Hi everybody, and welcome to today's event where we have the pleasure to present Agillic. To help us through today's presentation, we have Emre Gürsoy, CEO, and Claus Boysen, CFO, to help us through the presentation. Yeah. Thank you, Emre, that helps. Today's presentation, quite strong report coming out from you first today and, you know, you are looking into a difficult environment. Every company are doing that, and still a little bit positive on your 2023, I wouldn't call it guidance yet, but aspirations to actually follow the track you have followed the last couple of years with good growth and doing that on a also looking after earnings. I think you will get much more into this.
As always, ask questions over in the box below. What you can see is questions I get in before the event, so I put that in. As you can also see, we do it in English, but do feel free to ask in Danish. I will translate to the best of my ability. Emre, for now I think I will hand the call over to you.
Thank you very much, Michael. Good afternoon everyone. Thank you for joining us here in this session. My name is Emre, I'm the CEO of Agillic.
I'm Claus Boysen, CFO.
For those who are not aware of what we do and the business sector that we are operating, I just wanna make sure that we have a very clear update on that one. Let's start with this. Agillic, we are an omnichannel marketing automation platform. We operate within the MarTech industry, marketing technology industry, and we are in the business of creating value for our business via introducing the first-party data cultivation possibility and communication throughout all channels together. It's an agnostic approach on the media operation, and the whole idea is how we can create better value for our clients' business via our platform with higher performance, longer customer lifetime and higher customer lifetime value for them. This is the operation area that we are operating.
If I give you a bit of a quick update on the company itself, that we have listed back in 2018. Currently we have just reached to approximately 70 million ARR on our Q3 results. We have 100% of our business coming from SaaS businesses, both in subscription and transactional part of the ARRs. Got to 111 clients in total, and we are operating in 11 markets with our clients, and they're operating with our platform over 100 markets. 47 is the number of employees that we have, most of them are based in Copenhagen. We are also operating within a very broad sector approach across multiple markets. That is from retail to finance to travel and hospitality across the board.
Now, what makes them very unique is that most of these segments are operating within first-party data-rich operations. Now, what does that mean? It is that our focus is mainly to help our clients to activate the customer information that they have collected, the customer permission that they have collected, and with the first-party data as we call it, maximization of this utilization gives them the high level of engagement and a longer customer lifetime value. Very recently, we have conducted a research back in September. We have revealed the study results. We have commissioned Forrester for conducting this research for us across Europe, and the whole idea was that to understand the omnichannel marketing automation maturity within the markets, within the segments that we are focused and we are operating with.
What we have realized that there's a tremendous opportunity in the market. There are those what we call leaders, they're really cultivating and getting the most out of the marketing automation, and then you have those intermediate, those who started and they are working but they're not there yet, and then you have a lot of the beginners. If you look at the beginners and then the intermediates, that's 80% of the market. Which means that a company like ourselves, looking across the internationalization within the European markets, such focus is also giving us an opportunity that we are looking forward. Now we'll ask those companies what are they actually looking for getting the most out of this?
What I would very much like to focus on under the current circumstances that we are operating is results, return on investment, efficiency, automation, and getting short time to value, which is the return on investment from their investments. This is basically how we have been putting our narrative together to go out to market for the last two to three years and speaking to the market with such focus within the business operations. Now, with all this coming together, we have also seen that our strategy that we have defined as we call it Reboot 2.1 back in 2021, beginning of it, so almost like 18 months back, our strategy was our growth strategy for new markets, our growth strategy for our existing clients, our growth strategy via partner-driven growth, and the internationalization.
All this strategy has been confirmed also within this study that what we are focusing on is exactly the right way of actually investigating and operating and gaining market penetration also on the international ground, and working forward that one. With all this confirmation of our strategy, it's also the confirmation of our results. I mean, we are living and delivering the results that we have been working on. These are the quick highlights of the Q3. We have completed the year-over-year ARR growth of 36%. That's the number there of EUR 69.9 million. We have also had a very positive 19% revenue growth year-over-year. As earlier that we have always been focusing on the last two years, a positive EBITDA at the end of the year.
The last two years we have achieved, and again, we are achieving it this year. We have concluded the Q3 with a DKK -0.3 million end of Q3. Couple of days ago, we have also introduced a new guidance for this year. This is the second time we are doing this this year. The previous one was in August. What we are seeing is that there's a tremendous interest in our platform utilization, which is actually showing itself throughout multiple areas of our segment penetration. This traction increase towards our total ARR, thereby to our total revenue altogether led us to a new guidance to go out to the market which we are very happy with. Let's take some further details on the financials.
