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The Best Risk/Reward Microcap Software & Defense Play Globally 4C GROUP $4C? 4C is an owner-operated (30% insider ownership) with world class software leader within its specific niche of software powered training and evaluation. After purchasing equipment, tanks, jets, missiles, drones etc. - what will all NATO armies do, if there is no World War III? There is only one right answer, they will train and stay ready for war, and that’s exactly what the 4C Exonaut software is used for: tracking and analyzing this process with thousands of data points and integrations. Fundamentally, during 2025 the company is ramping up activity to a level never before seen with the order book doubling to a record in 2025. This is while receiving largest contract’s ever in UK and US. Question is what are the orders in the horizon and what impact it will have as additional orders will add directly to bottom-line? It seems major deals can be in the lining here tuning in to the conference call with three NATO countries having large successes in field tests. While the above fundamentals are in play the 4C stock is clearly currently heavily overshadowed by irrationally extreme pessimistic expectations and fear of financing “issues” pricing as if it were heading to bankruptcy, but the reality check scenario is most likely the opposite – and what happens here when that perception is altered? This is in my experience one of the most important things to always try to reach full understanding of in cases what is the downside? Well, company needs to head into a clear and irrational bankruptcy mode or dilution – again there are no signs of this – rather the opposite – one can also verify by just inverting asking here how will the slightest positive news be interpreted here by the market? In terms of short-term contract assets currently amount to 150m SEK, which, given the usual seasonal conversion in Q4, means the company will most likely have no financial issues. This was also stated by the Management during the Q3 results conference last week. In this context one could draw some similarities to Exail Technologies $EXA also clearly owner operated and one of the absolute best performers in Europe on defense side c.+344% YTD, which was hurt too by the unjustified financing worries in 2024. Demand of their products was just about to burst and until they signed the large contract it was clear that the financing worries was just noise. The company surged naturally after this as this was too irrational and 4C seems to be at a very similar moment with largest ever order book and awards of very large orders. Deepening the understanding of the business fundamentals the epiphany of the case becomes clearer: 4C is arguably a highly rare and unusual moat holding 1) Sticky product and long-term contracts 2) Very high barriers to entry 3) Stopped investing in the more competitive field of risk management / resilience software outside of defense. Furthermore, the new addition of the case is the clear focus on profitability and now taking the foot from Resilience business should add roughly 8% percentage points, 40m SEK cost savings starting in 2026. The company is in great structural position to tap into the large growth pockets within the mission critical field of training and evaluation software. So how long will this extreme pessimistic expectation last? Well let’s see for how it can last there seems to be multiple catalysts on record order’s, cost-cutting (40m SEK, c. 8% percentage points during 2026), record order book and financing issues that will most likely fade during/after Q4, all even per se seems to be heavily ignored. Hitting The Bullseye 4C is a global allied market leader within its niche of software powered training and evaluation Exonaut for military forces with 70-80% of its sales being software with c. 80% gross margins and high margin specialized services only on top of that. 4C has built through dedicated work and close working ties to the absolute leading allied military US along with many other leading allies including UK and Australia. The company has a rare NATO secret level clearance. It is all naturally showing how critical these systems are in day-to-day activities. Of course, entering such critical part of the everyday business an established military track-record as a company with exceptional references is essential. The use of the software can vary but training and exercises is naturally a day-to-day activity. This setup is a feat that will decades to build which explains the very unusual part that 4C arguably has: moat, which in the reasonable scenario contributes to the natural extreme R/R with