Bimobject AB

STO:BIM

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, welcome to the BIMobject's Q4 reports 2020. [Operator Instructions] I will now hand the call the call to Carl Silbersky. Please begin.

[Carl Silbersky, Chief Executive Officer]

Thank you very much, operator, and a warm welcome to Q4 2020 financial report audiocast at BIMobject. And today, I've got Alexander Dahlquist, the CFO of the company with me. My name is Carl Silbersky, and I am the CEO of BIMobject. So without further view, let's go to the next slide. Please, operator. The definition of BIMobject is a global marketplace for the construction industry. That's how we define ourselves. And what we do primarily is that we help manufacturers on building products reach, influence and understand designers worldwide. To date, we have 2.1 million registered users on the platform and over 2,000 brands. So it's a powerful marketplace in the construction space. Operator, next slide, please. The agenda for today, I'm going to talk you through some highlights. Quick, and we're going to follow-up with the business update. Moving on to Q4 2020 financials with Alexander & a summary and then over to Q&A. So operator, next slide, please. Highlights in Q4. So altogether, we are over 2,000 brands -- building product brands listed on the platform today. That is a large part, and we've been growing healthy over the quarter. We have 7.2 million files downloaded in the quarter, accumulated over 74 million downloads in the year and we're also seeing a healthy increase, especially in the Q4 in the downloads. We are SEK 25 million in revenue sales in the quarter, that's 13% platform growth year-over-year. The pattern of the growth between Q3 and Q4, Alexander is going to walk you through that one and it is a pattern that we see have been seeing over the past couple of years. More on that later. And finally, we have -- to date, we had 26% year-over-year cost savings. That's the highlight of the Q4 that we want to walk through. Operator, the next slide, please. Growth in the number of downloads. In the quarter, we have seen a strong downloading activity on the platform. Like I said earlier, we had over 7 million downloads in Q4, and that's representing each month we had more than 50% growth in the number of downloads on the platform. This is all organic, and it comes from -- at the 0 marketing cost or close to 0 marketing cost. So again, really, really strong activity on the platform, and that means that we're building a lot of value for our manufacturers. Going forward -- operator, next slide, please. Looking at our strategy, it could be said that we're sticking to what we do, and we are going ahead from focusing on the core. We have 4 things we focus on in 2021: First of all, we focus on the user base. Number of registered users and downloads. We need to have a strong platform and that we continue to be laser-focused on. The second thing is the number of brands on the platform. This is what you need to be tracking and a lot of people are tracking but also very important is what we're going to start to initialize given to you is that the ARPA, average revenue per account, on the platform. Important to track that one and how we're developing that, especially in the mind that we have a new price list on the platform. The third thing we will be following along and that we're focusing strongly on is the platform revenue, ARR growth. That's the first thing to be focused on. The second thing is the net revenue retention. How we do with our existing customers? How we're keeping retention rates? There's different components to that one. There's one part is the churn on the platform, the other one is up-sell. We're trying to -- we want to give you those numbers and for you to follow along how we're doing there. The third part we're focusing on and we're living on, of course, the follows on if you have a really strong platform that continues to add more value to the users, we should see that in the ARR revenue growth and it kicks in by having an improved EBITDA margin. So those four is the focus and how you should be followed on as BIMobject. So with that said very rapidly, I want to hand over to you, Alexander.

[Alexander Dahlquist, Chief Financial Officer]

Okay. Operator, next slide, please. So if we look at the financials for the quarter, Carl already mentioned, we have platform sales of SEK 25 million, that's a growth of 13% versus Q4 last year. Our earnings are still negative, but SEK 18.6 million in the quarter, but that is an improvement of 68% versus Q4 last year. And cash flow is negative SEK 11 million, where we see an improvement of SEK 20 million. We will get into a little bit more on each of these. But all in all, I mean, we're going in the right direction. We're moving -- we're growing. We have better -- the loss is decreasing, and cash flow is going in the right direction. So operator, next slide, please. We had growth both in the quarter and both in the year. But again, we've seen also there have been a number of questions today. If we deep dive a little bit into Q4, what's happening? There's an exchange rate impact in the quarter. It's 1.5% or roughly SEK 0.5 million compared to Q3. We also -- you read in the report are implementing a new global ERP system. And in that work, we identified the historic error, which we made a correction for, but that also has a small impact on the Q4 figures and that comes down to SEK 0.4 million. It's a one-off, no more than that. Then also, as you all know, we've been -- we've set out this year a new price list, new terms and conditions. And what we see is that the old process we've had has been very manual, and we had to contact each customer to get a new renewal. And now what we're moving to is more of an auto renewal process, and that is taking some time. Churn is not increasing. It's still single digit. So we're -- it's not customers churning, but the process is taking a little bit more time. Okay. Operator, next slide, please. Cost savings again. I mean, we're continuing the trend. We've now more than achieved the goal we set forward of SEK 50 million. The full year savings of SEK 58 million. We are, however, beginning to invest in some new hires, mostly marketing and in customer success. We believe now that cost-cutting is done, we're at a decent level. There might be some small things that we still work on, but all in all, the cost savings program is finalized and now we seek to build on where we stand today. Okay. Operator, next slide, please. Given that, and I think it's encouraging, is the improvement in cash flow this year. We're on a new level. It comes from the improved EBITDA margins from cutting costs and obviously having less to pay. That is a big contributor. And also, we've done great work this year on accounts receivable, which have also helped the working capital, which drives cash flow in the right direction. Major improvements this year, and this just needs to be maintained moving forward. Okay. Operator, next slide, please. Over to you, Carl.

