Upsales Technology AB (publ)

Good morning, everyone, and thank you for joining the earnings call for the second quarter for UpSales. My name is Daniel Wikberg. I'm the CEO and founder of UpSales, and I will be doing the presentation today together with my colleague Elin Lundström, who is the CFO of UpSales. If you wish to ask a question, you can do so throughout the presentation by simply using the Q&A button, which you find in the toolbar at the bottom of the Zoom window. And we will answer all questions at the end of the presentation in the Q&A section. So I will start by talking a little bit about up sales, introducing the company, talking about what's going on in our very exciting investments and developments in the product. And also talking a little bit about our growth strategy and do a short growth update. And then Elin will cover the financials and the financial highlights from the second quarter. So the mission for the team at UpSales is to build the best AI model to help CEOs and executives create revenue growth. And why we have this as our mission is all companies, most companies start out with great ambitions. You create a business plan, you want to create growth, you want to grow the business, you want to get customers. But in reality, if you look at the data of all the companies founded 10 years ago, less than 10% ever reach a revenue of more than 10 million SEK. And the number one reason for this is it's very hard to scale and execute sales. And that's where we come in. So Upsales, we are a software as a service company. We were founded in 2003. So we have a long track record of profitable and organic growth. We are currently at our ARR, it's currently 146.7 million. We have a very scalable business model. So more than 95% of revenue is recurring subscription revenue. And I will talk a little bit more about this. This is very appreciated by customers to be able to use such a scalable product. We're a net cash company with zero debt. The company is still 43.8% management owned. And we've always been able to run the company, creating growth with profitability. And the last 12 months, we had an EBTA margin of 21.5%. So I will just talk a little bit about why do customers come to up sales? Why do customers buy the product? Why do they keep using it and why do they stay? And in our industry, typically when you purchase this kind of product, you typically end up with an implementation project. And it's very common that it takes a lot longer time than you initially planned. And it's also very common that it costs a lot more money to implement the product than the initial plan. And this is, of course, not popular amongst the customers. And I think there are several reasons to this. Many products out there are legacy products that are not scalable enough. But there's also the fact that A big part of the industry works with channel partners. So most of the people who buy, most large companies who buy these kind of products, buy them from consulting companies. And the consulting companies, their business model is not to make money from selling software, it's to make money from selling consulting projects. So our approach is very different. Our approach is to talk to a new customer, identify the problems they have and get them up and running as soon as possible. And actually more than half of the new customers that start to use UpSales already have their data in the product before they sign the contract. So we put a lot of effort into having the product able to be used by the customer in a matter of 10-15 minutes of configuration, which is of course highly appreciated by customers because seeing is believing. And we are in the midst of our pivot from a CRM and marketing platform to a fully fledged AI revenue platform. So we have a very ambitious AI project at UpSales, which we have been running now for almost two years. And my view and the view of my colleagues in the tech team is that if you're a SaaS company, and you're not transforming into an AI company, you won't exist in three to five years. Not all people believe that. I very firmly believe that. What I see in the market is an extremely high-paced development. And now all of the, we are still at the beginning of this development, I think, but now you really see that the market and the customers are really starting to wake up and talk about this. So AI is on the agenda in probably every board meeting in every company right now. So, and we're a part of this and it's a very exciting time for App Sales. So what are our differentiators? Because any software company can build an integration to OpenAI or any of the other model providers to add AI features or AI functionality. And the mantra we had inside of UpSales is that AI is not a feature. So we believe that it's not enough to add AI here and there in an existing product. You need to look at the product as if you were a startup launching a company today with a mission of having UpSales going bankrupt. So if you were that company, what kind of product would you build? So these are the kind of questions we are asking ourselves every day in the product team. And some of the things that sets UpSales apart is that we have a long, long history of including proprietary, real B2B data, annual reports, financial data and stuff like that. And this is data you can't scrape it off the internet with AI, which is a very popular method to do it. So that's one thing, because AI with real data works a lot better than AI with broken data, which is the case in many CRM systems. So that is the primary driver, I would say, that makes these use cases really come alive when we are introducing them to our customers. Okay, let's talk a little bit about the growth from the second quarter. So Q2 was the fifth consecutive quarter with ARR growth. So we are really back to growth and it's very nice to see this trend continue. And we continue to see a very exciting runway for growth, for outsales, both when it comes to new customers, but also in the existing customer base. When we are out there talking to our existing clients, we see a lot of exciting opportunities. problems to be solved, a lot of exciting opportunities that customers are having related to our space, where up sales can be a big part in helping them. And just looking at the market in general, there are still a lot of companies out there that we visit and talk to every single week, my colleagues in the sales team, to have more companies start to use up sales. And