Agenda today. We will go through the Q1 highlights. We will revisit the outlook for 2025 and 2026. We will look at the short-term guidance and the long-term guidance. What can you expect? We'll go into and dive into the financials of Q1, the highlights from the P&L, the cash flow, working capital, and we'll wrap it up before we go into the Q&A session. All right. As always, I'm here together with my buddy and long-term partner, the CEO, Sverre Flatby. The floor is yours.
Thank you very much, Einar, and good morning, everyone. This is not just another quarter to us, it is a defining quarter, and it is a great moment to reflect and look forward. Three significant milestones have happened this quarter. The first one, we officially hit the 20-year mark. If you have not read our history in the 2024 annual report, which we published in April, please do. It captures our ambitions, our resilience, our staying power that brought us here. I recommend you do that. That is the thing that brought us to becoming the leading player here in the Nordics. This quarter, for the first time ever, we are operating as a fully decentralized business. That gives clarity, and it is easy to work and to reach our new ambitions. The reason is, this is not just a structural change.
It is also a strategic one. It unlocks agility, scalability, and speed. When we go through the numbers today, you will also see that the financial performance is very, very strong. It is not a one-off. On the contrary, this is more like a new platform, another platform that we can continue to improve our margin. All in all, before we dive into the highlights of the quarter, I think you should reflect on these milestones. Talking about the highlights, 15% growth speaks for itself. Not only that, 12% of our income is growth in recurring revenue. In this uncertain world, we are lucky to have such a strong growth in recurring revenues with less than 2% churn. The income side here is strong. Simple as that.
In addition, our performance on the profitability side, the EBITDA margin, 22%, a planned step into our target margin and actually on the upper level of our guided interval. Even stronger is the cash EBITDA because CapEx came in slightly lower than guided, meaning that the cash EBITDA is stronger. These three facts give us quite another start of a year that we've had for many, many years before. I guess you will see when my colleague dives into the numbers that this is a very, very good start of 2025. Not only the operations, but also our two acquisitions were closed this quarter, and they bring us new business, new customers, and new good products.
The AI company Dermicus and the acute healthcare company Aweria will contribute to the guiding, a positive guiding for 2024 and not be a negative aspect, although the integration is successfully ongoing. This is the facts. This is what happened. The consequence is, of course, that we look forward. We have guided. We actually started our first guiding at 20th of December last year, and we stick to that interval. We forecast NOK 460 million-NOK 485 million as the organic, business revenue for 2025. Similarly, we stick to the guiding when it comes to our EBITDA for the year. As you all know, we will have a stronger EBITDA in the second part of 2025. All in all, NOK 23 million-NOK 27 million is what we go for when it comes to EBITDA for 2025 in total. These are the highlights.
I think it's time to also reflect a bit on the income side because what is the really important thing if you look at this graph ? The darkest one here, 77% recurring revenue, is obviously the formal recurring revenue that is ongoing for years with low churn. That's one thing. If you look at the second biggest here, 19%, and put those together, you will see that that is also a semi-recurring part of our business. That means that the summary of those, we have a visibility for 2025 and even into 2026 and the years to come, which is close to 90%. That is a very strong platform to have when we run a very strong, profitable business in 2025 with ambitions to grow further also through acquisitions.
All in all, that is a very strong part of our first quarter numbers that you should have in mind. Based on the facts and based on these numbers, what about the future? Let me be slightly more specific when it comes to how we see 2025 and 2026 now. First of all, the growth showed the facts on the left-hand side, 15% from the first quarter 2024 to the first quarter 2025. That are the facts. Also the facts on the graph on the right-hand side, the first there, 2024 for 2029. Now we see with the visibility we have that we will reach the intervals published for 2025 and 2026. Remember, that is only the organic, the current organic business. Of course, we are also going to grow through acquisitions. The guiding is the same.
If you multiply as a test the first quarter by four, you'll probably see that the guiding for 2025 is slightly conservative and not a big stretch. On the margin side, how can we jump with eight percentage points from one quarter to another? I guess you all know, those of you who have followed us for years, that we have been working specifically to create this transparent decentralized organization through a couple of years. The work to make this jump was done many quarters ago by many of our good leaders and employees. This is not what happened in the first quarter. It is actually just showing the result of long-term work. We're quite happy with that.
