Hi everyone. Welcome to the Q1 2024 presentation. As usual, we wanted to introduce myself, Charles MacBain, CEO of Nordhealth, and also my colleague, Mari Orttenvuori, who is our CFO. We'll start with a company update, then we'll go through an update of each of the different business units. Then Mari will go through a financial update, and we'll end with a Q&A. For Q&A, please wait for questions at the end of the presentation, and you can ask questions by just raising your hands or also adding questions to the chat. I'll repeat the question and then answer that question. Starting with the company update. The first thing is at the beginning of every year, given that we display numbers in constant currency, we reset the numbers. The constant currency that we use is year end of the previous year.
So basically, we have to reset our AR numbers from being based on FX of end of year 2022 to FX end of year 2023. So as you can see, with the previous exchange rates, we ended the year at EUR 36.6 in terms of Q4 2023 implemented AR. There's a big FX impact, which is mostly due to the weakening NOK relative to the euro. And in addition, as we are improving our AR reporting capabilities, we have decided to shift the reported AR based on the last month of the quarter versus the whole quarter. So that will be a more precise measurement going forward. It doesn't have a huge impact, but it's also normalized for that. As you can see, that means that Q4 2023 implemented AR was at EUR 35.6.
Then if we look at Q1 implemented AR in 2023, which we have to adjust to be able to show the year-over-year growth rates in 13.2%-31.7%. Again, the 0.8% of that impact was due to the NOK-to-EUR changes, but there was a positive impact from the new AR reporting document. So starting with our Q1 2024 KPIs over the last 12 months, we've grown 15.1% in organic AR. Our net retention was 108%. Our gross churn was 6.6%. And our CAC to new AR was 1.3 overall. Which you can summarize into an LTV to CAC ratio around 8.5. Then as a result, we ended the quarter with EUR 36.5 million of implemented AR. And we reached this important milestone of signed AR being around EUR 40 million. Right.
Given the number of outstanding shares, this means that our AR per share is around €0.46. So it's always good to set the context. So when I joined the company in Q4 2018, right, and at that time we had EUR 3.3 million of AR. And we've grown over this period, this last few years, at a CAGR of 60%. Some of which comes from M&A and acquisitions, as you can see in the light blue, but most of which actually comes from organic AR. It's good to note here that the EUR 40 million in Q1 2024 does not include the VATs for passport roll-outs and also some of the CVS AR that has not been committed. Now quarter-over-quarter, we grew 2.6% in implemented AR. This was driven by new customer growth of around EUR 600,000 and that upsell of EUR 1.1 million.
That upsell is driven by price increases that we usually do for our products in Q1, and all of our products actually had price increases with the exception of EasyPractice, which will have a price increase effective in Q3. Then we also had churn of EUR 0.8 million, which is quite high relative to other quarters, and we'll go down to explain why that happened. Now looking year-over-year, we ended Q1 2023 with EUR 31.7 million. Then we added EUR 2.3 million of AR of new customers, right? We had a net upsell of EUR 4.6 million. And we had churn of EUR 2.1 million, which is the EUR 6.6 million churn that we mentioned before. Then what you can see in the last part, the EUR 3.5 million, which is the signed AR, which has not yet been implemented, has increased from EUR 2 million to EUR 3.5 million.
This is a big deal in that we have been successful with the CVS pilots. They've committed to rolling out all of their small animal clinics over to Provet Cloud. This is a big, big news for us in the U.K. and a testament to that of our localization and our scalability. We'll go down a bit deeper into that in the veterinary part of the presentation. We're also improving profitability where in Q1 2023, our EBITDA minus CAPEX adjusted. You can see the adjustments are for restructuring costs mostly in Q1 2023. In Q1 2024, you can see the amounts there. But we've almost halved the loss in one year. Right? So EBITDA minus CAPEX margin have improved from -23% to -9%.
We have had a small increase in veterinary headcounts to support growth, particularly some on the product side and also some of the implementation side to be able to support the accelerated CVS rollout. Now onto veterinary. So the big news that I alluded to in the earlier slide was CVS pilot has been successful, right? So we had an initial 15-clinic pilot with CVS where they tested out all of our features. We had some gaps in functionality that we worked on together in partnering with them to be able to create improvements. And following this lengthy pilot, we have actually been working with them on an accelerated rollout.
