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.

With that, I hand over to you, Torbjörn.

All right. Thank you very much.

We'll go through intro and highlights as a start. We'll do the financial development, and Jessica will do that, Jessica Holmquist.

Then briefly, I will go through a little bit way forward at the end. Then we have the Q&A sessions.

You can do questions both via chat and email. We'll reply to that and also some previously sent-in questions that we got by email before the meeting.

Our business operations, as a short brief, our largest business area, led by Marie Ekström Trägårdh, is Imaging IT. That is management of images in hospital and healthcare.

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 we have.

Then we have Secure Communications, which is high-security encryption systems for communications mainly. That is managed by Magnus Skogberg.

We have a good growth in that area as well. 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. We have some business areas there that are not big enough to become a big business unit itself, but are still interesting areas for the future.

Those are in orthopedics, it's 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 revenue is going up.

The contracted order bookings went a little down, but was still always above our turnover, at more than double the turnover of revenue in order bookings. We are not all panicked about that.

I should point out that in order bookings, the orders are very large relative to our size. 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%. Cloud recurring revenue, which is our big growth area when we transform into as-a-service, 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 old service contracts and more type of that which is not related to the SaaS model, that grew by 19%. The main part of that growth is, of course, the first one, the cloud recurring revenue.

Then we have churn. If you're on a service model, you don't want to lose customers as they pay per procedure.

We have a very low recurring revenue churn at 0.5%, which is a very important figure to look upon if you compare with the SaaS box. 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 management of radiology images stops, most of modern hospitals come to a grinding halt. You don't buy that from three guys in a garage.

You buy it from someone you trust. That trust comes both in other references and other happy customers, but it also comes from financial stability.

Our target there is 30% of equity-to-assets ratio, and we are well above that, 48%, despite that we also increased the dividends for last year. Profitability, which is our second prioritized target, is margin.

We have a margin target of 15%, and we're well above that at about 20%. These two first are hygiene measures.

Increasing margin, you can only do once, but growing profits, you can do forever. 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%.

Once again, we're ranked number one in customer satisfaction. When you have such a high-trust business as we are in, what other people say is very important.

We have now had the 13th year in a row in the United States and large hospitals. We have been named the system in our business which customers are satisfied with.

7th year in a row in Canada, and in global PACS, which are other areas, in Northern Europe, we have the happiest customers; Southern Europe, we have the happiest customers; 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. These are important things when you are 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.

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. That means real savings for the hospital.

Just to have another measurement for the doctor who needs to review an image anyways, that is not real savings. If you can take the doctor away from the loop for some exams, that's real savings.

That was the main reason why we acquired this. It's a 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 nationwide agreement in Norway for education portal. That was not for universities.

We have 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. 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 on what's happening in the field. They need continuous education.

The nationwide agreement in Norway is for pathology and radiology all over Norway. All Norwegian doctors will be 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 a organized training for that. In Secure Communication, we had very high revenue for a single quarter.

We are growing in a way because of a sad reason. There's a war going on in Europe, and that has driven a security concern and defense concerns all over the world.

We are doing encryption, which is very important to keep secrets secret. With the inclusion in NATO, we hope to have a larger RM market going forward as well.

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 solid financial performance for the full year and the fourth quarter. 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 7.6 billion, surpassed only by last year's record-high order intake, which was driven by the 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 UK. Our fourth-quarter order intake amounted to 1.6 billion, notably down versus the comparable quarter when we signed several larger US contracts.

This again confirms quarterly volatility in our order bookings. Net sales for the full year amounted to 3.5 billion, corresponding to a growth rate of 9.3%.

The SaaS transition drives recurring revenue, which increased by 19%, whereas our non-recurring revenue declined by 7%. I point out again that the cloud recurring revenue grew by 55% to 960 million.

Currency movements impacted sales negatively, with the US dollar, the euro, and the British pound all weaker against the Swedish krona than in the comparable period. Adjusting for currency effects, sales increased by 16.5%.

High customer satisfaction is reflected in our figures, with the low recurring revenue churn of 0.5 rolling-12. Fourth-quarter sales increased by 13%, and for the first time, quarterly sales exceeded 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 453 million.

The fourth quarter was strong despite product delivery delays, with sales reaching the highest level ever for a single quarter. In Business Innovation, where we include orthopedics, 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 US, 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 non-recurring patent settlement recognized in 24/25, which had an EBIT impact of 110 million. Excluding that, our operating profit rose by 16% to 711 million, of which 209 million was generated in the fourth quarter.

Profit growth is seen across all three operating areas, and the margin was improved to just above 20%, up from 18.9% the year before. 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%.

The drivers are the same as mentioned previously: increased usage, deployments of new customers, and add-on sales. 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.

