Oneflow AB (publ)

Good morning to all of you and welcome to this presentation of the highlights for our third quarter 2024. My name is Anders Hamnes and I'm the CEO of the company and next to me we have Nathalie Hjelve, our CFO.

Yes, big welcome.

As always, please use the Q&A function in Zoom. I will get back to your questions in the end of this deck. And don't use the chat because it's going to be easier for us to walk through the questions in the end. First, as always, some highlights for the quarter. We closed in with an ARR of 155.8. And at the end of October, we had 160.8 in total ARR. ARR is growing 34% year over year. We had a net new ARR of 3.8 for the quarter, which is down 29% from last year. And we will walk through or break down these numbers in a few slides. ARR to full-time employee was up 42%, closed in at 829,000 SEK. And net and gross retention, 106, and 90% end of Q3. We are now very close to 4,000 paying customers, and this number was up 25%. year over year and of Q3. First, to those of you that are new to OneFlow, we would like to just include two slides to describe what we do. So OneFlow is a platform for handling contracts, all kind of contracts, sales, procurement, HR, legal. And it's the whole process from start to finish. So you can build your templates in OneFlow. You can collaborate with the counterparties and make changes in real time. and of course you have the signing part and then post sign you can manage your contracts you can you can work with the contracts and since since we embrace html based contracts and not so much pdf you can do stuff with the data inside the contracts which is not as easy to do if you work with pdf based contracts and throughout this process we support our users with a lot of insights we give them we analyze the contracts there is also now some really powerful ai features and more ai stuff is coming also very shortly by the way so this is a high focus for us at the moment and since we work with HML based contracts, you can you can build very powerful integrations between one flow and your and your CRM, ERP or whatever system you use in your company. So to push data back and forth from the contract into whatever system you'd like. There are, of course, many benefits with OneFlow versus how we used to work with contracts in the old days. Today, most companies have taken the step into at least eSign. But eSign is just a very small piece of the process. It's replacing the scanner and printer. It takes two minutes. So that's why you can see in the middle here, we have the sign bar. So the problem you solve if you go for an PDF slash e-sign vendor is actually a very small problem. So the big potential is when you go with the whole process, pre-sign and post-sign and not only sign, like we work with here in OneFlow. And the pink bar is the time you can save by using OneFlow instead of using Word and PDF and email back and forth and so on. We push out a lot of features all the time. This is just a snapshot of some of the improvements to the product that we made during the quarter. The focus or the keywords I would say for our launches could be intelligence and experience. This has been the keywords throughout this year, and this is also going to be the keywords for at least next year. We have launched a lot of stuff in our AI assist function that will help our users to work, to create content to your contracts. And we're also launching more AI stuff within a few weeks. Actually, we have a very big AI launch within a few weeks from now. And we also have redesigned our editor. So now it's even more modern, and the navigation is much better. So experience is a big focus. We also launched in Q3 suggestions, or also called redlining. So you can really work with negotiation with the counterparties in real time inside the contract. And we always make a lot of improvements to our integrations. And the maybe most important integrations for us is Salesforce and HubSpot, a big focus on those. And we also launched a marketplace in the third quarter. where we now are selling add-on features to our customers. And one such example could be AI capabilities. So to the numbers, net new ARR was down 29% in the third quarter from last year. We also had some headwind from currency in the quarter. So we had a loss of around or close to 800,000 sec in the quarter due to the currency. It's also worth to mention that third quarter is a little bit tricky since you have the holiday season. And it's a very few weeks where you close the deals. So it's a little bit complicated. sometimes arbitrary if a deal fall inside or outside the quarter. But still, this was for us a disappointment. It's a weak number. It's worth to mention that the gross new ARR was actually all time high. We did a very good quarter on gross new ARR. It was actually up more than 7% despite the currency headwind. So the reason for the low net new ARR was churn. And we had quite stable churn for a long time, I would say. And in the second half of the third quarter, it picked up a lot. And we know exactly, of course, what kind of customer profile that churned. We don't see any increase among enterprise or mid-market customers. It's small businesses. Small businesses with a low volume of contracts that is churning. But what happened in... in September, we can't see any kind of indicators internally that explain this uptick because we didn't do any changes to the product. So we believe that it has to do with the market at the moment. It's external factors. We follow, we have a lot of health metrics and we really dig deep into our customer health score and we can't explain it internally why the churn picked up in September so much. So we believe it has to do with the market sentiment. It could also be that in September people start to look at the budget