Physitrack PLC

STO:PTRK

Q2-2025 Earnings Call

[Henrik Molin, executive]

Good afternoon, everybody, and welcome to Physitrack's Q2 2025 Results Webcast. I'm Henrik Molin. I'm the CEO of Physitrack, and I'm joined today by our Interim CFO, Mr. Matt Poulter. Let's dive right into the presentation. We will begin with a short overview of Q2, then we're going to walk you through the 2 divisions and their respective performance. Matt is going to take you through the financials in detail, and then we'll have a little strategic update and our outlook. We'll wrap things up with Q&A, and you can submit your questions as usual using the Zoom Q&A panel. Let's kick things off. All right. So Q2 financially, commercially. It was a very successful quarter. What really stands out here is that we were cash flow positive with EUR 0.1 million in this quarter, and that's an important milestone. This marks a significant improvement from the same period last year and actually from every single quarter since our IPO in 2021.

And to give you some context on this, in Q2 last year, we were approximately EUR 800,000 cash flow negative. And this seasonal pattern is largely due to the timing of our audit fees. We have platform vendor subscriptions. We have some other big expenses that fall in the quarter. And actually, we've never been cash flow positive in Q2 after the IPO. So it is historical. The improvement was about EUR 900,000. Now there's another twist to it as well because this year, we had EUR 200,000 of restructuring costs for Champion Health in here as well. And if you strip these out, we actually delivered significantly positive operational cash flow of about EUR 300,000, and that's quite exceptional and a testament to the strength of our operations and our lean team structure. As [indiscernible] as well, Matt will walk you through that. We had some legal fees as well related to the restructuring. So we were actually very deeply cash flow positive in the quarter. Now moving on from cash flow into profitability.

We've seen margin growth across the group, adjusted EBITDA at 33% and adjusted EBITDA less CapEx at 15%. So this reflects the successful restructuring efforts over the past few months in combination with high-margin top line growth. Now looking at revenue, it came in at 6%, driven by a shift towards recurring revenue and the phaseout of lower-margin one-off revenues. And this is very deliberate. As you know, we've always positioned ourselves as a software-first company and not a care provider, and that transition is well underway. Recurring quarterly revenue is up 9% year-on-year, supported in part by a recent price rise in the Physitrack platform, and that reinforces both predictability and long-term visibility. It's not on this slide, but the Physitrack platform MRR grew with 28% and Wellness ARR grew with 26%.

And here's a little summary of this, but very strong unit economics, operational leverage, and they mean that we're very well positioned to deliver sustainable KPI improvements now even as we maintain velocity with this tighter optimized tech-savvy team, [more exciting times]. Now divisional overview, you'll now see the updated split here post restructuring, 78% Lifecare, 22% Wellness. If you look at Lifecare here, quarterly revenue growth was 80% and brings current annualized revenue to EUR 11.3 million. Adjusted EBITDA margin is now at 50%, and it is up from 46% in Q2 last year. Very, very nice to see that 5 in front of the 0. Adjusted EBITDA less CapEx improved to 29% versus 18% in Q2 2024, strong step forward.

[Matt] again, is going to talk you through more of the mechanics behind this. Churn remains very low for a low-cost B2B provider like us. It's in line with previous quarters. And importantly, this is despite smaller teams delivering services and doing customer excellence, et cetera, more automation, more AI agent. So customers, they continue to perceive high value and this retention really supports that. Now within the Physitrack product, MRR grew 28% year-on-year, and we had no negative impact from the recent price rise. In fact, I'd argue we're still underpriced relative to the value we deliver and the fact that we keep innovating. You saw that in the intro clip here with the new amazing looking PhysiApp.

So continuing to benefit from excellent operating leverage, and that's reflected in the jump to a 50% margin. So we have delivered some great innovations here. And the big thing that we're excited about now is that we're preparing to roll out a significantly enhanced version of the PhysiApp patient, app in the coming months here. And historically, PhysiApp development was somewhat deprioritized in favor of the provider-facing side of the platform. But we know that happy end users, happy patients, they influence retention through their feedback to providers.

