Thank you. Good morning, everybody, and thank you for joining our call today. My name is Dan Wikberg. I am the CEO and Founder of Upsales, and with me today I have Elin Lundström, who is the CFO of Upsales. Our agenda for today is, I will do a brief presentation on Upsales and the strategy we have for growing the business. After that, Elin will cover the financials from our fourth quarter of 2019, and we will end with a Q&A session. Go to slide number three, please. A brief introduction to Upsales. What we do at Upsales, we help B2B companies to win more deals and reach new clients and generate leads. We have done this since 2003, from our head office in Stockholm. We do this by delivering Software-as-a- Service , sales and marketing technology.
We work with more than 500 clients in a total of nine countries. Next slide, please, number four. The vision for Upsales is enabling greatness in B2B sales. What we mean by that is that we believe that selling is the most important part of any business who has an ambition to grow. It is probably the most hardest part of running a business. We want to help our clients to become better and to win more clients. We do this mainly for B2B organizations, and our clients range from small one-man shops up to large enterprises with several hundred sales reps in multiple countries. Moving on to slide number five. Our business model, it' s a very pure Software- as- a-S ervice model. Almost 90% of our revenue comes from subscriptions.
Our clients pay us an annual fee based on the number of users they have and also based on the number of features they use in the platform. One thing we want to highlight is that when you buy Upsales as a client, you don't need to spend a lot of money or time into costly and complex implementation projects to get started. The platform is very easy to use, it is easy to get started, and it is very plug-and-play. You don't have to do like more traditional software providers where you need to spend a lot of money on consulting.
As I said, we work with everything from really small clients up to our largest clients has 300 sales reps in a total of 10 countries. The platform has a great amount of— it is a very wide platform covering a lot of challenges that our customers have.
Looking at the competitive landscape, if you are a startup, then you have a lot of alternatives. Most companies use a spreadsheet, or they buy something really cheap online. And if you're an enterprise company, if you're a Fortune 500 company, then you have a lot of primarily American providers that sell really large, expensive, complex systems. But if you are a fast-growing company, if you are a gazelle company with a lot of ambition, you don't really have a lot of options. That is a gap in the market that we feel that we filled in a very good way. Moving to slide number six. Looking at our growth strategy, we are focusing on three key activities.
The first one, we invest in our product to increase contract values and upsell on existing customers. The second one is, we are scaling our sales and marketing organization to reach more clients. The third one is, we are expanding into new markets. Moving on to slide number seven. The first one I want to talk a little bit about, w e are investing a lot of resources and time into building standard integrations to other systems in our ecosystem. One example of this is that most of our clients have some kind of ERP or financial software they use, and they want to integrate this with their CRM system. Traditionally, when you do this, you build a custom solution that you buy as a consulting project. This is where our model is a little bit different.
We build plug-and-play integrations to the most common other systems our clients use, and we sell these as subscription add-ons, creating more ARR instead of more consulting revenue. Another example of how we grow by investing in the product is our BI tool, our business intelligence tool, Upsales Insights. This is a platform our clients use to leverage all the data they have in Upsales, to better understand what clients are most profitable and where they have the best win rates and so on, to make a better plan and to make better decisions. Next slide, please. Slide number eight. The second part of our growth strategy is we are focusing a lot on growing our sales team. We had several new members joining our sales team in 2019. We have an even more aggressive hiring plan for 2020.
We see that thanks to the simplicity of the product and the ease of getting started for clients, this also makes it very easy for new hires to become productive and to start closing deals. The ramp-up time for new sales reps is very short. It's a matter of a couple of months. We have a very efficient model in our sales and marketing, which requires no external capital because we have a payback on our customer acquisition cost within year one. Moving to slide number nine. The third part of our growth strategy is to expand to new markets. Although we do not report region-specific KPIs or details like that, I can say that we have done five international deals in Q4. Our international expansion is—it's still at an early stage, and it's a long-term project, but we are starting to see some traction.
