Okay. Welcome to this meeting where we'll go through the highlights of the first quarter 2025 numbers for Oneflow. My name is Anders Hamnes, and next to me we have Natalie Jelveh, our CFO. Please also use the Q&A function in Zoom and not the chat, and we will get back to your questions in the end of this presentation. Before we dive into the numbers, we would just like to say a few words about ARR because we have made a change to this formula as of January this year. As maybe some of you have seen, we also reported slightly higher ARR numbers in our press releases from January, February, and March this year.
The reason for that is that we initially planned not to change our historical numbers, but we realized that this gave a slightly skewed or wrong picture of our performance when it comes to growth and retention and so on. We decided the last few weeks to just update all numbers back in the history to give you a more correct picture of how we are doing as a company. The changes in the formula is that before, when it comes to churn, we used notice date, and now we log churn on termination date. Also, when it comes to new and expansion ARR, before we logged that on contract sign date, and today we log it on contract start date or subscription date, invoice date, that is the same thing. This is kind of a more live ARR. Yes, highlights.
ARR was up 23% year over year, ended at almost SEK 165 million. For the end of April, we had SEK 166.2 million in ARR. We also had a quite heavy headwind in the quarter on the currency, so we lost around SEK 3.4 million on our portfolio due to a very strong kronor in Sweden. The net effect was SEK 5.6 million in net new ARR, SEK 5.6 million in net new ARR for the quarter. ARR per full-time employee up 28% and closed in at slightly north of SEK 900,000. Net and gross retention rates 101% and 89% end of the quarter, and we had 4,300 paying customers at the end of March, which is up 17% year over year. First, to those of you that are new to Oneflow, we'd just like to share two slides on what we do.
We are a platform for handling contracts, all kinds of contracts for all departments: HR, sales, procurement, legal. This is an end-to-end platform for all the steps in the process where you can create very powerful templates in Oneflow. You can collaborate in real time, make changes, audit trail, inline comments, suggestions, and so on. You do not have to jump back and forth between Word, PDF, Outlook, and a more simple e-sign tool. In Oneflow, you can do it all on one slate in a very interactive experience. Post-sign, you can archive your contracts, you can manage your contracts, you can have full control of your obligations and liabilities and so on, which is, of course, very, very important.
Throughout the process, we also offer a suite of very powerful AI services to help our users write better contracts and to also be more and to highlight risks and so on. Also, since we have an open format, we do not lock contracts down into PDF pictures. It is an HTML experience. You can have very powerful integrations between Oneflow and your CRM, ERP, HRM, ATS, or any other system that you use in your workday. Time is the most precious thing we have in life, so if you can save time, that is worth a lot, and that is what you do at Oneflow. We make you more effective.
You can save a lot of time throughout this process, and these pink staples is the time you can save if you use Oneflow compared to using what still most companies do, making your contracts in Word and PDF and mailing back and forth, and maybe upload it to an e-sign tool, which is a very, very crowded space these days. That is the staple in the middle here. If you go for an e-sign tool, you can, of course, replace the scanner on a printer, but that is only saving you a few minutes. The big potential for saving time is not in the sign stage; it is, of course, before and after you sign the contract. Highlights when it comes to feature improvements for the quarter, as those of you that know us well know, we put a lot of effort into integrations.
This is a very, very important unique selling point for Oneflow. Back in the days, if you go back five years, ten years, it was enough to just have an integration. Today, customers are more demanding, and they require really, really deep and powerful integrations with two-way sync and so on. We have a team in Sri Lanka, around 23 people at the moment, just building integrations and maintaining our public API. We have a top-notch integration to a lot of the big CRMs in the market, and we continue to just build and improve. For the quarter, we put a lot of effort into HubSpot and even the Swedish CRM Upsales and also an HR tool called Hibob, which is super big at the moment. We even launched an integration to Talentech ReachMee.
This is one of the biggest Nordic players in the application tracking space. Last year, we launched a more extensive signing order where you can have approvers and so on, build very powerful flows. In the first quarter of this year, we even extended those capabilities to the counterparties. Even counterparties can add different kinds of participants in the contract process. Some can be signers, some can be approvers, and so on. This is a very highly appreciated feature in Oneflow. We put a lot of effort into the post-sign experience, and we also added some more bulk action capabilities so you can be more effective when you organize your contracts, move the lead, and so on in bulk, not only one by one. Since contracts are part of other processes in the company, we even added what is called redirect after sign internally.
