Oneflow AB (publ)

okay good morning good morning 10 o'clock okay so welcome to this meeting uh where we will walk through um the highlights of the second quarter uh 25 for one flow so my name is anders hamnes i'm the ceo of the company and next to me we have

Nathalie Hjelve, CFO of Manflow.

Thank you. And also please use the Q&A function in Zoom and not the chat. And we'll get back to your questions in the end of this deck. So first, some highlights for the quarter. ARR closed in at 171.2. This is a growth of 19%. year over year. We ended July at 173.2. Net new ARR was down 33% during the quarter and closed in at 6.6 million. And the main reason for that is related to John and expansion that you can see from the retention rates below. Net ended at 97% and gross retention at 87%. ARR per full-time employee up 22%, 936,000. And we had 15% more paying customers end of second quarter compared to last year. getting the cloud close to four and a half thousand paying customers in one flow. So first, two slides to those of you that are new to OneFlow, just to give you some idea on what we are doing. OneFlow is a platform for handling contracts, all your contracts, sales, procurement, HR, legal. And this is an end-to-end solution for all the steps in the process. We work pre-sign. sign, and post sign. You can build templates in one flow. You can collaborate in real time with your participants, making changes, audience trail, suggestions, and so on. So you don't have to jump between Word, Outlook, and so on. You can do it all on one slate. Of course, signing is a part of the application as well, a small part. And post-sign, where you can manage your contracts. You can be notified on key events along the timeline. You can summarize, filter. We have... a set of really powerful AI features where you can analyze your contracts, you can get advice on improvements for your contracts, you can scan through all your contracts and find contracts that have some kind of deviation from whatever. So a lot of really powerful AI features, both in the pre-sign and in the post-sign stage. And obviously, contracts is a part of every company's workflows. So integrations are a very, very key area for us. We have more than 20 developers in Sri Lanka working full time only on building integrations and maintaining our API. So this is one of our cornerstones in the company. So we have Tons of really good integrations to CRM, HTS, HR, and API middleware, a lot of different tools. Time is the most precious thing we have in life. And if you can save time, that has a lot of value. And this is what OneFlow is about. Contract is the part of every department, every company across the globe. That's why companies exist, to buy and to sell and to hire people and so on. It's all about contracts. So if you can save time, that has a huge impact for companies. That's what we do in pre-sign and post-sign. And if you go for one of the more simpler e-sign solutions out there, there are tons of those vendors. You're only going to save... the purple bar on top of the sign stage. So you can see that it's a very, very small part of the potential. The magic happens in pre-sign and post-sign. E-sign is a commodity. That's not what we do. We have it, it's a wheel on the car, but that's not where we put the focus. Then to some product highlights for the quarter. We added what we call signature fields on PDF. Those of you that know OneFlow know that we are not a big fan of PDF. But still, a lot of companies are trapped in all ways of working. So we have to support this. So we are definitely on top of the line when it comes to PDF as well, even though that is not the core in what we're doing. new content tab. This is a very powerful way for people to work with templates to drag in whatever data field section you need. So this is helping to increase the happiness and the and the ease of use in one flow. Before we only had a marketplace for admins. Now we have it for all users. So you can see all the powerful stuff you can activate to do even more contract magic in in one flow. We have a lot of AI ideas. We have a lot of QAS. Actually, we had a discussion yesterday if we had the most in the market. We're not sure, but definitely in the top league there. And if companies should need something that we don't have, it takes a very short time for us to activate it. So we have a really, really powerful suite of advanced and qualified signature capabilities. uh we support today 12 languages in the application we have made several improvements to how the language behaves through the application we have launched new integrations with a hard pace hr and sweet time to big hr tools and we continue to make improvements to hubspot and super office and power automate main events during the quarter. After the quarter, during the summer, we have many developers working during the summer as well. We continue to work on HubSpot and those of you that have followed OneFlow for some time have seen that HubSpot goes again and again and again and again. A lot of consulting firms working with helping companies to integrate HubSpot have told us that we have by far the best integration in the market. We already knew that, but it's always fun to hear it from external companies as well. We are definitely a big, big step ahead of competition when it comes to HubSpot. And even for Salesforce Dynamics, we are definitely in the top three league globally when it comes to powerful integrations. This is a key area for us. New integration with Lime. We have had a Lime integration for years, but we decided to just remake it totally. And also we launched with an HR tool called Talent Recruiting. I think it's Benelux based in the Netherlands, quite big there. uh notes to documents before you only had the possibility to make comments between participants but now you can even make notes in in the documents as well we have launched a lot of new and really powerful capabilities when it comes to ai review more concepts um so you can do you can you can just decide how you want us to scan through your contracts and what kind of information data you want us to look for in a much, much more powerful way than you could during the spring of this year. And since OneFlow is a contract lifecycle management tool, we have made a lot of really powerful add-ons to our folders and how you can archive and manage your contracts. This is just some of the big highlights. We also launched or opened a new office in the North America. The office is up and running and we are starting selling in the beginning of September. First day one, only one guy, but we have a pipe of more people. So we expect this team to be somewhat bigger relatively soon. Location will be in Chicago. And the person that is going to be responsible for this company is not just somebody. This is the person that built up OneFlo North America for Pagero, another Swedish company that was bought and unlisted last year. So he's been living in Sweden, sorry, in the US for a long time. He's actually from Gothenburg in Sweden, but he has done this journey before. And also I could add that this is not something we do as an experiment. We have actually been selling in the US for quite some time. Around 40% of all business we close in the UK has been from the US. And we also have partners in the US. So we have a lot of data. We have a lot of customers. So we know what we are going into. So this is going to be, we're super excited. It's going to be really, really fun to start playing in that little bit crazy land, I would