Good morning, ladies and gentlemen, and welcome to the presentation of Omda's achievements for the first quarter of 2025. The report and a copy of the presentation will be available on NewsWeb and on omda.com. The webcast will consist of approximately a 30-40 minute presentation and i t will be followed by a live Q&A session. You can type in your questions at any time, and we will attend to them later.
A recording of this webcast will also be available on our website, and soon thereafter, a transcript will follow. We have an exciting 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 will go into a dive into the financials of Q1, the highlights from the P&L, the cash flow, working capital, and we will wrap it up before we go into the Q&A session. All right. As always, I am here together with my buddy and long-term partner, CEO, Sverre Flatby. The floor is yours.
Thank you very much, Einar, and good morning, everyone. This isn't just another quarter. To us, it is a defining quarter, and it is a great moment to reflect and look forward. Three significant milestones happened this quarter. The first one, we officially hit the 20-year mark and i f 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. So I recommend you do that. That is the thing that brought us to becoming the leading player here in the Nordics. Then 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, and 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 we 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. So 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 gives us quite another start of a year that we've had for many years before. I guess you will see when my colleague dives into the numbers, that this is a 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 AB, and the acute healthcare company, Aweria, will contribute to the positive guiding for 2024 and not be a negative aspect, although the integration is successfully ongoing.
This is the facts, this is what happened, and the consequence is, of course, that we look forward. We have guided. We actually started our first guiding 20th of December last year, and we stick to that interval. So we forecast NOK 460 million- NOK 485 million as the organic business revenue for 2025.
Also 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. So all in all, 23%-27% 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?
Well, 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 a 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. So all in all, that is a very strong part of our first quarter numbers that you should have in mind. But then 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 and also the facts on the graph on the right-hand side, the first there, 2024, NOK 429 million.
Now we see with the visibility we have, that we will reach the intervals published for 2025 and 2026 b ut remember, that is only the current organic business. But of course, we are also going to grow through acquisitions. So the guiding is the same, and 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 8 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 are quite happy with that. That also means when it comes to guiding, to get from 22% and to our guided interval 23%, 27%, 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 will probably see that first quarter 2025 really proves that it is working. It is 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, and 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, and 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 has a role in our complex value chains and has decades behind them with recurring revenues and also a future of recurring revenues as our current business also has. That is the strategy, and we are really now happy to start with this profitable growing platform in the first quarter and to continue growing faster through M&A. But now it is a presentation of the first quarter results. Now we are going back to diving into the details of the numbers, and Einar, get going.
Thank you, Sverre. Yes. Let us 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 last quarter, last year. It has shifted a little, b ut two of the acquisitions we made were within Emergency and one within Connected Imaging. So you see that those represent now a slightly bigger slice of the pie.
Also looking at the geographies, all three acquisitions were Swedish. So you see that Sweden now represents more than half of the customers are Swedish. Then the Norwegian and the rest of the world. So Sweden has really increased in presence. But we are still a very diversified company, spread over 27 countries with more than 500 different contracts. Okay. Look at this beauty, the recurring revenues.
They have been increasing for years and years, and reaching NOK 93 million in the quarter, and that represents an annual run rate of NOK 373 million . So that is a new record for us. Again, it comes from public sector, public sector-like companies, minimal churn, and very stable and predictable income this is.
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, and you will see that we are just on the verge of, on the point where the recurring revenue covers all fixed costs in the business. Again, very strong professional services in this quarter. The FTA, the number of FTEs, sorry, 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%. So we are already overshooting there. Nothing specific in this quarter. We have just trimmed the costs, so we should expect that to continue.
The number of FTEs still include approximately 30 consultants from Cebu. You will remember that 20 of our colleagues from Cebu left us the second half of last year. 30 will remain there until the end of June this year, and then they will gradually be phased out. Again, we see that total cost around NOK 94 million, NOK 95 million, recurring revenue, NOK 93 million. We are just about there. But 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 37 million in the first quarter this year, and that is a leap from 14%- 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%, 2 percentage points below our guided level. So you could say that the CapEx-adjusted or normalized CapEx-adjusted EBITDA would be at 24%.