What it means is that you can connect Oneflow to a bigger flow. What is going to happen when the contract has been signed? You can trigger different kinds of actions. In the beginning of the second quarter, we launched AI Extract. This is also a highly appreciated feature where customers can upload all their old contracts into Oneflow. By AI, we extract key data so you can actually make them alive and do stuff with the data. It can be participants, it can be amounts, date fields, and so on. You can actually get notifications and play with the data, and you can build reports and so on on this key data. If it is locked down, a lot of companies still, actually most companies still have their contracts in a folder, on a drive, as a PDF or an image, then it is dead data.
We can make that data alive. More concepts within AI Review and AI Insights. This is something that we launched last year, and we're just building, building, building. Now we would give our users a lot of powerful insights when it comes to how they write contracts. We can highlight risks, we can suggest improvements, and so on, and we can also do that across all your contracts. We can highlight contracts that deviate from something, a standard or a template. For example, if you have a due diligence process, this is a really, really powerful way of just scanning through all your contracts. Even we launched a simple version of AI Review and AI Insights for customers with the enterprise tier also in the quarter.
Just as a teaser, if you want to customize and so on and do more stuff, then you would have to buy this as an add-on. Just as a teaser, we launched it for all enterprise customers. We continue to build deeper and deeper integration with HubSpot, which is one of the key CRMs in the market. Net new ARR for the quarter was SEK 5.6 million, and then we also had a currency headwind of SEK 3.4 million. If you take out that currency component, it would have been SEK 9 million in net new ARR. We have roughly 40% of the ARR in foreign currencies. I know this is an old kind of record, but still the sentiment is not fun. Sales cycles are quite long, and the market is quite reluctant when it comes to investing and so on.
This is something that I guess most companies in the software space experience at the moment. If we look at how we reported the ARR before, we had gross new ARR signed for the first quarter at SEK 12.9 million, but only SEK 6.9 million was recognized during the first quarter. The remaining SEK 6 million will be included in future periods. We closed in at SEK 165 million in ARR end of Q1, SEK 166 million for the end of April. The growth trend has been declining, and we ended at 23% end of Q1. If we take out the currency effect, the growth would have been 25%. As many of you know, we do have some goals or targets, and that has been to have a growth more than 30% and to become profitable with the current funding.
What we do see is that we will not be able in the short term to maintain a growth rate at more than 30% because now we are so focused on becoming profitable, and that will impact our investments. Midterm and long term, we stay put with our growth goal of 30% plus. That is going to happen. We will refocus back on the growth when we become profitable. Obviously, what will also improve our growth going forward, underlying market fundamentals, will at some point get back to normal. That is going to, of course, help when the investment, when people are more open to do investments and so on. We do have a lot of features, a lot of product enhancements that we know our customers and prospects would like and even sometimes require. We are filling the gaps in the product.
We are constantly working with our go-to-market motion. We are going to rebalance our ICP. We are making changes to our ICP. We are even making changes to where we put the focus in the product to meet new needs and so on. We have a lot of data and a very good picture of what we should do to position ourselves better. This is always, of course, something that takes time, but we do have a very solid plan, and we are internally confident that we will get back to and break this downward growth trend as soon as we can see that now we are at least almost profitable. ARR for a full-time employee ended at SEK 905,000 for the first quarter, up 28% from last year. Why is this so important KPIs to us?
Obviously, because this is a very good indication on when we will become profitable. We have a recurring revenue of around 98%, 98% recurring, and the gross margin is in the range typically 91-94%. For the last quarter, it was 92%. Our main cost is salary, salary, salary. When we went public in 2022, we raised a lot of money to make some investments. That was to scale up our R&D units and even to open up offices outside the Nordics. We have offices now, as you know, in London, Paris, and Amsterdam, on top of the offices in Helsinki and Oslo. We planned for having a kind of low ARR per full-time employee, but now the focus is to bring this up and to become profitable. Net and gross retention.
