Good afternoon, and welcome to this Q3 presentation and Q&A with Konsolidator. With us today, we have the CFO of Konsolidator, Jack Skov. First, there will be a presentation, and afterwards a Q&A, where the CFO will answer questions submitted via Stokk.io. There have already been pre-submitted questions on Stokk.io, and the Q&A is still open so that you can submit questions live as well. I will now hand over the mic to Konsolidator for the presentation. Jack, your line is now open.
Well, thank you very much, and welcome, everybody. Thank you for joining. I am Jack Skov, CFO of Konsolidator, and I will be the one presenting today. It's a summer quarter that we've just passed. It's been more quiet than usual, as the numbers also will indicate. But we are seeing increased sale conversion rates, and the start to Q4 has been really good with the signing of eight new customers in October. So let's go on our way. I will just briefly talk a little bit about Konsolidator, who we are, what we do, and then on our strategy, our two growth funnels, and then some hard data numbers, and at the end, I'll answer any of your questions. Let's go to our... Here.
We, Konsolidator was founded in 2014 and, listed on the First North in 2019. Consolidation is, done the same way, all over the world, and that's why, we from the start, always thought internationally. So we, we wanted to, to be international because it's, it's done the same way. At the bottom, you can see a little hard numbers, 268 customers and 8.7 AAR at the... That is on September 30th. What we do? We do, financial consolidation. And financial consolidation is, is a complex process, but it's done the same way every month, so we can automate it. You add up numbers. You can see there is a group here.
All those add up numbers, so Konsolidator can consolidate the profit and loss, the balance sheet, and the cash flow. There are some complexities which Konsolidator helps with. For instance, any currency translation. You present the numbers in one currency, and if you have subsidiaries in another, there can be you can own a company with not 100%, but 70%, and consolidation need to take that into consideration. So there are some complexities as well, intercompany transactions. If the companies within the group are selling to each other, you need to eliminate for those facts. Our solution, we are focusing on from the close of the books in the bookkeeping station to the final reporting.
Also indicated in this page, this is our front page of Konsolidator, where you can see on the left, it says, "Upload." That is where the numbers come in, and then it goes through the five steps, and you have your reporting. It is important to easily to get numbers into Konsolidator, and that is why we are focusing on having integrations. And during Q3, we we released integrations to PowerOffice and also Microsoft Finance and Operations. Okay. Going to our strategy. The sales strategy, we have two funnels. We have our direct sales. This is our bread and butter. This is what we've always done since we started, and we get some leads. We have a salesperson having sales meetings. This is a business that we expect to grow maybe 10%-15% annually.
So, we have in our strategy, another funnel where we are focusing on free trials. We focused on that process, getting customers easily to try Konsolidator and hopefully become customers. On the Microsoft partners, having them sell, and then our audit firms, the auditors are really good ambassadors. So, so if we can get them to use Konsolidator, we can have some good ambassadors. This is where it start, where we expect the annual growth to increase a lot. Yes. If we go back to our financials for Q3. As I said, it's been quiet this quarter, and but Q4 started really well. We started out the quarter with, we have a quarter of DKK 4.9 million in revenue. This is some of it is because of our new customers as well.
We signed eight new customers. For the year to date, it's DKK 14.2 million, a 17% increase, and we have signed a total of 26 customers for the year. If we go a little, dig a little deeper, we can see the subscription is DKK 12.9 million, which has increased, and then we have our onboarding and consultancy, which have decreased by 28%. The reason for this is that we are fewer people compared to last year. So, this is on an hourly basis. Also, we have not had that many customers this year compared to last year, so the onboarding fees are also lower. If we look at our EBIT, it's been improved by a little over 50%, both year to date and for the quarter.