And this is why we think that this new version is super important to us. And of course, it opens the door to cross-fertilization between Lifecare and Wellness, especially in preventative and lifestyle-based patient journeys. And over time, I think this is what we will have as a bridge into B2C. Now Wellness and Champion Health, we had flat growth overall, but quarter-on-quarter, Champion Health software revenue growth was 9%, which is encouraging. The Champion Health business remains profitable and is now central to Wellness division growth, which is great. Champion Health is, as you know, our moonshot initiative has a really large total addressable market, has amazing potential.

But importantly now, it's a moonshot that is not eroding cash flow, and we're building momentum in a capital-efficient way. Annualized revenue in the Wellness division stands at EUR 3 million. There's some short-term softness in the Champion Health Plus and Champion Health Nordic revenue streams as we continue to transition away from one-off sales towards subscription models, more high-margin recurring predictable stuff. Now Nexa, which you know is our AI tool for onboarding and managing patients in Champion Health Plus, the rollout there with subscription offerings, that's gone really well. We're running 2 large insurance customers through that funnel in real time, and the data is super encouraging.

We have minimal drop-off rates in patient onboarding, and we have really promising care outcomes. We'll have more to share on that soon, but so far, really, really good there. While the Wellness division shows a flat revenue trend overall, do note that Champion Health software is driving this performance and it's offsetting the expected decline in physical care delivery. So profitability has improved significantly because of this. And even though the division remains slightly negative on the margin level this quarter, there are some big benefits here in transitioning to a scalable high-margin recurring revenue situation. So just wrapping up before I hand over to Matt.

So strong Q2 operational cash flow historically, really, really, really strong and continued margin expansion. It's a lean optimized team structure. It's still performing at a high level. We're still running fast, and we're still innovating, some really positive trends in both Lifecare and Champion Health, and this is a really nice, clear disciplined path to sustainable growth. Now with that, I'll hand over to Matt to walk through the detailed financials. Over to you, Matt.

[Matt Poulter, executive]

Thank you very much, Henrik. So let me begin today's discussion by taking you through the key financial headlines from Q2. And more importantly, unpacking what they signal about the underlying health and momentum of the business. At face value, revenue growth of 6% year-on-year and 8% year-on-year on a constant currency basis may look modest, but that number becomes a lot more meaningful when you recall where we started the year. We deliberately restructured the business in Q1 to exit low-margin and nonstrategic revenue streams, particularly in the Wellness division.

Despite that, we've grown revenue and significantly increased the quality of earnings with subscription revenue now making up 87% of the total revenue, and that's up 8 percentage points from last year, a material improvement in our revenue predictability and our margin profile. That shift translates directly to profit with adjusted EBITDA growing 34% with a margin now at 33%. This reflects both top line quality and leaner cost structure. And importantly, the business is now generating cash. We moved from an outflow of EUR 800,000 in Q2 last year to a positive EUR 0.1 million free cash flow this quarter. And if we haven't incurred EUR 600,000 in extraordinary costs, we would have generated a really, really nice positive cash rate for the quarter.

But in other words, what we're trying to demonstrate here is the business isn't just growing. We're scaling up profitably and sustainably. Next slide, please, Henrik. So let's look more closely at the revenue story and in particular, the 2 slides of our group, Lifecare and Wellness. Starting with Lifecare, the business continues to show remarkable consistency and operating leverage. We posted 8% year-on-year growth with solid sequential growth of 2% versus Q1. The main driver here is pricing power. In May, we implemented a targeted price rise and it's landing well. Customers are sticking with us. Our churn remains extremely low at just 1%, showing that clients recognize the value we deliver.

On top of that, new tools like the PhysiAsistant AI module and improvements in the clinician-facing app have deepened platform engagement, which in turn supports license expansion and customer retention. Now if we shift to Wellness, the picture is a bit more nuanced. Total revenue fell by 24% year-on-year, but that is by design, and I want to be really clear about that. We've made the conscious decision to pivot Champion Health Nordic away from one-off equipment sales and instead focus on building recurring SaaS revenue. And likewise, in Champion Health Plus, we're phasing out the unprofitable clinic model and moving towards a Nectar SaaS platform.

