Carasent ASA

OSE:CARA

Earnings Call Transcript

[Operator]

Welcome to Carasent Q1 Report for 2025. Now I will hand the conference over to CEO, Daniel Ohman; and CFO, Svein Martin Bjornstad. Please go ahead.

[Daniel Ohman, executive]

Good morning, and welcome to our presentation of the first quarter of 2025. My name is Daniel Lehman, and I will start to present, and then I will hand over to San Martin Brener, our CFO, to take the rest of the presentation. So looking at the first quarter, we continue to improve rapidly. We have our EBITDAC margin going from minus 8% to plus 6% and that's our most important financial metrics internally. And performance is in line with our plan overall.

We have slightly higher costs in the quarter and we planned for, and that's -- it's not a lot we talk about. We're talking about SEK 1 million to SEK 2 million more cost than we would have liked to have. So it's not a big deviation. And this deviation is due to partly that we have chosen to invest more into AI. And then we're talking AI in our products, AI in our development will be working for a long time. We've been able to offset most of the costs of terms in AI by getting rid of other costs, but some of it has increased our total costs.

We also had to do some write-down of receivables from the companies that went bankrupt as we spoke about in the last quarter. We also have had discussions in the Board about capital allocation, and I will get back to that later on in the presentation. I feel that we have good progress in our large development projects, that's surgery for Sweden, E-prescription as a new regulation around E-prescription called MLL in Sweden, which means that in all HR systems, you will be able to see all prescriptions from all other systems, and you will also be able to change those prescriptions. So that would be a really good thing for our customers that even if you're not in one of the regional systems, you will still be able to see all -- everything around medication and that way around also.

Volvat is proceeding according to plan, the implementation of [indiscernible] In Norway. We're also building our patient platform for Norway, that's going well and Webdoc X continue to develop for the German market with a lot of new functionality. So in total, I think that we see really good progress in other projects now a days.

The bankruptcies for some Webdoc customers. The one we spoke about in the last quarter, there are no major new ones but a bit higher pressure on sales now. We are selling better and better every quarter. We get a bit better at selling. So I feel that's really good. And we can follow that. We're learning. We do new things in marketing, we see that we can do different things and that our reputation is getting stronger and stronger, which makes it easier to sell. So that's really positive. And we need that because of those bankruptcies. Sign of ARR is now at [ SEK 12 million ], so that's slightly down, and that's because we have implemented Medrave for VGR. So that's why that's -- and we have not signed any new major contracts.

And we have 14% organic recurring revenue growth and 26% contract ARR growth. So as we have started to talk a little bit about AI in our products, I just want to take the opportunity to talk a little bit about what we're doing and how we're thinking about it. So yes, briefly, there are basically 2 types of AI support in our products that we could do. One is clinical decision support. So that's when we help doctors, nurses, physiotherapist to take decisions on what to do with the patients. So that could be automatic triage where AI decides on the severity of the patient's problem and automatically guide them to the right care level.

This type of decision support. We never aim to build ourselves. That's because this type of AI solutions or solutions in general, doesn't have to be AI, put in a very difficult legal framework called Medical Device Directory MDR. And you basically become a research company, and you have to prove in large studies that you always do the same thing and your advice, is the right ones and so on. So that will never be our aim to build those type of solutions, either with or without AI.

It's also not a big topic for our customers. We sell mostly to the private sector. The private sector has a bit easier patients, that's where what they're there for. So the clinical decision is not what takes a lot of time for our customers. The other type of support is administrative support. And this is what our customers really hate and what it's a lot of their time, all the reporting to different places, for example. We already do a lot with it. So one being our systems are really user-friendly, is it use good workflows, we also have a lot of automatic reporting connections and so on.

Between these using our products, you have to much less demonstration than in many other systems. But still, there are things we can do. And what we invest in at the moment is what's called ambient listening. So that means that the AI is listening to the patient meeting and then automatically proposes a medical record for you. We've been playing around for quite some time. I think like 2 years, we've been playing with it. And now we felt that actually last quarter, we felt that now it's time to start really put it into our products. We don't really feel that we have to be the first mover or the opposite actually. We want to see that first that the use cases are there that the customers really appreciate new technologies, new solutions and having a strong EHR position where we are the dominant provider of a system to our customers and difficult to change system, we are -- we don't have to be the fast mover. It's easy to just replace whatever they're using or quite this at least.

