Carasent Asa

Good morning and welcome to our presentation of the third quarter. My name is Daniel Erman. I'm the CEO and with me I have Sven Martin Björnstad, our CFO. We'll start with the company update and then Sven Martin will continue with the financial update. Looking at the quarter, we have a quarter of solid improvements in all areas. A trend which we see will continue each quarter going forward. We have a good organic growth. And almost all that growth translates into higher EBITDA, which we are very pleased with. And as I say, that's a trend we see continuing forward. We are now on the home stretch of listing on the Nasdaq Stockholm. We aim to have the first day of trading in December. And we believe that we are now past all major obstacles, even though there are some final approvals still awaiting. In the quarter, we have one high one-time cost, and this is related to this relisting, but also from the EG process and the acquisition project in Germany. So quite high one-time cost in the quarter, which we see becoming lower going forward. In the report, I also highlight that I see a risk that the Volvat implementation might be a bit delayed. And to explain a bit why that's costly, I think it's worth going through the contract a little bit again. That contract has an ARR of 6 million NOK, and all that will translate to EBITDA once the contract is up and running. Furthermore, we're doing quite a lot of development work for them. And if this year, 2024, it's around 3 million NOK, That's half the price would normally take for development work. So that would typically have been six million NOC of turnover this year. So in total, we have an EBITDA swing of nine million NOC once that contract is up and running. Now, we never calculated for a majority of that to be active next year, and it won't be because it will come on clinic by clinic. And we started to make sure everything goes well. So we might see a small delay in that contract. It may take away some of the headrooms we had in our goals, but we still believe strongly in our goals. But, you know, you always want to have some headrooms in your external goals. But also at the same time, we see sales picking up. We have really good discussions with new customers. So I saw we did another big sale this morning, actually. So we still believe that the goals are very much realistic. If looking at the growth, we have a sign of the ARR of 17 million NOC, and a 17% organic growth. And the total, we're now at 23% contrary to ARR growth, above our target of 20% for next year. Looking at the profitability, we see that EVTAC is also improving considerably. It's however worth noting that in the third quarter, we always have improving the quarter as such, but we have big improvements from last year. In total, we have an organic growth of 11 million NOK in the quarter. If we add SINOT implemented ARR or quarterly Recurring revenue in this case, we are at 50 million NOK. As you also can see here, we had last quarter, last year, the same quarter, we had 2 million NOK of turnover for Confrere, a company we now have divested. Looking at IBSTAC, which is the financial metric we follow most closely internally. So growth and IBSTAC is what we're looking at. We see that almost all of those 11 million NOC becomes improved IBDAC with an improvement of 10 million NOC. And looking at this chart, here we made some changes. So now we moved HPI and Adopus into operations. They were previously in a separate lane together with Confrere. As you saw that there, we had to do a lot of improvements. So Confrere has now been divested. and HBI and other offices are not losing large amounts of money anymore. So now looking at operations as such, it does not mean that we still need to continue to improve in that area, but we need to improve in all areas. So it doesn't make them unique in any sense anymore. You see the growth of 17%. You see that operations have improved the EBITDA from 11 million to 18 million in the quarter. and IBDAC from 5 to 30 million. WebDocX is now at the running cost of 4 million each quarter. That's roughly where it will be. We're not aiming to go lower. This is where the running rate will be. We have a really efficient team doing good improvements in the development. We said it's been very stable now. We have done a lot of changes to that part of the organization, got rid of a lot of consultants. So we're quite happy with where that project is at the moment. But also lower costs somewhat at the HQ level. I get quite a lot of questions about the situation in VGR and Millennium. So I thought it was worth talking a bit about the potential consequences of that situation at this call. So the background is that Västra Götalandsregionen, VDR, has decided many many years ago that when they change to Millennium as their EHR system in the public care all private providers providing public care should also change and work in the same system. And they do that in order to make sure that the information can flow between systems. That can be a accomplish in many other ways too. You can use the APIs, you can use robots, you can use the national services that are to change information in Sweden called MPR. Most users know it as 1177. So there are many other ways of accomplishing most of what they want to accomplish. All the caregivers really, really want to avoid going into Millennium. It's a very old system. It fits them really badly and it's much more expensive than their present system. The price is not the major hurdle. The major hurdle is that it would really, really hurt them financially in their operations, that they will become much less efficient. Where we are at is that, according to the region, the first private primary care clinics should move into Millennium by the end of next year. That will most likely be delayed again, but that's where they are at the moment. And that will just be a few clinics. and looking at the potential outcomes when now the private providers are trying not to get in there we are supporting them heavily there will be legal processes there were quite a good case a really good case i think it's more likely than not that they will succeed but you never know with those type of cases it's also might become obvious or and quite likely they will become obvious for the region this is not a good idea it's really difficult for them to be a good provider to the private providers of electrical health record systems. But the potential and range of outcomes is what I wanted to show you. So if the region would succeed and actually manage to get rid of the legal cases, manage to squash all the complaints from private providers, and actually manage to roll it out, then it would be a one-time churn of 15 to 25 million SEK. and in the late 2026. Why it's a range is that we cannot see what our customers are using WebDoc for. We're not allowed to go in and see what type of patients they have. And they are only allowed to use Millennium for the patients they take care of for the public. So not occupational health, not insurance, not private pay patients and so on, not vaccinations. So most or many might have to use double systems. So that's why we have a range of the worst case. A new sales would be unaffected. We're not able to sell to customers at this moment that are expected that they might have to go into Millennium. They are not buying a new HR system at the moment. Then if the provider succeed and stop this, then we would have zero churn and we would see a big increase in new sales because at the moment we cannot sell to the region where we are the largest and most well-known. So we would, in this scenario, see a big increase in new sales. And then there's the middle ground. As I said previously, many might have to use double systems. Millennium is a really bad system for our customers. So they might want to stay in WebDoc, and then we transfer data into Millennium. as we do in Stockholm, where we now have either first going back and forth between the public system there without the region actually opening up anything for us. We have to solve it at our end. And then users would likely increase in this middle ground because then they know that they can use Webhook for certain patients. So this is the scenarios that we could end up in. I think it's more likely not that we will succeed. And then we have a big positive scenario. And then in worst case, we have roughly one years of growth that in the worst case, we would lose. Last update is from June, which was very positive that private specialists will be excluded. They do not have to go into Millennium anymore. So looking ahead, going forward, We see a really big interest in surgery. We've been developing that for quite some time now. And it will go live early next year. And we can therefore start selling it now. And we aim to sign multiple contracts in the coming months. We believe that we have a very strong offering and have a very positive response from the potential customers. We will continue to work with efficiency. If we every month get a couple of percentage points more efficient in all parts over a year, that translates to big improvements. And over two years, it's even bigger improvements. And we can do a lot to become more efficient. I mean, most of the organization is new, either from a structure point of view or from the people or both. So that means that there's still a lot to get in place and to become really, really efficient in all parts. And that's something we're working hard at. An important area for us is cost control in this line. I think the connection dropped there. I hope that I was at efficient use of resources. And the most important part for us now is continue cost control. There are so many things we can develop for our customers that create value. And there's no end in the number of projects we could start. And all of them would have a positive return on investment. But we cannot let cost grow in that sense. So that's why we have chosen that we have quite a large development organization. But this is the level it should be at. And then we prioritize projects and choose the ones which create the best return on investment at a reasonable risk. So we continue to work hard on the financial follow up and have a very clear understanding of where we're heading. The third area for us is the launch of WebDocX. The focus is still on certifying WebDocX for Germany. It's taking a little bit longer than expected, but should be there in the first half of 2025. We have the first German pilots going live now, so physical clinics actually using WebDocX. They're not using it for all circumstances. They aren't allowed to do that yet. They are using it for part of their processes. And we're still working hard on the acquisition of a strong German position. I think we are in a good place when it comes to that, but I cannot say much more about that at this point in time. With those words, I would hand over to Sven Martin.