The good news is that SaaS ARR and Wellness grew 109% year-on-year and 25.7% quarter-on-quarter. That tells us the new model is working. It just takes time to replace the low-quality revenue with high-quality recurring income.

Next slide, please, Henrik. If we move now our focus now to profitability. This slide really brings together the results of the strategic reshaping we carried out in Q1 this year. On a group level, adjusted EBITDA less CapEx came in at EUR 0.5 million, up from breakeven a year ago. That's the cleanest expression of our operating cash flow after investment and it's moving in the right direction. And if you break that down, Lifecare continues to be our profit engine, posting EUR 1.5 million in adjusted EBITDA less CapEx for the first half of the year. The margin profile here is exceptional and reflects strong cost discipline combined with scalable revenue.

Wellness, unfortunately is still loss-making, but the losses are narrowing. We're seeing early signs of operational leverage taking hold as the SaaS business scales. The big story here though is margin expansion. In Lifecare, we've increased annual revenue per user through pricing while holding churn steady. We start more value per customer without eroding loyalty, and that is a hallmark of pricing power. Across the group, our cost base is lighter and more efficient following Q1's restructure, and we're now seeing those benefits flow through.

Next slide, please, Henrik. Cash and liquidity position. Now let's talk about cash. Free cash flow swung from a EUR 0.8 million outflow in Q1 to EUR 0.1 million inflow in Q2. And on the rounding, that is a EUR 0.8 million improvement quarter-on-quarter. Again, that's after restructuring costs and with no help from seasonal tailwinds. This is a significant turning point. Q2 is typically a cash-intensive quarter for us with annual audit fees, prepaid software renewals and other front-loaded costs. The fact that we navigated this period with a stable cash position shows the resilience of our operating model. Importantly, we still have access to EUR 1 million in undrawn debt facility, and we're not reliant on that facility to fund day-to-day operations. That gives us flexibility as we head into the second half of the year.

Next slide, please, Henrik. Looking at the balance sheet, we've maintained a strong and stable financial position. Net assets stand at EUR 18.3 million, and the overall structure remains healthy. We've improved working capital discipline. Receivables are coming down as we tighten collections and payables have normalized following the Q1 cost reset. Cash at quarter end was EUR 457,000, which we view as a solid base given our trajectory. When you include the available facility, we have EUR 1.7 million of total liquidity to support operations and opportunistic reinvestment.

We're also looking ahead, as we enter the budgeting cycle for 2026, one of our key priorities is the balance sheet derisk. So that includes ensuring that our assets are valued at fair value and that our strategic allocation of capital is efficient. We also love to bring down that debt, borrowing levels as well. And with the increase now in our cash generation, we are thinking of strategies in order to do that.

Next slide, please, Henrik. Now one area I wanted to spend a bit more time on because it's an area of focus for every business around the world at the moment is foreign exchange and the risk that this presents us as a business. As you know, we operate globally and receive recurring revenue in a number of currencies from Euro, U.S. dollar, Sterling, Australian dollar and Canadian dollar. Now where we operate globally, in some of those currency pairings, we're able to be naturally hedged. So we have minimal exposure with GBP, Euro and U.S. dollar. However, in currency pairings such as the Australian dollar and the Canadian dollar, these currencies are currently unhedged, and we do have a little bit of an exposure there. So how do we manage that risk? Well, we've implemented a formal value at risk model.

So this is the same approach used by large cap companies and banks. How does that work? Well, we calculate the expected minimum, maximum FX loss over a 1-week period using historical currency volatility. At a 95% confidence level, our model shows we'd be expected to lose no more than about EUR 2,000 per week across AED and Canadian dollar combined. So even in an extreme scenario, say, a 5% drop in both currencies, the impact to EBITDA will be less than EUR 27,000. So to put that into context, that's less than 2.5% of our Q2 EBITDA. Alongside that, if you look at our revenue on a constant currency basis, the growth would have been 2% higher, this year had the rate stayed the same as Q2 2024. And conversely, at an adjusted EBITDA level, we have generated an additional EUR 30,000 in adjusted EBITDA had the FX rates stayed at the same levels as they were last quarter.

