Sure. Okay, good morning, and welcome all to the Q3 report for the 4C Group. I'm Magnus Bergquist, and I'm the CEO.
Yes, I'm Anders Nordgren, Group CFO here at 4C. We'll be presenting our solid Q3 figures later on in the presentation. Before we start, just want to highlight that we will end the session with a Q&A, so please add or submit your questions in the chat, and we'll pick them up when we move into that section.
Okay, next slide, Anders. I'd like to start by giving some key highlights of Q3. First of all, as Anders said, we are very pleased with the performance in Q3. Looking at the Q1 to Q3 net sales, we have achieved a growth of 36% with an EBIT of 14%. A key achievement has really been to, you know, our ability to increase our proportion of software revenue to 65% year to date, and Anders will, later in the presentation, come back with more financial details. Worth highlighting in Q3 is our ability to extend and grow our key programs within U.S. defense. Before I hand over to Anders for Q3 financial details, I'd like to highlight some examples of the solutions we provide and the societal impact they have.
As presented last time, we started 22 years ago with the idea to digitize training with the Swedish Armed Forces. It was always with the purpose to collect and analyze data, to reuse the information, to achieve, on the customer side, process improvements, increase efficiency, and lower cost. We've always focused on growth, and we have, you know, grown the company organically since the start, and over the last three years by 26% CAGR. Today, 70% of our revenue is coming from outside of the Nordic region. Over the years, we have developed our unique and integrated Exonaut software suite to support defense, public, corporate organizations in the areas of risk and crisis management, analytics, and training and exercising. See. If you go to the next slide, I'll show you some examples here in Q3.
For example, we have supported a global energy company conducting an exercise in managing a potential oil spill catastrophe. Here, Exonaut is used as the exercise and evaluation platform. It is so important for an organization to be prepared and to be able to manage a real incident, and this is where 4C and Exonaut makes a massive difference. Another more operational example of where we operate in managing a real crisis, in Q3, one of our customers, a global telecom operator, managed their incidents in Exonaut during Hurricane Ian, and that impacted their operations and all of their staff in Florida. Exonaut here gives the customer the ability to act based on an enhanced situational awareness.
Last but not least, in the, you know, troublesome world we're living, we support NATO nations on a daily basis, where they conduct joint exercises around the world to increase their readiness in the more and more insecure world. Our view is that the offering of 4C has never been more relevant and important. I hand over to you, Anders, for some more Q3 details.
Thank you for that, Magnus. Turning to the financial update for the third quarter, we saw stable organic growth in the quarter and reached net sales of SEK 81 million, corresponding to an FX-adjusted organic net sales growth of 16% compared to the same period last year, a healthy figure that we are very satisfied with. As a standalone quarter, the 16% is slightly below our financial target, but considering Q3 normally being weaker due to vacation impacts in the service business, we are pleased with what we have achieved during the third quarter. On a rolling 12-month basis, we have maintained a very strong FX-adjusted organic net sales growth of 51%.
We are currently delivering on this basis close to SEK 340 million now, something that can be compared to SEK 261 million end of last year, so we are continuing our growth journey, in other words. Looking at the right side of the slide, we see that our software revenues continue to grow at a steady pace and in line with our strategic direction, reaching 72% of net sales in the third quarter, which exceeds our midterm financial target of 70%. On a rolling 12-month basis, software revenues in relation to net sales continued to increase, reaching 66% end of the third quarter. The strong development comes from a very successful software quarter in all segments, but especially within our North America segment, where both new and ongoing projects were driving forces for a strong software quarter.
This ratio, which we have set up as a financial target has always been important for us and would provide us the necessary support to reach our profitability target mid-term. This is a relation that we are focusing and tracking very closely moving forward. Taking a closer look at our net sales, we achieved growth in all segments during the third quarter to the left of the slide. Growth in the North America segment is particularly strong, exceeding 40% on a rolling 12-month basis to SEK 142 million, driven by both new software contracts and the ongoing project together with U.S. Army. Our other two segments also had solid performances in Q3, something that is driven by continued high activities and demand within the markets, resulting in extended and new software contracts.
