Good morning and welcome to our Clavister Q1 Interim Report presentation. My name is Aurore Gautheur, and I will be your host for today's session. Presenting the report today are John Vestberg, Clavister CEO, and David Nordström, Clavister CFO. We will start today's session with the presentation of the Q1 report, and then we will have a time for Q&A. Please use the Q&A box to submit your questions throughout the presentation, and we will get to them towards the end. Now, without further delay, I would like to hand over to you, John, for the presentation.
Thank you very much, Aurore, and again, welcome. As usual, starting with a quick summary of the quarter of Q1, taking a bit of an outlook first into the geopolitical situation, not dwelling into it too much, but it is a very important point that I think sets the narrative for both current but definitely future growth of Clavister. I mean, obviously, it's no news. We have wars raging close to our borders. We have all the hybrid warfare going on. We see attacks on critical infrastructure, on energy grids, on the financial systems. Just the other week, we had a blackout of the Swedish bank ID system as one example.
What might be less obvious, but for us in the industry, it's very obvious these days seeing a strong pro-European agenda driven by political leaders in Europe, by business leaders, with the narrative to drive a European digital sovereignty. In other words, having less dependency on American, Israeli, and other countries' technologies. Naturally, as a cybersecurity company, this is good news. I mean, the reasons are perhaps not good given what's happening in the world, but the consequences for European industry are good, especially in the cybersecurity industry. We see examples happening all day long now with companies driving anti-American technology agendas, looking at European alternatives to American cybersecurity products. I think we've been quite clear in previous communication that the good news is that there are not too many European cybersecurity vendors with the type of portfolio that Clavister has.
The bulk of the ecosystem is US-based vendors. That is good news, even though the circumstances are dire. If we look at some numbers, we saw a really, really strong order intake growth in the quarter, 190% growth. Of course, a key part of this is additional defense orders, but there is more as well, which David will dwell into a bit later. If we look at net sales, we reached SEK 53 million of net sales in the quarter. That corresponds to 21% growth, even in the current very interesting currency effect situation that we have, which also David will come back to. Strong net sales growth. Altogether, we then have an order book of SEK 356 million. If you recall from the previous quarter, we closed exactly at SEK 300 million. Now we increased the order book quite significantly.
At the end of the quarter, we closed the Series 9 warrant exercise with a fantastic outcome, 98.9% exercise rate, which is slightly higher than even the Series 8, which was good. That adds good cash to Clavister and allows us to further reduce our debt levels, which is exactly according to the plan. Moving ahead to some of the key events and key business details in the quarter. One very important aspect of the quarter was the growth of deliveries in hardware products or hardware units. We saw actually 111% year-on-year growth of shipments. That is probably the highest growth we have in shipments. What is important here is that this is typically sort of a two-step process. The first step is delivery of hardware. The second step is the activation of software running on that hardware.
Every device, every hardware unit we ship is typically, there are some few exceptions, but typically, every hardware consists of or carries a Clavister software license. As a consequence of this, when the products reach the end customer, when they get deployed, when they get registered, when they get started, that also triggers the start of a recurring software license revenue. All of these deliveries happening in Q1 set the tone for upcoming software subscription license revenues going forward. That is a very, very important message. We have communicated before as well that given that we take the full cost of the hardware directly at delivery, when we have this high growth of deliveries, it also pushes gross margin slightly, and that is temporary. Despite these high volumes, we are proud of maintaining a solid gross margin, 75%.
It's a few percentage points lower than our average target of 80%, but it shows or it demonstrates that the gross margin is really resilient despite these really, really high volumes of hardware. That's one of the key messages from the quarter. If we look at some of the main events, some of the selected events, in the defense sector, we had the opportunity to be selected as a supplier to a new defense customer, a major European defense company. Drawback working in this industry is that we cannot disclose names typically. Anyway, this customer is a completely new defense customer to Clavister, so it adds to the overall portfolio that had started with BAE Systems and getting complemented with more customers as we go. This customer or this company produces a range of different defense systems that are used by over 100 armed forces worldwide.
It is a well-established industry, well-established company. In one of the new systems they have designed for some years now, they have then selected Clavister to be integrated as a cybersecurity component in this new system. The interesting thing, and I think we have alluded to that in previous calls, that in the defense systems, even though the lead time to getting from initial contact to order is long, typically several years, once we are in these systems, we are sticky for a very long time. This specific system has an expected lifetime, as communicated to us by the customer, for over 20 years. This means that as long as we play our cards correctly, we will likely see revenues coming from this customer for 20 years.