And our advantage in this type of scenario is that we can build it directly into the system. So we get really tight integrations and we have access to all types of data around the patients and visits and whatever it is within the clinic. So that means that we can build support, it uses all that knowledge. And that's why I think that sometimes is the right that we do it, but not always, and that's what I want to show you on this next picture.

So different situations and different customers have different needs, and we will not try to solve all by ourselves. And this is some examples when we talk about [indiscernible] Listening, what we're selling now or start selling now. There are really big international companies like Nuance, that's owned by Microsoft, that have, I mean, really large resources, large training data. But what they lack is knowledge about how HR or methodologies supposed to be written in Sweden, how we set diagnosis and so on. So they are good at certain things, but less good at other things.

We sell their products today, and they're really good at, for example, speech to text, whether doctor or physiotherapist talk and it writes exactly what the doctor, nurse or physiotherapist say. Their [indiscernible] Is not as well suited for few circumstances at this point in time.

There are also specialized products. Another example is Tandem, which we also mean our customers appreciate that solution. It's built for our type of customers, they are niche, they can really focus on this and they can really invest in it in another way that we do and take higher risks than we would do with these type of solutions. And they will be the right for certain type of customers, for example, they built an app so that you can take the listening with you when you leave your outpatient office.

So if you are physiotherapist and you go out to the training floor, you can take that with you and record anything, it might not make sense for us to be such a map, for example, because it's maybe 10% of our use cases for our customers. And then we can have our own integrated. And the advantage we have is that we can be really seamless workflows as we do with other things. So it's always the right patient. You started all within the same system. You don't have to switch windows. You don't have to go into other things on that a copy of things, was built for our type of customers, and we have access to all the data that could be needed to medical record.

But I think all 3 of them, probably the place, and it's also difficult to foresee exactly where where technology will take us and what will happen. So we do not put anything on one course or whatever you call it. So we're doing all these things. where we think that for many customers, our solutions are probably the best choice, and we aim to make sure that it is. So it's a little bit how we're thinking about AI in our products. And over time, we see that we will add more and more administrative support in our systems. And that's why it's important to start releasing those type of features in our systems.

Also worth mentioning is that the thing we're leasing now is for all our systems. So it's already included in Webdoc SE in pilot and also in Webdoc for Germany. It will soon be in our Norwegian systems, and it's all using the same back end, and it's been trained on different languages. So slightly different backend, but in the same contention that builds it.

Moving on. We talked about how we use our capital. And looking at how we grow new sales is, of course, very important. What's worth noting is that most new sales are 2 startups, so clinics that start new, and then we grow with them. So new sales are extremely important, more important, it looks like in the numbers because it's with those new start-ups that we then grow the coming years. So new sales is very important, even if they often are small.

With surgery, we aim to also move over larger clinics and to increase that part of new sales. We grow with existing customers, as mentioned, that's both since they are growing, but also since we add more and more value into our systems and different add-ons we can sell. And then we have acquisitions. And what's really was an important to note here is that we do not aim to start making acquisitions and looking at different types of structured process that come out from Dyson store.

We have a few companies that we know would add a lot of value to our organization that we would, over time, like to acquire. So what this means is that we would go and knock on the door and say, hi, we think that we could add value to -- create more value together and then have the discussion. So that's very different from the acquisitions of hold in this company, but it's the same study we had in Germany, where we look at all different providers, we knocked on a few doors and said, "Hey, we think that together, we would be a good fit. And that's how I have done acquisitions before also. I think that's where you really can create our value that you have chosen, this and this and this companies such product fits really, really well with our company.

So we're not aiming at becoming a serial acquirer so, but we see that there are some opportunities to create real value and good value and strengthen positions. So that's what we're talking about. It will not be many acquisitions and not in a rapid pace.

