Good afternoon, and welcome to this Q3 presentation and Q&A with Risk Intelligence. With us today, we have the CFO, Jens Krøis, and the CEO, Hans Tino Hansen. First, there will be a presentation, and afterwards, a Q&A where the management team will answer questions submitted via Stokk.io. 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 Risk Intelligence to start the presentation. Your line is now open.
Thank you very much, Anders. Hans Tino Hansen, CEO and founder of Risk Intelligence, and then today, with me, I have Jens. Maybe you can present yourself.
I can do that. Jens Krøis, CFO in the company.
Thank you very much. We would be starting in a moment, and we will just give a few highlights from the Q3 report, and then go to some outlook and then move on to the questions that have been submitted. If you have any questions, please submit them via the Stokk.io system. First, this one is to read. Yeah, and then we move on to the agenda. First, something about what has been our main activities in Q3. Something about the report, highlights from the report, then the outlook for 2023, and then the Q&A session.
So in third quarter, our main activities has, as already communicated in the press release and in the report, have been development of the new platform, which in this quarter also have engaged a lot of people from other functions than those that are normally involved in development. That has been many people from the operations side and many people from the commercial side. One of the things that we experienced before is that, when we have a new platform coming up, then in the period just before, the sales activities, or rather, the closing of new deals take a dip because everyone will be waiting for the new platform.
So it's very difficult for the sales team to actually secure deals that are based on the existing or old platform at that time. This is basically holding back the ketchup in the bottle, so to speak, while Q4, as I'll get back to, has seen the ketchup coming out of the bottle. In top management, and especially considering Jens and my time, was focused almost entirely on the rights issue that we carried out in October. Preparations started for that during early summer, and that took up a lot of our resources during Q3.
If we look at the new platform, here is a look, and the interesting thing about the new platform from an investor perspective and shareholder perspective, or even from a CFO and sales perspective, is that the old platform has one license fee. One license fee based on users and number of ships operated if the client operates ships, and that's it. While the new one both has this license as the basis and then a number of new features that we are selling against a separate fee. On top of that, we are also selling third-party data. So for instance, ship position data, like all the small white ships you see here, where the client can get access to all the ship data for all the ships in the world, about 50-60,000 ships.
They can also get access, which is separate, to a history, you could say, feature, where they can analyze ship movements going back, many years. Of course, that's a rather massive data set that is necessary and therefore also comes with a considerably higher price. It means going forward, or actually already from Q4, that we have three levels of revenue originating from the system instead of one. So that will contribute to the upsell to the clients, but also to new sales and therefore to ARPU, the average revenue per unit, which is in our case, per client.
This is an example of one of the new features, our Voyage Intelligence tool, where the client can plot in a route and then automatically gets the incidents, so what's happening right now and what has happened within the specific time period, but also all the ports during that route, as well as the areas. And in this case, it's the Eastern Mediterranean, the Red Sea, the Gulf of Aden, the Indian Ocean, and the Persian Gulf. The new system also has a number of automated notifications, which the old one surely didn't. And this brings the new platform to another level. One of our clients that we have had meetings with actually said that this is an entirely new solution. The old platform was more of an intelligence tool, but the new platform in-...
includes a number of functions, so it becomes a total different solution to them, which is very nice to hear. They also said that they might be able to save one or two other subscriptions by using everything in our platform now. So this bodes well for the future. That was just something about the platform, then I will hand over to Jens.
Yes. Thank you, Hans. Looking at the numbers, which of course has been a bit affected by what Hans told was going on during the quarter, but if you take the year-to-date numbers, which are the top left numbers, our recognized revenue, which is the fully realized numbers, we ended at approximately DKK 15 million year to date, which is an increase of 16% compared to last year. In terms of invoiced, I would say invoiced sent to the customers during the nine months, we are 25% up. Cost, which in both the quarter and in the nine-month period has been impacted by growth initiatives that we have taken during the year.
