Welcome to our 3 months, Quarter 1 presentation for this fiscal year. We will begin with interim highlights by me, and then Jessica will take over and take the financial development.

I will briefly mention Sectra's way forward. Then we have a Q&A session, which is a little bit different this time as everyone can ask things online.

We'll come back to that when we come to that session. Our business operations, for those who are new to us, most of you are probably not, but just in case, our biggest business is Imaging IT, which handles images in hospitals.

All medical images are handled by us if customers want it, but mainly it's radiology. Radiology is the clear, dominant part of all of our Imaging IT, and Imaging IT is the dominant part of Sectra.

The second largest is Secure Communications, which was actually Sectra's origin. Sectra stands for secure transmission.

That is encryption and systems for transfer highly confidential data on national security levels. Then we have Business Innovation, which is our greenhouse for future successes, or sometimes, we have to close them down.

A little more, Business Innovation products is to either become a business line, it can sometimes be sold off, or sometimes, we close them down if we do not see success coming. Coming back to this, we have Medical Education IT, which is an interesting area of medical professionals live also in a rapidly changing world, and they need continued education.

We started that area mainly for education of medical doctors in medical school, etc. It's increasingly for education of all practicing doctors in the field.

We recently got a contract for all of Norway, where we are to supply all of Norway radiology and pathology continued education from a cloud platform. It's a pure cloud environment.

We have Orthopaedics IT, which provides special tools based on images for orthopaedicians planning surgery and follow-up after surgery. We have our new area, Genomics IT, which is about the DNA and modern medicine, especially oncology, is very much about gene sequencing, but it has not been reproduction.

We have production systems, where production specialists for medical, this is not images, but it's closely related to images, and we do that in Genomics IT. Then we have a research part, mainly doing AI research.

In Secure Communication, we also have a growth area in critical infrastructure, IT security for critical infrastructure. In Imaging IT, we have one area that we moved from the Business Innovation group into Imaging IT about 10 years ago for digital pathology.

We add that to radiology. A new area is outputs.

All diagnostics must result in a result, and that is documented in a report, and that report needs to be efficient, needs to be tightly integrated with imaging component, especially in radiology. That has been dominated by other companies before, especially US, but we are now creating tools where you can sit and interact with the report based also a lot of AI there, to create very efficient diagnostic reporting directly when interacting with the image.

Highlights from the quarter, our contracted order bookings went down, but we had an exceptional first quarter last year, and our contracts are now very large and very long in time, and therefore, we are not overly concerned about that. The book-to-bill ratio of 12 months is still very healthy.

Net sales rose by 26%, and profit per share rose by 55%. We are transforming into as-a-service model, Software as a Service.

Instead of paying upfront as customers did before for big license sales, they pay us now while they use the product. That means delayed time, or longer time to we begin to get revenue from an order, but also much longer revenue stream long term.

Long term, this is very beneficial for both customers and vendors as well. The cloud recurring revenue is the part of recurring revenue that we deliver over the cloud and that predominantly is in the US, Canada, UK, but also to some extent is Europe.

That rose by 75%. It's now beginning to be a significant part of our revenues.

Recurring revenue in general, which includes the cloud recurring revenue as a part, rose by 32%. That includes normal service contracts and a few other things as well.

The churn, the recurring revenue that we lost, which is a very important factor, if you have a customers who pay for usage, you don't want them to stop using your system. The churn was 0.5%, which is a very good figure.

We don't lose many customers. We lose some, but not many.

The financial targets for the group's stability, equity-assets ratio, we sell critical systems both in cybersecurity and in medicine. If our systems fail, the hospitals come to a grinding halt.

Imaging is a critical part of modern healthcare. Then the customers do not want to buy that from an unstable company.

It's dangerous. Being a stable company, financially solid, is important.

We have equity-assets ratio of 30% target. We are always above that at 52%.

52%. These are all prioritized in the order 1, 2, 3 here.

The second highest prioritized target is profitability, operating margin. That should be above 15%.

We're well above that at 21%. Both of these are hygiene measures.

The most important figure, but after the first two are fulfilled, is growth of profit per share. EPS growth over a five-year period should be 50% or better.

We are currently way above that at 90% growth. In Imaging IT Solutions, our largest area headed by Marie Ekström Trägårdh, we are leading that cloud transition.

We have large contracts that we have published over the last two, three years. They are now in roll-out mode.

We are rolling out. We are installing a hospital a week or something like that.

