Good afternoon, and welcome to our investor call on the 2021 audited and 2022 first quarter figures. We will lead in with our disclaimer and introduce today's speakers. Our CFO, Jan-Dirk Henrich, and myself, the CEO of Exasol, Aaron Auld. Welcome again. I'd like to start with a summary of the key points. Our audited financial year 2021 results are in line with the preliminary figures we already reported. The first quarter 2022 results demonstrate a clear improvement in both top-line revenue and annual recurring revenues, and importantly, profitability. Despite a seasonally slow start to the year, we are pleased that our ARR still increased by 28.5% with five important new customer wins across Turkey, Scandinavia, Germany, and Switzerland, including in Switzerland, one of the largest global banking institutions.
The customer wins here are very much in line with our target verticals, coming as they did from financial services, media and publishing, logistics, and healthcare. We also saw continued improvements in churn rates and net revenue retention. Our new software as a service product was launched in February with a range of potential customers in the trial phase and already first high-profile customers having migrated and booked pre-commitments. Unfortunately, we experienced some limited impact due to the sanctions on Russia with respect to existing Russian business and closing opportunities there from which we have, of course, walked away. Finally, we also see some instances of careful decision-making as a result of the current macroeconomic situation, while at the same time, ongoing customer interest and engagement remain high and our pipeline continues to grow. All this leads us to be fully confident about our guidance.
We expect our ARR and AAC, that is, annual average consumption, to grow to EUR 38.5 million-EUR 40 million at constant exchange rates during the year 2022. We also expect the adjusted EBITDA to improve significantly to EUR -14 million-EUR -16 million. By end of year, our liquid funds are expected to stand at EUR 10 million-EUR 12 million, and we fully expect to reach operating cash breakeven in the course of 2023. With that, we can also confirm our midterm guidance that we expect ARR and AAC to grow to a run rate of EUR 100 million in the course of 2025 without the need for further equity injections. We believe it's important to always have our vision clearly in line of sight and to focus all of our everyday efforts on achieving it.
Our ambition is stated and clear. It is to become the performance analytics platform trusted by the world's most ambitious organizations. In order to be trusted by our customers, we need to enable them to achieve their ambitions. Reliable and fast access to data is a fundamental success factor for business in a digital world. As our customers become ever more reliant on near real-time granular data insights to run their businesses, Exasol is at the forefront to deliver the right solutions. To this end, we are in the process of substantially expanding our platform capabilities and automation to drive high-performance data ecosystems and to provide integrated solutions such as enterprise self-service analytics at scale.
This, in turn, enables the customer to manage the full spectrum from simple to highly complex multiple data streams and deliver specific business outcomes to stakeholders across the enterprise, irrespective of data skill levels within the organization. Implementing business-specific data strategies, delivering rapid time to value, and staying within constrained budgets can only be achieved with best-in-class tools and technologies tightly integrated to address multiple data challenges. This is the focus of our work and ambition. Exasol's strengths and capabilities are uniquely designed to deliver on this ambition. Unrivaled performance metrics, linear scalability, platform independence, ease of use and automation, and of course, cost efficiency, enable seamless end-to-end solutions for customers. In doing so, extend our capabilities to additional layers of the data stack, such as ETL, data integration, and visualization, and in this way, expanding our addressable market.
One area where we are working very successfully with customers and partners is our bridge to the cloud concept. Customers can deploy Exasol within the existing on-premise environment to immediately fix an existing performance problem. At the same time, they can test and introduce new tools and business processes with Exasol, then ultimately lift and shift the whole system to the public cloud of their choice. In this way, the customer de-risks the transition of long-running legacy systems to the cloud while gaining immediate benefits with business owners. This creates a seamless transition path for the customer whose cloud strategies, in many instances, can take years to implement. The customer can now also select the required level of services from Exasol, from being completely managed by the customer to being fully managed by Exasol. What are we currently working on?
In line with our platform ambition, this is a combination of proprietary R&D and product development and near-native integrations with partner solutions. On the Exasol side, we have recently launched our software-as-a-service offering on the AWS public cloud platform, plus elasticity for all three major cloud platforms, that is next to AWS, Microsoft Azure, and Google Cloud Platform, to enable customers to scale up or down or in fact scale horizontally. We are delivering a constant stream of tight integration features for all of these platforms. Our initial focus on AWS is paying dividends for us with existing and new opportunities and being selected as the AWS technology partner of the year in 2021 in DACH has given us welcome visibility and credibility with AWS customers and the AWS sales teams.
