Agillic A/S

CSE:AGILC

Earnings Call Transcript

[Unknown Analyst]

Hi, and welcome to today's event where we have the pleasure to present Agillic Q3 2021 financial results. These results, I must say, showing growth, 16% our growth after a period where the growth has been kind of muted. So nice to see that, Emre.To help us through it, we have CEO, Emre Gursoy, to take us through the presentation. I think the main focus will not be on the -- so much on the figures. It was a continued reporting, but more on what strategic initiatives, new customers and how that will look into the future. So hope you will join in. Questions, do not hesitate to ask them down in the box on your right corner, do it through the presentation, I'll see if it fits in. If it doesn't, no worry, I will pick up all the questions, and we at the end of the presentation, we'll make sure that we get through all the questions. But Emre, I think you should take it from here.

[Emre Gürsoy, Chief Executive Officer]

Perfect Michael, thank you. Welcome, everyone. Thank you very much for taking your time joining us to listen to our presentation. We're quite excited to show, quite a bit of an improvement on our Q3 results, as well as, as Michael said, a couple of news that we also would like to share that we have been pushing out last week and this week. So if I may start, as Michael said, it's very important to make it as interactive as possible, so feel free to jump in any time you want. We usually start with a very quick introduction of our company for those who haven't heard it from us before, and we'll jump into the the details of the Q3 right after. So first and foremost, Agillic,we are a software-as-a-service platform, operating internationally within the marketing technology sector. Our omnichannel market automation platform enable companies to automate and personalize communications to their customers through all digital channels. That's what we do. Our business as a company back in 2020, we have delivered a revenue of DKK 50.5 million. Almost 100% of our revenue comes from subscription businesses, and we are listed on the NASDAQ First North Growth Market since 2018. Our award-winning platform is fully scalable and global. Currently, we are operating in 11 different markets with our clients and their activities. We are 47 people in our company in different locations and operating within 7 to 8 different industries currently. If you look at why Agillic, I mean, what is it that we do any different than the competition? Or why is it so important to think about what Agillic does. Currently, the demand for personalized revenue communication from end users to the brands and the companies is increasing, so does the interest to Agillic's solution for companies because the solution that we come into the picture with cannot be delivered by -- without any automation. We deliver the right message in the right channel at the right time, and that forms the basis for optimizing response and conversion rates for our clients' sales results. As a marketing automation platform, not only that we improve our clients' operational efficiencies, but we also and most importantly help our clients to generate revenue and increasing bottom line results. So I thought that this would be a very good opportunity to show a case, an example of what it is and how it is that we do, how do we impact bottom line or revenue generation. So here's an example. This is from a press release that we have recently came out with, and it is about Club Matas Plus. It's a new establishment business area from Matas. So Matas, whom we have been working for quite a long time as a client, they have 1.7 million members, and they've added a new revenue stream and service to their Matas portfolio. It's a subscription-based service called Club Matas Plus, which includes special offers, extra points and free deliveries for their club members. Club Matas Plus was launched in January 2021 as a complement to the existing free of charge customer club and is another sister in the family, as they call it. Julia Mary, who is the subscription and loyalty program manager at Club Matas, she actually puts it quite nicely in her way of defining, saying that our customer, they would like to connect their customers closer to them, increase their competitiveness and make sure Matas is always their first choice. And what Matas is not saying here, and I would like to say it because I would like to see it that way. They are really trying to establish a very strong platform in the Danish market against international competition. And when we think about what could that be and who is it that is starting that coming into the market, delivering free delivery services for subscription businesses, something as Amazon Prime, that's basically how they can actually prevent their market status and penetrating to the market, to the customers creating that loyalty structure. That is where Agillic is being used and delivering amazing results. Now another example that I want to show. This is actually...

[Unknown Analyst]

If you can return to Matas, just to maybe understand, if I knew Matas before, it was to drive customers into the shops, the Club Matas. And you help them to deliver messages, go to our shop. While you're now talking about extra revenue streams is that, now you help them to really drive the Internet business to drive that up. Is it correct to understand that. I think it's just not putting people in, but it's actually now really to push their web shops and their high extra revenue. Is that correct, Emre?