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 1 billion 78 million for the full year, of which roughly 500 was generated in the fourth quarter. The strong cash flow generation comes from profit growth and also from increased short-term liabilities related to advanced payments from customers.

Given the cash flow generation and the overall financial position, our board and CEO propose an increased ordinary dividend of SEK 1.30 per share and an extraordinary dividend of SEK 1 per share for approval at the Annual General Meeting in September. T?

All right. Thank you, Jessica.

Our way forward: There is a wave of AI coming through our entire society, and we have said several times that these 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 will fall a couple of times, but you can at least try to surf.

Use that energy to your own benefit. Or you can fight like crazy man on the back end of it, trying to paddle to keep up, and you will 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 healthcare more efficient. Actually, we can see a trend that healthcare, as we know it, would not survive without this new trend in AI.

It makes survival or increase of production in healthcare possible. We are helping our customers with that, and 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, it's going to increase in speed of change in cybersecurity. Our job is to help our customers as good as we can in both areas.

We also use AI to increase internal 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 way more efficient than you was 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 relative numbers of older people to younger people growing.

The main focus has to be related to the age-related diseases. These are neurodegenerative, cardiovascular disease, cancer disease, musculoskeletal disease, and vision and hearing.

We do image-related diagnostics. We don't do therapy, but image-related diagnostics and now also genomics in these areas.

These are areas that will have to grow if we want healthcare as we know it to survive in the future. 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. We do that increasingly with what we call Sectra One.

Sectra One, our customers are now on 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, cardiology, genomics, education, as we discussed before, breast imaging, orthopedic planning, all in one contract. 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, to say, and many source of information needs to be unified and participate in what the customer uses.

We can say that Sectra is, in a way, a Microsoft Office in medical imaging. You would not today buy Excel or Word separate.

You have Microsoft Office contains that. We have that possibility for our customers.

As with Microsoft today, you don't normally buy Microsoft as a package in the bookstore anymore. You get a subscription, and you get all the services going forward.

That is exactly what we are doing. We charge per usage; we don't charge per seat.

We're also adding now reporting into that. Reporting is kind of the output of the diagnostic process, and we have done that in Europe for many, many years.

We also add that in now in the US, and that is an important part because reporting can take the results of the different diagnostics and make a comprehensive report and then go to the referrer 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. We are also seeing cancer especially that cancer is transforming from being a 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 thing. Burnout risk is real in hospitals today.

It's especially in the US, but also in Europe, serious issue. People cannot 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 paramount important.

That is our core, at 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-based maintenance.

They have to have staff on hospitals that look on all the different systems, know all these different systems. That's expensive and cumbersome.

It's also a high cybersecurity risk. All of this 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. These two both motivate having one vendor for many systems.

Lately, we see personalized medicine, which is applying therapy that is different from two different patients. They have the same disease.

They look the same. They are perhaps different in genomics or something, and then you want to target personalized treatment for that person.

That requires integrated diagnostics. You need inputs from radiology, pathology to take those decisions, and not the least genomics, our newest area.

This is what we're building. As you saw that big circle before with Sectra One, this is what's needed.

It's one system doing all of this, but you can also have one report in the future having input from all these different areas. We are the only vendor in the world with all of this in one single system: radiology, cardiology, pathology, genomics IT, and ophthalmology.

That is a strength: fewer systems for the hospital, less concern, and one integrated report going forward. In cybersecurity, we normally say 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 very early versions of TCP/IP, which protocols underlying most of the communication in internet, etc.

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.

It worked fine. We built another floor on this building and a third floor.

There was no plan. There was no foundations made to support it.

Today, that's a big skyscraper built on a foundation that was never intended for this. There was no foundation, no plan.

This is scary. That building now runs all society, and that building needs protection.

We need to patch it as good as we can. We can't rebuild it; it's already there.

We need to patch it, and that is cybersecurity in a nutshell. We are good at that.

We help out in protecting that building. In both of these markets, Sectra is very well positioned.

Healthcare and cybersecurity are markets that even if you have a low tide in economy, even if inflation goes up, due to external pressures, we need to have healthcare especially for elderly, but also for ourselves. We need that huge skyscraper to be protected.

These markets have to grow. Our markets will grow despite if there is high tides or low tides in economy as a whole, which is an important nice place to be in, but that was intentionally built so.

The prioritized key takeaways going forward: We have significant go-lives in progress now. The large contracts we've taken over the years with all Sectra One, 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.

We are also exposed to currencies, we want you to be aware of that the Swedish krona affects our results quite a lot. The upcoming financial events: We have a 3-month report in September 4th.

September 8th, we have an Annual General Meeting. We are old-fashioned.

We do that as the kids say, in IRL, in real life, so that will not be digital. It will be physically in Linköping.

November 25th, 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.

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.

