Penneo achieves 18% year-on-year ARR growth, improved EBITDA, and positive cash flow from operations

Company Announcement No. 18-2024
Copenhagen, 20 November 2024
Financial report for the period 1 July 2024 - 30 September 2024

Q3-2024 performance highlights

In Q3-2024, the number of new customers increased compared to the same period last year, though individual deal sizes were smaller. A lower cost base highlights improved sales efficiency, and many of these new customers come from growth markets outside Denmark. Additionally, a major new customer was secured in Germany, with the ARR expected to be recognized later this year.

• ARR increased by 8.2M DKK in Q3-2024 YTD compared to 11.5M DKK in Q3-2023 YTD
• ARR increase from newbiz amounted to 8.3M DKK in Q3-2024 YTD compared to 6.3M DKK in Q3-2023 YTD
• ARR increase from uplift amounted to 2.4M DKK in Q3-2024 YTD compared to 7.1M DKK in Q3-2023 YTD
• ARR lost to churn amounted to 2.6M DKK in Q3-2024 YTD compared to 1.8M DKK in Q3-2023 YTD
• ARR from foreign markets increased by 4.0M DKK in Q3-2024 YTD compared to 4.1M DKK in Q3-2023 YTD
• ARR amounted to 97.5M DKK at the end of Q3-2024 compared to 82.5M DKK at the end of Q3-2023 (18% year-on-year growth)
• ARR from foreign markets amounted to 30.6M DKK at the end of Q3-2024 compared to 23.7M DKK at the end of Q3-2023 (29% year-on-year growth)
• EBITDA improved to negative 4.2M DKK in Q3-2024 YTD up from negative 17.7M DKK in Q3-2023 YTD
• Cash flow from operating activities improved to positive 0.4M DKK in YTD up from negative 3.9M DKK in Q3-2023 YTD

2024 Guidance

ARR

Penneo assumes growth in ARR and guides ARR at the level of 101-106M DKK at the end of 2024 corresponding to an ARR growth rate of 13-19%.

The outlook is based on currency exchange rates at the end of 2023.

EBITDA

Penneo assumes an EBITDA at a level between positive 10M DKK to 15M DKK.

Business summary

In Q3-2024, Penneo sustained its growth trajectory, achieving a year-on-year ARR increase of 18%. EBITDA improved from negative 17.7M DKK in Q3 2023 to negative 4.2M DKK, in line with expectations.

Despite a slower market quarter due to seasonality, Penneo maintained strong momentum in New Business. Growth in this area rose to 8.3M DKK YTD, up from 6.3M DKK in Q3-2023, continuing the strong momentum from last year.

Penneo experienced a lower ARR growth compared to the higher number of new customers due to smaller deal sizes, churn and currency fluctuations. Uplift amounted to 0.8M DKK, compared to 1.7M DKK in the same quarter last year, while churn remained consistent with previous years at 5%. The total Annual Recurring Revenue (ARR) reached 97.5M DKK. 

Fluctuations in NOK and SEK exchange rates against DKK negatively impacted ARR by 0.4M DKK in Q3-2024, indicating that currency movements masked a slightly more positive ARR development. Penneo reports ARR using exchange rates at the end of each quarter. At constant currency rates, Penneo would have achieved a total ARR of 97.9M DKK, compared to the reported 97.5M DKK.

ARR from foreign markets amounted to 30.6M DKK, up from 23.7M DKK at the end of Q3-2023, representing 29% year-on-year growth. This growth was primarily driven by Belgium, now Penneo’s largest foreign market, accounting for 39% of foreign ARR, followed by Sweden at 21.6%.

Penneo continued its international expansion by launching the highly requested KYC (Know Your Customer) product in Belgium in Q3 2024. Expansion into Germany has also commenced, marked by the signing of a major German accounting, tax, and corporate law firm, MHL, in early July. Product customizations are underway to ensure market fit in Germany, with ARR from this deal expected to be recognized in late 2024.

At the end of Q3-2024, Penneo’s cash position was 21.7M DKK. As we move forward, our approach is to invest the cash that is available and continuously ensure that we have a clear path to a cash positive position given the cash available. At the end of 2024, we expect to reach a position where our ARR will exceed our overall cost base, positioning us to achieve at least a cash neutral status on a yearly basis by 2025 according to our current projections.

Presentation

Penneo’s Q3-2024 financials will be presented at an online event hosted on 20 November 2024 at 10:00 CET. The call hosted by Penneo will be conducted in English and can be attended live here. Participants can also dial in via (DK) +45 70 71 41 69‬ PIN: ‪815 087 448‬#. 

Before the event, investors and interested parties can also submit and upvote questions to Penneo’s management via Stokk.io, a Q&A platform found here. During the live event, Penneo will answer questions posted on this platform after responding to analyst questions. 

On 20 November, Penneo’s financials will also be presented at a webinar hosted by HC Andersen Capital at 12.00 CET. This event is conducted in Danish and you can sign up here.