Bimobject AB

STO:BIM

Earnings Call Transcript 2019-Q4

[Operator]

Ladies and gentlemen, welcome to the BIMobject's Q4 Report's 2019. [Operator Instructions]I'll now please present our host, Carl Silbersky, CEO. Please begin.

[Carl Silbersky, Chief Executive Officer]

Good afternoon, and welcome to the Q4 2019 Financial Forecast of BIMobject. My name is Carl Silbersky, I'm the CEO, and together with me, I have Alexander Dahlquist, the CFO.We will walk you through this financial report. So next slide. BIMobject operates in a massive industry, one of the least digitalized industry in the world, just ahead of actually agricultural and hunting, that's how badly digitalized this industry is.The size of the construction industry is estimated to $11 billion, as you can see in the slide deck in the middle. The overall BIM's spending in this massive industry is nearly $4.9 billion, as we illustrated in the graph to the right. This is expected to grow positive 13% per year over the next 5 years. This massive industry we are operating in, and yet, we -- BIM is small. The average productivity growth in this construction is in 1%. Let me just repeat that. 1% productivity growth. In other words, there's a massive need for the utilization. And BIM will be a major part of that going forward. Thirdly, I want to point towards, there are strong drivers for BIMobject. To date, 26 governments across the world have implemented a plan to implement mentor BIM in construction. Eye -- first-hand witnesses happening, example, in Thailand, but more closer jobs today in Italy, every government, finance, construction, like schools, hospitals, et cetera, being built that cost more than $150 million. For those, it's mandatory to have a BIM model. Last year [indiscernible] was $300 million. That's a very interesting development we're seeing in a lot of countries. And fourthly, I want to point towards 1 important cornerstone here. 39% of the global CO2 emission comes from building and construction activities. And one of this impact of BIM is that we will decrease the waste of construction -- in the construction phase. Yes, BIM is and will be playing a major part in decreasing the CO2 level. So in other words [indiscernible] Right now, we are the ones making a difference. So the audience -- if you look to invest in the company, with ESG, environmental, social, governance criteria that is BIMobject. Okay. On towards the next slide, operator, please. How -- I would like to walk you through how our platform creates network effects. And this is our flywheel of growth model. For many of you, it's been unclear in how we define BIMobject. And here, I want to be very, very clear. We are a platform company, with a return revenue model. Let me just repeat that, we are a platform company with a return revenue model. The slide will here illustrate -- in the slide here helps us explain the value creation and the effect it has. So let me just walk you through this one. At the top, it starts with the use of value that we can create. We have over the years invested heavily into building market-leading tools for our users as well as the world's leading BIMobject platform. Year-over-year, that growth has been 42%. The growth in the number of objects on our platform is actually 42% year-over-year. The user value drives the increased user registration. Remember, we're not a platform for mass markets. Our users are professionals, architects, engineers, constructors and operators, and they come from top design and construction firms all over the world. Year-over-year, this growth of our registered users that today is 1.8 million is 70%. There's been a massive growth of the users. That just illustrates the value of our platform. Now thirdly, the number of users drives the value we create for our manufacturers. At the core, we help our professional users to understand the manufactured products. Users count [indiscernible] up on products and then to download them. I mean, to date, we have aggregated more than 450 million views of manufactured products. So it's a strong incentive for manufacturers to come to the BIMobject platform. This, today, we have last -- this year, we just -- we had up to 16.6 million downloads, that is in 2019 [indiscernible] And that represents a growth of 60% year-over-year. Again, we're seeing a massive growth in the willingness to download objects from our manufacturers. The manufacturing value we create, being the largest platform for professional users, attract more brands. Today, we have 61,656 brands year-over-year. That growth has been 26% on new brands. We have 4 of the largest building product manufacturers represent them on platform, and we're still only scratching the surface. As BIM grows, the interest grows for being on the platform. The effects are clear here, so with this flywheel, I mean, we have an increased number of customers on the platform. That means we have a potential to increase the revenue per counts as well as lowering the customer acquisition costs. The value we generate as we become stronger and stronger, is very, very clear. Okay, operator, I'd like to move to the next slide. Let me reflect on 2019, we're putting a very turbulent year behind us. Within just 12 months, BIMobject has 3 CEOs and 2 CFOs. It's very clear that the many changes has impacted an invoice sales and costs. There has been a lack of focus. We also started to tackle costs and efficiency throughout the business. But the immediate changes are taken, as I've been -- become the CEO, is to refocus organizational growth and to tackle this cost efficiency. I think it started when I become CEO back in November, immediate thing I started to do was freeing senior sales leaders to get them home to their home market and focus on sales. I also made a point and I've brought on Christophe Carvenius to the management group. He has strong experience of data and coming from King and driving growth via data. This is very important for us. Also, the second changes I made to the management was to add Åsa Gylling. With her deep development experience, we took a very focused view on the product development and on strengthening our web services, the very important ARR offerings that we have. 2 [indiscernible] that we drive in the company today is bending the cost curve and increase efficiency. We have been very focused on taking out costs that do not drive the core business. Further, we also have been forced to make some significant restructuring in closing down nonperforming entities. Thereof, the one-off costs here in Q4. Now I would like you to hand over to finance and to Alexander. Next slide, please.

