Earnings Call: Q4 2020

Jan 28, 2021

Thank you very much, and hello, everyone. I'll use a couple of slides, which will just cover sort of some thoughts about the report and then we'll move to questions. But then as the structure of the report is of the portfolio, forgive me, has, of course, been changed somewhat, but the overall sort of the bigger names are still the bigger names. Babylon has been revalued for obvious reasons, and that is slightly a larger part of the portfolio now, which is exciting. And Voya and Get has, together with Babylon increased on at the expense of Blavlacar, which is down a little bit. That the overall sort of structure of the portfolio is one that you're familiar with. But in terms of the overview of this NAV, so yes, SEK 11.36 per share in dollars, which is the dollar has fallen. So it's only SEK 93 or just under SEK 93 per share. That If you adjust for the rights issue, that's up 22% year on year. And then big contributors in this last quarter as across the year, Bauble and Avoy have been standouts, have been clear beneficiaries of the COVID situation we're arguably still in. Geth has been a contributor in this last quarter and Blavacar was taken down a bit. And come back to Blavacore because we really think that, that's going to be it's very interesting trajectory in front of itself now that we're going into the hopefully, the last inning of this COVID. Overall, the portfolio changed about just under $190,000,000 upwards, lots of driven by I mean, that's a change in NAV. Most of the NAV is at a model right now. So that will have been sort of on our models are we look out over the near term financials and apply a peer group multiple. In some cases, the peer group becomes very logical. And in some other cases, it's there is nothing like our portfolio companies out there in the listed world. So it becomes more of a larger group that hopefully sort of collectively sort of gets us the best sort of peer group we can. And We have put some money to work during the quarter, Baobelon, the main one, where we put together an SPV of totally $100,000,000 We put in $35,000,000 The biggest new investment is Hungry Panda, which is a delivery hero for overseas Chinese communities. Sort of laser focus on that community, which is a large community and perhaps growing given the stuff that's happening in some parts of around that country, but then also follow ons in BOI and Booksy. And Booksy has really sort of made a big step change here with attracting serious international money, American money for driven by the presence that they have now clearly demonstrated, especially in the U. S, but obviously Poland is also a large part of that. I think if we just go company by company here and touch upon that quickly. Bob, all of you know, of course, in an aggregated level is just under $400,000,000 in our NAV now. We own just shy of 11% of the company. It's during the Q4, they delivered 11,500 daily consultation. That is up nearly 50% year on year. And overall global registrations have reached SEK 6,700,000, which is up from SEK 3,800,000 as per year end 2019. So as could be expected, sort of lots of activity around that company, that lots and lots of activity to come. I mean, the company is really doing heavy lifting in securing very large contracts, predominantly with their existing clients, that, that will really sort of that will really sort of propel them into a completely different sort of revenue base over these next 2 years. So I'll come back to that a little bit later. BlaBlaCar is, as you know, has been it's the one that's of our larger holdings that's perhaps most negatively affected during COVID and that remains now. I mean, it lightened up a little bit during the easing, during the summer. But as you know, large parts of Europe, people are now at home. In the Q4, they had just under 21,000,000 passenger. That's down like 43% year on year, but quarter on quarter is up. So we see activity, especially in their emerging markets, have really picked up over this last quarter, which is very positive to see. It's also very interesting to see that they are in a relative situation relative to their competitors, which is mainly buses, because there's no one else doing this on the C2C car side of things. Relative to their competitors on the bus side, they are in such a good spot because obviously long distance travel has fallen. Today, people travel much less long distance than they did pre COVID. That's going to change hopefully with vaccinations and us getting out of this pandemic. But the travel that does happen, that happens in a car. People are not willing to spend time on a bus or a train. So the activity level of long distance basically happens in a car and on the blah blah C2C car network. And So they also possess all sort of long distance operation that goes on, on the 3rd party sort of relationship, and that puts them in possession of data that their competitors doesn't have. And so of course, blah blah has own bus network, that's also closed like to