Bigtincan Holdings Ltd

ASX:BTH

Earnings Call Analysis

Earnings Call Transcript 2023-Q1

[Operator]

Thank you for joining the Bigtincan Holdings Q1 FY 2023 Appendix 4C and quarterly report briefing. Today, I'm joined by Bigtincan's Co-Founder and CEO, David Keane; Global Financial Controller, Cyril Desouza; and Chief Product Officer, Stefan Teulon, who will discuss today's quarterly results release and provide an update with a Q&A session to follow. [Operator Instructions]

And David, I'll now hand over to you.

[David Keane, executive]

Thank you so much, Chloe, and welcome, everybody, to Bigtincan's Q1 FY '23 Appendix 4C and Quarterly Results briefing. And yes, thank you, Chloe, great to have you with us today. So yes, my name is David Keane, the CEO and Co-Founder of Bigtincan. And with me here today is Cyril Desouza, our Global Financial Controller; and Stefan Teulon, our Chief Product Officer.

For today's call, we'll be discussing the Appendix 4C report that was released to the ASX this morning together with a brief supporting slide presentation also released to the ASX. And just for folks, who have attended these briefings before, I'm actually in an unusual location. I am traveling today, so I don't have my usual background without visiting customers and teammates. But just great to be with you, even from a small laptop in a hotel room.

And before we begin the formal event, I would like to make a few remarks. Firstly, I want to send my thank you to our global Bigtincan team, who have again shown their ability to execute, delight our customers and deliver a strong result for this quarter, and to you that truly make this company great.

Now this quarter has been important for us as an anchor for our FY '23 results. And today, we'll be talking to investors about progress on both the cash component of the 4C. Now firstly, on cash, for me really pleasing was the record cash receipts result we're talking about today. And not just that it's a company record, but it comes in a traditionally weaker seasonal quarter. And yes, to some degree by a weaker AUD, but showing that Bigtincan's focus on enterprise customers and the work that's been done in prior periods to build the U.S. customer base is working.

And also to say that in this quarter, we were able to do that whilst maintaining sensible spend management. The company's focus is to continue investing in the core technology and team that we believe will create ongoing value for shareholders, but to always do that in the right way.

Now today, we'll also talk about the noncash updates for the quarter, including progress in that core technology. And today, you'll hear about a new product announcement that we are incredibly pleased to be able to bring to you today as well as talking about some new customer wins. And for investors, who have been following Bigtincan's disclosure on the LVT matter, we'll provide an update following the 4C detailed review.

All right. Let's get on to the results. So I'm going to bring up the slide deck, thank you so much. All right. Great. Let's jump to Slide 2. Thank you. So in terms of the highlights for the quarter, of course, those quarterly cash receipts coming in at $37.7 million, that's an increase of over 160% versus the previous year, and it's also up 20% quarter-on-quarter. Operating cash payments of $37.5 million, and that's inclusive of costs that related to one-off severances and associated costs of $2.8 million. And this is Bigtincan's fourth consecutive operating cash positive quarter. At the end of the quarter, the company had $35.3 million in cash and cash equivalents.

Now I think if we take those highlights as read, what I thought we might do is jump into Slide 3 and talk a bit about some of the overall progression that has happened during this quarter. Now often, we think about this first quarter, we think about as the summer quarter in the Northern Hemisphere is often being a quieter quarter. But for us, this quarter, I think is always insightful for investors. The company continued to achieve recognition in our market.

Now a couple of those recognition points I'd like to talk about today, I think, are really insightful for investors. The first one was that Bigtincan won in this quarter, the Product of the Year Award in the 2022 Sammy awards. Now the Sammy awards are an independent awards for sales and marketing type technologies, and Bigtincan was the only sales enablement platform in the category. So a really pleasing award, and you can learn more about the award as well as the way that system is set up with a link we provided in the 4C.

We're also the Software Reviews Champion, again, this time talking about how big Bigtincan's value and it's -- the way it makes people feel as a product was top right in the quarter that showed how we're continuing to build products that our customers love. And Gartner published their market guide this quarter where they talk about the market that Bigtincan operates in a global basis. And again, we received strong recognition and showed our competitive strength.

New logo wins for the quarter, a bunch of interesting wins there in terms of new customers coming online. I think one interesting one to talk about is Assurant. So Assurant is a Fortune 500 company. Interestingly enough, a partner of T-Mobile, another Bigtincan customer. And they're working with us to create and deliver experiences using Bigtincan Content Hub and Bigtincan XR.

And also XPO Logistics, which is a global company with more than 36,000 employees, chose Bigtincan this quarter to use our coaching technology, to initially use with several hundred of their customer-facing teams. We hope to be able to help XPO do even more as they build on their world-class transportation solutions and bring those to their customers all around the world.