Mr. Market arguably irrationally valuing currently nothing of this sort currently. While sales of the company have roughly doubled since 2020 following the Ukraine invasion more immediate needs of military forces was present that contributed to the stagnant sales development in 2022-2024. Nevertheless, the underspent and prioritized needs of the leading allied forces was and is imminent – so where does it show? Well, one has to go no further then observe the two contracts in 2025 alone and bunch of smaller while important one’s (!). From the world’s most powerful military US and then UK of 295m award and 275 million SEK respectively. US looks like a new order with 90m SEK initial call-off and a total potential of 275m while UK order award one is an extension and upgrade - previous one was smaller with initial 3-year period at c. 7m GBP. Furthermore, and more importantly, these orders are much telling of the future need to scale up on these systems across the board of NATO countries to be able for them to operate as efficiently in times of war. Take the Swedish military as a reference for example as one of the smallest EU militaries in NATO, in 2023 in midst of Ukraine war they signed a SEK 150 million order 5-year deal with software and software services. What if they sign a longer-term order with countries in NATO with multiple’s times larger size? Well, naturally it would yet again be a contributor to bottom line and strengthen the order book. From a top down perspective that’s obvious hit – after whole military ramp-up armies need to stay prepared and ready and Exonaut is only relevant platform offering that with major references and NATO clearance. In essence, the order book has doubled in the last year versus 2024 level of approximately 130m to around SEK 300 million. This is really telling what is structurally happening here. With more and more of these long-term contracts the change versus previous periods is also that stability and predictability of the revenues will kick in on top of massive operational leverage – this is another dimension which the market seems to totally neglect. Regarding this dynamic one should really have a listen to the latest webcast on potential new order and news as there are clearly clues there of the future (most I guess did not listen and sell stock based on Q3 headline weak print). In that webcast the CEO said that the potential new 3 additional countries that they have had very positive outcome of the tests and that “hoping to add new flags to the map in the near future” and on Australia “We’ll hopefully be able to announce more positive news from Australia during the next couple of months”. In the conclusion remark emphasizing that there seems to be clearly a lot of stuff cooking “I hope to be able to make some announcement in the near future and then again “hope to be able to share more positive news with all of you in the near future” Information has started to appear about the end of the shutdown in the U.S. Geographically, this is 4C’s most important client and accounts for about 30% of sales, where the company sells to individual customers below Department of Defense (Department of War). The CEO mentioned at the conference that end of shutdown opens the door to further large contracts in Q4 2025… The Machine Awakening Having the most advanced and demanding NATO military in the world US as a reference that naturally most likely is an easy sell for new countries but also this fact alone as a reference has made 4C razor sharp on development having the best and leading product within its Niche. Important to note here is that 4C being also a native European software made in Sweden, while having different foreign entities established in respective countries jurisdictions. It is no secret that this is need-to-have an abundant degree of high ranking and global allied forces has very positively remarked Exonaut as core to helping them to becoming better – just watch what a senior retired colonel of the US military had to say “I would say it’s the best management tool for military training, exercises and experiments, full stop.” – the feedback can be seen across NATO countries including some times the supreme commander himself. In terms of 4C market position the company is the niche leader in a much untapped market. The thing with 4C is that it’s a wide all-in-one training and evaluation tool with often single source supplier accreditation it has built its position step-by-step with the absolute leading militaries of the world for decades and has a very rare NATO secret level accreditation of its software. It is likely that the market for its software is 10-15x bigger than the current software