We really see that our scalable product helps us. The product is very well received outside of Sweden. One of the deals we did in Q4 was specifically attributed to a new functionality we have called Revenue Recognition. The product delivers really well even outside of Sweden. Moving to slide number 10. Our financial goals are to grow our ARR by more than 30% per year over time and we want to continue to have a high amount of recurring revenue as part of the total revenue.
That one should be higher than 80%. Looking at 2019 in total, we grew our ARR [revenue] by around 22%, which is 50% faster growth rate than 2018. We feel that we are coming to fulfilling that goal of growing by 30% per year. I will hand over to Elin now, who will talk a little bit about the financials from the fourth quarter report.
Thank you. I will start with going through some financials for the fourth quarter and then continue with the full year of 2019. Continuing to slide 12. Annual recurring revenue grew by 22.4% compared to the end of 2018. ARR as of the end of 2019 was SEK 69.8 million. Quarter-over-quarter growth in terms of ARR was 6.7%. Net sales increased by 16% to SEK 17.5 million. A part of our strategy, as Daniel mentioned, is to make it as easy as possible for new customers to begin using Upsales. Thus, we're focused on building tools and standard integrations to speed up the onboarding process, which has been very much appreciated by new clients. This has had an effect on revenue short-term, as we are selling less consultancy services. We can see that the share of recurring revenue of total revenue has increased in Q4.
If you compare Q4 2019 to 2018, we have 88% in 2019 and 83% in 2018. A larger proportion of our revenue is now recurring revenue. Continuing to slide 13. We want to continue to grow with profitability, although this does not mean that we aim to optimize EBITDA or net income, or something like that. In 2019, we've had increased costs due to investment in growth. These have been mainly due to new hires, both new employees and also staff working on a consultancy basis. In terms of profitability, EBITDA was SEK 2.5 million compared to SEK 3.1 million in Q4 2018. EBITDA margin was 14% compared to 21% in Q4 2018. Net income of the quarter was SEK 0.4 million.
As we're using the accounting principles K3, I would just like to highlight that we amortize goodwill straight over five years, meaning that we have a goodwill amortization for about SEK 0.7 million per quarter. Continuing to slide 14. We have some seasonality in terms of cash flow, as a large proportion of our contracts are renewed in the end of the year. In Q3, we had negative operating cash flow, but now in Q4, our operating cash flow was SEK 5.4 million. The investment in intangible assets was SEK 1.3 million. The cash flow was SEK 3.8 million, and net cash at the end of 2019 was SEK 16.5 million. Continuing with slide 15. We are now looking at numbers for the full year of 2019. During 2019, ARR grew by a total amount of SEK 12.8 million, compared to SEK 7 million in 2018.
The annual growth of ARR was 22.4%, compared to 14.5% in 2018. Net sales during the period was SEK 67.7 million compared to SEK 57 million during the same period in 2018. That means the revenue grew by 18.7%. Continuing to slide 16. Looking at profitability for the full year, EBITDA during 2019 was SEK 12.5 million, and EBITDA margin was 18.5%, compared to 18.8% in 2018. EBIT was SEK 3.6 million, and EBIT margin was 5.3%. Net income for the year was SEK 2.6 million.
Continuing with slide 17. Looking at cash flow, our operating cash flow for the full year was SEK 12 million. During 2019, we issued new shares in connection with our IPO of SEK 26 million, but we also repaid our interest-bearing debt of SEK 25 million. The cash flow for the period was SEK 7.7 million. The total investment in intangible assets for 2019 was SEK 4.8 million. Thank you. Let's move on to the Q&A.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. The first question comes from the line of Carolina Elvind from Danske Bank. Please go ahead.
Hi. Good morning. Just wondering if you could confirm how many people you've hired in sales during the second half of 2019, and how many sales you are now in total?
Yes. Right now we are a total of 14 people working with sales. I don't have the actual number from the second half of 2019 right now. Right now we are 14 in total.
