Carasent AB

Good morning and welcome to our presentation of the third quarter

We will start with me giving a general update, and then Sven-Martin will continue with the financial update. First, just a quick overview of the business. As you all know, we are a fast-growing SaaS company focused on healthcare and especially HR systems. We have 16% organic ARR growth in a quarter, more than 90% recurring revenue, and a net revenue retention of 111%. looking a bit on the highlights of the third quarter we have really good improvements i think and roughly according to plan and i'm especially happy about the a bit the ac improvement from minus 2.2 million q3 last year to 12.2 million this year and this is based on continued growth and and good cost control and we just continue to to run the business that way um Looking at WebDoc in the quarter, when we were working on their price models and also implementing a new CRM system, we were not totally happy with the old one. We identified a few customers that we invoiced the wrong way and that we have corrected. So it's a hit of roughly one million in the quarter and on an annualized basis. it will hit us roughly by 2 million each year. And it's never fun to take a step down in the recurring revenue. But what's more important for us is good long-term customer relations and good reputation that we continue to sell on. So it's a one-time hit, and all is good with those customers now. So we're in a good place with them, and that's the most important part. What I find really fun at this point in time is that we have very many long development projects that are now reaching the market. And I'll come back to that on the next slide. Looking now at Q4, it would be really important that we succeed with two implementation projects. The first one is Evolvat. I think you all are aware of that, but that's Capio Norway. where we're implementing a method for all the hospitals replacing six different present HR systems. So it's a very big exercise and most of those users are planned to go online in the end of November. So that will be a big project and when that happens we will start getting the recurring revenue from those users and we'll also be able to invoice some consultancy work. So that would be important to get online in time. and also that will allow us to start working with other projects and other customers for that product. The other part that needs to be implemented in Q4 we want to implement in Q4 is within data also our German business where every second year roughly in the German market there's an upgrade to the security system related to government infrastructure And this gives us every second year, roughly 4 million of revenue, but it also cogs related to that of 3 million roughly. So we think that will happen and we will get that done in Q4. But with both these projects, the risk we have is a delay of those revenues. We'll never miss the revenues. So for example, with data, then it would probably be in Q1 next year. But you don't want delays in your revenues and it's also important to be able to continue working on the next project. So we really want to get that done in Q4. When we look at growth, sign not implement ARR now amounts to 12 million. So most of the 17 million of sign not implemented ARR we had a year ago has now been implemented. And then we've had a lot of new customers and new contracts. So that's why it's at 12 million again. And I think we have really good, exciting discussions with potential customers that should get that number up a bit again. We have 60% organic area growth in the quarter and 13% reported organic growth. So looking a little bit about what we, developing and these are the projects that we capitalize. The largest one being in Germany. So we believe strongly in the German market as you all know, everyone is working or almost everyone is working in systems from the 90s. It's time for them to do the same as the rest of Europe has done to go into the cloud. There are no hurdles anymore for that in your market. And we're developing a really good solution for that market. We now spent five years on that. In total, we spent 87 million and this year we spent 9 million on that solution. So that's WebDocX. And now we're entering the pilot stage and we'll start commercial rollout. end of this year, early next year, depending a bit on the feedback and then start replacing one of our two present German products in the market and then continue replacing the other product. The next project is the surgery. So that's in Sweden to have a surgery module connected to WebDoc. That means that we open up new segments. We have now pain customers. We have both pilots and pain customers at the same time in that product. and are now out selling and meeting new potential customers for that product and doing a lot online for that also. Next in line is Medsum where we spent 3 million this year. It's a project that we've been working on for a couple of years, but we didn't capitalize it before. We have been kind of playing around with the technology for a while and see what we can do. But this year we decided to really make a push for it. So we spent three million on that so far. So that's the ambient listening. So we record the conversation between the doctor and patient and make a proposal for a medical note, saving a lot of time for the doctors. We are now at commercial rollout and the first commercial contracts are live. Next in line is one we haven't spoken that much about. It's NLL. So that's a new structure for prescription of medicine in Sweden. all HR systems that want to be able to prescribe medicine has to develop new functionalities so this is something we require to do it's not a choice we do but what's really good with it is two things the first one is that it will give all of our customers a really good overview what happens at other clinics both in the public and the private sectors so everyone will have a much better visibility of what other doctors and yeah most of the doctors have done and what I prescribed so that will make it easier to move to our system and not being in a public system. So I think that's really good. And the second thing is that we built in in such a way that we take away a lot of the work from our customers. Most other solution in competing solutions have put a lot of their security work on the customer, meaning they have to take on a lot of new costs and they have to do a lot of work, which they are not happy about. So I think that will be a commercial advantage for us. But that's also why it's on this list, because we will invoice the customers for some of that work we're doing. Not huge amounts, but some. Next in line is Advoca. So that's our solution for patient interactions in Norway. It has been in development for a very long time. We spent first 7 million on it in total, 6 million this year. And that is a solution for the therapist, doctor, physiotherapist, nurse, whoever's working on the healthcare side to work in the exact same system as the patient. So you have a joint calendar, you give tasks to each other, you talk to each other and so on. it's a really well-liked solution. It's already part of the commercial rollout in Norway, and it's the basis for many of the contracts we won there the last year, and also the basis for the contracts that I hope we will win there in the near future. And finally, we have HBI. So that's Health Profile Institute. So that's one of our components, one of the ecosystems products where we have built a lot of new functionality the last couple of years, quite many years, total spending 45 million on a new platform. And that platforms allow both the occupational health care provider the worker at the company and the company to be in the same platform and to work with a lot of those tests that you need to do for certain types of roles. And that's part of the rollout in HBI. But there we really have limited investments going forward. It's now where it should be, that product, and we will not invest as much in that going forward. So it's really exciting to have all these new parts of Kazakhstan that are being rolled out. This is much more than what we usually have that's being finalized. But I also want to caution everyone that in healthcare, things don't move that quickly. So healthcare professions are careful in nature. It's a slow-moving industry, so it will not happen overnight. This will drive growth for many years to come, but it will not be a quick win For example, me and some sellers are out selling. We have a meeting with a really big potential customer within surgery next week. If we're really good in that first meeting, we will have discussions for maybe half a year, nine months, then sign a contract. Then they will have to prepare the implementation and so on. And revenues will come in one and a half years, maybe. So it's that type of a little bit lower players. So that's just an example. So this will give drive growth for a long time, but it will not be a quick change overnight. So looking ahead, we spoke about growth. That's obviously important. We continue to grow. We use our resource efficiently with good cost control, always prioritize what we do, comparing different projects, opportunities, roles against each other, and make sure that we keep costs under control and do what adds the most value. and further them to launch WebDocX where we have this huge general market where we think we can play a really good role. So with those words, I will hand over to Sven Martin.

