Bimobject AB

STO:BIM

Earnings Call Transcript 2022-Q3

[Martin Lindh, executive]

Hi, everybody. A warm welcome to today's presentation of the quarterly report of Q3 2022 for a small but quite fascinating company located in Malmö called BIMobject.

Before we start, please be advised that questions, and I know this has been a bit confusing where to place the participants in this call, should be in the chat, should be sent ahead or how will it be sent. But questions, nevertheless, are to be submitted to the e-mail address we have here below, [e-mail]. And this e-mail we always use. And for those of you who haven't already sent in your questions, it can be good to know that it just -- it works just as well to send these questions well ahead of the presentation. In any case, at the end of the presentation, we have the Q&A session in which we will address as many of them as possible.

I am Martin Lindh. I joined BIMobject 1.5 years ago, and I've been working as operational CFO since then. During that time, I've been transforming the financial department of BIMobject, and also led and completed the acquisition of Prodikt. About a month ago, I was asked to step in as Interim CEO of BIMobject. And currently, I work with operational day-to-day matters, but also, jointly with the Board, to redefine the direction of BIMobject. And I do this in particular with Peter Bang, our Chairman, who is also joining me here today.

Peter, welcome, and we're happy to have you here and thought -- and I thought it would be good for everybody, given the recent transition, to hear from the Board as well. Who are you and what are your and the Board's plans and thinking ahead for BIMobject?

[Peter Bang, executive]

Thank you, Martin, and it's a pleasure being here today. I'm Chairman of the Board. I have been at the Board of BIMobject for the last 3 years, and I became Chairman at the last AGM. I have Board position in Solar Group, a Danish company distributing and supplying products for electricians and plumbers. I have been working in VELUX Group for many, many years and, by that, having some insight into the building industry.

But I'd like to say a few words -- if we can move on to the next slide. Thank you. I'd say a few words as an introduction. Because we are in a turbulent environment -- and I'll come back to the CEO transition. But starting with the environment around BIMobject, we have interest rates increasing. We have a war going on. We also see a building industry on its way into a downturn cycle.

But BIMobject is resistant to some of these things because we are a tech company, but we're also very much into the digitalization of the building industry. We are very much into the sustainability journey, which the building industry is in right now, not least the need to document the degree of sustainability in the buildings. For instance, EPD, which you will come back to, Martin. So we are confident about the situation right now in BIMobject, even though the business environment is turbulent.

A month ago, we transitioned. Carl Silbersky left the company and we asked you, Martin, to take over the interim role as CEO. And we are very pleased that you were able to do so, and we have been very pleased about all the actions you have been doing since then. We have, also from the Board, started the search for -- and including a definition of how will the new management look like for BIMobject going forward. So that process is ongoing in parallel with all the things we are implementing right now with you, Martin, as Interim CEO.

One of the things that we have been addressing and you have been addressing, Martin, is the strengthening of the organization. And maybe you should just elaborate a little on that because we have done at least one press release on it. So Martin, please, give some highlights on the organizational changes.

[Martin Lindh, executive]

Yes, sure. Yes. And yes, when it comes to the organizations we're doing, I mean, you can say that these are done in order to improve roles and responsibilities within the company. It's a way to strengthen the leadership and also improve the ability to govern the company efficiently and a good foundation to stand on for any type of situation we will have ahead. And BIMobject as a company has a very packed agenda to deliver on ahead. And we are far from having reached perfection in the company, and therefore, it is of high importance to get the leadership structure right already from the beginning when we move on forward.

The recent reorganizations we have communicated were made to move the company towards better clarity of leadership within our product development organization, but also when it comes to strengthening and, what you can call, the pure production of platform development. What I'm really happy about is that the people we talk about here were promoted from within and not brought in externally. And there are really good and great pool of talent in the company, which we are quite -- which are quite dedicated and passionate about moving the company forward.

Another important aspect here, of this change, is that we, at the same time, also ensures that the right persons in the company are part of the management team, or at least what we refer to as the extended management team, and this is to ensure that everybody are on board of the plan. They are aligned and well coordinated to move forward.

