Clavister Holding AB

STO:CLAV

Earnings Call Transcript 2022-Q4

[Jenny Ramkrans, executive]

Good morning, everyone, and welcome to Clavis' Q4 2022 interim report live presentation. Today, I have with me both John and David remote, so we're going to try this new format.

John, are you with me? And David?

[John Vestberg, executive]

Absolutely. Yes. Thank you.

[David Nordstrom, executive]

Yes, can you hear me?

[Jenny Ramkrans, executive]

Yes, I hear you. So we will start this prestation with the presentation. And in the end, we will have the normal Q&A session. If you have questions already now then item, I want to remind you that Titan to me, the moderator because John and David will not see the questions. So tie towards me. and I will bring up them in the Q&A session. You can also raise the hand, and I will let you in and ask the questions on your own. I would love to hear voices. John, are we ready to go?

[John Vestberg, executive]

Yes, absolutely. Thank you, Jenny. Welcome, everyone, and let's talk about our Q4 2022 interim report, but also, of course, some reflection back on the full year of 2022. So [indiscernible] when we look back at our 2020 full year, we have a year where we focused a lot on optimizing the business. We have for one example chosen to steer our sales and marketing efforts towards a more clear and distinct set of customer groups, primarily within mission-critical businesses, geographically within the European Union.

And the customer groups we've been targeting primarily has been the public sector. We've looked on defense, as you know, we've been working in the telecom customer segment and in critical infrastructure. So basically, customer groups where we have seen and we've learned that the Clavister technology is both viable, but also that our technology origin being a Swedish company resonates extra well with those customers.

Another part of the year has been the focus on our cost optimization program. And as a reminder, we kicked off a cost optimization program at the end of 2021. The goal was to reduce our operating expenses to a level where we would faster reach positive results and positive cash flow. We had a goal to reduce the cost from SEK 196 million to SEK 164 million.

And David will come back to the outcome in his part of the presentation. If we look more specifically at the quarter, the fourth quarter, we have continued to drive growth. If we look at net sales, we saw a growth by 10%. We also decided to include total revenues growth number in this report for one specific reason. As you might have seen, we are highly engaged in a number of R&D projects, which are externally funded, and those are primarily within defense and AI.

Those are part of our operations, meaning that they drive both pipeline and they drive our relationships with parent and future defense customers, hence being a super important part of the business. So if we include the -- those type of projects, again, externally financed, the growth of total revenues amount to 17% in the quarter.

If we look at our EBITDA results, it is the second consecutive quarter which we demonstrate positive EBITDA, which we're, of course, super happy about. Looking at the numbers, we are growing EBITDA with SEK 12 million year-over-year. And this is also the first fourth quarter, we are EBITDA positive, which is, of course, an interesting milestone.

Maybe even more important, of course, is our cash flow. And what we demonstrated in the fourth quarter is positive cash flow from our operations at SEK 11 million, also strong improvement compared to the previous year, where the improvement was around SEK 14 million. So strong improvement on cash flows. And of course, all of this is driven by the combination of the growth -- top line growth, of course, also the effects of the cost optimization program.

We ended the quarter with a cash position of SEK 42 million. This amount, especially in the combination with our significantly improved cash flows makes us confident about our liquidity situation. We look at order intake. There is a slightly reduction of order intake year-on-year with SEK 1 million. This is entirely due to the transition to the new business model. So as a reminder of repetition with the new business model, we see shorter contracts. And with shorter contracts, obviously, we record smaller order intake.

But the total contract value or total customer value rather over time is expected to be higher in the new business model. So all in all, good, but in the periods, we will see a slight reduction. If we then move ahead to the specific business areas, and we start with our next-generation firewall business, which represents our largest part of the business. The quarter has been very undramatic in this business, which maybe is a good thing. We see a strong performance.

