Agillic A/S

CSE:AGILC

Earnings Call Transcript

[Michael Friis, analyst]

Welcome to today's event where we have the pleasure to present Agillic. Joined from the company and to help us through today's presentation of the results and answer questions, we are joined by CEO, Emre Gursoy; and CFO, Claus Boysen.

Today, the Q3 '24 results fresh off from the press this morning, we will go through. As always, you are very welcome to ask questions in the box down below. We will take the questions primarily in the end if it fits maybe during the presentation. Do feel free to ask it in Danish, I will try and translate to the best of my ability to English.

But for now, I think I'll hand the call over to you, Emre.

[Emre Gürsoy, executive]

Thank you very much, Michael, and good morning to everyone, and thank you for joining us in today's session. What we would like to do today, me and Claus together with me, take you through the details of our Q3 results, starting with a quick introduction of our company, going into the details of our numbers, performance and then summing up with the market trends and how we see the developments going forward in the martech industry altogether.

If we start for those who have not a detailed understanding of what Agillic stands for and what our platform is all about, let me do a quick introduction. We are a customer experience platform, as we call it. We help brands and companies to work with data-driven insights and content to create, automate and send personalized messages through the channels that -- of their choices.

Why is this relevant in today's world? It's because those who are out there, which we call the consumers, are expecting a timely and relevant communication from the brands that they have given their data as a permission, and these conversations are creating quite strong impactful results, business results for those brands who are using this properly because this is creating higher conversion, eliminating losing the clients' customers from their databases, which we call the high retention and increasing the customer lifetime value, all this being driven by a platform as ours.

It also gives a major impact on their operational efficiencies because it is very easy to manage very complicated structures and solutions are achieved through our platform. It's very easy to use and easy to implement. And that's what our platform is all about.

If you look at our company in a very short snapshot, currently, we have our bases in Copenhagen, Denmark. We have 40 employees from different nationalities. I think it's up to 8 now. We have clients in 10 markets. And these clients of ours in Europe mainly are servicing their customers in over 100 markets around the world.

We're a 100% SaaS company. We do not do professional services. For that, we use our partners. We have a quite extended penetration of the market-based partners. Those partners and us, we are working with verticals. Those verticals mainly driven from data-rich and customer retention focused, customer lifetime focused businesses. And those are usually the retail, finance, subscription. These are the kind of the verticals that we have quite a strong penetration because that's where the business is actually highly fast and technology driven.

We have been listed since 2018 in the NASDAQ First North Growth Market in Copenhagen. We have multiple awards for our platform's performance, mainly for the Best Omnichannel Company, which we are most proud of for multiple years we have received. Recently, we have received the patent for our platform's ability and the method for large-scale real-time data processing. I like to mention this because it has taken us quite a while to go through this process. And finally, we have received the confirmation and the quality mentioning of the patent, which we are quite proud of.

If -- looking into our Q3 highlights, I'll give you a quick snapshot, and then Claus will go through the details of every area. We have completed Q3 with DKK 44.4 million revenue, a positive EBITDA of DKK 1.8 million. It also drove a cash flow from operations, DKK 6.7 million, which I would say is one of the highest of the last years. Our subscription ARR is DKK 52.5 million and the total ARR is DKK 63.1 million.

When we look at the numbers, mainly driven from the ARR decline that we have year-over-year, it's mainly driven from our Q1 decline in the ARR, which then affected on the revenue and the EBITDA. It's driven from, which we have previously talked about that, either the technology consolidations that our clients have concluded mainly in Q1 as well as the M&A-based global structural changes that some of our clients had to go through. Altogether, we -- even though we have a declining ARR, we have a very good performance on our financial structure operations, and we are still delivering positive EBITDA and improved cash flow from operations versus the previous years.

So Claus will take us through now in the details of the numbers.

[Claus Boysen, executive]

Thank you, Emre. And if we look at the ARR, both in subscription and transactions, what we have seen here in Q3 is that we have a 2% increase on our ARR on subscription. So modestly, but this is in line with our expectations that we would swift the pattern from the beginning of the year where we saw the churn. And the ARR from transaction is once again increasing from DKK 10 million to DKK 10.6 million here by Q3, both due to changes in some of the contracts with our clients that are using more transactions, but also due to the seasonality that we normally see towards the end of the end of the year.

