Divio Technologies AB (publ)

Hi, and welcome to today's webcast with Divio Technologies, where CEO John Levin and CFO Fredrik Wallmark will present the second quarter for the company. After the presentation, there will be a Q&A, so if you have any questions, you can send them in the form to the right. And with that said, I leave the floor to you, John.

Thank you very much. Welcome everyone. My name is John Levin and I am the CEO of Divio since almost four years ago. Time goes fast when you have fun. Med mig har jag även Fredrik Wallmark som är min högerhand och CFO som hjälper mig i att strukturera och få förbättra rapporter och iarbete och så vidare. Jag har jobbat i Divio i fyra år och har en bakgrund inom en rad olika bolag, startups, även stora bolag som en slags intraprenör. Jobbat mycket med produktutveckling och försäljning överlag i framförallt tech-relaterade bolag. Jag tycker det är superkul den här resan vi gör med Divio. Fredrik, du kan kort berätta vem du är och vad du har för bakgrund för de som inte har hört det.

Fredrik Wallmark, I have been with Divio for almost a year now and have some history of other types of SaaS companies with a background as a strategy consultant. Should we start with the Q2 number or do you want to give some background?

I'll take a short break. Precis. Jag presenter kort. Det kan finnas en och annan som inte har hört vilka vi är eller lyssnat på oss tidigare. Men jag ska vara väldigt snabb, för jag tror att de flesta har hört det här förut. Och är det någon som vill veta mer om Dibu som bolag, bakgrund och så vidare, så får ni gärna kontakta mig. Så kan jag göra en särskild sittning, så kan jag berätta mer. Men jag rasslar igenom det väldigt snabbt. Men som sagt, vi är ett gammalt web... An old web agency from Switzerland, which became a product company, started the journey in 2014. It was in connection with the creation of the platform that we sell today. The journey took place in 2014. In 2016, we took in money to make full commissions from consulting companies to product companies. And in connection with that, after we have taken in money, we got money in, especially from Sweden. And we are very grateful for that and were noted in that wave in 2019. And today we have, I would say, over 600 paying customers. We focus a lot on enterprise customers, which are around 30 people. And they grow slowly but surely in number. And not least existing customers grow as well. And this is where we focus and... tryck gör alla våra insatser, säljningssatser osv. är för att få de här, framförallt enterprise-kunderna. Nu har vi valt att gå mer och mer mot lite mindre bolag, smekunder, men fortfarande sälja en enterprise-lösning för att det är betydligt kortare ledtider och lättare att komma igenom och det passar bättre i tanke på vår storlek. Så där är vi och det vi gör det är, ska vara väldigt snabbt med det här, de flesta bolag som går från att jobbat tidigare med om premislösningar, egna hostinglösningar till molnet, förväntat sig att det går väldigt smidigt när man går upp i molnet och var enkelt. And it is much better, simpler and safer. But it still requires a lot of effort and different solutions to make it work and work without friction. And then we have built a solution that is like a layer between the Moln infrastructure, IWS, Google or Azure or whoever you may be, and the actual websites and web-based tools. Ofta använder man vår plattform för att bygga sina verktyg också. Så vi ligger som en mellanplattform där mycket av det här som normalt är handpåläggning och av seniorutvecklingar, det är automatiserat. Så vi strukturerar upp, vi hjälper till både i resan från att ha varit på on-premise upp till molnet but also those who are already there and have built up messy environments and with a lot of applications here and there, where we also help to structure it with the help of our platform. In this way, we can reduce costs and resources that have been put in to maintain a target infrastructure. There are many advantages of the platform, mainly cost savings and that you can predict costs, but also that you can allocate a lot of resources so that instead of working with operations, you can work with development, which is important. Then there is also a lot of security and other things that play a role where we can increase security in these web applications, which is also important. And then we have a support that is standalone and that is also very appreciated by customers. We have expertise in-house that knows everything that should be known about different cloud infrastructures and how they are connected to web applications and so on. And for large customers, of course, it is important with this support, but also that you can make resources available and that we exist where there are 24-7. Then it is also important, of course, that you can move from, very simply, you can move from one infrastructure to another, but you are never locked in. There are many, many advantages with our application, our platform. Erik, you can tell us briefly about our business model.

