Hello, and welcome to today's webcast presentation, where we have Checkin.com Group presenting the Q2 report for 2023. With us today, we have the CEO, Kristoffer Cassel, and CFO, Martin Bäuml. If you have any questions, please use the form that is located to the right. With that said, I'll hand the word over to you guys. Please go ahead.
Thank you, Martin. My name is Kristoffer, I'm the CEO and Co-founder of Checkin. I think today we will keep the same format as we've had in previous quarterly reports. Basically, that I share a few points from the CEO letter and how the business have developed, and that Martin Bäuml, who is on the call, who is our CFO, that he digs into some of the numbers from the quarter. We expect you to have read the report, and we expect that you have some basic knowledge about the company since before. Also really fun that so many are listening in today. As I said in the CEO letter, we once again see a strong organic momentum in the business.
I think that's what's really characterize the second quarter. It comes after a bit weaker start of the year. It feels really good to, to be back with, with a strong momentum and, and, and a positive development. We closed the quarter on, on SEK 21 million. That's our strongest quarter yet. I, I don't think these numbers fully fully shows the, the strong momentum we have had during quarter two. A lot of the growth in the quarter came in the end of the quarter, which means that I think the, the momentum is slightly stronger than, than the numbers shows. We also say that in the CEO letter, that we passed SEK 100 million in, in revenue on an annual basis in July.
We have come into the third quarter with a strong momentum. And this is partly because of the capacity investments we done early in the year, which enable... It enabled us to take bigger volumes, and we see that we have a capacity and an ability to have a very strong autumn in front of us. The development is primarily driven by a few of our largest customers with this European airline, perhaps in the lead, so to speak. We passed this milestone. As a SaaS company, it's an extremely, I would say, extremely classic milestone. It roughly, roughly translates to $10 million, which is classic sales- SaaS milestone. I think we're yet to celebrate it internally, but we should.
It's an important milestone from us, at least internally, but it also feels good that we passed it with, with a strong momentum and a sort of acceleration still. As I said, it's driven by some of our largest customers, and we have focused on enterprise customers for a couple of quarters now, where we really try to find the largest players within each vertical and also to give extra attention to our existing customers that are really big. As I said, we have had a very positive development of the airline we, we cooperate with, which we've talked a bit about previous quarters. The increase has been gradual throughout Q2, and it's not fully reflected in the numbers.
It's also already now our largest customer by far, and it continues to grow as we speak. This is something to follow, I think, in the next quarterly reports and see how it develops. Of course, it gives us some dependence on this big type of clients, but it also shows that our growth targets are achievable, even if we just add a handful of similar customers. We believe there are still enterprise customers in many sectors outside the travel segment, where we could repeat a similar success if we play our cards well. I mentioned, for example, a large Fintech company in the CEO letter that we have high expectations for.
If we manage to repeat this success, I, I think that the, the target for 2025 of SEK 500,000... sorry, SEK 500 million in revenue is, is within grasp, for sure. At the same time, as, as we get back the momentum and we have a strong organic growth, we improve EBITDA margins with 21 percentage points. It's our highest number yet, both in absolute and relative terms, and we expect continual gradual profitability improvements as we grow. We've also sort of started to finalize the investments in capacity that we did earlier this year. I think, we expect that as we grow, that the EBITDA margin and actually all the profit margins continue to grow.
We did tie up a bit too much working capital during Q2. I think generally you should see this over two quarters because there are some temporary effects. As I said, we had a lot of the growth in the end of the quarter. Yeah, long story short, we expect normalization of the cash flow already next quarter. Also worth noting is that a lot of the growth now, I think I mentioned this, of course, it's, it's in the other segments or new segments, which sort of gradually reduces our dependence on the individual sectors. Specifically, the iGaming sector, which has historically been a big driver of our revenue and an important sector for us.
It still is important, but it's now revenue-wise, less than half of our revenues, and, and two-thirds of our customers are active in other segments. We think this, this is a long-term trend for us, and, and I think the trend towards a broader distribution will continue in the coming quarters. Obviously, we expect the travel and leisure vertical to, to grow further, but also financial services and the other segment. In the other segment, you can point out there is a multitude of, of different industries. I think it's 20 or 25 different industries that we group under others. We, we hope that one of these industries under the other can become its own vertical over time and grow as well. We have a wider base of customers than ever before.
