Bigtincan Holdings Ltd

ASX:BTH

Earnings Call Transcript 2021-Q4

[Jane Morgan]

Well, good morning, and thank you for joining the Bigtincan investor briefing.I'm Jane Morgan. And today, I am joined by Bigtincan CEO and Co-founder David Keane, who'll be running through today's presentation.David?

[David Keane, Co]

Thank you, Jane. Welcome, everyone, to Bigtincan's June 2021 appendix 4C quarterly report and business update investor briefing.Yes, my name is David Keane, CEO and Co-founder of Bigtincan. And with me here today is Cyril Desouza, our Global Financial Controller; and Vivian Stewart, Bigtincan's Chief Operating Officer. For today's call, we will be reviewing the appendix 4C report that was released to the ASX this morning, together with some presentation slides that go along with that report. And we'll be using those materials to provide you with an insight into Bigtincan's results. And those materials are available on the ASX as well as on our investor site at investor.bigtincan.com.Okay, now on to some details for today. Let me start by saying that Q4 FY '21 was a strong quarter for Bigtincan, as we again demonstrated the benefits of our global enterprise [ focuses ]. And so yes, we were pleased with the results this quarter, as Bigtincan continued our progression as a global leader in one of the fastest-growing areas in enterprise SaaS. And today, we'll review those results in detail, but we'll also spend some time talking about our market and the growth opportunities for Bigtincan into the future.And most importantly, before we begin, I want to send my thank you to our entire global Bigtincan team. They've again shown their ability to execute, delight our customers and provide value to investors. And of course, thank you to our amazing customers who put all this technology to work.So let's get on with the results. Now for those that are new to the BTH story, I wanted to introduce our company and talk about, I guess, some of the impact we're having on the world's leading brands as they work with us to use our Software as a Service platform to create the buying experience of the future for their teams.So to do that, a few numbers about Bigtincan. We have more than 1,000 customer deployments around the world and we have users using that software in more than 60 countries, and that's a real global customer base. We have more than 0.5 million licensed seats now in the Bigtincan network, which is literally growing well. We also have established routes to market for our business both here in North America, where I'm speaking to you from just in our office just outside of Boston, Massachusetts; as well as locations around the world. And we work in a large market opportunity with a $10 billion-plus total market size [ as base ]. And there are more than 230 Bigtincan humans around the world dedicated to our vision of creating that buying experience of the future and helping every human being perform better in a world that is more digital and more remote than ever before.So as detailed in the 4C, this period, Bigtincan delivered strong operating cash flows. We achieved 48% ARR growth over last year, reaching $53 million. And we're pleased to inform investors that we expect FY '21 revenue to close in excess of $43.5 million. That's a strong result from the originally issued guidance of $41 million to $44 million that was then upgraded to $43 million to $44 million earlier this financial year. And that revenue growth is roughly 40% revenue growth over FY '21 and certainly, we believe, notably strong given the fluctuations in the Australian dollar during this financial year. Now today we'll look at the constant currency impacts of those fluctuations, which I believe will provide confidence to investors that Bigtincan is on track to continue our progress, with the ability to adapt to changing market conditions.Let's talk about some more highlights from the 4C on the next slide. So -- yes. So cash and cash equivalents was $56.7 million at the end of the period, so a pleasing result for the company. Let's have a look at the next one. Let me jump back, yes. We'll jump back to ARR.So we talked about ARR being up 48% over end of June 2020 to $53.1 million. I want to talk a bit about some of the sources of that growth, if we just jump forward to the sources of growth slide there. So the growth in ARR was driven by new wins and expansion that was powered by the multiple hubs product strategy, plus the successful integration of the ClearSlide acquisition. They were important in this quarter. In the 4C, one point we see as insightful for investors is that initial success, what we call the Engagement Hub product, which delivered $1.3 million in additional ARR in the 6 months or second half of this financial year. And it shows why these M&A activities can be tools to accelerate the core growth of the company.And more on that ARR, that's a second half ARR growth of $4.8 million. That's up almost 20% over the $4.2 million organic ARR growth in first half FY '21. And overall FY '21 ARR organic growth of $9 million. And this is an outstanding result for Bigtincan given the global market conditions over the last 12 months. And we'll talk a bit more about that currency impact and talk about constant currency results later and how that impacts the overall totals, but yes, this was a good result for the company.Now on products. We'll talk more about that shortly, but this quarter was important, as we built on that hubs strategy and introduced a bunch of new technology behind those hubs. And the team works really hard to communicate that product strategy to our customers around the world but also to our investors, notably at our investor product and technology event that was held this quarter. And that event is available to stream now on investor.bigtincan.com, and I highly recommend you watch that video if you're interested in learning more about the company and our products. I'd love you to look at some of these examples of amazing products, including our VoiceVibes voice analytics offering and our updated [ manager view ] learning tools that are featured in that video. And these are just 2 of a set of technologies that are really unique in the market and delight our customers. One measure I like to use to review that for investors in terms of how we're progressing is to look at how customers use and expand on our technology. Some new customers this quarter include Fujitsu, Air France and Uber Eats. And we've seen sort of expansion this quarter from a bunch of customers, including Allurion, British Telecom, Genentech, Peters Surgical, sales publishing (sic) [ SAGE Publishing ] and W. L. Gore.So overall, that land-and-expand model that we've talked to investors about before really is showing the benefits when Bigtincan approaches these larger markets globally. And that's work that's been done here in the U.S.A. to prove out that model, with the business already established, and it's something we plan to replicate in other geographies in FY '22.So to ground us on that hubs strategy and how those hubs work, we asked one of the previously existing and expanding ClearSlide customers, now Engagement Hub customers, Robbie Hebert, Managing Partner at Green Home Systems. Green Home is an amazing company. They are bringing American-made solar products to more than 25 states across the U.S.A. and using the Bigtincan ClearSlide product as a core part of how they drive that success. As we always do when we're talking to investors, we'd love to show you how our customers use our product. So Robbie, over to you to tell us more.

