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Thank you for standing by and welcome to the Whispir Limited Q4 FY '20 Activities Update Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Jeromy Wells, Whispir's CEO. Please go ahead.
Good morning, everyone. Thanks for joining us to discuss Whispir's Q4 FY '20 activities update. We have now been listed just over a year, and a lot's changed in that time. However, what happened is the ability of our communications software to play a key role in keeping stakeholders informed during rapidly changing operating conditions. Our customers are utilizing our platform to navigate the new normal with two-way communications across multiple delivery channels, languages and countries as they deal with the COVID-19 pandemic. We've had a strong finish to the FY '20 financial year despite unprecedented operating conditions. This morning, I'll take you through the major June quarter activity as well as provide some context around our financial performance. Our CFO, Justin Owen, will help me take any of your questions at the end. Slide 2 shows our business is built on strong underlying recurring revenue streams. Annualized recurring revenue was up $42.2 million at the 30th of June, an increase of 35.7% on the prior corresponding period and up 4.2% over the March 2020 quarter. Growth was driven by an increased platform usage across our existing customer base and significant new customer growth, particularly in ANZ and Asia. Turning to Slide 3. Net customer revenue retention of 124.1% was above expectations and up 1% on the previous quarter. As you can see, our customers are generally long term and increase their platform usage over time, providing future revenue surety. We know from experience that our customers initially use Whispir to solve a single communications challenge, often referred to as a use case. Over time, they use our platform to solve additional communications challenges with monthly revenue per customer significantly increasing once our platform is used for 3 or 4 more use cases. COVID-19 has been a good example of this increased use for many customers. I'll provide more detail on this shortly. Slide 4 shows our key financial metrics for the quarter. Quarterly customer cash receipts of $11.3 million were up 27% on the March quarter and increased 36.5% over the same period last year. At the same time, operating cash was close to breakeven for the quarter with a significant reduction in net cash outflows from operating activities to $100,000, down from $1.4 million in Q3. This was due to strong growth in customer receipts and the company achieving an EBITDA breakeven position for the month of June, excluding noncash share-based payments. With a cash balance of $15.2 million, we remain well funded to execute our growth strategy. The strong quarterly performance across these key metrics was due to higher transaction volumes from existing customers, maintaining strong cost-control management and record net new customers. Turning to Slide 5. The June quarter saw us on board a record 72 net new customers. Increased demand for easy-to-use software to automate and manage COVID-19 communications was a key driver of this growth as was our ability to quickly deploy communications capabilities for new customers, often within a matter of hours. This record new customer growth for the second consecutive quarter brings total customer numbers to 630, ahead of our prospectus forecast for June 2020 of 621. New customer growth has offset changes in traditional communications and transaction volumes from some customers within some industries that have been heavily impacted by the COVID-19 pandemic. Last quarter, I mentioned our COVID-19 go-to-market strategy based around 12 ready-to-use COVID-19 business-critical communication templates for organizations and 10 guiding principles to keep these stakeholders informed and master their COVID-19 communications. We recently moved to Phase 2 of this campaign called return to work. As much of the workforce continues to work remotely, and most organizations have had the way that they do business disrupted, the world has had to quickly evolve the way that it communicates. It's an important role to play in helping organizations communicate effectively with stakeholders as they navigate these changing operating environments, Whispir's developed an additional 11 ready-to-use return-to-work templates that ensure compliance with new government regulations. The return-to-work templates assist organizations are managing new workplace processes as they transition back to work as usual. The templates are designed for businesses with more than 300 employees with office and field-based work environments across a broad range of industries, including large retail, warehousing, finance, banking, education and construction. Moving to Slide 7. You can see the breadth of the ready-to-use return-to-work templates available. Everything from workplace capacity planning, shift availability through the health screening declarations and proactively managing an on-site confirmed case. On Slide 8, our ready-to-use return-to-work communications solutions are easy to update and modify and require no IT development. They enable organizations to quickly prioritize the health and safety of their employees, keep them informed of workplace changes and prepare for an incident with a strategy in the event of a workplace outbreak. Other key advantages include multiple delivery channels, secure communications, real-time updates and full order trail capability. We've been successful during this current environment because of the way that we have support innovation and build flexibility into the platform. So we knew that there was a trend towards platforms that don't need IT expertise at the customer level and are easier and quicker to deploy. Slide 9 highlights other macro digital trends that are driving growth from platform utilization. Remote working has accelerated digital