Good morning, and welcome to the Third Quarterly Presentation for PatientSky Group. Happy to have you here, all of you. I will go fast over the disclaimer and forward-looking statement and introduce the three persons we'll have on stage today. We'll have Stian Husvaeg, who has been our interim CFO since January. In this connection, I'd also like to thank Stian a lot for his huge effort at PatientSky. He's been instrumental in setting up the ERP, making sure that we had our finance system ready for the full scaling internationalization and working in the four business units we have set ourself up to. At the same time, he's also been a key part of us being able to attract the right CFO for the future, having a permanent CFO, having a strong foundation to work from.
Here I'm very happy to introduce Christoffer. He will introduce himself a bit more later on when he takes the financial numbers. I'm very happy to have Christoffer on board. He comes with a very strong background in investment banking. He has a strong professional experience, and at the same time, he's a perfect personality to fit into the PatientSky family. Myself, I'm Kristian Ikast. I've been part of the PatientSky journey a bit over a year. I was a board member until three months ago, where I took over as CEO. Let's go to agenda. The agenda of today is that we will go through some Q3 highlights. We will dig down a bit more to the PatientSky business. Obviously we go through the financial numbers.
We'll have a question and answer session, and then we'll end up with the closing remarks. Please feel free to shoot your questions during the presentation, then we'll collect them up, and we'll answer them in the Q&A session. The main events that happened here in the third quarter is, we appointed a new CEO. We used time on that in our Q2 presentation, so I'll not use more time on that right now. We have also appointed a permanent MD for our Norwegian SaaS business, Kjell Magne Solli. I'm very happy to have Kjell on board, who comes with a strong leadership experience to actually scale up the business we have in SaaS Norway. At the same time, I also like to have a big thanks to Bjarte Ottesen, who stepped up, took the interim MD role for PatientSky Group SaaS Norway.
Bjarke has been instrumental with actually incorporating the Infodoc business into the PatientSky family. Bjarke has also been a key player of setting up the leadership organization of SaaS Norway, which consists of both Infodoc and PatientSky old members. So we have a good team to build on. Then I'm sure that Kjell will build on this for going forward. On top of that, we have announced end of life on ProMed. We'll come into that a bit more in details, where we have the cloud migration will be done in first quarter of 2022. We have accelerated the reorganization into the planned business unit, as we also announced during our Q2 presentation we would. We have some updates on the organization also coming through this presentation.
Lastly, we have actually signed a new headquarters here in Oslo, so we can actually build on the organization we have a home for PatientSky and attract the best minds for the future. Let me just put a couple of words on PatientSky one more time. What is it PatientSky is? We are a platform company, as we have also gone in depth details with in our Q2 presentation. We are open, scalable, low-code platform. We also do have a SaaS business, which is the leading cloud-based EHR provider in Norway with 2,500 clinics and annual recurring revenue around NOK 191 million. The SaaS business delivers a recurring growth around 17% and has a 30% EBITDA CapEx margin.
We are 180 full-time employees in PatientSky at current time, and we have a headquarters here in Oslo. Our mission is still the same as we stated during our Q2 and has been the whole way through, to be a revolutionary and innovative e-health platform. We wanna change lives, and the best way for changing life as our vision is to actually go out and help the whole industry at improving everything around being the professionals. We had discussed many times that we wanted to be sharp on actually explaining our business. We actually tried to give a very short, simplified snapshot of our current business model.
One of the challenges we had is when you look at the overall P&L of PatientSky, it can be quite hard to actually grasp what we are and what we are not. Let me just take very shortly into two main part of PatientSky. We have the platform, which is the core part which we built the whole company on, but we also have the SaaS part, which is the revenue part, revenue-generating part. The phase we are in in the SaaS business is migration, growth, and margin improvements. At the same time, we have a platform which we are investing heavily in to scale up internationally. That actually means that we have a NOK 200 million SaaS business in Norway, which has EBITDA margin above 40%.