If we look at the revenue growth, we can see that we continuously over the last several quarters have increased our revenue on transactions, and we have also the last couple of quarters increased our revenue on subscriptions. If we move a little bit, we started last quarter to include what we call our committed future revenue to describe to the market how much we have already closed, and that is coming in within the next 12 months as a minimum. An increase in that committed revenue of DKK 7.2 million shows a strong base to go into the next couple of quarters. If we look at the EBITDA level, as Emre mentioned, we are ending Q3 at DKK -0.3.
We started the year with -1.7 going to zero in second quarter, and this quarter we have achieved a positive EBITDA of DKK 1.4 million. We are in the direction of showing a positive EBITDA at year-end. Again, if we look at our SaaS highlights for the total ARR, we see a continuous growth quarter-on-quarter on subscription, which is the base. Plus, we see a huge increase on our transactions over the last couple of quarters, and now we have a total change in our ARR of 36%. A few SaaS highlights, as Emre also mentioned, we now have 111 clients, so still increasing our client database and maintaining our average ARR per client at DKK 600,000.
Out of the clients that we have won this year, we have seen that 44% of those clients are coming from international markets, while we last year in the same period had 20% of our customers coming from international market. That supports the strategy that we also have and that Emre mentioned early on. Out of those 44% of customers coming from international markets, they also bring value in the same level, 46% to our ARR. If we go to the net retention rate, 102% net retention, showing that our client sticks with us, we are able to utilize them on our platform and engaging them. It's a positive signal that we can maintain the 102% or above 100%.
Even further, if we look at our cost, customer acquisition cost, we are now down to DKK 0.16 million as a cost of acquisition. It's an impressive low number that we have decreased over time with different types of focuses. That means that we have four months now to recover on CAC, meaning that after four months, our customers are profitable for us.
I just want to say that in addition to this, I mean, there shouldn't be any doubt that we are not trying to grow by cutting cost. I mean, we are putting quite a lot of investment on our efforts to both the sales teams, technology teams to increase our engagement and penetration in the new markets. Customer acquisition cost and the months to recover is declining, but it is not our aim to take it any further. It's actually continuous to invest back to the business for growth.
Emre, if I can have a short question. Do you include any of the, you might say, transaction in this customer acquisition cost? You might say customer acquisition cost is of course going down on a CAGR base. But can you describe a little bit on why it's getting this low? Why are you so much more successful on winning those clients with the same kind of resources, you might say, getting more client in? Any thoughts on that?
Again, we are as focused as many other companies on our cost structure and what is our return on investment. What are we utilizing our marketing and sales expenses on? Focusing more on customer relations with our existing customers, conferences, meetings, network, working with partners, which is generating a positive both net retention but also increase our win of new clients. At the same time, we can keep the cost level at a reasonable level.
I think it is also important to mention that, you know, if you remember, we have been speaking about this in 2020 and 2021, that our business strategy was highly dependent on partner-driven growth, and our go-to-market strategy was very much partner-driven. We have defined partners in different categories, business development partners, resellers, solution implementation partners, and technology partners. What is happening right now is that our teams are enabling our partners to their maximum value of how they can tell the story in their local markets and how can they reach out to those in their networks and prospecting, activating. What we're always now doing is co-innovating, co-creating, co-prospecting, co-selling. This all unified approach is giving us a higher efficiency also for the business that we are running and everything that Claus has just said.
Naturally, we are focused on cost, but we are focused on growth cost, and we wanna invest back into the business.
Yeah
In that perspective.
Yeah, it makes sense. I was just wondering why you said that it's not a target to come down there, but because as I guess you have always said from the start on this strategy, it is to create a lot of more muscles without you needing to you know do the exercise. But you're and getting the cost in, but your partners should do it.
Exactly.
I guess, you know, I know you can never keep it this low if you want, but is it a picture of what we should expect you in the future to run this quite efficiently, compared to other companies?
It is, it is in our-
tech
It is in our DNA that we are an agile company. We're gonna always be like that because this is how we work. We are highly focused on partner enablement. In that strategy, we keep investing, getting new team members in that space. With that, I would say yes, we will be very efficient always in that. If you look at it, I usually look at the SaaS businesses, companies within our size and within ARR size and complexities as a SaaS business, and I look at their benchmark and the successes. We are far beyond that. That's one of the reasons that I'm saying I don't wanna focus more to squeeze it. I prefer to invest on the growth of it and then utilize to its maximum, always being on our.
That makes sense.
To support that, you could normally say that if you want to go out to international markets, you would normally see an increase in your sales and marketing costs. While we have actually achieved to win more international clients while reducing the CAC.