Yes, and that is a SASE-based model. The product is basically finished even if we continue to improve and trim it so that it is very scalable. We can both grow with the number of customers and we can get customers to grow their engagement with us. We measure our MRR carefully. We want to see our monthly recurring revenue. Since we write longer contracts, it becomes a very predictable income model for us. Also a low churn. We lose very few customers and that makes us focus most on keeping our customers happy and a growing number of customers and growing with the customers. Then we get First payment, so usually yearly, there are some exemptions, and this is very good for our working capital structure, that we borrow money from customers instead of the bank.

As I said, if anyone would like to know more about the company, just let me know. I will tell you shortly, and also Fredrik, because I think that most of you are interested in what is happening in the company right now. But if you have more questions about what we are doing and are interested in it, I would be happy to take a separate meeting and tell you more. det gillar mest. Karro, jag lämnar över lite mer till Fredrik här och pratar om siffror.

Ja, och andra kvartalet i år då så har våra prenumerationsintäkter gått upp 14%. Det är de vi tittar på mest, utom då vi tittar på MRR-en, som är vår multi-recurring revenue, som så är 7%, men subscription revenues är upp 14%. Vi gör fortfarande en There's a loss on the EBIT level of 3 million. We have put in a little more costs here when we recruit and strengthen our sales team and also our engineering team. But maybe the most important thing in this quarter is that we, at least last quarter, we did an equity race. The money came in Q1 and there was a corresponding guarantee on that, where the entire 87% chose to sign. since it wasn't in the money when it was time. And we have 4 million that are not visible in our cash register right now, which is at 3 million, but we have increased it. Then we have renewed one of our biggest customers and a long contract that is worth 29 million. And we have made a deal that 21 million of them will be paid in advance. The invoice will be paid here in August. And then another important milestone for us is that we have taken a look at the Swedish state arena with a contract that Jo will talk a little more about later. Overall, the revenues are growing as I thought. We met our sales targets for Q2 and for the first half of the year. And yes, maybe I'll jump to the next one.