When you then add a heavy investment into our platform, around NOK 25 million per quarter as planned, it gives a very weird picture when you look into the overall P&L. Later on, Christoffer, he will actually come into the details of showing how is exactly our SaaS business P&L. To add to the mix of where the confusion could have been coming from is that we also have very different kind of customers we are addressing. In the SaaS business, we are addressing the private GP, physicians, chiropractors, and psychotherapists, whereas our platform business is addressing the software companies, SaaS partners like our own SaaS business in Norway, system integrators, service providers. Health information exchange companies and vendor neutral archive companies, IoT companies, et cetera, et cetera.
That obviously also makes that we have one common strategy to be an international platform company, but we actually have sub-strategies in our business units to really utilize the full potential. In Norway, we are continuing to integrate and acquire companies, the acquired companies. We are continuing to migrate from legacy to cloud, and we want to explore the public sector, new segments and new business. Whereas at the platform part, we are investing in the core platform to scale internationally, improve partner customer experience, and ramp up in-house partner competencies. We pretty much wanna make the platform more easily onboardable. We also want to continue building on the potential partner pipeline that we have already.
We are fully confident in having this heavy investment in the platform as we see today in our SaaS business, is that it's using 80% of generic services from our platform directly to drive our SaaS business. The platform has been optimized over the last seven years only to health SaaS business. At the same time, we are actually operating an app on our platform which has 250,000 unique users per month. We actually see that the platform is working, operating a SaaS business and an app business, and now we're just focusing on the scalability by making it easily accessible. If you just take a short look into how the 360 Platform is in a couple of words. It's a tailor-made boilerplate for healthcare applications. It's low-code, it's easy to use.
We have 140 microservices only for built up to drive our e-health company. There's 60 more than we had a year ago. It's openEHR, open to everyone. We work with reusable and global. We only work with international open standards, so the partners can subscribe and/or consume a PaaS service, tools, framework to standard open external APIs. If we compare ourselves to other of our SaaS competitors, web or cloud-based, they often have a EHR software tailor-made to specific countries. It's often very complex, and you are not able to sell off specific modules, you have to do license for the whole EHR solution. It's difficult to onboard external partners. It's very hard also to scale internationally.
Our 360 platform is actually built up where we have spread out the user interface, the SaaS modules, and the PaaS business. That means that we work actually with a separate user interface, business logic, data repository, data module and workflow. What does that mean? That means you can actually on our platform, you can use the whole platform, you can do the full license, but you can also actually consume services and you can consume modules. You can actually work on our platform on a data repository or not. Shortly, what does it actually add a benefit for our partners? Well, it reduced the R&D costs since we have developed 140 microservices just for the e-health.
We increased traffic by actually being able to sell off parts or the full platform to different kind of customers, and you can work on the platform. You give a shorter time to market as you both can develop on the platform and by working modules. It makes it much easier to scale. We have an international platform. We continue to innovate the services we have, and we today have 85% is pre-made and reusable, so you can actually have 85% of what you need to go to market. That is our biggest contribution to our strategy, our overall vision, changing life for most patients possible. What is the status of the platform? As communicated earlier, we still have 15 partners, above 15 partners on the platform today.
We have a highly flexible platform and strong functionalities, but we have also identified, which we communicated earlier this year, that it's too complex to onboard. Therefore, we have put ongoing contractual negotiations on hold, but we keep on heavy investing in the platform as we still see there is a huge total addressable market, as we also communicated earlier, around $100 billion. If we look into that, we can actually say just individual services has a total addressable market around $700 million. We could actually start selling services of the platform today to start actually generating revenue on the short term.
What we try to identify on the graph, the simplified graph is that if we start distributing services and have focus on that, we potentially delay the whole platform launch. We wanna have strategically made the choice to say we wanna launch the whole platform not to be a service provider, but to be a provider that both can do applications, services, and a full platform for our customers. What do we focus on right now as we are building the top layer of the platform? We still have ongoing discussions and awareness campaigns with over 50 partners. Majority is outside Norway. We have 35 companies and public organization waiting for commercialization while we are ramping up our capacity.
