Carasent ASA

OSE:CARA

Earnings Call Transcript 2021-Q4

[Dennis Hojer, executive]

Hello, everyone, and welcome to Carasent's presentation of report of the fourth quarter. And my name is Dennis Hojer, and I'm the CEO for Carasent. And with me today, I have Svein Martin, our CFO, who will go over some figures in this report.

And summarize -- a summary of the fourth quarter. We had a great revenue growth of 97% and organic growth of 19% for the group and 26% for Evimeria and Avans Soma, which we were in line with our last guidance for 2021. And during the fourth quarter, we have also made our Webdoc platform ready to -- and prepared for a Norwegian launch for the smaller pay-out-of-pocket customers, which we're looking forward to taking some markets in Norway.

And we have also decided to ramping up investments in our Webdoc X project, which I will go over some later in the presentation. And also, we made another acquisition of the Swiss company Medrave, which we signed in December and closed early January this year.

You can go to the next slide, and we are still showing a good track record of our growing plan with 73% revenue growth, which of this is 30% organically. And we still show a great pace of our net retention rate on these figures from the Evimeria business.

And the overall market trends remains intact. In fact, even though we have been suffering some from the COVID effects due to late -- harder dialogues with the larger customers and also been, in fact, affected by a large pipe of unimplemented customers due to COVID. We see that the pandemic has been an accelerator for the demand of digital tools within the market since -- and we think that we are in a great position to meet this demand on forth. So long term, we think that the pandemic will be a good thing for Carasent.

And we are continuously working towards a strategic direction where we want to become One Carasent and one platform. And the rationale behind this is, of course, that it will significantly lower our maintaining costs since one platform is easier to maintain than many. And also, it gives us a better place to scale on forth when we're growing and we are addressing more market segments.

And a few words about our Webdoc X initiative. We are going to ramp up the investments, as I said, for Webdoc X, which is our new offering to meet demand in the European markets, where U.K. is the first target market for us. And we have, during the year of 2021, had a collaboration with the Swedish caregiver, Mindler, and it's processing according to plan. And it also gives us possibility to get our offer accepted in the needs and the demands of the markets. And we plan to launch the product commercially in 2023.

And a few words about the acquisition of Medrave. And Medrave is, as I said, a Swedish company, which provide health care software for clinical performance analysis to primary care and the secondary outpatient care market in Sweden and Norway.

And Medrave basically have the whole primary care market within Sweden, which gives us great potential in cross-selling since that's a targeted segment for our platform, Webdoc. And also, it strengthened our offer when we are entering the Norwegian market since it's a demand for those kind of solutions there as well. So we are looking forward to work closely with Medrave within the Carasent Group on forth.

You can go to the next slide. And our path to growth, just a summarized overview. We are still doing initiatives to be able to grow organically like we have on forth. And also, we see great potential in growing throughout M&As like we have done for the last 12 months. And also, we want to harvest synergies between the companies. And we are building structures and organization enabled to do this so that we will be able to boost our growth even more within the group.

We can go to the next slide. And I say thank you, and I hand over to you, Svein Martin, for some figures.

[Svein Bjornstad, executive]

Thank you, Dennis. So having an overall look at Q4, the strong revenue growth continued in this quarter as well. We delivered quarterly revenues of NOK 40 million compared to NOK 20 million in the same quarter last year, which corresponds to a revenue growth of 97%. And we also delivered quarter-on-quarter growth of 8.5% compared to Q3 and -- which was driven by a combination of acquisitions and organic growth.

And EBITDA margins was slightly down in Q4, but this was mainly because of the dilutive impact of the acquisitions of Metodika and Avans Soma, which currently has a lower operating margin than Evimeria. The headquarter also increased the cost somewhat within the quarter, while Evimeria continues to demonstrate scalable margins.

The group grew organically by 19% in Q4. And in 2021, we have delivered an organic growth of 30%, which is in line with the updated guidance provided in Q3. And the organic growth is driven by a combination of our existing business and winning new customers.