The primary thing here is that, the cost, we've cut costs. Of course, also, the revenue has increased, but the cutting of cost has meant that we have also, improved that EBIT. With the improvement of EBIT also improves the cash flow, so for the Q3, our cash flow from operating activities was DKK 1 million. Looking at our EBIT, I have, made a graph. If, this graph shows, the blue column shows the revenue, development, and the red, column show the cost before, the share-based payments. And, the green line, that is the EBIT margin. We can see that the, the red in the beginning of Q1 2021 and, and up to Q3 2022, the red column has been a lot larger than the, the blue.
But in Q1 2022, we had to let go of some of our employees, and now we are counting 25 employees compared to the 35 back then. So we can see that the revenue is increasing a little bit, but the cost has dropped a lot, which meant that the EBIT margin of 20%- in Q3 2023 has been improved significantly throughout the last couple of years. Going to our SaaS metrics, and as I said, it has been acquired. This, we assigned 8 customers. We've also had some churn. The ARR has not increased since June thirtieth. It's only been a net increase of DKK 27,000 , and that increases both our new sales and the churn.
Since the net increase also impacts our other SaaS metrics, it doesn't look that good for this quarter. Churn is on an annualized, the churn is 8.5%, which is an increase. We still think it's too high. We want to be better, and we want, and we will, improve in 2024. I have... I will show a little bit on churn, why customers churn, and what we've done so far. First of all, I'd just like to briefly address how it's calculated.
So it's our lost AR for the last twelve months, and then it's the average of a beginning period, meaning October first last year, to the end of this period, and then it's divided by two, and then you get the average, and this is the main reason that it's improved. So churn is still too high. We still see churn today, and it's primarily influenced by customers groups. They are being acquired by larger groups using something else than Konsolidator. We also see that our smaller groups with only maybe three companies, they're also looking at cost situation, and being a company with no complexities, then they might not think they have the value in Konsolidator.
Going back, we started out with having onboarding churn, and we see that the onboarding churn has improved, and the trend is broken. It's falling rather rapidly now, which is really good. And the reasons, I believe, is that our customer success team has been upgraded during the year, and also, back then, when we saw the onboarding churn, we had the onboarding approach changed. And that change meant that we were assisting or helping customers a lot easier. We took charge of the whole onboarding process a lot more. So, it's going the right way. I'm confident that we will be improved in 2024, but, we're not gonna see the effects until 2024.
The outlook, we changed our guidance just before we released our half-year report back in August. And one of the reasons is because we could see that also Q3 would be a little slow. On the right-hand side, you can see the new outlook for 2023 and the new outlook for 2024. So, we are still maintaining the outlook, due to we think we have the good momentum that we have at the moment. The sales conversion rates are going almost up to or are going up to previous levels, it looks like for in Q4. So we, we're confident that this will happen.
On the left-hand side, you can see the growth for the different years, and the average growth rate over the years has been 45%-49%. So, we're still a SaaS growth company. We have received the financing last quarter, and with the sales conversion going up and with the momentum in place, we sure hope we can, or we believe that we can, really get started in 2024. Thank you for... That was my brief presentation, and now on to your questions.
Perfect. Thank you for that, Jack. Let's move directly into the Q&A. So the first question from an investor here is, if I calculate correctly, then LTV over CAC in H1 2023 was under two. What specifically are you doing to increase this number, looking on both sides, so increase LTV and lower CAC?
Well, thank you. Good question. I have actually prepared a slide for this, just so everyone know the LTV, lifetime value. So that's the new annual recurring revenue multiplied by our contribution margin, which is 95%, and then we divide this by churn. And then the CAC is the marketing and sales cost. The primary focus for us is definitely churn. That's where we can improve. And that's where we will improve. We have seen our costs decrease over the past 12 months-18 months, as you saw on a previous slide. So that is, as that it has been reduced, also. So that's where we are focusing.
Perfect. And then, the next question: Are you beginning to experience an uptake in sales conversion rate again, or still seeing lower than usual conversion? What are you doing in order to increase the value of the leads you get or increase sales conversion in the sales department?
