Sorry. Okay. My name is Anders Hamnes. I'm the CEO and founder of the company. Next to me, I have Natalie Jelveh, who is our CFO.
Welcome.
Please use the Q&A function in Zoom. We'll be back to your questions in the end of this meeting. First, a quick summary. The market is, at the moment, very turbulent. We are executing according to plan. We saw early signs in the end of the third quarter. Then the recession really kicked in during the fourth quarter. Then we experienced somewhat longer sales cycles, less expansion sales, and higher churn. This continued during the first quarter in the same magnitude, not more, not less than the fourth quarter. In a normal market, this would have been a little bit better because we are rigged for higher sales in our company.
Considering the turbulent market that we are in and the uncertainty, we have executed very well in our in a way to reach our long-term objectives. We had 52% year-over-year growth in the ARR. 52% growth. This is actually very, very strong, and I'm super happy considering how tough it is at the moment. This is a very good number. The ARR almost reached SEK 100 million end of Q1. And we also had a little bit luck with the currency because we lost around SEK 600,000 due to currency fluctuations during the quarter. The net new ARR was SEK 9 million for the quarter. With the same currency exchange rates as in December, it would have been SEK 9.6 million.
ARR to sales ratio has always been very high with Oneflow, 131%. The retention rates have been dropping for the last six to nine months, but now it seems to have stabilized. For the Gross Retention, it's 91, and for the Net Retention, it's 113%, reflecting also the market that we are in right now, of course. LTV:CAC, how much we, the lifetime value for the customer, divided on the cost is close to 8 SEK. We make 8 SEK for 1 SEK we invest.
Also have been declining, but that is according to plan and because of, mainly because of the costs we had in our new markets, which I will get back to in a few slides. As you can see also on the slide here, we have included, the ARR end of April. As maybe most of you know, we send a press release in the beginning of every month with our total ARR. The reason for that is not because we are so eager to inform the market, to be honest. It's more because we want to be very open internally and talk about numbers internally among our employees, since we work towards one common goal.
Not to make our employees insiders, we have decided to never put them in that position, of course, and be very open with our total ARR. Before we go into more numbers, as always, I would like to just take the opportunity and talk about two slides to give you more, those that are new to Oneflow, a better understanding of what we are as a company. We are an e-Contract platform. We work with contracts for all departments and the whole process, an end-to-end solution for handling contracts. We are... The space of e-Sign vendors is very crowded. We are not an e-Sign vendor. We are an e-Contract vendor, so we work with the whole process. We can create contract templates in Oneflow.
We can collaborate in real-time. You can make changes. You have an audit trail and so on. It's very powerful editor. You can of course, sign. Then you have post-sign feature to manage your contracts in Oneflow. This is like all the steps in the process in one platform. Our sales channels, we have three main sales channels. We have, of course, direct sales, outbound activities, and also inbound activities. We call it high touch. This is more the approach that we use for bigger accounts. Then we have partnerships in medium touch. We have different partner programs. The last channel is self-serve, and that one comes in, I would say, two flavors. We have marketing- driven, where marketing generates leads to our homepage.
There's some sign- up for freemium, and then some of them, again, converts to paid plan. The second flavor here is what is called product- driven. That is when somebody using Oneflow invite the counterparty, and they then decide, this counterparty decides to later convert to a freemium and then again to a paid plan. Expansion. This has been a topic we talked a lot about over the last 18 months. As some of you know, we opened up three new offices last year. We entered U.K. in May, we opened up offices in France and the Netherlands in September. Every market is very unique. We have a unique playbook for every market. What works in U.K. don't work in Netherlands and vice versa.
This is, this is super, actually interesting challenge for us to work with. Now we have learned a lot, and Sales are starting to kick in. We have had several bigger deals coming in now from these markets, which is super fun. The development goes in line with our plan. We continue to invest in global expansion, but there is no plans for new offices this year, for sure. Now the full focus is on our current teams still. 32 countries, customers in 32 countries, paying. I think we have users in almost every country in the world, but that, but paying is from 32 countries. We also have a small team in Sri Lanka with developers.
Just wanna run quickly through the main feature release highlights for this year so far. In Q1, we launched AI Assist, which is based on the GPT technology. Our users can now improve their contracts and get inspiration. If you want a contract for whatever, you can just search for it or you can search for a clause or whatever you need, and then we're gonna make very good suggestions for you. If you need an NDA, for example, or an employment agreement in any language, you can just describe what you need and then boom, it's there. Integrations is one of our key focus areas from the product because it is very, very important to have super strong integrations.
