Earnings Call: Q2 2021

Aug 6, 2021

Welcome to Bemobject Q2 2021 Financial Report AudioCast. My name is Karl Silderski. And today, I'm I got Martin Lind, our CFO, with me on the call. So let's go To the first slide, a recap of BIMobject and what we are. We are a global marketplace for the Construction Industry. What we primarily do is that we help our manufacturers in the of building products to reach, influence and understand the building designers worldwide. So without further ado, Let's go to the next slide, Slide 3. I want to dive into the Highlight of the Q2 report and some reflections on that. We saw a growth of 10.3% year over year ARR growth. The very important ARR growth for us is something we've been focusing on, and it's an area where we have started to transform ourselves to become a pure SaaS company. Quarter over quarter, we had a 3.2% growth, and this is despite the tough costs and company transition that we have done over the last 7 months. More on this with Martin, but it's important partners that we're turning back into growth again after a couple of hard months in the past. A couple of other points worth mentioning in the quarter, events that are significant. In May, we passed 2,500,000 registered users, and that represents an annual growth of 25%. We are undisputed the number one BIM source in the world in terms of traffic and users, and we continue to grow our position in the market. It's very important. And this is really the foundation for BIMobject. Without the massive advantage we have as a platform globally, we're unable to capitalize on it. It's a positive trend to see the platform growing. We're happy with that. You can also note that in April May, we recorded the highest number of downloads from architects and engineers and contractors In the company's history, we have 3,000,000 downloads in each month. And this is despite that we're coming out of COVID, we're still seeing an Increased activity in the platform. This also has to do with the development team has put tremendous amount of effort into getting a higher attraction of the platform. More to come on this one. Do watch out in Q3. More to say is that in July, we passed a mark of 100,000 product pages. Again, this is an effect Over the hard work we put in place in the last 6 months, we established a customer success team that's continuously helping our customers to launch more product pages and I'm to continue growing our platform. So that's short a couple of highlights from the Q2 report. If we go into Slide 4, we continue to powering, like I said earlier, the building digital building design worldwide. To date, we have 2,150 building product brands listed on the platform. We have every month 100 of the largest 100 Arctic firms as users on the platform. That means that more or less every large building getting built around the world is using BIM and more and more. So it's a positive trend. We are ranked according to SimilarWeb in traffic, we're the number 1 in the world. And in the quarter of Q2, we had approximately 8,000,000 files downloaded. So operator, if we go to Slide 5. Just to recap on what I just Yes, we are the most influential brand in the industry with a factor of 20x versus our competition. And this is something important for us, not only to be the largest, but also to make sure that we continue to maintain that position. As we are convinced that BIM is the future of to go in the construction, we need to maintain our position. And we're doing it very much in both the brand awareness. As you can see, we are 20x larger in brand awareness versus our competition. And this is not just any luck. This is hard work put in, in many areas, perhaps areas where Investors don't see them, but definitely our users. We're also excelling in engaging the visitors. We're Proud to say that we are definitely beating some of our competitors pretty early on both. If we go to the next slide, and So Slide sorry about that. If you go to the next slide, it's on Slide number 6th, we can see that the Flywheel growth for Q2 2021. We see continued growth in the number of registered users, 25% growth year over year. We had 8,000,000 downloads, and that means a 24% growth year over year in the number of downloads as mentioned. And again, worth mentioning that our brands on the platform grew 15% year over year. So the flywheel growth is continuing to spinning, and we're seeing that, manufactured in what I just mentioned. We are, at the end of quarter, 99,000 product pages, now crossing into 100,000 at an estimated 24% year over year. I've been repeating this slide a couple of times in our previous calls. But again, this is really what's building the value into the company and platform. Finally, I want to leave you with something good before Martin dives in. And that's Slide 7, please, operator. We have a new report outside the MobX on the topic of why sustainability is the key to getting specified. The report come on the back of the new demand and the new launch emerged to promote sustainable construction and cut the industry's rather massive contribution to the degradation of environment. So this report goes into the urgent need for greenship. And the hard truth is that The Building and Construction sector is responsible for 39% of the energy and process related CO2 emission in the world. We're repeating that. We are responsible for 39% of the CO2 related emission in the world. It's a tough pill to swallow, of course, but hope is far from lost, I can say here. In fact, we can make quite a big impact for the planet for Humankind. So for business, of course, that we are interested in, we know that BIM and the Building Information Manager. It's a way to move to a greener planet where you'd make choices on a digital level. So for you who are interested in this report, I urge you to go and look, go downwards@bimobly.com And really get a pulse on which climate related industry challenges we are facing and also learn about the digital tools that are needed. And again, I cannot highly emphasize it. Of course, Bing is part of that and very much in the tools. So With that said, I want to hand over to Martin for more information. Martin? Great. Thank you, Karl. All