Good afternoon, everybody, and welcome to Physitrack's
Q2 2025 Results Webcast. I'm Henrik Molin. I'm the CEO of Physitrack and I'm joined today by our Interim CFO, Mr. Matt Poulter. Let's dive right into the presentation. We will begin with a short overview of Q2, then we're going to walk you through the two divisions and their respective performance. Matt's going to take you through the financials in detail and then we'll have a little strategic update and our outlook. We'll wrap things up with Q and A and you can submit your questions as usual using the Zoom Q and A panel. Let's kick things off. All right, so Q2, financially, commercially, it was a very successful quarter.
What really stands out here is that.
We were cash flow positive with EUR 0.1 million in this quarter, and that's an important milestone. This marks a significant improvement from the same period last year and actually from every single quarter since our IPO in 2020. To give you some context on this, in Q2 last year we were approximately EUR 800,000 cash flow negative. This seasonal pattern is largely due to the timing of our audit fees. We have platform vendor subscriptions, and we have some other big expenses that fall in the quarter. We've never been cash flow positive in Q2 after the IPO, so it is historical. The improvement was about EUR 900,000 . There's another twist to it as well, because this year we had EUR 200,000 of restructuring costs for Champion Health in here as well. If you strip these out, we actually delivered significantly positive operational cash flow, about EUR 300,000 .
That's quite exceptional and a testament to the strength of our operations and our lean team structure.
There's more to it as well. Matt will walk you through that.
We had some legal fees as well related to the restructuring, so we were actually very deeply cash flow positive in the quarter.
Now, moving on from cash flow into.
Profitability, we've seen margin growth across the group. Adjusted EBITDA at 33% and adjusted EBITDA vs. CapEx at 15%. This reflects the successful restructuring efforts over the past few months in combination with high margin top line growth. Now, looking at revenue, it came in at 6%, driven by a shift towards recurring revenue and the phase out of lower margin one-off revenues. This is very deliberate. As you know, we've always positioned ourselves as a software first company and not a care provider. That transition is well underway. Recurring quarterly revenue is up 9% year-on-year, supported in part by a recent price rise in the Physitrack platform and that reinforces both predictability and long term visibility. It's not on this slide, but the Physitrack platform MRR grew by 28% and Wellness ARR grew by 26%.
Here's a little summary of this: very strong unit economics, operational leverage, and they mean that we're very well positioned to deliver sustainable KPI improvements now even as we maintain velocity with this tighter, optimized, tech-savvy team. Exciting times now. Divisional overview. You'll now see the updated split here post restructuring: 78% Lifecare, 22% Wellness. If you look at Lifecare here, quarterly revenue growth was 80% and it brings current annualized revenue to EUR 11.3 million. Adjusted EBITDA margin is now at 50% and it's up from 46% in Q2 last year.
Very, very nice to see the five
in front of the zero. Adjusted EBITDA less CapEx improved to 29% versus 18% in Q2 2024. Strong step forward. Matt is again going to talk you through more. The mechanics behind this churn remains very low for a low cost B2B provider like us. It's in line with previous quarters, and importantly, this is despite smaller teams delivering.
Services and doing customer excellence, etc.
More automation, more AI agent. Customers continue to perceive high value and this retention really supports that. Now within the Physitrack platform, MRR grew 28% year- on- year and we had no negative impact from the recent price rise. In fact, I'd argue we're still underpriced relative to the value that we deliver and the fact that we keep innovating.
You saw that in the intro clip.
Here with the new amazing looking PhysiApp.
Continuing to benefit from excellent
operating leverage, and that's reflected in the jump to a 50% margin. We have delivered some great innovations here, and the big thing that we're excited about now is that we're preparing to roll out a significantly enhanced version of the PhysiApp patient app in the coming months. Historically, PhysiApp development was somewhat deprioritized in favor of the provider-facing side of the platform. We know that happy end users, happy patients, influence retention through their feedback to providers, and this is why we think that this new version is super important to us.