Okay. During the full year of 2019, you've hired approximately how many?
Approximately seven new people.
Okay. Because I guess the people you've hired during this quarter will be productive during the first half of 2020, do you think this will be enough to reach the 30% ARR growth target?
We absolutely believe that we can reach our growth target of 30% during 2020. It's also important to highlight that since we report ARR growth trailing 12 months, there's a lagging effect, because the run rate will always be a little bit higher. But we absolutely believe that we will grow the ARR bar by 30% during 2020.
Okay. Thank you. That is all for now.
The next question comes from the line of Rikard Engberg from Erik Penser Bank. Please go ahead.
Morning, guys. My first question is that, can you elaborate a bit about the drivers behind the ARR growth? Is it the biggest contribution new customers, or is it in higher ARPU?
Good morning. The majority of the growth comes from new customers. A part of it is from selling more to existing clients. I would say that the most important factor in increasing our growth is in scaling the sales team and adding more customers, I would say.
Okay. May I ask a follow-up question on that? When you say new customers, what level do they get into in Upsales? Is it on the growth or the gazelle parts of your product, mostly?
For most of the new customers, I would say we have a so-called land- and -expand model. The most important thing for us is to just get the customer to sign. It's not actually important how much they pay us from the beginning, because we know that when you start using the platform, you will add more features over time. Most of the new clients start with our easier, more simple versions, I would say.
Okay. Big growth version, basically. Growth and launch version.
Yes, exactly.
Okay, good. The next question I have is regarding the launch of your marketing automation module in Q3. How has the reception of the market been for this? Is it a good reception, and are you starting to see sales towards the end of the year now of it?
Absolutely. We have a few clients who are using our new multi-brand leader edition, and the reception has been really well. The clients are enjoying the product, and we have had some really good reviews on it. Having said that, I would also like to say that we don't expect that product launch per se to have a material impact on the growth. It's another feature we can sell to existing clients and to new clients.
Okay, good. Just a follow-up question on your international activity, your non-Swedish activity. Is it mostly in Germany those new national clients are, or are they mixed and combined in Europe?
Like I said, we won't report any country-specific KPIs or results.
Okay, fair enough. That was all my questions.
Thank you.
There are no further questions registered so far. I hand the conference back to you.
Okay. I think we have a few questions via email from Mr. Niclas Möller . The first one was, you're still far from your ambition of 30% ARR growth in Q4. Do you think it will be achievable in 2020? I believe I answered that with the same question I got from Carolina at Danske Bank. We absolutely believe we will reach this ambition in 2020. Next question from Niclas. Can you talk about the ramp-up in sales rep? How many are they today and how many are you expected to hire in 2020? When do sales rep become productive? As I said, we are 14 people working in sales right now. We don't have a specific number for 2020, but we want to hire more people in 2020 than we did last year. The ramp-up time is quite short.
The goal is to have salespeople productive within the first three months. That necessarily doesn't mean that they are fully productive. They sell more month number four, five, and six and so on. After three months, we want to see if the new hire will succeed or not, so to speak. Next question from Niclas. Can you talk about the competitive situation? Have you felt competitive pressure during Q4? And r elated, what's your win ratio for new deals? We don't report win ratio as a KPI. What I can say is that almost all of the deals we pursue, we are in competition with our larger competitors from primarily the U.S. Although I don't have the exact number, my feeling is that we win against our larger competitors more often than we lose. We feel that we have a very competitive product.
The client really appreciate that the speed of execution and the speed of implementation. I would say we haven't seen a change in the competitive landscape. The final question from Niclas, what is your LTV/customer acquisition cost? You say CAC payback is 12 months, but what is LTV in relation to customer acquisition cost? That's a KPI we don't report, so I can't say anything about that. That was all the questions from Niclas Möller . I will hand over to the moderators. Do we have any other questions?
There are no further questions from the phone lines at the moment.
No further questions. All right. Thank you everybody for joining, and have a good day.