Oneflow AB (publ)

to this update of the highlights from the third quarter interim report for OneFlow. My name is Anders Hamnes, I'm the CEO of the company and next to me we have Nathalie Hjelve, CFO of OneFlow. As always, please use the Q&A function in Zoom and not the chat, and we will get back to your questions at the end of this presentation. First, some highlights for the quarter. ARR closed in at 179.7. And we also published yesterday the end of October numbers, which was 179.9. We had a currency headwind of around 700,000 in October. And year to date, we had a currency headwind of 4.2 million. ARR had the same growth rate in Q3 as in Q2, closed in at 19%, or 19.5 actually, but yeah. Net new ARR, up 19% year over year, 8.5 million sec in net new ARR, which is actually up 30% since Q2 this year. ARR per full-time employee, 37% growth year-over-year. Net and gross retention came in also at the same level as in Q2, 87% on gross and 97% on net. And to the maybe biggest highlight of the quarter, positive EBITDA, 16% on EBITDA and minus 12% on EBIT. EBITDA for Q3 last year was minus 17%, and last quarter we had minus 20%. So as always, we just like to take this opportunity and share with the new participant briefly what we do at OneFlow. We are a contract lifecycle management platform. We help people in sales, procurement, legal, finance, HR, all departments to manage contracts and the full lifecycle end-to-end solution. You can create Flexible templates in OneFlow. You can collaborate in real time. Of course, you can approve and sign and post sign. You can manage contracts inside OneFlow. You can be on top of your obligations and liabilities, get notifications, filter, analyze. And we also have a lot of really powerful AI solutions, both in the pre-sign and the post-sign buckets. to help and assist our users to make better calls and to be on top of everything. And one of the great advantages with OneFlow is that you can save a lot of time compared to working with Word. PDF or even e-sign. I mean, there are a lot of e-sign vendors in the market, as you know, that focus on the sign bar in the middle here, but they only solve a very small part of a much bigger problem, in our opinion. So this year has been quite eventful for the company. We have made a lot of changes in the company, not only in headcount, but even in headcount. And we have also made two very important hires this year. So we have I mean, we all have our sweet spot and the phase that OneFlow is in right now, the stage that we are in right now, and also where we are heading, we needed a different kind of leaders in the top management team. So we have added two really, really strong profiles to the company. Markus started as a CRO, Chief Revenue Officer, in June this year. And I think it's funny just to mention that he even has a doctor's degree. That's not so common. Doctor's degree in organizational leadership. He has extensive experience within sales, marketing, strategy, leadership, specifically within B2B SaaS and B2B, actually B2B software in general. And he also spent nine years in ProSales, a company working dedicated with research, advice, strategy, and either leadership training for companies in the B2B space. So a really, really interesting background for what we needed in our CRO profile. Kristoff started quite recently in September. Also a very, very heavy track record within product and product management. He came from a role as head of product at Entecard, almost six years at Entecard. And a little funny side note is that Kristoff actually worked in OneFlow some time back. He spent two years there from 2017 to 2019. Then it was a very small company. Kristoff was the only guy in products. and so he was a solo player and that time maybe the company wasn't the best fit for Kristoff because his profile is more for bigger teams like we are now so we have kept him warm over the years because it was also kind of a big loss back then but we are super happy to have him back in the team. So before we dive into the numbers, just some highlights from the product. And of course, we don't list all the things we do in the product. We just mention some of the bigger events. Otherwise, this list would have been really long. So in Q3, we added what we call internal notes. So we can have notes to documents in the company and, of course, collaborate with notes and so on across the team. AI summary, you can get a brief summary of the most