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Edited Transcript of INFRNT.OL earnings conference call or presentation 27-Nov-19 9:00am GMT

Q3 2019 Infront ASA Earnings Call

Nov 29, 2019 (Thomson StreetEvents) -- Edited Transcript of Infront ASA earnings conference call or presentation Wednesday, November 27, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kristian Nesbak

Infront ASA - Co-Founder & CEO

* Max M. Hofer

Infront ASA - CFO

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Presentation

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Operator [1]

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Welcome to Infront ASA Q3 2019 results. With us today, we have CFO, Max Hofer; and as always, Kristian Nesbak, the CEO.

Over to you guys in Oslo.

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Kristian Nesbak, Infront ASA - Co-Founder & CEO [2]

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Thanks. Hello. Welcome to this presentation. This is Kristian Nesbak speaking. So this is a big event for us. We have been talking about our latest acquisition, the vwd Group for many months. And for the first time, we are going to present consolidated numbers. So it's -- it has been a full quarter since the closing was mid-July, but quite close to that.

So when we look at the numbers year-on-year, there is a significant change, and this is mainly because of the vwd acquisition. And this quarter has been very interesting for us. We have learned a lot more about all the vwd employees and we have learned more about their products and clients, and it has been very interesting and we like what we see. So let's just move on there. We will come back to many of the numbers on this first page. And yes, let me mention one more thing. So this is the first time we report in euro. So that's also new.

So our strategic goals and how to get there maintains. A combination of these 4 areas we expect to bring us further growth. So we continue to grow in the Nordic with the latest acquisition. We can consider all of Europe as our home market. Having great products on one platform is our highest priority. And 4, in the long term, we need to continue to do acquisitions. And this strategy has led us to where we are today. And we can clearly see that reflected in the key figures.

So the annual recurring revenue has increased 250%. The number of professional users has quadrupled. The adjusted EBITDA has increased 150%. And the number of offices has -- number of countries with offices has doubled. So we see here that the -- of the numbers presented here, the one we can work with in the coming quarters will be the EBITDA to improve this in the future.

To summarize the latest transactions for new listeners, the transaction was completed mid-July and consolidated from that day. Final purchase price of EUR 130 million on an enterprise value basis, financed through an issue of EUR 105 million bond and equity of NOK 242 million. We have also, this time, changed the segment reporting adjusted to reflect new group structure.

The new position we have now is very helpful for the company moving forward. First of all, we have a larger revenue base. We have more diversified revenue base with 91 professional -- 91,000 professional users. We have a broader product offering in more markets. Highly complementary operation with significant cross- and upselling opportunities. We have exposure to the growing regulatory technology segment as well as wealth and asset management market. More than 500 employees in 13 countries and we have a platform for growth across Europe and in other markets.

We have a potential when it comes to income synergies with upselling, but this is hard to predict. What we focus on to -- what we focus to report on is the cost synergies that are not there only to save costs but also to create the organization and products for the future.

If we look at short-term cost saving, we expect a saving of EUR 2.5 million. And we have secured a good portion of that already, so we're very comfortable on this one with the time frame. The long-term identified savings, we estimate to be between EUR 6 million and EUR 8.5 million, and we will need 24 to 36 months to realize this.

So status update on key integration process. In sales, we focus on upselling existing products to new clients. The most obvious one is the Infront Professional Terminals and other products will follow.

To technology and products, we will move all products into the same platform and all will have access to the content-rich and stable Infront backbone. The main reason for this is the incredible product improvement this will be, and what we get at the same time is the long-term cost savings that we have estimated.

On the left, we see the growth of the number of users year-to-date, and here is also Market Connect included in the growth. On the right side, we have the new segment split that we are going to report on for a while. First, we see the Solution and Terminal business, that is the old Infront and Market Connect, then we see vwd Group and then News as the last segment.

So over to Mark's financial review.

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Max M. Hofer, Infront ASA - CFO [3]

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Thank you, Kristian. As you have already heard from Kristian, Q3 has been a very special quarter for us. Not only has it been the first quarter where we fully consolidated both the

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and vwd, but from now on, we will also report our financial numbers in euros versus NOK earlier. We see both as key milestones in the development of Infront into an international European leader. And hence, this is also very exciting for us.