ARR sales c. 200MSEK per year as militaries still rely on excel, pen&paper and legacy systems as from Lockheed Martin $LMT. This will likely become evident from future orders both likely within the sphere of its existing base wanting to expand to further divisions across the military as readiness and training must be ensured to deliver at the highest level at all times. Well, this highly unusual and hidden quality dynamic of course gives room for plentiful of upwards surprises on different spectrums including but not limited to buyouts and adjacent vertical penetration over time. But let’s delve deeper into this field at some point in the future. What’s Next The Earnings Machine Step The Operational Leverage Phase? For years 4C poured significant resources into developing modules for government and enterprise clients, fighting for space in markets dominated by giants like Servicenow $NOW and Everbridge (acquired by Thoma Bravo in 2024). That approach made sense back when defense budgets across Europe were stagnant and priorities lay elsewhere. The times have changed drastically and 4C has responded late, but brilliantly last week. By redirecting its R&D and sales efforts entirely toward Exonaut for the defense sector - it’s doubling down on what truly differentiates them: a unique product, strong references, and a competitive moat that others simply can’t replicate for next 10 years with US, UK references, where there is no competition from all software giants. In a market that’s now expanding faster than ever, this is arguably the smartest strategic move they could have made and one that positions them miles ahead of any potential challenger for the next decade in terms of software for military training, integrations with European primes like Rheinmetall $THM or Thales $HO, or basically long-term contracts like UK. This change while bringing smaller short-term costs listening to the call should generate 7-8% percentage points in EBIT margin from Q1-26 and a few percentage points less CAPEX. Needless to say, but very important in terms of context of the case the margin has been oppressed by similar amount most likely year after year – but no more. In terms of financing its clear from the call that EMEA should be stronger in Q4 and that contract assets (c. 250m) should also improve as what happened in Q3 – the company has also a 25 million to short term bank facility to safeguard liquidity. Naturally with the scale of C4 business, orientation being critical defense supplier and contacts around them short term financing to bridge any possible gap should most likely be manageable. Nevertheless, valuation - €35m market cap - seems to price in a full bankruptcy mode and doomsday scenario cutting off any reasonable scenario view of the company’s underlying business. It is clear from the ownership table that this is an owner operated business with high degree of insider ownership - the company also has some very significant skilled local Scandinavian owners and international owners; this arguably safeguards that interests are fully aligned to create value. And another question is really what happens if there is no equity issue at all as I think can most likely happen? Well, would not be surprised in this case at all to see this having opposite de-risk mode effect perhaps similar to Exail when it was clear financing was not an issue where Exail went proceeding with +100-200% in very swift time-frame. Most likely the market seems to basically price in all the most unrealistic worst-case scenarios already here, so it rhymes a lot with Exail case in 2024. With the current order book and operational leverage from these orders along with a small new order or so should likely yield SEK 430-450 million in 2026 with c.15% margin - where roughly half will come from direct savings from Resilience re-org - probably in the vicinity of 20% plus with this dynamic (their medium target EBIT margin is 20% plus) but let’s be more conservative and use a 15% rate. What is then a fair value multiple for a niche leader in its category with very interesting road for growth with c. 60M EBIT? Well, you choose whatever multiple you think is best – in a reasonable conservative scenario on moat standing, orderbook, short and long-term dynamic etc. it would not be surprising at all if it starts heading towards higher quality peers at 20-30x EV/EBIT which would be c. SEK 30-50 per share. If one wants to look from EV/S basis its trading 1.3x while comparable low or high-quality software businesses is trading at least multiple times higher. It simply is a very rare R/R situation to encounter just wondering really how long this very pessimistic Mr Market phase will last?

