Carasent AB (publ) (CARA) Earnings Call Transcript & Summary

Welcome to Carasent Q2 Report for 2026. [Operator Instructions] Now I will hand the conference over to CEO, Daniel Ohman; and CFO, Svein Martin Bjornstad. Please go ahead.

Good morning, and welcome to our presentation of the second quarter. My name is Daniel Ohman and with me our CFO, Svein Martin Bjornstad. Just a quick overview first. At the center of any clinic or hospital is the HR system. It is the same for Carasent, where we offer a number of HR systems for different markets. In addition, we offer a number of platform solutions that connect the Carasent with each other and other important players in the sector. And as you can see, we have higher recurring revenues with more than 90% and a 5% organic ARR growth and a 110% net revenue retention in the quarter. Looking at some of the highlights of the second quarter. I'm very happy that we finally acquired Infosolutions. That's something we have been working with for a number of years. It's an extremely important player in the sector and for our products, and I will talk more about that within short. In second quarter, we also had very strong sales, both in new customers and add-on services. As Svein Martin will show a bit later, our sign not implemented went from SEK 4 million in Q1 to SEK 6 million in Q2. And then most of those sales are Webdoc. So almost all of the SEK 4 million from last quarter have been implemented in this quarter and the SEK 6 million to be implemented in the next. So those are almost all new sales in this quarter. So we have a really good and strong pace in the sales. And I think that the organizational changes we have done is really working. So we're happy with that. For Germany, we have appointed a new CEO and a very experienced and entrepreneurial CEO with a strong sales and marketing background, which I'm really happy about. Because we are gearing up for getting Webcur to the market. So we really need to have the strongest team possible within sales and marketing. So I think that means he will really help us move forward in a good pace and really modernize ourselves. So I look forward to joining the first of September. Looking a bit as growth in the quarter. We have a 29% growth in ARR that's in also Infosolutions in the quarter. The organic ARR growth is 15%, and revenue growth in total is 11% and that is, as it was last quarter and what we also said for this quarter, a bit lower on the implementation and the consulting side mostly stemming from different Norwegian projects, both Ad Curis and Matua at Volvo. The profitability and adjusted EBITDA margin and adjusted EBITDAC of 11%, and that's been adjusted for the cost of this in cost savings at Infosolutions. Looking a bit in Infosolutions. So for almost all health care providers, it's absolutely key to be able to order tests on patients. So that's blood test, imaging, tissue samples and so on and there are very many different labs doing very many different types of labs. And if you might know, yes, we in blood there many different types of things you can do there are many different types of imaging can do and different type of labor you want to send your assembles to and you want to get supplies from. So it's a quite complex network or a very complex network where into solution is really the key player and has an extremely strong position. So it's been a key part of both we document Turkey in Sweden for many years. absolutely crucial part actually. So we've been trying to buy it for 1 year and was until now, we could agree on a price and I'm very happy with it. They have the strong position that will really strengthen our offering in our Swedish systems and strengthen the ties actually. What they have had is a weak profitability for many years, and we've been working with the management team on solutions to look over the cost structure. And as agreed that what we can do is to do quite substantial sales on the headcount. So we have lowered the personnel cost by 25%. It's already done and implemented. So all those that are living has signed and agreed. And I think that we will really have a strong exsolution going forward after. We have also met with all the staff after the changes and feel that they understand why it was needed, and they also feel committed to us move forward together and can see that we are in a strong position together. So that will really help in solutions have a good position going forward and also with good profitability. We will also do a number of price increases. Those have already been communicated to quite many of the customers and with being solutions to