We've shipped over 60% more hardware units in the period compared to the last year. And as a reminder, with hardware units, we obviously mean the hardware appliance boxes that run our software. First and foremost, we are a software company, but the hardware units are the platforms required to bring our software to the customers. With a larger and growing installed base of these platforms, it also serves as the baseline for upcoming recurring revenue from these licenses. So more and more boxes being installed out in the field is a good thing for our future revenue generation.

There were no disruptive orders in this quarter, meaning that the entire growth came from our regular baseline sales operations. So the typical channel and partner sales that we are focusing on in this business. We -- we're also able to release our Clavister Cloud Services in the quarter. So this is the first commercial version of the Clavister Cloud Services.

And for those of you who have followed Clavister for a while, you know that we launched an initiative around 1.5, almost 2 years ago, where we started the development of cloud services, knowing that part -- at least part of the future of cybersecurity resides in the cloud.

What our Cloud Services provides is security management, but also analysis and reporting as part of that and password less strong authentication. And if you followed security for a while, you probably know that weak passwords and password management is the most frequent vulnerability that are being demonstrated and being abused by hackers.

And with this service, we allow customers to basically get access to various types of services without having to work with passwords. So password less and multifactor or strong authentication. So a good combination. This entire service is based on the so-called SASE, or secure access service edge concept, which is more or less an industry term nowadays.

And what it does overall is enabling various types of organizations, private or public organizations to access whatever cybersecurity capabilities you can provide from the cloud via a cloud service, obviously, then with all the convenience that, that applies. The key differentiator here is that we've chosen to deploy our service on Swedish infrastructure. And this is different from most of the other SASI solutions that are out in the market, which are primarily using public cloud infrastructure and mainly then American clouds.

And as you probably know, to be able to really fulfill previously in data storage policies within -- especially within public agencies or public sector prerequisite is that you keep the data and you keep the service on local cloud. So this is our response to that, a deployment on Swedish infrastructure.

However, what we have also done during the design phase of this service a structure and an implementation that makes it possible to scale up the service to other countries. Obviously, we can't serve German or French or Benelux customers from Swedish infrastructure with the same previously argument. Technically, we can't do first, but the argument is different.

But our solution allows us to scale up the technology to other countries with very low marginal costs in the way it's defined. Of course, over time, this is only the first iteration right now, the first commercial versions. Over time, we will supplement the service with additional capabilities, both from our existing IPR, we have, of course, a lot of more IPR that we can provide to the cloud, but also, of course, upcoming clubs or IPR that we will develop over time.

If we now move to our 5G security business. This has been a quarter characterized by mainly design and deployment of contracts that we previously sold. And if we look back at the history, we realize and we note and remind basically that the lead times from the initial sales of a contract in this area to the deployments in most cases, several years.

We're not looking at the months or weeks in these type of deponents out several years. So the deployments we're doing right now and in the fourth quarter is from licensing contracts or related to contracts that were sold, both 1 and 2 and in some cases, even 3 years back and now they're going light.

This, of course, from a company perspective, it requires a lot of endurance, but on a positive note, it creates an installed base that drives licensing and also consulting revenue going forward. And given sort of the long lead times and the stickiness that comes from that, we can predict or project quite long periods going forward with revenue generation from these contracts.

One of the key drivers for increased growth going forward is the rollout of the so-called stand-alone 5G core networks. And as a reminder, most 5G deployment or 5G networks so far has been as they typically start in the radio side. So radio networks where Clavister is not part of is not yet, we are residing mainly in the core networks and the core networks are due now to start rolling out.

We see more and more signs on that even though the growth has been slow over the years. So we expect the business to continue to grow. And again, the key driver is the rollout of 5G networks or 5G core networks. Moving to the defense business plan. We continue to see strong interest for our solutions from this sector.

And to no surprise, the main driver is, of course, the digitalization that just continues and increases of all the various types of defense platforms be that land or vessels or air systems. For us, we are agnostic. The other key driver is the increased defense spending and, of course, highly driven by the situation in Ukraine. In the fourth quarter, we have initiated the commercial deliveries within the framework of the defense projects that we have previously won.