Net closed in at 101% in Q1, down from 109% same quarter last year, and gross around 89%, which is almost same level as it's been for the last kind of six quarters. Gross retention includes churn and downgrade. If you add expansion sales on top of that one, you will get the net retention. Churn has been quite high, and it started to pick up in the third quarter last year, and then it has stabilized on a higher level. In the first quarter, we had a churn of SEK 5.8 million. SEK 5.8 million. In the first quarter last year, we had SEK 3.1 million. Obviously, we are now a bigger company, so it should be higher, but still, it is up. The mix between downgrade and churn for the first quarter, downgrade was around 41%, and churn in terms of termination, 59%.
If you go back a year, the downgrade share was 44%. It is kind of downgrade is typically between 40-50% every quarter of the total churn. The biggest churn is also in what we call internally the bronze segment, the lowest tier, the smallest companies. Typically, between 50-60% of all the churn that we've had this and the last two quarters has been in the low-tier segment. What we call gold and platinum, the biggest accounts with biggest potential and so on, we see a very stable churn and not any uptick or downtick, and it's typically between 15-20%. It is at a more decent level. If you look at the churn reasons, there is one reason that is dominating across all segments and all industries, and that is the economic climate. This is what we get from the customers.
They lay off people, and they have to save costs and so on. This is reason number one, number two, and number three. If you go further down on the list, you will find reasons like bankruptcies, inefficient payment, some companies get acquired, and so on. Of course, yes, we do also sometimes lose because of competition, but that reason is not kind of growing or declining. It's always been there. It's a part of kind of business, so that's not on the kind of top five list, so to say. How can we increase the retention rates going forward? Obviously, as we already said, the market fundamentals will help, and at some point, we expect it to be more normalized. We are filling the gaps in the product.
We have a very good understanding of what products and customers need, and we are also rebalancing our product strengths into different ICPs and so on. This is a work that has been going on for some time, but it is going to take some time to get full effect. We know where the ocean is red and where the ocean is blue. We are rebalancing, and we have a very good plan for how to make the growth kick back again. Paying customers increased 17% for the quarter. We had 4,300 customers end of Q1, and the ACV, or average customer value, was stable from Q4, but up 5% since Q1 last year, slightly north of SEK 38,000 per account. We are planning to increase this going forward by adding more features, more value, and increase the prices.
We do renegotiate prices with old customers, and we also have launched a marketplace where we're going to add some features that will not be included in the standard tiers and only sold in the marketplace. There are many ways for us to increase our ACV. I think I'm going to leave the word to you, Natalie.
Thank you. Our net sales ended up at SEK 39 million by the end of Q1, which is a 27% increase comparing to the same period last year. As you can see presented here, our net sales are steadily increasing quarter by quarter, and that's, of course, connected to our ARR growth. We are an ARR-first company, which we are very much focused on ARR and ARR growth, and that is also something that is shown when looking at our net sales.
If we look at the software-related recurring revenue, 98% of that is the net sales consist of 98% of software recurring revenue. If we look at our shares of net sales coming from regions outside of Sweden, that is also a percentage that is steadily increasing, ending up at 40% by the end of Q1, and this is something that we estimate will continue to increase, of course, as we become more established in our regions outside of the Nordics. As you all know, Oneflow is sold all over the world, so we're also increasing our net sales from regions that we do not have a market presence. Our gross margin is quite stable at the last quarters at 92%. We can see a slight dip in Q3 between Q2 and Q3 2024, and that is connected to us establishing new partnerships.
If you look at our cost of service sold, the majority is connected to commission to our partners. If you look from a future perspective, we do believe that our gross margin will continue to be at a quite high level, around 92% going forward. EBIT and EBITDA, as Anders mentioned, we do have a strong focus on driving Oneflow towards profitability, as you can see shown here. Also, we are decreasing or improving our results going towards profitability. In Q1, we ended up EBITDA at SEK -8.6 million and EBIT at SEK -19.4 million. If we look and compare it to the same period last year, EBIT have actually improved by SEK 2.3 million and EBITDA at SEK 4.4 million. The reason for this is, of course, our focus to drive Oneflow towards profitability. We have stabilized our cost base in connection with an ARR growth.
