Kahoot ASA

OSE:KAHOT

Earnings Call Transcript 2020-Q1

[Eilert Giertsen Hanoa, Chief Executive Officer]

Hello, everyone, and welcome to the Q1 presentation of Kahoot!'s. Today presenting is myself, CEO, Eilert Hanoa; and our CFO.

[Ken Werner Ostreng, Chief Financial Officer]

Hi, everyone. I'm Ken Ostreng.

[Eilert Giertsen Hanoa, Chief Executive Officer]

And we are happy to take you through both our Q1 presentation and also our status so far into Q2. Kahoot!'s vision is to build this leading learning platform in the world, and I think our results in Q1 and also so far in Q2 truly shows that we have that potential.If we look at the Kahoot! as a whole, we have a scalable cloud platform that is truly continuing to cater all our customers around the world, whether they are schools, businesses or families at home. We have a strong viral business model, truly helping us scale, both when it comes to the word-of-mouth of the solution but also making sure that we are able to reach all our customers in a very efficient way, in addition to, of course, all our millions of free users around the world.Last 12 months, we had 1.3 billion participating players. We added over 125,000 net new seats as of Q1, and we have over 6 million active teachers on the platform. And we are also able to have a dollar retention close to 100% with a good commitment from our existing customers and users.Of course, for all of us, it has been a very turbulent and unprecedented time in the last couple of months and weeks in particular. We have been focusing on making sure that our operation is secure and the health and safety of our organization, but we've also been able to provide a free access of the Kahoot! Premium solution for all schools and teachers affected by the COVID-19. And we've seen a truly increase in interest, both when it comes to sign-ups and usage across the world on the Kahoot! platform.In the peak days, we added over 100,000 net new seats on sign-up. And just in April, we added 30,000 net new paying customers to our platform. We also see a great growth in using Kahoot! for home schooling, for assignments and for homework and all kinds of remote work at the business area with over 5x increased usage over last year.The highlights from Q1 includes, of course, the strong growth of our usage, as already outlined, very good growth in paid seats, adding over 30,000 new seats in Q1 alone. So we reached 200,000 paying seats by the end of March. We had a good growth in invoiced revenue with over 200% in the first quarter as well, which we'll get back to. And we had positive cash flow from operations, which is, of course, important for us to continue to secure our business and be able to continue to invest going forward. And we have a very strong financial position for our operations, which also gives us opportunity to think strategically going forward. And last but not least, we continued, through the whole of Q1, to add more value, more features and more functionality to both the free users around the world but also to the paying customers in all segments.We had the opportunity to also work with some of the bigger companies out there when it comes to using Kahoot! both for onboarding, for corporate training, for compliance training, for documentation of knowledge and we see that we are getting increased traction in several of these areas in larger organizations in addition to the hundreds of thousands of smaller businesses that are using Kahoot! every day in the work -- line of work. And we're very happy to be able to continue to work with some of our bigger customers but also adding new customers every quarter to use Kahoot! in new and exciting ways.The growth in first quarter were both in participants, last 12 months, in hosted games and in active accounts. And for us, it's important to continue to build out functionality, not only for the teacher and the presenter but also for those who are attending a Kahoot! experience so that we can make even more interesting journey for the learner as well as the teacher and presenter. And we see this through the uptake of use, both when it comes to the 1.3 billion participants, the number of games played now reaching more than 200 million in 12 months and of course, that we are closing in to 17 million active accounts using Kahoot! to present their message.We also see that the continued growth in paid seats are consistent in Q1. We added, as mentioned, 30,000 net new seats in Q1, fairly evenly distributed on teachers and businesses. And that has becoming accelerated trend into Q2 with over 30,000 added just in April, as mentioned.We also see how this reflects in our income of revenue from our invoiced revenue perspective, where the development has been substantial and consistent over last quarters and where we see that Q1 reached over $6 million on the core Kahoot! platform in addition to the initiatives we do around DragonBox and Poio. And we had over 20% quarter-on-quarter growth, which we are very happy with when it comes to the invoiced revenue in Q1.And last but not least, on the revenue side, we see that our sales initiatives, not only in the European and U.S. market but also Asia Pacific, in LatAm and EMEA, is continuing to also drive momentum around small and larger organizations. And we see that even though the acceleration has been even stronger in Europe and U.S., we expect all regions to continue to grow throughout 2020 in the same pattern that we've been seeing so far.Then I hand over to you, Ken.

