Bimobject AB

STO:BIM

Earnings Call Transcript 2021-Q2

[Operator]

Ladies and gentlemen, welcome to the BIMobject Audiocast Teleconference Q2 2021. [Operator Instructions]I will now hand the call to Carl Silbersky. Please go ahead.

[Carl Silbersky, Chief Executive Officer]

Good afternoon, and welcome to BIMobject Q2 2021 Financial Report Audiocast. My name is Carl Silbersky. And today, I'm -- I got Martin Lindh, our CFO, with me on the call.So let's go to the first slide and a recap of BIMobject and what we are. We are a global marketplace for the construction industry. What we primarily do is that we help our manufacturers in the build -- of building products reach, influence and understand the building designers worldwide.So without further ado, let's go to the next slide, Slide #3. I want to dive into the highlights of the Q2 report and some reflections on that. We saw a growth of 10.3% year-over-year ARR growth. The very important ARR of growth for us is something we'll be focusing on. And it's an area where we have started to transform ourselves to become a pure SaaS company. Quarter-over-quarter, we had a 3.2% growth. And this is despite the tough cost and company transition that we have done over the last 7 months. More on this with Martin. But the important part is that we're turning back into growth again after a couple of hard months in the past.A couple of other points worth mentioning in the quarter events that are significant. In May, we passed 2.5 million register users, and that represents annual growth of 25%. We are undisputed the #1 BIM source in the world in terms of traffic and users, and we continue to grow our position in the market that are important. And this is really the foundation for BIMobject. Without the massive advantage we have as a platform globally, we're unable to capitalize on it. It's a positive trend to see the platform growing we have with that.You can also note that in April and May, we recorded the highest number of downloads from architects and engineers and contractors in the company's history. We have 3 million downloads in each month. And this is despite that we're coming out of COVID, we're still seeing an increased activity in the platform. It also has to do with the development team that's put in tremendous amount of effort into getting a higher attraction of the platform. More to come on this one. Do watch out in the Q3.Martin said is that in July, we passed a mark of 100,000 product pages. Again, this is an effect of the hard work we put in place in the last 6 months. And we established a customer success team that's continuously helping our customers to launch more product pages and to continue growing our platform. So that's short a couple of highlights from the Q2 report.If we go into Slide #4. We continue to powering, like I said earlier, the building -- digital building design worldwide. To date, we have 2,150 building product brands listed on the platform. We have, every month, 100 of the largest 100 architect firms as users on the platform. That means that more or less every large building getting built around the world is using BIM and more and more. So it's a positive trend. We are ranked in -- according to SimilarWeb, in traffic, we're the #1 in the world. And in the quarter of Q2, we had approximately 8 million files downloaded.So operator, if we go to Slide #5. Just to recap on what I just said. We are the most influential brand in the industry with a factor of 20x versus our competition. And this is something important for us is not only to be the largest but also to make sure that we continue to maintain that position. As we are convinced that BIM is the future of to go in the construction, we need to maintain our position. And we're doing it very much in both the brand awareness. As you can see, we are 20x larger in the brand awareness versus our competition. And this is not just any luck. This is hard work put in many areas. Perhaps areas where investors don't see them but definitely our users. We also excel in engaging their visitors. We're proud to say that we are definitely beating some of our competitors pretty earlier on both.If we go to the next slide and slide -- sorry about that. So if we go to the next slide, Slide #6, we can see that the flywheel of growth for Q2 2021. We see a continued growth in the number of registered users, 25% growth year-over-year. We had 8 million downloads in -- that means the 24% growth year-over-year in the number of downloads that is mentioned. Again, worth mentioning that our brands on the platform grew 15% year-over-year. So the flywheel of growth is continuing to spinning, and we're seeing that manufactured in what I just mentioned. We are, at the end of the quarter, 99,000 product pages, now crossing into 100,000 at an estimated 24% year-over-year.I've been repeating this slide a couple of times in our previous calls. But again, this is really what's building the value into the company and platform.Finally, I want to leave you with something good before Martin dives in. And that's Slide #7, please, operator. We have a new report outside BIMobject on the topic of why sustainability is key to getting specified. The report comes on the back of the new demand and the new laws emerged to promote sustainable construction and cut the industry is at a massive contribution to the degradation of the environment. So this report goes into the urgent need for green shift. And the hard truth is that the building and construction sector is responsible for 39% of the energy and process-related CO2 emission in the world. Worth repeating that is we are responsible for 39% of the CO2-related emission in the world.It is a tough pill to swallow, of course, but hope it's far from lost, I can say here. In fact, we can make quite a big impact for our planet or for humankind. So for business, of course, that we are in cities, we know that BIM and the building information managers is the way to move to a greener planet where you would make choices on the digital level. So for you who are interested in this report, I urge you to go and look, go download at bimobject.com and really get a pulse on which climate-related industry challenges we are facing and also learn about these tools that are needed. And again, I cannot hide that I'm excited. Of course, BIM is part of that very much in tools.So with that said, I want to hand over to Martin for more information. Martin?

