4C Group

Q4 2023

• Net sales amounted to MSEK 107.7 (91.0), rendering a net sales growth of 18% (-7%)
• The FX adjusted net sales growth for the quarter was 18% (-13%)
• Software revenue amounted to MSEK 72.2 (54.3). The share of total sales reached 67% (60%)
• Adjusted EBIT amounted to MSEK 16.6 (9.7)
• Adjusted EBIT margin of 15% (11%)
• Cash flow from operating activities amounted to MSEK 10.9 (41.2)
• Net income amounted to MSEK 16.2 (5.2)
• Earnings per share before dilution amounted to SEK 0.48 (0.16) and diluted to SEK 0.46 (0.15)

2023 in brief

• Net sales amounted to MSEK 332.1 (331.3), rendering a net sales growth of 0% (27%)
• The FX adjusted net sales growth was -3% (18%)
• Software revenue amounted to MSEK 210.4 (211.6). The share of total sales reached 63% (64%)
• Adjusted EBIT amounted to MSEK -5.3 (43.9)
• Adjusted EBIT margin of -2% (13%)
• Cash flow from operating activities amounted to MSEK -17.7 (24.6)
• Net income amounted to MSEK -9.3 (26.3)
• Earnings per share before dilution amounted to SEK -0.27 (0.79) and diluted to SEK -0.27 (0.74)

A word from the CEO:

2023 has been challenging, but we are ending the year strong. During the quarter we have seen a strong growth in the International segment, while delayed sales processes within the North America segment have negatively impacted our revenues. Overall, the group reports a growth in the fourth quarter of 18 percent with an EBIT-margin of 15 percent, and software revenue in relation to net sales increased from 60 percent to 67 percent. For the full year 2024, we anticipate solid revenue growth and improved margins, we do however expect the quarterly volatility to continue, something that will decrease as the overall business grows.

As we summarize the fourth quarter, we see that our diversified business (multiple segments and sectors) has been advantageous for the group. Our North America segment has been characterized by delays in negotiations with the U.S. Government. At the same time, our International segment has shown very strong development, which overall has contributed to the group’s growth and the margin being strong in the fourth quarter. We have won and extended several new software agreements of significant nature, which shows that Exonaut is a very competitive software. During the fourth quarter several delayed deals within the corporate sector were converted, resulting in an increase in sales of 121 percent for the quarter and 12 percent for the full year. We have also launched a new version of the software platform Exonaut New Generation. This version upgrade provides Exonaut with improved user interface, scalability, as well as an enhanced ability to integrate with external systems.

Financial results
During the fourth quarter of the year, net sales reached MSEK 107.7, an increase of 119 percent compared to the previous quarter and 18 percent compared to the fourth quarter of 2022. The EBIT-margin for the quarter amounted to 15 percent. For the full year, the revenue was unchanged, with an EBIT-margin of -2 percent.

Nordics
During the quarter, the Nordics segment has secured several strategic contracts, but was simultaneously characterized by delays in sales processes. This negatively impacted the growth within the segment for both the quarter and the year. Contracts signed in the defence sector includes licenses and new development, which confirms our strong position in the industry. This will have a positive effect on sales of the coming years. Net sales for the quarter is at the same level as the corresponding period in 2022. To strengthen our position in the Nordics, significant investments have been made in the sales organization, as well as in a geographic expansion to Finland.

North America
During 2023, the North America segment has been affected by delayed sales processes. The fundamental reason for this is that American defence budget is delayed and not yet approved by the Congress. The procurements are therefore on hold, and we expect more clarity during the upcoming quarters. The assessment is that the budget will be approved by the end of the second quarter of 2024, and that orders must be finalized by the end of September, as the next fiscal year begins on October 1st. In the fourth quarter, revenues decreased by 61 percent compared to the same period previous year, to MSEK 8.9. In the North America segment, the defence sector accounts for 87 percent of the revenue. The remaining revenues are generated within the private sector, where we have invested for expansion throughout the year, and secured new contracts during the quarter. As previously announced, new Presidents have been recruited for both companies and a new board has been appointed in one of the companies to strengthen collaboration with the American defence.

International
The International segment has significantly advanced its positions during 2023. This resulted in revenues increasing by 120 percent compared to the same period last year, amounting to MSEK 62.3. Thus, this segment accounts for 58 percent of the group’s revenues in the quarter. The growth is primarily driven by Europe and the APAC (Asia-Pacific) region. Through investments in the sales organization, we have expanded our international presence, which has been a significant contributor to our increased growth. Important for the quarter and the future is our signing of major contract extensions with NATO, further enhancing our presence with new solutions. Sweden’s anticipated membership in NATO is also expected to give us improved access to procurements and new potential customers and users. A significant success in 2023 is also that we have delivered solutions to one of the world’s largest humanitarian organizations (NGO). 77 percent of the revenues come from the defence sector, with the remainder primarily from the private sector.

Outlook for 2024
During the upcoming year, many of the delayed sales processes from 2023 are expected to materialize. Due to the size of individual deals, they may have a significant quarterly impact. We therefore anticipate continued quarterly volatility and expect growth to pick up no later than the second half of the year when the situation in North America should improve.

One of 4C Strategies’ key strengths is our high customer satisfaction and loyalty, with continued marginal churn rates. The high customer satisfaction is reflected in existing customers not only renewing their contracts, but also expanding their businesses with us. We see no reason for our historical growth to stagnate. With a comprehensive and stable global customer base of over 150 customers in North America, Europe, and APAC, we generate increasing recurring revenues while attracting new customers.

The International segment is expected to continue driving our growth in 2024. We see a strong growth and anticipate expanding the Exonaut-family with new NATO-countries. Regarding the Nordic segment, we have a growing pipeline and a strong belief that the sales organization will deliver. The investments we have made in Finland are expected to contribute to growth in the future. Regarding the segment North America, there is continued uncertainty regarding the finalization of contracts in the defence sector, but we expect strong development from the middle of the year onwards. We also see many new contract opportunities linked to our focus on the private sector. 4C has nearly two years of investments behind us, especially in R&D, sales, and market outreach. The work to strengthen our global brand continues, but we do not expect investments in R&D, support functions and administration to increase. Existing and upcoming R&D work is shifting from transformation to Exonaut Next Generation, to an increased innovation focus on, for example, AI as an integrated part in Exonaut.

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

Magnus Bergqvist
CEO

Invitation to webinar for the presentation of 4C Strategies’ Year-end report, January - December 2023:

4C Strategies' Year-end report for January - December 2023 will be published on Thursday, February 15, 2024, 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