Bimobject AB
F:BOJB
Earnings Call Analysis
Summary
Q3-2023
BIMobject's third quarter reflected steady progress towards long-term vision, marked by initiatives for customer success and operational efficiency. The company introduced a soft launch of a desktop application, aiming to start user monetization in the next year. Significant growth was primarily organic, bolstered by the weak SEK, resulting in positive EBITDA. Despite seasonal effects lowering costs in Q3, overall expenditure decreased through efficiency initiatives. Revenue composition favored by weaker SEK, with 2/3 in EUR and 1/3 in USD, transfers less than 50% of positive FX effects to the bottom line. Profit attributable to shareholders was SEK 1.9 million. Investments held conservatively with a focus on growth, and no specific profitability forecast provided to encourage right long-term decisions over short-term results.
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Hello, everyone, and welcome to this audiocast where we will present BIMobject Group's Q3 report. We will soon hear from our panelists on the report itself. And at the end of this presentation, we will have a Q&A session. So for those listening in, you can send us your questions to the e-mail address you see here, ir@bimobject.com and we will try to answer as many of your questions as we can at the end. So, ir@bimobject.com if you have questions.Okay. And I am joined here today by a group of panelists. We have to start Peter Bang, who has been the Chairman of the Board for BIMobject since 2020. So, welcome to the call, Peter.
Hi, thank you.
And we also have Martin Lindh, who is the CEO of BIMobject AB and also Chairman of the Board for Carbonzero. Hi, Martin.
Hi.
And today, we're also joined by Per Goransson, who is our Director of Finance. So, hi Per.
Hello. Thank you.
And my name is Lisa Norlander. I'm Director of Revenue Operations at BIMobject, and I will be hosting this call today. But without further ado, I will hand the word over to you, Peter.
Thank you very much, Lisa. And I would like to start with to say that it's a good day today because working for BIMobject has always been a pleasure and we have a lot of opportunities. We have laid out a good strategy. But this quarter has been the first profitable quarter in the history of BIMobject. And I think that is a great achievement. And also an important milestone for us. We are not satisfied with this, of course, but this is the first step in our strategy towards having a profitable business and we have taken this step with this quarter. So, I would also like to congratulate the whole team. It's a team effort. It's a lot of great things that has been done over the past year or 2. And now we're here, but let's hear more about it from you, Martin, and I'm also pleased that Per is here, our Director of Finance.So, I hand over to you, Martin, and let's hear more about this quarter.
Great. Thank you. Hi, everybody, and a warm welcome to this quarterly presentation and also in line with how you ended, Peter, I'm very happy to have Per here joining me today. Per has been working with BIMobject now for a couple of years and is doing a great job in running our finance team and as well as securing reliability and consistency in our financials as well as continuously evolving our processes in that function as well as making sure that we have a very strong and improved cost control along the way.And today, as usual, we'll start off with a quick summary of what we do and then we will delve in more to the quarterly highlights. We'll give a macro and industry update. We'll talk a little bit more about what came out of our strategic review we did during the quarter. And also, we'll provide a more detailed walk-through of our financials. But before we start on that, we'll go a little bit into what BIM is for our new listeners to explain a little bit what we do and how this industry works.So, we are in the BIM business and in the construction sector. And what BIM is, is Building Information Modeling is the way that we, in our industry, is working digitally. It is applied across the industry. It is used throughout the construction processes from start all the way to when we have maintenance and operations of buildings. And it's also the way that all user groups are working digitally; architects, engineers, constructors as well as property owners.And why is a super powerful technology is because that is consisting of product level information or objects and those objects is basically each product where you can sort of like divide it into the geometric aspect of the product as is a visual representation as well as product information that can be static or it can be smart and it can be structured in different ways, basically, from the being containing more or less like an object ID and then you can attach more and more information, including sustainability and other relevant data points to it.We in BIMobject, we have been in the market for quite some time. We have now more than 4 million registered users across the world, of which 400,000 are monthly active users. We are used among the top architect firms around the world. And we're currently running on 3 platforms; 2 BIM platforms and 1 sustainability and product platform, which is called Prodikt. We have more than over [ 220,000 ] product pages on our platforms and covering products for more than 2,000 building product brands.And yes, by that, let's start taking a reflection of the quarter. So first of all, from the financial perspective, we did have a very good growth in ARR in the quarter of 10% and also with a less effect from FX rates that we have had historically. And then on turnover, we had even stronger growth of 21%. A positive result, as Peter mentioned, which