That is one salesperson we have hired, one person for our new customer success team. It's been impacted again by a—you can say—nine months or full year impact of a sales person we hired the last quarter of 2022. So of course, that impacts on the cost side. Across the board or across the cost base, we have been hit by inflation as well. I can say that's fair to say. In terms of the year-to-date EBITDA, still negative, but again a bit better, 8% less negative than last year, despite the cost increase, but of course, driven by the top line.
EBIT is eleven percent worse, you can say. And that's mainly impacted by interest cost we've had during the year. Profit and loss at the bottom is 9% lower than last year, DKK 7.3 million. If we go to the specific third quarter, the recognized revenue was 18% up compared to last year. The invoiced is more or less the same as third quarter in 2022. And it might be here that we can see the impact that Hans spoke about.
The cost side again, compared to last year, we have had the free sales per or the free person and the cost increase in terms of inflation, et cetera. EBITDA, more or less the same, 2% better. We take what we can get. And EBIT, 15% worse, and that's again the interest burden we have had. Profit and loss, 16% worse, more or less the same as EBIT. And earnings per share, it's... well, it's negative, but again 16% better. That is more or less what I would say about the numbers. You want to add something, Hans, or?
Yeah, as was mentioned in the report, the revenue mainly is lower because of one bigger client moving their invoice and license period, and the other one being a client reducing temporarily their license. We will have that in the Q&A because we got some questions on that, so we'll dive a little bit more into it and also what it meant for the metrics. Then I will just take over and talk about the metrics, and maybe we should emphasize that the ARR in Risk Intelligence is calculated and annualized from the last 4 quarters' license value. So it's not the MRR in the quarter or at the last month times 12 like many other companies use.
So it's actually a conservative backward-looking ARR rather than a forward-looking one. We are looking into ways of changing that. One would be the simple last month MRR times twelve, but there are some drawbacks with that as well. Of course, it looks forward, but it doesn't look into any license agreement-based price increases, and it doesn't include known churn in the future. So we're looking into a model that will actually be more comparable with other companies that have a SaaS reporting model. But bearing that in mind, it means that some of the growth that we see is actually forward, but not backwards. So in Q3, Q4 from 2022 is included as this logic when you have four quarters going back.
If we look at the numbers, then we have a small growth of only 7% of the ARR in these twelve months from the total, and we have a 7% increase in the system ARR. The ARPU has decreased from 147 to 143, and the renewal ratio is 99 for the twelve-month period, and this is a churn of 1%. Due to the NRR, the change in Q3, we also have a drop in the NRR. We'll get back to what it would have been because there was a question about that in the Q&A.
The figures are, as you can see, negative from the quarter, because that stems from these two relatively bigger licenses moving or reducing during the quarter. If we then look at the outlook for 2023, then we had, as Jens mentioned, a growth in invoice revenue of 25% and a growth in reported revenue of 16%. If we then look at the Q4, then it's looking quite good. As some of you already know, it's the biggest quarter for renewal in Risk Intelligence due to the renewals for first of January for all the clients that have the calendar year as the license period. First of all, we are implementing the price increase from the new platform for all clients that are renewing, except those that are on multi-year agreements.
They will have the price increase when these multi-year agreements expire. And most of them have 2024, which is then renewal for first of January 2024 as their last year. So there will be a delay before we see the full impact of the price increase. We do have a price increase of about 20%, or it is 20%, that will come from these renewals. When you look at the year, then they will be applied when the clients, sorry, renew. This means that it's cascading through the year with a big bunch, which is first of January, and then the rest are kind of distributed, not evenly, but distributed over the full year period.
So this means that the 20%, you cannot take our ARR and time it by 20%, as it was, but it have to be seen over a period during 2024. When we have carried out the price renewal for all the clients through 2024, then we will go back to the usual price increase, which is either the highest of the net price index or 3% automatic price increase. Then, as mentioned, when we talked about the new platform, we also have, in Q4, with the renewals, upsell of new features and third-party data.