Speaking of CapEx, all around the same level where it was in last year. From NOK 9 million-NOK 10.4 million in total. That includes the PP&E, b ut by and large, it is the same. The CapEx is, as always, it is 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 an M&A.
So it is really a buy or build. We are a bit indifferent to that. Whatever is the most profitable and clever thing to do. Again, 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 is still very strong. It is the third-best quarter we had over in the last four years at - 23%. So there again, we are focusing on cash management, net working capital. More than we do like prepayment and invoicing upfront annually, semiannually, quarterly. We have a target of an NWC of - 10% or better. So we are well within the guidance there.
There is a substantial improvement you see from the first quarter of 2024 to the first quarter of 2025. That said, if you look at the cash in the balance sheet, you will see that, oh, what happened here? It is really very explainable where is the cash. A large part of it is due to, we have acquisitions. They have to be paid for. We have delayed some invoicing on some of the newly acquired entities in order to improve performance and maybe do some increases. So improvements, improvements.
That is a large part of the explanation. If you look at the business areas this quarter, we see they all perform well. So there are differences between them. Some are more profitable, some grow faster, but they all perform well. So the 22% EBITDA margin isn't 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 don't invest so much at all because there isn't a business case or as for Medication Management, they are so busy implementing all the orders they've 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. So individual differences, but they're all contributing. That's a comfort, isn't it? All right. Time to sum it up. T he 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. We find it, fine-tune 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 thinking about clever ways to accomplish them. But it takes two to tango, and we're not in a rush to pay too much for something that isn't worth it. So discipline, discipline. Then 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. 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, and it says, "Hi. You remarked decrease in valuation of acquisition targets during the last call. Is this the case so far?" Although maybe it was a bit to me as well.
I agree. That's what it was on acquisitions.
All right. Maybe not 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 is more sober and more realistic b ut of course, the seller wants a higher price, the buyer wants a more reasonable price b ut I think, as we saw last year, it was possible to meet expectations on both sides. And we still see that all the targets we are discussing with should be possible to reach an agreement there.
Okay. And then the next question, this one is for you, Sverre, and 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, and it is a good question. And since we have made 17 acquisitions, we have learned a lot, actually a nd I think one thing we have learned is that we have had a structural methodology called buy, integrate, and build, and we follow that, a 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, look at contracts, customer relations, and 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. So all in all, yes, we have learned a lot, and I think we will try to avoid having a too standardized approach, be more focused on the actual characteristics of each target.
So that I think is the most important lesson learned.
Okay. Thank you, Sverre. There are a few other questions here a nd there is one from Benedicta, and it is, can you elaborate on where the cost cuts come from and how sustainable they are? And 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. Einar 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. 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 is sustainable and even has a better possibility for margin improvement going forward as well.
Okay, you hear the fire alarm in the background.
That is great.
Yeah. We didn't know the numbers were so hot. Okay. Let's continue on a 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 is not profitable or if it is unprofitable, a turn better or turnaround candidate. We really don't matter to us. Some of the best acquisitions we've done, they have been turnaround candidates. But what we do is we look at the current business and the cash flow from the current business. We see what synergies that we can add on the cost side or on the income side. How can we improve the business?
Because it's all about what will the business or what will the cash flow look from now and in the future. We're not buying into the past, we're buying into the future. So how can we improve it? If we 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 the terminal value if it's reasonable to do so, and discount this cash flow with a WACC of 12%. So that's how we do it. The same thing we do when we do a CapEx project. So a 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. So I'll just take them one by one. Another one from Benedicta. 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 one thing. If anything, we'll see that it will improve on the acquired businesses b ut at the same time, the pattern you see from net working capital, maybe we can bring it up on screen here.