[Emre Gürsoy, Chief Executive Officer]

Yes. I mean if you think about it, it's made us establishing a new subscription-based business model. It's a service. It's basically Matas' customers will pay a monthly fee, a very, very minimal fee. And with that fee, they become a subscriber of the service. And thereby, they will receive multiple services free of charge. Now this is an engagement between Matas and the customers without actually specific interaction of any purchases. It's a relationship, a continuous relationship that should be feeded with the right information at the right time so that everyone feels they are -- there's an actually mutual understanding between the needs of the customers and what Matas is establishing. And the communication in between those 2 worlds is driven and managed by Agillic.

[Unknown Analyst]

Perfect.

[Emre Gürsoy, Chief Executive Officer]

All right. Now let's just take this very same example into a new category and a new business that we have just actually today informed the market that we have won. It's IO Interactive, the amazing Danish gaming company who is the success behind the Hitman series. They've just launched the Hitman 3 earlier this year with tremendous success. Now this is another great example of how that actually makes a very interesting utilization of Agillic. Now think about it as the gaming industry today is larger than all global film and music industries combined. It's a $155 billion business worldwide. Now what's happening in the gaming industry is the player centricity is becoming the most important aspect of growth and future possibilities. Every gaming company would like to connect with the gamers, lead real time, on time with the right messages with the right way. Now that is where we come into the picture. Again, that we are the connection between 2 worlds with the personalized messages. Because the most important thing is, we're not speaking to everyone about the same thing. It's personalized messages at the right time through the right channel between 2 other parties. This is the way to interact with thousands of players simultaneously, and that's where Agillic comes into the picture, and that's why we are extremely proud of.

[Unknown Analyst]

Is it set to create a more buying in the games? Or is it -- it can also just lead to...

[Emre Gürsoy, Chief Executive Officer]

Again, it could be for the purpose of revenue generating revenue stream activities. It could be a player experience, maximizing the player experience. It could be community services within the play itself. I mean the opportunities are endless. And now it is also important to mention, IO Interactive has announced earlier this summer that they have gained the right to produce the James Bond game worldwide. First time ever a gaming company is being awarded with that by the family who's behind the James Bond rights. Now what does that mean is IO Interactive will be expanding and growing tremendously with these possibilities. Usually, these games are taking time to develop and everything. But being in this Agillic, in this journey together with them, and cultivating this movement in the database activation and player centricity is a tremendously important aspect for us.

[Unknown Analyst]

And I guess the gaming industry must be some of them, the ones who have the most data on the players and consumers are our customers, if I guess.

[Emre Gürsoy, Chief Executive Officer]

I don't -- I would easily say that I don't think they are missing any data. It's more about how to maximize the utilization of data and making it as relevant as possible. Now the reason that I wanted to bring these couple of examples is that relevance that we hear, we're talking about is not only in Denmark. It's not only into certain categories. It is across borders. It is across multiple industries. So what does that mean from the financial perspective, let's just jump into the numbers. Previously, we have talked about our financial goals, 3 main goals that we always talked about, double-digit growth on our ARR results, positive EBITDA and positive cash flow. Now we are still continuing on that one. Our financial guidance is remaining the same. And if you look at on the right side, I've put a table over there, which is basically fourth quarter in a row, we are going upwards with our ARR results. The dark blue section is representing subscription part of our ARR growth, the light blue section is showing the transaction part of our utilization. It's a growth. It is in the right direction. We are -- our interest is still very high on a higher level of double digit. But we're in the right direction, and we are quite happy with that. Now if we go into the financial results regarding Q3. Let's take them one by one. There are a couple of highlights that I wanted to talk about. Now our revenue from subscriptions continue to grow in Q3. And it is an all-time high of DKK 34.2 million. Also, the total revenue increased 2% to DKK 39 million year-to-date in 2021 compared to last year's same period. In Q3, we have continued to win new clients and uplift existing clients. That's -- with the 4 new client contracts across 7 industries we have signed in Q3, in Denmark and internationally, bringing the total number of new clients we have gained in to 2021 to 16. As of 30 September and end of Q3, we have now 92 clients, which is also the highest we have had since the company has started. A positive impact on EBITDA is DKK 3.2 million year-to-date, which is an increase of DKK 3.5 million versus last year's same period. The positive EBITDA has resulted naturally from the low cost on the operational cost and lower number of employees, number of employees versus last year. Now I would like to mention something here that it's very important for me to convey the message that even though it looks like we reduced costs and decreasing the revenue to increase EBITDA, it is -- our aim has always been to invest back the EBITDA that we deliver back into the business for growth. And that investment goes into sales teams, that goes into technology teams and technology improvements. And this is what we have been doing and we are continuously doing in the same. So even though our EBITDA results are high over here at the end of year-to-date Q3, we are not changing our guidance because we are in the process of investing to the business in Q4 so that the guidance review -- we are expecting to be in the guidance end of the year. In Q3, we have increased our sales team members, partner team members in Sweden. And very recently, we have actually completed our sales director hire for Norway also, that will be as of 1st of January. So we are continuously investing into the future for growth. In the meantime, on the technology side, we have been looking for a new Chief Product and Technology Officer for quite a long time. Internationally, we have been in New York -- candidates from New York to London to Berlin. And then we found a person here in Copenhagen that we are extremely happy because of his experience, his market understanding and knowledge. He is joining us in the 1st of December, coming from the industry, coming from the -- there will be a very quick ramp up to that. So all that is in the light of investments that we are putting back into the business for future growth. Any questions on this side before...

