Patientsky Group AS

OSE:PSKY

Earnings Call Transcript

[Kristian Ikast, executive]

Good morning, and welcome to PatientSky Group's first quarter presentation. We are happy to welcome you here at our new hub -- head office in [ Hobeck ] in Oslo. Today, presenting, we will have Christoffer Mathiesen, Group CFO, here in the PatientSky; and myself, Group CEO, Kristian Ikast.

Today, we'll go through some highlights of the first quarter. We will give an insight into our business, what we use our time on and some of the progressions we see here. Then we will give an update on our financial performance. Christoffer will take that later. And then we will have a Q&A session and then ending up with closing remarks. And then obviously, if anyone interested, we will have some meetings over the following days with investors who are interested in that.

So what are the main events here in the first quarter of 2022? Well, high level, we had our revenue on NOK 50.1 million. We had a cash EBITDA of minus NOK 20 million, that's NOK 10 million better than it was in fourth quarter. To that, it has to be said that we had some extraordinary one-offs in the fourth quarter. So the like-for-like is more like a couple of millions, Christoffer will come into the exact details, but a couple of million better first quarter compared to fourth quarter.

Very important, our cloud revenue here in the first quarter kept growing. We have now NOK 23.6 million in first quarter, which now consists of 49% of our total reoccurring revenue base. It's 8% growth fourth quarter to first quarter. On the other side, we also had somewhat lower on-premise volume in first quarter as we have a closing down ProMed, announced half almost a year ago, actually. And also, we had some elevated churn on SystemX that we know, Christoffer will share the details a bit later on that part. But that gives us, all in all, a lower starting point for -- of the year but a higher quality in our revenue and in our earnings. And it's very important for us to keep building on the future, building on the earning efficiency of our company, we have that possibility with our strong cloud revenue. I'll come to that a bit later also.

Also building on the future, we have now appointed our new Chief People and Culture Officer, Sesame Baker. Sesame with a very strong global experience from Carlsberg, LEGO and Siemens. This is actually a landmark for us. This concludes our C-level management group now. So we have a full team to build the future on.

So what are we in PatientSky? I know I presented this slide before, but I think we still -- it's very important for us to be very clear on that we are consisting of 2 very different business legs. We have international platform business, which is scalable, low code, which allows partners to build applications and solutions on top. We have now tried to scope it in a bit to focus on going on M-health and IoT on a go-to-market in fourth quarter, first quarter. Yes, that's going down. It's still not a small area. It's still a huge area to focus on, but we're going much more concrete to the market approach now. On our Norwegian business, it's a building on top of the Norwegian platform. It's the leading cloud-based EHR provider in Norway in our segment. We have around 2,300 clinics, annual accruing revenue on NOK 191 million.

The SaaS business consists of 90% recurring revenue, actually on the good side of 90% recurring revenue. And it has an EBITDA minus CapEx margin on 25% to 30% and increasing. We see a very good increase of the profitability in our Norwegian business this year also. We have 183 colleagues in our PatientSky family. That number is slightly smaller than last time just because we now included consultants, not really important, but we are building the organization still, but building in a stable pace compared to our earnings.

So what does that take us as a company? What's the state of the union? Well, first quarter was NOK 50.1 million. Let me start stating, that's not where we want to be. We did a 9.5% decrease compared to fourth quarter. This was a deliberate choice for us to have a more healthy revenue to get a more profitable business. We closed down ProMed, as we talked about. We have also had, as expected, churn on the SystemX customers, and we have also lost a lot of nonrecurring business. That's especially projects. Projects come, and we never know the timing of it. We also see other effects of, for example, COVID not being there, not having testing. That has impacted negative.

But really important is we had one strategy which we have been very clear on the last year, at least, is that we are growing our cloud revenue. And we have a 38% annualized growth in this quarter, which is also still on a very stable level and in line with what we wanted to do and expected. We have seen some sustainable contract wins and win backs over the last quarter, which will have full effect in the third quarter of this year and forward.

