Sectra AB (publ) (SECTB) Earnings Call Transcript & Summary

Welcome, everybody. Come on in and take your seats. We're about to get started. Excellent. So welcome to Sectra's Capital Market Day. We have an exciting day ahead of us. My name is Lisa Everhill. I'll work with people, culture and branding related questions at Sectra. I've been in for some 16 years now. We have some even more exciting people coming along though after myself. Before lunch, we will talk about our strategies. We'll talk about Sectra Communications and our business innovation initiatives. We'll go into lunch. You'll have an opportunity to actually see some of our solutions up in the demo stations on the 2 different floors. And after lunch, we'll head into Imaging IT. So before lunch it's our CEO, Torbjörn Kronander. You have the Sectra crew up here if you want to see them live. We have Magnus Skogberg, President of Sectra Communications. And we have Johan Carlegrim right there; and Gustaf Schwang; and then Torbjörn will represent one of our business innovation initiatives. So throughout the agenda, some playground rules, we'll save questions till after the presentation. So after all the different -- each business unit, we'll do a little gathering and Q&A. So note your questions. There are microphones between each two chairs. So when given the word, you can just use the microphone and ask your questions. But I'll remind you again when we get to that stage. With that being said, I will -- sorry. So after lunch, we'll talk about Imaging IT, and we'll have Marie Ekström Trägårdh, heading the business unit. We have Fredrik Gustavsson, our CTO; and we have Isaac Zaworski, from the U.S., President of our North America -- U.S. organization. So with that said, Torbjörn, let's get started with our overall strategies.

