Efecte Oyj

OMXH:EFECTE

Earnings Call Analysis

Earnings Call Transcript 2023-Q1

[Lari Nikkanen, executive]

Good afternoon, everyone. Welcome to Efecte's Q1 2023 Results Webcast. My name is Lari Nikkanen, and with me today are our CEO, Niilo Fredrikson; and our CPO, Santeri Jussila. Our COO, Steffan Schumacher, will be also joining the Q&A session following our presentation.During this results webcast, we will -- we encourage all participants and investors to review the disclaimer from our presentation materials.As for today's agenda, we have 1 full hour reserved for this webcast. We'll start with our CEO, Niilo, presenting our Q1 results. After the presentation, we will have the remaining time for our Q&A session. You may present your questions during the presentation by using the webcast portal's Q&A feature, and we'll answer your questions at the end of the presentation. This session will be also recorded and a recording of the session will be made available on Efecte's investor website.With that, I'll hand over to Niilo.

[Niilo Fredrikson, executive]

Awesome. Thank you, Lari, and hello, everyone. Great to be here to walk you through Efecte's Q1 earnings. It's the first quarter of the year 2023, and as I'm sure you saw from the release, we started the year well. That said, before diving into what we did in Q1, I wanted to ground us on where is Efecte as of today and where are we heading.So what do we do at Efecte is we help European mid-market organizations to digitalize and automate their work. We have a proven SaaS product, a service management platform known for its agility, great user experience and compelling total cost of ownership.Our rolling 12 months revenues amount already to EUR 22 million, slightly above. And we are running roughly operatively at breakeven level because of the growth investments we've been making in recent times to secure the long-term growth for us to get to our vision.The SaaS revenues form already most part of our revenues with the annual recurring SaaS revenue amounting already to EUR 16 million. And it's a team of about 200 people as of today, out of which 40% are located outside Finland, as a sign of our European ambitions and Efecte already becoming a real European business.The Board ambition that we've set ourselves -- and I can tell you, this is a team with high ambitions -- is that we want to build a clear European leader in service management software, and we call this vision the European Alternative vision.This industry, as most software product industries, is dominated by a few global large players, and there is a need, and especially a need amongst the mid-market customers in Europe for a strong European player who understand their specific needs.The addressable market is growing even during these economically uncertain times. The analysts are, on average, estimating that our target market in Europe is growing at roughly 15% annual growth rate for the coming years. And it's, of course, much better to be participating in growth market even though we also believe in our ability to take market share.Now how are we going to get to our vision and how does that translate into something quantifiable. So we said that from the levels of 2021, we're going to double the business by 2025 to EUR 35 million or above and reach a double-digit EBITDA margin at the same time.And eventually, we do think that we need to and we will become a business with net sales over EUR 100 million, and that's required for us to be the clear European leader and also for having enough absolute size to be able to compete for the long term with these global goliaths.The good thing is that now after Q1, we are again several steps closer to this vision, both the midterm '25 target as well as the eventual EUR 100 million target. Our strategy to get there is based on 4 cornerstones: growth; product; people; and mergers and acquisitions, and that's the type of framework we use to run our business.I mean, obviously, there are different KPIs and tactical level things we do, but I think of my job and our leadership team thinks of our job as guiding Efecte towards our vision, executing the strategy that we have set.So that's the lenses through which I also wanted to start with when talking through Q1 results. When we look at the growth, of course, we need to be happy with the growth, especially in this market situation where customers are sending mixed signals with some customers still buying a lot and wanting to drive digitalization and automation. But there are also customers who are delaying or postponing or even canceling initiatives.Even if it's for something like our software, which in the end is there to improve productivity and save cost, but sometimes short-term concerns mount up so that customers just decide to cut things. So in this environment, we were able to grow our SaaS revenues year-over-year by 28%, and that's something I'm super, super proud about. At the same time, our services growth was slightly slower, but still total net sales grew also 20%, which is -- which I consider also a strong result.In detail, I do want to call out is that international growth accelerated. And as you know, with our ambitions, it is paramount for us to be able to grow not just in Finland, that's important, but also grow outside Finland. And we were able to win new customers in Spain, in Sweden, in Germany during Q1, which I was very glad about.As you -- maybe as an additional comment, you remember that the ones who have been following us since last year, we said the Spain operation up very recently, essentially in the latter part of last year. So already now being able to win customers in a market like that is a promising sign to me.Product wise, what times are we living through? I mean for starters, of course, there have been fundamental big programs that we've been running in terms of modernizing Efecte user interfaces and bringing [ many ] interesting capabilities to the market. But what I'm right now most excited about, and we commented on that also in the release, is the first GPT-powered features on the Efecte platform that we announced today. And