Sales declined by 3% y/y, somewhat below our forecast of -1%. Organic growth was -8%. The volatile System revenue fell 14% y/y, about 7% below our expectations. All three Service revenue types beat our estimates slightly – just as in Q2. The recurring revenue (Cloud and Support) grew by 9% organically y/y, and the ARR was SEK1 747m. We believe that is a relatively strong level, and the trend since 2021 has been strong.

The gross margin improved y/y by one percentage point, which is quite substantial in a business like Proact with ~6% in EBITA margins. The improvement suggests that the service delivery’s cost-efficiency and general efficiency measures had a positive effect. It is encouraging to see Proact now being able to compensate for cost inflation by efficiency measures, as that has been its main issue lately, in our view.

We lowered our Base Case to SEK110 (115) largely because we increased our risk-free rate from 2.5% to 3%, resulting in a higher WACC. While the important group-wide figures gross margin and recurring revenue growth are in a positive trend, earnings’ momentum is primarily concentrated on the Nordics and Baltics. To strengthen the long-term case, where expansion in Europe, partly by M&A, is crucial, we believe it is important to see an improvement in the other Business Units.