So when we evaluate the risk, whilst we are unhedged in some currency bearings, the risk there is what we feel is immaterial. And at this moment in time, we've decided not to hedge those exposures at this stage. However, we've got materiality thresholds in place. And if FX volatility spikes or exposure levels increase beyond defined triggers, we're set up to act quickly. In short, we're applying structured data-led oversight in this area. The current FX risk is not material to our financial performance, but we're proactively monitoring this. Thank you very much.

[Henrik Molin, executive]

Thanks, Matt. So just before we jump into the Q&A, let me take a moment to revisit the value proposition. So both Life Care and Wellness are holistic technology offerings. They're designed to enhance patient recovery and to improve workplace well-being. And we believe that we're in a strong position to capitalize on key growth drivers with Physitrack and Lifecare as the base with as a cash cow and then having the moonshot with Champion Health sit on top of that.

We have a robust business model, and that helps us navigate headwinds while maintaining profitability. Let me also walk you through and reaffirm our financial goals. So top line growth remains a priority. Medium-term target is to double the company's revenue base. And we think that is very much possible given the trajectory and the market demand, size of the total addressable market, et cetera. EBITDA margins, we aim to bring the entire business in line with where our Lifecare division is today. So we're targeting 40% to 45% of the time. Lifecare [indiscernible] over 50%.

So we have done this, and we are very capable of doing it, and I'm very confident that 33% will expand to those targets over time. Cash generation, we are demonstrating that the model is cash generative, and we saw that this quarter in a big way the trend is continuing. Long-term shareholder value, of course, if we are in a good position where we are happy with the size of our debt position and the cash generation on top of that, we could position Physitrack as a dividend distributing investment and that would further enhance value for investors. That's certainly the long-term goal. Now with that, I'd like to thank you all for your time today, and we'll move into Q&A.

Please submit your questions via the Zoom Q&A function and we'll get to as many of them as we can. Thank you very much.

[Henrik Molin, executive]

If I unmute myself, it's going to be even better to get to some of these questions that have come in. So first question here, doubling down on scalable SaaS in Wellness is the overall theme of it. The Q2 report highlights doubling down on scalable SaaS revenues with a reduced OpEx base as a strategic priority for the Wellness division. Could you clarify the time frame for this transition and what specific initiatives would drive it? Very good question.

We don't actually approach OpEx reduction as an isolated sort of tactical cost-cutting initiative. We will identify something specific and have a list of things. We take a global and holistic approach to that. So we always ask ourselves where we can run faster, operate leaner and implement smarter tooling and especially with AI. And it's actually something that's been in place for a long time across the group. The engineering team is really, really good at this optimization piece, looking at the 350,000 lines of codes, how can we make that run faster, what tools can we apply to make that work better, how can we reduce cost for hosting, et cetera.

Now OpEx specific, we don't have anything that's targeted for short-term cuts, but to build long-term efficiency into the system. Now that said, there are some targeted OpEx refinements happening within Champion Health Plus, particularly as we now reduce exposure to this lower-margin hands-on care revenue. While that part of the business is modestly profitable and cash flow positive, it's not core to the long-term strategy. So we're adapting OpEx accordingly as we shut down more of these clinics, and we expect these transitions over the next 3 to 4 months to boost group profitability as well. So that's going to potentially push us into the 35% adjusted EBITDA range, and we'll take EBITDA minus CapEx higher as well.

Second question theme is transaction activity under the surface. In your Q1 CEO letter, Henrik, I guess, you referenced the breadth of additional transactions taking place beneath the surface. Has there been any change in momentum in Q2 or into early Q3? Are we seeing any of this activity beginning to materialize in reported numbers?

Well, if you know us, you know that we don't actually announce many transactions publicly. So we tend to reserve press releases for deals that are either significant from a money point of view or have a real brand impact. So a small deal with a big name client might sound exciting, but if it's not substantial, we do feel it's better to stay disciplined and avoid noise. We're probably quite different from a lot of microcaps in that respect. But we want to act like a responsible listed company, and we want to communicate when it's meaningful, and we don't want to communicate frequently just for the sake of doing that.

