Bigtincan Holdings Ltd

ASX:BTH

Earnings Call Transcript 2021-Q2

[Jane Morgan]

Well, good morning, and thank you for joining the Bigtincan December 2020 Appendix 4C Investor Briefing. My name is Jane Morgan, and today, I'm joined by Bigtincan's CEO and Co-Founder, David Keane, who will be providing you with an overview of today's report. David, I'll pass on to you now.

[David Keane, Co]

Thank you, Jane. Welcome, everybody, to Bigtincan's December 2020 Appendix 4C quarterly report and business update investor briefing. Yes, my name is David Keane, the CEO and Co-Founder of Bigtincan. And joining me here today is Cyril Desouza, our Global Financial Controller; and Vivian Stewart, our Chief Operating Officer.For today's call, we'll be reviewing the Appendix 4C report and the associated quarterly business update that was released to the ASX this morning. These documents are available on the ASX website or on our investor website at investor.bigtincan.com. Let's start by talking about the overall economic environment within which Bigtincan is operating.Now the December quarter was an interesting time for the world economy is that the pandemic, the U.S. election and overall market uncertainty over vaccine timing was a drag on economic activity. However, with the new U.S. administration in place and developing vaccine news, we are starting to see a more positive view of 2021. Now time will tell how fast that will impact the market overall, but the strong results you'll hear about today and our customer interactions are telling us that this growing certainly is helping our customers' view of the future. Now onto some details for today. The December quarter continued its trend of being a traditionally strong quarter. Our customers told us during the quarter, they really do continue to see a bit of move to a more digital and remote working world. It is important in how they empower their customer-facing teams, and that will continue for the foreseeable future. Humans in business need new ways to learn and develop, engage and share in ways that are more flexible than ever before. And all this is driving the move towards SaaS software as the platform of choice for enterprises across the globe, and that's supporting Bigtincan's growth.As we've said before, we believe the company is focused on mobility and digital selling, together with our growing set of household name customers, puts the company in a strong position to take advantage of this generational change. So highlights from operating activities for this quarter. Let's start, as usual, with ARR progress. Overall, Bigtincan's annualized recurring revenue grew 50% to $48.4 million, with strong growth in both organic ARR and acquired ARR, including contributions from the acquisitions of Agnitio and ClearSlide. Organic ARR was $40 million at the end of the quarter, and acquisition ARR was $8.4 million, made up of AUD 6.85 million or USD 5.2 million from ClearSlide and $1.6 million from the Agnitio deal.On our Land and Expand progress, interesting stat for this quarter. 21% of Bigtincan's total active customer base expanded in first half FY '21. That's compared to 16% in the prior corresponding half. I think this shows the strong product market fit that our technology has and the relevance overall of our technology suite.On cash receipts, highlights for this quarter. Cash position is strong with cash receipts of $10.5 million, up 17% from the PCP and 132% from Q1. And I'll note here, that $10.5 million included only a very small contribution from the Agnitio acquisition and 0 from the ClearSlide acquisition completed right at the end of the half. Operating cash spend of $11.6 million, with cash at the end-of-period of $65 million if you net out the acquisition payments and the receipts for the institutional raisings, which we received in early January.So Q2 was also a very busy operational period for the company. Firstly, we released our full 2020 software version to the global market. Fall 2020 added a bunch of new features. I thought I'd call out a few of those features for you today. Bigtincan 3D v2 extended our augmented reality capabilities into the learning and training market. The in-app AR camera can present augmented reality objects into a mixed reality environment by placing objects as well as delivering interactive overlays on real objects. And this is perfect for publishing training materials that interact with the exact environment in which users need that knowledge but can't physically get to.Our user metrics and analytics dashboard for shared content was enhanced during the quarter, really enabling new ways to take advantage of this most used content sharing feature. These updates allow our users to track engagement across individual pieces of content right down to the page level and the recipient's engagement with that content. And insights from this engagement inform our users about when is the next best touch point for that particular customer.Also in the fall release, we released new presentation creation tools for users. And these offer both content discovery and presentation features that our users use every day. These innovate on Bigtincan's search and presentation capabilities, and