Welcome to Sectra's three-month report presentation with CEO Torbjörn Kronander, and CFO Jessica Holmquist. My name is Helena Pettersson, Investor Relations Officer, and I will be the moderator of the Q&A session later. The chat function is open from start, and you are most welcome to start writing questions during management presentation. And with that, I hand over to you, Torbjörn.
All right. So welcome here to our three-month report, our first quarter for this fiscal year. We will start with the interim highlights from the quarter by me, and then Jessica will come in and speak about the financial developments. I'll speak a little about our way forward, and then we'll end up with the Q&A session, where you both call in and via the chat functions, or you can write the emails in. So our main business lines, as Imaging IT Solutionss, where we started up doing mainly radiology image handling for hospitals.
Today, we increasingly do all image handling from hospitals, as hospitals want to consolidate their IT system, they want fewer IT systems, and we are a vendor who can do all their images in one single solution, which has resulted in some substantial orders over the last quarter. And then we have IT security, where we mainly do encryption systems and communication, secure communication solutions. And then we have growth opportunities outside the main business lines, which is our little greenhouse. These are small, but they are supposed to grow rapidly. Medical Education IT, where students, medical students are nowadays trained in a very different way from historically. We have a special business unit for that, and that is more or less only doing recurring revenue today.
We Orthopaedics IT, where we do some special image management for orthopedists, and they use images very differently from radiologists and the diagnostic side of hospitals. They use it for therapeutic preparations. We have research division, mainly doing research within IT, AI and genomics now. And we have, inside the main business lines, we have critical infrastructure and Secure Communications and increase in digital pathology in imaging IT, which is then part of that overall image management of hospitals I spoke about. That area is growing rapidly right now. And we added 2022, Genomics IT, which is not images, but very much related to pathology images and increasingly used in diagnosis of cancer, and also treatment of cancer, I would say.
Highlights from the quarter, we had an all-time high contracted order booking of up to 33% from a very strong quarter last year as well. This result is sort of for the order of these images. We have high demand within all business areas, signed the largest order to date for Sectra, a U.S. Sectra One Cloud contract. That means we do not get paid up front. We get paid after the customer uses it.
It's one of the larger hospital chains of all of the U.S. healthcare systems, and we initially got an order for radiology, but there is also an umbrella contract that can be extended with other images, and they had the vision of having only one vendor for all images in the entire system to save cost and increase efficiencies on their side, also increasing patient throughput. Our orders now are very large systems, and they're over many years, which means the contracted order values become very large. We have significant quarterly variations due to large individual orders. Of course, we got orders in this size, and the order intake goes up and down between quarters. We are positive trend in all business areas.
We have rapid progress in the transition to services and cloud deliveries, and also for hardware, not only software and medical, but also in hardware. We're moving into recurring revenue that is increasing faster than the revenue, long term. We have a currency tailwind, that will not be forever, but right now it helps to cushion the effects of the change to a service-providing business model. And we have definitely seen a very strong turnaround for Secure Communications that I will come back to later. We are transforming the entire company to deliver as a service. Also, our security business, where often we, instead of selling our, high quality systems, we rent them to the customer. We let them use it for usage. Our net sales for the quarter was up 21%. Profit per share was up 14%.
Our recurring revenue, which is a very increasingly important measure now, was up 28%. The churn, that is how large proportion of the recurring revenue we lose. Of course, if you get a lot and lose a lot, you don't gain nothing, but we have a very low churn, 0.9% of our recurring, which means that the income becomes an integrator, which is good for long-term business. The financial targets for the groups are all fulfilled. We have the assets equity ratio first, which is a measure of stability that should be well above 30%. It's currently at 51%. The second one is profitability, operating margin. We do not want that to be too high. We have too much to invest in for future growth, but it should be at least healthy, above 15%.
It's currently at 19%. And then the last and most important is growth per profit per share over a five-year period. It, that is the target to be above 50%, and we're currently at 113%, and that's our main target. The first two can be seen as hygiene factors. The third one is the main target of our financial targets. In Sectra Secure Communications, we have considerably improved earnings, which is a very good thing, and that depends on two things, I would say. Both the world around us, with the kind of tense situation in European security right now, with price demand, but also a new management for this business area, which has proven very good.
Strong order intake, and as well, we don't know what the application to NATO from Sweden will mean. We are not members of NATO yet, but so that is a little unknown right now. But we do sell into NATO because we have NATO products already now that we sell from our Imaging IT Solutions, our largest business area by far. We got three significant Sectra One Cloud go-lives during the quarter. That means, we are selling and getting paid for usage instead of upfront, which of course affects the growth rate. We will, during this transition, have much lower growth than we would have had, both in profit and growth, than we would have had with the old business model, but long term, this is better.