On the revenue side, the subscription is driving DKK 37 million in revenue and transaction DKK 7.4 million. Altogether, Q3 ended by DKK 44.4 million. And if we see quarter-by-quarter here in 2024, we see a fairly stable development in the revenue, and the decline in the first quarter was also related to the decline in ARR.

On the EBITDA side, we have shown an EBITDA of DKK 1.8 million, and that is despite the decrease in revenue compared to last year, but it's because we choose to adapt our cost and primarily our employee cost already in the beginning of the year, and therefore, we can perform with a positive DKK 1.8 million in EBITDA. On top of that, we have also been through some extraordinary onetime costs during the first -- primarily first half year, which we evaluate to DKK 1 million. So if we adjust for those, the EBITDA would have been DKK 2.8 million.

Then we always speak about committed future revenue. That is when our clients has been invoiced for the future months. Normally, they are invoiced a year ahead or more, and then they pay for that year before they start using the platform or the license period. That amount is what we call committed future revenue. That will be booked into our revenue, our P&L in the upcoming months. And therefore, it's like this amount, we will, for certain, be seeing in our revenue stream during the next couple of quarters.

And here in Q3, we have a committed future revenue of DKK 27.2 million, which is an increase of almost -- or close to DKK 2 million from last year. And that is a quite strong development because we saw the decrease in our ARR. Normally, if we see a decrease in ARR from subscription, we will also see a decrease in committed future revenue and vice versa. But this is related to our development of the contractual commitments among our current clients. That's what we see on the index side, what we are trying to show there that when the ARR subscription increases on the index and then in 2024, decreases. But if you see the index on committed revenue, we managed to increase that here in Q4.

[Michael Friis, analyst]

Claus, is that only upselling that can drive that? Or is that also the contract period or just to understand the connection between those 2?

[Claus Boysen, executive]

It is more driven by contract developments, but that's because when we align with the NRR, which is fairly stable, then this is mainly driven by contractual better commitments. But it could also be an NRR effect.

So some of our highlights. Q4, 114 clients, a slight increase from Q2. We are still stabilizing around an average ARR of DKK 0.6 million, which has been stable for many years. And then we also measure how much revenue do we derive per employee. And in an index compared to 2021, we are driving a revenue of an index 133 per the number of employees we have, the headcount we have. So each employee drives a higher revenue as seen over the years.

With regard to the net revenue retention on the lower left side, we have shown here that we have 89% in NRR. This is highly impacted and primarily impacted by the churn we saw in the first half year and Q1. And by the first half, it was 88%, so a slight increase in NRR since the half year report.

The customer acquisition cost is DKK 0.7 million, which also drives a higher months to recover CAC of 19 months. And the reason for that being higher than the previous year is because of the slow development in new clients this year, but still paying for marketing and salespeople to drive sales.

[Emre Gürsoy, executive]

And we're also increasing the number of sales team members and the efforts behind the growth.

[Claus Boysen, executive]

Correct.

[Michael Friis, analyst]

And sorry, was this a Q3 number? Or is it accumulated? Because I guess Q3 is always very low...

[Claus Boysen, executive]

Accumulated.

[Emre Gürsoy, executive]

It's accumulated.

[Michael Friis, analyst]

Accumulated. Good.

[Claus Boysen, executive]

If we look into our liquidity model or our liquidity and cash position, this is what we call our cash adjusted EBITDA. It's EBITDA and then it's deducted from the R&D capitalization. And if we also have a positive impact on our committed future revenue, that will also have a positive impact on our cash adjusted EBITDA.

Seen over the years, we have, last year by Q3, minus DKK 8.3 million, which by Q3 2024 is DKK 4.4 million. This is derived by that we are able to maintain a positive EBITDA. We have increased our committed revenue, and we have also optimized our R&D capitalization. We have, in the beginning of the year, launched a big update of our platform, which made us in the position where we could optimize our R&D investments, and therefore, we could reduce them. And from 2022, where we invested for the first 3 quarters, DKK 10.2 million, we are now at DKK 8.3 million, which is the current level that we find is relevant and stable for our investments.