transformation projects for critical operational communications, and there's also increased organizational adoption of cloud-based communication systems. Globally, demand for data-driven intelligence is increasing as is the need for AI and machine learning functionality to automate processes and improve productivity. That takes us to our investment and platform development on Slide 10. During the quarter, we continued to enhance and refine our platform capability in line with our 5-year product road map, which sees us transition to a communications and intelligence company. Importantly, we made significant inroads with our digital direct strategy, improving self-service capability and removing friction for onboarding of new customers. Increasing our digital direct offering is an important part of our long-term SMB marketplace strategy, which provides significant growth opportunities for the company and will increase our target market beyond the enterprise sector. Improvements were also made to reporting functionality, increasing data-driven intelligence and providing greater transparency for our customers. At the same time, we commenced work on future AI and serve recipient preferences with updates to workflows. We've invested $8.8 million in R&D for the financial year-to-date. However, this will ramp up over the coming years as we deliver our product road map. This will see us introduce conversational messaging, smart scheduling and intelligent messaging design capabilities as well as significantly improved insights into individual recipient preferences. Turning to our outlook on Slide 12. Our strong fourth quarter performance sees the company on track to achieve its FY '20 prospectus forecast, underpinned by recurring revenue streams and significant customer growth. For those of you who haven't seen this graphic before, it shows where Whispir sits in the total global market for this type of communication software. The CPaaS market is growing at a CAGR of 35%. Now WCaaS market, which industry analysts believe is similar, will reach USD 8 billion in 4 years. We have been investing in our platform and people to ensure the company is able to capitalize on this market opportunity. As I mentioned earlier, we remain well funded for growth with a cash and equivalents balance at 30 June 2020 of $15.2 million. Slide 13 outlines 6 main drivers for our sustained growth and increase our footprint within our target markets of Australasia, Asia and North America. Much of our new customer growth over the last 2 quarters has been due to our crisis communications experience. However, this area traditionally only accounts for a small portion of platform usage and revenue. Long term, we expect revenue growth will be due to an increased focus on marketing, messaging, customer engagement and operational communications. While we have acquired a significant number of new customers during the pandemic because they require our expertise to meet an immediate need, we believe this won't just be a temporary increase in customers. We know from experience over the past decade that once customers begin using our software with one specific use case, we tend to become embedded in their workflows. Slide 14 shows how we're using our competitive advantages to strengthen the moat. Our customers tell us that our proven communications experience over 2 decades, combined with our low-code/no-code capability, on-demand capacity and easy integration to existing IT systems, are real differentiators for us. We have a long-term product road map strategy that we're investing in and the development of innovative, new communications technologies and enhanced platform intelligence to ensure we're able to keep meeting our customers' evolving needs. Turning to Slide 15. You can see the diverse industry sectors we service. Whilst we have more than 11,000 unique use cases, our platform is primarily used in 4 main ways: for business coordination, customer engagement, innovation and crisis communications. Industry diversity provides a key point of difference for us and reduces our reliance on a single customer or industry sector. It also provides us with unique cross-selling and growth opportunities. Our performance over the last quarter, particularly our new customer growth and increased platform utilization from our existing customer base, highlights our key competitive advantages and our ability to enable organizations to quickly automate, to manage critical stakeholder communications. As much of the workforce continues to work remotely, and most organizations have had to change the way they do business, we are now operating at a new normal. And while that will continue to evolve, our communications software will be key to helping customers navigate these dynamic operating conditions. Thank you for joining us on the Whispir journey. We'll now take questions, and I'll hand you back to our operator to put them in the queue. Operator?
[Operator Instructions] The first question comes from Ross Barrows with Wilsons Advisory.
Just 2 questions for me. One, just in terms of customer numbers and ARR, could you give some color around that? And while we are talking quarterly numbers -- but any possible insight, if you can, on whether the customer additions were skewed, I guess, for the month of June or the back end of the quarter, which would help us get some understanding around the ARR growth of 4%?
For sure. Thanks, Ross. So generally, we work on a quarterly sales cycle where the new customer additions generally come in at the end of the quarter. It's because of the, I suppose, the relationship we have with our channel partners and their sort of traditional operating revenues. So we work hard on a quarterly cycle, and you're correct. The majority of the new customers this quarter came at the end, which is normal for us. I mean June is generally the largest month for sales and new customer acquisition in this business, the end of the -- it's the end of the year.
Okay. Great. And...