We have a lot of integrations, but we focus more on having deep and very good integrations. HubSpot, we had that for years, but we are constantly making improvements to every integration, including HubSpot. We had some major releases also in Q1 in HubSpot. Folders. One of our strength in Oneflow is that we have a very, very powerful archive. We launched folders in the quarter, which makes the archive even more powerful. There's a lot of stuff around the folders, but I don't want to go into that in this call. We also launched last year a new editor, which is very much more powerful than the previous one.
During the first quarter, we added more stuff to make our users be able to customize and brand the contract in better ways, like fonts and so on. A lot of stuff that we added during the quarter. In the beginning of this quarter, we even launched two-way sync for HubSpot, and we are at the moment the only e-Sign/e-Contract vendor that offer two-way sync for HubSpot. The only one. Super powerful. Push data back and forth between HubSpot and Oneflow. We also launched a lot of stuff on the Pipedrive integration, which is we had for years as well, but still deep, deep, deep integrations is very, very important for us. We had custom data fields also supported in this quarter. AI Assist is...
We have extended this feature to include other parts of the system than only contracts. Now you can also use AI Assist for making emails and notifications and so on, through all the whole application actually. That's a very powerful feature. During the first quarter, we lost around SEK 600,000 due to currency fluctuations, it's mainly the Norwegian kroner which has slided. Actually, if you include April, the currency loss so far this year is close to SEK 900,000. As you can see from the graph to the right, we had a quite decent growth in the beginning or in the second and the third quarter of 2021.
This is also because one year earlier was the beginning of the pandemic. The growth rate we had back then was maybe a little bit higher than expected in the normal market. The growth rate that we experience right now, which is 52%, is a little bit lower than expected in a normal market. But we don't expect this to be a trend. It is little bumpy at the moment, but we will not accept this to be to continue to drop like it has for the last few quarters.
One also good news is that if you look at the churn on a month-to-month basis, we believe that the worst is over, and that the churn is about to find a floor. We had a few Peak months in churn in the beginning of first quarter and also during fourth quarter. For the last few months, we haven't been close to those levels. It seems that the worst is behind us, which is good news. Net New ARR slightly below our predictions because of sales cycles getting longer, churn is higher, and expansion also slower than it would have been in a normal market.
Again, it seems that churn is hitting a floor, that we're getting close to some kind of floor here. Also, the currency effect is also important to have in mind. Considering the tough market conditions, I would say that the fourth quarter and the first quarter of this year are strong evidence of solid underlying fundamentals within our company. I'm actually very impressed myself. If you knew how tough it is right out at the moment out there, it is kind of brutal. We are doing very well. Also, as I said, on the summary slide, we have started to get some deals now from our new offices outside the Nordics, which is super fun. Yeah. Retention.
Gross Retention includes, of course, churn and downgrade, but not expansion sales. If we include expansion sales as well, then we have Net Retention. During Q4 and Q1 in absolute terms, the churn and downgrade doubled compared to the first nine months of last year. It's mainly smaller companies with a weak balance sheet that churn. It's also larger companies that lay off people, and they downgrade to some extent. Again, churn is lower for the last few months. It looks like the peak months are behind us, and we're hitting a floor. Retention rates will pick up again as soon as underlying market fundamentals improve.
We see, by the way, we see no other factors than the economy causing downgrades and churn. No. Of course, some competition as always, not more competition than before. It's the same level as it always has been, it's related to the market that we see the churn levels that we see at the moment. The average ARR per paying user was SEK 3,100, almost actually SEK 32, 000. It's been increasing three months in a row now. We had close to 32,000 paying users at the end of the quarter, which is up 52% one year ago.
We increased our price list quite a lot actually in the end of the third quarter. If you look at the average price per user here, it doesn't seem like it's increasing it is increasing a lot, but actually, this is the average price, or the total ARR divided on the total customer count all time. It will take some time before you see the effect of the price change to kick in in these numbers. During the fourth quarter last year, we started to present our new pricing to new customers. We adjusted, made a lot of adjustments and renegotiations. This is an ongoing project, and it goes according to plan.
As I said also in the previous interim report presentation, back then, we were very satisfied with the new price list. It seemed reasonable and balanced, and I'm gonna say the same today. There is no indication that the prices that we took them up too much, even though we did a quite big leap actually. It seems balanced and reasonable. We expect our ARR per user to continue increase going forward.
Okay, net sales. The net sales for the first quarter ended up at SEK 21.7 million, which is great growth of 50% comparing to the same period last year. Of the SEK 21.7 million in Q1, 96% was software- related recurring revenue. The remaining 4% consists of professional services. As mentioned, our aim is always long-term profitability instead of quick wins, and we have invested a lot in our product and our platform, which is a very intuitive platform, and it enables self-services. This is also demonstrated in our strong ARR net sales ratio, which ended up in Q1 at a level at 131%. Looking at our net sales outside of Sweden, it continues to grow, ending up at a percentage of 28% for Q1.