We have low churn on recurring revenue, as I said before, and we have a cloud recurring revenue, which is a portion of the increase of the recurring revenue we sell for cloud applications. That is the main growth area. That's up 76%. Then I will leave over to Jessica, who will tell you a little about the financial development.
Thank you. Good morning, everyone on the call, and, I will jump right into our, Q1 financials, starting off with the order intake. Contracted order bookings was close to SEK 3 billion in the quarter, up 33%, with high demand for our offerings, both in Medical IT and Secure Communications. And the single largest contributor to the record high order intake is the already mentioned, 10-year Sectra One Cloud contract in the U.S., which amounted to approximately SEK 2.4 billion, sorry. And, in this context, again, we point out that, orders of this size do not come every quarter.
We see stable top-line development with a growth in net sales of 21%, a reflection of our long-term commitment to customer satisfaction, and the SaaS transition is driving recurring revenue growth, up 28% in the quarter. And the recurring revenue from our cloud contracts was up 73% for the group to SEK 86 million, equaling or coming close to 15% of total sales, which is a sign of progress in this area. And as Torbjörn also mentioned, our recurring revenue churn is limited, and the recurring revenue development is supported by that, and it remains just below 1% on a 12-month rolling basis. And also looking at the non-recurring revenues, growth in those in Q1 came mainly from Secure Communications. All business segments increased sales in Q1.
Imaging IT was up 19%, and as customers expand their use of our solution and also due to a growing customer base. We also note that the currency tailwind contributed to growth in this segment. Secure Communications increased top line by 35%, and the positive trend that we've seen over the past quarters remained in Q1, and the demand was also confirmed by additional order intake secured during the quarter. We also have growth in Business Innovation, although this segment still represents a smaller share of our total revenues. All geographic markets increased sales, except in the U.S., where we now see an impact of the change in business models.
In the comparable quarter, we had more upfront or more deployment revenue from license sales, whereas this quarter's deployments were SaaS contracts to a larger extent. The highest growth in absolute terms we had in the U.K., largely driven by recurring revenue growth. Our operating profit rose by 8% to SEK 69 million in the quarter, whereas the operating profit margin was slightly reduced. The operating profit is affected by the shift to service sales and cloud deliveries. This, in combination with our continued investments in the organization, preparing for large deliveries, cost the lower margin in the quarter. We also had increased cost for marketing activities in Q1 versus last year.
The weak Swedish crown give a favorable currency effect that is partly offsetting the transition to service sales. On a rolling 12-month basis, the margin was at 19% at the end of Q1. Imaging IT delivered less operating profit than in Q1 last year. During the quarter, one customer in the U.K., two customers in the U.S. went live in Sectra One Cloud. As these cloud installations ramp up in production volume, they will contribute nicely to revenues and profit over time. But short term, it means less revenue than a traditional license sale. Secure Communications delivered a strong performance in Q1 versus last year.
Demand for encryption products and cyber security is high, and we have seen that the market situation has normalized. We still note that quarterly variations are expected in this segment due to the nature of the business. Cash flow from operations was negative at SEK 98 million in Q1 due to negative changes in working capital. Q1 is normally weak, and timing effects in customer projects caused tied up capital in projects and accounts receivable to increase. The overall cash position is strong at with SEK 808 million, including the SEK 120 that we have in a short-term bank deposit. During Q1, we signed an agreement to acquire two properties, the headquarters in Linköping, plus an additional property nearby.
We paid a deposit during the quarter, and the rest was transferred on closing, on the closing date, September first. We do not expect these acquisitions to have a material impact on our financial results. With that, I'm ending my part of the presentation.
Thank you, Jessica. I can comment on the acquisition properties, that it is not our intention to be a real estate company, but this was an opportunity to reduce operational costs a little bit, and we signed up instead of renting the entire property. So our way forward, where others see a problem, we have a demographic challenge all over the western world, and we have cybersecurity threats all over the world, we see opportunity. With our special niches in when healthcare must scale up and become industrial production, and industrial in a positive sense. Some say that healthcare shouldn't be an industry because we're treating humans, but industrialization means repeatable quality at the lowest possible price. That is exactly what healthcare is all about now, in order to survive the demographic explosion.
You can do that in a very humane way, if you're careful about it. And then when mobility, when top-level security needs to go mobile, we see that from very much after COVID, people dealing with very sensitive material, they also need to be online when they are traveling or working from home, and that's a very special niche for Sectra. Focus forward is high customer satisfaction as before. The only way to have long-term success in a company, and we are long term, is to have high customer satisfaction, which we have proven over and over. We measure this by Net Promoter scores, and we measure...