Like I said, we are over Q3, we saw the conversion rate increase, and we believe it will be, or we expect it to be back to previous levels in Q4. So that's a good sign. And our leads are always qualified by our business developers having a discovery call. So our pipeline is usually really good, good leads, most of them. There was another question at the end, wasn't there, Anders?
What are you doing in order to increase the value of the leads you get or increase sales conversion in the sales department?
So basically, this, as in H1, we had a staffing situation, which we've dealt with. We have new salespeople on August first, a couple, and they have started to get into the whole process and learning how to sell. So that's one. Yeah.
Yeah. Perfect.
Mm-hmm.
And the next question: What do you believe internally is the main reason for the low sell-through rate? There are probably both external and internal things affecting this, but if you look internally, what has been the cause and what can you do?
I slightly, yeah, also talked a little bit about on the, on the previous question. We've had some staffing in the first, first year. We saw our pipeline was, was really good and, but, we had a, a staffing, situation which we needed to, to solve, and a lot of, some of our sales stopped. We need to hire new salespeople, and, and that's, looks like it's, it's coming back now. So, so, so that's externally, we see a little longer, acceptance cycles, so the sales process is a little longer. Maybe that's because of the... And that's my guess, because of the, the interest, investment environment at the moment.
Yeah. And, then, the next question here: You explained in the Q3 report that you signed 8 new customers in October.
Mm-hmm.
How is that compared to October 2022, or compared to Q4 2022?
We don't publish monthly intake usually on... So for last Q4 2022, it was 16 new customers for that period. So... And you had a question of free trials, right?
Yeah. The, the next part of that question is, you also mentioned free trials and that you have signed two clients on a free trial basis. Are those two clients part of the eight mentioned, and how is a free trial set up?... or what is your expectation of turning free trials into paying customers?
Yes, the two free trial customers are part of our eight customers. We have really worked on the whole setting up process, making sure that the expectations from free trial users are fulfilled, and that we don't promise too much. We expect to get more free trials. It works really well with our AppSource in Xero. So we expect to get more free trials and convert also. So we definitely see an increase in that too.
There is a follow-up question regarding these eight clients.
Mm-hmm.
You mentioned that you acquired eight new customers in October. Is this also the net increase?
Meaning if every, any customer churned in October?
Yeah, I believe that is the question.
We didn't have any churned customers in October, no.
Okay, perfect.
So it's a net increase. Correct.
Yeah. The eight customers in October, through what sales channels did these come from? Audit, partner, or direct sales?
Our bread and butter, the direct sales, is so everything is coming through direct sales, some through the free trials, but it is part of direct sales as well. But so yeah, two free trials and six direct sales.
Okay, perfect. Then there's a question regarding the employee change in the company.
Mm-hmm.
Which kind of employees did you let go? Was it salespeople, developers, or what else?
Back in, I expect this is back in March 2022.
I think it is as well, yeah.
We let seven people go, and it was developers primarily. And then over the period of 2022, we didn't rehire any other... But it was mainly in the development department.
Okay.
Mm-hmm.
Then we have a final question here.
Yeah
... on some key metrics. How many new customers this quarter? How many churned ones, and what are the reasons for churning?
We had, let me put it that way, we had 266 customers at the end of June. We had 268 customers at the end of September, so that means a net increase of two, and we got eight new customers, meaning six customers have churned. The reasons for churning, like I said, a little bit on the onboarding churn, but now we see the churn coming from customers being acquired or smaller customers looking at their cost. By smaller customers, I mean groups with three companies. Yeah.
That was actually all the questions that we have for now. So, before we end the webcast, I will just hand over the mic to you again, Jack, for some final remarks.
Yes. Well, first of all, thank you very much for joining my first investor presentation alone. It's been a pleasure. I look forward to seeing you again on our next presentation, the annual accounts, on February ninth. So thank you very much, and have a good day.