So firstly there, the growth on existing business continues as there is a strong underlying growth in the market. And our ecosystem of products and services continues to expand, both through third-party services and through our own developed offering. And this, combined with price increases long term and underlying patient growth for our customers, is driving our net retention rate, which ended at 114% within the quarter.

Also, we had a very strong growth in terms of new sales, where we signed 35 new clinics -- new units in the period. And for the year, we have grown our customer base organically by 25%. And if we include the effects of the acquisitions completed, the number of units has increased by 71%.

And the performance in the beginning of the -- of 2021, we provided a guidance of 35% growth and 40% EBITDA margins for Evimeria and Avans Soma, the business units. And in Q3, we revised the guidance on revenues due to delayed implementation of new customers that have been signed but not onboarded yet, given that the customers prioritize pandemic-related activities.

And that caused us to revise the guidance to 30% to 35% revenue growth. And the performance ended in line with this updated guidance, with revenue growth at 30% and EBITDA margins at 39% -- 39.5%.

The margins for the group was slightly down in Q4, as mentioned, mainly because of the impact of the recent acquisitions, which currently has a lower operating margin due to the business model and product characteristics with on-premise solutions. And our plan is to shift these customers from on-prem solutions to the web-based and scalable Webdoc platform, which will also impact margins positively.

With that, I'll leave the word back to you, Dennis.

[Dennis Hojer, executive]

Thank you, Svein Martin. And going forward, you can go to the next slide. As I mentioned a little bit before, the organic growth has been impacted by the pandemic in the last years, but the long-term prospects remain intact. And as I said, in fact, we believe that the pandemic will be a long-term good positive effect for Carasent.

And for 2022, we aim to achieve NOK 200 million or above, excluding potential from additional M&A. And the group EBITDA will be in line with the ones we had in 2021. And we will continue to execute on our growth plan, where we want to expand in the dimension, where we want to expand our product portfolio, we want to expand our products to address new segments and also the geographical dimension.

And we will continue to do this organically and also throughout M&As. So we see great potential and continues -- continue this growth plan on forth and looking forward to a great 2022.

With that, I say thank you, and we open up for some Q&A.

[Svein Bjornstad, executive]

Yes. There is no questions posted yet in the platform. So we can give it a few seconds, but -- please pass questions if you have any. There is a slight delay. So we'll wait half a minute to see if any questions pop up.

Yes. So we have one question from Mark at Redeye. Could you expand a little on the cross-selling potential from Medrave, Evimeria? How will you approach the primary care providers in Sweden? And given that Medrave has been a part of Evimeria's ecosystem for quite some time, how is the adoption rate among specialists? If it's relatively low, how come? Maybe, Dennis, you want to take that?

[Dennis Hojer, executive]

Yes, I can do it. First of all, we have had an integration to the Medrave software for a couple of years, although it hasn't been included in our revenue stream in our ecosystem. And what we see in front of us is, of course, together with Medrave approaching the primary care customers that they have together with our Webdoc offer to be able to present the Webdoc offer. So it's a way into this segment, a warm way for us into this segment and showing our offer.

[Svein Bjornstad, executive]

Great. Next question. On your career page, one can see many new job openings for -- connected to Webdoc X. Could you talk about the project with Mindler and its progress? How are you getting paid? Is it a revenue share agreement per user? And in general, what is your medium- to long-term plan with Webdoc X? How do you envision the launch in 2023?

[Dennis Hojer, executive]

I can elaborate a little bit about that. Mindler is a digital caregiver, which provides patients with psychological services. And the platform that we aim to build together with Mindler is due to that based upon the needs for paramedical care, which is the category of psychologists for us. And we have been developing the system together with them for a couple of months during 2021, and it's working accordingly.

And they have also tried out the functionality, which they are very happy about and pleased about. But in order to address the wider market and also psychologists, we have some more things to do in order to do it properly. There are some local integrations in the U.K. market as well for us to adapt to in order to address the broad markets. But that's where we are right now.