Then we also have a -- what we have seen here in Q3 and year-to-date is that we have a significant improvement in our free cash flow. Our free cash flow is our cash flow from operation less the investments that we do in the platform primarily. And if we look over the years, it has been amounts between DKK 9.5 million negative to DKK 15.5 million. And by this Q3 2024, we are at a minus DKK 1.6 million, primarily driven by cash flow from operations, but also the optimization of our R&D investments. This is a clear pattern of our strategic goals of being cash adjusted positive by 2025 and be self-sufficient in our cash position. So this is all the things that we have tried to aim for towards our strategic goal for 2025.

We go more into the details of each quarter's cash flow. We started the year with DKK 9.8 million in cash. And at the end of Q3, we are at DKK 3.7 million. Again, this is primarily driven by our improvement in the cash flow from operations, our more efficient R&D investments. But in this period of time, we have also made installments on our loans of DKK 5.3 million. And the loans have started sort of making our installments, which means that we -- by the improvement in the cash flow operation, needs to be able to pay these loan installments. So it's quite a strong operational performance for this quarter and year-to-date.

The amount for Q3 on DKK 4.1 million includes the tax credit that we have mentioned in our previous announcement of DKK 2.1 million. We do expect that Q3 -- Q4 also will be an individual cash flow positive from operation, which means that we will improve that number for the full year.

Then looking into our guidance. We made our guidance on the 22nd of February this year. We maintain our guidance, which is on the subscription side, DKK 56 million to DKK 60 million and on transaction side, DKK 10 million to DKK 14 million. Currently, we are at DKK 10.6 million in transactions. So we are within the frame of our guidance. And when we look at where -- with DKK 52.5 million in ARR subscription and where we're heading into Q4, we are both expecting that our current contracts, which are much into renewals in Q4, will deliver a solid performance as well as our new sales will pick up here in Q4, which means that we maintain our full year guidance.

[Emre Gürsoy, executive]

With a positive EBITDA.

[Claus Boysen, executive]

With a positive EBITDA, correct.

[Emre Gürsoy, executive]

Right. Now what I wanted to add up on top of the financial results of the Q3 is also another terminology that has been going on for the last couple of quarters is the slowness of the sales, new sales, the slowness of the decision-making overall, not only in Agillic's case, but overall in the market space, within the SaaS businesses, technology businesses, across the board.

So what we wanted to do in the last couple of months is we went into the understanding of what is really causing the slowness. What are the changes happening in the market space and the decision-making processes to better understand the market sentiments and then adjust our activities, both go-to-market activities and the way that we are marketing, the way that we are speaking and whom we are speaking to altogether.

So I wanted to combine this into a very quick update, which I've collected under 3 major areas: buyer profiles, so who are the decision-makers; buyer readiness, are they ready to actually take a decision and move forward to make a purchase a platform such as ours?; and then the behavior, what kind of balances in the organizations are taking place and who are they speaking to and what are they looking for?

So if I may take you through very quickly on these 3 areas, and I would love to take your questions on that one, too. So the first part is buyer profiles. Who's buying it? In the decision power, we, I think, also mentioned this in the past, it shifted towards upwards. So what used to be the middle management in the case of Agillic decision-making processes, now it went up to the C-suite. In the meantime, where we were a lot in communication with marketing and communications department, now it's shifting between marketing and IT. Now I'll tell you about why the IT is coming back and it's -- they're having their heyday again.

But in the meantime, there's something really interesting is happening, and I really like to bring this to attention is what they call the competency paradox. This has been defined by -- one of our partners did a maturity survey in the Norwegian market, speaking to 200 different companies to define what is the technology, purchase, process, sentiments and what are the details. And they have defined this result. This is driven by the -- most of the management members are calling the C-level members are defining it. They say 76% of the speaking research survey base is saying they believe that the management does not have the necessary expertise and tools to make the transformation process.

In the meantime, the very same people are saying that 67% of them that they believe that digital transformation is the integral part of their company's future strategy growth. So on one side, they're saying, we do not have the right competencies to make the decisions. And then in the meantime, they say, these are the most important decisions for our future growth. That's what they call the competency paradox.

