VNV Global AB (publ)

STO:VNV

Earnings Call Transcript

[Operator]

Welcome to the VNV Global Third Quarter '21 call. Today, I'm pleased to present Per Brilioth, Chief Executive Officer. [Operator Instructions], Speaker, please begin.

[Per Brilioth, CEO, MD & Board Member]

Thank you. I'll go through a couple of slides, highlighting the quarter, and then we'll move over to Q&A. And I hope you can see me flicking the pages now. But if I think, a good summarizing page will be this one. And so I think if you sort of flick through the actual report, all of this will be clear to you, but NAV is now roughly $1.5 billion, that's up since last quarter, and that's driven by various sort of revaluations and one markdown and collectively, sort of that has us up nearly 14% over this quarter. I mean the -- it's -- our largest investment is Babylon. Babylon lists pretty much now on the New York Stock Exchange. So that's big for us. Not that we are in any way looking to say bye-bye to Babylon at these sort of levels, at this point of time or anything like that, but it's -- so it's not by any means an endpoint to our sort of journey on Babylon, but it's more sort of one step forward. It gives the company access to new capital markets and other cost of capitals et cetera, et cetera. But -- so important to follow that. So it's difficult sort of to have anything else that -- and I was going to say, it's difficult to sort of -- that sort of dwarfs everything else. But at this particular moment, we didn't really have an intention to sort of do this call at the exact moment that it started trading. But here we are. And -- but beyond that, I think there's been a lot of activity at our end over this quarter with several new investments that we are very, very excited about. A couple of just taking the time to do a couple of background slides. Not that any of you need any background, but it's just flick through quickly a couple of slides that we use when we talk to shareholders. This is an updated one, sort of NAV development over the years since we spun off that listed portfolio now nearly 10 years ago. Time goes quickly. So we -- our annual NAV is some 33% since. We are -- I think it's good -- on this page, you'll see a good sort of NAV bridge from the second quarter NAV, which was just under SEK 108 per share. So there's been 2 revaluations, which we have talked about over this quarter in sort of separate press releases that SWVL. That revaluation added another SEK 8, just above Voi's around added another nearly SEK 8. Numan, which we haven't talked about, which I'll touch upon a little bit later, add another SEK 2. And then in this quarter, we've taken down BlaBlaCar a little bit. I'll come back to that, too. And and we end up at SEK 122.5. And now that Babylon is trading, it's -- you guys may be more updated than me at this particular time. Last I heard, we were looking at 10 -- I think the pre-market puts the price at $10.80 per share. We own 43.2 million shares in Babylon. So that has the NAV pretty much bang in where our stock is trading right now. So talk about efficiency of the markets -- that. I'll -- the slides I wanted to sort of use -- that we use in our presentation, I think just it's worthwhile repeating sort of the backdrop to what we do. So in contrast to those of you who've been with us for a long time, this portfolio is sort of diversified now. That's not something we seek. We sort of let things run and develop as they do. And if they become a large part of the portfolio, that's fine. But today 70% of the NAV is -- are across 6 assets. These are the same 6 assets that would have been there a quarter ago, but they're somewhat sort of moving around Voi's now become the second largest taking over from BlaBlaCar in that sort of #2 position after Babylon. Importantly also, it's -- well, not much of a change but importantly, this is across 3 -- not maybe sectors but macro themes, mobility being the largest, followed by digital health and then our more traditional marketplace space. We're not so much about Russia anymore. This is about Europe really. We do have some Russian stuff. We have some Middle Eastern stuff. We have a global focus. As you know, we've done some small things in the U.S., small things in Latin America, small thing in Asia, but most of this is sort of Europe and our time zone. But what I wanted to get to is that, as of this exact moment, Babylon is also listed, which means that we have the green part here, as you see. So it's just north of 30%. A 1/3 of the portfolio is, in fact, now listed with Hemnet and Babylon. SWVL, dark blue here, is about to be listed. The planning there is early December for that to be listed that we feel good about that. That's -- and then this , as we call it, blueberry mixed with milk common color, Voi, BlaBlaCar and Gett are all companies that are in the -- at a matured stage, which they can access public capital market as well. So in fact -- so it is not totally inconceivable that come -- give us a year or so that as much as 70% of the portfolio is in the listed format. And as you know that we're not investors into public companies. Very conscious of that. We are a public company and that our typical investor can invest in that themselves. But that doesn't mean that we have to sell things upon an IPO. And If we feel that there's 30% plus sort of -- or 20-plus here but obviously, 30% IRR is our -- it's what we produced earlier. If we think there's that sort of kind of annual upside left, we will sort of hold on to them as we go along. And I think Babylon sort of clearly checks that box of that -- I mean, in our view, that kind of upside. Beyond that, we -- I think it's so important to just highlight that there is -- there's more in this portfolio than the 6 large ones that make up 70% in what we call our next-generation portfolio, there's 4 names that stand out. That's very good candidates to sort of become much larger at percentage-wise of the portfolio. Property Finder, you've known for a while. Numan has been in our portfolio for a couple of years, that's now starting to serious -- become a seriously sort of large company. Borzo is the new name of Dostavista. That's also been there, and that's developing very well. Booksy in sort of the same position. So these are names that are large enough to actually show up, but they're maybe not large enough to matter in the short term, but that can change quickly. And finally, in this large Other space, there are a lot of names. And in fact, if we click to the next page this -- the other part, it's broken out into sort of a little bit more detailed sort of pie chart. And you see here that this is -- these sort of 30-or-so names that are not large enough to show up in any sort of material way are spread across, Seed, Series A, B, some C. All of these companies are though -- are young and growing very fast, and it's not inconceivable that they will grow in the same way that Avito went from a $5 million position to a $500 million position. Voi went sort of -- had a similar sort of very, very large upside -- or it had become something that was very smaller into something that's now our second biggest position. So we essentially think that there's potential in this portfolio among these names to become something that actually sort of becomes much more material in the portfolio going forward. So leaving that sort of sort of big picture background, a couple of slides on the different companies that matter in this quarter. And well, Babylon, it's complete in its listing. It's merged with the Alkuri SPAC. It's changed its ticker. So if you