Good morning, Europe, welcome to our earnings call for the first half of 2023. Glad to have all of you participating in our earnings call. As usual, as usual, we have the agenda. First, we have the introduction to LeadDesk, just to get everybody on the same page. We have some new, new joiners on the call as well. Looking at the highlights for the first half, key figures, take a look at the outlook as well, and then the investment case. Finally, we have the chance for QA and a chat on the fireside with then Henri Palomäki from Sijoittaja.fi, hosting that, and myself and our CFO participating. Great to have you all on the call. We have a great agenda coming on and, and great call.
As said, on the call with me, is myself, I'm the CEO of LeadDesk, I'm Olli Nokso-Koivisto. We have some parts also covered by our CFO, Kaisa Rönkkö, who joined the company in this first half of the year, this being her first official call then, where she's participating. Great to have her also on the call and get you guys to know, know her. Firstly, let's take a recap for those who've participated before and read all about the company, and then, for the newcomers, some new info here. What do customers actually do with LeadDesk? We talk about Contact Center as a Service software, but what are the actual use cases? On that, we have a large variety of use cases where our customers rely on our software and our platform.
We have anything from healthcare to electricity, to pay TV, to home security. Basically, a very wide range of industries, relying, relying on our software for their mission critical, mission critical activities. Our target on this market, the contact center as a software market, is to lead, lead the market and really make a difference to the 4 million people working in the contact center industry across Europe. That's our target. There's some 4 million people working in contact centers, whether it's outsourced or in-house, but there's 4 million people working in this kind of setting in Europe, and we really want to make a difference there. Of course, the 1 billion people they are then serving from these contact centers.
We see our future as being, being the by far the largest player in the European market, and we've set the target of EUR 100 million now as our target with 20% then EBITDA to say that we're doing it efficiently. That's our target. We want to reach out for EUR 100 million in the revenues with a good profitability level of 20+% EBITDA then, then in the in the future. That's the, that's the yardstick that we are racing towards. Going deeper into the actual software, what does our software do? What's the justification for us to win? Our justification to win is that we've got a large range of channels we can bring together. We can take traditional phone calls, SMS, WhatsApp, social media channels, and so on.
We can take all these channels, combine them into one pipeline, our system. We bring it all into one system, where we then provide tools for our customers to interact with these conversations happening with their customers on these channels. A large variety of channels connecting into one system, where our software is then used by our customers to interact with these conversations. This is a great value, it's a large value, and it's a persistent value, even in a transformation, such as now with AI augmenting, the tasks at hand. Bringing all these channels into one system, one harmonized system, and being able to manage and interact with those discussions is the, is our, is our right to win, on the other side. Then just having those discussions with the customers is not enough.
You have to be able to interact with the back-end systems, get the customer data, actually do the changes, and so on. The integration part, then bringing in together. LeadDesk, in essence, is taking conversations with customers on the other side-... The integrations on the other side with the customer data, and then our platform is used by the agents in contact centers, in customer support and sales, to have the actual conversations. That's our place in the, in the, system landscape. This is basically the workhorse. This is the, this is the paper mill of our business. On top of that, our customers, of course, need to optimize their processes, optimize how they interact with their customers, have leadership tools, have engagement tools for the employees, and so on.
What we provide is workforce, workforce engagement, whereby our customers can then really light up the energy in the contact centers and get the best possible performance out of their contact centers through our workforce engagement tools. On the top, that's the fundamental. We have to have this machine working. It's great machine, and it brings a lot of value in itself to our customers, being able to talk with any channel, with the customer, having the integrations to support those discussions, and then on top of that, then the workforce engagement tools, helping out, helping out then in optimizing the workflows. Of course, nowadays, with the changes happening in the market, this is all enhanced with AI.