[Robbie Hebert]

Partnering with Bigtincan was a game changer for us. We expanded and grew in 2020, and the primary reason for that is our relationship with Bigtincan and what they provide for us.Hi. My name is Robbie Hebert. I'm the managing partner at Green Home Systems, and I've been part of the management team since our inception.We sell solar to homeowners and businesses in about 25 [ U.S. ] states. 8 years ago, we were a local regional Southern California company whereby the sales reps would go out and meet and try to earn business face to face. We can't afford to have salespeople spending 50% of their day not on the phone selling. Thankfully, an old colleague of ours had been seeing praises about ClearSlide, so we gave it a shot, and 8 years later, we're still using it. Somebody once asked me how ClearSlide incorporates into our sales process. And I thought about it for a second, and the answer was it is our sales process. It literally is the backbone of our sales process, period. Nobody has been able to come along and do what ClearSlide can do [ with its ] process and the engagement and the mass e-mails and the data tracking for management and et cetera, et cetera.ClearSlide, 100%, is responsible for giving us back about 4 hours of our time per sales rep. We're able to double our sales simply because we're able to get twice as much done in the same 9-hour day. Essentially it just expands our reach by about 10x in terms of number of homeowners, so if you do the math, it's increasing revenue by conservatively 40% on an annual basis. And it's just so simple. I could train a 10-year old how to use ClearSlide in 3 hours. We couldn't be happier.