What I wanted to lift here is if you compare it to the Q4 last quarter, which also was 28%, we had a one-time, non-recurring revenue in Q4, which was quite large. If we would take that away from the calculations, we would have ended up in Q4 around approximately 27% of growth. Now in Q1, we have 28%. We continue to grow the net sales outside of Sweden. We are seeing that continuous growth in our especially in our new markets as well. Our estimation is that will continue to grow, especially as we get more established in our new markets.
Currently, as Anders mentioned, we have paying users in 32 countries, and the aim is always to extend that and go into more users in more countries. Still very high gross margin, ending up at 94% in Q1. A slightly decrease comparing to the same period last year. Looking at the cost of service, sold expenses, it mainly for us contains of sales commission to partners. That has increased as we establish, of course, more strategic collaborations, which is quite important for us. Looking at that, the main cost of services that the sales commission stands for is approximately 4%, and the remaining is hosting. Our expectation is that we will continue to have quite high gross margin going forward.
Our EBITDA for the quarter ended up at SEK -17.3 million, which is corresponding to an EBITDA margin of 80%. Our goal is to have and to take a position as a global thought leader when it comes to digital contract handling. Therefore, we also have a lot of focus and a lot of investments in our product development. As mentioned previously, during Q4, we opened three new offices outside of the Nordics, which of course entitles higher costs, especially initially. However, we are seeing increases in sales and especially more increases will come as we become more established in those markets. Our increases in cost mainly consist of higher employee costs.
We had 161 employees by the end of Q1, comparing to 101 for the same period last year. This is, of course, an investment, both in our new markets, but also, of course, the high investments that we do in our product development. EBITDA amounted to -23.5%, which is corresponding to, 108% in EBITDA margin. Except for the increase in cost, we also increased the depreciation, and that goes hand in hand, of course, with our investments in capitalized development work. As planned and as always, we always aim to turn, around profitability.
LTV:CAC. LTV is the lifetime value divided by the customer acquisition cost for the last 12 months here. We came in around SEK 7.6 , close to SEK 8 . And we had actually a small increase in the LTV in Q1 versus Q2, Q4. The CAC went up more because of, again, the hiring and expansion into new markets. This is actually according to plan. Now we have to turn this into another direction because we're not gonna, we're gonna hire less, much less this year than we did last year, and no new markets this year. I also want to comment on this formula.
We have not included any expansion sales when we calculate the LTV. It's just flat, which is quite conservative, but I think it's good to be conservative. The CAC is just all sales marketing costs divided on the number of new users. We have a very strong financial position with almost SEK 190 million in the bank by the end of the quarter. We will, of course, invest our money wisely. Our solid balance sheet means that we have the financial strength to go full force even during the storm that we see right now. The current recession is, of course, painful for most companies, but to us, it's also an opportunity.
It might become easier to attract top talents going forward. There also might be opportunities along the road when it comes to other companies and new markets. We'll see. We have an opportunistic approach. All this combined with a highly competent team and very strong company culture. A scalable product that's top-notch in the market space, delivering to the most demanding customers, put Oneflow on a rock- solid position. In times when companies put greater focus on cost reductions, Oneflow is strongly- positioned to offer a critical need-to-have product sold at a low cost with a high return on investment.
Then to the goals, considering the global financial situation that we experience at the moment, we believe in a somewhat more cautious expansion approach until the economy has shown clear signs of recovery. We decided to keep the same kind of targets but just move it from 2026 to 2027. Now our goal is an ARR of SEK 600 million by the end of 2027 and an EBIT margin of 20% in the same year. While the future is hard to predict for all of us, we will never jeopardize our strong financial position. We'll always be humble and strive to make sound long-term business decisions. Then we will go into the Q&A session. Is it to me or to you, Natalie?
I can read the questions.
All right.
One of the questions that we received is, the new ARR target. How do you see the shape of the growth curve until 2027?
Yeah, that's a good question. We have not disclosed those numbers, as obviously as you know, and we don't want to do that. We can't, we don't wanna open that door. It's already complicated with this, to be transparent because we are. If you compare Oneflow to other companies in the space, we are pretty transparent with all the numbers. I think it's good if we are consistent here and don't open any new doors. We might open that door at some point, it's gonna be more thought through. Of course, when we communicate a target, I mean, for any company communicating a target, it would be wise to have a buffer, of course.