If we look at BAE Systems, still within the defense sector then, of course, we were able to close a new contract for the CV90 infantry fighting vehicle, delivering our Cyber Armor product family to yet another European nation that are deploying CV90s. This time, the contract is worth SEK 68 million and has an option as well to grow the contract potentially then to SEK 96 million. Quite a significant order in the CV90 family. The contract spans over three years. Series deliveries are planned to start early 2027 and then continue for three years. With this, we have now established a footprint where our products are being used by not less than seven different nations using the CV90 platform. That is fantastic. That is really good.
Worth to remember still is that if you look at our P&L, there is still only one nation that has an impact on revenue and earnings, which is the contract that we signed in 2021 that we are in series deliveries on at the moment. Additional contracts that we have signed, they will start providing revenue support from the second half, from late 2025, essentially. The bulk of revenue coming from the contract base will start 2026 and span over three-four years. If we look at the civilian side of things, we were able to sign a contract with what we refer to as a global technology provider. It is a company that delivers real estate technical solutions or technology to the commercial real estate industry. They needed a solution to basically overall increase the cybersecurity footprint across their infrastructure.
They had evaluated a number of vendors for a while, including American vendors, and eventually decided to go with Clavister, which we were, of course, really happy with. The first contract we signed with them spans at or is valued at approximately SEK 15 million, and we have already started on delivering on that. We also announced quite recently an interesting collaboration with NXP Semiconductors. If you're not familiar with NXP, they are a well-established leader in electronics. They build CPUs or controlling units and so forth for the automotive sector specifically. There is, since a while back, perhaps a couple of years back, there is a UN directive, a UN resolution that mandates civilian car manufacturers to integrate technical solutions for cybersecurity in cars, in civilian cars.
Even though Clavister has specifically not indicated or not selected the civilian car industry or the automotive industry as a target vertical, we are still, of course, exploring these types of collaborations where partners can bring our technology into other segments. In this case, what NXP is doing, they are integrating our AI component or AI technology into one of their CPU platforms. By doing that, we, together with NXP, are able then to basically push the narrative to the automotive industry. The demand is there, obviously, due to the UN resolution, but able to demonstrate to the industry that here is a perfect example of technology that runs on well-established electronics components, being able to provide the level of security and the type of security that is required by regulations. Super interesting collaboration. Of course, it's a bit on the technology edge.
It is more research than commercial, but definitely driving an agenda and sets the tone and spreads the Clavister brand where we need it. Moving then to David and walking us through the numbers a bit more.
Yeah. Thank you, John. So we start with order intake. As John said previously in the presentation, we see 190% growth of order intake for the first quarter. Definitely, the large BAE Systems order is, of course, very important to land in this large growth, but we've also been seeing a very good momentum and strong growth in our civilian firewall business. These two are leading the order intake growth in the quarter. Looking at the order intake trend, we see that we will land on yet again above SEK 300 million over the trailing 12 months. That is also, of course, very positive.
Net sales-wise, we see that we have been able to translate quite a lot of the order intake in the period and also deliveries from the order book we had in Q4 to deliveries in Q1. We have quite a big impact on FX effects, as you know, with quite a lot of turmoil on the currency market. The SEK has improved quite substantially versus both the EUR and the USD during the quarter. Since roughly half of Clavister's sales comes from EUR and USD, mainly EUR, this, of course, has a negative impact on our net sales. If you look at FX adjusted net sales, that lands on 24%, so well above our target. However, as said before, when we're tracking net sales growth performance, we do that on reported numbers. 21% growth then, but with big FX impacts.
The biggest driver here is a good momentum in the civilian firewall business. I mean, we have seen good growth with the focus we're having, and then clearly the geopolitical risk that we're currently seeing in a narrative where more and more companies, government agencies, and so forth are looking for European solutions to protect their cybersecurity. That has a positive impact. I think the majority of that impact is in front of us, but we see some impact on sales already in Q1 from the new administration in the U.S. ARR-wise, we continue the growth trend with an 8% increase in ARR. However, it is clearly then a decline from Q4 2024. Why is that then? Those who have been with us for some time might remember that we did a very big overhaul of our entire financial and our sales model back in 2021.
