Earnings Call: Q1 2021

Apr 28, 2021

This is Per Brillouet at VNB Global. And this is our Q1 call. So welcome to that. And I hope people can see this slide presentation we've together. I'll flick through some pages there and then open up for Q and A. And diving straight into it, This presentation goes through a lot of background, which I don't think will be necessary for you guys. And so I'll just quickly go through the background. You all know that and what we do and to take you into The portfolio, which at least sort of graphically looks like this and During this quarter, there hasn't been that many sort of larger changes in it. We can in fact go to the next slide and you can see here, I mean More sort of text form what this quarter has brought. I mean, it's up a bit during the quarter I mean, the NAV. And it's a mix of reasons for it being up a bit. Some of the holdings are up. Some of the holdings are down. We issued some shares at a premium. That Helped a bit, but the 2% up. And of course, the as you'll know by now, but maybe worth reiterating is that we put together our net asset value using The last price, if that's something that's if there's been a transaction of sort of larger size. And then failing that, we use a model. And the model, we look out at sort of financials in over the next year or 2, and then we multiply that by multiple from a listed peer group. And then in many cases, our portfolio, as you'll know, there's not a perfect sort of comparative sort of in the listed world. So we'll have a we'll put together a group and that gets us the mark. So hence sort of stuff moving around a little bit. It's up 2% over the quarter. Pretty busy quarter. We issued new shares. We did a placement of $140,000,000 in the early innings of the quarter. And then we've been busy investing that. We decided to do the rate primarily as we were far down the road of 2 transactions in our existing portfolio. Those have been completed. In the quarter, we completed we led the bridge round into Swivel, the transportation company for emerging markets. We also but only after the quarter, we finalized The larger check, EUR 35,000,000 check into Blakar as part of a larger financing round and where we led it, but we were also joined by Filip and Jonas of who we know from Avito and then also FMZ Ventures, which is led by a French individual with a long background at primarily Alibaba. So and we're continuing to sort of have quite an intense deal flow, most of which We have declined, but we that doesn't fit us for a variety of reasons. But there are several things we are working on right now. And some have been concluded, but it's still a little bit too early to talk about them at this point in time, but we've names that we are very, very excited about. And then, of course, also after the year end. We are or after the quarter's end, Hemnet IPO ed, in fact, yesterday. And Hemet has we sold some of our shares alongside everyone else. And that gave us so that's provided some capital to us. But most importantly, I think we have we kept most of our shares as with everyone else. And of course, That's been good so far because the trade the stock has traded up. So in fact, the IPO price It was higher than where we were carrying at, at 31st March, which is also the input to this report. And then since the IPO, the stock has traded up. So we got about dollars 16,000,000 $70,000,000 in sales proceeds. And we have a remaining number of shares in Hemnet that Today's price is roughly valued at $88,000,000 So good investment we invested about €10,000,000 So it's one of these 10 baggers really, which we're very happy about. But Also, NAV wise, obviously, the NAV for the quarter ended at SEK 101.5 of SEK 101.6 to be exact. If you adjust that for the live Hemlet price, Then you're looking at an NAV, which is nearly SEK 107 per share. Yes. So that in at a high level, it's our quarter. If we continue into Babylon, I don't know if you see these slides, but we've taken the time to sort of Take a little bit of step back and to sum up the where the in terms of presenting, Bavilom, We've taken a little bit of a step back and to try to sum up the position of the company in maybe a different context now that the company is so focused on the U. S. In management wise but also product wise. And sort of Just going back and describing it in slightly different way than we have had before, I think it's 1st and foremost, As you all know, it's a huge market that they are swimming in, a double $10,000,000,000,000 market. But maybe more relevantly, The addressable part the relevant addressable part market part of the market in the U. S. For Babylon It's nearly $900,000,000,000 So that's the first point. And then the second point, which I know, mean, a lot of people stress around the company. We haven't stressed so much is that we when we talk about investing into digital sort of disruptive companies, It's often sort of connected with what problem they're solving. And here, defining the problem that Bubbler is out to solve is that There's a real imbalance between how the accessibility of health care and what quality is offered and then how what it costs basically. So the imbalance around that It's been around for a long time if you look at this on a global scale. And you can only really address it with the kind of sort of tech product that Valvoline is offering. So I think those are 2 sort of important points to sort of remember and that we sort of maybe have lost in highlighting when we talk about the