we're quite happy about and we'll talk a little bit more about later. We did also have a continued strong development in our platform when it comes to user activity. And we also continuously have a very strong balance sheet where we have a bit over SEK 230 million in that we have to our disposal.When it comes to the business event, we released 2 press releases in the quarter. One was that we reached 4 million in accumulated user registration, which is always great to see when our platform is increasing and it seems like it's going quicker and quicker for every million we capture, but very fun to have passed that milestone. We've also had a press release on a new building product manufacturer that joined our platform, which is called Figueras Seating. And Figueras is a Spanish building part manufacturers providing seating solutions for stadios and concert halls and other big venues.And it's a great example of a building product manufacturer who wants really to take a step into the digital world and to joining BIMobject because it's super important, of course, for designers and architects when they're in the building projects that they really can illustrate and have the right product in the building models to show and have a solid solution that they can communicate around for their -- in the project.And we also had a couple of internal events happening during the quarter. We did a strategic review, which we'll talk more about. We also launched an updated price list to our clients, which is much more tailored to their needs and in the markets that they want to be in. We also did a soft launch, our desktop application for AECs. It's a very early launch, but we wanted to do it so we can test the platform that we have built and we have a group of users that are now continuously working with it, so that we can get traction and learn from it. And we're currently exploring areas in which we're going to add more and more value-adding functionalities in, which will be the next step for that application.We will not go too much into detail on that today, but we will do that in a later stage when we are having these more substantial features that we want to launch to the market. Then we also had a continuous event for -- internal event for our sales organization, which we call like a virtual sales [ event ]. Doesn't say so much to you, but it is a very important thing for us that we continuously do these initiatives where we continuously build the skill and capabilities of our sales team. And finally, we have signed or settled an agreement with our Thai joint venture and now we've also, again, started to see revenues in our P&L from the Thai joint venture.Now, so let's talk a little bit about the macro and industry outlook. And what has happened since last time is that we see -- we still see that inflation is coming down across many markets. France and U.S. being exceptions where it started to bounce back a little bit. We still see a situation where there's interest rate uncertainty. And we also see that the longer rates in the market are increasing recently. And then, of course, there is some industry that potentially could have an implication for us, which I guess, would be for many markets, but it's, of course, related to the current conflict in the Middle East.However, what we see from the building industry where we are exposed to in very many markets is that it varies quite a lot between them. And that is very good for us because it provides some stability in an uncertain world to have that flexibility. But in general, what we see is still new -- low levels of new builds, all the renovations are being less affected. Nonetheless, digitalization in the industry is progressing and that is very good for us because we still see that there is a nice demand for us. And we also see that in the sustainability area is going quite well because the environmental legislation is progressing.So for us as a company, we summarized this as a little bit like volatile growth because it is growing, but it's more stochastic than it typically is. So in general, what we see is that the new ARR taking longer time to close. But despite that, bookings in Q3 were actually quite high and that was very nice to see. Also, when we look at the existing [ partners ], they're generally staying on with us, and we're very happy to see that. But in Q3, there were somewhat elevated levels of churn. But again, looking better for Q4. So, it seems like there's this sort of volatility in it, although, it goes in a good direction.We also have seen a continued stable demand of services in the third quarter, again showing a strong interest for our services and the trend that is moving towards more and more digital -- being digitized. Then a continued strong growth in the platform, as earlier mentioned, and that from a sustainability perspective, this trend is quite unstoppable unlike other crisis that we have seen before.Okay. So, let's move over to the strategy and we have had a review of the strategy. So, we wanted to -- we launched it a year ago. We had very many good thoughts put into the strategy. And now when it has been passing the year mark, we wanted to take a reflection of it to see is it the right path and what -- if not, what needs to change and so forth. One important part here is, of course, how it has been going, and we are so happy and pleased to see that we have reached profitability in this quarter. And this has been a very core part of our strategy to move towards profitability and we are happy we actually reached just a little bit earlier than anticipated. And it is very much because of a hard and dedicated work by our team at BIMobject.It comes from improvements in so many different areas, both on the revenue side