Bigtincan Holdings Ltd

ASX:BTH

Earnings Call Transcript 2022-Q4

[Jane Morgan, executive]

Good morning. My name is Jane Morgan, and thank you for joining the Bigtincan Holdings Limited Q4 FY 2022 Appendix 4C and quarterly report briefing. Today, I'm joined by Bigtincan Co-Founder and CEO, David Keane; Global Financial Controller, Cyril Desouza; and Chief Product Officer, Stefan Teulon, who will discuss today's quarterly results release and provide an update with a Q&A session to follow. [Operator Instructions]

David, I'll hand over to you.

[David Keane, executive]

Thank you, Jane, and good morning, everybody. Yes, my name is David Keane, the CEO and Co-Founder of Bigtincan. And as Jane said, with me today, we have Cyril Desouza, our Global Financial Controller; and Stefan Teulon, Chief Product Officer. For today's call, we'll be discussing the Appendix 4C report that was uploaded to the ASX this morning together with a brief supporting slide presentation that has also been released to the ASX.

Now before we start this call, I do want to send my thanks to our entire global Bigtincan team who have again shown their ability to execute, delight our customers and deliver a strong result for this quarter that closes out a transformative FY '22.

All right. Let's get on to today's results. I'm going to bring up the slide deck here for you.

All right. Let's get started. Thank you. So let's jump into the first slide. If we can just [ go there ]. Thank you so much. So just a few highlights from the 4C today. As you'll hear from Cyril, total cash receipts increased 113% to $31.3 million from Q4 FY '21. Operating cash payments of $31.2 million. That includes costs related to the Brainshark integration program. And that's our third consecutive operating cash positive quarter. The company had $33.9 million (sic) [ $39.3 million ] in cash and cash equivalents at the end of June 2022.

If we jump to the next slide, I thought I might spend a bit of time talking about some of the trading highlights in terms of Bigtincan's performance. One of the things we talk about in these 4Cs is the progression on the annualized recurring revenue, and this year, we've now passed $120 million of annualized recurring revenue. And as we talked about before to investors, certainly at Bigtincan, we see the benefits of the enterprise customer base driving that growth.

But one of the things I thought would be insightful for investors would be to think about how the company is translating that ARR growth into revenue certainty. The chart on the right here talks about the contract length by ARR, so it gives you a view of how to think about the split of that ARR.

Now we've talked a lot to investors about the typical sort of 12-month contract. At the end of June, 12-month contract customers made up 57% of the ARR base. Now we do have some customers in Bigtincan that are on less than 12-month contracts. So it's not a typical case, but it does happen. And we have about 10% of our revenue of our ARR, excuse me, in that less than 12-month contract base.

But we can -- I think the interesting figure for investors here is that 33% of the ARR base is now in more than 12-month contracts as we finish June 2022. And that certainly helps the company to get that increased revenue certainty when we work with our enterprise customers.

Now one of the other things that I've talked about in the 4Cs is some of the traction we've had in the market, both with new logos and expansions. Now in the 4C document, you'll see a bunch of names that I thought I might call out a few to talk about.

One of the ones I think is really interesting for Australian investors, of course, is JCO Australia, and that's a wonderful win for us as they see Bigtincan's technology helping them to sell in new ways when they're bringing their products which are, of course, incredibly important in today's world, to their customers. But they need new ways to be able to engage and sell. And they're using Bigtincan's product for content delivery as well as really pioneering with some innovative augmented and virtual reality technologies.

Another interesting new logo for us this quarter is McLaren Group. Yes, that's the car folks out of the U.K., again, looking at Bigtincan as a sales tool. And I think there's interesting growth opportunities in that account. Other new logos are in the pharmaceutical space and even in sports this quarter.

In terms of expansion deals, I think some interesting names there are Farmers Insurance and Allianz Life Insurance, both expanding in this quarter as we see opportunities in the financial services sector; Abbott Laboratories and Roche Diabetes Care on the Bigtincan life sciences space; W.L. Gore in manufacturing and life sciences; and of course, others as well. And we're just seeing those companies realizing the importance of how they need to sell to their customers and how they need to manage the way they engage with their customers in today's new economy.

Now we've mentioned this to investors before, we did a little business update in May and -- where we talked about Bigtincan being expected to report our maiden adjusted EBITDA positive full year results FY '22, and this report confirms that it's on track as well as being on track to meet or exceed our revenue guidance for FY '22. Something else we talked about in that May business update was cash flow breakeven to be achieved in FY '23. So all those things continued along post that May update.