Yes. So, it happens a lot in the company. During my four years here, we have been running, we have tested, We've changed our business model, our pitch, we've added new strategies and so on. That's what innovation is about, when you have something good and you're going to build a company. It's a bit of a sustainability race. What's fun is that, and it's been both up and down, motivation-wise and so on, Nu är vi i en fas där det är otroligt, vi har hittat rätt, vi fortsätter spetsa till vad vi gör och bli bättre och vassare och smartare. Men vi har hittat rätt vinkling. Vi har hittat rätt koncept, rätt sätt att kommunicera. Vi har en bemanning också i bolaget som är rätt. Vi har tagit in både på utvecklasidan och säljsidan. Det är väldigt kul att jobba i bolaget nu. Det är inte bara jag som tycker det, utan hela teamet tycker det är superroligt. Vi har börjat få medvind och börjat få lön för allt det här. We continue to follow our sales strategy. as we mentioned at the beginning of the year. We have sped it up, but in terms of communication. I will tell you more about that very soon. We continue to pursue 30% average growth during the five-year period. We had a relatively aggressive H1 target that we have closed and delivered on. And one of the more ambitious goals for the next six months, which we also have a good plan for to deliver on it, which is fun. We have the right hands and feet to achieve it, the right dialogues in progress and so on. So it's really fun. It was also fun to renew the Fidelity contract and also that they choose We have made an agreement. bygger på att 70% av den totala kostnaden som de betalar är inte återbetalbar om de skulle motförmodar. Någonting skulle hända med avtalets... Givetvis om vi skulle begå någon form av... avtalsbrott, vilket vi såklart inte gör. Då kanske blir det en annan diskussion. Men det innebär att vi inte är återbetalningsskyldiga på de pengar vi har förskottsfakturerat, vilket är ju ett fantastiskt avtal för oss. Och det känns väldigt bra att ha det i ryggen. Sen då den här sveitsiska statliga kunden, det är ju en del av deras We have signed an agreement that we have also started to deliver on now. And that's really cool. They have extremely high requirements on compliance, security and so on. And to get through that is an eye-opener. But we have succeeded after a while. And it's also fun. If you get in there and get verified by one part, maybe that part with the highest requirements, it also opens up to be part of transactions in other parts. So it's an incredible experience. fun and interesting customers that we can really grow with. We have continued to develop and evaluate sellers and have continued to build on the sales team. We work with our consultants and we work with Mötesbokningsbolag och vi har utökat också teamet då så att vi är ett bra team som säljer och det vi har fokuserat nu, nu har vi lyckats hitta säljare också som har extremt djup kompetens och som kommer från utvecklarledet och har sålt just similar services, especially morning services for both Azure and AWS and so on. And it greatly facilitates when we are out now and where we have both contact networks and we have the knowledge, not just the development team, but also on the cell front. So we are not as dependent on letting go or letting go, but take with us the development team early in the cell dialogues. So we can work effectively. And it's really fun. And we have finally started after all the certifications with AWS. So it is activated in the partnership and we have already started a dialogue with them. So it's really fun. As soon as they arrive, both on our own initiative and their initiative, we have started a dialogue. And it looks very exciting. So it's super fun. And we have also started to have dialogues here in other areas with AWS. So it's also fun to get to know other, not just Sweden, but also other regions. Then, as I said, we decided at the beginning of the year to focus a lot on SMEs, small and medium-sized companies. And we have gone down, and we continue, but we have gone down further vertically and should not only focus on FinTech companies, which are in a relatively early phase. Because what is interesting is that FinTech companies, they have banks as customers and financial institutions, and the requirements for their hosting or cloud infrastructure is very high and De behöver egentligen uppfylla samma krav som vår plattform gör, fast normalt kanske de väljer att bygga det själva, men genom att kunna använda vår plattform så slipper de, så kan de fokusera på sina applikationer istället för själva molninfrastruktur och annat. Då kan vi verifiera att säkerheten finns där. Plus att det är viktigt för dem att de har oftast lite begränsade resurser, så de vill ju sätta det på utveckling, inte på operations. And then it is also important for them to be able to scale with the solution, the decisions they make early, that they should be able to scale the whole company with. And there comes our platform also in as a very good piece of the puzzle. So we have started and received a good response also on that. As far as I've been involved, and even earlier, we've been struggling with how to communicate what a solution is. We've been between a classic platform, i.e. service, and a cloud management platform. We've been a bit of both, which we've been quite unique with, and it's been a bit difficult for our customers to benchmark other solutions. Nu på sena år så har det dykt upp någonting, det har funnits ett litet tag, som kallas för då Internal Development Platform. Och det är någonting som de stora techbolagen, de bygger egna lösningar, till exempel Spotify och Netflix och Klarna och så vidare. De lägger ner enormt mycket tid och pengar på att bygga en plattform som sköter de målen infrastruktur och underlätta utveckling och så vidare, som bara skrädas ut för deras behov. This is something that smaller companies are striving for, but they don't have the money and time to build this type of solution. So we have packaged our service as an independent IDP, Internal Development Platform, where you meet the same needs, the same functions and so on. But you share the costs with several other customers. So we don't do anything new or change, we just build on the base we have today, that platform. And then we add more functions and features that go towards this internal development platform. But it's not like we build something new, but we continue to build. It's important to point out that we continue. This is more of a packaging question. So it becomes much clearer for our customers what we actually are and what advantages we can give them. And this is also something that I have started to communicate now towards ID cell dialogues, which is also received very well and it goes very well with fintech. strategy or approach. So it's a little new packaging, communication, but it's exactly the same offer in the bottom line, it's just much more clear what we do. So it's very fun and what's also fun is that we put down a flag We have a technical roadmap that is very clear for a long time to come. We are also relatively unique in taking this approach. Hade vi varit helt unika så hade vi nog kunnat frågasätta om det är rätt strategi. Men det finns andra som gör liknande. Men det gör också att det blir enklare att jämföra oss också. Det var kort det. Någonting har missat. Jag tror inte det. Fredrik?