So we've moved basically from product development phase to pre-series phase, and now we are in the rollout phase in the actual commercial delivery phase. We will continue deliveries according to plan with more extensive deliveries during this year and going forward through 2025. The extensive pipeline we've built up during 2022 is quite substantial. So with that significant pipeline, we are quite optimistic or we're really optimistic about winning additional deals, significant deals in the sector in the near future.

Our final business teen access management business that we are operating through our wholly owned subsidiary Phoenix ID also saw a strong end to 2022. So we recorded both high order intake and had a lot of deliveries to customers in the quarter. The largest customer group or at least a large customer group for this type of solution is the Swedish public sector.

The solution is well proven. It is deployed already at a very large number of regions, municipalities and public agencies in Sweden. There is, however, no technical limitations, and this might be important to just note that there are no technical limitations on the solution to scale this solution on the business gradually to other European countries. But for the time being, the focus has been and still is our Swedish customers. With that, I'm leaving to David.

[David Nordstrom, executive]

Thank you, John. So we will look into the financials a bit deeper. Starting off with order intake. And as John says, we see a slight decline, primarily driven by on average shorter contract lengths as a consequence of the new business model. And so really the explanation is found in the mix of contract lengths. Net sales then, we're seeing a growth of 10% and adjusted for currency effects, the growth is 6%.

We see basically the same percentage-wise growth numbers for the full year, meaning also that we're back on a better growth trajectory compared to 2021 and 2020, also more sling growth. So we're pleased to see that. Recurring revenues flat in this period, representing a total of 66% of our total revenues.

Lack of growth here. Again, this is explained by shorter contract length because we see growth on net sales meaning that we are confident that we're shipping more platforms. We're building a broader base of subscription contracts. But given the mix and length of the contracts, we see a short-term negative effect, mainly driven by the fact that in the new business model, contracts on average are shorter than the old one, which gives an initial impact.

Over the course of time, as John said, we expect the value of contracts to be higher in the new model compared to the old. And we expressed that some time ago in reporting calculated the total value to be 40% higher over the course of the contract length in the new model compared to old. We will see -- we expect to see more and more revenue support as we grow the installed base in the new business.

Other revenues, primarily this is grants for R&D and also then primarily with the AIML and within in the defense industry. So this is a good way of expanding our technological capabilities, but also as John said, our commercial reach and our commercial relationships within this business. Gross margins, I would say that we have strong margins in the quarter given the fact that we have increased appliance sales in absolute numbers.

In the numbers of clients are up 63% in the quarter and we also then started the Series D to B. So the big increase in cost of goods sold here, up from 5.5% to 9.2% million. That is mainly driven by the fact that we're shipping more fiances, meaning that we're building a broader, larger installed base, but also that there is an underlying flow from the old business model where customers migrate over to the new model.

And often when doing that transition, a new appliance is bought. And as we've been saying before, in the new model, hardware plant is are cheaper. We're saying that it will be cheap initial investment to move to the new model, but we will earn more from the software contracts over time. And this explains why we don't see a bigger revenue support initially from winning than a contract in the new model.

OpEx, strong point in the report, I would say. We are reducing our reported OpEx at SEK 11 million, which is a decrease of 20%, all driven by our cost optimization program. Adjusted for onetime effects, the decline or the decrease there is SEK 8.4 million on then 16%. We had a full year run rate target for cash flow OpEx of SEK 164 million, and that was a 12-year -- 12-month run rate.

But our adjusted reported OpEx end of 2022 is then EUR 162.6 million. So we are ahead of target. We're pleased to see that the cost optimization program has gone well, and we expect to see some additional support in reduced OpEx in coming periods from that. First, EBITDA posit of Q4, first time with 2 EBITDA positive quarters in rows, Q3 and Q4 were EBITDA positive and adjusted for onetime effects, EBITDA is plus SEK 1.2 million compared to minus SEK 8.2 million in the corresponding quarter.