Now on the next slide, I think what's important for us as we think about what Bigtincan really does, is how our technology plays such an important role with our customers. And Stefan Teulon is going to give us a bit of an update on the progression on the technology side for this quarter.

Stef, over to you.

[Stefan Teulon, executive]

Thanks, David. Next slide, please.

So we talked about our vision for Bigtincan at our recent product and technology update, you went into a demo of our end to end solution. And we want to really overemphasize why it's important, even more important today than ever before.

Bigtincan really is all about helping our customers deliver the buying experience of the future to their buyers. And it's more important because the trends of digital and the remote economy continue to be strong. And our customers are looking for solutions like Bigtincan's Content, Learning and Engagement hub to help them operate and win in this environment, whether it's from optimizing productivity of their sellers or delivering the buying experience across new and emerging channels.

In-person is the most common, digital is what we're used to, but virtual is the future. Bigtincan solutions really support whatever our customers needs are. Next slide, please.

In terms of productivity at Bigtincan, it's been a busy quarter. In the run-up towards the end of the year, we shipped over 75 new features, both on the platform and across each of the hubs. A couple of call-outs: the general availability of an updated user interface across our Learning and Engagement hubs, really improving the overall platform experience regardless of whether our customers are using one or multiple solutions; the rollout of our conversational intelligence solution and Engagement Hub, bringing insights into the effectiveness of how [indiscernible] performance by seller and their audience. That's been powered by our VoiceVibes technology; and Content Hub version 5.9 which includes support for additional modern content formats. And we think this is exemplified by the use case of GUESS' rollout of the Matterport-built 3D that create digital twins of their stores, which have been fundamental in digitizing their merchandising and store training programs. Next slide, please.

So in terms of defending and reinforcing our technology, Bigtincan continues to invest into our IP and patent coverage. It's great to get to announce that, during the quarter, Bigtincan was awarded an additional patent that's taking the total stable to 16 on top of the additional 15 previously. The 4 main areas, as you can see here, cover content management, training coaching, remote communications and what's commonly referred to as XR or augmented reality and virtual reality.

Bigtincan is a platform-first product. And so we really recognize that it required IP and defensibility in all these areas to bring our solution to our customers. And so our investment into these areas is not just a silo. It's really part of the holistic strategy across all of our products.

And now I'll hand over to Cyril.

[Cyril Desouza, executive]

Thank you, Stefan. Good morning, afternoon and evening to all on this call. Customer cash receipts for the quarter were $31.3 million, in line with the company forecast, which represents an overall increase of 113% from the previous corresponding period. The sales and receipts were driven by strong accounts receivable balances which were collected in the quarter as well as new expanded and renewal opportunities which were closed, billed and collected within the quarter.

Total operating cash payments for the quarter were $31.2 million, an overall increase of 113% from the previous corresponding quarter. The decrease in costs were due to the adjustments in staff costs, marketing and specific vendor programs initiated from Q3 FY '22. The company continued to invest in server and hosting infrastructure to support our customer base in North America, Europe and the Asia Pacific.

Turning to Slide 10. In summary, from an operating cash flow perspective, the company generated net cash of $49,000. This included $800,000 allocated to the integration of Brainshark within the quarter, making the year-to-date integration costs related to Brainshark of $1.8 million. And this is out of the total integration of $5 million that was set at August 2021.

Turning to investment activities. We continue to invest in long-term software development projects as we believe these projects are essential for the long-term sustainable growth with $4.7 million invested in the quarter. Now although there was a slight increase in this quarter from the last, these are essential for the data product and our AI developments. And these investments are necessary to add to our FY '23 and beyond growth.

The business finished FY '22 with $39.3 million in cash and cash equivalents and is well funded to execute on our company plans for FY '23 and beyond.

Turning to Slide 11. Q3 has historically been a strong quarter in terms of receipts due to the business that's closed towards the end of the fiscal year. And you can see that displayed in this graph for the previous years. Cash receipt growth for the quarter was driven by a good influx of medium to large size customers signing up during the second half of FY '22.

As mentioned, total cash receipts for the quarter were $31.3 million. When the multiyear payment of $1.2 million is backed out, the remaining $30.1 million when annualized represents a strong correlation with the FY '22 ARR total of $120 million.

That's all for me. Thanks, and back to you, David.