Now in terms of commercial momentum, yes, we're absolutely seeing a pick up. There's more activity. There's more engagement at the bottom of the funnel. So deals that we worked on for a while have gone down to the period where you're negotiating the contract or there are more deals being closed. A lot of clients had paused decisions early this year due to macro uncertainty. So you had the tariff [debacle there] in April, and that keeps coming and going. And we're now seeing those conversations reignite as sort of the world normalizes or at least we're getting used to these type of activities. And while Q2 has already been largely captured in our financials in terms of the deals that we have in here, we expect to see improvement show up in Q3 and definitely for the rest of the year.

Third question here, the CapEx discipline versus long-term platform ambition.

So CapEx for the Wellness division is down 65% year-over-year, which appears low in light of previous ambitions for Champion Health. How should investors interpret this shift? Is the current level sustainable? And where do you see Champion Health positioned 3 years from now? Now yes, obviously, if you reduce CapEx in an entity with 65% is a sign that we're actually shutting the lights off and we're going home. But it's actually more intelligent than that. So CapEx in the Wellness division on an isolated basis is down significantly, and that's by design.

So what we've done is to leverage the existing especially product and engineering teams, but also sales and marketing but especially product and engineering that touches CapEx. So we've expanded the scope of what we do in product and engineering by broadening the remit. So instead of having separate teams, which we had before, we had a team for Champion Health, we had a team for Lifecare and Physitrack. And we had duplicated leadership or leadership structure. So we now operate as one company with 2 product lines. And that integration has delivered some real results. And you actually see that in the CapEx as well on an isolated basis in terms of Wellness.

So leadership is streamlined. We merged the product responsibilities, and we've created a much more efficient and collaborative workflow. And it's not just a cost win, it's actually driving better outcomes and faster delivery, more innovation, like more people working together and just doing amazing things. It's actually very motivating new hires that we've had that they focus on the 2 business lines, for example. So it's actually been very, very accretive. And also, I should say that the structure is sustainable. So it's not something that we did in terms of slashing costs for the sake of doing that. We did this with the overall workflow and strategy in mind.

And so as the business grows here, we're going to scale the teams organically, but the base of just having siloed team growth and duplication of tasks, they're really behind us. So the restructure we implemented earlier this year has given us a really lean and integrated operating model. And as you can see now, it's showing up in the numbers and also in the velocity. And if you keep in mind what we launched in the previous quarter with these enterprise tools for Champion Health, for example, and now you see the PhysiApp piece, you can see that things are really moving nicely with a much tighter cost base.

Next question here. The theme is SaaS transition momentum. And I'm going to give this to Matt, but recurring revenue now accounts for 87% of total revenue. Can you expand on the financial implications of this shift, especially in terms of revenue predictability, customer lifetime value and pricing power?

[Matt Poulter, executive]

Yes, absolutely. So reaching 87% recurring revenue is a major milestone for us and fundamentally improves the quality of our earnings. It also most importantly, brings around greater revenue predictability and it allows us to plan with more confidence and stability, especially in what we're experiencing at the moment, quite a volatile macro environment. And we're already seeing this play out in our results. ARR has grown 21% year-on-year. Net revenue retention remains strong at over 100%, especially in Lifecare, and that reflects the sticky customer relationship and the consistent upsell success.

The shift to the SaaS also improves our customer lifetime value and margin profile. So average revenue per license is up 16.6% in Lifecare and our EBITDA margins in Lifecare also hit 50%, so we're capturing more value per customer at very low marginal costs. Also gaining the pricing power, which we've mentioned several times today, and that is demonstrated by the recent successful price increase without any material impact on churn. And this transition is central to the overall business strategy so that we can unlock stronger, more resilient and more profitable growth and cash flow generation.

[Henrik Molin, executive]

[Are those facts] Matt. I have another one that we're going to -- I'm going to bounce your way as well here. This is a 2-part question. So I think if you take the first part, and then I can take the second one. Nice to see the restructuring developing so well. And yes, I would agree with that. It's very nice to see that come into play. Could you please explain the definition of the KPI customer growth rate? So how do we actually calculate that? And there's a second part of it, but I'll bounce it over to Matt now if you just want to grab that.