of course, we continue doing everything we can, investing into accelerating the growth. In Q2, the quarter-over-quarter ARR increase was around 2 million SEC. And if you've been following UpSales for some time, you see that When we were growing faster in the past, we were able to add around eight to nine million sec per quarter in ARR. We still see that opportunity and I see a bigger opportunity than that. So we continue to invest in the product and in the sales organization to accelerate the growth. And I usually get questions about the market conditions and everything that's going on in the global environment. And the way I like to look at this to know is upsets being affected or not by tougher conditions in the market. My favorite KPI is incoming churn, which is the amount of cancellations or notices of canceled contracts we receive. And that number has actually had a very positive trend in the last 18 months. So we actually see churn going down. Of course, we are doing a lot of actions to make that happen. we are not seeing any material impact from, from a more, more negative market. Uh, and when I wrote in my CEO note as well, when looking at, at new sales, uh, we, we are, we've had, uh, uh, several quarters in a row now where, where new sales, new customer acquisition has been very strong. Uh, so, so we, we, uh, we see a very good market out there and I mean, it's, it's, um, We're a company, we have no debt, we have net cash, we have positive cash flow. So I think we have a very strong position to continue investing in the things we need to invest in when some other companies have to scale down. I'm going to talk a little bit about what we are doing in the product and the most exciting part that we are working on right now and that all customers are talking about is our agentic platform, our AI agents. So this has been maybe the biggest investment in the product that we've ever done in the history of the company. So through a combination of third-party providers, data providers, and our own platform, we have been able to launch an agent platform allowing up-sales customers to build agents that actually automate, in some cases, entire roles in the company. So these are very powerful features that you can use to, you can save a lot of time, you can save a lot of money, but most importantly, you can move a lot more faster and you can get a lot more done. So I will share just some examples of how our customers are using this. So this is an example of the sales agent, which helps you automatically understand your customer base, prioritize your leads. It joins your sales meetings, records them, transcribes, sends automatic emails to customers and stuff like that. And if you look at the I mean, the typical use case when a customer comes to Upsales is usually related to this area. You want to have higher effectiveness in your sales team, which is a problem in almost any company out there. And if you look at the studies that have been done about how do salespeople and sales organizations spend their time, you see that they spend a massive amount of their time on doing administrative work. And this is the kind of task that AI will be able to automate completely. Another interesting use case for this is in finance. So if you look at almost any finance team in any company, you find a lot of these manual routines, things that needs to be confirmed and double checked and data that needs to go from one system to another system and so on. And with the help of a finance agent in combination with smart integrations to, for example, accounting and invoicing software, you're able to significantly reduce the amount of these manual routines that almost all finance teams have. I mean, this has been a use case for a long time in the IT industry before AI, but what's different with AI is that now when you have these large language models, you don't have to have perfect data and you can have a large language model reading contracts and understanding contracts and reading emails from customers and understanding requests for quotes and questions about invoices and stuff like that. So it becomes extremely more efficient than traditional IT automation projects. So another use case is in marketing. And I think when you use the data that customers have access to inside of up sales, all the market data and company data that I talked about previously, you can do very, very powerful things because you can do personalization at scale. So you can use AI to understand every single company you want to approach, understand what's on their website, understand what's in their annual report and what kind of company they are. And then you can have very, very personal communication. So that I think it's a very powerful use case that enables customers to generate a lot more leads and book more meetings, basically. And the last use case is the in-service. So again, like in finance, you find these manual routines in all companies. A lot of companies have entire departments just scrolling through an inbox, answering emails that are very simple stuff for an AI to do. So this is also a use case where you can save a lot of time and a lot of money. And with this platform, since we have the platform connected to all the integrations we already built to ERPs and the data our customer have, you can build your own agents. So what we are doing now with a lot of our customers is sitting down in workshops Looking at the org chart, what kind of roles do you have? What kind of tasks are people doing on a daily basis? And just looking at, okay, which of these tasks can we delegate to an agent instead of adding more people to the team? And we are in the process of releasing interface agents, which will be a very exciting development. And what this means is that our customers will be able to have custom chatbots inside of UpSales, inside of the application. So, for example, if you've just been hired by a company that's using UpSales, that company is selling 10,000 different products. Typically, you have to go to 30 or 60 day training to understand the product catalog and the use cases and stuff like that. Now you don't have to because you have an agent in the order form that helps you, that knows everything about the product catalog, everything about previous orders and all of the customers and so on. So that's a very exciting development and hopefully I can share more in the next report. All right, so I will hand over to Elin for some of the financials from Q2.

