Welcome everyone to Efecte's Q1 earnings webcast. My name is Tatu Paavilainen. I'm the Head of Investor Relations here at Efecte. With me today here is Niilo Fredrikson, our CEO, Steffan Schumacher, our COO, and also on the line for any potential questions you may have, Taru Mäkinen, our CFO. As a disclaimer, we may be making some forward-looking statements. We have a disclaimer for that in the materials. As for today's agenda, we have approximately 60 minutes time for the presentation or the webcast, and we'll start off by Niilo Fredrikson and also Steffan Schumacher presenting our Q1 results, including our financial results and product development update, and then European expansion plans and ending with a couple of notes on looking ahead. After that, we have the traditional Q&A, and in the past we've had lots of good questions and engagement during the Q&A session, and we're looking forward to that this time as well. With that, we will be starting the presentation, but just before starting, just as a reminder, you can pose your questions already during the presentation. Feel free to write your questions already during the presentation, and we'll moderate them then afterwards. With that, I'll hand it over to Niilo. Thank you. Thank you, Tatu. Also on my behalf, welcome. This is the first time, by the way, that we host this call from the new Efecte headquarters. As you can imagine, it was a good time to negotiate for office space, and Taru, our CFO, and Miia, our VP HR, did an excellent job. We got this beautiful office, which you see only a small snapshot of, and with smaller cost than before. We're all happy about that. I think what we'll do now is dive in the presentation. As you know, we have not set a small ambition to ourselves. We said that we are the European alternative to the global goliaths in our space, and we help service organizations digitalize and automate their work. Being the number one in Europe in this space is a huge undertaking. When I now look at the Q1 outcomes, both the things we did for the short term and the things we did for the long term, it's against this backdrop, this vision, that I evaluate are we succeeding? Now let's move forward. What we promised was, of course, first of all, to continue our SaaS growth. We've given guidance for this year for a range of 20%-24% SaaS growth. We've definitely promised to continue the international expansion. As you know, it's still a business where the majority of net sale comes from Finland. Finally, we have been guiding an EBITDA margin for the year between 1% and 4%. Click forward, please. Looking at how we actually did, SaaS growth was actually very strong in Q1, driven by good growth in all regions, including Finland. Our international expansion has been happening traditionally through our teams in Germany and Sweden, serving the DACH and Scandinavia regions respectively. Now, as you know, starting last year, we've been building a parallel new engine that we call the second phase of our internationalization, where we started recruiting partners in new markets across Europe. The Q1 results were definitely driven by DACH and Scandinavia, but what made me particularly happy was that we were able to sign our first deal in the new markets. It was a relatively small pilot deal for a short-time commitment in the U.K. with a managed service provider. Still, to me, it was an important proof point of our ability to execute sales cycles completely remotely. Finally, looking at profitability. That's something where I think we definitely executed well, supported especially by strong total net sales development, where a big factor was our best services quarter since the beginning of the pandemic. Next, please. Our SaaS growth came again in a relatively balanced way, both from the install base as well as new customers. What was remarkable was that we were able to reach the EUR 10 million ARR, annual recurring revenue, milestone, which look, of course, it's just a number, but still in the SaaS world, it's a nice milestone to hit. Next, please. Can we get the next slide? Maybe I'm experiencing a little bit of delay here. There we go. Looking at the revenue mix, no big surprises there. The SaaS transformation continues. Obviously now, with services revenue posting better numbers than before, that somewhat slowed a little bit the relative decrease of services and the relative increase in SaaS. The trend, as you can see here on the slide, is of course a really clear one that we expect to continue in the big picture also going forward. Next, please. Now, let's stop for a moment and talk about the profitability development. Of course, continued SaaS growth is a big driver here. We have been able to do that. We want to keep doing that. It's a big supporter of our P&L and the bottom line. At the same time now, as I said, reversing the declining trend in services helped from a total net sales point of view and help us, for the first time in a while, post double-digit growth also for total net sales. That, of course, flows quite directly to the bottom line, and hence the strong bottom-line performance