We are externally measured, especially in medicine, in medical, by the KLAS Research in Utah, who measure customer satisfaction in the U.S. and other countries, and we have had the highest customer satisfaction for many years in a row now. But you cannot have high customer satisfaction if you are have unhappy employees and a poor culture. We work a lot with recruiting the right people and having the right culture, because then customers will be happy. It won't work otherwise. Then, of course, profitable growth, that is what business is all about. And also seeing, we've been good at seeing where things is going to end up, and skate where the puck is going to be.
We started in pathology for digital pathology eight years ago, and now other companies are seeing this was a correct move, but we are now very well positioned in that. Now, sometimes we have to take a few bets, and we have to shut it down, but we are willing to take risks for these opportunities that might become very big for the future. And we say the main culture thing we use in our discussions, internal and external, is the oldest rule of humanity. People forget it. It's the one thing you've seen in all religions we found around the world, and that is the golden rule. And it might be strange that an IT CEO preaches the oldest rule of religion in the world, but it's a good rule.
Behave unto others as you want them to behave to you, and we'll be fine, and that is what we try to teach and infuse in our employees. In medical, we have the growth areas that are a consequence of the demographic situation all over the world, and that is the old people diseases. We have more or higher and higher shares of old people or retired people all over the world. A little different timescale in different countries, but this is coming in the entire developed world, and we have no way of doing this. I have a friend who said that if we are gonna keep the relationship between staff in healthcare, in hospitals, and patients in 20 years or 15 years from now, we need to use every single student who are examined or graduated high school and put them in healthcare.
That won't happen. So we need... That's why industrialization is so crucial, and the things that are most important are the diseases of the elderly, and that's neurodegenerative disease, cardiovascular disease, cancer disease, musculoskeletal disease, and vision. If you cannot see, you become very expensive and dependent, and all over this is medical imaging. But we try to be very good in these five areas because that is where the money is going to be, and the needs, and thus the money, which we can get a share of our customers' profits. And we added, genomics, which fits perfectly into cancer. We don't do everything in genetics and genomics. We do solid tumor diagnosis, which is very closely related to pathology.
It's even called molecular pathology, and it's a very high growth area of medicine that has not been industrialized yet, but needs to become so. Our vision for the medical imaging area is collecting all imaging-related diagnostic data in one system to support better care from patients and lower cost and reduce complexity. The large order we got from the U.S. was exactly about this. This customer wants one single system for all image-related data they have in the entire operation. That saves cost for them. They don't have so much staff trained on different systems, and they can also do what we call integrated diagnostics, where they can use multiple input for the same diagnosis, which is very important for the correct diagnosis and follow-up during cancer treatment.
We are currently the only company who have radiology and pathology in one single system because we started so early. Now we're adding Genomics IT. That means complete cancer diagnostics in one single system. And it's built for production. This is not research equipment. It can be used for research as well. We're good at that. But it mainly built for production, so doctors actually can come home at a reasonable time instead of burning out, which is a big risk today. Medical doctors all over the world are working so hard that the risk of burnout is increasing in unacceptable way, and our job is to help them out, so they do not burn out.
Going from research IT tools to production in genomics, and just genomics alone, we see an estimated market growth in 90% per year for the foreseeable future. Now, this is very small. We have no revenue there yet. We have a collaboration project with the University of Pennsylvania in the U.S., who wants to take this into production during 2024, and we're developing together with them right now to build this. But it is a large interest all over the world for this integrated with pathology and radiology. And this is, as we see, the spot on for skating to where the puck is going to be. Data needs to be integrated.
Decisions for diagnosis must be based on all available data in one single system, and we have a huge growth in genomics as the number of DNA sequencing for cancer is going up, going up all the time. In cybersecurity, we have a new digital reality. Cybersecurity market will grow. It has to grow because cyber theft, cyber fraud, and cyber espionage are growing. We see it every day in the papers, not the least in healthcare, but also in other areas. We are very, very well positioned. We have a super strong brand, known as the only vendor with top secret approved mobile phone in Europe, for instance, which we can use to sell all the other equipment. The current crisis in Europe will boost demand even further, as we'll see. Threats are expanding. Attackers are getting smarter.
They utilize advanced psychology and behavioral science to find vulnerability. I think you all have been exposed to phishing attempts. A few of you might have even bit that hook. But the impact are larger and larger, and that means that cybersecurity will continue to grow, demands more and more countermeasures, and thus invest in society, in companies like us. We are transforming as a service company. Not only software, we also do hardware as a service to some extent in communications, and that has quite large implications for growth. We would have grown much faster than we do right now if we had everything up front, but long term, this will be good when this integrating system begins to work. We have increased our recurring revenue to 59% now, and we had 58% for the full year last year.
We have a large interest in this, and we see more or less all deals we're discussing, especially in the U.S. right now, is this model. But in order to be successful, you require low churn. As we said before, we have a very low churn. We are below 1%, which means we add on... Everything we add on will be long-term income. During the transition, revenue and profit growth will temporarily be smaller. This we have spoken about for several years. We also, at our capital market day in this year, said that we'd be stronger, this fiscal year, that we're in now, 2023, 2024, and we see the effect that we predicted happening right now. Long term, the financial effects will be strongly positive, however.
