Bimobject AB

STO:BIM

Earnings Call Transcript 2022-Q2

[Carl Silbersky, executive]

Warm welcome to BIMobject's quarterly call. I have to remind you that questions are to be submitted to [e-mail]. Today with me, I have Martin Lindh, our CFO, and my name is Carl Silbersky, and we will walk you through this Q2 2022 financial report audiocast.

In the independent service, we, as a company, are consistently ranked as the #1 platform for architects. BIM is starting to move from an industry outlier to an industry standard. Digitalization and the digital building process is rising in popularity. That's why we've foreseen ever increasing need from manufacturers to expand the new product reach as the construction industry is maturing and the need for digital building models with the correct data is increasing in demand.

BIMobject is the leader in BIM, and the go to place for thousands of manufacturers. We have, over the year, investor into our platform. You noticed this by the new user interface, but much more notably by the performance of the platform. To date, we have 3.2 million professional users that indicates a growth of 23% year-over-year. And an accumulated download of 127 million downloads that represent a 43% growth year-over-year.

So we're doing pretty good, but the question is, how are we doing versus our competitors. The data is here taken from SimilarWeb, that's probably the most trusted and comprehensive and detailed view of the digital world. If you benchmark BIMobject here versus our 4 competitors, you can see that we are the top 1 in terms of visits and traffic.

And if you come -- we are approximately 7x larger than our nearest competitor, ARCAT. And if you combine all our 4 competitors here in this slide, you can see that they reach approximately 1/3 of the traffic that BIMobject has. So we have, undisputed, the leading global platform for architects, engineers and constructors when it comes to BIM.

On the other side, when it comes to top websites, you can see the performance of the site. We are, on average, 8 minutes and 48 seconds versus competitors that do approximately 2 to 3 minutes visiting time. Page per visits outperformed competitors by 3x, and our bounce rate is approximately half of our competitors.

When we're looking at the state of the BIMobject, there are 2 things that stands out. One is that the industry has recognized BIM as the best technology in construction when it comes to return on investment. And secondly, BIM is very much becoming mainstream.

So why is this happening? Well, the drive for sustainability in construction is happening today on a scale, and it's much pressured by financiers, property developers and real estate owners. And they need to disclose the carbon footprint. We're also seeing that this was a top priority from COP26.

But the big thing here is that the industry lacks data, and data is what BIMobject provides to the market. The lack of data has impacts. It's estimated by Autodesk that the lack of data makes us generate 3.8x more carbon than designed to achieve. And the cost of construction is approximately $1.57 trillion more expensive than needed if we would have the right data when it comes to construction.

From the market, we can see huge demand, but what about our business. The state of our business, we are seeing a couple of things happening that affects our business. On the positive side, we continue to grow our annual recurring revenue. We've had positive foreign exchange effects. On the other note, Service sales has not been in line with expectations.

What we have done in the quarter is that we have reorganized it and that's been carried out and that has the impact that 21 employees leaving the company. We are also seeing potential areas for -- to increase our revenue, primarily from 3 products. One is a product that we call CMAAS, it's Content Management as a Service, that we sell to our customers. Second part is the newly increased product of credits that our customers can use to take advantage of the service on BIMobject.

And thirdly, we see huge potential in upsell on large accounts. We'll come back to more of this during the year. But we're also seeing macroeconomic volatility, and it is a concern, but it's not really impacting our business at the moment. Also, the capital market is in a state of flux. It's outside our control, but it's something that we've noted.

Okay. Over to you, Martin, for the financials.

[Martin Lindh, executive]

Thank you, Carl. From a financial perspective, we had a continuous positive development during the second quarter of the year. This, as we increased the ARR as well as net sales while maintaining a controlled cost level.

On a very high level, new sales in the quarter increased with 7% versus Q2 2021. On EBIT level, there was a significant improvement versus last year of approximately SEK 10 million. And of the total group earnings of about minus SEK 20 million, about SEK 2.5 million of those are attributable to noncontrolling interest related to the minority owners of Prodikt.