and the cost side. And it's really been a tough but fun journey to be part of. And I couldn't agree more with Peter, we're not satisfied yet, but it's always nice to reach a milestone like this. And we can also see that we have had a nice continuous progression in the last quarters. Also, I think is a nice sign or like indication that we are continuously grinding on to refine our model and find better and better ways of going out with our offerings to the market.From a historical perspective, we have actually moved the EBITDA margin from minus 86% to plus 1% in this quarter over this period. And I think that has been a very, very interesting journey to be part of and so much rewarding to reach to this stage. So, reaching SEK 0.2 million is not much, of course, as a profitability. But if we think about it, we actually did it in a quarter where we have pretty tough market environments. We are making some really good investments into our sustainability platform, Carbonzero. So, if we would exclude that, we would be close to SEK 4 million profitability or 10%, and that is, I think, a respectable figure for BIMobject Group.We have also done it in a situation where we actually invest very much in our future growth, both of refining the existing features we have to our clients, but also investing in new products that's going to help us grow in the future. And we also spent a lot of time with continuous cost improvements to invest in that and spend time on that, which I think makes this a sustainable path for this company. And we actually had some positive accounting effect from the vacation period. So that has helped us a little bit. But nonetheless, I think we're on a very good momentum here and that we will continuously work with going forward.Also, when we look from a cash position, we are quite good in that -- in a sense that, I mean, with this continuous improvement in result, our cash runway, which means how long our cash would last at the current pace, we are now at plus 5 years ahead. So, we're really getting to a safe space and have moved quite rapidly into this space over the last 2 quarters.And then if we look at Carbonzero, our daughter company, which we invested in about a year ago, I think, maybe 1.5 years, it was, we continuously grow the sustainability platform and we have now been able to sign frame agreements with 6 distributors in the Swedish market and that is really good to get connected. And what we do is we share sustainability data with these distributors. We have also launched a couple of new features for users to make our offering much more complete and relevant for them. So, it's called logbook and the full billing LCA, which we believe will be quite appreciated by the users of the platform.We now have more than 65 building product manufacturers having signed up for the platform. And we have about 50-plus EPD projects going on and this is quite similar in a way when we at BIMobject produce BIMobject is that Carbonzero is producing sustainability reports or digitalizing that data for the building product manufacturers. And from a quarterly perspective, Carbonzero, we're able to continuously grow their ARR, both on the AEC side as well as the building product manufacturer side.As you can see, the net sales went down in this second quarter and that is quite natural because it's a fully Swedish company and we have a vacation period during this quarter. And because of that, we have a lower capacity for production. And that's one of the reasons for why the revenue is a bit down in this quarter, but we have been ramping up quite nicely after the vacation period, so we are going in a continuous good direction here. And EBITDA and cost control that's quite stable and of course, also a bit dependent on the net sales generated in each quarter.Then from the strategy when we did a review, we went through the different areas and also in light of where we are in the industry development and also the overall macro development and so forth. And we looked upon the different areas. When it comes for repositioning, we have had quite good progress and this has been, of course, very important for us to make sure that the foundation of the company is solid. And we are quite pleased on the progression in most matters here.Secondly, it was a great growth area. And here, we have also in the third area here, the accelerated inflow and expansion of BPM accounts have had quite a nice progress with the [ partners ] I've talked a little bit about before, but also other initiatives that we'll be working on the sales side, get really the engine growing. And then when it comes to the rest of the initiatives, we're going to talk about, we have made very good initial steps, but those would be much more focused going forward. So that will be how we work with partners and having active industry dialogues with different partners in the industry and so forth. It is how we continuously grow and integrate with Carbonzero's platform.It is how we work with our new initiatives, both on the monetization of our users at BIMobject where we are building our desktop solution, but also how we work more and more to integrate with other stakeholders in the industry and refine our content portfolio model or like how we structure our data, that is. And so what we also want to be a little bit more clear here when we are looking at the strategy is also to clarify a little bit about our long-term vision. And basically, the way that we see it is, first of all, where we want to move and really get positioned -- get a good position in is to be the best and most suitable partner for our building product manufacturers when they want to get connected to the industry.So basically, what that means is that we want to be able to help