We've had the Journey for quite a long, long time already, and we've had other data and AI tools, but now the market is clearly in a turmoil, where then there's a lot of changes happening, and we can also bring a lot of value to our customers through enhanced AI with the new capabilities. More about that a bit later on in the call. We are a varied team, and our, our business is also varied, so we have some 60% of our revenues coming from outside of the domestic Finnish market, and we've got offices spread across Europe, and that's where, where our growth also happens. We are growing, growing in Europe, in the continental Europe and Scandinavia, and we are a truly European company, setting us apart from many other, other software companies.
At the same time that we do focus on these geographies, and we have the people to support this, we do have an infrastructure that spans the globe. We've invested a lot into security. ISO 27001, SOC 2 Type 2, very strict certificates. We've done a lot of big work to be able to call ourselves compliant, and we've done this also already for quite a few years. This is clearly something where we can outstanding our investments from quite a bit of the competition we see in Central Europe. Then, of course, that's the background, but then most of you want to hear about the first half of the year. How did that go?
Firstly, we said in the beginning of the year that our strategy for this year would be focusing on organic growth, maintaining and improving profitability, tightening AI integration, then executing on non-organic growth. Now, these are the things that we set as targets for ourselves in the beginning of the year, and also communicated. Where are we here? After the first half, we see on the growth side that we've got a very good SME growth side. SME is performing even a little above our own expectations, while at the same time, we do have struggles in the enterprise side, where the customers, we're not losing any cases, but the customers are not making decisions for any investments. That's the kind of place where we are now at, on that side.
Of course, we are now working on then smaller cases on the enterprise side, then to be able to ramp up at a like a phased approach, where the customer doesn't need to make such big investments to take over, but we can maybe separate into smaller batches, the deployment. Looking at the profitability. Firstly, of course, you all have the revenue and then profitability, and on the revenue side, SME is performing well, but we had hiccups in the enterprise side, taking our revenue to the low end at the moment. At the same time, we have managed to work on our profitability-...
which is of course, a great thing, considering even that, then if revenue has been a little lower, we've still managed to increase our profitability well, making, making really the investment case stronger on the profitability side. We have invested quite a bit on AI, and just to bring in some flavor, I'll go into that, on the next, next then after this. Before that, I just want to comment on the non-organic side. The non-organic market has opened up significantly during this year. The private market, valuations have come to a tolerable level, and we can see the pipeline really picking up in a different way than it did, for example, last year. One example here is the acquisition of Länsilinkki, our longtime partner, in Finland for the telecom, telecoms here.
Without further ado, let's jump into the AI. Here we've asked ourselves that, how can we make contact center work more enjoyable, 2x as efficient, and enable 50% more revenue generation from the contact center-related activities? We've asked ourselves, how do we make it more efficient and enjoyable in the future for all the contact centers across Europe? One specialty here is also that we see that, with the help of good customer service and a great customer experience offered by the contact centers, the contact centers can actually become profit centers in many cases, instead of just being cost centers. It's really a revolutionary endeavor that we are embarking on. Here, looking at then expanding the use of AI.
At LeadDesk, we are broadening now the use of our AI capabilities, as said earlier. We have got already quite a few AI, AI features, for example, the Journey, but as well as then other, other features. We are now really broadening the use of AI, and this is, of course, helped by the large language models that have become available and the arms race between the global colossus on the AI field. We are and have been taking now new technologies into use in the AI field, especially around large language models, so text generation, text understanding, but also then on the audio side and voice side. What we've actually are doing on the voice side is really phenomenal.
What we're doing is that we've got a lot of data and a lot of enthusiastic customers to support us in developing our own fine-tuned models especially for contact center work being done in a contact center setting and with the phone quality audio. We are building our fine-tune models to support better, better AI models for voice recognition, for example, in the Nordic languages, which has been problematic earlier.