Hello. It's nice to see you all here. Not so much strategies. I would just do a little intro. For some of you, you have seen is several times before. It would be kind of boring. Please do not snore out loud. Otherwise, as some of you are new, we decided to take it from the grounds up, how we think and how we organize and how we plan what we're doing. And we'll start with the curve. This is a revenue trend from 1978 when Sectra was founded. I was not around -- well, I was around, but I was a new student in university by then. Sectra was found in -- by professor [ and previous ] doctors, students to create the encryption systems of the ATMs of Sweden. Sweden has being a country for growth and is pretty happy to new technologies. A lot of new technologies has started here. Mobile phone is not the least, but we all seek digital that will become back to later. This is the curve of the revenue. And you see we started with the medical around 1991, and then there's 3 dips on that curve. First one was for us when we lost a big channel, Philips, sold off PACS worldwide, and that was tough. We managed and there was a special feeling we were sold in [indiscernible] in Holland, finally. And then we had another dip when we sold off our mammography division. We are a software company, we're not a hardware company. And it seems extremely difficult to do both in one company. We see that when a large modality companies, our comparison, PACS try to do. I think it has not been a raving success to say the least. And we also saw when we tried to do it hard way. It didn't go very well, we sold it to Philips, but we lost revenues, but profits went up. And then the third dip is COVID. A little about who we are and how we think. So who am I? I'm the founder of the medical sideof Sectra, I'm the son of a radiologist once, she became a gynecologist later and she was alone with 2 kids, I more or less grew up in a radiology department. That's where we went up to after school, which cause she was coming home at 8:00 at night or something like that. I'm the largest owner today by votes, but Jan-Olof Brüer, my predecessor is about the same. I have a few more than him. I have been the CEO and President of all of Sectra. I started medical. I was managing medical until 2012. And when I took over as CEO, Jan-Olof had other plans. And after, I think, 27 years as President, want to do something else, not to go with that. It was not actually my plan to take over this, but I didn't want to have another man above me, except for Jan-Olof. So that's what ended up. I was a naval officer in the service in Swedish Navy. I grew up in Gotland. I'm Master of Science in electrical engineering on medical technology and PC in information theory, which is single processing. MBA from Handelshögskolan and also doctor of medicine. Sailor most things that float, pilot the most things that fly and have 8 kids, of which 6 of my own. So this is my background. So contents of this presentation, we will have an overview, a little about the overall goals that we think, current market position -- sorry about that, if can go back there. A little about future opportunities and then question, but the questions will come after the next speaker. So don't ask me questions, please, but not now. Do it later, but as we break the plan for this. So the main business lines of Sectra is IT security still. That's where we started. That's where we came from Sectra for secure transmission. We still do extremely advanced encryption systems and Magnus Skogberg will talk about a little later in more detail about that area. It's about 10% of Sectra today, but an important 10%. We have Imaging IT, which is Marie setting, which is another area that I started up, handling -- mainly handling images in hospitals. All images today, radiology only from the beginning. And then we have our little greenhouse, where we have products that will -- something will happen with 1 day. They can become a complete business line themselves. They can be incorporated into another area or they can be spun off or that can be shut down. And we have examples of own. My mortage, we spun off and sold. And digital pathology came from research and is now part of Imaging IT. Orthopedic, special customers grow. We made a corporation or a company out of it last year. And medical education has also came out of research from the beginning, but is now growing rapidly around the world. And a new one that many of you haven't seen. We started Genomics IT this year, which I'll come back to a little bit later. Fredrik who runs that, he is the one working and doing programming himself. So I will present his part later on. Our philosophy and shareholders is quite simple. If you have a rational strategy in a growing market, and we like growing markets, it's tough to be in a stagnant or stable market, it's difficult to grow and more or less have to fight with prices to grow. But we try to be in growing markets. Then if you have happy customers, and in order to have happy customers, you must have happy employees. It's literally impossible to create a happy customers with unhappy employees, that will kind of -- you spread that culture out to the customers. They can be little expensive at times. Because of a good quality, you have to be willing to be expensive. Otherwise, it doesn't match up. Have a reasonable cost control and some stubbornness, then shareholders will be happy. But it comes in that order, and we've been very specific about that. Some people said shareholders first, and that is not a good way. This is a better way. So let's start with the rational strategy in a growing market. So we work in the markets in medicine. And I will start -- and we'll start with it. This is a population pyramid, Sweden. We have too few people down here. In order to serve these old folks like me, when we get owned. The population pyramid should have been a little triangle, but it's not. Now I've done my share. I've got 6, but not everyone has. And this is a problem. It would be very, very difficult to keep health care on a standard we have when a lot of people get old, and there's just a few people behind it. And Sweden is quite good, actually. This is Italy. Now you want to produce wine and Fiats and a lot of other things as well in Italy. How on earth should you be taking care of all these people. They're still productive. They haven't really hit the fan yet, but it will. When these people average are 70, 80, there will be very few people to take care of them if they're going to do anything else in Italy but taking care of old people. Now people say, Italy, well, that's not the biggest economy in Europe. But look at the locomotive, the engine of whole economy in Europe. The national economies say, if you have a lot of people in productive age between 25 and 60, something -- let's say, 65, as I'm 65, so up to 65 would need to do good for society. That's productive people. If you have a lot of people in that age [ or span ] and few dependents, few old and few young, then your economy growths are crazy. Because you use -- everything used for production. We don't have a dependence to take care of. The problem of that is that time goes, a lot of people will become dependents and there would be fewer that take care of them. This is a real problem for Europe. U.S. in a little better, but there's a huge necessity shift in the U.S. So the people who make the most money, who stands on a large portion in the economy. They have fewer kids. And people who are migrants, a lot have more kids. And so it looks in U.S., it's such a colossal mix of people, and they are better off, actually, a little better of, still a problem, but more like Sweden. So what does it lead to? Well, this leads to that we also get older, will live longer, which will lead to that the cost for healthcare will explode. We, in Europe, say, we look at the upper curve here, we said, that's the U.S. and they'll kind of make fun of them because they're not really take care of this, they have very expensive health care. But it's not different, there just ahead of us. Look at the derivative of these curves. All of them are pointing upwards. U.S. is today, I think, it's 20% of GDP for health care, that will work. You need to do something else. You cannot like approaching 100% of GDP for health care. It won't work. This will not work. Now most people have seen this. If you break this down on age bracket instead. So you look at cost per capita for EUR 10, EUR 20, EUR 30, it's not such a big difference. U.S. is still a little more expensive, except for 50-year-olds where most Germans are right now, where Germany is most expensive. And then -- but look what happens after 60, boom, all countries except one very weird country where it doesn't grow linearly with increasing age. That's Sweden. Above 80 in Sweden, we seem to have a little problem because we don't increase it in Sweden. But in the general thing, the cost goes up with age. So if you're going to handle the situation, you have to look at the diseases on the aging person. That's where you have -- if you're going to treat these curves, that's where you need to go. And those diseases of the elderly is neurodegenerative disease, Alzheimer's, MS, Parkinson, very, very, very expensive. We need to cope with it somehow. We have cardiovascular disease, not heart infarctions, they're quite cheap, you get well or you die. But chronic heart failure, super expensive. Cancer disease, if we live long enough, we'll get cancer. Musculoskeletal disease, grossly underestimated. We don't know why because it's the most expensive area. But it might be connected to -- it's mainly women's disease. And it's undertreated and underrepresented. It's super expensive. And vision, we've added vision. The last time we spoke of this, we didn't have vision here. But we actually got a request from Kaiser Permanete in the U.S. to create an ophthalmology system for them. And that is not now rolled out all of the Kaiser, which is like a country in Europe. But we also discovered vision. If you can't see, they're very expensive. So that needs to be handled as well. And these -- if we're going to growing cost of society, we have to attack these 5, and that's where we should be. We are doing medical imaging as a base and we're -- of course, we need to treat pediatrics and children stuff as well, but we should be very good in diagnosis in these areas, and that's where we go with all the medical side of Sectra, and vision here is new. So the -- my mission statement in America to increase effectiveness because that's where the money will be of health care, while maintaining or increasing quality in patient care. We not have as a goal to increase the quality, but that's very often what happens when we do things. But the main thing is to increase effectiveness. 5 to 10 years ago, you didn't hear the argument on cost in the U.S., for instance. We heard it here, but not in the U.S. Today, every customer would speak to in the U.S., even the most wealthy and riches of the hospital providers, health care providers, everyone talks about cost. It's a massive change after COVID. In Cybersecurity. So this drives the market in medicine. It's a market that has to grow. In cybersecurity, of course, we have the general situation in Europe. We have Ukraine. Everyone, all of a sudden, is much more aware of that. We thought there will be no more wars in Europe ever. That was naive. Unfortunately, politicians tend to be naive sometimes. But most of us didn't think this would happen. But now we're there. We have a war, very short distance from here. And of course, everyone is more scared, this drives the market. Add to this, in general society, we have an increasing dependence of IT. Everything is depending on IT. So -- and ransomware is attacking, most people are aware of phishing today, and there's enormous cost in IT for cybersecurity. And we have entire countries. North Korea have thousands of very smart people making money for North Korea by ransomware. We know it, but it's very difficult to prove. And in North Korea doesn't care, they need money. So they use -- that's on the national scale of attacking civil companies in the western world. Attackers are getting smarter and smarter and more. This is not -- 3 guys in a garage, leaving X-ray was here on some web page somewhere. This is organized cybercrimes, it's mafia or even countries as I said, who actually attacked to get money. There's even a help desk. Some of these ransomware companies, they're on the dark net. If you get there, you pay, you get the key back, you don't -- are not able to restore your systems with the key. That's a help desk. You go to help desk, they will help you because you paid. The is not 3 guys in a garage anymore. Secure communications and critical infrastructure are a core of this situation. We need to have encryption for communications, we need to protect the most critical functions of society. We see what the Russians doing in Ukraine now, now they're bombing it. But if you can destroy that with over IT, of course, it's very efficient. No one can even prove what you do. And it's a little too scary what we have built in society today. We also see synergies between these 2. In normal if a