Oneflow AB (publ)

Welcome to this meeting where we walk through the highlights of the first quarter 2025 numbers for OneFlow. My name is Anders Hamnes and next to me we have Nathalie Hjelve, our CFO. And please also use the Q&A function in Zoom and not the chat. And we will get back to your questions in the end of this presentation. So before we dive into the numbers, we would just like to say a few words about ARR, because we have made a change to this formula as of January this year. As maybe some of you have seen, we also reported slightly higher ARR numbers in our press releases from January, February and March this year. The reason for that is that we initially planned not to change our historical numbers. But we realized that this gave a slightly skewed or wrong picture of our performance when it comes to growth and retention and so on. So we decided the last few weeks to just update all numbers back in the history to give you a more correct picture of how we are doing as a company. So the changes in the formula is that before, when it comes to churn, we used notice date and now we log churn on termination date. And also when it comes to new and expansion ARR, before we logged that on contract sign date and today we log it on contract start date or subscription date, invoice date, that is the same thing. This is some kind of a more live ARR. Yes, so highlights. ARR was up 23% year over year, ended at almost 165 million. And for the end of April, we had 166.2 million in ARR. We also had a quite heavy headwind in the quarter on the currency. So we lost around 3.4 on our portfolio due to a very strong kronor in Sweden. So the net effect was 5.6 million in net new ARR, 5.6 million in net new ARR for the quarter. ARR per full-time employee up 28% and closed in at slightly north of 900,000 sec. Net and gross retention rates 101% and 89% end of the quarter. And we had 4,300 paying customers at the end of March, which is up 17% year over year. So first, to those of you that are new to OneFlow, we just like to share two slides on what we do. And so we are a platform for handling contracts, all kind of contracts for all departments, HR, sales, procurement, legal. And this is an end-to-end platform for all the steps in the process where you can create very powerful templates in OneFlow. You can collaborate in real time, make changes, audit trail, inline comments, suggestions, and so on. So you don't have to jump back and forth between Word, PDF, Outlook, and a more simpler eSign tool. In OneFlow, you can do it all on one slate in a very interactive experience. post sign you can archive your contracts you can manage your contracts you can have full control of your obligations and liabilities and so on which is of course very very important and throughout the process we also offer a suite of very powerful ai services to help our users write better contracts and to also be more at the highlight risks and so on And also, since we have an open format, we don't lock contracts down into PDF pictures. It's HTML experience. You can have very powerful integrations between OneFlow and your CRM, ERP, HRM, ATS, or any other system that you use in your workday. Time is the most precious thing we have in life. So if you can save time, that's worth a lot. And that's what you do at OneFlow. We make you more effective. You can save a lot of time throughout this process. And these pink staples is the time you can save if you use OneFlow compared to using what still most companies do, making your contracts in Word and PDF and mailing back and forth and maybe upload it to an e-sign tool, which is a very, very crowded space these days. And that's the staple in the middle here. So if you go for an e-sign tool, you can, of course, you replace the scanner on a printer, but that's only saving you a few minutes. So the big potential for saving time is not in the sign stage. It's, of course, before and after you sign the contract. Highlights when it comes to feature improvements for the quarter. As those of you that know us well know, we put a lot of effort into integrations. This is A very, very important unique selling point for OneFlow. Back in the days, if you go back five years, 10 years, it was enough to just have an integration. Today, customers are more demanding and they require really, really deep and powerful integrations with two-way sync and so on. And we have a team in Sri Lanka, around 23 people at the moment, just building integrations and maintaining our public API. We have a top-notch integration to a lot of the big CRMs in the market, and we continue to just build and improve. So for the quarter, we put a lot of effort into HubSpot and even the Swedish CRM up-sales, and also an HR tool called Hybob, which is super big at the moment. we even launched an integration to talent tech reach me this is one of the biggest nordic players in the application tracking space last year we launched a more extensive signing order where we can have approvers and so on we've built very powerful flows And in the first quarter of this year, we even extended those capabilities to the counterparties. So even counterparties can add different kinds of participants in the contract process. Some can be signers, some can be approvers and so on. This is a very highly appreciated feature in OneFlow. We put a lot of effort into the post sign experience and we also added some more bulk action capabilities so you can be more effective when you organize your contracts, move, delete and so on in bulk, not only one by one. And since contracts is a part of other processes in the company, we even added what is called redirect of design internally. What it means is that you can connect one flow to a bigger flow. So what's going to happen when the contract has been signed, then you can trigger different kinds of actions. In the beginning of the second quarter, we launched AI Extract. So this is also a highly appreciated feature where customers can upload all their old contracts into one flow. And by AI, we extract key data. So we can actually make them alive and do stuff with the data, it can be participants, it can be amounts, date fields, and so on. So you can actually get notifications and and play with the data and you can, you can build reports and so on, on this key data. So if it's locked down, if a lot of companies still actually most companies still have their contracts on in a folder on a drive as a PDF for an image, then it's dead data. So we can make that data alive. more concepts within ai review and ai insights this is something that we launched last year and we're just building building building now we we would give our users a lot of powerful insights when it comes to how they write contracts we can highlight risks we can suggest improvements and so on and we can also do that across all your contracts we can highlight contracts that deviate from something a standard or a template so you can for like if you have a due diligence process this is a really really powerful way of just scanning through all your contracts. And even