4C Group

Financial development, Q2 2023:

• Net sales amounted to MSEK 85.4 (83.3), rendering a profitable net sales growth of 3% (29%)
• The FX adjusted net sales growth for the second quarter amounted to -3% (22%)
• Software revenue amounted to MSEK 56.3 (51.4). The share of total sales reached 66% (62%)
• The quarter was impacted by items affecting comparability amounting to MSEK 0.5 (9.6) (attributable to IPO)
• Adjusted EBIT amounted to MSEK 1.0 (12.3)
• Adjusted EBIT margin amounted to 1% (15%)
• Operating cash flow amounted to MSEK -1.8 (-4.0).
• Net income amounted to MSEK 1.0 (5.0)
• Earnings per share amounted to SEK 0.03 (0.16) and diluted to SEK 0.03 (0.15)

A word from the CEO:

The second quarter has been important for us. We have extended two of our most significant software and software-related services contracts, with the Swedish and British defence forces. These contracts not only extend our long-term relationships with these customers but also enables our development, innovation and integration of our software and managed service activities to go further than in the past. During the quarter we also continued our expansion in North America where we established a business unit in Washington D.C. to address the public and corporate sectors. This is a key enabler for the continued success of our resilience offering and an important step in our profitable growth journey.

Continued investments in uncertain times
As we close the second quarter of 2023, we see how the uncertainties in the world continues to challenge businesses and organizations. Although our offering is ever more relevant in such times, as predicted in the first quarter purchasing and procurement processes now take longer time. Our net sales reached MSEK 85.4 (83.3) in the quarter, generating a growth rate of 3% (29%) with an FX-effect of 6% (7%). Extended procurement processes have had an impact on our net sales figures in the quarter, especially in the North America segment, and our public and corporate customer verticals. We are not satisfied with our performance in our corporate vertical over the last three quarters and our ability to convert enough contracts. However, we are optimistic of the growth in our pipeline which is a result of our investments in brand awareness and extended sales force. We remain confident in our ability to convert expected contracts in the year’s coming quarters and expect to seize new opportunities as our addressable market grows.

As underlying growth in our markets is strong and we enter new markets, through for instance the launch of our Climate Resilience solution, we continue to invest heavily in sales, market expansion and new offerings. With continued investments and short-term procurement delays impacting sales, our profitability reached 1% (15%) in adjusted EBIT during the second quarter. Profitability on an RTM-basis amounted to MSEK 35.5, rendering a margin of 10%.

Significant progress with new agreements in the defence sector
During the second quarter we signed noticeable extensions and new contracts in the defence sector.
In the Nordics segment, we have closed a new five-year framework agreement with the Swedish Armed Forces, with an option for a two-year extension. The agreement, which has a maximum value of MSEK 150, covers 4C Strategies’ market leading Exonaut Training & Exercise Management software and is an add-on to the previous maintenance agreement of MSEK 79 that was signed in the fourth quarter of 2022.

Overall, the International segment performed above expectations in the second quarter. We have signed an important extension with another long-term defence customer, British Army. The customer has exercised the two optional years that were offered as part of the 2020 contract and ensures continued support to the British Army’s Collective Training Exercise Management System through our Exonaut software and related consulting services. The total value of the extension is approximately MSEK 89.

In the North American segment, the ongoing development projects with the US Army and the US
Marines have been delivered according to plan and licensed data rights for one of the larger contracts will be handed over to the US Army in the second half of this year. We are currently involved in multiple programs with the US Army and US Marines, and we are part of several teams bidding for new phases and adjacent solutions. We expect more clarity during the third quarter on how these phases and bids will be delivered going forward. This may have an impact on our full year ambitions in our North American segment. Our Training and Exercise Management solution is also generating considerable interest in other areas of the American defence sector. Interest we expect to be able to convert in coming quarters.

Successful launch of Climate Resilience solution
During the second quarter, we have launched our new Climate Resilience solution, a solution based on the Exonaut Resilience platform. The solution, which helps organizations tackle the challenges of climate change and manage their environmental risks and impact will enable us to meet the increased demand for digital solutions in this field.

In connection to the launch, we have participated in several important sales-related activities. We attended the Responsible Business Europe 2023 exhibition in London to debut our new Climate Resilience solution. We have also invested in training our sales force to ensure that we seize new business opportunities and manage growing interest and we already see a promising pipeline of future Exonaut customers.

We see great potential for the climate resilience offering in all segments. With the launch of our Climate Resilience solution we have proven our ability to rapidly deliver new software solutions using Exonaut Next Generation. This will be a great driver for continued and accelerated
growth.

New business unit in North America and new Managing Director in Nordics
With the opening of our new entity in Washington D.C. we will be able to address the non-defence market directly. This means that we will have a full offering in North America with training solutions targeting defence customers and resilience solutions targeting the public and corporate sectors. With the increased interest from these sectors, in combination with an already strong presence and existing customer base in the US, we see great potential for a successful market penetration.

Mikael Grape, currently Managing Director of 4C Nordics, has been appointed Managing Director for the new entity in North America and will officially start his new role in the third quarter. Mikael will be responsible for developing our growth journey within the public and corporate sectors in North America. As Mikael Grape moves to the US, a new Managing Director has been appointed for 4C Nordics. Josefine Rosén has been with 4C Strategies for 13 years in multiple roles. We are confident that Josefine will steer the organization in the right direction and to the next level in our growth journey, across all sectors. Josefine will also join the group management team.

New contracts signed in Australia, APAC
The expansion to new geographical markets is crucial for our growth journey, and a major focus this quarter has been on developing newly established markets. Since the expansion to Australia last year, we have continued to strengthen the close relationship with the Australian Defence Forces and are happy to announce that we have signed new contracts in APAC. Going forward, we see great potential in this market as the pipeline is growing in all customer verticals.

Investing in further growth
To summarize, the second quarter has been important but also challenging. We continued to increase our presence in newly established markets. We have deepened and extended long-term relationships within the defence sector, which shows the demand for our software and expertise within the training management domain.

We are committed in supporting more clients building safer societies around the globe. Therefore, we continue to invest in our offering, sales activities, and our geographical expansion. To this point, we plan to expand our global sales force with tens of new sales resources spread among all segments and sectors during the remaining quarters of 2023. We are also establishing operations in more markets within the Nordics. More details to follow in the next quarter.

We are confident that with a growing global sales team, in combination with our expanding solution offering, we can maintain and attract new clients and reach our financial targets.

Magnus Bergqvist
CEO

Invitation to webinar for the presentation of 4C Strategies’ interim report, Q2 2023:

4C Strategies' interim report for Q2 2023 will be published on Friday, July 21, 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