[Carl Silbersky, Chief Executive Officer]

So yes, over to me. Thank you very much, Alexander, a very rapid walk-through of the financials there. So in summary, for the year. We -- it's been a transformational year without a doubt. To start with, the operational transformation has been significant. We can go from the new go-to-market model, how we organize marketing to sales, a significant cost reduction program we put in place of SEK 50 million that we overdelivered on and successfully implemented during the year have been two rather large things. So that's been the transformational year for the company. On the financial side, if you sum that up, you have seen strong finances. I mean, we're moving towards profitability. The cash flow has significantly improved and we have nearly SEK 400 million in cash and short-term investments at hand. And looking at the continued growth going forward, the continued growth we are, despite transformational year, we are doing SEK 13.5 million year-over-year platform revenue growth. Something should also be highlighted and should be very, very proud about, and that is, of course, 2.2 million registered users and the 25 million downloads in the -- that we're ending up now at the end of Q4. So we maintain our market leadership, transformed the company with strong on finance, and we continue to go for growth. So with that said, I want to hand over to the operator for Q&A.

[Operator]

[Operator Instructions] And we have one question in the queue so far, that comes from the line of Matthias Durner Tuner of Discover Capital.

[Matthias Durner, Senior Equity Analyst]

I have two questions. And the first one would be, if you could elaborate a little bit more on the, let's say, different platform revenue sizes of Q3 2020 and Q4 2020. I understand that there's one sort of -- a one-off negative with the revenue recognition. But let's say, revenues would have still been below the Q3 level, adjusting for that negative one-off. And I was wondering if there were other effects as well and if you could quantify them? You were talking about the change to, let's say, a different, I think you called it automatic renewal change, that would be quite helpful to understand that development.

[Carl Silbersky, Chief Executive Officer]

Alexander, do you want to address this question?

[Alexander Dahlquist, Chief Financial Officer]

Yes. Sure. As we said -- or I tried to say was, yes, there's the currency effect, obviously, that is in there that amounts for a deviation of about SEK 0.5 million and then the adjustment we spoke about on revenue recognition, which is SEK 0.4 million, and that takes us more or less in line with the Q3 figure. And then on top of that, we are seeing the time it takes for us now to renew, it's taking us a little bit more time. And that's -- that kind of explains why it's not turning higher than it is.

[Matthias Durner, Senior Equity Analyst]

Okay. And just to follow-up on this. So the exchange rate difference is -- so compared to the previous quarter, not compared to the previous year, because I would guess, looking at the euro and the U.S. dollar exchange development, Q3 would have actually been probably negatively affected already. So in Q3, you should have had a negative, let's say, FX effect already?

[Alexander Dahlquist, Chief Financial Officer]

Yes. From -- I mean, if we look at it, it develops from Q2. And I mean, the impact -- if I compare from Q2 to Q4, the currency impact is 6% but then on Q3 to Q4, it's only 1.5%. So you're right. So it is higher. The change in the SEK happened around the end of Q1, Q2, and that's the explanation.

[Matthias Durner, Senior Equity Analyst]

Yes. Okay, great. And my second question...

[Carl Silbersky, Chief Executive Officer]