our clients in the best way possible to get digitalized in different aspects. So, it could be to BIM platforms, industry organizations, if they want to get digitalized within the ESG area or get connected to different softwares and so forth. So, our role here is really to listen to our clients, make sure that we tailor our offering to their needs, work in their best commercial interest and are providing the best possible guidance and support for them and most importantly, makes it easy for them to become digital.Secondly, and that's the other side of our platform is the user side is to make sure that we are a provider of reliable product data when and where it is needed. And what that means is a little bit like this. So, we talked before about the objects being -- having both the geometric aspect of it and also the meta data aspect of it. But it is to make sure that we distribute the data in the best way possible through different channels and make sure that we can improve collaboration in the industry, that we have directly an interactive connection to the building product manufacturers that we can make sure that we can provide reliable product info when and where it's needed as well as provide tools that we can enhance the way that the users in the industry work. So, this is just to give a sort of like a high-level perspective on where we're heading as a company.Then -- so what does this mean in terms of the strategy and how we look at it. And I think it's a large part of the conclusion we have is that the strategy works quite well also now a year in. It goes well with our long-term vision. It still works despite changed macro environment and so forth. But we're going to have a little bit small tweaks to it and also change a little bit where we put extra much effort. So for this year, this coming year, one big thing here is that we will continue to focus on completing remaining initiatives. We're not done until it's complete.So, we will continue to grind and make sure that we work in the right direction. We will remain focused on profitability even if we, to some extent, have reached this quarter, it's not enough. We will continue to work on this to be as lean and mean as possible. We will also spend more time next year on the customer success deal and how we can better adapt ourselves to the client demands and put them as much as possible in focus. We will also work even more on our content process to streamline that a little bit about the vision and the way that we're working, but also operational efficiency as such.As we do this, we will gradually advance towards our long-term vision. So, we have a couple of initiatives taking us step by step into that direction. We also see more and more confidence in the user monetization stream that we're working with and we want to double down a little bit more on that and put a bit more resources into that initiative. And finally, also to continue to work with the integration with the sustainability platform project, which is run by Carbonzero.And now, let's talk a little bit about -- more about the quarterly financials. Per?
Yes. Thank you. So, if we start in the left graph here, we see very stable growth in the recurring revenue from our platform business and that is KPI in constant currencies. In addition to the recurring revenue, if we look at the middle table of the slide showing recognized revenue, we also see growth in the services business, which is partly thanks to the acquisition of Carbonzero, but there is also growth in our core business of BIMobject.Looking at the development of our operational costs to the right, there is a quarter-over-quarter decrease partly due to the summer vacation season, but there is also clearly additional effect from custom initiatives worked on throughout the last year. The cost development should also consider the weaker Swedish second general inflation, which makes the relative improvements on the cost side even stronger. Next slide shows pretty much the same development but through the more full income statement perspective.Growth in net sales is primarily organic, driven by all revenue streams this quarter. But on top of the organic growth, we are also favored by progressively weaker Swedish SEK. FX effect contributes with 8% growth to our net sales, but the positive FX effect is on bottom line, less substantial. Stable growth in combination with the decreased costs takes EBITDA in the quarter to a positive figure. And below the EBITDA, we have the amortization, which is significantly decreased due to the prior year write-down of the remaining goodwill from the acquisition of Convergo.Worth to note here is also the financial net. Normally, it covers mainly fluctuations from currency conversions of financial assets. But in the actual quarter of Q3, it is primarily interest income and value development in current investments. And going forward, our exposure to foreign currencies has also decreased during the quarter, partly due to some intragroup recapitalization. Results to the quarter is just below 0, but attributable to the shareholders of BIMobject, there is a profit of SEK 1.9 million. That is due to the noncontrolling interests in Carbonzero, which is still in an earlier phase and running losses.If we move over to the balance sheet, we can conclude that we have a tighter process for accounts receivables. There is a continued strong equity ratio of 72% and there remains a strong cash position, where 74% of all our assets lies in short-term investments and cash equivalents. That amounts to SEK 232 million, which is only SEK 8 million less than the year's opening balance of SEK 240 million. On the liability side, we have deferred income, which is mainly related to prepaid subscriptions and services.