we launched a simple version of AI review and AI insights for customers with the enterprise tier also in the quarter. So just as a teaser. So if you want to customize and so on and do more stuff, then you would have to buy this as an add on. But just as a teaser, we launched it for all enterprise customers. And we continue to build deeper and deeper integration with HubSpot, which is one of the key CRMs in the market. So net new ARR for the quarter was 5.6. And then we also had a currency headwind of 3.4. So if you take out that currency component, it would have been 9 million in net new ARR. We have roughly 40% of the ARR is in foreign currencies. uh we do i know this is an old kind of record but still uh the sentiment is not uh fun sales cycles are quite quite long and it is quite um the market is quite reluctant when it comes to into investing um and so on and and this is not this is something that i guess most companies in the software space experts at the moment If we look at how we reported the ARR before, so we had gross new ARR signed for the first quarter at 12.9, 12.9, but only 6.9 was recognized during the first quarter and the remaining 6 million will be included in future periods. Um, We closed in at 165 million in ARR end of Q1, 166 for the end of April. The growth trend has been declining and we ended at 23% end of Q1. If we take out the currency effect, the growth would have been 25%. As many of you know, we do have some goals or targets and that has been to have a growth more than 30% and to become profitable with the current funding. What we do see is that we will not be able in the short term to maintain a growth rate at more than 30%. because now we are so focused on becoming profitable, and that will impact our investments. But mid-term and long-term, we stay put with our growth goal of 30% plus, so that's going to happen. We will refocus back on the growth when we become profitable. Obviously, what will also improve our growth going forward, underlying market fundamentals will at some point get back to normal. That's going to, of course, help when people are more open to do investments and so on. We do have a lot of features, a lot of product enhancements that we know our customers and prospects would like and even sometimes require. So we are filling the gaps in the product and also we are constantly working with our go to market motion. We are going to rebalance our ICP. We are making changes to our ICP. We are even making changes to where we put the focus in the product to meet new needs and so on. So we have a lot of data and a very good picture of what we should do to position ourselves better. This is always, of course, something that takes time, but we do have a very solid plan and we are internally confident that we will get back to and break this downward growth trend as soon as we as we can see that now we are at least almost profitable. ARR. For a full-time employee, ended at 905,000 SEK for the first quarter, up 28% from last year. And why is this so important KPI to us? Obviously, because this is a very good indication on when we will become profitable. We have a recurring or revenue of around 98%, 98% recurring and the gross margin is in the range, typically 91 to 94. For the last quarter, it was 92%. So our main cost is salary, salary, salary. And when we went public in 2022, we raised a lot of money to make some investments. And that was to scale up our R&D units and even to open up offices outside the Nordics. We have offices now in, as you know, in London, Paris and Amsterdam, on top of the offices in Helsinki and Oslo. So obviously we plan for having a kind of low ARR per full-time employee, but now the focus is to bring this up and to become profitable. Net gross retention, net closed in at 101% in Q1, down from 109, same quarter last year, and gross around 89%, which is almost same level as it's been for the last kind of six quarters. Gross retention includes churn and downgrade. And if you add expansion sales on top of that one, you will get the net retention. Churn has been quite high, and it started to pick up in the third quarter last year, and then it has stabilized on a higher level. So in the first quarter, we had a churn of 5.8 million. 5.8 million. And the first quarter last year, we had 3.1 million. Obviously, we are now a bigger company, so it should be higher, but still it is up. The mix between downgrade and churn for the first quarter, downgrade was around 41% and churn in terms of termination, 59%. And if you go back a year, the downgrade share was 44%. So it is kind of downgrade is typically between 40 and 50% every quarter of the total show. And the biggest churn is also in what we call internally the bronze segment, the lowest tier, the smallest companies. Typically between 50 and 60% of all the churn that we've had this and the last two quarters has been in the low tier segment. what we call gold and platinum, the biggest accounts with biggest potential and so on, we see a very stable churn and not an uptick or downtick. And it's typically between 15 and 20%. So it's at a more decent level. If you look at the churn reasons, there is one reason. that is dominating across across all segments and all industries and that is the economic climate this is what we get from the customers they lay off people and they have to save costs and so on so this is the reason number one number two and number three so if you go further down on the list you will find reasons like bankruptcies inefficient payment, some companies get the quiet and so on. And of course, yes, we do also sometimes lose because of competition. But that reason is not kind of growing or declining. It's, it's always been there. It's a part of kind of business. So that's not on the kind of top top five list, so to say. So how can we increase the retention rates going forward? Obviously, as we already said, the market fundamentals will help. And at some point, we expect it to be more normalized. We are filling the gaps in the product, we have a very good understanding of what products and customers need. And we are also rebalancing our product strengths into different ICPs and so on. This is a work that have been going on for some time, but it's gonna take some time to get like full effect. But we know where the ocean is red and where the ocean is blue. So we are rebalancing and we have a very good plan for how to make the growth kick back again. Paying customers increased 17% for the quarter. We had 4,300 customers end of Q1, and the ACV or average customer value was stable from Q4, but up 5% since Q1 last year, slightly north of 38,000 sec per account. so we are planning to increase this going forward by adding more features more value and increase the prices we do renegotiate prices with old customers and we also have launched a marketplace where we're going to add where some features will not be included in the standard chairs and only sold in the marketplace so there are many ways to for us to increase our acv Then I think I'm going to leave the word to you, Natalie.