Our revenue model is subscription and consumption-based. Right now we are building up the market, we are building up the commercial traction, we're ready to scale the platform. We're also ready to get partners on the platform. We do expect that we can announce the first contracts within the next 12 months. With the lead time we see in a platform business where we're bringing on bigger partners, we are confident that we can see a proper revenue expected during the next 18-24 months. On top of the platform, we also have a solid SaaS business. Just to give a little highlight into our SaaS business, we're all on the same page.
The SaaS business consists of four companies: PatientSky, Hove, Infodoc, and Programforlaget. We are now focused on integrating the four companies, building their common culture, utilizing and optimizing resources, streamlining and unify product catalogs. The first step we have taken to really unify everything here is actually that we reported end of life on the ProMed. The reason why we've done the end of life of ProMed is that we see that we rather take a short-term hit by actually getting our customers over to a future-proof product that we will keep develop on and we actually do believe in. Let's make it very clear. We will have PatientSky, Hove, and Infodoc in the future. Our core products will be the PatientSky Clinic cloud-based, the Hove Total cloud-based, the Infodoc Sky.
We'll continue to migrate from on-prem to cloud solutions to increase the flexibility for both PatientSky and the clients and reduce cost and operational complexity. We today have 1,500 GP clinics, and we have around 1,000 non-GPs. Each of these GPs consists of roughly four-six licenses and non-GPs, one-three licenses. That actually means that we are having a high focus on our SaaS business still, while we are focusing as a company on the strategy to be a platform, international platform company. The only reason why we can actually have this dual focus at the same time is actually by developing into four different business units. Each business units will have individual finance accounts, meaning a full P&L responsibility.
We'll work with intercompany SLA agreements to kind of create an arm's length principle between the companies, so we really have the chance to develop different organization with a clear focus. One of the big steps we had to actually be able to develop the four business units is actually to have business unit leads in place. I'm very happy to say we on the platform has Anne in place to running the platform and developing on that. We now have Kjell Magne in place to operate the SaaS business, Norway, which is where the revenue is. We have Egil in place on the app. I'm also very happy to say that I'm confident that I very shortly can announce a permanent CCO on our Vest business as well.
By having the high potential and the high profitability we have in Norway, we actually have the chance to evaluate strategic alternatives to really keep developing all our business units. Now, that was a conclusion on what we had around the business and the insight to our business. Now I will hand it over to Christoffer, who can start with introducing himself and then also give a bit more insight to our financial numbers. Welcome, Christoffer.
Thank you, Kristian. Before we dive into the financial numbers, I would like to spend a few seconds on my background and also some initial reflections I've done. My name is Christoffer Mathiesen. I've been working in investment banking for 16 years, last with DNB Markets, and I've been with the company since the first of November, i.e., four weeks. I'm very well aware of a bit rocky start PatientSky has had as a listed entity, but hopefully I can contribute with rebuilding some of that trust going forward. I would like to thank my predecessor for the great work he has done through 2021, and we'll build on that work going forward. What can you expect from the finance function going forward?
There's a big milestone for the company that by first quarter next year, we will have every company in the group on the same ERP system fully integrated with our CRM tool. That will also help with achieving several other points on this list. We will also work on earlier release of the financial figures, which I believe is a sign of improved internal processes. We will also continue working on adding transparency and improving the KPIs and the quality in the figures we provide. I'll come back with a couple of examples later on. Furthermore, we will start publishing more standardized financial reports in addition to presentations, improve the investor relations homepage, and add an analyst tool, and eventually start preparing sometime next year for converting our accounts into IFRS. If you look at the third quarter, how did we do?
The top line came in in line with previous quarters. Up quite good from third quarter last year, mainly driven by the Infodoc acquisition. The flattish revenue development hides the fact that our recurring revenue streams are developing quite favorably, which we'll come back to on the next page. The EBITDA came in at NOK 6 million, which is down to 12% margin, mainly driven by three factors. One is that we had one additional month of salary this quarter compared to the second quarter. We hired new people, so increasing the salary costs, and we also had the lower capitalization rate, taking it down to 12%. More importantly, we are reiterating the guidance we have given earlier this year of top line coming in at NOK 205 million-NOK 210 million with an adjusted EBITDA margin of 20%.
