Welcome everyone to the Q3 2021 presentation. Maybe briefly start introducing yourself. I'll introduce myself, and then Valter will introduce himself. I'm Charles MacBain. I'm the CEO of Nordhealth. Started my career in consulting, where I focused quite a bit on working with clinics and hospitals. That's where my interest initially in this space of healthcare practice managers or software started. Went on to work in private equity for a family office, doing software and technology investments. Thereafter, went to Harvard Business School and learned about what's called the search fund model. Upon graduation, I searched for just over a year, looking for a practice management software company in sort of lower regulated healthcare niches.
and seeing or meeting many different management teams, I settled on the purchasing a majority stake in Nordhealth in November 2018. It's just been three years I've been running the company now, and it's been a great journey. Valter.
Thank you, Charles. My name is Valter Pasanen. I'm the CFO of Nordhealth. I joined the company shortly after Charles had joined. Before that, I was working various financial roles, including six years in Germany, and most recently at Eltel. It's listed on Nasdaq Stockholm. Eltel was looking to consolidate the German markets, and I was responsible for integrating acquisitions there. The most recent role I held was CFO for Eltel in Germany before getting the opportunity to join this amazing company.
Thanks, Valter. Just starting with the mission, what we're trying to achieve is we're trying to build a software that empower healthcare professionals to save time, so they can focus on what matters most, which is delivering great care, great experiences to their patients, and growing their business. Who are we? Nordhealth is a leading healthcare SaaS company in the Nordics. We develop cloud-based practice management software for veterinary, physiotherapy, psychotherapy, occupational and speech therapy clinics and hospitals. We serve over 30,000 healthcare professionals in 7,000 clinics and hospitals that are located in over 29 different countries. Today, we've got over 250 employees, so designing, developing, implementing, and supporting our users.
We're currently the market leaders in the Nordic veterinary and therapy PMS markets, and we're rapidly expanding internationally with a strong initial beachheads in the U.S., U.K., and Spain. We're targeting an AR EUR 23 million-EUR 25 million by year-end 2021. If we look at our AR split, about half our AR is veterinary, half is therapy, with a small component being incubator, where we develop products that we then upsell to our therapy and veterinary users, such as payments and so on. Our AR split by country was very much Nordic-focused, but as you can see, with a growing emphasis outside the Nordics.
We've got just over 50% of our AR coming from Norway, 24% coming from Finland, 13% coming from Sweden, and then we've got around 4% coming from Denmark, and a growing share coming from U.K., U.S., and around 43 other countries. Wanna take some time to go through our revenue and growth model. Our revenue model is that the majority of revenues come from recurring software license fees. In addition, there are some repeating transaction fees such as SMS, payments revenue, right, imaging revenue per study, right, and insurance revenue, which is normally per claim. The third type of revenue is professional services, where we charge for implementation, training, or data migration. Now onto our growth model.
The way that we grow is one way is that we recruit and onboard new clinics from both new and existing customers in current and new countries. Second is that we increase the adoption of our current full suite of products. Third, we expand the functionality of our platform through developments. Fourth is that we acquire competing PMS providers. That helps us accelerate normally our interest to new markets. To date, we've been able to successfully acquire and migrate customers from over eight acquisitions to our flagship platforms of Provet Cloud or Diarium. One of the key things of our growth model, at least in the medium term, is we're gonna continue reinvesting the profits that we make from our established Nordic business to fund investments in product development and ramping up new country teams. Now on to company updates for the quarter.
If you look at the KPIs that we had for Q3 2021, 92% of our revenue is recurring revenue. Our AR growth in Q3 2021 versus Q3 2020 was 109%. Our organic AR growth over the same period of time was 27%, and that's broken down by two growth drivers. One is our net retention, organic net retention of 110%, and second, it's our organic customer recruitments of 18%. In addition, we've been able to actually reduce our gross churn versus the previous quarter, where it's now at 3%. Bit on the operational update. We've been continuing to ramp up the organization for international growth. One of the key parts of that is new hires, right? We've hired net 31 new employees in Q3, right? A lot in support and implementation, right?
Some in sales, some in product development, and the G&A part of it is mostly country managers, which we've newly recruited. Second, this is a key part, is that we're onboarding many new employees because the fact that it takes six to 12 months to ramp them up to full efficiency, right? Full efficiency being that they can manage a certain number of projects, right? Or if they're implementing them, they can support a certain number of user base, or they can sell up to certain sales targets. Right? We'll continue investing in recruiting and onboarding great talents over the next few years. This should be the expectation. Third is new contracts.
Big news for us is that we've added a new player or a new partner on our Nordhealth Pay platform with Adyen. It's with Nets. We signed a partnership agreement with Nets that enables unified omnichannel payments similar to what we are offering with Adyen, right? All our current customers which are already on Nets will be able to benefit from this. And for the new customers, we mentioned in the last quarter that we had signed a new U.S. corporate, and the first locations of this U.S. corporate are live. And second is that we had signed previously two Spanish corporate chains, and we're slowly implementing them one by one for those two different corporate chains. Now, financial update. Valter, please.
