Risk Intelligence A/S (RISK) Earnings Call Transcript

Good afternoon, and welcome to this Q3 presentation and Q&A with Risk Intelligence. With us today, we have the CEO, Hans Tino Hansen; and CFO, Jens Krøis. First, there will be a presentation and afterwards, a Q&A. There have already been pre-submitted questions on Stockio, and the Q&A is still open so that you can submit questions live as well. I will now hand over the mic to Jens and Hans to start the presentation. Jens and Hans, your lines are now open.

Thank you very much, and thank you for being with us today and for the opportunity to present our Q3 report that we are quite satisfied with. Just a few words from the CFO. Yes. Today, we will shortly go into the main activities during the third quarter. Then Jens will go into the highlights of the Q3 report. We will talk a little bit about the 2024 outlook. And then we have the questions-and-answer session based on the questions that you have submitted plus other questions that may arise during the presentation. During Q3, we have continued rollout of the new platform. We have had a renewal process that we have every quarter. And this time, we didn't have a 0 churn, but a low churn. That was one small license that was terminated, and some upsell to -- during the renewal process. We've got 3 new maritime clients during the quarter. We've had a good sale of advisory service projects, both small and medium-sized. And then finally, we've had a new hire in the commercial department and one in development. In other words, we got a new Head of Commercial Operations and a new Head of Development, which means that a lot of the work that we earlier had outsourced is now in-house in the building, so to say. And with those words, I will hand over to Jens.

Yes. Thank you, Hans, and thank you for everyone listening to our voices today. And as Hans already said, we are a bit proud to announce this third quarter. Just to start with the highlights, which is a glance of the quarter. Actually, we are -- for the first time, at least while we have been listed in the last 5 years, we have a positive EBITDA in the third quarter of DKK 65,000. It's not much, but it is positive. Our cash flow from operations during the 9 months, we've improved by more than DKK 6 million compared to the 9 months in '23. Our ARR increased 28%. And as I said, a very low churn, not 0, but 0.2. Our NRR, 164% and I'll just come back to that. And we changed our guidance. And again, we'll come back to that. But looking at the more detailed numbers, not to go through all of them, starting at the quarter. Top line increased of the recognized revenue by 32% and the invoiced revenue by 48% compared to third quarter in '23. Most important or at least as important, our costs stayed at a level that is 4% higher than last year, but again, looking at the increased level of invoiced revenue of 48%. Again, if you look isolated at the quarter, the cash flow from operations increased by 61% compared to last year. Yes. Can I move the slide here? Sorry. Thank you. Looking at the 9-month period, again, top line increased by 29% of the recognized revenue and invoiced in total by 40%, up compared to last year. Costs, again, stayed at a low increased level of 5%. EBITDA increased by 65%. That is more than DKK 3 million. We improved our EBITDA, still negative for the period, but again, 65% better. And then the cash flow from operation, which is quite a huge number for us to improve more than DKK 6 million, still slightly negative, but coming from DKK 6.8 million negative last year. Yes, positive net cash flow here. And looking at the metrics, 27% growth on our total ARR to a level that's more than DKK 24 million now. System ARR increased by 28% and the net retention rate, 164%. And we actually explained the high level of that is one customer, which have a -- we take that customer out. The rest actually came up by 27%. So 127% if you clear out that heavily increased one client. Looking at the -- will you take that, Hans? Or should I just...

Yes. There is actually also a question later, but we might as well take it now. We -- the thing is with EBITDA is slightly more difficult to predict because it's very much about timing since we were aiming for about 0. Obviously, we were aiming for higher, but we had done guidance for 0, around 0. And in recognized revenue, obviously, if you have sales that go through later in the period, be it Q3 or in Q4 than you expected, then you have a change in the time when it's recognized. So that could be 1 or 2 or 3 months. And that's what we're looking at. The other thing that we have had an impact from is one client because of a merger is changing its license period. That also changes the recognition and thereby the revenue. So it's not because of increased costs, but it is compared to our budget, it's because of less recognized revenue that actually falls into 2024 and does not -- are not kind of put into 2025 with the recognition and the periodization. I don't know if that made any sense, but that's at least the reality.

It's okay.

Yes.

Then we have received, I think, 5 questions and then 6 came in just before we started. And I'll hand back to -- or should I just start?

I will read up the first question here. So the first question is, could you describe your main competitors? And if you know whether the customer that you recently came back to you did explore any of them before deciding to come back to you?

For competitors, I would refer to some earlier presentations, but also the memorandum that we did during for the capital increase in October 2023. It's all described there, both for land and maritime. But one of our main competitors on the maritime side is Ambrey from the U.K. We actually do not know if they looked into choosing that provider, because the reason why the energy client came back was that their maritime chartering arm, that's a separate organization chartering tankers to move their oil and oil products around the world and gas, already had a license and they were very satisfied. And from the discussions we know, they are looking into possibly increasing their license in 2025 also on API.

And then we move on to the next category around sales and growth. And the first question here is the new agreement with international SOS and Bosch Logistics seems very promising. However, how will this influence your SaaS metrics? Will you count each of the SOS/Bosch customers as a single customer, reducing ARPU and CAC significantly if many small customers sign on, or will you just count SOS and Bosch as large single customers?

Yes. That's a really good question because in the case of International SOS, it can actually be an individual super yard or mega yard. Thereby, it will be a relatively low -- small license compared to, let's say, a big shipping company. So if we use them and just divide it by the numbers of clients that will come from NATO -- sorry, from SOS and Bosch, it will skew our SaaS metrics and SSS metrics. And that's why, as Jens already mentioned, we actually did a calculation on all clients minus the large increase from one particular client, which gave an NRR of 127 instead of the -- you can say mathematical 164. That's why we actually report both numbers. So you can say that the rest of our client base is 127, which is also high compared to other NRR figures in -- with SSS companies that are doing business-to-business. Therefore, we need to find out what we're going to do if it's going to be one of them each accounting as one or if we're going to separate it, just like we did with the NRR calculation here. We simply have to see what are the numbers and so on. There will also be an option under the International SOS agreement, actually also on the Bosch one that they can refer/sell licenses on the whole license agreement, meaning that, that will obviously be to the full price in terms of ARPU and NRR.

And then moving on to the next question. With a CAC of DKK 50,000, ARPU of DKK 171,000 and very low churn, it seems logical to invest any positive cash flow you will hopefully soon achieve in accelerating your growth. Could you comment on any reasons that might or might not be an obvious choice, e.g., if you expect increased investments in sales will be far less efficient and mainly drive up the CAC?

Yes. That's actually also a good question. But actually, we are already accelerating initiatives in the commercial side. I already mentioned the new Head of Commercial Operations, and this would be further increased during 2025. As you know, with such things, they may increase CAC in the short-term because of the cost being the same regardless of what month we're looking at for the individual initiative or the individual hire, but pay off in the medium to longer run. We are, however, aiming for [ black ] figures by the end of 2025. That is, of course, a constraint instead of just investing everything into growth. So we have to deliver both on the [indiscernible] figures for the full year of 2025 obviously, the positive cash flow that these 2 go together, but also on the growth figures. But here, the [indiscernible] figures will come first for 2025.