company gets a ransomware attack, it's a long way before you pay. Because normally they say, we will not pay. We will not teach people that you can make money by ransomware attacks. We take double the cost, but we will not pay the crooks. That's money. The problem is when a hospital gets attacked, people die. People die, patients die. So -- and then you can reason in that way. And that, of course, leads to that a lot of -- especially U.S. customers -- U.S. hospitals today have already made Bitcoin accounts. They pay out immediately when they have an attack. And guess who knows that, the cyber crooks, of course. The mafia knows that hospitals pay. Our health care today is by far the most attacked industry or area in society for cyber attacks. And there, we have synergies. We were awarded at the RSNA, which is a radiological show last year to be the most cyber secure company of all our competitors. And 10 years ago, people -- our customers here or in the U.S., they said, that's not important for us. You guys say, why do you do this in same company? You have cybersecurity and health care. Now we have synergies and they are growing. And there's like 200 questions in RFP today about cybersecurity questions to us when we sell magazine. So there are synergies now and benefits. It's more of a reputational and knowledge-based synergies that products we sell in communications are not used in hospitals, but we have a lot of benefits because we know how to build secure systems. Nothing is 100% secure though, but we have secured the most. So leading the purpose of Sectra communications, protect our society from cybercrime from individuals, but also from nations because that's a span we see today. The interesting thing with both of these, as I said, from a profitable growth is easy in a growing market. And especially good if it's a market that has to grow, it's a recession or high tax or whatever, they have to grow anyways, both our main markets are markets like that. Healthcare has to grow because that population pyramid will not change if we have a low tide in economy. And cybersecurity is growing all the time because we're becoming more and more industrial or digitized in society. That's a bad background. And then we now add a Genomics IT in which we now have products. We have no demos yet. But that's also a heavily growth market because it's so important in oncology and cancer care for the agnostics in cancer care is super important. So this is kind of the background how we think about things. And again, if you have a rational strategy in a growing market, you are well -- you have a good foundation for your company building for growth in the future. That's why we have these markets. Now you need happy customers. And we have been awarded the most happy customers in the entire United States, large hospitals for 9 years in a row. The jury is out, if it's going to be a 10th, we don't know that yet. But that kind of makes us a little bit proud, right? We're sitting in a little company in Sweden, Stockholm, Örebro and Linköping. We have created the happiest customers in the entire U.S. market in large hospitals, which is a main market, but also a small hospitals, which was not a main market from the beginning, but companies, we take care of our customers. So we are the happiest customers in large companies -- large hospitals in the U.S. for 9th year in a row. We have small hospitals for quite a few years. And we have the happiest customers in Canada with a huge margin. We have the happiest customers in Australia and New Zealand. We are 2nd in Europe. We need to fix that. we're working on it. And we are 2nd in pathology, and we have more customers in pathology we're very close. So we work on these as well. And these are the markets where we compete. So this shows we are succeeding in -- and KLAS is a company -- independent company in the U.S. who actually sells reports. Before you buy large IT systems for healthcare, you want to know if they're okay. And KLAS spends all the time, calling customers say, what IT systems do you have, are you happy with it very extensively. A lot of dimensions to that there are management -- do you see management to the company in nickel and dime, does as systems work as promoted, it's a service to take all aspects and then they rank all the vendors, and we're #1 in this thing. In Sectra Communication, there is no KLAS, there is no -- only independent company around as I can evaluate. So we do our own measurements. It's a little difficult in communications because we are not even allowed to know who is using our phones, for instance. We have no clue. And we sell like thousands of these phones to EU or EU put them, we are not allowed to know. If some of these guys are the people who had a telephone before using the ones and dropped it in the wastebasket. They have now our phones instead. So we don't know, but we have internal actions as good as we can do it. And the indicators saying business innovation and in communications. We are above. We have the cultures all over the company, but we don't have external measures for that. This makes our day. This is a comment in class reports. You can also -- they can also give comments about the vendors. And this is -- look at the CEO presentable large U.S. hospital corporation. Sectra has gone above and I cannot say enough good things about them. Sectra found out that they had made a mistake, which is, okay, everyone makes a mistake, but they worked hard to make it right. I'll be a Sectra customer for life. And you see a lot of those in these reports, and that's what all the culture is about. We care about customers. We spend as well, we're quite greedy at Sectra. We don't want to spend money for unnecessary things. But when a customer is in trouble, it's okay, you spend, you fix it, you just fix it. And that's how it creates happy customers, for that, you need the happy employees. And without happy employees, you cannot create that customer situation because it's like having a broken car, you go to a garage to fix it, and there is an idiot behind the bar. That CEO will not be happy even if they fix the car. But if that's a nice person, you see like they really care about you getting your car fixed. The impression is like 3x better. And in order to do that, you need to have happy employees. That's expensive, we knew it was and have a reasonable cost control. We don't go business class over the Atlantic. Even I go sit in the back seat unless upgrade with miles or my own money. And that's kind of all over the company. We are careful with our money. We spend it for reasonable things. But starting with happy employees, as I said, happy customers can only be achieved by happy employees. We are very careful about hiring. So I have the luxury of being probably one of very few people who will work in a company with 1,000 people where I selected everyone myself, if I don't like them, they don't get a job. That's it. So it's good. I have an extremely nice workplace because I like everyone we have. But we have 5, 4, 3 interviews with everyone, I see everyone still over teams nowadays. But we hire people we like. Hopefully, they will like each other. They shouldn't be similar to us. We need a lot of diversity. But we want people that customers like work and at time work as a team. We hire for attitude and ability, they should be reasonably smart, and we train them for skill. And then continues with culture strategy of breakfast. Some famous guru said that -- Marie, who came up with that quote from the beginning. I never remember who, but I think so true. You can try to regulate in the process for everything, it will not work unless you have the heart of the people. So we spent a lot of this. And then with the major teaching we do, it's the very one, very old one. The only rule you find in all religions we ever found, just behave to others as we want them to behave to you. Feel unusual having a person of an IT company teaching the oldest rule of all religions, but I tell you that takes you for a long way. And that is what we try to get into the very heart of all employees. Because if we behave to other as we want them to behave to us, it will be fine. It's interesting. All religions we ever found have a version of this rule. And it has resulted that we were last year voted #4 on the employees in Sweden of all employers as the best workplace. We were #1 of all production companies, [indiscernible] so with 3 consultants and companies ahead of us. And this is anonymous. We have no control of it, and we very happy about that. And this also shows that we have people who like the workplace and then they will behave good to customers. And the best possible cost control comes also from culture, you cannot have process or it doesn't work. Little about nationals finally here. We are performing from a licensed selling company to a recurring revenue company. That's a huge transformation. Most software companies are going through it or have gone through it. It results in delayed income and profits, and we will see that over the -- already see it, but we'll see that. That short term, this will decrease our growth, it will decrease our profitability. But long term, it will be grossly benefit. It's very interesting. I pay as a person today to Microsoft. Before I paid for a little box with licenses. Now I pay a subscription, and I get upgrades automatically every other week or so. I pay way more than I did we bought that box every 3 years, but I'm very happy with it. It's a very interesting effect. Both customers and vendors are benefiting from these solutions compared to buying a license and then have only support. Usage of customers as well as not losing customers to become crucially important in such an environment. They pay while they use it. They do not pay upfront so much anymore. And we have very low churn, and we'll come back to that. But usage becomes super important. And then we have new roles in all of Sectra customer success management. That's a comparable organization to say, but they work mainly with going out to customers. If we see a decrease in usage, we go out and find out why. To get them to use the system because that means they have a use of it and they benefit from it, and we get more pay. So the customer success organization will hear that from many presenters today, it's crucial in its new organization parallel to what we hedge for. Closely linked to sales, but not as people who say. These are our financial targets for the group. In order, number 1 is stability of the company. So the assets to equity ratio that should be above 30%. I was at Stanford University Hospital in Palo Alto, where all the employees of Apple and Google, all these places where they get sick, right? And we have the PACS, it's kind of nice feeling to have the PACS in Stanford, made and delivered from Sweden. And I met the CEO, Michael Pfizer, a very smart person, both IT and medicine. And he said that the most critical system we have in this hospital is you. The medical record system, we can live with that for while if it doesn't work. But if the PACS goes down, the acute intake, the acute system, the emergency stops functioning, the entire hospital come to a grinding halt. You cannot buy such a system for someone you don't trust. He was extremely clear about that you are most important IT systems we have in the entire hospital. And then you need to be trustworthy, you cannot be sloppy about -- and apart that they will not buy it from a company that think might go down the drain financially. So we need to have finance in order, stability. Then we had margin, the second highest priority, but we could take up a margin significantly if we wanted, but we want to grow. 15% is a good level if you want to have a sustained business and still spend money for growth. It's hygiene level. This is not the target to hygiene. If we reach 15%, we should all use all the money for growth, and our target for growth is growing profits per share. That means I wouldn't do it, I'm the largest shareholder. But my success for 1 day, is a very common thing that you buy other companies who are own stock, is more -- actually it's more for the benefits or the ego of the management than for shareholders because you buy it too expensive. Now if you have the measure in EBIT per share, you can't do that. You have to buy things that are better than yourself if you're going to buy with your own stock. That's why we have this rule. And the rule -- and the target here is to grow more than 50% over 5 years, and we are way above that. We are currently at 84%. So if you do all these things, shareholders will be happy. That's our theory, and we believe in it. All management at Sectra are shareholders, and this has also shown in the share price development. I look 10 years back, I found a figure of -- January 1, we had a price of SEK 7.50 per share. A few days ago, were SEK 163, that's about 21x in 12 years or an average growth of about 29% per year. So it seems that our strategy of thinking of having this order growing markets that has to grow, happy customers, happy employees, cost control, it seems to work. So thank you very much. That was an introduction. I will now leave it over to Lisa, again.