say. Yeah, you kind of like it and hate it. Yeah, we're going to get potential. So... Let's dive into some more numbers. Net new ARR closed in at 6.6 million Q2 for the first half of the year, 12.2, which is down 45%. We had some headwind from currency, 2.6 to be accurate. So if you adjust for that, we were down 36% year over year, first half. Around 40% of the ARR is foreign currency. New ARR was actually very strong for the quarter. We had the best second quarter ever when it comes to new ARR. And we also had the second best quarter ever across all quarters when it comes to new ARR. So what pulls the numbers down is churn and expansion, which has been the case for roughly a year now, I would say. So the market is sluggish. It's not the most fun market at the moment. And it's been like that for some time. Do we see some sign of improvements? I would love to say yes, but actually I would say no. But not the other way either. It's still quite tough out there. And we can also add that we have also signed contracts for 8.1 million that will be recognized after the quarter. So what we report here is the live ARR. So still there are 8.1 million in deals that will fall into the following quarters, not yet reported. ARR 171 million up 19%. If we adjust for the currency, the growth would have been 21% and not 19%. But still, the trend has been declining, which is something that most software companies experience at the moment. It is a different climate. It is tough out there. And we have communicated two goals to the market. That is to have an ARR growth of more than 30% year over year and to become profitable with the current funds. We also said to the market sometime now that we are going to prioritize become profitable. Obviously we have to do that. So we will not be able to reach our growth market during that phase. So that is still the case. We focus on becoming profitable. And after that, we will work on getting the growth up again at 30% plus, which is our mid to long term goal. How to get there? Obviously, there are different factors there. We need to see some kind of underlying market improvements. At some point that's going to happen. When? I don't know. Obviously, we do have a lot of stuff in the product that we are working on that we need. It's going to have an impact on our hit rate and our customer happiness. So we have a really good picture of what we need to do in the product, obviously, to make customers more happy and to increase the hit rate. And it's not like We're going to continue to do what we have done in the past and expect to see a different result when it comes to go to market and how software companies operate. That has changed a lot over the last few years. I would say if you go back five, 10 years, how ways of working were quite the same year after year. But now for the past few years, things are changing really, really fast. And you have to adopt and change your whole go-to-market motion to adjust to this more challenging market. But this is something that we obviously, not only we, I guess all software companies are having kind of the same situation. We don't call it a problem. It's more like a challenge. We think that's also what makes this really fun to work in software because it is hard. It is tricky. This is like playing chess. There are a lot of combinations, but we have a really good idea on how to get through the storm, how to get ahead of the 30% mark again. So we are very excited to see how this is going to play out. Net New Year R, sorry, that was the wrong button. This is another key metric we love to follow, talk about. ARR per full-time employee up 22% year over year, 936,000 SEC. Why is this so important? Obviously, because we are an ARR company. 99% of our business is recurring. 99% is recurring. That is beautiful. Gross margin is 93%. That is also beautiful. It's super high gross margin. So we have basically one cost. It's salaries, salaries, and salaries. So that's why this is a key KPI to follow. The beauty of SaaS is that the revenue is recurring. But the challenge with us is that you have to make the investment upfront to have something to sell. And that's why this curve has been increasing from quite low numbers. After the funding we did when we IPO the company, we needed to really, really step up in the tech teams and so on to get the head of competition and to maintain the strong position we have with the product today. because it's all about the products it's all about having a really really good product and we do so um but now we can steer um gradually over to to becoming profitable we also did some big changes in the first half of the year when it comes to head counts So we have reduced head counts during the first half of the year. So this line, this curve is not going to follow the same trend as you see on this picture. It's going to be a really big bump in Q3 and Q4. And we look forward to show you that in a few months time. Retention rates, net retention, 97% and 87% for gross. This is honestly below our internal expectations. We know the market is sluggish, but this is not the way we want to see it. Gross retention is about churn or includes churn and downgrades. And if you add expansion error, then you get the net retention. So downgrades, obviously, are included in the gross retention. I know that not all companies do that, but we think that's the way it should be. First half of the year, we had a churn, including downgrades, obviously, of 13.1 million. 13.1 million. And that is up from 6.2 million. First half last year is a really, really big bump in churn. Started to hit us in Q3 last year. And if you look at the mix between downgrades and churn, it's around 50-50. Actually, we had slightly more downgrades than churn in the second quarter, which is, of course, better because Downgrades mean that the customer is still, in most cases, happy with the product, and it's going to stay with you in the product, but it's more that they are downscaling headcount. So at some point in time, when the market comes back and people, companies start to hire again, we believe that this is going to hit the net retention and pull it back up where we'd like it to be. So drivers for increasing net retention, obviously the market fundamentals is going to be an important factor. We are, as I said, working on new features, new product enhancements to meet our customers' needs, to make customers more happy and to increase the hit rates. And we are changing how we work, both in the go-to-market motion, but even in the product. So it's a lot of really, really, really big and exciting moments that is going on in the company at the time, which is super, super interesting and inspiring because it's really challenging and it's hard, but we have a really good plan on how to get there, get where we want. Paying customers increased 15% year over year. We ended at 4,400. I guess it's quite 4,500 quite soon. It's a lot of customers, a lot of customers. The ACV or average customer value is around 39%, sorry, 39,000 SEK. And this is up 3% since the last year, we are constantly, as I said, adding more features, we are also we opened up the marketplace. Now for all users to, to showcase all the stuff that you can add on and buy more in one flow. So I'm also working on renegotiation of contracts and so on when customers have had discounts. So it's a lot of different movements that we are doing to increase the average customer value. And we expect, obviously, this to continue to grow going forward. And with that, maybe I should leave the stage to you.

