Hi, and welcome to today's webcast with Checkin.com Group, where we have the Interim CEO, Kristoffer Cassel, and CFO, Martin Bäuml, presenting. If you have any questions, please use the form located to the right, and with that said, please go ahead with your presentation.
Thank you, Martin. Welcome and good morning. Great to see so many people listening in. My name is Kristoffer Cassel, and I'm the Acting CEO. Together with our CFO, Martin Bäuml, I will walk you through our report for the third quarter today. I hope you had a chance to review the report in the morning and also that you've read our previous market update that we communicated three weeks ago. The plan today is for me to start by discussing the company's general development, followed by Martin, who will go over the financial parts. After a brief summary, we will also open up for Q&A. The third quarter has continued to be challenging for us, much like the rest of the year has been. At the same time, we continue to see strong demand for our products and for our company, which we hope to capitalize on in 2025.
Our revenue in the quarter amounted to SEK 18.6 million. It makes it to the lowest quarter in terms of revenue this year. If we compare it to the last year, the loss is primarily driven by lower revenue in the travel segment. If you compare for the quarters during 2024, the quarter is mainly affected by the loss of revenue from Datacorp with SEK 3.3 million. As I said in the beginning, we had a tough start of the year, and we see 2024 as a lost year for us in terms of growth, which we are, of course, extremely disappointed with. This is primarily driven by our significant investments in product and marketing in the travel vertical, which has not been paid off yet.
However, we are looking forward with great optimism into this vertical as we made serious investments through the year, and we are in many discussions and ongoing procurement processes with many leading global airlines around the world. As we previously communicated in our market update, there are some concerns regarding our collaboration with this large Swedish fintech company, meaning that we currently have no revenue from this customer. However, we hope that this agreement should be up and running again. We have significant opportunities to capture market share in the emerging Brazilian regulated iGaming market, which is expected to be regulated to start from January 2025. We have also previously announced a partnership agreement with Creatio and are now live on their marketplace. That means that over 7,000 companies globally can use our products through a simple configuration on the Creatio platform.
This allows us to reach new industries and regions where we haven't had any previous business. As I talked about in the beginning of the call, Datacorp is a company we acquired in the beginning of 2022, specialized in advanced technology, particularly in image analysis and facial recognition, and is now fully live as part of our software offerings. With the acquisition of Datacorp, it was included revenue from a client called RingCentral, which was about 1.1 million SEK per month. It was, however, also associated personnel costs at the same levels. It's been difficult to scale this opportunity together, and we have, for that reason, agreed with RingCentral to end the partnership. As a result of that, we recorded a negative net revenue of 3.3 million SEK in the quarter, while it also reduced the cost by the same amount.
This has led to a reduction in the number of employees in the group, decreasing from 63 to 55 in the third quarter. Over the last year, we've made heavy investments in both product and marketing, especially targeting the travel vertical. Although this investment has not paid off yet, we are convinced that they are the right steps for the future. This industry has much longer processes compared to other sectors, especially regarding procurement and regulatory compliance, which makes it take considerably longer for us to close deals. Today, I feel there's a strong interest in the products through the entire vertical, particularly from airlines, and I'm happy also to announce that during the quarter, we signed an agreement with FlightHub, which is a leading online travel agency in North America with over 5 million customers annually.
This also demonstrates the broad uses of our technology within the travel vertical, so it's not only targeted, for example, to airlines and so on. We remain engaged in multiple serious discussions with several global airlines, where we have made some really good progress, and we hope that we are approaching deal closures. In parallel, we are involved in several global procurement processes. The iGaming industry has been a quite lean year for us, both due to challenging markets for existing clients and perhaps a little bit reduced focus on this industry on our part ourselves. However, we are now starting to see some demand rebound with a higher influx of customers and greater interest than before.
I want to highlight the agreement with Stake.com, the world's fastest growing iGaming company, that we have already led to additional contracts for our products, even though they have not been going live yet. We also see great opportunities in the upcoming regulation in Brazil, which is expected to take effect on the 1st of January 2025. As part of this, we have already signed an agreement with Superbet, one of the operators that are expected to be one of the market leaders. With the current regulatory momentum and a general focus on enhancing customer knowledge, we feel really well positioned for additional opportunities going forward. As we previously announced, we will not meet our goal for the full year to reach 80% of this classic SaaS metric, Rule of 40, which combines the growth per share and the EBITDA margin.