they really drive both adoption and expansion in the use of our platform.And one that we're seeing having a big impact already is the enhancements in the fall release in our manager tools. These are used for grading a team's training performance. And this caters to the simple reality that managers are being separated from their Teams and where our grading and activity dashboard now gives the insights and real-time metrics on how the team is performing. Now this, together with our existing coaching features, enables these dashboards to reduce the time needed to follow up and give feedback instantly for managers.Now the full release also continued our focus on internationalization. We added 6 new languages in the period and a total of more than 50 new features in the fall release.Now investors should expect that Bigtincan will deliver our winter release during Q3 FY '21.Now in the quarter, the company continued our strategy [ of considered ] M&A, and one aim of which, of course, is that acceleration in our product and technology road map. And we did that through the completion of 2 acquisitions: Agnitio in Europe and ClearSlide here in the U.S.A., both technology sets adding to our remote selling strategy. And we continue to see that, that M&A is an adjunct to organic growth. It adds technology, people and market access that helps to underpin future growth. And this strategy is allowing us to capture a growing share of our market at what management considers a lower level of investment that would take through that otherwise in future periods.The M&A program has been delivering scale benefits in our go-to-market teams, our customer care groups, finance and other areas. And we see it offering benefits to investors who've done an accretive multiple as was the case with both ClearSlide and Agnitio in this period.Now to support the ClearSlide acquisition, which was our largest to date, the company conducted a $35 million institutional raising exercise that completed early January of 2021. Now I think it's important to understand that whilst you'll see Bigtincan continue to move quickly to tie together technology from acquisitions and that's back-end and front-end code, platform and hosting and expertise, so we can scale our engineering groups.We also know it's important to maintain ways for customers to buy the offering that they want. And we've seen some strong success from organizations like salesforce.com and ServiceNow and others who've had benefit from that strategy. Now Bigtincan we call that our on-ramp strategy, where a customer can choose a part of the platform that works for them and then they can add on other components over time. And this is a strategic advantage, and it's been helpful in delivering the expansion revenue that we saw in first half FY '21, whereas we mentioned, 21% of Bigtincan's total active customer base expanded compared to 16% in the prior corresponding half. I think that really demonstrates the importance of the internal product development and technology acquired through M&A.Now we will be announcing details on how Bigtincan customers will be able to buy and integrate ClearSlide on bigtincan.com starting soon, providing another on-ramp for the business. There are more to come on this. I want to say, the team is executing well on this strategy. Now to add to our remote selling set of offerings. During the quarter, Microsoft announced the ability for apps to be integrated into the Microsoft Teams' remote engagement platform. And they had chosen to work with Bigtincan to integrate the Bigtincan's software into the Teams' application. Well, I'm pleased to confirm to investors that the first release of Bigtincan's Microsoft Teams is now available on the Microsoft Teams app store. And more information is available for investors on this product at bigtincan.com.And that partnership with Microsoft and our 2 strategic acquisitions in the quarter, together with our internal development teams work on this area are enabling us to take a leading place in remote selling. We look forward to strong contributions to our business from remote selling in FY '22 and beyond.Now on to some customer wins for the quarter. The company continued to win competitive deals and demonstrated ongoing expansion with existing enterprise customers with new accounts across each geography, including wins with Lexmark, Allurion, SAGE Publishing and Kofax; and expansion deals with Thermo Fisher; Pacific Life; WL Gor, yes, that's the Gor from Gortex; GUESS Clothing; and Breville. One further example in the quarter is Bigtincan expanding its relationship with Waters Technology, choosing to deploy Bigtincan's software in 33 countries. That's really showing the ongoing impact of sales enablement technology in today's economy.So on to overall performance against guidance. With our ARR at $48.4 million at the end of December 2020, Bigtincan expects to be at the top end of our FY '21 guidance of $49 million to $53 million, assuming, of course, reasonably stable exchange rates and expected stable retention in our business.Now I'm going to ask Cyril Desouza, our Global Financial Controller, for some remarks about the cash details in the 4C. Cyril, over to you.