That for -- and what that means for our capital allocation, that is that we see that we want do some acquisitions, but they are very targeted, and we know exactly who those are. and we have no hurry to do those. But then we said we want to keep some cash on hand for that. And we also have -- we have on hand already SEK 253 million. And we have a rapidly increasing cash flow. So that means that we will do recurring share buyback. The exact size of those will depend on the discussions we have with those M&A talks, I spoke about earlier. So the Board will decide on how much to buy back, when they think it's the right time to do it. So I hope that we, quite soon -- after AGM, we will come back to you all on that and what size it is at this year. But I cannot give you that answer today.

You can see that share buybacks is a good way of distributing cash to our shareowners. And then we'll be looking at a few very selective M&A opportunities. And looking ahead, it continues to have a big focus on growth, of course. We have pilots in 3 very high potential projects ongoing at the moment. So we are surgery, we have Volvat where the first pilots are live now and also [indiscernible some that our listening solution, we also have pilots live. So 3 very hypothetic that will be really fun to follow.

We continue to focus on efficient use of resources every day, every month, every quarter, becoming more and more efficient in all parts of what we do. And I think that's extremely important. That's how we'll be able to scale in a really good way. And cost control is vital. And finally, launching Webdoc X in Germany. And I also have our largest high potential projects, so the fourth one with the first German pilots live, as you know, and we aim to replace data cure their older product in data during 2025.

So with those words, I will hand over to Martin.

[Svein Bjornstad, executive]

Thank you. Starting off by looking at high-level metrics. We improved a lot also in Q1. Our ARR grew 26% to SEK 321 million, including the backlog. And our recurring organic recurring growth was more or less in line with previous quarters at present rate as well at 110%. And then margins also improved. We did expect margins to improve a couple of percentage points more, but we had this additional costs that was mentioned. But overall, a quarter in line with our plan.

If we take a closer look at the P&L, you see strong improvements year-over-year. Revenue growth was 29%. And we have highlighted some points there where our EBITDA grew at [ 15% ]. So there, you see that it's slightly lower than what we posted last year. And this is because this bankruptcies or churn took full effect from the end of Q1. So going into Q2 as well, the pace will be affected by this churn.

On the other hand, we did have a very strong quarter on the sales side in Webdoc in Q1. So we expect to be back on track quite quite fast. Overall growth, as mentioned, 29%, driven by the acquisition of Data-AL and strong organic growth. And you see also consulting revenues for very high. This was due to this big implementation projects being at full speed and also sort of weak comparables last year, it was quite slow on consulting.

[ SEK 3.10 million ] EBITDA improvement or a 14 percentage point increase in margins. Worth noting as well is that in the first quarter, we were close to being neutral on EBITDA for our German operations. And this was because of a very strong quarter on profitability side for data which had good consulting revenues, which helps, of course, and also that we have gone through the cost base after acquisition. And removed, particularly on the OpEx and COGS side removed unnecessary costs and also negotiated with suppliers. So the underlying profitability now is better than before the acquisition.

If we look into the growth ARR growth, it was, as mentioned, more or less in line with previous quarters in the reported figures but there are some effects that pull in opposite directions. So as Daniel mentioned, we implemented a VGR contract for MetWave and also implemented some clinics for [indiscernible] In Norway, which also contributed to the growth. That would have increased growth a couple of percentage points but then the Webdoc term for the bankruptcies took full effect from -- in these figures. So that pulled in the other direction. So overall, it was quite stable.

If we look at the profitability, it's improving rapidly. We have gone from minus 30% margin 2 years ago to plus 6% now. We are, of course, still far away from our potential. And the key, given that we have a strong backlog of revenue to implement the good underlying growth momentum. The key will be to convert as much as possible of those revenues into profits.

And we look -- if you look at this slide, it shows how we are doing with this over the last year. So the left-hand bar, it shows the revenue growth revenue increase, excluding Confrere, which was sold and Data-AL, which was acquired over the last year, so the organic business. And then we had the COGS increase naturally. OpEx was quite flat. And then the personnel expense increased SEK 0.6 million, but we did have last year, we had some one-offs related to layoffs of [ SEK 1.7 million ]. So if we remove those from the comparison figures, it increased [ SEK 4.3 million ]. And then CapEx decreased by a similar amount. So in total, we were able to convert 90% of the revenue increase into EBITDAC.

