Kahoot ASA

OSE:KAHOT

Earnings Call Transcript 2019-Q4

[Eilert Giertsen Hanoa, Chief Executive Officer]

Welcome, and thank you for listening to our fourth quarter presentation of the Kahoot! company. Today, we have Martin Kværnstuen, CFO; and myself, Eilert Hanoa, CEO, presenting.Kahoot!'s vision is to build the leading learning platform in the world. And we had a very good fourth quarter in achieving both new goals for the usage, but also launching new products and new services. We have a scalable platform with our viral business model. We are still not using any substantial proceeds on marketing. We've been able to add over 110,000 net new paid seats in 2019, and we have over 5 million active teachers on the platform. So with 1.2 billion participating players in 2019, we had a fantastic growth in usage in all areas. And we also have a loyal and a -- customer base that has continued to renew, so we had a net dollar retention in the range of 90% to 100% for the year of 2019.We also got new and existing customers in the large customer's base that are making learning awesome with Kahoot!. Kahoot! is used both for corporate training, for compliance testing, for documentation, for onboarding and for creating good awareness of company's values in the corporate culture and any kind of HR and knowledge sharing. We're very happy to have large organizations around the world in addition to all our small business customers and teachers and schools using Kahoot! for all these purposes.So let's switch to the fourth quarter. We had good growth in our platform. We had, both on the user side and on the host side, over 20% growth in games played and in the number of active accounts. We also had several new features we launched for both our free customers that are using Kahoot! for free and for our paying customers during the quarter, both for the professional organizations, for schools and for private individuals. We also saw the good growth in paid seats continuing in fourth quarter, and we reached 117,000 paid customers by the end of the quarter, with over 152,000 seats from the Kahoot! platform and 18,000 seats from the DragonBox School platform.In 2019, we had invoiced revenue growth of 275%, reaching $13 million or pro forma revenue was $15 million for the year of 2019. And in Q4, we were able to reach positive cash flow from operations, with $1.2 million compared to minus $0.6 million in the third quarter of 2019. So all in all, with a solid financial cash position with over $40 million in cash by the end of Q4, also including the proceeds from the equity we raised in October, we have a solid financial situation -- setting for the 2020 and beyond.As mentioned, the growth continues both on active accounts, closing in on 16 million accounts on the hosted games, over 200 million hosted games throughout the year, and participants over 1.2 billion at the run rate we are now. And this is, of course, a good foundation for the continued growth of both free and paid users on the Kahoot! platform going forward. This also resulted in a growth in paid seats, both from teachers and schools and organizations at work, reaching 152,000 seats by the end of Q4, and we started the year with around 40,000 seats on the Kahoot! platform, paid seats. So it has been a good strong growth throughout the year of 2019 every quarter.This has also been translated into increased revenue streams from both the existing customers upgrading and adding more seats, but also new customers coming into every quarter throughout 2019. And we have the strongest trading in the fourth quarter of the year, reaching over $5 million in invoiced revenue from the Kahoot! platform in Q4 2019. And all in all, we had organic growth quarter-over-quarter for -- of 54% from the third quarter. So it was also our -- the best quarter-on-quarter growth in 2019 in the fourth quarter.We also see that revenue is continuing to come and grow from all the 5 main regions that we -- where we have customers. We have over 150 countries with paying customers. And even though Europe now represent over 1/3 of the revenue and U.S. and Canada still is around 50% of our trading, we see that we have good growth both in EMEA, in LatAm and in Asia Pacific throughout 2019. And we will continue to expand both when it comes to products and services to cater all these regions going forward.Then we switch to the profit and loss statement, Martin?

[Martin Kværnstuen]

Yes. Yes, and then in here, we have the summary of the P&L in the quarterly report, which is attached in the notice of the stock market, you will find more detail with -- including the depreciation lines. But as mentioned by Eilert, we have a very strong growth in invoiced revenue in the Q4, resulting in $5.3 million in invoiced revenue. And then, of course, being -- going through 2019 with a increased growth in all quarters, so we will now have a recognized revenue of almost $4 million in Q4, resulting in an EBITDA result of minus $1.1 million. And as we will get back to the cash flow effect of having -- reaching $5 million in invoiced revenue also now results in positive cash flow.We have also included the comments on the pure organic Kahoot! growth in Q4, excluding the acquired units, which was close to 200% in Q4. For the full year, this is now -- in 2019, we reached $13 million in invoiced revenue, that includes Poio and DragonBox for the last 4 months and compared to 2018, which was $3.5 million, which is a total growth of $275 million. And then the recognized revenue has a total growth of 353% in 2019.In the balance sheet, we have -- there's only 1 large change in Q4, and that is the equity raise we did in October resulting in $40.9 million in cash by the end of the year. And of course, we don't have any long-term debt and equity ratio of 86%. And of course, we also see the buildup in deferred revenue, which reached $6.7 million by the end of the year compared to $1.7 million 1 year ago. And of course, the goodwill in our balance sheet is from the acquired units in 2019 and since Kahoot! is still is following the NGAAP, we are depreciating goodwill over 5 years. And from the cash flow statement, here, we also include all quarters in 2019 for comparison. And as indicated by the stock -- to the stock market in January, we indicated that we will have a positive cash flow in Q4 of positive $1.1 million, and the final number is close to $1.2 million, which we are, of course, very happy with.On the financing activities in Q4, you will kind of see a very normalized level of investment on fixed assets with around $74,000, which is kind of the current run rate on -- in investments. And then we also had some last settlement on the acquisitions from Poio and DragonBox, which has a cash flow effect in Q4. And then, of course, the proceeds from equity has, of course, effected the cash situation by the end of the year, as mentioned. For the full year of 2019, we have a negative cash flow of $2.7 million from operating activities, resulting in almost $41 million by the end of the year. We also included here in the cash flow statement the proceeds for -- since both Poio and DragonBox acquisition was paid both in cash and shares, the $14.6 million in the last line is the value of shares used for the acquisitions in 2019.

[Eilert Giertsen Hanoa, Chief Executive Officer]

Thank you, Martin. Looking forward, we see a continued good trading, both in Q1 and for 2020 as a whole. We repeat our guidance for the full year of 100% to 150% growth on the 2020 level from the pro forma of 2019 level, also with positive cash flow from operations for the full year. For the first quarter isolated, we see a growth in 10% to 15% range from the Q4 trading, also with the positive cash flow from operations for Q1 isolated. And in addition to the current business, we will launch several new initiatives throughout the coming months, including Kahoot Study, which is focusing on self-study features, both for groups and individuals that are both eager and willing to study with Kahoot! throughout the world. And we will come back with more launch notes on the products in late Q1 and Q2. And also, as we have previously indicated by the company, we will also use 2020 to prepare the company for moving to our main list during the first half of 2021, meaning 12 months to 15 months from now. We also repeat our targets for 2022, reaching over $100 million in customer base value by the end of '22 as our long-term goal for this cycle. So with that, we thank you for listening in to our Q4 webcast. We hope to connect with you at a later stage. Thank you very much.