Great. Thank you very much for your time. We're gonna be recording this presentation, and we'll be posting it online after the presentation as well as the slides. All right? Thank you very much everyone for making the time to join us to go through the news of the acquisition of EasyPractice and why we actually went forward with it. I wanted to start this presentation with a reminder of what is our M&A strategy and our M&A history. If we look at the history of our M&A for Nordhealth, right? We've acquired quite a few practice management software companies, and the strategy has been very much the same since we started, right?
We purchase usually legacy practice management software, and then we migrate them to our cloud software, right? We've done that starting in 2005 with the acquisition of Provet in Finland, then we did that again in therapy side in Finland with the acquisition of Praktika, then we did that with Trofast, Sanimalis and Vetserve in 2019, which are practice management software for veterinarians in Sweden and in Norway. We're doing that again with Aspit that we acquired last year. For EasyPractice, it's slightly different. EasyPractice is a modern cloud software. They've got a very high quality software. They target therapists, but a different type of therapist. We'll go through what's different about the EasyPractice acquisition versus the rest.
It's good to understand why we focus heavily on M&A. One is, and these are the same rationale that we emphasized during the IPO. One is that high level, it's a winner takes all market that we're in. Practice management software for these niche healthcare niches require a huge amount of investment in research and development to be able to compete. And we need to be able to spread that among a larger user base. Second is it helps us accelerate our expansion to new geographies, but also new markets, and the acquisition of EasyPractice does both, right? New geographies such as Denmark and other countries for therapy, and then new markets focusing on the sort of smaller or individual therapists.
Third is, and this is a really important one that we learned over time, is that we can help secure a really knowledgeable team that can both market, sell, implement, and support new products. Third is improving the core product that we have. If we have one core product like Diarium, for example, for therapy or Provet Cloud, when we actually have acquired a software, we've learned a lot from them in terms of through a deep dive analysis. Next is it's an affordable way to capture new customers, right? It's quite expensive to be able to capture them organically as well. Acquisition has traditionally been a route which we've been able to acquire new customers quite efficiently.
Penultimately, we've got also a high degree of stickiness and trust with the actual company, and especially the employees, so which makes it very likely that a certain customer of one company that's been acquired will migrate to the software of the same company. The last point is that does also remove competitor, which is an added bonus. In terms of where we are in terms of M&A, right? The strategy is one is to identify attractive new countries, right? Based on average revenue per user, right? Market size, competitive landscape.
Second is that we normally acquire the PMS companies that have some of the strongest customer base in that market and the strongest local team, and then we work with that local team to be able to localize normally the core flagship PMS and integrates with the local stakeholders, for example, local integrations. Fourth is that we actually do migrate those customers and upsell those customers on the flagship PMS, right? Fifth is that we upsell them on other sort of types of add-ons, such as payments or consumer apps and so on. For the case of EasyPractice, right? EasyPractice is already a very strong base focusing on quite a separate market, right? For the foreseeable future, we'll see that as an independent platform, right? Independent from DR.
They're organically growing quite well, but they can target and continue to be able to develop that platform. There will be some features over time which will be shared more and more over time, right? Which will enable us to get synergies on product development side. The current product is very good. In terms of numbers, right? We've got still list of 100+ potential targets, of which 15 are sort of priority 1, priority 2, acquisition targets. We've closed this, our first acquisition of 2022, right? We believe that over time, similar to our previous ones, because of growth of organic growth, that we'll be able to significantly increase both the customer value but also the value of the total customer base. A little bit more about EasyPractice acquisition.
EasyPractice is a very fast growing cloud-based software-as-a-service practice management software that's targeted for sort of smaller therapy clinics. It was founded by two wonderful founders, Emil and Bo in Denmark in 2014. They currently focus on booking, scheduling, and billing services for therapists across Denmark, Norway, and Sweden. They are in other countries internationally, right? Those are currently their main markets. You can see the ARR split to the right-hand side, where roughly 80% of the ARR comes from Denmark, 13% from Norway and 7% from Sweden. What's really interesting about this acquisition is their go-to-market strategy and their onboarding strategy. They've got a fully automated low-cost acquisition model, right? It generates a huge amount of inbound customer interest.
Today, they've got over 30,000 registered customers, which are psychologists, psychiatrists, physiotherapists, and chiropractors that use the software, of which around over 3,300 are actually paying users. There's a big freemium component here. They've got roughly 22 employees and consultants that are working both in Denmark and internationally. They actually have, very similar to us, a remote culture. They do have an office in Copenhagen. However, the majority of their employees, just like ours, are working remotely. As we said before, they are focused on serving primarily small independent practitioners and small clinics, right? An interesting way that they accommodate for slightly larger clinics who have more complex operations is through EasyPractice apps, which enables users to be able to manage that complexity without making it harder for all users.
In Denmark, the main competitors are CBET and ClickCare. What we're very excited about this is that it provides us a really interesting potential access to SME markets for therapy, both in the Nordics and also internationally. A bit about the SaaS metrics. As of January 31, EasyPractice had about EUR 1.9 million of ARR. They've been growing extremely fast. Their revenue CAGR from 2019 to last twelve months, 2021 September, which is the audited number that we did during the financial DD, was 27%. Their gross margins is around 87%, and their EBITDA margins is 25.8%. As we'll see later in the presentation, that's actually a conservative measure of free cash flow because you've got negative working capital.
