Carasent AB

Welcome to Karasent Q4 report for 2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Daniel Omen and CFO Svein-Martin Bjornstedt. Please go ahead.

Good morning and welcome to our presentation of the fourth quarter 2025. I will start with a business update and today a little bit extra about AI again. And then Sir Martin will give a financial update. And as most of you know, we're providing EHR systems for healthcare providers. We're growing quite rapidly at 15%. with more than 90% recurring revenues and a net revenue retention of 110%. Looking a bit at the quarter, We have a strong quarter with high activity, especially given that we have taken almost all of Volvat, so that's Capio Norway online. That's something we're really proud of. It's more than 5 million medical records have been transferred from multiple old systems into our system. So I think it's gone more or less on time and in a really good way. So we're really happy with that. And it gives us an extra strong quarter with some extra high consultancy revenue. Even if that's not our focus and we price it lowly. It's the result of the Volvat implementation mostly. In general, we have a really good improvement in profitability with EBITDA margin of 16% in the quarter. That's up from 5% last year, and there are no adjustments this quarter at all. And we also have a very promising sales pipeline. We've been doing quite a lot to strengthen the sales team and marketing team in Sweden, adding new roles and start working in more in different ways. So really promising start this year and the end of last year on sales. So we're happy with that. Looking a bit into 2026, I think it's important to note that the Nordics, we're happy about, we believe it will grow strongly. We're happy about Germany too, it's according to plan. But the old products in Germany are not growing very much, and the new product will start to roll out this year, but from a very small base, obviously. So that means that the German growth this year will be quite low. The knowledge should be good. And then over time, Germany will increase, giving us the three-year targets. If looking at growth in the quarter, signed not implement ARR amounts now to 5 million. That's because we implemented Volvo at most of it and also Frälsningsarmén in Norway. But we have a strong sales pipeline, so we're not worried about that. And in total, we have 15% organic ARR growth and 16% reported organic growth. If we look at the entire of last year, we're really proud and happy what we have accomplished with strong improvements from last year. We have quite strong growth and you see the EBITDA, so that's our main target as we look at internally. EBITDA minus capex going from minus 30 million to plus 34 million. and this is something we aim to continue with having a very large percentage of our growth falling down to higher margins and especially a bit duck margin which we think is the most valid number to look at when it comes to us so what's almost everyone is talking about at the moment AI and we will be looking at three different perspectives this morning. So what does it mean for our development? How do we use it in product and how do you think about it? And what about our position in the market? So if you look at development or productivity, our strategy has been the last couple of years since I joined. to have a high development pace and to develop our products faster than the competitors. So by always having a higher pace than our competitors, and our competitors are old legacy softwares, the distance between them and us increase every year, and thus increasing the need to change system and make it easier for us to convince customers to change to a better, newer system from us. With the help of AI, we can develop faster obviously. That means that compared to the legacy softwares, we will improve more rapidly and the change will become bigger faster. So we continue on that in that time. I think it's important also to use the productivity gains to improve the products faster than before. Because what will happen when productivity in development increases is obviously that development will go faster. And by keeping a high pace ourselves, we stay clear of new entrants and we gain on incumbents and old softwares. So we'll continue that. But having said that, it's important to at the same time make sure that we always fulfill all legal requirements. There are strong high demands on how we are allowed to develop and in what way and what process we need to have from most of our in Sweden. But there are similar rules in other countries. And we cannot and never have disruptions to our services. If we have, our customers cannot work. so the most important for our customers is that software is always up and running so and that's 24 7. so we have to maintain that same time but having said that i think that the new tools are great uh we're using them more and more and really getting productivity gains from them when we look then at how we use it in the product um Our plan is to continuously add AI functionality in the product. I think most of you know that a year ago, we decided to increase our spending on AI in the product as we saw that it can really help our customers become more productive. So we aim to add more and more functionality in the product step by step and giving it more of an AI agent feel all over all. The first product is MedSum, which is an AMB-unscribed. That means that we listen in on the call and the discussion between the patient and the doctor or the physiotherapist, and then we automatically propose a medical note from that. That's the functionality that's gotten the most use within healthcare so far. But even if this is the most used type of healthcare, function healthcare from AI, it's still way below 10% of our customers that use any of these type of tools. So it's not moving very rapidly. But still, it has the potential to really save time for our users, and