be in a very strong position to do those price increases. But that will take effect mostly from year-end. Looking with the Medsum. So Medsum is our AI system. So what it does is listening to the conversation between the caregiver and the patient and then at marked draft, can get nuts so that the doctor or fixed artist or ecologies and so on, can go through and check that this is the right ones and save cancel, take so much time. And that's what we hear from our customers. They really -- they want using it, we love it. They save a lot of time and can see extra patients or finished the day on time or so. So it's really -- should be really easy calculation for customers. Our customers, they see maybe 10 to 15 patients per day per [indiscernible] , so per doctor or per nurse. And if it's a doctor, then an average income of around SEK 1,000 per visit. And then the first day you take an extra patient, you are paid for Medsum for entire month. And this other 19 workdays at the month, he will make profits from using it. And it does take away the most spare part of the work. So having said that, it's still -- I think we should be able to increase the pace quite a lot on sales it should be really in. I think the thing holding it back mostly is, yes, it's new, it's different. It can give us a bit of [indiscernible] They are already allowed to use this type of technology will region say something about assets in this technology and so on. So I think it's a bit of fear following it back. We tried to educate the customers. We also make sure that what we do, of course, is really correct. And we really trying to build Carasent and web doc standing in the community as a really compliant partner, a very knowledgeable partner. We're doing a number of 7 ounces and so on to really show the compliance we have we've invested a lot in our compliance it's quite to be come back to -- so I feel that we're going to push this forward. Many of the customers who have won so far are from competing solutions. So it's still early adopters, but we're also getting some from new ones. So we look forward to continue growing it. We can grow it with the present functionality. We have very limited churn so far. So given how different you work with the [indiscernible] I think that's says quite a lot that it's really to churn on such a different product wanted to what they're used to using. We will add a lot of new functionality in the [indiscernible] then we will really from every visit also make a toss of everything you believe with the patient and then prefill all those things into the system. So you have ready solutions for [indiscernible] to do after a visit. So all that administration documentation that takes so much time away from health care, we can really help them save a lot of time. So I really look forward to releasing all that functionality in the autumn. It will be -- all of it will be there in the end of the [indiscernible] the U.S. off were doc to really be -- so it's a native solution within the system. What we also will do in this regard in the autumn is an MDR certification. So that's quite a heavy process to go through, but it seems like the authorities will demand that these type of solutions have an MDR certification and will also make customers be more at least at using this type of actionality. So it will cost us a couple of millions in the autumn, but it will be worth it. So that's something we aim to do through the beginning of the autumn. And we're really working hard to increased pace of both sales and development in this sector, but there's so much we can do for our customers. Looking forward, we're in to continue our growth. I think we should -- we are in a really strong position to continue to grow. Our customers like our solutions. We have really a high pace in our development making difference between our systems and competing systems largely by [indiscernible] is. So the system is getting -- all our systems are getting better at a high pace. So I'm really happy about it. We continue to have strong cost control. So we make sure to always, always know exactly what our costs are. We know what the cost will be next quarter, and we tight control of that. And every day, we get a little bit better than anything we do so that we can continue to grow without increasing costs very much. And we're launching works Webcur in Germany where we had the official launch of midsummer Day in Munich, we really started showing it to the public. And then when Niels coming in to [indiscernible] this up in the market during the autumn which I really happy about. Those first, I'm going to hand over to Svein.