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. So around the New Year's Eve, so to speak, we'll always be very cash-rich and then b ecause 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. But apart from that, we think that on average, we will fare better this year, and improve as compared to last year.
Okay. Then, a question related to this one from Alex. What do you expect the free cash flow conversion rate to be? The simple answer is, say, if you look at cash from operations, you see the EBIT t ake the EBITDA, and then you knock off approximately 10% CapEx, and 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, and the interest on the bond is three-month NIBOR plus 600 bps, so say around 10%. So you knock off another 10% and the rest is yours or ours. So think of it that way.
Okay, try to arc up this one. Yeah, there are little break from all the financial questions. There's a question here from Jonathan for you, Sverre, and that is about cross-selling opportunities, and the question is, hi, any cross-selling opportunities, example of past acquisitions to share with us? So what can you say? Cross-selling, how does that work in Omda?
Well, as I mentioned, when it comes to our M&A strategy, our focus is on value chains. As we presented on 20th 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.
Then we go from planning an Emergency business into operating the call takers, who administers 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.
The patient will go into an acute area. Before we acquired Aweria and Predicare, we didn't have that part into the acute room. That is how we add the value chain. To the specific answer, cross-selling.
Cross-selling in Omda would be that the customers that has 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 acquire 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's how we do it.
Okay. 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. I said there were a couple of more questions on finance and one of them are related to the growth plans. The question is, how do you intend to finance your ambitious growth plans? That's a relevant question. In Omda, if you look back, you see that we have grown from back in 2015. We have sales revenue of NOK 50 million, and we are now approaching NOK 500 million. So 10 x 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. You can pay something up front. We haven't done so many equity issues. We have used leverage and we still do.
We also use creativity in order, tools in the toolbox such as earn-outs or seller credit, vendor notes, et cetera. We will continue to be as creative as possible to make the most out of it. Again, seller credit, earn-outs, may not be suitable for all transaction types. Typically, it's more relevant when we deal with entrepreneurs or people are going to continue to work here rather than a more industrial seller. So it's very contingent upon the target, what kind of financing we do.
When it comes to leverage, we have NOK 500 million outstanding on OMDA02 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. 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 bond holder agreement, there is an incurrence test that we need to meet or exceed in order to utilize the tap issue.
Let us do a little flip side of an envelope calculation together. 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%. 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 flip side of an envelope calculation, NOK 500 million in sales, 30% EBITDA, that is NOK 150 million. With a net debt of, say, around NOK 400 million divided by NOK 150 million, less than three. Do the math. That is probably the best answer I can give. With the speed, the current run rate of speed running at, we are quite rapidly deleveraging the company.
Okay. Another question coming while we address 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 OMDA02 PRO that is a bill of loan. It matures. It is a five-year. So it is December 28th. Before that, we only have to service the interest, and that is it.
We have seller credits, but that is really a beautiful thing, because it will be self-financing. Both the seller credits we have or the earn-outs, they are always linked to sales and cash EBITDA. Okay.
That is a simple answer for that one. Yes, they keep coming, and that is a good thing. Thank you, Jonathan, for being engaged. It is, hi, you guys have guided 5%-10% organic revenue growth and around 20%-30% revenue growth by M&A in the past. Any changes? I would like you to give an answer as to have we reduced our ambitions or where are they?
No, of course, we're not going to reduce our ambitions. I think that is a very good methodology, 5%-10% there, and additional 25%-30% through acquisitions. That is what we're aiming for. To get back on that pace, I think the most important delivery was actually what we did this quarter to actually show it, and then to continue to improve the margin.
Based on that platform, yes, we're going to continue to grow in that same as we have shown the last 20 years, 5%-10% organically, and then continue acquiring 25%-30% annually. That will be the target.
Okay. Seems to be no more questions here. I'll give it just a few second because there's always a little delay when being live and broadcasting. No, it seems like this was indeed the last question. All right. As there seems to be no more questions, we 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. Take care and stay safe.