We have great traction on our team. And product development, very important. That's what we're building the international platform on. So we see a good -- more concrete things coming out now, which is really, really good. And we are preparing the organization for international scalable expansion. We now have the organization in place to go international. It's all about when do we scale up with people in the organization.

So again, just to make it more comparable, we have done this simplified a snapshot of the current business model.

I actually would be the first to say, it's maybe not so simple as we call it. It seems like quite complex, but I think it's very important to see that it's 2 very differences also why we have divided the organization up in 2, also why we are required to have staffing up in 2 different silos because we have a B2B business -- B2B2B business internationally, which are in the investment and the scale-up phase. Here, we are approaching other companies we're approaching other vendors who work on top of the platform, who go to enter the market. And we are investing very much in our platform, our technology and bringing people onboard.

On our SaaS, Software-as-a-Service in Norway business, it's a very different model. We are more mature there. We are more focused on the migration, earning efficiency and, of course, also growth. Here, is the B2B2C model. So it's a bit different again to how do we actually focus on it. We are continuing to integrating. We are continuing to optimizing our positive cash flow we have in that part of the organization. That's actually also very important for us to say when we have such a heavy investment in the international markets where we see a huge, huge potential.

We have a huge luxury of having a profitable company in Norway that we can actually balance our earnings off with our investments. In that market we have now, we all know that's slightly unstable. Also this week, there has been shakes in the market. It's a very big luxury that we have our ability to scale up and down in the pace we can actually afford. And that actually enabled us to have our destiny in our own hands, and that's been very important for us. And we also said that several times. We have a self-financing plan to do what we want to do as we look now, and it's extremely important that, for us, that we have this balance in our company with the different opportunity that gives us.

So what is this platform? This slide I showed, I will not go through all the details again, but I think it's important to say it's a tailor-made boilerplate, where through a marketplace, our customers can do everything from building on top to actually hosting the data. We've got a new European hosting center up and running here in May. So we actually have European-based hosting we are facilitating now to being able to go into new contracts, even if the data has to be stored in these countries. That's a big win for us and a huge effort from the team, which get codes, so we've got that up really fast. We work on international open standards.

So basically, why do we do that? Well, we want to reduce the R&D cost for our customers. We want to increase the traffic for our customers. We want to shorten the time to market. That means we're both approaching the start-up companies that needs to get into the market. They will get a boilerplate to build on, so they don't have to start from scratch and get all the difficulties with that. At the same time, we can also support the enterprise on everything from hosting their data, make them more scalable across countries, et cetera, et cetera, et cetera. So we will keep focusing on developing our services so others can develop on top of our services, meaning making the localization that needed per country.

So where are we on that journey? We are still building international teams here in Norway and Denmark, and in Finland. Both commercial teams and technical teams, but both dedicated to either international journey or to assess journey. So we have dedicated people now only looking at the international business. That has been a precondition for us to be successful here. We are right now making it easy and accessible. That's a whole philosophy in what we do and why we actually use a little extra time of setting this up.

We want to make it easy and successful through a marketplace where it's easier to go to market for our partners. We have the European hosting now up and running, as I said, already. So that means we host data now in Norway and in Denmark and are able to set up new countries. Key for us is the future-proof in what we do. It has to be a scalable platform, and it has to deliver on the high standard that is in the health industry. So we continue to focus our product offering, the marketplace and onboarding commercial.

So while we are building, we are still also looking to the commercial markets. We have actually, over the last 2 months, been out discussing with 50 potential partners, what are the pain points in the market today, what are the opportunities, to be much more concrete when we go with our offering. So majority of these are outside Norway. So this is our international business we are approaching and really focusing around our focus areas, M-health and IoT. It's going to be a subscription and consumption model. First step, as I said, we focus on M-health and IoT. I know that's big areas, but we have a very focused area to go into and then further build on there.