during Q1. We've also talked about cash flow during the last quarters and years, and what made me particularly happy was that we were able to continue the good trend there, generating cash. That's what we've been doing now already for multiple quarters in a row, and given that we are still making long-term investments, I think that puts us in a good position. It gives us the opportunity to consider both organic and inorganic investments, for example. Next slide, please. The SaaS business recurring gross margin is, of course, one of the key elements of when you assess the scalability of a business. Compared to full-year numbers 2020, I believe there is a one percentage point increase now. This is a rolling 12 months view that we always give you here. This is just part of the overall SaaS metrics package that we promised to keep sharing in our quarterly releases, and I think this is now the most extensive package that's part of the results this time. The whole intention there is just to provide all of you transparency into how this business is developing. Next slide, please. Financial numbers are one thing, but at the end of the day, in a way, in this type of a business, it all starts with the product. That's why we have a lot of focus. We had a lot of focus here in Q1 for sure in the product area. We strengthened the team. Santeri Jussila joined us from Nokia. He took over as Chief Product Officer. Previous CPO, Peter Schneider, took on another important role as the new Chief Evangelist at Efecte, and overall, I feel that we definitely are heading in the right direction when it comes to product. There were a couple of releases during Q1. We released the whistleblower solution on top of the Efecte Platform. There is an EU Whistleblowing Directive which mandates all companies, all organizations over 250 people to provide a whistleblower solution, basically a place where somebody can anonymously raise any concerns regarding the organization. It is possible to do that on top of Efecte. We packaged the solution, and it's available to all existing and potential Efecte customers. The other highlight was definitely supplementing or increasing the AI capabilities in the Efecte Platform with introducing category suggestions in our Virtual Coach feature set. As we've shared previously, we've gotten some pretty good feedback on the first version of the Virtual Coach, now we look forward for production deployments with the extended feature set. Maybe the final thing I'll mention here is the recognition that we got from ISG, the analyst company, who named us Efecte, a Rising Star in the enterprise service management area for German market. Of course, with our big focus in that market, we were quite glad to see that nomination. Maybe one more thing, sorry. Sorry, Tatu. Let's go one back. One more thing that I'm mentioning here is that when we talk about, we often have said, and we again say that we do prioritize long-term investments over short-term profitability. The product space, whether it comes to hiring people to Efecte into product, into R&D, or using external resources to help us in specific projects or areas, that's all an important part of where our investments are going. With that, let's talk a little bit about how our European expansion project is going, both in terms of the classic motion with the German and Swedish teams, as well as the new markets motion. For that, I'll hand it over to our COO, Steffan. Hey. Thank you, Niilo. Good to be here. My name is Steffan Schumacher. I'm the COO of Efecte, and good to have you all in the call. As you noticed, our European expansion was on track during Q1. We executed both on short-term and long-term plan. We had solid execution in our DACH area and in Scandinavia, and delivered a 46% year-over-year SaaS growth. As Niilo talked, we continue to build our new market model based on a digital go-to-market and local partners. We have systematically analyzed hundreds of companies active in the ITSM field in our target markets in Europe. Based on these analyses, we have had many discussions and gathered valuable insights and areas of R&D focus from the market to make our offering even more competitive in the market. The feedback is that there clearly is a need for an European-based alternative in our space. Companies and partners are looking for an agile platform that provides great user experience with a cost they can afford. All of these three things, agility, experience, and total cost of ownership, are unique selling points of Efecte. As a highlight, we also received our first pilot order from the U.K., and this is really a proof point that we can start up new markets totally remote, and we are pretty excited about that. While there's a lot of work ahead to get this motion up and running, we are excited where we are. I'm happy where we are, and I think I'm even more excited where we can bring Efecte in the future. Thanks again, and I'll hand it over back to Niilo. All righty. Thanks, Steffan. A couple of points in what Steffan said I think are important. First of all, when we look at the learning that we're