company. But then obviously, their product, which is really a product that's really hard to replicate in terms of the platform and the AI. That's the heart of the business. And then the fact also that they have now proved up large revenues. We don't It's for many years, this was all about building product. And now since a couple of years, they've come up and they've been starting to produce large revenues with very large and serious global counterparties. And it's obviously Despite that, it's obviously still it still has lots of room to grow, and it is growing very, very quickly. And also then and this is really where we why it ticks all of our boxes is of network effects that it's margins can really scale here. And We sort of see it, as you know, that this is the one who has the most data wins. So Babylon sort of kicks in. Well, this quarter had 13,000 or over 13,000 daily consultations, which is up some 30%. And but also imagine the amount of data that, that provides a company compared to sort of a normal sort of GP practice, which maybe gets about the same number or not. I don't think even quite that per year. This sort of picks up maybe double of what a normal GP does per year if this picks up every day. So it's really that data drives the ability to sort of scale these margins. They can Babylon can add on clients and revenues at a much, much quicker pace that they can that they need to invest into technology and product. And then also remembering as this slide Tried to sort of map out, but this is not a new phenomenon now. This is not something that's come about during COVID, we see so many businesses come and try to raise money that sort of really were only started after sort of this world was hit with this virus. But this has been added for nearly better part of a decade and starting off in a very sort of advanced health market with the UK, taking that to a very rough health market with in Rwanda with basically no preexisting infrastructure Sure. And then scaling that further in Southeast Asia, now sort of going to nearly hypergrowth in the way they're taking on the world's largest health market in the U. S. And I think also it's worth highlighting and remembering now, especially now that the U. S. Has become such a large part of this company's business. It's how they monetize through their products. And it's really well, we have 3 products here, but It's really 2 products. One is this is what they call Babylon 360 or Babylon Value Based Care, which basically sums up or takes into account All the previous products that they have built and driven which has driven revenues for them in the past. And this is, of course, value based care. It's where it's the part of the insurance system where insurance companies outsource the full sort of care products to a 3rd party. And so a value based care operator will assume sort of The full sort of financial liability of providing care to the insured life And then has, of course, a very It aligns the system around proactive care. So it obviously wants to sort of bring down the cost and manage the cost of keeping people sort of out of hospital. Traditionally, that's done in a very traditional way with by bringing people into sort of a doctor's appointment. But so and but Babylon sort of brings a digital first approach in this, which just simply no one does. And this is enormous amounts of scale around this, which no one really sort of offers. And I think if you compare it, for example, for the to Oak Street Health, which is a $10,000,000,000 listed company in the U. S, and it's sort of Come it's taken a better part of a decade to build up an amount of covered lives shy of like 100,000. And Bob will sort of come to sort of the same rough and ready the same number of covered lives in not even half a year. So it gives you sense of the scalability of this. And the other real sort of Sirius products here is where they take this technology and they license it out to 3rd parties as they have done in Southeast Asia with Prudential and now also with TELUS, in Canada. And I think also, finally or importantly at Babylon is to sort of emphasize how this management team has always been good. Ardis have always had sort of a very strong team around them. But over the past sort of Well, quarter or half a year, it's really sort of built strength on the management team sort of to make this a very U. S.-centric company. And now This is sort of a world class team with a background from Google, Amazon, Expedia with lots and lots of experience of scaling Technology era in difficult situation, which environments, which obviously the health care market is, And then supported by doctors and also supported by an advisory board, which is world class in terms of Sort of the background, especially with an emphasis on the U. S. Side of things. So we put together these slides, and I thought they were good to highlight here for you and we'll continue to use them as we meet with new investors. And then like before, we map up what part of the U. S. Health care market is relevant for Babylon. It amounts to sort of a stunning $860,000,000,000 I mean, it's difficult to see them taking all of that, but they Given that they're pretty low in offering what they do, it's very good assumption that they'll be one of the leaders in taking on that market. With that, I'd like to sort of just touch say a few words around BlaBlacar and where we have invested more money during well, not quite during the quarter, but just After the quarter, now in April, we