Earnings Call: Q4 2020

Feb 16, 2021

Good morning, everyone, and thanks for joining our conference call today. So our agenda today, I'm here with Eeli Lundstrom, our CFO. And I will start by doing a short Presentation covering our growth strategy and then the short company introduction. And after that, Ierl will talk about the So up sales, what we do is we help our customers, who are mainly B2B companies, find new sales opportunities and win more deals. And we the way we do this is that we provide a software as a service DRAM and Marketing Platform. And our main focus is fast growing SMB Companies. So the company has been around since 2003. Our head office is in Stockholm, Sweden, and we currently work with around 1200 customers in a total of 10 countries. So next slide, please. Our business model, It's a very scalable model. So we sell our services as a subscription. So our clients pay us an annual fee, and these subscription fees Make up over 90% of our total revenue. And the model is that Our clients pay a per user per month fee for the basic features And then we sell additional add ons. So we have over 20 add ons that our customers can buy in addition to the user license. And we invest heavily in improving the scalability to be a streamlined organization to facilitate further growth and accelerated growth in the future. So next slide, please, Slide number 4. Looking at our strategy, there are Three components to what we do to accelerate our growth. So the first one, Galing our sales team and hiring more people, hiring more sales reps to win more contracts and then also up Sell existing clients. And the third one is investing in our customer success team and our customer success strategies to keep our churn low and continue to grow existing contracts. So if we move to Slide 5, just a brief overview of the up sales platform. So the core functionality is made up of a set of CRM features and marketing features, which our clients use to keep track of everything they do with their customers and their potential customers. And it's also used by sales managers to get an overview of everything that's going on in the sales team. And our customers also use our marketing features to create Digital campaigns to generate new leads and to find new opportunities for the sales team basically. And there are probably the most appreciated Part of up sales is our rich data integrations. And what we mean by that is We create off the shelf ready made integrations to the most Common financial and ERP systems that our customers are using. And this enables our customers to get up and running really fast. So without the need for long configuration projects and costly consulting projects, Our customers can get up and running in a matter of minutes instead of weeks or months or even years in some cases. And we also connect up sales to different kind of data sources to help our customers Get kind of market intelligence about their existing and their potential customers. So we have several partnerships with data providers, so where the goal is to eliminate the need for manual data inputs into up sales. So let's go to Slide 6. So the rationale behind investing more into the product is that By creating even more add ons, we are able to continue to raise Our average contract value, so the typical customer journey for an upsell client is that You usually start small. You start with a few licenses. Maybe you are 10 or 15 or 20 sales reps. And then as you grow and as you start using more parts of the software, You add more features and then start buying more add ons. So it's a really, really effective way to grow the existing customer base, and it's also very appreciated by all of our clients. And As I mentioned, I think that most customers don't really want these complex long implementation projects, which is case with many of our competitors, they just want a fast solution to their problems. And that's kind of Our reasoning behind all these off the shelf add ons, so enabling the customer to get up and running quickly and creating value quickly. So moving to Slide 7. We continue to invest in growing the sales team. And we do some benchmarking from time to time with other SaaS companies with the data that's available out there. And we're very proud to say that we have best in class sales efficiency KPIs. And this is the most important explanation to why we are able to continue to grow, to grow faster and still be profitable and have positive cash flow. So we will continue to double the size of the sales organization during 2021. And our sales team is divided into we have one team who are Only focusing on new clients, and then we have a separate team that is working with account expansion, so selling these add ons and increasing the contract value to existing customers. So next slide, please. So customer success is the 3rd component in our growth strategy. And by investing in customer First, we create growth in 3 ways. So as I mentioned, we sell more add ons and more seats to existing contracts. We are also able to do new deals within our existing clients that are Parts of larger corporations or larger company groups. And the third one is that Probably the most common lead source we get where we get new clients are referrals. So happy customers talking about upsell, saying positive things to other companies who then contact us and become clients as well. So and like growing the sales team, we will continue to grow the customer success team during the year as well. So next slide, please. So we have seen now in the Q3 and also the Q4 that We continue to accelerate our growth. So we had an all time high quarter over quarter ARR growth with 9.6%, which implies an annualized growth rate of 44%. And my comment on this is that We have been working during 2, almost 3 years now with our long term strategic plan as to how we want to grow up sales and grow faster. And we continue to see increased traction from this Equitgen. So it's very satisfying to see that it's starting to make an impact in the not just the KPIs, but the actual financials as well. So that was everything for me. I will now hand over to Eerlyn for the financials. Thank you, Daniel. Good morning, everyone. Let's continue to Slide 11. Looking at the figures for Q4, our annual recurring revenue grew by 23.8% Compared to the end of 2019, ARR as of the end of 2020 was 86 €400,000 And as Daniel mentioned, quarter over quarter growth was 9.6%. And the net sales increased by 15% to €20,100,000 And as Daniel mentioned and as we have communicated previously, our strategy and focus is to grow recurring revenue. And we also want potential clients that should to be able to buy up sales without having to pay for big And time consuming and expensive implementation projects. And for the financials, this means that We will continue to sell less one offs, and this has an effect on revenue growth year over year. So let's continue to slide 12. In terms of profitability, EBITDA was €4,500,000 compared to €2,500,000 in Q4 2019. And EBITDA margin grew to 22.2% compared to 14.2% during the same period in 2019. Net income of the quarter was €1,600,000 And as we're using The accounting principles K3, we amortize goodwill straight over 5 years, which is about €700,000 each quarter. And this goodwill will be fully amortized in Q2 2021. So we just have a bit more left on that. Continue to Slide 13. So Due to we have a lot of contracts that are renewed in Q4. So we usually have a strong cash flow during that period. But we are happy to be able to report a significant increase in operating cash flow, which was €10,000,000 in Q4 compared to €5,500,000 During the same period in 2019, the overall cash flow for Q4 was €8,400,000 and net cash at the end of 2020 was €35,400,000 So that was everything from me. Let's continue to Slide 14 and the Q and A section. Thank you. Okay. There appears to be no registered questions. So I'll hand back to the speakers for any other remarks. Right. So thank you everybody for joining. To summarize, I'm very happy with the last quarter, especially to see that the growth continues to increase and looking forward to continue to execute on our strategic plan. Thank you, everybody.