Thank you, Lisa, and a warm good morning to all of you. It's great to have you here, and I'm delighted to this opportunity presenting our operations within Secure Communication. Magnus Skogberg is my name. And I had this operation. I joined Sectra as of last year. And I am gradually tuning into my new role. And I must say, it's tremendously stimulating. And I'm truly impressed by what I have seen so far. I joined the company with a lot of skilled people, knowledgeable people, delivering and producing excellent and world-class products and services in the segments where we operate. I have a long background within Defence and Security. Before joining Sectra, I was working for the [ soft ] group, and thereby, I have quite a lot of experience from the defense sector, and I'm thinking about the specificities, such as the political aspects and regulatory topics of that industry, complex sometimes lengthy sales processes as well as all the long-term programs and not to forget the close collaboration together with both, customers and end users to be able to create the capabilities that they need. I've had various positions within marketing, sales, strategy and management and always been working at the intersection of technology and business. And also, I've been into different product areas throughout the years: aviation, fighter aircraft, training and support systems as well as unmanned systems. And always, it has been a lot of high-tech and that type of technology. I have a Master of Science in Industrial engineering management and also been studying engineering and management in both France and Germany. So there has been a lot of international context in what I have been doing throughout the years. I will use the same setup for my presentation, start off with an overview of what we do, talk about our top level goals and then going the market position we hold and where we are heading for the future. So in a nutshell, we're about 130 dedicated and skilled people, working to support defense organizations and authorities. And we do that by offering advanced encryption products and services to defense organizations. We also offer security services mainly for Critical Infrastructure segment. And we didn't start yesterday. We have a thorough experience and background of 45 years within cybersecurity. And I think it's fair to say that in many ways, we are and we have been pioneers and frontrunners within our business. We used to say that we provide security that improves both the availability and the efficiency of the critical functions in our society. And going into our advanced encryption products. Here, we offer a number of different things. Part of our portfolio is about so-called high insurance cryptographic products. And those are meant to be used for national security. We use here a specific customer purpose-built equipment where we have the full control of components and all the production chains here. And that means these systems can handle very sensitive information, up to the classification level of top secret EU and NATO secret information. And the customers in this segment typically are defense organizations, governments, ministries of foreign affairs, ministries of defense, as well as multilateral organizations, EU and NATO. We also serve a segment that are still requesting high security for exchanging information and accessing information between organizations and authorities and within them as well to enable people working in these organizations to access this information when they are remotely somewhere. And here, we have a bigger volume and also other expectations when it comes to price, and there is another price sensitivity. And here, we use standardized commercial off-the-shelf equipment. However, we make sure to have these secured in various ways and to make sure also that the systems can be integrated in a smooth way within the existing IT infrastructures of these organizations. When talking about high assurance crypto solutions and communication systems. What we mean by this is that they are approved by the national security agencies. We work closely together with them to make sure that we meet the highest standards. They follow the process from the design throughout the development, and they make thorough assessments and valuations of risks and vulnerabilities. They look at the security models, what types of design principles we have and the algorithms used. And they overlook all the security aspects throughout the whole production and development chain, and outcome these approved products that can be used to handle national secrets within these organizations. There is also a commercial segment, but we are not targeting that. We are targeting the approved products market. Then aside our Communication systems, we're also serving a market for critical infrastructure. And here, since some years back, we have developed a technical platform and a service offering to make sure that we can meet and support the ever-growing vulnerabilities when critical infrastructure and traditional industrial control systems are more and more connected to IT networks and even to the Internet. And we've seen that traditional IT security companies, they tend to focus primarily on the IT side and sometimes lack the appropriate ways to handle an efficient monitoring of the industrial control systems, and that's why we have chosen to go into this segment. And we install data loggers and systems to capture the important information. All sensitive information is always remaining at the customer side, and we follow and monitor what's happening 24/7 security operations center. And here, the customer base, traditionally, it's a critical industry, it's process industry and energy companies, for instance. Then some examples of our products or from the product portfolio. We provide mobile communication systems, and the backbone of the product range is the Tiger system. This is a mobile phone for secret level communication. It's using the standard commercial telecom network, but it can also be using connections through direct Ethernet or satellite communication. And it's very easy to use. It's stable, it's versatile, and this has really become a de facto standard within its niche. Then we have the network encryption systems, where the security level classification goes up to top secret and EU NATO secret information. And these systems are for high data throughput, high-speed to connect different data centers, nodes in networks together and handling the top-level classified information. And when it comes to the segment we serve, broader for authorities, we use the commercial costs or available technology. However, we make sure to control the security mechanisms and the integrity of these systems and that they use the right encryption and thereby, we achieve what we need and we can handle the so-called restricted level information with these devices. The market that we address is defense organizations and authorities and primarily within EU and NATO countries. Sweden and the Netherlands, they have a special position for us. We look at them as our home countries or home markets. And of course, we're a Swedish company from the beginning, working extremely closely with the Swedish authorities. The Netherlands has been a bridgehead into the NATO context. And there, we have not only sales activities, but we have operations as well, including production in that country. When it comes to the critical infrastructure business, our market focus is on Sweden. The overall goals we follow is that we want to be a leading provider of advanced encryption products for defense organizations and authorities. We shall deliver high-end security services for critical infrastructure and industrial IT and OT. And of course, as Torbjörn was talking about before, we need and we must have satisfied and recurring customers to this because that's the way to build the profitable growth over time. So some words on the current market position we have. We have about SEK 200 million as an annual revenue and 40% out of this is recurring. We have a very stable customer base with low churn. And if we look back during the last 10 years, we can see an average revenue growth of about 7%. The first half of this graph shows a little stagnant situation, however we need to look at how the world was looking in the ever [ piece ] type of thinking we have that. And in the second part here, we've seen a much better growth, and the trends are pointing into the future way in a nice way. For the encryption products, in Sweden, we have a strong position. We are the largest sector. We have about 40% of the market share. And in -- sorry, in the Netherlands, we're a trustworthy supplier and have been working alongside the customers since many years back. We're the biggest on high assurance crypto in the Netherlands. And we are the main provider in Europe of secret level mobile communication. When it comes to the critical infrastructure, we are a credible provider in Sweden However, still, this segment is in its early days, and we are looking forward to see much more of growth and development going forward. Something that we're really proud of is that we built a pan-European network where the European external actions service, the European Commission and as well the council. They are all using our Tiger system for the highly sensitive communication. So typically, when a minister, top-level minister or state leaders need to discuss certain things, they pick up the Tiger phone from Sectra, and that's the way handle a situation. We have quite a broad user base in our specialized niche. And more than 20,000 products are delivered, 30-plus different types of systems are in operational use as we speak. And this by more than 100 different organizations around the world. Now looking into the future and what is coming next year. We can see some important and interesting trends and drivers in society that are extremely important to our business. Torbjörn mentioned the digitization of the society. We take for granted to have the right information accessible in a secure way between organizations, between people working in a mobile setting and this is, of course, driving the needs for secure communication. Then we have the troublesome situation with different actors, state actors or other actors on the criminal side, with ransomware and so on, that present vulnerabilities our IT systems and communication systems. This is unfortunately on the rise, and it's asking for the type of systems we deliver. And then I touched upon the vulnerabilities when the traditional old operational technology or industrial control systems are connected with IT and even Internet sometimes, then new vulnerability vectors are introduced, and this needs to be protected. And in essence, all in all in society, there is an increased understanding of security and the awareness is going up. And this is kind of an important background to what we are doing each and every day. Defense and Security, to continue is really on the agenda. We read about it. We hear about it each and every day. Nobody has missed the target for NATO member states to target 2% of GDP in defense spending. In Sweden, we see that transition from 1.2% to -- sorry, to 2% within a 5-year cycle. The same goes for the other important market to us in the Netherlands, going from 1.47% to 2% in roughly the same time span. And a lot is happening. We see that not only on the policy side, there is a lot of needs, lots of developments of new systems and capability, but we need this in the everyday dialogue with our customers. They need more systems and they need new functionality. And then there are increased regulatory requirements. This service is specifically within the critical infrastructure business, where EU regulations and others are pointing out that energy companies and other actors running operations critical for our society are requested not only to safeguard, but to continuously monitor and report on vulnerabilities. And our estimation is that the overall and underlying market growth here is with margin above 10%. The needs are growing for sure. And what are we striving for looking ahead? Well, to maintain the full position we have in the mobile communication on the, well, secret level communication. And we work a lot with product renewal to stay at the forefront and to broaden the customer base. We develop our offering in the restricted segment. And here, we expect the biggest growth. And in the Critical Infrastructure segment, we want to turn investments we made during a number of years into sustainable profitability, and we think there is a good potential to do this. And partially, we are looking at doing this through partnership to boost and accelerate the market access. We work with research to stay at the forefront and some examples of focus areas that we work with is traffic analysis and network protection. It doesn't matter how good our encryption is if antagonists can follow and understand on meta data, what communication is being done between what nodes and so on. So this is important. Quantum computation is another shift in technology trend in society. And many have been thinking and asking themselves, okay, is this a danger to the encryption algorithms that we use. And we have one of our researchers specifically focusing on this. And we feel assured and confident that the systems we have already today, they are quantum proof. We work with 4 methods, also a verification to speed up the approval processes of cryptographic systems that often is quite time consuming and lengthy. We want to be thought leaders within Europe when it comes to encryption, and we work closely with Academia. And to summarize here in my last slide, we are helping the ones protecting our society from the top level, state leadership through our defense organizations and down to critical infrastructure in various ways. We provide secure data access where needed, when needed. And we ensure collaboration with our tools and equipment and make sure that continuity can be there for the critical processes in society. So that, ladies and gentlemen, concludes my presentation. Thank you very much for listening.