[Martin Lindh, Chief Financial Officer]

Great. Thank you, Carl. All right. We can go to the next slide, and I'll start a little bit to give a brief update on the transformation that has been part of BIMobject's journey over the last year. So could you please take the next slide?

[Carl Silbersky, Chief Executive Officer]

Yes?

[Martin Lindh, Chief Financial Officer]

Yes. Thank you. All right. So first of all, I mean, over the last year, could be a little bit more than that perhaps, BIMobject has been in a cost-reduction program, which has been quite successful, where the organization has been trimmed down. And at the same time, it's -- especially the sales organization has been restructured. And this has been a necessary move for a company, both strategically but also [ taxes fee ] when we go to the market. And what we see now, despite these big changes is that we can see the ARR going back to growth from a quarter -- in the last quarter where it was more flat. And this is important for us because then we really get a first proof of the new model is working.And now I think we are in a mode where there's a lot more calibration of the sales organization that is taking place rather than more restructuring-related improvements. At the same time, we, of course, do a lot of platform-related initiatives. We are changing ERP system and also a lot of other initiatives.We will also -- there's also a lot going on within the product organization. And as you can see, the platform is working quite well. We do have a very stable and strong growth in the platform, but we see that there's a lot of things we can improve on that side as well.At the same time, we have retained control of costs in relation to the restructuring that we did. Meaning that in the terms of number of [ employees ], we're not growing significantly. That's not related to the cost increase in this quarter, and I will come back to that on a future slide.Then the last point is quite important for us, and that's related to the employees that we have in the organization. It's also a part of a transformation when you shift a lot of people and that there will be some sort of transition. But what we can see already now is that very new people coming in are delivering quite promising. That's partly related to the increase we see in the ARR.Next slide, please?

[Carl Silbersky, Chief Executive Officer]

Martin, there's a delay in the slide. You can continue in the...

[Martin Lindh, Chief Financial Officer]

Okay. Yes, okay. Maybe I can continue a little bit quicker. Sure. All right. So the reason why we focus so much on ARR is because this is the most important metric for us to understand growth in the company. And as you can see, we had -- I was talking earlier about we had a flat quarter last quarter, and this quarter, we had a growth again of around 3%, 10% on a year-to-year comparison. This is obviously not where we want to be, but it's still a very good improvement. And since we're doing a lot of calibration in the sales organization, we expect this go up as we go forward.The reason why it's so important metrics for us is because if you look at net sales, there are some differences in how that turns out in the reported numbers. And in this period, it's mostly related to currency where there's like a 10% effect on a year-to-year basis. And that obviously gives a little bit different view of how the company is performing. Whereas if you look at ARR, you can more and better see the development of the company.Next slide, please? Okay. When it comes to net sales, we had an improvement in services. And services is where we do content production in BIMobject. Content production or services was quite much affected by COVID. And we see a recovery, but it's not back at the historic levels. And we -- but we're very happy of the improvement that has been made.In previous quarter, we have also mentioned the shift we had in other platform revenue, which is related to a joint venture, which we have. In Japan, there was a transition of the contract where we lost some recurring income. It's a new model where we still get income but in a little bit different form. And then in Q1, we started to get a new joint venture contract in Thailand, and that is continuing also going forward.Yes, next slide, please? When it comes to the cost development in the company, we had a quarter where the total operating costs increased. There are some good explanation for this. As I previously mentioned, the cost level in the company has been roughly the same when it comes to quarter-over-quarter increase.One of the main important factors, and this is -- we see a really good thing for the company is we have launched incentive program, and that wasn't costs related to that, around SEK 7.9 million. But at the same time also, we have one -- almost close to 100% participation in this program. And also, we had investments into the [ company ] of over SEK 6 million. And we see a very positive sign of the engagement level we have internally with employees.At the same time, we also had around SEK 4 million noncomparable costs in the quarter that is also affecting this -- the operating costs of the quarter. So if you do adjustments for these, we see that we have very good control of the costs also going forward.Next slide, please? In relation to cash flow, there is the same effect, basically, from the incentive program we have affecting us in the quarter. And in addition to that, there's also effect on net working capital related to government support program that we received related to COVID. And if you look at a year back ago, in Q2 2020, we had a correspondent positive effect in that quarter, which means that if you look at a year-over-year perspective, the difference is quite significant, but these are the main contributing factors to that.Next slide, please? Carl, will you...