We moved from contracts with more of perpetual parts in them to a new subscription-based model. When we did that, we end of life announced those product lineups three years ago. They were possible to renew for the coming three years up until January 1, 2025. The absolute majority of the contracts we had back in that day has, of course, been transferred to the new business models. However, not everything, especially what is churning here is a larger volume of many small contracts, contracts where we do not have a direct engagement relationship with the end customer. It might be many small SMBs, and they are not very close to the reseller either. Many of them might not even know they have a firewall. That is what constitutes the churn base. It is a one-off effect attributed to the product lifecycle decision three years ago.
This has nothing to do with us trending downwards when it comes to ARR, but it's an impact isolated in Q1. Gross profit-wise, we grew net sales with 21%. Gross profit is growing with 12%. There is a gross margin impact here. We have increased hardware sales substantially in Q1, and of course, that comes with an impact on gross margins. I would say with that high growth, we're quite pleased with maintaining such a strong gross margin of 75% with much more hardware in the sales mix. As you know, Clavister is typically definitely in the civilian firewall market, also in defense, but generally, we are leading with hardware. When we establish new contracts, there is, in most cases, a hardware element associated with it. Day one, there will be a hardware, a hardware revenue, and a COGS element.
Day two, it will only be a recurring software component. That comes with that impact. We can say during this quarter, civilian firewall sales have been very strong. That is weighing heavily in the sales mix. Hence, there is a little bit more hardware in the sales mix than landing on a 75% gross margin. That, in turn, we are looking at operating leverage. As we said during a later part of 2024, we see that there is a good market opportunity for Clavister. The Trump administration with increased geopolitical risk has made that, I would say, market opportunity for Clavister even better. We have been saying for some time that we see that we come from a trend of lowering cost, holding cost, but now gradually with control, increasing cost because there is a good market for us.
These cost increases are in line with our plan, mainly constitute investments in sales and marketing and some increased R&D capacity for us to be able to utilize the market potential we see. That is the main reason for somewhat increasing OpEx. EBITDA then, of course, the combination of good growth, but with a gross margin impact driven by mixed factors in Q1 together with larger OpEx investments, we have a somewhat impact on EBITDA in this quarter. It is not large, but of course, it is a setback, but mainly driven, I would say, by the mixed factors in sales where I think the gross margin will likely be higher in coming periods, but still supported from good net sales. I would say OpEx is definitely under control, but some EBITDA and hence also EBIT impact in the quarter.
For the financial ambitions and current performance, sales CAGR will be at or over 20%, landing on 21% despite big FX headwinds. Gross margin, not reaching the 80% mark for this quarter, but I think there will be other quarters this year where we will have more margin support. EBITDA at or above 20%, so far reaching 13%. That is a little bit below, but I think there is a lot of things indicating from our perspective a good potential to come in with a higher EBITDA performance in coming quarters. Operational cash flow, we see the improvements of the growing business in our cash flow. Both cash flow from before working capital changes have improved, and we have been very successful in improving the working capital in Q1. Clearly strengthening cash flows after working capital effect. That is in a good direction there.
Thank you, David.
Thank you.
And with that, back to you, Aurore, to set the stage for some Q&A.
Here I am. Yes, let's start with the questions then. Thank you for the presentation. Here we are. First question, how is the geopolitical situation affecting Clavister?
As I started mentioning, it sort of affects Clavister in many ways. I mean, I think everyone can conclude and realize that the practical effects of the ongoing wars increase defense budgets, increasing spending on cybersecurity in defense. I mean, obviously, that's a strong direct growth driver for our defense sales, even though some experts have actually claimed that the main impact is still to be seen from the Russian-Ukraine war. It hasn't really trickled down all the way to all the subcontractors yet. To be seen, but I think there is something to that.
If we look on the civilian side, we've been in a number of events and forums over the last months where the agenda is really, really clear. The narrative is clear. All the European nations are looking at agendas to maintain or increase, rather, to increase what is a bit sort of, in layman terms, referred to as digital sovereignty. What is that? Essentially, the ability for Europe to build an ecosystem of suppliers, technology that makes Europe less vulnerable to the geopolitical situation. I think everyone has been aware of the rumor on the market about the F-35 aircraft kill switch, where, I mean, the speculation is that if the U.S. government would like to shut down air forces of some European countries, they would essentially kill the operation of the F-35 aircrafts. Naturally, Lockheed Martin being the supplier, they, of course, deny this, naturally.
