Earnings Call: Q4 2020

Feb 11, 2021

Quarterly report

Hi, everyone, and welcome to join me, Johan Ejadepyr and Jurgen Rehmelt, as we are here today to present the year end result for XM Reality. Hi, everyone. And today, we're actually shooting this in the office and not the car. How come? Well, we have some full year metrics. And talking and driving is one thing, but to show PowerPoint slide at same time, it's maybe too much. So that's why we're here at the office today. And you guys can also see the interior here, which is nice. And before we dig into some of the metrics, which we intend to, I just have to say it's been a very good year, and I assume that you are pleased. Sure, sure. I'm pleased. It's a good year. It's a strong 4th quarter, so we see nice growth both in terms of Order intake, net sales and also annual recurring revenues, ARR. Yes. And I thought that we should take a closer look at The order intake, which was very good for the Q4. Right. We ended up just shy of €11,000,000 4th quarter. Full year 2020, we were just shy of €26,000,000 So It's good absolute values. And of course, the growth rate is also nice on the order intake. Usually, the 4th Quarter is a strong quarter and also this year. So it's pleasing, absolutely. In our last interim report, We introduced a new metric, the annual recurring revenue, and we also touched upon that in this report. And It's actually a very central metric for our business. And why is that? Well, it's essentially the Net sales that we start the new year with, so coming out of 2020 and into 2021, we're starting at €17,600,000. And this It means that we have achieved the growth during 2020 of 117% of our ARR. Right. That's the number that we have achieved going into 2020 and coming out of 2020. So it's absolutely the strongest metric We have and we should also remember that, that metrics also compensates for the churn that we have had during the year. What are the main factors behind this big increase? I think this stems from the Vision and Strategy work That we did this spring or the spring 2020. Obviously, we have the vision to become the most used Remote guidance. And to become the most used, we need to sell a lot of licenses. And to sell a lot of licenses, we need subscription contracts As opposed to hardware contracts, as opposed to proof of concepts or pilot contracts. So It's one of the strategies and part of the focus. Which we have apparently delivered quite well on. Yes. Again, I think that's maybe our strongest 2020 metric. And speaking of growing sales and top line, that's, So, of course, dependent on the market where we are acting as a company. And how would you describe the market where we are, which could be the augmented reality market per se. So we're in the market of enterprise software mainly. So if we take The total augmented reality market and then we take away everything, which is gaming and hardware. We get enterprise software remaining. Rough estimate on the CAGR or compound annual growth rate is 48% over the 5 year period. If we look on that growth rate only for 2021, it's going to be a higher number, almost up to 80%, 90%, I believe so. We're present in a very nice market. The market is growing. And That itself makes it much easier for companies like us to grow because we do not have to steal market shares from the competition to show nice top line growth numbers. So I think we're well positioned. Does this mean that we don't have any competition? Of course, we do have competition in this marketplace. And we're also seeing the market being a little bit more mature. So we see more competitive procurements where our customers are structured in the way they procure the service that we deliver. So you do some early tests with maybe 3, 4, 5 suppliers. At the end, you down select 3 and you make a Pure competitive procurement for those 3. And here, we succeed well, I think. We did well in 2020. I can hardly think of a single procurement round that we lost, which I think is A testament of the company, the service, the way we perform. To summarize, we actually have a quite nice market outlook with the fact that The market is maturing. We're no longer in the early adopters phase, more coming into a mainstream phase. But however, there are still plenty of market shares for us to capture. I think that's a good summary. And speaking about the market and development And looking back at 2020, the big thing everyone are, of course, talking about is the COVID-nineteen Pandemic, which we have previously mentioned, gave us some positive momentum. But now when there are talks about vaccines rolling out And hypothetically, that we could start going back to whatever we want to call normal sometime during the year. Does this mean that There's a backside for us? Or do you think we'll still have a good momentum? I guess the future will tell, right? But if I would be We can, I mean, we can still be satisfied with just looking back? How much do we think, looking backwards now, 2020, how much boost have we had from the COVID-nineteen pandemic and specifically then the travel restrictions. Yes. I think it's difficult to assess. But at least myself, I See this new behavior in the marketplace being permanent. Obviously, companies are Making money or earning money from implementing in our service, we see return on investment as short as 6 months, Which is, I think, extraordinary. And it's a no brainer to implement, more or less. And I do think that we'll see some continued acceleration or acceleration From the COVID-nineteen pandemic now being obviously prolonged for all of us, Also pushing companies into a new way of doing business or doing services or fixing their problems, meaning that I think no one wants to make the travel unless it is absolutely necessary. And everyone, they want to maximize The utilization of their expertise, both in terms of project management, quality, technicians, responsible engineers, So I think the spectrum is very large, and I really think now this will be a permanent behavior, Which also 70% of our customers confirm that it will be. So we've covered some different metrics and talked about the market. If you would wrap this up and try to summarize the biggest takeaways for our investors. What are those? Well, I think we come out of 2020 in a good situation, right? We had Net sales growth of 74% and the associated cost growth of only 7%. I mean, the Ratio between these two are really a nice ratio, right? So we come in strong into 2021, And we also act on the market, which is in a very nice growth rate at the moment. And we also see that The market in general and the customers in specific are really requesting our service in a different and Much more mature ways. So I really look forward to 2021. So without Saying too much about the future, we can at least summarize that we think that we have a very good start position in the year and then we'll simply see where we end up with the next interim report. Absolutely. And we'll work very hard, not only me, but the whole team. Yes, we will. With that said, thank you and goodbye. Goodbye.