Thank you. So our net sales ended up at 39 million by the end of Q1, which is a 27% increase comparing to the same period last year. And as you can see presented here, our net sales are steadily increasing quarter by quarter. And that's, of course, connected to our ARR growth. We are an AR first company, which we are very much focused on AR and AR growth. And that is also something that is shown when looking at our net sales. If we look at the software related recurring revenue, 98% of that is the net sales consist 98% of software recurring revenue. If we look at our shares of net sales coming from regions outside of Sweden, that is also a percentage that is steadily increasing, ending up at 40% by the end of Q1. And this is something that we estimate will continue to increase. Of course, it has become more established in our regions outside of the Nordics. But as you all know, OneFlow is sold all over the world. So we're also increasing our net sales from regions that we don't have market presence. Our gross margin is quite stable like the last quarters at 92%. We can see a slight dip in Q3, between Q2 and Q3 2024. And that is connected to us establishing new partnership. If you look at our cost of service sold, the majority is connected to commission to our partners. And we do look at, if you look from a future perspective, we do believe that our gross margin will continue to be at a quite high level, around 92% going forwards. EBIT and EBITDA, as Anders mentioned, we do have a strong focus on driving one flow towards profitability. As you can see shown here, also we are decreasing or improving our results going towards profitability. In Q1, we ended up EBITDA at minus 8.6 million and EBIT at minus 19%. If we look and compare it to the same period last year, EBIT have actually improved by 2.3 million and EBIT are at 4.4. Now, the reason for this is, of course, our focus to drive on flow towards profitability. We have stabilized our cost base in connection with an ARR growth. This is shown in the numbers. And one thing worth mentioning here, we did have an effect of 1 million in currency, which actually lowered our numbers. So if we take away that 1 million, we actually would have had an EBIT at minus 18 million in Q1. EBIT and EBITDR margin. I love this slide because it is really showing how we are improving our results. We are lowering our losses. We ended up at EBITDR margin at minus 22 and EBIT margin at minus 49. That is actually improvement by 21% comparing to the same period last year again we have stabilized our cost space we continue to grow in in arr and also we are doing all of this you know working more efficiently stabilizing our cost base and this is without any effect on product development that will always remain a focus to make sure we deliver the best product possible for our customers Our financial goals are not changed. We do still believe in them. We have financial growth of having an ARR growth above 30% and to reach profitability with current funds. And as Anders mentioned previously, our ARR growth in Q1 was 23%. So in the short term, we will not reach above 30% with the current market environment. And as mentioned before, we prioritize right now to become profitable. And once we achieve this milestone, and of course, in connection to the market segments being improving, we will accelerate again the ARR growth and focus on growing the ARR. But we do still believe in the long run that we're going to achieve AR growth over 30%.