[Matt Poulter, executive]

Yes. So in calculating the customer growth rate, this is essentially the growth in the SaaS user licenses. So it reflects the volume of our paying end user across the platforms. I appreciate there isn't a definition in the quarterly report, which we will obviously include going forward. But yes, it's solely just the growth in the user licenses.

[Henrik Molin, executive]

Yes. Thanks for pointing that out. We'll put that in the report with some more definitions. As you've seen, we retooled a little bit of quarterly report to make it more readable and more and more accessible. Now how will you grow going forward? Are you going to do more price rises? And do you see possibilities to also grow the number of customers? Why has it been challenging to find new customers? So I would say it hasn't been challenging to find new customers. We have a steady flow of new customers every single month because of -- we have the product-led growth. There's [new] things happening. We are participating in new tenders. We are winning business. So I don't think that's a correct definition that it's challenging. I don't think either in terms of Champion Health that there is a real challenge to find and have a good pipeline of customers. It's just been slow to get things through that pipeline.

And also to remember, some of these deals that you've seen, the latest -- the big one that we announced with Champion Health in March, that is actually a customer that has customers under them. And I think we have the first 5 companies that's part of that group that's joined the Champion Health platform. There's much, much more to be done. So I don't think there's a challenge of finding customers, but the closing activity, notably for Wellness has been quite slow and challenging, and that explains a little bit what's going on there. Now Champion Health has had a strong run with 9% growth, relatively speaking, for previous quarters. And so yes, the challenges are mostly related to getting stuff to move through the pipeline.

How will we grow going forward? Well, it's new business. I think price elasticity is on our side. We are still a very inexpensive platform for what we do. So clinical validity in what we do. We have 18,000 exercises. There are so many nice tools, both for the health care provider in terms of data and data and analytics and things that we do then. And you saw with the patient app, there's a lot, a lot of new value coming in there. And that every time we do that, it increases the price elasticity, moves in our favor and the scope for actually adjusting what is, I think, an artificially low pricing situation. There are also more enhancers coming in.

We're looking at new ways of doing the enterprise products. So we have a product called Physitrack Direct that we are enhancing more. So there'll be more things in that part that we will be able to split out and have as revenue enhancers for us. So more things for the customers to do and more opportunities for us to enhance revenue.

So a lot going on there, which is quite interesting. And lastly, I'll say this on the Champion Health side, we are tying more care products into that via partnerships. And so being able to get a virtual doctor's appointment and going through with an appointment, a session with the doctor that will be a reality in the next few months. Same thing with seeing an online psychology, mental health coach, et cetera. Just have that one place to go. This actually opens up for more enhancers, which is really, really interesting. So yes, a lot on our plate. The -- yes, more of a -- I have a specific question here from updated long-term goals. So we -- yes, so thank you for having an increased focus on true profits and cash flow, more transparency there.

And yes, that's been deliberate for us to just be more transparent on that point. So thank you for noticing that. Will you also present updated long-term goals for EBITDA less CapEx margins, meaning having goals setting for there because as it is now, we only have the EBITDA margin. So that is an interesting point of view on that. So I think we'll take that back and we'll have a thought about it. And so I think it's definitely relevant and in this environment that we're in with more transparency and focus on profitability. So it's a nice one. So I don't have a clear answer for yet, but we'll take a look and to see what we can do.

Now what are the last question here? What are your biggest concerns in the near and distant future? Well, if you go to the distant future, obviously, the advent of AI and the ability just to build whatever you want very quickly, quite easily using AI tools like Lovable, that increases the risk of a customer saying, you know what, I'm just going to build it by myself. I'm not going to buy this from a vendor and pay $20 a month for it. I'm just going to build it by myself using Lovable, and I'm going to film my own videos and just plug that in there.

So obviously, that's a threat in the long term. And that's something that you mitigate by just being really, really good at innovation and just never stopping to think how can we enhance this journey for our customers? How can we do this at an attractive price point? How can we make it clinically valid, safe and scalable so that they wouldn't even consider building it by themselves.

