Earnings Call: Q4 2020

Feb 16, 2021

So good morning, everyone, and thank you for joining this Q4 earnings presentations for Kherson. My name is Johan Lindqvist, and I'm the Chairman of the Board. Today also joined by our new CEO, Dennis Hoyer. And before we start walking through the agenda, perhaps we will give Dennis a chance to introduce himself Yeah. Thank you, Johan. My name is Dennis Hojer. And as of this year, I'm the CEO for Kera Sense and I've been in the Efemilia company for almost 8 years now. I started out as a salesman when we were I think we were 3 people at that time and had different roles and been within this company since the beginning more or less. And I'm very excited to take on this new role as the CEO of Khersonth. We have a very exciting time ahead of us and I will make sure it will be to the better future. Thank you, Johan. Thank you very much, Dennis. And I must say I'm very pleased and very comfortable with you as the new CEO. So that's good. So let's look into the agenda for today. We I will start with giving an overview over the Q4. Dennis will do a review of the EMEA area, both for the Q4 and also a little bit about the full year. We will discuss the acquisition of Avansoma, the background, what we intend to do in Norway going forward. We will comment a few things on financials. And then finally, we will give an outlook what we think about 2021. And of course, we will end this session as well with a Q and A. And I think you can already now write your questions. So we will answer them at the end of the session. So a short brief overview and summary of the Q4. So for Also, the revenues were €20,300,000 as compared to €14,100,000 during Q4 in 2019. So all the revenues are related to Evimeria. So the difference you see between the 20.3 and the 19.3 in SICK is all an FX effect. As you know, the FX has had big swings in between the NOK and the SICK during the year. Then we also had some expenses related to the stock options, which was a negative of 17.5 percent in the 4th quarter. And we also had some acquisition related costs for Avan Soma, together with some legal costs and prospect costs of SEK 7,300,000. So the result in total was a loss of €21,900,000 as compared to a net income of €400,000 during Q4 in 2019. We'll come back to that under the financials and explain that with a bridge a little bit more in detail. Cash balances were 2 21,200,000 on December 31. So looking at Evimeria, who has In the operational entity during the year, revenue was NOK 19,300,000, an increase of 31% as compared to Q4 2019. And EBITDA was SEK 7,700,000 as compared to SEK 5,800,000 in Q4 2019 and EBIT of SEK 5,700,000 as compared to 4.5 during Q4 2019. We signed 25 new clinics during the Q4 2020, and we ended the Q4 with 4 95 active clinics. So with that overview, we'll come back to all these items. I'll Hand it over to you, Dennis, to give a short review on Evimeria. Yes. Thank you, Johan. As Johan said, we signed 25 new clinics during the Q4. We still saw the smaller clinics was signed according to plan. We saw no other changes in their behavior during the pandemic, although we still could see some effects from the pandemic according to the larger customer segments that had to focus more on their business than changing the record systems. But over the year, we grow the customer base with 23%. It's a few percent behind the internal goals we have with the 30% growth. And it's mostly because of the larger customers that postponed the dialogues with us. But still in the Q4, So we started out good. We could see our existing customer base production almost be back to normal. Although in November we had the virus starting to spread again and the government was communicating new restrictions And we did see a small uncertainty in the market again, especially the large customer that again had to postpone their dialogues with us. Although our existing customer base production was not so affected that it was this spring. But we ended up the quarter with revenue of SEK 19,300,000 and From the quarter 2019 to the Q4 2020, we grew our revenues with 31%. And all over the year, we grew our revenue in 34%, which also is a few percent behind the goals the internal targets that we have. And it's mostly because of the larger customers. We can See some small negative effects as you hear, but we also see a lot of positive effects On this pandemic, it has most certainly accelerated health segment to digitalize the business and we are very well positioned to meet up their needs in this digitalization journey that they have to do. And as of the bigger, larger customers, maybe some of you have read on every Miriam's That we signed the framework agreement with Alaris. So that's a good thing since it was a Bill that we've been working on for some time. And they have postponed the dialogue a couple of times during the year. But we still can see the scalability of our business. We ended up the quarter with an EBITDA Now 7,700,000 and an EBITDA of 5,700,000. And The EBIT grew over the year with 42% and the margin was 27%, which is a few percent higher than the 25 Range that we're well, we're still growing. Okay. Thank you very much, Dennis. So as you can see, we had If you compare to our internal targets, the 30, 40, 50, where we intend to grow our customer base 30%, our revenues with 4% and our EBIT growth with 50%. We have had a small pandemic effect during the year. We think it's a temporary effect. And we can also say that when things come back to normal, we will be closer to our internal targets again. And we see that already this year. And we'll come back to that when we discuss a little bit about the outlook for the year. Okay. Next highlight of the quarter was the acquisition of AvanSoma. Of course, so This was the first acquisition for us, and it's for sure not the last one. Very important acquisitions to enter the Norwegian market. And we'll discuss the rationale for that in a couple of minutes. We paid €125,000,000 in enterprise value for the business. And the consideration was split between shares in Kherson and 50% cash. And you will see us do more of that Type of business splits between shares and cash, because it's important for us to keep the entrepreneurs in the companies that we acquired tied to us. We