Earnings Call: Q4 2020

Feb 12, 2021

Thank you very much, operator, and a warm welcome to Q4 2020 Financial Report, AudiCast at Bimobject. And today, I will got Alexander Dahlqvist, the CFO of the company with me. My name is Karl Zielbergki, and I am the CEO of Bimobject. So without further ado, let's go to the next slide, please, operator. The definition of Bimavriks is a global marketplace for the construction industry. That's how we define ourselves. And what we do primarily is that we help manufacturers Building Products Reach, Influence and Understand Designers Worldwide. To date, we have 2 point 1,000,000 registered users on the platform and over 2,000 brands. So it's a powerful marketplace in the construction space. Operator, next slide, please. Agenda for today. I'm going to talk you through some highlights quick, and then we're going to follow-up with a business update. Moving on to Q4 2020 financials with Alexander and a summary and then over to Q and A. So operator, next slide, please. Highlights in Q4. So Altogether, we are over 2,000 brands, billing product brands listed on the platform today. That is a large part and we've been growing healthy over the quarter. We have 7,200,000 files downloaded in the quarter, accumulated over 74,000,000 downloads in the year. And we're also seeing a healthy increase, especially in the Q4 in the downloads. We are SEK 25,000,000 in revenue sales in the quarter, that's 13% platform growth year over year. The pattern of the growth between Q3, Q4, Alexander is going to walk you through that one. And it is a pattern that we see have been seeing over the past couple of years. More on that later. And finally, we have 20 To date, we had 26% year over year cost savings. That's the highlights of the Q4 that we want to walk through. Operator, next slide, please. Growth in the number of downloads. In the quarter, we have seen a strong downloading activity on the platform. Like I said earlier, we had over 7,000,000 downloads in Q4. And that's representing each month, we had more than 50% growth in the number of downloads on the platform. This is all organic, and it comes from at the 0 marketing cost or close to 0 marketing cost. So again, really, really strong activity on the platform, and that means that we're building a lot of value for our manufacturers. Going forward, operator, next slide, please. Looking at our strategy, it could be said that we're sticking to what we do and we're going ahead and focusing on the core. We have 4 things we focus on in the 2021. First of all, we focus on the user base, number of registered users and downloads. We need to have a strong platform and that we continue to be laser focused on. The second thing is the number of brands on the platform. This is what you need to be tracking and a lot of people are tracking. But also very important is what we're going to start giving to you is the ARPA, average revenue per account on the platform. Important to track that one and how we're developing that, especially in the mind that we have a new price list on the platform. The third thing to be following along and that we're focusing strongly on is the platform revenue, ARR growth. That's the first thing to be focused on. The second thing is the net revenue retention, how we're doing with our existing customers, how we're keeping retention rates. There's different components to that one. That's one part of the churn on the platform, the other one is upsell. We're trying to we want to give you those numbers and for you to follow along how we're doing there. The 3rd part we're focusing on and we're living on is, of course, the follow-up on. If you have a really strong platform it continues to add more value to the users. We should see that in the ARR revenue growth, and it kicks in by having improved EBITDA margin. So those 4 is the focus and how you should be following on the SPE module. So with that said very rapidly. I want to hand over to you, Alexander. Okay. Operator, next slide, please. So if we look at the financials for the quarter, Karl already mentioned, we have platform sales of SEK 25,000,000. Has a growth of 13% versus Q4 last year. Our earnings are still negative at SEK 18,600,000 in the quarter, but that is an improvement of 68% versus Q4 last year. And cash flow is negative SEK11 1,000,000 where we see an improvement of SEK20 1,000,000. We will get into a little bit more on each of these. But all in all, I mean, we're going in the right direction. We're moving were growing. We have better the loss is decreasing and cash flow is going in the right direction. So operator, next slide please. We have growth both in the quarter and both in the year. But again, we've seen also there have been a number of questions today. If we deep dive a little bit into Q4, what's happening? There is an exchange rate impact in the quarter. It's 1.5% or roughly SEK 500,000 compared to Q3. We also, you read in the report, are implementing a new global ERP system. And in that work, we identified a historic error, which we made a correction for, but that also has a small impact on the Q4 figures and that comes down to SEK0.4 million. It's a one off, no more than that. Then also, as you all know, we've been we've set out this year a new price list, new terms and conditions. And what we see is that the old process we've had has been very manual. And we've had to contact each customer