actually later on this call, Santeri, our Chief Product Officer, will join me and give you a little bit more color on what did we announce and why.People and the culture of Efecte continue to be one of the foundations of our plan and our success. It's a team of 200 people now. And we've slowed down the recruiting. We haven't stopped it completely, but according to the plan we communicated already last year, we've slowed down the recruiting, and that's also something that will then be towards the end of the year visible in the bottom line.And finally, on the M&A front, of course, very happy about the InteliWISE acquisition we did last year. We've been able to successfully integrate the team, and that team has been very helpful and in a critical role in being able to develop so fast the first GPT-enabled features on the Efecte platform.While InteliWISE was the first acquisition for us as a listed company, it's not going to be the last one. There are multiple interesting target companies we've been evaluating, having discussions with some. But as always, we keep the bar high, and we are not going to pull the trigger on any transaction where we feel that it's not the right value for us and the shareholders and the customer. So the bar is high. But then on the other hand, when the right type of target emerges, we are ready to move.So how did we do against the guidance. So, I mean, the guidance over here is full year guidance, but we want to provide you here also like a quarterly view, even though the guidance specifically is for the full year.So we started the year well on SaaS growth. Profitability-wise, I mean if you look at the adjusted EBITDA, it was in line with our expectations, but obviously, below the guidance. And the back story there is that we do believe that the economies of scale will trigger in -- during this year as we continue to grow and on the other hand, we increase headcount significantly slower than before, and of course, exercise good cost control as always. So towards the end of the year, we expect the profitability to improve.Some of the KPIs, maybe a few I'll kind of highlight from here. I'll start with the churn, bottom right. So as expected and communicated earlier, churn bumped up a little bit. I think, as I always say that as long as we're in that 5% ballpark or below, we are fine. To me that's a gold standard for our type of B2B SaaS business, so no big concerns there.Of course, it reflects somewhat on the net retention rate, which was a few percentage points lower than last quarter, but overall, strong level still, and also looking at the rest of the metrics I have no big concerns. But if you have any questions, happy to comment in more detail in the Q&A later on, on any of this.So where did that growth come from? What is visible here is that, actually compared to historical average, a relatively large proportion of the growth came from new customers plus the InteliWISE acquisition. So traditionally, we've been very strong on the existing customer growth, the installed base growth. But now in Q1, we were able to complement that also with good new customer traction.And as mentioned, I was especially happy that, that good new customer traction, it wasn't limited to Finland, our home base, but we did see that almost across the whole board of our international markets.Now looking at the financial performance and the profitability view. So well, I'll start with the adjusted EBITDA, the graph on the top right. So in a way, obviously, direction, one might say it's wrong from positive to negative. But at the same time, it was planned, and it is something according to our plan about which we've been communicating earlier.Now of course, it is important that towards the end of the year, we will do what we expect, which is for that adjusted EBITDA to start to improve. And I'm personally confident that we will be able to make that happen. Other than that, no major kind of developments here. I mean I really just keep an eye on how we get that adjusted EBITDA up towards the end of the year.Looking at the market update. Well, I talked already about success in international markets. Another point worth calling out here is what we've been doing in the public sector, not just in Finland, but also other places. Like for example, during Q1, we won the public tender of the city of Helsingborg in Sweden.And all of this is based on the decision we did last year where we looked at the market and realized that, all right, there's some uncertainty brewing. We did see some early signals in the private sector for demand possibly to slow down a little bit. So we made a decision that let's double down on our already strong momentum in the public sector. And that has paid off, and that has worked out really well with many great public sector customers with whom we are working with every day.Now when I think going forward -- like what's going to happen going forward, definitely, we expect this relative uncertainty amongst the customer base, especially in the private sector, and maybe increasingly even in the public sector to continue. So that's for sure there. So we take it as a base assumption that the market might slow down a little bit.And with that assumption, we have been planning how to best navigate that market because there are always opportunities even in the market like that. You saw that the total addressable market is still growing. So for a player the size of Efecte, there is always opportunity.It's, of course, not easy. I'm not saying that, but there is opportunity and we are committed to finding the best path through that kind of environment. And that's why we reconfirmed our guidance for this year and I think we have a good plan in place how we deliver that.So with that, I think it's enough about the numbers. I'd like to invite now Santeri with me here in front of the camera to talk a little bit about what are the new GPT-powered features that we announced today. So Santeri, welcome.

[Santeri Jussila, executive]

Hi, Niilo. Thank you.

[Niilo Fredrikson, executive]

How are you?

[Santeri Jussila, executive]

Doing very good. It's exciting day.