And if we adjust for the nonrecurring last year, it was 73%. So we have set an internal target to convert around 80%. And Yes, we did have this extra cost this quarter. Next quarter, we will have around SEK 1 million in extra cost for the new incentive program. So it will be key that we succeed on these cost initiatives that we are taking. And over the last year, we have removed roles that were not necessary and also replaced consultants for employees, which typically generates a good saving. So that is why we are able to keep these costs quite flat even though the -- of course, we have wage increases, et cetera, and had roles in other areas.

Finally, the cash flow. We had, as mentioned, good improvements in profitability and lower investments, but we had the working capital headwinds. So I mentioned this in the last report that we had a lot of outstanding invoices for their relisting at the year-end, and these were paid in Q1. This was an effect of around SEK 12 million, SEK 13 million.

So if you look at the figures, it would have been quite strong if we hadn't had this effect on the cash flow. So overall, financially, we developed despite some smaller items on the cost side, we developed according to plan and in line with our financial targets for the year, which we maintain. The key to reach those will be to roll out the implementation projects in time and also, of course, keep the cost control.

So with that, we can open up for Q&A.

[Operator]

[Operator Instructions] The next question comes from Frederick Nielsen from Red Eye.

[Unknown Analyst]

Daniel and Martin, I want to start with the new AI functionality. Could you perhaps elaborate a bit on what share of customers do you believe will be interested in your solution relative to third-party solution? And also, if you could say something about the pricing.

[Daniel Ohman, executive]

Yes, sure. Thanks, Eric. So I believe that over time, we will be able to sell to a really large portion of our customers, these type of solutions. It has the potential to -- I mean, what doctors do when they have an outpatient day, or physiotherapist or nurse for that manner? Is that they meet the patients, but then they have a lot of documentation to do afterwards. And if the more we can admit that for them, they can really help more patients. So it's really a big potential on time saving for the user.

Of course, none of the AI solutions today, I mean, deliver 100% of their time saving, but they're doing a really good job. And it's therefore, over time, I think that we will see a really large part of our customers using these type of solutions. I think that also our solution will have clear advantages by being completely connected into the system and just being a part of it. It's a natural part of the HR system. It's not a system on the side. But you have to pay to get access to it and then it opens up. And then you have access to it in the system or in our systems, so to speak.

So I think the potential is really strong. Then Health Care is always slow to take on new technology. So I think it will take some time before it grows really big. But the reason why we have chosen to kind of overinvest compared to plan, is that I believe that the potential is really strong. And the pricing from our side will be very competitive. So we build our solution based on open source products. So that means that our costs will be quite low. And then we are hosting it with our own host, so to speak, just like we do with our other systems.

So, that means that we can scale costs in a very good way compared if we would use ChatGPT or similar solutions. And we can also make sure that there are no access from the U.S. to our solutions, which cannot do it not 100% if you're ashorcloud. So I think that we have some clear advances and the pricing will also be lower than competition.

In general, these type of solutions today that are sold are a bit are more expensive than what the HR systems licenses per month. So it's -- we will be a bit priced at a bit lower than what HR licenses is. But yes, in Webdoc, I think we have 18,000 users. Our estimate is that more than half of those generate medical notes. So the potential is really strong. And I mean, over time, that could really be an area for growth. So that's why we have taken this choice to overinvest a bit. But most of the costs we've been able to offset by -- I mean, just have to outcompete other projects, and we have removed some roles we maybe hadn't before planned to remove. So I think that's been a priority for us and that want to -- yes, there are really big potential in these types of solutions. I think over time, we will see more and more built-in AI support just like we have, over time, built more and more integrations that [indiscernible] In other ways, automate reporting for our customers.

And given that our that we -- types of customers we sell to, we can be very quick at implemented this type of solutions. If you're selling to the public system, it's completely different because they have to go through their tenant process, and they have to go through all the committees, and we can be a couple of years before that easily. So I think it's also an advantage when comparing different systems.