I hope that gave a little more insight in our R&D part of our business on getting on the international platform. We still believe that is where the huge potential is for the future. We think we have a unique market position to actually go out and address this. We have 7 years of experience in Norway, actually 7 years-plus to develop on a platform. So we can take -- that's what we're working on taking out.

But our Norwegian business, it's still also a very important business for us. We have a strong position as a market leader in our segment. We are the leading cloud provider, which I think is very important. We -- as we talked, we have actually worked on cloud since 2014. We have acquired a lot of companies, both with on-premise but also cloud solutions. Long-term, our focus is PatientSky Clinic, Hove Total and Infodoc Sky product, the cloud version. We believe the future lies in the cloud.

We have worked a lot to educate our on-prem, but we also had the sense to introduce add-ons to the on-prem solution. So it's not like we also want to improve the reality for the on-prem, but we still believe long term, everybody needs to go to the cloud. We will keep developing and offering the best-in-class journals, patient dialogue, bookings, et cetera, et cetera, everything we already do today. The business is, as I said, around 2,300 health care clinics, and we have -- 26,000, sorry, health care users using our system.

Very simplified and not very concrete, but just to say why is cloud so important for us. We think it offers some opportunities of actually changing lives both for the patients, for their users, but definitely also for our customers. In our industry, we would like to give the same freedom to work from everywhere, the flexibility to work anytime you want. I know when the patients are there. Of course, and the clients, they need to be in the -- but all the administration, we need to take off and make that much more secure and much more easier, accessible data from different systems. That's actually what we're trying to solve. But we also definitely are going into the security area. To work on a cloud base is a secure way to do it. We want to lower the customer support. We want to have lower maintenance as everything is in cloud. There's no iron to maintain.

And then we want to make it easy to implement new add-ons. For example, when it comes epidemic, and you suddenly need video. You can actually turn that on straight away. And when we do new further developments in our cloud base, our partners and customers actually are able to drag on that when they need it. We truly believe that's the future out there to make it much more flexible, makes it much more time coherent and also give more opportunities for our customers. And for us, it's also easier to scale on. So, the more we build, the more we can scale.

So how do you get everyone to cloud? That's been the big question for us. We started up, as indicated, as a greenfield in 2014 doing cloud. But we saw that to really get some momentum on, we needed to acquire companies with both the cloud but definitely also had on-premise and then do the migration journey. As I showed last time also, we are very far on this journey. On the practitioner side, therapies market, we are actually done with the on-premise. We are fully focused on a cloud-based PatientSky Clinic. We still have SystemX, and we have [indiscernible], which we still have an on-prem customer, very valuable customers for us also. But we are still trying to help them on the journey to get the cloud when the timing is right for them. We are also approaching new customers because we don't have the focus of acquiring more companies. That's not our focus. Our focus is to migrate the ones we have and then focus on new business.

We see that's on our side, that our competitors, partners in the market, or do you want to call them, they have to go through the same journey at one point in time. We think the future goes to the cloud. When you do a migration, you will see elevated churn, that's completely normal, because you're actually opening up the contract with the customer. We think by having our position in the forefront of that part gives us a huge opportunity for the future.

So why are we so confident in this part? Well, we are one of the first movers on the cloud-based business. We also one the first mover of actually doing acquisitions and migrations, not from prem to prem to consolidate systems just but actually from on-prem directly into the cloud business. So we've been focused on that for a long period. We have a uniqueness in our platform. I can tell you that have definitely also give me some frustration with customers that we have worked on micro services, making it scalable and reusable instead of just doing hard coding on top. But we really believe in that having that ongoing reusability of the services for the long run takes us in a position that we want to be in.

We are the leading SR provider in our segment. We are the biggest cloud EHR in our segment. We have proven migration journey. I think it's fair to say we have migrated a lot of business, also making a lot more healthier business for us as a supplier. And we are actually very soon to be 50% of our revenue is cloud. That's a quite big milestone from our side. To say we're halfway there, but it's definitely on a big milestone from our side.