[Niilo Fredrikson, executive]

Absolutely. So hey, can you give us a little bit of background. So first of all, why did we kind of jump on this bandwagon and start to develop GPT-powered features? And what is it really that our users are going to be able to benefit from now going forward?

[Santeri Jussila, executive]

Absolutely. So, many of you have probably seen, there's a little bit of a buzz in the tech world around Generative AI and these large language models. We've seen first real software applications, obviously, adapting these very much led by Microsoft, but also others. And not only that, we've seen that in our domain, in service management domain, the first players have now come out with the first features leveraging GPT and these language models.And today, I'm actually happy to share that we are among those first wave service management players globally to do the same and we are launching our first GPT-powered features to help our users.And so what are we doing here. So basically, our objective is to help the support agents' productivity so that they can have more conversations with the end users with less effort. And this is enabled by what I'd like to call 3 magic buttons that we now introduce.Autogenerate, which allows the agent to automatically generate response for the end user question by leveraging the power of GPT. Autocorrect and autocomplete that allows them -- the agent to automatically fix whatever text he or she is writing. And also whenever the agent starts writing something, the autocomplete can kick in and actually finish the sentence for the agents. All of this kind of reduce time and effort to serve the end users in real life operation situations.And, so this is what we are launching today. These are the first steps towards our vision of FEAI, personal assistance that we know you -- can help you work better to digitalize and automate your work even better in the future.And we actually feel it's very important that we move fast here. We are applying these cutting-edge technologies, and we are part of these bigger ecosystems that are now forming in the tech world.And like you said, the InteliWISE acquisition we did earlier, actually positions us really well. So with those competencies and technologies, we're actually able to move this fast in the domain as we are today.

[Niilo Fredrikson, executive]

That's super exciting. I think you raised their multiple interesting points, both about kind of the benefits and features we are going to able to be offer our users. Also in terms of how we as Efecte, the European Alternative in our field, can participate in some of these global ecosystems, which you know is a world of competition and collaboration.

[Santeri Jussila, executive]

Absolutely.

[Niilo Fredrikson, executive]

So I think it's great to see us move so fast on this one. One question though, I'd have is, how about the data privacy and security? I know that there's been some speculation in the market. How does that play out in this world?

[Santeri Jussila, executive]

Yes, absolutely. It's a very important question and we're obviously taking that really very serious. And we're actually looking at that from multiple angles. Just to give you examples. So first, kind of as a guiding principle, the agent is always on control. So we are not passing through anything without the agent explicitly approving the responses and being able to check and modify them.Also, even if -- we are obviously passing here data, and we are querying the open AI's language model, but we are not passing any sensitive user information. We are very particular about that. We use the commercial API, so none of the querying we do will not go to training of other models. So they will not be used in any other context than our context as well.And finally, even above and beyond that, we are also looking into and researching concept of a local model, which means that we could run all of this locally in an effective environment, which is obviously something very important as part of us being the European Alternative that we really want to explore that as well.

[Niilo Fredrikson, executive]

Well, that's exciting stuff, all up. So I feel very good about us being able to move that fast now in this domain, and I'm sure we'll see very interesting developments in this space. I mean, even things that might amount to disruption in the market, when people really understand the power of these models and how they can be applied to our specific domain. And of course, it's great for us to be at the forefront of that. So hey, with that, maybe you can ask -- Santeri stay here --

[Santeri Jussila, executive]

Sure.

[Niilo Fredrikson, executive]

Bbecause we're going to move very soon in the Q&A. We'll invite Steffan to join us as well for that. But before that, let me just wrap up with our targets and guidance.So no changes here. We are proud to reconfirm our guidance for the year despite the uncertain market and our view on a potentially softening demand, but we are confident in our ability to execute our original plan.So I think that's pretty much the summary here. Obviously, there is more detail and we can go through. But I think now let's get Steffan here on stage as well. Hey, Steffan.

[Steffan Schumacher, executive]

[indiscernible] Hey, good to be here once more.

[Niilo Fredrikson, executive]

Excellent. So hey, just double checking with the tech team, are we all visible?

[Steffan Schumacher, executive]

A little bit -- okay..

[Niilo Fredrikson, executive]

We need to move a little bit closer to each other. We are big guys here on stage. So is it now better? Okay. Awesome.So hey, welcome once more, Steffan.

[Steffan Schumacher, executive]

Thank you.

[Niilo Fredrikson, executive]

For the last time --

[Steffan Schumacher, executive]

Yes.

[Niilo Fredrikson, executive]

-- now unfortunately, as part of our Efecte's operational team -- So as mentioned in the release, during Q2, Steffan will transition to pursue another opportunity outside Efecte. Of course, you leaving is a loss of a great colleague. We had a great run over the last 3 years and in that sense, obviously, we're going to miss you.At the same time, change is also always an opportunity. And I think we've together built a good plan of how to go forward. And what we commented on is that we'll get back to it in the half year release in terms of the updated responsibilities in the Efecte leadership team.So maybe, still before any questions, any comments, Steffan, from your side?

