LeadDesk Oyj: H1/2023: EBITDA 12.6 % and ARR +10.0 % - solid foundation for growth

LeadDesk Ltd Half Year Financial Report 1/1-30/6/2023

Figures in parentheses refer to the equivalent period in the previous year unless otherwise stated.  (Unaudited)

January-July 2023

• Revenue EUR 14,474 (13,674) thousand, growth 5.2%
• Annual recurring revenue contract base EUR 25,553 (23,228) thousand, growth 10.0%
• EBITDA EUR 1,818 (1,384) thousand, 12.6 (9.8)% of revenue
• EBIT EUR -705 (-1,041) thousand, -4.9 (-7.6)% of revenue
• Profit/loss for the period EUR -800 (-1,197) thousand
• Cash flow from operations EUR 1,735 (29) thousand

Outlook for 2023 unchanged

In the outlook published with the financial statements on February 23, 2023, the company expected 6-14% annual revenue growth and positive profitability measured by EBITDA and operating cash flow. The outlook does not consider the impact of significant acquisitions on revenue or profitability. The company maintains the same outlook.

LeadDesk Group Key Figures

EUR 1,000 1-6/2023 1-6/2022 2022
Revenue 14,474 13,764 28,084
Revenue growth, % 5.2% 14.5% 14.3%
Annual recurring revenue contract base 25,553 23,228 24,300
Annual recurring revenue contract base growth, % 10.0% 21.9% 8.6%
EBITDA, % of revenue 12.6% 9.8% 11.8%
EBIT, % of revenue -4.9% -7.6% -5.5%
Return on Equity (ROE), % -9.2% -13.2% -9.9%
Return on Investment (ROI), % -4.3% 7.6% -5.3%
Equity ratio, % 51.6% 55.1% 56.3%
Net gearing, % 32.1% 30.4% 30.9%
Earnings per share -0.15 -0.22 -0.33
Earnings per share (incl. dilutive effect) -0.15 -0.22 -0.33
Personnel at the end of the period 199 185 170

CEO Olli Nokso-Koivisto:

"LeadDesk is a leader in European cloud-based contact center software. The LeadDesk product and the new AI features improve the efficiency of our customers' operations, helping them provide a better customer experience and increase sales productivity. Our products are used weekly by over 20,000 customer service and sales professionals in Europe.

Good profitability shadowed by weaker exchange rates
Last autumn's shift in focus to profitability produced good results. Our EBITDA was EUR 1,818 thousand, or 12.6% of revenue. Compared to the first half of 2022, we also improved our EBIT, profit, and cash flow from operating activities for the period under review. We develop our business with a focus on profitability. Good profitability provides a solid basis for business growth even in challenging market conditions.

Our revenue increased by 5.2% compared to the same period last year. Revenue growth was slowed down by the exchange rates of the Swedish and Norwegian kronor, which have significantly depreciated compared with the euro. Together, these countries account for up to 40% of our revenue. Calculated with the exchange rates of the corresponding period last year, the revenue for the review period would have been more than 15 MEUR and revenue growth 9.2%.
Even though revenue growth from SME customers even outperformed our goals, operative revenue growth was slowed down by Enterprise customers' cautious decision-making. Due to the general uncertainty in the global economy, many customers have postponed decisions to purchase business-critical software.   
Our annual recurring revenue (ARR) contract base grew by 10.0% over the period. The increase in ARR will support revenue growth in the second half of the year. The ARR growth reflects the efficiency of our operative sales as with our current calculation models[1], exchange rates have not had a significant impact on ARR. We expect to reach our outlook (6-14%) for full-year revenue growth.

The Länsilinkki acquisition strengthens our telecom operator business

The acquisition of Länsilinkki Oy at the end of the period will strengthen our competitiveness in the telecom operator business. The acquisition will expand our telecom operator services and improve their quality. The business benefits are significant; the telecom operator business accounted for 22% of our total revenue last year. The telecom operator business is highly competitive, so cost efficiency is critical to profitability.

The measures we implemented immediately after the acquisition will rapidly improve Länsilinkki's profitability. We expect to see a positive turnaround in profitability already this year. Our medium to long-term objective is to grow our telecoms business internationally.    

Rapid progress in the development and deployment of AI solutions

Our product development strongly focuses on developing AI solutions that improve customer service and sales. With AI solutions enabling better customer service and more effective sales, there is already strong demand for AI solutions among our customers. Our goal is that by early 2025, all our customers will use at least one of LeadDesk's AI tools.

Around 20 of our customers are already piloting LeadDesk's AI solutions. Our solutions bring tangible benefits in customer service automation, quality assurance and reporting, among others. For example, the products convert speech into text and enable automatic identification and retrieval of specific keywords. This information can be used to analyse and improve customer service and sales performance. The products can also automatically take notes on calls, saving customer service agents' time for the most critical task - serving the customer. LeadDesk products can also create a knowledge base of customer data, allowing the AI to answer customer questions, e.g. in chat or email, based on accurate data.

The development of AI solutions has been a determined effort. For example, the poor audio quality of phone calls is a challenge when developing software that converts speech to text - especially in the globally rare Nordic languages. The AI models we are training further ourselves solve this problem. The AI solutions are hosted in our IT infrastructure, so our customers' confidential data is not transferred to third parties. Investing in our own servers and AI processors allows us to process data securely, even in critical industries such as healthcare. We see value in collaboration when developing AI solutions and have established partnerships with a university and research institutes.

