Oneflow AB (publ) (ONEF) Earnings Call Transcript & Summary

Good morning, and welcome to Oneflow's Year-End Update of 2025. My name is Natalie Jelveh. I'm the CFO at Oneflow. Unfortunately, Anders Hamnes, our CEO, could not join us today. So I will walk you through this presentation. I also want to encourage you to use the Q&A function in Zoom and not the chat. So if you have any questions, please use Q&A function and we will have Q&A session at the end of the presentation. So some highlights of 2025. We closed our ARR at SEK 183.1 million by the end of 2025. We also released our press release of the ARR for Jan. We closed Jan at SEK 186.4 million. 2025 was a tough year from a currency perspective. We actually had a currency headwind in 2025 of minus SEK 5.6 million. And in January, we had a currency headwind of minus SEK 1.3 million. We continue to grow our ARR. We actually had a growth of 19% in ARR if we exclude the currency effect, quite strong growth. Looking at our net new ARR, we closed at SEK 3.4 million, a little bit below our expectation. I will walk you through that in the upcoming slides. Our ARR per full-time employee grew 46% from a year-over-year perspective, closing at SEK 1.2 million by the end of 2025. Our net and gross retention still a bit under pressure. The net retention closed at 96% and the gross retention at 86%. We have continued in Q4 to deliver a positive EBITDA margin, closing EBITDA at 16% and also made significant improvements on our EBIT margin, closing at minus 11%. I also want to take this opportunity to do a little short presentation of what Oneflow do to our new participants. So Oneflow is a contract life cycle management platform. We help all companies within all departments in the company with their contract management. Every department from sales, HR, procurement, finance, all departments within that company, Oneflow can help with their contract management, handling the contract management. Starting off, of course, with the pre-sign functionalities, create template, collaboration, real-time collaboration, the negotiations, moving on to, of course, the signing part, but also the most important part or critical part is, of course, the post-sign, the life cycle management of a contract, storing, managing the contracts, analyzing, getting real-time insights on business performances and so much more. And of course, we have the AI functionalities. We've invested quite a lot in AI, both in pre- and post- sign, enhancing the functionalities we already have with even deeper knowledge and deeper insights on the contract data points. We also have quite strong integration, enabling Oneflow to be integrated to other business systems. And this, of course, enables an efficiency within our customers in their whole contract management performance. During 2025 and with all years, we've, of course, invested quite heavily in our product development. AI and contract intelligence is something we've invested heavily and we'll continue to invest in making sure that we enhance the functionalities we already have with AI functions, getting more insights on contract data points and so much more. And of course, our integration is something that we continue to work with to get even more deeper integrations, [indiscernible] integrations. We're quite strong on our integration point. We have a team in Sri Lanka that is consisting of 23 people solid working with our integrations. So quite strong functionalities and feature enhancements have been done during 2025. Of course, the life cycle functionalities such as personal time zones, data format setting for global teams, enhancing and supporting our global companies. This is, of course, something that will also enhance the growth that we have, especially in our global markets such as the U.S. market expansion. So we do a lot of investment in enhancing our product and these enhancements you will be able to see when you use our platform, but this is something that we will continue to work with, of course, going forward. Our net new ARR, we closed at SEK 3.4 million in Q4. If we look at the net new ARR, we had a really strong new ARR during the quarter. Expansion has been on a quite average level, so to say. However, what hit us in the last quarter is churn. Churn has been a bit challenging, especially when we look at the churn, look at the downgrade portion of the churn, we know the market segments are quite tough today and the last years, especially. And we see that when looking at our churn numbers, a lot of downgrades, of course, coming from customers that are struggling today, but also some churn from our smaller customers that are struggling due to the current market environment. What we also have done that I want to highlight is that we actually also closed approximately SEK 7 million in signed contracts that will be recognized as ARR in the upcoming quarters. So quite strong new ARR numbers in Q4 and SEK 6.9 million of them will be recognized as ARR in the upcoming quarters. If we look at the net new ARR from a full year perspective, we closed net new ARR at SEK 24 million. If we adjust the growth from the currency effects that we have, as I mentioned, we had quite strong currency headwind during 2025. Adjusted for that, we would have a declining ARR growth of -- net new ARR of 21% compared to 2024. As mentioned, churn and expansion is still a bit challenging during the current market environment. However, Oneflow is now, what we prioritize right now is to steer Oneflow towards profitability. We are looking at making sure that we work in the most efficient way and have long-term resistance. And once we reach the profitability goal, we will again accelerate the ARR growth and accelerate the growth. So right now, the focus is to steer Oneflow towards profitability. The ARR, as mentioned, we closed at SEK 186.4 million in Jan and SEK 183.1 million by the end of 2025. That's a 19% growth if we adjust it from the currency effects. Our long-term financial goal is to reach an ARR above 30%. We still believe we're going to do that on a long-term perspective. But as I mentioned, our focus right now is to steer Oneflow towards profitability. Once we reach that milestone, we will shift the focus and accelerate growth again. So we still believe that we will reach an ARR growth above 30% from a long-term perspective. So how will we increase the ARR growth? Of course, we will always continue to develop our product, make sure that we develop the features, functionalities that we have. But we also do believe that the market segments will improve. That's a hard one to make bets on. But of course, once the market segments improve, our ARR will also improve. We launched several heavy features during 2025. We'll continue to do that many AI features and functionalities. We also have entered the quite new big market, the North American market. We also will see -- that we see it increasing in growth. Package and pricing, of course, something