April - June 2024 (compared to the same period last year, Upsales group)
- Net sales decreased by -3.7% to MSEK 35.4 (36.7)
- Annual recurring revenue (ARR) at the end of the quarter was MSEK 137.5, a change of -2.8% during the last 12 months
- ARR increased by MSEK 1.6 during the quarter
- EBITDA decreased to MSEK 6.7 (11.9)
- EBITDA margin decreased to 19.0% (32.3%)
- Operating profit (EBIT) decreased to MSEK 4.5 (9.8)
- Net income decreased to MSEK 3.5 (7.9)
- Cash flow from operating activities decreased to MSEK 4.0 (7.2)
January - June 2024 (compared to the same period last year, Upsales group)
- Net sales decreased by -0.4% to MSEK 72.6 (72.9)
- EBITDA decreased to MSEK 15.4 (21.3)
- EBITDA margin decreased to 21.2% (29.2%)
- Operating profit (EBIT) decreased to MSEK 11.0 (17.2)
- Net income decreased to MSEK 8.8 (13.8)
- Cash flow from operating activities decreased to MSEK 11.8 (20.7)
CEO COMMENT
In Q2, Annual Recurring Revenue (ARR) stood at MSEK 137.5, an increase of MSEK 1.6 during the quarter, marking a turnaround after five consecutive quarters of stagnant or negative growth. Compared to the same period last year, net sales decreased by 3.7% to MSEK 35.4 (36.7). EBITDA decreased to MSEK 6.7 (11.9), with a margin of 19.0% (32.3%). Operating profit (EBIT) fell to MSEK 4.5 (9.8), and cash flow from operating activities decreased to MSEK 4.0 (7.2). The lower margins are attributed to several quarters of low ARR growth and lower one-off revenues in Q2 than usual. We anticipate continued ARR growth throughout the rest of 2024, though Q3 is expected to be slower due to the holiday season impacting new sales negatively. As ARR growth resumes, revenue growth will follow, leading to improved margins.
While a quarterly ARR increase of 1.6 MSEK is not near the growth rate we want to have, I am pleased to have Upsales back to ARR growth on a q/q basis, as predicted in our last report. This ARR growth is the result of several strategic efforts we have implemented over the past quarters. We have successfully reduced customer churn, increased winbacks, and improved our processes with existing customers. Additionally, we have seen a higher intake of new customers, which has contributed to this positive trend. Throughout the quarter, we have been diligently building our sales capacity to support our ambitious growth plans. We have recruited new team members to our sales organisation and have seen positive results from our customer engagement team, dedicated to helping customers maximise their value from Upsales, thereby reducing churn. Our sales and marketing efforts remain focused on customer segments where we can deliver the most value. This strategy not only increases customer satisfaction but also enhances Upsales' efficiency, enabling profitable and effective long-term growth. We continue to see significant growth opportunities within our existing customer base and the broader market.
We continue to develop our product and offering based on research and feedback from hundreds of customers in our segment. The launch of Upsales Customer Support has been well-received, helping us drive growth by solving more customer problems. Many companies struggle with the transition between sales and after-sales, and Upsales is perfectly positioned to solve this problem for numerous potential customers. Additionally, we have continued to expand our tech and sales teams to support growth going forward.
ARR growth is expected to continue throughout 2024, and as revenue growth gradually follows, margins are expected to improve. Upsales has a long history of rapid growth with strong margins, and I see no reason why we shouldn't continue this trend in the coming years. Our philosophy remains to grow effectively with positive cash flow and profitability. But as always, we don’t optimise short-term margins at the expense of ARR growth, as we believe that growing ARR is the best way to create long-term shareholder value.
Daniel Wikberg
Founder & CEO