Bambuser AB

STO:BUSER

Earnings Call Transcript 2022-Q4

[Maryam Ghahremani, executive]

Good morning, everyone, and welcome to Bambuser's Year-end Report 2022. I am Maryam Ghahremani, the CEO, and I will hold this presentation together with acting CFO, Jonas Lagerstrom.

Today's agenda will cover a short company introduction for people new to Bambuser. We will then move over to Q4 highlights and finish off with SaaS KPI and financials.

Bambuser is the world-leading video commerce company. We were founded in 2007 by offering a video technology that let users stream live video from their mobile phones. We pivoted into video commerce at the end of 2019 and has since then attracted over 350 brands across 45 countries. We have a global presence in New York, London, Paris, Tokyo, Turkey and Stockholm, where we have our HQ.

We have since the start delivered a strong ARR momentum every quarter and believe that there is a massive market opportunity for us to pursue. I would like to emphasize that we are only 3 years into the video commerce journey.

We have assessed the market opportunity and estimate that the global total addressable market is over SEK 250 billion and growing. The market is wide open with low penetration. The opportunity follows the video trends that are more dominant in our everyday digital life. E-commerce has until now been based on images and text. The evolution to video is unstoppable.

Our core market opportunity is estimated to be over SEK 9 billion. It consists of larger companies being present in the regions and verticals that we currently serve. Bambuser is the leading SaaS company in the video commerce space and well positioned as demand grows.

Our product suite consists of 2 products. One-to-Many is our flagship product and stands for over 90% of our ARR. This is a solution when one on multiple hosts is interacting with many viewers. It's very easy to get started. You can basically start from your smartphone or use external cameras. The viewers can interact via chat and send likes during the show.

The One-to-Many solution has a full product promotion and add-to-cart functionality. One of our core strengths is that we use the merchants native checkouts. This is important as the checkout is very often the most important step in the customer buying journey that the merchants have spent most time iterating in order to achieve the highest conversion. One-to-Many integrates seamlessly with the customer journey. Our solution is also platform agnostic, meaning that we can work with more or less all e-comm platforms such as Salesforce Commerce Cloud, Shopify or Magento, to name a few.

Our other product is One-to-One. This is our solution that allows the merchants to have a face-to-face conversation between the end customer and the brand representative, either in the form of a drop-in or a scheduled meeting.

Our solution is very strong in verticals such as beauty and consumer electronics as the end consumer needs personal advice to make a purchase decision. We also see a demand in verticals that have complex purchase journeys such as automotive and luxury. Our One-to-One solution has interactive shopping layer that integrates with merchants native add-to-cart functions and checkout. We also have integrations to several booking systems and CRM.

We offer our product as a SaaS business, and we have 3 revenue components. We charge the customer a onetime fee when we signed the contract for onboarding and technical setup. Once the license starts, we invoice the customer a license fee 3 to 12 months in advance. We also have a variable fee for streamed hours and agents that we charge in arrears.

Our products are nothing without our main customers. Bambuser is present across the globe with over 350 paying customers and we are very proud to have some of the best-in-class merchants using our video commerce platform.

Okay. So let's move on to the highlights of last quarter. We successfully acquired new customers, such as Bosch, Amway and Guerlain and renewed and expanded several other top retailers, including Farfetch Tommy Hilfiger; and Givenchy, who is a part of the LVMH Group.

We are thrilled that we have launched our live shopping cartage on Salesforce AppExchange for Commerce Cloud. This will allow merchants to easily install our One-to-Many solution on their platform. We believe that this is of significant importance as we estimate that Salesforce has a bit over 5,000 customers, and that the majority of them fits perfectly into our ideal customer profile.

Another highlight was that one of the largest sporting goods retailers in the U.S. engaged Bambuser Plus to fully execute a holiday themed live shopping events on our One-to-Many platform. Outcome was amazing and attracted over 160,000 site visitors.

From a product point of view, we rolled out a new feature called Invite-Only for One-to-Many. Invite-Only allows merchants to invite a selected group of people into password protected events. We see a high demand for discounted feature amongst customers who really want to nurture deep loyalty and customer relationship.

