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Good morning, and welcome to SmartCraft's Q1 Presentation. My name is Gustav Line, and I'm the CEO of SmartCraft.These days we've been 2 years on the stock exchange and I'm pleased to announce that for the eight quarter in a row, we continue to deliver on guided revenue and margin. We see good demand for our solutions and see that they are a good fit in today's economic environment, where parts of the construction industry is under pressure. I'll talk more about that today. We'll have a brief intro to SmartCraft, and also talk about the financial highlights, and then a bit about the market and then we'll summarize with the Q&A.So to look at SmartCraft from a distance, what do we actually do? We deliver software for construction companies, for SME construction companies and mostly companies that are concerned with maintenance, upgrades and services for existing -- on existing buildings. And what our software do is that they provide overview and control for these companies. So, they are able to be in control of 3 very important areas. They need to be in control of their people. They need to know that they have the right people and the right projects at the right time. And they also need to be in control of the material they use and to get the right prices and so on. And they need to document the jobs that they do out on the building sites. And this information that they capture with the people and so on, needs to be synchronized between the people out in the field and people in the office. And that's what we do with our solutions, having mobile solutions to capture the information so that the people in the office can actually have a good overview. So this way, we provide strong value for our customers, and I'll talk more about that later.Today, we have a leading position in the Nordics. We have around 12,000 customers, and we have grown our user base to 120,000. We have about 200 employees located in Norway, Finland and Sweden. And I think we have a good and strong basis for further growth, both in existing geographies, but also outside our existing geographies.So to move on to the Q1 highlights. We deliver on our strategy with high stable growth, high margins and low churn, resulting in high cash conversion. In Q1, we see a solid ARR growth of 24%. And just to take some drivers behind that, first of all, we have a very efficient sales and marketing organization, creating lots of activities and opportunities. And when we meet with customers, we convert more than 60% of those meetings into sales. So, I think that's a very efficient way we do business. Also, we continue to scale and tune the organization. In 2022, we announced that we went into a country organization so we could better align resources and costs in each country and then allowing us to create more synergies and also be able to deliver good margin. So, we're quite pleased to see that our margin is at 42%.But before we talk more about that, I'll give the word to Kjartan, who can take you through the financials. Kjartan?
Good morning, everyone. And it's great to have you all joining us this morning.For those of you who do not know me, my name is Kjartan Bo. I'm the CFO of SmartCraft. And SmartCraft delivers yet another strong quarter with high growth and increasing profitability. We also, as you will later see, have a very strong cash flow in Q1. In general, the macro picture has not changed considerably. We still see high inflation and uncertainty in the market. But let's look at the segments for more details.Norway is performing well and is largely unaffected by macro effects in the current environment. We see both growth and profitability increasing, as well as price increases and upsell increased average revenue per customer. We see some effects of the macro environment in Sweden and Finland, but we also see positive signs towards the end of the quarter. Sweden is the market with the highest inflation, and has also an increased number of bankruptcies. This is the driver for the slight increase in churn the group has in Q1.Both sales and pipeline look good, and we have recruited 2 new sales managers in Sweden. Although these sales managers have little effect on the Q1 revenue, we see very positive effects on the pipeline for upcoming quarters. In Finland, we have many larger enterprise customers in the newbuild market. And we have earlier said that we have 18 of the 20 largest construction companies. These customers rarely churn, but fewer initiated new projects affects our growth.During the quarter, we have increased our focus as a consequence trend on the renovation subsegments. Gustav will talk about this a bit later. Additionally, in Finland, we are offering the EL-VIS solution to the SME market. The share of revenue is quite limited still, but the solution addresses the SME market, which is a much healthier market and we see great response.In total, we grew revenue more than 19%. We increased the recurring revenue share compared to both the same quarter last year and the previous quarter, and it's now 97%. Our flexible business model gives us the possibility as we see the macro effects to maintain our high profitability. The margin is now almost 42%, including the dilution from acquisitions. Also note that in Q1, we have no adjustments on the EBITDA.The margin expansion is backed by the increased level of CapEx. As you will hear, we have increased our R&D capacity by working smarter, which is allowing more of the development teams to focus on new features and future value creation. We have capitalized in line with plan, but notice is seasonally higher in Q1 and Q4, as vacations naturally reduced the capacity in Q2 and Q3. Currently, with the roadmap we have, we estimate to capitalize 9% for the year, which is in line what we said in Q4.Our solid financial position remains solid. We have an unchanged profile of the capital structure with only seasonal effects such as deferred revenue. We have also continued to acquire shares through our buyback program. This program ended at the General Meeting in April. And shortly after we initiated a new program on similar terms that runs until the General Meeting next year.We are self-funded. We are net cash positive, and we have a negative net working capital. We generate cash every quarter, every year. As you see on the left, Q1 is a seasonally strong quarter. This is due to how the invoicing are distributed throughout the year. But Q1 2023 also shows a strong growth year-over-year. This is due to the change in advanced customer payment plan.Our main metric is ARR, and this is the focus in the daily operations. ARR grew by 24% in Q1, of which 15% organically. Total growth is affected both by acquisition and increasing currency effects. We increased prices in December the Q4 -- in last year and in January this year, depending on solution. The price increases are included in the majority of customer contracts by the end of Q1. But as the remaining customer contracts are renewed in the next 3 quarters, price increases will also have a gradual effect on ARR for the rest of the year.So now Gustav. Let's hand it back to you.