Part of this endorsement is due to the fact that we've worked hard to develop certified integration into their tool landscape, such as Amazon SageMaker for artificial intelligence and machine learning, Amazon QuickSight for business intelligence visualization, and Amazon S3 support for our Virtual Schemas. We are also continuously improving our Virtual Schema technology, which affords the customer a single pane of glass view and improved access to their diverse data assets. Virtual Schemas are basically enabler for Gartner's vision of the logical data warehouse concept and will also be an anchor technology for further data management and observability solutions as we move ahead.
In addition, we are close to releasing a unique technology for automated data warehouse and data mart building, which will be the first end-to-end automation tool that completely abstracts from the underlying heavy lifting schema modeling and data integration work so that users can concentrate on the relevant business objects. It will be a further driver for the consumerization of data analytics by empowering non-technical business users to make changes to existing data warehouses within minutes instead of weeks, sometimes even months. While we already support integration with a vast array of tools and technologies in the data partner ecosystem, we are currently focusing on key strategic partnerships in line with our platform strategy.
As I already mentioned, we are constantly innovating and integrating our offering for the major public cloud platforms, and you will hopefully have seen that we are also announcing other key partner technology integrations, such as our strategic partnership with Keboola, which augments a smooth and intuitive software-as-a-service trial experience and provides a rapid access to more than 200 supported data source technologies. Another exciting partnership we've built is with a smart startup based in London, TurinTech, which provides low-code auto machine learning functionality and visualization capabilities, which massively simplify data science process steps. By creating a native integration into Exasol, the resulting machine learning models can be executed directly in the Exasol in-memory database, and in this way bring data science directly to the productive data with no loss of performance.
Of course, while all of these streams have been proceeding in Q1, we have been particularly focused on bringing our software as a service offering on AWS to market. Working on the principle that we need to walk before we can run, we initially ran a soft launch. Now, having completed this phase, it is ready for prime time with multiple go-to-market activities planned for the remainder of the second quarter and of course for the rest of the year. We have already seen a number of existing clients migrate to SaaS either to implement their cloud-first strategy or to gain increased flexibility through autoscaling. SaaS is of course an enabler. It will also allow us to compete across all use case scenarios required by the customer.
This is exciting and will allow us to provide a constant stream of innovation and improvements to our customers without having to wait for major new releases. Moreover, we will be able to closely monitor customer interactions and identify areas to improve and expand the customer experience as they happen. With software as a service, we are now able to provide consumption-based pricing, and in our next step, we'll provide consumption-based pricing models across all deployment options. This means that the upfront investment and therefore entry barrier is substantially lower for potential customers. For example, for lower impact scenarios, test cases, and separated workloads, just to name a few. Of course, the more applications that are migrated to Exasol, the more customers will use and therefore pay. By offering a credit system, we can still close long-term contracts by providing discount levels for pre-commitments.
We fully recognize that a consumption-based linear pricing model in the cloud world is well accepted in the market, and we expect it to be an additional growth driver for Exasol. I've outlined how we are now totally focused on delivering a solution-based performance analytics platform to our customers. This requires a clear understanding of the different outcomes our customers need to implement their data strategies. Our go-to-market strategy is therefore rapidly transitioning towards outcome-based messaging and sales motions rather than feature or component selling. Moving the focus away from product capabilities towards actual outcomes that matter to our customers is key.
This approach is sharply redefining our go-to-market strategy and its execution across sales and marketing, with all teams completely focused on addressing customer data needs, whether that is the way we organize our demand generation, run campaigns, select events, manage communications, build or repurpose content, design the customer journey on our website, and of course, train our sales teams to engage with partners and customers. As evidenced by multiple best-in-class customer ratings from different analysts, we very much have this in our DNA. However, we continue to operationalize this mindset, and to this end, we have brought experienced people on board who are already delivering against agreed objectives with more to follow as, of course, this is a journey. Part of this process is also to streamline the way we work internally to ensure smooth and enjoyable customer experiences, from first responses to contract to support and professional services.