Financial items. And this is an area where I will actually get back to you when we include the balance sheet as well. Looking at them, they are quite large, both in the period and in the full year. So we will deep dive into that this report. But I think it's important to stress the fact that out of those SEK 22.3 million, only SEK 2.8 billion has a cash flow impact.

The increase from 0.7% from last year is driven by 2 things. Interest rates have increased. And we have -- we are using the ability to defer tax payments and by then having liquidity support from that.

That is roughly SEK 60 million, and that runs with the interest as well. So that is explaining the increase from SEK 0.7 billion to 2.8 million. But the rest is noncash. And I think it's important to bear in mind that the vast majority, 90% of the financial items have no cash impact in the quarter. The majority will never have a cash impact, and we'll get back to that.

CapEx. These investments are slightly dropping, mainly by 2 reasons. Reason number one being the cost optimization. So we have a bit of a more lean team. So we are a bit less costly. Second is that we have natural fluctuations between quarters of a mix of the amount of maintenance and research versus pure development.

Cash flows, strong improvement from minus 10.9% to minus 2.0%. If we would adjust for increased interest rates, the underlying cash flows on our operations is actually positive. So the operational business is cash flow positive in the quarter for the first time ever, actually.

Cash flows are also supported by balance sheet changes. Even though we have quite a large buildup of accounts receivables, this is offset by an even larger buildup of short-term debt. Main drivers are different revenues. As the largest part, it also accounts payable.

So we have cash flow from operating activities is plus 7.2%. Cash position as well, improvement with more than SEK 20 million compared to last year. And this is operationally driven. There is -- there are no financing actions impacting either the corresponding quarter or this quarter. So this is improvements within operations driving the improved cash positions.

And then looking at the 12-month period, we have used the ability to defer tax payments, which has given a liquidity support of SEK 62 million. We successfully applied for extension of those who are done with SEK 59 million confident that we will conclude the last 3 as well, meaning that we can keep this cash until 2024.

Looking at full-time equivalents. This is, of course, the main explanation to why OpEx is dropping with 20% is the fact that we are reducing FTEs with 25 heads from 133 down to 108. Consultants then increased from 14 to 21. This is more short-term mitigations as to handle the fact that we are streamlining the number of FTEs. Financial plan. I said that I will get back to you and explaining what does the financial net consists of.

So total for the full year, SEK 61.1 million in financial cost. Out of that, SEK 5.9 million has a cash impact, which is less than 10%. The rest here is then if we go through all these bullets, it is long-term interest. So this is interest that will be paid when corresponding loans are repaid, meaning that will not have happened within the 12-month period from now.

Then we have the cost of borate related to primarily the EV, but also to our formal loan targets. That has an impact of SEK 30 million. And that now we have no more impact from that the P&L from February 2023 onwards, meaning that these items will increase SEK 17.7 million during 2023 compared to 2022. So we expect a much only a slight impact on January '23 from these items. And then the rest is currency revolution.

As you know, our loan to EV is in Europe. And when the deteriorate, we have an impact from the reevaluation of the loan. So then looking at the financial, 90% does not have capital impact. And I think it is important to understand that. You would see then more or less, the same fourth quarter cash impact back here, SEK 2.78 million, 12%. Rest is long-term interest is cost for warrants that is now gone from February '23.

And so we will not see that part more and then the currency revaluations and were what we hope with the that we don't know, but it totally depends on how the performance versus euro. So that includes the financial summary. So over to you, John, for outlook.

[John Vestberg, executive]

So a final part of the preseason before moving to Q&A. So let's have a look at our outlook for the year, the new year 2023. We have concluded, I would say, the majority of our transition from our old business model to the new business model. In 2022, we still saw lingering effects by the transition. Now we're through with the transition to the greatest park. As a result of that, we expect sales to grow the net sales, reported net sales to grow. We stand by our previous outlook that over the 3-year period of 2023 through 2025, we believe that the growth can gradually increase to average of 20%.