look for BBLN, Babylon without the vowels. And that's the ticker we trade at. And yes, well, this -- the transaction update in this slide is somewhat sort of [ quest ] now as a asset -- that's all in the past. But obviously, the merger was approved. The transaction completed, and it's trading, and it's trading just above SEK 10, as we speak. We've got 43.2 million shares. So our mark will now follow that price. So no more models from us valuing Babylon. This will all be done with the help of the market. And in rough, rough terms, $1 on Babylon, it's SEK 1.8 per share in terms of our NAV. And if we continue here to Voi, well, Voi contributed positively to our NAV growth during this quarter. It's been -- since then, it's obviously been out in the press that they're out there doing another round. So we'll see how that sort of develops. They are developing very, very healthily, basically. They are in 70 cities now. They clock in the third quarter, this third quarter that we're now reporting on. They clocked 25 million rides. You can see sort of the green line on this chart. It speaks for itself. And I think it's also important to highlight how strong Voi is versus all competition and basically across all -- any way, you measure it, it's strong, but also importantly, it's a clear #1 in terms of licensed markets. And this space is becoming more and more sort of infrastructure operated under license, although with network effects, which is obviously what we're looking for here. But as you can see, Voi clearly leads the space in Europe in terms of number of licenses. BlaBlaCar, is, as you know, we're very, very enthusiastic on. We are -- but the way our models work are that we look out into the near term, and we apply sort of a -- we build a peer group of the best peer group we can, and then we multiply this, too, right? And the fact of the matter is that, it's -- that the outlook is, in fact, not -- it's been -- long distance travel is yet to come back in a way where you can sort of say things clearly about the near term, which is what we use when we do the models. I mean, obviously, if you look beyond the very near term, I think there's a very, very rosy pictures that you can sort of point at to Babylon. But for the near term, that -- I mean '22 doesn't look like the '22 of a few years ago, if you see what I mean, and that matters for our model. Having said that, as you noted in our report, we -- the company in September saw that it was coming back to 2019. So essentially pre-COVID levels in terms of net revenues for the first time since the crisis. So this model is something that may move around, and it should by no means be seen as us being negative on the company. We are -- I mean, as you know, we funded the company earlier this year. We're in fact very enthusiastic about this marketplace. And I think it's -- and our funding and the company at large is, of course, making -- our funding and I think helps the company in terms of -- on the M&A front to be smart and opportunistic on the M&A. And as the company has stated themselves, they're positioning themselves as the leading player in terms of digitalizing long-distance buses in emerging markets. And that's a very, very large growth area. We've seen the sort of strong effects of them buying the bus marketplace to Russia and Ukraine, Busfor, and the good synergies that creates with the C2C markets of cars. And there's simply more to do there, and the company is optimistic and strong in that M&A sense. So we're very enthusiastic about that, and a short-term markdown should not be seen as a negative for us. We are very enthusiastic, and that model will likely move around as we go forward in these sort of quarters. Swvl, is, of course, also contributed nearly SEK 8 per share. It is -- they have announced their SPAC plans at $1 billion pre-money, that should express the close in this -- by December -- in December. And the company is performing very well. I mean, 2 days, it has crossed 53 million bookings this year, which is, of course, very strong. And we think there's strong upside to this space and this company for -- in the coming years. So very enthusiastic about that. And then Numan, it's perhaps a new company. It's not -- if I say new company in our portfolio, and I think maybe some of you may have come across it. but it's become a new company in terms of the size in our portfolio. So this is -- it's a digital healthcare provider. And it's actually #1 in the U.K., and it's focused on men -- on men health and well-being. There are U.S. peers for this, most notably HIMS, which has sort of developed very well and also -- this sort of developed into quite substantially larger absolute valuations than we have at Numan today. But they did -- I mean, we first of all, we have invested in it during the quarter. And it has closed around, which has had us revalue our stake in Numan to nearly $40 million. And so -- and the company is just doing very well. Finally, a company that -- it has been in the portfolio actually since last summer when we bought a small secondary stake in Olio but for -- we own less than 1% of the company. We've now moved up, and we own 11% of this company after having led their most recent round of some $40 million. And we -- this has since moved up to like a $60 million position for us. And then, I'm very, very enthusiastic over this company, and I think that this may be one that sort of develops into, I think all of our smaller positions now this is no longer a small position to have the potential to go sort of some -- like an Avito sort of future. It has to have a Avito-type of return future ahead in themselves. But this one, maybe especially, and it has a lot to do that the space is not one that anyone has really built before. But the community around their product, which is, although, the overall sort of ambition here and the gap that they are -- have a large good possibility to fill is want to become a global, even, iconically, global sustainability brand, which is, as you can imagine, there is none out there today. I think someone said that it's -- that's the only one out there today's Patagonia. So there's some big sort of gaps for companies to fill, but their current product, their product today is one around food waste and which is such an important part of the sustainability focus of the planet overall. And they have sort of really sort of built a community that is very effective in terms of dealing with this problem, and they are -- and so become the largest in the U.K. and growing a lot outside the U.K. to become the global leader in this. And so there's a 4 million large community around this. And we sense that this community will be able to grow enormously over the coming sort of years. And if this company is monetized today versus large corporates who need help with the -- to deal with its food waste product, I think the -- our feeling here is and our -- and more than that, sort of we've built models around this, assess the company, of course, that there are very, very interesting ways that this community will be able to be monetized in the coming years, distributed into exactly high -- how it's low but that there is a potential for that if I think our conviction is very high. It's not too dissimilar from doing classifieds in Russia and the lack of visibility into the monetization opportunity around that in sort of the mid-2000. This just feel similar. Tons of more details to talk about that, but I hope that works as an intro. With that, I think we'll open up for questions. If the operator could help us manage that, that would be great.