As an example of this change process, we are currently transitioning to Service Cloud, the Salesforce tool to enable end-to-end views of the customer experience. Our objective is to build a single view across our entire organization for every single interaction with our customers. As such, it will quickly be extended to our partner ecosystem. At the same time as building out the foundation for accelerated growth and scale, in Q1, we also continued to deliver growth and improve other key performance indicators, as evidenced by the numbers we are able to share today. Although the overall new customer acquisition run rate clearly needs to be improved, and you may rest assured that we are working every hour of every day to increase pipeline coverage, we are also excited about the customers we won in the first quarter and the upsell opportunities these will afford us.
Overall, we're making great progress across the board in building a solid foundation for expanding our addressable market and faster revenue growth, and we feel very optimistic about the company's direction. With that, I will pass to Jan-Dirk, who will take us through the numbers.
Thank you, Aaron. Before I run you through the financials of Q1 2022, allow me to give you a brief update on the final audited figures of 2021 and how they compare to the preliminary figures reported in our webcast in February. As mentioned before, there are no substantial differences between our preliminary and final audited figures. Recognized revenue remains the exact same as previously reported. Gross profit decreased slightly by 100,000 EUR due to minor corrections in the capitalization of own work. Adjusted EBITDA was also lowered by 700,000 EUR, driven by increased provisions for personnel expenses and selective write-offs in assets. The final adjusted EBITDA, therefore stood at -31.6 million EUR, and the final reported EBITDA at -25.7 million EUR.
Just as a reminder, adjusted EBITDA compared to reported EBITDA excludes costs for any capital measures as well as delayed cost effects from legacy stock appreciation rights programs in connection with the IPO. These effects will come to a complete end in 2023. Breaking these final full year numbers down to quarters, of course, leads also to slightly adjusted quarterly figures. The above-mentioned adjustments really only affect the final quarter of 2021, where the quarterly adjusted EBITDA moves from the previously reported -EUR 7.9 million to -EUR 8.6 million. In addition, there's a shift of EUR 200 thousand of adjusted EBITDA between Q1 and Q2 numbers due to an adjusted phasing in expenses. The Q4 numbers still include a total of EUR 1.2 million of restructuring expenses for the reorganization, which we implemented in November 2021.
As will be seen later, the impact of the reorganization efforts only becomes fully effective and visible in Q1 2022. Against the background of these final quarterly results, I'll move on to run you through our development in Q1 this year. We'll start, as always, with our growth performance. ARR, as mentioned by Aaron, as of end Q1, stood at EUR 31.5 million on a constant FX basis, meaning non-euro revenues are converted at the same rate as our ARR at the end of 2021. At current FX, ARR stood at EUR 31.7 million, driven mostly by the strengthening U.S. dollar. Growth versus same quarter last year therefore came in at 28.5% on a like-for-like basis, in line with our guided growth dynamic for this year.
ARR grew by EUR 1 million at constant FX, which is basically identical to the growth performance in Q1 2021 in absolute terms. Q1 performance was characterized by the typical seasonality we've seen in prior years, with generally slower business acquisition compared to the other quarters after closing out end of year business in 2021, but in line with our expectations. Q1 growth was driven by the acquisition of five new customers, as well as continued upselling to existing customers, while two customers were lost to churn. Upselling remained the dominant contributor to growth to the amount of 75%, consistent with the pattern of the past 12 months. Total customer base stood at 215 at the end of Q1. On a full year perspective, and therefore excluding impacts from the mentioned seasonality, we see continuously improving core performance KPIs for our subscription business.
Over the past 12 months, net revenue retention improved to 121% compared to 115% last year at the same time, driven by improvements in both gross revenue retention rates as well as shrinking ARR churn rates, both to the extent of three percentage points. Customer churn remained at a low 5% overall. As a result of the net growth of EUR 7 million since Q1 2021, 75% was generated through net business expansion with existing customers, while 25% of the growth came through new customers. As outlined by Aaron, expanding the share of growth generated with new customers is a key focus for all our efforts in go-to-market and product development in 2022.