So if we jump ahead and talk about on Slide 4, I did mention the Gartner Market Guide. And again, this is available for investors, free of charge, on the Bigtincan website. And again, 2022 is our seventh consecutive year of recognition from Gartner. And I think, again, Bigtincan was able to demonstrate that our technology ticks all the boxes for the requirements to build a successful sales movement solution for enterprise organizations.

But I think what's interesting for investors is to see Gartner's remark about where they see this market going. And if you look at their commentary, they talk about the market by 2026 leading to 65% of B2B sales organizations alone transitioning from what they're calling intuition-based decision-making to database decision-making using technology that unites workflow data and analytics.

And that's really what Bigtincan technology does. We're able to bring together capabilities that help our customers to be able to understand the way their teams work with their customers, and to help them to improve and create what we call the buying experience of the future that enables them to manage those customer interactions, provide value throughout the entire buying cycle and understand how these tools deliver revenue and help them to grow their businesses.

Okay. Let's have a look on Slide 5 because another thing that happened this quarter for us was the completion of the 12-month anniversary of the close of the Brainshark acquisition that many investors have been following at Bigtincan. Given that 12-month anniversary, we thought we should spend just a moment reflecting on the impacts of that deal and the work done by the global team at Bigtincan, who've been behind this progress.

So what have we achieved in 12 months? Well, let's start, of course, with product. On product, we've completed the integration of the Brainshark platform into Bigtincan's Intelligent Enablement Platform or IEP. And at the same time, we designed, built and shipped a totally new user experience for Brainshark based on the Bigtincan design system. Now Stefan will run you through more on the stats you see on the right of this slide. But what you can see is some of the real-world impact that those changes have made on real humans who use our system every day.

Talking about humans and teams. On the teams side, we've completed the integration of the humans. And as I often say, we are now one bigger Bigtincan. On systems, we have eliminated overlapping systems in that period and gained benefits from picking the best ways to build a more effective and more scaled business.

Now all of that translates to commercial benefits. And on those benefits look lots of longer-term benefits. But for these 12 months, let's talk about a few. So on revenue, we've said that there is no more separation from a revenue point of view with Brainshark products now simply part of Learning Hub. What we can tell investors is that in this quarter, Brainshark originated deals contributed 48% of total deals by number in the quarter, and that included cross-sell and upsell of Learning Hub to existing Bigtincan Content Hub customers, with gross margin in line with Bigtincan historic rates.

And on NPAT, as per our FY '22 full year results, the Brainshark business delivered $3.6 million in NPAT in FY '22. And retention, MRR retention rate has hit levels that have been historically achieved by Bigtincan. So overall, that's a successful 12 months progression. Now let me hand you over to Stefan who'll run you through technology and product developments in the quarter. Stef, over to you.

[Stefan Teulon, executive]

Thank you, David, and on to Slide 7, please. So we continue our journey, helping the world's best brands to create the buying experience of the future for their customers. And every release from our platform is designed to make the use of our solutions more effective and deliver more value to our customers. The metrics David highlighted coming out of the updated UI and Brainshark, I think, are a really great example of this. 34% and 97% increase in time and usage, respectively, on new UI pages versus old UI, I think further highlighted by a quite remarkable 650% and 90% increase of search and filter usage on those on those pages, a strong result.

On to Slide 8, please. In total, it was a busy first quarter. I'm really delighted with the work the teams have produced, shipping over 56 features and enhancements on the platform. As I do -- as I have done on previous calls, I'd like to call out a few highlights. We're continuing to expand the UI updates across Brainshark. We really hope to continue the trend of those good results that we just highlighted on those metrics.

We're bringing deeper integration across the hubs, new content share features in hub share rooms, extended public APIs, extended third-party integrations in Content Hub, connected to the conversational intelligence I mentioned last quarter, and new controls and governance features for our meeting hosts on Engagement Hub.

Next slide, please. As David mentioned, we do have a great announcement today. So Bigtincan has had a longstanding and successful partnership with Apple, and we're thrilled to announce the release of Bigtincan's Mac app built for Apple's macOS Ventura, bringing the best of Bigtincan's platform to the MAC. Let's check out a short video that showcases this release.

[Presentation]

[Stefan Teulon, executive]

Good stuff. Over to Cyril.

[Cyril Desouza, executive]

Thanks, Stefan, and good morning, afternoon and evening to everyone on this call. Starting on Slide 12, as you can see, depicts the progression of Bigtincan top line receipts over the last 4 years. Now as David mentioned, Q1 is typically a seasonality impacted quarter. However, in Q1 FY '23, the business was able to generate a positive operating cash result, which was in line with company forecast, and as we head into the busiest time of the calendar year right now.