Looking more into detail on the top line, you can see that the non-recurring items are almost half of the last two quarters, but our recurring revenue streams are up 17% on an annualized basis. While our cloud revenue, which is the most important revenue for us, is up almost 50% on an annualized basis. We are measuring this over two quarters to take into account semi-annually invoices so that we don't overstate the cloud revenue growth. On the next slide, we will show you some new information which Kristian alluded to on business units. Hopefully, this will help you assess the company even better than we have previously given you information to do. Looking at this is a preliminary assessment of the revenue and cost allocations by the management.
As you can see, the software as a service business constitutes almost all of our revenue and is delivering very healthy margins with 46% EBITDA margin and a 30% cash flow margin. It's very important to note that this is pre any intracompany transactions, and we are in the process of setting up arm's length principles and pricing structures between our SaaS business and the platform business. As we have said several times, the SaaS business is using our platform business. Group is overhead, C-level management, and most of our adjustments on EBITDA is in that column. In the other category, you'll find the platform business. We will continue to report on this also going forward. The next couple of slides will be related to our SaaS business.
Before we dig into customers and churn and other KPIs, we want to give you a high-level view on what to expect going forward. As you can see from the illustration, as we have mentioned several times, we are in the midst of migrating the final ProMed customers, and that is taking a lot of time and resources in the organization. That will still be the case through the fourth quarter. Once that done, we expect accelerated new sales, first from our non-GP segment, then subsequently for the GP segment, as we are doing improvements on the functionality on the GP products. It's important to note that migration of ProMed customers has been the focus for this company for the last years. The other on-prem customers has been taken more on an ad hoc basis.
Currently, the cost of running ProMed is higher than the remaining revenue. Every time we do migrations, we always start by trying to educate our existing customers of the advantages of going to cloud. We have a lot of other things in the toolbox. For instance, increasing prices on on-prem. We are developing new functionalities limited to cloud product only. We are providing incentives like free licenses and grace periods to get them over to cloud. If we go on and look at the customer development in the SaaS business, we have around 2,500 customers, and it's a rather flattish development. The big development is actually between on-prem and cloud.
Basically, you can say that both on the revenue side, but also on the customer side, we're taking from on-prem, dark blue, putting it into the green area, which is cloud. Bear in mind that this is end of period customers, and the way we define the customer here is that this is clinics or customers with at least one paying EHR license. We also have some customers that don't have the EHR license, around 100. The development and all the steps in the bridge on the right is measured as invoice date, meaning, for instance, that 69 upgraded customers during the quarter, most of them were sold and delivered prior to the third quarter, but started paying in the third quarter.
Looking at the average revenue per customer, we have made a slight definition change from the second quarter presentation, where we have excluded all the non-recurring items, only focusing on recurring revenue, and added revenue, cloud revenue on the cloud, RP, if you will, or average revenue per customer from the connected clinics, that is, clinics without an EHR license, but they are paying for our cloud add-ons or solutions. You can see we had a healthy development in the average revenue per customer on both segments, both the on-prem customers and the cloud customers.
If you want to calculate our cloud revenue, you need to take the average cloud customer, multiply that with the average revenue per customer in cloud, and in addition, add the small gray area on on-prem customers, which are cloud products upsold to on-prem customers as well. Looking at the churn, I'm happy to say that for the most part or every all quarters, we see a clear tendency that we are losing low-paying customers, i.e., the revenue churn is lower than the customer churn. That is something we've seen throughout the year, exception being on on-prem in this quarter, and that was mainly due to a rather aggressive price increase in the second quarter. To round things up, we would like to show you the monthly recurring revenue development per month through 2021.
We have excluded ProMed from these numbers to focus on continuing business. We divided it into the more fixed license part and a more variable component called notifications, where you can see the seasonality effect in July. The ProMed adjustments are ballpark NOK 1 million in January and NOK 450K in September, which you can add to this graph just for transparency, so you understand that we're not trying to hide anything. We are very glad that the MRR is up 60% over the last 8 months, and the cloud MRR is up 25% in the same period. Unless that is almost 40%. Kristian, I'll let you round up.
