Warm welcome to our fourth quarter presentation today. I will, nice and elegant, jump over the disclaimer and the formal-looking statement. Today's presenter is Christoffer Mathiesen, our CFO in PatientSky, and myself, Kristian Ikast, CEO of PatientSky Group. Today, we will give a view how we work to our long-term vision of changing lives. The agenda of today is consisting of five different points. We'll first of all give a highlight into the fourth quarter, then we will discuss a bit more into the PatientSky business, both how is it performing and what is it we are doing in the organization. Then Christoffer Mathiesen will go through our finances in depth and give a highlight on how we are performing and how our finances look. Then we'll have a Q&A session, and then lastly, we will have closing remarks.
First of all, I'm extremely happy to say that we in the first quarter ended up reaching our upper end of our guidance. We had a revenue guidance of NOK 205 million-NOK 210 million. We realized just above NOK 210 million, so we are extremely positive, happy about that. We also had our adjusted EBITDA in line with our guidance of just above 20%, so also delivering on that point. We have a record annual recurring revenue in December of NOK 198 million. Overall, our commercial business ended the year in a really good state. Also on the organizational part, we saw good changes coming in. I'm very happy to say, and don't say that only because he's here, Christoffer, I'm really happy to welcome him to the team as our CFO.
Also happy to inform that we have appointed a new CCO for our VAS organization, Nicolai Ingemann-Paulsen. He started here start of January. We have also signed a new talent hub in Copenhagen with the capacity of actually having 70 employees there, so we can have more brilliant minds in the organization on our journey to create an international platform company. We'll move in there in May 2022. What is PatientSky? This is both for some of our new investors, but definitely also just so we're all aligned with some of our existing investors. We are a platform company. We are a platform company working on open, scalable, low-code, which allows partners to build applications and solutions on top of our platform. We also have a SaaS business which is built on top of our platform.
It's the leading EHR provider in Norway with 2,400 clinics and an annual recurring revenue of NOK 194 million. Our SaaS business is delivering a recurring revenue growth of 19% annualized and an EBITDA margin of 31%. We are close to 200 full-time employees in the organization now. We have a headquarters here in Oslo. We have hired 17 new faces since our last update. Q4 was very positive for us. We ended up with NOK 55.3 million, which is a 7% growth compared to third quarter of 2021. We see a healthy and stable growth in our cloud revenue in fourth quarter, annualized 57%.
We see the new business development also taking good steps, so we have actually added NOK 800,000 monthly recurring revenue during the fourth quarter, sorry. We at the same time see great traction on our R&D and product development in our PaaS and VAS part of organization. We're really happy to see how our platform has delivered stable through the epidemic with our partners handling testing, et cetera. We are now preparing the organization full on to the international expansion on the platform. This slide we also showed the last time we had a presentation, but just to remind ourselves what is it actually we have. Two out of our four business units are the platform and the software, SaaS part, which is the majority of organization. Our platform is in investment phase.
We are scaling up organization, scaling up technical competencies in the organization and on the platform. Typical customers here are software companies, mobile health, telehealth, devices, et cetera. We work with a subscription and consumption model. The platform consists of platform services, platform tools, frameworks, and then infrastructure as a service. We are right now using all our energy in scaling the platform to make it international onboardable. It's the CX experience we are investing heavy in also. At the same time, we have the SaaS company, which is migrating our acquired on-prem customers over to our cloud solution. We are focusing on growth, and we are focused on increasing profitability. Here is the practitioners we are focusing on with EHR modules, journal, et cetera. We have add-on video, VoIP, and other communications that we can also put into the clinics.
Recurring and licenses here. We are continuing to integrate the acquired companies we have. We are continuing to migrate from on-prem to cloud, and we are also now looking into different verticals and new sectors. Our Norwegian business is ending 2021 around NOK 206 million revenue and with an EBITDA above 45%. What is our platform? Showed this one the last time also. Our platform is a tailor-made boilerplate for the healthcare applications. We work low-code, easy to use. We have, as also communicated earlier, just above 140 microservices. We have added around 60 over the last year. It's open to everyone, reusable and global. No country specific. We'll do the localization on top of the platform. We have international open standards.
We will have our own hosting setup, which is all data hosted in the EU. What is it we actually offer our partners here? We are actually offering something both to the enterprise customer, to the scale-up customer, but definitely also to the startup customer, where we have reduced R&D costs, we have increased traffic, we have shorter time to market, we have easier to scale international as we work with international standards. We continue to innovate in our service offering and basically, we are offering 85% of what we use as a vendor on our platform.