So there was share of use, as you said. So I think that over time, we will be able to sell to most. And I think that our solution it's likely to become the most popular around our users, but it's hard to tell exactly where these technologies go. So I think it's important not to put all eggs in the same basket, and we're selling our own and we're selling the other solutions, too. So that's -- I think it's fine. But of course, for our moneys are much better when we sell our own solutions. Did that answer your question, Fredrick?

[Unknown Analyst]

Yes. Yes, absolutely. That was a good answer, I think. So I want to -- I have some questions about the opportunity for Webdoc outside of the 3 largest regions in Sweden. What is the TAM like relative to the 3 large regions? And what can you do to potentially open up additional regions?

[Daniel Ohman, executive]

What's the time line that market? Okay, TAM -- sorry.

[Unknown Analyst]

I mean look at it at a long-term time line.

[Daniel Ohman, executive]

Yes. So private health care is by far the largest in the 3 large regions and by far, it's Stockholm that largest. So Stockholm is really the big market, the most important market. Then there are private caregivers around the country. We have customers in all regions. So where we really are locked out kind of in many regions is primary care. You have a few primary caregivers, like 2, 3 in the region then it's really no or maybe 10. I mean that's very few, not much revenue. But in total, all those regions that adds up to something. It's not -- we're working a bit on it to open it up. So we have projects in -- or a project in one region, where they've now rolled out Cambio and the private caregivers are really not happy.

And we have a discussion where Cambio is positive, and we see if the region is positive, but we might be able to do something. But I think it will not generate a lot of revenue, but I think the point of that project is just to prove it and to show whether it works well. I think that over time, we will have the new regulation, EHDHDS, I should probably say, which says that all systems have to be able to and have to actually exchange information with each other. So I think that for us is an excellent opportunity.

Then all those arguments goes away because all systems have to be able to talk with each other. And that's by -- I think it should be implemented most years by 2030. So -- and there's a lot of work going on with that. We're sitting in those committees working on those proposals together with other HR providers. So that will also open up a lot of markets. But at the moment, we are fully focused on taking those -- I mean, there are so many caregivers to sell to and we can grow so much within existing potential markets that we don't need to focus really on the other markets.

It's -- but I mean, potentially in the VGR, if they go for one of the proposals that's been proposed there is that they will have a floor of different systems, then potentially we could sell to the public primary care centers. That's never been a focus for us, and it's not included in our TAM numbers, but if that will be the case, that would open up, but it's not really -- we don't need to fight to get those type of new situations where there are so many customers we can sell to already.

[Unknown Analyst]

Okay. I see. That makes sense. And lastly, just a clarification regarding the churn. As you mentioned in the last quarter, you will see an uptick in churn in the beginning of this year. Is all of that taken in Q1? Or should we expect a further increase in Q2?

[Svein Bjornstad, executive]

So that was -- the full effect of that was in the March figures. So in our ARR, it's taken.

[Operator]

The next question comes from Elvin Roder from Carnegie Investment Bank.

[Unknown Analyst]

I have A couple of questions, more nitty gritty nature, if I may. You mentioned that the OpEx increase partly due to the increased investments into AI, but also that there were some write-down of receivables for these customers that have gone bankrupt. Would it be possible to split or you said that the AI investments was SEK 2 million, how much were the write-downs of receivables, so we get to selling for the size there?

[Svein Bjornstad, executive]

So in total, the extra costs were SEK 1 billion to SEK 2 million. So nothing dramatic, but a slightly higher than we expected. And then the write-off of receivable was the majority of that.

[Unknown Analyst]

Or the AI cost, you said that we're able to offset most of it here in Q1. How should one think about that for the the rest of the year? I mean, how much will that drive an increase in OpEx, if you look at compared year-over-year? Or will you be able to offset it still? Or how should one think about that for the rest of the year?

[Daniel Ohman, executive]

Yes. No, we should be able to continue to offset most of it. What possibly could happen because I think you need to be a bit flexible on these kind of things is that if we see that -- now we're running pilots when we start selling, if you see that it really starts selling well, I think we might invest more in it. But we have chosen to invest more in it than -- and go a little bit beyond our body just because we see that there's so great potential in it over time.