But that's a longer-term thing, and it keeps us really on our toes to be really fast and amazing when it comes to innovation, always being curious about it. And of course, being among the top 5%, 10% and using coding tools is just one out of dozens of examples of tools that we use. But that's obviously something that we're quite aware of. In the near future, obviously, the speed at which things move through the sales funnel is something that I look at. And what you do there is, you look at, do we have the right team composition for sales and marketing?

Are we doing everything that we can in terms of handholding our customers through the purchasing journey, even though it's a challenging macro climate, are we able to work with them so that they understand that the value that we deliver is very significant for them and that they are then likely to just close these deals and sign these contracts in the shorter term. So that's something that I look at quite closely. There's a lot of exciting stuff going on, on the U.S. side of things. We have a couple of million of revenue in North America in some of the biggest hospital systems in the world and actually in America, in New York City. We have so much to do there in terms of potential enhancements that we can do. We're on the Epic platform.

And there's so much that we can do with these hospitals on the -- notably in the New York region on the East Coast, but also the stuff to do on the West Coast and across the border in Canada. We are in the biggest rehab system in Canada with CVI that's publicly known. And we've only just scratched the surface of the potential there. And the same with some of these collaborations that we have across the border, ClinicMaster, Jane App and others, there's so much to do, but we need boots on the ground that are geographically close.

And so we're setting up more presence in the New York region, just about to recruit our first full-time North American salesperson on this that can work on enhancing this revenue situation. It's so much to do just with what we have. And that's obviously on my mind, making sure that we can get that contract signed with that first person based on the ground in New York and just making sure we can hit the ground running with these relationships. So those are the sort of the things that I'm thinking about. Okay. I don't think that we're all aware any -- oh, yes, there's one last question here. Maybe this is information I could get somewhere else, but I'm wondering about the low churn and how it's measured.

Do the clients sign up for, say, 12 months and are not seen as churn even if they cancel within that period. Now let me do the second half of that, Matt, you can do the first part. We -- for product-led growth, meaning you find us, you sign up with your credit card and you start that journey with us. It's actually monthly. These are monthly contracts. So you can cancel just 10 days before month end. It's very generous. It's very fluid. And because we originally set this up to be a low-risk proposition for our customers. You find us and you want to work with us. Well, if you don't like us anymore, you can leave and you can leave quickly. So something that was done out of fairness.

So it is seen as churn immediately as they churn, and we know about that about 10 days before a month end. Bigger enterprise contracts, like the biggest -- and especially where we do a lot of work. So we'll point our engineering and product teams to working with a specific customer. There, we want to make sure that we get a return on that investment. And so typically, those customers have 12 to 36 months of worth of contracts. And they can typically cancel that either on a yearly basis with a couple of months' notice or at the end of the contractual period with a few months notice. And it's recognized the churn -- it ends up in the churn numbers at the moment that you don't have a renewal.

And so you see that when the contract expires. And so that means theoretically, we know that we will have churn at the end of a contract period. We know that a couple of months in advance, but it's not captured in the numbers until the contract fails to roll over. This is all automated and it's all booked in our revenue systems. We use ChartMogul for a lot of these things. So it's something that's seen when the new invoice doesn't come in because the contract is expired and then it's captured in the churn. So quite hope that wasn't too technical. And so Matt, do you want to do the 12-month look back for churn?

[Matt Poulter, executive]

Yes. So in calculating churn, what we essentially do is we take the average MRR from customers which have no longer renewed their contract over a 12-month period. And then we divide that by the 12-month average total group monthly recurring revenue and it's as simple as that. As Henrik says, we utilize a platform called ChartMogul, and that tracks for us automatically. All of our billing systems feed into that, and that tracks automatically all of the key SaaS metrics you'd expect, including churn in there. But then obviously, we're able to audit those results.

[Henrik Molin, executive]

Yes. And a bunch of systems that we have AI-based that we try to predict sort of the future. So we try to be never really taken by surprise when it comes to accounts receivables or cash flow or churn and things like that. So we have some overlays on top of these things that Matt, is in charge of rolling out. All right. I think that's it for now. Thank you so much for participating in this earnings call. Stay in touch, and have a great day. See you soon.

[Matt Poulter, executive]

Thank you.