Just on a general note to that one.
Another question that we received is regarding OpEx growth. We added 50 more people in Q1. What's the plan for new hires in the rest of 2023?
To you, Natalie.
Yes, of course. I mean, we do have a hiring pipe. We do have talent that's needed, special talent that's needed, and we'll continue to do those recruitments going forward. Of course, we are being cautious with our costs. We are being cautious with our spend. There are some roles that, of course, is very necessary to hire to make sure that we reach our financial goals, long-term goals, of course.
Yeah.
We will continue to hire. With that said, we are being cautious.
Yeah. When we set our initial targets in Q1 last year, that was of course, based on a lot of assumptions. The main assumption is, of course, the headcount. We have, during the last six, nine months, sliced our headcounts projections several times. We are, as Natalie said, gonna do a few more hires this year, but far from to the same extent as before. It's more niche roles where we just need to have some cover. Focus now is that we need to bring this company into profitability. I mean, when you decide to go public, you also decide to not burn money for the next five years.
We made that decision, that we would like to make this company profitable within relatively a few years. We, we're not gonna continue to hire like we have done in the past.
Yes. Another question is regarding our international offices. When do we expect the international offices to contribute in a more tangible way?
Yeah. Of course, tangible is a definition. I mean, they already did actually in Q1. We had a few really big deals in Q1 coming in. You should expect that this year. I mean, the teams now have been onboarded for quite some time. Of course, it takes time to build a brand. It takes time to for some, it takes time to get up on and role as a sales rep. It's a new market. It's, I mean, we have to tell them first what Oneflow is before we can talk about the product, when we call somebody in France, for example. There's a little bit more friction.
Still, now we expect to start closing deals, and we already done that, so this year.
We have one final question here and it's regarding the market turbulence. Can you talk a little bit more about what gives rise to the market turbulence, and is it the same across customer groups? How are your competitors reacting?
What gives rise to this market turbulence? Do you understand that question, Natalie?
I think they mean what is the cause?
I think that is external cause. I don't. We don't have any turbulence in Oneflow. There are not any internal things that's, like, wobbling. It's all external, as we all, you know about.
Yeah.
Is it the same across customer groups? Well, that's a good question. Of course, there are differences. I mean, some branches are hit tougher than others, like we saw in the pandemic. I mean, the traveling and hotel business, it took a big beat. Now in this crisis, there are also differences within the branches, but we don't wanna go into... I mean, we of course have an ICP, Ideal Customer Profile, we follow in each market, and it's also a little bit different, actually across different markets. We don't wanna open up that door and talk about our ICP. That's too detailed. How are your customers reacting?
Sorry, your competitors reacting. I mean, the landscape, the competitive landscape is today is like it was six months ago, and 12 months ago, and two years ago. It's, I would say it's, the barriers to enter this space is getting higher and higher. If this is some kind of competition, then the dancers are all in on the floor. I don't expect any new participants in this competition. There is a lot of players in the field, but I would say, 95% of them are very uninteresting. Easy match to be a little bit frank.
There are a few that's tougher, which is good, which we like, but there are no, like, changes in the competition, I would say, during the last year.
Okay, we got a question regarding our ARR update in April. Was there any deals pushed from April?
Mm-hmm. Actually, we don't comment on the monthly updates we do. We only push a very, like, the number to be able to talk about it internally. What I can say is that obviously April is always... I mean, you have the Easter in April, so it's actually a three-month, between two and three month week, month, sorry, weeks in the month. What I can say is that to get a good month, you need to have a few bigger deals in the mix. If you don't have any bigger deals in the mix, then it's not gonna be a good month. It is very bumpy between months in a quarter.
Also typically, the first month in any quarter, I'm not talking, I'm not talking about Q2 now, I'm talking about general. The first month is always or very often a weaker month, and it's getting better and better, and the last month in the quarter is typically the best month on a general note, so to say. It is very hard for the market to make any conclusion, of a trend based on one single month. You have to look on maybe the last three months, because it's gonna be bumpy, also going forward. I would not make too much conclusions. If it's a very good or a very slow month, you have to look at the last three months, I would say.
I think we answered all the questions.
Yeah. You said that the market is brutal. What do you mean by this? Companies take a longer time to make a decision. That's why I called it brutal. Everything is slower at the moment. Much slower. Not like it used to be. With the size of our company, we are definitely scaled for a different growth, even though we are growing 52%. It is actually not that bad, but still, we want more, much more. Okay. That was the last question. Thank you for attending, and have a wonderful Friday-
Thank you.
... and weekend as well.
Have a good weekend.
Cheers. Bye.