Carasent AB

Hello, everyone, and a warm welcome to Karasen's fourth quarter report. My name is Dan Hjelman, and with me I have our CFO, Sven-Martin Björnstedt. I will start with some highlights from the fourth quarter and a company update. Thereafter, I will hand over to Sven-Martin, who will give a financial update. In the fourth quarter, we continue to improve our underlying profitability significantly, and also we took many steps towards improving our growth. Especially, I would like to highlight that in the fourth quarter, we sold for more than in any quarter before. Looking at the summary, we had a growth of 15% year over year. But only in the quarter, only 8% was organic. But what we really focus on is our ARR. And the recurring revenues grew by 13% in the quarter. And our focus on recurring revenue hurts our revenues short term as our consultancy revenue becomes lower. And the reason is that we want to make it as easy as possible to change to our systems. It's big enough to change HR, but we really want to make it easy. So we don't want a lot of upfront costs. So that's part of the reason. The other reason is that ARR is much more valuable to us than one time incomes. So for WebDoc, which has no development for a specific customer, that means that we give a lot of rebates on education and implementation of WebDoc when a new customer comes in. But we give very little rebates, if any, on their monthly fee going forward. And this is especially true for Metodica, where we have a lot of customer-specific development, where we now give all rebates. and very little, or if any, on their recurring revenues. Metodica is roughly 50% of our consultancy income. Looking at our sales in a quarter, the most significant milestone is that our new contract with Volvat, which is one of the largest healthcare providers in Norway. It will give us a revenue of roughly 7 to 9 million per year, whereas most of it is recurring revenue. It will go fully live by the summer 2025. Also in the in the quarter, we signed an agreement with Joint Academy for WebDoc, which is another quite big company, not as big as Volvat, which will go live later on in this quarter. We also distributed roughly 250 million NOK to our shareholders and set new financial targets in the quarter. Looking at our turnover in the quarter, it was 65 million Norwegian kronor. And as mentioned before, we had record sales in the quarter, but it takes time from sales implementation, which is reflected in this number. If we're looking at EBITDA, you can see that we are capitalizing less than we used to. This as a smaller part of development is in new products. It is still, however, the case that even if we do not capitalize as much as before, the majority of all our spend is to increase future growth. It's not to keep present customers. Underlying the EBITDA C, so EBITDA minus capitalization, continues to improve. You can see that we lost a little bit. We went from minus 12 to minus 30% in the quarter, but that's seasonal effect. The third quarter is always better from a profitability point of view for us. And that's the effects from vacation. So almost all vacation are in the third quarter. You can see the same effect in the third quarter of 2022, where we were on a downward slope. But that quarter, EVT-AC improved, actually. And that's because of the vacation effect. And then just to give a brief recap on everything we've done during 2023. to address our financial and growth issues. So we have enacted a cost savings program of 40 million NOK on a running basis. All of those costs are related to employees and consultants that we have, those who have taken out of the company. We also prioritize quite heavily among our products. We used to have two international projects, one for Norway and one for Europe, WebLockAid. We couldn't continue both projects with high quality and costs in line, so to speak. So we chose to focus on Germany with WebDocX and close down WebDoc Norway. Also, in the organizational structure, we have reduced complexity a lot. So nowadays, each product is its own P&L, and we have very clear lines of responsibility where I can keep each head of each product responsible for their performance, both when it comes to growth and financial results. The most important part, I think, if we look a bit further ahead, is our focus on business with a strong sense of urgency through the entire organization. And of course, if you do a cost experiment, we're done. That helps a lot for this. But also, we continue to push this. And everyone in the company knows that what we need to do is to improve growth and keep costs flat. That's the focus of what we do every day, increase growth and keep costs flat. And finally, we have improved our capital structure with the distribution of 250 million to our shareholders. Tell you a little bit of what we have done. After the end of the fourth quarter, we have sold Conferrera. The most important reason why we've done this is to reduce complexity, and this allows us to focus on our larger products. It will also improve our financial results quite a lot. Confrere had a turnover of 9.3 million NOK in the last 12 months, and an EBT effect of minus 1 million NOK. They also had a negative growth of 18% year-over-year in 2023. So it was a part of Casentagor going down in size, losing money, and not an important part of the entire product. And now we can focus on our core with sticky product with minimal churn. Standalone video solutions is an area with low margins, high competition, and high churn. We don't see it as a very attractive niche. The financial impact of the sale is, of course, that our results will improve, both from a turnover point of view that we will start growing more rapidly, but the bottom line will be more profitable. We will have a right of approximately NOK 5 million because of the sale. This can improve if Compodium, the buyer of Confea, is successful in transferring customers to their platform. Now I will show two new slides where the goal is to increase transparency on how we are progressing. And first of all, here we look at the full year of 2023. And the first column here is what we call operation. So it's all our products except HPI, Adopus, Confreda, and WebDocX. And what you can see here is that the majority of Calcent is doing quite OK. So 84% of our revenue is in what we call operations. We have an organic growth of 15% in that part of the business and an EBITDA margin of 23%. So we have a core that's doing