Matthias, I can shed some light on your questions regarding the contractual differentiation and the delay in renewals. So we're moving -- like I said, in a transformational year, and we are moving into more of a SaaS dedicated sales model. The contractual we had before was manual renewed, that means that there was some auto renewals in place. That means that we have to go out to all our existing customers and renew their contracts and on completely different terms. The terms also allow us to do increases on a yearly basis. That contractual renewals, of course, is a complicated product -- process. In line with that, we also introduced a new pricing list. So we came to the new customers with a new price model, with new price list, as well as different contractual terms. That's, of course, causing some delays. Let me give you an example of, let's say, we're negotiating with one of [ Wolfgang Spain ]. We emphasized the 30% increase on the price on the annual contract. We successfully did that one, but of course, the legal department takes some time to push through the new contract. So we are positive, but we're, of course, having a strong headwind, and we especially see it now as people interpreted as, well, what about these price changes? What is happening? Well, as we introduce them, we expect them to be kicking in over the year. We said that all along. We expect to have a positive picture of it. Otherwise, we wouldn't have done it, of course. So we are remaining confident that it will happen. We don't see an exceptional amount of churn or anything like that. It's still single digits. It's still low. So we are confident, but that -- these factors, like Alexander said, in combination with what I just said, is a real explanation of why there is not a strong development between Q3 and Q4. And historically, if you go back in time, why is Q3, Q4? Because it is a large renewal month -- renewal quarter, Q4, where sales normally has dropped a little bit -- new sales has dropped because we have been focusing on renewals, that we are now with new contracts are changing going forward. So please scream at me next quarter if we don't fulfill all your wishes there -- or sorry, not next quarter, but next in Q4 -- next year. We think we are on top of this situation.

[Matthias Durner, Senior Equity Analyst]

Okay. Okay. And do you guys sort of also have an indicator of that delayed renewal? And I guess then invoicing, which is basically also related to the drop in the invoicing amount basically compared to Q4 last year. Is that sort of also the connection of these delays probably going into January?

[Alexander Dahlquist, Chief Financial Officer]

Yes, that explains some of it. But there is also another side of our business, which is the Services side. And this is one of the main explanations on the invoice, why there is such a shift. I mean, that's a good -- why we've moved to a business model, which is more and more of a SaaS model because it becomes more predictable. The other side of our business, the Services side, is more traditional B2B and it's very jumpy. And last year, in Q4, we had good sales on our services side, and we haven't seen the same this year.

[Matthias Durner, Senior Equity Analyst]

Okay. Okay. And one very...

[Carl Silbersky, Chief Executive Officer]

One final explanation, let me just shed some short light on the Q4 as well. Here in Sweden, we have been pretty liberal on -- with the COVID-19. We've been functioning pretty well. The rest of Europe has to be more shut down, and we are seeing the effect of that one. We're seeing longer times to make decisions, especially in Europe, southern parts of Europe and some parts of the U.S. and that maybe correlated. And there's no excuses for us here, but there's maybe a correlation here between the presidential election and the COVID situation in the U.S. in the final quarter. Hopefully, we shed some light on the numbers here.

[Matthias Durner, Senior Equity Analyst]

Yes. No, definitely. That puts a lot into perspective. And one very quick one. Could you roughly indicate -- you were talking about maybe doing some strategic cost increases over 2021. Is there any chance you can indicate there what you're thinking about in terms of amount? Or would that be very opportunistic and basically dependent on the business performance over 2021?

[Carl Silbersky, Chief Executive Officer]

Obviously, that's going to be dependent on how the development goes for the company.

[Matthias Durner, Senior Equity Analyst]

Okay. So there's no, let's say, amount you would, let's say, have now in mind at the moment for the coming year?

[Carl Silbersky, Chief Executive Officer]

No.

[Operator]

[Operator Instructions] There seems to be no further questions on the phone. So I'll hand the call back to our speakers.

[Carl Silbersky, Chief Executive Officer]

Thank you very much. Alexander you are closest to data here. Do we have any questions on the web that we need to address?

[Alexander Dahlquist, Chief Financial Officer]

I think we more or less covered them. Obviously, Carl, if you'd like to comment on M&A, that would be good, I think.

[Carl Silbersky, Chief Executive Officer]

Yes. Good question. We are -- we have been saying and emphasizing that we are -- we will do M&A. We will do acquisitions from time to time. Of course, that's a very sluggish thing. I think they move very sluggishly, the M&A. Some you think you're close to some and then they disappear for some and other reasons. We are emphasizing our focus on the M&A, and it should be natural for any kind of marketplace company that wanted to grow. We want to focus on primarily things like we did in when we acquired Polantis. We want to acquire market share in selected geographies. We want to acquire traffic. It's a huge component for our growth, and that means also registration of users. So we're very much focused on those, and we, of course, want to strengthen our position in the markets to gain a further lead. Do remember, BIMobject is world-leading in every market we operate in and actually globally as well, but that doesn't stop us. We believe this is a winner takes it all kind of market. Okay. Maybe that has addressed it. And I can't say more specific about the M&A. So I hope to come back to you over in 2021 and get back to you. Okay. Anything else? No?

[Alexander Dahlquist, Chief Financial Officer]

No, I think that's pretty good.

[Carl Silbersky, Chief Executive Officer]

Then I want to say thank you very much for listening into this audiocast. And this is a cold day in Skane, Malmö, Sweden, but sunny, and I hope you all take care of yourself. And thank you more. Thanks very much.