However, the goal remains in place going forward, and our ambition is to exceed 80% on an annual basis in 2025 as well. And with that, I will hand over to Martin to summarize the financial parts.
Thank you, Kristoffer. As we've done previously quarters, the report itself has all the numbers you can think of, but in this presentation, my thought is just to go through the financial highlights, so starting with revenue, it fell 38% compared to the same quarter last year, landed on SEK 18.6 million. That growth was not affected by any acquisitions or disposals, so organic growth was also minus 38%. The gross margin was 73% in the quarter, lower than what we've experienced previously, and as we mentioned previously, it's due to the capacity that we are building to meet future demand. Despite continued depressed revenues, especially compared to Q3 and Q4, as you saw on Kristoffer's earlier slide here, combined with lower gross margins, EBITDA still lands at plus SEK 4.3 million for the quarter, corresponding to a margin of 23%.
The cash flow from operating activities was +SEK 2 million. We ended the quarter with a cash position of SEK 30.2 million and an equity ratio of 87%. Going into the details on net revenue here, for those of you who followed us before, you recognize this format where we've added another block, SEK 18.6 million in the quarter. That's 38% lower, as we already discussed, compared to last year. The decrease from last year was primarily driven by loss in the travel or lower revenues, I would say, by lower revenues in the travel segment, and especially our largest customer. If you compare it sequentially to Q2 this year, the loss in revenue compared to Q2 is primarily driven by the loss of or reduction of the revenues from Datacorp and RingCentral that Kristoffer already covered.
Going to gross profit and gross margin, gross profit landed at SEK 13.6 million in the quarter. That's lower than last year, driven by decreasing revenues, as we already mentioned. And the margin of 73% is also lower than what we've experienced previously, around 80%-85%, as you see there for full year 2022 and 2023. And this is because of the investments that we are making in expanded capacity in the systems to be able to handle higher volumes and higher demand from our customers, and especially costs for server capacity and similar. So when our larger customers push through more volume and use our software more, just like Q3 and Q4 last year, we are ready to handle it, and the margin will go up again. The gross margin will go up again.
The reason behind this is that many of our direct costs, especially servers and capacity-related direct costs, are not completely variable with the underlying volume. So it's more like incremental capacity steps is probably the best way to describe this. And then you have this dynamic with a lower gross margin when revenues fall, and on the flip side, when revenues grow again, we expect the gross margin to go up. Going to sales and marketing, we have increased these investments slightly compared to last year. We invested SEK 4.3 million in sales and marketing during this quarter, corresponding to 23% of revenues. And we are at 21% of revenues so far this year, as you see on the right-hand chart there. Going to EBITDA, it decreased a bit from last year, landed at SEK 4.3 million in the quarter, corresponding to a margin of 23%.
And the decrease from last year is driven primarily by falling revenues and gross margins, but it's also partially offset by lower personnel costs, as we were able to reduce the personnel associated with Datacorp and RingCentral, which Kristoffer also already covered. And then finally, if we're looking at the cash position and equity ratio, we ended the quarter with a cash position of SEK 30.2 million and an equity ratio of 87%. And with that, I'll hand it back to Kristoffer for some closing remarks and Q&A.
Thank you, Martin. To summarize, we view 2024 as a lost year in terms of growth. In the short term, our investment, especially in the travel sector, has not paid off. But we have a strong belief in this vertical going forward. It's a really big interest of our software. As we also previously communicated, there is some uncertainty around our future collaboration with a large Swedish fintech company, meaning that this partnership is currently not revenue-generating, but the contract remains intact. The contract tied to our prior agreement with Datacorp has ended, which had a negative effect on the revenue and growth in quarter three. We are in several discussions with global airlines where we see that we could close deals quite soon. We see substantial opportunities for capturing market share in the upcoming regulated Brazilian iGaming market.
Despite the challenges this year, we continue to feel that we are in a strong position and that we should be able to scale up going forward. Before we move to the Q&A, I would like to thank those of you who are following us and listening in. If you feel anything is missing or you want us to clarify certain points in future presentations, please feel free to email us at ir@checkin.com. With that, I will hand it over to Finwire for the Q&A.
Thank you for that presentation, and yes, let's jump right into the Q&A section here. We'll start with the first question. How does the payment model with Creatio work? Is there some type of revenue share?