We also remain with the 2025 targets, that our net revenue should grow on average 86% annually, including acquisitions. If we reach this, we will reach 500 million SEK for the full year 2025, and this is organic and by acquisitions. With the strong organic momentum we have now, as I said, we feel more confident than ever, almost on reaching this. Of course, it, it will also most likely require acquisitions, and we are actively working to keep finding good technologies and teams to add to our software.
I think we have been very successful with the two acquisitions that we did, and we keep looking for, for companies and technologies that are beneficial for our customers and who are beneficial for the end users, rather than adding revenue in the next quarter, so to speak. Me and Martin are working very intensively with finding and evaluating potential targets. Naturally, we can only disclose once we finalize something, but we hope to get back on that front as well. With that, I'll leave to you, Martin.
Thank you, Kristoffer. The quarterly report is full of numbers and details, so I thought I'd cover the highlights here on these couple of slides. Net sales increased by 19% compared to the same quarter last year, up to 21 million kronor. The gross margin was 81% in the quarter, in line with recent quarters, but somewhat negatively affected by the capacity investments we made during the last six months or so to be able to meet the higher volumes in the future that Kristoffer was speaking about before. We continue to realize synergies from the acquisitions, as well as focusing on operational improvements, which have led to a sharp increase in EBITDA compared to last year.
We had an EBITDA of SEK 4.3 million in the quarter, which corresponds to a margin of 21%. However, the cash flow from operating activities is a little bit weaker. Kristoffer mentioned it previously here. In general, in, in general, Q2 is generally our worst quarter in terms of cash flow, because many of our suppliers who invoice us on an annual basis gets paid during this period. Also, as we have grown, during the last few months, we've also tied up additional capital. As Kristoffer mentioned, we, we, we see that that is already normalizing now, during Q3. Finally, we ended the quarter with a cash position of, of, 33 million kronor and an equity ratio of 85%.
Going into the, to the slides here, those of you who have watched us before, recognize these building blocks, where we once again add the largest building block to date, the yellow 21 million SEK in, in Q2. It's up 19% compared to last year. If we go to the gross profit, that also increased up to 17 million kronor, which corresponds to a margin of 81%. I already mentioned that it's, it's in line with, with the historical years and, but a little bit on the low side. In the future, in the, in the next coming quarters, we, we believe that this is going to go back to the historical levels of around 85%.
We've said it before, it's these high gross margins that leaves a lot of room for investments in growth driving activities, especially product development and sales and marketing. Looking at sales and marketing, we, we have continued with these investments, of course. We see an improved efficiency and a, and a greater focus on the enterprise customers, the largest customers we have. As a percentage of in relation to net, net revenues, we are at 18% sales and marketing cost in the, in the quarter. It's a little bit lower than, than we've had in previous years, and we maintain our guidance that this will be around 25% of our net revenues in the, in, in the longer term.
Going to EBITDA, as I mentioned, we continue to see improved efficiency and synergies from the acquisitions, which led to a strong increase in EBITDA up from zero last year, up to SEK 4.3 million in this quarter, which corresponds to a 21 percentage point increase in the margin. As we scale, we continue to gradually improve EBITDA over time. So our expectation is that this will go up as we scale. Finally, we ended the quarter with a cash position of around 33 million kronor and an equity ratio of 85%. With that, I'll hand it over to Kristoffer again for some final remarks and the Q&A.
Thank you, Martin. Yeah, so to sum up, our impression of the quarter is that we're entering the autumn with a strong momentum. We have passed SEK 100 million annualized revenue, and we're passing it also with a sort of acceleration in the business. We also gradually keep improve the profitability throughout basically all the metrics, and expectation that remains for the coming quarters as well. We have a strong financial position, which allows us to play the long-term game and really think strategically about opportunities.