[David Keane, Co]

Thanks, Robbie, for sharing that story with us.Now that -- the hubs strategy that we introduced in that investor product and tech event this quarter is helpful here in terms of how we think about that strategy and where these hubs come on stream for the business. The best way to think about the hubs is in a similar way to how software organizations like Salesforce.com grew their offerings with a cloud strategy. The hubs strategy is allowing our customers to purchase more than 1 hub and do so in an integrated way; for example, purchasing our content hub with our learning hub or our engagement hub with our learning hub, et cetera, or of course, hopefully, all 3 hubs. So we see growth opportunities inside each hub and new potential hubs coming on stream in FY '22.Now before I hand over to Cyril Desouza, our Global Financial Controller, to take you through the results in detail, I thought we could talk a little bit more about that strategy and why we see the platform underneath those hubs making such a huge difference for our customers. We continue to invest in ensuring Bigtincan has the core underlying technology that drives that platform. We'll talk about it later on, but we continue to protect that with patent applications and work that our team does around the world to build the very best infrastructure for our business.All right, Cyril, over to you to run through the details.

[Cyril Desouza, Global Finance Manager]

Thank you, David. And good morning to everyone.Let me start by reviewing this quarter's cash position. Customer cash receipts for Q4 FY '21 were $14.7 million, an increase of 20% from Q3 FY '21 and of -- and an increase of 40% over the prior corresponding quarter. If we excluded prepayments from any quarter since the IPO, this quarter represented the highest cash receipts in the company's history. This highlights the success, and David has pointed it out, of our land-and-expansion model, as seen by some of the customer wins and expansions during this quarter such as Air France, Uber Eats and British Telecom as we continually seek to grow a long-term sustainable business.Total cash operating payments for the quarter were $14.7 million, in line with the cash receipts, which represents a decrease of 7% over the prior quarter and an increase of 19% over the prior corresponding quarter as you factor in the operating costs such as ClearSlide and Agnitio, which were acquired during the financial year. Also please note in this quarter that we included acquisition costs of $200,000 related to ClearSlide; and $300,000 worth of acquisition costs related to Vidinoti, which was announced on 17th of June earlier this year.Overall, this quarter ended with a net cash position from operating activities of $22,000.I'd like to highlight in this cash report that in the prior year, next -- on the next slide, that -- total cash collections were $39.7 million, of which $4.5 million related to multiyear payments, with $4 million related to services in FY '21 that would have been received in FY '21. Adjusting for these multiyear payments, that would have increased our cash collections by a total of 29%.Moving on to the next slide. Another way of thinking of these results is to look at the total collected of $41.9 million, representing a 117% conversion against the initial starting ARR of $35.8 million. This is consistent with the prior years of FY '19 and FY '20, demonstrating strong execution of accounts receivable and our enterprise-focused business model benefits. And when considering with adjustments for multiyear payments, it actually represents a 125% growth.Moving to the next slide. And as David has discussed, we expect our audited revenue to be in excess of $43.5 million, representing an annual growth of over 40%.Moving now to ARR. As David mentioned, ARR for the period was $53.1 million, an increase of 48% from the prior year of $35.8 million. This represents a compound growth rate of 51% over the last 4 financial years. The split in ARR was pretty much 50-50 in terms of new wins and expansion, with full disclosure of all the other metrics and retention rates to come with the results in August. Since the majority of our ARR is generated in the U.S.A. and reviewing the impact of foreign exchange by using the FY '20 average rate against all the transactions in FY '21, ARR was impacted by 4% on a constant currency basis and would have been $55 million, up from $53 million, with the organic portion [ rate ] being 29% to $46.1 million on a constant currency basis.Now I wanted to point out as well, within investment activities, Bigtincan continued its program of investing in long-term development projects by capitalizing $2 million for this quarter. These relate to software that will likely achieve technological feasibility and will be eventually marketed and generate future revenue opportunities. They are long-term strategic programs and intangible assets that support our ongoing investments in data science. For FY '21, these costs represent 30% of total product and engineering costs, which is slightly higher than the percentage that we had in FY '20.As at 30 June 2021, Bigtincan held $56.7 million in cash and cash equivalents, net of the final consideration payment of Vidinoti of $500,000. The company is well funded to execute on our growth plans as we continue to deliver long-term shareholder value. That's all for me. Thank you for all attending, and looking forward to seeing you all at the full year results.Back to you, David.