💥Very interesting development that Mr. Market seems to have completely missed in European AI-native SaaS player Serviceware $SJJ.DE (like great Q3 results I already flagged). US investor Joshua Braden has disclosed a 4% voting stake through Mission Trail Partners LP. So, while German investors keep ignoring what looks like an obvious opportunity, are Americans now quietly picking it up for pennies on the dollar (sub 1x EV/Sales? Would love to hear any insights or thoughts on this. All replies and DMs welcome.

Gaming is back? Paradox $PDX EBIT figure SEK 142m for Q3 This was approx. 35% higher than analysts expectations. This was driven by back catalogue, Playrion sale and boost coming from Transport Fever sales recognition (29th September). I guess in Remedy Entertainment $REMEDY next week investors should see strong back catalogue (Alan Wake 2 and Control 1) and few strong days coming from Control Resonant sales recognition (end of Sep launch date too).

💥Serviceware $SJJ big Q3 WOW. The German AI-Native SaaS company reported its Q3 results just a few days ago, and almost nobody seems to have noticed. Yes, I've covered Serviceware before. They have been building its AI-native platform for years, helping major German corporations digitize their operations and integrate AI into their workflows through its SaaS solutions (ESM Software like $NOW). But this time, let's forget the product story and focus purely on the numbers. Because if a US or Canadian software company had just reported these results, I suspect the stock would be absolutely flying to the moon. In Germany? Crickets. The stock is still trading after one of the largest software rebounds ever (check $IGV or $NOW) and I'm not kidding at their extreme ~0.6x EV/Sales today. For an AI-native SaaS business growing its recurring SaaS revenue at over 20%, expanding profitability, and benefiting directly from enterprise AI adoption. Take a look at these Q3 numbers and tell me this makes sense: First of all total revenue +10,5% does not show the picture because: SaaS/Service revenue: +23,2% SaaS/Service revenue share: +8,4 percentage points Legacy Non-SaaS/Service revenue: -26,0% Why this is so important? Serviceware appears to be translating its recurring SaaS revenue growth into stronger quarterly profitability and decline of legacy products it’s close to an end. Profitability improved substantially. Q3 EBIT nearly doubled thanks to AI and SaaS, while revenue increased 10,5%. The EBIT margin is still only in the low single digits, but the company has reached breakeven and operating leverage is starting to kick in. From here, margins should expand as recurring revenue continues to grow. That creates another obvious opportunity to play the operating leverage story, which seemingly nobody is paying attention to. This is a meaningful improvement in operating leverage in Q3 2026 and massive CF improvement shows this even more. Despite ongoing buyback liquidity strengthened again. Cash and financial assets increased by €8,7 m y/y to more than €40m now (it’s ~30% marketcap..) Yes and backlog continued growing in AI times, so expect much more to come. The €121,5 m backlog supports future revenue visibility (+19,3% y/y). This visibility is now extremely high with backlog to annualized Q3 revenue equals 91%! The most encouraging Q3 indicator is the combination of y/y: +10,5% revenue growth, while backlog 19,3% y/y, +31,6% EBITDA growth and +99.2% EBIT growth. Most suprising part is their stock despite management running buyback and huge software sector reversal ( $IGV +30% in 3 months) did nothing. See the $SJJ.DE chart yourself and think €40m net cash is close to the value of free float, as owner operator management owns majority (and does buybacks). Suprisingly German analysts from Quirin Bank did their home work very well after results and put reasonable increased price target €35 (2.5x upside), but I guess no one listens? DYOR, really not hard to spot this for Mr. Market now, how long it could stay like that?

💥💥 4C Strategies $4C $4C.ST now gets 2 new orders from the US Department of Defense (or Department of War). Corresponding to SEK 30 million, split equally between the orders, it includes licenses and continued development of functionality for exercises and American Army training. Work will begin in the first quarter of 2027, and deliveries will be completed during the year. Are there any more demanding and critical customers in the world for a microcap company like 4C to justify product and development quality? It is ridicolous with the share price down from 10 SEK to 6.40 now wity new lows. 4C stock was trading higher even before record multiyear British Army contract in July 2026. No one cares?

Ultra cheap European defense technologies M&A Wave now starts full speed? US drone company Red Cat $RCAT offered €39 for Steyr Motors $4X0 to boost its engine tech. This can succeed as B&C entered into an agreement to tender its stock (15% votes). Means Steyr will he delisted in 2027 probably. This is probably close to 30x EV/EBIT multiple this year and ~13x next year. Other obvious 🇪🇺 smallcap defense acquisition candidates are: 🇩🇪 Ceotronics $CEK, leading defense communication tech at 8x EV/EBIT 🇲🇫 Lumibird $LBIRD, leading range finder tech / photonics at 17x EV/EBIT 🇸🇪 4C Strategies $4C, leading defense software for readiness and training at 12x EV/EBIT All of them have record backlogs and established relationships with European army and primes (and Steyr like sold off stocks, check charts). Time to wake up Mr. Market or critical sovereign plays in Europe will be delisted for nothing at bottom?

DNB Carnegie raised Remedy target price to €22 from €20 with BUY raiting. I think that will be supportive - at least outside of Finland where people have own opinions or follow Inderes recommendations.

Finally update from Remedy Entertainment with 1 million copies SOLD. Few days later than I expected, but good to have it.