Some of these contracts are very many hospitals in one single contract, and so the deployments go over several years. Two health boards in Scotland, Scotland was one of those large, two health boards are now live, and then new one added all the time.

In the US and Canada, we have very large contracts both in Quebec, which is public, and some other operators in the US, which we are not allowed to disclose who they are, but they are very large. These are all now in delivery mode.

All of the big contracts are in delivery, and we added a few every month, or we adding many every month, I would say. We also have a large interest with diagnostic reporting that I mentioned before.

The output of diagnostic is a report, and that should be include images and be very efficient to produce, and it contains a lot of AI in making them as well. We are revamping that and releasing a new diagnostic reporting system, initially offered mainly in the US, but we have large interest all over the world.

That is a significant part of radiology business that is up for grabs if you can do it, but there are other competitors there than we normally see. In Secure Communications, we are supporting national resilience and total defense preparedness.

Of course, with the crisis in Europe with Ukraine, the interest and growth has gone up in that area a lot. We had a production problems in Q1 that meant a factory came to a grinding halt for a while.

That is now resolved, and we have begun deliveries again, but that impacted Q1's a lot for Communications. That is now resolved.

Of course, the crisis in Europe drives demand. In general, cybersecurity is a rapidly growing area, not the least with AI that I will come back to later.

Then I will leave the word to Jessica, who will go into the financials a little more.

Thank you. Good morning, and thank you for joining our call today.

We are reporting a first quarter of strong growth in recurring revenue and in operating profit. Before I walk you through the financial development, I would like to highlight a few changes that we have made to the format of our interim report.

First, to improve readability, starting this quarter, we report amounts in millions without decimals, unless otherwise stated. Secondly, we have added external sales by segment, and we have expanded the table in Note 6 to reflect this change.

Thirdly, we have expanded the income statements by quarter, and we have added cash flow statements by quarter. We hope that these changes will add value to the readers of the reports.

Order intake. We reported 699 million of contracted order bookings in the first quarter, a decrease of 47% year-over-year.

Despite the lower figure, demand for our solutions remains high in all operating areas. As you heard Torbjörn say, given the long-term nature of our contracts, we expect quarterly order intake to continue to fluctuate significantly going forward.

The rolling 12 book-to-bill ratio is at 1.9. We did not sign any individually large orders this quarter, but we saw increased order intake in Australia, Norway, Germany, and Portugal.

Our net sales in the first quarter amounted to 962 million, corresponding to an increase of 26% year-over-year. The continued growth of usage or use of our services is driving the recurring revenue growth, up 32% year-over-year.

We also saw non-recurring revenue increase year-over-year by 11%, mainly from license revenue, migration, and professional services delivered during the quarter. Our cloud recurring revenue keeps growing.

We increased by 75% to 315 million, and for the first time, we saw rolling 12 that cloud recurring revenue is exceeding 1 billion. Currency movements had a small negative impact on sales in the quarter, and the pattern for recurring revenue churn is unchanged.

Please note that the chart on this slide shows the changes in external sales, whereas in previous reports and presentations, we have included internal sales as well. Imaging IT increased sales by 30% year-over-year, and the main driver is volume, increased usage of services, and additional deployments of new sites.

The share of recurring revenue in this area is high. It was close to 78% in the quarter.

Sales in Secure Communications decreased by 4% to 89 million year-over-year, following continued impact from the delays in delivery. Then in Business Innovation, sales in Business Innovation primarily go through the Sectra One service in Imaging IT.

As a result of that, we will see limited external sales reported for Business Innovation. Looking at our geographic markets, the US reported the by far largest increase in sales.

All other markets contributed to growth, except the UK, where we saw temporary decline year-over-year. Our operating profit increased significantly year-over-year by 61% to 191 million.

The operating margin improved to 19.8%, compared with the 15.5%, driven by the development in Imaging IT. Profit was held back by Secure Communications' performance in the first quarter and also partly by currency headwind.

Operating profit variations have leveled out over the past four quarters, which is according to expectations, transitioning to become a service provider. With large individual contracts and also on-prem deliveries, there may still be quarters deviating from this trend.

Imaging IT increased the profit by 77% year-over-year, and the margin reached 23%. Again, the driver in this area is volume, more medical images through increased usage and also additional deployments and add-on sales.

We also note that rapid growth in this area requires investments, investments to further scale and refine our offerings, our organization, and also our ways of working, while at the same time, maintaining a strong focus on quality and security. Secure Communications reported an operating profit slightly above break-even.