A big thank you to the LeadDesk team, who have continued to innovate and serve our customers diligently this year. I am particularly proud of our people's optimistic and forward-looking attitude, which will ensure our future success. Thanks also to our customers for their bravery in experimenting with new AI solutions! This courage will surely be rewarded with efficiency gains and a better customer experience for end customers, even in the short term."

[1 ]The ARR is calculated so that the contract denominated in a non-euro currency is converted into euros using the exchange rate of the month when the contract is added to the contract base or when existing contracts are changed.
Financial review 1/1-30/6/2023

Group financial performance and profitability

Revenue of the LeadDesk group during the period in question was EUR 14,474 (13,764) thousand. Revenue grew by 5.2 (14.5)%. The revenue growth was driven purely by organic growth, especially in Spain and Germany, and, in euro terms, Finland. Revenue growth was negatively affected by the weakening of the Swedish and Norwegian exchange rates compared to 2022 (approximately EUR 600 thousand).

At the end of the reporting period, the company acquired the entire share capital of Länsilinkki Oy. The acquisition was signed and carried out on 30 June 2023. The debt-free purchase price of the acquisition was EUR 500 thousand. In addition, a commitment was made to pay a maximum of EUR 250 thousand as a possible additional purchase price if certain conditions are met. The purchase price was paid in full in cash. LeadDesk raised a loan of approximately EUR 1 million to fund the purchase price and working capital and applied a floating charge of EUR 1.2 million for the loan. Länsilinkki Oy has been reported as part of the group balance sheet as of 30 June 2023. Regarding financials, Länsilinkki will be included in the Group financials from 1 July 2023 onwards. Länsilinkki's revenue in 2022 was EUR 1.3 million, and EBITDA was EUR -255 thousand. The company believes that the EBITDA can be turned positive within the next year. Länsilinkki's balance sheet total at 30 June 2023 was EUR 0.7 million. Länsilinkki's impact on the Group's 2023 revenue is forecast to be no more than EUR 0.5 million

In June, the group's recurring revenue was EUR 2,008 thousand (1,845), a growth of 8.8%. Annual recurring revenue contract base on 30 June 2023 was EUR 25,553 (23,338) thousand, a growth of 10.0%. The growth of the contract base was positively impacted by the price revisions made during the period in question and the second half of 2022.

 
Group EBITDA for the period was EUR 1,818 (1,348) thousand, i.e., 12.6 (9.8)% of revenue. The increase in EBITDA was caused mainly by the actions to improve profitability carried out in the latter stages of 2022.  Group EBIT was EUR -705 (-1,041) thousand, i.e., -4,9 (-7,6)% of revenue.

Group earnings before appropriations and taxes were EUR -758 (-1,159) thousand, and the loss for the period was EUR -800 (-1,197) thousand.

Group earnings per share were EUR -0.15 (-0.22), and diluted earnings per share were EUR -0.15 (-0.22).

Balance sheet, financing, and investments

The group balance sheet total on 30 June 2023 was EUR 35,193 (34,854) thousand. Group goodwill of EUR 17,430 (19,206) thousand was negatively impacted by the planned amortisations during the period and positively impacted by the Länsilinkki Oy acquisition on 30 June 2023. At the end of the period, group equity was EUR 16,714 (17,997) thousand, and net debt was EUR 5,367 (5,474) thousand. Net gearing was 32.1 (30.4)%, and equity ratio was 51.6 (55.1)%. Net debt decreased despite the loan taken out for the Länsilinkki acquisition.

Cash reserves on 30 June 2023 were EUR 2,543 (3,148) thousand. During the period, cash flow turned positive and was EUR 20 (-3,187) thousand.

Operating cash flow after interest and direct taxes was EUR 1,735 (29) thousand. Operating cash flows improve mainly due to improved profitability but also due to the growth in short-term payables compared with short-term receivables. The increase in short-term payables was caused by timing differences in the invoicing of costs related to a significant customer of LeadDesk Solutions AS. Group investments in tangible and intangible assets amounted to EUR 1,352 (1,396) thousand. Investments consisted primarily of product development of the LeadDesk product. Cash flow from financing activities was EUR 290 (-342) thousand.   

Equity per share on 30/6/2023 was EUR 3.07 (3.33). Taking share dilution into account, equity per share was EUR 3.03 (3.17).

LeadDesk Plc

Board of Directors

More information

Olli Nokso-Koivisto, CEO, LeadDesk Plc

+358 44 066 5765

olli.nokso-koivisto@leaddesk.com
 

Approved advisor:

Oaklins Merasco Ltd, tel. +358 9 6129 670
 

Distribution:

Nasdaq Helsinki

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http://www.leaddesk.com

LeadDesk Plc in brief

LeadDesk is a fast-growing and internationalising software company, operating in the cloud-based software market in Europe. The company offers the LeadDesk cloud service for sales and customer service and has grown to a leading cloud service vendor in sales and customer service in the Nordics. In 2022, the company's revenue was €28.1 million. The international revenue share was approximately 58%. LeadDesk's shares are traded in the Nasdaq First North Finland market under the ticker LEADD. The company has offices in seven European countries. The LeadDesk cloud service is used by ca. 1900 customers around the world.  www.leaddesk.com