cap to get a new renewal. And now what we're moving to is more of an auto renewal process, and that is taking some time. Churn is not increasing. It's still single digit. So it's not customers churning, but the process is taking a little bit more time. Okay. Operator, next slide, please. Cost savings again, I mean we're continuing the trend. We've now more than achieved the goal we set forward of SEK 50 SEK1 1,000,000. The full year savings of SEK58 1,000,000. We are, however, beginning to invest in some new hires, mostly marketing and in customer success. We believe now that cost cutting is done. We're at a decent level. There might be some small things that we still work on. But all in all, the cost savings program is finalized. And now we seek to build on where we stand today. Okay. Operator, next slide, please. Given that, and I think it's encouraging, is the improvement in cash flow this year. We're on a new level. It comes from the improved EBITDA margins from cutting costs and obviously having less to pay. That is a big contributor. And also we've done great work this year on accounts receivable, which have also helped the working capital, which drives cash flow in the right direction. Major improvements this year, and this just needs to be maintained moving forward. Okay. Operator, next slide please. Over to you, Karl. So Yes, over to me. Thank you very much, Alexander. A very rapid walk through of the financials here. So in summary for the year. We it's been a transformational year without a doubt. To start with, the operational transformation has been significant. We can go from the new go to market model, how we organize marketing to sales, a significant cost reduction program we put in place of SEK 50,000,000 that was over delivered on and successfully implemented during the year has been 2 rather large things. So that's been the translation area for the company. On the financial side, if you sum that up, you have seen strong finances. I mean, we're moving towards profitability. The cash flow is significantly improved, and we have nearly SEK 400,000,000 effect in cash and short term investments at hand. And looking at the continued growth going forward, the continued growth we are despite transformation year, we are doing SEK 13,500,000 year over year platform revenue growth. Some things should also be highlighted and should be very, very proud about, and that is, of course, 2,200,000 registered users and the 25,000,000 downloads in the that we're ending up now at the end of Q4. So we maintain our market leadership, transformed the company. We're strong on finance, and we continue to go for growth. With that said, I want to hand over to the operator for Q and A. And we have one question in the queue so far. That comes from the line of Matthias Dooner of Discover Capital. Please go ahead. Your line is open. Yes. Hi. Good afternoon, gentlemen. I have two questions. And the first one would be if you could Elaborate a little bit more on the, let's say, different platform revenue sizes, Q3 2020 and Q4 2020. I understand that there's one sort of one off negative With the revenue recognition, but let's say revenues would have still been below the Q3 free level adjusting for that negative one off. And I was wondering if there were other effects As well and if you could quantify them. You were talking about the change to, let's say, a different, I think you called it automatic renewal change. That would be quite helpful to understand that development. Cash. Alexander, do you want to address these questions? Yes, sure. As we said or I tried to say was, yes, There's the currency effect, obviously, that is in there that amounts for a deviation of about SEK 500,000 and then the adjustment we spoke about on revenue recognition, which is 0.4 and that takes us more or less in line with the Q3 figure. And then on top of that, we are seeing the time it takes for us now to renew, it's taking us a little bit more time. Cap. That kind of explains why it's not turning higher up than it is. Okay. And Just to follow-up on this. So the exchange rate difference is So compared to the previous quarter and not compared to the previous year? Because I guess looking at The euro and the U. S. Dollar exchange development Q3 would have actually been probably negatively affected Already, Maerso. So in Q3, you should have had a negative, let's say, FX effect already? Yes. From Q2, I mean if we look at it, it develops from Q2. And I mean the impact from if I compare from Q2 to Q4, the currency impact is 6%. But then on Q3 to Q4, it's only 1.5%. So you're accurate. Cap. So it is higher. The change in the SEK happened around the end of Q1, Q2, and that's the explanation. Yes. Okay, great. And my second question Yes. I can shed some light on your questions regarding the contractual differentiation and the delayed in renewals. So we're moving like I said, it's a transformational year, and we're moving to more of a SaaS dedicated sales model. The contractual we had before was manual renewed. That means that there was no auto renewals in place. That means that we had to go out to all our existing customers and renew their contracts and on completely different terms. The terms also allow us to do increases on a yearly basis. That contractual renewals, of course, is a complicated process. In line with that, we also introduced a new pricing list. So we came to with