This is actually quite unique in that we've been able to implement over 50 practices per week for CVS, which is a feat that has never been achieved by us personally or as far as we know by any other company in the veterinary PMS space. This is a real testament to not only the product architecture scalability because doing data migrations for over 50 clinics with a huge amount of data is very, very taxing on the product, but also on the operational innovations that we've had on implementation. I'm super proud of the team and what they've been able to do with the CVS implementation. As of yesterday, around 140 clinics are now live on Provet Cloud. In addition to that, we've also been keeping busy with recruiting non-enterprise clients. We signed over EUR 400,000 in additional new AR in Q1.
Next is on the migration side. So as you know, our strategy is to be able to migrate customers from our legacy platforms that we've acquired to Provet Cloud, a flagship platform. And we're happy to announce that we've actually end-of-life Provet Win, which was a Finnish, mostly farm animal software. And second, we are going to end-of-life as well VetServe in Q2 of this year. These are two big products that will be discontinued. And these have accounted for the majority of the churn in Q1 2024. As there's also a few remaining customers that just stay on until the last day, until the end of life. And as of the end of Q1 2024, 64% of our implemented ARR was generated from Provet Cloud. And we still have a few product migrations that are pending: Sanimalis in Norway, Vetera in the DACH region, and Novasoft in Denmark.
So in terms of implemented AR performance year-over-year, we have been able to grow 21.3% year-over-year. The net retention rate was around 114.4%, right? You can see by that EUR 2.9 million increase in AR. And churn, despite the fact that we had quite high churn in Q1 2024 as a result of these end-of-life of the two softwares you mentioned, VetServe and Provet Win, was still only 4%. And as we can see, the impact of the CVS signed agreement means that we still have to implement about EUR 2 million of additional or, I'm sorry, EUR 1.5 million of additional signed but not implemented AR. Quarter-over-quarter, we grew 4.7%. New customers were around 0.2% as well as what they're implemented. Net upsell was EUR 1.1 million and churn was 0.4%, which is higher than we normally have in the quarter due to these migrations.
We also improved the adjusted EBITDA minus CAPEX, right, from -0.6%- -0.4%, which is a EUR 1.2 million improvement in profitability. The drivers of improved profitability were, one, primarily growth, right? So as we grow, right, the operational leverage that we have enables us to be able to have a great impact on the bottom line. So that accounted for 0.9% of this difference. And we also have been able to improve our customer acquisition costs due to reorganization improvements of the implementation functions. Both on the operational side but also on the revenue side. And other costs have remained the same. And this is a really, really key point is that as we scale, right, more and more, right, we do not have to add significant new headcounts in many of the areas. At least not proportional to growth.
Now diving a little bit deeper into churn net retention, as we mentioned before, right, the churn has been higher in Q1 2024 year-over-year due to these migrations. But we do have to keep, although this graph looks a bit scary to the increase, we do have to keep in context that it is still 4%, right? And 4% actually means that someone stays with us on average 25 years, right? So still, despite these high churn events, we still have a huge, huge long customer lifetime value. And what you can see as well is that the net retention rates on average over the last 5 years have been around 117%. However, it was 114% in Q1 2024.
That's actually slightly by design, is that we believe that we need to focus on capturing more and more new users and focusing on expanding our user base and putting our development resources on those versus focusing on net new add-on products. Once a user onboarded, then we have the opportunity to offer them more integrated, better add-on products. But the primary focus is still increasing the user counts. And one of the key things is that the rapid rollout of Provet Cloud for CVS will have a positive impact on their retention rate. As it's a current customer now. On the therapy side. So we had price increase on therapy for our products except EasyPractice. EasyPractice price increase will be in Q3 2024. The user growth account actually has declined by 75 users in Q1, right?