But to do that, we have identified some -- quite some time ago now, and we're very focused on, we needed to split up the business. We needed to split up the focus. So we didn't change content all the time from being internationally focusing on B2B2B, being nationally focused very much on the clinics. We needed to have people doing both. So the business is now split up, working with individual P&Ls, working as completely separate companies are unlinked. So we are innovative developing our Norwegian business, at the same time, as we're innovative developing our international business. And that's extremely important for us. So we don't want to do the other on the cost of the first.

We give the group flexibility to strategic initiatives. As I also indicated earlier, we have a potential that shoots international, but we also have our machinery, very cash-efficient, that actually gives us the balancing of -- actually balancing our future. We enable better earning efficiency and better scalable organizations, but we can actually see very concrete as we look at it now, our requirements to new hires, not to take out but new hires has decreased by 20 to 25 people for this year due to us having a much more clear road and responsibilities, and then we can put in people when the timing is right and scale the organization according to that.

We're, as we said, operate with 2 different businesses, SaaS and International platform business. As you will notice here, the app is located under our, VAS, which is actually part of international business. That's because that could both be that we want to do an app internationally, we have that opportunity. But the current app we have today is only in Norway and consumer-focused, high traffic, good market position in Norway. We have also indicated earlier, we are optimistic on the app as we are on the SaaS business in Norway.

So this was a little snap of how our business is going, what are we working on, where we are in the progress. But Christoffer, could you maybe give us a hard core facts, where are the finances and how we're performing really?

[Christoffer Mathiesen, executive]

Sure. Thank you, Kristian. Revenue is down by 2.9% in the quarter. We also see -- saw a drop in sales from last quarter to this quarter, driven by lower nonrecurring revenues and lower contribution from our on-premise portfolio, the latter being due to end-of-life ProMed and churn. On the positive side, cloud is still growing nicely and the cost base is lower. Salary expenses and other OpEx are down by NOK 7 million and NOK 5 million, respectively, compared to the previous quarter, pre any capitalization effects. And as is previously mentioned, we will now start emphasizing the cash EBITDA to avoid any volatility in the capitalization rates, and it's also closer to our cash flow.

As you can see, the adjusted EBITDA is around NOK 19 million for the quarter compared to above NOK 21 million last quarter, adjusted for years. In first quarter, we had NOK 1.2 million in adjustments being double rent and some legal fees. So if we look at revenue composition, you can see that the cloud part is still growing very nicely with 38% [ annual growth ]. Our on-premise revenue is down by over NOK 3 million, basically driven by less projects, which often come in lump sums. And the on-premise is lower. Bear in mind, our Everyone to the Cloud strategy is -- means that we take all new sales to cloud, but we also take from the blue, on-premise, and migrate over to the green, cloud. That doesn't explain all the downtick on, on-premise this quarter. We also had churn.

Please also note that we have restated the figure to the left, which we have shown previously due to defining a new way of reorganizing the group. We had approximately NOK 1 million each quarter in past revenues, which are now part of cloud recurring.

So if you look at the revenue -- sorry, the customer development through the quarter. You can see that it's ProMed. That is the main contributor for the big movements, but with limited revenue impact from ProMed. I'll revert back to that. If we start with cloud, really happy with our cloud development with almost 0 churn. 43 new sales, and we have upgraded 26 clinics in the quarter. Bear in mind, the way we measure clinics in this overview is that they have to be a revenue-generating clinic in the quarter and they need to have at least 1 EHR license as part of their products they're buying, meaning we can have customers without EHR licenses that have contributed positively on revenues in the quarter. In addition to that, as you can see in the 80, we have upgraded an additional 80 clinics, but they are still in grace period. i.e., they have not had any revenues in first quarter, but we expect them to contribute positively in the next coming months.