And so just to provide a bit of color in terms of the ARR question. Obviously, we still encourage customers to start small and so that they can get a quick return on their initial investments, get confidence to start learning about the platform and then to start building out other use cases. So the new customers in this quarter don't really have much of an impact at all in terms of the ARR. But what that does mean is that we've created a really solid revenue foundation for FY '21 and beyond as those customers increase the utilization of the platform over time.
Yes. Perfect. And just 2 questions -- or one question on 2 geographies. Just offshore, could you give any color around, I guess, the Singapore business and any insights you might have around the U.S. business and plans to -- could you give us some color around that new strategy or give an update to the strategy that you currently have in place?
Yes, for sure. So our Asian business is on fire with record growth. We'll give you more detail on the specific numbers associated with that in -- when we release our full year results. That's a -- it's safe to say that revenue has increased substantially in the region from our store base, which has been really encouraging. And the depth and the quality of the opportunities continues to improve quarter-on-quarter. In North America, it would be fair to say, we haven't met our own expectations in terms of where we would hope to be. Fortunately, the strength of the ANZ business and the Asian business offsets that weaker-than-we-would-like performance in North America. Having said that, though, we have made substantial progress with key channel partners, including a new channel partner, which gives us confidence that we've got in place the key levers that we need to accelerate the velocity of our North American business to get to where we would like to be. I mean we see North America as potentially the largest market opportunity for this company, and we're committed to tweaking and nuancing our strategy to ensure that we're successful in that market. I mean I think up until this point, we've been very measured in terms of capital that we've deployed in North America, so it's not to get ahead of ourselves whilst we build confidence with our channel partners and get the plumbing in place. Now I think there are a number of innovations with those channel partners that will -- ideally should be beginning to bear demonstrable fruits for us in Q1 FY '21.
The next question comes from Owen Humphries with Canaccord Genuity.
Well done on a phenomenal quarter. Just targeting the net retention ratio. I noticed that's obviously increased, but you guys haven't talked about the churn figures. I'm guessing that will come out in the results. But is the increase in the revenue retention driven by both ARR or ARPU and also a combination of reduced churn?
Totally correct. So we'll give the specific number on customer churn in the full year results, but customer churn has continued to reduce during the course of this year, which has been really encouraging. And -- but that concurrently also have increased utilization of the platform from our existing customers. So that's driven an extraordinarily strong result in terms of customer revenue retention. It's -- they're really solid numbers that we're looking forward to sharing with you in a few weeks' time.
Good one. And just I guess on the pipeline of opportunities. The last 6 months, you've added 100-plus customers, the last 40 of out of 70-odd. Just understanding the one-off nature of these customers. Obviously, COVID, you've been a beneficiary of the world being digitized. But is there any reason why we should see a slowdown in customer adds? Or is the pipeline -- given the 3-month lead, is the pipeline strong, and we should be expecting another step-up in customer adds in this half coming?
Well, I think generally, it's -- Q1 is the slowest quarter in terms of net new customer sales. In part because ourselves and our channel partners have all been working seriously to the end of the financial year to make sure we'll achieve our numbers. So generally, the sales take a little bit of time off at the beginning of Q1 to catch their breath. That has a little bit of an impact generally on sales, particularly with channel partners can be a little bit slower than what we would like to hand out new sales targets to sellers and what have you. So generally, Q1 is our slowest. It's not a linear relationship in terms of new customer acquisitions. But having said that, we have a very healthy pipeline, and we anticipate that a pretty consistent rate of net new customer acquisitions. So we're anticipating that this Q1 will be better than normal in terms of net new customer adds, but it's going to be another -- if things remain the same, it looks like it's going to be another solid year for us in terms of net new customer acquisition.
Good one. And maybe just one last question around margins. My understanding is that the wholesale rates have been coming down over time here in Australia. Is that expected to remain true for FY '21?
Yes. Look, I think there's a quality of maturity in the communications market here in Australia in terms of the prices of -- reasonably stable. We'll see margin improvements in North America and Asia for the business over time as we're getting scale and we get the benefit of scale. So I think, look, for the time being, like, it's a sort of -- from here on, we anticipate margin improving incrementally over time, and we're looking forward to that. Because of the operating leverage in the business, a slight margin improvement goes straight to the bottom line, and that really shines a light on the economics of this business. So we look forward to pointing to some more of that activity through the course of this year.
The next question comes from Julian Mulcahy with Evans and Partners.
Jeromy, perhaps I could just start with just a question on the customer profile of the ones you've won in the last few months. You had a sort of introductory sort of COVID-type price structure. Were many of those related to that, and therefore, they may not progress into sort of typically fully fledged customer?