Not all of them are taking it on, but a number are, so it will also impact, and some of those that are not taking it on will be looking into it, from the beginning of 2024 and throughout 2024. So, that takes us to the Q&A session. We have prepared the questions in five sections, and I noticed that a question came in like half an hour ago, so we didn't manage to get it into the presentation. But I'll guess, Anders, that we will take that as we go forward. There are five areas where some have, there are some of them that have more than one question. Temporary reduction in ARR, new platform, growth in general, liquidity from operations and cash flow, and the last one about shareholders.
That is perfect, Hans and Jens. Let's move directly into it. I can also see that there have come a few questions here live, so we will take that after we have been through this.
Yeah.
Yeah. So the first question: You explained that the client downsizing license is temporarily. Does this mean you already have a clear expectation of the client increasing the license again in the near future? Or what is the reason behind, first of all, the downsizing and afterwards the reason for expecting it to be temporarily?
Yeah. The reduction was due to an immediate and unexpected budgetary problem in an otherwise long-term relationship. So basically, something that we couldn't impact. And we have clear indications from the client that it will come back again during 2024. It is a client that we've had a license and a contract agreement with for a long time, and we've had it historically. It has happened before, not with this client, but with others, and they came back. So it is about budgetary mainly where they need to move things around. This is unfortunate for us, but we know that if we are continuing to give the client the same service, then they will come back. That's usually the case.
... Okay, and then the next question: looking at the Q3 results NRR, can you provide some numbers or estimates to how NRR would have looked if we exclude that one big client downsizing the license?
Yeah. As mentioned in the report and the press release, there was also a change in invoicing period in addition to the temporary reduction. If we take the net effect of both of them, and we exclude them, then the NRR would have been 113%, so 13% higher than last year.
Okay. Will the new platform in any way impact your gross margins positively or negatively, or do you expect to stay at the same level?
Yeah. I should say that, even if we use the SaaS model, we are not a software as a service company. We are intelligence as a service company, meaning that we are providing intelligence analysis on a platform which is fully scalable. So that means that we have resources that need to be involved in actually producing and updating the system, and then it's from when they put the analysis on or whatever it is, it's fully scalable. But then we can have 1,000, we can have 10,000 users on it, doesn't matter. It's just about the cloud size. It's somewhat similar to Bloomberg or S&P or similar, but there it's financial data on a platform.
We should also note that the gross margins in Denmark are different from the Swedish or the international way of reporting gross margins, which leads to some misunderstandings, where we need to include, and Jens obviously knows a lot more about that than I do, need to include a number of items that are not included in the normal gross margin. So ideally, our gross margin would only be the direct costs associated with delivering the service and any commissions or bonuses to sales teams. That's normally how it will bear down to, because many SaaS companies, they have, as you all know, about 85%-95% in gross margin.
Ours is much lower because we have to include a number of items that are not directly related to the delivery of the service. This is unfortunately for us because we can see that people are asking about the gross margins, and also in times of, let's say, when it's not so much the growth anymore that people are looking at, but profitability, then obviously gross margin is the first thing that you start looking at. We are discussing, and also with our chartered accountants, if we can actually show two lines in our reporting. We don't know if it's possible.
One that is a net one that would be comparable to the IFRS or the Swedish way of doing it, or and the other one being the Danish reported one, which is much lower, or how we can do it. Otherwise, we have to write it in text going forward.
Okay.
I should say, concluding that the new platform will increase revenue significantly and also have a moderate net increase in costs, mainly because that we have changed the way of operating with the platform to having a partner, Geollect, developing the platform for us, but also running it and maintaining it for us, and there is a cost associated by that. We can then reduce or actually fully remove the cost that we have had in on the same area so that... but there is a small net increase on the running of the platform.
Okay. And then the next question here: How do you expect to begin to see impacts from the release of the new platform? Can we expect to see it already in Q4, or do we need to move into 2024?
