Oneflow AB (publ)

Okay, good to go. Welcome to this presentation of the year end results 2024 for OneFlow. My name is Anders Hemnes and I'm the CEO and founder of the company.

My name is Nathalie Hjelberg and I'm the CFO of OneFlow.

Okay, so as always, please use the Q&A function in Zoom. Then we will get back to your questions in the end of this presentation. And do not please use the chat box. Q&A is better for us. First, as always, some highlights for the last quarter. We closed in at 166.8 million in total ARR end of last year. End of Jan, we had 168 million in ARR. We're still growing quite fast, 29% year over year. Net new ARR was down 60% since last year, ended at 11 million sec for the quarter. An important KPI ARR full-time employee up 33% and getting close to 900,000 soon. Net and gross retention 101 and 89% in the last quarter and we had 4,100 paying customers in the last year up 21% since one year earlier. As always, we like to just take this opportunity and describe what we are doing at OneFlow for those of you that are new to our company. So we, OneFlow is a platform for handling contracts, all kinds of contracts, sales, procurement, HR, legal, and we work with the whole process from pre-sign, sign, and to post-sign. So you can build very powerful contract templates inside OneFlow. You can collaborate in ways which is not possible to do if you work with Word or Google Docs, you can control your templates in fundamentally different ways, what is allowed to do and not do and so on in the template, you can collaborate in real time, audit trail, fact changes, and so on, of course, sign sign is a small part of what we do, but but it's important, obviously, and post sign, you can manage your contracts, you can notify it on key events, you can filter, summarize, and work with the data inside your contracts. And throughout this process, we have a lot of AI features that will assist you, help you to write content and to analyze the content inside the contracts. so um and obviously integrations is very important since contract is a very central part of the process for any company we have a lot of integrations to crm and another systems uh the main Benefit of using OneFlow is to save time, obviously. You will save a lot of time in all stages throughout the process. And the pink bar here is how much time you can save in the pre-sign, sign, and post-sign stages of the process. So let's zoom in at some of the product highlights for 2024. We had a better release of AI review and AI insight, AI review. Highlight risks in your contracts and improvement areas and make suggestions for you. Super powerful tool, AI insight. is is a cousin of that. So we inside you can, you can get dashboards with overview of contracts based on data inside the contracts. And you can, for example, see cohorts on on notice period jurisdiction, if the consumer price index is less uh then x for example so you can make we we call it concepts you can make concepts and filter uh filter contracts uh smartly lots of ai insist improvements and assist is our tool for you can you can prompt if you need a clause if you need a contract template or whatever you can prompt it that we're going to give it to you on the fly super powerful approval flow is I would say the more advanced version of signing order, but with approval flow, you can do more. You can have different types of participants and more advanced flow in how you approve contracts before you, for example, send it to a counterparty. Inline comments, suggestions, redlining. We all know this from Word and Google Docs. Super powerful tools. We now have it also inside Monflow. fields of PDF is actually a little bit maybe dated feature, but we decided we had tried to not do this for many, many years because we are very much in found of HTML contracts. We think it should be live contracts. We don't think it should be PDF picture of image, but we decided still to do it because we have presence in uk and in france and um in those markets um docusign had a much stronger foothold and we needed to build that feature to bring in larger accounts and then bring bridge them over to our solution in the second stage so this was more like a tactical decision that we decided to bring it to to to build it for for especially you can and france that are a little bit behind when it comes to working in a modern way with with contracts Contract preview. Now you can see how the contract is going to look like on a desktop device, on a cell phone, an iPad, for example, for the counterparty. So you have full control of, of the look and feel for the contract, we redesigned our editor last year, much more neat, good looking, easy to use view. And we made tons and tons and tons of improvements on our integrations. We have a big team in Sri Lanka, 25 people working full time on our API and integrations. This is one of our core unique selling points. I would say with one flow we have, of course, many more, but this is this is one of them and might even be the most important because contracts is always a part of the flow. for any company. And we have very, very strong integrations at Bonflow. And of course, much more. This is just a snapshot of the maybe more kind of bigger feature launches last year. And of course, also, we had the big ISO project that was finalized last summer in June. So now we have ISO 9000, 14000 and 27000. So we also made a small change to our ARR formula from the beginning of this year. So it did not affect the 2024 numbers, but it affected the Jan number that we sent out a few days ago. And so from now on, when we book a churn in our ARR, we're going to book it on termination date. when the contract period is actually ending. Before, we took it in right away on the date that the customer noticed us about the charm. We've done a lot of research on this. We have talked to other companies in the space. This is how most, maybe even all companies that we have talked to at least, are doing it. It seems to be a standard way of doing it. Jan-Willem Wasmann, We didn't know one more change to the formula so before. Jan-Willem Wasmann, When we sign a contract we booked in the air are on the contract signed it. Jan-Willem Wasmann, But today now or starting now, we will book it in the air are. on the start date of the contract or the month where we push out the first invoice. So for example, we can sign a contract in January, which have started in April, then you won't see that ARR before in April. So how is this gonna affect our ARR going forward? I would say that, these two obviously the first one we turn is going to pull up the ar a little bit and the second one is going to pull it down and the total is effect is going to be roughly nothing i would say yeah yeah so it is going to balance out uh over time on the average in january we would have had half a million higher ARR if we used the old way of reporting the error. So it would have been a little bit better in general. But this feels better for us. So that's why. And it seems to be a more common way of reporting it, a more live ARR, so to say. So that's why we decided to do it. Okay. Net new ARR was down 16%. in q4. And if you look at the graph to the right, we did have actually have a quite good q1 last year, q1 was also okay. But then second half, something happened, we broke our beautiful pattern of constantly increasing our ARR quarter by quarter. And it This is also obviously below our forecast estimates. What is also worth to mention is that we are still doing actually very good on new ARR. So we had an all time high new ARR in Q4. But We are having a quite low expansion ARR and churn is very high. So churn picked up a lot starting in September last year. And then we had a peak. It went a little bit back, but still every month after September, the churn has been quite high in our, I mean, it's obviously all relative to something else, but how it used to be at least for one floor, not compared to other companies. and also expansion is lower. So that's why we missed our net new ARR goal because of expansion and churn. New ARR, all time high in Q4. We're still quite good at the acquisition part, first part. So churning, if assuming that the churn, it is still most these small companies that adjourn and we see a clear pattern it's it is small companies with a low adoption of the product um On the expansion part, market sentiment is still a little bit, I would say, sluggy. We have investments get paused, it takes time, cycle cycles are longer, and hiring is still slow. So that's why the expansion is not as it should be at the moment.