[Steffan Schumacher, executive]

No. Thank you a lot. I believe in this company -- and I'm going to remain a big shareholder of the company. And maybe I'm going to ask all the tough questions from the other side of -- so -- and they are very specific questions on specific KPIs and customer...

[Niilo Fredrikson, executive]

We know who they are coming from.

[Steffan Schumacher, executive]

Yes, exactly. So watch out for that. Thank you, Niilo. And thank you, Santeri, as well for your kind words. The company is in a good shape and all good.

[Niilo Fredrikson, executive]

Yes. No, you've had a huge contribution. So hey -- but with that, let's move over to the Q&A, which traditionally has been a pretty exciting part of this. So over to you, Lari.

[Lari Nikkanen, executive]

Thank you, Niilo. And as always, we have a very healthy pipeline of questions. But as a general reminder, you can present your questions using the webcast portal's Q&A feature. And with that, let's kick off with the first question.Niilo, can you give a general comment on Q1 numbers? Were you happy? And were there any surprises?

[Niilo Fredrikson, executive]

Great question. So short answer was, I was happy. Then the little bit longer answer is that the SaaS growth, while it wasn't -- I wouldn't call it a surprise, but still, I was very glad that we were able to post that strong of a growth. And maybe it was even a little bit of a surprise that it ended up at 28% level. So that was, for sure a strong execution from the [ whole ] field team there.Profitability wise, it was in line with expectations. We commented on professional services that professional services profitability was slightly lower than usual. There were some ramp up of new people and investing [ right things ] there as we can look into now in Q2.But overall, I mean, we also talked about the SaaS metrics, really very much in line with the expectations and maybe a few slight positive things there compared to my own view beforehand.

[Lari Nikkanen, executive]

Thank you, Niilo. Next, we have a question on new customer acquisition. So what was driving the strong new sales in the quarter?

[Niilo Fredrikson, executive]

Well, maybe that's something -- Steffan, if you want to cover that? It's a good question, of course, one of the highlights in a way of Q1.

[Steffan Schumacher, executive]

Yes. Like Niilo said, I mean we are really happy about the strong performance in our new sales and especially about the balance of the growth. So it came across all of the channels we have, actually go-to-market channels. So in a way, I would say that it was strong execution across all of our execution vehicles. So very well done for our sales and delivery teams.

[Niilo Fredrikson, executive]

Yes. I already earlier commented on it, but maybe once more let's highlight it then. Kudos to [ Tommy ] who's running on our Spanish business.

[Steffan Schumacher, executive]

Yes.

[Niilo Fredrikson, executive]

I think it was an important proof point for us to get a couple of good deals in there.

[Lari Nikkanen, executive]

Next, we have a question on our guidance. So in your release, you reconfirmed your guidance for 2023. Given the market environment, what gives you the confidence in your performance for the rest of the year?

[Niilo Fredrikson, executive]

There are multiple drivers for that confidence. So I'll start with the market. So while it's a potentially slightly softening market, at the same time, the big wave of digitalization and automation is still continuing. So kind of that fundamental desire for organizations to digitalize and automate their work is still there. In some cases, it might be impacted by short-term concerns or economic difficulties, but the fundamental need and desire to invest in these type of systems and this development is there and it's growing.Then, when you look at more Efecte specific drivers, I think our team now -- after the hiring we did last year. As you know, there was quite a bit of that plus the acquisition of InteliWISE -- I feel we have a really strong team in place. I don't see any major gaps there. Of course, as always, we'll keep evolving it and developing it further, and there's always a little bit of rotation. But at the core, the team is in place. So it's not like we need to hire a lot of people that are missing or so forth to be able to hit the target. So the people and the team is there.Also, what Santeri showed us was some of the very kind of cutting-edge things we're doing, product development, but let's not forget about the kind of more day-to-day or closer to today's opportunities type of things in terms of the user interfaces where we've been doing -- or features that improve the productivity of Efecte consultants and customer admin. So there's so much in -- what we do in product development and it's getting good feedback from the market, from our sales teams, from our customers that it just makes me confident that our growth this year won't be blocked by product.And then finally, of course, there are metrics KPIs we look into. Steffan has built a really world-class sales management system here with -- including forecasting and pipeline management, which gives us good visibility into what's ahead. And of course, situations change day-to-day, week-to-week. But overall, when you look at what are the KPIs telling us at the moment, they're telling us that we will be able to hit our guidance for this year despite -- I mean we commented on this in the release, despite end of the year, Q3, Q4 growth most likely being slower than the first part of the year.And then one aspect there just to note is that with the InteliWISE acquisition that we did beginning of July last year, InteliWISE numbers will be part of the comparison period numbers starting Q3. So that also kind of in terms of percentage growth, obviously impacts a little bit the growth rate for the latter part of the year. But as I said, looking at the guidance, we are confident that we are able to get to that.