Yes, please. Thank you. More than happy to take over. So I'm going to start to talk about our net sales. So we closed Q2 with 42 million in net sales, which is 28% improvement or increase comparing to the same period last year. If you look at the year to date numbers or the first half year of 2025, we closed net sales at approximately 81 million, which also is a 28% improvement comparing to last year. As Anders mentioned, almost all our net sales comes from software recurring revenue. So we really are ARR driven revenue. The old 99% actually is software recurring revenue. And 1% is connected to professional services. So very much an AR-driven company. If you look at the shares of net sales coming from regions outside of Sweden, that is also a percentage that steadily are increasing quarter by quarter, closing at 41% by the end of Q2. Also, if we look at the net sales by country for the first half year, as you can see, Sweden is having 63% of the net sales come from the Swedish region. We're quite strong in Sweden. We've been the longest in Sweden as well, but we're quite strong in the Nordic. So you can see Norway, 14% of the net sales comes from Norway and almost 10% from Sweden. from Finland. And then we have the 14% remaining coming from the rest of the world. And as mentioned previously, we have paying customers in 48 countries. So 48 countries or minus three is representing the rest of the world. So quite a lot of countries. If we take a look at our gross retention and gross margin, sorry, that remains to be quite stable and high, ending up at 93% by the end of the quarter. However, you can see it's quite stabilized the last for quarters. If we look at the largest cost of service sold expenses, that's related to sales commission to our partners. That's, of course, that's something that you want to see increase because that means that we are establishing more strategic partnerships. Of course, also, we have hosting expenses as part of the cost of service sold, so that's part of those numbers as well. But again, the gross margin has been quite stable, and we do expect it to continue to be quite stable around 92-93% going forward. EBIT and EBITDA. So we closed EBITDA at minus 8.4 million in Q2. That's actually 7.2 million improvements comparing to the same period last year. So we are reducing our losses quarter by quarter. If you look at the first half year of 2025, we have EBITDA at minus 17.1. So that's actually a 40% improvement comparing to the same period last year. So really reducing our losses quarter by quarter. 40% is a really good improvement comparing to the first half year of 2024. We had an EBITDA margin at minus 20% in Q2.