Yeah. If we divide it into invoiced and reported revenue, because invoiced revenue, that's how we pay the bills, and reported, that's how we with full periodization, and we do the reporting, then, the first impact in invoiced revenue will be in Q4. It's already happening. We already sent out the first invoices with both price increase and upsell and so on. But the reported revenue will obviously be, because they are from first of January, so the reported revenue will only happen from Q1, first of January, and then onwards, as I mentioned before, with the cascading of renewals during the year, due to the full periodization.
The price increase, as mentioned, will happen throughout 2024 while the upsell may happen earlier because we are obviously launching the new platform to all clients, even those that are renewing only in September or October, but they will get the offer to get the features and the third-party data already from now on. So that may happen earlier. So there will be like a spread over the year.
Okay. And if we then move into the category of growth, can you put any estimates on the growth for 2024 in terms of percentage, 20%, 25%, 30%? Or what do you expect on the top line? How much of the growth do you expect to be from current client base, and how much from new client acquisitions?
Yeah. Since anything like this has to be communicated to the market first, then we have to take the point of departure in what is already communicated to the market related to the entire 2025 strategy. Which is 30 year-on-year average growth. So that's the target for the invoice revenue. As you saw on the figure earlier, there is a time lag for the period, periodized or reported, revenue. During 2024, the rollout of the license fee increase and the upsell to existing clients will deliver majority of the growth, while new client acquisitions from 2024 will increase in relative weight. You know, without putting percentages, then we are already seeing the majority of the growth coming from existing clients.
But of course, new clients will become existing clients in 2024, and those from 2024 will become existing clients in 2025, and so on and so forth. So that'll be like a, a stairway, where we continue adding, but also obviously, even if we have a low churn, with 0% in Q3, then there will be some churn during 2024 and 2024 to 2025. Anything else would be, would be strange.
Yeah. The next question: potentially included in the question from other shareholders. Nevertheless, what is the estimated P&L and cash flow, if any updates have been made recently?
Yeah, the guidance unchanged as per the Q3 report, and that reads an ARR growth of between 15% and 30%. System ARR between DKK 18.5 million and DKK 20.9 million. Negative EBITDA, negative net result, but positive net cash flow for the year.
Looking ahead on your revenue and costs during the year in each quarter, do you expect ongoingly that cash flow and profits will continue to be negative during low quarters and positive during high quarters? Or do you expect at some point to reach a level where all quarters will show positive numbers on the bottom line metrics?
Yeah. When we talk about the reported revenue, then it's already periodized, so it means that it's kind of almost distributed over the year. And there, they will at some point actually go into to zero and plus going forward. This means that we are expected to, we will have revenue will come close on cost during Q1 to Q3 2024, and is expected to deliver a positive EBITDA, maybe not big, but a positive EBITDA for the full year of 2024. In terms of the invoice revenue, the Q1 to Q3 will be around ± zero, and likely with a small positive result, i.e. positive liquidity from operations, and then significant positive liquidity for Q4 2024.
Perfect. Can you update us on the number of shareholders in total, Swedish, Danish, perhaps, and top 10, aside from the 2 main shareholders?
Yeah. There we are unfortunately in a very bad position, like many other Danish companies that are on any of the growth markets, because we have no visibility into non-Danish entities. We can only see the banks or the trading houses. We cannot see the individual shareholders, except for a handful. And unfortunately, the EU regulation that should give companies full insight into the shareholders that you have in any country within the EU does not apply, or rather does only apply to the main market. So this means that we cannot see the Swedish shareholders.
We can see the numbers for Nordnet, we can see that Nordnet is a shareholder, we can see that Avanza is a shareholder, we can see that the SEB Bank is a shareholder, and so on, but we cannot see the actual shareholders. Furthermore, we know that within, for instance, Avanza Pension, we cannot see them at all, even if we try to look into it. According to the numbers that Jens pulled out earlier today, we have 978 shareholders are registered in VP, so in our share registry. That's not equal to the total number of shareholders, because some of them might be Nordnet, one might be Avanza, one might be SEB Bank, and so on.