that's something we're working on. Given that our customers are afraid of change, and especially our strong position, We don't need to be first. We think it's good that others are first and that we can see what works and doesn't work and in what way our use is like functionality. And if we believe that we can do it well and if it makes sense to have it in our systems, then we can develop it. So we don't need to be first, but we should really follow very closely after. So take medicine and ambient listening, where there are a couple of products like that out in the market already. Still use is very, very low among our customers, but we believe it will grow over time. So then we will need to get there. Given our product then, medicine, we have been a bit too slow, I think, even given that we don't want to be first. We should be a little bit closer to being first. And the reason why we've not been in the forefront is that we have tried to stay clear of US-owned clouds. So even if they are in Europe, we don't want to be in them. It's a promise we make to our customers because most of our customers do not like to be in the US-owned clouds. And many of them know that it's quite likely that it would be illegal to be in US-owned clouds with personal data in the EU. Again, it has been twice before. And our customers are really PR because the type of data they are handling. And that's why they are very well informed about this type of risks. But what we've noticed is that the type of a LLM models we can run outside of use on clouds are, they are too weak, they're too small. So it's been Lama we've been running and it's not good enough. So now we have moved to OpenAI and ChatGPT instead for our customers. And we'll be rolling out that. Those who really don't want to be in the US clouds, even if they are in Europe, they can still use LAMA. But I don't think that our customers will use that. But we can always switch them back to, for example, LAMA if we want to. And they want to. And now we're really getting the pace up. So last of all, the market position. So HR systems, by nature, I mean, they are truly mission critical. Our users, the healthcare providers, they are standing still when our systems are not up and running. They don't know which patient to meet. They don't know anything about the patient. They cannot make sure they are called. They cannot charge payments. They cannot do basically anything. On top of that, we have countless integrations with different levels of Swedish society and different types of entities. There are very many different workflows that we need to accommodate in our systems. Very many different people that collaborate within a hospital or healthcare clinic. There are tough legal requirements and it's really painful to swap systems. So that's what our customers think. We're trying to change that as much as we can. But I would say that they don't like change. Doctors, nurses, so on, they are trained never to make mistakes. They don't like taking risks. And changing systems is a risk, as they see it, so they avoid it. And also, HR systems cost only 1% to 2% of the turnover, so it's never worth taking any type of risk for them for that cost. So that's always our challenge. What we are competing with mostly are systems that are 20 to 30 years old, and they look like they're 20 to 30 years old, We have a lot of new good functionality and still it's hard to make them change. So in total, I think that there are very few software or knowledge companies that have a stronger position than us in this environment. I think we really can gain advances for this. We can add more functionality to our customers. We can help them have more patience. We can also improve our products faster than before. And since we are the ones investing most in our markets, or most of our markets in our products, we are likely to gain the most, I think. But having said that, I think it's always important to stay curious, stay on our toes, always think about our position, how can we strengthen it. And that's what we do every day, and that's what we've been doing for a long time. But I think this is a discussion that's likely to continue. But for now, I will continue to the next slide and look a little bit at the journey ahead. So we aim to continue with the high growth we have. We have added sales resources in Sweden, also divided workflows a bit differently to make sure we have a strong focus both on existing customers and new customers, and also working more with outreach and sales. We will now strengthen the sales and marketing staff and organization in Germany in order to roll out the new system. And it's a really exciting time. There are many projects that are now facing the day of light and are ready for commercial rollout or are in commercial rollout. So we have WebCur in Germany. We have our new system, Adopus Web, in Norway. We have Sergio Funcionante that more and more customers are adopting in Sweden. We have MedSum for ambient listening and so on. So we're really happy about where we are and finally this will be a very exciting interesting and fun year. And as I mentioned before, we aim to continue to invest a lot in our products, but we do not plan to invest more than we do. So we aim to every day get more efficient, being able to get more functionality to our users with the same resources and to help more users and to sell to more users with roughly the same resources. So every day getting a little bit better, And over time, that adds up to a lot. And we maintain good cost control. And what will be really fun and interesting this year is, of course, the launch of Web.x, where both our team in Germany early pilots, and when we show it on fairs and so on, we have really strong and good reception. So it would be a very interesting year to follow that and see the first customers, how do they feel about it, and then start getting sales going. So with those words, I will hand over to Sven Martin.