It opens the door
to cross-fertilization between Lifecare and Wellness, especially in preventative and lifestyle-based patient journeys. Over time I think this is what we will have as a bridge into B2C. Now Wellness and Champion Health we had.
Flat growth overall, quarter- on- quarter
Champion Health software revenue growth was 9%, which is encouraging. The Champion Health business remains profitable and is now central to Wellness division growth, which is great. Champion Health is, as you know, our moonshot initiative. It has a really large total addressable market, has amazing potential, but importantly now it's a moonshot that is not eroding cash flow, and we're building momentum in a capital efficient way.
Annualized revenue in the Wellness division stands at EUR 3 million.
There's some short-term softness in the Champion Health Plus and Champion Health Nordic revenue streams as we continue to transition away from one-off sales towards subscription models, you know, more high-margin, recurring, predictable stuff. Now Nexa, which you know is our AI tool for onboarding and managing patients in capital, the rollout there with subscription offerings, that's gone really well. We're running two large insurance customers through that funnel in real time, and the data is super encouraging. We have minimal drop-off rates in patient onboarding, and we have really promising care outcomes. We'll have more to share on that soon, but so far really, really good there. While the Wellness division shows a flat revenue trend overall, do note that Champion Health software is driving this performance and is offsetting the expected decline in physical care delivery. Profitability is improved significantly because of this.
Even though the division remains slightly negative on a margin level this quarter, there are some big benefits here in transitioning to a scalable, high-margin, recurring revenue situation. Just wrapping up before I hand over to Matt. Strong Q2 operational cash flow historically, really, really, really strong, and continued margin expansion. It's a lean, optimized team structure, still performing at a high level. We're still running fast, and we're still innovating some really positive trends in both Lifecare and Champion Health. This is a really nice, clear, disciplined path to sustainable growth.
Now with that, I'll hand over to
Matt to walk through the detailed financials.
Over to you, Matt.
Thank you very much, Henrik.
Let me begin today's discussion by taking you through the key financial headlines from Q2, and more importantly, unpacking what they signal about the underlying health momentum of the business.
At face value, revenue growth of 6%
year- on- year and 8% year- on- year on a constant currency basis.
Look modest, but that number becomes a
lot more meaningful when you recall where we started the year. We deliberately restructured the business in Q1 to exit low margin and non-strategic revenue streams, particularly in the Wellness division.
Despite that, we've grown revenue and significantly increased the quality of earnings.
With subscription revenue now making up 87% of the total revenue, that's up 8 percentage points from last year. Material improvement in our revenue predictability and our margin profile. That shift translates directly to profit, with adjusted EBITDA growing 34% with a margin now at 33%. This reflects both top line quality and leaner cost structure. Importantly, the business is now generating cash. We moved from an outflow of EUR 800,000 in Q2 last year to a positive EUR 0.1 million free cash flow this quarter. If we hadn't incurred EUR 600,000 in extraordinary costs, we would have generated a really, really nice positive cash flow for the quarter. In other words, what we're trying to demonstrate here is the business isn't just growing, we're scaling up profitably and sustainably. Next slide please, Henrik.
Let's look more closely at the revenue story and in particular the two sides of our group, Lifecare and Wellness. Starting with Lifecare, the business continues to show remarkable consistency and operating leverage. We posted 8% year-on-year growth with solid sequential growth of 2% versus Q1. The main driver here is pricing power. In May, we implemented a targeted price rise and it's landing well. Customers are sticking with us. Our churn remains extremely low at just 1%, showing that clients recognize the value we deliver. On top of that, new tools like the PhysiAssistant AI module and improvements in the clinician-facing app have deepened platform engagement, which in turn supports license expansion and customer retention. If we shift to Wellness, the picture is a bit more nuanced. Total revenue fell by 24% year-on-year.