And this is actually one of the reasons that we also say that decisions are taking a lot of long time and slow, it's mainly because of those who are supposed to take the decisions now are not capable of taking decisions, so they are seeking help. They're seeking consultancy. Who they are going to?

Number one, the place they're going to is their own IT department because the IT is now technically the top management's #1 go-to place technology. The trouble with the IT is everything around IT has just blossomed and boomed. They're so busy. So their priority is very, very different and very high on the top levels of the areas that they need to look into. So that means that the C-level goes to IT seeking assistance, and they are waiting for the assistance to come to them because there's a long waiting time.

In the meantime, the very same people are talking about something very, very important, and that's what's called the AI. So the C-level, the top management, has also realized this AI wave, they need to ride on this. This is very important for them, too. So they are seeking their organization to come back with consultancy of how they should be applying AI into their business, in their business, how they should be working with this, and they actually would like to see some results around that, too.

But here comes the problem. AI comes with very important necessity, access to data, quality data and to activate that data to give intelligence through that. Now what companies are also realizing that their data is not in the place. The data, not only the quality, but also it's not ready for a combined exercise of an AI because AI requires very clean and structured data to work with, and it's a nonstop activity. So when -- on one side, we are having a huge pressure on IT for a lot of requirements, then the C-level is pushing also for AI-driven initiatives in the house, but that also requires data and quality, which is also going back to the IT.

So one of the things that they also highlighted is quite interesting, it's another research they're saying about when marketers, communication departments where we are highly interested to conversate with, say when they go into -- speak about the first-party data exercises, either they're having conversations with IT because they have the full picture or the legal department because they need to make sure that it's compliant. They're having trouble with getting full access because they're also under pressure.

So all these are causing slowness in the process, and I'd like to call it, it's a phase. So we're going through a phase in the market disrupted by the whole AI buzz, you might call it, but it is something that will resolve itself. It has to because at the end of it, the customers are requiring the relevant data, relevant communication, relevancy in the best case.

The last portion that I want to talk about is the buyer behavior. So when we're talking about all these bits we have talked about, they're also looking for -- so who do I go and access information? The C level, the middle management, they're all looking for who is my trusted adviser, where do I get the right information, where do I see and believe is the right solution. So in this maturity survey, they also defined the top areas of #1 area that everybody goes for most helpful or helpful area of interest is friends and peers, interestingly, and then coming the agencies, consultants and service providers, which we call the solution partners.

So they are a top priority if trusted adviser are people that actually today's world is still the #1 area of support for those who are seeking intelligence. The technical expertise, which is basically companies like us presenting, demoing, technology getting served in the way that if you will be choosing us, here's how it's going to look, here's what you will be looking at, here's how you're going to be working with it, seeing is believing, which is a huge pressure from our side towards the market with our center of excellence team, which is all about this.

And then the last portion, the thought leadership is basically reading, learning because it's an extremely fast-moving area. Every day, there's a new thing coming up. Everybody is seeking for more information. But in the meantime, they're all tidying up to business results. So they would like to learn more. They would like to understand more, but they would like to see how this will make an effect in their business.

So this picture that I'm trying to paint over here is actually what we have been calling the slowness in the market, and this is the kind of the sentiments behind why this has been slow and why we believe that it is a phase and it's going to be releasing itself as we go through because it has to, there's a business requirement.

[Michael Friis, analyst]

And Emre, just we can always call it a phase. And now I will challenge you a little bit. You have the third-party and the first-party data. First, understanding that is the first-party data, if they are not good enough yet, you cannot do anything about. You need to wait that the customers get their first-party data in a good enough quality. Is that correct? Or can you do anything there?

And secondly, if the decision process has changed, have you changed your sales approach, who you're targeting, messages and so on, if you understand what I mean? There's a phase and a slowness, but there's maybe also be a larger change that you need to address and target somehow and try and help.

[Emre Gürsoy, executive]

Fundamentally -- so let me just start with the second part first. Fundamentally, we changed the way that we go to market, the way that we are speaking the language of business. So we are not selling technology. We are selling business results. We are not selling a technology that will only just send certain messages to certain people. We're talking about how this customer experience will have an impact into the clients' business in the different units.