With the impacts or the effects now of what we have done with regards to our operating expenses and as a result of the cost optimization program, we will see a lower level of OpEx in 2023 compared to 2022. Keep in mind that several of the OpEx reductions that were made during 2022 will not be visible in its full effect until 2023. So already by the coming quarters, we will start seeing effect.

With that and in combination with the expected growth in sales, we will continue to see improvements in cash flow and positive EBITDA for the year. With regards to our ambition on cash and cash flow, we would like to see our ambition, our goal rather is to achieve a positive operational cash flow in the second half of 2023. So to be clear, not for the full year, but for the second half -- in the second half of 2023. With that said, back to you, Jenny, and for the Q&A talk.

[Operator]

[Operator Instructions] Let's kick it off. So John, where do you see the most growth opportunity for Clavister?

[John Vestberg, executive]

In general, I would like to answer like this. We made some changes already during 2022. And prior to that as well, starting already in 2021, we focus our sales and marketing efforts towards customer groups where we, as a small player against the large American incumbents have a better chance to win and to demonstrate the viability of our products.

And what we arrived to as a conclusion is that, of course, geographically, let's focus on the European Union. There is a geopolitical element in that, that is important. If we look at the specific customer groups, we realize that. And to no surprise that the more mission-critical type of customer group, the more vulnerable you are for a cyber attack or a cyber threat. And consequently, you have more cyber budget to spend.

And evidentially, with those customer groups, they happened as well to overlap with a strong understanding and a strong desire to buy technology that originates from within EU. So by us focusing larger on those type of customers, we have higher chances of winning against competitors with much larger financial muscles. And of course, within type of customers, we need to focus as well as we need to select even more carefully. So what I mentioned earlier, our focus has been great, and we'll continue to keep a focus on those with public sector critical in profit, segments in society where a cyber threat, cyber attack will have massive consequences I would say that the growth opportunities are quite equal across those 4 groups, then you have different characteristics.

So over sense, within Defense, we see fewer orders but larger ones within public sector, we see a more steady state of order but then being lower as an average order. But if you blend those together, I would say that the grape are fairly equal between all of them. And they have different timing and different characteristics, but the prospect is very go.

[Jenny Ramkrans, executive]

So I have a question, but first of all, we -- first, let me say that I'm happy to see the continued cost control and improved cash flow well done. Then you say that the lower order intake is due to new business model with recurring revenue, yet the recurring revenue is not growing at all. First, can you please elaborate a bit more on why recurring revenue is not growing a lot more?

And why we should not worry about this. And secondly, should not the recurring revenue metric be the key metric to track for sales and success and should not be much more comment on -- in this report?

[David Nordstrom, executive]

Okay. So yes, yes, okay. So I would try to answer both. So let's start with the fact that the old business model also contains recurring revenues. But we say that in the new model, the recurring revenues are in an opt out model, so they are much more likely to happen again, but we're classifying them equally in the report.

And we are reporting revenues under IFRS 15 standard, meaning that we need -- when we ship a contract, we need to look into what does it contain and how do we account for that, meaning that if we are shipping a contract that for the sake of the market, the total value is 1,000.

Then we look at, okay, out of that, how much do we account directly seeing that this has been distributed to the customer directly as the contract is signed and how much is distributed overtime. The overtime value is larger in the newer business model versus the old, but everything of this will go into the recurring revenue portion of our revenues.

So if I will be selling a contract of a longer contract cycle, which the old model was to a higher degree, we took more longer contracts, they were not at the same value over time, but they were more -- predominantly more over 5 years. That means that the revenue recognition will be higher when we take such a contract than it is in a new model where the contract is on average, more [indiscernible] to be 1 year.

So that is the key explanation to why our recurring revenues not growing in this period. Well, in corresponding quarter, we had more contracts that were longer, meaning that the instantaneous effect on revenues were higher compared to this quarter where we have more contracts but they are on average shorter, so the initial revenue recognition when the contract is signed is smaller.

