Okay. Good morning, everyone. Welcome to Bittium Corporation First Half 2022 Review Meeting. My name is Hannu Huttunen. I'm the Bittium CEO, and with me here today I have Mr. Pekka Kunnari, the company CFO. Contents for the meeting today as shown here. First, I will go through the highlights for the Bittium from the second quarter of the year. Pekka will discuss about the numbers during the quarter and also the whole first half of the 2022, and then I'll get back to take a look about the outlook for the rest of the year and the whole year 2022. If we start from the Defense & Security side of Bittium’s business portfolio , tactical communications.
Generally speaking, the unfortunate Russian invasion of Ukraine has led many, especially European, countries and governments to analyze and think about their capabilities when it comes to defending their countries, and as we have seen from quite a few countries that have already decided that they will increase their budgets for the defense. For us, this will mean that this will enable several countries to start their modernization programs for the tactical communication systems and devices.
We have already seen quite a lot of requests or information requests from the customers, and we will participate to the several RFQ processes for this year and coming year from many countries. Another interesting or important point from our point of view is Finland's decision to join the NATO alliance. If and when Finland will reach the full membership of NATO, this will open Finland and also Finnish companies access to the parts of technology, namely cryptography, for example, that are available only for the companies operating in the NATO countries.
We see that this will enforce our competitive position in some of these coming RFQ processes, namely in the, of course, NATO countries and European NATO countries. We generally speaking the market is clearly speeding up here in the tactical communication side. This does not mean that that these will be orders immediately, but this means that these processes starting from the requests for information, RFQs, pilot trials and finally the decisions to buy the production systems are now starting and we will see the these processes to realize as an orders from somebody. Of course, we want to win as many as possible of those in the coming, let's say, two to three years.
If you take a look at the first half of the year, second quarter of the year, our capability to deliver our products was still quite heavily restricted by our capability to purchase components, namely semiconductor components. Situation in the semiconductor market remained quite challenging during the first half of the year, and we expect that the challenging situation in that market to continue at least during the rest of the year. Maybe some point of time in the next year, there would be a balance in the supply and demand of semiconductors and situation would start to normalize from that point of view.
It's expected that this access to the components needed in the production of our products will remain challenging during the whole this year. In the product offering side, we introduced to the market our new field phone, so new really modern digital field phone for that market segment. In the domestic defense market, we continued our excellent cooperation with the Finnish Defence Forces. Finnish Defence Forces continued the work to enable the operational usage of our new SDR radios, handheld and vehicular radios. They also ordered a narrow band waveform development to complete the waveform portfolio or capabilities of these new products. We also received several orders from.
Based on the frame agreements that we have with the Finnish Defence Forces for our TAC WIN and Comnode products, and also got a order for the development of the next software version to the TAC WIN system. Generally, we were able to grow our service business in the defense market, meaning that we were developing AI features to the specific customer needs, getting AI, of course, revenue from that and margin from that, but also in the same time, utilizing this customer financing to improve the competitiveness of a product. Getting new features to the production systems in the by using customer funding. Good progress in that area.
In the international defense markets, we continued deliveries to our two current biggest outside Finland customers, Austria and Estonia. We also delivered several systems to the weapon system manufacturers or sensor system manufacturers. Big international companies that are providing such solutions to their customers that are using our products as a communication solution in a part of their system. For example, in the air defense systems, you need to have an efficient and a robust and data capable way of transferring data from sensor to the weapon itself. Our current technology offering is very competitive for such solutions, right?
Our hardware and our tactical waveform, we believe that we are really there in the leading edge when it comes to capabilities of data transfer capabilities in the tactical systems. Now, when we reached like a first phase of readiness there with our new SDR radios, handheld and vehicular radios, now we have also been able to start several pilots in several countries with these new products. These are important first steps in this process to finally get into volume production and volume sales phase. That's a good achievement and implementation of our strategy that we now have been able to start those long processes that finally will lead to the decision to purchase the products and systems.
Also important milestone achieved here in the tactical communication area was ESSOR Waveform joint testing happened in June with our ESSOR partners, where this new version of ESSOR Waveform, which is really the first one that this is truly operational capable, really can be used there in the battlefield, was introduced and tested together with the partners and this test went very well. ESSOR starts to be ready to be taken into real use. In the secure communication side, this unfortunate situation in the world where situation is quite tense and a lot of hostile activities is happening clearly has an impact also for the cybersecurity side.
More and more governments in the different countries are focusing also on the cybersecurity capabilities there in the mobile communications. Typically today, you have this highly secure communications, fixed lines, but at the same time, more and more communication is happening there in the mobile networks and as we have seen good examples in the world, for example, different kind of malware like Pegasus that there are a lot of vulnerabilities in the modern high smartphone-based communications. Demand for truly secure smartphone-based communication clearly is growing and during the quarter and the first half, we were able to start quite a few new pilots and trials and first implementations with the several countries and with the new customers.