So it's all about value-driven approach. It's all about business results. And most importantly, this is also something so important on the buyer behavior is also to be mentioned. It's very important that people are listening to those who are coming from their industry. So all our go-to-market now is also very much driven from industry-based cases, industry-based businesses.

So if you're a financial institution, you would like to know what others are doing in your industry, how they are improving their performance, what are the best cases, what are the best use cases that they should be also applying. That's the way we go to the market right now.

And the first part of your question, very, very relevant question. The data quality, so first-party data is the data that the customers have given permission to the brands to communicate with them. That's first-party data. And our platform is mainly activating this first-party data for relevant conversations. And yes, it is a very important part of the quality of the data, the quality of readiness of the data to be integrated into our system so it can start running is a very important part.

So that's one of the reasons. For example, a partnership we have with one of the leading customer data platforms, CDP Tealium, comes into the picture here because they are a kind of a fantastic data library with fantastic ability to serve this data into an engine as ours to activate. So -- and what are we doing about this? So in addition to doing partnerships with the CDPs, we're also looking into how to make our customers' life easier. How do we make it easier to integrate into our system without actually, are there possibilities that we can work with to make the integration from customers disorganized or uncentralized data into our system, so making the integration faster and easier?

In other words, how can we be less dependent on IT department? How can we be less dependent on a certain number of operational people in the -- on the client side? What we call it, getting ready for is an easier process. It's almost like we are not there yet, but we are going for the vision of plug and play. And in an enterprise platform as ours, saying something like plug and play, it's a very, very big move. But that's the aspiration we are going to be able to eliminate some of these obstacles we are seeing here. So our R&D department today is working a lot with that.

[Michael Friis, analyst]

Perfect. So you're working together with partners to try and get -- I guess it's not the data quality as such. It's having it real time all the time in a certain quality, then it is -- I guess, first-party data is quite strong collected...

[Emre Gürsoy, executive]

It is. It is. And you also have to remember that first-party data can be siloed in different -- in organizations. It can be in different organization structure, different departments, different -- but they're all the same people. So you need to bring this. It's like centralizing the customer in the middle -- in the middle of customer-centric thinking, that kind of the data structure that where Agillic is actually flourishing a lot.

Now I want to add one other thing in this, both from the perspective of business value and creating business exercise, but also how to apply the latest technologies, AI into our services with our clients. So I want to talk about -- back in half year conversation, we talked about Agillic and AI. And I went into details of how we are seeing the -- how we visualize the way that we work is it's either with AI plus Agillic because there are so many AI platforms from industry-specific areas where we can integrate and activate. And then another one that we're talking about AI in Agillic, so we are embedding certain AI solutions within our platform and AI Translator was one of them that we talked about a bit detail. And AI for Agillic is our own efficiency exercises.

But we have now an example that I would like to talk about. This is Helle Schjodt. It's -- I'm actually quite proud of that we have put together a client video as we call it, is basically a case study being told by Helle Schjodt, CMO, and the marketing department, how they have used AI and integrated into Agillic and how they have harvested the personalization benefits of this and what kind of results they've created.

We have published this yesterday. It's on our website. Please do watch it because this is a perfect example of how AI and Agillic can come into an exercise and how -- what kind of business results that it can create. So this is -- I just wanted to mention that because this is what we said that we are doing, and we just finished it, and I just wanted to share it up. We have many different ones in the pipeline.

That's all from us for today. So we'll be happy to have the questions if you have.

[Michael Friis, analyst]

Well, let's start with some questions. Are there expectations of a pickup in ARR in Q4 '24 based on pipeline or general seasonality?

[Claus Boysen, executive]

So it is both. It is both. The seasonality, if we can speak about that, is because we see that normally more decisions have been made in Q4. But also on our current contracts with our existing clients, there are a number of renewals that we know of and how they will actually derive a positive NRR together with how the pipeline of new sales looks into Q4.