This is quite normal in Q1 in that we previously had bi-yearly plans for, for example, Aspen. So January and July was normally the main time where people actually reduced or were able to reduce their user counts. The second driver of that is that a lot of our Finnish customers also take a look at how many users are actually not using the system and they do a little clean normally in Q1. Interestingly, we're still doing sales and we're still doing quite well on sales of our legacy Physica and PsykBase products. Where the Oslo municipality signed a 4-year deal for around 60 users. On the migration fronts, so the way we are initially targeting this is that we're targeting the most simple use case, which is basically single users, private therapists.
We've done an initial pilot with 28 clinics that were migrated as of December 31st, 2023. The main feedback was that we had to do a bit more work on the accounting reports. So we created that work that was launched actually this week. We are looking to resume the pilot to get that feedback on the accounting reports. Once that feedback is positive, we might have to do a couple more tweaks, but once it's positive, we will continue the migration of all single user private therapists initially and then look to target development on the next most complex user segment, which is the users which are using Norwegian HealthNet. On the people side, as we mentioned on our previous calls, we've been shifting from a product-based organization to a functional organization as we centralize our resources around EasyPractice, our flagship product. That was completed.
And so we've got a big change in the leadership team on that one with new responsibilities. On the recruitment side, as we continue to grow both business units and with the experience that we've had in veterinary, Valter, who's been doing a great job, we are looking as well to hire a new general manager to replace myself as the CEO of the business unit and to take full ownership of that to allow me to refocus my time on acquisitions. And thirdly, we are also looking for a new head of marketing. That will happen after the general manager because there's two different types of profiles that we're looking for. One is someone from the engineering product side, which would need a much stronger head of marketing. And the second is someone from the marketing side, which would require a less strong head of marketing.
So depending on the choice of GM, we will make a subsequent hire of a head of marketing that goes along with that quite well. So year-over-year, we grew 9%. And from EUR 14.2 million to EUR 15.4 million, right? Net retention was quite low and including prices is around 101%. That's quite low historically. And churn was also quite high. This high churn was driven primarily by one big change, which was that in 2023, our second largest customer, which we mentioned in the previous presentation in Finland for DRM, actually churned. So the nice thing about the overview numbers is that we're still doing quite well on new customer recruitments. And recruiting new customers is relatively veterinary decision actually quite cheap.
So with this product-led model that we have, we believe that we can actually be quite successful once we've got product-market fit in some markets to be able to scale quite cheaply organically. Quarter-over-quarter, implemented AR 2.7%. As you can see, although the new customer growth was quite good in Q1, net upsell was positively impacted by price increases but negatively impacted by the downsell that's driven by user count going down, right? As we mentioned, the churn rate was high due to loss of the one enterprise customer, which also impacted previous quarters. That means although growth has been a bit less than we expected on the therapy business units, the profitability has continued to improve as a result of the fact that we are growing recurring revenues. That growth due to operational leverage results in bottom line improvements.
And that other costs are relatively stable. Diving deep a little bit more into churn and net retention, right? We can see in 2023 and Q1 2024, last 12 months, the higher churn. That's mostly due to this impact of Fysios. On the net retention side, net retention historically has been 110%. And similar to veterinary, we are prioritizing the new user acquisitions or migration in this case over new add-ons. There's a big exception to this, which is basically the booking portal, which Ollie is developing for us, which will be a great upsell opportunity in the next years to come. Now, Mari, I'll hand it over to you for financial updates.
Thank you, Charles. So let's take a look at the first quarter financials then. Total revenues in the first quarter grew by 17% year-over-year. That was mainly driven by veterinary cloud products, as already discussed.
If calculated on a constant currency basis, growth in total reported revenues would have been slightly higher at 18%. But with almost half of our revenues being earned in Norway or in Sweden, the weak currencies continue to have a big impact on our reported revenues as they're converted to euros. I do apologize for some background noise from here. Share of recurring revenues in the first quarter was 91%, an increase from 86% in the previous quarter that was being impacted by high level of paid development revenues. Adjusted EBITDA improved from -EUR 0.6 million to EUR 0.3 million. And adjusted EBITDA margin improved from -6% to +3%. Then onto the recurring revenue. Next slide, please. So reported recurring revenues have grown by 14% from EUR 7.9 million to EUR 9 million. And on a constant currency basis, the growth would have been 16%.
