. And just for information for you online, if you have any further questions, please write them. And I will move on to another question from Kristofer Liljeberg at DNB Carnegie. How large was the retroactive revenues in Q4? And why did you not mention before that explained part of the big increase in Q4?

It was not deemed significant to report in Q4. And again, I repeat, it's both currency and -- that is currency and retroactive revenues that is impacting the Q1 numbers.

Thank you, Jessica and Torbjörn. I think that was all of the questions for today.

And we thank you very much for attending. And those of you who come to the AGM next week, much welcome. Otherwise, we'll see you in September. Thank you very much.