Ja. Och lite mer på den finansiella sidans status då. Som jag sa, varanterna där. Vi har fått in på banken också 4,1 miljoner innan kostnader. Det här kompletterar den equity race vi gjorde i januari som var 10 miljoner förekostnader. Det känns jättebra att det gick så bra som det gjorde. Jätteglada för alla som var med och backade oss där. Nu invänder vi förskottsbetalningen från Fidelity på 21 miljoner. Vilket gör att vi kommer att ha mer än en årsomsättning på banken. How do we use this? Well, we have already started by investing in sales resources, which Jon has been talking about, and also the engineering team to develop the partnership that we started with AWS. Right now, at the end of the H1, we have a very strong Balansräkningssiffra på sista raden där. Vi har 22 miljoner i receivables. Och där försvann någon mening då. Men en lika stor bit då i deferred revenue, vilket är egentligen en skuld till våra kunder för att det är en känsla vi ska genomföra de kommande åren. Men väldigt bra finansiell position just nu. Jag tror att det var sista bilden där, Jon. Det var det.

Så vi är redo för frågor, men det jag vill bara avsluta med att säga är att det har varit lite kämpigt, och det är det ju oss att bygga bolag såklart, men det som är kul nu är att det är just nu, det är väldigt roligt överhuvudtaget, och alla i bolaget är extremt I've had problems sending people on vacation this summer because it's so busy. So very few have been on vacation at all. No one wants to let go. Everyone thinks it's so much fun to work and that so many fun things happen, so it's hard to be away. This is a bit of a baby for us as well, that we want to care for and foster and have grow. So it's really fun to work in Didi and you are incredibly grateful that everything is starting to fall into place now. And that it is mainly connected to seeing that it is not only on the product side, but also on the sales side that it falls into place. So it's incredibly fun to work. So now we are open for questions, there was not much more we had to share, but feel free to ask questions and we will answer them.

So, thank you very much for the presentation. I'm going to jump right into the first question here. Prelimination revenues increased by about 14%. What have been the contributing factors behind that?

We supply Swedish kronor and have a lot of US dollar and Swiss francs and euros. Of course, the effect of the currency is a part of it, but above all, we have had customer growth. And then it is mainly about subscriptions, recurring income, that has increased. While it has been a little lower in the consulting sector, but it is as I said, We don't measure it, and we mentioned earlier this year that we are working on cloud consulting, helping customers to convert, to prep their web applications, to make them ready to containerize and so on, and to make them ready to move to the cloud. And we are trying to sell that as a subscription model, so it doesn't affect the classic consulting part that much. It is mainly the subscription part that we are increasing and that is mainly new customer sales. And some customers who have also increased their sales.

You also mentioned that you have had a breakthrough with the Swedish government. Have you started that delivery?

Yes, we have done that. Absolutely. So it is fully in progress. So we are starting to set up projects. They have started with their parts and we have started onboarding and part of it is already done. So they are already in progress. They are already using our platform today.

You have increased the number of leads with your new sales strategy. Can we interpret this as going into Q3 with a strong pipeline?

Yes, we really do. Both in terms of the number of customers, but also in terms of improving the quality. And what is also fun when it comes to the pipeline is that we have fought a lot with outbound sales. But a lot of inbound people are starting to come in who are listening to us. And that is because we have also invested a lot in marketing in recent years. Not really a full year, but almost a full year. And in a year, we started investing in marketing, communication, a lot on LinkedIn and all relevant media. So we have invested a lot in that. And it started from a pay-off as well, that we get a lot of inquiries. It is also always easier, of course, to sell to companies that listen to you. Then there is a developed interest already from the beginning. You don't have to arouse interest. So absolutely, Pipe is very good. We have also worked with a company in Sweden that helps us to find good leads and also set up meetings to make it more effective. And then we also have some dialogues with AWS. So the quality of the leads is completely different. This is what we are going to harvest in Q3 and where we have built up during Q1 and Q2.