Thank you, Charles. Let's dig a bit deeper on that yearly ARR growth. Basically, we started Q3 2020 with an ARR base of EUR 10.9 million. We then only look at the organic growth rate. We had 27% organic growth. The majority of there coming from new signed ARR, so new signed customers, EUR 2 million from that, which is very good. Because we like to focus first on capturing the customers that we can then later upsell. EUR 1.4 million for net upsell of existing customers. We had churn of EUR 0.3 million, leading us to EUR 13.9 million when we exclude the acquisitions. We had acquisitions during last year of, well, in last quarter, we had EUR 8.8 million.
There was also organic growth there of EUR 100,000, ending the Q3 2021 at EUR 22.5 million, resulting in the 109% year-over-year growth.
Thanks.
We get to take a look at the quarter-over-quarter development. We had a 3% organic growth quarter-over-quarter. What's key to understand when looking at Q3 is that there's a lot of seasonality there. Q3 includes July and August, which are the main holiday months in the Nordics, where everybody takes their time off. It's also that 90% or over actually of our ARR is still from the Nordics. The new signed ARR was somewhat lower than usually, mainly because our sales reps and customers were having on their vacation. More so in our net upsell, we can see that net retention was lower as our revenue share-based customers and contracts, where we get a percentage of their revenues, also saw a decrease during the summer months.
For instance, in the therapy sector in Finland, there was a drop of more than 20% in volumes during those months. Also, we didn't have a price increase in Q3, which is one of the main drivers of our net retention. When we look at the churn rate there, it's actually slightly lower than it has been in the last 12 months, what Charles also mentioned earlier. We had on an annualized level, a 2% churn in Q3. We have then the acquisitions, the EUR 8.8 million, and their organic growth of EUR 100,000 ending Q3 at EUR 22.9 million.
Thanks, Valter.
Let's look at the reported financials. In Q3, we're looking at year-to-date, 90% of our revenues are recurring revenues. That's the year to date. When only looking at Q3 alone, we had 92%, so the trend is actually increasing there. Here we have adjusted for the consulting business in the revenues that we divested at the end of last year. In 2021, the impact is negligible. It's less than EUR 100,000. In 2020, we adjusted for EUR 500,000 roughly in revenues and EUR 300,000 in recurring revenues in order to show the underlying growth rate that's really there in our continuing operations. The key number here is the growth rate of our recurring revenues. Year-over-year growth rate of 72%.
We also had 67% of total revenue growth. Q3 year to date, total revenues at EUR 13.8 million. In our EBITDA, we actually also had an implied growth rate of 6%. Year to date, Q3 2021 at EUR 2.3 million. Now, the EBITDA we have adjusted for the IPO and M&A costs in the second quarter, so we didn't have any new adjustments now in the third quarter. It's the same ones used already in the earlier report. Still actually a bit more profitable than year to date and last year. If we then look at the next slide to look at only the third quarter alone, we can see in the recurring revenues growth of 105% year-over-year.
In total revenues, we can see a growth of 95% year-over-year. I said, in the third quarter, we didn't have any adjustments in the EBITDA, so this is the reported EBITDA, where we see in Q3, EUR 0.4 million, so still clearly positive. Nevertheless, we, as Charles already mentioned earlier, we hired net 31 new people in the third quarter, so we were very successful in recruiting a lot of talent. That has planned decrease effect on the EBITDA in the third quarter. Nevertheless, it's important to also know that the gross margins remain stable, so there's no impact on those, and we continue to be highly profitable in our established markets in the Nordics. We are then reinvesting those profits into growth in our growth markets right now.
To look a bit on the year-over-year development, this chart probably is familiar to you from the earlier presentations. Now updating on the third bars there on the Q3 2021 year to date, reported income of EUR 13.9 million year to date, one quarter still missing for the year. We have also here the same adjustments as earlier for the IPO and M&A in Q2. The adjusted EBITDA, as mentioned earlier, EUR 2.3 million, and adjusted free cash flow of EUR 1.5 million. Still, cash flow sort of conversion of 65% and clearly positive, mainly driven by net working capital items. Going through the profit and loss, now without any adjustments in those. The recurring revenues had a growth of 100% year-over-year in Q3.
Total revenues were up 88% year-over-year. In the third quarter, as mentioned, 92% of our total revenues were recurring. The EBITDA still positive at EUR 0.4 million, at 7% EBITDA margins. I said the gross margins remain stable, but our recruiting activities that are very big in the third quarter decreased the EBITDA as planned. We can also see a clear increase in the amortization of goodwill, which is coming from the acquisitions that we amortize, which we completed in the second quarter. There's an increase in financial items which were in the third quarter, somewhat positive, but year-to-date, slightly negative. Those are mainly relating to changes in currency valuations of our holdings.