right. We can go to the next slide, and I'll start a little bit to give a brief update on the transformation that has been part of BIM Journeys BIMobject's journey over the last year. So could you please take the next slide? Yes? Yes. Thank you. All right. So first of all, I mean, over the last year, it could be a little bit more than that perhaps, Bimobject has been in a cost reduction program, which has been quite successful, where the organization has been trimmed down. And at the same time, especially the sales organization has been restructured. And this has been a necessary move for the company, both strategically, but also tactically when we go to the market. And what we see now, despite these big changes, is that we again see the ARR going back to growth from the quarter the last quarter where it was more flat. And this is important for us Because then we really get a first proof of the new model is working. And now I think we're in a mode where it's a lot more calibration of the sales organization that is taking place rather than More restructuring related improvements. At the same time, we, of course, do a lot of platform related initiatives. We are changing ERP System and also a lot of other initiatives. We will also there's also a lot going on within the product organization. And as you can see, the platform is working quite well. We do have very stable and strong growth in the platform, but we see that there's a lot of things We can improve on that side as well. At the same time, we have retained control of costs in relation to the restructuring That we did. Meaning that in the terms of number of FTEs, we're not growing significantly. That's not related to the cost Increased in this quarter, and I will come back to that on a future slide. Then the last point is quite important for us, and that's related to the employees that we have in the organization. It's also a part of a transformation when you shift a lot of people and that there will be Some sort of transition. But what we can see already now is that very new people coming in are delivering quite promising. And that's partly related to the increase we see in the ARR. Next slide, please. Mark, there's a delay in the slide, so you can just continue in this. Okay. Yes, okay. Maybe I can continue really quickly. Sure. All right. So the reason why we focus so much on ARR is because this is the most important metric for us To understand growth in the company. And as you can see, we had I was talking earlier about we had a flat Quarter last quarter and this quarter, we had a growth again of around 3%, 10% on a year to year comparison. This is obviously not where we want to be, but it's still a very good improvement. And since we're doing a lot of calibration in the sales Organization, we expect this to go up as we go forward. And the reason why it's so important metrics for us is because if you look at net sales, There are some differences in how that turns out in the reported numbers. And in this period, it's mostly related to currency, where there's like a 10% effect on a year to year basis. And that obviously gives a little bit different view of how the company is performing. Whereas if you look at ARR, you can more and better See the developments of the company. Next slide, please. Okay. When it comes to net sales, We had an improvement in services. Services is where we do content production in BIMobject. Content production or services was quite much affected by COVID. And we see a recovery, but it's not back at the historic levels. And We but we're very happy of the improvement that has been made. In previous quarter, we have also mentioned The shift we have in other platform revenue, which is related to a joint venture, which we have In Japan, there was a transition of the contract where we lost some recurring income. It's a new model where we still get income but in a little bit different form. And then in Q1, we start We got a new joint financial contract in Thailand that is continuing also going forward. Yes. Next slide, please. When it comes to the cost development in the company, we had a quarter where the total operating costs increased. There are some good explanations for this. As I previously mentioned, the cost level in the company has been roughly the same when it comes to Quarter over quarter increase. One of the main important factors, and this is we see as a really good thing for the company, Yes, we have launched incentive program, and that was a cost related to that, around SEK 7,900,000. But at the same time also, we have 1 almost close to 100% participation in this program and also we had investment into the company of SEK 6,000,000. And we see a very positive sign of the engagement level we have internally with employees. At the same time, we also had around SEK 4,000,000 non comparable costs in the quarter that is also affecting this The operating costs of the quarter. So if you do adjustments for these, we see that we have very good control of the costs Also going forward. Next slide, please. In relation to cash flow, there's the same effect Basically, from the incentive program we have affecting us in the quarter. And In addition to that, there's also effects on net working capital related to government support Program that we received related to COVID. And if you look at a year back ago, in Q2 2020, We had a correspondent positive effect in that quarter, which means that if you look at a year over year perspective, the difference is Quite significant, but these are the main contributing factors to that. Next slide please. Karl, will you Yes. Thank you very much, Martin. And I'm very apologetic here, Martin, I didn't introduce you to start with, and I maybe should have done that. Martin is new CFO. For those of you who have noticed, Martin comes with extremely strong background and maybe if you want to share some words on that. Martin has background from several years at McKinsey and then continued as an investment banker and that was spent a couple of years at private equity company before joining us. And we're super glad to have Martin on board, especially strengthening the deeper analysis that's needed on the financials as well as other