This is shown in the numbers. One thing worth mentioning here, we did have an effect of SEK 1 million in currency, which actually lowered our numbers. If we take away that SEK 1 million, we actually would have had an EBIT at minus SEK 18 million in Q1. EBIT and EBITDA margin. I love this slide because it is really showing how we are improving our results. We are lowering our losses. We ended up at EBITDA margin at minus 22% and EBIT margin at minus 49%. That is actually an improvement by 21% comparing to the same period last year. We have stabilized our cost base. We continue to grow in ARR. We are doing all of this, working more efficiently, stabilizing our cost base. This is without any effect on product development.
That will always remain a focus to make sure we deliver the best product possible for our customers. Our financial goals are not changed. We do still believe in them. We have a financial growth of having an ARR growth of above 30% and to reach profitability with current funds. As Anders mentioned previously, our ARR growth in Q1 was 23%. In the short term, we will not reach above 30% with the current market environment. As mentioned before, we prioritize right now to become profitable. Once we achieve this milestone, and of course, in connection to the market segments being improving, we will accelerate again the ARR growth and focus on growing the ARR. We do still believe in the long run that we're going to achieve ARR growth over 30%.
Okay. We are at the Q&A session.
ARR grew 33% in Q1 and slightly higher adjusted for FX. What was the growth rate in April? Have you checked that? Actually, we haven't checked that. No, but we can get back to you on that offline. Given the current pipeline and macro, do you think you can keep the current growth rate for the rest of the year? We don't provide that exact guidance. I think we shall keep it at the level that we already have done, actually. Were there any non-recurring items in OpEx or cash flow besides the SEK 1 million in FX for staff redundancies, etc., in Q1 to be aware of? No. I mean, there's always smaller, of course, one-time cost in the results, but nothing significant or nothing bigger worth mentioning here. So beside the SEK 1 million in FX, there was nothing else that we need to highlight here.
Did the Q1 FTE reduction result in any savings in Q1, or will that be seen ahead?
The Q1 FTE reduction, as you mentioned, is not really a reduction in that matter. I mean, we will see that in upcoming quarters in the results. We have fewer employees by the end of Q1 compared to the end of last year. That will also be shown in the numbers in the upcoming quarters.
Yes. Upcoming quarters. How comfortable are you with cash flow given the current cash position and the aim to become profitable?
I mean, we do monitor our cash flow quite in detail, of course, but also we do monitor our cost base, and we always make adjustments to make sure that we are quite comfortable with the cash flow based on the expenses that we have. This is something that we do continuously, I mean, monitor. Based on where we stand today, we are quite comfortable.
Yes, we are comfortable. What is the timeline to becoming profitable and cash flow neutral? Again, we have not disclosed that kind of information before, and I think we're going to keep it at the current level.
Yeah. Definitely.
What does the current strategy mean for your international expansion? What markets are in focus? The focus is still on the markets where we do have a presence, a physical presence. We do some spikes outside these markets as well, but that's not kind of on a very low level, so to say. The focus is to increase our unit economics in the markets that we are currently covering, six markets. Other expenses were quite high this quarter compared to last year, Q1.
Is there any one-offs for this quarter, or what has caused the increase?
I mean, the FX currency effect, that is something that will be in the other expenses. That is one of the things that differs from previous quarters or previous quarter last year. There is no other bigger cost that could have, I mean, generally, all costs do increase year by year. That is the way the world looks like. Besides that, no other significant expenses.
Full-time employees are down this quarter compared to last year. Can the effect from the lower FTE base be observed in this quarter personal cost, or can we expect to see personal costs to come down further for the rest of the year?
I think we had this question earlier, and we answered it. Yes, we will see that in the numbers upcoming quarters.
Yeah. What we can say is that we have, in the last few months, made changes on several things in the company that will have an effect in the future that you have not seen yet. What is your definition of profitable? EBITDA, EBIT, or cash flow?
All three are super important, of course, but we are looking at EBITs. That is our measuring point.
Exactly. I think that is all questions. Okay.
Good questions.
Thank you for your time, and wish you all a wonderful upcoming weekend.
Friday. And Friday. Thank you so much.
Thank you. Thank you. Bye-bye.