[David Keane, executive]

Thank you, Cyril. So looking ahead, first of all, we've talked about this in the May business update. But from a cash perspective, you can see the company is set up for that cash flow breakeven position to be achieved in FY '23. Cyril talked about that maiden adjusted EBITDA positive result, and we're pleased to confirm that with an increase in net adjusted EBITDA compared to the result achieved in the first half of FY '22.

And as you heard from Stefan, the company continues to believe that our marketplace is something unique that is really well suited to help enterprise organizations to create that new buying experience that takes advantage of our ongoing transition to digital and remote, and that the technology innovation that Bigtincan is building is going to provide that fundamental layer for the company to continue to grow and build successfully into the future.

That's really it for our 4C briefing. Obviously, for investors, we'll be looking forward to seeing you in around a month when we announce the full year FY '22 results and talk more about FY '23. But we thought it would be worthwhile getting together today to give you this update and to take any questions you have about progression in this quarter.

[David Keane, executive]

All right. We will start taking a bunch of quarters -- questions. Okay, there is a question here about -- from [ Adam Bradic ] about 8% drop Q-o-Q in spend. Is it due to lumpy [ profile ] or has to do with revenue, I think you're asking, as opposed to spend -- or cash? I mean this is a cash report. So of course, cash is lumpy. You're right. I mean, there are some quarters when, based on when a company pays and the size of the deal, that can impact when the cash hits. But as you see from the charts, the quarter was successful in its traditional strength for the company. Anything else to add to that, Cyril, in terms of the cash versus the previous quarter?

[Cyril Desouza, executive]

Yes. I mean I was going to just add that in FY '20, as you can see in the graph, it's pretty much in line with how that year trended in terms of seasonality. We are a seasonality-based business, and it does depend on in terms of the enterprise customers, in terms of their payment terms, [ some of them go out ] for many days. So it does fluctuate, but we're very pleased with the result in terms of cash receipts for this quarter.

[David Keane, executive]

All right. I've got a question from [ Mark Dietrich ]. What was the revenue and ARR breakdown from Bigtincan -- from the branch out in Bigtincan's conventional bond? We'll definitely provide more detail for you, Mark, at the full year results, including revenue and ARR, and that will give you more insight. We are pretty pleased with the way Brainshark turned out, actually, but also pleased with the work that the team did on existing Bigtincan customers.

But I will remind viewers, attendees on this webinar that, from a Bigtincan point of view, we've pretty much made the transition now to the sales team selling the unified platform story. So the way I'd suggest we talk about that is the organization split is more about Content Hub, Learning Hub and Engagement Hub. I think that's something we want to give you a pretty good view into which will help you to think about future prospects.

There's a question here from someone about will cash flow break even FY '23 be an exit run rate by last quarter or Q4? Or should it be for the whole half or an exit run rate based on a month? Well, I think, what you've seen from today is that the company understands the importance of making sure that we're well set up and well structured, and we talk to investors in today's 4C with a bit of a view of that cash outlook. And I think that gives investors confidence that the company is making the right steps to adjust its cost base so that we can not just ensure that result, but that we can do that on an ongoing basis.

So I would say this is an ongoing expectation that we're going to be able to deliver cash flow breakeven and onwards into calendar '23.

Okay. There's a question from James Bales. Is FY '23 cash flow breakeven called out in Slide 12 on a full year run rate basis? Yes, so I think that it's not full year, James. I mean, Cyril might want to give a commentary on that. But I mean, of course, we have seasonal cash receipts. And so we do need to talk about that. Cyril, do you want to comment for James there?

[Cyril Desouza, executive]

Yes. I mean, we specifically have said that within FY '23, the business will achieve that cash flow breakeven point. We haven't specifically said exactly when, but it will be within [ FY '23 ]. And you can see the trends from the last quarter to this quarter in terms of some of the cost initiatives that we've taken.

[David Keane, executive]

Question here from someone else, how sticky are the contracts? Look, I think that's actually a really interesting question and probably fundamental to how we think about the business in today's economy. These are organizations that are making multiyear transformative commitments to our technology. But the reason they're doing that is because they're faced with situations where their way of working is fundamentally changing. And again, Stef talked about that virtual and digital economy. And that's true for our customers.

And so what we've seen, and we'll talk about -- more about this in our full year results is that the stickiness is represented not just in these length of contracts but in how long they stayed with us. And we talked a lot about that in our audited results. And I think you'll see that is continuing into this FY '22.