[David Keane, Co]

Thank you, Cyril.So in summary, this quarter was another consistent quarter in the company's progression towards creating the buying experience of the future for the world's leading organizations and their customers.Now I did want to show you just a few of our highlights from FY '21 as we end the year. And I know there's a lot on this slide and also a lot in the 4C for you to review, but for investors, it's important to get a view of the broader Bigtincan opportunity by understanding how this fits the strategy of the well-funded organic growth engine; working with a team that is executing globally to drive that land-and-expand model; our M&A strategy that brings new technology, new customers and highly skilled employees to Bigtincan; our strong and growing U.S. customer base that is delivering now; and ongoing recognition from market analysts for our award-winning products; our growing channel network, which continued to develop in FY '21; and of course, some cool core technology that goes together to build the business. So I want to take this opportunity again to thank the entire global team of Bigtincan for their commitment to our vision; and for the work that they do every day to deliver for our customers, our investors and each other.So thanks again for attending this 4C briefing. And again, as Cyril said, for investors who follow Bigtincan: We're looking forward to seeing you again with our full year results in August.Okay, we're now going to take some questions from the Q&A panel. And there's a bunch of questions in there, so I'll -- I might start on these, Cyril. And I think I'll pass some to you.

[David Keane, Co]

Did Vidinoti contribute to ARR at all? And the answer is practically not. I mean 0 -- almost 0. It's a nonmaterial, I think. I want you to understand. Sometimes we will do an acquisition like Vidinoti where there's core technology that we want to own. And we believe that, by owning that technology and embedding that technology into one of our hubs, we can obtain better value from the customers that already purchased that hub and also sell that hub with that new technology embedded into it to customers that maybe aren't buying that hub. So Vidinoti, very important core technology acquisition for us, no real contribution on ARR. It's a question from James Bales.Another question from James. How should we think about fourth quarter incremental ARR outlook versus FY '22 outlook, i.e., seasonal factors driving fourth quarter? I mean, certainly if we think about the company's growth in the second half of FY '21, as we talked about, there was an acceleration in the organic ARR growth to $4.8 million from $4.2 million in the first half. In terms of quarters, we're working on enterprise deals. It's very tricky to work on the actual quarter numbers, so I'd advise investors it's a deal could fall one side or the other side of a quarter, but certainly in terms of how we see the market, the recovery and the opening up, certainly in North America, is generating more interest from our customers. We mentioned to investors earlier this calendar year that we were already seeing "top of the pipe" interests return to pre-pandemic type levels. So I think that's encouraging as we think about our future.There is a question on -- also here. Someone is talking. It's an anonymous person. "Can you step us through the constant currency conversion? What rate do you use, and did you apply to the entire FY '21?" Cyril, maybe you can go through that for us.

[Cyril Desouza, Global Finance Manager]

Yes. So we used a rate of 0.67 for FY -- from FY '20, the average rate, for all the transactions in FY '21. So that obviously is all the opportunities up for renewal and all the new and expanded opportunities that we had within the financial year. And as you can see and as I pointed out, the result was an extra $2 million in ARR that would have put us at $55 million for the year.

[David Keane, Co]