[Peter Bang, executive]

Excellent, Martin. Excellent. And not least the recent appointment of the CTO is also a good move in that process. Then what we are also working on, linking to the strengthening of the organization, is the management and the Board are working on adjusting the strategy right now. It is work in progress. And we will come back with more information about the activities and things we are going to focus more on going forward. So this is a small teaser for us -- to you, that we will come back on this.

The last point on this list is improved market communication. We have already started, but we have a strong ambition of improving our communication to the market with press releases, but also, in general, being more open about the plans we have and our progress. Because there are so many great things we do in BIMobject, big and small, but we can be much better in communicating all these great things we are doing and all the possibilities we see in this company. But we're going to start with communicating some of it today, and then you will, going forward, hopefully see more news from our side.

So on that note, Martin, from the Board, we are very satisfied with having you there as Interim CEO. And over to you, presenting some of the numbers for the Q3.

[Martin Lindh, executive]

Thank you, Peter. Thank you. So this fascinating company, BIMobject, what is it? Well, it is, in short, a tech company, powering digital and sustainable building design. And I'll come back in a bit to bring some more clarity on what this means. But first, let's look at some of the highlights of the most recent quarter that we have passed.

In this quarter, we've had quite positive development in many important metrics. First, overall, we see users downloading more and more from our platform, and this is really key to us as we primarily are here to serve the many architects and engineers that come to our sites to download high-quality BIM objects throughout the world.

Secondly, the financial metrics all developed favorably this quarter. ARR, the portfolio of subscription contracts, kept growing. The turnover followed, slightly behind, and we'll come back to this later on why. Most importantly, for many reasons, but perhaps especially due to the change in how the public market values [ unprofitable world ] companies, the profitability of the company improved quite a bit at the same time as we are growing as a company.

A couple of milestones were also met when it comes to Prodikt. First of all, a significant EPD order was awarded. And secondly, an AEC order was won with Sveafastigheter. Finally, BIMobject stands on a solid balance sheet, which provides us with remaining flexibility, which is also important to have especially in this dynamic market environment which we're in.

So back again to the company and what we do and what it looks like. We are a tech company operating within the construction industry, powering digital building design worldwide. We currently have over 2,000 building products -- brands on our site. We are used globally by architect firms, small as large, and -- or by most sources and rankings, seen as the clear market leader of providing specific digital BIM objects to the market. We are here -- we are a company connecting both the building product manufacturers and the architects of the industry. And are positioned in the middle, where decisions and specifications of products are made.

And today -- if we move to the next slide. Today, BIMobject mainly consists of 2 platforms. The first one is BIMobject, which is our global-reaching site for product and manufacturer-specific BIM objects. The platform which the company -- this platform is also what the company was founded upon and has the vast majority of users, and accounts for the vast majority of the revenue for the business today. We also have Prodikt, a similar site, but more climate and sustainability-focused platform, which we acquired in the beginning of the year and which is also on an exciting scale-up journey.

But let's start talking about bimobject.com. This platform keeps growing. And earlier this year, we surpassed the 3 million mark of user registrations. Most importantly here, and this is a key metric for us, is that mostly downloading users kept growing, and we see a strong momentum here and seen it throughout the quarter on this particular metric. Bimobject.com is a 2-sided marketplace in the way that it serves both building product manufacturers, but also architects and engineers on the site.

But currently, we only monetize on one of the sites, which is for the building product manufacturers. There's 2 types of revenue streams here. One is the service revenues, where we support building product manufacturers with creating digital objects. And then we have the platform revenues, which is basically mainly subscriptions that the building product manufacturers pay for us to host their objects so that they can be downloaded by the architects in the industry.

The other platform we have is product Prodikt. Prodikt is a specific site, as we mentioned. And we can move on to the next slide here, where we have a better description of it. So Prodikt is a niche but powerful platform currently only operating in the Swedish market. It's, however, gains fast traction and is building up a strong momentum at the moment. And the site has also product-level digital data, but more in regards to sustainability and climate data in which users can make easy, quick and transparent analyses of their projects. And this is increasingly important, especially in our part of the world where legislations are coming in country-by-country now in the coming years.