I think everyone realizes that a modern aircraft of that character is a super complex product, has a lot of software in it. If there is a government or legal decision that would prevent Lockheed Martin to provide upgrades or updates or defect fixes, that is essentially or implicitly, it is a kill switch. It's not really hard to translate that into the network security market. Given that a lot of European industries, European governments are protected by US-produced hardware products or devices or software, routers, switches, firewalls, access points, and so on, I think quite many IT managers, CIOs, and board members are having a hard time sleeping right now realizing that, well, my entire business could be shut off with one mouse click of the US administration.
I think our neighbors in Denmark have probably come the furthest in their thinking on this, and they realize that if the U.S. administration stops U.S. cloud services at 8:00, then Denmark will be shut down at 9:00. It is really that harsh. We see that with inflow of requests, inflow of asks from both customers and partners or prospect customers and partners that we never talked to before. They are approaching us now and looking for European alternatives. All in all, I think it's just the start of it. Even if there would be an administration change in the U.S. tomorrow, the lids are open. Now people have really started thinking about this, and there is no way back.
Yeah.
I'm going to add one comment here because I think clearly there was an understanding in the defense sector before Trump that there is an unhealthy dependency on the U.S. and a risk for espionage and so forth. We had a lot of good engagements in the defense sector for quite some time. I think adding what we're seeing based on kind of the level of what the Trump administration is doing is causing a situation where I think many people are offended, which means that there is not only kind of technical and logical reasons for talking to Clavister. I think there is quite a large amount of feelings-based arguments also that, okay, I want to buy a European solution.
I do not want to buy an American solution, which is kind of in a certain way distancing from what people, I think, and I think you might experience that yourself or in your relationships that this effect is actually happening. That also has a positive impact on our sales from that perspective.
Thank you. All right. Going back to the numbers, is it possible to quantify the % increase in ARR, sorry, from the 111% hardware deliveries? In which quarter will we see this?
Yeah, it is not super easy to say that it is a direct correlation between hardware volumes and ARR, but absolutely, this will have a positive ARR impact. The majority of that ARR impact will come in Q2.
Exactly how large it is, it's hard for me to quantify in this call, but it will be a positive effect, quite a clear one, and it will be majority in Q2.
Thank you. Can you elaborate a bit on the EIB loan repayment plans based on Series 9?
Yeah, I can take that one. As you know, in the prospectus, we said the net proceeds from Series 8 and Series 9 warrants will be used to downpay the EIB loan. That's the starting point. With Series 8, we did this. We repaid with EUR 4 million plus used EUR 2 million from our cash positions. We brought that down with EUR 6 million, targeting repayments with higher interest rates, but also repayments closer in time, leaving those further away in time.
With Series 9, we aim to also, okay, repay what's more closely here now in time to reduce potential pressure from repayments in the coming, say, two years to try, the aim to remove, in principle, all contracted repayments up until late 2027. That is an ongoing dialogue with EIB. During Series 8, we succeeded with EIB also waiving their rights to anti-dilution warrants on the Series 8 program. Of course, the ambition here, nothing guaranteed, but the ambition is, of course, to land on a similar setup with Series 9 that we repay EUR 5 million and that EIB waives their right to any anti-dilution warrants to that. That is not completed in any way, but that's, of course, being open with the ambition and to do this as soon as possible.
EIB is a quite large organization, and I foresee that ambition is to be done with this before summer, hopefully. That timeline is also highly in the hands of EIB, but that's our ambition.
Right. Thank you. On to the defense sector. Can you explain a bit more how the defense orders handle necessary software updates and support? Will there be any new revenues from this and when?
Yeah. Going back a little bit to what David mentioned earlier about the transition from perpetual license sales to more of recurring or subscription-based license sales, that is now dominating the majority of Clavister's sales, except for defense. Why is that? Defense is still a very traditional industry. It is an industry where digitalization is quite recent. The industry is used to purchase caterpillar rubber bands, engines, and so forth.