That also means when it comes to guiding to get from 2022 and to our guided interval, 2023-2027, and then of course to our target margin, 30% in 2026, that isn't that hard if you look at the numbers and where we are at the moment. We are quite excited about the situation in our organic business and are very thankful for our good employees, getting up every morning and work with this important software business for the society in the Nordics and Europe. We have always gone through our four building blocks, how is actually Omda's business model. Those three in the bottom here, you'll probably see that first quarter 2025 really proves that it's working. It's always like this underlying market growth will be there and will be there for many years.
As long as we stick to our strict strategy about focusing on only specialized healthcare, emergency response, and highly complex value chains inside those, that is our strategy makes Omda very unique. On top of that, we get the long-term recurring revenue with low churn. The profitable organic growth you have seen proven in the first quarter is mainly through dialogue with current customers using current contracts in 27 countries, more than 600 contracts. Every day we work to secure the future that way in our organic business. Now it is time definitely to focus on the upper part of our business model and to grow faster. What we are going to do is simply look back in our history. We have more than doubled our business since we IPO'd. The question now is to double again.
We are going to do that through a combination of the organic growth ongoing, as shown in the first quarter, with additional acquisitions. We will stick to acquire very important businesses that have a role in our complex value chains and have decades behind them with recurring revenues and also a future of recurring revenues as our current business also has. That is the strategy. We are really now happy to start with this profitable growing platform in the first quarter, and to continue growing faster through M&A. Now it is a presentation of the first quarter results. We are going back to diving into the details of the numbers. Einar, get going.
Thank you. Thank you, Sverre. Yes. Let's have a look and dive into the Q1 financials. The attractive revenue diversification continues in Q1.
You will see that, after we did three acquisitions, announced the last quarter, last, last quarter last year, it has shifted a little. Two of the acquisitions we made were within emergency and one within connected imaging. You see that those have, represent though a slightly bigger slice of the pie. Also from a, a geograph, on the looking at the geographies, all three acquisitions were Swedish. You see that Sweden is now, represents more than half of the customers are, are Swedish. Then Norwegian and the rest of the world. Sweden has really increased in, in presence. We are still a very diversified company, spread over 27 countries with more than 500 different contracts. Okay. Look at this, this beauty. The recurring revenues, they have been increasing for, for years and years and, reaching NOK 93 million in the quarter.
That represents an annual run rate of NOK 373 million. That is a new record for us. It comes from public sector, public sector-like companies, minimal churn, and very stable and predictable income. The revenue mix continues to be a favorable one. Software represents 80% of total revenue. We see a stark increase in professional services for the quarter. We have the highest recurring revenue ever. You will see that we are just, you know, on the virtual, on the point where the recurring revenue covers all fixed costs in the business. Again, very strong professional services in this quarter. The number of FTEs is providing visibility for this year.
You see the cost composition here, COGS is flat, in spite of a 15% increase in revenues. You see other OpEx is actually going down and lower than our target of 15%. We are already overshooting there. Nothing specific in this quarter. We have just trimmed the costs. We should expect that to continue. The number of FTEs still includes approximately 30 consultants from Cebu. You will remember that 20 of our colleagues from Cebu left us the second half of last year. Thirty will remain there until the end of June this year, and then they will gradually be phased out. Again, we see that total cost is around NOK 94 million-NOK 95 million, recurring revenue NOK 93 million. We are just about there.
By and large, very good cost visibility, cost control in Q1 and going into Q2. EBITDA is in line with our guidance, and maybe then some, up from NOK 15 million up to almost NOK 27 million in the first quarter this year. That is a leap from 14% to 22%. It shows that the cost initiatives that we have initiated, they actually work. The increase in EBITDA is not because we performed any tricks on the CapEx or anything like that. It is still at 8%, two percentage points below our guided level. You could say that the CapEx adjusted or normalized CapEx Adjusted EBITDA would be at 24%. Speaking of CapEx, we are around the same level where it was last year, from NOK 9 million to NOK 10.4 million in total. That includes the PP&E.
