4C Group

Financial development, Q3 2023:

• Net sales amounted to MSEK 49.1 (81.0), rendering a profitable net sales growth of -39% (30%)
• The FX adjusted net sales growth for the second quarter amounted to -42% (16%)
• Software revenue amounted to MSEK 26.2 (58.7). The share of total sales reached 53% (72%)
• The quarter was impacted by items affecting comparability amounting to MSEK 0.1 (0.5) (attributable to IPO)
• Adjusted EBIT amounted to MSEK -34.2 (13.6)
• Adjusted EBIT margin amounted to -70% (17%)
• Operating cash flow amounted to MSEK -18.5 (-14.0).
• Net income amounted to MSEK -34.2 (13.3)
• Earnings per share amounted to SEK -1.01 (0.40) and diluted to SEK -1.01 (0.38)

A word from the CEO:

The third quarter was characterized by delayed and longer sales processes which meant we were unable to convert expected deals into large new software contracts. Therefore, we announced our preliminary results on October 10, 2023. However, the level of activity and interest in new business from all regions remains high.

Results in the third quarter
The uncertain global situation continues to challenge companies and organisations. Although our offering is becoming more relevant than ever, purchasing and procurement processes are becoming longer. As a result, several software deals have been delayed, not lost, during the third quarter. Net sales reached MSEK 49.1 (81.0) in the third quarter, which represents a negative growth rate despite a positive currency effect of 3% (14%). The level of activity remains high and the interest in 4C Strategies' products and services is at a good level in all regions, which unfortunately is not reflected in net sales for the third quarter.

4C Strategies has a large and stable global customer base that generates recurring revenues. ARR at the end of the quarter amounted to MSEK 110.5 compared to MSEK 99.8 last year, indicating a growth of 11%. Profitability, adjusted EBIT, amounted to MSEK -34.2 (13.6) in the third quarter. The negative development is due to the weaker sales conversion in the quarter. Profitability on an RTM basis amounted to MSEK -12.7, a margin of -4%.

What happens in the sales processes?
In the North America segment, we expected ongoing projects/programs to transition into permanent rollouts in the third quarter. In these projects/programs, which are led by prime-contractors, negotiations with the US government have been delayed, resulting in smaller contracts being established in the meantime until a permanent roll-out or full purchase can be completed. The procurements are thus on hold, and we expect more clarity in the coming quarters. During the third quarter, however, sales activity has been high, which has resulted in several new potential contracts in both the US and Canada.

Another contributing factor to the weaker performance in the third quarter is linked to the Nordic segment. As a result of delayed decision-making processes at an existing defence customer, delivery could not begin during the quarter. However, we are hopeful that this will happen in the coming quarters.

In contrast to weaker performance in North America and the Nordics, our segment International, which covers the rest of Europe and APAC has delivered a strong quarter with several new contracts in all customer verticals.

We continue to receive positive response from new and existing customers in the public and private sectors when demonstrating the Exonaut Resilience Platform, however we see that the market is currently somewhat hesitant about major IT investments. Our view is that we have a competitive offering to meet market demands. We are therefore proceeding according to plan with sales and marketing activities and expect better conversion in the coming quarters.

New Management in North America
In November, Guy Jones will assume the role of Managing Director of our military operations in North America. With a long and distinguished career in the US Army where he served for 32 years, I am confident that Guy possesses the knowledge and experience required to expand our defence business in North America.

Senior sales management and increased conversion
4C has strengthened its sales organization, in all three segments. Focus has been to strengthen the teams with a combined experience in software sales and subject matter expertise. A major focus has been to accelerate onboarding of these key individuals for them to contribute in existing and upcoming sales processes. 4Cs Group management has during the third quarter further increased focus on monitoring existing sales processes, as several of these are complex in nature.

Increased focus on optimization and streamlining
During the third quarter, most of the investments announced in connection with the IPO in May 2022 have been completed. Investments that are largely allocated to geographic expansion, sales resources, sales activities, and improving our offering. The focus during the last quarter of the year and especially in 2024 is on leveraging the full effect of these investments and optimizing support functions.

Satisfied customers and a strong pipeline of potential deals create opportunities
We have a strong pipeline of new potential customers and contracts. Our existing customer base of more than 150 customers in the US, Europe and APAC is a key strength. Customer satisfaction is high and existing customers are extending their contracts and upgrading the software. The focus is now on converting delayed deals into new customer contracts and I strongly believe the sales organization will deliver.

Our ambition is to achieve an average annual currency-adjusted organic net sales growth of more than 20% in the medium term, that 70% of total net sales are generated by software revenues and that we reach an adjusted EBIT margin of at least 20%.

We are convinced that with a strong global sales organization, combined with an expanded offering, we can retain and attract new customers and achieve our financial targets.

Magnus Bergqvist
CEO

Invitation to webinar for the presentation of 4C Strategies’ interim report, Q3 2023:

4C Strategies' interim report for Q3 2023 will be published on Tuesday, October 31, 2023, at 07:50 CET.

The same day at 09:30 CET, a presentation will be held where analysts, investors, media and other stakeholders are invited to participate. The presentation will be a webinar where 4C Strategies’ Magnus Bergqvist (CEO) and Anders Nordgren (CFO) will comment on the published report and answer questions. The presentation will be in English.

Afterwards, the presentation material will be available on 4C Strategies’ website under 'Reports and Presentations'.

For participation at the presentation:
Sign up here