Thank you. So looking at the financials for Q3, we saw good improvement across all our metrics in the quarter. We now have a contracted ARR base of 277 million NOK. And that has grown with 23% organically over the last year. And that is, of course, boosted by these three large contracts that we have signed. That is still in the backlog, but not yet in the reported figures. The reported recurring growth was 17%. And that is also a step up compared to what we have posted the last few years. I would say the main driver of this is WebDoc, where we continue to have a good pace on the sales side. And we have seen an increase in both signing new customers, new clinics, and also selling to existing customer functionality. HBI is also growing fast, and Meddrave as well had a good quarter with growth. We had net retention of 113%. I think it's worthwhile just recapping how we calculate that figure, because these customer groups where we have such as, for example, Capio, there we have many clinics, but they are counted as one customer in this figure. For WebDoc, we have signed a lot of clinics for Capio and other existing customers, and that is also a main driver of the net retention. Margins is also improving. We are still at quite modest levels, but it's improving rapidly as we see. In terms of contracted ARR growth, see that the net upsell was 14%, churn is stable at 2%, and new customer growth was 4%. And then we have this big jump in the revenue backlog from 2 million in the same quarter last year to 17 million now. And that is driven by the contract with Volvat for Methodica, VGR for Medrev, and Frilsesarmén for Adcuris. And these contracts will be gradually implemented next year. And that is a key contributor to our growth next year. Looking at the profitability, we see that we are improving every quarter. And we are now at EBITDA of 12 million and EBITDA of 8 million, excluding the investments into WebDocX. or 11% margin. And in addition to the revenue growth, we maintain a very high focus on cost efficiencies. We have done several measures on this this year, including, for example, renegotiating prices with suppliers. We have changed from consultants to employees, reducing costs, and we have also removed several roles during this year. And I think it's a promising signal as well for the future that we have capacity to grow further. And when we do a budget now for next year, it's very limited roles that is even being requested by the organization. So the organization is fully on board with the strategy and the plan to keep costs flat for a long time. If you look at this slide, it shows our P&L for the quarter and year to date. I think I would like to highlight a few different figures here. Firstly, you see the gross margins improved from 80% to 85%, which is quite a big increase. That is driven by two factors. Firstly, that we sold confrere, which was dilutive. And secondly, that we renegotiated costs with the hosting supplier in Norway. So it's a big increase and it's sustainable as well. Secondly, the non-recurring expenses is high in this quarter for the cost for the EG process and also for the relisting. And we will have additional costs for the relisting in Q4 as it concludes in December. Thirdly, the third figure I would like to highlight is the EBITDA minus capex for the group, including all costs for WebDocX. It's also positive now at around 4 million or 6%. But it's worth noting that it's some holiday effects in there as well. In Q3, as we have lower personnel expenses as people go on annual leave. Finally, the cash flow has improved a lot year over year, but it was negative in Q3, the free cash flow, and that is basically mainly driven by this working capital effects where we pay out holiday to the employees and also holiday payments to employees and also this one of costs as well. But in general, a good financial quarter with solid improvements in line with our targets and our plan. So with that, we can take the questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Fredrik Nilsson from Red Eye. Please go ahead.