And then we have kind of made it a little bit more difficult for us to charge for this year. We still think we can do it, but made it a bit more difficult for us to deliver short term. But for the long term, we really we feel strong that that will create more value. So there's choice we have taken. We try to offset most of it, and we continue to have that offset. It's just prioritization between different roles and different projects. So but we have chosen not to offset it completely because we believe strongly in many of the projects we had planned to run. And then this starting to really show some great potential.

And I think it's also important that I think this will be one of the technologies that will be used in our products. And then I think it's very important that we also start learning how to commercialize those type of technologies. But most of it will be offset and it will not be a major factor.

[Unknown Analyst]

Okay. Good. And a bit related to the AI investments then. Is there any like hardware adaptations or anything you need to do on that front? I know that some of these like AI assistance and so on use specific hardware that is adapted to that assistance or some -- is there anything you can do there there? Or is it just plug and play, you need [indiscernible] mic -- it's a bit of a weird question, but...

[Daniel Ohman, executive]

No, no. Yes. yes, that's a good point made there. So we're not running our own data centers. I think that's important. We do set them up ourselves. It's private clouds. So I think that's important for our customers and the type of data we handle. And we are the one configuring all of it, but it's not our hardware. And with the AI, we use much more hardware than we do for our normal solutions. So that means that COGS for these types of solutions is higher than what we used to.

So they will be around 25% to 30%, somewhere around that, I think. It's difficult to foresee exactly we're playing around with smaller LLM models also. And if you train and they can be really good, then you can get those costs quite -- down quite a lot. But at the moment, our focus is not to get them down the most. It's to have really good quality in the outcomes. And then after that, we can try to go to smaller models. And in that way to have a better margin. But first, we want to win customers. So I think we will not buy any hardware, but we will have COGS of 25% to 30% of those products to start with, at least. And that's just all data. Yes.

[Unknown Analyst]

Okay. Okay. Cool. And then a bit on Germany, I guess, can you comment a little bit on the initial feedback you have gotten there with Webdoc X, and how should one -- I mean, how should one think and when you're ready to like fully sell the first version of Webdoc X like actual use? So how is the time line there?

[Daniel Ohman, executive]

Yes. So the pilots are seems happy. But those pilots, when we talk about the AI project, let's comment some -- and also when we talk about surgery, those are full-scale pilots. So they use in the systems every day, all the time and in all circumstances. Webdoc X do not have the full functionality to be used and completely replace your existing systems. So that's a big difference from other types of -- the other pilots we have, where they completely chosen away other types of solutions. And they use it full time all the time every day.

So these are users testing functionality for us, but then they also have to use the normal system. So -- and that's because we still have, for example, a building, you cannot do in our system in Germany. So we know exactly what to build. The data organization is really good at making sure that we build exactly what the customers need. And there is a clear road map. And during this year, our aim is to replace them all of their users that you stay secure today with our new product. And that means that by the end of the year, we should have around 80 paying customers, I think in Webdoc Germany. And that's -- I mean that's quite okay.

It's then in physiotherapy. So they pay a little bit less than doctors. And in general, clinics in Germany is a little bit smaller than in Sweden. So, if you look at Webdoc Sweden, we have 800 customers, a bit more. But there their average size is much bigger than those German first 80 clinics. But from there on, we can continue, of course, and then we're moving to doctors the year after. So that's the time that we're working towards and aiming for.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any written questions.

[Svein Bjornstad, executive]

Okay. We have gotten quite a few questions in the chat here. First one is from [indiscernible], Are you able to charge extra for the transcription feature that you are launching?

[Daniel Ohman, executive]

Yes. Yes, for sure. So the cost for that will be roughly 80% of the license cost, somewhere around there.

[Svein Bjornstad, executive]

Next one, you mentioned strong new sales in Webdoc, what has improved from before? Is it sales efforts or improved product?

[Daniel Ohman, executive]

I think it's very different to a focus to break those 2 things apart. And the product is improving. I think it will -- and it will be improving more and more all the time because we get quicker and quicker in our development. So that really helps. But I think also it's within sales and marketing, we're learning and improving all the time. I think I mentioned this call before that add-on sales were something we were not that good at. And it took a bit longer than we had hoped for it to get started. But after the summer last year, we really started to get moving on that, and it has continued to improve. And for all months so far this year, we're selling both new customers and add-ons at a higher pace than planned. So -- and the plan was a bit up from last autumn. So -- and in our plans, we have increasing sales all the time. So we get better and better. So that's a little bit of the everyday improvement I have been talking about.