And second.

So if you zoom out looking at the annual numbers, net new error reached 37.4 million for the year, it was a decline of 3% since last year. And we did actually do quite well the first half of the year. But the second half was the reason why we missed our mark a little bit. um arr totally r ended the year at 166.8 million a growth of 20 29 percent and jan 168 would have been 168.5 if we used the old formula and and then In some ways, we have seen a little bit better sentiment during last year. And that's also why we had an all-time high new ARR in the last quarter. But still, the churn and the expansion is not where it should be. Our goal of having a 30% plus growth year over year still remains. So this is still going to be our target. And how should we be able to break this trend line and keep growing again? Of course, when the sentiments get better, this is going to be a help for us. We have a lot of new feature and product improvements coming, which is going to be a good help for us. When it comes to churn, we see a clear pattern on what kind of customers do actually churn. And it is typically small companies with a low adoption. And this bucket of customer is also very limited. 60% of our churn comes from this bucket of customers. But this bucket only represent a rough relief around 4% of our total error. So the bucket has its limits, so to say. And a fourth way how to improve our growth again, ways of working be more effective, it has to do with go to market. And I will get back to that in more details in two slides. So ARR per full-time employee, including also Sri Lanka. We had 25 people in Sri Lanka end of last year. It closed in at 882,000 end of Q4. Growth of 33%. So why is this KPI important? Obviously, we are a recurring business. 98% of all revenue is recurring. We have a gross margin of... 94 to 90 uh 91 to 94 percent kind of range closed in at 92 percent in q4 so our main cost is salary it's about salary salary salary And that's why this KPI is a very good indication on our progress towards profitability. And you might wonder why we decided to have such a low AR per full-time employee in the beginning of 2023, even 2022. Obviously, we went public, raised a lot of money. We decided to do many investments. We opened three offices outside the Nordics and we hired a lot of developers. We are in a product race and we need to remain in the forefront on the development side. Net and gross retention closed in at 101% end of Q4 and 89%. So gross includes a churn and downgrade. and not expansion, there are obviously, we see that many companies out there don't include downgrade in the gross, we think that's, that's not right. The mix between churn and downgrade is is roughly 5050. So if you take out the downgrade, it would have been we have would have had a gross retention of 94 95%. Net retention If you include expansion error to the gross, then you're going to have net retention. And as we've said, when is this going to improve? Because our goal is still obviously to have this up a lot from these levels. And we believe that is within reach. Market sentiment is one factor. We talked about it. New features of product enhancements is going to help us improve. And this bucket of weak customers has its limits. But ways of working, what I would say is maybe the most important factor in how we can break this trend. So I would say that if you Are familiar with the SaaS space, you would maybe know that most SaaS companies over the last few years, I would say post pandemic has experienced that the customer acquisition costs has gone up a lot and growth has been on a declining trend. And this has to do that we are within a shift in how we go to market. Before, it was easier. You could just buy a list of prospects and hire sales reps and start calling them and write content and so on to get traffic into your homepage. But today, the whole go-to-market motion is much more complicated because there are so much more noise out there. So this is for us a huge, huge initiative. I mean, we are obviously working on it all the time, but this is where we believe that we are going to be smarter going forward. Stop doing what's not working, do more of what is working. And because the whole trick, I would say, to become successful in SaaS is to achieve more with less. We have to achieve more with less. This is what excellence is all about. Achieve more with less. This is our main focus and has been that for a very long time. Paying customers increased 21% year over year, and the average customer value closed in at 40.4 thousand, up 5.2% since one year ago. add more features all the time, more value. And we renegotiate every year customers with discounts. And obviously, I mean, there are many discounts, so there's a lot of potential there. And we also launched last year a marketplace for selling add-ons. So this is also going to help us improve the average customer value. So we believe that this is going to... continue to increase going forward. Maybe we should switch now, Natalie. Will you take over? Yes, please.