Q2 was another strong quarter financially. No big surprises and another step in the right direction. So recurring revenues continue to grow strongly. And we also continue to convert the far majority of the revenue increases into profits. As you see here, contracted ARR is now SEK 401 million and it grew 15% organically with a net retention of 110%, which shows that the strong underlying momentum continues with good upsell and very low churn. Infosolutions added around SEK 40 million of ARR. So total growth was 29% and profitability also continued to improve rapidly. We did have some extra cost that we adjusted for that I will go through on the next page. But in general, a strong quarter as mentioned. Looking at the P&L, the revenues came in at SEK 97.7 million, 18% growth where 11% was organic. So you see that, as mentioned, recurring revenue growth was strong. The consulting side was a bit lower. But we do have a high activity now on the consulting side, and we had an improvement compared to Q1, which is positive and the trend is going in the right direction. The gross margins was slightly lower than last year. It's partly because of Info Solutions, which has a slightly lower gross margin than the rest of the group. On the cost side, you see that personnel expense and other OpEx increased a bit. And it's mainly due to this Infosolutions and one-offs. This was SEK 300,000 related to transaction costs and SEK 3.9 million related to the restructuring and the cost savings. A positive note on that is that we -- the transaction cost was a lot lower than we have done in previous acquisitions because we were able to do almost all the work internally this time. But this resulted in an EBITDAC improvement of around SEK 8 million and the margin increased from 3% to 1%. Looking at the ARR bridge, the growth remains balanced. We had a strong upsell continued strong upsell. It's a mix. We continue to add new clinics for our existing customers, new users. We also have a good upsell of new functionality. Medsum is starting to contribute to this, but it will also be a very important contributor in the next coming years, we believe. If you look at the churn, it's 3%. However, the legacy products in Germany is churning a bit quite a lot compared to the rest of the group. So that's around 1% of those 3. So if you look at the churn in the Nordics, it's extremely low now. It's 1.6%. So this has come down again after it was a bit elevated last year from bankruptcies, et cetera, but it shows that, that was only temporary, which is very positive for us. New customers contributed with 5% growth. And then we also had Infosolutions adding SEK 42 million of ARR. So Infosolutions has also grown there. ARR quite significantly over the last year which is positive. The backlog is now SEK 6 million compared to SEK 12 million last year. You should bear in mind that last year, we had a lot of these big contracts that we in the backlog for many years level, that has now been implemented and the SEK 6 million. As Daniel also mentioned this mostly on the sales that we did in Q2. So actually, that's a very strong quarter for us on the sales side. It was SEK 4 million in Q1. So a strong development there as well. This slide, I show it every quarter because it's I would say, one of the best demonstrations of the leverage in the business. You see that orange line there on top is the revenue. It has grown around SEK 120 million over the last couple of years. And then the dark blue part is the organic cash cost base. So OpEx, CapEx, personnel costs combined and it has been essentially flat over the same period. And this is -- bear in mind that this is including wage increases, inflation, et cetera. So it basically means that we are able to take out cost because we also add costs like we have done on the AI side for tokens and tools, we have added personnel in some areas, but we take out in other areas. So the costs are essentially flat. And in this quarter, 83% of the revenue increase for the organic part, if you exclude M&A dropped down to the profits, 83%, which is in line with what we aim for, basically. But more than 100% of the gross profit increase actually dropped down. So costs were lower this quarter on just base than last year. So in summary, we have good control of our cost and continue to become more efficient. Finally, on the cash flow side, we had a very strong cash flow this quarter and also for the first half of the year. You see here that free cash flow, including the CapEx investment was 26% of revenue for the first half of 2026. So it was actually much stronger than even the EBITDA. And this is because of the working capital effect. And I talked about this in Q4 and also in Q1 that there is some special effects in the working capital. For example, that one big customer paid in January instead of December. We also had, yes, a few high consulting revenue in December that was paid in January. So it is somewhat boosted maybe around SEK 15 million. But even adjusted for that, the working capital is very supportive for us because customers in general, pay in advance for our products. Finally, on the capital allocation side, the InfoSolutions acquisition and resulting in net cash flow of SEK 92 million. And we also did share buybacks of SEK 40 million for the first half of the year. But our balance sheet remained solid with a cash position of SEK 51 million at the end of the quarter and no debt. So with that, we can stop there and open up for questions.