able to generate through interfacing with such a big group of potential partners, most of whom are working already in the ITSM space and have existing partnerships with our competition. Those conversations, and even if we would get zero new partners from this, it would be worthwhile to do the offer just because of the insight that we've been able to accumulate in the process. That's just, I think in a way, a side effect, but the important outcome for us and guides also our product direction going forward- Yeah. -in terms of priority setting. The other thing maybe worthwhile to emphasize here is, as Steffan and I both know, we've both worked in channel businesses most of our professional careers. While the opportunity is huge and the scale to which one can get is immense, at the same time, it's a long-term project. I will repeat myself a little bit here, things I've said before, but I do want to emphasize that it's not an overnight thing. I hope you got the sense that we are very serious about it, we are committed to it, and we are doing it in a very structured way. At the same time, it does take time to build a working channel. We are on track. We've executed all the first steps now according to plan or even a little bit ahead of the plan. At the same time, we are still in the beginning of the road, and it will take many quarters and years to ultimately get to the type of scale that's possible and where we eventually want to get. Yeah. That's a good point, Niilo, because what we really want to provide is that same high-quality customer experience, if it's us delivering the solution for our customers, or if it's one of our partners doing that. Doing that thing right, it's going to be a key for our success in the long term. Exactly. Exactly. Also, by the way, there is an indirect impact on our own direct business as well. In the process of setting up structures and processes that enable us to work through channel partners, through that same process, we actually end up improving our own way of operating and in a way upgrading our operational standard. Good. Hey, let's move forward. We're soon getting to the best part of the day, the Q&A. You guys know, we always enjoy the huge, direct, challenging, fun questions you guys have been posting, and very much looking forward to do that in a minute. Before that, let's just stop for a while at our guidance. Our guidance is unchanged. What we guide for the year 2021 is 20%-24% SaaS growth and EBITDA margin between 1% and 4%. I do realize that after relatively strong Q1 numbers, with the EBITDA margin being at the very high end of the range and the SaaS growth for Q1 being even outside that full-year guidance range, there might be a question. Why keep the guidance as is? Simply put, it's the best view we have. What we do is we factor in, of course, our sales pipeline. We factor in churn. We got long-term contracts with most of our customer base, which means that also in terms of churn, we got a pretty good look ahead several months and sometimes even quarters or longer. Finally, especially in terms of EBITDA guidance, there is, of course, the cost element. One looks at things like what's the pace of hiring, what's the cost picture otherwise? Once you start hiring, there is a little bit of a blowaway effect. The cost hits your P&L, of course, only after people you signed start working in the company. Once we factor in all these data points and all these forecasts, that's the view we have for this year. Maybe the final detail there, I mentioned that also in my remarks in the results release. The comparison period MRR net add during Q2, which translates then into SaaS revenue, especially Q3, Q4, and going forward, that MRR net add last year, Q2, was exceptionally strong. That's no excuse for us not to continue growing, don't get me wrong. I'm just saying that that also puts the bar high in terms of year-over-year growth development. I believe with that, we are almost ready to start the Q&A. We are also well on time. I do want to say to wrap it up that Efecte, in my mind, is in a very exciting phase at the moment. We've been able to get some of the basic operational execution right thanks to the efforts of all the people at Efecte. I feel very proud of this team. It's a team with very high accountability. There's definitely challenges that we are solving every day and that are waiting for us around the corner. To balance those out, there's also lots of opportunity. It's a growing market, and we are on a good path at the moment. It's fun to work at Efecte. With that, why don't we switch gears and get into Q&A mode? Thank you, Niilo and Steffan. We already seem to have a couple of questions, but if you have not yet had the opportunity to post your questions, now is the perfect time to do that. Without further ado, let's dive into the first questions. The first one being, what is your expectation for the service segment for the rest of 2021? What is your ambition for 2023? How many percent SaaS and how many percent services? Okay, thanks. Good question. Maybe what we'll do is, I can comment overall on the expectations, and