competitors. But the car side of things is really holding things up. They're very, very well financed, And there's they have a very interesting sort of 2021 ahead of themselves as competition suffers and may also give rise to interesting opportunities. On VOI, Voigt, like I think we may have spoken about also in this sort of forum. But I mean, despite all these restrictions that we have had during the year, I mean, BOE grew its total number of rides by 50%. And I mean, the their success, I think we can allow ourselves to describe it as in the UK, has really propelled them into becoming the absolute leader in this space in Europe. And that's also helped them that put them on the radar screen of large U. S. Institutions to we're on the sidelines waiting for which European scooter platform would pull away as the winner. Voy has now done that with the success in the UK, where they're basically taking 80% of the licenses issued, and that enabled them to complete this funding round in that we also talked about in December last year. So they raised a total of $160,000,000 led by RAIN Group of California and that revalued our investment in the company upwards from the lower evaluation that was put in the midst of that COVID sort of early COVID days from visibility also inter travel inside the city was much lower. Going on here. We have GETS, which has it well, the valuation is up 18% during the quarter. It's primarily driven by that the market multiples have been going upwards. We are now present on the board. I'm on the board of GET, and I'm really fascinated by the speed of which they're sort of delivering their new product, which is a SaaS product to their business clients and really puts them in a different sort of pocket, story wise equity story wise, etcetera, compared to their competitors, which is which are all pure ride hailing. And sort of in the tennis maniac kind of description that I make of myself. I think I'm a tennis maniac. And my attempt to sort of map out our entire portfolio in sort of tennis players. I think it's that all really comes from that I've found myself more and more describing 3 Darlings in the portfolio as our next generation players. Next generation, those players who are still they're young, they're not they may not even be in the top 100, that so it's more risky, but there's some of those that will be the next sort of Nadal of this world. So we think we the 3 of them in our portfolio, books, Zwivel and Dostavista, we think all three of them are around $200,000,000 some a little bit more, some a little bit less. We own around 15%. But I think all of those will double again over the next sort of 3 years in their funding rounds. The businesses are growing. They will need funding. They will attract increasingly sort of larger Czech kind of investors. So collectively, they could be like $100,000,000 like sorry, dollars 1,000,000,000 each of them. And so Assoni, 15%, they collectively could sort of start to approach like $500,000,000 $500,000,000 in our portfolio as sort of visibility growth over these 3 years and funding rounds are completed. And we don't talk much about them today, but because they're small those large ones. But these are really these will come out of the shadows of Babylon and Blavacar and Voie in the same way as those companies did from Avito. So Swivel is disrupting intercity public transportation in large and margin market cities, Southern Cairo going elsewhere. We this if I had to choose amongst the ones, this would probably be the standout one. We own 13% of that Booksy SaaS driven booking platform, which is going into a marketplace type of business, just completed around where actually our friends at Sprint's invested alongside some Americans. So we CatRock Capital led a $70,000,000 funding round in the company, which closed just now. And we participated to cover after we own about 10%. And Dostavista is this last mile delivery service, which offers on demand logistics for SMEs started in Russia. It's growing very, very fast in primarily Asia. We don't talk much about ESG and sustainability here in this format that we are doing an enormous amount of work on that as everyone else. We're not doing it because we are I mean, for our operations, although we will start to report by GRI standards now. And so we comply fully with that. And but we I think it's just worth noting that all our investments are our business model that sort of hinges on our offer of products to consumers that are completely sort of conscious over these different elements of ESG. And so although we sort of monitor it when we enter and when we are present at these portfolio companies' boards, they are their products are driven by this from day 1. So BlaBlaCar has delivered 1,600,000 tons of carbon savings. Voya is, of course, lower COT per kilometer than anyone else. Bavilun is offering health care with the help of Bill and Linda Gates Foundation to large parts of Africa and get sort of in the similar fashion to boys. It's a very climate efficient way to run transportation