No. So some customers have availed themselves with the special pricing, but it was for effectively a limited scope or a subset of the Whispir platform functionality, so that people could do simple things rapidly and quickly, that you'll notice. But the majority of the customers that we have in, I suppose, looking at the Whispir platform because of the power of the software to solve more critical business challenges where the requirement for additional features is strong. There are a few -- not a great deal, but a number of smaller customers that have -- we're talking small numbers, but SMBs and customers and other sectors that we wouldn't normally engage with, which we're working with as part of sort of maturing of our processes before the release of the Whispir Store within the next 12 months. So we're doing that work now really with a small cohort of smaller customers. It would be interesting to see how their profiles evolve over time. But at this stage, we've got a nice kind of balance of larger customers accelerating the utilization of the platform, which is really balancing out the sort of average revenue per customer. So we see for the time being, that's come down a little bit because of the larger number of new customers coming on at the end of the year in terms of what those average numbers are. We'll give a bit more color in 3 weeks' time at the end of the financial year, just the solvency and the nuances around the mix of customers. But broadly speaking, I think the profile remains pretty consistent and stable.
Right. And with the existing customers that kind of transitioned from 1 to 2 to 3 to 4 services, has there been a change in the pattern of that? Or is the chart on Page 3, is that just increased usage because they're using existing services more?
Yes. We'll provide a bit more in terms of some numbers in terms of what that looks like in a few weeks' time. Look, there's been a bifurcation of usage where some sectors have been materially impacted by COVID. So some of our customers, so for example, the -- in the aviation sector, clearly, operationally, there's less activity. So this year, there's less utilization of the platform. Now similarly, some of our emergency services customers where there's less cars on the road, there's less accidents, there's less requirement of certain types of activity, so there's less utilization of the platform to facilitate those day-to-day operational use cases that we support. Those are more than offset by other companies where the impact of COVID-19 has seen an increased utilization of use cases and what have you. It's quite -- it's really quite balanced, like the 2 really almost, sort of percentage point, offsetting each other in terms of those that are reducing the utilization and those that are increasing. So it's a sort of a nonstandard environment in terms of it. It makes it harder to say what the average profile of a Whispir customer looks like in terms of their increased utilization over time. It's safe to say, I think, that customers are, has a role -- and we'll look to provide a bit more color in 3 weeks, as I said, has a role of finding it easier to do more of the platform, plus I think the new -- the land-and-expand strategy is supported with our new customer success team are doing an excellent job in assisting customers go through that sort of cycle of maturity with respect to the platform --
All right. Cool. And just finally, with the -- in the U.S., with your return to workplace templates, have you seen competitors trying to do the same thing?
Yes. Look, I mean -- look, I think there's a few [ opportunistic startups of ]. And look, I think that -- yes, I mean, that's to be expected. But I think our thesis remains the same. Applications, endpoint solutions, they're clumsy. They're expensive, they're slow to innovate, a generally constrained engagement. Really, our thesis is that you want to deliver an app-like experience without having to have the cost or the complexity of deploying, running and maintaining an app. Where we change the economics of communication management, where you don't have to have IT, project managers or third parties managing apps, but knowledge workers within a business can simply open up templates, modify them, refine business processes, refine workflows themselves at a fraction of the cost. So look, I think there's -- I mean there's a handful of them trying to exploit the market opportunity. But look, I think the value proposition where we sit in the market is far superior, and it's much more healthy. This is not just about COVID-19. This is about organizations taking the opportunity to really think about how they accelerate digitization of existing processes. And that's -- organization-wide, this is not just a tactical response. The tactical response stuff is useful for us because it signs the life of the power and flexibility and how quickly we can respond and how nimble the technology is. But I'd say most of our customer conversations with the customers we have are at a much more mature level in terms of the way they're thinking about this.
The next question comes from Jules Cooper with Ord.
Look, congratulations on a great year. Just 2 questions from me. In the past, you've mentioned that you would expect growth to accelerate from the prospectus year. And I'm just wondering if you can sort of talk to what we should be expecting in terms of revenue growth or ARR growth at the top line, and then just how you see the head count for the business progressing over the next year, cognizant of the opportunity that's ahead of the business.