I think it would be useful then if, Steffan, you can help out a little bit and also explain what do services actually mean in the context of Efecte? Because I think there's been often questions on, is it really just helping customers getting running with the Efecte, the initial deployment, and what else there is on top of that. To start with the expectations, we are not guiding any particular development for services. Our goal is to grow SaaS. Our goal is to grow our SaaS revenues, In the process to enable that, help our customers be successful with Efecte. Helping our customers be successful with Efecte, often, not always, but often involves Efecte consultants helping them. That's why with growing SaaS revenues, I don't expect services to massively decrease. I don't expect them to grow either completely linearly together with SaaS revenues because for one, we've been streamlining the product and deployments. We do want to make it even easier to deploy and use, decreasing the need for services, and at the same time, our growing partner ecosystem is doing an increasingly good job in doing part of services, and meeting part of the services demand from our customers. Once you factor all this in, the services development will be definitely slower than our SaaS growth, but I don't expect services to go away or completely disappear from our P&L. In terms of a long-term ambition, at the moment, SaaS represents some 60% of our total revenues. I said earlier that personally, I do think that for a SaaS business like ours, thinking about the very long-term ambition and scale much greater than where we are today, an 80/20 split typically would be normal for a SaaS business like that. Definitely, we won't be there anytime soon. Steffan, do you want to comment briefly on what do those services actually mean? Yeah. That's a good question. I think you positioned it very well. Our key and our goal is to grow our SaaS business. Basically, our professional services consulting business is there to support that motion. We help our customers to be successful with the Efecte Platform. That normally includes the initial setup of the system, configuration of the system, consulting related to processes, and then surely as the customer expands the usage of Efecte, you saw from the numbers that we have a pretty good upsell motion going on. We help them, customers, to expand to HR, for example, or financial services, service management. That's a very typical motion there. Like you said, we have lot of good partners that are really successful with the Efecte Platform. One of our partners just released a reference story about Scania, and it was Verco. They've been doing an amazing job with that customer, and taking good care of that customer and doing the professional services for them. I think it's a supporting function for us to accelerate our SaaS business and to keep our customers happy for sure. Great. Hope that that addressed the question. Great. Thanks both. The next question, you mentioned possible inorganic investments. Can you elaborate what you are looking for? Are you open to taking on debt or issuing? In a way, multiple questions there all related to M&A essentially. As you know, we haven't done any M&A at Efecte in recent history. There is this one acquisition that happened, I don't know, seven, eight years ago, which brought the Identity Management capabilities to Efecte. I think the reason that we haven't been active in that space in recent years has been actually a good one because we've been saying that, "Hey, we got a good organic growth story going." At the same time, we're not yet 100% confident that we have the structure and culture and everything in place that would be at a level that is ready to take on inorganic expansion as part of it. As we have developed, we definitely think of M&A as a potential tool. Let me be clear, Efecte is not the type of company where the business case is based on M&A and successfully finding multiple arbitrage possibilities, et cetera. That's not the business we are in. We do think of M&A as a tool that could help us in some areas. It could help us complement our platform, increase our platform capabilities with some adjacent technologies. Of course, there's always the opportunity to buy into a market or increase market share. Yeah, we are evaluating opportunities in that space as part of our normal ongoing operation as any business would do. I don't want to set an expectation that that would be something where we look to move aggressively or very short term. Yeah, it's a tool in our toolbox. I believe there was the second part of question, which was would we be ready to- Open to taking debt or issuing. -taking debt or issuing and it's a little bit of the same that it's a means to an end. Say we would identify an M&A target that meets our very high bar. There are multiple ways, of course, to finance such a such an operation, depending, of course, also on the size of it. We haven't made any decisions at this point. At this point, we are open to all options. Thanks. Continuing on the same lines, the next question