[Unknown Analyst]

Yes, I think maybe we should touch a little bit about customers. I also read one customer because I got the 92 versus the 91, but you mentioned 4 new customers. So does that mean you have lost 3? And how do you -- there's a question on you are talking about the market that looks better and then one is asking why only one new customer? So if you can elaborate a little bit about the new customers you have gotten in, in this quarter and the numbers and how you see that going forward?

[Emre Gürsoy, Chief Executive Officer]

Of Of course, of course. I mean it's a very dynamic environment. There are clients, as I mentioned, maybe I should mention that one is quite important. For us, it's been a kind of a disappointment to engage in the U.K. market for heavily in, not investment, but engagement-wise, for 2021 as part of our strategy, for example, because we were expecting quite a lot of positive results in the U.K. market. But having a look at the U.K. right now, I mean it's not living up to the expectations due to the market unease and continuous dot on the business engagement. I mean, this morning, I was reading whether they should cancel the Christmas in Q4. I mean what a terrible news for the retail market in -- I mean besides all, of course, naturally terrible news on the health part of it. But when you look at it from the business perspective, they're still not under control. The decisions are not being taken. So that's one of the reasons that the growth that we were expecting from the U.K. market has not been there for us and hence, the number of clients question. On the other side, because that we are running a very agile go-to-market strategy, I'm very happy to say that we can shift from one market to another due to our engagement with the partners, due to our boots on the ground, as I call it, having seen the Nordic markets accelerated going back to the normal business environment, we are shifting our focus to the Nordics. And therefore, we are hiring a salesperson in Nordics, in Sweden and in Norway to make sure that we can leverage that. Now yes, in that press, we lose some clients, we gain some clients. That's a part of the business when you're in the subscription business. But for us, what is important is continuously grow the numbers and level up our existing clients. And that's where the numbers are coming out right now, even though it looks like we shifted one client from quarter-to-quarter, it's the overall engagement from our customer success team to sales team, lifting up the ARR altogether.

[Unknown Analyst]

And there's a question also -- I don't know whether you're really committed to it, but there's a question. Is gaming a new customer segment that you're really targeting into?

[Emre Gürsoy, Chief Executive Officer]

Absolutely. Absolutely. It's actually under the subscription businesses that previously that we have called it, there are actually 4 categories that we are focusing tremendously heavily on, media and energy and entertainment and gaming as well as cloud technology software businesses. But gaming and entertainment is a very, very important part of our -- we already have another client from Norway, Multilot, which we have informed the market earlier this year. And thereby now, we have IO Interactive, and there's a tremendously long prospect list that we are working on right now because there is player centricity. It's the business needs across the board.