[Cyril Desouza, Global Finance Manager]

Thank you, Dave, and good morning to everyone. Let's start by reviewing the cash receipts. Customer cash receipts for the quarter were $10.5 million, an increase of 16% over the prior corresponding period, up over 26% when excluding multiyear collections and increasing 132% from Q1 FY '21. Cash receipts growth for the quarter were driven by strong ARR increases in both new and expanded customers during the period. In addition, during the quarter, the company received $37,000 government grants with making a total of $501,000 for the half.Total operating cash payments for the quarter were $11.6 million, in line with Q1 FY '21 cost of $11.5 million and an increase of 12% over the previous corresponding period, which resulted in an operating cash loss of $1.1 million, a reduction of 14% compared with PCP. During the quarter, we continued to invest in software development by capitalizing costs of $1.1 million. These relate to software that will eventually be marketed and sold and have achieved technological feasibility and also software for internal use. They are long-term strategic programs that support our ongoing investments in data science and AI technologies. These costs account for approximately 25% to 27% of our total product development spend and are in line with similar percentages for FY '20.At the end of the period, working capital remained strong, with both accounts receivable and accounts payable in line with seasonality of prior years. The company did not experience any material changes in accounts receivable in the form of extended terms requests from our customers, reflecting the enterprise nature of the business.As at December 31, 2020, Bigtincan had $33.4 million in cash and cash equivalents, pro forma cash of $65 million post settlement of the acquisitions of Agnitio and ClearSlide and also the 32 institutional capital raise that was conducted in December 2020 and settled in January 2021. The company is well funded to execute on our growth plans as we continue to deliver shareholder value. That's all from me. Thank you. Back to David.

[David Keane, Co]

Thanks, Cyril. Look, I'd like to now ask Vivian Stewart, Bigtincan's Chief Operating Officer, to provide a few remarks about our investor programs that we conducted in Q2 FY '21 and also to outline for you the programs that are part of our strategy to expose the company to more investors in Australia and around the world. Over to you, Vivian.

[Vivian Stewart, Chief Operating Officer]

Thanks, David. In the December quarter, Bigtincan successfully conducted its first fully virtual AGM, which was well attended. All resolutions were passed, and we progressed the end of this calendar year with strong support from our growing investor base. In early November, we conducted the company's first ever Product and Technology Investor Briefing event. This webinar introduced some of Bigtincan's key product and technology people as well as walking through how we build our solution, who actually uses our software and how they use it with key case studies. If you couldn't attend, it is available at investor.bigtincan.com, and it's a terrific way for investors to understand our latest innovations. Moving out to our investor engagement program. I thought it might interest you to note that we now have over 18,000 shareholders, and as such, we are uplifting again our Investor Relations efforts this year with a series of additional activities planned to continue to educate investors on the Bigtincan's story, and we look forward to holding another Investor Product and Technology Day in April this year. You can also expect to see new information on investor.bigtincan.com about the company and the market during the quarter. That's all from me. Thank you. Back to you, David.

[David Keane, Co]

