Earnings Call: Q1 2021

Apr 28, 2021

Thank you. Good morning, everybody, and welcome and thanks for joining our Q1 conference call. So the agenda today is I will do a short presentation of up sales and talk a little bit about our growth strategy and then an update on what's happening with our growth. And then Eelind will talk about the financials from our Q1 report. So if we go to Slide number 2, short introduction to the company that is Upsell. We are a technology company offering a software as a service product for sales and marketing. So our product is used by sales and marketing teams in a total of 10 countries. And we have A little bit over 1200 customers using the product. We have been doing this since 2003 with our head office in Stockholm. And we currently have a fast growing team of almost 70 people. And our value proposition is that we help our clients, we help B2B companies Find new opportunities, generate leads and win more deals. So let's go to Slide number 3. So looking at the business model for up sales. So we sell our product as a subscription. So our customers, they pay us a per user per month fee to use the platform. And this The subscription fees is more than 90% of our total revenue. So more than 90% of the upside revenue are recurring revenues. And the way we continue to grow is to Investing in building a scalable organization and a scalable product that will facilitate Even faster growth in the coming quarters ahead. And we've been doing this, like I said, since 2,003 and we have always grown organically. So we have a long track record of organic and profitable growth. And if we look at the 3 components of our growth strategy, moving to Slide number 4. So the first one is we want to build the world's best B2B sales software. So we invest continue to invest in the product. The second part is scaling our sales organization. We have been doing this now for almost 2 years in an aggressive pace And we continue to do so. And the third part is to have extremely satisfied customers In order to keep churn as low as possible and grow from our existing customer base by selling additional services such as add ons that's available in the product. So Just briefly about the platform, moving to Slide number 5. So we call up Sales, the intelligent CRM for fast growing companies. So the last 6 to 12 months, have been investing heavily into AI and intelligence. And what we're doing is We connect our customers ERP or accounting systems and use the data that our customers already have To help our clients find new business opportunities that are hidden within their own data, And then we mix this data with 3rd party data. So we connect to other data sources Like company databases and other types of data sources to enable All up sales companies to find new leads and find new opportunities in a data driven way, which is very appreciated by all our clients. I think prospecting and finding new opportunities is Probably the biggest hassle for all sales organizations regardless of size or industry. So the feedback we get from our customers is that it's very appreciated to be able to uncover these leads in a data driven way. So looking at what we're doing also with the product and our strategy moving to Slide number 6. So like I said, we want to build the best sales and marketing platform in the world. And we invest heavily in the product. We build we improve all features to increase user experience. But we also invest a lot in building more add ons like integration to other systems and the additional features that our customers can buy. So this is a very effective way in to over time increase the average contract value per client by selling add ons into our existing customer base. And the feedback we get from customers, we haven't always had this strategy. Like most Software companies, a couple of years ago, Upsales also built these customized per customer bespoke solutions. But we stopped doing that a couple of years ago because we didn't think it was very effective either for us or for the customer. So instead we started focusing on creating more scalability and flexibility into the platform. So we are able to solve the same problems as most of our competitors do, But we don't need to write any custom code to do it and the customer doesn't need to buy A complex IT project. So that's something that it helps us grow faster And it creates ARR for us since we sell these add ons as additional subscriptions. So it's a much more effective way of growing the company rather than selling consulting services. So let's talk a little bit about our scale up of the sales team moving to Slide 7. So this is probably the most important part of any growing technology company. I mean, even if you have the world's best product, you need to have a world class sales team if you want to grow fast. And I'm very proud of the work that the entire team is doing. When we benchmark Our sales KPIs, our operational KPIs, we find up sales in the absolute top. So we're planning to doubling the size of the sales organization, more than doubling the size during 2021. And the model we use is what we call the land and expand model. So we focus on closing as many new customers as possible every month. And we don't try to maximize the value of every new client. We want to have we want it to be Really easy to get started and we want to we usually talk about lowering the threshold to becoming a new customer. So we just want to get the customer on board and then as the customer grows and gets more value out of the platform, they can grow and add more features and add ons, which also grows our revenue. So it's a very it's a win win model for up sales and for our clients. So the 3rd part I mentioned moving to Slide number 8, it's our customer success, Our customer success team. So as for probably all SaaS companies, customer success It's a key component in continuing to grow. You need to manage churn and you need to have a lower churn. And also you need to utilize the potential that's always in your existing customer base. So there are 3 ways in which we grow existing accounts. We sell more seats as our customers grow and hire more sales reps and we also buy more add ons as they grow. We also do a lot of cross selling. So for example, we if we Close a client that's part of a larger company group, then we can use that client to do more deals within the same group. And the third way is, we get a lot of referrals from happy satisfied successful customers. Actually, referrals is still one of the most dominant sources for new clients for us. And in my opinion, I think that's probably the best I mean, the best feedback you can get is your clients telling friends and colleagues about your product. We also see that our operational KPIs like Net Promoter Score and Our satisfaction are steadily improving. So we have a very positive trend with churn going down, But we have a very high ambition here. So we will continue to focus on this going forward. All right. So that was everything I had. I will now hand over to Ellen to talk a little bit about the financials. Thank you, Daniel, and good morning, everyone. Let's continue to slide number 10. Annual recurring revenue grew by 26.6% compared to the same period last year And ARR as of the end of March 2021 was €92,100,000 Quarter over quarter growth in terms of ARR was 6.6%. And as Daniel mentioned and as we have communicated previously, our strategy is to grow recurring revenue And that potential client should be able to buy up sales without having to pay for big and expensive onboarding projects. During Q1, net sales increased by 15.2 percent to 21,800,000 And about 89% of our revenue were recurring revenue. Let's continue to Slide number 11. In terms of profitability, EBITDA was €6,500,000 compared to €2,800,000 in Q1 twenty And EBITDA margin was 29.8% compared to 14.6% In Q1 2020. And net income of the quarter was NOK 3,200,000 compared to NOK 0.2 during the same period in 2020. And as we are using the accounting principles K3, we amortize goodwill straight over 5 years, meaning that we have a goodwill amortization for about €700,000 per quarter. This will be fully amortized during the next quarter, Q2 2021. So Q2 this year, we will no longer have a goodwill amortization. Continuing to Slide 12, looking at cash flow. And as I have mentioned before, many of our contracts are At the end of the year, meaning that we usually have a strong cash flow during Q4 and also Q1 the next year. We reported a strong cash flow in Q4 and we continue to have a strong Cash flow, where operating cash flow in Q1 was €16,400,000 compared to €11,900,000 during the same period in 2020. Cash flow as of Q1 was €14,100,000 and net cash at the end of this quarter was €40 €9,500,000 Yes, so that was all of the financial highlights. Let's continue Slide number 13 and the Q and A section. There will now be a brief pause for questions are being registered. There are currently no questions. So I will pass back for any closing comments. All right. So thank you everybody for joining. We are very happy with the results in the Q1 and looking forward to