Upsales Technology AB (publ)

Good morning, everyone, and welcome to the earnings call for up sales for the first quarter of 2025. My name is Daniel Wikberg. I'm the CEO and founder of up sales, and I'm joined today by Elin Lundström, our CFO, who will join me in this presentation. So the agenda today is I will start by doing a company presentation and talk about an update from the first quarter in terms of growth and what we're doing on the product side. And then Eli will cover some of the financials from the Q1 report. If you wish to ask a question, you can do so throughout the presentation by using the Q&A button. You find it in the toolbar at the bottom of the Zoom window. And all questions will be answered during the Q&A session after the presentation. All right. So the mission for Upsales, we want to build the best AI model that helps CEOs and executives to create revenue growth. And the reason why we are focusing on this area is if you look at the statistics from most companies, the number one reason why B2B businesses fail is the lack of sales execution. So everyone starts out with ambitious plans and ambitious targets. But in reality, of the companies founded 10 years ago, only 9% of them ever reach a revenue of more than 10 million SEC. And the number one reason is the lack of effective execution of sales. So this is the problem we want to address. It's the same problem we've been addressing for the last 20 years. And we are a software as a service company. If you're not familiar previously with UpSales, we're a software as a service company with a very long track record of profitable and organic growth. Our ARR is currently 144.7 million SECs. And we have a very scalable business model. So more than 95% of revenue is recurring revenue that comes from the subscription base. We are a net cash company with zero debt. 43.8% of the company is management owned. And trading 12 months, we reported slightly more than 20% EBTA margin. So that's a short introduction to up sales as a company. And I also want to talk a little bit about why do customers come to us? Why do companies choose up sales over large international competitors? And one of the reasons we like to talk about is this, is the scalability of the product enables customers to get started within a matter of days or weeks, as opposed to... engaging in months or sometimes even years long implementation projects. So this has always been a core focus of the company as we operate and when we build the product to deliver fast time to value for customers. And we are in the middle of a strategic pivot. We started our AI project a little bit more than a year ago now as a response to needs from our customers and also the general market trend. I think nobody missed that, that AI is something everyone is talking about right now. And we have been doing some very interesting developments here in the product. And we've been starting to roll out the new features to our customers. And we believe and I believe firmly that... as a software company, it's important to regard AI not as just another feature, but more as a completely new way of looking at what a piece of software is and should be. So that's the view we have. So we're not just adding AI features here and there, as a lot of software companies are doing. We are more building the product from the ground up with a focus on AI throughout the entire platform. And we are lucky to be very well positioned to be able to deliver AI that delivers actual results for customers because we have a more than 10 year history of of working with best in class data. So if you look at CRM or sales tools in general, the number one problem you will see is that all of them contain broken or missing data. And if you have broken or missing data, no AI will work for you. So in order to get these AI agents and AI features and AI use cases that customers and companies want to do now, it's impossible to get them working if you don't have the right kind of data. So we have a long track record of collecting data, buying data from third parties and building that as a core part of the product. And that positions us extremely well now for helping our customers to create AI workflows that actually work and where you can see an actual ROI. So it's a very exciting development for us. And talking a little bit about the ARR growth from the first quarter. So if you've been following up for some time now, you see that we are coming from a period of slower growth. And I'm happy to report that this is the fourth quarter in a row where ARR is growing again. And we continue to accelerate the ARR growth. And looking ahead, we expect this acceleration to continue. And it's driven both by new clients, but also a strong demand from existing clients that want to invest more in their sales and marketing tools and more specific in AI. So that's the... That's a driver for the growth we're seeing. And I just want to talk briefly. I get a lot of questions about the current macro environment and how up sales is affected. So for us, probably as for most companies, it's difficult to forecast exactly what will happen and how it will affect us and our customers and our customers' customers. We're coming from a position of we've always been running the company in an effective way as a profitable company with positive cash flow. We have zero debt. We have net cash. So we are happy to be in that position when a lot of companies are struggling to kind of make a turnaround to start generating positive cash flows. But of course, we just try to monitor the situation closely and keep a close dialogue with all of our customers. But we are happy to see progress and we expect to continue accelerating the growth in the remainder of this year. Okay, let's talk a little bit about what we're doing on the product side. So I want to talk more specifically about what we're doing with AI. And we are just a few days away from releasing our new AI agents. And the AI agents allows customers to automate very complex workflows and in some cases replace complete jobs that we're doing by full-time employees. So it's a very exciting development and it also broadens the use cases and the problems that you can address with up sales. It's just not for sales. So some examples of what you can do with these agents, you can build the sales agents that can automatically find new business opportunities that can qualify leads, that can route leads to the right people in the organization. It can automatically update and keep your data in good shape. And it can also remove a lot of the tedious task of administering your data you have about your clients and your potential clients. Another example is the finance agent. So when we talk to our customers and when we work with our customers, typically you see a lot of manual processes in between sales and finance to make sure that the contracts and agreements are correct. that the communication with finances is done in an efficient way, managing invoices and contract issues and stuff like that. And a lot of these processes are fairly straightforward and easy to automate with the help of AI. So one benefit of this is, of course, cost savings, but The bigger upside we see when we are working both internally with these use cases, but also with customers is speed. So by removing all of these administrative hurdles, you can have a lot higher velocity in your growth organization. So the third example is the marketing agent, which uses all the data that I talked about previously to automate a big part of the lead generation and marketing efforts our clients are doing. So you can run highly personalized campaigns, completely automated. You can use these marketing agents to generate new leads and actually book meetings for the sales team as well. So these are just a few examples of what you can do. And the final example is related to after sales and service. So if you collect enough information and you have a... relevant enough knowledge base, if you will. It's also fairly straightforward to automate a big part of the work that is done to service existing clients. So you can automatically respond to customer inquiries. You can book field service appointments. You can streamline internal communication. So you can save a lot of time and again, gain speed and velocity in the organization. So these are some examples of what you can do. But with the agent platform that we are now releasing to customers, we have integrations to hundreds of systems, which you can also integrate to AI, which means that you can pretty much automate anything you want. It's just a matter of imagination. So we are very excited to see what our customers will do and what benefits this will deliver to upsells users. All right, so that was it for the growth update and the product update. Now Elin will talk about the financials.