The maturity in purchasing software is, maybe not where it should be yet, but it's getting there. We, and I know the entire industry is pushing the defense industry towards more type of recurring term-based licensing. I'm sure we will get there one day, but it will take some time. In the meanwhile, we will have the more traditional perpetual sales of licenses and then support and maintenance contracts added on top of that or after that. As long as we are in serious deliveries of products to a contractor such as the system, all focus is on the perpetual licenses, getting the products delivered, getting the revenue recognition for those products. When serious deliveries end, then comes the next chapter, meaning support and maintenance and aftermarket, if you like. That will for sure bring some kind of support and maintenance revenue to Clavister.
Exactly the portion of that, the ratio compared to the perpetual sales will be case by case depending on the actual configuration, actual size of the project, and so on. Yes, there will definitely be support and maintenance revenue. It will start when serious deliveries are done.
All right. There are news that Lithuania and other Nordic countries might buy up to 1,000 CV90s. Could you maybe elaborate a bit on the CV90 pipeline, meaning what is roughly the order intake per vehicle for Clavister?
Yeah, I think the ones that have done their math looking at previous announced orders and previously announced order intake from those orders, and then looking at the amount of vehicles it corresponds to, can easily figure out that we're looking at roughly EUR 50,000 in revenue for Clavister per vehicle.
Typically, it depends a little bit on configuration and type of product and so on. That is sort of where it is. If we look at the pipeline going forward, to start with, I think we should be careful, of course, of speculating. So far, however, what has been rumored in media has become true. That has happened. Still, having some cautious about what is being speculated. When it comes to this Nordic country collaboration of a joint purchase, I think that will happen. Whether it will be 100, 500, or 1,000 CV90s, I do not want to speculate in that. It will probably be significant numbers, and I hope Clavister will be able to participate in that. It is still a little bit too early to see.
All right. We have seen the effects of the partnership with BAE. Will we also see the partnership with Thales develop further?
Yes, we will. I think in order to answer that question, a bit better than just saying yes, we need to take one step back and look at what are we as a supplier trying to achieve here. The overall cybersecurity spending in the defense sector is huge. We're looking at $70 billion in a few years from now. That covers the entire cybersecurity spending. That includes threat intelligence services, that includes data center security, and so on. If we look at the niche Clavister has selected, we are focusing on the tactical security within defense. Tactical in this case meaning equipment, vehicles, drones, aircraft, ships, et cetera. Equipment that are closer to the battlefield, if you like. That's tactical security.
We have set out an objective or a goal for ourself to be present with our technology, with our products in, without saying an exact number, but some dozen of defense platforms where the CV90 from BAE Systems would be one such platform. The new defense customer that we announced in this quarter represents another of those platforms. Since before, we have yet another. I would say we're established with commercial shipments with at least three defense platforms where the CV90 is one. CV90 is also the oldest, if you like. It is no surprise that we see the most orders, most revenue coming from that right now. Thales and their system, their SOTA system, would represent another of those platforms. The strategy is clear.
We would like to be integrated in as many of those systems as possible, but we have a clear target. We have come the furthest with BAE. We're making advancements with others as the one we announced this quarter. Thales is the one that we have announced previously. We're working actively with them to position technology, position their products together with ours on the market. I expect or hope that we will see a similar trend, keeping in mind that we're looking at different time windows here because we started so much earlier with BAE. The key for us here is to build a stack of these types of partnerships so they continue to overlap and grow in time.
Okay. I think maybe you have answered part of this at least.
Is it likely that other defense companies or businesses will have the same development as your business with BAE Systems? If so, what time will it take? I think maybe you—
Yeah, I think I've answered that partly. Just to complement that, if we look at some—I mean, of course, no deal is the other one alike. In general, if we would look at the typical lead time from the initial dialogue with a defense contractor, a defense system producer, until or through the process of validating technology, being through the legal frameworks, being through the procurement activities, that's quite an undertaking. We typically look at three years from initial contact to an order. From the order, we start—if there is hardware involved, of course, we start production. Otherwise, we can start shipping software more or less directly.
Then comes the serious deliveries, which might typically then span over three to four years. After that, the long aftermarket period in the contract we announced this quarter, we spoke about 20 years of expected lifetime. I mean, typically, an engagement would span 25 years. It means that we needed, and we have done that, we needed to start a number of initiatives already several years back to start getting sort of reaping the fruits of those initiatives now and in the near future.