The actual free cash flow margin is over 30%. 100% of the business is recurring revenue. Right? Interestingly, they've got a much higher churn rate than our traditional businesses, but also way lower acquisition cost, right? The average net annual churn rate is around 5.16%. Average MRR per account is around DKK 355. Interestingly, despite the fact that they've got a much higher churn, right? Their customer acquisition cost is much lower than ours, and their onboarding cost is much lower than ours, right? The LTV to CAC ratio is around 13x, which is very attractive. A little bit about the P&L, right? We saw that revenue CAGR was around 27%, and it's primarily driven by increased subscription customer base, right?
Which increased 117% from January 2019 to September 2021. The increase is also driven, however, by a price increase, MRR per customer increases or price increases. They were able to achieve not just pure price increases, but also through the sale of additional add-ons, right? So the average spend per customer has increased from roughly EUR 34 to around EUR 38 in the last few years. One thing you'll notice is that operating expenses have increased, and that's mostly due to an increased spending on online marketing activity, right? Bo, who's the founder who is in charge of that, realized that the unit economics made sense, so he added more fuel to the fire. Third is you can see the really strong cash flow generation, right?
The EBITDA to free cash flow generation is over 136%, right? Free cash flow margins, pre-tax of over 30%, which is amazing, right? This business has been fully bootstrapped as well. That's why you can see such high margins. Why did we buy EasyPractice specifically? One, it's a great self-service product with a freemium model, right? Which means dramatically reduced CAC payback periods, right? Less than 4 months, actually, right? We see excellent synergies in utilizing these CAC strategies and processes in our other products. Second, it's a really good team that's similarly to us, they're very passionate about improving the daily lives of therapists.
You can tell that through the conversations that we have together with the founders and also with their broader team, that they're always thinking about how to make it easy for the initial customer that signs up and so on. Third is they've got a leading presence in Denmark, in the therapy markets, which is a new market for us. That's really exciting. Fourth is their focus is more on individual psychologists, psychiatrists, right? Which we mentioned, which are really hard to capture actually with our current sales-led model. So this is a really interesting model to be able to capture sort of the lower end of the market. Five, there's a huge upside in potentially scaling internationally through this automated sort of marketing and onboarding approach. Lastly, a bit about the transaction structure, right?
We've described it in the press release, but we acquired 100% of the shares in EasyPractice, right? The initial purchase price was DKK 80 million, which is roughly EUR 10.75 million based on the AR of 1.94, which means roughly a 5.56x multiple, right? In addition, there's an earn-out payments of DKK 30 million, EUR 3-4 million, which provides us downside protection in case of potential business underperformance in 2022. I'm very confident in the founders, and I do know, and I fully expect that we'll pay out this full earn-out. The founders, Bo and Emil, are wonderful entrepreneurs, and they're looking to remain on board not only for the earn-out period but also beyond, right, and take roles in EasyPractice but also maybe in the broader therapy business unit.
That's a little bit about the acquisition. Next is, I would love to get... If anyone has questions or comments, we'd love to go through this. What you can do is raise your hand, and then I can call on you. Whoops. Hi, Maxi.
Hi.
What's your question?
Hi, Charles. Thanks a lot. On this freemium, maybe you can explain a little bit more on the sort of metrics, how they have converted their freemium customers in the past and what your expectation is going forward.
In terms of the freemium to paid conversion, as you see, if you look at the total customer base is around 30-something thousand and probably just above 3%, sorry, 10% of those are actually paid users, right? You can actually run a business with the free version, right? It's very low functionality. In terms of the conversion rate, we don't see a big change after we acquire it from freemium to pay, right? We're very comfortable with where they are today. It's more about being able to scale this model into different countries, and that's, I think, something that Nordhealth is quite good at, right?
If you look at our original acquisition, right, which was mostly in Finland, we were able to scale internationally with those both organically and by acquisition. I think that's something that we'll be able to help them out with, so doing more of the same but in new countries. In terms of the metrics, we have not gone into that publicly.
Okay
Does that answer your question, Maxi?
Yeah, yeah. No, that's very helpful. Thanks a lot.
Any other questions? Please feel free to raise your hand. Akash?
Hi, Charles. Thanks for this, and congrats. Just wondering what was the motivation for the founders to sell and but stay on. What was their rationale?
Yeah. I mean, we've had quite a few discussions about this. There's a couple reasons. One is that they've realized that there's a lot of consolidation in the industry, right? They've realized that in order to compete long term, right, it is probably good to ally yourself with a bigger provider which can afford to finance the R&D costs, right? A strategic thing. Second is that they're excited by the problem, right, and that the reach that it, being part of Nordhealth, what that means in terms of being able to access way more therapists, and being able to improve those, a lot of those therapists. Those are the two main reasons. Then 3rd is that they're, it's taking some risk off the table, right?
They're also considering, post-acquisition, maybe investing in Nordhealth as well.
Right.
It'd be a win-win for all if they continue to do well with EasyPractice. Probably one last one is that we do have a broader organization in therapy, and over time, maybe after the earn-out period, both Bo and Emil might take on bigger roles in the company, and that's quite exciting, right? Instead of having a team of maybe 10 developers, right, and designers and product managers, right, you can maybe manage a team of 100, right? The power that gives you is quite impressive.
Both founders, I think, are not hugely motivated by money, I think, and so they really, you could feel it is one consideration, right, but it is very much the passion for the product and the industry that drives them. I think both are on the actual call here.
Great. Yeah. Thanks for explaining that, Charles.
Any other questions? Perfect. Well, thank you very much, everyone. So as next steps, we'll be posting this presentation online as well as the recording. If there's no other questions, thank you very much for your time. Thank you. Bye.