So we classify Creatio as this type of platform deals. The platform deals can work in different types of commercial setups, revenue share, reselling, and so on. In this particular case, it's more of a reselling deal, which means that we're selling to them and they're adding a markup on top that they're selling to their customers. That means that it's really scalable and it's also more attractive for them that they can sell this directly to their customers.
In previous reports, you have referred to seasonal variations in terms of the travel volumes. Why does traffic not return if these are seasonal variations?
It is a seasonal variation industry. Normally, quarter three, especially in Europe, is always the strongest, followed by quarter four. I think that was what we saw in the end of 2023. But at the same time, we also have a reduced traffic from what is called OTAs, online travel agencies. So the information that has been communicated before has been based on the fact that we had a.
And both in the market updates and in the CEO letter, you communicate an uncertainty regarding the fintech customer. What has happened and what is the status there?
Yeah, we touched base on that in the presentation, and the agreement is still valid, but they've paused the rollout until further notice. That means that we currently have no income from this customer. So let's see what will happen. I can't say much more than that, but we hope, of course, that this contract and the rollout will continue.
I understand. Thank you for clarifying that. You have also recently told us that you will not be able to meet your financial goals for 2024. What can we expect from Checkin.com now in Q4, but also for 2025?
Yeah, we see continued challenging quarter four or end of the year. We continue, however, to feel that 2025, our financial goals are still the same. We have a lot of opportunities coming up. So what you can see is that we will try to get as much business as we can in all the different verticals that we are active in. And with the amount of discussions we are into, I feel that 2025 could be really good.
At the IPO, your business model was to sell fixed packages. Does this still apply now that your target large customers or recipient adjusted and become more tailored for your customers?
No, but the main business of us is the fixed packages. That's still, I should say, the default part of all our deals, basically. But obviously, sometimes we also need to be flexible in certain deals if it's specific regions or specific verticals and so on. But in the majority of the cases, it's fixed packages we are selling.
I understand. And you have told us that your software helps Ryanair identify customers who book tickets through OTAs. Are these OTAs they have an agreement with or only those they do not have an agreement with?
Regarding the large airline we work with, we have several different types of use cases. It's both coming from OTAs and from usual bookings. As we also communicated before, we have built some new software together to be able to attract all types of bookings, and one of the examples of that is today live in the Irish market, and we hope to be able to scale that to more markets going forward.
As you mentioned, the growth has stopped. How big is the risk of needing a new share issue looking ahead?
Kristoffer, maybe I can take this. I think potential share issues is more of a board and ownership question, but maybe we can explain a little bit our financial position and our cost base. As we mentioned a lot through the IPO and after in our presentations, the beauty of our model is that we have ongoing income or ongoing revenues from existing contracts with high gross margins. And a large part of our costs today are related to stuff that is happening in the future. We invest a lot of money in sales and marketing and also product development to build future products that do not really affect the existing revenues that we have today. So we have a quite flexible cost base and can adjust our cost as needed. Then if we require a new share issue, that's more of an ownership question.
And you mentioned for some time now that the market for M&A has stabilized, but still you have not made any acquisitions. What's behind that?
I think that's for me as well. M&A is very binary. It has to feel just right, be a good team, good technology, and so on. We made two acquisitions within a short time period, about two, three years ago, and those have been very successful, and since then, we have continued to look at many interesting companies throughout the years, and it wasn't that long ago that we were very far along with kind of contracts drafted, but in the end, we chose not to go through with it because it didn't tick all the boxes, so the short answer is that we continue to look at acquisitions, but it's very hard to say anything about this until we have a signed agreement in place.
Can you tell us something about your longer-term R&D and where you think the market is going?
Yes. Yeah. I would say the last year, as we earlier talked about, we've invested heavily, especially in the travel vertical. And we see it's a really big interest around that. We see that many companies in this particular industry want to more streamline their check-in process. They want to get away with the queues from the airport and so on. It's a really hot topic right now with both biometric and facial recognition. And we know that many travel organizations have this on their roadmaps for 2025. And so where we are right now, we will continue to invest, especially in the travel vertical. And that's where we see the market is going right now with more of the streamline of the check-in processes and so on.
In this quarter, there will be a significant difference between EBITDA of just over SEK 4 million and a total reduction of cash of almost SEK 5 million. What is driving this?