There's a question here, could you provide some color on the current software sales environment and expectations of how slowing U.S. economy could potentially impact sales velocity and momentum into FY '23. Of course, everyone is looking at the economy. One thing I will say is it's one of the things that gave us some comfort is that the customers we have are asking into these longer-term contracts. That is helpful in terms of planning for the company's direction, in how we think about that momentum into FY '23.

And we're also pleased with the progression of Brainshark. As we've talked about in today's briefing, that's actually turned out to be something that has helped us to use the scale that we're now operating at to be able to deliver the strong results.

So I think that, who knows the future of the economy? I'm not predicting the future of the economy. But what I can tell you is the company is well set up to adjusting that to whatever is out there but also to make sure that, should there be growth opportunities, we're ready to be able to take advantage of those opportunities as well.

The question is from Ben O'Leary. Will you be switching Brainshark customers to the newer technology platforms and software of Bigtincan? Maybe I'll hand this one to Stefan. So question is about switching Brainshark customers to newer technology.

[Stefan Teulon, executive]

Yes, thanks, David. And great question, Ben. I mean our approach is one of evolution. I mentioned earlier that the Learning Hub, which we categorized Brainshark within that hub category, received numerous updates. So Brainshark customers are being upgraded as the technology and the platform upgrades. So there's no migration or switching needed. The technology has been invested into and modernized in place.

[David Keane, executive]

Thanks, Stefan. A question here from Ross Barrows. Can you provide any insight into your pipeline? Some enterprise SaaS players are seeing some delays in deferrables from client -- deferrals from clients. Are you seeing anything like that? Look, I think, Ross, we're looking at that, of course, really closely. One of the benefits of the enterprise customer base is that we do get to talk to them. They're not like small businesses or consumers that we don't really talk to.

So whilst we're tracking that and there's definitely some -- and you have to watch the media to get questions about the economy. But I will tell you that there's always going to be those balancing forces, the forces that drive digitization. And the company is having to be more productive with their own resources than ever before, which is true if you think about what they have to do now. They have to adjust and adapt their go-to-market processes to do more with less. That presents an opportunity for the use of our software, which is clearly focused on productivity of each individual seller.

Okay. There is a question here about, are you happy with retention and churn of Brainshark as well as the core business? I mean, Cyril, you might want to give some commentary on retention, net retention. I mean, we'll announce that, of course, in the full year, but any kind of view you can give there?

[Cyril Desouza, executive]

I mean, retention was stable in terms of FY '22 on both businesses in terms of Brainshark and also the core business. So we believe we've integrated the platforms quite well. And more information will come out when we disclose, obviously, at the end of August but very pleased with the retention. The net retention will be in excess of 100% as well. And that's something that we're looking forward to bringing out more details soon.

[David Keane, executive]

Thanks. There's a question here about are you seeing staff payment -- how are you seeing staff payments going forward? Will you slow down, given the life cycle of business? Or are you looking to find additional talent in tight labor markets? Well, first of all, we're always looking for the right talent. These companies depend on the right talent.

But as you will note from today's briefing and from the 4C, we did talk about reducing cost. There is a model in the cash outlook section of the 4C that talks about the ability for the company to adjust its spend. And that's something that comes naturally through a bit of scale and also comes -- I'll remind investors, this company has grown very, very quickly over the last few years, and that's presented opportunities for optimizing the spend environment.

And those are kind of natural things and also challenging things. I think it's about finding that right mix between the levels of investment we need to make together with the focus of the company and the markets on the mix between profitability and growth. But certainly, I would say that we're always looking to find good people because this is absolutely a people business, and we will find ways to work on them.

Okay. There's a lot of questions coming in, so please bear with me. Andy Gracey, hi, and he asked a question. To achieve F '23 cash flow breakeven, have we taken cost out of the business already? Yes, exactly. That's the message from that cash outlook. It says that, yes, we've already made those decisions. Those things have been done, and the company is now in a position to reduce its quarterly spend in both operating costs and programs and capitalized software.

Okay. There is another question on the cost side about where the expense cut is coming from to get to the $31 million to $33 million. And I think the answer to that, it's a combination of things, it's optimizing the existing business, making sure that every part of the company is as optimized as possible. And for sure, with the growth we've had and has come from a pretty transformative acquisition in FY '22, the opportunity is there and really just making sure that we can make the right decisions. It's not -- these are not easy, but we think it's important to demonstrate to the market that we can run a strong business with a clear focus on what are those necessary investments. And I think the message would be that the company does need to keep making investments that needs to be done in a planned and thought through and well managed way.