Thank you very much, Kjartan. So, we have a very positive view on the future and we see great market opportunities. But let me first address the Finnish market that Kjartan touched upon.In Finland, we have larger customers and they have been challenged with the falling new housing market. The thing is in Finland, we see -- we have a very strong subsegment and that's the renovation market. That's actually the largest segment in construction and that market is growing healthy. And we have a very long history in renovation. That's actually where we originated from in Finland.So, we will now, going into 2023 or in 2023, we focus more on renovation and we have both great solutions and we have the organization understanding the customer needs and knowing how to execute in the renovation space. So that's how we're going to address the Finnish market going forward. And the good thing is when new housing slows down, then you need to speed up repairs and renovation to keep the existing buildings up and running.We continue to see strong demand for our solutions. This is illustrated in the graph to the right where you see a large customer group. And in Q1, you can see that their invoicing to their customers has actually increased in Q1 versus last year. So, we have a healthy and strong pipeline going into Q2 of potential customers. We also see a lot of upsell and cross-sell opportunities. There is still lots to be done with our existing customers. And also the great -- the sort of energy efficiency initiatives. Electrification is also a great demand, driving demand for our electric and plumber customers, which actually accounts for a majority of our customers. And they have more work than they can actually manage to do.In today's climate, it's super important that our customers have great solutions to deal with how they're going to increase their margin and increase their revenue. And I want to give you some examples of how we help our customers. First of all, we help them to increase revenue because when they are on-site, meeting the customers, with our solutions, they are better able to sell additional sales on-site.Also, it's super important that they managed to invoice all the jobs they do, all these odd jobs and small jobs that they do, it's important that they managed to invoice those. Actually, that brings in a lot of extra revenue. And also working with calculations knowing that they have calculated an offer to the customer correctly is very important, so they don't underprice the different projects.If we look at cost of material, of course, getting the right products at the right price is very important, but also being able to calculate the amount of material you need in the project, so you don't have too much excess material. It will also give you extra percentage points on your projects. And finally, when you have good visibility into the project, when you had good overview and control, it's much easier to actually maximize your OpEx in order to -- or maximize your workforce and also reduce our OpEx. And this way, we drive both revenue and margin.I'm going to give you some concrete examples. We've done an analysis, or we actually asked an external company to do an analysis of the Bygglet customers that we won in 2019 and to see how they performed over the next years. So, we compared all the customers we won in 2019 to a random sample of about 1,000 companies that are similar to the companies we won in 2019. And we looked at those companies over a 3-year period. And as you can see, the Bygglet customers grew nearly twice as much as the reference group.We also did an analysis together with a franchise chain of -- a franchise chain for plumbers. And we analyzed 25 plumbing companies in the period of 2019 to 2021. And basically, these companies were already using SmartCraft, but we wanted to see if we could help them to improve their margins and the way they did business. And by doing several initiatives, you can see that the revenue had a healthy growth, but also a very strong margin improvement that more or less doubled over the years.These are also 4 examples, sort of voice of our customers. And maybe you could just have a second to read through them to see how we actually add some extra value. And then I wanted to move on to another sort of live example from an SME carpenter using Bygglet. This company, Nicke Snickare, has been using Bygglet for several years. And as you can see, his revenue, the company's revenue has grown nicely and so has the EBITDA.So let's see what Snickare -- Niklas has to say.[Presentation]So, I hope these examples give you a good flavor of how we help our customers to increase both revenue and margin. SmartCraft is in a unique position. We have, as we tried to show you, best-of-breed specialized solutions for the SME customers. And we support the workflow inside the company, but also -- we also support the workflow with wholesalers and distributors and ERP systems and so on. And that's basically super important, and that's where we originate from. That's what we're really good at, the workflow. And we like to say that the glow is in the flow.Another unique thing about SmartCraft is that we have a very low take rate. It is super important that our customers see that the solutions are easy to buy, and they are easy to -- and they are -- the expense is quite affordable. And this way, we can give them predictable cost as well. And today, the solutions cost about NOK8 per user per day. And also, we want our customers to feel that they have a good return on investment as soon as