[Lari Nikkanen, executive]

Next, we have a question for Santeri. So in your release today, you introduced the new GPT- powered feature. But in general, what are your future product plans for implementing AI-based technologies on top of your platform outside InteliWISE?

[Santeri Jussila, executive]

That's also a very good question. So in general, I think we can safely say that we continue to bring the AI assistant and AI [ assistance ] more and more into our product. And we've kind of revealed last year in a Digitalize and Automate event, brand called FEAI, which is basically a vision of us that defines this type of a new generation of personal AI-powered assistant who can help the different people who work around Efecte platform. And under that umbrella this GPT-enabled feature that we launched today is our first step. And we have a road map full of items for rest of the year going forward that we plan to bring more features to help both agents and end user to work better with Efecte platform.So you will hear more about those in Q3 and Q4. We have, for example, our Digitalize and Automate event coming up again in September, and we do plan to launch more AI features there.

[Lari Nikkanen, executive]

Next, we have a comment and a question for Steffan. So first, a comment. Really sad to hear Steffan leaving as an investor, but all the best for you in the future. The webcast will miss you. And then the question. So Steffan, what has been the highlight of your Efecte career?

[Steffan Schumacher, executive]

That's a really good question. I mean I would say the whole journey. With these gentleman here and a lot of the other team members here, we have built an amazing company that's just getting started. We have an amazing bunch of people here. We've hired a lot of talent and we have all of the building blocks in place to really become that European -- leading European Alternative in our space. I really believe in that strategy. And I think that's my like, maybe the highlight [ building ] us here and then basically going to look from the other side how you guys are going to execute and make it happen.

[Lari Nikkanen, executive]

Next, we have a question for Santeri. So how big is your AI team in Poland?

[Santeri Jussila, executive]

Well, I don't think we've kind of opened up our specific team sizes. But obviously, the addition of InteliWISE team was -- it greatly strengthened our ability. Even before that, we have people in -- we had people in Efecte with the AI skills and know-how. I actually -- I look at AI, going forward, it's one of these kind of capabilities in tech that pretty much everybody need to understand.Obviously, if you're in sales, you need to understand the value that AI can provide. If you are in R&D and product, you really need to also understand fundamentally how it actually works and how we build around that.So obviously, we'd like everybody in Efecte to be AI fluent. But then there are, of course, the core teams that actually build the technology for us. And we will assess that all the time that we have enough people there, but hopefully, the launch of today showing we are one of the first in -- globally in our domain to launch feature like what we did today and many more to come, it will act as a proof point that we do have very good competition know-how today in-house in Efecte for AI.

[Lari Nikkanen, executive]

Next, we have a question on our partner channel. So how do you see the international partner program progressing?

[Niilo Fredrikson, executive]

Yes, that's a good one and also a timely question. Today -- actually here at Efecte headquarters in Espoo, we've been hosting yesterday and today, the first ever Efecte partner event with 20-something partner people from across Europe flying in and we had great, great conversations about various -- some product things Santeri and the team have been presenting, but also jointly workshopping on positioning sales, go-to-market, marketing. Because at the moment, really the main focus in our partner function is how can we best enable our partners in each and every country to sell more.And today, it's already over 20 countries across Europe, plus South Africa, where Efecte offerings are available through partners. So in a way, the scale exists and now we have started to see partners here and there, get the first deals and good traction. And if we are able to continue that momentum and get more and more partners into what we call active transacting partner status where you've had the first deals and SaaS revenue is flowing, the partner is getting a share, that's obviously greatly helping us in our growth ambitions.

[Lari Nikkanen, executive]

And next, we have a question on effective SaaS metrics. So what was driving the increase in churn compared to previous releases?

[Niilo Fredrikson, executive]

Mostly seasonality. So when we recently had super, super low, like exceptionally low churn numbers -- I believe I gave the same answer. I think as long as we are in that 5% ballpark, it's a good number. There's always going to be a customer who leaves. No matter how well we run the business, that's just part of it. And if it happens to be in a certain period of time, a couple of customers who happen to be larger in size, then the churn number is going to be larger. If it happens to be customers who are smaller in size, the churn happens to be smaller.Now there were 1 or 2 customers who were on the larger side, who stopped using Efecte now in the period -- the rolling 12-months period that we look into when we calculate churn, and that made the number bump up. And I mean the reason we commented on it that we expect it to bump up a little bit already in last year's release was that, of course, these are typically long-term things, and we have some visibility on what's going to happen. So no surprises there.