To support this, we've also invested in our own infrastructure so that we can run our own fine-tuned models, but also so that our customers, who are many times in industries where data security is of a super high importance, then we can provide the safety that we are running the AI on our own infrastructure instead of then sending it over to somewhere else. We are here in a hybrid model where we have both options available, just to keep in the race the best. As said, this is a massive transformational opportunity, and as you see here, these pictures of the AI slides, they're all generated by Midjourney, just to highlight, like, the capabilities of AI nowadays.
I said, we are not doing this on ourselves only, so we do have, and we've recruited, very knowledgeable, knowledgeable people on the AI field, but we do see ourselves as building on the shoulders of the large multinational giants, and then adapting for the use case in customer service, sales, and especially the European markets and the European languages. We have a, a approach where we, we try to take the best of all the different worlds, and not just rely on a single ecosystem, but, choose the right ecosystem for the task. The increased value we provide our customers is, of course, better customer service, more, more, more of, customized and more-... personal service, better agent experience, so taking away those menial tasks from agents and let them concentrate on the really important things.
Easier reporting, maintenance, and setting up. All this makes into really a great package for customers, where they can easily then take a ready sort of and made solution for the contact center vertical, and start benefiting from AI without a lot of investments on their end. We are the experts in both software and contact centers, and contact center software, of course. Now, with the AI, we can really bring, bring a lot of benefits to this market. As said, we have some 20 pilots already ongoing with new technology enabled in the last 6- 9 months. We are very fast on track. Here are just some of the, some of the things that we are concentrating on at the moment.
The final word here is that our target is to have all our customers benefiting from AI in the next 24 months. That's the, that's the target we are striving towards, that all the 2,000 customers should benefit from AI in the next 24 months, and that's really like a really nice target to strive towards and really motivational to see it through. This was the backdrop on AI. Let's move then to the other big topic of today, so the financial progress. I'll hand it over to our CFO, Kaisa, to shortly introduce herself and then dive into the financials with you. See you in a bit.
Thank you, Olli. Good morning on my behalf as well. My name is Kaisa Rönkkö, and I'm the CFO of LeadDesk. Today I will shortly present you the key figures of the first half of this year. We probably will dive a little bit deeper into the figures in the fireside chat after this presentation. First, let's have a look at the numbers. We generated EUR 14.5 million of revenue during the first half of this year, generated by our roughly 2,000 customers across eight countries. As Olli mentioned earlier, 57% of our revenue comes from outside of Finland. We currently employ 199 person...
employees, and this includes the 14 new LeadDesk members that we added to our personnel from Länsilinkki at the end of the first half. Our annual recurring revenue amounted to EUR 25.6 million, and EBITDA margin was 13%. Now, our most important KPI, financial KPI, is revenue, and we've had some great progress over the years, and this progress has been done both organically and non-organically. During this first half, our growth was purely organic, as the Länsilinkki deal closed at the end of this period, and it's not in the sales figures yet. Our revenue grew by 5.2%, which was quite heavily impacted by the currencies.
Roughly 40% of, of our revenue come from Sweden and Norway, since the currency rates have been rapidly declining, this has had an impact on our revenue figures. Calculating... If we calculate the revenue growth with last year's currencies, the growth would have been 9.2%. Our... most of our, our best growing markets at the moment are Spain, Germany, and Finland. Other important KPIs that we monitor is the annual recurring revenue and profitability, measured as EBITDA margin. ARR grew 10% during this period, and we see that the ARR is, at the moment, the best measure of our sales efficiency, since this figure is not as sensitive to currency fluctuations.
EBITDA grew from 10% to 13%, and in EUR, that's a 35% increase. Now, back to you, Olli.
Thanks, Kaisa. Then looking at the rest of the year, we continue on the same strategy as for the first half. We focus on organic growth, laser focus, especially on the enterprise side. Maintain and improve profitability, very important for us, looking at the profitability, especially in this market. Tightening integration with AI, that's, of course, as, as heard on the previously on the call, a very big topic for us at the moment. Lastly, then, non-organic growth, we see that this is something, we see that we, probably can execute, execute then, later this year on. So these are the same things that we saw in the beginning of the year being important for this year, and we continue on the same track for the second half as well.