With this, I leave the word over to our acting CFO, Jonas Lagerstrom.

[Jonas Lagerstrom, executive]

Good morning, everyone. I will now guide you through the SaaS KPIs and financials for the fourth quarter.

Our ARR bridge -- our ARR growth was 57% at constant exchange rates year-over-year. As of now, we will measure our ARR growth in constant exchange rates going forward. The quarter-over-quarter ARR growth was 6% despite a gross growth of over 16%, the overall growth is slower this quarter due to churn.

We are simply not satisfied with the current churn, and we're working hard to reverse the trend short term and long term. The main churn reasons our low adoption amongst our current customers and lack of seriously betting on video commerce as a part of the overall commercial strategy. Our solution may be plug and play from a take point of view but it requires commitment from the customers to allocate sufficient resources to run video commerce in a meaningful way. In that sense, we are like most of our software.

We also note that the churn customers have a smaller-than-average ARR. This quarter, we also faced headwinds from FX.

If we take a closer look at net revenue retention, we closed the quarter with a very strong NRR up 112% in the enterprise segment. For our top 20 customers, we see an impressive NRR of 159%. The enterprise customers stand for 43% of our total ARR, and we are focusing all our efforts on this customer group that represents our core market opportunity.

Onboarding the right customers will improve ARR significantly over time. The right customers will also expand over time. So it's definitely satisfying to see our average ARR per customer group grew with 38% year-over-year, and we're seeing strong support from verticals such as fashion and home and garden.

We saw a small decline in the number of customer groups quarter-over-quarter, but if we zoom out the last 12 months, we added 51 customer groups year-over-year.

If we look at the geographic market growth and market share, EMEA remains as the largest market, but Americas and APAC are growing faster. The vertical mix is slightly different depending on market. For EMEA and Americas, we have Fashion and Home & Garden as key verticals. And in APAC, we see strong traction in beauty and consumer electronics.

Moving on to the product mix. One-to-one represents 6% of the total ARR, but we had a strong year-over-year growth with over 120%. One-to-Many had a solid development still representing the majority of the ARR share of 92%.

The SaaS net sales grew 41% year-over-year in line with the ARR trend. The total net sales year-over-year closed at plus 6% and was impacted by a weaker Professional Services development. However, the Professional Services saw a strong upswing from the 2 previous quarters, mainly driven by improved sales pipeline.

The SaaS gross margin increased to 83% and was up 5 percentage points compared to last quarter. The margin improvement was driven by better scale of our fixed costs. The gross margin for Professional Services is equivalent to EBITDA, meaning that we recognize all typical OpEx costs such as staff cost, assignment costs and cost of subcontractors as cost of revenue. We saw significant improvement from last quarter by 19 percentage points. As mentioned during our last call, this is the first step for us to move over to a function-based P&L that we expect to start presenting for the Q1 '23 report.

Let's focus on the bottom line and the adjusted EBITDA. We're seeing a significant trend shift with improved EBITDA for 2 consecutive quarters now. The improvement between the first half and the second half of the year is SEK 25 million. This is the result of our initiatives in Q3 to trim our cost base and rightsize the company. Today, we are a leaner company with higher efficiency, which also shows in our cash flow.

The adjusted EBITDA improvement was well translated into our free cash flow. If we compare the first half and the second half of the year, we noticed an improvement of SEK 32 million. It was further supported by the working capital mainly driven by a higher share of up-front payments from customers and better efficiency in account receivables.

We closed the quarter with a cash balance of approximately SEK 379 million. We reiterate our message that the cash balance is sufficient taking us to a positive cash flow.

Thank you all for listening. We are now moving on to the Q&A session, and we are ready to answer your questions.

[Operator]

[Operator Instructions] There are no at this time, so I hand the conference back to the speakers for any questions from the web.

[Jonas Lagerstrom, executive]

Okay. It looks like we do not have any questions by web either. So with that said, we say thank you very much and wish you a great weekend.

[Maryam Ghahremani, executive]

Thank you.