The gradual ramp-up of our SaaS business will play an increasingly important role in this in the second half of the year, but even more importantly in 2023. Looking at the ARR growth breakdown by geography illustrates where the untapped potential for growth is located. First of all, you will notice that this regional breakdown differs from the one that we shared with you in previous webcasts. As already mentioned by Aaron, our new go-to-market organization is structured along three key dimensions: EMEA Central, EMEA North, including emerging markets, and North America. Our focus and as of now limited efforts in emerging markets are currently led by our head of EMEA North and will be broken out separately, both in organizational as well as reporting terms as soon as sufficient momentum has been built.
Overall, 70% of last 12-month growth was generated in our core region, EMEA Central. However, in terms of new customer business, EMEA North and emerging markets already made a significant contribution with more than half of new customers, customer business emanating from there. In North America, while upselling performance is already on a similar level to EMEA Central, generating a similar dynamic in new customer business remains a task and a strategic priority for Exasol going forward. That concludes our update on growth. Before moving on to the P&L and Q1 profitability, I would like to provide you with an update on the status of the organization. Total headcount as of end Q1 2022 stood at 225.
After the reorganization in November last year, which was focused mostly on the US and UK organizations, we since carried out further necessary changes to our EMEA business in February. With the completion of these measures, we have established a baseline organization for our growth efforts in 2022 and 2023. From that baseline, key new hires have already joined, as mentioned by Aaron, such as our new head of marketing and the new head of EMEA North and Emerging Markets, with further key hires in our go-to-market organization still outstanding. The financial plan underlying our guidance is based on a headcount of roughly 240-250 by year-end. Bearing in mind these organizational measures which drive our primary cost driver, personnel costs, let us review the quarterly results.
In our webcast in February, we announced that we intend to discontinue the capitalization of own work starting with the financial year 2022. Taking into account that to ensure a like-for-like interpretation of results, you will henceforth find on the bottom of this page an additional line adjusting 2022, 2021 quarterly results by the impact of capitalization. Based on this perspective, Q1 has seen a significant improvement in profitability, which is further testimony to the impact of measures I just discussed. Adjusted EBITDA improved by 26% compared to the same quarter last year, and by a very substantial 58% compared to Q4, 2021. Dominant drivers of this reduction compared to previous quarters have been, as you would expect, the reduction of personnel costs, but also a streamlining and focusing of all marketing spends.
As a consequence, we were able to generate a substantially higher top line with a largely identical cost base compared to Q1, 2021. Overall revenues grew by 25% versus same quarter last year. The slight decline in revenues versus Q4 is due to exceptionally high one-time revenues in Q4. The underlying recurring revenues driven by ARR are in line with ARR growth. With this Q1 performance and profitability, we are already at a run rate in line with our full year guidance of -14 to -16 million EUR EBITDA, putting us well on track to achieve it. Moving on to the development of liquid funds, this positive picture persists.
Consumption of liquid funds adjusted for the same FX effects that are excluded from adjusted EBITDA improved from EUR -7.6 million in Q1 to EUR -0.6 million in Q1 2022. This over-proportional improvement in cash consumption compared to the improvement in adjusted EBITDA is driven by additional positive effects from deferred income as well as lower paid sales commissions for the preceding fourth quarter in 2021. Let me again reiterate that a quarter-on-quarter comparison of cash consumption has little explanatory value in Exasol's case due to the strong seasonality in cash inflows from customer contracts. With new contract signings being historically concentrated in Q4, annual cash inflows from these contracts are concentrated in Q1, making it easily the strongest quarter in terms of cash inflow. Q2 to Q4 will therefore again see higher cash consumption.
That being said, Q1 cash performance was fully in line with our planning for the year and we are clearly on track to achieve our guidance of EUR 10-12 million remaining liquid funds at year-end. What does this in total mean for our full year outlook? As already indicated, based on Q1 results, we reiterate and confirm our financial outlook for the year 2022. ARR is expected to grow to EUR 38.5-40 million based on gradually rising absolute ARR growth per quarter. Adjusted EBITDA is expected to improve to -EUR 14-16 million, and remaining liquid funds are expected to stand at EUR 10-12 million.