And the Mindler agreement is that they provide us with the information and the need on a free basis. And they get to use the system on a free basis as well when we launch it together with them for a period of time.

And we haven't yet decided what kind of pricing model we are going to use for the system. But it's probably going to be per user since the targeted market that we want to address with the product, they mainly are smaller offices where there only are 1 to 2 doctors. And it's also to compare our offer to other vendors in the markets.

[Svein Bjornstad, executive]

Yes. Great. Next question. Dennis, how many sales people have you recruited in the last few months? And are they going to be both in Sweden and Norway or focused on one geographic -- geography at a time? How come you see opportunities to increase your focus on outbound sales and marketing going forward now? Is it more than just the M&A and broadened product portfolio?

[Dennis Hojer, executive]

Let's see if I can try to remember to answer all the questions. But if we start to look at the amount of sales personnel that we have been recruiting for the last month, we have been increasing our sales force within Sweden with approximately 30% the last quarter, which is 3 resources. And we are continuously developing our sales team to work more outboundly, which have been showing effects. And we are going to intensify that approach during the year.

And due to the -- and regards the question if the sales personnel is going to sell in both geographies, the answer to that is no. We're going to have one sales force in Sweden, one sales force in the Norwegian markets. We have done some key recruitments in the fourth quarter in the Norwegian organization, where we are going to start to intensify the recruitment within the Norwegian market in order to increase our pipe of customers and also to approach it.

[Svein Bjornstad, executive]

Great. And how many of Metodika's Swedish customers have converted to Webdoc? Do you see Metodika returning to growth in 2022? Or will the transformation affect it short term?

[Dennis Hojer, executive]

We do not see that the transformation will affect us negatively within the group in the short term. Probably it will affect us in a good way. But you won't see any great effects of this during the 2022. We will be able to achieve some migrating during the year, but it won't have any large effects on the P&L.

But what we see is that when the customer is onboarded to the Webdoc platform, we also are able to provide the customers with the ecosystem integrated to Webdoc, which they are -- they don't have the possibility to within the Metodika platform.

[Svein Bjornstad, executive]

Great. Then we have a question from [indiscernible]. Are all clinics on Avans Soma onboarded? Or will this continue to impact 2022 revenue growth?

I can take that one. So the large contract that we signed in early 2021 had a planned onboarding throughout the year, and that will also continue into 2022 as a large project, where several of the units will be onboarded. So that will also -- the run rate on this will also impact the growth in 2022.

One final question from [ Matthias Silva ]. Can you give some reasoning behind the decline in revenue per clinic year-on-year for Evimeria, decline for Webdoc and growth slowdown for integrated services?

So I can start on this one. The decline in revenue per clinic is mainly driven that the new clinics that we have signed is a bit -- and onboarded a bit smaller than the existing clinic base. And that also has to do with that, the -- what we mentioned on the delayed implementation that several of the larger customers and clinics have been delayed during the year. And also the clinics that we onboard typically show an increase in revenues from the first year to the second year, which is also driving the net retention rates.

So another question there. The ratio of license and integrated services was 1:1 in Q4 for Webdoc customers. How satisfied are you with this? And what is required for you to double the ratio over the next 5 years? Maybe you can start, Dennis?

[Dennis Hojer, executive]

Yes. Of course, we want to see this ratio grow. So we are not that satisfied with this, although due to the circumstances, we are satisfied with it. And what we do require in order to double it the next 5 years, it's throughout establishing new partnerships and also continue to develop new add-on services. And we also see that we are able to do this throughout M&As, where we want to -- historically, we have been mostly done acquisitions of vendors that providing the EHR platform.

Medrave is the first one to provide us with a new add-on service within the group. But we see great potential in strengthening our whole digital offer, which including add-on services, which will also gives us possibility to increase this ratio on forth.

[Svein Bjornstad, executive]

Great. That was the last question. So thanks all for dialing in.

[Dennis Hojer, executive]

Thank you all, and have a great day. Bye-bye.

[Svein Bjornstad, executive]

Okay. Bye-bye.