To go a little bit more in detail to these figures, we have the next slide. And looking at the ARR, at the end of the quarter, our contract portfolio ARR reached SEK 140 million. If neglecting positive currency effects, looking at it with constant currencies, the ARR grew with about 1.4% versus last quarter and 6.1% versus last year.

At the end of the quarter, we also noted some early indications of churn was starting to come down from historically high rates seen in 2021 as well as in Q1 2022. This, we believe, is a direct effect of the renegotiation project that has been phasing out since year -- in the beginning of the year. And our customer success team is now shifting gears towards a more normal and proactive work mode.

Part of this new phase will also be to the customer success team to ramp up its sales of upgrades which has been less of a focus during the last year. So far, we believe the industry has been less affected by the otherwise negative development of the macro environment and many of our customers still have strong order books and are more concerned about supply chain issues rather than a decline in demand.

In regards to net sales, most of it, namely 82%, is attributed to recurring revenues from our platform subscriptions, which grew about 15% versus last year. Sales of our Services continue to develop at a more moderate pace during the quarter. And this, to some extent, due to the reorganization made in the content production team, which Carl mentioned earlier.

We believe that this new setup will enable us to better focus on the sales of Services, especially in the EMEA region. Prodikt, which is still in its nascency, is not yet having a material impact on the overall group net sales. However, during the quarter, Prodikt signed an agreement with a Swedish construction material distributor, Optimera, through which they will provide automated climate declarations onwards to their customers.

In the quarter, BIMobject also started to build up a Prodikt-dedicated sales organization for new sales to building product manufacturers that will be launched in the middle of Q3 this year. On the cost side, we continued, during the quarter, to keep our spend at a stable rate. Majority of our cost base, up to 75% historically, is related to personnel costs.

As mentioned in last quarterly audiocast, we foresee to have inflationary effects on such costs in control for this year. Overall, we are currently trading at a stable spend level and the moderate increase versus last quarter can be explained by 2 things: first one is about SEK 2 million from extraordinary and relatively high severance payouts. And second one being SEK 1.7 million in recurring, but not comparable costs related to the add-on of Prodikt.

And cost is an ongoing and important focus for us, and we will therefore proactively be working on reducing the overall spend level where and in the -- where we can. Most of the changes in our balance sheet versus last year is due to the acquisition of Prodikt. For more details on those effects, I recommend you to listen to the audiocast held last quarter.

At BIMobject, we continuously have a stable cash position, and we don't foresee the need to raise additional funds in the near future unless a larger acquisition opportunity would present itself. We still enjoy about SEK 280 million in cash and cash equivalents when including short-term investments made in low-risk financial instruments with a high liquidity.

To summarize, BIMobject is a true SaaS company. We continued to increase the net sales of the quarter with -- of which 82% is attributable to recurring revenue from our platform subscriptions. ARR at the end of the quarter reached SEK 114 million with an estimated 12-year lifetime. We saw a continued discipline in spend and landed at minus SEK 18.6 million in operational results. And finally, we remain well funded with approximately SEK 280 million in readily available funds.

And with that, we are done with the presentation for today and open up to answer some of your questions.

[Martin Lindh, executive]

Great. And we have a couple of questions that have come in to the mail. And the first one is regarding the Service units we have and the layoffs of 21 employees. And it's regarding the positive net effect on the cost side of this transition and -- yes. And will there be some layoff costs related to this project?

[Carl Silbersky, executive]

Great. Martin, do you want me to take that question? I can do that.

[Martin Lindh, executive]

Yes.

[Carl Silbersky, executive]

Correct. We are seeing -- we're going to see some slight -- there won't be negative impact. It's rather the opposite. We are expecting cost savings -- slight cost savings. However, we're not actually foreseeing any layoff costs since this is an agreement we have done with an external agency to take over the 21 people from BIMobject.

We are also as well increasing our capacity -- the ability for us to produce more Services related revenue at the contract with this external partner. So I hope that gives some flavor to -- or answers to the question here.

[Martin Lindh, executive]

Yes. All right. And the second question we have received is around key metrics concerning the development of churn and ARPA for our customer base. And yes, any view on that?