By and large, it's the same. The CapEx is, as always, investment in our own software. We present business cases for those investments, and we use the same metrics and valuation criteria as we do for M&A. It is really, you know, a buy or build. We're a bit indifferent to that. Whatever is the most profitable and clever thing to do. Again, you know, that CapEx is below our guidance, so it needs to be a business case before we commit any money to it. The net working capital, it was at a record high, or should I say low, - 31% last quarter. It's still very strong. It's the third best quarter we had over, since the, in the last four years at - 23%.
So, very again, we are focusing on cash, cash management, net working capital, and more than, and we, we do like, you know, prepayment and invoicing upfront annually, semi-annually, quarterly. And, we have a target of an NWC of - 10% or better. So, we are well within the guidance there. And there's a substantial improvement you see from the first quarter 2024 to the first quarter 2025. That said, you will, if you look at, at, at the cash in the balance sheet, you will see that, oh, what happened here? It's really very explainable. Where is the cash? A large part of it is due to, we have acquired acquisitions they have to be paid for. And we have delayed some invoicing, on some of the newly acquired entities in order to improve performance, and, and, maybe do some, some increases. So improvements, improvements, improvements.
That is, that is a large part of the explanation. If you look at the business areas this quarter, we see they all perform well. There are differences between them. Some are more profitable, some grow faster, but they all perform well. The 22% EBITDA margin is not due to one business area overperforming, the rest being lackluster. On the contrary, they are all performing, contributing. You see the difference there, for instance, on CapEx. Some places we invest more, some places we do not invest so much at all because there is not a business case or, as for medication management, they are so busy implementing all the orders they have already had. You see also a difference there on, say, health analytics, very strong EBITDA, zero CapEx, zero growth, but all in all, a contributor overall. Individual differences, but they are all contributing.
That's a comfort, isn't it? All right. Time to sum it up. The key numbers, they are in line with our guiding, and maybe then some. We will continue to focus on organic growth and on the EBITDA margin. That will continue. I can promise you. We will ensure and work hard to ensure that the acquired entities are being incorporated into Omda in an efficient manner, the buy, integrate, and build methodology. We have optimized that, refined it, fine-tuned it, and we continue to do that. Kaizen. One thing typically we'll look at when we acquire a new business is to improve net working capital, cash management, invoicing, to see and explore unused opportunities in the contracts, all those things. No, we have not forgotten about M&A. We are working on that every day.
We go to bed thinking about acquisitions and we wake up in the morning, you know, thinking about clever ways to accomplish them. It takes two to tango, and we don't, you know, we're not in a rush to pay too much for something that isn't worth it. Discipline, discipline, discipline. When opportunity is there, boom, we will strike. All right. All in all, we will continue to work focused and diligently to reveal the true value of Omda to the benefit of all stakeholders. Until the share price reflects the underlying value, we will not rest, we will not sleep. We will continue to march on. Won't we, Sverre?
Of course. I'm marching already.
All right. That was the end of the presentation.
Now let's have a look at the Q&A to see if there are any questions, and there are some questions. A lot of them seem to be financial, but I'll start with one for you, Sverre. That is from Jonathan Curtis. He says, hi, you remarked a decrease in valuation of acquisition targets during the last call. Is this the case so far? Maybe it was a bit to me as well.
I agree.
I thought it was on acquisitions.
I would maybe not say valuation, but what we said last time was that, yes, we think that the hype that was there a couple of years ago, that is gone. I would say it's more sober and more realistic.
Of course, the seller wants a higher price. The buyer wants, you know, a more reasonable price. I think, as we saw last year, it was possible to meet expectations on both sides. We still see that all the targets we are discussing with, very, you know, should be possible to reach an agreement there. Okay. The next question, this one is for you, Sverre. That is with respect to the past acquisitions. What are some lessons learned from past acquisitions and integration? Is it anything you would avoid in the future?
Yes, actually it is. It's a good question. Since we've made 17 acquisitions, we've learned a lot actually. I think one thing we have learned is that we have had a structural methodology called buy, integrate, and build.
We follow that two-year plan. We have seen that, in many cases, there are possibilities to speed it up. That is what we have learned, that we have to look at each and every target in more detail and look at contracts, customer relations. As Einar mentioned, actions like awaiting invoicing for a year of recurring revenue to secure that the right things are done, like CPI or added price, et cetera. All in all, yes, we've learned a lot. I think we will try to avoid having a too standardized approach, be more focused on the actual characteristics of each target. That, I think, is the most important lesson learned.