During the quarter, there's been some significant development for Prodikt. First of all, there's the orders. There's the EPD order of SEK 2.5 million that was communicated earlier, some weeks ago. And this order is actually larger in size than the turnover of entire Prodikt last year, so this is a big step for the company and a big trust that they have received from this client.

Secondly, they received an order on the architectural side or like the property owner side, you can say, by Sveafastigheter, who wanted to improve their control of the climate agenda. Prodikt for them is a tool of transparency of all their other projects. It is used to reduce carbon emissions and easily update the climate impact from different materials they use when they work on their properties. This will make their buildings more climate smart, circular and healthy.

At the same time, Prodikt has secured a couple of partnerships, one being from Optimera. This is building distributor in Sweden that we currently have signed an agreement with. And this is -- we let Optimera's customers get a better and smarter information about the climate impact for buying building materials from them. The other cooperation or partnership that they have secured this quarter is with CCBuild. This is a Swedish organization, which is partly government funded, and it strives to increase circular use of building materials.

Today, CCBuild has already connected with -- I think it's close to 80 companies in the building sector, of which some of them are the larger ones of the industry. And through these partnerships, circular products from CCBuild will be included as objects in Prodikt's platform. And utilizing the benefit of circularity is, of course, a great opportunity to reduce the climate impact we're striving to build in a sustainable way.

All right. Now let's move to the financials of the company. Yes, next slide, please. The third quarter of the year developed quite favorably as earlier mentioned. The ARR contract portfolio, measured in recurring revenue, ended at SEK 120 million after having grown by 21% since last -- since the quarter last year -- the same quarter last year; and correspondingly, 7%, if looking at it with fixed currency rates. Net sales reached close to SEK 34 million, growing with 10% since the same quarter last year and 3% with fixed FX rate when using that.

What we can see here is also one of the reasons why net sales is not keeping up with the annual recurring revenue growth is because of Services not growing in the same way. And this is something that we're working quite a lot with at the moment to make sure that we also can have growth in this business and not only the recurring revenue. This is one important lever for us in our path to work towards profitability.

Most importantly, we remain having a good control of our costs, which continue to develop favorably. In terms of comparison, it could be worth noting that although we did have some nonrecurring cost the same quarter last year, we did so as well this year. And actually, I think, about SEK 1 million more. So this development here is actually quite good in that respect, and we're quite pleased to see that and look forward to keep working on the cost base of the company.

Looking at the income statement, we are approximately SEK 9 million ahead versus last year to date in regards to total operating income. On EBITDA level, we performed over 50% better than Q3 last year and -- or over SEK 20 million ahead of last year to date. Depreciation and amortizations are higher this year versus last, and that is attributable to the acquisition of Prodikt. There's also a one-off we have done from one of the earlier investments we did in a content service provider, which we have handled this quarter. [Foreign Language]. One second. The last quarter and are over SEK 20 million ahead of last year to date.

Depreciation and amortization are larger this year than last, and that is attributable to 2 main things. One is the acquisition of Prodikt, which has increased the amortizations we have. But also due to one of the historic investments we did in Convergo, which is a content service provider. We have a onetime write-off of SEK 3.5 million this quarter. And that is related to the outsourcing we have earlier communicated about on the internal content production we have. So this is related to that process.

On the balance sheet -- next slide, please. On the balance sheet, I mean, it remains strong, and this provides well needed flexibility in a turbulent environment. Cash and cash equivalents of the company, we have invested in low-risk liquidity and bond funds to make sure that they are well handled there.

And yes, let's move on. And I think now we will come back to the highlights, yes. So to come back to the highlights, we -- I mean, we've had a positive development in most metrics. This is, of course, good, but at the same time, it's not enough. BIMobject, as I mentioned, is a fascinating company, but there are much more that can and should be done in the company. And this -- I and the rest of the company, as well as the Board, are continuously working hard to it make happen. You will hear more about this from the ongoing strategy work, but also from regular press updates that we will submit in our journey going forward.