That is by design and I want to be really clear about that. We've made the conscious decision to pivot Champion Health Nordic away from one-off equipment sales and instead focus on building recurring SaaS revenue. Likewise, in Champion Health Plus, we're phasing out the unprocessable clinic model and moving towards the Nexa SaaS platform. The good news is the SaaS ARR in Wellness grew 109% year-on-year and 25.7% quarter- on- quarter. That tells us the new model is working. It just takes time to replace the low quality revenue with high quality recurring income. Next slide please, Henrik.
If we move our focus now to profitability, this slide really brings together results of the strategic reshaping we carried out in Q1 this year. On a group level, adjusted EBITDA and CapEx came near EUR 0.5 million, up from break even a year ago. That's the cleanest expression of our operating cash flow after investment, and it's moving in the right direction now. If you break that down, Lifecare continues to be our profit engine, posting EUR 1.5 million in adjusted EBITDA and CapEx for the first half of the year. The margin profile here is exceptional and reflects strong cost discipline combined with scalable revenue in Wellness. Unfortunately, still loss making, but the losses are narrowing. We're seeing early signs of operational leverage taking hold as the SaaS business scales. The big story here though is margin expansion in Lifecare.
We've increased annual revenue per user through pricing while holding churn steady. We're extracting more value per customer without eroding warranty, and that is a hallmark of pricing power across the group. Our cost base is lighter and more efficient following Q1's restructure, and we're now seeing those benefits flow through. Next slide please, Henrik. Cash and liquidity position. Let's talk about cash. Free cash flow swung from a EUR 0.8 million outflow in Q1 to a EUR 0.1 million inflow in Q2. On the rounding, that is a EUR 0.8 million improvement quarter-on-quarter. Again, that's after restructuring costs and with no help from seasonal tailwinds. This is a significant turning point. Q2 is typically a cash intensive quarter for us with annual audit fees, prepaid software renewals, and other front loaded costs.
The fact that we navigated this period with a stable cash position shows the resilience of our operating model. Importantly, we still have access to 1 million in undrawn debt facility, and we're not reliant on that facility to fund day to day operations. That gives us flexibility as we head into the second half of the year. Next slide please, Henrik. Looking at the balance sheet, we've maintained a strong and stable financial position. Net assets stand at EUR 18.3 million, and the overall structure remains healthy. We've improved working capital discipline. Receivables are coming down as we tighten collections, and payables have normalized following the Q1 cost reset. Cash at quarter end was EUR 457,000, which we view as a solid base given our trajectory. When you include the available facility, we have EUR 1.7 million in total liquidity to support operations and opportunistic reinvestment.
We're also looking ahead as we enter the budgeting cycle. For 2026, one of our key priorities is the balance sheet de-risk. That includes ensuring that our assets are valued at fair value and that our strategic allocation of capital is efficient. We'd also love to bring down debt borrowing levels as well. With the increase now in our cash generation, we are thinking of strategies.
In order to do that, next slide please, Henrik.
Now, one area I wanted to spend.
A bit more time on because it's an area of focus for every business around the world at the moment.
Foreign exchange and the risk that this presents us as a business. As you know, we operate globally and receive recurring revenue in a number of currencies from Euro, U.S. dollar, Sterling, Australian dollar, and Canadian dollar. Now, where we operate globally in some of those currency pairings, we're able to be naturally hedged, so we have minimal exposure with GBP, Euro, and U.S. dollar. However, in currency pairings such as the Australian dollar and the Canadian dollar, these currencies are currently unhedged and we do have a little bit of an exposure there. How do we manage that risk? We've implemented a formal value at risk model. This is the same approach used by large cap companies and banks.
How does that work?
We calculate the expected minimum maximum.
FX loss over a one-week period.
Using historical currency volatility at a 95% confidence level, our model shows we'd be expected to lose no more than about EUR 2,000 per week across AUD and Canadian dollar combined. Even in an extreme scenario, say a 5% drop in both currencies, the impact on EBITDA would be less than EUR 27,000. To put that into context, that's less than 2.5% of our Q2 EBITDA. Alongside that, if you look at revenue on a constant currency basis, the growth would have been 2% higher this year had the rates stayed the same as Q2 2024, and conversely at the adjusted EBITDA level, we'd have generated an additional EUR 30,000 in adjusted EBITDA had the FX rates stayed the same levels as they were last quarter.
