Nordhealth As

Hello, everyone, and welcome to the Q2 2024 presentation. For those of you that are joining for the first time, I'm Charles McBain, I'm the CEO of Nord Health, and I'm joined by my colleague, Mari-Lena, our CFO.

Hello.

Today we're going to go through three different topics. One will start with a general company update, then dive into the veterinary view update, then the therapy view update, then Mari will go through a financial update, and then we'll leave some time for Q&A. So please hold your questions till the end. And then you can ask questions by just raising your hand or also typing messages in our chat and we can go through them either myself or Mario will answer them. Starting with the company update. In Q2 2024, when we look at growth, right, in the last 12 months ending Q2 2024, we grew 17.4%. which is within the range of 15 to 20% that we guided. Our net retention in the last 12 months and in Q2 2024 has been 108%. Our net churn has been 5.1%. We have had a cap to new ARR, of 0.8. And our LTVD CAC is still quite high at 12.5, based on last 12 months Q2 2024 numbers. We ended the quarter at 40.8 in implemented AR. And our signed AR was 42.7 at the end of Q2. This is signed AOR, just as a quick reminder, is the total value of the implemented, the invoiced revenue that we get from our customers, plus those signed contracts that are signed, but not implemented. Um, good to note as well, this number is that we do not include, um, uh, post pilot rollouts for corporates in this number, unless those are sucked. Right. So we wait until the pilot is officially successful until we include them, which is leads to a bit of conservativeness. RAR per share, which is the best, uh, short term proxy for free cash flow was a 0.52 euros per share. Next is, just to give a background, we've continued growing every year, both organically and by M&A. In 2023 and 2024, we have not done any M&A yet, but you can see we've got already quite a strong growth path in 2024. Just to highlight this better, because this graph makes it a bit tough to highlight the impact of growth, I looked at organic growth on a yearly basis, excluding M&A. And you can see that every year we've improved the organic growth. And last year we added 5.8 million euros of ARR organically. And the first half of this year, it does include some price increases, which are much more on the first half of the year, but it's already 5.1. So we've done a very good sales performance this year. Looking at the quarter-over-quarter AR growth and the breakdown, We, in Q1 2024, we started at 36.5. We've added a million of new customers of AR. And our net upsell was 3.7. And churn was 0.5. Which means that we grew quarter over quarter 11.7%. The driver of the net upsell large number of 3.7 was primarily driven by the implementation of the CVS small animal clinics. So how it works basically is when they're piloting, they're a new customer. Then when they sign, because they're a current customer, we actually add those to the upsell numbers. Now, looking at the, zooming out a little bit and looking at this year over year, in Q2 2023, we were at 34.7. We've recruited 3.2 million of euros of AR of new customers. Our net upsell has been 5.5, but our churn was 2.7. where that means that we ended up at 40.8 of implemented AR and 42.7 of signed AR. Interesting to note is that 70% of the 3.2 came from a cloud and easy practice. That 5.5 net upsell is primarily driven, as we said, by CVS, as we can see in the Q2 numbers, but also by other private clouds, ARPU and user growth. it's really important to note at the 2.7 of churn, right? Which actually is, means a 7.7% churn in the last 12 months. This is much higher than historical. So let's go through what are the driving factors behind this. Number one, right? We lost a enterprise customer of the arm. That was the reason for the loss that we explained in the previous quarters was that the customer was bought by a company which had both GPs and therapists and wanted to unify their software. So have one software that can serve both markets. That is not the case for our software, where we only tailor this to therapists. So if we exclude that, our churn rate would have been 6.2. The second one-off impact on churn is that with our acquisition and migration strategy, There are some customers which remain until the end that are not willing to shift to our software, our new software, Provet Cloud, but instead want to go to a new software or not new software at all. And so when we've sunsetted Provet Win and NetServe, those last customers are now churned, given that we stopped their membership. So that would actually have churn be around 5.5. And we do foresee the long-term average churn to be roughly around 5. There'll always be noises, right? But upwards or downwards, right? Because it's highly sensitive given this low churn. But still, if we put into perspective, 5% churn means that someone stays with us for 20 years, which is incredibly low. Next important thing to note, which I highlighted in the first page, but I'll re-highlight here, is that the Feds for Pets post-pilot route is not included in this 1.9. Only the pilots are included. Now, on the profitability side, we're very happy to announce that although we had forecasted to breakeven in Q1, 2025, we actually have been able to achieve that EBITDA minus capex margin breakeven in Q2, 2024. So this was maybe driven by the fact that we accelerate the implementation of CVS, right? Which you could see in the recurring revenue numbers. Now going into the veterinary updates, So in Q1, as we mentioned a few times, we started the CBS rollout, and we now have 385 locations live on Provide Cloud. We still have further locations to implement, but this is a good initial start of this project. We also were able to deliver this project in record time, which was an incredible feat from our UK implementation fleet. In addition, excluding CVS, we also signed around half a million euros of new AR in Q2 for veterinary customers. And also an interesting milestone is that our payment solution, ProVetPay, has reached over a million euros in AR in Q2. And they are