[Unknown Analyst]

And it is also, I guess, from your perspective, it's nice to move a little bit more to a less cyclical business, I guess, moving to a secular growth instead of cyclical cyclical business, I guess, where you are before.

[Emre Gürsoy, Chief Executive Officer]

Exactly. I mean it's 2 parts of it. It's the geographic reach following the market conditions. Besides Nordics, we also have a very strong focus and penetration in Germany right now because the German market is doing much better than in most of the other European markets.

[Unknown Analyst]

And there's actually a question about the German market. If you can elaborate a little bit about the German market.

[Emre Gürsoy, Chief Executive Officer]

Sure. I mean there are 2 things that we are working on. It's our go-to, dual go-to-market strategy. We have our own team, sales team on the ground working from Berlin, reaching out to the market. In the meantime, we also have our solution partners, business development partners, collectively looking into not only Germany, but DACH region. And then we have multiple new client partners that we're working with to grow our business and trying to open up new doors across the board because Germany has awakened to the new world of digital transformation. They are ramping up very quickly. Not everybody is well aware of how to start that process and follow up and implement. So what we are trying to come in with know-how with our partners, implementation and possibilities and local market engagement in Germany to make sure that -- so that's why we are in Germany with the German team members to make sure that there's as local as possible engagement that we can establish.

[Unknown Analyst]

And then there's a question also here that it's nice to see that you are growing your ARR. But your number of employees is again falling. So the question must come and you try to explain it that you have invested in sales directly new functions, but the question must come, are you sure you're not under investing...

[Emre Gürsoy, Chief Executive Officer]

Absolutely. This is very, very important. And I'm glad you're asking that Michael, because now, when we were reporting last year, I mean what we are doing is the 57, 47 versus last year, if you look at the number of employees, there's actually another thing going on here. There is lack of talent in Denmark. That's a fact. We -- the number of companies who are -- we are also under attack, I mean, our employees are being picked up too by the big boys in the market. But in the meantime, the shift, the lack of talent, we also need to think ahead. So what do we do? We look into the new markets and how do we engage with that. So what happens is, in our reporting, but when we are saying 47 team members right now, that doesn't include our offshore partners that we are working with, where we are dedicating a number of people. If you actually look at it, we are now exactly 57 people as of end of October -- September there, we are now over that. So it's not only the numbers. We shouldn't look at the numbers as if we are cutting down people. We're just moving the roles into different directions. And when we do that, that goes into another line item rather than the number of employees. But the important thing is, we invest back into the business. So that's the name of the game.

[Unknown Analyst]

And if I should look at it, then I'm actually quite impressed because if I understand you, you're taking some of what has been [daily workers] to move into the partners. But that should in reality maybe hurt your gross margin because you are delivering something more. I am totally wrong here or...

[Emre Gürsoy, Chief Executive Officer]

No, no. It's not partners only. It's also our -- we are putting our employees in the -- like in Romania and Cluj and in Kiev, we have our team members, but they're working [indiscernible]. So there are basically freelancers kind of engagement for us. Therefore, they're not counted as full-time employees, but they are 100% working for us. But towards employee of who's taking care of our team members that we have services that we are buying from. So the important thing here is not only because of cost, it's access to talent and time to market because we cannot spend more time searching for talent and technology suffering because of that.

[Unknown Analyst]

Sorry, you're moving to a more agile business model. So you should look at employees. You should look that you are not blowing up your total bottom line. You are investing back to the business. It might not show up on the employee count, but on the cost line more.

[Emre Gürsoy, Chief Executive Officer]

Exactly. I mean, it is not about the number of employees. It's the smart ways of working and having continuous capability, engagement to that increase our capabilities because nothing stands still. Everything is moving as we speak. I mean our ecosystem, all the technology partners that we're working with, they're all evolving and we need to evolve together with them to be a part of the game.

[Unknown Analyst]

Perfect. Perfect. Yes, I think we hear a lot of the Q3 questions.