When we evaluate the risk, whilst we are unhedged in some currency pairings, the risk there is what we feel is immaterial, and at this moment in time we've decided not to hedge those exposures at this stage. However, we've got materiality thresholds in place, and if FX volatility spikes or if exposure levels increase beyond defined triggers, we're set up to act accurately. In short, we're applying structured data-led.
Oversight to this area, the current FX risk is not material to our financial performance, but we're proactively monitoring this.
Thank you very much.
Nice work, Matt. Just before we jump into the Q and A, let me take a moment to revisit the value proposition. Both Lifecare and Wellness are holistic technology offerings. They're designed to enhance patient recovery and to improve workplace well-being. We believe that we're in a strong position to capitalize on key growth drivers, with Physitrack and Lifecare as the
base as a cash cow and then
having the moonshot with Champion Health sit on top of that, we have a robust business model, and that helps us navigate headwinds while maintaining profitability. Let me also walk you through
reaffirm our financial goals.
Top line growth remains a priority. Medium- term target is to double the company's revenue base, and we think that
is very much possible, given the trajectory.
The market demand, size of the total duration of market, EBITDA margins. We aim to bring the entire business in line with where our Lifecare division is today.
We're targeting 40%- 45% of the time.
Lifecare is clocked in at over 50%. We have done this and we are very capable of doing it. I'm very confident that 33% will expand to those targets over time. Cash generation, we are demonstrating that the model is cash generative and we saw that this quarter in a big way. The trend is continuing. Long- term shareholder value, of course, if we are in a good position where we are happy with the size of our debt position and the cash generation on top of that, we could position Physitrack as a dividend-distributing investment and that would further enhance value for investors. That's certainly the long term goal. Now with that, I'd like to thank you all for your time today and we'll move into Q and A.
Please submit your questions via the Zoom Q and A function and we'll get to as many of them as we can. Thank you very much.
If I unmute myself, it's going to be even better to get to some of these questions that have come in. First question here. Doubling down on scalable SaaS in Wellness is the overall theme of it. The Q2 report highlights doubling down on scalable SaaS revenues with a reduced OpEx base as a strategic priority for the Wellness division. Could you clarify the timeframe for this transition and what specific initiatives would drive it? Very good question. We don't actually approach OpEx reduction as an isolated sort of tactical cost-cutting initiative. We'll identify something specific and have a list of things. We take a global and holistic approach to that. We always ask ourselves where we can run faster, operate leaner, and implement smarter tooling, especially with AI. It's actually something that's been in place for a long time across the group.
The engineering team is really, really good at this optimization piece. Looking at the 350,000 lines of code, how can we make that run faster? What tools can we apply to it to make that work better? How can we reduce cost for hosting, etc.? OpEx- specific, we don't have anything that's targeted for short-term cuts, but to build long-term efficiency into the system.
Now, that said, there are some targeted
OpEx refinements happening within Champion Health, particularly as we now reduce exposure to this lower margin hands-on care revenue. While that part of the business is modestly profitable and cash flow positive, it's not core to the long-term strategy. We are adapting OpEx accordingly as we shut down more of these clinics, and we expect these transitions over the next three to four months to boost group profitability as well. That is going to potentially push us into the 35% adjusted EBITDA range, and we'll take EBITDA minus CapEx higher as well. Second question theme is transaction activity under the surface?
In your Q1 CEO letter, Henrik, I guess you referenced the breadth of additional
transactions taking place beneath the surface. Has there been any change in momentum in Q2 or into early Q3? Are we seeing any of this activity beginning to materialize in reported numbers? If you know us, you'll know that we don't actually announce many transactions publicly. We tend to reserve press releases for deals that are either significant from a money point of view or have a real brand impact. A small deal with a big name client might sound exciting, but if not substantial, we do feel it's better to stay disciplined and avoid noise. We're probably quite different from a lot of microcaps in that respect, but we want to act like a responsible listed company and we want to communicate what is meaningful and we don't want to communicate frequently just for the sake of doing that.