[Lari Nikkanen, executive]

Next, we have a question on sales. So in which countries are you focusing on sales efforts on the public sector?

[Niilo Fredrikson, executive]

Great one. Do you want to take that?

[Steffan Schumacher, executive]

That's a good question. I mean, in a way -- how would I state it. I mean if there's a customer opportunity in any country, we cannot go after that. But let's turn it around maybe that we have our own sales teams in Finland, Sweden, Germany, Poland and in Spain. And I would say that it's these 4 countries: Finland, Sweden, Poland and...

[Niilo Fredrikson, executive]

Germany and Spain.

[Steffan Schumacher, executive]

Germany. Yes, exactly. And then, I mean, we are working with some of public tenders through partners as well, but those are the more partner-driven opportunities. But in a way, if you look at our pure direct sales, that would be the countries in which we have salespeople.

[Niilo Fredrikson, executive]

By the way, I realize now, when you mentioned all the countries that, in the beginning when I talked about where we won new customers, I think I missed Poland.

[Steffan Schumacher, executive]

Yes.

[Niilo Fredrikson, executive]

You should have shouted like from the side line, hey, Niilo...

[Steffan Schumacher, executive]

Yes. And you also didn't say Finland, but Finland...

[Niilo Fredrikson, executive]

Okay. Let's add Poland and Finland to the list. So it's all those kind of 5 direct markets...

[Steffan Schumacher, executive]

Yes.

[Niilo Fredrikson, executive]

-- we were able to win new customers. And like Steffan said, public sector focus is probably most kind of prevalent in those 5 direct markets.

[Steffan Schumacher, executive]

Maybe if I -- if you allow -- give a bit of color to that. So a lot of kind of increasing amount of public sector customers around Europe are putting more and more requirements on data privacy, security, kind of the flexibility of the service and all kind of things that affect this really, really well positioned in the market. So we have a really good competitive advantage in those public tenders. And that's also because of the good work of Santeri and the product is kind of helping on that. So that's really -- I think we are well positioned there.

[Lari Nikkanen, executive]

Next, we have a question on our IGA deliveries. So what was the situation with IGA deliveries this time, which you last time commented that there were a bit resource shortages and delays?

[Niilo Fredrikson, executive]

Well, maybe that's something where both of us can comment. You've looked into it back in the time when we had some resource shortages and in terms of how the product team and the delivery team can -- what you can do to ease the situation.

[Steffan Schumacher, executive]

Sure.

[Niilo Fredrikson, executive]

Now I'm just commenting on where we are as of today. The team is booked. I mean we have the ability to start also new implementations later this year, but there is a good amount of projects that the team is working on. I think the type of big resource crunch that we saw last year, we are over that. So we were able to resolve it. Steffan was also a big part working together with Santeri and the team in resolving the situation. So we are not any more in that spot.But we continue to work there because IGA is -- it's a new product. And it's a new philosophy, more packaged than the traditional identity management solutions. So we continue to find ways to, in a way, streamline the deployments and kind of reduce the amount of work needed in these deployments, which is, of course, one of the reasons customers choose us and also an important part of the story. Anything you want to add?

[Santeri Jussila, executive]

Yes. I mean absolutely. I mean I think we brought up that new type of offering last year and kind of hit the nerve in the market, and we've been now obviously very focused on both delivering but also optimizing the solutions. So as Niilo mentioned, we work hand-in-hand with the delivery team so that the product is supporting. But also like learning all the time that any improvements we kind of can get out of those customer deliveries will bring back to the product. So we are also building and optimizing the product for better capability all the time as we deliver these projects to the customers.

[Lari Nikkanen, executive]

Next, we have a question again for Santeri. So has...

[Niilo Fredrikson, executive]

You are [ popular ] today. You have to come more often.

[Lari Nikkanen, executive]

Yes, definitely. So the question goes, has ChatGPT and other generative models yet affected the demand for InteliWISE offering?