So at this point, we welcome questions in the this business area. As I mentioned before, please use the microphone that's next to you so that we all can hear your question. [Operator Instructions] Go ahead.

Thank you. On the critical infrastructure, when that was introduced some years ago, the potential was huge. But correct me if I'm wrong, but it seems the uptake has maybe been slower than what was expected. So do you have a common strategy if it's correct and why? Because it seems potential, it should really be huge for that one.

Yes. I agree with you. It is a relevant and great observation. We were expecting a quicker boost in this segment. We have seen some of the effects from the pandemic situation, where especially the community-driven organizations within energy companies and so on, they haven't had the abilities, resources to take these kind of bigger steps forward, and also some of the regulations that have been discussed have taken a longer time to be introduced. However, that decision was made within EU towards the end of last year. And the implementation needs to be carried out before the end of next year. So yes, it is correct. It has taken slightly longer time than expected.

But it makes sense for it to go outside Sweden? So other Nordic countries and maybe Europe as well?

It would long term make sense. However, we've seen that this market segment is quite national. There are different regulations in each and every country. And as you are pointing out, seeking to find a kind of -- the volume that will provide a stable and profitable good business, and we've decided to our focus in Sweden. But yes, we have our tentacles out, and yes, there are opportunities as well long term in other countries.

I follow Sectra for quite some years from a distance, I must admit. This sector is still rather small. And from time to time, the profitability has been not that satisfactory. Are you being a provider to the European Commission on NATO? Does that preclude you from selling to some other parties and what about the United States and countries like Japan, Australia and New Zealand and so on?

This is, of course, a business of trust. And that means when we work extremely closely together with some of our customers into the top secret level, that will require certain approvals before export can take place. There are no formal stopping points like that. But we have seen that within the European context, we have a good basis where we can be, where we can grow. We have looked at opportunities also in other parts of the world, but this is quite a traditional business, where some countries truly focus on their national industry when it comes to cryptographic products, especially on the highest assurance levels. Sweden is a very knowledgeable country within this area with a long heritage from signal intelligence and encryption going back decades. The Netherlands is another one in Europe, and there are just a bunch of these types of countries. And if we can sell to some countries, certain areas, we see that the national industry is being protected in a way that doesn't make sense for us to go in there and compete. So it's always a balance, where we do believe that we can find good market opportunities.

To add onto that. France is a special country and many of you -- have you tried to enter that market?

I think it's an excellent example of some of trickiness you can see and from my previous background, I can just, as an analogy, say that it's not always easy to -- or it's not easy to sell, for instance, fighter aircraft from Sweden to France. I think France is one of the few crypto countries as well in Europe, where they have certain industrial base, and there is a tradition that they are protecting it. So we are not specifically targeting the French market.

Yes. One question regarding the increased spending on defense, et cetera. Can you maybe comment a bit on how that's been a constraint to your growth historically? Or has it's been more of your own ability not maybe -- have been able to meet customers during the last couple of years because I think the growth in the Secure Communications has been a little bit disappointing, at least to me.

It's fair to say that the underlying market growth has been quite low during many years within this segment. And I can talk from my long experience within the defense business as well. That has kind of put a certain level -- certain blanket on the capabilities and abilities. At the same time, we have been able to have a growth of 7% in average. And that is kind of much better than the underlying kind of funding increase, but in many cases, was going like this downwards. I can also say that we now see, the trend is going quickly in the other direction. But due to the long processes in this market, it takes time before we see the effect in revenue streams on our side. But there is a lot in the market right now.

Yes. But what you said that we're losing market shares in your segment during the last, let's say, 3 years? Or have you grown relatively in line with the market or...

We have not been losing, no. We have been growing as the market, if not slightly better in certain areas. And then this is quite a small niche market. So it's a little hard to find the perfect kind of figures to compare with.

Yes. And then maybe just the last question let's say, the synergies between the business areas. I mean Torbjörn mentioned that hospitals in the U.S., et cetera, are valuing this more and more. But I mean your business seems to be -- I mean your customers are a bit different, I guess. Can you maybe talk a little bit about how you work with the segments within Sectra, within the different divisions.

Yes. Of course, as Torbjörn was mentioning, there are a lot of synergies when it comes to the knowledge base and how we look at security. People are moving once in a while between the segments, and we use each other to soundboard different experiences and knowledge. At the same time, we are looking into what -- at what stage and within what areas it may be relevant to more concretely go into, applying the product base and the knowledge within our segment into the medical side. But we have seen that not yet that perfect match has been there on the product side.

Thank you, Magnus, and thanks for all your questions. Magnus will, of course, be available to our lunch if you have additional questions, and you will also have a colleague demoing some of our solutions on the upper floor.

That's correct. Don't miss it upstairs. Thank you.

So as we still ahead of lunch, I will say good morning. My name is Gustaf Schwang and I'm heading up the Orthopedic division in Sectra. I'll start with a little introduction on myself. I'm from Stockholm. I have a Master of Science in Vehicle Engineering, which was also the beginning of my career, working for a company called Nautor Swan making large sailing yachts. After a bit into my career, my father got cancer and he was treated with radiotherapy. And that made him have a quality of life in the end year of his life, and that turned me into the passion of what technology can do for mankind. So I start -- I joined Elekta, radiotherapy company that many of you are familiar with, worked there for about 10 years. And about 5 years ago, I joined Sectra. And since then, I've been heading up the Orthopedic division. I have a 5-year -- sorry, 5 months old son. So I'm not really contributing like Torbjörn to the pyramid here, but I have a girlfriend and a little dog. So I will talk to you about our business line orthopedics, where I will give you an overview of what it is that we are doing, a bit about our overall goals, the current market position and the future and trends for us in the orthopedic domain. I will start with the mission statement, and it's really about to harness the full power of medical imaging in order to deliver highest efficiency in the market for orthopedic disorders. And the reason why we are a separate business unit are not part of medical Imaging IT is that we have a different customer segment being the orthopedic surgeons. We are a dedicated team of about 20 people. We have our own sales force. We have a dedicated development team. We have our own marketing. And also, as Torbjörn introduced customer success management, which is more and more as we are also following the transition into a SaaS kind of delivery, a very important function. So a few words about the overall market that we operate in. About 20% of the global population is suffering with some kind of muscular -- musculoskeletal disorder or discomfort. That's 1 in every 5. It's actually the third largest health care cost globally, only bypassed by cardiovascular and diabetes. There's a rising population of elderly people as we saw in the previous graph. And the musculoskeletal disorders are very much tied to the elderly. It's an elderly disease. And as that is growing, the need for our solutions grow. Of course, there are also lifestyle-related diseases with obesity and others that are affecting the movement apparatus. And we, as future patients or current patients, demand a higher quality of care, but also it needs to be given at a lower cost. So looking at the total addressable market for orthopedic software, it's estimated at about SEK 5 billion, 2 years from now, and it's growing by average 8% per annum. With some of our solutions that I will give you a very brief introduction to, we are expanding that space as well. Just looking at the installed base, I presume otherwise I will get that question, how about selling to the installed base? The serviceable available market is about SEK 350 million to sell into, and that is, of course, steadily growing. So we see an overall trend in radiology in general, moving towards the utilization of CT images. So the traditional way in our space has been 2-dimensional, meaning plain X-rays. And that is driven very much on the increased clinical value that a CT-based image provides compared to an X-ray image. And it's also driven by the cost of the CT is going down and also the dose that you're exposing the patient for. Our -- and that means that our preoperative planning solutions are more and more needed so that you can harness and use this data in the most efficient and best way for treating those patients. We are operating in these markets. In the U.S. is our largest market and also the fastest-growing market. Scandinavia, we are present in basically today almost every hospital that has an orthopedic department. There, it's very much about increasing the usage of our solutions. U.K. is a steadily growing market. In Benelux, we are present at most of the larger university hospitals. Dutch is a rather competitive market for us, but we're there as well. So the current market position, I will start by saying that the American Academy of Orthopedic surgeons has established that 60% of the surgical errors in orthopedic procedures are caused by the orthopedic surgeon. And the majority of these mistakes and errors, could have been handled with preoperative planning so that could come in better prepared. About 10% of all implants that go into our body throughout the lifetime of these patients will have to be changed or revised, taken out and replaced. That's where our tools come in, where we impact safety, accuracy and efficiency in selecting and deselecting patients. And the ones that we are selecting, they are given the best possible care. A brief overview of our products today. Sectra was actually the founder -- Torbjörn was the founder of preoperative planning in X-ray and that started in the early '90s. Before, you were using these plastic sheets, the old way of X-rays, and literally cutting and pasting, putting these together. This was done digital. And that's still the largest portion of our business today. But as we're seeing the transition, as I mentioned, into 3D space with CT, our new solutions are becoming more and more used and it's becoming more and more standard of care, in particular, for those more complicated procedures and complicated cases. You need more data, and that's where CT provides more information. About 1/3 of all medical images that are taken today belongs to the musculoskeletal patient. So they are about muscles, bones, cartilage, tendons. And this, of course, requires a large focus in this area. And Sectra is actually the only provider today in the market of packs, who provides a completely integrated solution for MSK patients, both for orthopedic surgeons and musculoskeletal radiologists. A measurement for a musculoskeletal radiologist that is complex can sometimes take about 20 minutes up to 30 minutes, which some of our solutions can reduced down to a few minutes by few clicks. So you can really save a lot of time. Our solution can be provided today together bundled with the Sectra packs, but we can also sell our solutions in a cloud-based solution. We called it Sectra Preop Online. The postoperative space is perhaps -- or sometimes when patients come in with pain back to their surgeon, and the surgeon has a very hard time to assess whether this pain in the implant or close to the implant is caused by the implant failing. And on a static image, it can be really, really difficult to assess that. As you can see in the middle picture here, the naked eye can really see just a few millimeters or even sub-millimeter movement with the help of our tools. So you can select and deselect those patients who are relevant or irrelevant for surgery. CTMA is a way of making sure that new implants brought to the market are safe, and it's replacing the gold standard of bringing new -- the method that is used today. I'm very proud to say that about almost 230,000 patients were treated based upon plans that we provide our users with last year. That's a big number. We're growing up 30% in average year-over-year. A bit more than 3,000 monthly active users is what we have to date, and that's growing about average 22%, indicating that our users are using our systems more and more. And that's done by using customer success management and making them comfortable in using our solutions. And my final slide is about future opportunities. So as being an elderly or approaching the elderly population and the rise of the number of orthopedic disorders, it is steadily growing and fast-growing and something needs to be done because it's so costly. Our solution is to look at how we help them become more data-driven and making this patient pathway more industrialized and efficient. And the pathway includes diagnosis treatment and also the follow-up, which we've seen in our products here. We see that those clinical experts today and the clinical staff working with these patients are often burned out. They're growing care cues. And we are sure that this can only be handled through technology, AI, evidence-based medicine, personalized medicine. And by providing the technology, we can do a left shift, meaning that lesser experienced staff can do more sophisticated procedures. That was all for me. Thank you very much for listening.