Serial production started end of last fiscal year, but as already commented, it was on a small scale in Q1. Our cash flow from operations amounted to 3 million in the first quarter, compared with 118 in the corresponding quarter last year.

Our underlying performance has improved, but the changes in working capital had a negative impact on cash flow, mainly temporary timing effects between quarters. We ended the reporting period with a cash balance of 1.8 billion.

Based on our strong financial position, the board and CEO propose a total dividend of 443 million to the shareholders, for approval at next week's Annual General Meeting. That was my last slide.

All right, thank you, Jessica. Going forward, I spoke last time about the AI wave.

We have a tremendous wave of AI coming all over, and it has not slowed down. It's rather faster than before.

The AI wave comes, we can like it or dislike it, can't do much about it. We can choose, as individuals or companies, to either surf on the front side, trying to keep the balance, and if you fall, you rise up and try surfing again, or you can pedal like a crazy man on the back side and try to keep up, and that would be very difficult.

We have chosen the previous; we are surfing the front side. It's fast-moving.

There have been huge changes just over the summer in the AI world, not the least in cybersecurity. Many of you might have heard about Mythos and things coming out, where large vulnerabilities in cyber systems or IT systems all over the world have been discovered that in some cases have been 30-year-old, 30 years old.

No one have seen them. That of course means that we as IT companies, all of us, all over the world, have to patch things and fix holes that we discover.

We are not different from others. We will spend a lot of effort now to fixing cybersecurity issues in the products as all IT companies do.

That means we will develop a little slower, but so is the case for everyone. We are to help our customers to benefit from AI as well, in healthcare as well as in cyber resilience and defense, and we are getting quite good at it, we can provide a lot of advice and help into healthcare as well as in cyber.

We also see increasing internal efficiencies. In the beginning, people speak mostly about coding, but software writing software is today to a very large extent done by AI, but we see it all over.

AI is changing the way we operate, and we become more efficient. Is everyone else, it's a race here to be faster than the others.

In medical IT, we have said many times, our main areas and the growth areas of medical IT is, or medical at large, is the age-related diseases. That is where society have to act, because those are the ones who grow the most.

Neurological diseases, neurodegenerative diseases, MS, Parkinson's, Alzheimer's, these are very expensive and needs to be handled by society, cardiovascular disease, cancer disease. Cancer is transforming from being an acute, deadly disease 50 years ago to now a chronic disease.

People can live with multiple metastatic cancers and continue living, but they need a lot of diagnostics in healthcare while continuing their life. This drives the growth of healthcare at large.

Musculoskeletal disease, a grossly undervalued area, affecting mainly women, but also men, but women very often, after menopause, have osteoporosis, which results in a lot of musculoskeletal problems that we are good at handling and planning and following up for. Vision, vision is also an age-related disease that is very expensive for society and insurance companies.

These are the main drivers for future needs in healthcare, and we will be there with image-related diagnostics and of course now also genomics. We are bundling all of these in one service called Sectra One.

A customer can sign a contract with us, and they can do all of these, if they use cardiology, or ophthalmology, or radiology, they just have a tick, and they get that on the next invoice, but only when they use it, not just for having access to it. We are adding reporting into that as well, especially we have had reporting in Europe for a long time, but we're adding reporting as a service into this, especially in the US and Canada, where the need is the largest right now.

We see ourselves a little like Microsoft Office in medical imaging-based diagnostics. We don't only have Word or Excel or PowerPoint; we have all of those in one subscription.

We are the only one who have all of these in one single system: radiology, cardiology, pathology, genomics, ophthalmology in one single system. The output, all of that, will go into diagnostic report.

Right now, we do radiology reporting primarily, but in the long term, that will be a diagnostic report that a clinician can get: what is the problem with this patient. In cybersecurity, there has been a lot of events in cybersecurity in AI.

Agentic AI broke out of OpenAI, recently and broke into a other company despite that the environment where they tried out this new AI was sandboxed. There are very interesting videos on YouTube how that worked, but it's clear that AI will play a very strong role in attacks, cyberattacks in future.

Moments after a vulnerability becomes known, there will be attacks with AI. AI will also be used for automatic AI defenses.

This is a rapid game now, and we will work and see what we can help out within AI defense of cybersecurity. Sectra will be there at the front of this wave, but so are many other companies as well, but it's a rapidly moving field.

Good to remember, we had a board member once, Gunder Lénsch, he minted the phrase: "Where there's change, there is margin." The trick is you have to be faster than the other guys.