[Santeri Jussila, executive]

Yes. Well, I mean, let's first kind of position InteliWISE in our offering. So obviously, we do have InteliWISE as a stand-alone kind of a conversational AI offering we offer to our customers. But beyond that, one of the really main drivers for us to acquire InteliWISE was that -- to use the technology to be able to boost our service management and over time, also IGA businesses.And obviously, if I look from the service management point of view, I would say no impact -- so rather positive impact. And launch of today, I think, is a good example of that. So much is happening not only by OpenAI, but many companies in the world developing that. It's just smart that we are part of that. We leverage that type of development, and we think carefully how do we integrate so that we can actually benefit from that development. And that's what we are really trying to do with the launch of today.Going forward, long term, how would that affect for the chatbots and kind of that market. In a way, we do believe that there is -- this actually strengthens the realization in the market that conversational engagement with the users is the right way to go. And through that, I think there is a -- we do see a bright future for the conversational AI portfolio as well as people will get more and more accustomed on discussing with computers, discussing with bots. And they always need to be in context of the use and the use case, and that's what we can do. So we can bring these technologies and put them into context of be it service management or any other service that we offer. And I think that's the role we can play here.But hey, I mean, this technology move fast. How does the future look like? I think we are all learning. But at the moment, I mean, we don't see any big concern. Actually other way around, I think it's a big opportunity for us at the moment.

[Niilo Fredrikson, executive]

You're raising multiple -- again, further points here. I think that -- the point about the conversational paradigm now becoming really mainstream even in -- possibly even in B2B software. That's something we've always believed in.

[Santeri Jussila, executive]

Yes, I talked about that. Yes.

[Niilo Fredrikson, executive]

I mean, the renewed Efecte self-service portal, which is already, by the way, in production use at the first customers.

[Steffan Schumacher, executive]

Yes.

[Niilo Fredrikson, executive]

I think that's a great development. Kind of that direction that we said originally somehow feels now much more realistic and mainstream than in the beginning when we set out that vision. So definitely, the world is moving now in that direction.

[Santeri Jussila, executive]

Yes, absolutely.

[Lari Nikkanen, executive]

Going back to our reported KPIs. So we have a question on international growth. So how do you see the international growth trending going forward?

[Niilo Fredrikson, executive]

Well, we are not guiding international growth. Our guidance is based on the SaaS growth overall. I do want to remark that in the international growth, because the base numbers are smaller, also, the individual deals might have a larger impact than on the total SaaS growth number. So that's also one of the dynamics just to consider. Overall, I mean, long term, obviously, we look forward to growing internationally faster than we grow in Finland, and that will support our overall SaaS growth also going forward.

[Lari Nikkanen, executive]

And next, we have again good question for Santeri. So Santeri, if you would have to name one thing in Efecte products, which you would like to improve in comparison to the competition, what would that be?

[Niilo Fredrikson, executive]

It's like a tricky question.

[Santeri Jussila, executive]

It's a tricky question. So yes, I mean, like -- well, usually, the way we look at that is that we have always something to improve. I mean you've got to be humble building products. Nobody has a perfect product and market moves on and requirement moves. So there's always things to improve.To put it in the context of this year, I think we have said that, look, we've got a fundamentally unique value proposition with our agile platform and ability to expand processes and help grow with the customers' business, with the TCO that is really, really fitting to our market.Where we can improve, obviously, is that -- the ease of use. From a customer point of view, the world is getting more complex. There are more things to manage. Agents have more people to serve. Our workloads are increasing all the time. So really, the software needs to come and help you. And part of that is the ease of use. So easier the software is to use, more simpler it is to use, then better you do your job.And that's been kind of one of our themes as we renew our self-service, and we are in process of also renewing our agent UIs. So we are creating -- kind of investing into a modernization of our user experience and user interfaces. And I think that's kind of the top of mind where we're really committed on improving that and creating, again, better product in the future.

[Niilo Fredrikson, executive]

Let me -- if you allow a little bit to [ build ] on that because it's a topic I think we are all quite passionate about. And I think it's also a broader responsibility on the whole B2B software and SaaS industry to bring more consumer-like experiences into the B2B world. I mean, just imagine, there is somebody 25 years straight out of university, she comes to the workplace. All her life she used like these magical apps on the phone and tablet where you just swipe here and there and magic happens or maybe you speak to Google or you talk now to ChatGPT. And you just control all the information in the world and your life and business. Everything just magically comes together.And then day 1, she comes to the office, gets the laptop, opens the laptop and she see there is the ERP, the CRM, all these systems and lots of buttons and menus and everything. And then a colleague says, "Well, no, you need to start with the training." And she's like, "What training?" In last 25 years, she never trained to be able to use an app. They just work or maybe there is a little bit of a guided flow in the beginning when you start the app for the first time. There's no classroom training. There is no online training.So the gap between what's in use at the workplace and what we use in our daily life is just massive in that user experience and productivity. And that's one of the main reasons why we started investing quite a bit last year in these programs that Santeri was talking about, and that are now starting to come to fruition during this year in the various releases.

[Lari Nikkanen, executive]

Very important topics. Next, we have a question on M&A. So from an outside end point of view, it seems that you have been able to integrate InteliWISE very well. What did you learn from InteliWISE integration? And how can you utilize those learnings in the future?