That takes me to the on-premise development. As you can see, we have upgraded 106. That's the 26 plus 80 you see in cloud. And we have announced end-of-life ProMed, 109 ProMed customers that were revenue generating in the fourth quarter are no longer in the first quarter. But that doesn't mean that we have given up on them. We're working really hard to try to win some of them back and to choose our cloud solutions. But again, limited revenue impact in fourth quarter, no revenue impact in the first quarter.

And then we had churn of 65 clinics. We're obviously not happy with that, but that is an effect of the contract structure, where our on-premise portfolio is on 6 months contracts. So this is the accumulated number for number of clinics lost but terminations received for the last 6 months with first revenue effect in January this year. We'll go back more to churn.

If you move on and look at a number of licenses. We can see that on the cloud part is still growing nicely with a 7% increase from last quarter. And also very good to see is that our average prices on both cloud and on-prem per license are still growing, meaning either that we are turning out lower-value customers and/or we get a revenue uptick every time we migrate on average. But on-premise is down by 20%. That is due to obviously the lost clinics, but also ProMed, which accounts for 900 out of those 1,600 decline in the quarter.

So if you look at churn in more detail. We are, as I said, really happy about the cloud development, low volume, low revenue churn. Let's spend more time on what we have seen in on-prem this quarter with rather extreme observations, and that's due to one-off effects, our definition and also that we analyze all the numbers, of course. ProMed, as stated, end of life, a choice we made last year. So if we try to focus on churn from other parts of our on-premise portfolio, as we see it, we've had 10%-ish volume churn on average over the last 2 quarters. Why is that? In this quarter, it's close to 20%.

But if you look at our fourth quarter numbers, they were abnormally low. You should look at those 2 together, given the contract structure. So 10% over 2 quarters with normal churn, we will always have. We're doing migrations. And to be fair, we did a rather high price increase last summer, which we believe explains majority of the churn. Also worth mentioning is that part of the revenue churn is the 80 upgraded ProMed customers that are still in grace period. So that revenue will come back.

So leaving behind KPIs and revenues, if we look at the more business unit part of things. I mentioned that we're doing the reorganization in a different way. The intention now, as Kristian also alluded to, is that we want the SaaS business, the Norwegian business to operate independently without intercompany dependencies. So now we have defined the organization where they keep the Norwegian platform, not international, the Norwegian platform. And that also from a financial perspective, means that they have to pay for all the COGS which were previously held out of the Norwegian business.

So what we see here is the restated 2021 numbers. We're going from NOK 63 million in cash EBITDA to around NOK 53 million, so a downtick of NOK 10 million. But you're carrying over NOK 20 million more in COGS, implying that the work we have done on the realization has also been covered, that we need less costs to operate the Norwegian business than what we previously assumed. And a disclaimer, this is still management accounts, but now there will be no intracompany major transactions that will disrupt the numbers.

If you look at our -- 2 slides left, it's the MRR development and the -- and some considerations around cash. You can see, we have touched upon this, on the churn side having an effect on the numbers in January and February going down. But we're very pleased to see that it's -- the momentum is gaining through the quarter, and March finishing off around at the same level as year-end. In total, year-over-year MRR growth of 11%, clouded MRR growth in the same period, 28%.

And then on cash. We spent NOK 19 million in cash this quarter. The cash balance ended at NOK 227 million. I know there were some questions in the last presentation we had on the cash flow. And besides the cash EBITDA, we have some smaller investments in tangibles, interest. And that is mainly the biggest contributor to our cash flow, together with working capital. And as you can see here, the receivables part spiked a bit in December, but it's now down to NOK 34 million. And in the quarter, we had a very, very important milestone for this company. We went from pursuing invoices and overdue invoices manually to getting an automated dunning module in NetSuite. And we waited for that until every company in the structure were on NetSuite, the same system, then we're able to implement that across all companies. So we expect the receivables in nominal amounts to normalize during 2Q, in the second quarter. Kristian?