I think, we did investments early this year that now it's leading to, to strong organic growth and momentum in the business, and I think, it is because of our strong financial position that we can allow ourselves to do that and, and, and really think ahead. So that feels, feels great. All in all, we're happy with the quarter, and, we look forward for, for the rest of 2023. With that, I'll leave back to Martin from Finwire for some questions from the audience.
Thank you, Kristoffer and Martin, for that presentation. Now we'll jump into the Q&A section. We'll start with the first question here: How much of the turnover in July, given the SEK 100 million annual rate, is driven by the volume and the fixed costs?
Yeah, exactly. I, I, I think the person asking the question is probably referring to the fixed packages or the fixed revenue for us. So we have a part which is fixed monthly packages or revenues, and then we have a usage-based fee on top of that. We have previously not, or we haven't shared the exact split in this report, but of course, in moments of strong growth, it's usually the variable part that grows first, and then over time, sort of you, you increase the fixed component. I think it's fair to expect that a large portion of those is variable, but they are variable in such a way that we expect a continuation going forward.
The EBITDA margin improved by 21 percentage points, which is stronger than the improvement in Q1. What's behind this increase, and will that and will this development continue in the coming quarters?
I think there is two main components. One is that as we grow, thanks to our high gross margin, we get more and more money as gross profit. At the same time, it's also our efficiency internally, where we've been, I think throughout our history, quite capital efficient and also managed to realize some synergies from the acquisitions we've done. That combination means that we expect as top-line grows, that the cost base will not grow as quickly and that the EBITDA, both in terms of margin and in absolute numbers, should step by step grow.
You mentioned that growth accelerated in the latter part of the quarter, and you passed SEK 100 million on an annual basis in July. What can we expect for Q3?
Those of you who have followed us, know that we, we try to not, not to not look too, too, too long into the future. What, what we can say is that July had a very strong momentum, and we passed this SEK 100 million with a sort of acceleration, I would say, and a strong demand from new and existing clients. Yeah, we have, we have good hopes for, for Q3, and, and I, I think, let's see where we, where we close that. Again, we are in here for the, for the long run, really, and, and for us, the, the key is that we keep growing long term as well and not a single quarter, so to speak.
Okay, thank you. In several reports in a row, there's been talk of a continued increase in volumes from a large airline. What would you say is the potential there, and how much of the potential would you say that has been reached already?
... I think probably when we release the, the Q3, Q3 report, we can share some more information about this, and, and probably see slightly better the, the full, or at least part of the, the potential in this client, because it's only part of the Q2 report, as we say, it doesn't fully show in the Q2. We have previously said that we believe somewhere between 1% and 2% of their customers used our software earlier this year. Of course, our internal goal is always to increase that to 100%. If we manage to do that, there is still potential left, and quite a big potential.
So basically two things: there is potential that is yet not seen in the Q2 report, and even from existing sort of run rates, the today's usage, we believe there's still potential to increase further.
The iGaming segment is now a minority of, of your revenue. Are you continuing to lose in this, this segment, or is that more of an effect of other sectors growing even stronger?
I think it's a combination of, of other sectors growing quickly, especially the travel segment. Also that we have a very strong position within the iGaming segment, and we keep adding clients and have positive cooperation with some of the best players in the market. In a macro level, the iGaming market has had a challenging year, I would say, especially in some of the territories where we have traditionally been very strong, like Germany. So we continue to expand, I would say, and we hope that the sort of macro level for that segment improves. But that's very, very lucky that we now have a broader distribution of segments as well, which should give added stability. We see potential in the iGaming.
We are, I would say, successful in adding clients and keep working with some of the best brands, but the industry in a macro level has had some challenges.
EBITDA margins continue to rise, but at the cash flow level, you are still negative. Can you comment on when you think you'll reach break even on cash flow?
I think, Martin, as well as myself, we went through some of the reasons and how we see this, in terms of the working capital and the cash flow. We have not guided for when we'll be cash flow positive, but we have said that we expect a normalization of the cash flow during Q2, Q3. There was a wedge, I would say, between the EBITDA and the operating cash flow during Q2. We expect that wedge to close and that gap to close, and that we have a more normalized cash flow. That probably means that the cash flow will be positive fairly soon if we keep improving the EBITDA, EBITDA margins.
