Divio Technologies AB (publ)

Good morning! Hello and welcome to today's quarter presentation with Divio. With us from the company we have CEO Jan Plevin and Finance Manager Fredrik Wallmark. After the presentation follows a Q&A. It is good to send a question to the company via the form on the website finvayer.tv. My name is Fredrik Hansson and I come from Finvayer. Jono and Fredrik, you have the floor now.

Thank you very much again. Welcome everyone. My name is John Löfven and I have been the CEO of Divio for a while now. And with me is Fredrik Wallmark, my CFO. And we were going to start by going through what we do and then go into numbers and tell you a little bit about what happens in the company. So I'll start with a short presentation and a little background. Divio, we started as a Swedish company relatively long ago. We still see ourselves as a start-up slash scale-up, because we have made so many changes since the start. Today we are a product company that has been running since about 2014, but the full conversion to a product company took place around 2019. Vi har en plattform som vi säljer som underlättar hantering av olika molntjänster. Det gör vi åt kunder. Vi ska gå in alldeles strax på mer exakt vad vi gör. Vi noterades sen slutet av 2019 på Nasdaq. Vi har idag strax över 700 kunder. Det ligger ganska stabilt där. Man kan säga att The reason for that is that we focus a lot on larger customers, while the large number of customers we have is a little smaller. But the large customers grow, but you don't see that much in the number of customers. But the parity changes, so we get more and more larger customers, which is what we do. There are other actors in this industry that focus more on volume customers. Many, many, but smaller customers. But that's another strategy that we don't want to run. We focus on the larger enterprise customers. A little of what we do. Managing morning services is for most. It requires quite a lot. I'm not going to say that it's a burden, but it is a certain form of headspace. There is a lot to keep an eye on. Previously, you had these on-premise solutions, your own servers that you handled. It was, to a certain extent, maybe easier, but much worse, really. Then we moved, the goal service was created quite a long time ago, it became much better, everything much safer and so on. But you still have to have a stone's throw on the goal supplier's setup and if you're going to släppa webapplikationer, hemsidor och annat på i olika molntjänster så måste du, och även bygga applikationer, så måste du ha stenkoll på hur det funkar. Och det här skapar en del huvudbry och lite utmaningar kan man säga. De utmaningar som finns är framförallt mycket kostnad. Det är svårt att förutse kostnader och när man väl satt igång så har man en idé om vad det kommer att kosta men det kan lavinartat öka mest beroende på dels att man behöver mer kapacitet men det är också väldigt svårt att förstå de här olika betalningsmodellerna som finns. Since it requires a lot of knowledge, you need experts in this field, and then you tend to employ people who have a lot of knowledge, but they also build themselves into solutions if you become very dependent on this person. They are difficult to find, they cost a lot of money, and they are not always particularly long-term. Sen är det många som inte tycker det. De flesta utvecklare tycker det. De gillar att bygga saker. De är inte så intresserade av hur bakgrunden och infrastrukturen funkar. Det ser många som mer som en börda snarare än en möjlighet. Then comes the issue of stability. Everyone knows that things tend to go down all the time. There is a lot of instability when it's like now, Black Friday. Today, it tends to be many websites that lag and go down for various reasons. And it creates enormous stress on not least those who are responsible, but the entire IT organization, the entire company. Then we have compliance security. We see a strong increase in various forms of attacks against websites, servers and so on. With various web applications and that is something that constantly creates a lot of stress. And then you have to follow all the compliance rules that exist, GDPR and so on. And it is also a big jungle that is difficult for most to follow and make sure that you meet the expectations that exist and the requirements. And then to find the right support when something goes to the forest or something goes down and so on, to know how to move forward and solve various problems. It is also very difficult in general to know where to start and how to get the right information and so on. So there are many, many challenges and you can solve them in different ways. Many employees can start employing people. If you are a larger company, you employ an army of people who can try to solve this. Often cost-effective, or you take in consulting companies that help. Then you can also use a platform, and this is where we come in. We solve this for customers with the help of a platform that facilitates the management of target services. We automate a lot of what is normally done manually and then we take care of it and make sure that it works and if something goes wrong, we make sure that it is resolved. They are often not even able to react to the fact that it is up and working again. That's why we exist. We increase the efficiency. Developers can focus on developing. We and our platform take care of the target infrastructure and make sure that it works. Vi minimerar riskerna så att vi tar hand om 24-7. Också om någonting går ner så är det vi som löser det så att man kan sova gott. Även någon som är ansvarig kan sova gott på nätterna. Sen är det också det här med kostnaderna. Vi ser till också att optimera och trimma och se till att allting är precis som det ska. Att man inte använder för mycket. Se till att du använder rätt... applications and so on to optimize costs so that it does not just stick away in the avalanche so that you can foresee the costs. Then we also make sure that what is built on the mining services, that it also does not just work here and now, but also follows the development that the mining service takes so that it works all the time. And then it's us as experts. If you need help, you don't need to contact 10 different suppliers or support on AWS or documentation that you don't really master. If you contact us, we'll solve it. So what we sell and what we offer our customers is largely a lump sum. You can focus on your business, build your business, then we can take care of this, which is not necessarily painful, but necessary. We take care of that part in a cost-effective way. So the advantage for customers is that they get more currency, they get more from their developers, they get reduced costs, they become faster at developing services and also get them deployed, so to speak. You have one person or one contact point in us you contact regardless of what it is about, connected to this, which of course is very important. Man kan slappna av i det här också och vara lugn i att vi har koll på compliance, security, hjälper till, vi certifierar och så vidare. Man behöver inte fundera på det. Den biten tar vi också hand om och har stenkoll på. Och sen är man inte låst vid en. Man bygger inte in sig i en leverantör, en måltjänstleverantör. Med vår plattform kan man hoppa från, kan vi lätt skicka, flytta projekt och så vidare till en helt annan leverantör. Again, calm is the most important thing. Fredrik, our business model. You can tell us a bit about it.