just for everyone for payments, how we do it. It's just the amount that we make on, uh, does not include the full payment volume. That's one way, which is hard, right? It does not include the transaction fees that we pay back to IDN or to visa or mask card. It's just the additional revenue that we generate above that. And then. Lastly, Vetsr has successfully been discontinued and customers migrated to Provide Cloud in Q2 2024, which is a big, significant achievement. Now, looking at the year-over-year breakdown of ARR growth, We ended Q2 2023 with 18.2. We were able to recruit 1.7 million of new customers. We had a net upsell of 4.2, which is equivalent to a net retention rate of 118.7%. And we had churn of 0.8, which is equivalent to a 4.4 churn. And again, excluding these one-off impacts of probit, win, bet, serve, right? That churn rate would have been 2%. Which is an absolutely ridiculous number, right? It's very, very low, which is a testament to the stickiness of our products. Then 33% of the growth in new customer was accounted for by, came from new customers year over year. Looking quarter over quarter, you can see the more accentuated impact of the CVS role with 3.4 million. And we grew over 20% in one quarter, which is a great performance by Walter and his team in the veterinary business units. And despite us having very strong new jobs now, we also were able to sign quite a few new customers, around 700,000 new customers. And you can see that the churn rate is normalizing as well. And from a EBITDA as CapEx level, we also were able to, we improved it quite significantly by 1.5 million year over year. And you can see the drivers of that improvement. One was the implementation and one of license revenues, 1.3 million. Second was recurring revenue growth. That's more of a constant one that we have over time. However, this was negatively impacted by the investments we had to make to support growth of 1 million. Now, going on to the therapy update. First is... Our new implemented AR year to date ending June 31st was $55,270, which is slightly above our target. So we've been able to sign up new customers quite well. Recurring revenue was slightly below targets due to higher churn and downsell. And also the price increase was easy practice as we're looking to do a more thorough price restructuring to be able to match the pricing of Aspen. Also on the growth side, our new product, our booking portal, we've had at the end of Q1, 334 therapist profiles signed up to the booking portal and they've made just over 1,500 bookings. So we're very excited about the booking portal's ability to improve access to care in addition to improving the ability for customers to be able to have a better experience on the booking process. From the migration side, migrations of gaps between hospice and easy practice have been more extensive than we initially foresaw. At the end of QM, we had only migrated 34 of the 73 single user private therapists. because we've been focusing on all users which don't use Norwegian HealthNet, which is a big blocker currently, which we are looking to solve very soon. Interestingly though, the feedback has been very positive from these clinics and we've had no migrating customers churned. From a new joining perspective in the team, we welcome the new principal product designer to help improve the design of EasyPractice, We've also hired a principal software architect to help us scale the platform, right? And we've been aggressively recruiting full stack developers to be able to accelerate the migration. Also in Q1, we completed the functional restructuring and hiring of BU CEO was completed. What that means is now that instead of having each product have its own GM, we are split by functions, sales and marketing, support, product and design and engineering. In addition, Christian is focusing to helping us on the implementation of the new upgrades. A bit about our new GM. We have recruited Karan Valia to join NordHealth. He will be joining us on September 2nd. Prior to NordHealth, he started his career at Microsoft as a senior business development manager. Then moved to Europe, where he worked in products as director of product development, responsible for the homes and apartments, hotel chains and new segments. And prior to that, at Booking.com, he was also in a similar GM role, focusing on launching a new product as part of Booking.com called Booking.com. And prior to joining us, he was at Smart Recruiter where he was a general manager and then a senior VP of product management. One thing that we're very excited about is Karan's strong and deep product history, which is increasingly important as the directly business units under our flagship product, EasyPractice, has a strong product-led growth focus. Now for the results. Year-over-year, implemented AOR has grown 5.4%. We've had very strong new customer acquisition growth. Our net retention, however, has been very low at 97.9. You can see from the 1.2. And our churn, which is most a driver of this net retention, was very high given this one-time impact. And you can see excluding that impact would have been quite a bit lower. We've shaded that separately. Also important to note, which affects that retention, is that we haven't done a price increase in the last 12 months for easy practice, as we're aiming to change the pricing model in late 2024. Quarter over quarter, we grew 2.1%. which is 300,000 came from new customers, met upsell of 300,000, and churn was 0.2. So if you look at this as we go from quarter to quarter, you can see churn is decreasing from 11.3 when we had this initial loss of customer, which continued in Q1 2024 with 8.8, and now it's 6.5. And we can see that although we are quite profitable on this capex level, right, including group allocations, in Q2 2024, we decided to accelerate the investments in development to be able to accelerate the migration. And you can see the drivers of the results are known between Q2 2024 and 2023 are yet recurring revenue growth, which counted to 200K. But as we said, product development and sales and marketing investments have actually increased. Next I'll leave it to Mari.