Another question from James Bales talks about any thoughts on FY '22 cash burn. Look, I think it's -- as you know, we provided some really detailed reports for investors in this 4C about the seasonality. This company is working in enterprise. And certainly if you think about seasonality, I think we've provided tons of detail there. If you think about it over the longer term, there's no doubt, and I think that Cyril demonstrated, that we're looking at the cash conversion, if you like, from ARR being strong. And so we're pleased with that level of growth. We're not [ instituting it in there for ] the future at this point, but we just wanted to give people confidence that the company is achieving its goals and is making the right decisions in terms of investment.Question from Luke MacNab, what organic growth we're targeting in '22. And any acquisitions to add to this? Look, I think we've always said to folks that we believe that the most successful enterprise SaaS companies in the world are growing in that 30% [ on ] rate in terms of total growth. And again you saw today where we -- what Bigtincan is achieving. We think there are opportunities for us to continue to grow strongly into '22, and we'll provide full guidance to the market at our results in August.Question from [ Wayne Sanderson ]. Are there any large acquisition opportunities still out there? Or just smaller bolt-on ones from here. Look, I think the way to think about that, [ Wayne ], is that it's the hubs strategy. We do see opportunities to add more capabilities into the existing hubs as well as potentially add new hubs, but I will remind you that the majority of that technology comes from our amazing tech team all around the world. We have some of the world's best engineers looking in our company, building incredible solutions, but we also do look at the market. And where there are opportunities to use our capital to accelerate our growth, bring forward our road map, bring new products to our customers, we'll definitely be looking at those.I think, Vivian or Cyril, that's all I see at the moment...

[Vivian Stewart, Chief Operating Officer]

David, there's actually just one that's come through on the chat function from Owen Humphries.

[David Keane, Co]

Okay. [ I did not ] see that...

[Vivian Stewart, Chief Operating Officer]

So winning -- do you look?

[David Keane, Co]

I think I see it. Winning -- okay, a question from Owen Humphries: Winning larger brand names, are you seeing the deal size increase as you mature? Look, I think the idea we're seeing is that the ability for customers to start with one of our hubs [ and add ] other hubs makes total sense to [ them ]. At the end of the day, what they care about is the value this solution gives them. It is not a -- and look, it's a value-based use. And by adding additional hubs, we can fulfill our vision of creating the buying experience of the future for our enterprise customers by allowing them to grow inside each hub and adding more hubs on the side. So we think of it that way. Now it might be that some customers start bigger and some customers start smaller. What we have seen, though, over the years has been a consistent view whereby those customers continue to add more capabilities and add more seats.We've talked before about those 2 vectors of growth for the company. One vector, of course, is more seats, yes, true, but the other vector is those more value, more capabilities, more hubs, if you like. And we actually like working with customers to take advantage of both. So yes, look. I think you'll see some big deals, but at the end of the day, we don't get too excited about running out after the big deals. They're nice, but it's about building that long-term, consistent ability to be able to add more and more customers each period and then grow those into the future.

[Cyril Desouza, Global Finance Manager]

[ Wayne ] has just come in with a question. What percentage of revenue is non-U.S.? Typically, [ Wayne ], it's usually around 90% is U.S.-based, so around 10% would be non-U.S., but as we start winning opportunities such as Air France; and BT, British Telecom, that -- Europe has got a potential to increase in terms of size of revenue. So hopefully, that answers your question.

[David Keane, Co]

Question from [ Vistella ] about what is the customer retention rate for FY '21. So what we traditionally do is do that with the audited accounts. And the reason why is because we want to do that properly, and it's important to have that audited. And again I think it leads us to go -- it's a really interesting question because it leads us to talk about how Bigtincan talks about retention rate. We do not do customer retention rates. We don't think customer retention rate helps investors to understand the value of the company because, I can tell you now, we have extremely high customer retention rates. What we talk about is revenue retention rate. And that's a lot more real for investors when you think about the value of the business that we operate here at Bigtincan, so we're going to give you detail on the revenue retention rate so you can get a bit of a view of how we're doing in terms of the actual dollars, but yes. So that will come out with the full year results next month.[ All right, well ], thank you again. I think we're done, Jane.

[Jane Morgan]

David -- yes. Thank you, everyone. We will have a copy of the recording of the presentation up on our website tomorrow. Thanks for joining us.

[David Keane, Co]

Thank you, everyone.

[Cyril Desouza, Global Finance Manager]

Thanks, everyone.