On the balance sheet side, maybe the last row there isn't fully showing, Charles, if you can a little bit zoom out. In the asset side, it's very important to note that we transferred EUR 46.5 million of our cash to fully liquid money market funds with the clear purpose just to minimize negative interest and to minimize also bank solvency risk. That cash you can see now in a separate line, money market funds with EUR 46.5 million. The target there is not to make big profits, it's just to minimize risk and also the interest in the negative interest rates environment we have in the Nordics.
When we add the money market funds and cash together, we come to EUR 73 million cash or cash equivalent holdings or a net interest-bearing debt also, which is negative EUR 73 million because we have practically no interest-bearing debt since we paid off our debt. We also had an increase in goodwill, which should be familiar from the earlier quarterly results, which results from the acquisitions. On the other side of the balance sheet, we see the repayment of nearly all interest-bearing debt, and then a slight decrease in the advances received from customers versus the earlier quarter, but this is normal seasonality in invoicing. We can go on to the next slide. Running through the cash flow statements, we can see net cash flow from operations at positive EUR 1.3 million. If we adjust for...
Actually, when we look at it without the adjustments, we can see that the main driver there being the net working capital items as mentioned earlier. But when we adjust for the exceptional IPO and M&A costs in the second quarter, our net cash flow from operations would have stood at EUR 3.7 million. And then the biggest driver would have been our profitability. Looking at the cash flow from investments, these now include, very importantly, the EUR 46.5 million of transfer of cash into money market funds. So that's the main change versus the earlier quarter. Otherwise, it's the same investments into acquisitions and capitalizations into product development. In the financing cash flows, the only real change there happening in the change of debt with the repayment of our debt we had.
As mentioned earlier, total cash at EUR 26.6 million and money market funds of EUR 46.5 million, resulting in EUR 73 million.
Thanks, Valter. Now, we want to provide a bit of sort of guidance for next year. One of the things that we decided to do is for next year, given the fact that we've had quite a few sort of larger corporate chains signed up, right? These larger corporate chains, right, get implemented over time, and it can create a lot of sort of bumpiness. We've decided to be a bit more conservative when we're signing these corporate chains. We're reporting and focusing on only the implemented ones. What that means is that when we sign a corporate chain, right, and they've got 100 locations, we'll only be reporting the ones that are actually implemented in our numbers, right?
That'll be a much more steady number over time, right? What we're predicting is 20%-25% organic growth in implemented AR, and this does not include acquisitions. Acquisitions are on top of that, right? There's mainly four different pillars of the strategy that we're following for next year. One is really focusing on ramping up and training our veterinary team in the growth markets, which are U.S., U.K., Spain, right, to be able to accelerate that AR growth. Right? Second is, given this focus, we're gonna limit migrations growth in the Nordics and focus, as I said, on these growth markets. Third, we will be focusing on localizing and upgrading the IRM to replace Aspit Norway and become the new international therapy platform.
Fourth is we will see a steady state, as we have in the past, growth in AR in the Nordics for veterinary therapy. Our next update will be for Q4 2021, will be on the 18th of March 2022. This is actually Valter's last update. Thanks, Valter. We'll have our new CFO, Mari, which will be joining us in January, taking over from there. Any questions? I'll search. There's some questions in the chat, what I'll do is I'll repeat the questions, and then I will answer them. The first question was, can you please elaborate on your sales progress by geographic market? Where is the pipeline more significant and positive, i.e., where do you expect to see growth contribution over the next two to three quarters? That's a good question.
What we're looking at is, there's two types of growth, right? There's a growth from net retention, and that will mostly come from the Nordics, given that that's where the majority of our customer base is. Second is new signed customers, right? Which will mostly come from our growth markets. We're looking U.K., U.S., Spain, right? As well as new clinics that open in our current markets. That we can see for the next two to three quarters. The next question was, what has organic AR growth been in year-to-date until Q3 2021, year-over-year? Valter?
I'll pull up the exact number just to make sure that I'm correct. Maybe we can take the question, and we'll get back to that.
I'll go to the next question first, and then we can come back to that. Next one is the guidance for 2022 is 20%-25% in organic AR growth. Half of this is expected to come from Provet Cloud outside Nordics. Which are the main countries that are targeted for this organic AR growth? If we take a look at the guidance, right, half of it is not expected to come from organic growth, Provet Cloud organic growth, right? We have not given guidance as to splitting that out into more granular.
The organic growth in 2022 will be made up of net retention, right, coming from our current client base, right, in the Nordics and abroad, as well as new customer growth, which in the new customer part will be mostly in the U.S., right, U.K. and Spain, some new markets, right, as well as some new customers that we sign up in our current markets. Now maybe coming back to the organic AR growth.
When looking at the year to date, that means not last 12 months from the Q, but just for the year to date, just three quarters. Our growth rate was 17% organically. When we look at the organic growth on a yearly level for the last 12 months and the end of Q3, that was the 27% we saw earlier.
Any other questions or comments? Please feel free to type your questions in the Q&A box. Okay. Well, thank you very much. There's no more questions. It was great to have you all on board. Thanks, Valter, for your nice presentation.
Thanks, Charles.
Bye.