Carasent AB

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.

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