Yeah, that's for me. I think this is something that applies to all companies, including us, and not just this quarter. It's usually called cash conversion, which is the difference between EBITDA and the change in cash. And without going through too much detail, there are a few big drivers behind this. And especially for us, I would say the first or the most significant one for us is investments or the investments we do in R&D, which is the capitalized R&D expense that we show in our reports and numbers. And if you compare it to maybe an old-fashioned company like a sawmill, they need to buy machines to be able to saw the wood. We instead build software that will generate income over time. And those investments generate income or revenues over time, and that's why we put them on the balance sheet through this capitalization process.
Obviously, those costs need to be paid in this period, and that's why we kind of have a reduction in cash in this period from EBITDA. I think it was around SEK 5 million we invested in our software this quarter. Maybe the most classical one is the change in working capital. If we are getting paid from our customers or if we are paying our suppliers. I think in this particular quarter, we had a few larger invoices from our customers that were paid in October rather than during Q3. That's why we lost a little bit of cash flow there as well.
Then the last one is, or the last big one that I can think of right now, at least, is financial cash flow, which is in our case. We have loans, bank loans, and we are amortizing on those every quarter. And I think it's SEK 1.1 million approximately every quarter that we pay back to the bank. So that obviously reduces the cash position as well. So I would say this is not something strange that is happening just this quarter, and it's not something strange that we are doing as a company. This is pretty straightforward kind of accounting rules that apply to every company.
I understand. Thanks for clarifying that. It appears that neither the airline nor the fintech company follows the previously communicated rollout plans. How come?
Yes. No, but historically, it's like this that I would say almost all companies who start to work with us, especially the enterprise ones, they normally start with a little bit less of traffic. Maybe they go ahead with one market or one type of device type and testing out before scaling to other markets and so on. And sometimes it's hard for us to know when the further rollout will happen. We can only make sure that we are ready from our side. And I would say the larger the company is, the longer time it normally takes for them to scale this out. It can also be operational changes and challenges on their side or regulatory ones. So yeah, it normally takes a little bit longer time than we hoped and believed. But yes, that's my answer around that.
Thank you, Kristoffer, for that answer. Don't you think you overestimated EBITDA by capitalizing a lot of your costs?
I think this one is for me as well. This is a classic question, and I think we discussed it a number of times during the IPO process and afterwards, and I think I touched on this also in the previous question here. But the short answer is we are a product-driven company that invests a lot to build our software, and building software takes time and costs money, and you don't get revenues until it's complete. And then you can start selling it, and it generates revenue over significant time after that. So when it works like that, the accounting rules kind of force us to capitalize those investments that are relevant for this, which is the R&D costs.
And the principle behind this is the matching principle where the accounting rules say that you should match revenues and costs and by capitalizing these costs now and then depreciating them in a future period, then we have that matching between the revenue that happens in the future with the depreciation that is also happening in the future. so that's kind of the main reason that we're doing this. Of course, you can argue that you're deferring costs to the future, but it also gives a fairer picture as you match this. so that's why we're doing this.
And you talk repeatedly about the airline and the fintech company. Are there no other major projects or clients that you believe in?
I think we already in the report talked, for example, about Creatio. We talked about the opportunities in Brazil and so on. But other than that, we are in discussions with many, many large enterprise companies, especially in the travel vertical. But before something is signed there, there's basically not much more to say about that.
I understand. Thank you for that answer. The income is decreasing. What are you doing on your cost side to pare the loss of income?
I can take this one too. I think we already touched on this in a previous question where I talked about the cost base and the flexibility that we have. And so yeah, I'm not sure there's so much more to add than we have a flexible cost base that we can adjust accordingly.
How are things going in the U.S. for you guys?
Yeah, we feel it's increased interest for us as a company. We hired a new accounting manager this spring in 2024. We said it before, we are in many interesting conversations, mainly related to the travel vertical, and one example for that is the agreement we signed now with FlightHub, but it looks positive. It's a massive market, and I really hope and believe we should be able to get the higher market share there.
Okay, we take one final question here. You have long talked about focusing on larger customers. Has it had any effect yet? And for example, how has the average revenue per customer developed?
It's not really a KPI we measure, but as everyone knows who's been following us this year, it's probably has not been on the positive side, especially with our largest customer. For us as a company, it's more important to get many of these companies, so we're not having this volatility in the revenue, but the revenue per customer is not that super important for us right now. It's more a focus on to get more of these customers up and running.
Thank you very much for your presentation, Kristoffer and Martin. And also thank you for answering all of the questions we got from our viewers. And thank you everyone who followed this webcast with Checkin.com. And I hope to see you next time. Thank you very much and goodbye.
Thank you.