[Michael Friis, analyst]

And then maybe also getting back to the visibility about this technology consolidation and the negative it had on you, how are your visibility? I guess you are now in a renewal period and thereby contracts. So you must have a pretty good picture. You already warned us last year that you would see this in Q1. So how is your visibility on the negative impact from, you might say, the technology consolidation? Are you sure you're not going to see a second wave? We might say -- how do you feel about that?

[Claus Boysen, executive]

Well, you can never make promises on that. But definitely, this is something that we are very aware of. We have -- we do -- this is also the reason why we some -- part of it why we have center of excellence where they go out and evaluate and help the client, understanding how to utilize, let IT, as Emre spoke about, how can they actually see the benefits of having a platform as Agillic, legal-wise, 100% GDPR compliance and so forth. So that is what we are focused on to make sure that they understand the value of a best-of-breed product into their environment.

[Michael Friis, analyst]

Perfect. And then there's an assumption here. It's not from me, but from -- Viking is -- can't be satisfied with the performance and their investment. What are the measures that need to be taken? Or [indiscernible] Viking is one of your larger investors who invested into you, that should make them satisfied with the investment. Is it -- and I don't know whether you want to comment on a single shareholder. Are they focusing on you going the profitable way or the growth way or both? What are the things that should satisfy investors?

[Claus Boysen, executive]

Well, we -- if I may start. It's a very unique balance where we make sure that we have our self-sufficient cash position. We make sure that we are profitable. We have promised, we have a strategic goal of being positive EBITDA. We have a goal for 2025 to be cash adjusted positive. So that is a self-sufficient driver.

Then on top of that, we -- ARR growth is, of course, a major thing that -- but it has to be balanced. So we are investing, as we have said earlier this year, in our sales departments in order to increase our ARR, to make sure that it's both that actually will take in place and secure better investment.

[Michael Friis, analyst]

So those are the 2 parameters investors should watch out for. Perfect. Then there's a question here. You have a revenue of DKK 15 million and 40 employees. How is that connected together? I guess, DKK 15 million is the quarterly revenue. I guess, it's a little bit higher, but let's plot it out. You have increased efficiency actually to 133 the index. But if you benchmark against others, and I'm sure you do that, I know your way of working, benchmark revenue per employee. And I know it's hard to do generalization. But in general, as the software sector, is there a possibility to increase this, meaning you can drive top line growth without getting more people in? So a little bit of feeling on, yes, this number, the effectiveness of employee or the [ measured ] per revenue.

[Claus Boysen, executive]

Again, I could start. From an Agillic point of view, it's a perfect example of what we said about the investment in our R&D, where they went from DKK 10.6 million to DKK 8.3 million on 3 quarters, where we launched a huge upgrade of our platform. We look at our internal operational efficiency in order to make sure that we are doing better and better and better on our operational side, so we can adapt to market conditions where we -- what we saw in Q1.

So we are faster and try to predict how it is. So that's the operational efficiency, but that comes along with a number of things in each department, how we make it more and more efficient, data-driven, make all these decisions and focus on the right thing with the right and the highest return on investment. So that's sort of the internal focus where we have not just been all in on ARR growth, but a combination of sustainability growth, which is both profitability and growth in ARR.

[Emre Gürsoy, executive]

And I think this is very important to mention that we know each other. We have been together with you, Michael, for the last 3, 4 years. So you know the development of our company. We have been focusing a lot about the sustainable growth for quite a long time. And year-over-year, we have been creating a positive EBITDA and then trying to find our way into this -- into very competitive market space, do our own organic growth. Again, it's important to mention, it's an organic growth within that space.

So when you look at the competitive space of our business, and the business itself is a very fast-moving environment, and you have very, very big players, global players in this very space that we are operating. And I'm so proud that we can compete with such big companies with our platform's ability to actually win against them. And that means that we have an extremely strong platform. We have a business model that actually creates a sustainable organic existence.

So the last part of your question, are we independent from putting more people in to grow the business or the other way around, if our business increase, do we need to increase our investment people? No, we are not. We have actually established a very, very lean and a very growth-driven company and very efficient. So our processes, our way of working created this very strong fundament that the minute that we increase our growth, it has a major impact on all financial parameters altogether.