possible, creating customer value from day 1.So, our solution should be easy to onboard, they should be easy to use, and we should have a lot of tools to be able to find out if you have any challenges and also we should be easy to contact if you need any help. And we need to be close to the customers when it comes to product development. And we are close to the customer, understanding their needs and putting that into our development pipeline, which takes me to the next slide.For a software company -- and all software companies, developers are scarce and we need to use our developers in the best way we can to create value. I think the trick of the trade is to really make new features that you can sell rather than use developers for maintenance and support. Sounds very simple, but that's how it is. And I'm pleased to see that in Q1, we see a shift where we create more code for future revenue than we have done historically. And this is in line with our strategy to shift more of the R&D to future revenue growth.How do we do this? Well, basically, we have managed to increase our capacity. We work smarter together as a team. We use more best practices, and we don't develop the same things several times. So, that's one way we sort of get more out of existing resources. Over the last years, we also invested in processes and platforms and sort of technical procedures in order to let the developers have more time to do what they're really good at and to create new value. And now we can spend more time in R&D, doing things that are important for our customers like integrations and APIs, so they can expand their ecosystem. So, we can expand to, like I said, wholesalers and so on, but also enabling cross-sell among the different solutions we have, which is more or less untouched today.And also, we provide new functionality for electricians, attracting new customers because we have an even wider portfolio, and also being able to provide more functionality in SmartCraft Core, providing great opportunities for future revenue growth. So, that's basically the sort of R&D investments we see in Q1 that I'm really proud about. We are at the beginning of a mega trend. There is no doubt about it. This industry will digitalize more of their manual processes and more of their paper handling.Today, very few companies actually use tools properly, like I mentioned earlier on. Only about 10% to 20% of SME construction companies in the Nordics actually have proper tools. So, this is an immense opportunity and we can do really good stuff in this area. I think also going forward, we should expect that our consumers -- our customers will expect a similar experience as they do as consumers when they surf on the Internet or use their mobile. So, there's loads to do, and we have still a lot of great opportunities in this space.There are 2 -- also 2 very strong drivers that you need to be aware of, the decarbonization of buildings. EU has proposed that all buildings should have a better category of energy efficiency. Today, all buildings have a category between A and G. And EU suggest that the F and G category should be moved to E in the next 10 years. That's billions and billions of investments, that will be super good for our customers, and it's a very, very strong driver.Additionally, there's a need for more documentation and this need will come and it's something that will hit industry hard. This is very much related to ESG as well. Companies need to be able to declare the use of material, what they use and so on. They need to show that their buildings have been build under the follow rules and regulations. They need to provide service and maintenance manuals. And also, importantly, they need to be able to document waste and how they recycle materials. So, these are super strong drivers that are in favor of our solutions.We see several ways we can grow the business organically. First of all, we want to sort of do more of what we good at. We have a strong position. We want to capitalize on that position in existing markets. We also want to do more upselling and price optimization. I think we have loads of opportunities there. We haven't really extended that opportunity. And also cross-selling on existing portfolio, like I talked about earlier on. Having the APIs and the integrations allows us for more cross-sell, which is more or less an untouched opportunity so far. And then we are really strong in certain areas like plumbing and electricians and builders, but also we can deepen and expand our presence in similar parts of the industry where our solutions fit well. This is also something that we haven't explored much.So to sum it up, we are in a great position in a growing market. Our solutions have a good market fit in today's environment, and our team have a strong track record in building pipeline and sales conversion. We have delivered consistently on our growth and on our margin targets since the public listing in 2021. And our ambitions stay firm going forward.And I think we should now open up for the Q&A, and I'll just get my PC and I'll get Kjartan on stage as well.
So let's see what we have. So, we have one question here from Oliver. What was the quarter-over-quarter ARR growth, excluding price hikes approximately?
Yes. We haven't disclosed that level of details before, but we see that ARR grows organically by 5.5% quarter-over-quarter. The majority of our price hikes was taken in December. So, there's less effect on the price hikes in the quarter-over-quarter growth. Approximately between 1% and 2% of the growth is price hikes.