Looking at our verticals to the right, all verticals experienced solid growth in the third quarter. The defense segment showed the strongest growth, something that is heavily connected to the North America segment. It is also worth highlighting the corporate segment, which is growing rapidly, showing a net sales figure on a rolling 12-month basis of SEK 53 million now. Something that is in line with our direction and focus as we are investing heavily within this specific vertical. Looking at profitability, we maintain an adjusted EBIT margin of 19% on a rolling 12-month basis. This corresponds to SEK 65 million. Our adjusted EBIT in the third quarter amounted to SEK 14 million. The lower EBIT margin is mainly due to our expansion investments within sales, brand awareness and our geographical expansion.
As I or we mentioned in the Q2 report webcast, this is all in line with expectations and also in line with what we communicated during the listing process. We expect to continue to see margins below our financial target in the short term. In the midterm, however, these investments are expected to contribute to us reaching our set financial targets. Summarizing and taking a look at our KPIs for the quarter, we maintain a balanced financial position and a negative net debt ratio. That together with healthy levels of working capital, gives us confidence during this expansion phase we currently are navigating through. Our annual recurring revenue amounted to almost SEK 100 million, an increase with SEK 1 million compared to the same period the previous year.
Worth mentioning is what we also said in the presentation of our Q2 report, our recurring revenues are not growing as rapidly as our top line, primarily because of the ongoing projects in North America. Projects that during 2023 are expected to generate recurring revenue and will have significant positive impact on this specific KPI. As we have seen on previous slides, we have solid figures for growth in all segments and verticals. We exceed our target for software revenues in relation to net sales in the third quarter, and we continue to move towards our target on a rolling twelve-month basis, and we maintain solid profitability despite short-term negative effects due to expansion investments.
Okay, Anders, thank you. Short summary. First of all, we are very pleased with our financial performance, where we see growth in all areas. We're especially glad to see the increasing number of new software customers giving us a solid increased proportion of software revenue. This is a strong contributor in our ability of reaching the financial targets that Anders referred to, 20% growth, 20% EBIT margin, and then the 70% proportion of software sales. If we look a little bit into the future where, you know, where we are investing according to plan to support the future growth, I'd like to mention and detail a couple. First of all, we're expanding our sales force in all existing regions, with, for example, a new sales team in Australia that was announced last quarter.
We're also investing in new sales teams in Norway and Finland, and we're planning now for a non-military sales team in North America to support the increasing demand in the corporate and public sector. Also as communicated during the listing process, one very, very important area in 4C is that we are increasing the investments in brand recognition. You know, as examples, we have participated in US Army's AUSA Convention. Down in Australia, the Land Forces in Brisbane, and last week, the BCI World in London. We're currently planning for a multi-channel branding increase during Q4 and well into 2023. We know and, we believe that this is instrumental for future growth. Finally, our R&D, our development.
To extend our Exonaut offering and to continue the tech transformation, we have since early 2021, grown our Exonaut team by 65%, counting FTEs. We've also managed to expand our tech teams globally in our dev teams, dev hubs in Sweden, U.K., and North America. Currently, we're also evaluating new tech hubs to support growth. We will continue to invest and grow our R&D, however, not at the same pace. By that, I hope you are as excited as we are. Let's see if we have any questions in the chat. So far, no questions.
No, I can't see any.
Okay
I think we receive one now. Can you open it up, please? The question is from Albin Melion: "What's your estimated growth after the midterm?
Well, we have not set that financial target out. When we talk about midterm three to five years.
Yeah
We estimate the +20% and, you know, that's as long as the board and, the company has decided. We will come back with more details on how we see the long-term potential growth.
Yeah. I think we have another one as well. It's from Anders Björkstål: "Can you share what the bad debt of SEK 3.4 million was?" In the Q3 report, we highlighted that we made a provision for a bad debt that relates to a client in Middle East.
Yes. Okay. Well, I don't think we have any more questions coming in, so.
No, I can't see at least. If you have any questions afterwards, feel free to reach out.
Book a meeting with us.
Yeah
that many also have done.
Yeah
By that, we conclude the Q3 webinar.
Mm-hmm
Have a great day out there. Thank you.
Thank you.