Yes. Yes, for sure. So I'll start with the back end, and we get back to the front. So look, we clearly demonstrate what we set out to do. We had an EBITDA breakeven month in June just letting noncash share-based payments. The cash outflows, almost neutral this last quarter. We got the business to a really strong point. But the market and the opportunity that we have is substantially material. So in the last sort of couple of months, we've onboarded an additional 32 net new employees, so the head count is increasing. So there will be -- which is really about servicing the opportunity that we have, and a substantial part of that investment is increasing our customer success function to ensure that those record number of new customers that we're onboarding are all having a good experience in getting the maximum benefit out of the platform as possible. So there will be an increase in a cost basis, the major costs, obviously, the employees and the salaries. We are focused on driving productivity, increasing efficiency and accelerating our rate of growth. And I really look forward -- and through time, when we sort of -- when we publish our full year results, providing much clearer color in terms of what our expectations are for FY '21. But just -- we just have to wait till then in terms of [indiscernible]
Sure. Okay. And then just a final question around the new customer pipeline. Are you able to share your sort of understanding of how you and your channel partners are looking at opportunities to keep the product out to more customers, run incentives, campaigns? I suppose I'm thinking first step was to respond to the crisis. And then -- but do you see that being a sustained approach of promotional activities to get Whispir in front of their own customers?
Yes, totally. And just some of the innovation within the channel partners with respect to strategies to give Whispir primacy over potentially, for some of them, quite large product portfolios have been tremendously supportive. And we've had a terrific year with our channel partners, and the relationships are stronger than ever. And it's a bit -- trying to give you any sort of specific things other than there's lots of small incremental tactical things happening within the channel partners. We have alignment around a certain cadence in terms of formalized campaigns, in terms of things that we haven't done, in terms of product updates aligned with the channel partners and with Ben Erskine and our marketing capability really leading a number of new initiatives to build on the history of our relationships, the strength of them but really celebrating innovation and moving forward into FY '21. A little bit more color on that also, I think, in August.
[Operator Instructions] The next question comes from [ Paul Benyan ] with Single Point.
Congratulations for a very good quarter. I just had one question regarding your beta rollout of the new platform. All the photos and screen captures we see on the website, are they all from what the new platform will look like? And how is the rollout going?
Yes. So most of the screen images you see are new interfaces. But I think you can see in a lot of the product videos, you can see the traditional Whispir interface in terms of if you want to have a look at that, how to use it, how it performs. We've -- under the leadership of Brad Dunn in terms of the new product team, we've substantially increased the maturity of the products team and taken the time to sort of align and prioritize the initiatives that we have with respect to the product road map, which means balancing a number of different features in terms of the [ standing ], the ARR, the intelligence of it. So it would be -- it's not really just about the front end in terms of the work. For sure, that's the experience that many people have. But there's a lot of concurrent activities that are happening that aren't quite as visible. With respect to the -- how fast is being implemented, probably not quite as fast as we would like, but I think we have to be respectful for existing customers that have built workflows using the traditional interfaces. And we have a specific programmer and a team of people working on customer migration. So over time, the traditional interface will be phased out. We're just -- many of our customers' critical infrastructure providers, first-line responders where traditional interfaces are baked into training manuals and quite structured processes. And so we have to be respectful that it takes time for those things to evolve and to change. So I think we have a balanced approach, but it will -- everyone loves the new interface look and so much more contemporary look and feel. And we look forward to the day when everyone can benefit from those new tools, but it's going to take a bit of time.
Certainly. So it will be less of an upgrade and more of customers will migrate to the new platform?
Yes, that's right. Yes. So customers have access to the new platform, and then they can -- and by default, and they can migrate as they're already in. It's part of the work that we're doing with the customer success team and the specific migration team.
There are no further questions at this time. I'll now hand it back to Mr. Wells for closing remarks.
Well, I'd just like to thank everyone for taking the time to listen to the Whispir's story today. Obviously, we're talking to a number of you over the coming weeks. But at this stage, we're planning on releasing our full year results on the 26th of August where, at the same time, we'll look to provide much more color on FY '21. Look, I suppose, from a personal perspective, we're really proud of what we've achieved this year. The business is performing strongly with the company's thriving at what we -- to invest and be able to -- in being able to nimbly respond to quite dynamic market circumstances. And I've been super impressed by the focus and the commitment of our team right across the various regions that we operate with. We implemented work-from-home very quickly with seamless, and productivity from all departments has continued to improve. And the focus and the commitment dedication of those people is just, I mean, world-class, and I want to acknowledge their contribution and also the support of the Board for their engagement through this period. We've been actively involved. And we are in an awesome position, and I want to thank all the people for their support.
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.