Gustavsson will come back on stage after we present our other seed for the future so to speak, and answer any questions that you may have. At this point, we welcome you Johan Carlegrim, President for our Medical Education business on stage. Go ahead, Johan.

Thank you so much, Lisa. Hello, everyone. I'm representing our Medical Education division of Sectra. I've been working at Sectra since I was born, or at least since I graduated and slightly before. I did my Master thesis within Industrial Engineering and Management at Linkoping University at Sectra, and I got stuck and no one else wants me. I was initially in charge of Sectra's solution to connect different hospitals to each other for collaboration, which grew to become the largest and most profitable Software as a Service business sector at the time. And we led the internationalization of that product from being, at the moment I started, only local to 2 countries. I've been, in the last 3 years, at Medical Education, which brings the new focus more into the academia and the new target segment. I will ask everybody else give you an overview of what we do within Medical Education, where we are at the moment, where our focus lies and what we see moving forward. As I said, our focus is on the academia, on the education of future doctors, nurses and other health care professionals, rather than the ones that are actually already in clinical practice, providing care to the patients. However, focused on the academia and the medical education and the focus on that requires us to really understand what's going on, obviously, in the hospital setting. So the advantage of us as a company is that we're positioned in and active in both areas at the same time. The students of the medical universities are obviously to end up in the hospitals, and they are supposed to do so at a higher rate and with more knowledge than ever before. So the connection between the two is very strong and important. When looking at the hospitals, one of the most obvious problems for them at the moment, which is also what we try to work with on -- and for the clinical staff is to be able to do more with less. One of the biggest problems for many hospital executives today is staff shortage. They lack the enough staff to provide the care that is necessary, driven by the demographic pyramids that Torbjorn showed before they need to do more. And that's a problem. We try to work with effectiveness to resolve that, but obviously, bringing in more and more capable, more competent staff to the hospital organizations is also very important to try to mitigate this challenge. Another reason why it's challenging, not only that you need to deliver more care, is that the care is becoming more and more advanced and complicated. So this is a chart that tries to explain the increase, an explosion of medical knowledge that is happening at the moment. This goes both in the clinical sense, but also in the technological sense. So the tools from a technological standpoint, Gustaf presented some before, are becoming more and more advanced as well, both for diagnostics and the treatment. So a doctor that graduates today needs to know a lot more, and they also need to continue to learn a lot more in order for them to meet the needs of their patients today. By 2020, it was estimated that the total available knowledge within medical doubled every 2 months or so, and this trend just continues. So you need to learn a lot more and you need to continue to learn throughout your career as a doctor, nurse or other health care professionals. This means that the traditional ways of learning medicine, in this way trying to dissect an old corpse, is not going to be sufficient to meet this challenge for medical universities and medical schools, but it opens a market which is rather large and growing. The estimated total market for medical education in 2022 was USD 41.6 billion. Obviously, we can capture all of that, but it's a very big need that needs to be addressed. From our point of view, we look at the market from a different -- a few different perspectives, and we try to divide the market into perspectives that we find relevant. Our core segment is medical and veterinary schools and simulation centers. A lot of medicine is today learned by simulating the scenarios in the hospital that the students will eventually meet. They try to simulate the patient scenarios, both when it comes to diagnostics and treatment in as a real way as possible. Many of our university customers are building what looks like very much a hospital setting for their students to learn with. Often the patients are extremely real high fidelity manikins, dolls that they play with, but for a very important purpose. They can scream and they can cry. And they even have helicopter pads to simulate the urgency comes to certain of these scenarios. That is what happens in what we call simulation, and simulation center is a very strong growing market. There are about 3,600 medical schools globally. Within veterinary medicine, we see quite strong growth actually. Many people bought their pandemic puppies, and the veterinary market is growing also really nicely. Obviously, the veterinarians also need to learn medicine before they start to treat their patients, the animals. There are about 1,000 simulation centers. As I mentioned, this is a more rapidly growing market than the medical schools. And at the moment, if I look at our offer, we estimate that we have an opportunity to get about SEK 0.25 million from each of our customers today as a subscription, which means that the serviceable addressable market just within this segment for us is well over SEK 1 billion for a year. On top of that, fortunately for me, we work also very closely with the hospitals. And as I mentioned before, the medical students, they won't be done learning when they graduate. So a larger and larger part of the learning for health care professionals today happens in the context of the hospitals, maybe when they are residents, but also when they are specializing or when they are specialists. There are about 3,000 teaching hospitals globally, 1,000-plus only in the U.S. where Isaac focuses. This adds, if we assume a similar revenue per customer a year, SEK 800 million per year in service of addressable market only with our current product offer. Finally, I mentioned they need to continue to learn. Actually, the medical education -- continuing medical education market is growing quite fast at the moment. And it's, in total, estimated to over USD 12 billion -- or estimated to grow to USD 12.0 billion by 2027. There are about 10 million doctors in the world, and I've heard more than one of our current users of our PACS and 3D asking to get access to our educational solutions as well to buy their own personal subscription. At the moment, this is an untapped potential, but it's a rather large such. Let's assume we can get each of these doctors to pay us SEK 500 per year to access the tools that I'm soon going to introduce to you is that, I will say, the largest addressable market for us within medical allocation overall to tap the potential of the learning needs of the already graduated medical students, the doctors out in the hospitals. All in all, we estimate our serviceable addressable market to over SEK 3 billion, just based on our current product offer. And on top of that, the value for a company to really position itself amongst their future users. You know that maybe Adobe and other large tech companies, they really put a lot of emphasis on trying to get hold of the user well early on in their careers. Going to the university setting as at some companies that I know of valued by a factor of 10 per dollar because they actually create brand awareness and they create brand loyalty with the users they will have in the future. We used our tools within education to position us as a really exciting company. It's one of the best ways I think. You may see outside in the demo area, it's one of the best ways to understand what we're doing as a company. For many of the medical students that have been using our tools, it was the actual reason they chose to become a radiologist or pathologist because they found that our tool that they would eventually be able to use in those specialties were so exciting and intriguing. I think for us, as a company, on top of the 3 billion per year market potential, I would say, brand awareness and brand loyalty is an important reason for us to work with this strategically. The goal for the business units is to try to use our position working both in the academia and in the clinical space to narrow the gap for the students that want to come into the clinical reality well equipped, to narrow the gap and create a bridge between the academia and the clinical setting. And that's where we have a very unique position with our technology and with our company. Because it's proven that the use of medical images, which is our core competencies within imaging, the ability to see the world's leading technology that can visualize the human body in various ways and disease, our customers have proven that with the research, they are academia, they will want to have scientific evidence of it. It's proven that the ability to do so, in this case, see an embryo, helps the students learn faster, learn better and learn in a way that makes them analytical and learn in a way that makes them capable of learning also when they graduate. So our medical images are the core of our product. We deliver all of our products within medical education as a cloud service. This is our education portal. In the portal, we have collected throughout the years, together with our hospitals and also our universities, a very unique library of clinical content, medical images that each university and each university teacher would never be able to find themselves. We've gathered that and makes it all available in the cloud portal for all of our customers, and that can be accessed both for the teachers and for their students. Combining that with our state-of-the-art visualization tools is something that provides a platform that we don't have any competitor out there that can even closely match. Our current market position, we have customers that are in a variety of different categories. I mentioned before, universities simulation centers, veterinary education. One of the most exciting opportunities for us is to put our tools directly in the hands of the students. And we see that more and more on medical education is actually self-directed. It's not enough for the students to learn in school, they also need to learn when they get a home, study for their exam, and they can now access all of these tools and this material online whenever they want from wherever they want. This is one of our huge opportunities, I would say, to continue down that path. In terms of customer, we have customers in about 60 countries today with our educational platform. We have a large presence in Europe, North America, where, obviously, with the rest of Sectra is also very present. But we also have a big installed base in Asia. We have a big installed base in South America. And one of the benefits of our distribution model is that it's not that difficult for us to deploy our solution in any new country. So we're active in about 60 countries today. Usage-wise, all of us talked about customer success management and the importance of driving usage. Our price model is directly correlated with the usage. How many students and teachers are able to use and are using our platforms in the university setting or wherever they want? We've seen over the last 3 years that we've had a growth of about 84%. We're almost doubling the usage in 3 years. This has resulted in also a growth of monthly recurring revenue. All of our revenue is cloud recurring revenue and has been over the last year. We almost doubled that in the last 12 months, and we see that this trajectory is just continuing. So we're seeing that there is a great correlation between usage and also the growth of revenues. When it comes to future opportunities, where does my focus lie at the moment? Well, I had a foot with the imaging IT and the hospital side before. So that's obviously close to my heart. But we see that actually our opportunity with our very sophisticated tools for that are even relevant to use for the physicians and the graduated students makes it possible for us to actually go outbound in the circle. Starting from the medical universities where, for instance, in Sweden, all of the medicine students get an account to education portal today. So all of the doctors in Sweden will have experience from sector and hopefully like it when they graduate from med school. This is the starting point, but we see that we have a very good opportunity to provide value in the hospital teaching setting. And also, as I mentioned before, to the already graduated doctors. Unfortunately for me, I have colleagues out in the hospital setting. The imaging IT and orthopedic solutions are already out there. So I see that we can both create a position within those segments of the hospitals that can be leveraged by the Imaging IT and Orthopedics business lines, and hopefully drive some sales of the clinical systems. But equally important for me to drive my business is that those positions with the hospitals creates a huge opportunity for me to also complement our footprint with those customers with an educational solution, and that's the synergies that we start to see more and more of. And that's the potential I would like to focus on moving forward. So we have an opportunity to act in all of these. And I would say, as a company, we're the only one that fits with the foot on both sides, and that's the synergies we've tried to exploit. Thank you.