Thank you. So I'm going to start off talking about our net sales that went up 29% in Q4, comparing to the same period last year. So we closed net sales at 37 million. And if we look at our net sales, as Anders mentioned, the majority is connected to software recurring revenue, which actually is 98% of our net sales. We also increase the net sales coming from regions outside of Sweden. We close at 38%. And as you can see presented in the graph, we steadily increase that percentage throughout 2024 quarter by quarter. And this is, of course, linked to us becoming more established, especially in the newer regions, sort of say the regions that we went in in the end of 2022, UK, France and the Netherlands. But also, let's not forget, OneFlow is a product that can be used all over the world, any type of business, any business that have a contract. And that's basically all businesses. And that is also shown when we look at the number of paying customers that we have in different countries. So by the end of 2024, we had paying customers in 42 countries. So our estimations or expectations is that this percentage will continue to increase in the upcoming year. If you look at the net sales on a yearly perspective, the net sales actually went up 36% in 2024, comparing to last year. We closed the year with 136 million in net sales. We also see an increase in the net sales coming from regions outside of Sweden, that percentage have increased by 6%, closing at 36. Looking at the ARR net sales ratio, it continues to be strong. We close the year with 123% in the ARR net sales ratio. So continuous strong growth when we look at our net sales, and that is connected to our growth in ARR. Gross margin, we closed it at 92% by the end of 2024. And so when you look at the gross margin or our largest cost of service sold expenses, that is linked to our sales commission to partners. And we do see a slight decrease in Q3, Q4 of last year. And that decrease is connected to us having higher sales commission to our partners. And that is due to the fact that we are establishing more strategic partnerships. And if you look at what our expectation is ahead is that the gross margin will continue to be high and our prediction is that it's going to be around 92% going forward in the upcoming year. EBIT and EBITDA, as you know, our main focus now is to grow one flow, but also to drive one flow towards profitability. And that is also shown when looking at the numbers of 2024, we actually have reduced our losses comparing to previous year. If you look at the EBITDA in Q4, we closed it at minus 11 million. That is a 7.3 million improvement comparing to the same period last year. The same goes if you look at EBIT. We closed EBIT at minus 21. That is a 5.5 million improvement comparing to the same period last year. Now, if we look at 2024, 2024 have been a year where we have stabilized our cost base. We have continued to grow in revenue, to grow in ARR. But also the investments that we did during 2023, both as Anders mentioned, investments in the product development, hiring more bigger teams within the product, but also investing going into three new regions, UK, France and the Netherlands. 2024 has been a year where we actually see that we have been becoming more established in those regions. We have a stronger product and that is also shown in the numbers that is presented. We are reducing our losses. We have stabilized our cost base and we continue to grow when it comes to the ARR and the revenue. This is also quite clear presented here when looking at the EBIT and EBITDA margin. Quarter by quarter, comparing to last year, we see a slight reduced numbers in losses. So we are working towards driving OneFold towards becoming a profitable company. If you look at EBIT, we actually have a 34% improvement in EBIT, closing EBIT at minus 57%, comparing, sorry, in Q3, which is a 34% improvement comparing to 2023. EBITDA, we close it at minus 30%. And that is 38% improvement comparing to the same period last year. If you look at the yearly numbers, so the EBIT margin have increased by 38%. So we have improved the EBIT margin by 38%. The EBIT margin closed at minus 34 for the full year. And if you look at number wise, so we closed the EBIT at minus 83 million. And that is actually 15 or almost 16 million improvement comparing to 2023. The EBITDR margin, we closed it at minus 61 million. And that is an improvement comparing to 2023 by 16... Very sorry for that, by 36%. In numbers, that means that we actually reduced our losses comparing to 2023 by approximately 24 million. So a steady improvement when looking at both EBIT and EBITDL margins, steady reducing our losses comparing to previous year. Going back to what Anders mentioned in the beginning, if we look at the numbers, the historical numbers 2021 and then comparing to 2022, 2023, we see we have quite bigger losses during 2022 and 2023. And that is again connected to our investments. in new markets, our investments in the product development, our investment in the organization. And in 2023, we can see that it's starting to bear fruit by us reducing our losses. We have stabilized our cost base. We continue to grow. We have the right organization to drive OneFlow towards reducing our losses even more and reaching our profitability. That is our main focus. The financial goals, we are strongly committed to them. We have a commitment to reach yearly ARR growth above 30% and to reach profitability with current fundings. Very much committed to those financial goals. Anything more you want to add on that Anders?