There are, as of, I think today, 970 in Nordnet and 301 in Avanza. There is some overlap in these figures because, as we mentioned, we don't, do not have insights. So in total, probably, about 2,000, give and take. This is of course very unsatisfactory for a company not knowing its shareholders. But it's not something we can do anything about because it's simply about legislation. Nordnet and Avanza has no requirement to do so, to give us any information on that. It also means that we cannot see our largest, except for one, which is registered separately. We cannot see the largest shareholders from the Swedish side or any other side.
When it comes to the top ten, we will publish some of them in the Q4 end-of-year report. However, we cannot. First of all, we do not know necessarily what top ten is exactly because we do not have insight on the Swedish side. But those that we can, we have to ask for their permission, and if they are okay, then we can put it in the report.
... Perfect. And I think that was all the pre-submitted questions. So now let's take the few that has come in live. The first one is: What is the biggest threats to the company going forward, and what will Risk Intelligence do to counter them?
Yeah, I mean, if we look strategically and not looking at, you know, kind of operations and month to month or quarter to quarter, then the biggest threat you can say theoretically is that, let's say an organization would provide the same service for free to its businesses. That would be a competitor. And I've always kind of said that competitors is not something that you define, it is something that others define. So actually, a free competitor, even if the quality is less, is a competitor. Even a cheap, low-quality competitor is a competitor. It might not be on the decision-makers table, but it's just to say that there are certain parts of the market that you cannot reach because they will be satisfied with those kinds of products.
However, if, let's say EU as an example, if they came out and said, "Now we will do, land-based, logistics, for like land risk and land risk logistics, we will give provided to all logistics providers and all, transportation companies in Europe for free, in high quality," that would be a kind of a major threat, the same obviously, if it applied to the maritime, field. What we've seen of those kinds of, let's say, initiatives, is that the countries and those that should are supposed to share the data will not do it. They're simply not doing it, meaning that you can never, not never, but it is very difficult to get high-quality data and analysis of these data for free in, by a big organization with a number of member countries.
I don't know if that makes sense.
Yeah. And then there's a bit of a long question, so I will read everything so you have the full context, and then you can ask, answer afterwards.
Mm-hmm.
You spent plenty of time working on the rights issue, and you obtained pre-subscriptions, a positive outcome. However, aside from the pre-subscriptions, the overall public subscriptions was undeniably poor. What do you believe is the reason for this, considering all the time you put into this transaction? Have you done an analysis? Do you know how many regular Danish subscribers you had aside from the underwriters and pre-subscriptions?
First of all, it's correct that it is not, it wasn't the full amount that we subscribed. And that the number of, you can say new subscribers, was low. But in the current market, we actually see it as a success. That's also what we heard from our corporate finance advisors, that we could deliver this level of subscription in this market. And it was difficult, because a lot of companies are out there, were and are out there looking for capital, and a lot of companies are not getting it. So with that in mind, we believe it was a success. We actually got what we were looking for. And could we have done more?
Difficult to say. We looked into a number of avenues together with Corpura, our advisors, and we came to the conclusion that the cost of doing a lot more would be substantially higher. The cost of the transaction was already quite high compared to what we've done when we did the directed issues in the past. So, all in all, our assessment and analysis of the whole transaction is that it was satisfactory. We hope that we can attract new subscribers when we start providing the results that we have been talking about.
Perfect. And that was, actually, all the questions, so that ends the Q&A. And before we end the webcast, I will hand over the mic to you for any final remarks.
Yeah, I'll just hand it over to Jens first. If you have anything you want to say here at the end.
No. Thank you for listening in. That's the, that's the main issue I have. So it's, it's a pleasure to actually being able to tell the story and not face to face, but close to face to face.
Mm.
Yeah, the same. Thank you for attending this presentation on Stokk.io. We believe it's a good platform. It's good that we can get the questions in advance and actually be able to do some digging in if there's anything that needs so, which we wouldn't be able to do if it was only questions presented during a presentation. So thank you for attending, and hope to see you on the next one when we do the Q4 and the end-of-year report. Thank you very much.
Thank you.