Which is the miracle in itself.
Perfect. Thank you. Now it's clear.
If we go to the cash flow, the first, we started the year with DKK 20.6 million, and then we showed half year report DKK 12.6. During this, Q3, it is fully aligned with our plans and strategy that our cash flow from operations is usually negative from the seasonality of when contracts are renewed and paid. We have continued our investment in our platform, as well as we have repaid the loan as we announced in the half year report, 2022. We repaid two of our most expensive loans in order to reduce our total payments over the next 12 months of a larger or greater amount. That leaves us at the end of Q3 with DKK 1.9 million.
If we look ahead, in Q4, it has always and it will be a positive cash flow from operation period of time. At the end, this is a seasonality fluctuation that we would anticipate, and Q4 will be a positive cash flow from operation. We will maintain a level of investment around the same size, while our cash flow from finance will be lower than what we have seen this quarter.
There is a question here. You kind of explained some of the parts of it. Were you forced to repay the loans, or was that voluntarily? Has it built up, you know, some kind of backup, you know, a credit facility?
This is a voluntary situation.
Yeah.
We went into a negotiation. We have more than two loans with Vækstfonden, and we went into a talk with them because our financial position allowed us to repay the most expensive loans and change the profile of the existing loans in a manner where we over time could save cash and then also save interest.
I know, and now I go very much into detail, there is a lot of focus on the cash. You made around DKK 6 million on the operational cash flow, and then you said investment in this. You have grown your business this year and new clients coming in, so is that a good level to think as a floor, the DKK 6 million in cash flow coming in because you have a lot of the payments from customers in Q4? I don't know whether you wanna go into those details. There's a lot of focus on it.
Well, what I can say is that we have maintained our clients. We have a positive growth in our existing clients, and we will win new clients in Q4, which will also make payments of the new contracts in Q4. If we achieve the same level of maintaining our existing customers and create a positive retention, plus new clients, yes, it will be positive to some extent.
Perfect. Thank you.
Very good. If I may follow the last chart actually from our side.
Do you want to? Yeah. We lifted our guidance two days ago, and now, as per Q3, we have DKK 69.9 million in ARR. We now have a total ARR range in our guidance between DKK 68 million and DKK 76 million. We have increased the range than when we did it in August because the fluctuation in transactional ARR is depending on several things, which is among others, the market, how will that go? We still do expect that there will be some leverage back towards Q4 2021, but the recent one and half months has shown that it's not going at the speed that we anticipated, which we are glad for.
Hopefully we can maintain this level into Q4, but right now, we are expecting a level of ARR from transactions in the DKK 12 million-DKK 16 million, which has lifted our total ARR guidance for the year.
I just wanted to add that when we are looking into the numbers and are putting our guidance, and we always have been very realistic and very. Because we like to deliver what we promise. As we move into the next quarter, it's a very interesting picture that we are seeing. I just want to add a bit of a realistic perspective in that what we are experiencing, what we are reading in the papers. It's a very different environment, and everybody knows, full of uncertainties. When we look at our business, what I mean by that is our clients' business, and we look at it in different geographies, we look at it in different segments, in different company sizes.
When we look at this all together, what we are seeing actually right now is that there is a lot of activity. The amount of activity that is targeted towards first-party data utilization, especially because that is the customer that you already have in your disposal that you can actually build your communications around and expectations for increasing your sales. I mean, I'm sure you have also read in many different papers that warehouses are full of goods and material to be sold. The retailers are highly interested in pushing these ones out. Of course, the first thing they will always be looking into first-party data, meaning their own customer base, and looking into that, how can we actually become more relevant, more timely? Because we know what they're interested in. They told us.
They gave us the permission to get to know them better. That's where Agillic comes into the picture with a tremendous impact because that's where we are actually delivering business results to their activities. From there, when I look at forward Q4, this is seasonally the highest season we have, we have multiple holiday season activities such as Black Friday. It used to be a Friday, now it's a weekend, will be maybe 10 days. We have Christmas coming up. All these activities, we shouldn't think only about physical retail, we should also look at a digital environment. When we look at digital, there are multiple digital services. These are our clients. They're operating. They're not affected from any kind of physical activity out there.
All together, what we are seeing right now, it's not as simple as one single headline can define everything. There are so many nuances, and we have to look into our business individually and say, "How do we get the most value to our clients as quickly as possible?" Because then we are becoming something that they cannot stop having more. This is all from us for today.