Send an email to [email protected] if you want us to improve these, if you have suggestions how they can become more efficient. We have changed quite a lot over the last years based on that feedback.

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.

It's connected to the Sectra One cloud. Could you please update us on the implementation status and timeline on some of the largest Sectra One cloud deployments and how they are proceeding, especially contracts nationwide enterprise imaging in Scotland, the Quebec contract in Canada, and the major US contract?

The major US contract, we are now in the early phase. We have the first hospitals or 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. In Scotland, it's a little delayed, but that's proceeding well, but the early starting with this a bit delayed.

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?"

Long term, it cannot grow faster than our revenue. The proportion of the revenue will increase.

Long term, we think we'll be, by far, majority be a recurring revenue company. It cannot grow faster than top-line growth long term because, well, that doesn't work.

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 the region?"

Denver is opened for mainly two reasons. It's a nice area to recruit in.

A lot of people would like to go, young people who like skiing. That's one of the reasons we have that office.

It's also closer to the West Coast without being all the nine-time hours away from Europe. 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. Then

I think we will move on to a question from a private investor. It's regarding 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.

Oh, then I shouldn't say we haven't disclosed this. I don't know, but you can fill me in.

It's 25% of the 180 million.

About 25%.

Yeah.

All the new deals we do in the US are cloud-based. Europe is delayed as for cloud because of the political situation and is more uncertain right now what's going to happen in Europe than it was a year ago.

In US, more or less all US, Canada, and the UK, all new business is practically in cloud.

Thank you. Then we will move on to questions from Jakob Lembke at SEB: "Can you elaborate on the strong order intake in Q4?

Which type of orders, which regions?"

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

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?"

Mammography is part of radiology in many aspects. They take them together.

The absolute majority is still radiology and mammography. Increasingly, shares of cardiology, pathology, and the other ologies as well.

They are small compared to radiology.

Yes. Then another question from Nikola Kalanoski at ABG: "Are customer using Sectra Amplifier Marketplace more this year so far compared to last year?

Are you generally seeing more adoption of AI applications among customers?"

Yes. The growth in Amplifier is large, and over 2 years, it's doubled.

It's a heavy growth, and customers are using AI more and more for every year that goes.

We also have a question from Daniel Albin at Trias 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 might happen for a few cases. 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 few hospitals want that.

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 requirement for actually signing a report is still there. In order to do that, you need to see the images.

For some acute settings, it might increase, but for the final handling, creating a medical report, a diagnostic report will not change. Reporting that we do, it will be increasingly important.

Okay. 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?"

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.

Then I will move on to some more questions from the chat function. We have one question here from Kristofer Liljeberg at DNB Carnegie: "Would it be possible to say the number of US 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, I cannot reveal that. We normally will report that on the Capital Markets Day, and there will be more of those coming.

The next question is regarding the US market: "Is the sales you are reporting now purely recurring, or are you still incur some license revenues in the US?"

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

Another question related to that: "Do you anticipate that non-recurring revenue in Imaging IT will continue to decline this fiscal year we are in now?"

We are not giving predictions on that level. Long term, it will be declining because we are also transferring the old customers over to the new model.

That, meaning the license sales what we did before, will decline. Then

we have a question from Jakob Lembke at 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 of the type that Sectra very often do.

We are long term. It will contribute strongly, but not in the short-term future.

A reflection regarding the order bookings: "It seems like you are booking less non-guaranteed orders recently. Has there been any change in contract structure or type deals you are winning?"

No,

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

Then

we have a question regarding UK and rest of Europe: "What are the causes of UK and rest of Europe weakness when there is so much untapped market, especially in rest of Europe?"

I would say that the geopolitical situation, and in general, also, Germany is a large country and they 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. Uncertainty always creates delays.

That's part of human nature. 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, US, Canada, Europe?"

Yes. Yes.

Yes. There's both business areas, both in Imaging IT and Secure Communication.

It's also across the geographies.

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. Now, previous year, we took almost everything.

Now we have not been able to take everything, but we have taken a very large chunk.

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

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?"

I can explain the principle we have used over the last years. That is to have a stock options program, a very long-term until vesting program that we have been granted by the annual meeting.

That we have run that every 2 years. We intend to propose that for this General Assembly as well.

When in between years, when we do not issue that stock options program, we have 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.

That is what you see this year. We had a good year, so that became a quite significant sum.

That is good. It's all the people out there that contribute this profit.

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?"

Two questions. Yes, we are improving.

We are learning fast, and it's also important 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 a lot, but also recruitment issue.

It will not make any big difference in deployment time as such. Most of deployment work today is done remote.

I'm looking through the chat function, and if you have any final questions, please write it, and I will just check the email 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, and we look forward to see you in September again.

Thank you very much, and best wishes for a good summer.