Thank you, Daniel. Looking at The highlights of the quarter, Q4 was a very strong financial quarter where the profitability improved a lot and we also had good growth. ARR ended at 331 million SEK. including the signed contracts. And we grew our 15% organically with 110% net retention. And the margins on EBITDA was 25% and EBITDA 16%. So starting by breaking down the growth, one point here on the high level is that it's the first time we include the German acquisition in the organic growth, given that it's been part of the group for years. over a year now. And that is still the legacy of products, so it's not growing, basically. So the Nordics, it basically means that the Nordics grew very well to be able to maintain the 15% for the group in Q4. Looking at the net upsell, an important contributor here is Volvat. It's included in the net upsell because we had the very small part of Volvat before the new contract. So that contributes with 6 million. And worth mentioning as well is that new clinics for existing customers, groups such as Kapiolaris is included in this figure. So net upsell has been on the sales side very strong in 2025. The churn we have spoken about many times over the last year is elevated figures, mainly due to non-voluntary churns such as bankruptcies that we saw last year. On the churn, we generally are notified by our customers cancelling the contracts at least three to six months before it takes effect in the figures. And what is good is that we had, in terms of like canceled contracts before it's reflected, we had high levels in second half of 24 and also in first half of 25. But for the second half of 2025, we saw that the churn levels dropped again down to normalized levels, which is... which is positive and will be recycling the figures basically this year. New customers, it looks like a small percentage of the revenue growth is 5%. But what is positive is that if we compare it to what the same figure was last year, it was 9 million. So it actually grew 56% year over year. So it shows that we are succeeding well with our sales. And this is, of course, also a very important driver of net sales. retention after the customers are on board as they grow with us. Moving on, looking at the P&L, our revenues ended at 93.6 million compared to 78.7 last year. So we grew 19% in total. the growth was boosted by a very high consulting and other revenues. If we look at the gross margin, it was impacted that we have this one big one-time revenue in Germany that had direct costs linked to it. So this increased the COGS. And if we hadn't had that revenue, the gross margin would basically be Also looking at the cost base, it's developing according to plan. We did have a positive effect by a grant in Norway related to one of our development projects. where it basically reduced the cost in the quarter by around 2 million. So this was according to plan and we had expected it, but it's nothing that's going to come every quarter, basically. So this resulted in a big improvement in profitability. So you see here that the EBITDA increased from 12 to 24 million on adjusted basis last year. No adjustment this year and the EBITDA landed at 14.5 compared to minus 16.8, but on an adjusted level, we increased from 5% margin to 16%, which is a big improvement. Naturally, it's worth mentioning as well that this quarter is a bit special in terms of profitability, given that we have the high consulting revenues and combined with the lower cost that I mentioned. So if we hadn't had this, the margin would naturally be a couple of percentage points lower, like our underlying run rate. But still, very good improvements year over year. This slide is a good illustration of how we think about running the business. Basically, it shows our revenue development compared to our costs. So the orange line here is the revenue LTM going from 245 to 344, growing about 100 million. Then we have the gray part of the bars is the cogs, which increases a bit. And we have the light blue, which is the acquisition in Germany that was done in Q4 24. and then the dark blue part is the cash cost base of the organic business basically so opex capex personnel expense and you see that it has been very much stable over the last couple years which means that the business is scaling nicely for 2025 in total we were able to convert around 80% of the revenues into profits, which is basically in line with our target. And we still invest a lot in our projects, so we aim to be able to scale the business for a long time when we grow our revenues. The key is to grow the revenues and keep the cost under control. Finally, on the cash flow. Cash flow is naturally supported by the big improvements in profitability. However, we see that the working capital development in 2025 has been very weak, and there is a few reasons for this. These three reasons that I list here. Firstly, as I've talked about many times during last year, is that we took the relisting costs, were taken in December 24, and then it was paid in December. So that hurt. You see the effect there in Q4. So it had a big positive effect on the working capital in Q4 2024 and then a big negative in Q1 this year 2025. It's around 15 million effect. And secondly, we had a large customer that, due to a mistake on their end, didn't pay their invoice in time in December. This is a big public healthcare provider, so it's a very solid counterpart, but either way, it was paid in in January this year instead of in Q4. Thirdly, these big consulting revenues that we have talked about mainly occurred in December with the payment date in January 26 as well. So it didn't come in in Q4. So as you basically understand, some of these effects will... have a positive impact on Q1 26. Then we have done the share buyback program, which also impacts the cash position. We have in total acquired almost 6% of the outstanding shares in Carcent. But in summary, another strong quarter financially, very much in line with the plan that we have. And with that, we can open up for Q&A.