Thank you. And by that, we can open up for questions.

[Martin Lindh, executive]

All right. We have received a couple of questions here. The first one, I think we have received from more than one questioner, and that is regarding the new strategy. And when we're about to communicate on that. Would you like to share some word on that, Peter?

[Peter Bang, executive]

Yes, of course. Because we have been in discussion whether to communicate it at the same time as the Q3 report, but we decided that let's have the market to digest this -- the numbers of Q3. They are comfortable, but we would like to do more, of course, but showing that we actually have a comfortable base for starting with. And then we will announce the adjustment of the strategy within -- yes, within the next month, I would say. So the question is, will it be this year? Yes. So we will spread the news and will come, and we are working on it. So that's why we have decided to announce it a little later than the Q3 report.

[Martin Lindh, executive]

Okay. Great. And then we have a couple of questions regarding Services. And the first one is regarding the outlook and then there's another one with -- in regards to how costs are recognized from the outsourcing. But let's start with the outlook of Services.

So well, we've seen a slight slowdown in the market in the last quarter. But still, I think there are plenty of opportunities in the market. And quite honestly, there's a lot of things that we can improve internally in order to increase Service sales. And that -- there's a lot of work and thinking and actions on its way to work with the Services, and it's actually quite attractive area for us as well. I mean, of course, we love when it's recurring revenue. We have very high gross margin on that. But Services, it's not too bad either. I think we have about 50% gross margin on those products. So of course, this is a quite good business as well for us and also is contributing with content to the site. So quite important in that aspect as well.

When it comes to Services, we have also announced earlier this year that we have outsourced the internal team that we have to an external provider, which also had a very long relationship with. That was done in the second half of the quarter. So it's not so much visible in the financials this quarter, but will be sort of next quarter instead.

Yes. And then we also have a question regarding Prodikt. And if it's -- the business model of Prodikt is similar to the one that we have of BIMobject, and I think this mainly is -- the question is about the BPM side of it, but I think it could also be good to address the AEC side when we have this question.

You can say that it is very similar. I mean it's a similar type of platform. It's both digital objects on product-specific levels. There are -- the Service business that have in BIMobject, that is when we create BIM objects on behalf of our building product manufacturers. Prodikt, they do basically the same. But they create EPDs, which is the sort of like technical standard or international standard for climate data that they support clients with. And this is, in this area, where we have received now this big order that I earlier mentioned.

And that is -- so Services is nonrecurring revenue, and both companies have that. You can say that the Services business is much more mature when it comes to BIM objects. And when it comes to the EPDs and climate data, it is less mature. So that's why Prodikt, they have -- they're building up capabilities internally to handle these orders and produce them themselves.

The second part here is regarding the subscription fees. So we, at BIMobject, we have the recurring revenue which is part of how we build up the ARR portfolio of contracts, recurrent contracts. They have exactly the same -- working in the same way. So there a lot of similarities on the BPM side of the business, of course.

On the AEC, Prodikt has come further than BIMobject. So they are already having quite advanced products offering to the market. And the order with Sveafastigheter is a good example of that. So it's a property owner who wants to have a good transparency and visibility of the different projects, and the climate impact and the effects they gain from using more smarter objects in the projects.

Yes. And I think -- let's see if there's been other questions. I think those were the questions we have received for this quarterly presentation. So by that, we thank you for listening in and look forward to the next quarter presentation.

[Peter Bang, executive]

Yes, we will get back soon, Martin. Isn't that what we say?

[Martin Lindh, executive]

Yes, yes.

[Peter Bang, executive]

We will get back soon. And also, with a call with possibility for Q&A as well.

[Martin Lindh, executive]

Indeed.

[Peter Bang, executive]

Yes.

[Martin Lindh, executive]

All right. Thank you.

[Peter Bang, executive]

Thank you.