[Emre Gürsoy, Chief Executive Officer]

Perfect. So let me just jump into the next part, which is now specifically talking about the SaaS highlights. So I always shift those to company highlights and then SaaS highlights. So if you look at here, and I would like to bring up a couple of the highlights again. So year-to-date, our ARR subscriptions increased 10% and total ARR increased by 16%, and mostly driven by the very high level of transactional increase of over 80s. Now a transactional part of the business, we would like to see this as a positive trend, but one single quarter cannot be defined as a trend. It's a number that we would like to see it continuing, and this will also contribute positively to our Q4 and going forward. But -- and Q4 is always a really high engagement, mostly for the retailers, thinking about all the Black Fridays, Christmas, everything that actually push up the transaction part of it. But we still, in the absence of a clear understanding of the market conditions, we still would like to keep our guidance as it is and hoping that we can actually outperform ourselves. If you look at the end of September, total ARR is now DKK 51.3 million. And that's a year-to-date increase of DKK 7.2 million. Now another important highlight that I usually would like to deliver -- our average ARR is the same as 600,000 across. The next item that I usually focus on is the customer acquisition cost. I mean, this is always an important part of how much -- how effective we are and how well we are running our cost versus sales engagement and gaining new clients. And we have quite a good performance on that one of a decrease of 69%, 70% decrease on our cost of acquisition, which is good because it is always different. I mean when you are running an EBITDA positive company, it will always be lower. But what I really like is the next slide. It's months to recover cost of acquisition. It's -- we have declined from 31 months to 9 months, which is a very, very strong number. And if you look at the SaaS category across the board internationally, 9 months is quite a strong performance for a SaaS company. So I'm very pleased with that one and then the number of clients we talked about it as earlier.

[Unknown Analyst]

And I was also, when I looked at the reporting Friday, the 82%, the transaction part was the one who [indiscernible] to the eyes. Of course, they're nice to see the growth and subscription also. But is it the customers who are interacting more with their customers. If you try and put some color on it, and maybe also, I think you already alluded to that you hope and expect, but the world is still changing out there. So you will not guide with it. But let's come, but maybe put some color into this transaction part, what you are seeing by your customers.

[Emre Gürsoy, Chief Executive Officer]

I mean what is happening is as we are reading the market movements right now on, specifically on the retail businesses, the activities are increasing. And that's where the transactional business are running, which is basically the number of e-mails, the engagement is increasing, the SMS part of the channel activation is increasing, which is all positive. .I mean, absolutely, it's a highly positive results that we are seeing, mostly in the Nordic region because our world has turned into a bit more, let's say, we don't think about COVID-19 as our #1 thing every morning when we wake up anymore. We think about business. We think about other priorities, which is also affecting the businesses across the board on how they are maximizing utilization of out tool. But on the other side, I don't know if you have seen it. But for example, travel and hospitality business. This was the news from last week on the finance, the paper. It says that in 2020, they've been losing DKK 40 billion, and half of the companies are running on negative down loss and 1/3 of the companies are not so sure whether they can continue the business due to the financial pressure. So that sector alone has been a very important part of our business. Now going back to the ARR transactions, normally, this should be the period of time there should be also quite a lot of pressure on that one because everybody is looking for the summer holiday and all the activities going on. So it's a very unsecure -- it's really hard to say something about trend. That's why I call it we realize the numbers. We don't see them as trends. We look at them as numbers that we will take consideration in the next quarter or 2, and then we will know much better how it is evolving going forward.

[Unknown Analyst]

And if I look at the number, and I don't know whether you can give a little bit color on it. But if I look back before COVID-19, the transaction part was around this size of your business. So maybe more normalizing. I don't know whether that gives you some comfort.

[Emre Gürsoy, Chief Executive Officer]

Not really because it is not in our current visibility how the markets were. I mean, I look at the trends, too, before the COVID period. I would like to see it as a strong part of -- a promising part of our growth. But our main focus is on the subscription part of our business because as we increase the subscription part of our ARR, it will eventually also have a plus effect on the transaction part as it grows itself. So we are working on multiple success stories, let's put it this way, in parallel. But it's too early to come into conclusions in regards to transactions.

[Unknown Analyst]

We will look at it after Q4 and ask you the question here.