areas that we are looking into including on going forward. So thank you very much, Martin, and welcome to the first call here at Didi. I want to end up before we go to Q and A But I want to say that we remain focused on the long term value creation. There is three things that we stay focused on too Despite quarter over quarter and in a massive transformation program, we have the platform growth in new registered users and downloads. That's really what we are strongly focused on, and you see the effects on that. We've really been on top of that one. The second one, where we are not happy with the pace, It's increasing revenue base. We have explained it, but it's hard to see through it. We are seeing now that we're back on ARR growth despite the much lower cost base. But if you add the services part where we have not happy with the pace, I only need to step that up, and we have programs in place for that. So new brands in the ARPA is we're happy about, especially regarding new customers There's significant uptrend in the ARPA there. And the 3rd part we are super focused on is, of course, shareholder value. That is ARR growth For a company like ours, it is that to defer the terminals and what we are, the long remaining revenue as well as on top of that one is the net revenue retention, maintain the customer, grow the customer. And to do that one, you need to do a lot of transformation. We have a lot of transformation in place. We hope that, that will carry fruit going forward very soon. So with that said, thank you very much for listening in to our audio cast. And now, operator, over to you for questions. Thank you. Ladies and gentlemen, we are now ready to take your questions. Barski. Our first question is from Frederik Nielsen of Redeye. Please go ahead. Your line is open. Hello, everyone. Felix Insoom from Redeye here. I want to start with a question about the flywheel of Growth, I mean, everything's growing at about 25%, except for the brands. Why is the brand lagging behind? And what can you do to change that? Hi, Fredrik. Great to good question, important question. Everything in brands, brands is dependent on 2 things. 1 is the time to come on to the platform. That means that how long does take to do create your BIM object files. That's the service part we talked about, the one part where We have seen a drop over the last quarters in revenue and it's kind of consultancy So Frederik, to answer your question is that as we are really being focusing on the recurring revenue, that means subscription part, We have been focused on getting making sure that we make money on the service part. And that means that we haven't paid as much attention and we haven't invested as into the service part historically, since we're not able to do, I think. And maybe we're lagging them to get the brands quicker up onto the platform. That's part of the explanation. The second part of that explanation is that we have been stricter on getting non paying customers on the platform. And of those 2,152 brands, some of them have been test and some of them have been, therefore, haven't been paying, but we're much strictly today on that we need to pay to be on the platform. So that's why maybe you're not seeing as big growth as we do. I'm very keen with us. You know that it's important for us that we are cutting costs and increasing revenue, making sure we're profitable long term. So important part of the transition. Okay. Thanks. And one more question. You mentioned that the retention is It's improving month by month. Why is that do you think? And is that sustainable? Martin, you or me? Or you want me to take it? I can take it. I mean, the retention rate, I mean, we I think it's part of the reorganization we have been doing that we are getting into place. Obviously, you're never like 100% completed, and we're very well aware of that. And that's why we do a lot of recalibration and optimization of the sales Berstki. We see the long term trends, very positive. And that could also be said that during this transition we've had, Inflow has been relatively stable throughout the transition, which we also see as a very strong Fine. I think where we have been lacking is more on the churn side. And that we are improving also Quite much during the last quarter. Okay. One last question from me. I mean, in the report, you just seem quite optimistic going forward. You mentioned a very strong pipeline, good retention, as we talked And also strong news sales. However, while you're back to RR ARR growth, it's still not At levels where I suppose you are, I mean, You're not giving any guidance, of course, but my interpretation is that you expect the higher growth rate going forward, Considering your statements about the new sales pipeline and retention. To use the hard word here, of course, Hell yes, we are. This is not good enough for us as a company and definitely not where we want to be. We have a massive market in head of us. But it's so sometimes Complicated to explain why the old model wasn't sustainable when you see the you saw the growth. The growth wasn't sustainable from a cost perspective. It definitely wasn't sustainable as we're accelerating now. We hope that as we put this in place, the new models, new price list, new all across the company and then invested into that Renovation of the house will pay off and getting back to much stronger growth rate. And as I see it from the inside of the company, I can see some of the extremely positive momentum. Now we need to turn it into, I guess, the net sales if the market always looks at that. But also importantly, we really want the ARR growth to always be as a best in class. And by class, I mean best staff company on the stock exchange convention. Okay. Thanks. That's all from me. Thank you. There are no further questions on the audio line, so I'll hand back over to our speakers. Thank you, Martin. I'll ask you, Martin, since we are on different locations. Any questions In the e mail. No, I have not. Okay, great. In that case, I want to conclude our audio cast. I want to thank you very much for listening in. And We are here for the women soccer team right now. And with that said, thank you very much from BMO Capital.