Thank you very much. What happened since the third quarter? We have had an all-time high MRR in October with around NOK 16 million. We have appointed a new CFO, as you just saw. We have also appointed a new additional board member, independent board member, representing a large shareholder, Sven Gustav Bakken. Very happy to get that on board as well. We had our new sales month in October with the highest number of license than entire second quarter. I think let's open up for some questions. Stian, will you come up here and run the question sessions?
Thank you, Kristian. Perfect. We'll run through the questions. We have a couple already in, and I encourage you guys to write more questions, and we'll try to address as many as possible during the session. The first question here is on the revenue split of the different legacy systems of the NOK 27.4 million in on-prem revenue. Specifically, what's the share of ProMed revenues here? I can probably take this one.
Yeah, sure.
As Kristoffer mentioned, the MRR for ProMed was NOK 450K in the third quarter. They make up NOK 1.5 million of the on-prem revenue. We also have Infodoc Plenario, so the on-prem system, which made up around NOK 8.5 million. The remaining is then Hove's System X on-prem solution. The next question is, what is the average number of licenses per paying customer? Do you wanna take that one, Christoffer?
I can do that. I can start with a more, you know, general comment first, and then I'll dig into the details. I think one of the pages had a customer split per segment on the non-GP and GP. On the GP side, you can assume that we have around four-six paying licenses per clinic. On non-GPs, we have around 1.5%-2% per clinic. So adding that up, I think the average is around 4.6%. Is that correct?
Yep. Spot on. That's actually all the questions we have in so far. Let's see. One more here. Churn picked up quarter-over-quarter. Is this only driven by ProMed end of life, or are there other reasons? How do you see this developing in the coming quarters?
Yeah. You want me to take it?
Yes, yes. You take it, Winter.
Yes, end of life ProMed is one factor, but I also mentioned the rather aggressive price increase we had on our on-prem products in the second quarter, where we count churn when they stop paying. A lot of those customers that didn't like that price increase stopped paying in the third quarter. That's one thing. On the expectations going forward, we expect some elevated churn on on-prem. We are working really hard to get all the ProMed customers over to our cloud solutions, but we expect some elevated churn because of that. On on-prem, ProMed-related churn, yes.
Yeah. Perfect. Thank you. The next question is, how to secure enough momentum to create the traction on the platform as a service in Europe while developing the platform? That's probably a question for you.
Yeah. I think that's a very good question. I think we have obviously, as we also alluded to a bit earlier, we have kept the focus on really developing the core of the platform. When we go to the market, we come out with a full platform where we can both offer platform services, we can offer applications or modules, and we can offer services. Our focus right now is obviously to go have the context we already have. As communicated earlier, we have 50 customers we are in ongoing dialogue with, 35 signed up, really wanna address it here. We wanna really build on that momentum, and really also start during next year, also showing some product demos also on these sessions here. That's an ambition.
I think we need to build everything to a loop and be very clear on what we do on the platform.
There's a follow-up on this one. Is there any markets that seem more mature for PatientSky's platform?
Yes, there is, but there actually is a big variety of market. There is, of course. We are already in Finland, which is a very mature market on this. There are obviously the normal candidates we've been talking about earlier. For us, it's really to build up to find the right partners in the market as well. We are looking a bit wider, and our platform is also set up for that. Yeah.
More questions. Yeah. Can you give a short outlook concerning revenue for 2022?
Yep. Want me to take that? I think we will revert back on potential guidance in the fourth quarter presentation held in the first quarter next year. I think we have also given you higher level illustration of what you can expect from our revenue generating business unit, the SaaS business, where we expect new sales and revenue uptick in second half of 2022. Besides that, I don't think we are ready to guide anything right now.
Yeah. There's a question here, in terms of scheduled growth, do you foresee any capital increase? I'm assuming they're asking if we're gonna need any more capital to realize the growth ambitions that we have.
Nope. Not at our current time. We have made a plan, also a bit of conservative estimate on our revenue and with the investments that we foresee. Our investments is going according to plan, and we have the time to do it the right way around.
There's a question here on, do you still, after the on-prem price increases, expect migrations from on-prem to cloud to generate upselling on average?