[Carl Silbersky, Chief Executive Officer]

Yes. Thank you very much, Martin. And I'm very apologetic here, Martin, I didn't introduce you to start with. And maybe I should have done that, Martin is the new CFO. For those who have noted, Martin comes with extremely strong background. And maybe I just want to share some words on that. Martin has a background from several years at McKinsey and then continued as an investment banker and was -- spent a couple of years at private equity company before joining us. And we're super glad to have Martin onboard, especially strengthening the deeper analysis that's needed on the financials as well as other areas that we are looking into executing on going forward. So thank you very much, Martin, and welcome to the first call here.I want to end up, before we go to Q&A, that I want to say that we remain focused on the long-term value creation. There is 3 things that we stay focused on to despite quarter-over-quarter and a massive transformation program. We have the platform growth in new registered users and downloads. That's really what we are strongly focused on, and you see the effect on that. We've really been on top of that one. The second one, where we are not happy with the pace, is the increasing revenue base. We have explained it. It's hard to see through it. We are seeing now that we're back on ARR growth despite a much lower cost base. But if you add the services part where we have not happy with the pace, only need to step that up, and we have programs in place for that. So new brands and the ARPAs we're happy about, especially regarding new customers being significant up trending in the ARPA there.And the third part we are super focused on is, of course, shareholder value. That is ARR growth for a company like ours. It is that to defer the terminals and what we are, the long remaining revenue as well as, on top of that one, is the net revenue retention, maintain the customer, grow the customer. And to do that one, you need to do a lot of transformation. We have to lock transformation in place through that one. We hope that, that will carry fruit going forward also.So with that said, thank you very much for listening in to our audiocast. And now, operator, over to you and for questions.

[Operator]

[Operator Instructions] Our first question is from Fredrik Nilsson of Redeye.

[Fredrik Nilsson, Equity Research Analyst]

Fredrik Nilsson from Redeye here. I want to start with a question about the flywheel of growth. I mean everything is growing at about 25%, except for the brands. Why is the brands lagging behind? And what can you do to change that?

[Carl Silbersky, Chief Executive Officer]

Fredrik, great to -- good question, important question. Everything in brands -- brands is dependent on 2 things. One is the time to come on to the platform. That means that how long does it take to do create your BIMobject out. That's the service part we talked about, the one part where we have seen a drop over the last quarters in revenue and kind of consultancy.So Fredrik, to answer your question is that, as we have really been focusing on the recurring revenue, that means the subscription part, we have been focused on getting -- making sure that we make money on the service part. And that means that we haven't paid as much attention and we haven't invested as much into the service part historically, since we were not able to do that thing. And maybe we are lagging them to get the brands quicker up on to the platform. That's a part of the explanation.The second part of that explanation is that we have been stricter on getting non-paying customers on the platform. And of those 2,152 brands, some of them have been tested, and some of them have been, therefore, haven't been paying. And we are much stricter today on that we need to pay to be on the platform. So that's why maybe not seeing that big growth as we do.And Fredrik, you've been with us, you know that it's important for us that we are cutting costs and increasing revenue, making sure we're profitable long term. So it's an important part of the transition.

[Fredrik Nilsson, Equity Research Analyst]

Okay. And one more question. You mentioned that the retention is improving month by month. Why is that do you think? And is that sustainable?

[Carl Silbersky, Chief Executive Officer]

Martin, you or me? You want me to take it?

[Martin Lindh, Chief Financial Officer]

I can take it. I mean the retention rate, I mean, we -- I think it's part of the reorganization we have been doing that we're getting into place. Obviously, you're never like 100% completed, and we're very well aware of that. And that's why we do a lot of recalibration and optimization of the sales organization. We see the long-term trend, very positive. And that can also be said that during this transition we've had, inflow has been relatively stable throughout the transition, which we also see as a very strong sign. I think where we have been lacking is more on the insurance side, and that we are improving also quite much during these late -- during the last quarter.

[Fredrik Nilsson, Equity Research Analyst]

Okay. One last question from me. I mean in the report, you just seem quite optimistic going forward. You mentioned a very strong pipeline, good retention, as we talked about, and also strong new sales. However, while you're back to ARR growth, it's still not at levels where I suppose you are active with. I mean you're not giving any guidance, of course, but my interpretation is that you expect a higher growth rate going forward, considering your statements about the new sales pipeline and retention.

[Carl Silbersky, Chief Executive Officer]

To use the hard word here, of course, hell, yes, we are. This is not good enough for us as a company, and it's definitely not where we want to be. We have a massive market ahead of us. But it's so sometimes complicated to explain why the old model wasn't sustainable when you see the -- you saw the growth. The growth wasn't sustainable from a cost perspective. It definitely wasn't sustainable as we're accelerating now. We hope that as we put this in place, the new model, new price list, new -- all across the company and invested into that renovation all that, it will pay off and getting back to much stronger growth rate.And as I see it from inside of the company, Fredrik, I can see some of this -- it's really cost momentum. Now we need to turn it into, I guess, the net sales if the market always looks at that. But also importantly, we really want the ARR growth to always be as a best-in-class. And by class, I mean, best SaaS company on the stock exchange eventually.

[Operator]

There are no further questions on the audio line, so I'll hand back over to our speakers.

[Carl Silbersky, Chief Executive Officer]

Thank you very much. I'll ask you, Martin, because we are on different locations. Any questions in the email?

[Martin Lindh, Chief Financial Officer]

No, I have not.

[Carl Silbersky, Chief Executive Officer]

Okay. Great. In that case, I want to conclude our audiocast. I want to thank you very much for listening in, and we cherish for the women soccer team right now. And with that said, thank you very much from BIMobject.