Strategy Update

Oct 20, 2021

Slides

Hi, everyone. This is Johan. I'm one of the founders and the CEO of Verticesit. And today, we're going to share our strategy updates that we had in a longer version on the Capital Markets Day. Now. It's a condensed version in English. And beside me, I have My name is Jonas Lagerquist, and I'm the Deputy CEO and CFO of changes that we have done within the group. And it's due to, of course, the acquisition that we did before the Summer of Grouse Fish, becoming the number one retail digital signage software provider in Europe and also that we have performed according to our long term goals, actually one and a half year ahead of schedule. We are really happy about that, and we will present the new goals and, of course, also the new strategy that has been Impacted by this. So if we first we take a close look to the group. So the group now consists of 3 companies. We have Verticus, which is actually more of a full service provider, the digital in store agency for retailers and brands. We have Dice. It's an acquisition that we performed 2017, aiming to be like the platform for the digital in store experiences. It has been the platform for everything that we have done in Vertiseit, and it also has sales through other partners out globally. And the latest acquisition, Grass Fish, is basically somewhere in between. So it's the most used ticket to signage platform in the DACH region, and they also have included Expertise in Form of Consultancy Services as part of their offering, but they also go together with partners. If you look at like the customer list, we could see that we have customers from Vertices that's basically grown in and out of the Nordics. We have DICE with customers through partners, basically all around the world. And we have Grass Fish, which have successfully signed direct contracts with leading brands on global scale, but they also have fulfillment partners to take care of the rollouts globally. And I will come back to this later on to see where we are heading. So to give you like a brief introduction to how the industry works and what you see in the retail environment is digital solutions to support and enhance the customer experiences. But if we start from the beginning, it's built up with a platform at the bottom, the in store experience platform. On top of that, we have integration layers 2 data capabilities and so on and so forth. Also, with using the customer specific data, we can build specific in store applications. And they are typically customer specific built on top of the platform. And then we need the actual displays technology sensors in the physical spaces to make to really like make the experience work in the meeting with the customer. And of course, all of this also means barriers of entry. So basically, this is a market where you don't actually shift supplier when you are there because when you have the platform, you integrate it to your ecosystem, you build touch applications and templates on top of the platform, and you also have thousands of devices with the right software installed and we will come back to that when we come to the acquisition strategy. Vertecitof today is the number one digital signage software provider in Europe, still a small company. I think we could maybe we have between 1% 2% of the global market in digital Itasign Software. And so it's a very fragmented market, but that's something we are here to change. We are 120 people present in U. K, Austria, Germany and Sweden. The head office is in Sweden, Warburg, south of Gothenburg at the West Coast. We have had a long series of 38 quarters of growth in ARR, and it's now up to SEK 62 1,000,000 Swedish Crowns in ARR. And this is basically how it looks like. So not in a single quarter. So 2 quarters from now, we are up to 10 years streak in ARR growth, and it's something that we are really proud of and something that we, of course, aim to continue performing. Due to the latest acquisitions, we also performed according to the long term goals. So first of all, when we we went public and did our IPO. We said that we want to have €50,000,000 in ARR in the end of 2022. And we want to have 1 of the largest one of the 50 largest consumer brands to choose Vertize It for their global concept by 2023. And now we're happy to say that we have EUR 62,000,000 ARR and BMW from the latest acquisition with a global rollout really hits the 2nd target that we had. We can also see that the market is changing really rapidly now. Like all industries that mature, We See Changes. The first thing that we really need to take a closer look at is like the full service provider, the full service digital signage provider that provides everything from like hardware, equipment, installation, content software that they have developed themselves of 1 Package. I think we can see from the largest brands now that they want to pick and choose and I see like the digital in store experience platform as much more strategic for them. So I think we will see specialization here. So platform is one thing, Building the Instore Experiences and the strategy work around that is one thing. The integration part, the rollouts and Support Services, might be other companies doing, and of course, the hardware itself. So I think the fragmented platform market that we have today, it has been due to that full service provider has choosed the technology. I think when the market matures and when customers have more impact, of course, we will have category winners in the platform as well as other industries has had. If you look at the e commerce, for example, today you have clear winners when it comes to WooCommerce, Magento, Shopify and so on. And it wasn't like that 10 years ago. And I think we will see the same pattern here as in other markets. So this means that digital signage has a closed system where you just say this is what we want, this is how we want the experience looks like and do it as you