Good afternoon, and welcome to this Q3 presentation and Q&A with Risk Intelligence. With us today, we have the CEO, Hans Tino Hansen, and CFO, Jens Krøis. First, there will be a presentation, and afterwards, a Q&A. There have already been pre-submitted questions on Stokk.io, and the Q&A is still open so that you can submit questions live as well. I will now hand over the mic to Jens and Hans to start the presentation. Jens and Hans, your lines are now open.
Thank you very much, and thank you for being with us today and for the opportunity to present our Q3 report that we are quite satisfied with. Just a few words from the CFO. Yeah. Today, we'll shortly go into the main activities during the third quarter. Then Jens will go into the highlights of the Q3 report. We will talk a little bit about the 2024 outlook, and then we have the questions and answer session based on the question that you have submitted, plus other questions that may arise during the presentation. During Q3, we have continued rollout of the new platform. We have had a renewal process that we have every quarter, and this time we didn't have a zero churn, but a low churn. That was one small license that was terminated and some upsell, too, during the renewal process.
We've got three new maritime clients during the quarter. We've had a good sale of advisory service projects, both small and medium-sized. And then finally, we've had a new hire in the commercial department and one in development. In other words, we got a new head of commercial operations and a new head of development, which means that a lot of the work that we earlier had outsourced is now in-house, in the building, so to say. And with those words, I will hand over to Jens.
Yeah, thank you, Hans, and thank you for everyone listening to our voices today. As Hans already said, we are a bit proud to announce this third quarter. Just to start at the highlights, which is a glance of the quarter, actually, we are, for the first time, at least while we have been listed in the last five years, we have a positive EBITDA in the third quarter of DKK 65,000. It's not much, but it is positive. Our cash flow from operations during the nine months we've improved by more than DKK 6 million compared to the nine months in 2023. Our ARR increased 28%, and as Hans said, a very low churn, not zero, but 0.2. Our NRR, 164%, and I'll just come back to that. We changed our guidance, and again, we'll come back to that.
But looking at the more detailed numbers, not to go through all of them, starting at the quarter, top line increased of the recognized revenue by 32%, and the invoiced revenue by 48% compared to third quarter in 2023. Most important, or at least as important, our costs stayed at a level that is 4% higher than last year, but again, looking at the increased level of invoiced revenue of 48%. Again, if you look isolated at the quarter, the cash flow from operations increased by 61% compared to last year. Yeah. Can I move the slides here? Oh, sorry. Yeah, thank you. Looking at the nine-month period, again, top line increased by 29% of the recognized revenue and invoiced in total by 40% up compared to last year. Cost, again, stayed at a low increased level of 5%. EBITDA increased by 65%. That is more than 3 million DKK.
We improved our EBITDA, still negative for the period, but again, 65% better. And then the cash flow from operation, which is quite a huge number for us to improve, more than DKK 6 million, still slightly negative, but coming from DKK 6.8 million negative last year. Yeah. Positive net cash flow. Yeah. And looking at the metrics, 27% growth on our total ARR to a level at more than DKK 24 million now. System ARR increased by 28%, and the net retention rate, 164%. And we actually explained the high level of that is one customer, which we took that customer out. The rest actually came up by 27%. So 127%, if you clear out that heavily increased one client. Looking at the, will you take that, Hans, or should I just?
Yeah, there's actually also a question later, but we might as well take it now. The thing is with EBITDA is slightly more difficult to predict because it's very much about timing since we were aiming for about zero. Obviously, we were aiming for higher, but we had done guidance for zero, around zero, and in recognized revenue, obviously, if you have sales that go through later in the period, be it Q3 or in Q4, then you expect it, then you have a change in the time when it's recognized. So that could be one or two or three months, and that's what we're looking at. The other thing that we have had an impact from is one client, because of a merger, is changing its license period. That also changes the recognition and thereby the revenue.
So it's not because of increased costs, but it is compared to our budget. It's because of less recognized revenue that actually falls into 2024 and are not kind of put into 2025 with the recognition and the prioritization. I don't know if that made any sense, but that's at least the reality. Yeah. Then we have received, I think, five questions, and then six came in just before we started. And I'll hand back to, or should I just start?
Perfect. I will read out the first question here. So the first question is, could you describe your main competitors and if you know whether the customer that you recently came back to you did explore any of them before deciding to come back to you?
For competitors, I would refer to some earlier presentations, but also the memorandum that we did during for the capital increase in October 2023. It's all described there, both for land and maritime. But one of our main competitors on the maritime side is Ambrey from the U.K. We actually do not know if they looked into choosing that provider because the reason why the energy client came back was that their maritime chartering arm, that's a separate organization, chartering tankers to move their oil and oil products around the world and gas, already had a license, and they were very satisfied, and from the discussions, we know they are looking into possibly increasing their license in 2025, also on API.
Then we move on to the next category around sales and growth. The first question here is: the new agreement with International SOS and Bosch Logistics seems very promising. However, how will this influence your SaaS metrics? Will you count each of the SOS/Bosch customers as a single customer, reducing ARPU and CAC significantly if many small customers sign on, or will you just count SOS and Bosch as large single customers?
Yeah, that's a really good question because in the case of International SOS, it can actually be an individual super yacht or mega yacht. Thereby, it will be a relatively low small license compared to, let's say, a big shipping company. So if we use them and just divide it by the numbers of clients that will come from Navtor, sorry, from SOS and Bosch, it will skew our SaaS metrics and SSS metrics. And that's why, as Jens already mentioned, we actually did a calculation on all clients minus the large increase from one particular client, which gave an NRR of 127 instead of the, you could say, mathematical 164. That's why we actually report both numbers. So you can say that the rest of our client base is 127, which is also high compared to other NRR figures with SSS companies that are doing business to business.