The outlook for 2023, we keep the same, so we still expect 6%-14% of annual recurring revenue growth and 11%-16% profitability, as measured by EBITDA. The investment case, we see keeping strong. We have great product leadership, and we see that with the coming of AI, we can invest and get the benefits of AI better than many of the other players on the European market, as they are significantly smaller than us and cannot cannot innovate and move, move on this initiative on the same scale. We see our revenue mix being very positive.
Of course, it means that, then we are also in some areas, we have more risks related to smaller amounts of the revenue, such as we see now in the currencies. On the other hand, if we didn't have the risk of the Swedish and Norwegian kronas, that would mean that then naturally we didn't have the market either. It's a great thing that we can leverage the risk and have it spread, spread across industries and European geographies. Go-to-market model, we've been successful in opening up new markets in Europe, and our ambition is to grow even further. This is the formal part of the earnings call, call. I'd like to thank you for this part now, and we'll continue in a short moment on the fireside chat.
Thank you for participating so far. See you soon.
Welcome to LeadDesk's earnings report and fireside chat, also on my behalf. My name is Henri Palomäki, and I'm from Sijoittaja.fi, which is an information service for private investors. I'm here to ask some questions from Olli and Kaisa, and in case you have any questions about the earnings report for the management, raise your hand in Teams, and later, I will give you turn to ask your questions. Okay. Thanks for the great presentations, first of all. Olli, LeadDesk had quite a solid performance in the first half. As a CEO, how happy you are about the performance of the company overall in the first half?
I'm particularly happy on two fronts. On the SME, we've managed to grow a little bit even above our expectations there. We had a new, new VP of sales started in the SME segment in turn of the year, roughly. He's been able to perform tremendously well, and everything's move moves smoothly. Also, I'm very excited about the AI pilots that we are running, so some 20 pilots running. We started progress in the beginning of the year, and now we are managed to really run solid pilots, and now we have the first prioritizations going on, so turning those pilots into products.
As it is, on the AI market, it's, say, like, super easy to get something done, but it's super hard to get actually a solid product that can be then, like, taken from one customer to the other without a, a project or any, like, external work needed. And we see that we are progressing well there, and I see that we're progressing there well.
Okay, let's talk about IE, AI and SME a bit later, but let's dig into the numbers first. Only the revenue was affected by exchange rates, and it slowed down a bit, the revenue development. On the other hand, your ARR contract base was growing good. In general, how was the performance in revenue-wise?
On the... I think there's good distinction because the revenue is always calculated with the running inter- running exchange rates, whereas for ARR, basically you see the exchange rate changes when there are contract changes. So it's more stable on that front, and that's where you can see the most, most, like of the organic, like how we are performing organically and how sales are, is performing. The revenue development, driven by enterprise sales and, and then also this exchange rates, declining, those have been like the biggest worries on my, my back.
The things that, of course, you can't do anything for the interest rates, but, then, for the enterprise side, we're working hard on, on, mitigating all, all those effects. It's clear that the enterprise side is lagging behind now. On the positive side, then the SME side is little bit at least compensating for it, but...
Your guidance is still same than before, so the guidance for revenue growth is 6%-15%. You're expecting more growth in the, in this second half this year?
Yes. We see, that we can perform into the guidance this year, and it's not any wishful thinking on the, on the exchange rates, turning back. We're always taking ex- exchange rates. I believe and we believe that, the markets are always correct.
Mm.
That means that the current interest rate is then what we are projecting for the rest of the year.
Okay. Let's move to profitability then, and, and to you, Kaisa.
Mm.
Since last year, LeadDesk has been focusing a bit more on profitability, and it has paid off. Last year at this period, you had 9.8% the margin, and now 12.6%.
Mm.
Which were the main causes for improved profitability?