Thanks, Vivian. I do hope you do get a chance to visit investor.bigtincan.com and watch the Product and Technology Investor Day presentation. And we're very much, the whole team here, looking forward to seeing you again in April for our next Product and Technology Investor Day.Now there is one more thing that I wanted to talk to you about in today's call. Post the end of December 2020, we conducted and announced a small technology acquisition that's called VoiceVibes. Now VoiceVibes created one of the most advanced audio analytics engines in the market. It was built by a team of speech and linguistic data science experts and Ph.D.s and was supported by U.S. government funding to create the future of voice analytics for coaching and engagement analysis. Now this is a great example of Bigtincan's M&A strategy, how we see opportunities to accelerate our road map and provide real value in the business.Now VoiceVibes' data set itself is one of the largest data sets that can measure human perceptions of voice. This data set is used to figure out how humans perceive emotion and intention from your voice. Now independent study by Towson University showed the success of the Towson University VoiceVibes' model. It was able to predict with 97% accuracy 11 what they call vibes, so way the human would perceive a voice, and they named and created 20 vibes, which they could predict with 90% accuracy based on that data set and that proprietary model headed by VoiceVibes. Now we see owning this data set as another step towards the company's strategy in building out the overall data set. We spoke a bit about that at our AGM and the progression of the company is moving as it continues to add more capabilities and usage of the platform. And it really enables us to be in a strong position in the coming AI-driven world. These data sets are the foundation for AI, and we see Bigtincan continuing to add to that data set over time, which is adding value for the company and for investors.So thank you all again for attending this 4C briefing. And for investors who do follow Bigtincan, we're looking forward to seeing you again with our half yearly results later in 2021. So now back to you, Jane.

[Jane Morgan]

Thank you, David. So we will now answer a few investor questions that have been received with the remaining become available. And to submit questions, please use chat function at the bottom of the screen.

[David Keane, Co]

Okay. I can see one here. The question from Owen Humphries. The question is -- I'll read it out. It says, well done. What were the currency headwinds to ARR in first half FY '21? It is the first part of the question. So in terms of currency, maybe I'll have Cyril give us a bit of a review on how we see the currency implications.

[Cyril Desouza, Global Finance Manager]

So being an enterprise customer and having long-term contracts in place, we've got less of an impact in terms of fluctuations. So whilst we were impacted slightly by ARR, the ARR would have been higher, we, at this point, don't see it as material. Also, the results that are coming out in 4 weeks' time will highlight exactly what the foreign exchange movements were.Just another point in terms of FX. Our net operating cash, there's a natural hedge, whereby the -- most of the [ costs ] are denominated in USD, which are offset by a lot of the cash receipt impact. So yes, but more of the FX will come out within 4 weeks' time.

[David Keane, Co]

Thanks, Cyril. The second part of that question talks a bit about the percentage growth from new versus expanding. So certainly, we'll provide more detail for that again in those half yearly accounts. I think it's pretty clear, though, from the data point, 21% of our customer base expanding in the half, and that's up from 16% pre-pandemic. That, I think, is an important stat for investors to give you a bit of a view of the success the company is happening with the land and expand model. I think you'll see that as a nice pleasing result, and the more we can expand our existing customers, the better we can do overall. Question about sales cycles and changes. Look, I think the pandemic has been unusual. And certainly, I think I spoke to a bunch of investors during 2020, talking about some of the uncertainty over where that would all pan out. Definitely some customers impacted, making a slightly slower decisions, thinking more cautiously. And other organizations are really accelerating as they sort of need to digitize and mobilize their teams being critical for their business. I still think we have a combination of that. There's a question here also about [ items ] for organically achieving guidance. I think we tried to provide detail in the 4C today about the organic and M&A position. I think it was a pleasing result for the company, both in terms of the progression of the organic business as well as some strong progression with a couple of really helpful M&A deals.Question here from Luke MacNab. Current cash balance earmarked for acquisitions. Look, we're always looking at the market to understand where we can execute on the company's M&A strategy, which we talked about, I think, in detail today. Where we do see opportunities to be able to accelerate the road map or get a particular competitive advantage, we'll continue to see that as being one of our strategic levers the company will pull. But overall, the M&A strategy fits into the overall company vision. We believe we can create a leading platform on a growing global market that's going to help, we believe, many thousands of organizations to solve the problem they're having connecting their customer-facing teams with a smarter and more informed buyer. And from a company point of view, it's important that we have the flexibility to be able to take advantage of market opportunities where they exist as well as continue to fund the organic growth engine, which is the real heart and soul of this business. All right. Well, thank you. We've actually gone longer than our 20 minutes, Jane, that we set aside for this call. I really appreciate everyone giving us their time today. And again, looking forward to speaking to you all at our half yearly results.

[Jane Morgan]

Thank you.