[Emre Gürsoy, Chief Executive Officer]

Absolutely. Absolutely. All right. So I just wanted to -- being cautious of time, I would just like to mention a couple of highlights. It's just 2 more slides. One is, so how do we see the future? I mean I think it's important that we have established our Reboot 2.1 strategy, and we are fully executing it to the maximum of it. And we are seeing the results, positive results of it. We talked about the financial performance, the product focus unchanged. And now we are actually putting a new appointment, a new role that we have defined, Chief Product and Technology Officer, someone to take our product to the next level on an international basis. Our go-to-market strategy is functioning. We are going into the market internationally, creating results in a very agile and efficient, cost-efficient way. Partnerships. All our partners are highly positively giving us feedback of our close relationship, our integration of technology and growth opportunities. I mean, we are also -- let's not forget, we are also delivering quite a lot of revenue to our partners. So there's a very good positive relationship among. It's a win-win-win model across the board. Proof of concept. I talked about this earlier. I will continue to talk about this. This is our lend and expand strategy, and it's working so well. We have just completed multiple end of Q3, multiple proof of concepts with success. I mean it is already delivering over 100% performance because we gain, every time we do a proof of concept, we gain the client to our portfolio. It's a very strong approach.

[Unknown Analyst]

And maybe, even if we are running out of time just -- this is where your customers can go on for free, a freemium right where you prove proof of concept and then you'll try to sign them afterwards.

[Emre Gürsoy, Chief Executive Officer]

And they see that. Exactly. Now one last thing before we close up. By the time we just joined to this call, we have also sent a press release and a company announcement in regards to news from last week. There have been some transaction. One of our institutional investors, strategic investment, has just increased their investment in Agillic. And I'm really, really proud of this interaction, even though I can see that it is -- it's shares that are being sold within the ecosystem and the existing partners are selling to a strategic investment. It's how it's being defined. And I really like to, that's why I put a code in there by Kim Mikkelsen, co-founder and CIO of Strategic Investments. I really like that I want to read this because this is basically how we see ourselves, and I'm really happy that the investors are looking at it. We have been following Agillic for a long time and already invested earlier in the year. We have wanted to increase our exposure significantly and make it to one of our new 10% investments. Today, we have taken a step in that direction by crossing 5% ownership. We believe that Agillic has the right balance between growth, positive EBITDA and a cheap pricing. And then he's talking about our ARR evaluation versus 10% is globally and 5% is current. What I really like to mention on this one is that we see this as a great opportunity to underline that our strategy is functioning, our investors are seeing the future together with us with the growth and thereby, they are putting more trust into that. This is from me for today.

[Unknown Analyst]

Perfect Emre. I think we can round the most of the questions down there. I have 2 that the people sent me on an e-mail because they can't participate live. One is maybe you already alluded a little bit. Above your guidance interval, already I know it's primarily on the transaction side, so why don't you raise your guidance when you're already above and expressing a little bit of optimism than those transactions can continue on a high note. So that's the one question. And what I also note is people asking and the new CFO is that still, do you have a timeframe? Is it in the -- is it coming soon? It's something people also are focused on.

[Emre Gürsoy, Chief Executive Officer]

Absolutely. So let me just take one by one. The first one, we are currently operating within our guidance with both our results, both our ARR subscriptions, ARR total. So thereby, we have decided to retain our -- and Board of Directors have decided to retain our guidance as it as defined earlier. It's always good to outperform. The second question, whether CFO -- we have identified the right CFO for us. Our search is continuing. I think it is very important to mention that we are a company that really keen on getting the right talent in and without any compromises. We want to use our time to bring the right. I mean, as I mentioned, the Chief Product and Technology Officer, it took us around 6 months to identify the right person. We are also doing the same. Having said that, we have an interim CFO, Carit, has been with us. And it's an absolute pleasure to have him as an interim CFO. So there is no rush until we find the right person as the -- not only as a finance person to take the lead, but also a business partner, a growth partner for the future of Agillic. So that search is continuing. But no worries, we have everything under control.

[Unknown Analyst]

So you don't have a date for us. But the process is continuing. Perfect, Emre. I think we got to both the questions and the presentation nicely. So congrats with you finally starting to see some movement in it. So let's look forward to see you again in Q4.

[Emre Gürsoy, Chief Executive Officer]

Perfect. Thank you. Thank you for your patience and support.