[Kristian Ikast, executive]

Yes. Thank you, Christoffer. I hope that gave a bit more insight in the granularities of the decisions we have made in the implication of it. Since first quarter, what has happened in our organization around the world? Well, our international journey is progressing as expected. As I said earlier, we have -- without talking directly with, more than 50 potential customers, I would say, all players in the market discussing what is the pain point and what is actually the solutions that does look for in the market, how does that cohere with the journey we're on.

We have, as we talked about the whole time, carried out the full reorganization now working as completely separate companies. So the Norwegian team can actually step up together and take a good step on their journey and keep developing that company. The same International team will do. Our European platform was installed. I have mentioned this 2 times. I know that was part of earlier, but it was actually just 2 May. But we're actually very proud of that, and I'm very proud of the team because I think that is a major achievement that they've done that, and we are actually able to facilitate hosting data in Europe for more partners.

We will move into our new talent hub in Copenhagen here at start of May. Also important for us to say now we have 2 places that we can actually get people together. We can iterate, we can develop together. I think that's a really important part of our DNA that we really want to cherish going forward, bring more talent into our business, giving them the chance, given the duration with good skilled partners.

We won a big public tender with municipalities with the highest scores among others functionalities and quality. That obviously don't show in the financial numbers you've just seen. But which would be shown in our future. That's also a big mark for us that we start being a frontrunner there. We have also seen a win back of previous bigger ProMed customers. We have closed down the system but have gone back to the PatientSky Clinic system, which we're also extremely happy of and say -- believe in that, that's the right choice for our journey. So big kudos to the Norwegian team also going in, doing a very hard exercise for keeping very focused on developing the company and also, therefore, giving us opportunities with very strong partners from a previous system.

Yes. So Christoffer, maybe I'll invite you on stage, then we can take some Q&A sessions, in the room, if there's anyone here.

[Kristian Ikast, executive]

Yes.

[Unknown Analyst]

Two quick questions. First on the cash situation and the cash burn. You burned about NOK 20 million this quarter. Is that sort of the level you are intending to burn for the coming quarters until you start making money on your platform?

[Christoffer Mathiesen, executive]

Yes, I think the last 3 quarters show that, that's the run rate burn rate we are at now. We obviously have some volatility in the working capital side. So it might be lower than higher. So yes, that's the level. But we still believe that even without any contribution from the past platform, that we have substantial upside on the SaaS business on the profit side. So that alone should bring us up to a cash EBITDA of 0 in the quite near future.

[Unknown Analyst]

And then on the potential contracts within the platform, so what you're basically saying is that the platform is now up and running. You've done all the things you needed to do?

[Kristian Ikast, executive]

So no, I'll phase myself clearly. We have the basic of the platform. We have that all the time. Now we are, what you can say, modeling it to be ready to go international. So it's easy to onboard, that's what we talked about our problem. The Norwegian platform is very specific for what we do here. Now we're working on together. That's why we went out to discuss with partners and say what is the first step they need ready to actually to work on our platform. So our platform is not ready. We are right now matching up what is the feedback we get from customers with what is actually what we can do from a technical perspective. That's also why we are not very concrete in the revenue because I think, for us, it's important that we take the right decision first and not just go for the easy revenue, but actually take a decision to how do we build the next step on the platform.

But we now have the ground foundation of the platform. We are building on the platform, and we now start building to the market. So it will not be a big boom with everything on our platform because then we will be building for probably many years. We will build in a structure that we can actually keep building on it and actually facilitate, as I said, both start-up companies, but also enterprise customers. .

[Unknown Analyst]

And then just quick on the revenue. I find that you don't say anything about the revenue potential. But sort of understanding your first contract, will it be a fixed monthly fee for using the platform? Or user...

[Kristian Ikast, executive]

It depends a bit what the first is going to land on us, but our base is going to be more on the consumption base. That's also why we have the market patient win there. There will be some signs up, but I think the majority of what we'll get in the past is actually on consumption-based. But it again depends about if you go on a big enterprise, they probably want to have a more recurring cost-based. So it depends with that first. But we are going for a more consumption based and more flexible for our partners. I hope that makes sense.