in these cities. I think the only other sort of point I'd like to make before we go over to Q and A is, of course, that I note where we're trading in relation to our NAV. And I've only noted this When this has happened in our previous sort of history, we it's usually been when one of our portfolio companies has been in the run up to an IPO. It happens from time to time. I think we are very conscious of building a portfolio that's difficult for our typical shareholders to access themselves. We think our portfolio has the potential to do to deliver a lot of value over the longer term. As you know, we're very long term shareholders. And So we and although our NAV should be put together, so it reflects a fair value, we think it leaves a lot of upside. So us trading above that, I don't think it's odd by any measure. But I think it's noticeable that it seems to sort of coincide clear runs above our NOV coincides with portfolio companies going public. And I think there may be some sort of for I mean, And I think as you've all seen, there are IPO sort of listing ambition across quite a few of our portfolio companies, not driven by us. We are not going to exit the main ones. We are here for the long term. We will sell when the founders sell. But for some companies, it makes sense from an operational sort of standpoint to become public. And of course, without sort of knowing without going into any details if it may happen or not happen. It's just clear that there's a big price discrepancy in the market for which where Babylon is active between public and private holdings. So obviously, clear, a listing sort of environment would allow a company like Babylon to gain a currency for M and A, which is something that they're already engaged with us in our funding out of their balance sheet. When we value a company like Babylon now with a model, we have a peer group that is that that we think is relevant. It's relevant here because mostly they're involved in some sort of fashion in digital health. There's none in the peer group that is as technologically advanced or offers the same sort of product and with the same sort of prospect as Babylon. So I think it's fair to say that I think the medium multiple that we get is like 12 and ex on revenues. And we look on that and then we discount that because because we are not listed at Bobblum is not listed, etcetera. I think though, if you remember, if Bobblum were to list and a public market investor would look at it, you I think it's easy to put together a scenario where You look at the presentation that Pablo showed us at our Capital Markets Day last year. And that had projections over $900,000,000 revenue base in during 2022. Now there's that's large growth, and that needs to be delivered. This risk with everything. Things could be delayed. Things could also come earlier. But the company is performing well, and things are rolling on to plan. So if you take, I think, the cleanest maybe, at least in terms of sort of digital health exposure in the U. S, I think a company like Teladoc, if you take that kind of multiple and look out a year on revenues approaching SEK 1,000,000,000 you, of course, get to sort of values of Babylon that are nowhere near where we have them in our mark. That where we have them makes sense. We look not so distant in the future. We look near in the future, and we use a multiple that comes from an average, from a median of a peer group that involves companies with maybe multiple level are not relevant for Babylon. So I think that's important to note. And so if this company were to go public at some point, then I think there's a margin for that maybe we trade at the not the premium, but the discount and the large discount. I think with that note, I think I'll leave it over questions. And if the operator could help us handle that, that would be great. Thank you. We have a question from the line of Ramiel Kuria from SEB. Please go ahead. Your line is open. Thank you, operator. Thank you, Paul, the presentation and for taking my questions. Just 2, if I may, on Babylon. First off, apologies if you've already mentioned it. But With the new convertible financing, should we consider Babylon sort of fully financed for the time being? Or how should we Consider the financing situation now post the convertible. Yes. The convertible certainly helps. Or the convertible is our financing. We put together an SPV that predominantly sort of consists of a convertible that will convert at the into equity at the valuation their next funding round with a discount, so which I think is attractive. So we hold €35,000,000 of that 100,000,000 financing and other investors holds the rest. And so to your question is that, that money, together with some other, maybe not funding routes, but sort of operational deals that they're doing. The company is funded under some scenarios all the way to sort of becoming EBITDA positive. Having said that, there's lots of opportunities out there for a company like Babylon. So that may change. That they're in a