also have a lockup of 50 months into the Kherson shares that they received. So a few things on AvanSoma. They have been around for many, many years on the Norwegian market. They were leading provider of eHealth solutions for 2 new segments for us in social care and rehabilitation. So these are like similar to our own segments in Sweden. These are niche segments, but with good dynamics as we have in Sweden and also limited competition. They have a strong market position, limited churn, as we do, and a high degree of earnings visibility. So A difference between Evimeri and Avan Soma is that they come a little bit from the legacy systems. So they are transforming their systems into cloud environments. And you will see a significant growth on their existing customer base from this year and going forward. When they transitioned their offering to a cloud based offering. They have approximately €21,000,000 in revenues as of 2020, 140 customers and 22 employees. So the average customer size in revenue is similar to the size of every area customers and clinics. So why did we acquire Avan Soma? Well, for several reasons. First of all, it's a step into Norway, which is important. They have a loyal customer base and a very strong for our further expansion into the Norwegian market. It's also important when you go into new market to have a kind of an on the ground organization, knowledge, experience and a proven track record on that market. What we have discussed before when we talk about entering Norway with Webdock is that The complexity is not all that much to adjust webdock for the Norwegian market. The complexity is around all the different integrations that we have to do for the local market in Norway. And with that, Ansson, I'll get a lot of technical the solutions and integrations that we can use in our webdoc expansion into Norway. That's also extremely important. We also get local knowledge and relations into a market that's a little bit different from Sweden, which is important for us. And also of course, AvanSoma as a standalone business is a great business and there are some great people there. So all in all, there are several good reasons for us to acquire Avan Soma. And it will accelerate our expansion in Norway. So a few comments then on the financials. So as I started to say, the revenues of euros 20,300,000 is actually an increase of 44% compared to Q4 2019. However, All that revenues relates to Evimeria. So it's only FX effect. So the growth in local currency is was 31%. If you look at the EBIT result, you can see basically 2 things. There are non recurring costs related to the share issue and the Johan Soma transaction that we did in Q4. And that is approximately SEK 7,300,000. So the adjusted EBIT was SEK3.9 million and EBITDA of SEK4.8 million for KAOSANT in consolidated numbers. And we also have, which is not relating to EBIT, but we also have this stock options where we take it over the P and L. And the reason for that is when we launched this program, we decided that when the program ends, we have an option to either, A, pay the stock option holders in cash or B, do a share issue of 2 1,000,000 new shares. And when we have that option, we have to take the costs for a potential cash solution over the P and L each quarter. It has no cash effect whatsoever. So it's either that we reverse that post when the program ends, or the shareholders will be diluted by 2,000,000 new shares. So it's a little bit theoretical, but we have to do it each quarter. So looking at 2020 from another perspective, you can see that we have made a short kind of illustrative pro form a P and L, where we include the Avance Soma business, as if we have bought it in January 1, 2020. And then you can see that Erbemeria represents 70,500,000 of the revenues and Avan Surma 21.4%. And that number, 21.4, is actually also a little bit complicated because that doesn't include Soma the first two months in 2020. Soma was acquired by Avance in March 2020. So the actual run rate for Avan Soma is closer to 23,000,000 going into next year. That gives us a total revenue on pro form a basis on the NOK 92,000,000 and adjusted EBIT of approximately SEK10 1,000,000 for the year. So what about 2021 and beyond. Looking at our financials, where we stand today and the growth drivers that we see going forward, we expect the business to grow approximately 35% in 2021 from an organic perspective. That's both for Evimeria as a business unit as well as for Avan Soma. The difference between the two business units are that, as we have done before, approximately 70% of the growth in Ebermere comes from new customers and 30% from existing customers. In Avan Soamma, it will be the opposite. We will have approximately 30% from new customers and 70% from existing customers. And the growth drivers are a little bit different between the companies. In every area, we still have significant market growth. We sell a lot of new services to existing customers. And we also have new customers in existing segments. But we're also looking to new markets and segments. When it comes to Avan Soma, as I said before, It's a shift to cloud solutions and new models to existing customers. But we will also see some increase in new customers within AvanSoma. And we do expect the customer growth to come back to our normal levels, meaning that we expect the customer growth to be in the 25% to 30% range in 2021. So we're a little bit cautious around how the pandemic will develop. We see things go back to normal during this year. We will also continue to look and we have a strong pipeline when it comes to potential acquisitions. And not only growing the business organically, you will also see substantial growth from acquisitions during 2021. We continue to look from the 3 different dimensions, products and services, new segments and geographies. And you can expect to see some substantial growth also from acquisitions during 2021. So with that, We're going to open up for some questions, if we have any. So I haven't received any questions. So I don't know if this is correct, but I don't see any questions in the text here. So with that, we're going to end this session. Thank you very much for listening in. Please feel free to contact us if you have any further questions. Thank you.