The way we actually look at it, we have the infrastructure as a service in the bottom, then we have the tailor-made boilerplate which is consisting of services, tools and frameworks, and on top of that, we are building healthcare-specific applications, easy to use EHR solutions. Here, our VAS business is also adding international modules that can use the cross-border. Yeah. What is our commercial plan for our PaaS and VAS to combine the two? We still have 50 partners. We have communicated earlier, we're not onboarding partners presently, but we still have 50 on board. We are building international commercial and technical competences in Finland, Denmark and Norway. We are focusing on delivering our long-term strategy of changing lives, but doing it internationally. We are still looking into a huge addressable market.
We're using an easy, accessible platform, ready to use, where we create easy sign-up of services and standard modules, and easy access and easy to market for the partners. We actually are coming out with our European platform. We have the Norway region platform up and running. We have also Finnish platform up and running. We're coming out with the European platform here in the first half of 2022. We have done the investments and are building it now. A key criteria is delivering a future-proof and scalable product. Focus is continuously improving our product catalog and easy onboarding and communication, commercial opportunities. We have ongoing discussions with around 50 partners still. We are in very close discussions with the concrete partners, where we are waiting for the commercialization of the platform.
We still expect to see the first contract announced here in 2022, and we really expect to see revenue coming in in 2023. That was the core part of our platform, our international platform. We also have the SaaS business, as earlier communicated. Our SaaS business consists of four overall product groups. The PatientSky Clinic, there's the Hove Total Cloud, and the System X on-prem. We have Infodoc with Infodoc Sky and Infodoc on-prem. We have ProMed. We have announced the end of life on ProMed, as we communicated earlier. That will be the final execution. This will be part of in Q1 here. That means that we are now streamlining our product offer. We are moving the customers from the ProMed over to our PatientSky Clinic cloud products.
We are done with integrating the different companies. We are now continuing to leverage on our proven toolkit of migrations. We educate the on-prem customers. We are giving favorable prices to the cloud solutions. We are introducing cloud add-on to on-prem solutions. Because we are now closing down the ProMed business and focusing on doing the PatientSky Clinic and the developing additional products to the cloud solutions we have, we expect to see an accelerated new business coming in here in the first quarter on therapist market and for second quarter and third quarter on the GP market. Long-term, our focus is still everybody to the cloud on the PatientSky Clinic, Hove and Infodoc Sky.
This next slide is to show a bit how we are actually addressing the market in the Norwegian if you wanna do pace. We wanna have everybody to the cloud. To do that in a high pace, we need to acquire on-prem solutions. We can also see that our peers is doing the same strategy. I will not mention the peers we're looking at. We can see our peers doing the same strategy. They are out identifying on-prem targets. They are doing negotiations, acquisitions, then working on the PMI, and then starting the migrations and end of that journey, you'll end up having full focus on your business. What we can actually see is that we on-prem, sorry, on cloud, on the clinics, the therapists, we have PatientSky Clinic, which has been a cloud product from the start.
If we have only focused on doing organic growth, we firmly believe that it would take us 20 years to come to the position we have in the market today. That's why we have done acquisitions. We did the first acquisition of ProMed back in 2017. We have used energy on acquiring them, integrating them, and now we're doing the finalizations, the migration. From after Q1, we can have full focus on our clinic product, only looking for new business in the therapist market. We can also see our Hove Total, where we have System X being the on-prem solution. We are done with the PMI. It's fully integrated in organization. We are now fully focusing on doing migration and obviously also looking into new business. Our last acquisition is Infodoc that came in in 2022.
They are still doing the finalizing of the PMI. We are now, as we speak, on unified financial systems, sales system, customer systems, and we have also one unified organization across the Norwegian team. The leadership team in Norway actually consists of what you call old Infodoc people and PatientSky people, so we are fully integrated as one company today. What we really see is that you go through the three different journeys when you acquire on-prem. You go through, of course, the acquisition, identifying all the synergies. You go through the M&A and the PMI, which is extremely stressful for an organization. When you get into the migration part, that's where you put the stress on the customers. You will see you have elevated churn.
You will also see that there will be elevated cost as you lose focus on other things in the organization. We see ourselves being a lot further on that journey than our peers are. Many of them are not even started the migration phase yet. As we believe firmly the cloud solutions are the future, so they will have to go through the same process. We now have a module where we see elevated churn, but we don't see an elevated churn higher than what we expect, and we have a controlled process of it now. This is definitely not an easy journey, and we are also aware of that. We are focusing on building an international company, platform company. At the same time, we're having full focus on important market as Norway.