Now, we are quite a fast company, but this, of course, is a challenge to keep that speed up, because now, the world moves faster than before. Upcoming financial events: September 8th next week, we have our Annual General Meeting.

That will be a physical meeting in Linköping. Those of you are shareholders are most welcome to come.

Or if you have announce your arrival, you have to pre-note us of that you're coming. Then we have the November 25th, we have a 6-month report.

Again, I remind you, these meetings or presentations are not for the sake of us. We knew this stuff beforehand, and we wanted to be good for you and an effective way of transferring what you need to know.

If you have any comments on the format of the presentations, please send an email to [email protected], and we have changed the content quite a lot based on that input over the years. Now, we open up for questions.

You can either use raise your hand button in the Teams system, or you can use the chat function, and a moderator will read your questions to us here. Then I leave the word to Helena, what we have heard anything coming in.

Yes, thank you, Torbjörn and Jessica for your presentations. I actually will start with handing the word to Nikola Kalanoski at ABG.

You are welcome to un-mute your phone and ask your questions.

All right, thank you very much. I hope you can hear me.

Yes, we can.

All right, great. Thanks for taking my questions.

I'll ask them one by one if that's okay. The first one is on the reporting module.

It sounds like you have quite significant interest in this module, but I'm curious on one thing here. For your existing North American customers that are also potential future reporting module customers as well, what would you say is the primary advantage for purchasing your reporting module compared to purchasing from a competitor that does not provide PACS to them?

It's faster. Radiologists of today, or diagnosticians today are stressed.

They have a very high workload. Every click is important.

If you have to leave for another application to write or dictate a report or make a report, that takes time. We do it from inside the imaging window, which makes huge efficiencies.

We can provide more intelligent reports because we can provide links to images, etc. for the clinicians to read.

It's a speedup and a efficiency boost for the diagnostic part.

That sounds very reasonable. Then a bit curious on another topic, which is, you've historically recruited quite significantly each year, but that pace has slowed a little bit somewhat recently in percentage terms.

Now that AI tools are very helpful, should we see this as changing the balance between hiring new people versus spending more on AI tools that allow for higher productivity per head, or should we think differently?

No, that is a correct statement. AI will take over a lot of routine work.

It will be a slow process. We can't change this overnight, but gradually, AI will do a lot of boring stuff that we had people for before, and we will have a little less growth in people, and growth in the cost for IT and AI.

All right, yeah, that's also reasonable. Then a bit of a, I guess, reporting question here.

Just on the gross margin, it was down a little bit year-over-year. Is this primarily because of higher cloud costs that arise in relation to Sectra One cloud revenues ramping up, or is there some different element to this from the Secure Communication segment as well?

There are several explanations behind the margin development. Increasing cloud costs, yes, also increased external costs for migration, and we also had a slightly higher share of hardware versus Q1 last year.

All right, perfect. That's all for me for now.

Thank you very much.

Thank you, Nikola. Then I will hand over the turn to Jakob Lembke at SEB.

Hi and good morning. Hope you can hear me and see me as well.

I'll start with a question on the cloud recurring revenues in the quarter, the quarter-on-quarter increase looks quite strong. If you can elaborate on what type of customers are driving that in the quarter.

The main increase is for the large contracts in the UK, US, and Canada, because these are contracts we've been working with and investing in for a long time, but they're now beginning to go live. Larger and larger portion of these customers are live, and that of course, when they begin to use it, it drives growth.

Good. Then also on the non-recurring revenues in Imaging IT, which also is quite strong, and I'm wondering if you can elaborate on sort of the year-on-year increase we have here in the quarter, how much of that is driven by license sales and how much is driven by sort of professional services and migration and so on.

You're spot on, it's driven by all of them, we have some license revenue in the quarter, but also of course in relation to these large go-lives, we provide more migration and professional services, generating revenue.

Were there any sort of unusually large go-lives of sort of on-premise customers here in the quarter?

We had not unusual, but we don't have them every quarter, on-prem go-lives with license revenue, but so it contributed, without being too detailed on the numbers, it contributed, but it's not only license revenue.

In Scotland, it's a little special, because Scotland, we're also responsible for some hardware, the clients. That's a lot of PCs that is included in our shipment that we forward to customers.

Normally, we don't do that, but in Britain, the contracts include some hardware as well, even though the server side in the cloud, the clients are not.