Okay, thank you, Sverre. There are a few other questions here, and there's one from Benedicte.
Can you elaborate on where the cost cuts come from and how sustainable they are? I would like you to answer this, Sverre, because did we do anything special in this quarter? Did we do any trimming specifically for this quarter or what happened?
Good question. I mentioned it briefly, but no, actually none of these actions have been taken in the first quarter at all. They are all sustainable and based on a long-term plan. It started actually in 2022 when we decentralized the specialized healthcare of Omda. In the second half of 2024, we decentralized the emergency part of Omda. The combo of that is a sustainable platform and even more potential going forward for margin improvement because there are still some consulting costs, et cetera, that will be removed.
I would say it's sustainable and even has a better possibility for margin improvement going forward as well.
Okay. You hear the fire alarm in the background.
That's great.
Yeah. We didn't know the numbers were so hot. Okay. Let's continue on the question on acquisitions. The question there is, can you comment on your profitability requirements when evaluating new acquisitions? That is an interesting question. The thing is, when we evaluate a new acquisition or a new target, we don't mind if it's not profitable or if it's an unprofitable turnaround candidate. It really doesn't matter to us. Some of the best acquisitions we've done have been turnaround candidates.
What we do is we look at the current business, and the cash flow from the current business. We see, you know, what synergies that we can add on the cost side or on the income side. How can we improve the business? Because it is all about what will the business and what will the cash flow look from now and in the future? We are not buying into the past. We are buying into the future. How can we improve it? And if you think that there is a room for improvement, that there is a potential that is unlocked or that we can unleash, we will go into it.
On a general basis, I'd say, we like to identify the cash flows, discount them over a period of seven years, add a terminal value if it's, if it's reasonable to do so, and discount this cash flow with a WACC of 12%. That's how we do it. The same thing we do when we do CapEx projects. Very, very simple math. Okay. There are four more questions. You can continue to type in questions if you have any. The next questions, they are also related to financial things. I'll just take them one by one. One from Ben, another one from Benedicte. How do you expect net working capital to develop in the next couple of quarters? Okay. We will continue to focus on net working capital.
Again, the upfront invoicing, annual invoicing is like a one thing. If anything, we'll see that it will improve on the acquired businesses. At the same time, the pattern you see from net working capital, maybe we can bring it up on screen here. If production, yeah, there we go. You see there is a seasonality there. We typically invoice a lot just before Christmas in the fourth quarter. Last year we were very active, and it was paid in before Christmas. Around the new year, so to speak, we'll always be very cash rich. Because a lot of it is invoiced annual upfront, we will deplete those cash reserves through the year and typically be at the lowest in the third quarter. That seasonality will remain.
Apart from that, we think that, on average, we will fare better this year and improve compared to last year. Okay. The question related to this one from Alex, what do you expect the cash, free cash flow conversion rate to be? The simple answer is, say if you look at cash from operations, you see the EBIT, take the EBITDA, and then you knock off approximately 10% CapEx. That will be the cash flow from operations. Then we have some financing costs, interest costs. As we are now approaching NOK 500 million in sales, the interest on the bond is three months NIBOR plus 600 b ps, so say around 10%.
So you knock off another 10 and the rest is yours or ours. Think of it that way. Okay. I'm trying to archive this one. Yeah, there is a little break from all the financial questions. There's a question here from Jonathan for you, Sverre. That is about cross-selling opportunities. The question is, hi, any cross-selling opportunities, example of past acquisitions to share with us? What can you say? Cross-selling, how does that work in Omda?
As I mentioned, when it comes to our M&A strategy, our focus is on value chains. As we presented on the 20th of December last year, when we focused on the emergency acquisitions, you will see that we add components into a value chain, meaning that we address more users than we have from earlier.
That means, for instance, the last two acquisitions within emergency, being Predicare and Aweria, both very important add-on modules like Predicare, which is a decision support and triaging methodology, while Aweria focused on developing a software that supports the acute care part, on acute hospital. We go from a planning, an emergency business to into the operating, the callers, the call takers, who administer the calls and make a decision as soon as they can, and then address the situation with a decision, for instance, sending an ambulance, a helicopter, et cetera. Then the patient will go into an acute area. Before we acquired Aweria and Predicare, we did not have that part into the acute room. That is how we add the value chain.