Perfect. I think let's end on that note. You know, I will ask it in a two-way because I was thinking there's a question here regarding, you know, what have you done to drive up those transactions? You know, is it merely market or is there some explanation to it? Maybe looking a little bit into next year. You know, everybody unfortunately remembers the corona and how much that hit your business. Can we compare the maybe crisis we are going into, as you say, to this one? How good will it hold up? If you can elaborate a little bit on that.
I think you already started there more, but maybe a little bit more dig into that because it's where your growth are and it's where maybe the uncertainties are by investors on the transaction base and your client base, which were hard hit by corona. Is it the same when a consumer maybe gets a little bit worried about his own pocket?
Let me start with the historical approach first, and then Claus can go into further details from his perspective too. If we go back in time, if you go back to 2019, before the COVID times, and if you look at our transactional activities by then, you will see actually a whole nother picture than what we have seen during the COVID times. COVID times were uncertainties, a lot of business were highly impacted, and we also did have certain number of clients operating within very hard-hit segments, such as travel and hospitality. Those who were with us in those times that I was explaining, that there was quite a big portion of our business, up to 26% actually, was carrying in that.
Now we are going down in that by having a much broader segment integration across the board so that we don't have that. When we look at that, we are seeing the increase. On the other hand, I think it's also important to mention that transaction is not in our control. It is our clients' activity. They decide when and how much they want to actuate that. With that perspective, we always take a bit of a cautious approach on that one, if I may say this, to say that, you know, "This is what we foresee. These are the numbers, statistics that we are looking at." Then we are looking at the same papers that you are reading, that it's talking about something different. We want to be as realistic as possible within the circumstances. Yeah.
Only a very little support to that. It's difficult to predict how much people will travel in 2023. It's difficult to necessarily predict how the spending will be. What is predictable is that the customers that we do have need to communicate with their customers, and that's where we are in. And that is what drives the type of transaction, whether it's email or SMS or anything else.
Perfect. Then there's actually two questions out there, you know, the German market, you know, and now we read newspapers, Emre. I know you say we shouldn't read all the headlines.
No, I didn't say that.
You must be happy about the.
No
The German market. Is there any special market and especially in Germany, and there's a question also, you know, there's a lot of talk of crisis there. Maybe they could be the hardest hit market in Germany. Some feedback from you there. Is there any special market that has grown your international part being so much better? Or, and looking a little bit into the future, I guess you're betting a lot on the German market, so what are you hearing from there? Are they on the way to a big crisis?
That's a very big question. I mean, I'm honored that you're asking this question to me. Thank you. No, but I mean, I'll give you the most practical answer. I've been having multiple meetings with opportunities, prospects, partners from Germany, a couple of actually the last two weeks, couple of times. Now, the very interesting thing is none of them talked about it. They're all talking about how to create more value to their clients, to their businesses as quickly as possible. It's very interesting to go into a meeting from a prospect from Germany that doesn't actually mention anything about those kind of worries. Instead, they're talking about how can we accelerate as quickly as possible, create business value, and get the most out of it.
I'm sure there are a lot of businesses are hit and thinking that way, but what we are focusing on is finding and building relationships with partners that has access to client value building thinking in Norway, in Sweden, in Germany. These are our equally important international markets at the moment. Then we are also looking for prospects who are interested to build business value as quickly as possible, and that's the way that we have been approaching to it. Rest, I don't think I can tell you more than that because we're reading the same papers.
No, I didn't ask you to comment on the German economy.
Yeah.
I recommend you to ask what you hear from your clients.
I know.
Sorry. We have a question here. Should we expect you to run profit-wise on the EBITDA bottom line? It's almost impossible to get capital at a good price in this market. This question I got from one, I think before you actually gave us the target for 2023, but maybe you can elaborate a little bit on what you put out today for your thinking of 2023, Emre.
Well, what we can say is we have the same strategy. We want to have our growth. We want to have our positive cash flow from operation that is going to drive the company. That positive cash flow from operation is an effect of both being cost cautious as well as being focused on increasing our existing customers and creating new clients through prospects. If those three things match up well together, that is where we're heading to get a profitable EBITDA. That's without giving any guidance to 2023. Yeah.
Perfect. Then there's a question here. Do you see any ceiling on your traction? Can you continue this year's growth into 2023? Now we are turning around positive, Emre. You know, we could fear-
Yeah.
Is there a ceiling? Because, you know, I guess when you grow your subscription client, then you can push a little bit more transaction through by this. Is there a ceiling on, compared to how much subscription you have and how much transaction you can drive out from that client, you know? Could you hit DKK 30 million, or is that impossible with the number of subscription clients you have? I think, maybe a little bit, I'm not asking you to guide precisely, but a little bit thinking on
Oh, I'm
... on how much you can actually pull out of the existing clients.