Of course, in the first phase, the volumes are not really big in this first implementations, but they are like a good ground to grow the business in the longer run. More and more users to the secure communication systems, it means that we will be able to grow our volumes and sales in there. What comes to offering there in the Bittium Tough Mobile 2 secure communication side, we introduced this kind of tactical version of our Bittium Tough Mobile 2 product to the marketplace, meaning that mechanically this has been hardened by using accessories that is really meant for the battlefield. Really robust mechanical solution and then easy to use for the soldier.
What does this soldier do with the product is that it's like a user interface and display for the situational awareness and battle management systems that are run there in the phone AI system or memory. In the same time, the phones in this tactical mode are connected to the tactical radio, meaning that you can use this tactical radio provided by Bittium or some other tactical radio vendor can be then used as a data transfer to deliver the data needed for this battle management or situational awareness systems.
At the same time, of course, if the mobile networks are available, you can also use the terminal as an additional way to connect to the tactical network by using commercial like LTE, 4G connections if they are available, utilizing our secure data transfer technologies and softwares in there. Medical technology side of the business. In the early phases of the COVID pandemic, we saw that there was an impact to the medical technology product market also, so that healthcare organizations were so much focusing for taking care about the COVID patients that even the other critical health problems were not focused too much. That's clearly over.
At least in the current pandemic situation, let's hope that it will not get any worse. We don't see such restrictions in the market anymore, but market is proceeding quite well and demand is again there. We have several products there in the process to get this new European Union Medical Device Regulation-based approval or certificate. We already have been able to verify that our organization and processes are fulfilling all the requirements caused by this new regulation, and we are expecting that we would get a certificate for our new sleep apnea Bittium Respiro analysis product and software solution still during this year.
We are not far away anymore from getting this approval and starting the deliveries and business with this new business area for our medical business. At the same time, we have already started to get the approval, also the FDA approval for the U.S. market and we believe that we would be able to get the FDA approval roughly in the same pace as we expect to get this MDR approval. Also we should be able to start the sales and business development of Bittium Respiro products in U.S. still during this year. Demand for our Bittium Faros ECG devices was good during the first half of the year.
Still our delivery volume was somewhat restricted because of the component availability. During the first quarter, we were not able to deliver too much of these Faros products and then second quarter was clearly better, but not still yet all the needed volumes we were not able to produce. Still there in that business area, the most important biggest customer was this U.S.-based Preventice Solutions, today owned by Boston Scientific Corporation. In the offering side there in the medical technology business area, we launched to the market our new Bittium Faros 180L product, meaning that they this product is capable to acquire full heart data for the 14 days without recharging.
This kind of very difficult to find a heart problems that require really long time measurements, special device for that, and good feedback from the market. The EEG side of our business was clearly most impacted by the COVID pandemic because the first application area in there is focused to the intensive care units, and intensive care units have been pretty much occupied and focusing to the COVID patients. Now let's say that as we see is the situation starts to be quite normal also in there, and we've been able to proceed with the pilots and trials in there and start to develop that business also. R&D services side of the business.
Also in there we had some challenges during the pandemic times to acquire new customers because typically this is a trust business. When you have some really important product that you want to develop and bring to your customer, who do you rely to be your partner to develop this such a solution? You want to meet the people, you want to see the capabilities, products, et cetera. If that's forbidden, it's very difficult to open new customerships. Now it's okay in there. Now it's normal. Our sales and business development people have been able to travel and meet the customers, and customers have been able to travel here and see our technical teams and to be convinced by our capabilities in there.
This business starts to be in a quite normal mode. We saw growing demand of our R&D services there in the area of Open RAN, Open Radio Network Architecture Ecosystem, this new like low orbit satellite systems and basically all the embedded products where wireless connectivity is needed. If you think about 5G, what's that enabling? It's not only having a faster data connectivity to your phone, but it means that it will enable all kinds of things to be connected to the cloud and digitalized that have not been possible with the earlier technologies.
It means that you need to integrate this wireless connectivity to really new product areas and our strong competencies to develop such embedded devices where wireless connectivity is connected or integrated. I am pretty convinced that there will be a good demand for our R&D services also in the future. To improve our competitiveness there, we introduced our new like platform, cellular IoT solution, so basically technology parts or components that we have developed in our product business area enabling this kind of IoT LTE-M-based connectivity to be integrated to customer products or systems faster and cheaper because we already have ready parts of technology in our portfolio that we can offer improving our competitiveness in such cases.
Well, if the product business side in our business is today restricted by availability of the components, then this R&D business is clearly suffering the availability of the professionals. So the employee market continues to be really tight, and competition for the talent continues to be really tight. So this is clearly limiting and will limit our capability to grow in this area that how much talent we can and how many new employees we can get to the company. Right. I will now hand over to Pekka. Thanks.