Yes, thank you. We are a so-called SaaS company that many use, or in our case a PaaS company, Platform as a Service. This means that we have built a product that we can then quickly copy, which makes this a very scalable model and we can roll it out to several customers in parallel without much more work. This means that we can grow in the number of customers and we can also grow in the dimension that each customer can increase their engagement with us and thus have a larger business per customer. What we measure is our MRR, or as other companies do, ARR, Monthly Recurring Revenue, or Annual Recurring Revenue. We focus on Monthly Recurring Revenue. The difference is just a multiple with 12. We look at that to see what our monthly revenues are in the future, and that makes us a very predictable model. Then the customers pay in advance, but we get income monthly over time. This means that if a customer pays in advance, we have an improved working capital, but a debt to the customer to carry out the task, but it works well financially for us. Then in our case, we are very happy that we have an extremely low churn. Most of the customers who jump on our platform and enter into an engagement with Divio choose to stay with it when they have seen the advantages and entered our model. This makes it very nice for ourselves and our support, and above all for Finans, that we know that the customers we have secured are the ones we will keep and our MRR is stable in that way. I can jump to the next picture then, Jon. And this morning, due to a capital acquisition round that we have been doing, we have released our Q3 figures. We have also announced these figures preliminary before the capital acquisition coverage started, so there are no big news here really. But the important thing is that our MRR in September And then we count the last day in September, what we have for MRR right there and then. It is 109,000 US dollars. Last year, at the same time, it was 151. That is, it has gone up 38%, which is big for us. Then you can add that we have just signed a new deal and that is the reason for this, it has been handed over. So the revenue for this has not materialized yet. On the other hand, our revenue has gone up by 8% and has fallen to 5.2 million. Earlier this year it was at 4.8 at the same time. And then we have got a little higher professional service revenue, i.e. the one-time consulting revenue, which is usually like start-ups and so on. And we will see a little more of this, and Jon you can go into a little more detail about this business that we have closed, which is very large and that allows our MRR to go up to 40%. EBIT is still flat, about where we were, and due to some financial items, our earnings per share is almost zero. We have 1.1 million i kassan och det är inklusive ett brygglån som vi har förtydligat i kvartalsrapporten vad det är för någonting och det som har hänt nu efter Balancedagen är då att vi har gått ut med kapitalanskaffning, den är redan stängd och fulltecknad och utökad så att det blev 17,5 miljoner då för kostnader som vi har säkrat för framtida drift och investeringar. Och den nya kunden då har gjort sin första betalning så där rullar allting på. Så finansiellt så känner vi oss mycket trygga och det känns väldigt bra alltihopa. Jo, några kommentarer eller ska vi hoppa till nästa?

Nej, det är väl inte så mycket kommentarer. Det man kan säga här är att vi håller fortfarande på med fokus på att vi vill ju bli kassaflöjdspositiva och vi har gjort en del omställningar både personalmässigt, kostnadsmässigt, optimerat och så vidare för att också optimera så att vi blir av med en hel del kostnader eller When it comes to personnel, it is important to move from more expensive countries to more cost-effective countries. But it's not really visible on the numbers yet, but it will start to be noticed. We have had quite a lot of double costs, where we have made transitions, but you sit with double costs. Nu börjar vi få ner dem, så det syns inte riktigt än, men vi har gjort väldigt mycket på den sidan. I kombination med att öka intäkterna såklart. Men vi kan hoppa vidare till nästa för att berätta vad vi håller på med. Vi fortsätter med vår målsättning att ha genomsnittlig ökning med 30% per år. Och det kommer fortsätta. Det är klart att det blir än mer utmanande när vi gör stora kliv, men det är medtaget i beräkningarna och vi har bra självförtroende nu. Och vi ser också, om man börjar med att prata om den här nya affären, med det stora sveitsiska... Heltiga-bolaget så är det ju en enormt tillskott. Vi har egentligen den totala intäkten per månad ligger strax över 100 000 dollar. Men vi har en del av affären skickad kommer vi inte ta oss vid. Det är ett jobb vi skulle kunna göra men vi ska inte fokusera på det och det är ren självutveckling. Vi äger även den affären men vi har tagit in en partner så därför kommer även då MRR increases what we see as our part of the revenue, where we have a good margin, but then we have the consulting revenues that will also increase significantly due to this business, and that is what is called professional service, where we have a lower margin because we send further or we use a partner. We have a margin, but we use a partner for the outside work.