quite okay. We're not satisfied where we are at the core. This is where we need to increase our growth and keep costs flat. Then we have our area with products which are a little bit more of a challenging situation with HPI, Adopus and Confrera. This is only 16% of our revenue. It do cost us quite a lot when it comes to growth and also when it comes to EVTAC. We have now sold Confrera which will improve this part of the business quite a lot. HPI is doing better and better and the same with Adopus because we have lowered costs quite a lot in the fourth quarter within those two businesses. WebDocX is our new medical record system for Germany. And my view is that this part of CalCent has the potential to be much more valuable than the rest of CalCent combined. The reason being that Germany is the largest healthcare market in Europe. They are far behind Sweden and Norway when it comes to EHR systems. They've just opened up for cloud solutions. And there is no strong incumbent there. There are just a lot of really, really old systems that our competition in the country is milking, so to speak. So we believe very strongly that there is a big month for us to take in Germany. And finally, we have the head office. And looking at the entire year of 2023, As you all know, we have lowered costs by roughly 40 million NOK on a running basis. But if we would have done that cost saving program before 2023, the results in all this column would be roughly 20 million NOK better than what you can see here. So the EBITDA2 would be roughly 32 million NOK. Looking at the same structure for the fourth quarter, we can see that we still have the core, which is doing quite okay. The growth is a bit disappointing, as I mentioned already. We sold for more than any quarter before, but actual revenues that come in in this quarter are a bit lower, and that's most because of the consultancy being lower. And so Martin will go into that in more detail later on in the presentation. But we continue to keep costs flat and to grow. When it comes to HPI at Opus Confrere, as you know, we sold Confrere. HPI has been growing quite a lot lately. That's why we now have organic growth of 0% in this part of the business. And HBI's new products are actually growing exponentially. And that's what we typically see when we have a new product of this sort is that you first get one user, then you get two users, then you get four users, then you get eight users and so on. So it's typically that you see an exponential growth. When it comes to the new products within HBI, it's from a low base. But if that trend continues, it will look very promising. And it seems like it. The customers are happy with the product. They want to implement it. So I have strong faith in HBI. Adopus, we will see that they continue to lose customers and lose revenue during 2024. The reason being that the contracts within Adopus are one year contracts. So you can only, they always end at new year. So we had customers who signed in from Adopus during 2023. And that will take effect during 2024. However, now we have the new Adopus web that's been live for a couple of months now and which has strong interest in customers. So I expect to see Adopus start growing by the end of the first half of the year of 2024. And otherwise we'll have to take further actions. WebDocX is now at the run rate it should be. roughly and also will reduce costing at the headquarter quite a lot compared to where it used to be and in total you can see that we much better than the same quarter last year and we will continue to show this structure and this setup so that you can see how we are improving in different parts of California and I hope this is a good way of showing how is we are actually doing Looking a bit ahead, I mentioned it a couple of times now, we have a strong focus on growth. What I would like to highlight especially is that we've been working a lot with sales during the last four, five months. We now have in-house digital marketing in place. We're getting better and better at doing those videos. I hope you've seen some of them on LinkedIn with our customers, explaining how very happy they are with our products. The next set of videos will focus on that it's much easier to change systems than you believe. And most caregivers, I was one of them, really think it's so difficult to change systems. But it's not. And if you're looking at our customers that have changed switch systems, they are really happy. So we hope to get some strong testimonials on that. We have implemented a CRM system in the fourth quarter. giving us much better visibility on how we're progressing. We can really see the funnel and how we're moving forward, which will allow us to act quicker. It also allows for our sales people, but also support and implementation to work with existing customers to have a good overview of what they have and what they don't have of our products. We will also be able to much better target potential customers than we used to be. And I would also really like to highlight that we've changed the remuneration model for our sellers. They used to have 90% flat income and 10% group bonus paid out by the year end. Now they have 70% fixed salary and 30% flexible salary, which is dependent only on your individual performance and is paid out after each month. So giving much stronger incentives to really push forward and seek out new customers with the help of a CRM system and everything else we do. And this should be seen in addition to everything we do to improve the product. E-Refers in Stockholm is now live with the first two pilots with good reviews. What we haven't spoken about in this type of forums before is that we also have our archive module up and running. And the point of that is that when you change to WebDoc, you will be able to see the medical records from your previous system within WebDoc. And this is really important because it used to be, if you don't have this type of setup, that you have to run double HR systems for roughly two years. And the reason being that when patients come in to see the doctors, the doctor needs to know about the patient's medical history. And it takes roughly two years to have everything in the new system. So with this, you can close down the old system and More importantly your staff only needs to log into one system and can work with it once you can be much more efficient so that really is the change and Coming around the summer autumn. We will launch their surgery module