concluded that deal, which was an equity deal, a convertible deal of €50,000,000 and which is also combined with a debt part, which we didn't take part of, of roughly another €50,000,000 so leaving the company sort of very, very well funded. And we This deal was we've spoken about this, but it was led by us, but also brought in the Avito founders and former Alibaba employees. But I think this slide that hopefully you see now shows graphically how strong Blabla Car has been during the course of this COVID period. And that, yes, the market's down. Of course, it is. I mean, people have traveled much less during the pandemic, actually long distance. But it's important to note that BlahBlahCar is really sort of has really the contraction in their business has been much, much lower than all the other sort of travel companies out there with everything else from Airbnb to booking Expedia train line, seeing their revenues drop much, much more then for BRABLOCAR. And the background of that is, of course, that the long distance travel that has happened during this pandemic has happened in the car. People are much more possess a much higher sort of sense of control in traveling in a car than traveling on a train, for example. And so whatever travel has gone on, has gone on in the car. And that extends also to carpooling. And it's the carpooling part of LabCorp that has been sort of really holding up well and has given them this position of high relative strength. And so that's important. The other thing to highlight is also how despite them being global leaders in their field in terms of long distance travel through buses and car and carpooling. It's also it's so early days. So there so Blavacar's Current footprint in the bus space has an addressable market of about €3,000,000,000 But that's dwarfed by the part of the market that's still off the offline part. So The current footprint and I think it's a strong argument to say that all of this will move online or pretty much will all of this move online. But so if you clear that The addressable market on the bus side, I think, is $20,000,000,000 And then if you also assume that there are other geographies where their kind of product Fitz. There's further room for growth in terms of total addressable market all the way up to $60,000,000,000 So lots and lots of room to move up there. And the same goes for car for carpooling. And 75% of all long distance trips are in Europe are done by car. There's 2,000,000,000 car travels every year. And I think just interesting to highlight also that less than 2% of this travel is done through carpooling. So also enormous growth potential here. On average, there's 2 people in any car trip in the car in any car trip in Europe, whereas in Bloblight, it's 4 double. So you can also get a sense of the sort of how you maximize utilization of this sort of equipment by sharing a car, so important. And as we highlight in our report, I think it's also a strong point In this period where the world pretty much stood still in terms of travel, Plava still recorded 50,000,000 passengers over this last year. So that's a lot of passengers. And finally, on Blavacore, we have Members are continuing to rise despite the pandemic. So they're clocking in at 105,000,000 members. And you would all remember our rough and ready Sort of investment case around this that we argue that over time, we'll see each member generate on average €5 of net revenues to annual net debt revenues to blah, blah, car. And we, in fact, think that When we think about conservative, we think the number of members can has a growth potential of another 60%. So $160,000,000 I think, in fact, that may Prove too conservative and that we're actually looking at adding another 100,000,000 members to Blabla Car as they sort of penetrate larger parts of the countries the markets in the countries they're in and hence sort of reaching a member level of €200,000,000 which will then give them a revenue potential of €1,000,000,000 And that, of course, is We'll achieving that, we'll not see them remaining at the sort of €2,000,000,000 mark that where we have the mark today. I'm not saying that They're going to sort of go all the way up to the absolute levels of their closest peer, which is Airbnb at €100,000,000,000 But I think you sense the sort of the potential there. We Voy is continuing To develop well, the number of rides at the company grew by 117% in this quarter on a year on year basis. And interestingly also, the revenues now in March 2021, which It's very much a low season for this type of business exceeded revenues of June 2020, which is very much a high season. Humble, of course, that June was still in the early innings of this pandemic, but still quite an interesting sort of fact. And the estimation is also that the pan European market share of licensed scooters. It's that Voy has is 42%, which is a massive 80% presence in the U. K. In terms of licensed scooters. So really become the European over this past year and really become the European leader in this space. And so Yes. No, I think there's lots more to talk about. But given time running away, I think it's maybe better it's best to open up a question. So if the operator could help us organize that, that would be good. Thank you. Okay. There appears to be no questions registered at this moment. So I'll hand back to the speaker. Thanks all for listening in, and we'll see you in a quarter. You know where to find us if you want to talk about something in between. All right. Thanks.