We have also, as we communicated the last three times, we have divided organization up into business units. We have the PaaS, which is the platform business unit. You can also see compared to last time, we have added a lot of people there. That's majority of the people coming in is to the PaaS organization. We have the VAS organization, which is building on top of the platform organization. We have the SaaS organization, which is pretty much flat compared to last time. We are now focusing on actually building it as completely standalone business units with own financial, own P&L, own ownership with an SLA agreement between the different business units. We actually keep a real true arm's length principle. This gives us the flexibility to pursue different strategic alternatives, but it also ensures focus within the business units.
We keep developing our Norwegian business at the same time as we are focusing on the remaining organization on international growth. Our VAS is adding value-added services on top of our platform, so also extremely important so that we start developing something on top of our platform we can distribute across borders. What it really gives us is a full focus on driving the SaaS business in Norway, but definitely also scaling our organization to be international. It also, as stated in the Q2 report announcement, gives us the chance to be opportunistic on the SaaS and mobile app part of our business.
We have full focus on developing international platform company. Yes. I'll hand it over to Christoffer, who can then go in depth with the performance and the financial figures.
Thank you, Kristian. Happy to present the fourth quarter figures, and hopefully also show you some progress on the reporting goals we set out in the third quarter. Basically, fourth quarter was a good financial quarter for PatientSky with a record high revenue of NOK 55 million. That is 36% up from last year and 77% up from the last quarter. Bringing the total revenue for the year, as Kristian has mentioned, just above high end of guidance of NOK 210 million. We are especially happy about this as we are going through the migration phase, as Kristian mentioned, with somewhat elevated churn. The adjusted EBITDA came in at NOK 7.7 million or 14%, bringing the total for the year to NOK 20.3 million, which is also in line with the guidance of 20%.
On a more detailed level, gross margins were in line with previous quarters. Salaries up around NOK 2 million, other OpEx down around NOK 2 million. Those two OpEx elements, basically a neutral effect from last quarter. Adjusted EBITDA, less capitalized costs from the P&L, was negative minus NOK 21.4 million. The quarter also contained some large one-offs, in total NOK 8.1 million, mostly related to provisions and expenses relating to exit agreement with former employees, but also some extraordinary large items on project costs. We also had, or we have, a negative NOK 1.4 million non-cash revenue item, which we'll book in the fourth quarter and thus reduce that 55 number with 1.4 million. That relates to an old claim or bad debt, if you want, from 2019. There are no effect on adjusted EBITDA.
Looking more into the revenue growth, good contribution from all presented revenue streams, and especially cloud with a tick of NOK 2 million or 57% annualized growth in the fourth quarter. Also on-prem contributed positively and blended annualized growth in the quarter for our recurring revenue streams was 19%. If we look more into the different business units, it's pretty evident that our financials are heavily influenced by the investments we're doing in the platform and by the other services. The SaaS business is producing good numbers also in the fourth quarter. You can see that we have around 45% EBITDA margin, or to be exact, 44% adjusted EBITDA margin in the quarter, with a cash flow margin of 25%. For the total year, the same numbers are 47% and 31% respectively.
We still believe there is room for improvement in the Norwegian business, both on top line growth and margins. The other category is basically group functions, platform, and value-added services business unit. As expected, we are investing heavily in that, bringing the total figures down. Please also bear in mind that all these figures are presented on a management account basis, preliminary figures, and also pre any potential SLA agreements between the different business units. Also worth noticing is the green bubbles. In the fourth quarter, we invested around NOK 30 million or NOK 11 million in the new data center and with some additional fixed assets as well, close to NOK 13 million in fixed assets. This was an investment planned for next year, but due to favorable terms, we were able to do that in the fourth quarter.
The SaaS business has been performing well over time, and if you look very high level on per quarter in 2021, we see that the EBITDA margins are around 45%-50%, and the CapEx, or sorry, cash flow margins are around 30%. In the fourth quarter, we have some one-off CapEx elements relating to the movement to the new headquarters and integration of ERP and CRM systems, approximately NOK 1 million, which brings the fourth quarter number a bit down, but also year-end bonuses, which influences the figures negatively on cash flow and margins. If we turn our focus towards more on the KPI side of things, we have included additional KPIs as promised on number of licenses. Before we dig into that, I'll just show you the same picture as we did last time on number of clinics.