prefer. I think it's a stage which we are past now where you need to see like the digital in store experience platform as part of the full ecosystem. On the same level as the PIM system, the e com platform, the MRM system for campaigns, we also need the in store experience management To Be on the Same Level. So, the market so, so, so far has been driven by national concepts and it's due to that communication needs to be local. But We see a pattern where you want to unify the platform as a global resource and be able to deploy different concept for each and every market on that platform with different agencies, different initiatives going forward. So based on this insight, we also launched now the new strategy. And our strategy is based on that the group structure needs to support future acquisitions. We have done like is it 8 now, Jonas? Yes. So I think we're up to 8 acquisitions so far. And we this is a perfect market to really take a leading position with the use of acquisitions. We Also want the business model to be really have like global scale capabilities, and that means that we cannot be hands and feet all around the world. We need to focus and specialize Where We Are DUST, and of course, that's the platform. So and also this leads into new financial Targus that Jonas will present. And our ambitious goal is to go from the European leader 2, the global leader in digital in store and be that one of those category winners within in store experience management, and I'm pretty sure that we will deliver on that. If you look at the group, we also do changes within the group. And the main changes is that the operational units, Vertiseit. The operational business go in under the Grass Fish brand. It it's based on the insight that Grass Fish is the most known brand out there. Vertica is famous in the Nordics, but Grass Fish Essamore Global Footprint, so it's kind of an easy choice, and DICE Stays as it is, as a own entity with platform sales through partners globally. Vertize It. We become the listed holding company within retail tech, focused on like developed SaaS Companies within digital signage with the focus on digital in store as it has been before. Short introduction to Dice. Dice Dice offers the leading digital in store experience platform through a global partner community. The business model is SaaS. Its channel strategy is partners, typically full service provider for each and every market, aimed to have the leading brands and retailers using them. And the differentiator is really that It's a very intuitive, easy to use platform, and it fits like 80% of the needs. It also how like a modern architectures with open APIs in both ends, so you could build your own industry specific, customer specific modules, have all the resources from the platform to do that, like walk the extra mile with the customer. And we don't offer any additional services, so it's a pure sauce. Typical customer could be Marks and Spencer, as we have communicated before, where we go through the our partner, Pixel Inspiration in U. K. And they have up to like 5 different touch points, different applications that they use digital in store for. And we also have like more than 1,000 units out there in the U. K. Market only. Growfish. On the other hand, we are in a position now. Growfish is listed as the number 1 digital signage software in the dark region. And we really want to be like the global front runner in digital in store and combining like the best in class platform with consultancy expertise. And so it's platform Plus Consultancy Services with direct sales. And it doesn't mean that we Don't Work With Partners. It means that but we need we signed the platform contract direct, but we also work with Partment as fulfillment partners. We work with agencies on different levels to do like the best solutions out there for global brands, retailers. And of course, the Grouse Fish platform is the opposite of the standardized dice. So Grouse Fish is more we can customize it according to the needs. We really need to implement it in the ecosystem of the customer. We can customize the workflows and we can walk the extra mile of like automated and intelligent content distribution in relation to the known platforms out there. Typical customer for this is the BMW, where Accenture has to lead on Customer Journey, the new concepts. They have brought in Groundfish Consultancy people to be part of the team of creating the future for digital in store. We 3 Sun have the majority of the rollout responsibilities here in the world. We see how we have taken like the digital signage concept into a more personalized data driven experiences where also we have dealer app where you can call up content and you can really empower the staff in the store to deliver value in the meeting with the customer. Today, it's more than 8,000 endpoints out there in the global rollout, and it's increasing day by day, really cool. And if we have a closer look on the impact on the business model, before Vertices and Dice worked like this. So DICE was the platform, Vertecit was the full service provider in the Nordics and then we have other full service providers for different markets. Dice. We'll continue with that model. So Dice will work with partners in different parts of the world. And Grass Fish We'll work with the Platform Plus consultancy, but we will never take the whole responsibility for the rollout. So we need to work together with fulfillment partners, together with digital agencies, together with consultancy firms to deliver the best in class digital in store experiences that you could imagine. So the previous business model was built on agency plus systems. And when you do that, when you like map the customer journey, create, have the best insight on how to add value in the customer meeting, Deploy It with the best equipment, then we can have high customer satisfaction and grow our sauce business. And now we actually have the pure sauce