Good morning. Can you hear me? Yep. Good morning. I want to start with the situation in VGR. I mean, as you mentioned, specialists will be excluded. Does that eliminate the region succeed Or is that included in those numbers that you presented?

No, that's included in the numbers we present. So, I mean, we've been growing with customers all along. And also the specialists were never being able to fully go into Millennium as they have so much insurance patients, private pay and patients from other regions. So they would always stay within WebDoc to a very large percentage.

Okay, thanks. And now that the surgery module is more or less finished, could you remind us of the market potential for that functionality?

The surgery module? Yeah, we have calculated it to be around 150 million SEK in Sweden. It's typically bigger clinics than than what we normally sign and yeah that's been our calculation.

Okay and given that you sound quite optimistic regarding the prospects the customers or potential customers being quite interested already I mean could you elaborate a bit on your expectations I mean should we expect I mean, a meaningful increase in new sales or what's your expectations?

Yeah, yeah, that's my expectation. And that's what's also included for numbers next year. I would say it's a meaningful increase in new sales. So study is a part of that, even though these are large clinics typically, so they take a bit longer to sell to and it take a bit longer to implement that. Normally a small clinic we can sell to and implement sometimes even the same day. A lot of things like this, you have a lot of staff to educate, you have to do it in, they have to take turns because they don't want to lose production and so on. So we will see the actual payments come from new clinics that will take some time before they start coming in. But signing contracts, I would say they're accelerating the coming months.

Okay, and lastly, could you elaborate a bit on why you are more successful with the semi-cold cases, as you mentioned? What's the new thing you do there?

Yeah, so I think that our sales and marketing team has done a great job. It used to be, the last couple of years, WebDoc has sold mostly through or almost only through potential customers emailing us saying that they want to have WebDoc. And then we have contacted them. Now we have done so much, actually. But we're very active when it comes to marketing, social media, IP-directed marketing to create leads. And we are very visible for our customers. I think that's important to be visible, that they think about you and they have you on top of mind. And I think there are many potential customers going around thinking that, ah, the system I have is quite bad, but it's a lot of work to change. Let's do that later. And those you can push, I think, to change systems earlier. So and what for the sales department, we have moved from almost only fixed salaries to 30% variable pay based on your own performance the last month. So some of our sellers now have been like almost twice the normal salary set months. So it creates very strong incentives. We have also divided all present or potential customers between the sellers so everyone knows who are their customers. Otherwise, it's difficult to start working on. And we have introduced a CRM system so that we have a better understanding of the customers, what they're using today, and that we can also do additional sales to present customers. So far this year, we've been selling to new customers a bit faster than planned. We've been a bit below plan when it comes to additional payments, additional sales to existing customers. That has really increased the last couple of months. And I think that we are learning. It's a process both for the individuals as such, but also for the organization to learn how to do this type of sales. And that, I think, is the key.