To the specific answer, cross-selling in Omda would be that the customers that have these components inside, for instance, the acute area could have the use of the other types of components, for instance, in the ambulance or the other way around. That is how we do it. Cross-selling is not that a customer that has a type of software within cancer suddenly acquires something within maternity. That is not cross-selling. Cross-selling is within value chains through acquisitions, new customers that could add new components and all the customers could acquire new components. That is how we do it.
Thank you, Sverre. We have two more questions pending, but if you have any more questions, please type them in. We really appreciate the opportunity to have the dialogue with you and your engagement. Now is the time.
Okay. And, I said there were a couple of more questions on finance. One is, one of them are related to the growth plans. The question is, how do you intend to finance your ambitious growth plans? That is a relevant question. In Omda, if you look, if you look back, you see that we have grown from back in 2015, we had sales revenue of NOK 50 million, and we are now approaching NOK 500 million, so 10 times bigger in 10 years. Could have been worse. We have done this through organic growth, 5%-10% per annum, 7% the first quarter this year, and through M&A. When we have acquired businesses, we have, of course, I mean, you can pay something upfront. We have not done so many equity issues.
We have used leverage and we still do. We also used creativity and other, you know, tools in the toolbox such as earnouts or seller credit, vendor notes, et cetera. We will continue to be as creative as possible to make the most out of it. Seller credit, earnouts may not be suitable for all transaction types. Typically, it is more relevant when we deal with entrepreneurs or people who are going to continue to work here rather than, you know, a more industrial seller. It is very contingent upon the target, what kind of financing we do. When it comes to leverage, we have NOK 500 million outstanding on OMDA 02 PRO. There is a tap issue there that allows us to double that.
There is an untapped potential, literally, when it comes to the bond. Of course, we need to meet certain criteria, but with the results that we are displaying for the first quarter, if that continues and we maintain and meet our guidance, that problem, or that challenge, will absolutely be possible to overcome. That said, we have no plans for any equity issue, no plans at all. That is not on the option list. Speaking of debt and equity, that takes me to the last question. If you have any more, this is the time to type it in while we address the last question. That last question is related to debt.
Could you give some guidance for your net debt- to- EBITDA ratio for the next 12 and 24 months? That is relevant, because in the bondholder agreement, there is not a current test that we need to meet or exceed in order to utilize the tap issue. Let me, let us do a little, you know, flip side of an envelope calculation together. We, for the first half year this year, we said we will have an EBITDA margin of between 18% and 22%. We said that for the second half of this year will be between 25% and 35%. This is the one, yeah. That is this year.
That means that, if we are there, we will be in the 30% EBITDA margin for the second half of this year. Our guidance is that we will maintain that level heading into 2026. A simple, you know, flip side of an envelope calculation, NOK 500 million in sales, 30% EBITDA is NOK 150 million, and with a net debt of, say, around NOK 400 million, 400 divided by 150, less than three, do the math. That is probably the best answer I can give. We are, with the current run rate and speed we are running at, quite rapidly deleveraging the company. Okay. Not a question coming while we are addressing this one. Thank you, Alex. Appreciate it. This is currently the last one.
Do you have any debt repayment or refinancing needs in the next few years? The simple answer is no. We have OMDA 02 . That's, it's a billed loan. It matures, we, is a five year. It's so in, we, from is December 28th. And before that, we only have to service the interest. And that's it. Then we have, we have seller credit, in, but that is really, you know, a beautiful thing, because it's, it will be self-financing. Both the seller credits we have or the earnouts, they're always linked to sales and cash EBITDA. Okay. That's a simple answer for that one. Yes, they keep coming. That's a good thing. Thank you, Jonathan, for being engaged. Is hi, you guys have guided five to. The, the last, the last question. Alrighty.
As there seems to be no more questions, we have time to round off. We are a bit ahead of time, but that gives us a little more time to further improve the business. Hope you have enjoyed this presentation as much as we have. Tune in again on the 29th of August, when we will present the results for the second quarter of 2025. Until then, spring is unfolding, days are getting longer, and things are indeed looking brighter. Thanks for watching. Domo arigato. Take care and stay safe.