[Operator Instructions] The next question comes from Elvin Roller from DNB Carnegie.

I hope you can hear me. A couple of questions from my side. Perhaps beginning a bit on InfoSolutions. It's encouraging to see, I guess, the kind of swift actions you were able to take. I just have a couple of questions if you can be a bit more granular on where you're taking out costs within the organization? And just kind of clarification, as I think in the report, you said 25% of the cost base, but you mentioned personnel costs here in the presentation. Is that -- which one is the most correct to look at? And is there any kind of potential impact on top line from what you're taking out? Or is it purely kind of more admin/back-office based costs you're removing from the organization?

Thank you. Yes, first of all, I'm sorry about the unclear writing, but then the CEO work. So it's 25% of staff costs were taken out, means rough SEK 10 million right of margin. So it's the costs we're taking out, and it will now have no effect on the top line. So I will say like this, that InfoSolutions had a really great time during COVID because all those tests went through their platform. So you can see that from the history of the company, they were really, really boosted during that period of time. And I think that, that last and then they really never got out of that cost situation. So they added staff from making all those money and they never really took care of that situation afterwards. They've been doing things in those years, and there have been in no hurry to do things. I think they've been quite fine with it, and they've been growing their business a little bit again after the COVID effect disappeared but we wanted to see more -- we needed to see more swift action. So that's why we would be like this. And my experience is also did a similar thing in the beginning of Carasent when I joined. It's quite good to make sure that you take all costs in one go and then it in from there instead of doing a little bit now and down because then we now everyone knows this is the did that do it together going forward, and they can feel reasonably safe on that. So I think that's why it's important to do it swift and do it in one go and also to make sure that your ones with the staff from day 1, and that was we were. Did that make sense?

Yes, makes perfect sense. But then just maybe to clarify because I guess most of the company's cost is personnel related were personnel related to begin with, what's kind of like a reasonable net savings on the total OpEx base if it was 25% of personnel costs that are removed.

Yes, it's SEK 10 million in cost savings per year.

And then maybe moving on a bit to MDR for Medsum, I mean, I guess, previously, my impression from you guys has been that you kind of quote on current to avoid MDR, considering the kind of numbers and process that it is. But I guess now this is kind of a hedging towards the towards the regulators if they were to become more strict in this. But I guess it also unlocks more kind of features for you guys to be able to roll out to clinics given that it will now be -- or it probably will be certified then in a couple of months. What's the -- are there any specific kind of features that our customers or doctors and clinics have been requesting that you have previously been unable to roll out due to this kind of hindrance that you will be able to roll out after? Or is it more purely a hedging effect from a regulator standpoint, how should we view that?

Yes, I understand. Yes, it's correct. We've been trying to avoid MDR historically. I would say part of -- I think most companies are a bit afraid of MDR. It's quite a big process. But the last couple of years, we have done so much with our ICE certifications, NME and other regulations hitting our industry. So we've become quite good at it, and we have a strong compliance team. So we feel quite confident that this will not be a major untaken for us. It will cost a bit of money. We need to do some start base and so on. So we are much less afraid of it, so to speak, today than we were a couple of years ago. It's also that the regulation has kind of matured in how it's implemented. So also easy to understand what we need to do. There is no significant new things. We can do things to MDR, but we can make our customers feel more safe. It's mostly a [indiscernible] where are responsible in Sweden have are saying that, okay, we will start saying that this is MDR over time. We might have been able to get any way with not doing it, but it's important that our customers feel safe in using this technology. So I think it makes sense to do it from that perspective. There are some minor things we can do. So for example, today, when we do after the meeting, we proposed the entire medical record, except for the diagnosis. So I don't think that's a major problem for most of our customers, [indiscernible] really simple. They are very much routine patients, so they don't need support that, and that's also part of the role they lack the most. But doing MDR, we will start proposing diagnosis too. But it's not a major advantage in it. It's more about keeping customers safe but also at latest seems to have a different opinion than the rest of Europe. So I think this is more of a Swedish thing that will be in MDR. I don't think it will happen in Norway, for example. But then we'll be there, of course, also in Norway on this functionality that's fine, and we'll use in marketing as much as we can. But Sweden in general seems to take a bit more strict view on these things than the rest of Europe, I would say.

Okay. Very clear. Perhaps a last question before I will leave room for others to ask regarding Medsum. Of course, positive to see that the user base is steadily increasing here month-over-month and I guess it's still, of course, very early days and a lot of the users now are, as you mentioned, previous users of a similar kind of solution. But regarding the interest overall for Medsum, have you seen any like clear patterns on types of clinics that are interested in the product? Or are you seeing any disparities between smaller versus bigger clinics and so on that kind of can indicate where the majority of the bigger adoption, say, in a 3-year period can come from? Or any kind of those trends that you've picked up since launching the product?