Interesting. That's all from me. Thank you very much.

Thank you, Fredrik. Thank you, Fredrik. We also have some questions in the chat. So first one from Rasmus Persson. Good morning and congratulations on the strong quarter. Thank you. Could you clarify what you mean by scope regarding the Volvo contract? Are they increasing the functionality, number of clinics, or what are you referring to also? Is it possible that it will lead to larger ARR from that customer?

Yeah, so what I think is there are a couple of different things that has increased the scope. For example, they were planning to use their own billing system or an external billing system. There is a built-in billing functionality in Metorica, which they did not plan to use from the beginning. But now when they've seen how well it works together, they're planning to use our billing system instead. But then they want some additional features in that. They've also asked for a patient portal so patients can rebook their appointments and chat with the clinics and so on. We already have that in WebDoc, but we do not have that in Metolket at this moment. So we are developing that. So that's the type of thing that goes into the increase scope. It will give us some extra income from consultancy, but that's not what we look for, but that will be full price development. So that's better at least than what we're doing at the moment. And also some of this functionality we can hopefully sell to other providers, for example, the patient portal. So it will lead to better income going forward. It also will lead to more satisfied customer. So I think there are many positives in it. And we're talking about a couple of months delay. So it's no major thing and the contract is still really good. But, you know, being on the stock exchange, a couple of months delay is not very fun and it hurts.

Next one. Are there any large tenders in the market in the coming 15 months, such as the one you took with Medrave?

Yeah, I think it's quite likely that we'll see. We have signals that there might be tenders for Medrave, for example. I also think that it's possible for us to take large contracts with both WebDoc and Adopus in the coming six months. That's not a promise, but there are quite a lot of opportunities out there, so I'm hoping.

Yeah, and the final one here. The Suicide Group went live in September. Will the Will the changes to these regions affect your ability to sell into those markets in any way?

So the SUSE group is a couple of regions using Cambio and they went live in, it's not a real cloud solution, but one of those client server cloud solutions of Cambio, the same system we had most of them. It does not change anything for us. These regions have very little private care and we are not focusing on them.

Great. Next one from Niklas. Can you tell us a bit more on the development for HBI? It seems like you are investing in new staff. What's your view on the product going forward?

We're changing staff from consultants to employees. So it's not new stuff. We're not increasing costs at HPI. But my view of the product is that it's a really good product. It has a strong position within occupational health with almost all occupational health in Sweden using them. We have interest from Norway also on that platform. And to take that platform to Norway is not a big thing. You just need Norsk Bank ID. and you need the language. So it's very easy to take it to a new market. It's not like an HR system. But the challenge for the platform for HBI is that occupational health compared to healthcare is quite dependent on how the industries are doing. Occupational health is the first place you can try to save money on before getting rid of staff. So it's quite sensitive to downturns in the economy. So that makes it a bit harder to grow that compared to our products for the healthcare market. But still, it's a really good product. It can really improve how occupational health can work with both the customers or their employer, but also with the employees. I think it's a great product. We have big interest from both small and large occupational health care providers. The downside with that product is that they need to change somewhat how they work. And typically, I don't think we should develop solutions that require that our customers change how they work. We should allow for changes in how to work and improvement in workflows. But we also need our products to support existing workflows because otherwise the barriers to sell are too high. So we're trying to never end up in that scenario, but sometimes you have to, and this is a big improvement, but it requires more from the customers than our new products typically do. And I would say that's why it takes a bit longer. But that being said, they're growing very rapidly in our market, which is quite challenging at the moment.

Next one from Emilia Simby. Any updates on guidance for 2024, but also 2025, given what you are currently seeing?

So, no changes. As I mentioned earlier on the call, we are a bit worried about the delays involved, but we removed some of the headroom we had in the goals. I mean, you really want have headroom in external goals so that you can beat the external goals and that's why we want to give heads up because we have a really good overview where we're going we have good cost control we know what we're selling we see the pace of what we're selling so but we still believe in our goals we should be able to fulfill them so they stay as they are okay

There are no more questions in the chat.

OK, then I would just like to thank you all for listening in and hope you all have a good day. Thank you.