Yes, thank you, Daniel, and good morning, everyone. So let's continue to the next slide, looking at ARR and revenue. So our annual recurring revenue grew by 2 million SEK in Q2 and was 146.7 million SEK at the end of the quarter, compared to 137.5 in Q2 2024. This corresponds to a growth year-on-year of 6.6%. Net sales was 37.4 million compared to 35.4 million in Q2 2024. And we divide the revenue between the recurring revenue that comes from our subscriptions and one of revenues such as onboarding and consulting projects. And in Q2 recurring subscription revenue accounted for 95.7% of total net sales. Let's continue to the next slide and look at profitability. We had an EBITDA of 8.5 million compared to 6.7 million in Q2 2024. An EBITDA margin was 22.8% compared to 19% during the same period last year. We had an EBIT of 6 million compared to 4.5 million in Q2 2024. And our net income of this quarter was 4.8 million compared to 3.5 million in the comparison period. Yes, let's continue to the next slide looking at cash flow. So during this quarter, we had an operating cash flow of 6.6 million compared to 4 million during the same period in 2024. And net cash at the end of the quarter was 24.1 million. And as Daniel mentioned, we don't have any debt. But if you look at the cash flow statement, you can see that we, during this quarter, we paid a dividend of 1.5 SEC per share. So a total amount of 25.3 million. Yes, that was all of the financial highlights. Thank you. And let's continue to the q&a section.

Again, if you wish to ask a question, you can use the q&a toolbar in your zoom window. I will start with a few questions I got through email from Philip Helmroth. So the first one, how's the new pricing for your product being received by existing and new customers? So we launched a few months back a new pricing structure pretty much at the same time as we started releasing AI feature where we went from previously we were selling a module based, we had a module based pricing approach where you bought the license per user and then you had almost 20 different add-ons. And this created the flexibility, but it also created a lot of confusion for customers. So we decided to go to a more all-inclusive, if you will, where more features is already included in the package. And we put that at a slightly higher price point. And I think that... For new customers, this has been a game changer. This is one of the reasons why we have seen so much success in the new sales team. I mean, I think the main reason is because of the hard work the team is doing, but I think this has really been an enabler. For existing customers, we are... I mean, we don't do... We don't send an email to every customer like Netflix would do, just informing them that the price will go up. That's not how we do customer relations. So we do it customer by customer. We talk to them, we visit them, and then we find ways to make it work. But we are in the process of, you have to, if you want to use the AI features in upsells, you have to buy the new product. So you cannot buy them as an add-on to the previous product. All right. And then next question was regarding headcount. So if you look at the report, you see that there are slightly fewer employees compared to last year. And there's not a deliberate like strategic answer or anything like that. One explanation is that some people are on parental leave and those people are not included in this number. And I think this is just timing effects. Some people have left and we are in the process of having more people joining after the summer. I think there was one role where we actually removed the role, where we saw that we could replace that role with AI and smarter ways of working. But I mean, the strategy is the same as it was 12 months ago. We want to grow ARR and we invest in all ways, including the organizations that we see necessary. And the final question from Philip was in 2022 and 23, you were able to add around 5 to 7 million in ARR each quarter compared to today's around 2 million per quarter. How do you work differently today compared to then? So I think there are two answers to this question. If you've been following up sales, you see a very long trajectory of uninterrupted growth. And then we had five quarters of very slow and sometimes negative ARR growth. uh and there were two reasons we had a lot of we did a lot of changes in the in the sales organization uh so we brought in a new sales manager we we uh we had some some some people leaving and some new people joining two years ago and that that affected growth um and this was done at the same time as we launched our new sales and go-to-market strategy which evolves around working with slightly larger clients, closing larger deals and so on. And both of these things in the short term affected growth negatively, but in the long term was very necessary. So I'm very happy that we're back to growth. And the number one priority for me, the entire management team, the entire company is to get back to rapid growth, to the growth levels we had in the past. All right, we have one more question from Johan Bostrom. Yeah, that was also regarding the number of employees, which I just answered. All right. Again, use the Q&A button in the Zoom toolbar if you wish to ask a question. All right, so we seem to have no further questions. So I'd like to thank you all for joining us this morning and hope to see you next time.