Last year, during the latter part of last year, we started some cost, cost-saving initiatives, and these are now paying off. It's also very typical to our business that the profitability is slightly better during the latter part of the year. Now we expect the profitability to improve towards the end of the year again. The cost savings and the scalability of our operations, of course, we don't need to increase the cost base as much as we get revenue. Scalability is the other factor.
Okay. Then we have the first question, Jaakko Tyrväinen from SEB. You're welcome. A problem with the sound. Technical problems.
Okay, thanks. Now I can unmute myself. Good, thanks. I could just start with the ARR growth of 10% that you have now. Could you talk a bit how that splits between pricing and volumes if you compare the situation a year ago? How that 10% splits between those?
The base, like on the ARR side, so we've executed on price increases. That's quite typical before the summer for us. Our... Like, typically, we try to, of course, account for all the inflation that's happening. Of course, it's impossible to fully account for inflation in the price increases due to contractual problems, of course, market conditions. We always have to plan this on a market-to-market basis as well, and other, other items that then hinder our possibility to reach, reach the inflation levels completely. Then, of course, we try to account for that, but then end up short, short a bit on the... Still looking at clearly higher figures than previous years.
Okay, thanks. Then, then regarding the price hikes before the summer, what has been the take-up on the customer side here? Did you experience any additional churn because of the pricing initiatives you made?
Churn per se was minimal, but what we did see is that the customers, they've optimized their usage already before, but this was really like they really, like, turned that knot. They were really looking at everything they are actually then paying for and trying to-... then decrease the usage if they have like too many licenses, for example, for their current operations or try to save wherever they can. I think this is like not only relating to price increases, this, the cost-saving initiative Kaisa was talking here earlier, I think this is something going on in all the companies, but of course, when you do hike the prices, that gives an added incentive then and motivation to the other side.
Good. Thanks. That's helpful. A bit technical one on, on ARR. Did Länsilinkki have some recurring revenue, and is that booked in your, your year-end, or, or quarter-end ARR?
It's not included. Yeah, what do you say?
It's, like based on the DD, it was not, it was not something that is significant, that we, we are of course then looking at the whole picture of Länsilinkki now in the second half, and there is some recurring revenue that we would account, but it's insignificant in our scale.
All right. Thanks. Then, perhaps, on the strong sales or healthy sales on SME side that you are mentioning, at the same time, the enterprise customers remain cautious. Has there been any changes lately in this enterprise segment activity? In your own analysis, what should they change in order to the enterprise demand to pick up again?
I think that the enterprise side are hesitant. One thing was the financial, financial situation, but I think one that might be also now making them hesitant is, like, the AI possibilities of the future as well. The larger deployments we have done at this time, because of course, it's not everything that we publish. So the, on the larger end, the project have included now AI parts already, like in the, in the mid, mid-size, customers as well. So that might be one thing that when we do have a clear, solid offering to make a difference there, that might also then help in the decision-making in the future. I think the investment budgets for this year have been super tight.
Now that the interest rates have settled quite a bit, it's hopefully easier. Here, one must remember that, like Sweden, for example, their economic situation is quite a bit worse than what we are seeing in Finland, for example. So it's not just like the economic pickup in Europe, but more so like pickup in, for example, Sweden.
Okay, thanks. Make, makes sense. that's all from me, at least for now.
Okay. Thank you, Jaakko. Okay, let's stick into SMEs then. You said that SME side was covering quite good the enterprise segment slowness. Is there some specific sector where you thrived, or, or was it a wide, good performance in that side?
Yeah, we actually managed to secure quite sizable SME customers, while we didn't manage that on the enterprise side, get the largest ones. We did manage to get quite a large Swedish customer that actually has operations also in other countries. Also, one in Germany, which is a significant customer as well in the SME scale, not in the enterprise scale. I see that we had actually quite solid performance across the markets this time, so there was no clear, clear, like, number one. Finland being the largest market, like percentage-wise, grew euro-wise most. Like looking at percentages, it was quite solid performance from all the countries.