Now in terms of commercial momentum, yes, we're absolutely seeing it pick up. There's more activity, there's more engagement at the bottom of the funnel. Deals that we worked on for a while have gone down to the period where you're negotiating the contract or there are more deals being closed. A lot of clients had paused decisions earlier this year due to macro uncertainty. You have the tariff debacle there in April that keeps coming and going and we're now seeing those conversations reignite as the world normalizes or at least we're getting used to these type of activities. While Q2 has already been largely captured in our financials, in terms of the deals that we have in here, we expect to see improvements show up in Q3 and definitely for the rest of the year. Third question here. The CapEx discipline versus long- term platform ambition.
CapEx for the Wellness division is down 65% year- over- year, which appears
low in light of previous ambitions for Champion Health.
How should investors interpret this shift? Is the current level sustainable, and where
do you see Champion Health positioned three years from now?
Now, yes, obviously if you reduce CapEx in an entity with 65% it's a sign that, you know, we're actually shutting the lights off and we're going home. It's actually more intelligent than that. CapEx in the Wellness division on an isolated basis is down. Significantly
that's by design.
What we've done is to leverage the existing especially product and engineering teams, but also sales and marketing, but especially product and engineering that touches topic. We've expanded the scope of what we do in product and engineering by broadening the remit. Instead of having separate teams, which we had before, we had a team for Champion Health, we had a team for Lifecare and Physitrack, and we had duplicated leadership or leadership structures. We now operate as one company with two product lines. That integration has delivered some real results. You actually see that in the CapEx as well on an isolated basis. In terms of Wellness, leadership is streamlined. We merged the product responsibilities and created a much more efficient and collaborative workflow.
It's not just a cost win, it's actually driving better outcomes and faster delivery, more innovation, like more people working together and just doing amazing things. It's actually very motivating. New hires that we've had focus on the two business lines, for example. It's actually been very, very accretive. I should say this, the structure is sustainable. It's not something that we did in terms of slashing costs for the sake of doing that. We did this with the overall workflow and strategy in mind.
As the business grows here
we're going to scale the teams organically, but the days of just having siloed team growth and duplication of tasks are really behind us. The restructuring we implemented earlier this year has given us a really lean and integrated operating model. As you can see now, it's showing up in the numbers and also in the velocity. If you keep in mind what we launched in the previous quarter with these enterprise tools for Champion Health, for example, and now you see the Physitrack piece, you can see that things are really moving nicely with a much tighter cost base. Next question here. The theme is SaaS transition momentum and I'm going to give this to Matt, but recurring revenue now accounts for 87% of total revenue. Can you expand on the financial implications of this shift, especially in terms of revenue predictability, customer lifetime value, and pricing power?
Absolutely. Reaching 87% recurring revenue is a major milestone for us and fundamentally it
improves the quality of our earnings.
It also, most importantly, brings around greater
revenue, predictability, stability, and it allows us
to plan with more confidence and stability, especially in what we're experiencing at the moment, quite a volatile macro environment. We're already seeing this play out in our results. ARR has grown 21% year-on-year. Net revenue retention remains strong at over 100%, especially in Lifecare, and that reflects the sticky customer relationship and the consistent upsell success. The shift to the SaaS also improves our customer lifetime value and margin profile. Average revenue per life license is up 16.6% in Lifecare, and our EBITDA margins in Lifecare also are hitting 50%. We're capturing more value per customer and very low marginal costs, also gaining the pricing power which we've mentioned several times today, and that is demonstrated by the recent successful price increase without any material impact on churn.
This transition is central to the overall business strategy so that we can unlock stronger, more resilient, and more profitable growth and cash flow generation.
(All right, Gustav.) Thanks, Matt. I have another one that I'm going.
To bounce your way as well here.