Let's dive into the Q&A part of this presentation.

Let me just open the Q&A box here.

Okay, so Q4 net sales was lower than what could have been expected given average ARR over the quarter. What explains this? Have you made any changes to reporting or calculations? Should one expect a catch up in net sales in Q1? I guess that's good for you.

Definitely. So we have not made, as Anders mentioned, the changes in the way that we calculate ARR that have started from 1st of Jan in 2025. So when talking about the 2024 figures, there have been no change in the way that we calculate ARR. So the net sales, I mean... The majority of the deals that we close in Q4 have a start date in the 1st of Jan. The majority of them, not all of course, but a high percentage of that close deals that we do in Q4 usually have a start date in Jan. That basically means that that will not hit our revenue until Jan because we will not invoice the customers before the start of the license period. So will we see an effect in Q2? Yes, from the deals that we sold in Q4, we will see the effect of that in the majority of that. We will see effect in the Q1 in 2025.

Okay, good. ARR growth was 26% in January and you aim to accelerate ARR growth to about 30% in 2025. what is needed to reach this how much does it rely on improved macro so i think um i mean there's a list of obviously things that is going to help us improve the growth again again macro is uh one of them but it does not rely on macro um alone it's just just a small factor so i would say that Obviously, the product is getting better and so on, and we add stuff that is attracting different customers, and we can get more out of our existing customers. But I would say that maybe the most important factor to improve growth again and break the trend is ways of working. And we're not going to get into details because that's very technical, but it is... It is about doubling down on what works and stop doing what is not working as good. We talked about the good marketing. And this is this is the game in sauce at the moment is to work smart and achieve more with less achieve more with less. What is the plan for hiring and costs for 2025 given the currently lower ARR growth rate?

I mean, as mentioned previously, we have during 2024 stabilized our cost base. We're comfortable in the cost base that we have going forward. I mean, we do not have big plans to hire more. We do believe that we have the right organization to drive one flow towards profitability. Of course, there will be some recruitments necessary during the year, both replacements recruitment, but also when we realize that there is some particular need recruitment that is needed to be done, but we won't see the increase in head counts as we did perhaps in 2023 or in 2024. We do believe we have the right team in place to drive OneFlow forward.

Yeah. Are there any plans for price adjustments during the year? We have not changed our price list since I think it was September 2023. And we're not talking about the anchoring prices that you can see on the webpage. And many customers have discounts. Typically, if a big company buy a lot of seats, then they will get a discount. But the anchoring prices is not going to be changed this year for sure. And we are working on renegotiating contracts that are discounted. But we have started to launch add-on products. So that will also pull up the average value per customer. So the idea is that you're going to have different tiers and every tier has its own price list. And then there is a volume discount of course included if you buy many, many seats. But we're also going to expand the value for the customer within that tier by selling add-on products. to them. Cash flow from working capital was strong in Q4. Were there any extraordinary items in Q4 cash flow?

No, there were none extraordinary items in the Q4 cash flow. There are many things that defines the cash flow from working capital, but we do a lot of improvements when it comes to making sure that we support our customers the best way to get the payments on our invoices. We do have a really tight process. We have enhanced that process. And that is actually bearing fruit when we see, I mean, the DCO numbers are going down and that is having an effect on our and operating cash flow, definitely. So no extraordinary items.

Would the January ARR growth rate have been 27% and not 26% with the old ARR definition, or would it have lowered the ARR since 24 as well? I think we touched upon this question in the deck. If we used the old formula, we would have had slightly higher ARR end of Jan, roughly half a million. But over time, we don't, at least based on the history, these two changes that we made will not impact the total ARR because they kind of balance each other out quite well, I would say. So yes, to that question, the growth rate would have been a little bit higher in Jan with the old formula. Okay, that's all. Good. Good. Thank you for joining us today and wish you all a very nice weekend.

Definitely. And a happy Valentine.

Thank you for letting me know.

Okay. Thank you so much.

Bye-bye.

Bye.