[Operator]

[Operator Instructions] And our first question comes from the line of Stefan Wård from Pareto Securities.

[Stefan Wård, Research Analyst]

Okay. Sorry, I was on mute there. Thanks for very interesting presentation, Per. I also wonder if you could give a little bit more detail on the actual process of the listing of Babylon. If you have -- has there been any announcement on how they redeemed their share, the amount of that or any other details that you can give in relation to this?

[Per Brilioth, CEO, MD & Board Member]

Well, thanks, Stefan. Yes. No, it's -- this is new for us. The -- being a part as a substantial shareholder in a company that's listed on the New York Stock Exchange, and I hope that as we go along, we'll find sort of a firmer footing in terms of how we deal with this communication-wise. But for now, I think it's -- we have to defer basically everything to what the company says and doesn't write. It's -- if it becomes a delicate position for us. So in terms of the details around the listing I think that the normal procedures that becomes clear in the different filings as we go along. But I'm not at liberty to sort of go into -- now, I'm sorry, but I'm sure you understand.

[Stefan Wård, Research Analyst]

Of course. Of course. Then just a few questions. If you could give a little bit more details on the -- on how your thinking is on BlaBlaCar? I read the reports, I see the argument that you take it down a little bit because it's still sort of impacted negatively by pandemic considerations. But I think it could be useful to get some more clarity on your view of that holding and what you expect maybe in the sort of a medium-term perspective for that asset?