In the previous quarter, adjusted EBITDA margin was negative 7%, but we are back on positive 3%, and we expect a positive trend to continue. Headcount has increased from 378 to 392 in the last 12 months as we've seen some recruitment activity picking up slightly again during the second half of last year. And that is now continuing, for example, in Provet Cloud implementation and support teams in order to ensure all of our ongoing implementations and migrations to Provet Cloud. Also under the new scalable implementation model as well as providing quality support to all of our customers. But profitability has improved quarter-over-quarter with the exception now of the final quarter of last year that was impacted by additional spending on marketing and security audits. But we are committed to improving our profitability and with a positive trend to continue from here.
We've improved our free cash flow by EUR 3 million from the previous year. For the first time since the IPO, our free cash flow was positive. We're really thrilled about that. Although we are still likely to see some fluctuation in our cash flows between quarters, we are steadily improving towards long-term positive free cash flows as we are on the path of becoming EBITDA minus CAPEX positive in the first quarter of next year. With that, we will be in a great place to further finance our investments in product development or in any potential M&A. It was mentioned in our previous quarter's presentation that the majority of our Aspen customers in Norway have now changed from bi-annual to monthly invoicing cycle. That took place as of the beginning of this year.
So that means that previously our Aspen customers were invoiced in June and in December, and the majority of the customer payments were received already in December for the December invoicing. The first invoicing under the new billing schedule was now made in January this year. The estimated impact on our net working capital for the first quarter was approximately EUR 1.6 million. Also, we have received some delayed customer payments of about EUR 1 million during the first quarter. That is impacting the quarter's free cash flow positively as well. Our cash balance remains strong. Cash equivalents and investments in total increasing from EUR 22.2 million to EUR 22.8 million during the quarter. Of this, EUR 16.2 million of the total is invested in money market funds as at the end of the quarter and the rest is in cash or cash equivalent.
We have EUR 46.3 million of goodwill on our balance sheet, and there have been no acquisitions, no impairments of goodwill recognized during the quarter. And of the EUR 12.8 million intangible assets, almost entirely that consists of capitalized development expenses, and we have recorded some additions of about EUR 1.2 million in the first quarter. We haven't had any material equity transactions during the first quarter, and equity remains strong at EUR 78.8 million. And we continue still not to have any external financing. We don't have any material earn-out liabilities remaining on our balance sheet. So all the liabilities consist of operative liabilities. So no change there from the previous quarter. And the more detailed first quarter financials you can find in the appendices as before. And we will issue the second quarter results on the 20th of August. And also the half-year financial report will be issued on that date. Charles, you're on mute.
Thank you, Mari. Just to conclude, on the veterinary side, we're really excited about the CVS pilots being successful and the rollout also, the ongoing rollout being successful, right? It's a really big milestone for our expansion in the U.K., right? And improves the implementation architecture scalability of our solution. Excluding CVS, we also continue to sign other clients. And third is we've taken a more aggressive approach in Nordic migration to Provet Cloud that has led to some churn but will dramatically simplify operations for us. On the therapy side, we had a slower than anticipated migration due to the pilot pause, right? But pilots will be resuming in June. What's really exciting for us on the therapy side is that once we are localized for those specialties or subspecialties, right? It's a fully automated migration. So all of our pilots were fully automatically migrated.
There was no onboarding or training needed by other people and very limited support post-migration. The support tickets for these upgraded users or pilots have actually been lower than they are quite significantly lower than they have been on the legacy solutions. We're very excited about that and the impact that it'll have once we have more and more of our customer base onto EasyPractice. We also have had 30 clinics onboarded to our booking portal, Nordhealth.fi in Finland during the Q1 pilot phase. The first sale has been made. That's an exciting new development. We look forward to scaling that booking portal in Finland. On the guidance side, no change to the guidance. We are still reiterating despite the CVS rollout acceleration of 15%-20% recurring revenue growth with constant currency, right? An EBITDA minus CapEx breakeven by Q1 2025. Great.