Good question, given the on average point at the end. I think when you do price increases on on-prem, as a general note, the uptick to cloud won't be that high. You're closing that gap. The picture is a bit more nuanced than that because you need to look at the different companies in the structure, and there are still some parts in some of the companies, the uptick is still very much present. In the other parts, the gap has almost been completely closed.
Yeah. Just to add on that one. I think also we talk about we wanna enriching our cloud products and have more focus on that, so that also gives us a much higher chance of the upselling. Really by making the business units, we also have a chance to actually now we have a higher focus on upselling and actually offer our products around the core products to our customer, which will of course also help in uptick.
Yep. Good answer.
Should take one more.
On average, we do have a positive uptick when we migrate the customers to the cloud, and it also gives us a chance to upsell further modules down the road.
Yeah.
There's a question, how the cash burn run rate is?
Times the cash runway.
Yeah.
I think looking at the presentation and the numbers you have been provided, you can probably calculate that yourself. Basically, we have liquidity now to deliver on the targets we have, short and medium term.
Yes, definitely.
Internally. If there is any deviation around that, the market will know.
Also just a little comment on when we plan with Casper and internally, we do very conservative on the revenue side to make sure we don't have any negative surprise in that sense. Obviously, we keep the market informed.
Yeah. There's a question on System X customers. What is expected in terms of end of life of System X?
We don't have any end of life yet. I think we will see in a couple of years' time before we'll have full end of life. We are focused very much on actually enriching our product to actually take the customers from the System X to the cloud solution. We are more focused on actually developing a cloud solution to make sense for the customers than doing a pressure on the short term.
Yeah. There's a follow-up question on when we expect System X customers to be migrated.
Yeah. We are migrating System X customers now, right?
Yeah.
As I mentioned in the presentation, we spent three years plus on ProMed migration to finalize that. I won't be surprised if we spend something like that also on System X.
Definitely.
There's a question on the SaaS business. If you present yourself as a platform company, why is that you have almost 5x more full-time employees developing the SaaS system instead of a platform?
That's actually a very, very good question. Obviously that's because where we have the full revenue generating, it's much more staff consumption to do a SaaS business as well. One of the business unit, VAS, will also take over some of the modules to make them international, which obviously will scale up there to make it more efficient and utilize resources better. Right now, we have a revenue, as you can see, Norway, that's also why the organization is severely bigger there.
Yes.
Yeah. It's probably not correct to view all the employees we have in SaaS Norway as developers. If you look at the developer split, it's very different than the FTE split between the two.
Good point.
There's a question here. What is the improvement in notification revenue? Will there be a focus on notification revenue growth? I can probably take this one. Notifications is mainly driven when GPs send out messages to patients, and this is driven organically as we add the clinics and clinics add more GPs and GPs add more patients, then this is a natural trend that grow. Of course, during COVID, we had a few periods when a lot of the notifications were sent out to patients regarding COVID-related items. Overall, we see notification revenue growing quite steady in line with our overall recurring revenue business. I think we are mostly done.
Yeah.
There's one more question here.
Yeah.
As SaaS is the main revenue driver, what is the focus of the product development for SaaS? I think this is a good question.
It's a very good question, and I think actually, as we alluded earlier, I mentioned it also, we will have a high focus on actually working on the whole total solution to actually get that enrichments. The same we will do on the PatientSky Clinic cloud solution to get the full product pages improved there. At the same time, we'll keep moving on the Infodoc cloud solution we have there. We very much focus on actually adding to the products we already have, the cloud solution, and therefore, actually get the product roadmap built around that. I hope that answers.
Perfect. That was all the questions we had.
Thank you very much. Let me conclude on today's session with an outlook and final remarks. We will continue to ramp up our platform organization, the technology and the pipeline. We have focus on migrating and consequently new sales in our SaaS business in Norway to increase growth and margins. The platform partners agreement expected in second half of 2022. We will have our next presentation in the 22nd of February for the Q4. We also want to do product presentation during 2022 when we have the platform to present it in a more visible manner. Thank you very much for following us and look very much to see some of you over the next couple of days and always reach out with question. Have a nice day.