So this -- for a very long time, we have been doing this. So it actually establishes a very strong footprint for us altogether.

[Michael Friis, analyst]

And actually, you answered maybe one of the questions a little bit ahead. The competitive situation, any changes there? Or is it still the big ones that you're fighting with and you're trying to go in and be a faster and more efficient or maybe an easier implementing tool? Is that how we should see the competitive situation?

[Emre Gürsoy, executive]

The competitive situation is the similar -- the usual suspects are still in the space, different stages of the very high-end enterprises, the best of breed, and it's a very fast-moving area. Everyone is moving one to right or left and it's a very, very partnerships, frenemies, everything what you might call it. The way I see this one is as long as the platform is easier to implement, easier to create value and we can prove that we create that value, then we have a very, very strong voice in the space.

[Michael Friis, analyst]

Is it still a financial goal to reach positive cash EBITDA in '25? What growth do you need to reach that? What are the drivers? Is it the growth on the top line combined with a stable cost development, other parameters that is driving you there? So I know you can't guide on '25 and which growth you exactly need, but kind of maybe talk about the levers.

[Claus Boysen, executive]

Yes. But as you said, that was my first word. We can't guide on '25, but it is our strategic goal. And it is a combination of 3 things. It is still a combination of making an efficient investment in R&D. It is an operational efficiency. We have reduced our cost towards Q3 here, and we have a very, very solid base for how we go into 2024, driving EBITDA. And we, of course, would like to grow our ARR.

So it's a combination of all those -- or actually on top of that, also the structure of our contracts and how much committed revenue we can get in the future will also assist in our cash adjusted EBITDA. So there are a number of factors that actually drives this strategic goal.

[Michael Friis, analyst]

Perfect. And then -- I don't know whether it's a simple question, everybody is probably somehow working in sales. How many salespeople work at Agillic out of your 40% -- sorry, 40 people?

[Emre Gürsoy, executive]

Yes. I think, first of all, I would like to change the word sales to growth. How many people are focusing on growth in the company, that's all 40 because some of them are working on the R&D department, but their mainly focus is how do we create more value through technology to our customers or the new ones. And then we have mainly 3 departments that are focusing on the customers. Existing customers, new customers, partnerships, they're all part of that group, and they're all adding up directly impact to our ARR.

And if you look at it from that perspective, the 2 largest departments in our company is the commercial department and the R&D department.

[Michael Friis, analyst]

Okay. So you can't put a...

[Emre Gürsoy, executive]

We don't have a very -- we are very, very lean. So you can look at it as basically 40%, 40% and then we have support, and Claus and I, I guess, that's all.

[Michael Friis, analyst]

And then, I guess there's a question about how Agillic apply AI to the company. I guess, I think we did that in the last presentation and maybe you can watch this video. I'm sure we will also talk about that in the future. How do you measure GTM efficiency? What are your plans for optimizing and accelerating of growth of new sales?

[Emre Gürsoy, executive]

If I start, you might end it up. So it goes back to the question you have asked actually when I was presenting the different buyer group has come into the picture, what kind of go-to-market adjustments that we have applied. So it is very much of -- our go-to-market efficiency, #1 thing is basically closing sales on the new side. And the existing clients is how we are actually improving the uplift, eliminating downgrades and churn, right?

So from that perspective, our efficiency is measured by the results. The way that we are doing it and the way that we are -- we are very much of an outside-in company. So the meaning, we see what's happening in the market, what are they asking for, what are they looking for, how are they thinking at the moment, and how do we apply this solution as ours to their requirements, to their needs.

So it's very much of an outside-in perspective in the go-to-market altogether. And of course, our partners, very important part of our business, because our success is mutual. If we win a client, we win it together. And if client stays with us, it stays with us and them as they go forward. So our relationship with partners, our go-to-market efforts with the partners is a big part of this exercise.

[Michael Friis, analyst]

And then the final question, I think we are -- you already touched a little upon it. If you feel you are doing the right things and everything, why in the end, are you not growing more? Why are they not choosing Agillic's product? And I guess you've been through a little bit of this one, but -- and we can call it a phase, but if you should pin one pain point, one pressure point that you really have a hard time pushing to and that you don't reach the final decision of an investment. I know it's not easy, but let's try and if you have one pinpoint and what you are doing to address that?