[Alexander Dahlquist, Chief Financial Officer]

Okay. So looking at the development in the quarter, we only had a 2% increase in our invoicing, of course, this is not where we want to be. We want to be at a higher level. With the changes we're making and that Carl was relating to, we are gaining momentum, and we expect the future to be very bright for us. We do see what is important for us is a very strong growth in our ARR business, the web service part. Also, when comparing to last year, we did have a number of larger content production deals coming in the quarter. This year, it's a bit lower, and they also came in late in the quarter. Obviously, they're not resulting in any net sales. We see a step change in the U.S, the last 2 quarters, which is good for us, which means that we enter the new year with good momentum. However, unfortunately, there is always 1 or 2 markets that is not performing. And especially Germany now is an issue for us. We will focus on that market. It is a key market for us. A milestone was passed in the year. And that is that we passed SEK 100 million in Web Services or ARR, which also gives us a very good base to stand on moving into the next year. Total growth for the year then at 14%. Obviously, again, not where we expected to be. But again, with the changes made, we expect to deliver better moving forward. So if we move on to the next slide, please. As Carl mentioned, we have -- since I joined, spent a lot of time on our cost, understanding our cost, taking out as much cost as we can. And it's especially good for us to see that we are more or less on the same cost basis, Q4 2018, despite a number of one-off costs. We've analyzed our accounts receivable, made sure that there's nothing left there that is not to be paid. That has resulted in some bad debt reserves, which are now taken. We've done some restructuring, which is also going to help us moving forward. That said, then means that we now have a cost base, it will go up somewhat, but we believe we're at a level where we can maintain the cost level to better match the growth and not accelerate the way we've seen historically. So if we could please skip to Slide 8. This -- the graph here shows the split between content development, then -- our -- 1 part of our business and then the Web Services, the SaaS part of our business. And this clearly shows that our focus area now is continuing. We have 31% growth, both in the quarter and year-on-year on ARR growth. And for the quarter, 75% in total is Web Services, which is very pleasing for us moving more into a SaaS model. Okay. So I will hand back to you, Carl, on the next slide.

[Carl Silbersky, Chief Executive Officer]

Thank you very much, great to hear. Maybe I just wanted to slide into things, that BIM, as we move into reporting in Q1, we will move to a kind of new format of displaying our data more in line of a SaaS company, and you will see that effect in the next quarter. This will be the last time you see these figures reported this way. Okay. It can be very interesting. Next, let's talk about the goals of 2020. As I've stated before, and I will continue to talk about with you guys over the year, the importance of Web Services, ARR. The goal for 2020 is to increase Web Services, ARR with at least 40% in full year. Secondly, we have a goal on a significant increase to number of manufacturers. We want to increase that to at least 500 new BPMs in the year. We also have a third goal and that's the strong increase in number of registered users. I like that the final slide to elaborate a little bit here on the strategy for reaching those 2020 goals on a high level. Operator, please, next slide. So high level on the strategy for driving Web Services, ARR growth. Firstly, increased sales effectiveness. We started that off by hiring David Kullander as the new CMO, and with him, we put a lot of activities in motion on the digital marketing side, with the clear goal of increasing the pipeline and thereby, increasing sales effectiveness. That is a starting point. Moreover, we have tweaked the sales compensation model to focus on new ARR. It's been very much appreciated, and it's showing results. Secondly, lower the barrier to entry. We will have an entry-level that will simplify the process for new customers to get on board with BIMobject platform. We will have a self-serving options that will eventually -- will built out and we expect that to grow the number of BPMs coming onto the platform. Thirdly, account expansion. As communicated in the Q4 report, we're set to launch a new pricing model. We're moving towards a value-based pricing model. Note this at the last time BIMobject made any adjustment into the pricing model was over 3 years ago. Today, the platform is 6x larger with more range of professional users. And that means that we are providing a massive amount of more value to our users, still at that fixed cost that we have in the pricing model. So we will be moving towards the value-based pricing model, that I would like to elaborate you more on as we continue into the year. But more, we're also launching customer success to drive this account expansion. And this customer success team is going to be led up by Henrik Nystrom, which we're very excited about and is also another opportunity for us to improve our accounts and thereby making more to drive revenue. That's it for now folks. I'd like to hand over to the operator for Q&A. Next slide.

[Operator]

[Operator Instructions] Okay. There seems to be no questions on the phones at this time. So I'll hand back to our speakers.

[Carl Silbersky, Chief Executive Officer]

Okay. So no questions. Then we had one question here coming into the web, and I can try to answer that one. The question, I will try to read into this. They've understood that we have closed down the R&D units for something called Matterport. Somebody said on it, correct. I want to share that we have -- this year, we have been focusing -- very, very focused on what is building the business and what drives ARR. I think that is important for our shareholders as well as important for every [indiscernible] our business has massive potential. So we have gone from 13 projects down to 3 major projects and to deliver them with high-quality for our users as well as for our manufacturers on the portal. So that means that we had to kill a lot of darlings, and one of those was Matterport. But again, the Matterport did not drive a lot of revenue. No, that's fine. Do we have any other questions? No other questions?

[Operator]

None so far on the phones.

[Carl Silbersky, Chief Executive Officer]

Okay. Then I would like to thank you all for listening in to this Q4 financial reporting, audio cast and that's it. Over and up.

[Alexander Dahlquist, Chief Financial Officer]

Thank you very much.

[Carl Silbersky, Chief Executive Officer]

Thank you very much.