Thank you, Hannu. Let's look at our financial numbers for second quarter and first half of this year. Let's start with quarterly development of net sales. Our net sales for second quarter was totaling roughly EUR 23 million, and it was right at the same level as it was one year ago. As we can see here in the graph, first quarter, we made EUR 8.0 Million this year and now EUR 23 million, so there is a growing trend. Roughly 70% of total net sales was Product-based, totaling roughly EUR 60 million. Half of that, roughly half of that was medical technology related products and rest was the defense and security products.
Especially that medical technology product net sales was strong for second quarter, EUR 7.7 million. It roughly doubled since this first quarter this year and it was higher, also compared to last year. One reason for this strong second quarter for medical technology net sales was that during first quarter we had shortage of components, and we were not able to deliver so much products as we had planned. Partially, our manufacturing lines was stopped and during second quarter, we were able to start those lines again, and then we were able to deliver also those products which was originally planned to deliver to customers during first quarter. Defense and security products declined.
It was roughly EUR 8.0 Million during second quarter as it was EUR 11 million in the last year. There is one matter is this shortage of components, but also another matter is the timing of the deliveries of the products which varying between quarters. Service-based net sales was roughly EUR 7 million, and roughly four, maybe less than EUR 4 million of that was Connectivity Solutions, R&D services, which remained at the same level as the last year. The rest is mainly defense and security related services as Hannu mentioned earlier, and it grew during this quarter. Let's look then the net sales for first half. The total net sales was roughly EUR 41 million, and it grew 3.4%.
Two-thirds of that was Product-based net sales, totaling EUR 27 million. There the medical technology products declined compared to last year, but at the same time, defense and security products increased. Service-based net sales was roughly EUR 14 million and again, there the Connectivity Solutions net sales remain quite same, at the same level as it was last year. It was EUR 8.0 million for the first half of this year and again, there is a defense and security-related services which grew. Operating result for second quarter, the total was operating profit EUR 0.8 million, 3.5% of net sales. It was quite at the same level as it was one year ago.
This covered not even, but quite close to operating loss, which we made during the first quarter this year. Totaling the first half, operating result was negative. We made that it stayed near the loss side, so operating loss was roughly EUR 0.2 million. Anyhow, it was better than it was the last year when it was -EUR 0.7 million. The net sales increased, and we earned bit more gross margin, of course, of that. At the same time, our costs of R&D activities increased because we capitalized less development costs during first half as we did last year.
During this first half, we capitalized EUR 3.0 Million as we made EUR 4.4 million capitalization during last year. EUR 1.4 million were more costs. Taking care, taking that, noticing that amount, it was good progress there that operating result was better during the first half as it was one year ago. Okay, this R&D investments, I said about this capitalization to total. Total R&D investments were roughly EUR 11 million, representing 27% of net sales. Both numbers, this ratio and this absolute euro amount was at the same level as it was last year.
We have started to change our focus to development from defense and security products more to medical products, the end of last year, and that is also impacting the first half this year. The cash flow. The first half total cash flows was zero. Cash flow from operating activities was +EUR 6.0 Million, and there the net working capital remained at the same level as it was the end of last year. We invested EUR 3.7 million, and EUR 3.0 Million of that is capitalized development cost as said earlier. Financing activities was -EUR 2.3 million. It includes dividend contribution made in April, which was EUR 1.4 million.
The total is zero, as it was last year roughly minus EUR 6.0 Million. Good progress there also. Then our balance sheet, still strong, still stable over the past times. The total amount of the balance is roughly EUR 165 million. When we look the assets, roughly 50% of that are non-current and current are roughly 50%. Non-current assets are EUR 85 million and major item there is a development capitalizations totaling EUR 48 million. Current assets totaling roughly EUR 81 million and that it includes inventory roughly EUR 22 million. Trade and other receivables, roughly EUR 37 million. Our cash balance at the end of June was EUR 22 million.
On the other side of the balance sheet, equity and liabilities, equity ratio still very strong, so roughly 71%. Liability side, our interest-bearing debt about EUR 22 million, and it has remained stable as well. Net gearing ratio quite close to zero. Balance sheet is stable, as I said, and is still in strong shape. Okay, that's a very brief review for our numbers. Next, Hannu will tell about our outlook for current year. Hannu, please.
Thank you, Pekka. As said already, the component situation remains challenging still during the rest of the year. That causes really weak visibility to the second half and the whole year. There are also other, like, geopolitical risks that have increased, like inflation, problems in the logistic chains, et cetera, caused by the war and other issues. That may have an impact to Bittium also, but our main challenge clearly for the rest of the year is still the semiconductor market situation. As said, not too good visibility for the rest of the year.
However, our best forecast for the rest of the year is as such that we believe that our net sales will be roughly in the same level as it was in the previous year, so about EUR 87 million. Our operating profit, although as we see that third quarter of the year will be negative, we believe that the whole 2022 operating result or profit will be positive. This is the outlook for the rest of the year. Okay. Thank you for participating in the meeting. Have a nice rest of the day. Thanks.