is, Efecte has plenty of cash flow is positive, and growth investments seem to be paying off. Why not invest more in growth? Valid question. Thank you. If you look at our performance in Q1, and then you look at the guidance for the full year, it's probably not far-fetched to say that we are doing some of that. Definitely, we think of investing in long-term growth as a priority. Some people have asked us already way before last year, so forth, why not invest massively more? That's of course always also a consideration. So far, we have felt that we are on a pretty good track. There are certain proof points for the initial investment case, which we launched when Efecte listed back in 2017. In terms of international expansion, in terms of SaaS growth, in terms of profitability development, that we have wanted to secure and to show to us and all of you that we follow that plan. We are on that path still. I just want to make sure also that it's not like we haven't thought about things or we wouldn't think about these kind of things in the Efecte management and within the Efecte board. Obviously, all the time we consider all sorts of options and opportunities, but right now we are very focused on the plan that we have outlined, and I think there is a little bit of runway definitely left still executing that one. Thanks. The next question: Having signed your first customer in the U.K., how many new markets can you realistically open up over the next year? Yeah, I think maybe to me, the key question is not as much how many new markets we can open, but how many quality partners we can sign with whom we are confident that we can build the type of long-term partnership and ability to increase our reach, meeting Efecte quality standards in new markets. I think we are talking about Now we've signed two, three partners in new markets, and we have a pipeline of discussions there which might then result in more partners or might not result in more partners. I do think we are on a upward trend there, but I don't want to set an expectation for a very, very big number there. I think more important to me would be that we signed a partner in Czech, we signed a partner in Poland. More important to me would be to, now during this year, close a deal in Poland and close a deal in Czech just to show that, hey, we are able to make commercial progress in those markets. I don't know, Steffan, if you have anything to add to that. You're very close to that side of things. Yeah, we talked this a bit in length in the 2020 release. I had a slide there, and we first describing the systematic process we do in actually identifying these partners, and that's a really systematic approach. Like I said, we have qualified and identified hundreds of companies across Europe, and that's like a funnel. You start to work the funnel, and then you choose the good partners there, and then you have a kind of a negotiation and a discussion. After that, the second phase starts, which is basically the go-to-market execution, in which you build a kind of a feasible readiness and trading plan, marketing, sales plan. You start to work on the opportunities, you close the opportunities, you get the first customers online, like it. There's almost two funnels. Rest assured, we are having the best Efectians working on that, and we have a very systematic approach. Maybe the best way of saying is that in that way, all hands on deck. Cool. Thanks. Thanks, both. Just as a way of remark, we have a couple of good questions about customer acquisition, but if you have any more, feel free to write them in. We'll take them gladly here. Oh, no, I can't believe. Are we seeing the end of the question pipeline? This has never happened before. Yeah. There were so many questions we couldn't solve them. Yeah. Answer them. Yeah. Hey, let's dive in. Yeah See how many more pop up. What actions do you take to decrease the length of the current sales cycle? Oh, that's one for you, Steffan. That's a really good question. Surely that's a question that keeps me awake, and it keeps our sales leaders awake because the shorter the sales cycle, the more productive the sales team is and the better cost of sales you have. There surely are a lot of things doing that. How do you decrease the sales cycle? It's basically a question, how do you make buying easier for the customer? There are a few things you can do, right? You try to hit the customer's requirement to the head. You do pre-packaging, and you do a compelling offering. You make transacting easy. That's where Tatu has worked a lot this year, we try to make buying easy. Thirdly, you are competitive in your pricing. You offer the customers a unique value proposition, and that's agility, that's experience, and that total cost of ownership. I think there's not one-size-fits-all, but being relevant to the customer and having that good Efecte spirit up, that helps to kind of reduce the sales cycles. Systematic approach, daily improvements in many things. A related topic is customer acquisition cost, which is, by the way, I think the final source metric which we have not disclosed. Maybe one day