Earnings Call: Q2 2021

Jul 28, 2021

Thank you. Good morning, everybody, and thank you for joining our call this morning. Our agenda today is, as usual, I will do a short company presentation and talk a little bit about our growth strategy and what's happening with our growth and up sales. And after that Eelen will talk about the financial highlights from our latest report. So introducing up sales. Up sales is a software company that builds sales and marketing software that helps B2B companies find new leads and opportunities and win more deals and new clients. And we do this as a pure software as a service model. So our clients pay us a subscription fee for using the software. The company was founded in 2003 with our head office in Stockholm, Sweden. We currently work with over 1800 customers in a total of 10 countries. And our team is currently roughly above 70 employees. So moving to the next slide, talking a little bit about our business model. So our clients pay us a per user, per month fee to use the software. And they can also purchase additional add ons. So we have a marketing add on, we have an analytics add on and so on. I think we almost have 20 different add ons now that our clients are able to purchase as they grow and as their needs become more complex. So our revenue is more than 90% subscription based. So we sell Verity Services. And the reason for this is that we invest a lot in building a scalable product that can be deployed to our customers without the need for consulting projects and customizations, is which is usually the case in this type of software when you look at more traditional vendors. And we have been growing the business organically for almost 20 years. So we have a proven model with organic profitable growth for many years now. And looking at our strategy to growing and to accelerate our growth in the years ahead, we usually talk about 3 components. So the first one is we want to build the world's best B2B sales software. So we invest a lot in the product. The second one is we are scaling our sales team and our organization rather aggressively to win more contracts and to add more clients to the customer base. And the third one is we invest in customer success to keep churn at a low level and also to grow existing contracts. So I'm going to talk about each of these three components a little bit more. So moving to Slide number 6. We want to build the best sales and marketing software in the world. And the rationale behind investing a lot in the product is building more add ons enables us to continue to grow our customer base and our existing accounts, which leads to increased average contract values. So in the last quarter, we added a number of exciting add ons. We added also a number of data sources and integrations, international data sources and integrations, making the product more attractive for our international clients, which is an increasingly important part of our growth strategy. And we also continue to build smart big data AI features, helping customers and users becoming more data driven, which is a trend we see and feedback we get from our customers that using all the data that you collect in your sales and marketing platform is increasingly important to understand which clients and which markets and which prospects are the most profitable ones to focus on. So that's a very important part of our product road map and the investments we do in the product. So looking at the second part, moving to Slide number 7. We are growing the organization rather aggressively. The up sales team, the last 12 months has been has grown with around 90%. So we have a very ambitious plan and we have a high pace in our hiring. It's not only for the sales team, it's for the entire organization, also for the customer success team and the product team, of course. But growing the sales organization enables us to reach more clients to cover a larger part of the market. The market is huge. In Sweden, we have around less than 2% of the market share. So there's a lot of business to do in the future in Sweden and also in the international the markets we are looking at. And I think that being able to almost doubling the size of the organization in a year and continue to be profitable. It's a clear sign of the scalability in our business model. So that's something I'm very proud of and the organization does a great job here, onboarding new hires, finding new people joining the team. And we have a very short ramp up time for new hires. So it's not a very it's a very effective model and it's not very capital intensive. And we are planning to more than doubling the size of the sales team again during 2021. So the 3rd part is, moving to Slide 8, investing in our customer success team and everything we do with our existing clients making sure they get value out of using the platform and they get the help and support they need. So up sales has a very deliberate land and expand strategy when it comes to selling to new clients and to growing existing accounts. So we work a lot with, so to speak, lowering the thresholds to becoming a new client, making it easy to get started, making it attractive to get your foot in the door and get started using the software. And then as you grow, our customers, and then as you grow, our customer success team works with our existing accounts, helping them get more value using more feature and also purchasing additional add ons. So there are basically 3 ways in which we create growth in with regards to existing accounts. We sell our add ons and also more seats, more users. We also do a lot of cross selling with larger existing clients. So for example, it's very common that an enterprise client doesn't buy 1,000 seats from the beginning. They usually start with a department or 1 subsidiary. So we do a lot of cross selling there to grow within these larger corporations. And the third one is we get a lot of referrals from existing clients that leads to new clients. Another exciting thing we are doing with regards customer success is that the last 6 months, we've added a number of new roles within the customer success team that's helping customers get more value and become more satisfied with upsell. So we now have a dedicated person doing training. We've grown our support team. And it's clear when we look at the operational KPIs like Net Promoter Score and customer satisfaction, all of those KPIs are steadily improving. So we are really moving in the right direction. And overall, we have very satisfied customers. Our retention rates are in the high 90s and the feedback we get is overall very, very good. So that was everything I had. I will now hand over to Eilin to talk about the financials from our last report. Thank you, Daniel, and good morning, everyone. Let's continue to Slide number 10. Our annual recurring revenue grew by 30.3% during the Q2 of 2020 compared to the same period last year. And the ARR of the end of the second quarter was 98 point euros 4,000,000 compared to €75,500,000 at the end of Q2 in 2020. And the quarter over quarter growth in terms of ARR was 6.8%. And as you can see, the ARR grew by EUR 6,300,000 during the quarter. Our net sales increased by 20% to EUR euros 22,000,000. Continuing to Slide number 11. In terms of profitability, EBITDA was €4,100,000 compared to €5,100,000 in Q2 2020. And EBITDA margin was 18.5% compared to 27.7% during the same period last year. And the net income for the quarter was €1,800,000 And as I have mentioned before, we are using the accounting principles K3. And that means that we have amortized goodwill straight over 5 years. And that has meant that we have had a goodwill amortization for about SEK 0.7 €1,000,000 per quarter and this is now fully amortized, so we will not have that going forward. Continuing to Slide number 12, looking at cash flow. We have some seasonalities in our cash flow with a large proportion of our contracts being renewed during Q4 and Q1. And during the Q2, we had a operating cash flow of euros 2,200,000 and a total cash flow of €2,000,000 And net cash at the end of this quarter was €51,500,000 compared to €28,600,000 during the same period last year. Yes, thank you. Let's continue to the next slide for the Q and A section. There appear to be no telephone questions registered. So I hand back to the speakers. All right. So thank you for joining our call today. It's been an exciting quarter, a record quarter in terms of ARR growth. And we're very guided to see you all again in for our Q3 report.