important stuff in your contracts in a second instead of reading the whole contract. And we are constantly, constantly doing a lot of improvements in our AI insights offering. It's a really powerful feature. You can scan through all your contracts, find deviations and so on. And before we had fixed playbooks, but now you can even customize your own playbooks. This is really, really, really powerful. customize even severity and bridge risk levels and so on. And everything you do and write closest feedback and so on will inform our AI agent and make it more accurate and more exact. This is not based on chat keepity. So this has been trained on contracts for very many years. So a lot of years. So this is really, really a product that we're really, really proud of. Data retention, of course, we are in the kind of compliance business. Contract is your goal. It's your obligations. It's your everything. So we need to be top notch on that. And we had a lot of new rules and more flexibility when it comes to data retention that was launched during the quarter. It's very important, especially for enterprise companies. White labeling, you can now have a much stronger brand profile with the counterparties in the contract. So OneFlow is toned down, if you'd like. You can brand your mails and contracts and so on in different ways. personal time zone and data format. We have always had this kind of basic level, but now it is way more powerful. This is obviously very important for big enterprises working globally. And to us, this was kind of a thing we just needed to upgrade heavily when we opened our office in the US a few weeks back. Integration is one of the kind of key features in OneFlow. We have a lot of really powerful integrations, and this is kind of an ongoing thing. We had several improvements this quarter on HubSpot, Dynamics, Pipedrive, and UpSales, and we even launched a new integration to Lime CRM. We had an old one that was just Sunset, but now it's a totally new integration to Lime, and Talent Recruitee, an HGS system. After the quarter, we made several new improvements to SuperOffice and into Lime, and we also launched what we call multiple custom email domains. This is maybe also a feature for enterprises and global teams operating in different regions. So you can send contracts from different emails based on what regions and so on you are active in. So let's go into the numbers. A net new ARR closed in at 8.5 in the quarter, 19% growth year over year. And if you look on the graph to the right, you can see that, or even to the left, actually, you can see that we have a nice trend this year. It's been increasing quarter on quarter. And even 8.5 is up around 30% since Q2 this year. Heavy currency headwind, as we said in the beginning of the deck, so 4.2 million year to date. If we zoom in at the numbers for the third quarter, we actually had an all-time high in new ARR. an all-time high in expansion ARR, but we also had an all-time high in churn ARR. That was why the net new was pushed a little bit down. It is still quite windy outside. It's been windy for some time now. Gross new ARR, so if you add new and expansion, you get gross new ARR. We had 14 million in the quarter, and this was just behind the all-time high across all quarters, which was 14.5 actually. So gross new was actually quite good but the big bully here is the churn actually. And we also had end of Q3 signed contracts worth around 6.6 million that will be recognized after the quarter. ARR almost 180 now and that this is a 19% growth year over year. And if we fix the currency, it will be slightly north of 20%. We have guided the market before and we reiterate our same guiding that we still gonna stick with a goal of reaching 30% growth again. But now we made a quite hard turn right to become profitable. If you go back a few years, we didn't expect it to be kind of this rough, the right turn. But we have been selling a little bit more over the last few years than we were planning to do. So that was why we needed to just make this turn a little bit rougher. So, of course, it's hard to balance becoming profitable and also to maintain the high growth base. So our focus is now primarily to become profitable and try to grow as much as we can. But it's heavily weighted over to profitability at the moment. This is going to shift, obviously, but we'll comment more on that later. How can we... see an excellent growth again. Obviously, many