A follow-up question about marketing, as you mentioned. Was it some kind of time-limited campaign or something that you continuously work with?

No, it's dangerous to run that time-limited thing. It's a bit of endurance work even there. You can't make a point effort, but to be relevant, you have to... Because it's always like that, you look at, oh, it costs a lot of money, and then you think, oh, well, we should probably reduce that. If you look at the effect, you might think that there are a bit too many costs linked to the effect. But that's because it's building up slowly. In the first few months, there was no effect at all of this marketing work. But then you are just a bit careful and test different subjects, what you want to write about and so on, and pay attention. who we turn to to experiment. So in the end, it starts to find the right way and it starts to get an effect. But it takes quite a long time. So it's not a point effort, it's something we will continue to put on a mat and an investment that will lie there over time and become more and more specific and hopefully there will be better results all the time. It's important to keep it up all the time. When we sell and contact customers, they are guaranteed to google us or search for us on LinkedIn and so on. And if there is nothing there, then we are not there either. But if there is a lot of content and relevant articles and exciting articles, then it is verified that we exist and that we are an interesting company. So marketing is super important.

You also mentioned in the introduction that you will use your strengthened financial position to build strategic partnerships. Do you have any new partnerships in the current situation and what type of partners are you looking for?

It's a combination of... We can start with IWS. We have started that in Switzerland. We have started that discussion in other regions, especially in the north. That's one type of partnership that is important to us. It's very easy to ride on what we have already started. We have also looked at finding partners in other countries that can help to sell our solution. This is to expand our sales organization and our presence in other countries. We have also been working with consulting companies for a long time. Small consulting companies and agencies in all their countries. We have a lot of dialogue with them, but it also requires a lot of focus to get the work started, especially with agencies. They use our platform, but we also have to put in a lot of time for it to grow. And also many that we have started dialogues with and collaborations, partnerships, then it must be managed. We have to be there. So we also invest in that to enable all these dialogues or these partnerships that we have. So there are a number of different partnerships that we are looking at and that we are working with already today. Not just looking at it and not just thinking about it, but that we are actively working with.

Another question has come in. The majority of the customer base is naturally in Sweden, but how are the dialogues with Nordic companies going?

It goes well in the dialogues we have had. But since we have had a little change in sales representatives, it has been a lot on my side to close the shops. I have a couple of shops that which are really interesting. But they are slightly larger companies, which means that it has taken a long time to close them. But we have a lot of dialogue going on in the Nordic countries, not just in Sweden. And I expect that we will close a couple in a year. without a doubt. And now we have got a little more stable, competent sales staff. But it has been a bit tricky before. And I have also been involved a lot in these more international dialogues with other customers. So I've had a bit of a lead there and gotten a little more speed. It has been a bit slow, but mostly because I haven't been able to spend as much time as I have historically. And we have had a little too high turnover. We haven't had enough sales power. But we have today, so things will happen. But it has been a bit slow, I must admit. Not at all as I had wanted. But the interest is great and we have many dialogues. But if you work with sales, you have to be there all the time and hunt and drive and hunt and drive. I haven't really had time to be as active as I have wanted. Now I am much more active and can keep going. Plus, we've had sellers who have come and gone. It doesn't work either. You have to have someone who knows what they're doing, can be a product and platform, and who can drive to the goal. So it has been more about our inability than the interest of our platform. Even if the interest has been great, you still have to drive. So that's the answer to that question, that it has been our inability rather than anything else. But we're not there anymore.

Thank you very much. That was the last question. And we thank you for the presentation today and that you answered the questions. Good luck in the future.

Thank you very much. And if anyone has other questions or wants to know something more or misses something in this session, please let us know and we will answer as soon as we can. Och stort tack för alla som har lyssnat.

Tack så mycket.