EBIT.

EBITDA. Sorry, EBIT margin. Sorry, Anders, thank you for correcting me. And the EBITDA margin, exactly, sorry.

EBIT margin.

The EBIT margin, exactly. If you look at the numbers, so EBIT, we closed it at minus 20%. 7 million in Q2. That's approximately a 4 million improvement comparing to the same period last year. If you look at the year-to-day numbers, we closed EBIT at minus 40.1, which is approximately a 13% improvement comparing to the last year. However, one thing that's important to highlight is that we during Q2 had a one-time cost of 3.6 million impacting our quarter numbers and that's related to our reorganization that we did during the quarter that resulted in a workforce reduction and accounting wise we need to take in that full cost as soon as it's finalized so 3.6 million have affected their numbers in Q2. Now, if we would adjust the EBIT towards that 3.6, we actually would have had an EBIT of minus 17.1 and EBIT margin of minus 41. So important to highlight that for Q2. If you look at the EBIT and EBITDR margin, I really like this presentation or this slide because this is really visualizing how we are reducing our losses quarter by quarter. Our main focus, as Anders mentioned, is to steer one flow towards profitability. We always review the way of working. We review the organization. We make sure that we have the best talent in place. We work as efficient as possible. I mean, the reorganization is part of that. And also with increasing in ARR and ARR growth, that combined with our stabilized cost base, we are driving one floor towards profitability and we are reducing our losses quarter by quarter. Again, if we would adjust EBITDA for Q2, the 3.6 million that we have in one time cost, we would have, of course, a better EBITDA. margin of minus 41 percent. Our financial goals are not changed, so as Anders mentioned in the beginning of the presentation, we have a year-over-year AR growth that should be above 30 percent, but also, as mentioned, in the short time we are focusing on profitability and the current market situation, we understand that we will not reach the above 30%. However, this is a mid or long term goal. And our aim is, of course, after reaching profitability to focus on accelerating growth and reach the 30% or above 30% in ARR growth. Our second financial goal is to reach profitability with current funding. So that is something that we actively are working with every day. All right. So we move on to the Q&A and let's see if we've received any questions.

Okay, I can read the first one here. So could you elaborate on the FTE for the quarter? Last quarter, you ended with 157 FTE. And now it's 161. Have you hired during the quarter while still incurring restriction costs? And what should we expect to see in Q3?

All right, I can ask another question if that's okay with you. So, of course, I mean, when we look at the FDEs, we look at, you know, all the active employees that we have contractually. And then there could be cases where, as mentioned, this workforce reduction, those people that have been affected are still included in our numbers. And as Anders mentioned, we will see an improvement in ARR per FTE in the upcoming quarters, because of course we are growing in ARR, but also we are lowering number of head counts. So the difference between Q1, as you mentioned here, and Q2, that is due to the fact that we, yes, sometimes we are, hiring because we realize that we need specific talents to join our journey. So that may happen. However, we are quite restricted with recruitments and our ambition and aim is to have the top talent in our organization to make sure that we drive one flow towards profitability and growth. That's the main focus.

Yeah, so the FT curve is definitely heading down, but obviously it's not a straight line and it's always a little bit up and down. Some roles you need to replace, some roles you just need to have, but overall, this number is going to go down now on a floating basis, so to say. I can read the next one as well. Okay. Could you just clarify exactly how they are with this new method? Is it last month's recurring revenue times 12?

All right, so I can take that one. So clarify exactly how they are. ar with this new method so basically with the new method that we're doing um so as soon as our contract is activated so basically when we start deliver service to the client that is when that is activated as arr so compared to how we did it previously that was as soon as a contract was signed so as soon as we had a signed contract with a customer then it was activated as ar now is actually when you can say the invoice is starting. When we start deliver, the license period is starting. That is when we activate the contract or the value of the contract as ARR. That's the big difference. When it leaves ARR, so basically when we get the churn, it's on the contract end date. That is when it leaves the ARR. So that's the big difference between how we did it and what we're doing right now. Now, the next question, if the new method, so is the month recurring revenue multiplied by 12? No, not really, because we take in the full contract value in our AR. So basically, as an example, we sign a two-year contract. They get 50% discount the first year. We're still taking the full contract value. So it will never be 100% equal to the revenue. However, in the long term, it should be. But in the short term, it's not because we take in the full contract value. However, we only invoice. The first year 50%, right? So that's the difference. Did that answer the question?