factors always, but one, obviously, the external factor is the market fundamentals at some point that might change. We do have a lot of new features and product enhancements all the time. So there are gaps in the product that we know about. We know the pain points. We know why we lose when we lose. We know why we win when we win, of course. So we have a very, I would say, really, really interesting backlog for 2026 to fix that. We have launched many really heavyweight AI features over the last few years. I'm not sure actually if the market recognized this in the same way as the private market does these days, to be honest. This is not some AI fluff that a lot of companies talk about these days. I mean, even my toothbrush has AI on it today. So, I mean, this is, I mean, we have really invested heavily in AI over years now. So I'm really proud of what we have to offer, what we can offer. What we experience in the market when it comes to selling AI is that most companies are still sitting a little bit on the barge. Customers are very immature when it comes to AI. We all talk about it. We all use chat GPT for kind of maybe polishing some email or whatever, but this is not... using AI in your work to analyze stuff and so on is still a little bit immature. But what we see now is that more and more companies actually take the step and start to experiment with AI in a different way, which is a very interesting sign for the future. And we are in a great position at Bonflow. We are not in the backseat. We are having our hands on the wheel in the front seat there. And mid and long term, we see this going to have a big impact for Bonflow. And of course, we do a lot of improvements in our go to market motion and in our product as well all the time. So a lot of things here that's going to play together and going to bend the curve at some point. We had an ARR per FTE end of Q3 at around 1.1 million sec, which is up almost 40% year over year. And in combination with an ARR growth of almost 20%, this is, in our opinion, at least quite impressive. Efficiency is about achieving more with less. And that is exactly what we're doing at the moment. And this is an important KPI, obviously, because we are an ARR company and 98% of the revenue is recurring. And we don't basically, I mean, gross margin is 93%. So it's a very, very small coax here. Our main cost is salary, salary and salary. And this is why this metric should be a good indicator for when we're going to break the magic line and become profitable at some point. Yeah. The net gross retention rate was stable. from Q2 this year, 87 and 89%. Gross retention include down, gross retention include churn and downgrade and not expansion and net retention rate includes everything, churn, downgrade and expansion. Over the last few years, two years, one and a half year actually, we've had a quite balanced mix between downgrade and churn, or when I say churn now I mean terminations, it's around 50-50, and it's the same kind of mix now in Q3, 50% downgrade and 50% terminations. I know that some companies don't report actually downgrades. That's what you should do, of course. So it has stabilized now and the drivers for increasing the net retention rates, obviously, as we said in the two slides ago, underlying market fundamentals, new features, new integrations. product enhancements, gaps. We have a lot of really, really interesting AI features that's ready for market that might not be as ready yet as our features, but that's going to change soon, we think. GTM and product-wise, many, many changes. And even product packaging is something that we believe is going to help us out here to bring the net and gross back to where we want them to be. Paying customers increased 12% year over year and the average customer value up 6% just hit the 40,000 sec mark. And we believe that the ACV is going to continue to increase going forward. This is a very important focus area for us at the moment. Again, it's about features, deeper integrations, adding more value to customers, adding more value to customers and solving new problems to customers. And packaging is also going to be a very important component here to increase the ACV. We do constantly renegotiate contracts with our customers. And we also have this marketplace that we launched earlier this year where we are upselling add-ons to the plants that our customers are in. Maybe I will leave the stick to you now, Natalie.