Thank you, Johan. And as with Gustaf, Johan will be upstairs later during the lunch and show his products. And you can ask more questions. And he will also be part of the Q&A session after Torbjorn has presented our newest addition to our greenhouse, which is genomics IT. Welcome back on stage, Torbjorn.

So we thought it was better use of Fredrik Gustavsson's time, who was mentioned in this area that he actually makes the product. So I'll do this for you in a brief way. So genomics IT research. What do we do in this area, especially in genomics IT? And why are we starting up something outside of imaging? The background is that this is mainly about cancer. Cancer cases are growing and growing and growing. More or less all of us will get cancer, if we live enough long, not all, but most of us. Just a matter of time. Sorry for that depressing news, but I don't think it was very new to anyone else. But it's a growing concern and it has to be dealt with. So transformation. There's a huge transformation in cancer care. Now 40, 50 years back, you got cancer, you're most often died. There was not much you can do about it. If it was very easy to surgically remove, you remove it. Some miraculously turned healthy, we don't really understood why. And that was the situation. But now -- and then you introduced a lot of chemo and you had radiation coming on and surgery got better and better, so it was treatable. But if I went in there with a prostate cancer, and some other men in here went in with a prostate cancer were treated in the same way. Someone died. Someone didn't. And there was it if you like it or not. Now the big change in cancer care is personalized medicine. First medicine is that you don't treat 2 patients the same way. You measure the cancer. Some cancers can be treated in one way. Some cancers can be treated in another way, and we have seen incredible improvement in cancer survival. Maligna melanoma is a skin cancer. Most of us, at my age, know at least someone who die from it. I know 2 or 3. If you got that in the old days, 95% of patients did die within 5 years. Today, they survived, 5-year survival. Maligna melanoma is 60%. 5% to 60% that's amazing. That's by immunotherapy and first dose medicine. Now it requires accurate initial diagnosis, but also continuous monitoring because as you had now had many treatment, you treat different people in different ways. You need is -- you need to know if the current treatment works. After 2 weeks, it must -- something must have happened or you changed to another treatment. And that means it becomes continuous monitoring and diagnosis. What happens? Well, and then after you're healthy, cancer very seldom goes away. It's still a risk to -- that it comes back. So you need life of monitoring. And that means that the agnostic will be used many times for each cancer patients instead of just initially. So diagnostic will grow much faster than therapeutics, much faster. Diagnosis growth in cancer care is a tremendous growth. We also see that in radiology departments, a very large portion of what you do in a radiology [indiscernible] is monitoring cancer -- monitoring cancer? Does it work? Does it? Is it shrinking? Is it growing? So cancer is transformed from acute deadly disease to a chronic disease. We live with it, most of it. Many die, but not as it used to be. And genomics in cancer care, what's happening there? Well, mutation in order to really find the treatment that works for you or you, we need to know the germline genomics. That's your inherited gene or DNA. There are some mutations that are inherited. Most of you might have heard about the BRCA gene. If a woman has a BRCA gene, a mutation, she has an 80% lifelong risk of developing breast cancer or ovarian cancer, 80%, if you have that gene. We don't get it as men, but we progress it to our daughters. Really serious. You can find it by a simple test of that mutation. You also need to monitor the DNA genomics of the cancer because one of the reasons with cancer is that the control mechanism when you multiply cells happen, doesn't work. There's no errors checking that works anymore. So the cancer can mutate -- some cancers mutate everything -- every new division of cells you have. So it become crazy. We have different DNA in every new development of the cancer we have. So you need to follow this over the treatment time and see. Very often you begin treatment with one treatment that works for most of the cancer cells, but 1 or 2 it didn't work for. So you kill off all the ones that you are sensitive, but the 1 or 2 that is still remaining have another mutation. And guess what happens? They, of course, take over. So you can have initial treatment for cancer in the beginning and completing another 1 after 2 years, 3 years. And you need to see that, and that is done by continuous DNA testing and genomics of the cancer. Many thousand mutations -- sorry about the spelling there, needs to be handled. And today, 5 years ago or even 15 years ago I would say, there was like 5 different mutations and most people had it in the head. Now it's thousands. No doctors can have it in the head, and you need to handle that. The proportion of cancer that require genomic analysis is increasing. Now I need speed up here. I'll talk too much. Workflow of genomics is closely, closely related to pathology. It's molecular pathology and the pathologies use some cancers to genomic and analysis. It's increasingly complex. More and more mutations. No one can have it in the head. And it's a huge growth. It's time and it's been done with research tools before. It has to become industrialized, and that's where we come in. That's where we come in. We are a production company. We oriented powers clinical production in health care. Industrialization is a very good thing. Sounds cool and cold, is not? Is repeatable, high quality at a low price. That's industrial. And genomics now is in a phase where research has to be obsoleted and you're needing industrialization in the process. So what we do in genomics, we built -- we saw this coming 5, 6 years ago. We began recruiting bioinformatics. It's a special kind of IT in between biology and informatics. And they are educating different parts and be mostly hired by the pharma companies. But we build staff and knowledge over 4 years. We look for our customer. And all of a sudden, in the University of Pennsylvala, one of the most famous university is all the United States, they have an incredible explosion of a genomic analysis. They built a home build system, but it was not industrialized. It was not in production system. They came to us. They are a radiology customer. They will become a pathology customer. Already got the orders, not implemented yet. They wanted also genomics. And now we had a paying customer, and then it's when we act. We don't want to do things on our own. We too often make something completely useless. If we do that, we need a customer with us in the boat. It has potential to significantly improve cancer care because the speed is also in essence. Now cancers are not still. Plan to go live. We have a product together with them, then we'll take it into clinical use when we're done, and the plan is to have it available for them to use in 2024. And then we have an extremely interesting situation, one of the most prominent universities or hospital in the world working with the system, and they know what they want because they build something in before. Massive interest from the market. Fascinating, when we made the press release, we don't have a product yet. We are developing it right now. But we have a very large interest for it. And this is a picture of the university, Pennsylvania in Philadelphia. This effort have built themselves. Very good, well done. But in an environment that is not really organic. There's no service people, is a system by bill, if bill quits. Well, it's a problem of university, and they know that. But they know what they want to have. So we need to make that into a live reputable normal serviceable product, working closely with our other systems in cancer care. Current situation is a good solution, poor integration with other IT systems, lack of review in the sequencing lab. Hard to find all testing results, limited access to multi-structured information. It's a myriad of mixed system. They're using all the different sequencing equipment and stuff that is equivalent to the X-ray machines in [ PACS ], but they're not connected. It takes too much excel to move things in between. And the growth of their number of exams is 30% a year. They had to solve it, and they came to us. Current solution is great. It's homebrewed, but it's homebrewed. Depending on people, no formal service, lack of security, audit tracking things that are needed in clinical systems. We are building it, but we have complete to build towers is what they need and develop the needs. [ PolyVision ] is -- have an integrated pathologist workflow, completely integrating pathology that we have already in many places. And the new business innovation department, we built, we started partner because the growth and the need was so large. We have 3 PhDs in bio genetics that we hired over the last years. 1 PhD student, 4 developers is led by Fredrik Lysholm, PhD in bioinformatics himself. Also a very good programmer, which is a nice combination to have. And the goal, of course, is a clinical product ready by spring '24, highly efficient workflows to cope with incredible growth of need in the hospital's integrated diagnostics and tumor board, which is where you take decisions on cancer these days. And scalable a number of examples, a number of variants that's all the mutations you need to keep track of, and the number of hospitals and the partner work together. So it's similar to what we do in PACS, but for genomics now. It's a huge potential going forward. But, again, the -- it might fail. Sometimes it fails on these areas, but sometimes they go very well. And we are enough with 1 out of 5 of these tests to go well, but this looks promising. The average growth in genomics that we estimate right now from the market is 90% annual. I would just mention what we do in research at the very end of this. These are different I showed that before. These are our greenhouse products. Some of them fail. We had a wonderful product for osteoporosis. Probably one of the best ideas we ever had. We had to shut it down. It was impossible to sell it. We have digital pathology came from research. We have education, who came from PhD dissertation, that our research may did from the beginning for very fast visualization. We have orthopedics, IT, et cetera, and research -- our research people is now 8 people. They work closely with our other business lines. As I said, education came from there. Orthopedics have all the time interaction with research. Imaging IT pathology came from there. We moved and we spun off mammography to -- with solar to Philips actually. So this is what we do in research. It's very closely related to genomics IT, who came up there as well. So that concludes the report.