So we will see an increase in professional service revenues, but also an increase of almost the same amount in our cost mass compared to the third party.

Exactly, but it is still a business that we own and a three-year business, which is important. And a very exciting project. We also see it as an entry-level business, because now we're starting, we're testing. It's a huge company, but we're starting with a whole lot of their projects. Then we have all the opportunities to grow more and more within the company, which is super exciting. We also have other businesses, we are pushing on Stenart in sales. And I announced some new businesses a while ago and I have some other on the way that I should have mentioned. It's not this magnitude, but it's smaller businesses where we come in on the inside of the customer and can get them to grow. I will go out with it very soon. and try to be better at it in the future and tell what we do, not just focus on these big businesses. Because there are many businesses, it's a bit like that, we have to come in on the inside with the customer and write a contract. It can take a long time and then you start small and then it slowly but surely grows. We've had a lot of such nice businesses as Girl Effect and Novagradec and so on, which become that type of business. It started small and then slowly but surely grew. And we have announced a few of those now and we have more of those to announce. So it's very fun. We see a lot of positive, especially sales, which has been very tough historically to get the business going. I'm not going to say it's getting easier and easier, but we're getting better and better at getting the business going. and smarter and how we work and more sophisticated. So it's very fun to see that development. Then we started working a lot more with partners as well. We put a lot of focus on using or using us as partners and we have, as I mentioned earlier, a guy who comes from a partner, was the CEO of a partner, one of the agencies that we worked with and now he works there all the time with us, but only make our partner network grow and it works very well. It's also fun to bring in an external person who has worked with our platform for a long time, who is completely, I'm not going to say in love, it sounds silly, but he really is passionate about our platform and can talk in a completely different way than we ourselves can to partners. It's incredibly fun. Vi tog in pengar nu också som Fredrik berättade om vilket är jätteroligt och det är framförallt kul att det var så många som har varit med och backat oss. Själv såg jag en bra möjlighet att kliva in och ta mer andelar. I'm very excited to see what happens and I think it's incredibly fun, especially since the last quarter has been intense, even though it continues now, it's a lot of work and very intense, but it's also very fun because everything is going in the right direction. So we are very happy and grateful for all the support we have received, really fantastic. And our ambition is now that we will aim to get our nose up on the surface and not have to be dependent on going around and hunting for money from our dear archers, but we will be able to stand on our own two feet. That is what we have as an absolute goal now. That is why I also look at costs, but above all I also see that sales are taking us forward so that we can that we don't cut costs, we optimize costs without destroying operations or nagging on operations, but at the same time increase revenue. So we close this gap and the whole company is completely focused on this now. So there we go. And then it can be that we want to take in money in any case in the future, but then it is for a completely different reason than to cover cash. Then it's more about making investments and so on. But now the focus is on getting the company to stand on its own two feet, so it's really fun. What else do we have? In general, this is what the focus is on. It's very fun right now that it's starting to open up on many fronts and it's enormous power internally. It also puts a lot of pressure on everyone internally. People are working very hard, so you also have to be aware of that. Det är bra tryck just nu och det är väldigt kul och alla är väldigt motiverade. Det är väldigt roligt. Det är slitigt att driva den här typen av verksamhet. Det tar mycket längre tid än vad man tror, vill och önskar. Därför är det skönt när det börjar röra på sig i rätt riktning. Nu kör vi på. super excited. But it was probably something more, Fredrik, that we have missed to talk about.

No, I don't think so, and the money will probably come from the emissions that have started to come in different tranches, so it will look a little different from cash to next release.

So once again, thank you very much and I hope there are a few questions.

Ja, tack för den fina presentationen. Vi har fått in lite frågor här och du berörde ju det här nyligen precis på slutet med likviditeten och kassasituationen. Men rätt och slett, kommer den nya likviditeten att räcka till lönsamhet nu?

Ja, det är både uträkningen och ambitionen för oss. Så det ska den absolut göra.