Thank you so much. Perfect. So we continue to increase our net sales, and that's, of course, in line with our increase in ARR growth. We have improved our net sales with 21%, ending up at 43%. million in Q3. Also looking from a year-to-day perspective, we can see that we have actually improved our net sales with 25%, closing at 124 million year-to-day numbers compared to 99 million we had in the same period last year. Sweden is still our strongest market when it comes to the net sales. It stands for 59% of our net sales, but we're quite strong in the Nordic. We have Norway at 14% and Finland at 10%. And then the remaining 17% comes from the rest of the world. If you look at the shares of net sales coming from regions outside of Sweden, we see that percentage steadily increasing. We ended up at 41%, which is approximately the same percentage we had last quarter. However, we do believe that this percentage will increase as we expand into other regions outside of the Nordics. The majority, almost all our net sales, is connected to our software recurring revenue, which stands for 98% of our net sales, and the remaining 2% comes from professional services. As you can see, our gross margin continues to be quite high and strong at 93%. Looking at the last quarters, we are around 93%. But we do... I think that we do know that the gross margin will slightly decrease in upcoming periods. Now, the reason for that, if you look at the cost of service sold expenses that we have, the majority of that or the large portion of that is connected to sales commission to our partners. Now, the partner channel is very important to us, of course, a really strong channel we have and a very important partnership that we recently established. engaged to was the partnership that we have with OneFlow North America. Now, OneFlow North America is a company that is established on the North American market, and that is our way to expand the North American market. And as you know, the North American market is a big market with great potential. And besides the partnership agreement that we have with North America, we also have 20% ownership in OneFlow North America. And I'm happy to share that we have actually closed our first deal and many more to come from North America. We have a really strong leadership team in OneFlo North America. So there's very good and high potentials on a rapid expansion in that market. But besides the partnership agreement and 20% ownership that we have in North America, we also have an option to buy the remaining 80% of that company. And so initially, we do believe that the gross margin will decrease because the partner commission will increase. But in a couple of years, when we make the decision to buy the remaining 80%, of course, our gross margin will increase a bit, approximately at the same level that we have today. As Anders mentioned in the beginning of the presentation, this quarter is a very big financial milestone for OneFlow. We closed EBITDA with a positive number of 7.1. This is a really great improvement if you look at the last quarter at minus 8.5, but also compared to where we were one year ago at minus 7 million. So a really important milestone have been achieved this quarter with a positive EBITDA. Also, if you look at the year-to-day numbers for EBITDA, we close at minus 10. And this is to compare with last year, we have approximately at minus 35. So this is a 71% improvement from where we were one year ago. Also looking at EBIT, EBIT have also, of course, improved significantly during the quarter, closing at minus 5 million to compare to the minus approximately 16 million we had one year ago. Also from a year-to-date perspective, we have improved EBIT with 27%, closing at minus 45 million for 2025 year-to-date. So a really big, big milestone for OneFlow this quarter. Also looking at the EBIT and EBITDR margin, we have an EBITDR margin that is positive, closing at plus 16%. And compare this to where we were one year ago, minus 17%. So this is a really big achievement this quarter. And more to come, of course, as you know, as Andrew mentioned, our most important priority right now is to steer one flow towards profitability. So that's a really big focus that we have. EBIT flows at minus 12%, but our predictions is, of course, continue the work that we've done, reviewing the way that we work. We have a really great organization, a strong organization, really good product and expansion that we do in North America. All focused right now on driving OneFlow towards profitability. stabilizing the cost base, having this strong mobilization, a very strong product, but also continue to grow in ARR. We have not changed. Our financial goals are remaining. We do believe in an ARR growth above 30%. And this is a long-term perspective. It's long-term financial goals that we have, but also to reach profitability with current funding. And as Anders mentioned, in the short run, we do understand that we do not have the 30% year-over-year growth when it comes to ARR. But in the long run, That is our ambition. Let's see if we've received any questions in the Q&A.