better situation. They're in a good situation now in terms of funding, and they don't have to rush into anything. That there's lots of activity and which may have them looking up funding routes of different sorts. That's very clear. Just a slight follow-up on that. I mean, could you just remind me about your policy in terms of owning public companies? If Babylon, the other shareholders are pushing for a potential IPO, how would you go about in such a An area where an IPO did materialize. Yes. No, I mean, what we have traditionally done when the company I mean, long term, we will not own stuff that is listed. We feel that our shareholders, be it large Swedish or international institutions or Swedish retail that can do that themselves in a very efficient way now. And so long term, we are not holders that we note that it's we're close to the company and we should Beni and we should it go public now? I think our rule of thumb is that we sell when I mean, or not I think, but our rule of thumb is that we sell when the founders sell. I think even if this company should go public now at even double where we have it at, it leaves such a large upside. So I don't think I'm quite sure that the founder won't sell any stock. And hence that box of ours, that total of 1,000,000 of ours is not sort of ticked. But long term, it's not I think it doesn't make sense for us to hold listed stocks. So but then there are what we've done in the past is that in some cases where we felt that there was a clear upside, we've dividended out these holdings to shareholders pretty quickly. And where and in other cases, I think of is a good example. And then the IPO in 2013, we sold into that IPO because we felt the price was full. And so but we don't have anything in our charter, which sort of tells us that we have to sort of sell into an IPO. We have to distribute. We can hold these new things. We just don't think it makes sense to do that long term. That's very clear. And the final one for me, perhaps on the operational side, on Babylon again. I We listened to Oli on your Capital Markets Week saying that the company aims at having an our annual recurring revenue of USD 600,000,000 by year end. And I haven't, to my knowledge, seen any deal announcements since. Could you just take us through, first off, if any contracts indeed have been won? And then Secondly, if they haven't, you touched upon it yourself, but why are we seeing a slight delay in contract wins. No. So they are delivering their contracts. They're live with a couple of new contracts during the autumn. And they and from getting live, they will also band and then revenues will start to show. They are pretty much all their growth in revenue over these coming years are all sort of sourced from expansion of existing sort of commercial relationship, existing clients, that's to say. So obviously, Centene in the U. S, NHS, UK Prudential, Southeast Asia are 2 sort of 3 large clients where they have expanding relationships. And so those are all on plan. So it's not Babylon being a private company and it's not I'm not sure that they all get sort of become public, those relationships. But I think what's fair to say from where I am, it's they are things are on plan. It's not it takes a long time to put these contracts together. And then a contract is one thing. And then it takes time also to start to implement and transform a contract into actual revenues. Because obviously, the risk of those revenues coming in it's very low once you have a contract signed, but there's still a time gap between that. So I think that's all pretty much in hand as per plan from the company. So delivering well there. Right. That's encouraging. Thank you. We have a question from the line of Stefan Lourdes from Parete Securities. Please go ahead. Okay. Thank you. And a couple of questions or 3 actually, small questions, if I may. Jeff, if you could repeat the outlook for the 3 sort of growth investments that you highlighted in the presentation. I didn't follow exactly on the valuation potential that we saw there. Maybe you can start with that. Yes. So those 3 are I did it in perhaps a 2 sort of back of the envelope or high level way. But What I did say was that they're all around $200,000,000, Dostoevista is a little bit lower. So we will certainly books are higher, but I mean and books here quite a bit higher, but around $200,000,000 certainly on an average basis. And from that basis, I think they all have the potential to double and then double again as they over 3 years complete probably 2 more funding rounds, which and each funding round, I think, will has the potential to be double of the previous one because these companies are growing so fast. Is the risk with everything, and this could be wrong. I could turn out to be wrong. But for where we are now, I think that's entirely possible. And hence, SEK 200,000,000 goes to SEK 400,000,000, SEK 400,000,000 goes to SEK 1,000,000,000 it goes to SEK 800,000,000, of course. And so and if you sort of if you sort of allow yourself