Yeah. You also mentioned Spain and Germany in the earnings report.
Yeah.
Any updates on that? Why, why you are succeeding there? Very good.
Yeah. The Spanish market has been very good for us from the beginning. We see even in the... Like, looking at the industry analyst figures, we see that the market is expanding. There's a cloud transformation happening, which is then making it faster. Compared to Nordics, for example, Scandinavia, where our cons- cloud transformation is on the, like, the last legs, then Spain is on the first steps or in the mid-journey kind of phase. That's why Spain is going so well. Germany was helped by this 1 significant case on the SME side, and also then very good, like, solid performance from quite a small team.
This has been like, I can't remember when Germany has behaved so well, but it's, it's going very well at the moment there.
Okay. Thanks. Then we have, next question, Frans-Mikael Rostedt from Inderes.
Frans-Mikael has written it in chat. There are two questions. The first question is: Your gross margins improved quite clearly compared to last year. Could you describe the main drivers behind this improvement?
Basically, working on our cost base, we've been working quite a bit on our cost base. And also if you look at like, if you look at how our employee, the cost of employment has stayed stable, while we have then at the same time increased our revenue. Basically efficiency gains and synergies are the key, and that's, that's where it comes from. Working, working quite a bit on that.
Then the second question is, of course, it's very early still, but could you describe the gross profit profile of your new AI products?
At the moment, they, we basically want to get good, good reception from customers and really fine-tune those before then monetizing largely. Looking at the different products, this is one of the reasons why we also have invested in our own infrastructure. As for example, the amount of audio and voice data we have in our systems in different languages is phenomenal. There's the 300 million calls handled every year kind of thing. It's a lot of audio.
In no way could we find a way where we could actually then like utilize only externals here, but we must build our own efficient models, fine-tune to our business case in order for us to then bring down the cost down enough for the required quality, and then provide, provide that to our customers with a margin justifying also all the investments we have done as well. It's something that we are looking at, and we're not like going all in on any one ecosystem as we see that there's there's not that much profit margins to be made with that strategy.
Okay. Let's stick still a bit in the AI. You have now-- You said that 20 customers are piloting your new AI product or AI tool. What has been the feedback for that for now?
Yeah, there are quite a few, like, different use cases. One, one of them is with reporting. Of course, there's a lot of data generated in a contact center, and with this tool, you can have AI help you figure out what's important and build, build on that data. That's been one of the, one of the, like most successful ones for now, like in the name of like how many customers are using. We have voice recognition-based systems, so we are piloting keyword detection, automatic quality assurance. We have run tests on semantic analysis, and agent assistance. That's working on the voice side. Then, automatic message generation.
Basically, for example, for customers doing a lot of email on our system, we have now a few customers piloting that they can actually generate a reply to the customer's email straight away for the agent then to approve and modify if they wish. These are the kind of things that we can already now, like, provide and have pilots on. And on top of this, of course, then we have other, other things that we're working on, but those will then form into pilots after we get now these productized and...
Okay. Let's then change to. Okay, there's one question from Antti Luiro.
Yeah, Antti Luiro has written them in chat. There are two questions. It's the first is: Your June recurring revenue grew, grew clearly faster than overall revenue in H1. As for other revenue items, what was the slower overall growth more about project revenue or usage-based teleservices?
If we look at the when we're talking about enterprise, when we talk about enterprise slowdown, it's not just the licenses, which I think the licenses grew by eight. The recurring license or the recurring invoice items grew 8 point something % to my recollection. The thing is that with enterprise, the services are a much bigger part of the whole. As we didn't execute on new enterprise sales, but we did execute on SME sales, for example, that meant that our professional services revenue is very much behind the budgets.
nd then the other part is some on the telephony side as well, because it's the same kind of dynamics a bit there, not to the same extent, but anyways, but it's... That, that is the difficult part about enterprise. It's not just the licenses, but it's the services. Before we had the enterprise segment, years ago, I remember our, like, share of revenue for services being somewhere like 5%, plus, minus. After we embarked on the enterprise side, it grew to some 10%, and that was all, like, then from the enterprise side pretty much. This is just the, like, the effect that things have on the enterprise side
Okay. Thank you.