We have a strong cash position also, so it's not, it's not the goal in itself, right now.
There's not a lot of Swedish Fintech companies with 150 million users, and also several at Checkin have a background from Klarna. Can you say anything more about the new collaboration you mentioned in your report?
My short answer is no. I can maybe speak generally that, of course, the way we word certain things in the CEO letter is because of a reason. We try to be open to the market in regards to which companies we are, we are trying to work with, which, which, clients might become big clients of ours, in the future and expand our cooperation and so on. We- there is a reason we, we don't want to share more details, than that right now.
Understood. Thank you. Do you have do you expect a similar development together with the new fintech customer that you had with the airline?
I, I, I, how should I say? I, I think we hope for that. If we can repeat the success we have had with the airline so far, like I said, we don't need many of those clients to reach our growth target for the next two years, if we can add that scale of Enterprise clients. The fintech has the potential to become that, but of course, it will, it will take time, and as we've seen with the airline, we have cooperated with that client for, for more than one year, before we see this increase. I, I think Enterprise clients, they, they really show the potential and, and the sort of leverage that you can get when, when you are successful with them.
The drawback is that it takes a long time. You need to have patience, you need to trust the process and let it take time, and then get the reward at the end of it. I think we should see that quite long term. But of course, it is our hope that we can replicate that success. Yes.
Has the Fintech customer communicated any plans for, for, for their volumes?
No.
how would you say a successful rollout of another large customer affect the company as a whole?
I, I think if you look at us and, and at the Q2 report, first thing is to fully grasp the impact of this one client, the airline, so to speak, and I think more will be visible in the next quarterly report regarding that. Of course, it, it has a huge potential if we can replicate that success, if we can get the biggest players, both offline and online, to adapt our software, that's a way to reach our, our growth targets and do that with a large part organic growth. It is important, and as our focus is on enterprises, each single enterprise client becomes quite important. So yeah, let, let's see.
We hope to continue working, and, and we have patience in that, and we think long term. So let's see when we can add the next big player.
It is mentioned that cash flow was suppressed due to you tying up an unusual amount of working capital. Could you elaborate on that?
I think that answer has largely been covered, both by me and Martin, so I'll, I'll refer back to my answer regarding the cash flow.
Okay, thank you. Profitability remains strong, and according to the report, it is expected to continue upwards. How do you see the company's profitability versus growth in the long term?
Yeah, I get this question some- sometimes, and, and I think it's important to, to note that we have one financial target, which is the growth target, and this is what we're really focusing on. As we grow, thanks to our strong gross margins and thanks to the fact that we are a software company, which means that it really scales, we expect the margins to, to go up and the profitability to go up as we grow. Growth is the target, and as an effect, if we reach that goal, I think we'll have quite good profitability. The growth is, I think what will drive the profitability. The growth is the target.
Acquisitions are one of the path towards your goal in 2025. What's happening in this area, and when can we expect any news?
Yeah, exactly. We, we haven't. It was more than a year since we finalized the last acquisition. Both me and Martin spent a lot of time actually on the acquisition side and the M&A side. Unfortunately, because of the nature of that, we can only communicate the things once we finalize something, basically, and the market doesn't really see all the effort and all the things that are close or all the things that are bubbling, so to speak. But we believe there's still a good technology and good teams out there that can add to our software, and as I said earlier in my pre-presentation, that we're focusing on things that makes our software better for our customers and makes our software better for the end user.
If we do that, the growth and the revenue will come over time. We're not really looking to add acquisitions, you know, to get revenue the next quarter, so to speak. We're still looking for technology to add to the software. We think there is good, a number of good cases out there, but, let's see when we can come back and, and announce something around that.
Okay. Thank you very much, Kristoffer and Martin, for that presentation and answering all the questions. Also a big thanks to all of you who followed along for Checkin.com's Q2 report for 2023. Hope you have a great rest of the day, and until next time, thank you guys, and goodbye.
Thank you.