This will put us in a good position to achieve our long-term goal of EUR 100 million ARR by 2025 without additional capital injection, with the aim to reach operating cash break-even in 2023. This concludes my numbers update, so I would move on to give you an outlook on our financial calendar for the rest of the year, where we have some important events coming up. These two important events are namely, first, our Capital Markets Day, taking place virtually on June first, and our annual shareholder meeting, also taking place virtually, a month later on July six. The Capital Markets Day will give you the opportunity to learn more about how we plan to achieve our long-term goals, about our overall strategy, our go-to-market approach, our technical and product roadmap, and how we plan to ensure efficient and effective execution.
You will also have the opportunity to get to know the Exasol leadership team in full. Aaron, Don, Matthias, and myself will all participate, and we look forward to providing you with an update on how we as a team intend to achieve our ambitions. We look forward to meeting as many of you as possible there. In case you are not able to participate, a full recording of the event will be made available on our Investor Relations website shortly thereafter. Following the CMD, we have the annual shareholder meeting on July sixth. Invitations and agenda will be sent out shortly. An important topic you will find on the agenda will be the election of new members to our supervisory board. As you have probably read from the corresponding press release, our current head of the supervisory board, Professor Jochen Tschunke, as well as Dr.
Knud Klingler have decided to step down from their positions after almost one and a half decades of service to the company in their functions. The whole leadership team here at Exasol would therefore like to take this opportunity to thank Jochen and Knud for their constant support, loyalty, and dedication to the company and their significant contributions in making Exasol what it is today. The company will use this event to complement and expand the diversity and competency profile of its supervisory board. In addition to backfilling the vacant position of Jochen and Knud, the company plans to expand the supervisory board to six members. This will facilitate a broader spectrum of competencies and the creation of committees as recommended by the German Corporate Governance Code. Shareholders can look forward to candidates with a broad range of experience from, among others, finance, accounting, sales, and transformation management.
The names and detailed profiles of the proposed candidates will be released in conjunction with the invitation to the AGM coming up shortly. Volker Smid, who has already been a supervisory board member since early 2021, is expected to assume the role as head of supervisory board. We as management look forward to a continued close collaboration with our supervisory board and are confident it will strengthen us for the execution of our plans in the coming years on multiple dimensions. One of these dimensions being the strengthening of our profile in terms of sustainability and ESG. Concluding today's webcast, I'm happy to share that Exasol has recently been upgraded to prime standard in the ESG assessment by rating agency ISS.
Building on this, the discussed changes in our governance structure, as well as additional improvements in transparency on management compensation and sustainability reporting that are underway, will help us maintain and further improve from there. With that, it concludes our quarterly update for today. We thank you for your attention and look forward to your questions.
Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will now take our first question from Robert-Jan van der Horst from Warburg. Please go ahead.
Hi, ladies and gentlemen. Thanks for taking my question. I have two questions, if I may. The first one is on your outlook on the ARR growth in the coming quarters. I mean, it was expected, of course, that most narratives you took wouldn't really show up in the Q1 growth. Just to give me an idea, since we're already a little bit in Q2, how is the SaaS platform going? Do you expect a lot here in the coming quarters? You mentioned that there are already some customers that are maybe about to sign in the near term. A little bit more color on that would be very helpful.
Also with your now more focused marketing approach, do you have any indications or customer feedback that you can share so then we can get an idea when this strategy shift will kick in. The second one, just a little bit of housekeeping. If you could remind me, please, what expenditure you still expect in, I think Q2 from all those, you know, stock related incentive programs that you have. I think the provisions went down quite a bit. I was just interested if there are any provisions that are related to your share price, and if so, which share price did you use to value those provisions? Thanks.
All right. I would probably start out with giving just a brief answer on the ARR structure per quarter that you mentioned, and then hand over to Aaron for giving some color to it in terms of SaaS progress and strategy impact. Then I would answer your question on expenditures in the end.
I think in terms of ARR, structure or the growth structure this year, if you and I can switch back to the page now, but if you look at the quarterly growth of last year, that is basically the pattern that we're expecting this year with, in a sense, even a slightly higher second half heaviness because the impact of the ramp up of the SaaS product, although it's not taking a substantial part in this year's growth plans yet, but it takes place in H2 as well. If you look at last year, basically we realized almost 40% of our growth in Q4. If you take Q3 and Q4 together with that, it's even more so. That's roughly the pattern that we will
If you take the full distance between where we started in the beginning of the year and where we want to be in terms of guidance, that's roughly the distribution we're expecting this year as well. That would be the kind of quantitative answer to your question on ARR. I would throw the ball over to Aaron to give you some color on SaaS progress and impact of the go-to-market measures we're seeing.