Very well, actually, I took a note of that as well myself.
There's a second question from Antti, which is, "In H1, you were behind your guided revenue growth for full year at 5% versus full year guidance of 6%-14%. In what scenario do you see the upper range of 14% as realistic given your H1 performance?
The upper range, would, I, I think, would require some M&A, smaller M&A, to be viable. On the other hand, of course, then a rebound of the exchange rates, but we don't look at the interest rates when we think about, sorry, exchange rates. We don't make predictions on the exchange rates, moving anywhere, when we look at the, our guidance. We always take, like, the best, best, prediction of the rest of the year for the exchange rate is today, and then we look. Executing on the higher end, would have, would mean then, smaller, smaller M&A, to augment our organic growth.
Okay, let's continue with them today then. Last time, half a year ago, we were sitting here, and we were waiting and expecting something to happen in this first half, and we put some pressure also on Paul, and now, in the last days of June, you published this news about Länsilinkki. Revenue-wise, it's small purchase. Can you share the rationalities behind the purchase and what does it bring to LeadDesk?
Yes, Länsilinkki has been a long-time partner for us, providing for quite a bit of the telephony services we provide in Finland. Länsilinkki's history is as one of the large operators in Finland, or the interconnect operator for the Finnet Group back in the day. We see them as having, like, a great technology. They have a great background and great technology, especially on the telephony side. As some 20% or even, like, 22% of our revenue is connected to telephony, having more opportunities and really working on the core telephony, like with the core telephony operators, with direct interconnects to everybody, is a key to providing quality service.
We see, like, working more tightly with Länsilinkki will enable us then to be more competitive, especially now first in the Finnish market, but then taking these learnings also to the other markets later on through either acquisitions or through organic growth is then a great great possibility for us. We see ourselves as being, well, quite a large operator now in the Finnish scale, with all the all the traffic we're operating. We published some numbers as well. It was, like, over four hun- what was it?
I don't remember.
400 million minutes or something like that.
Yeah, it was a huge figure.
A huge number of.
Yeah
... telephony that we together transport every year.
Yeah. What about the future in M&A side then? Is this just the beginning, and can we, can we expect something more to happen, and how does the market look in general at the moment?
The market is still completely different from half a year ago, from a year ago. Before this, GetJenny was our last, last acquisition, and that was two years previous.
Mm.
I think it was also June, but two years earlier that we then acquired GetJenny. This two years, we saw that the market was just not like, in line with our expectations on M&A targets. Now, now things have changed a lot, and now we see the private market and very good companies being open to discussions, and we are having, having many, many discussions, which seem to be quite fruitful. We, we are positive on that side, but of course, it's always like, we have very strict, like, levels that we, we want to go through, and we want to be really diligent in, in this. Let's see. I'm very hopeful for the rest of the year.
Now that we have separated the roles of the CFO and the corporate development, we also can put more focus into building the pipeline.
Yeah, exactly. Good. Then there's another question from Jaakko.
Yes, thank you. Could continue on, on, on AI, where you target that all your customers should use at least 1 AI solution by 25. How should we think the commercial, commercial side of this? How much more you are able to charge with the, with the AI expansion, with your product portfolio? So, so any, any, any thoughts on the kind of a revenue per user or, or, or, or metric like that?
We, at the moment, we are in the productization phase of now the first, first parts of the products, and one of them is a key question of pricing, which is I, I now asked the question in quite a few tables with people from different SaaS companies, and nobody yet has a clear, like, answer on how will these be priced. We see that they are not something to give out for free, for certain, but the pricing models, and the ranges are still a bit open, and of course, depending on the value you provide the customer. Looking at, like, the guidance on getting to EUR 100 million, how do we get to EUR 100 million? I see that AI supports that in two ways.