for 2025 So they kind of walk through the costs and so on. But again, in the mid-market, large and enterprise segments, the churn is stable. It's in the small customer segment. We have a very good pipeline for the fourth quarter and also started good in October with a gross new of 5.7 million. Looking at the total, ARR end of Q3, 156, end of October, 161. We have a growth rate at the moment of 34%, And of course, if you look at the graph to the right, it might look kind of depressive, but still, we are growing 34% in a tough market. It's a very high growth compared to other SaaS companies and competition. But still, the trend is going down. And how can we turn this trend? How can we make it go up again? This is, of course, our goal. um first we we know that the the churn today is higher than normal this is this is not normal we also know that expansion is lower than normal so the market sentiment at some point will turn and that of course will have a huge impact on our growth rate another thing is has to do with the product itself because Of course, we are in kind of a product race. Competition is tough, and the customers are very demanding. We have a lot of features in OneFlow. It's a very powerful platform. And sometimes you don't win all deals. And we log everything in OneFlow. We have a very high focus on data. So we know exactly when we lose a deal. We know exactly why. And we know also, of course, the cost for building those improvements that we have to do to the next time win that deal. So we have a very, very, I would say I'm very comfortable with our roadmap, we have a very smart roadmap, we have an analytics team working only with data, analyzing what to do and what we will do in the future. So it's about, we have to make improvements to the product, and we know how much that will impact our growth. Third, We launched a marketplace last quarter, third quarter, where we now are adding more and more add-on services. This is going to have an impact on expansion ARR going forward. Today, we have 188 people working in one floor and that also includes 25 people in Sri Lanka. So ARR to full-time employee was up 42% since last year and they closed in at 829,000 SEK for the third quarter. This is a very important KPI to us because for OneFlow, 98% of our revenue is recurring. We are an ARR company. And the gross margin is in the range 29 to 24%. And our main cost is salary. Salary, salary, salary. And the two most important kind of numbers for us is ARR and salary. Internally, we don't talk about salary. We talk about employees, which is kind of the same thing. So this KPI comprise both those two numbers that are most important to us. profitability. So why did we allow this important KPI to be so low back in 2022 2023? We went public, we raised a lot of cash, we opened many new offices, we hired a lot of developers to, to be in the in the top of the product, it come among competition. So this was a decision that we made and it was always according to plan. The plan was to have a log KPI because the beauty of SaaS is that business is recurring, but it also takes a lot of cash upfront to build an amazing product. But now we are slowly turning towards profitability. Uh, we will still keep a high growth base and balance the growth and, uh, our cash reserve. Um, yeah, so this is a very interesting indicator that will show you the when, when, when it's realistic to, to reach the water surface. net and gross retention, 106% in net and 90% in gross. We in OneFlow include downgrades in gross, which I think is how we should do it, but I know that not all companies do. And the mix for us between churn and downgrade is roughly 50-50. So if we should compare our gross retention to companies that don't include downgrades, it would be maybe in the range 94 to 95%. And net retention includes, of course, everything, including expansion, ARR. The macro is still challenging. We have a high pressure on churn, and we don't do that much expansion as we used to do. And we know that... Big companies, they don't churn so much. Our churn rates among enterprises and large companies is very low. But we don't have that much expansion either at the moment. But the churn we see, again, it is among small companies, typically small companies that don't have high volume of contracts. And this is the reason, the explanation for the increase. We do see some bankruptcies also at the moment, and large companies are stealing of people and downgrading seats. So very much the same story as we actually had for the last, I would say, six, seven, eight quarters. Competition is constant, so it's always there, not kind of worse or better than it used to be. But the main reason for when we lose customers is not competition. Drivers for increase. How can we improve these retention rates? Again, at some point, the underlying market fundamentals will improve. Another factor is that we are working heavily to make those improvements to the product that we know will have an impact in our sales meetings. And third, we have now a marketplace and we will work to upgrade our customers, not only to make them buy a more kind of comprehensive and expensive tier, but we also can do add-on sales to our customers within the tier that they are in. Paying customers increased 25% year over year, getting very close now to 4,000. And the average customer value is slightly north of 40,000 sec per month, also up 7% since a year ago. We believe that this trend is going to continue, that we will be able to still increase our average customer value. And again, it's about more features, more value, higher price. We do a lot of renegotiation also with customers, old customers, and we have the marketplace to work with smart add-ons to increase the price as well. So maybe I should give the word now to Natalie.