We also do have some questions relating to CapEx. They're quite similar in sort of -- can you give us sort of flavor of what type of functionality or what type of features this is?I think I gave some examples. Basically, there are -- we also have the single-line diagram that we launched, which is very important for electricians. That's one thing that we launched this quarter. We also have a lot of added on to the SmartCraft Core platform, which is very important for us. And we do -- so we do quite a lot of stuff that really adds value. We'll get back to that. The plan is to get back to a more sort of technical session in Q2. So, this was just to give you an overview.
I will also add integrations to the recently acquired solutions as well.
Yes. Like we talked about earlier on.There's a question regarding churn. Do you see churn trending higher ahead, given the cyclical headwinds in the sector in general?No. As a matter of fact, the churn is slightly higher in Q1, but it's actually trending down at the end of the quarter. So there, we are quite positive going forward. Of course, it's difficult to predict. But so far it looks like the churn is within the range that we are comfortable with. We previously said sort of 6%, 7%, 8% is more or less okay. If it gets above that, we'll get a bit more stressed. But so far, we are in line with what we are comfortable with.There's a question regarding the competitive position in Finland regarding the electro SME segment and sort of what sort of position do we have?And the thing is we went with EL-VIS into the Finnish market because we know that there's a really great opportunity for us with that solution. It's a great solution. The solutions on the market today are quite expensive, and they are a lot more complicated than what we can provide our customers. We have a super solution for the Swedish market. It's now time to go into Finland, and we think we have a super strong value proposition. That is, of course, better than competition.Let me see. There are quite a lot of similar questions relating to the same topics. There is a question regarding SmartCraft Core. Where are you in the process of implementing modules for SmartCraft? And that's from Oystein.And it's a good question, Oystein. We are doing this according to plan. We are very comfortable and we're very pleased with the progress we've had in the last sort of 12 months. We will get back to more details regarding this. That's one of the reasons why we see a higher capitalization as well because we are able to move more of our resources to more value-driven development. So, we were very pleased with that.There's a question that I was sort of expecting coming in. It's about AI. How that's affecting SmartCraft?And I think, as a software company, you can't -- you need to look into AI. And we have done for some time actually. We are using both ChatGPT and other solutions mostly in our development, because it's a good way to get sort of code that we can use really quickly, and we can test solutions and so on. So, we used it for some time. We'll continue to look into how we can utilize it. So far it's mostly within the company, and then we'll see if we're going to extend it to users in the future.There's a question from Gustav Froberg regarding investing more in organic R&D in the event multiples remain high.I think the thing is we -- like we tried to explain today, we're very pleased. I mean, we haven't really invested in a lot of new R&D resources, but we have invested in getting more out of our existing R&D group and making sure that we can really create more value. That's what we want to do for the time being. I don't know if you want to add to that, Kjartan.
No, I think that's right. We are looking how to invest. As we have said a couple of times already, we have a good financial position. We have the firepower to do both M&A and investments. And we continuously look at how to invest both R&D, sales, yes, what can help our growth.
There's also question regarding performance of our acquisitions. How they've been performing over time?
Yes. The short answer is all our acquisitions are improving, looking at the big picture. Of course, business goes up and down. But overall, all our acquisitions are improving, increasing both in growth and profitability. This is true also for the 2 latest acquisitions we did in 2022. And we are very pleased with the performance from all our solutions.
So let me see. Yes, there's a question from Oystein regarding organic revenue growth. We see some differences between the segments growing. Growth in Sweden and Finland has slowed down compared to 2022. Is this driven by macro?I think it's -- I just want to give sort of a little bit of flavor on this. Business isn't linear. When we look a year back, we saw that Sweden and Finland actually performed really well. I think it was all-time high. We had really strong performance in Sweden and Finland, and Norway was not performing that well. Going into 2023, the picture has completely turned around. So, I think we should be careful to draw too many conclusions.We did talk about Finland a little bit earlier on about how we have larger customers, how we're now focusing more on renovation, which we think is going to be really good. And also how we strengthen the sales team in Sweden, which obviously has given us some good results now in the short term. That hasn't really been visible in revenue since they started in Q2 -- Q1, sorry. So, we're positive going forward. And as I said, the pipeline looks good, and we are very positive about the future.I think that is it. There are some questions that are quite similar to what we already talked about. So hopefully, we covered your questions. And if not, please get back to us, and we will, of course, answer them by e-mail or phone. So thank you very much for listening in. I hope you enjoyed it, and have a great day.