What were the main driving forces behind the increase in the net turnover of 11% in the third quarter and how sustainable is that growth trend?

First of all, it is customer growth, as Fredrik mentioned earlier. We have received new customers and new projects. And then we have, if you look forward, we basically have no current, so it is stable, I would say. And now it has increased significantly more since then, and it is also stable. Then of course, I may not count on the fact that we will increase by 37% again in a quarter. Det vet man aldrig, men med hjälp av befintliga kunder och alla de nya lid som är på gång så kommer vi fortsätta den här tillväxten på genomsnitt 30% på femårsplan per år. Så den har vi väldigt stor tillförsikt till.

Men jag tror att 10% kommer vi överträffa närmsta rapporterna framöver då i och med att vi har ökat vår MRR med 40%. And then the business is even bigger than that, if you count the professional service parts. So the revenue next quarter will look completely different when compared to Q4 2023. Because that's when it starts to take effect. Now in Q3 2024, the business hasn't been able to get any more effect than a few days, really. Since we signed exactly a few days before the quarter closed. So I think you will see a much higher growth rate than 10%, I'm sure of that. Thank you.

What role does this new Swedish health and healthcare customer play in the result? It's important, of course. You said you had been paid for the first time. Can you tell us a little more about the customer's impression and feelings now that the business is starting?

Absolutely, and it's always an intensive job, especially when you take, we haven't had that many big customers, we've had a couple of big customers like that before, which are still there, but this is usually, Fidelity is perhaps the biggest customer we take on board. It's clear that it's a lot of work compared to smaller customers, the more common customers. So it takes a lot of work from our side to get them to land with us and then get to know them and understand their challenges and so on. And you can say that it started so what happened quite quickly was that we got redan initialt började ta lite mer ansvar för deras, de dumpade över mer på oss än vad vi hade egentligen förväntat oss, och lite snabbare, vilket av positiva skäl, men det har krävts en hel del arbete och kommer fortsätta fram till årsskiftet, den här onboarding-processen. Sen kommer man in i mer en process där man mer ska underhålla och fortsätta och växa och hjälpa till, men det blir inte samma Now there has been a lot of work here since the decision of September, or since we started with onboarding. So it takes a lot of work, but it is mainly in the first part. Then we free up capacity again and go back into more day-to-day operations for this customer, and then it is not at all as much So that's always initially the biggest effort. Thank you.

We have one last question. It concerns the technical and strategic partnership with AWS. Can you give us a little more about that and how the Accelerate program is expected to contribute to growth?

Vi har gått in i ett ytterligare djupare samarbete. De har så många nivåer på det samarbetet. För inte så länge sedan var vi tvungna att komma upp till en viss nivå där vi levererat visst antal kunder till dem. Så kom man upp på ytterligare nivåer. It was not that long ago. And then the work intensified, so now they have started to send more. We have been with a lot of processes, quite long, big processes with them. And they have also been in the latest processes we have run. So we deepen it and get closer and closer. And now it's starting to fall in. In the last few weeks, more and more dialogues have started to come in. We are getting better and better dialogue with them. All these collaborations are based on us delivering to them, then they will start to deliver to us. And now we have delivered quite a lot to them, so now we are also starting to get even more back. So it has also taken much longer than we had expected, both because we have not been able to focus as much as we wanted, and be able to deliver as much as we would have liked. But now we have done that and reached that level, so now a lot has just come back. So it also affects the collaboration a lot. But I feel like I've said it many times, but that's the way it is. It's a fact, actually, and we're very careful about that. And it will also be important in this Ökningen, om vi ska fortsätta öka med 30% i snitt, så är det här också en viktig del, en viktig kugge. Och vi har nu också fortsatt med Intisfia-dialogen även med svenska IWS, vilket också är en jättespännande spin-off på det här.

Yes. A question about the figures from today's report. The cash flow from the ongoing business was negative 4.4 million. Can you develop a little bit about how the cash flow is expected to develop in the future now that you have strengthened the cash flow as well?

Yes, exactly. We will see. Det som är lite svårt med SAS-bolag är att kassaflödesanalysen versus resultaträkningen hänger inte riktigt ihop så som den brukar göra. I och med att vi får betalt av våra kunder en gång om året och i vissa fall så förskottsbetalar några för flera år framöver och då kommer en stor injektion av kapital från verksamheten men intäkterna är hyfsat stabila. Det vi kommer att se framöver är en stor inflow of capital from the financing business. During the next quarter, it will be visible then, the emissions that we made. But still, purely operational, we are bleeding money. We are not at the level of profitability yet. So it will still be from the running business, we will still go back a while until we have achieved our cash flow positivity in P&L Tack.

Det var den sista frågan jag hade. Jag får tacka för dagens presentation och önskar er lycka till framöver.

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