Cloud had a good development in the quarter with an increase of 34 clinics net. As in the previous quarters in 2021, it's migrations that are the big source of the movement in both cloud and on-prem. We are expecting higher new sales activity and numbers going forward and we're reverting back to churn. On-prem is down by 39 clinics. Also note, we have done a cleanup of the on-prem portfolio, reducing that with 107 clinics, basically removing what you can consider dead licenses that either didn't fit the definition which set in the third quarter, or were registered in different on-prem systems wrongly due to human errors. Basically a reduction of 7% of the on-prem clinic portfolio. This has no impact on revenues.
If we look at number of licenses, which as a KPI is one of the most important revenue drivers we have, we can see that cloud is adding around 850 licenses in 2021, not surprisingly due to the migration we're doing. The share is now 32% compared to 24% in the first quarter. This is not only migrations, but all new sales we do are also on cloud. In addition, and not a small effect either, is actually portfolio growth. Our clinics are growing, adding more and more licenses. On on-prem, it's a decrease around 1,000. Higher churn and also migration, biggest effects. There's one thing that's really important to note, and that is when we migrate from the blue on-prem over to the green cloud, it's not a one-to-one ratio in number of licenses.
The costs on on-prem services charge for support personnel at the clinics, while our cloud services do not. That's for free. We get that back with higher revenue on the licenses on cloud. If we look at the average price per license, we can see that through the year, blended, it's up 15% from first quarter. That obviously is a cloud slash on-prem effect. It's also a sound development within both, each of cloud and on-prem. As you can see, we have grown the average license price from approximately NOK 1,700 on cloud to now NOK 1,800. For on-prem, 1,000 to just north of 1,100. In this, you have price movements or not price movements, but price increases for on-prem. You have customer mix.
Obviously also additional revenue beyond ordinary licenses, add-ons, variable revenue that influences these figures. You can see very clearly, as I stated on the previous slide, for example, in the first quarter, the price per license for cloud is around 70% higher than for on-prem. Okay, if we look at churn, you can see that, on-prem, we lost 0.6% of our clinics on an annualized basis in the fourth quarter, which is artificially low. The reason for it is that many of our on-prem customers are on six-month contracts, and we measure churn on the date they stop paying, not when we see the termination. It's the same count, the same definition as we do when we count clinics and licenses. We received more terminations in the fourth quarter, and we also see terminations in the first quarter.
We expect churn numbers for on-prem to increase in the first quarter. Basically, to get a more accurate picture, it would be more correct to look at on-prem churn over two quarters. On cloud, on the other hand, we lost 3% annualized on the volume side, but only 0.5% on revenues. If we look at the total year, we have on average around 3% volume churn and between 1.8%-1.2% revenue churn. That's annualized figures, and we're quite happy with that when we are in the phase we are. Before I give the word to you, Kristian, just rounding it up with the MRR development through the year. You can see that, as Kristian mentioned, we added NOK 800K in MRR from September to December.
The annualized growth on cloud is 40% and 23% blended. Around 10% of the MRR we present is variable components like notifications. We had a natural dip in July, as we mentioned last time. Please bear in mind, all these figures are excluding ProMed, which are now closing down. Okay. That's all from me, Kristian. Will you round it off?
Yes, I will. Thank you, Christoffer. Just before we go to the Q&A session, just a couple of highlights post the fourth quarter. We see a continued healthy cloud growth. We also see the new sales in cloud is having a good momentum also into the new year. We are very happy to keep strengthening our Norwegian organization as a standalone business unit with adding Siv Jensen to the board in SaaS Norway business. Our platform is also progressing according to plan, including new employees and technical development. Fresh off the press, I'm also very happy to announce that we have just signed our Chief People and Culture Officer, which is now completing our C-level management. That was all we had from the first go here. We'll go to the Q&A session. Yeah. Okay. Ida, would you...
Christoffer, I don't know. Okay. Let me just check.
I think we can handle it.
Yes, let's do that.
Okay
Yeah
I think, Kristian Ikast, the first question is, for you.
Yeah.
You stated that the platform is ready in Norway and Finland. What is remaining in order to onboard the first platform partners in second half?
It's a really good question. I think just to be very sharp on, we are working on a European platform now, and it's the onboarding and the readiness of actually making it international scalable and onboarding that we are waiting on. The Norwegian and the Finnish platform is the one we have done some time ago. Now we are focused on making a European platform. That's why you can't connect the two of them, one to one. Hope that answers the question.
Yeah. The next one, I believe we might, both of us might, be able to answer. How high churn were your expectations? How high was it actually? Just I can start off.