I think so. But that's only the case when it's kind of discounts. So it's not like a big impact, but still. So what we actually reported before is what is also commonly known as CARR, where C stands for Committed or Contracted. But this KPI is not so kind of obviously known, not so many companies talk about it. But it is quite common, we've seen for SaaS companies to sometimes they report ARR, sometimes they report CARR, but they still call it ARR. like we did in the past. So there would be great to have a standard actually in this industry because there is no standard. It's up to the companies how you report and define and what to include and not and so on. So it would be great with a standard here. But how we report it now is you can call it a live ARR. and we have when we did this update or changed we talked with many companies in the space and we obviously did a lot of research from the us and so on so how we report it now is it seems to be a more common way of reporting it but still there are companies out there that report c-a-r-r and call it a-r-r like like we did wrong right i mean absolutely to The next one is also employee-related, so I'll leave it to you, Natalia, you can read it. Regarding personal downsizing and one-offs of 3.6, how many people will leave as part of this? and of these okay number of employees is up four versus that's the same cost as lost why are why and are employee reduction visible in the q2 employee number of 161 yeah so um

It's just trying to understand. So we won't really comment on how many people that were affected in this downsizing or reorganization that led to a workforce reduction. And when it comes to the question if it's visible in the Q2 numbers, no, not yet, because there are still, I mean, there's a long tail there. So those numbers, you will see an effect on those in upcoming quarters, not in the Q2 report.

Yeah. The next question is on the same line. I don't know if there is a tweak to it, so I can read it anyway. So how significant is the cost reduction? What amount of employees or costs are we talking about approximately?

Okay, can I take this one? So how significant is the cost reduction? I mean, again, we are reviewing the organization. We are reviewing the way that we work and we want to optimize the organization. That's our main focus. And in this case, it led to a workforce reduction. So of course, from our perspective, the goal is to say one flow towards profitability. We want to lower our cost base, but doing that without impacting our product, without impacting the quality that we deliver to our customer we will still invest in our product that's that's of course always a top priority um when it comes to uh the cost as mentioned i mean uh we had a one-time cost of 3.6 um that that affected the the quarter um that's uh i think all i can say about the about that i hope i answered your question okay um

Maybe I can add something more generic to the topic. I mean, sure, that we are reducing headcount does not necessarily mean that we have kind of been wrong in the past and had too many because people in some areas, yes, but overall, I would say that the way SaaS companies or actually maybe even any company operate at the moment by changing the ways of working, it's about achieving more with less. Our AI stack is so heavy. We are really, really kind of using AI to its full extent. And in marketing, for example, which is one team that has been heavily impacted by these reductionists is, I mean, before you needed to write a lot of posts and it took days and hours and a lot of the work that you do in marketing has been automated today by the use of AI. So the ways you work is changing. That's also part of the explanation why we change in the headcount number. But obviously also we have been too heavily loaded in a few areas, so yeah. When is the partnership in the U.S. expected to show in the numbers and will ARR from the North America partnership be disclosed by itself or reflected in your total ARR? I can take it unless you want to. So we're starting to sell in the U.S. now in September and the ARR, even though OneFlow only owns 20% of the company today. And then we have and then two board members loss and banked have funded funded the company with 15 million sec. So even after post dilution, we are going to own 20% of the company and we have an option to acquire to buy the remaining 80% for three times the ARR in the US or in North America in three years, of course adjusted for the money that we already have in the US so we don't pay for our own money. And the ARR that we closed in the US is going to land 100% on top of our ARR. And then we have a market based partner commission between the companies. And Our cost for that ARR is going to land on cost of goods sold. That is not a term that is used in IFRS. So it's going to land under other costs in our P&L, other costs. that internally is going to land in what we call cost of goods sold and the gross margin. Gross margin is not either a term that is defined by IFRS for some strange reasons, I don't know why, but that's how it is. So yes, and the reason why this is, we had a discussion with our auditors about this, since we don't own 50% or more, should it be incorporated or not? But this is, since this is what we call, is the English term an interest company? interest company yeah so this is how it is done by IFRS so this is actually not I mean that you could choose this is this is how you do it kind of yeah okay then I guess that was last question this time yeah good then we wish you all an amazing Friday and a good weekend upcoming weekend definitely happy Friday thank you for your time thank you cheers