I know it's not super concrete, but I think for us, it's very important that we don't promise anything we cannot deliver on. That has been a very mature from our side. We see now we are very concrete, actually matching up where it will be. Therefore, we can also be a small concrete on the revenue side. But for us, to come with a revenue where we don't have the match between the customers and the product would be wrong for us because then we could overstay on the stake, if you understand.

[Christoffer Mathiesen, executive]

Yes. Okay. We have some questions online. Why have we changed the wording on 2022 revenue expectations of past from solid revenues to only revenues?

[Kristian Ikast, executive]

It's not a big deliberate choice. Actually, we have just not put the word in to be fair and a bit also the discussion we have here. We are still mapping out what is and what is solid revenue. I think that was a question we got from a couple. So i think for us, when we cannot be more concrete, I think it's wrong to us to try to overstate that word. I hope that answers.

[Christoffer Mathiesen, executive]

What remains to do with the platform before you can launch. You mentioned it a bit now, but also how many of the potential 50 partners you highlight you think will sign up in the first year?

[Kristian Ikast, executive]

That's a good question. We have actually chosen a wider scale of partners to meet with here, also some that was not willing for us now to get a more deeper knowledge from the market. So I don't expect 50% of that, but I expect a lower number of these partners. But I think we'll see similar partners joining on our platform. So we have not delivered, not just going to the market just discuss on potentially -- on direct customers, but this is all potential customers on our platform. Some of them is bigger, we also try to go to some of the very big ones to get their feedback to what to develop. But that's a longer run than one year from now.

[Christoffer Mathiesen, executive]

What are your plans to enhance and/or realize shareholder value in PatientSky? You previously highlighted the business split out of the SaaS business, but seem to focus less on this today.

[Kristian Ikast, executive]

I think we are just optimistic on the SaaS business as we've been the whole posters true. For us, it's very important for us now. We have isolated the business. We have a really strong team in our Norwegian SaaS business. So for us, it's all about making a healthy business. When we make a healthy business, then whatever strategic choice we make down the road will have a better effect for us from our cash flow. So nothing changed in our strategy there. We are just focusing very much on making it even more healthy business.

[Christoffer Mathiesen, executive]

Could you please elaborate on SystemX churn? What competitors are customers switching to and how are you coping with this?

I think the numbers we've gone through, right, and they are choosing some of our competitors and cloud competitors. And the way we cope with it is to do things differently now than we have done, try to treat our customers even better than we have been doing, but at the same time, also improving our own cloud products, making them even more competitive in the market. So that's a continuous process. Anything to add?

[Kristian Ikast, executive]

No.

[Christoffer Mathiesen, executive]

How should we think about the cost development going forward in both SaaS and the rest of the company? How many employees do you plan for hire in the next 12 months? Should we account for more consultant fees in other OpEx?

[Kristian Ikast, executive]

Do you want to take this, Christoffer?

[Christoffer Mathiesen, executive]

I can at least take the last part. I think, yes, we will hire some more new people, mainly in PaaS, not in SaaS. We'll probably replace people in SaaS if people leave, but the growth will be come in other parts of the organization. I think on the consultancy part, it's rather the opposite because every time we hire someone in, we can reduce the use of third-party consultants. But we are pretty focused on getting the right people in with the right skill sets, and that has to match. And that's a long process. But we definitely see investing in people will also reduce costs on other places.

[Kristian Ikast, executive]

Yes. And I think on the total number of added staff, I think we earlier indicated around 60 to 80 people. I think we'll definitely see -- or we will definitely see that number being lower. And 1 of the things we're also looking at with everything moving in the market right now, we are having a bit more conservative hiring in the pace that we can really utilize the resources we bring in. Some resources we will bring in to actually take out other costs, and some resource of costing in to develop our business. So we'll keep doing that, but the number will be significantly lower than we have indicated earlier. Unless we get our whole in, then we can really start adding up. So it will be a more controlled expansion of our organization.