a new price model, with new price list as well as different contractual terms. That's, of course, causing some delays. Let me give you an example of let's say, we're negotiating with 1 of Wokka in Spain. We emphasized the 30% increase on the price on the annual contract. We successfully did that one, but of course, the new department takes some time to push through the new contract. So we we're positive. But we're, of course, having strong headwinds, and we especially see it now, as people interpret it as, well, what about price changes, what is happening? Well, as we introduce them, we expect them to be kicking in over the year. We've said that all along. We expect to have a positive picture of it. Otherwise, we wouldn't have done it, of course. So we are remaining confident that it will happen. We don't see an exceptional amount churn or anything like that, still single digits. It's still low. So we are confident But that these factors, what Alexander said, the combination with what I just said, is a real explanation of why there is a strong development between Q3 and Q4. Okay. And historically, if you go back in time, why it's Q3, Q4? Because it is a large renewal month, renewal quarter in Q4, where sales normally has dropped a little bit, new sales has dropped because we have been focusing on renewals that we are now with new contractions changing going forward. So please screen at me next quarter if we don't fulfill all your wishes there or sorry, not next quarter, but next in Q4 next year. We think we are on top of this situation. Okay. Okay. And do you guys sort of Also have an indicator of that delayed renewal and I guess then invoicing, And which is basically also related to the drop in the invoicing amount basically compared to Q4 last year, is that sort of also the connection of these delays probably going into January? Yes, that explains some of it. But there is also another side of our business, which is the services side. And this is one of the main explanations on the invoice why there is such a shift. I mean that's why we've moved to a business model, which is more and more the SaaS model because it becomes more predictable. The other side of our business, the services side, is more traditional B2B and it's very jumpy. And last year in Q4, we had good sales on our services side, and we haven't seen the same this year. Okay. Okay. And one very quick one. And the final explanation, let me just shed some short light on the Q4 as well. Here in Sweden, we have been pretty liberal on with the COVID-nineteen. We've been functioning pretty well. The rest of Europe has been more up down and we are seeing the effects of that one. We're seeing longer times to make decisions, especially in Europe, southern parts of Europe and some parts of the U. S. And that's maybe to collect it and there's no excuses for us here, but there's maybe correlation here between the presidential election and the COVID situation in U. S. In the final quarter. So hopefully, we shed some light on the numbers here. Yes. No, definitely, that puts it a lot into perspective. Thank you for that. And one very quick one. Could you roughly indicate You were talking about maybe doing some strategic cost increases over 2021. Is there any chance you can indicate there what you're thinking about in terms of amount? Well, would that be very opportunistic and basically dependent on the business performance over 2021? Obviously, that's going to be dependent on how the development goes for the company. Okay. So there's no, let's say, amount you would, let's say, have now in mind At the moment for the coming year? No. Okay. Okay. No, that will be all. Thank you so much. Thank you. There seems to be no further questions on the phone, so I'll hand the call back to our speakers. Thank you very much. Alexander, you're closer to your data here. Do we have any I think we more or less covered them. Obviously, Karl, if you'd like to comment on M and A, that would be good, I think. Yes. Good question. We are we have been saying and emphasizing that we are we will do M and A, we will do acquisition from time to time. Of course, that's a very sluggish thing. I since they move very sluggishly, the M and A. Some you think you're close to, some and then they disappear for some and other reasons. We are intensifying our focus on the M and A and it should be natural for any kind of marketplace company that wanted to grow. We want to focus on primarily things like we did in when we acquired Polantis. We want to acquire market share in selected geographies. We want to acquire traffic. It's a huge component for our growth, and that means also registration of users. So we're very much focused on those, and we, of course, want to strengthen our position in the markets to gain a further lead. Do remember, Bemov, it is world leading in every market we operate internationally, globally as well. But that doesn't stop us. We believe this is a winner takes it all kind of market. Okay. Maybe that has addressed it, and I can't say more specific about the M and A. So I hope to come back to you over in 2021 and get back to you a bit. Anything else now? No, I think that's pretty good. And I want to say thank you very much for listening into this Oerlikar. And this is a cold day in Skane, Malmo, Sweden, but sunny. And I hope you all take care of yourselves and stay tuned for more. Thank you very much.