offering in Dice. We have the sauce offering plus the best consultancy expertise to support partners going forward. And we think this is a much, much more scalable solution if we want to be the number one company within the digital in store space. So now I'm happy to like Look at Jonas' presentation on the financials. Yes. So let's I will give just a brief Flyover of the financials and then we'll focus on the growth strategy with some extra Spotlight on the acquisition strategy and of course, the long term and the financial targets, which are the outcome of this strategy change. So the our latest disclosed financials are from the 2nd quarter, of Which was kind of a special quarter since it only included our the Grass Fish acquisition of approximately 1 month. So it has some impact on the turnover, but full impact on the ARR. And as always, the recurring revenue is our top priority and it came out of Q2 on SEK 62,000,000, which is the annual recurring revenue on as per June of 2021. And just as Johan pointed out, that was our 38th quarter in a row of with sequentially increasing ARR. So it's 38 quarters with like Consequential Growth in Recurring Revenue, which we are very, very proud of. So this year end it will be 40 quarters in a row, which is a 10 year streak and that's even ourselves find that quite impressive. So we're proud. But the ARR growth compared to last year was almost 100 percent and of that is approximately 20% organic growth and 80% are acquired growth from the Grass Fish acquisition. And our operations performed profitability on EBITDA level of 15%. And just like before, we have grown this far with being profitable every year and that's something that we're going to continue doing. So our growth strategy of is divided into organic and acquired. And with a focus on acquired growth, this strategy will actually accelerate our acquisitional agenda. And the reasons for that is that we have a good track record of performed acquisitions And we know that we are in a business where it's very beneficial to be a good acquirer. And from the from 2,008 until 2020, Which means not including Grass Fish. Like the history is that about 45% has been of the total growth have been acquired and 55% has been organic. But going forward, there will be a tilt towards acquired growth. And to support this new strategy going global and accelerating our acquisition strategy. We've we are about to perform a directed share issue. The Board of Directors has proposed to an extraordinary journal meeting of to do a direct to share issue of SEK 100,000,000 where this where new investors will be joining the shareholders, which are some well known institutional and professional investors. Amongst others, it's Swedish bank Nordea and their funds private investor KL Capital Alkur, which is also a Swedish investment fund company, Protean Capital and a list of other investors, which will support the acquisitions strategy of short term, but also provide some extra resources of For moving forward executing on the strategy. And it also We are very, very happy to welcome these new owners to the company. When we backtrack our 8 acquisition that has been done so far, We can we find that if we look at the revenue retention, which means the recurring revenue from the acquired customers at the on the day of acquisition and compare that of the recurring revenue from the exact same customers today. Regardless of when the acquisition was performed, We can see that the revenue from the exact same customers is today 150% of what they were at the date of acquisition. And that leads us to 2 very, very important insights. And one is that. We do not have to depend on acquisition to perform growth. So we have a sound company like in the foundation, which where the customers of Are growing without having the need to perform acquisitions. Of If the environment or the financial landscape is not right. And the second insight is Also that it is a business where it is beneficial to perform acquisitions since of there is a lot of stickiness in the business model. As Johan said, you have first you have the platform, then you We integrate the platform to the customers' systems. You do customer specifics And you do physical rollouts of infrastructure. And all of these steps, they create stickiness in itself, Which means that the acquired revenue is likely To keep growing if we do our job and keep providing value to our customers. And the new group strategy is also set up to support this acquisition strategy, whereas we can both perform acquisitions of markets and customers of on the vertical level beneath the Grass Fish and Dice. And we can also Do strategic acquisitions on the horizontal level, expanding of the Retail Tech Group, Abertisit. So and when it comes to synergies, there you can find them a bit further down when it comes of Technology and there are synergies to find further down. And all of these lead to new long term goals and new financial targets, Which are that in the coming 3 years. We will aim for the Mission 200, which means that by the end of 2024, we will have annual recurring revenue of at least SEK 200,000,000. And of by the end of 2026, we will be the global digital in store software company and measured as active SaaS licenses. And in parallel, this means that we will have a growth in ARR of at least 25% Per year. We will have profitability at the end of the period on at least 30% on EBITDA Level. And we will also have, during this period, a revenue retention of at least 100%, which means that we will always We will always be growing on existing customer base. So I think that was all Jonas from, like the condensed version of the strategy updates. Really looking forward to deliver on those new goals and be like the number one digital in store software company. And we hope that many of you like to follow us on our journey both as investors and also follow how the company progress. Thank you so much for watching.