This is a two part question. I think if you take the first part, then I can take the second one. Nice to see the restructuring developing so well. Yes, I would agree with that. It's very nice to see that come into play. Could you please explain the definition of the KPI customer growth rate? How do we actually calculate that? It's the second part of it, but I'll bounce it over to Matt now if you just want to grab that.
Yes. In calculating the customer growth rate, this is essentially the growth in the SaaS user licenses. It reflects the volume of our paying end user across the platforms. Appreciate there isn't a definition in the quality report, which we will obviously include going forward, but yeah, it's solely just the growth in the user licenses.
Yeah, thanks for pointing out. I will put that in the report with some more definitions. As you've seen, we retooled a little bit the quarterly report to make it more readable and more and more accessible. Now, how will you grow going forward? Are you going to do more price rises and do you see possibilities to also grow the number of customers? Why has it been challenging to find new customers? I would say it hasn't been challenging to find new customers. We have a steady flow of new customers every single month because, you know, we have the product-led growth. There's this new things happening. We are participating in new tenders, we are winning business. I don't think that's a correct definition that it's challenging.
I don't think either in terms of Champion Health that there is a real challenge to find and have a good pipeline of customers. It's just been slow to get things through that pipeline. Also, remember some of these deals that you've seen. The latest, the big one that we announced for Champion Health in March, that is actually a customer that has customers under them, as I think we have the first five companies that's part of that group that's joined the Champion Health platform. There's much, much more to be done there. I don't think there's a challenge of finding customers, but the closing activity, notably Wellness, has been quite slow and challenging. That explains a little bit what's going on there now. Champion Health has had a strong run with 9% growth, relatively speaking, for previous quarters.
The challenges are mostly related to getting stuff to move through the pipeline. How will we grow going forward? It's new business. I think price elasticity is on our side. We are still a very inexpensive platform for what we do. Clinical validity in what we do. We have 18,000 exercises. There's so many nice tools both for the healthcare provider in terms of data and analytics and things that we do then. You saw with the Patient app, there's a lot of new value coming in there. Every time we do that, it increases. The price elasticity moves us in our favor and the scope for actually adjusting what is, I think, an artificially low pricing situation. There are also more enhancers coming in. We're looking at new ways of doing the enterprise products. We have a product called Physitrack Direct that we are enhancing more.
There'll be more things in that part that we will be able to split out and have as revenue enhancers for us. More things for the customers to do and more opportunities for us to enhance revenue. A lot going on there which is quite interesting. Lastly, I'll say this on the Champion Health side, we are tying more care products into that via partnerships and being able to get a virtual doctor's appointment and going through with an appointment, a session with the doctor, that will be a reality in the next few months. Same thing with seeing an online psychology, mental health coach, et c. Just have that one place to go. This actually opens up for more enhancers which is really, really interesting. A lot on our plate. I have a specific question here from updated long- term goals.
Thank you for having an increased focus on true profits and cash flow. More transparency there and yes, that's been deliberate for us to just be more transparent on that point. Thank you for noticing that. Will you also present updated long term goals for EBITDA, less CapEx margins, meaning having goal setting for there because as it is now we only have the EBITDA. That is an interesting point of view on that. I think we'll take that back and we'll have a thought about it. I think it's definitely relevant in this environment that we're in with more transparency and focus on profitability. It's a nice one. I don't have a clear answer for yet but we'll take a look and see what we can do. Now, the last question here, what are your biggest concerns in a
near and distant future?
If you go to the distant future, obviously the advent of AI and the ability just to build whatever you want very quickly, quite easily using AI tools like Lovable, that increases the risk of a customer saying, you know what, I'm just going to build it by myself. I'm not going to buy this from a vendor and pay $20 a month for it. I'm just going to build it by myself using Lovable and I'm going to film my own videos and just plug that in there. Obviously that's a threat in the long- term. That's something that you mitigate by just being really, really good at innovation and just never stopping to think, how can we enhance this journey for our customers? How can we do this at an attractive price point?