A lot of questions.

A lot of questions.

So I can read this one for you, Natalie. Have we seen full effects from the personal reorganization carried out last quarter or is more effects expected to be seen in Q4?

So, as we mentioned, the last report, the Q2 report, from an accounting perspective, we do need to take into account the reorganization that we did in June, the full cost of that in our book. So that cost has already hit our books in Q2. However, from a cash flow perspective, of course, it looks a bit different because we have some costs that we still need to pay out. But we always review our organization. We always make sure that we work in the most efficient way. We always have a really, really close look at our cost base and making sure that... We try to make sure that we don't have any necessary costs, of course, but that in connection to still do improvements in the product, do improvements in tech stack that we may need to continue to have growth. So looking into Q4 and Q3, of course, there will be some changes. We do changes all the time. I cannot talk about exactly how big effects will come, but we always review our organization and the cost base that we have.

Can you read the next one?

Sure. Yes. You emphasize profitability and cost awareness in recent years. How much has that focus to profitability been the reason for the slowdown in your growth?

Yeah, so obviously this is the kind of the holy grail or the big question for us internally always. We have to, there are two kind of main important KPIs that we strive for. It's growth and it's profitability or EBIT margin and this is a balance obviously and at the moment the focus is heavily on becoming profitable and That, of course, has made a hit on growth. I mean, we would have been growing more if we didn't have to turn right so hard as we have done. So I would say that... The main focus is profitability at the moment. At some point, we're going to achieve that goal and then we're going to change our priorities. Still, we're going to have a goal of improving the EBIT margin going forward, but not at the same pace as you have seen now. It's going to be a different pace, it's going to be quarter by quarter, smaller improvements on the EBIT margin, and then the main focus for us will be to achieve growth here. It is much harder to achieve good growth and then to be profitable. So I know that many investors look at this rule of 40 formula or model and I would say that the weakness with this model is that it puts equal weight on growth and profitability. But in real life, it shouldn't be equal because it is much, much harder To grow and to be profitable. It can be profitable now, bang, if you want it. So I would say that actually Bessemer Venture had a much better approach to it, I would say. They have something that's called the rule of X. So they weight growth three times more than EBIT margin, which I think is a much more fair way to look at it. because that reflects how harder it is to achieve growth. So we're going to put more focus on growth than making the really, really fast EBIT margin improvement going forward, but we are going to improve it step by step. That's important, obviously.

So the next question is a bit linked to that. So what type of actions and investments could you do to make it once we've reached profitability to achieve growth?

Sorry, what kind of investments?

What kind of actions and investments would we make once we reach profitability to increase growth?

Yeah, that is... Oh my God, this is an luxury question. We have a lot of... We know exactly what we should do. But I mean, we can't, of course, expose that to this meeting. But this is not... I mean... We always track, we are very KPI nerdy. We track a lot of stuff. We have even a team of three people only working with data in workflow. And even actually the ROPS team, those also focus a lot on data. So we have a lot of people focusing on data. So we know exactly how much one person I can give an example of an important KPI. There are many more, but one important KPI is GTM efficiency, which measure how efficient every motion that you do are. then you can see how many months it takes for us to get payback from this investment. So we know exactly everything we do, how efficient we are. We know the GTM efficiency for every motion, every team, every country, everything we do. So we know where to double down. We know what to do less of and what to kill. But to invest more, in the motions that have more attractive payback time is not hard for us to find. But more specific than that, I can't be more specific than that in this meeting.

So the next question, is there any seasonality or quarter to quarter patterns in your sales or profitability that investors should be aware of? For example, Q3 is typically a more profitable quarter compared to others. Yes, there are. So basically Q3 is usually from an accounting perspective, lower in cost from an accounting perspective. And that is due to vacation periods because we do accrue vacation throughout the year and then release it. Once people go on vacation and normally many of us here in the Nordics go on vacation during Q3, July and so on. And that also applies when it comes to sales numbers, because the industry, especially in the Nordics, closed down for approximately one month. And then it's quite hard to do sales if no one is on the other side of that table. However, what we also see now that we, I mean, we do have sales in other regions than the Nordics is that in other regions outside of the Nordic, the vacation period looks a bit differently. And especially now with our expansion in North America, we do believe that we will see a more equal quarter by quarter sales numbers. So it wouldn't have that big of effect that it perhaps have today.

When you win or lose a competitive deal, who do you usually lose to and who do you win against and why? This differs a lot between the different markets. Sweden, Norway, Finland, and outside in Europe, it's a different playground in every market. And even within every market, there are different cohorts or segments. So this is a quite fragmented question. And I would say that this isn't the big problem at the moment. We have quite good hit rates when we sit around the table. And we have a strong product. And we win much more than we lose when we are around the table. The problem at the moment, or not only moment, that's been for maybe the last few years, not only for OneFlow, but for every SaaS company and even every software company is top of funnel. Top of funnel. It is so much noise in the markets. It is hard to get attention, to get to the table. But once we are at the table, we are doing very good.