[Svein Bjornstad, executive]

Okay. Next question is from [indiscernible]. First one, can you give us more information on the operations module? How many trials do you have? And have you closed any deals yet any large customer discussion and what do you expect from it by the end of the year?

[Daniel Ohman, executive]

Yes. So we have one pilot using module fully and they are really pleased with functionality They're just all happy. And as I remember, the contract, they will start paying in the half year or now, I guess, 4 months or something like this , 4 months. We're getting the second pilot up and running any day now, and it could be already up and running. I'm not really sure. And they will also be paying customers after a couple of months.

We have a third one going online quite soon. So we will be paying customers. But all of these are existing Webdoc customers that been lacking this functionality. So it -- for sure, it adds some revenues for us. So that's good. But the real aim of this model is to add new customers, the large new. And we are in those discussions. It takes time to convince if you have a small hospital off a couple of hundred or 100 users, they are not the quickest to change. And they want to see that everything is top-notch in all parts of it before the exchange systems.

And I can understand that as a previous customers, you've been promised a lot from software companies and then they don't really deliver what they've said on time. So they want to see everything in place, all parts before committing. I can understand that. So I think that month after month, we should really have good development within new customers, and it will help us add new customer sales. But it will not be like going from [ 10 to 100 ] in a couple of months, it will be customer by customer, but we have a new good tool to take on large customers. The big advantage to the competitors. So I think that step by step, you will see sales increasing and partly thanks to the surgeon model.

[Svein Bjornstad, executive]

Great. Next one, if you can give an update on your customers' actions against VGR and Millennium.

[Daniel Ohman, executive]

Yes. So [indiscernible] Was judged against our customers. We believe that it was very faulty judgment. Of course, we think. But it's also, I think, that anyone would think so because they the reason they used saying that it was not proven that it was much less work or less -- what's the right word, they said it was not proven that it would be much easier for our customers to live with their existing system and change into Millennium. And that was not something that we are trying to say it wasn't the case. So it was not part of what was actually discussed.

So they just ruled on something that was not discussed and not part of what shouldn't be part of the ruling it should only be things that the parties are not agreeing on that should be ruled on. So typically, in these cases, when you are in this type of course, it's only around 12% to 14% of the ones when you try to as appeal, when you try to feel that actually get to go to an appeal. So it's not like normal course.

We believe that our customers have a good case of getting their appeal through. They have appealed, and we think they should be able to get the ruling in an appeal court but it's not given since normally only 40% of all the appeals go to the next level. That being said, I think that Millennium is -- it's a bit difficult to see how Millennium could go forward in its present form, and we have good discussions with primary care centers in the year about switching to Webdoc now. So we'll see, but I -- fingers crossed, and we will have some new primary customers in VGR within not too long.

[Svein Bjornstad, executive]

Next one is on quantification of the receivable loss. I think we addressed that. And then a question for me, 80% revenue to profit. Is that target for '25 or long term? So that is an internal goal that we have set and it's basically reflective of that. We have -- we are at a level on the margin side that we think, as I said, we are far from our potential margins. So we think we can be able to grow for quite some time without increasing the cost base significantly. So that's sort of the internal target.

From -- yes, that's also on the VGR appeal. So I think we can skip that. And then the final question we have gotten is also related to this. incremental EBITDA, implying that basically all additional gross profit translates into EBITDA, is that correctly understood?

Our gross profit is around 85%. So it basically allows us to add some roles where we see the need. But yes, not a lot of wiggle room there, and I think that's important as well if we are -- if we should deliver on the plan we have to increase margins rapidly.

[Daniel Ohman, executive]

Yes. And also to mention last quarter, we have large capacity when it comes to development, and we become more efficient in all roles. So I think that's what built on. That were all the questions we had for today. So thank you all for listening in and just reach out if you have any further questions.

[Svein Bjornstad, executive]

Thanks for this morning. Thank you.