Just a follow-up on this, given that you are in this sort of intense period in implementing a lot of large contracts, I guess we should expect this sort of consulting, hardware, sort of migration revenues and so on to remain at quite a high level here for the coming, let's say, 2 years.

We don't give that forecast. It changes from quarter by quarter.

It will not be significant. It will go up and down a little bit.

Good. Then I'm also wondering if you can elaborate a bit on the reporting solution and, for example, if you're starting to win any customers in the US.

We have advanced discussions with several customers. We have nothing published yet on any wins.

Good, and then I also have some questions on the large cloud contracts you're moving forward with. The large US health system that you've talked about before, when do you expect to make any progress beyond the sort of initial smaller region you have implemented for them?

It's continuous progress, we're taking things live all the time.

Good, and then on Scotland, now that you are live with the first regions, do you have a sense of when it can be fully implemented with Scotland?

Also Scotland is very large product with very many health trusts. It will take 1 or 2 years more before we are completely live.

Good, and then finally also on Quebec, if you can say how many hospitals you're in right now.

I don't know, but we started with two, we're now delivering many more. I don't know exactly the figure as of today, but it's beginning to get up in the teens, I would say.

It's in progress, far from complete.

Maybe just a final question then also on AI, which you talked about here in the presentation. Just wondering, is cost for AI tools starting to become a meaningful cost item, and if so, also where in the P&L do we see that?

It is a growing cost, obviously, you will see it under other external expenses. That's where it will be part, the AI we use internally would be seen under other external expenses.

From the looks of it then, it's not yet at a stage where it's a sort of meaningful impact on the P&L, I guess.

No,

not yet. It's picking up.

Yep. Good.

That's all for me. Thank you.

Thank you, Jakob. I'm actually not seeing any more raised hands right now, if you have a question, please raise your hand.

While you are doing that, I will take some questions from Kristofer Liljeblad at DNB Carnegie that has been received by email. I will start with one on the orders.

Could you please comment? They are, of course, lumpy, but how do you view the overall demand from new hospitals to sign enterprise imaging contracts?

Do you see any trend shift in US demands?

Not in the US. I will say they're not affected by this trend.

We see it in Europe because of the cloud problems with public clouds delivered by American companies, and that has kind of slowed everything down because that was what people thought they would do. All of a sudden, that is not as easy as people believed.

In Europe, we see some effects. In the US, there's no big change, at least not for the time being.

The next one is regarding Secure Communication.

How soon do you expect production and sales to ramp up?

It's already ramped up. It affected first quarter, but the problems in the production is fixed, and we see that coming back to normal levels soon.

Then we have two more financial detailed questions. What explains the somewhat weaker gross margin in Q1, the production ramp-up in Secure Communication or larger hardware shipments in Imaging IT?

If so, are those booked on the non-recurring sales line?

All right, I repeat a little bit of what I said before. There are several factors impacting the gross margin.

Slightly higher share of hardware is one of them, more external cost migration and cloud cost is the other, so that's more relating to the Imaging IT side of the business than the Secure Communications.

Thank you. The next question is regarding EBIT margin.

With 19% EBIT margin this quarter and Imaging IT improving margin 6 percentage points, do you think the overall group target is starting to look somewhat conservative? Would you need to accelerate costs even more next few years to deploy all new customers?

I don't think we will have to increase the cost a lot, but it will be a lot of cost getting big contracts live still. We do not comment on our goals and targets, that's a board decision.

Thank you. Then I will see if we have any more questions.

I can't see any that has written questions, but I see that Jakob Lembke is raising his hand, please go ahead.

Just another one. Now that you have your first US customer that have or at least a larger US customer that has upgraded from on on-prem to to cloud, do you see that the interest from other US cloud or other US on-premise customers to to upgrade are increasing?

Yes. It's increasing.

It will be a long process, though. We have a lot of on-premise customers, and it's a large project, but it is increasing.

People would like to go to cloud. It obviously works.

We have not only done one; we have done a couple now. We are learning, and it's still a large project.

It's a large change, but we don't see the reluctance that we see in Europe in the US and Canada. They are like, 'Yes, we want to do this,' because it saves them costs, it saves them space, and they can use their personal money for medical people instead of IT people.

Good. Thank you.

If you have some final questions, please raise your hand. It seems like it's not any further questions, I leave the word to you, Torbjörn.

All right, then we thank you very much for joining our event. We hope to see a few of you next week at our Annual Meeting, and the rest of you, we will probably see in November then.

Thank you very much for joining.