Understand. That's actually quite an interesting approach to look into that one. I would say, let's look at the way that the transactions are actually being exercised by our clients. It depends on which segment you're coming from. I mean, there are certain business areas where transactional communication is quite a high priority because it's necessity. It's the way that they need to run their business. Then you have certain type of clients that they are not so dependent on it, and they will be working in a different model. One thing is which industry you're coming from, and then the next one is how big your first-party database is, as a company. Then comes the next one is how are you actually running your strategy to run your business?
These all three different elements can actually differ a lot from one company to another, one market to another. There is no one size fits all answer to this question. I would say what we are naturally looking for is how do we create more opportunities for us in the new international markets with larger first-party data clients. Think about our clients that we have in Denmark. Their base is limited to the population of Denmark, which is basically the 5.8 million. Then when you come to Germany or to the larger markets beyond that's become so much bigger. What then happens is your transactions also growing naturally in addition to that. I don't think there is one answer to that one.
It is more about how we are engaging with one specific client and the size and the way that they're running their business.
Plus, if I can add that there's also a difference on maturity within industries, within markets like countries, where how far they are with communicating with their customers on SMS or emails or whatever their communication channel is, which we are trying to develop with them so they will be better at it.
Yes. We didn't get a ceiling. No, I'm joking. I know you can't give that. There's a question here: Why did you not raise the low ARR range, the ARR range in the bottom when you expect more customers? You mentioned that, Claus, and ARR transaction maybe increase with Black Friday, et cetera. You know, we are in a month where, you know, where you have a lot of, you know, holidays, Black Friday, Christmas and everything.
Let me elaborate a little bit further on that. We have clients that are not impacted by Christmas times or Black Friday that will probably decrease in the number of transactions they have during Q4. Therefore, you know, that's a part of the decrease. We have retailers that we expect will increase like they did last year.
What we're looking at is that the base that will normally increase their level of transactions in Q4, we are still expecting that, while the other ones will typically follow some sort of a pattern where we saw that the summertime or from June to August, September, actually had quite significant high numbers that we have no background for saying that will continue, and therefore anticipate that it will level back towards what we saw in Q4 2021. That's why we're expecting that we will see a decrease or expecting DKK 12-16 million in ARR transactions, while right now it's DKK 19.6 million.
Your partner in Germany, bluplanet, I think that was quite a big news when that came out.
Mm-hmm.
A very big, I guess, partner you got down there. Are you seeing any pickup from their network?
Yes, indeed. We have quite a lot of conversations. bluplanet is the name of the company that we have been partnering with. Indeed, and we have both our direct sales and our indirect sales, which is basically driven on the reseller side. From bluplanet perspective, we have quite a lot of activities happening. Marketing activities are happening. Prospect conversations are happening. There's a very heavy engagement, and some of these conversations that I mentioned from the last couple of weeks are driven from these engagements. We're very hopeful in the right direction that the conversations are going.
There's a question here: Do you see any possible M&A targets? Is there any technology out there? I guess you have been pressured on share price now, together with all the sector. Could it be time for someone to move or go together, your new technology or something like that? Or is that not on your board?
We have chosen to, back in 2021, Reboot 2.1. The strategy that we have defined was how do we create partnerships, ecosystem engagements with technology partners? This has been something that we have been cultivating heavily for two years now, and it is paying off. Now, I cannot answer that question. That's a conversation that is based on the strategy driven by the board of directors. I would say from our perspective, this is something that we do not as an M&A, but as a technology partnership with those kind of international technology engagements that we're working with. Yes.
Perfect. Yeah, but it's easier.
Yeah
just to be a partner rather than buying anything that needs cash. No. Final questions. Are margins the same for transaction versus subscription? And I guess we are talking on the gross margin side because
Yeah
Just to get a feel of that, whether that weighs out, your gross margin.
Yeah. No, it's not. Our gross margin on subscription is much higher and the transaction is much lower. Therefore, we also see that we're not moving the EBITDA range on our guidance, even though we increase our ARR on transactions by DKK 2 million below on the low and the high side. They do not have the same impact and that's, but they do. They are a part. ARR transactions are part of our guidance, and that's why we are adjusting it, even though it doesn't have a huge impact on our.
Mm-hmm
on our operations.
Perfect. I think we'll end it there. Thank you for all the questions to listeners, and thank you to you, Emre and Claus, for taking us through the presentation, and may everybody have a nice weekend.
Thank you.
Thank you very much. Thank you for joining.