Thank you. Someone has raised their hand in the audience, so we can maybe take a live question. I do not know how that will work. Can you open your microphone, maybe? Should be allowed to do it. Or was it an accidental hand raising?
It is Simon Jönsson at ABG.
Simon, did you do it by purpose, or did you accidentally raise your hand?
Oh, wait. I need to—maybe I can do this. Now you should be able to speak, Simon. No?
Hello? Can you hear me?
Yes. I had to enable your mic. Sorry about that.
Thank you. Hello, guys. On the defense area, just first on deliveries this year, could you maybe talk a bit about how you expect that the deliveries will be distributed for the year?
Overall, in general, we have a fairly even distribution of deliveries. You could expect more or less the same type of size of deliveries every quarter. There might be slight deviations, but it is fairly distributed by quarter.
Defense-wise, increasing from the second half of this year?
Yes. Yes, that is true.
If we look at sort of Q3, Q4 last year, Q1, Q2 this year, more or less the same, and then a slight ramp-up in Q3, Q4. Then additional contracts are kicking in.
All right. Got it. Thank you. I want to continue on the sort of potential future contracts you have with the current collaborations that have not really yielded any orders yet. On those sort of optionalities that you have, is it just lead times, or is there sort of competition for those potential orders? How should we view that?
The ones that we have announced, such as the one in this quarter, there is no competition on that. That is just pure lead time. Just to give you an example, the collaboration we announced or the contract we announced this quarter was initiated two and a half years back.
After maybe six months of initial collaboration, the customer went ahead and did proof of concept with the technology at the same time as they were completing their design of their new defense system. It is a new system we get integrated into. We have received initial orders on that for the initial proof of concepts and initial first system and so on. While we were in the evaluation phase, of course, there was competition. Now when we have been selected as a supplier, there is no competition. Any system they sell of that new kind will have Clavister integrated. That is done. It is only about the lead time for them to ramp up their production and deliveries on this new system.
Okay. Good to hear. David, on the cost side, we had increased OpEx.
I understand you need to have some investments in the sales organization here to scale up further. Is it fair that development costs and other costs should remain more stable in general? Do you expect to recruit more in the sales organization here this year?
Yeah. There were many questions in the same questions. I take them kind of by part. We have no cost increases in general administrative costs in Clavister. We're not recruiting more managers. We actually have ongoing initiatives to see, okay, how can we ensure that we are organized in such a way that when we're growing, we don't need to grow with that type of costs? Of course, in order to minimize OpEx impact. Yes, from a recruitment perspective, the majority is sales-related and marketing-related.
I mean, of course, the Clavister brand known is not that well known. Of course, it is something to be considerate about that, okay, we have a situation now where there is generally in Europe a big willingness to buy European rather than American. Then, of course, they need to know that there exists a great alternative in Sweden supplying firewalls made in Sweden for Europe. Of course, that generates more marketing costs than before. To be, of course, to have control over that, but that is still important. The same with sales. We have more leads. We have more potentials. If we would hold back too much on investing in the sales organization, yeah, that would in the short term boost EBITDA and EBIT. What about next year? I think that is trying to balance that.
Investments in the tech organization are relatively smaller, but there are some selected investments with, I would say, the same reasoning. We have clear identified verticals that we're chasing, especially mission-critical applications within government, energy, defense, telecom in Europe and sectors who care about technology origin. We can see it, okay, we need to speed up our development capacity where we see certain bottlenecks or where we need to see more strategic growth. Some investments there, but smaller than sales and marketing investments. A bit long, but I think I wanted to elaborate a bit on that. Let me know if that answered your question.
Yeah, yeah, it did. Just a follow-up on sort of how we should think about it coming quarters and what you have done.
Have you done this already recently, or is this that you have just started to scale up new organizations in other countries? Just trying to understand how we should think about investments coming quarters.
Exactly. I mean, a lot of the planned investments for this year are in place. There will not be many recruitments throughout the years according to the plan and more recruitments than we have done. Looking at to add some more sales capacity in one of European markets outside of the Nordics. I mean, then we talk about then we get quite granular. Some more investments together with our sales network.
Great. Thank you, guys. That's all for me.
Thank you. We have David. Maybe you can answer about the increase in the Swedish crown value during this quarter. What kind of effect did it have on Clavister?
Yeah.