we'll get even there. I'm not making any commitments now when, but I'm just saying. Customer acquisition cost overall is something that we do look at quite closely internally, and then for one part, the length of the sales cycle determines it, and of course, then the sales channel and the particular characteristics of it determine the other parts of it. As we are working to shorten sales cycles, we are also working on the partner motion, which we think, this is a hypothesis at this point, not proven yet, but we think that if everything would go like in the movies and we end up being successful in building that channel, it could, in the grand scheme of things, actually decrease our customer acquisition cost. Remains to be seen. Thanks. Continuing on the same theme, on customer acquisition. Are you happy with the current pace of new customer acquisition, and do you see the pace picking up in 2021? Last year was a bit slower with 17 new logos signed in 2020 versus 33 in 2019. Yeah, that's a topic that definitely has been top of mind for us. We covered some of that during the 2020 earnings call, and it's a big focus for us this year. A direct answer, no, I'm not happy with how we did in terms of new customer acquisition in 2020. It's something where, of course, one can say that the environment with the pandemic wasn't helping us out there, but still, we definitely want to do better this year. That's a number we're going to release in the half year. That's a number we're going to release in the half year report. Yeah. I believe that's not part of the package now. Yeah. No comment on the number now, but in a few months you'll hear how it's been going. Thanks. Next question, also on the same lines. Any changes in Q1 regarding customer behavior? For example, customers making decisions faster in Q1 versus Q4 2020, larger or smaller companies signing Efecte, et cetera. You want to take it or? Yeah, I can talk about it. On the grand scheme of things, we don't see a significant change in the customer buying behavior compared to, on the behavior itself compared to Q4 to Q1. I would state I haven't seen- I agree. -anything significant. I agree, of course, comparing customer behavior to what it was before the pandemic, there is a big shift. There is a big shift. A shift towards more online evaluation and buying, a shift towards more demand for packaged offerings, standard offerings, easy, fast to deploy offerings, as opposed to customized things requiring long configuration projects. Those shifts we've definitely witnessed, but it's not been a shift from last year to Q1, but a shift from pre-pandemic to inside the pandemic. Yeah. It's almost like it's become the new normal. You don't even- Totally. -remember how the buying behavior was before the pandemic. I don't know what you think, but I guess our expectation would probably be that there is no big change. No. Whenever the pandemic ends, but as you said, it's more like a new normal that we expect to continue. Yeah, our team has really, we talked about this earlier as well, I think the team has really risen to that occasion. We work in a fully remote mode now. We measure our customer satisfaction on multiple touchpoints. All of that has been on track at our expectations. Surely, always big room for improvement there. We're never going to be happy about that, but I think everything is operationally rolling pretty smooth. Yeah, the digital sales and marketing capabilities that we started building already at the end of Q2 last year. Then there was the reorg. Then kind of look in the mirror after the pandemic really hit us in terms of, okay, the world changed. The world changed. We can't change that, but we can change how we, as Efecte, organize, we can change how we engage with customers. We can change how we develop product. We can change how we market and sell. It was the right decision at the time. Of course, we need to keep doing that constant evaluation- Yeah. -using the data points that we get, for example, from the new markets. Yeah. Exactly. Yeah. Okay. Yeah. Actually, that brought us to the very bottom of the question list. What's going on? Maybe I need to start to ask questions for a change from you. Maybe I interview you next time, or you interview me. Yeah. Very good. Okay. Hey, it sounds like it's a wrap. Thank you. Thank you for joining Efecte's Q1 investor webcast. Thank you for being part of the Efecte story, the joint task we have here, the joint journey that we embarked on with the European alternative in this space dominated by the American and Asian companies. Nothing wrong with that, we think that definitely the world deserves a strong European player in the field of cloud-based service management, we are on that mission, thanks for being part of it and talk to you soon again. Just as a final note, if you happen to have any further questions, we have the Investor Relations email address showing, so investor.relations@efecte.com. Feel free to write any questions that you may further have. We are at your service. Precisely. Good. Back to Q2, my friends. All right. See you. Take care. Bye now.