Excellent. Thank you. At this point, I will ask Gustaf if you want to reenter the stage, and I'll open up the room for questions about our business innovation operations.

This is first about the medical education. In my day, we launched surgery on the patients going and working along, so to speak, which is -- not over that's satisfactory. Now I'm convinced that your devices are excellent, but you need them enthusiastic educationer that cease to that, this are utilized in a good fashion. How do you go about to see that?

So I would say you're absolutely right. I mean, in often cases, it's a quite conservative user group. Professors of the university are not always the ones that jump on board with the latest and greatest amongst the first. So that's very true. At the same time, I would say that that's one our key focus areas to make it exciting for all the different user types we have. I mentioned the students before being an important user group for us because when the students start to demand these types of tools, which has happened amongst a number of our different customers, they have pushed the decision-makers of the university to invest on our tools for their use, even sidestepping or bypassing the educators. So I would agree with you that in the general scenario, we need to convince all of them. We do that by making the tools easy to use and really clear in how they provide value and make the lives of the teachers easier. But we've also examples where we have necessarily not been able to commit with the educators, but have been able to convinced the students that, in turn, have made our products get a foothold in the university. So I would say we can work on multiple fronts with that sort of movement towards our software.

And then one question on genomics. I'm not quite sure I understand what you do. I suppose that you are not doing the DNA or RNA analysis, you are putting together the data that someone else gathered -- mixed up or gathered. Is that it?

We do the selection first. Integrated with pathologists. You can tell what part of the slide is going to be sequenced. You don't sequence every slide, it's the tumor sensible sequence. How many of these you said to DNA sequencing? Then it's done by some other companies' equipment. It's very similar to radiology in that aspect. We take care of the data. We also have interface to the databases. There's 1,700 current images they keep track of. And that depend -- influence medication or treatment in adjusting them, is too much to have in your head. We have interest in the databases. We present the mutations on the tumor Board as a decision tool for the tumor Board is a lot of different doctors sitting together deciding about treatment, and we can assemble and make the information readily available for that tumor board. So we keep track of images, which is -- and it's too much to handle manually on small notes, et cetera today.

One question to each of you, actually. So I'll start with Gustaf. Is it possible to give a figure for your penetration of this solution for the current pack users today? And if they don't use the Sectra product or a competing available products?

Sure. I mean, in general, what I can say is when we are selling packs today, and we do have an orthopedic department. It makes so much sense to have an integrated system in the workflow. And now also, as I've mentioned, the solutions for the MSK radiologist is the same patients to have that on the same platform makes a lot of sense, which gives us a unique position, a unique selling point, so to speak. There are other manufacturers of preoperative planning software out there. We, of course, consider ourselves to be innovative and technology leaders in this space. And also by having this combined and bundled solution, we see a great competitive advantage.

But it's not used, I guess, by all orthopedic departments that have Sectra packs today. What's the reason for not using it? They want to do it manually or I don't know?

It could be legacy that they have been using previous systems or still are. We see alot of replacement of those. And we're certainly growing our presence.

Okay. And therefore, you won -- you showed the slide of recurring revenue. How much of your sales is recurring today? Is that all of it or is recurring a smaller part of?

It's definitely growing to become the majority of our business, but it came from a lower level a few years ago, but it is definitely going to be the main business, the main part of the sale.

Percentage?

I don't know. Do we disclose that?

Probably, we shouldn't. It's a significant part and is growing, and we haven't disclosed the percentage. We can't do it either.

And you showed those different customer groups. Is it even split between these 3 or what of the bigger?

I would say that the core of our installed base resides in the medical universities today and the simulation centers. I would say that we see a lot of untapped potential in the more hospital close education. So that's what I said in the end there. That's where I see we have a lot of room to grow, but most of our installed base today are in the university setting.

And then for the genomics IT projects. Are you ever of any competing similar type of projects out there?

No one that came to pathology. We are -- we became a thought leader in the cancer diagnosis field. We invited to scientific meetings to present what we do. There's no one who do digital pathology and radiology and also genomics in the same system today, not even radiology and pathology in the same systems. We have been reselling both, but then it's two systems, and that's not good for us. Now genomics were allowed. There are a lot of people, a lot of pharma companies and medical equipment companies like Roche and these people, they want to do it, but they're not IT companies. And they do not have different pathology in the same system. We are workflow. We're industry-oriented. We need to prove to the customer they become more efficient because they need to do more and more with the doctors they have. They cannot find doctors, and that's where we offer. And right now, there's no one else.