One is that it can generate a lot more per user in the long run when we are able to make an agent, a super agent, that double double the efficiency. When we can make them twice as efficient, then we can, of course, charge for that value. The other thing is then taking over the market from the players who are not able to execute on AI effectively. That I see in the short term will be the solution, then in the midterm, charging for those features. It's a twofold as the market is moving so fast.
Good, thanks. Back to, back to Länsilinkki perhaps. You provide some sales guidance, for, for, for the full year, 2023 impact there. How fast do you expect the profit- profitability to be turned around in, in Länsilinkki? Will it still burn money in, in Q4, or what should we think about it?
Well, as of course, it's, we, as, as you can read in the newspapers, we act quite fast on the getting the profitability to the expected level. We see that there will be... The profitability will not be at the expected level until start of next year, but it won't be in the Q4, it won't be impacting our profitability significantly.
Oh, and less, of course, when we go further, further down next year.
Some effect still in Q4, as of course, there's, oh, these are not fast processes. But then, looking at the beginning of next year, we should be in the shape where we expect ourselves to be.
Good. Good. A final, bit technical one. Did you have some M&A-related cost in, in the second quarter regarding Länsilinkki, and was that meaningful?
No. Nothing, nothing meaningful, no. Not that wouldn't have been taken into account in the, in the goodwill. Not on the cost side.
All right. Thanks. All from my side.
Okay, and then there's one more question, from Sven. This is the last one.
Can you hear me?
Yes.
Okay, good. Apologies, I'm new to LeadDesk, so I have a pretty basic question on gross profit margins and why they're actually quite low for a software company?
Oh, so our gross profit is-
From a bit over 70%, and, it's a bit lower because we have the teleoperator margin there, which is, lower than, our usual, software margins.
What's a teleoperator business?
We provide contact center software, and still some 80% of all contact center work is done over telephony. When you operate in the telephony market, it's like you have to have interconnects, and you have to actually, if somebody, like, if you, if you have your mobile and you call out to another operator, your operator has to actually pay per minute to the other operator, and those kind of costs then. Of course, we are in the wholesale business. Our customers use a lot of telephony. That means that the margins can't be too high.
Okay. You mentioned enterprise versus SME, and you're doing well in, in the SME part. Who are you coming up against in terms of competition and enterprise versus SME, and what's the split roughly for you?
If we look at the competition on the SME side, it's mostly small local competition. Now there's been consolidation on the market, so they might be under an umbrella of some other umbrella. Basically, it's the local software. Most typically, they haven't been able to expand across geographies. We don't really see good examples of that apart from ourselves working on the SME segment, so being able to go to and open up other countries. That's where we, we have excelled in the SME market clearly over, over all the competition there.
The larger players that work on the enterprise market, which are quite a few, are U.S.-based, and there are a few traditional players also in Europe, are then separate and typically don't offer to the SME segment at all, as their offering is not competitive in that market. They are typically not cloud-native and cannot operate as efficiently as we can.
The split?
The split, you can get some kind of an idea on the split based on our acquisitions. We've acquired, acquired, acquired quite a bit of the enterprise business to start it off, and then, we've grown on that. I think Inderes, who also publishes the, the report in English, has, has then, calculated, the split.
Okay. Thank you.
Thank you. Now we are running out of time. Thanks for the great discussion. Thanks for the audience for the great questions. Is there still some words you want to add in the end?
It was great, having you all, listening in. Great to get this chance to open up our first half and, really expecting towards the second half now and, working hard on bringing the good results to you.
Thank you on my behalf as well.
Yeah, thank you from my side also. The recording will be published in the website later. Have a wonderful day.
Thanks, everybody.