Therefore, we need to find out what we're going to do. If it's going to be one of them each counting as one, or if we're going to separate it, just like we did with the NRR calculation here, we simply have to see what are the numbers and so on. There will also be an option under the International SOS agreement, actually also on the Bosch one, that they can refer/sell licenses on the whole, a whole license agreement, meaning that that would obviously be to the full price in terms of ARPU and NRR.
Then moving on to the next question. With a CAC of DKK 50,000, ARPU of DKK 171,000, and very low churn, it seems logical to invest any positive cash flow you will hopefully soon achieve in accelerating your growth. Could you comment on any reasons that might or might not be an obvious choice, e.g., if you expect increased investments in sales will be far less efficient and mainly drive up the CAC?
Yeah, that's actually also a good question. But actually, we are already accelerating initiatives in the commercial side. I already mentioned the new head of commercial operations, and this will be further increased during 2025. As you know, with such things, they may increase CAC in the short term because of the cost being the same, regardless of what month we're looking at for the individual initiative or the individual hired, but pay off in the medium to longer run. We are, however, aiming for black figures by the end of 2025. That is, of course, a constraint instead of just investing everything into growth. So we have to deliver both on the black figures for the full year of 2025, obviously the positive cash flow that needs to go together, but also on the growth figures. But here, the black figures will come first for 2025.
The total ARR increase from Q2 to Q3 of DKK 190,000 kroner seems very low, especially considering that you are still implementing your price increase that you had below expected average churn. You had three new customers signing up, and you had an NRR of 164%. Could you elaborate on why the ARR did not increase more under such favorable circumstances and why we can expect the growth rate to pick up again in a situation where the conditions presumably become less favorable?
Yeah, first of all, as I mentioned earlier, the price increase, and it's also in our written material, the price increase of 20% as of 1st of January this year applies to all licenses renewed except for those on multi-year fixed agreements. They obviously have the agreed amount that was agreed at that time, and they can be two, three, or one is five years in length. Two of the largest of these are actually in Q3. And we also had one license that was reduced, so not churned, but reduced in size, while we have other smaller ones that were increased with upsell. We expect to get that one back to normal levels in 2025. Also, the NRR is compared to the same quarter last year, the same clients at the same quarter last year, because otherwise we cannot manage the numbers.
This year, we have renewed with a 20% price increase until November, where we are renewing licenses for 1st of January 2025 with the usual standard price increase, which is 3% or the highest of 3% and the Danish net price index in October.
Then we move on to the next category, financial results. From Q2 to Q3, your operating expenses and staff cost have dropped with a combined DKK 0.4 million. Is a temporary effect, e.g., due to the holidays or vacant positions, or have you achieved some more permanent savings?
Expectations of cost in Risk Intelligence, if we read our financial reports, should not be based on the individual quarters, but as an average over 12 months or nine months, because there are certain fluctuations, and there are also one-offs. One of them, which is obviously not a one-off, but a fluctuation, is holidays, where we in some quarters, due to the Danish holiday regulation, you could say it costs us money, while in other quarters, when people have their holidays, they are reduced. It's a kind of a weird balance exercise, but it also impacts the EBITDA and the result. So look at more quarters than one. Do not compare them one to one because there are these fluctuations and one-offs.
We have arrived to the last pre-submitted question. Given unprecedented uncertainty from a geopolitical perspective, it would be interesting to hear how the prospect list has developed. What is the reason for gross margin decline in the quarter and outlook going forward? What is the main reason for downgrading 2024 EBITDA outlook and outlook for 2025? What is the level of net interest-bearing debt? Could you please update us on the process in the LandRisk area? A lot of questions in one here.
Yeah, pipeline is looking good for the maritime clients and government clients. The marginal decline of gross margin is related to a one-off and some direct costs on one project, and also, we still got well above 90% in marginal cost if you look at it from a SaaS marginal cost perspective and not the Danish financial regulation definition. The EBITDA outlook we already discussed, and the level of interest-bearing debt is in the balance sheet, and Jens, do you have anything on that?
Yeah, it's actually just four numbers you have to add, and it's DKK 21.6 million. That's in total with bank and all.
Yeah. And the important thing is obviously that all the lowest ones in the sheet are non-interest-bearing or even with the deferred income, which is a very big one. That's obviously outside the DKK 21 million do not even have a liquidity impact. LandRisk, just to mention that, we have, as I think we mentioned before, LandRisk has a very long, you can say, capture period before we acquire LandRisk clients. And one client that we got in was in April has assisted in potentially getting three or four, two to four, I would say, in the same sector. And that takes time because just landing the client in April took maybe nine, 12 months, which is the usual length. My maritime client is often three to five or two to five in that time range.
Also, LandRisk is not impacted by the geopolitical situation, and it is mainly organized crime we're dealing with. They are not impacted of what happens in between Iran and Israel or Hezbollah or whatever, or the war in Ukraine, only to a certain extent. Also, this is very Europe kind of centered with the LandRisk logistics. We don't have an outlook for 2025 yet. That will obviously be communicated when it's ready with the forecast. I think that was it.
Perfect. And that was actually all the questions, and we didn't receive any further live questions, so that finalizes the Q&A. And before we end the webcast, I will just hand over the word for you if you have any final remarks to end with.
Not really, except that we are satisfied with the result. I personally hadn't expected to have a small positive EBITDA already in Q3. We have also communicated earlier that we were on that path for positive EBITDA and positive cash flow. And it's looking the right way going forward. And this is also how we can achieve black figures sometime in 2025. Jens, do you want to add something?
You just said it all, Hans. Thank you.
Perfect. Then thank you, Hans and Jens, for the presentation. Thank you, everyone, for listening in, and thank you for submitting questions. See you next time.