but so far we have really good collaboration with our Existing and potential customer for that solution. So it's really good. I think when it comes to efficient use of resources uh as i mentioned before we aim to keep the cost flat but there are always new demands for example we're investing a lot now in compliance and it security so that we increase costs then that means that we also need to take out costs constantly within the organization so for example at the moment we are looking at reducing roughly eight roles within the organization at different levels, and that's to make room for other roles. So we're working very hard to keep staff costs flat, even as we're growing and doing more things. We also work at optimizing our cost base. It's a lot about prioritizing what costs can we actually take and what can be prioritized. and we are improving procurement an example of this is that we have now procured new hosting in norway for our norwegian products and that costs that have diminished cost by roughly two to three million per year and we're now looking to do the same in sweden for our swedish products and finally uh we're focusing on launching webdocx uh which as i mentioned my view is that potential to be more worth than the rest of kathleen combined um the present focus in our development is for certifying the system for germany and that means so to certify it for the insurance market in germany and what you then certify is the billing module which has to fulfill i don't know roughly 200 different demands so that's a lot of the work now and that's really the big hurdle for germany Other than that, there is very little specific needs in the German market. There are much more specific needs and requirements in, for example, Sweden and Norway. And I think we have good initial dialogue with potential partners and acquisition targets in Germany. And that's where I and some of my colleagues will put a lot of the efforts this coming month. So having said this, I will hand over to Sven Martin.

Thank you. So looking at some of our key financial highlights in the quarter, we had revenues of 65 million in Q4. Of this, more than 90% was recurring revenues, and our ARR was 239 million at the end of the quarter. growing 13% year-on-year organically and the net retention of 108% shows that the position we have as business critical systems for our customers. We have also taken steps in the right direction on the profitability side. The cost savings program we did in Q2 is starting to show results and we had the EBITDA margin of 10% in the quarter and the EBITDA minus capex margin of minus 13%. In total our revenues grew 15% year over year and this was partly driven by the acquisition of HBI in November last year and partly by currency. But our recurring revenues, which was 91% of total, grew 30%. Which is quite in line with how the growth has been in the last five, six quarters. Our key strategic focus, as Daniel mentioned, to grow this going forward as well. Total organic growth was 8%, which is slightly lower, as we saw a decline in consulting revenues. Metodica is basically around half the consulting revenues we generate, and Metodica was very much focused on winning the Volvo tender process in Q3 and Q4. So that also impacted the consulting revenues, I would say. So as mentioned, our recurring revenues grew 13% organically. We have a very strong basis with the high stickiness and low churn. Our net upsell was 11% year-over-year from existing customers, and churn was very low at 3% And the little churn we have is really not coming from the core. Our two smallest products Adopus and Confrere generated almost half the churn that we see in Q4. Confrere is now sold and Adopus We will face some headwinds from January, but we are also seeing very promising signs from the market that we are able to turn this trend going forward. Excluding these two products, churn is basically around 1% to 2%, and that includes involuntary churn, so people going out of business, retiring, et cetera. So the voluntary churn for customers leaving our system are very close to zero actually. So this clearly demonstrates how business critical our systems are to our customers and the very strong position we have to build from for all of our products basically. New customer growth was five percent which is in line with the previous quarters and the currency effect and M&A brought the total growth to So, our ARR was driven by the same organic trends as the reported recurring revenues. However, we are starting to see that our investments into new sales is starting to generate results. orange part of this graph. It shows the ARR we had signed but not yet implemented as of year end. So basically our revenue backlog. And this figure was 8 million at the end of 2023. The same figure last year was under 2 million. So it basically shows that our backlog has grown for four times in size since last year. Also, if you compare that backlog of 8 million to the total growth from new customers during 2023, it was 10 million. So this clearly shows that we are starting to build a very solid foundation for a step up in growth going forward. It is, of course, boosted by the Volvat agreement, which will have a main impact in 2025. We are also seeing promising signs and an increasing amount of promising dialogues, I would say, on the sales side for WebDoc particularly, but also for our other products. Finally, we are also seeing that profitability is improving gradually. We see the effects of the cost savings program we completed in Q2. The cost base remains high compared to our revenues as we invest in future growth, but as we have shown, we strongly believe that this is the right thing to do in the long term. And going forward, we basically aim to grow our revenues and keep our costs quite flat. And if we are able to do this, we have a gross margin of around 80%, which can basically be translated directly into our cash profits going forward if we are able to keep operating costs flat. We are also working on optimizing the cost base in general, and we monitor all parts of the organization very closely so that we develop according to our plan. And if we have this very high predictability and stickiness in our revenue streams, so if the growth we plan for does not materialize, we are also able to adjust costs very quickly to address that. So with that, we are done with the initial presentation and we can open up for Q&A.

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