Now off to questions. So as I mentioned at the beginning of the presentation, please feel free to add questions on the chat or feel free to raise your hand and I can say the question. We initially have a few questions from Ollie. So I'll repeat the question first and then either I will answer them or I will answer it. So the first question from Ollie was, did you experience any negative Easter effect on sales or working capital? Mari?
Nothing material. So our revenues are accrued over the period of the month. So always if our customer contracts are made mid-month, we start accruing revenues mid-month. Of course, sales activity over holiday periods is impacted somewhat, but nothing material on that side.
There was a second question on, there's a slowdown in organic new customer sales growth year over year on a group level.
Could you elaborate on the drivers behind this? So if we look at sales, right, the way I like to look at it is looking at signed AR, right? Not just implemented AR, right? And so there has actually not been a slowdown if we look at the change in signed AR plus the change in implemented AR, right? It's actually accelerated year-over-year. And the last 12 months have been our best months that we've ever had. But yes, there has been a slowdown if you look at implemented AR. And that has two reasons. One is that resources are going from implementing other clinics to implementing CVS, right? So the pilot has been, even though they weren't live in Q1, it has taken a lot of resources to make sure that it can actually go live.
The second is that the CVS rollout, it's also a net retention. So that's probably a big explanation for it as well. Ollie, does that answer your questions? Hopefully. Well, let me know if it doesn't and we can clarify some other points. Any other questions? Okay. There's no other oops, yes, there's another question. Thanks. So question from Mateo. Can you comment on the development in the U.S.? What is the development strategy going forward? Can you comment on market dynamics and competition? That's a great question. So in the U.S., we only operate with Provet Cloud, which is our veterinary practice management software. We've got over 100 clinics in the U.S. using Provet Cloud daily. Our development strategy, there's a big overlap in development between what's needed in the U.K. and what's new in the U.S.
There are net new developments needed as well for the US, specifically on the integration side. But also on the, there's some onboarding functionality that does not exist as prevalently in the U.K.. So there are some additional developments needed. We are localized given that over 100 clinics are using us, but we lack some of the integrations for now as we've been focusing on development resources on making sure that we're successful in the U.K. with CVS and Pets at Home, right? We have had less development capacity to focus on the US. That being said, we're continuously selling in the US. The other really interesting dynamic about the US is, that is, on the payment side. The attachment rate of payments is quite high.
For smaller clinics, the profit we can make from payments can be just as much as the profit that we can make from subscription revenues. As a result, right, we can afford to spend a bit more on customer acquisition costs given that additional revenue that we get per customer. If we talk about the market dynamics, the U.S. is by far the most competitive market in the world, right? In terms of they've got great products, competitive products, both on the startup side, mostly on the startup side, such as Shepherd, Vetspire. These have good solutions. They're not yet very mature to target the enterprise segment. So that is the segment that we are going after in the U.S. and that's designing a software that's fit for purpose for enterprises dramatically different than designing a software that's just fit for purpose for one clinic.
In terms of the scalability required, the way you design the architecture, and also the way you go about implementing. Implementation can be very, very complex and often fail as we've seen in the U.S., many of our competitors have failed implementation. So that's the sort of niche market side that we're going after, enterprise, mostly small animal. We always continuously monitor the customer acquisition costs and the return on investment on that and it still makes financial sense, right? Even though it's more competitive, it's hard to find clients, right? So we will continue to develop in the U.S. And our next big goal there is to actually have a big corporate join us, right? That's been how we've been successful in all of these markets is that these corporates are very needy and that neediness drives us to up our bar in terms of product development.
And I love that, right? So fussy customers leads us to better product, right? So I love that. And so the important thing to note is that the bar is higher in the U.S., not just in terms of their integration, but also in terms of the basic processes. And those basic processes are shared globally. So the better we are in the U.S., the more gap we have before European competitors as well. So it keeps us on our toes. And I like that. Hope that answers your question.
Any other questions?
Perfect. If there's no other questions, thank you very much, everyone, for your time and we'll see you next quarter. Thank you.
Thank you.
Bye.