Thank you, Daniel. Starting off with some of our important metrics, we had a good improvement in this quarter, both on recurring revenue side and profitability. And we ended the quarter with an ARR of 335 million, including the signed contracts. The ARR grew 27% and 16% organically. Profitability also improved quite a lot, basically as a result of the revenue growth and cost control. So looking at the ARR bridge, you can see that the growth remains quite balanced. We had the net upsell of 14%. It's worth repeating here that When we sign new clinics for existing customers, such as, for example, Capio or Aleris, then it's included in the net upsell, and it's an important part of the net upsell as well. Churn was 9 million, or 3%, and then new customers were 5%. And again, these new customers, many of them are small upstarts, et cetera, that grow with us. So they will be Even though that the figure is not that large, it's a really important growth drive for us to keep that figure as high as possible for the long term, because they, again, drive the net retention rate in the coming years. What is good to see is that even though we had these growth issues in WebDoc this year and a bit higher churn, it's good to see that we have been able to maintain net retention at 111% and also growth at 16, which is quite decent compared to what we have done historically. And the reason for this is mainly that the 17 million you see there in the backlog we had last year, most of that has been implemented and is contributing to different parts of this bucket in the growth this year. Looking at the P&L, we changed our revenue reporting split this quarter. The reason for it is to better show our business model and also to better reflect how we follow the revenues internally. and to make a better understanding of the fluctuations in the revenue from quarter to quarter, basically. So you see, we had a good growth on the subscription side. And for the transaction-based revenues, these are these tick-based services that, for example, patient communication or these tests for HPI, etc., There we changed some customer contracts to be more subscription based. So that is why the growth of that is a bit more slow in this quarter. If you look at the total organic growth at 13%, it's quite low. And that is because the consulting revenues were very low in this quarter. There's two reasons for this. Firstly, that in general, we have during the last year or two, really prioritized recurring revenues over consulting. So we have taken a short term hit for long term gain. The second part is that the consulting is more lumpy in nature. And when we finalize these projects that Dana talked about, then we will have some big consulting revenues. So for Q4 to reach our targets there, it will be very important to deliver on these projects in time, basically. But it's good to see that even though we had low consulting, the profitability improved quite a lot. So EBITDA margins of 29% with no adjustments this quarter or year to date. If you look at the adjusted last year, it was 19%. And that was only adjusted for the relisting and the acquisition in Germany last year. EBITDA improved from a minus 2.2 to 12.2 million. And the next slide here is one we have shown the last few quarters and it's a really important metric for us. It's how we convert the profits to, sorry, convert the revenues to profits. You see here that if we exclude the data acquisition we did, revenues grew around 8 million. And then COGS increased a million. But then we only increased the other part of the cost base by half a million. So we were able to convert 6.3% of the growth into EBITDA. And that's around 82%, which is... uh yeah close to the gross profit that we have and pretty much in line with what we aim for if we include the one of from last year the improvement is 154 percent i think this slide is a good illustration of how we think about the scalability of our our business so if you look to explain the graph a bit if you look at the yellow line there at the top that's the ltm revenue of the group. So you see that it's gone from 245 Q4 23 to 329 this quarter, growth of around 75 million. If you see the gray part on the top of the bars, that's the COGS. So it's naturally increasing a bit with the revenues. And then the light blue part, that's the cash cost based of the data basically, the acquisition that we did. And then the remaining part, the dark blue, that's basically the OPEX, CAPEX and personnel expense, the entire cash cost base of the organic part of the business. And what is good about this part is that it's entirely under our own control. We decide if we want to hire people, we decide if we want to take on more OPEX, et cetera. And you see that the total there is, it has been quite flat during the period around 230 to 235. And this is including like wage increases and inflation, et cetera. So we have actually been able to in real, if we're just for that, we have been able to actually decrease costs in many places. So this is the main reason why the margin, we have seen the margin expansion we have. And keeping this under control is a key focus for us also going forward, because if we do that, then the margins will continue to scale, basically. Finally, looking at the cash flow. was a bit affected by the working capital this quarter, which is typically the case in the Q3 because of the holiday effects. It's worth mentioning as well on the profitability side that Q3 is generally more It's generally a very good quarter on the profitability side because of holiday effects. So the cost is lower. As I have talked about previously in the year-to-date figures as well, we had this big relisting costs at the beginning of the year that we paid in Q1 and the costs were in Q4. So that's why the working capital is so weak this year. But Q4 will... will be a strong quarter for the working capital where we have some large invoices of annual contracts etc. You see that we spent around 70 million on the share buyback program where we bought back a little more than three percent of the shares in the company and we still have a strong cash balance of around 170 million at the end of the quarter. So with that, we can open up for questions.