And the next question is regarding our churn. So how serious do you consider your churn situation and what specific measures have you taken to improve it? I mean, we always take a turn very serious. Of course, it really hits us in the heart when we receive a turn or downgrade. Again, what Anders mentioned just now, I mean, the market segment or the market environment is tough. However, we take every turn or downgrade very, very serious. We have a really strong CSM team that works really close with our customers, making sure They utilize the product the best way possible and also try to understand if we get the churn. So the reasoning behind it.

Yeah, I can maybe refine it a little bit. So, I mean, we do have, you have churn within your ICP and you have churn without your ICP. ICP is ideal customer profile. And we have had a lot of the churn that we've had over the last, I mean, the increase started September last year, and a lot of the increase in churn has been from customers that are not in our ICP. So we treat our customers, of course, in a different way, based on deal size, based on expansion potential, based on ICP fit or not. And we are on top of our data. We know the quality of our customers in every cohort. sliced in so many ways. And we have put in the right kind of efforts and so on. So I don't think we can be more, we can, but we will be more detailed on exactly what we're doing. But we know what we should do and we do a lot.

This is an interesting question. And I would want to ask that to you, Anders. How would you describe OneFlow as a company in 10 years from now?

Okay, so we are a contract lifecycle management company. That's our space. In 10 years from now, our goal, I mean... Our goal is not to grow 20% per year and become just another company. I mean, we have a much bolder vision internally. We want to be one of the big players in the field. We want to be a thought leader. We want to define and shape the field. and be there on the kind of one of the stars on the sky in the night. That's definitely. So we have a really ambitious goal internally. And I know that we have a lot to prove to get there. But we do have a lot of plans. We do have a lot of plans. And we are going to make some... I mean, if you look at our product roadmap and so on, that's not a linear curve. We have a lot of things that is planned to come over the next years, which is going to open up new pockets of opportunities. So I wouldn't put any number on this question, but we are not in this to just grow 20%. That's true.

And we do not like war. No. So the next question is, how would you comment on your cash position and financial strength in relation to progress towards profitability? I mean, the cash position, of course, something that we monitor on a daily basis, of course. And we do believe that we're going to reach profitability with current funding. We are strongly aware of that. Again, we always review the way of working, do more with less, which is our mantra, and continue to grow in ARR. I mean, we do have an ARR that is, as we published now in October, 179.9. That is recurring revenue, recurring cash flow for OneFlow. So we do monitor that, and we do still very much believe that we're going to reach profitability with our current fundings.

How have the recent organizational changes affected employee engagement morale and your team's ability to move the company forward? So obviously when you, I mean in Q2 last year, this year we had, we laid off some people and that of course have an impact on the happiness um inside an organization it always it always But I would say that now we are out of that tunnel. That's kind of history now. And it's been this fall, happiness and culture and so on have kind of strengthened back to where we were before this event. So that's not kind of an issue, I would say. And when it comes to ability to move the company forward, I would say that it's not always about, I mean, about headcount to achieve more. Remember, excellence is to achieve more with less. And so we don't see that the efficiency, the output, what we do in the product and so on has slowed down due to this actually. I don't want to comment a bit more in detail than that, but there is not a linear and a very exact correlation between headcount and output. Sorry, yeah, between headcount and exactly output, yeah.

Would you say that the FTE base and of quarter of 144 is expected to remain and be rather stable going forward? Should I? Yeah, we do. I mean, we've done this redundancy or reorganization for a reason. And we do believe that we're going to be quite, quite stable around 144. Of course, we always review what talent is needed in the organization. And if a specific talent is needed, our recruitment will be done. But I wouldn't think, well, we won't expand, I mean, do heavy recruitments going forward. But recruitments, if there's necessary recruitments, those will be done. That's all part of the plan to reach growth and to move the organization towards growth.

Okay, I think that was the last question. We didn't jump anyone here in the list here. No, I think we answered everyone. Okay then. So thank you for today and have a wonderful Friday.

Thank you for joining.

Thank you. Bye-bye.