Turning on to Slide 13 and looking into Q1 in a little bit more detail. So customer cash receipts for the quarter were $37.7 million, as David mentioned, which is a 162% increase over the prior corresponding period and is also a 20% increase over the last quarter. Now this included approximately $6 million of multiyear payments as customers continue to extend average contract length as the business focused as well on long-term deals.

In Q1, receipts were driven by renewals that were closed, billed and collected within the quarter as well as new and expanded deals. And in addition, a large portion of the $18.4 million that was in accounts receivable in June 2022 was collected and contributed to that total.

Moving to total operating cash payments for the quarter were $37.5 million. That's an overall increase of 94% over the prior corresponding quarter and a 20% increase over the previous quarter, which included payments related to the accounts payable balance at June, which flowed through as well as David mentioned, the $2.8 million severance and other one-off adjustment costs as the business pivots to a sustainable cash outflow position for FY '23.

Turning now to Slide 14. The net operating cash position was $300,000. When we adjust for the one-off item that I just mentioned, it basically gives an underlying net operating position of $3.1 million. Focusing now just on the right-hand side, the investing activities. We continue to invest in long-term software development projects as we believe these are essential for the long-term sustainable growth of the business. So we invested $3.5 million in this particular area. But please note that there was a reduction from Q4 FY '22 of $4.7 million, which represents a 25% decrease.

Bigtincan expects that operating payments, capitalized R&D, PPE, lease liabilities will adjust during this financial year to where we get to a sustainable position to be at cash flow breakeven. In Q1 FY '23, the higher USD did have an impact on our spending of AUD, and we are in the process of looking at the longer-term potential impact of the stronger USD. However, a note to investors is Bigtincan, throughout the year, does have a natural hedge as most of our receipts and our expenditure is denominated in USD. So for the quarter end, the business finished at $35.3 million in cash and cash equivalents and is well funded to execute on our company plans for FY '23 and beyond. Thank you, and I'll now hand over to David.

[David Keane, executive]

Thanks, Cyril. Thanks, Stefan. Great to see that Mac app. It's a pretty exciting stuff. Let's look ahead. So first of all, of course, just reaffirming our FY '23 guidance still early in the year. On the market side, I think whilst there remains talk about macroeconomic challenges, what is going to be insightful is the impact that the need to drive individual productivity will have on enterprise organizations. We see it every day, the ongoing need to make the most of every resource and particularly every human being, and no doubt tools like Bigtincan's products help to do that.

And on technology, as Cyril said, look, we continue to believe that investing in technology innovation will drive cross-sell and expansion and it's important to add value to the business through FY '23. And whilst we're here on that LVT matter for investors who've been following the discussions on the LVT situation, we wanted to use the 4C business update to provide some clarity for the market. For those not aware, Bigtincan submitted its confidential, nonbinding, indicative and conditional proposal on the LVT business on the 3rd of October this year.

Now since then Bigtincan has received very limited engagement from LiveTiles beyond acknowledgment of the proposal. Now whilst genuine engagement from LiveTiles and the opportunity to undertake due diligence -- sorry, excuse me, without genuine engagement from LiveTiles and the opportunity to undertake due diligence, Bigtincan is unlikely to be in a position to make a formal proposal, but reserve the right to do so.

Okay. That's it on that. Let's do some Q&A. And of course, one more thing, always, if we turn to Slide 16. We were asked by a number of you following our FY '22 results to bring back this slide. So those who didn't get a chance to get the -- we're calling the Bigtincan trophy to do so today. Now to do that, all you need to do is to scan this QR code from this slide on your phone and enjoy it. And I've been told by our team that for the AGM, attendees will be able to expect something special and unique and even more interesting as we work to showcase our technology developments to our shareholders. Okay. That's it for the formal portion. Let's jump into any Q&A.

[David Keane, executive]

Okay. First question, talk about -- I'll hand some of this to Cyril. Q1 receipts are annualizing at 151%, well ahead of FY '23 ARR. What's driving that strength? What should we expect in terms of seasonality. And I think as people who know Bigtincan understand that there is some seasonality in the business.

I'll start by saying, look, we had a good start to the year with customers renewing, and that's really helpful. We did a bit of an announcement to the market early on about some of the positive progression in those early renewals. Cyril, any commentary on that?

[Cyril Desouza, executive]

Yes. I mean I was just going to mention that there were multiyear payments of $6 million. So when you back that out of the total receipts of $37.7 million, get to close to 32x full year view around that high $120 million mark, which is where we're intending to be at this point in time.

[David Keane, executive]

Okay. Further question about costs. So similar thing about costs. We did talk about the FX impacts and making sure that investors are clear that the stronger U.S. dollar does have an impact, of course, both on spend and on the cash receipts. As Cyril mentioned, Bigtincan has had and continues to have a natural hedge in the way our revenue and our spend is received. And of course, the seasonality in payments, as we just talked about, that happens too, based on when bigger deals do close. Any more comments here on the cost side of things and the foreign exchange impacts?