Absolutely. Thanks for the questions. The initial feedback we've got is very positive. A number of customers have moved across, as part of the trial process and are also migrating other processes as we speak. We carried out a soft launch, as I mentioned before, because we really needed to see that everything was working as it was supposed to, identify any issues. Of course, with a new product, they always do. You know, there are always going to be things that you realize haven't been joined up properly or you cannot see sufficiently. We use that period to really do some fast sprints to join everything up fundamentally. We feel we're in a good place now.
I think it's this week or next week, we are starting our first full-blown campaign to reach out to a much wider audience. Behind that campaign, we have put in place a full nurture program to make sure that in that program, everything is joined up as well with the right content, the persona-directed kind of outcomes that we're describing, and making sure that we have all the follow-ups in place as well. We're looking forward to that. How that will play out in the course of the year, we are not sure. Obviously, we've made some internal estimations, but the reality is, we'll see as it happens.
At the same time, we are now in a position to react very quickly to what we're seeing and make any necessary adjustments. In terms of what we've been hearing from our customers so far, also in terms of pre-commitments, we're confident that this will really be a game changer for us moving ahead.
Just a quick follow-up, maybe. Those pre-commitments you mentioned, is that cross-selling with existing customers or is it new customers that you now targeted as your first customers for this new product?
The ones that are already booked are existing customers, although not always with existing processes. There's a level of expansion there as well. We are also in discussions with some new customers. From where we are right now, this is not wholly unexpected because the way our database is used most often is for high-impact use cases, where you don't turn it off. It is running basically all the time. You're using it to run parts of your business. You are, of course, looking for discounts. We give a modest discount for pre-commitment, of course, and that's going to be the discussion immediately.
As we go out to a larger audience and raise awareness of what we have, we expect that to be a more varied picture.
Okay, perfect. Thanks.
You're welcome.
Okay, Robert, addressing your final question. As you see on our guidance page in the document, the cash out that we incorporated into our planning for the stock option programs for this year was EUR 2.7 million of extraordinary effect. That is basically related to the stock appreciation rights program for the employees. As you know, there's also a stock appreciation rights program, and this is a fixed provision which doesn't vary with stock price. Yeah. Because this is a fixed cash entitlement. There is the stock appreciation rights program, which was for the board members at the time of the IPO, which however, is hedged by the treasury shares in our balance sheet.
Half of these entitlements have already been settled by transferring of shares. Actually the exposure to that program has gone down, and the remaining is gonna be gradually settled in the course of the year without impact on cash. The provision for that particular program might vary a little bit based on the evolving stock price. It was updated in the balance sheet on the thirty-first based on year-end share prices. I think 30 different
Okay.
Share prices.
Perfect. Thank you. In terms of payout in the remainder of the year, that was in Q2, right?
For the employees, that's gonna be in Q2, in June, if I recall correctly. For the settlement of the treasury shares is gonna take place across the year.
Okay.
But then again-
Interesting.
That's not gonna materially impact cash flow or P&L.
Yeah, of course, just for housekeeping. Thank you very much.
Yep. You're welcome. Of course, the impact of the stock appreciation program was part of our guidance, so that was incorporated in our guidance.
Yeah, of course.
As a reminder to ask a telephone question, please signal by pressing star one on your telephone keypad. We'll pause for just a moment to allow everyone an opportunity to signal for questions. There appears to be no further questions at this time. I would like to turn the conference back to the host for any additional or closing remarks.
Thank you very much. Well, thanks to everyone for joining. I hope we were able to convey a good picture of where we are and where we're going. We have the capital markets day coming up, as Jan-Dirk Henrich pointed out, which will allow us to go into much more depth in what's going on, what we're working on, what we expect the outcomes to be. We hope that as many of you as possible will join us there. For today, thank you again for joining, and I wish you a good day's end, and goodbye.
Thank you from my side as well. Bye-bye.