This will be better than the old model, but it will take a few years to get there. Why should you invest in Sectra? We are positioned in markets that are, by external factors, forced to grow. No one can do anything about the demographic situation. We want to keep healthcare, and we are very well positioned in that area. And in cybersecurity, likewise, it has to, the market has to grow. We are well positioned there. We have a very high customer satisfaction, and in order to have that, we have high, and we need to have high employee satisfaction with a strong corporate culture. I think we ranked very high in Glassdoor, for instance, in the U.S., which is a site where job prospects and employees can evaluate the employers.
A strong brand in market where trust is critical, if our systems fails, people will die in the hospitals, and that's when brand is very important. Likewise, in cybersecurity, if we fail there, secrets that should not be public will become public or known to the enemy, and that's a brand. Both are brand markets, and we have strong brands in both markets, where trust is critical. We have rapidly growth in the largest medical market in the world, which is the United States. We are profitable, very strong cash flow, not this quarter, but over the years we have that, and we have a solid balance sheet, which is trust for our customers. We have rapidly increasing revenue, recurring revenue, especially the cloud-based revenues, which is important.
We have a good collaboration with public cloud vendors, especially Microsoft, and we have very low churn. Sustainable investments in R&D with exciting future opportunities. One of the small greenhouse products we're doing, if they grow, we will have very strong business in that. We do not invest in these unless they have good potential for the future. Now, some of them will not succeed and might have to be closed down, but that is okay. They are all profitable, which is the important thing, except for Genomics IT. And our management owns shares, which we think is important, not only options and stuff, but they actually own shares.
The upcoming financial events after this is September seventh, which is now, three days from now, two days from now, our annual general assembly here in Linköping, in Sweden, and then the December fourteenth with our Q2 report. Please remember, your feedback is important. We try to modify these meetings and presentation based on what you think, so if you have any suggestions to improve it, please send an email to info.investor@sectra.com, and we will review it and modify the presentation so they become effective for you when you listen to them. Then we open up for the question section.
Thank you, Torbjörn and Jessica. I will start with a few questions from Kristofer Liljeberg at Carnegie, who we have sent an email. The first one is, "Could you please explain when you expect revenue to start for the recent large U.S. order? According to the press release, the deal was supposed to generate about $2.5 billion over 10 years. Is it back-end loaded?
It's back-end loaded, that we do not get paid. It's a lot of hospitals. Some of them will go live quite soon. They will begin to get, but taking, you know, so many hospital live will take time, so it's definitely gradually build up over one or two years going forward.
The next question from Kristofer is: "Historically, external costs tend to be lower in Q1 than in Q4, but not this time.... What is the reason for that?
It has been some hardware that we shifted and, and some picture, like, peculiarities. Sorry about that. Jessica, do you have any more comment?
Well, and also the ramp up of the organization that we're hiring, like I mentioned before, preparing for the large deliveries ahead of us.
The third question is, looking at order to be delivered in the next 12 months, it was at half the level seen in the past four quarters. Does this reflect natural variations, or should we expect that to be lower in the past because of the change in revenue model to more subscription?
We ask more and more customers, they want, they cannot sign up a contract with us. It's some cases, it's framework contract, sometimes it's a definite single provider contract, as we have with a big deal right now. But they won't promise what they are going to buy for every quarter, which means we cannot, you know, report it in that way. It will be money anyways, but we cannot guarantee it, because they only pay when they use the system. But they also commit that they will not use any other system. So unless they stop doing medicine, they will pay.
Then we have a question from David Vignon at Stifel. You shared in the report that you were hiring in North America to be able to deliver on major contracts. Can you share your plans in terms of hiring for the coming quarters? How many hires should we expect, and should we expect personnel expenses to grow faster than sales in the short term?
In the short term, personal expenses will grow faster than sales, because we have to deliver these large products before we get income. We do not reveal how many people we employ.
And then we have an additional question from Kristofer Liljeberg, Carnegie. What is the total investment for the properties? How large will the positive impact be on EBITDA from owning instead of renting?
Yeah. SEK 150 million is the preliminary purchase price for the properties. We count on a smaller EBITDA impact that we did not quantify, but it's immaterial.
But it's positive.
It's positive, yes. For sure, it's positive, but it doesn't have a material impact on our P&L.
What I can see, we have no further questions on the chat function, and I will check the email again. We have no further questions on the email, so we end the-
All right. Then we thank you for your attention. We look forward to see some of you on Thursday, if you come down to the general assembly, and the rest of you in December for our Q2 report. Thank you for listening, and goodbye.