I hope that explains the question. Why does contract length explain why we have this effect? And we had lingering effects of quite some, quite large and quite long contracts in the old model taken in Q4 2021. We don't have that in this quarter. So -- but the mix over time is more valuable for us in the deals taken during Q4 2022, '21. That was a very lengthy answer, but it was also a question that's a bit tricky.

[Jenny Ramkrans, executive]

Yes. It was.

[John Vestberg, executive]

Yes. And if I can add to that, it is a technical matter. So we fully understand that it's material that is difficult. But to then as a segue into the second part of the question, yes, that's absolutely correct observation that recurring revenue being the main sort of main business concept in Clavister has been so for a while, but even more so now in 2023.

And you're absolutely correct. Recurring revenue is the key sales metric. And it is the metric that we are both compensating and driving our sales operations by 2023 and onwards. We haven't started to expose that type of metric yet externally, reason being that we have been in this transition from the old model to the new one, and we wanted the new model to stabilize a little bit until we are confident to start exposing that number.

With that said, we will be using more of, let's call it, industry standard metrics, including annual regarding revenue. If we would have been exposing and your recurring revenues already by now, you would have seen the decide of effect already that would be clearly visible.

But as David mentioned, from an accounting perspective, a net sales part that we're reporting in the forte previous reports, we have the technical effects of the contract length. But going forward, we hope to be able to be more accurate or clear rather in the recurring revenue reporting.

[Jenny Ramkrans, executive]

Thank you. David, I want to stay on the financial part. So when will the deferred tax -- when will the deferred tax of SEK 62 million need to be paid back? And can this be handled?

[David Nordstrom, executive]

Well, it is during Q1 2024. And we are -- we will be able to handle that. And then, of course, the question is, will it need to be repaid all in one? Or will we land in a more a repayment schedule for that over a longer period of time? That would be our aim, but that would be a discussion needed to happen with the tax authorities. We have many, many companies in Sweden who are using -- or strengthening their liquidity in the same way as we do or who have prolonged the repayment time exactly as we have. So now the Swedish government announced only a week ago, the possibility to use liquidity supports for the tax account even more.

This is something we're looking into as a possibility of strengthening our cash position with that tool. No decisions have been made, but it's an option. And I would imagine that as the economy is slowing down, I think the wider government and the tax authorities need to have a discussion, what repayment schemes are we going to introduce to Swedish enterprise and to which degree are we requiring very fast and repayments of these money and what potential impact do this have on business as a whole in Sweden.

But from now for now, the repayments are need to be done Q1 2024, but we will investigate the possibility to repay that over a longer course of time. But that would be the EBITDA dialogue with the Swedish tax authorities which haven't happened yet because they were just prolonged. I hope that answered the question. it's an important question. So it's good that it was asked. And please ask again if I wasn't specific enough.

[Sam Coleman, executive]

I mean we can ask the question we'll close to run out of cash during 2023...

[David Nordstrom, executive]

Yes, we believe that we have secured enough liquidity to run the business during the full year of 2023. And for several reasons, we have more growth. We have a significantly lower cost base. Our cash run is an consequently much lower, meaning that we need less cash to fuel this business, and we believe that the gap will gradually close as we transition to the year.

And as John said, our aim is to have a cash positive business by the second half of this year. The operations will be cash flow positive during the second half. So our cash requirements to run Clavister or the burn is going down. So we need less also.

[Sam Coleman, executive]

Should we move into the defense area. And I will ask what happened to the potential CV90 deals Slovakia and Czech Republic? Are they lost? Or when can we expect any news on this? And if they're lost, what can we learn?

[John Vestberg, executive]

No, they're absolutely not lost. The Keep in mind that these are highly complex configurations where one project is not equal, not similar to the others. So design and configuration is ongoing. And we have high hopes to be able to be awarded those contracts as well. And as soon as we have news, we will, of course, it's our duty to report any news from those.

[Sam Coleman, executive]

Some time ago, it was talked about a pilot for the U.S. Marine. What happened with this?