that we look at increasing our ARPA, adding more value to our customers and so on. So the ambition is always to -- the vision is to still [indiscernible] towards profitability, but also in the long term to reach an ARR growth above 30%. We made a 40% improvement when we look at the ARR per FTE closing at SEK 1.2 million by the end of the quarter. So why is this KPI important? If you look at Oneflow, almost all our revenue is recurring revenue, 98% of our revenue is recurring, and we have quite strong gross margin, ending up at 93% by the end of the quarter. So basically, the highest cost that we have is salary and employee. So this KPI, ARR per FTE is a really good metric to look at to give quite good indications on our progress towards profitability. Our gross and net retention, as mentioned, the churn levels have been high during 2025. We've had a quite stabilized gross and net retention in the last 3 quarters, closing the year with a net retention of 96% and a gross retention of 86%. Again, with increase in ARR with enhancement that we do with our product, the underlying market fundaments, all of these changes in directions that we are working towards will also improve our gross and net retention. Net sales. So we had an improvement of 27% on our net sales, closing Q4 at approximately SEK 47 million in net sales. If you look at the shares of net sales coming from regions outside of Sweden, it has been quite stabilized last year around 41%. And as I mentioned previously, looking at our net sales, the majority of that, almost 98%, almost all net sales are connected to our software recurring revenue. And then we have the remaining 2% connected to professional services. And by the end of 2025, we had paying customers in 45 countries. If you look at the net sales from a yearly full year perspective, we closed 2025 with net sales of SEK 171 million, up 26% compared to 2024. If we look at the net sales by country, we can see that Sweden is the largest country contributing to our net sales. Sweden stands for 59% of our net sales. We're quite strong in the Nordics with Norway at 14%, Finland at 10% and then the 17% from the rest of the world. We have a quite strong gross margin being quite stabilized throughout 2025, closing at 93%. If you look at our gross margin and look at our largest cost of sold expenses, that is related to commission to our partners. We work actively with establishing new collaborations, strategic partnerships with different partners. So this is something that the more we establish these type of collaborations, our, of course, partner commission will increase. But we do believe that the gross margin will continue to be quite high going forward. And as mentioned, being quite stabilized during 2025, around 93%. We delivered positive EBITDA by the second half of last year. Even in Q4, we delivered a positive EBITDA of SEK 7.6 million. We also made heavy improvements in EBIT, closing EBIT at minus SEK 5.2 million to compare that to minus SEK 21 million we had in Q4 of '24. So significant improvements both on EBITDA and EBIT. Now EBIT will remain to be impacted by our investments in our product development and then the amortization of capitalized development costs, but significant improvements, both on EBITDA and EBIT during the second half of last year. We also had, of course, then positive EBITDA margin, closing at 16% by the end of 2025. Also significant improvements on EBIT, closing at minus 11% by the end of 2025. As you can see, we have made improvements both on EBIT and EBITDA. So during the year, we have also worked quite heavily on making efficiency, making the organization more efficient, improving the efficiency and improving the performance in the company. We have stabilized our cost base and that in combination with us continue to grow in revenue, have resulted in us reducing our losses and actually switching over to a positive EBITDA margin by the end of the year. If you look at EBIT and EBITDA from a full year perspective, we closed EBITDA at minus SEK 2.4 million in 2025, and we closed EBIT at minus SEK 15.4 million. We are there almost on a breakeven level when looking at the EBITDA margin, closing at minus 1% for the full year and closing EBIT margin at minus 13%. If you compare this to 2024, you can see the significant improvement we have done with both the EBIT and EBITDA margin. We have truly reduced our losses. And again, as mentioned, our main focus right now is to steer Oneflow towards profitability. That's the main focus right now. And that will be done without impacting the product development. We will still continue to invest in our product always. We have not changed our financial goals. We still believe in our financial goals. We believe in an ARR growth above 30% and to reach profitability with current fundings. As I mentioned in the first slides of the presentation, our ARR growth for 2025 was 19% adjusted from the currency effects. But as mentioned, we have the main focus right now to steer Oneflow towards profitability. Once we have reached that, we will accelerate the growth again. So from a long-term perspective, we do believe that we're going to reach an ARR growth above 30%. All right. Let's see if we've received any questions.

So looking at the cash flow, can you tell us more about the belief of reaching profitability with current fundings? Of course. So basically, as mentioned, during 2025, and this is something that we will continue to work with is to work the most efficient way possible to enhance our performance. So that is done, of course, in combination with us stabilizing the cost base. And looking at the growth and the growth potential that we have, we do believe that we're going to reach profitability with current fundings. This is something that we evaluate on a daily basis, of course. Things can, of course, happen in the market. The market segments are hard to estimate how they will look in the upcoming quarters. But looking at our organization and the way that our organization is structured and the performance that we have and the functions and the product that we deliver to our customers, we do believe that we're going to reach profitability with our current funders. This is something that we truly believe in, and we are looking into it on a daily perspective to make sure that we can reach profitability with current funders. And the most important thing, again, for Oneflow and mantra that we have is to do more with less. We have a quite talented team here at Oneflow, a really high-performing team. And that is something that we believe in, and that's also why we have not changed our long-term financial goals. All right. Let's see if we have any -- all right. I think that was it for questions. Thank you all for joining this presentation. I want to wish you all a happy weekend. It's still snowing here in Stockholm. So please go out and enjoy the snow and enjoy your weekend. Thank you so much for joining.