How can we make it clinically valid, safe, and scalable so that they wouldn't even consider building it by themselves? That's a longer term thing and it keeps us really on our toes to be really fast and amazing when it comes to innovation, always being curious about it. Of course, being among the top 5%, 10% and using vibe coding tools is just one out of dozens of examples of tools that we use. That's obviously something that we are quite aware of. In the near future, obviously the speed at which things move
through the sales funnel is something that I look at.
What you do there is you look at, do we have the right team composition, therefore sales and marketing? Are we doing everything that we can in terms of handholding our customers through the purchasing journey? Even though it's a challenging macro climate, are we able to work with them so that they understand that the value that we deliver is very significant for them and that they are then likely to just close these deals and sign these contracts in the shorter term? That's something that I look at quite closely. There's a lot of exciting stuff going on on the U.S. side of things. We have a couple of million of revenue in North America in some of the biggest hospital systems in the world. Actually, in America in New York City, we have so much to do there in terms of potential enhancements that we can do.
We're on the Epic platform and there's so much that we can do with these hospitals, notably in the New York region on the East Coast, but also stuff to do on the West Coast and across the border in Canada. We are in the biggest rehab system in Canada with CBI, that's publicly known. We've only just scratched the surface of the potential there. The same with some of these collaborations that we have across the border, ClinicMaster, Jane App, and others. There's so much to do, but we need boots on the ground that are geographically close. We're setting up more presence in the New York region, just about to recruit our first full-time North American salesperson on this that can work on enhancing this revenue situation.
There's so much to do just with what we have and that's obviously on my mind, making sure that we can get that contract signed with that first person based on the ground in New York and just making sure we can hit the ground running with these relationships. Those are the things that I'm thinking about. I don't think there were any—oh yeah, there's one last question here. Maybe this is information I could get somewhere else, but I'm wondering about the low churn and how it's measured. Do the clients sign up for, say, 12 months and are not seen as churn even if they cancel within that period? Let me do the second half of that, Matt, and you can do the first part for product-led growth, meaning you find us, you sign up with your credit card, and you start that journey with us.
It's actually monthly. These are monthly contracts. You can cancel just 10 days before a month end. It's very generous, it's very fluid. Because we originally set this up to be a low risk proposition for our customers, you find us and you want to work with us. If you don't like us anymore, you can leave and you can leave quickly. Something that was done out of fairness. It is seen as churn immediately as they churn, and we know about that about 10 days before a month end. Bigger enterprise contracts, like the biggest stuff where we, and especially where we do a lot of work, we'll point our engineering and product teams to working with a specific customer there. We want to make sure that we get a return on that investment.
Typically, those customers have 12 to 36 months worth of contracts and they can typically cancel that either on a yearly basis with a couple of months notice or at the end of the contractual period with a few months notice. It's recognized, it ends up in the churn numbers the moment that you don't have a renewal. You see that when the contract expires. That means theoretically we know that we will have churn at the end of a contract period. We know that a couple of months in advance, but it's not captured in the numbers until the contract fails to roll over. This is all automated and it's all booked into our revenue systems. We use ChartMogul for a lot of these things. It's something that's seen when the new invoice doesn't come in because the contract expired and then it's captured in the churn.
Hope that wasn't too technical. Matt, do you want to do the 12- month look back?
So
in calculating churn, what we essentially do is we take MRR from customers which have no longer renewed their contract over a 12- month period, and then we divide that by the 12- month average total group monthly recurring revenue. It's as simple as that. As Henrik says, we utilize a platform called ChartMogul, and that tracks for us automatically. All of our billing systems feed into that, and that tracks automatically all of the key SaaS metrics you'd expect, including churn in there. Obviously, we're able to audit those results too.
Yeah, and a bunch of systems that we have, AI-based, that we try to predict sort of the future. We try to be never really taken by surprise when it comes to accounts receivables or cash flow or churn and things like that. We have some overlays on top of these things that Matt is in charge of rolling out. All right, I think that's it for now. Thank you so much for participating in this learnings call. Stay in touch and have a great day. See you soon.
Thank you.