Yeah
Please fill in. I think the actual churn is what we have presented, right, with the definition we have when they stop paying. We see that we have received more churn than the numbers show now. I would expect an on-prem churn for the first quarter around 6%-10% or something.
Yeah.
The blended would be, let's say 3%-4% over the two quarters. That's my guesstimate.
I would say that that's very much in line with what we actually also did expect. We have also had communication with the partners ongoing, so it is expected. What we can see is we are having a little positive upside compared to expected on the revenue side. We're actually expecting a bit higher churn on that part, on the prem part. I think that covers it, right?
Yeah. Any updates on the potential divestment on the SaaS business?
No. We can say so much. We have been clear on that the whole way through. We are optimistic on the SaaS business in Norway. We are now splitting out the units in different legal entities. That is ready. We can definitely also say there are people asking into our Norwegian business, but there are no concrete updates on that one.
Okay, next question. How much do you expect that the ProMed end of life to impact the first quarter revenues? I'm not sure if you have the exact number, Adam, which is a colleague we have with us, but I think we said in the third quarter that the remaining MRR from ProMed was around NOK 450,000, if I remember correctly. We expect to lose most of that-
Yeah
Over the next two quarters. Just to give you a ballpark figure on that. What ARR are you expecting for the end of 2022? We will have to revert back to the market with any potential guidance for this year. For now, we have guided on more operational, soft factors, on the mix of migrations versus new sales, and also around the platform.
Yes.
An exact number, we have to revert back to if we want to share it. Okay. Could you elaborate on the EU platform investment in the quarter? That's the data center.
Yeah, I think that's very easy. We took the data center earlier, and pretty much the basics very easy. We did get a good offer to do it four months earlier, so we did the investment four months earlier than we do it. We are still working on delivering the hosting set up ready here in the first half this year, and it's going according to plan. It's just we moved cost in a bit earlier to actually do a substantial saving. It's very simple.
Could you comment on the net working capital impact on cash flow in the quarter? Yes, I can do that. The main change is on the receivables side. We have a cycle during the year where we issue invoices to our clients on the six-month contracts in fourth quarter, some in the first quarter, but it's basically every half year or end heavy, to say it like that. In fourth quarter and third quarter, we will have an increase in receivables on our balance sheets. Just to explain, one of the effects, we saw that already in January. Our cash grew again from what we report on the balance sheet today. They have until into January and February to pay us.
Yes.
Higher cash burn than I expected in fourth quarter. How do you view your future financing need? We are operating under a business plan where we are fully financed through the trough. That obviously is no guarantee. A lot of things can happen. We have a buffer on that business plan and are comfortable with that as we stand. If the SaaS business suddenly starts performing worse or we have further delays on the platform, those kind of things, then we have no signals that it will, then it might be a different situation.
I think it's important to say that we are seeing that we have a buffer on it, and that's also why we have such a high focus on the Norwegian business performance. Because the better we perform there, of course, the more safe we are on the ground. The R&D phase is also going according to plan as we speak now.
Yeah. Last question: how much cash do you have for acquisitions, and how much do you want to raise as new capital? I think, in general, I think we're done with acquisitions for now. We might reconsider down the line, but that's a few years from now. More related to the platform part, we have bought three companies, and we know the pain of migrating those companies together. I think we have no plans of doing more M&A.
I think maybe just to add on that one.
Yeah.
I think it's important to say, as we are focusing on being an international platform company, we are much more looking at external partners that work across borders and help other partners across borders than actually going out and doing acquisitions. Obviously, if there comes some cash events in our organization, over time, we will use that to integrate new revenue into the organization, obviously. Right now, we're not looking actively into any acquisitions. We are focusing on developing international platform.
To the last point of the question, as of now, we have no plans of raising more capital, where we stand. Yeah, I think that's the questions we will cover now. No more. Will you round it off.
Yep
Last slide?
Definitely. I will. Thank you very much for your questions. Really appreciate it, and also look forward to having some individual sessions with many of you over the next days, and always welcome others to have these sessions. Just to round up, we are continuing to ramp up our platform organization, technology, and the pipeline. We are increasing focus on new sales in our SaaS business. We are expecting a healthy cloud growth in to continue. We, as Christoffer has mentioned, know that there will be an elevated churn in Q1, completely planned. Our platform partner agreements, we still do expect here in the second half of 2022, in the later part of 2022, I would say. Our next presentation will be the 20th of May, where we'll go through the first quarter of 2022.
Thank you very much for joining in on this, web meeting, and look forward to seeing many of you over the next days. Have a good day.