Earnings Call: Q3 2020

Oct 29, 2020

Quarterly report

Hi, everyone. And a very warm welcome to join me, Johanna and here in the car. Good morning, everyone. And as some of you have seen before, we are here today, 29th October to discuss the quarterly report, which we just released this morning. So we'll do the traditional start. And how's your feeling about this report, Jorgen? Well, I think it's a pretty good report, especially in relative terms. In absolute terms, I would have like the order intake to be a bit better, but some of the bigger discussions pushed into Q4. Saab, as you know, being one of them. But in general, I'm happy. And looking at the result or at the net sales, this is actually our 2nd best quarter ever, which is not that bad. No. That's correct, due July typically vacation time in the Nordic countries. July, August typically the vacation time in the rest of the world. So given that Q3 normally is a bit slower than the other 3 quarters over the year, indeed it's the 2nd strongest quarter in our history, which is, I think, good. And another number which we actually mentioned for the first time in a year is the annual recurring revenue for this time. And why is this an important metric for us? Well, most of our businesses are recovering annual subscriptions, which are automatically renewed, which means that you need more SaaS company. Historically, we have not had a, I would say, a typical SaaS metrics We we would have selected contracted monthly recurring revenues, see MRR or we could have selected annual recurring revenues ARR. And now we have selected ARR and we will report that for the owners and for ourselves on a quarterly basis. And again, now we released the number for the first time. And I think we also note that over the year we actually grew ARR 87 percent from the number coming into 2020 until the number now that we have coming out of Q3. And I think that's a pretty good growth rate on the aero. And looking at the net sales so far this year, we've increased them with 57% compared to last year. But cost on the other side has only increased with 3%. Are you happy with that balance? I mean, as we touched on before in the previous discussion we had, we need to get to a black 0 sooner or later. So we need a top line which is growing significantly faster than the cost side. It's a 57% growth on the top line and a 3% cost growth, a good balance. Well, I mean, sometimes you need to grow costs to grow the top line. And for us, it's opportunity based, right? I mean, if we have good opportunities, we will invest to grow the top line. For sure, the balance itself is a good one because if we can maintain this, it means that we have a strong production versus getting to a back 0. And speaking of the cost, I mean, one of the most cost intensive activities we have is actually our product maintenance and product development, which is also something you touched about, where you talk about our road map moving forward. Can you explain a little bit more the importance of our road map? Well, I mean, it's the functionality of the product that creates customer value and keeps the customers happy. And I'm happy with where we are in 2 aspects. First of all, I think concept of the road map is strong. We have good ideas. We have a good plan for the development and the action release of additional functions. And I'm also very happy about the process and the process being having a continuous dialogue with the customer base, which would typically have on a monthly basis today. Ping ponging and discussing the road map with the customer base, taking input, establishing a good schedule for deployment of each of the additional functionality. So I think it's a strong part on our side and I know that the customers are happy with both the content and the process. And speaking of customers both during the Q3 quarter and also after the quarter, you've signed some quite interesting contracts. Which ones do you think are most significant for us? Correct. Correct. Well, I think we are still strong and doing well in the food and beverage industry. We signed Multivac and we signed Quaysia. So they are packaging company which is in this ecosystem. So additional success here. I do think that NTT in Nippon and Japan covering Asia in terms of partnership is a good one because I think we have the opportunity to become a bit stronger on the Asian market. And then of course now that brings us into the aerospace and defense market with its security requirements, which we now have passed. And I think especially the Saab 1 gives ground for similar business without other aerospace companies. So I think it's a good mix. And looking at 2020, we have roughly 2 months left of this year. Which activities do you think are most important for us to focus on during these 2 months? Well, I mean, if you look at where we are currently coming out of Q3, we have already surpassed the full 2019 net sales, which I think is good. Still one quarter to go. Of course, the order intake is essential. We need to close bigger customers. We need to close smaller important customers, which have the ability to scale in the next step. So it's about continuing the good momentum and make sure that we actually get ink on the paper, especially with the big customers before the end of the year. And with that said, would you like to give any outlook on the last quarter financially? I will try to avoid being too formal booking here, but I just note that, okay, we passed 2019 for net sales already. I think we have a strong pipeline with a lot of prospects and a lot of customers. We are discussing with bigger customers at the moment. Obviously, this has to again be signed and landed before New Year to get it on that, I think we should wrap this up for this time. And we very much look forward to returning to you with a full review on 20