Great. So, for concluding remarks for this presentation. So, if someone has missed it, we had the first profitable quarter for BIMobject in the Q3 this year. We did the first soft launch of our desktop application and we will provide more update on that going forward. And we also doubled down on our strategic direction. We feel comfortable with it and we will continuously work with it going forward as well.So, thank you very much for that and for listening in. And now we're opening up to questions.
Thank you for that, Martin and Per. Yes, so as you said, Martin, now we're moving over to the Q&A part of this webinar and we had quite a few questions coming in through our e-mail and we'll strive to answer as many of them as we can now. Most of them are centered around the financials of this report. So, let's start with the first one.When will we see revenue from user monetization?
Yes. That's, of course, a very interesting area. I know both for -- from the investor perspective as well as for us in the company. And right now, what we have done is to launch the first very early version of this desktop application. And it does not, at this stage, provide very much value to the users than our website does. But on the other side, what we have also created is a really nice platform to which we can add new features, new value-adding features that we hope will be quite good for our users. And those we plan to release sequentially starting sometime in the next year.And when we see that they are strong enough to motivate that we will monetize on them, then we will certainly do so. So, we will continuously provide updates on this and how it's going through the quarterly presentations during next year. And of course, it is something that would be very, very nice milestone also to reach to really start working on that user base.
Thank you. So more on that topic to come for sure. And another question here around currencies. We mentioned it a couple of times during the presentation. So the question here is, which are the most important foreign currencies for our revenues and costs? And a follow-up question then if the U.S. dollar and euro becomes stronger against the Swedish krona, is this positive or negative for BIMobject's bottom line?
Yes, it's definitely euro and USD. So, most of our revenue is set in euros and USD where euro is roughly 2/3 and the USD is 1/3. And hence, the weaker SEK favors us also bottom line. It varies with the mix, but it's less than 50% of the positive effect that we have left on the bottom line.
Thank you, Per. New question here. What kind of securities are your short-term investments on our balance sheet? And wouldn't it make sense to park more cash in money market securities to receive a higher interest rate on your cash, considering that we now have cash burn under control?
That's a good question. It's a mix of interest funds and corporate bonds. And overall, we invest with a relatively low risk, but we consider it similarly and work actively with our cash position today.
Thank you. On vacation effects, how large is the positive vacation effect on our costs?
We -- for that, we don't have an exact figure of it, but it is an annual season effect in Q3 every year. And we have been fairly -- given that we've been fairly stable in the number of FTEs in our organization, the difference in personnel costs between the quarters should provide an indication of this.
Thank you. And besides then the vacation costs coming back in Q4, are there any other cost increase or decrease planned for Q4 and 2024?
Yes. We don't provide detailed forecast to the market, but we -- what we are doing is to give some sort of direction by presenting the strategy, which -- I mean, it entails quite much of what we're focusing on. And as such, we will continuously work on the costs where we can, but of course, also continue our initiatives for growth.
In which part of the business are your noncontrolling interests?
I can answer it. It's the noncontrolling interest is purely related to the acquisition in Carbonzero where we purchased 51% of the shares in 2022.