Thank you, Daniel, and good morning, everyone. Let's begin to look at the ERR and revenue. So annual recurring revenue grew by 2.8 million in Q1 and was 144.7 million at the end of the quarter compared to 135.9 during the same period in 2024. This corresponds to a growth year-on-year of 6.5%. Net sales was 36.1 million compared to 37.3 million in Q1 2024. And as Daniel mentioned in the CEO letter in the report, revenue decreased year-on-year mainly due to high one-offs in the comparison period, so in Q1 2024. And looking at revenue, we divide our revenue between the recurring revenue from subscriptions and one-off revenue, such as onboarding and consulting. And in Q1, recurring subscription revenue accounted for 95.6% of total net sales. So looking at profitability, our EBITDA was 6.3 million. compared to 8.7 million in Q1 2024, and EBITDA margin was 17.5%. We had an EBIT of 3.9 million, which is a margin of 10.8%, and a net income of 3.1 million. And during this quarter, we had an operating cash flow of 5.3 million compared to 7.9 during the same period last year. And net cash at the end of the quarter was 47 million. And as Daniel mentioned, we don't have any debt. And for the annual general meeting now in May, the board has proposed a dividend of 1.5 SEC per share. That was all of the financial highlights. Let's continue to the Q&A section.

So I'd like to remind everyone, just use the Q&A button in your Zoom toolbar if you wish to ask a question. Let's start. So we have a question about the one of revenues in Q1 and what these consist of. So I don't have the exact number, but we had 95% recurring revenue share now in this quarter. And I think we have around 90 or 91% in the comparison quarter. And I mean, one of the revenue are the services, the consulting revenue we sell to mainly new clients to onboard them and to do implementation work. So in the last quarter, we had a big project for a new client that wanted to build a lot of integrations and needed a lot of help, basically. And we, I mean, as a business, we try to sell as little services as we can. So we try to focus on building a scalable product and hopefully one day reach 100% recurring revenue. Okay, next question. What were the main drivers behind the increased CapEx in the quarter? Maybe that's one for you, Elin.

Yeah, so the main drivers was basically our investments in our product. And one, the main project there is the AI project.

Okay, we have a question about the pricing of the AI agents. So what we have done when it comes to AI is that we used to have a pricing model where we sold the license that you need for every user in upsells. And then... A lot of advanced features were packaged as add-ons. So we had kind of a pick and choose pricing model, if you will, with almost 20 different add-ons. And as we release AI and some of the new data and other features, we... We started moving away from this add-on based pricing to a more all-inclusive based pricing, if you will. So we have a new packaging called UpSales Accelerate, which includes all of the add-ons that you have to buy separately and also the AI features. And then we will have some kind of usage-based pricing for the AI agents because it will vary a lot from customer to customer how much you use them and how much work the agents will do. We have a question. Will the introduction of AI have any impact on gross margins? We don't think so. I mean, the development is... It's a very high pace now in what we are doing and what's going on in the market in general. So... I mean, it's difficult to say exactly what will pricing look like in one year and what effect will that have on our margins. But we don't see like a material shift up or down in margins because of AI. All right, so we have no further questions. Again, you can use the Zoom toolbar if you wish to ask a question. Okay, so that concludes the Q&A session and today's presentation. Thank you very much for joining us today and I hope to see you next time.