Yes, I would say it's most of my small chemics, and it's mostly still on a user basis. So it's -- so for example, one can have 2 big who likes this AI stuff and they get it. They're not the rest of them. So it's still -- it's seldom we see a clinic buying to everyone. So it's still kind of -- yes, this guy here really likes the are things. And maybe it's been using bit of Chatgpt now we can do it in the right way, so that's good. I think it's a matter of time. And this is Swedish can special [indiscernible] is very careful and you have to remember that doctors and nurses, they're trained to do right and to make no errors. They also know there's a lot of regulations around the area, and they know they are personally responsible for what they do and what they write in the medical notes. And it's their own license that is at stake, the personal license as a doctor [indiscernible] So it's a very careful group of people. And they're used to work in really old systems. Everyone is training the public where you use this warm season typically. So it's -- it will not grow I think this is -- we should be able to increase the pace, I think that's the macro view. I think we -- it's such a good time for them. So they should really all use it, and we're going to do everything we can to push it. But I think the most likely is that we'll see a steady growth kind of slow growth because it is a very careful industry, heavily regulated, not to make mistakes. They're personally responsible. So it will not be a boom. It will be a steady growth, I think where they pick it out person by person.

The next question comes from Frederik Nilsson from Redeye.

Just a few more questions on InfoSolutions and regarding the numbers you present here for ARR for InfoSolutions in the presentation, it seems to have increased from SEK 34 million last year to SEK 42 million if you look at net ARR, is that the correct interpretation?

Yes, that's correct. But they did towards the end of last year, they did acquire a small customer portfolio, and that was included. So that's part of -- it's like SEK 4 billion or SEK 5 million of the growth. So the rest for them is organic. So the organic growth is taking them from like 38% to 42%, basically.

Okay. Great. That's clear. But still quite -- I mean, reasonable organic growth then what's driving that growth?

I would say it's mainly from new customers being added. It's like they grow a lot together with the systems, for example, together with [indiscernible] and also -- they have added some additional regions as well that started using their system. And they have added some functionality that includes that has also driven a bit of the growth. But it's a mix, but the main driver has been adding new customers for them.

Okay. Great. And as you touched upon some of the customers or your competitors, what has the reactions been so far regarding the purchase and also the announced price increases?

So it's been a bit mixed. I think many of them understand the price increase, many of them says that, yes, I mean, you as InfoSolutions haven't raised prices for like 10 years, so it makes sense to do raise some prices. So I think many of them are quite fine. We have done some one price change that does create a little more frustration among some of them. And that historically, I feel that institutions kind of supported new systems into the market by kind of saying that you can just get one for free and then you just pay as you add more users. But it's quite big cost to implement the new HR system into it. So from now on, you have to really pay for it. And so that's a change that some of the small systems never really liked. But otherwise, I think that most of them have understood it and also some smaller easiness that, yes, it makes sense not to sell sooner subsidized small system managing the market. So I think that's been quite okay. And it's important for us to keep those customers or most of them, at least, and they're important partners to us also when it comes to [indiscernible] and HBI. So we've been talking to some of the larger customers about that. We have good collaborations both when it comes to HPI and end from before, and we continue to have a good collaboration, and we're saying up front what we will do, and that's what we will do, so you can trust us. And I think they know that from a couple of years. So I think that it will work okay.

Okay. I see. Could you give us any indication about what kind of price increases on average we are talking about?

Yes. very different between different customers, and we will treat our own system and other large competitors, the same. It's just that we're not subject small ones. And then we have some public -- a lot of the PAP regions and the public lands that we are not allowed to increase prices as much as we think we should even though they haven't done it historically, they will use the -- not always use the KPI that [indiscernible] are in the agreements with [indiscernible] used. So -- but in some cases, we're allowed to increase it as historically for the regions. In some cases, we cannot. In some cases, with coverages the guest in the tender in the process and that you cannot do us, it's not incur contract. But I think we'll be able to do an average of around 20%, maybe.

Yes. And it's first mentioning that, that's on an ARR basis. So it's not like for the total revenue base.

Great. And just one last question from me. Regarding Germany, you mentioned more than marketing and sales. Could you give us some examples of what kind of initiatives that are?