[Carl Silbersky, executive]

Our thoughts here -- I mean what's going, happening, we do not reveal churn at the moment in ARPU. And -- but first of all, let's clarify this one. Churn is improving quarter-over-quarter, and we're seeing a very positive trend.

Two things you have to remember. Last year, we put in place large renegotiation of all our contracts with our customers. And the intent of that was supposed to be the payoff this year. We started -- and we are seeing that trend happening now. And the combination with the investment in that work in combination with the investment in customer success program we put in place is paying off. We're seeing that. So we're expecting the churn to decrease, increase over the year.

And the outlook on the other metrics, ARPU, average revenue per user, we do not monetize on the user base. But it's average revenue per account, we have to get back to reporting on that one since we are not revealing that number to market at the moment. I hope to get back to you perhaps early next year, we are working on that.

[Martin Lindh, executive]

Great. We have also another question here regarding the Service segment and the decline in Service sales. So the question here is regarding if the decline is temporary, and we will see a shift going forward. And also a little bit related to this reorg we have been doing. And if -- how we look upon the capacity going forward.

[Carl Silbersky, executive]

So the lower demand or actually we've seen the lower demand in Service sales is actually related to an effect of a large customer completing their product portfolio of BIMobject. What we're seeing now is that we are -- as we are redoing the contracts and also investment into customer success program, that would enable us to work with more customers in developing the BIM portfolio.

So we do not expect it to be -- to be going -- to be having lower demand. We hope for the opposite. And going forward, we -- this could be a temporary effect, but also remember that we came in with a huge contract on a couple of large ones that are now getting completed. But those are getting more replaced with others.

So we are seeing stable demand in BIMobject and also that's very much related to the industry win. There is a need for BIMobject in the industry, and that will continue for a very long foreseeable future.

The reorg capacity, like I mentioned, is rather the opposite. We will not have any capacity constraints.

[Martin Lindh, executive]

Great. All right. Then we have a question on the value proposition and a comment that we have recently strengthened the value proposition to our customers or building product manufacturers. And the question is concerning whether we see any improvement in customer acquisition and the efforts required to acquiring customers.

[Carl Silbersky, executive]

That is correct in one way. We are -- again, I'd say we put in place and invested last year into a sales model that we explained to the market very much in details. And what we're seeing is that we've taken out approximately SEK 60 million in costs over the year, and we're still seeing a very stable. So that you can see that the efficiency per salesperson has been going up.

So that's a very positive trend. That's where we want to be. We want to get to that position before we start to scale up the sales side. So we're very happy with the outcome. We think we can do more here, and we expect that to be happening over year. So the efficiency is going in the right direction, definitely.

[Martin Lindh, executive]

Great. And we have a couple of questions regarding monetization of users and to which extent it would happen this year.

[Carl Silbersky, executive]

We have mentioned, we have done some trials in this. We have been running trials in the U.S. on a certain area. We haven't seen the effect we wanted to see. So we are still iterating on that trial, and I have to get back to you if that's doable by the end of this year or if that's early next year. But I have to get back on that one to the market.

[Martin Lindh, executive]

Great. The final question then is regarding the ARR forecast outlook for the second half of the year.

[Carl Silbersky, executive]

We do not provide forecasts, but we are feeling confidence on 2 levels. One is that we're having a good tailwind since we have put in place contracts that are in external currency, especially in euro and dollars. So we're having that tailwind with us. But we foresee a double-digit growth, I can say that humbly, but we do -- at the moment, we're in a year, where we are -- we would like to hope to come back to you next year when we have a robust year behind us to provide forecast.

Martin, maybe that's something that we need to talk about as well. What do you say?

[Martin Lindh, executive]

Yes, let's do that. And by that, we actually are done with the questioning for this quarter and look forward to continue to answer your questions in the next audiocast for next quarter. So thank you very much, everybody, for participating, and feel free also to reach out to us to [e-mail] should you have any questions for us. Thank you.

[Carl Silbersky, executive]

Thank you.