[Ken Werner Ostreng, Chief Financial Officer]

All right. Thank you. So from the development of the key financial figures, we can see that both invoiced and recognized revenue continued to grow quarter-over-quarter. Invoiced revenue growing from $2 million in Q1 2019, reaching $6.4 million in Q1 2020. The lower growth in total operating expenses, combined with strong cash collection of invoiced revenue, drive positive cash flow from operations for the past 2 quarters. EBITDA continued to improve quarter-over-quarter from minus $2.2 million in Q1 2019 to minus $1 million in Q1 2020. The cash position remains very solid.Number of full-time employee equivalents was 120 by the end of the first quarter. We continue to develop the company, adding product and commercial talent as we're growing.Moving on to the profit and loss statement on the next slide. So here is the interim condensed consolidated profit and loss statement for the first quarter 2020. You'll find more details in the first quarter report published through Oslo Stock Exchange.Invoiced revenue in the first quarter this year was $6.4 million, representing more than 220% growth compared to the first quarter of 2019. The quarter-over-quarter invoiced revenue growth continued in the first quarter, representing 21% growth from Q4 2019. Invoiced revenue for Kahoot!, excluding acquired units, totaled $6 million in the quarter, representing 200% growth compared to the first quarter of 2019. And the acquired units referred to are Poio and DragonBox, both acquired effective September 1, 2019. Recognized revenue for the first quarter was $4.5 million, an increase of $3.3 million, representing 282% growth from the $1.2 million we had in the first quarter 2019.Operating expenses for the first quarter was $5.4 million compared to $3.3 million in the first quarter last year. So this means that EBITDA for the first quarter was minus $1 million compared to minus $2.2 million for the same quarter a year ago, representing an EBITDA improvement of $1.2 million.Moving on to the balance sheet. Kahoot! has a solid balance sheet with cash and cash equivalents for the end of the first quarter of NOK 357 million, translated to $34 million. There is no long-term debt in the company, and the equity ratio represents 84%.R&D costs are expensed as they occur. Historically, R&D costs were capitalized until the end of 2017.Goodwill from the 2019 acquisitions of DragonBox and Poio are amortized linearly over 5 years and represented $19 million per the end of the first quarter. Deferred revenue reached $7.6 million per the end of the first quarter, representing an increase of $5.1 million compared to the end of the first quarter 2019. We can see that significant shifts in the U.S. dollar exchange rate impacts the balance sheet values compared to year-end 2019.Moving on to the cash flow statement. So cash flow from operations in the first quarter was $900,000, representing NOK 9 million compared to minus $1.9 million for the first quarter of 2019. We have limited negative cash flow from investment activities as R&D costs are expensed as they occur, and our operations are not requiring recurring significant capital expenditures. The significant shifts in U.S. dollar exchange rate impacts translation differences on cash held.Moving on to the forward-looking statements. So for the second quarter 2020, invoiced revenue for the Kahoot! Group is expected to exceed $8 million, representing 250% growth compared to the second quarter 2019 and 25% growth compared to the first quarter of 2020. Cash flow from operations in the second quarter is expected to exceed $2 million, representing 25% cash conversion on invoiced revenue. For the full year 2020, the Kahoot Group expects 100% to 150% invoiced revenue growth from pro forma 2019 level. And invoiced pro forma revenue for 2019 was $15 million. We expect continued positive cash flow from operations for the full year 2020. And to reiterate our target for 2022, we aim to reach over $100 million in customer base value, indicating an MRR between $9 million and $10 million.And finally, just a note on that due to the extraordinary circumstances caused by COVID-19, it is, in general, more challenging to provide accurate guiding. Thank you.

[Eilert Giertsen Hanoa, Chief Executive Officer]

Thank you, Ken. That's very good. Just want to wrap up with our platform, reminding everyone that this is truly the core fundamental of Kahoot!'s. We have this great platform with over 100 million Kahoot! games created with 1 billion questions. We have a massive usage on this platform from teachers, from students, from parents and from businesses around the world. We have some great partner integrations from a tech partner perspective with Microsoft, Google, Zoom integration and improved support for both Google Hangouts and Slack. And of course, we have our content partners, including Disney, National Geographic, Getty Images and Britannica as the most important.And going forward, we're very happy to announce that in Q2, we're going to do a lot of new initiatives that will be improving the experience, both for students, being able to do Kahoot! -- using Kahoot! Study to do home study and really perfectionize their knowledge. We have a great partnership with Microsoft, and we're very happy to announce the upcoming integration with Microsoft Teams that will already is available for the first customers and used by thousands of organizations already. And we will launch the Kahoot! 360, which is truly the new solution for businesses using Kahoot! for corporate learning for all employees in the organization.And last but not least, the improved interactive presentation mode, which means that it's possible for customers to both import all their slides and make a full interactive presentations used in the organization using Kahoot! as the platform. We look forward to share more exciting news about these announcements and others throughout the second quarter.So finally, I would like to sum up that although we have this very special times, we think that we have a very good position to continue to provide great solution making learning awesome for all user base and all organizations that we are working with. We have strong growth in active accounts, very good growth in invoiced revenue. We have improved cash conversion, which is important for our financial fundamental position, and we are announcing continuously new features and improvements for all user groups throughout the quarter. We will -- we are also happy to announce our upcoming Kahoot! EDU Summit that will be in June. And last but not least, stay updated on the Kahoot! News with all the initiatives and all the coverage we have, which you will find on kahoot.com/news. So with that, wrapping up. Thank you very much for attending this webinar, and have a great day.