[Emre Gürsoy, executive]

I'll give one and then you might give one, so then we have 2. So I will say -- I mean, the truth is this is a question that every evening I go to bed with and I wake up with this one. This is it. This is basically the main exercise that we go through every day.

My take for this current time being is -- and I'm thinking as a CEO now because they are the ones who are buying our product at the moment, that's what we're talking about, is not taking a decision is less risky than taking a decision, one thing.

[Michael Friis, analyst]

So that you need to convince them about that, if you don't move, you're going to lose...

[Emre Gürsoy, executive]

It takes time. That's exactly the reason that -- it's not because our product is worse than what's out there or it cannot -- it doesn't work or it's complicated to work with. It's none of these things. It's basically they've never bought one before. This is the first time they are being exposed to a technology purchase exercise and those who they are seeking advice from is basically now the IT department. They are swamped under amount of work.

So what's happening is -- that's why I call it a phase. This has to be resolved. Either they're going to hire more IT people or they're going to say, "Okay, I'm not equipped with this one. I need to hire more people who have done this before, who knows what they're doing." So this is where the partners come into the picture.

Our partners have -- that's why we're pushing -- in our cross-selling exercise, pushing them forward because they are those trusted advisers that they should be exercising that. So that was my take.

[Michael Friis, analyst]

So did you take Claus'?

[Emre Gürsoy, executive]

No, this is what I've been -- like this is what I do going out and speaking to CEOs.

[Michael Friis, analyst]

But if I should understand right, then it's the consultancy, what you call your partners, but they're consultancy service. That has also been my thinking that they need -- they will soon see a growth because at some point in time, they need -- the companies need to take a decision on their IT and they can't just await and they need to seek outside help for them to tell people what are the right investments that will give you the highest return. So is that your partners? Or do you need to work more with consultancy businesses? I guess maybe your partners in the old time was more marketing consultant, if you understand what I mean. But now maybe it's more IT consultants that actually take the decision.

[Emre Gürsoy, executive]

The question that you asked earlier, how do we measure go-to-market efficiency, I think it's a perfect -- it's all of the above. We need to work with different type of partnerships with different type of services within the ecosystem of our prospects interest because not everything -- everyone goes to the same place or same type of people. It's a very divert area. So that's why our partnerships and our efforts behind this is very, very important that they are targeted to the right industry support groups and the right areas.

[Michael Friis, analyst]

Sorry, now you got...

[Claus Boysen, executive]

And to add to this, one of the things that we have also seen is if you look at our -- some of our latest clients -- acquisitions or clients -- new clients, they are within like finance sector, they're within NGOs, companies that has first-party data and doesn't need to invest a lot to get this in place. So they don't need either to buy into a huge investment with a solution partner or increase their IT investments or change their IT departments.

So that's also a part of the pattern here that the ones that are more mature and have learned this where they don't need to reinvest, it's easier for them to actually focus on the return on investment of our product.

[Michael Friis, analyst]

And secondly, I guess, going to the C-suite, it was also what you touched upon, value-based. You will learn this if you invest this. This is different than selling to, I guess, IT or marketing department. That is the Board and the CEO, that is, I guess, the investment case put in front of them. That's what they normally understand. So I guess that's also a part...

[Emre Gürsoy, executive]

And I think it's also important to mention, to follow up on what you just said, is CEOs are not alone on -- or the C-level team members, they're not alone on making this decision because at the end of the day, decision is easy to make. The hard part is implementing it proportionally within the company and with the right team supporting the idea. So that's why it's an exercise that is -- that's why it's taking longer because those who are working with it is a larger group of people.

So going back to the -- what I was talking about the competency paradox, those who didn't try it before and they don't have the competencies is taking longer. So that's basically the answer that I can give you there.

[Michael Friis, analyst]

Perfect. That was the last question. Thank you to you, Emre and Claus, for taking us through your results.

[Emre Gürsoy, executive]

Thank you for everyone.

[Michael Friis, analyst]

And may everybody have a nice day.

[Emre Gürsoy, executive]

Bye for now.