As I said kind of earlier, I mean, roughly half of our sales are in SEK and the other half in EUR mainly and USD. Of course, when the SEK improves this drastically versus EUR and USD, our sales in those currencies are worth less when we exchange them to SEK. If we had had constant currencies, we would have had a growth of 24% instead of 21%. Of course, it also has a certain cost and OpEx and cash flow impact as well as we had quite strong sales in the end of last year, beginning of this year. Say if you sold something for EUR 100,000, and then the SEK strengthens quite significantly versus the EUR. When that invoice is paid, we get paid less than it would have been in another currency level.
There are some effects that have some impact on us. All in all, mainly negative impact, but with one important exception that means that in total, the currency effects for Clavister are yet positive, which means we are planning to, as we spoke before, repaying EUR 5 million to the EIB. Of course, we have a totally different exchange rate now than we did during the autumn when we paid EUR 6 million to them. Meaning, of course, that it is less costly to repay EUR 5 million of loan now than it was before. We have been able to, during these latest periods, secure almost all that. We feel that, okay, this will be done from a financially much better position than last year.
Yes, we're losing some on net sales, and we're losing some with negative impact on OpEx, but we're gaining more in the financial net and repaying our loan from a better cash position or a better FX position. All in all, a positive total effect.
Thank you, David. On to the telecom business, and we have a couple of questions about the progress of it. Clavister has previously focused on 5G networks. Is this still a strategic priority, and are there any developments or ongoing work in that area?
Just as David alluded to, telecom is one of our four key verticals still, so public sector, energy, defense, and telecom. We still maintain telecom as one of our four verticals. We did not expose in the report or in this presentation any significant events because there hasn't been any significant events in the telecom sales.
It's quite uneventful, a bit flat, if you like. We still maintain it given that we have the same sort of macro conditions that would sort of govern a push towards European technology. However, we all know the challenges that the mobile operators have had and still have to some extent. We're still seeing the likes of Nokia and Ericsson and others being challenged and streamlining their organizations to better match the market conditions. It is a tough market for telecom. Important to state, however, is that Clavister is not maintaining a cost base specifically for telecom. We're using the same technology, the same products, and so on, although better packaged or better marketed towards the telecom industry. I mean, the proof is in the pudding. We'll see if that market will recover in general, the 5G market in general.
When it does, I do not think if it does, but when it does, then clearly it will drive security investments. The partnerships we have with Ericsson, sorry, with Nokia and others are strong. That is why we maintain it as a key industry and looking forward really to see a boost in that, even though we have not seen it yet for some quarters.
Thank you, John. I think that was all the questions. Now you get a couple of questions from me. John, first, what are you the proudest of for this quarter?
I mean, two things, essentially. The fact that we keep on maintaining a really good growth trajectory, seeing that, yes, it is really not that many years back when growth was non-existing. It was flat.
Then slowly but surely moving that into low single-digit growth numbers, into high single-digit growth numbers, into double-digit growth numbers, and now hovering around or above 20% for some time and being able to sort of sustain that. That is good. I'm proud of that. I think there is merit to, even though looking at the effects on EBITDA, it's easy to be self-criticizing and look at the gross margin is impacted by 5 percentage points. It is 75%. That is a high gross margin, especially given the fact that we're shipping so many hardware units. I'm proud of that, even though, of course, the numbers it translates to in the exact period have a negative impact. I think we have to remember where we're coming from. We're not talking about 16% gross margin, 75%. It is a strong margin. Thank you, John.
David, anything you'd like to highlight?
Yeah, I would say I fully stand by what John said regarding the gross margin. I mean, I think it's showing resilience. I think that's important. To add something else also, I would point to the fact that the severely increased geopolitical risk and tension that we're seeing, it is highly impacting our lead generation, our pipeline, much more than it has yet impacted our sales. I think the outlook, it is a very interesting market for Clavister. It is up to us to scale that successfully and do a lot of business in this market.
If I've been in Clavister for four and a half years, it is a totally better understanding on who we are and what we do and a market that really favors the positioning of Clavister in a totally different way than it was only six months ago. I think it's an interesting future going forward.
Thank you, David. Thank you, John and David, for a very insightful presentation and for addressing all the questions we had today. Thank you, everyone who attended and shared their questions. Your input means a lot to us, and it really adds value to these sessions. A recording will be available shortly on our website. With that, I wish you a pleasant remainder of your day, and thank you again for joining us.
Thank you.