[Per Brilioth, CEO, MD & Board Member]

Yes. Yes. No, the short to medium term, I guess, I know the definition, but what or the longevity of the outlook, but over a medium term, this is, of course, very much driven by long-distance travel coming back. And as we noted in the report there, it is -- I mean it is coming back, right? I mean in the September -- we clocked in at September 2019 pre-COVID levels. So it's really, it's really coming back with the vengeance. And that, I guess, it's an effect of vaccinations being more spread, and people sort of feeling more at ease, et cetera, et cetera. So maybe this markdown -- we have a model, we have to follow it. But as far before, there will be more -- there'll be volatility around that. But that is clear. And then the -- beyond that, what will be important here is the monetization of their new market, so to speak, and that is the large emerging markets that will be very interesting to see. Russia, Brazil are becoming very, very liquid markets and sort of huge GMV and big potential sort of to monetize that, which I wouldn't expect sort of -- I would expect sort of Avito-type of rollout of that. I mean you start small and then it increases. But that's -- that will be another interesting sort of thing to follow. And then as the company has said, it's -- and which we have supported to our funding, will be them, using their very strong balance sheet to be optimistic on the M&A side. And as we try to point out in our report here, the focus is obviously that they position themselves as a leading player in terms of bus marketplaces, which marries very well with the C2C side. So long distance travel coming back, big sort of positive. And then monetization of markets beyond the sort of the most mature and developed markets, the developed markets of Western Europe, and then more acquisitions like Busfor. We think the -- if you combine that, they're clocking 113 million users, I really think that you could stretch that outlook if you -- I mean, even on a medium term too that could grow to like 200 million users. And if they are monetized today at like $1 or EUR 1, not quite as slow but EUR 1, EUR 1.5 type user, I think that has the potential to go to EUR 5. France and the developed markets will be higher, and the emerging markets will be lower, but an average of EUR 5, I think, it's entirely possible. That's how we look at our investment case here, and we feel strong, high conviction that, that possible. So 200 million users, EUR 5 a piece in annual revenues, EUR 1 billion of revenue, Avito-type of margins because it's a very fragmented supply to a very fragmented demand in all these markets. And you get -- yes, you get to classified-type of margins. And you -- then you sense that the -- it's sort of the mark that we have we at least, this is not normal drop size. So that's sort of the thinking. I hope that helps your question.

[Stefan Wård, Research Analyst]

Yes, absolutely. I'll take the opportunity to follow-up with another question regarding the future investments. I mean, the Babylon investment has been hugely successful for your side, but from my point of view, it still feels like the digital health space, it's maybe not your sort of core focus area? Or will you try to do more investment in that area just from my own sort of thinking.

[Per Brilioth, CEO, MD & Board Member]

Yes. No. I mean, I think first, it's important to sort of to -- for me to sort of reinforce that we look we really invest bottom up. Our niche is not mobility, digital health or anything else. We look for network effects. We look for companies that can build so high barriers to entry that they really become like something close to natural monopolies. And that may get us into -- that has currently got us into classifieds, of course, but mobility and digital health. But it could, and it will, and I think and Olio is a good example, it will get us into -- it is getting us into a climate macro. It may get us into other macros as well. But -- so that's important. But of course, as you sort of allude to, this digital health, there's a lot of stuff going on there. There's a lot of interesting stuff that we say no thanks to, because they don't necessarily build very high barriers to entry, but they could still be interesting, but it's not for us because we really feel strongly and have a set up that's catered to these sort of barriers to entry type of businesses. But having said that, we -- I mean, there are -- we have done investment here, right? I mean a lot of them center around data or communities. So beyond Babylon, there is, we have, what is it now, we have 2 doctor-booking platforms, doctor-booking platforms, right, one in the Middle East, one in Russia. We've got one health insurance, digital health insurance company, BestDoctor, in Russia. That's essentially like Alan of France or Oscar Health of the U.S., that business model in Russia and the Middle East. We have recently -- during the quarter, invested into Palta, which is essentially -- it is exposed to digital health in a large capacity with a lot of young companies in that portfolio. But the big and mature company is a company called Flo, which is the world's leading period tracker, but also a very sort of interesting sort of product development beyond just the period tracker and very centered around data. So there is a portfolio of companies in the portfolio that are obviously not as large as Babylon, but I think -- I mean, they have this -- they have certainly the potential to become large contributors to the portfolio, all of them, if not perhaps the -- I mean, Babylon obviously has the potential to become, maybe, the, global leader in digital health. The others are niches more to geographies or certain sort of areas, but I think all of them have a strong potential. So no, there's still a little healthy stuff going on, for sure, in the portfolio.

[Operator]

[Operator Instructions] And as we have no more questions registered, I hand back to our speaker.

[Per Brilioth, CEO, MD & Board Member]

Thank you so much for listening in. And well, you know where to find us, if you want to discuss anything else. Otherwise, I will talk to you all in the quarter. Thank you.

[Operator]

This concludes our conference. Thank you all for attending. You may now disconnect your lines.