[Cyril Desouza, executive]

Yes, I was going to -- I mean there's definitely a natural hedge over the year, but obviously, depending on the quarters, the cash receipts will come at different periods. But this -- for this Q1, it was pretty much a natural offset, but we'll monitor that as we go throughout the year. One thing I will note about free cash flow, as James Bales' pointed out, we are on our path towards that because Q4 FY '22 free cash flow result was a negative $5 million. But you can see in this result, we are narrowing that gap and is close to just under $4 million. And when you take into account the $2.8 million severance and the one-off, we're definitely on our path, as Dave and I both mentioned in the presentation.

[David Keane, executive]

The question here from Owen Humphries is about the receivables at the end of Q1. Look, we don't separately publish those. Cyril, do we do it? Is there any insight maybe you can give in terms of the trajectory there?

[Cyril Desouza, executive]

Yes. Historically, Q1 -- the end of Q1 is quite a seasonally hit quarter. The accounts receivable usually will start to accelerate as we get to the end of December. But to answer your question, Owen, pretty steady, pretty normal as we normally have had in the past.

[David Keane, executive]

Yes, there's a question here from someone asking about how you can run through how SaaS contracts are taken into account of the U.S. dollar increase. If the currency stays at USD 0.65 or so, will renewals drive revenue upgrades?

I mean Bigtincan does this in what we see is the correct way. So when we book a sale with a customer at the time we deliver the service, we will do the exchange rate calculation. And so then we have a whole bunch of customers over a year, some of them are on 12-month agreements, some of them are on multiyears that Cyril talked about, some of them on shorter periods. And whenever we do that provisioning or upgrade or new sale or whether we're doing a renewal, we would then change the exchange rate. But we don't change the exchange rates unless there was a -- those conditions occur. So I think, look, it's natural. As we said, there are some benefits in terms of cash. There'll be some customers that come through that do renew at a lower AUD higher USD rate, but it's going to be a natural smooth trajectory. And Cyril, do you have any commentary about that?

[Cyril Desouza, executive]

Yes. I mean I was going to say, depending on -- as David said, when we book the deal, some of the revenues already been released now and deferred from last year's booking. So we will get some upside if it does stay at USD 0.65, but we don't usually just straight line that across all our renewal base. It's only the ones that we close and renew during the period, so that will get the upside.

[David Keane, executive]

Thanks, Cyril. So a question here about deteriorating economic conditions, how they have impact on customers' intentions or lengthening decision-making cycles heading into Q2?

We didn't see anything material in Q1. Heading into Q2, look, we've still got a bit of time to go. It is a busy period, the end of the year. So I can't give you any more comment on that now. The December period is always important for Bigtincan, and has been historically. So look, I think that a lot of -- it is going to be an interesting thing to see how much the focus on individual productivity drives our customers to spend more or not, and we've got a lot to see as the market continues to adjust and adapt to these unusual circumstances. But the best that the company can do is make sure we're well prepared for that, and we have the best tools we have to adjust.

A question from Luke McGrath. Can you comment on increase in staff cost? Is it clearly an element of currency, yes, in the higher number versus fourth quarter? What's the difference? I mean, Cyril, do you want to comment about staff costs?

[Cyril Desouza, executive]

Yes. I mean some of that, Luke, related to the $2.8 million in terms of severance payments that were into that bucket. And the other part of the severance or the one-off adjustments were in the admin. So that was mainly the main driver in terms of staff increased costs there.

[David Keane, executive]

We've also got a question about the MAC app. I mean, Stefan, what is -- obviously, that's something we think is going to be pretty helpful for our customers. How do we see the MAC outfitting with the existing solutions we have?

[Stefan Teulon, executive]

Yes, great question. Its companions are iPad and iOS app. Bigtincan has historically been very strong on mobile. It was the really pioneering sales enablement on mobile devices. Apple's converged MAC and iOS systems together so that you can have perhaps the work across compatibility. Bigtincan has partnered with Apple to make sure that as Apple reaches across roads that we're able to deliver that MAC app iOS and iPad experience seamlessly as well.

[David Keane, executive]

All right. Look, we've got a bunch of other questions, but I think that's about it for time. Thank you again for attending the Q1 FY '23 results briefing. We appreciate everyone being here. Looking forward to having you all attend as shareholders at our AGM coming up at the end of November, and I appreciate the engagement. Thank you all so much.

[Operator]

All right. Thank you all for joining. And a copy of today's presentation will be available on the Bigtincan website in the coming days, and we look forward to hosting you next time. Thanks, everyone.