And a question on the ARR then. What's your perspective on the growth rate for the ARR? And why do sometimes ARR numbers differ between reports for the same quarters?
All right. Well, I think let's first talk a little bit about what ARR is for those ones who are not into the definitions we're using here, it's Annual Recurring Revenue. And this is -- it sounds like it is revenue, but it's actually the portfolio of contracts we have, like the total value of those that are running on a yearly basis. And when we present that, we present it in as a constant FX currency, which means that it is easier then to compare from a historical perspective. So, even if you have currencies that are fluctuating and we want to do that so we can provide a good transparent view to the investors of how that is progressing.And then -- and that is also one of the reasons for why it differs between reports because the difference there is that the currency might have changed. So, when we talk about historic quarters and what the ARR was there, we reflected in -- we reflect them with the latest currency we're using for the report you're looking at. So that's the sort of explanation for that. And then you can sort of like argue around what is affecting ARR. And of course, that is both how much we sell to new clients. It is also if we upsell to existing clients or if they downgrade their offers or if customer decides to leave us. And that is what we are continuously working with to enhance these metrics. And of course, it's a little bit tougher market environment now and we also commented a little bit on this in the presentation.But on the other hand, we also have a very strong momentum and we have also quite some good initiatives ahead of us within customer success and so forth that we're doing to improve the growth rate on this metric. Also, this is one of the reasons why the new initiatives are so exciting because if we -- on top of what we already are doing, start monetizing on our user base, that growth will come on top of what we already have and also the growth that we are building up in Carbonzero, of course. So yes, big focus on that internally.
Thank you, Martin. And then we have a question on AI. Do you produce any objects with AI? And can you elaborate regarding the potential here?
Yes. I mean, AI is very like interesting area for, I think, all industries, and it's very hard to not look at it because it is such an interesting technology. And of course, we are also looking at it here at BIMobject. I don't have any specific news we would like to share at this point on it, but this more than that is, of course, an interesting area also for us as a company to dig into.
And it's not 2023, if we don't mention AI. So, I'm glad we got that covered in the question as well. Okay. I think this might be our final question for the call then. What is our prognosis for profitability going forward?
It's a great question. And again, we don't provide a forecast to the market. But instead let me clarify a little bit more why we don't give that type of forecast. And one of the reasons for this is that we don't want to make investors disappointed. Instead, we want to show that we are a great company through the performance from the quarter we present. Another reason why this is, is that we don't want to create a situation where I, as the CEO or the management team or the Board will sub-optimize the business decisions just to get the specific result in the quarter or not. So, we believe that our investors appreciate this approach, although, of course, they very much would also like to see a forecast.So instead, what we do is we do our best to follow the strategy and also act upon it. And if that means that in 1 quarter, would have to take a cost or not, that shouldn't really matter. What's most important is that we make the right decisions when they're needed. So, if we look, for instance, then at the next quarter and let's say that we would be unprofitable again, well, as long as there is a good reason on why there would be a potential cost increase and we would then continuously have a very strong momentum and being a growing company and making right decisions, then I, as a CEO, would not really have a problem with it. But on the other hand, if we would have a profitable quarter in Q4, and we would have made some short-term decisions to achieve it, then it wouldn't have felt as good instead.So, I think a really good example of this is when we launched the strategy a year ago, where we made a decision -- we had the alternative of cutting a lot of costs to reach profitability for certain or we would cut a little bit less and also be able to work with the organization to grow. And we chose the latter because we thought that, that was the most -- or the best one for the company in the long run. And I think today, it's really a good proof of that because we have been able to focus what we needed to focus on. And we also reached this milestone quicker than expected and I think it's partly through that. So, I really believe that this shows the strength in our approach.
Thank you, Martin. And I believe that takes us to the end of this call. I want to say thank you to everyone who listened in for your time and attention today. If we missed any question, you can still reach us on this ir@bimobject.com e-mail. And otherwise, we will see you for our next quarterly presentation. So, thank you for today.
Thank you.
Thank you.
Thank you.