One more question on people here. There's a question that says, are you seeing an increase in technical talent in the labor market as larger players, further hiring and crypto terms go on? Yes. Not to any big degree here. I think we're always very cautious of this. Keeping -- ensuring that the best people want to work with us and want to see their future with us is certainly a very important part of what we want to do. And I think that's one of the reasons why this is a company that's built entirely on the team. It's the people here that make a difference. And we've got some amazing people in the company. And I think our view is to keep those amazing people rewarded the best we can and incented to build amazing technology. I think that's one thing that, certainly, from my point of view, I see that is really pleasing about the progression of the company is we're building and building on that core technology set that those amazing people create for us, and we're very fortunate to have them.

The question here again about the market, are you comfortable with the current level of inquiries and opportunities in the current economic climate? Is revenue weighted geographically to the U.S.? Well, first answer is, yes, revenue is weighted geographically to the U.S. However, I will qualify that by saying that many of these U.S. companies are buying for global deployments. And so a bunch of the deals that we talked about today came from companies buying globally.

So yes, the U.S. market is still the biggest global market for enterprise software. And yes, we do expect for us that continue to be the case. In fact, it's one of those times when there's all kinds of geopolitical challenges and questions out there, but certainly, the U.S. economy, we feel, is an important place to be focused on right now because it does present opportunities as digitization continues to [ stay across ].

There's a question about the share price. I'm always careful about talking about the share price, but it does say I know share price was 35% down from last capital raise. Are there more acquisitions in FY '23 and then capital raises? So as Cyril told you, the company is well funded with its cash balance. Given the cash flow discussion we've had today, the company is not looking to make any new capital raising activities, and there are no acquisitions currently planned.

There's a question here as well about integration costs. This is one interesting question actually from Ryan Newman. $1.8 million integration cost, so far there were $5 million flagged. Are we still expecting total integration cost of around $5 million? I might pass it on to Cyril to give some commentary on that. Certainly, I'll start by saying, Ryan, we're pleased with the progression with actually the team, and it's all about the team. They've just executed off the charts. We should be all so proud of them because the more they've got scale and understanding of how to do it, plus particularly when we think about acquisitions like Brainshark, where I'm going to talk about it, so much synergy. Even the offices were like half a mile away, that really helps. But Cyril, any commentary on that?

[Cyril Desouza, executive]

I was just going to say some of the costs towards the end of the year were accrued. That will probably come into next quarter. But in terms of materiality, I would say they're immaterial. So as David said, the team has done exceptionally well. We probably or most likely won't get to that $5 million mark, and it's been extremely effective and efficient.

[David Keane, executive]

Thank you, Cyril. Another question from Andy Gracey. A significant question as well. I'm not surprised to get. How are you approaching share-based incentivization with the depressed share price, like many listed technology companies? Looking at it very closely, I think there's always -- for investors, there's always an interest in ensuring that the executive team and the whole company is aligned with investor interest in terms of seeing success through a growing share price. But there are also share-based payment costs that have to be carefully thought through and managed.

So I would say that it's a combination. Looking at it in the right way, we do believe that aligning the team -- everyone here at Bigtincan, we want everyone at Bigtincan to be aligned with investors, so if we're successful, they're successful. And I think there are opportunities to do that in the right way while balancing that with what it costs the P&L.

One more question from Tom Massey. Are you seeing your customers that signed up for 12 months are renewing for longer-term contracts? Yes, this is also interesting. I think the answer is yes, Tom, but hard to give you a lot of data yet. We now have 2,000-plus deployments. So I don't know if I can give you any -- I'm not sure I might give some comment. I don't know if there's anything, Cyril, yet that is certain. But definitely, what we are seeing is just, across the board, people want 2-year contracts or more. Any comment, Cyril, on that?

[Cyril Desouza, executive]

Yes. I mean, obviously, you can see historically, we've always had a multiyear kind of 12 months and advanced deals. So I mean, that's obviously going to be -- that's part of the sales team in terms of the incentives to secure those deals. And yes, we definitely see more of those coming in FY '23.

[David Keane, executive]

Well, look, thank you all so much for giving us your time. I know it's very busy wherever you are in the world for joining this call, and we really appreciate you being here. We're looking forward to seeing you in about a month for the full year results. Thank you all so much.

[Jane Morgan, executive]

Yes, and thank you all for joining the Bigtincan Holdings Limited Q4 FY 2022 Appendix 4C and quarterly report briefing. A copy of today's presentation will be available on the Bigtincan website in the coming days. And as David said, we look forward to having you next time. Thanks again.