The revenues for the period were EUR 25.3 million, which is more than 2.5x more than in Q3 2018. The majority of this growth was related to the successful acquisitions of Market Connect in Italy and vwd. In addition, we also see healthy organic growth in the single digits as previously communicated to the market and in accordance to our plans. Our subscription revenues accounted for 97% of all revenues.

Furthermore, we are excited to also announce another key milestone in our history with our annual recurring revenues reaching more than EUR 100 million by the end of Q3. This is one of the KPIs that is very relevant to our business, and we will continue to report this figure also in the upcoming quarters.

The adjusted EBITDA increased to EUR 2.9 million compared to EUR 1.2 million in Q3 2018. The adjusted EBITDA margins declined to 11.4%. This decline is something that we see as temporary and will be supported going forward by profitable organic growth, but of course, also, the cost synergy activities, as you have seen in Kristian's slides a few minutes ago.

Looking specifically at the development over the past few quarters, you will see the continued trend of growth in our business. As mentioned, a large portion of that is attributable to the recent acquisitions, but we also have a positive organic growth. And this is something that, I think, is important to state.

The gross margins have recently stabilized as the acquisitions are being integrated and our data purchasing is streamlined, resulting in cost savings over time. The adjusted OpEx reflects the increased size of our business

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Also, our continued efforts to grow successfully across our key markets.

The adjusted EBITDA continues to grow quarter-on-quarter as well as year-on-year. As mentioned previously, Infront Italy and vwd synergy capture activities are on track as planned. And with the consolidation of data feeds and licenses, expected to yield EUR 0.7 million and EUR 2 million, respectively, in annual savings.

Additionally, and as you have seen in Kristian's slide a few minutes ago, operational improvements are expected to yield an additional minimum of EUR 6 million in annual cost savings over the next 24 to 36 months.

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per region, you will see a slight adjustment in

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As you can clearly see, the acquisition of vwd has led to a new major region for our business. The DACH region, which represents Germany, Austria and Switzerland, is now the largest region for us following the acquisition. And it had EUR 12.7 million in revenues in the third quarter.

The Nordic region had stable underlying revenue. Q3 and the previous quarter were impacted by recognition shift of EUR 0.3 million of accrued revenues. Adjusted for this, Q3 and Q2 would have been flat.

The Other Regions are including our operations in smaller markets not included in the other regions, such as the U.K., South Africa, France and Benelux. The revenue in those regions was at EUR 6.2 million up from EUR 0.6 million in Q3 2018. And again, this is mainly driven by the inclusion of Italy and vwd.

Looking at the revenue per segment, the Terminal and Solution revenue increased 64% year-on-year. The organic growth was a contributor there as well, but of course, also the vwd and Infront Italy acquisitions. The News and Other non-core businesses were slightly down 7%. For now, we are showing the vwd Group as a separate segment for Q3.

The company's overall cash position remains very solid at the end of the quarter. At the same time, you see strong movements in investments and financing. And of course, this is a result of the activities related to the acquisition of vwd Group in Germany. Investing cash flow was negative EUR 121 million reflecting the EUR 130 million paid for vwd and EUR 2.7 million of other investments, partly offset by cash balance acquired of EUR 12.9 million.

Furthermore, in order to finance this

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company raised a 4-year EUR 105 million bond and NOK 242 million in new equity. This is shown in the financing cash flow of EUR 127 million, which is representing the net proceeds of that.

To summarize, Infront has now achieved its target, as stated at the time of the IPO, of becoming the leading European provider of financial information to financial professionals with the acquisitions of vwd and Infront Italy.

Going forward, the organization will continue its strong efforts on integrating those businesses and then taking out the significant cost savings from these transactions. So far, these activities are on track and are proceeding according to plan, and significant annual cost savings have been secured already.

The group now generates more than EUR 100 million in annual recurring revenues, 97% of our revenues on a subscription basis with long-standing and solid customer relationships.

At the same time, we see a very strong sales pipeline across regions, and we see strong and significant cross- and upselling opportunities to the acquired customer bases. We believe that there are good opportunities to increase those activities even further and that this will continue our long-term ambitions regarding organic growth.

Finally, we continue to see attractive M&A opportunities in the market and we intend to pursue those selectively.

In case of any questions, please do not hesitate to reach out via IR at infrontfinance.com. We will be back with the Q4 2019 report on the 28th of February 2020.

In the meantime, thank you, again, for your continued interest in Infront, and have a good day.