[John Vestberg, executive]

That pilot is still ongoing. It's sort of a live pilot since, I think, maybe 4 months or something. They will require quite a lot of time to conclude whether or not they will extend that pilot to a commercial offering or not. So we're sort of waiting patiently to see if there is any business coming from that.

[Sam Coleman, executive]

I will move into the increase in grants, what do they relate to, for instance, the commands product?

[John Vestberg, executive]

Yes, absolutely. So within -- specifically within defense and the defense sector, this is, to be honest, quite a small pond of few companies and few stakeholders working quite tightly with different type of collaborations within the defense industry. A big part of the defense collaboration includes these type of projects. And there are specific funding engines for this like European Defense Fund, who typically fund various type of research projects.

And the Commands project is one of those where we were invited and are now part of a collaboration with, I think its 14 companies in total small and large European companies, including General Dynamics and Indra but also smaller ones, of course, like Clavister. Our contribution in a project like that is to provide technology and knowledge, of course, in that specific project, it's regarding unmanned vehicles and providing cybersecurity for autonomous hypervehicles.

So those projects serve basically, I would say, 2 main purposes. They make sure that the European defense industry are constantly evolving and innovating, that's key, but they also start as a good networking platform for companies to engage with the other to create colorations and at the end of the day, to provide complete offerings to the defense customers, namely the various defense departments in the various countries. So it's an important part of the defense vehicle.

[Jenny Ramkrans, executive]

Does the war in Ukraine effect Clavister in this sector?

[John Vestberg, executive]

Get with us. I mean, as tragic as it is, it's no secret that the war has triggered a lot of the defense budget increases for more or less even on -- especially in Europe at least. With that said, it brings production of new defense material on the table. And the majority of new defense platforms, as Solvy mentioned, are highly digitalized. And with digital digitalization comes demand for such security we see that with the existing orders already that particular on the customers we have within defense.

The second impact it gives is a more, let's call it, a more generic one where suddenly [indiscernible] and press in general are more -- it's a higher level of awareness sort of the unit audience. And we've seen when we did our market survey in the autumn, we saw that the war in Ukraine has triggered enterprises and, of course, defense customers and enterprises as well to look at their cybersecurity spending because there is basically an increased threat and an increase of awareness. So yes, that was just there is a positive impact from the activities.

[Jenny Ramkrans, executive]

If we look back at the Q4, John, what are you most proud of?

[John Vestberg, executive]

I would say that we've driven a very, very strict cost regime during the year. And typically or commonly at least, you will see that when you decrease cost and you're heavy on cost, you would have challenges to, at the same time, drive growth. It's hard to break and push the accelerator at the same time. So I would say I'm most proud that we keep on driving growth. We increase growth, but at the same time, heavily reduce our cost base. So in essence, that's my key highlight for the quarter.

[Jenny Ramkrans, executive]

David, if we look at the report, is there something you would -- what would you highlight, I guess?

[David Nordstrom, executive]

Yes. I think selling cybersecurity is in the trust business. And I think what is important for us is to make sure that there is transferable as a business. And then I would like to highlight what John said about getting OpEx under control, getting growth back on a more positive trajectory. And also then the fact that our cash burn is going down, I think there are strong proof points showing that we are mainly more profitable. We are improving capital significantly. And I think this will lead to a higher trust in Clavister.

I think that's also important in many of the discussions where we're in. I think this will help us also to win more business because there will be more trust in the Clavister brand as well because if you're looking for a partner, for your security, it is important to feel trust in that partner's financial liability. So let's be honest that, that is something that is very, very important for us to make sure that we are on route to profitability and good cash flows. And I think the report of that, but we're on track. And so that's what I want to highlight.

[Jenny Ramkrans, executive]

Thank you. And with ours, I would actually like to conclude this Q&A session on this like presentation. Thank you, both John and David for this. Thank you, the audience for listening.

[David Nordstrom, executive]

Thank you, Jenny, for moderating.

[John Vestberg, executive]

Thank you much.

[Jenny Ramkrans, executive]

Thank you. Bye.

[David Nordstrom, executive]

Bye-bye.