[Christoffer Mathiesen, executive]

What is the size of the public tender?

[Kristian Ikast, executive]

I cannot go into anything concrete right now. We are very, very [indiscernible]. It's just signed. So I cannot unfortunately be very concrete in that, but it is of a significant magnitude from our side also. So it is something that we can fill in later. It's not going to be a game changer on the whole, don't get expectation too high, but it is something definitely that is a good win for us.

[Christoffer Mathiesen, executive]

Next question. How do you decide how much of R&D costs you capitalize?

That's a methodology that's pretty standard. And we measure ours per developer per project, and it has to be development and not maintenance and it has to have a future value in order for us to capitalize the costs.

When will you announce your first PaaS customer? Is the platform improvements process as planned?

[Kristian Ikast, executive]

Yes. For now, we are progressing as planned, and we are still expecting to see the first contracts coming in the end of this year. So that's still, according to the plan we work on the whole way through getting more and more concrete.

[Christoffer Mathiesen, executive]

And last question for now at least, what is M-health?

[Kristian Ikast, executive]

Mobile health. Sorry, that was just verbatim. But in general, mobile health. It is a wider terminology, that's also why didn't use too much time on. We have actually taken some deliberate choices on some segments. You can actually see that in the presentation also. we show really the areas we focus into.

[Christoffer Mathiesen, executive]

I think that was the last online. Any more questions here? No, then we can wrap it up.

[Kristian Ikast, executive]

Cool. Thank you very much for some good questions. I do understand some of the things we can be very concrete on, some of the things we cannot be very concrete on both of respect of new partnerships. But also, we don't want to go out and overpromise something when we are so much in our R&D phase as we are now. But we are progressing very healthy. And as soon as we start seeing the first feedback from customers, obviously, we will start highlighting this in the presentation as well. but we don't want to start the expectations on the wrong foot. But one thing we can say, and I think that's really important to -- I think Christoffer alluded to a couple of times, I also alluded to it, we have a high focus on improving our earning efficiency.

We have, as also shown, investing heavy in our international platform is a cash burning exercise. We want to make sure that we are on a good side of that and controlling that keeping destiny in our hand. That has actually been the major priority from our side. That's also why we say we don't go out and catch any low-hanging fruits we can just get tomorrow and if they don't bring us the right direction because that will hinge our journey going down line. So what we do is that we ensure that we can keep developing and keep investing in developing both our SaaS business, but definitely also our international business, which is still the focus we have as a company and still where we believe the long-term potential is.

We will continue to ramp up international scalable platform, organization, technology and pipeline. We will do it in a pace that we ensure that we can manage our cash flow under process. but definitely also take the choices that enable us to take the next step. So we'll not stop. We'll keep doing it. We just want to make sure we have a responsibility in the process we go towards. I think in the current market condition, that is extremely important.

We have the first contract -- concrete market match on product and partners. So that's why I'm not very concrete. We are concrete matching now say what is it actually matching what we have, what they want and what is the tweaks that we need to do. We have a high increased focus on new sales in our Norwegian business, expecting the healthy cloud growth to continue to grow. So I think overall, we can say now we have organization in place. We are delivering much more concrete work towards the 2 different plans, which also enable us to pursue different strategic alternatives, actually also enables us to scale in a pace that we can control.

So I think that was actually everything we had for today, and thank you very much for your interest here. Thank you very much for the question. And we would love to see any of you who have further questions in our one to one meeting over the following weeks, you are welcome to reach out. But otherwise, we will be back here the 15th of August with giving a more concrete update on where we are going. And we still hope to do some product demos in the second half of this year on our platform. Where we will continue. Yes.

Thank you very much for joining in, and have a great weekend. [Foreign Language]