sort of the sketchy rounding up to SEK 1,000,000,000 each, then the Nasoning 15% of that gets you to about a $450,000,000 collective value of those 3. Very, very high level, SKF funds. So but I think that the growth that they will be able to sort of to perform strongly over the sort of next 36 months and double and double again. I think it's entirely possible. So then collectively, it could be like a $500,000,000 part of our portfolio across 3 companies bigger than Babylon is today. Over 3 years. I think Pablo will be nowhere near where it is today, of course. But anyway, that was the logic. Perfect. Thank you very much. Then on to the next question, it's a little bit about I haven't seen, but if you could give Do you have like a rough ballpark of annual investment needs? Or is that not a relevant measure for you? Yes. I think we don't typically supply that. I think it's The only company we know that will race around this year and that we know where we want to participate is Swivel. So Swivel is growing very fast. They have large opportunities across Middle East, Asia and now Latin America. That company, you'll see I think you'll see doing $100,000,000 round. We own 15% of it. That's probably not until later in the year. But if there are good deals to be done earlier, we could that's something we have our eyes on and we're very close to the company. My colleague Bjorn is on the board. And yes, so that's what we know. There are most others are funded in terms of operations. There is some exception. But obviously, Babylon got some money from us and did some other sort of got some money from another route as well. And Voi is very funded, gets sort of funded. RAVA has a large balance sheet. The other so Swivel will be the standout. I think the there may be opportunities in the portfolio. And for example, around something like Blavacar, who is so strong in relation to their competitors. And there's so many opportunities out there on their knees. So that if it certainly doesn't need to raise any money for defensive reasons. They have a very large cash pipe for that on their balance sheet, but we'd like them to get it'll be great they have a great opportunity to become more aggressive. So but so there may be sort of funding needs in the portfolio for aggressive reasons, but those also come. Those also. It's different they're priced differently, of course, if they're done for aggressive reasons rather than defensive reasons. And then we continuously look for new investments. We have the Scout program going now where we have 4 or 5 Scouts who are building portfolios of 5 to 10 names each. We hope that will, over the course of this year, generate a portfolio of 40, 50 different names, which will be very small, and we won't talk about them until they come into the next round or the next round where we have the optionality to sort of enter directly into the cap table rather than via our scout programs. But that's in the very early days, those checks are very small. On an aggregate level, they're still small. It's more to have sort of exposure to those companies from a young stage. And when they grow older, they become more relevant and hence also the check sizes are bigger. That. So we have lots of activity going on there, but we're also looking at new investments in our space. Okay. And then a last question also relating to Babylon. You mentioned I fully agree with that Boblan looks a bit it's conservative value if compared to how it could be priced in the market today. But you mentioned a figure there like SEK 12,000,000,000. Given what's your view on the prospects of Babylon and if we just assume that the prevailing evaluations are sustainable for that segment. Where would you be a seller sort of where would you see that What's the potential for Babylon, say, in a 5 year format, would you say, if you would like to put the figure out there? I don't think we'd be a seller of this below $20,000,000,000 and that would be in the current sort of environment. Over the and the current environment, in a sort of a maybe if you look over this year and next year, I think sort of the revenue growth of that company will prove up those sort of valuations. And then beyond that, there will be upside. I mean, their addressable market in the U. S. Is close to $1,000,000,000,000 I'm not saying that they're going to take all that, but there's a large market to gun for and their offering something that no one else is. And so and the multiples that their listed peers are trading at. They obviously factor in a lot of growth. But I think Babylon sort of stands out they will be able to deliver at least the same growth as their competitors are likely more because of their products being so unique in many ways. Yes. It's really interesting. Thank you, Thank you, There are no further questions for the search. I hand back to the speaker. Thank you very much for your participation here, everyone. And Let us know if there's anything else we can help you with. Otherwise, we'll talk to you in 3 months. Okay. Bye bye.