[Niilo Fredrikson, executive]

Well, Lari, maybe I should ask you and [ Tatu ] who are active in doing much of the kind of transaction work. I would say the first learning was that, yes, it was a little bit complex from the transaction point of view to acquire a small publicly listed company in Poland on a relatively unknown marketplace over there. So that definitely increase the difficulty. And there were some consideration with the case whether we should even go for it because we did foresee some of that complexity ahead of time with the public tender offering [indiscernible] out and the whole process.Now that said, even though it was a massive effort, it was the team and the technology we really wanted to bring as part of the Efecte family. So no regrets there. And with some skill and some luck, we managed to complete the transaction successfully. And then the integration actually has been definitely a positive surprise. I mean, as a starting point, you, of course, think that, okay, transaction might be difficult, but boy, the integration, that's where the real trouble starts. People leave, customers leave and the technology turns out to be worth nothing. That's like [ best ] assumption typically in M&A in software.But actually, none of the bad things have so far happened, knock-knock. So we've been impressed with the team, super nice people and skillful people. And I think we've been able to bring the InteliWISE team as part of the broader Efecte team. And culture wise, it's a good fit. And now -- I guess, now being able to bring both Efecte Chat for Service Management last fall, very fast to market, the first joint offering. And now with this speed that we all witnessed, be able to bring the first GPT- powered features on the Efecte platform, I think this is all testimony to things having gone well.But coming back to the question on learnings, I think multiple smaller learnings here. But maybe the biggest one is that, trusting kind of your assessment on the culture fit and people fit is probably one of the most important things that -- if that works out, a lot of the smaller details are going to get sorted out.

[Lari Nikkanen, executive]

And as our time reserved for the webcast is slowly coming to an end, we have 1 final question for all of you. So Niilo, Santeri and Steffan, can you all tell what were your personal highlights of the quarter?

[Niilo Fredrikson, executive]

So yes, maybe Steffan, you get the honors to start.

[Steffan Schumacher, executive]

Yes. Good.. I mean there's a lot of things to be proud of, but I'm really -- I mean, I'm really proud of the SaaS growth we delivered, 28% SaaS growth with new customers in all of our markets. So I think that's something I'm really, really proud of. So we offer a good start for the year.

[Niilo Fredrikson, executive]

How about you, Santeri?

[Santeri Jussila, executive]

Well, I mean, for me, it's like we are in a business of building new software. So whenever the new software actually materializes customers, so these are the moments we live for. And in Q1, like we had great first -- So our new portal sold to a first net new customer and our chat product went live with the first customers. So these are the moments I feel really, really glad and proud.

[Niilo Fredrikson, executive]

Well, guys, see, I mean, Steffan is responsible for growth. So you mentioned the growth, you're responsible for the product so, you mentioned it.

[Steffan Schumacher, executive]

It [ goes ] right -- in the script, right?

[Niilo Fredrikson, executive]

Yes, it's according to script. So I'm here scratching my head what should I say. So maybe taking the cues from you guys, and actually this really is my view also. You can read it in the actual release comments. The thing that I really was most happy about and I'm proud about is that this was another quarter where we took steps towards our vision according to the strategy that we have set, and that's really what we are here for to do. I mean we've set an ambitious goal of becoming that clear European leader in service management. We have a clear strategy based on growth, product, people and M&A to get there. And that's the strategy and the plan that we are executing.And it's not to say -- I mean we have now this history, one might even call it a track record, of being able to deliver consistently and follow the plan and move step-by-step towards our goals. So from the outside of this, it might look like super steady or even easy. But of course, it's not easy. For every deal, we need to do our best. In sales, the competition is running fast also in products. So we really need to be making clever decisions where to invest and then execute those product programs well. But that's what business is like and that's what makes this exciting. And we have a great team to make it all happen. So just super happy with Q1 and now looking with confidence at the rest of the year and all the challenges and opportunities ahead.

[Lari Nikkanen, executive]

Thank you, Niilo and Steffan, and Santeri. And with that, it's time for us to wrap up and wish all of you -- thank all of you for participating and wish all of you happy 1st of May.

[Niilo Fredrikson, executive]

Great.

[Steffan Schumacher, executive]

Let's waive.

[Niilo Fredrikson, executive]

Thank you all for joining.

[Santeri Jussila, executive]

Thank you.

[Niilo Fredrikson, executive]

Have a great weekend.

[Steffan Schumacher, executive]

Let's waive like those images on… You can find me...

[Niilo Fredrikson, executive]

It's going to be a gift. All right.

[Steffan Schumacher, executive]

Thank you.