Okay, then we are at the Q&A session. ARR grew 33% in Q1 and slightly higher adjusted for FX. What was the growth rate in April? I haven't checked that.

Actually, we haven't checked that.

No, but we can get back to you on that offline. Given current pipeline and macro, do you think you can keep the current growth rate for the rest of the year? We don't provide that exact guidance. I think we should keep it at the level that we already have done, actually. Were there any non-recurring items in OPEX or cash flow besides the 1 million in FX for staff redundancies, etc., Inc. you want to be aware of?

No. I mean, there is always smaller, of course, one-time cost in the results, but nothing significant or nothing bigger worth mentioning here. So besides the 1 million in FX, there was nothing else that that we need to highlight here.

Did the Q1 FTE reduction result in any savings in Q1 or will that be seen ahead?

So the Q1 FTE reduction, as you mentioned, is not really a reduction in that matter. I mean, we will do, of course, we will see that in upcoming quarters in the results. And we have less employees by the end of Q1 comparing to the end of last year. So of course, that will also be shown in the numbers in the upcoming quarters.

Yes. So upcoming quarters. How comfortable are you with cash flow given the current cash position and the aim to become profitable?

I mean, we do monitor our cash flow quite in details, of course, but also we do monitor our cost base and we always make adjustments to make sure that we are quite comfortable with the cash flow based on the expenses that we have. This is something that we do continuously, I mean, monitor. So based on where we stand today, we are quite comfortable.

Yes, we are comfortable. What is the timeline to becoming profitable and cash flow neutral? Again, we have not disclosed that kind of information before, and I think we're going to keep it at the current level.

Definitely.

What does the current strategy mean for your international expansion? What markets are in focus? So the focus is still on the markets where we do have a presence, a physical presence. We do some spikes outside these markets as well, but that's not kind of on a very low level, so to say. So the focus is to increase our unit economics in the markets that we are currently covering, six markets. Other expenses was quite high this quarter compared to last year. Q1, is there any one-offs for this quarter or what has caused the increase?

I mean, the FX currency effect, that is something that will be in the other expenses. So that's one of the things that differs from previous quarters or previous quarter last year. But there's no other bigger cost that we, that could have, I mean, generally all costs do increase year by year. That's the way the world looks like. So besides that, no other significant expenses.

And full-time employees are down this quarter compared to last year. Can the effect from the lower FTE base be observed in this quarter personal cost or can we expect to see personal costs to come down further for the rest of the year?

I think I had this question earlier and we answered it. Yes, we will see that in the numbers upcoming quarters.

What we can say is that we have in the last few months made changes on several things in the company that will have an effect in the future that you haven't seen yet. What is your definition of profitable? EBITDA, EBIT or cash flow? um all three super important of course but we are looking at ebit that is our measuring point exactly i think that's all questions um okay good question thank you for your time and wish you all a wonderful upcoming weekend and friday thank you so much thank you thank you bye